<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 5, 1998
REGISTRATION STATEMENT NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
JTM INDUSTRIES, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
TEXAS 4953 74-2164490
(State or other jurisdiction (Primary standard industrial (I.R.S. Employer
of classification code number) Identification Number)
incorporation or
organization)
</TABLE>
------------------------
BRETT A. HICKMAN
127 SOUTH 500 EAST 127 SOUTH 500 EAST
SUITE 675 SUITE 675
SALT LAKE CITY, UTAH 84012 SALT LAKE CITY, UTAH 84012
(801) 355-9166 (801) 355-9166
(Address, including ZIP Code, and (Name, address, including ZIP Code,
telephone number, and
including area code, of Registrant's telephone number, including area code,
principal executive offices) of agent for service)
------------------------
WITH A COPY TO:
DAVID BLEA
MORGAN, LEWIS & BOCKIUS LLP
101 PARK AVENUE
NEW YORK, NEW YORK 10178
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
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(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. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED AMOUNT OF
TITLE OF EACH CLASS AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE REGISTRATION
OF SECURITIES TO BE REGISTERED REGISTERED PRICE PER UNIT(1) OFFERING PRICE(1) FEE(1)
<S> <C> <C> <C> <C>
10% Senior Subordinated Notes due
2008............................... $100,000,000 100% $100,000,000 $29,500.00
</TABLE>
(1) Determined solely for the purposes of calculating the registration fee in
accordance with Rule 457 promulgated under the Securities Act of 1933, as
amended (the "Securities Act").
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
JURISDICTION I.R.S. EMPLOYEE PRIMARY STANDARD
EXACT NAME OF GUARANTOR OF IDENTIFICATION INDUSTRIAL
REGISTRANT AS SPECIFIED IN ITS CHARTER INCORPORATION NO. CLASSIFICATION CODE NO.
- ----------------------------------------- -------------- ---------------- -----------------------------
<S> <C> <C> <C>
Pozzolanic Resources, Inc. Washington 91-1194442 4953
Power Plant Aggregates of Iowa, Inc. Iowa 42-1008282 4953
Michigan Ash Sales Company, Michigan 38-1864427 4953
d.b.a. U.S. Ash Company
U.S. Stabilization, Inc. Michigan 38-2891341 4953
Flo Fil Co., Inc. Michigan 38-2762168 4953
Fly Ash Products, Incorporated Arkansas 71-0650457 4953
KBK Enterprises, Inc. Pennsylvania 23-2254804 4953
</TABLE>
<PAGE>
PROSPECTUS
OFFER TO EXCHANGE 10% SENIOR SUBORDINATED NOTES DUE 2008,
WHICH HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED,
FOR 10% SENIOR SUBORDINATED NOTES DUE 2008
[LOGO]
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON
, 1998, UNLESS EXTENDED.
JTM Industries, Inc., a Texas corporation ("JTM"), hereby offers (the
"Exchange Offer"), upon the terms and subject to the conditions set forth in
this Prospectus and the accompanying letter of transmittal (the "Letter of
Transmittal"), to issue an aggregate of up to $100.0 million in principal amount
of its 10% Senior Subordinated Notes due 2008 (the "Exchange Notes"), which have
been registered under the United States Securities Act of 1933, as amended (the
"Securities Act"), in exchange for an identical principal amount of its
outstanding 10% Senior Subordinated Notes due 2008 (the "Restricted Notes"; the
Restricted Notes and the Exchange Notes are collectively referred to herein as
the "Notes"). The terms of the Exchange Notes are identical to the terms of the
Restricted Notes, except for (i) registration rights applicable only to the
Restricted Notes, (ii) terms relating to Liquidated Damages (as defined) and
(iii) that the restrictions on transfer set forth on the face of the Restricted
Notes will not appear on the Exchange Notes. For a complete description of the
Exchange Notes, see "Description of Notes."
JTM will accept for exchange any and all Restricted Notes that are validly
tendered prior to 5:00 p.m., New York City time, on , 1998 (the
"Expiration Date"). Tenders of the Restricted Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the Expiration Date. The Exchange
Offer is not conditioned upon any minimum principal amount of the Restricted
Notes being tendered for exchange. However, the Exchange Offer is subject to the
terms and provisions of the Registration Rights Agreement dated as of April 22,
1998 (the "Registration Rights Agreement") among NationsBanc Montgomery
Securities LLC and CIBC Oppenheimer Corp. (collectively, the "Initial
Purchasers") and JTM relating to the Restricted Notes. The Restricted Notes may
be tendered only in multiples of $1,000. See "The Exchange Offer."
The Restricted Notes were issued in an offering (the "Offering") pursuant to
which JTM issued an aggregate of $100.0 million in principal amount of the
Restricted Notes. The Restricted Notes were sold by JTM to the Initial
Purchasers on April 22, 1998 (the "Issue Date") pursuant to a Purchase Agreement
dated April 17, 1998 (the "Purchase Agreement") among JTM and the Initial
Purchasers. The Initial Purchasers subsequently resold the Restricted Notes in
reliance on Rule 144A, Regulation S and certain other exemptions under the
Securities Act.
The net proceeds of the Offering were used to finance the acquisitions of
Michigan Ash Sales Company, d.b.a. U.S. Ash Company, U.S. Stabilization, Inc.,
Flo Fil Co., Inc. and Fly Ash Products, Inc. and to repay certain existing
indebtedness of JTM and its affiliates (collectively, the "Transactions"). The
consummation of the Offering and the Transactions were conditioned upon each
other.
(CONTINUED ON FOLLOWING PAGE)
SEE "RISK FACTORS" COMMENCING ON PAGE [ ] HEREIN FOR CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY HOLDERS WHO TENDER THEIR RESTRICTED NOTES IN THE
EXCHANGE OFFER.
---------------------
THE NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------------
THE DATE OF THIS PROSPECTUS IS JUNE , 1998.
<PAGE>
(CONTINUED FROM FRONT COVER)
The Notes will bear interest from the date of issuance at a rate of 10% per
annum, payable semi-annually on April 15 and October 15 of each year commencing
October 15, 1998. The Notes will be redeemable, in whole or in part, at the
option of JTM, at any time on or after April 15, 2003 at the redemption prices
set forth herein, plus accrued and unpaid interest thereon and Liquidated
Damages, if any, to the redemption date. In addition, at the option of JTM, up
to $35.0 million in aggregate principal amount of Notes may be redeemed prior to
April 15, 2001 at the redemption price set forth herein, plus accrued and unpaid
interest thereon and Liquidated Damages, if any, to the date of redemption with
the proceeds of one or more Public Offerings (as defined); PROVIDED, HOWEVER,
that at least $65.0 million in aggregate principal amount of Notes remains
outstanding following such redemption. In the event of a Change of Control (as
defined), JTM will be required to make an offer to repurchase all outstanding
Notes at 101% of the aggregate principal amount thereof plus accrued and unpaid
interest thereon and Liquidated Damages, if any, to the date of repurchase.
The Notes will be general unsecured obligations of JTM, will be subordinated
in right of payment to all existing and future Senior Indebtedness (as defined)
of JTM, including indebtedness under the Secured Credit Facility (as defined),
will rank PARI PASSU in right of payment with all existing and future senior
subordinated indebtedness of JTM, and will rank senior in right of payment to
all existing and future subordinated indebtedness of JTM. JTM's payment of
principal, premium, if any, interest and Liquidated Damages, if any, on the
Notes will be guaranteed (the "Guarantees"), jointly and severally, on a senior
subordinated basis by all existing and future domestic Restricted Subsidiaries
(as defined) of JTM (the "Guarantors"). The Guarantees will be subordinated in
right of payment to all existing and future Senior Indebtedness of the
Guarantors, including all obligations of the Guarantors under the Secured Credit
Facility, will rank PARI PASSU in right of payment with all existing and future
senior subordinated indebtedness of the Guarantors, and will rank senior in
right of payment to all existing and future subordinated indebtedness of the
Guarantors. As of March 31, 1998, on a pro forma basis after giving effect to
the Transactions, the issuance of the Notes and the application of the net
proceeds therefrom, the aggregate principal amount of Senior Indebtedness
(excluding trade payables and other accrued liabilities) of JTM and its
subsidiaries would have been approximately $9.2 million. The indenture, dated as
of April 22, 1998, among the Company, the Guarantors and the Trustee (as
defined), governing the Notes (the "Indenture") limits the ability of JTM and
its subsidiaries to incur additional indebtedness.
For each Restricted Note accepted for exchange, the holder of such
Restricted Note will receive an Exchange Note having a principal amount equal to
that of the surrendered Restricted Note. Restricted Notes accepted for exchange
will cease to accrue interest from and after the date of consummation of the
Exchange Offer. Holders of Restricted Notes whose Restricted Notes are accepted
for exchange will not receive any payment in respect of interest on such
Restricted Notes otherwise payable on any interest payment date the record date
for which occurs on or after consummation of the Exchange Offer.
The Exchange Notes are being offered hereunder in order to satisfy certain
obligations of JTM contained in the Registration Rights Agreement based on
interpretations by the staff of the Securities and Exchange Commission (the
"Commission") as set forth in no-action letters issued to third parties, as to
the transferability of the Exchange Notes upon satisfaction of certain
conditions. Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Restricted Notes where
such Restricted Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. JTM has agreed that, for a
period of 180 days after the Expiration Date, it will make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
JTM will not receive any cash proceeds from the Exchange Offer and will pay
all expenses incident to the Exchange Offer. In the event JTM terminates the
Exchange Offer and does not accept for exchange any Restricted Notes, JTM will
promptly return the Restricted Notes to the holders thereof. See "The Exchange
Offer."
There is no existing trading market for the Exchange Notes, and there can be
no assurance regarding the future development of a market for the Exchange
Notes, or the ability of holders of the Exchange Notes to sell their Exchange
Notes or the price at which such holders may be able to sell their Exchange
Notes. JTM does not intend to apply for listing or quotation of the Exchange
Notes on any securities exchange or stock market.
<PAGE>
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). SUCH FORWARD-LOOKING
STATEMENTS ARE BASED ON THE BELIEFS OF JTM'S MANAGEMENT, AS WELL AS ON
ASSUMPTIONS MADE BY AND INFORMATION CURRENTLY AVAILABLE TO JTM, AT THE TIME SUCH
STATEMENTS WERE MADE. WHEN USED IN THIS PROSPECTUS , THE WORDS "ANTICIPATE,"
"BELIEVE," "ESTIMATE," "EXPECT," "INTEND" AND SIMILAR EXPRESSIONS, AS THEY
RELATE TO JTM, ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS.
ALTHOUGH JTM BELIEVES THESE STATEMENTS ARE REASONABLE, PROSPECTIVE INVESTORS
SHOULD CONSIDER CAREFULLY THE FACTORS UNDER THE CAPTION "RISK FACTORS," AS WELL
AS THE OTHER INFORMATION AND DATA INCLUDED IN THIS PROSPECTUS, IN EVALUATING AN
INVESTMENT IN THE NOTES. JTM CAUTIONS THE READER, HOWEVER, THAT SUCH LIST OF
FACTORS UNDER THE CAPTION "RISK FACTORS" MAY NOT BE EXHAUSTIVE AND THAT THOSE OR
OTHER FACTORS, MANY OF WHICH ARE OUTSIDE OF JTM'S CONTROL, COULD HAVE A MATERIAL
ADVERSE EFFECT ON JTM AND ITS ABILITY TO SERVICE ITS INDEBTEDNESS, INCLUDING
PRINCIPAL AND INTEREST PAYMENTS ON, AND LIQUIDATED DAMAGES, IF ANY, WITH RESPECT
TO, THE NOTES. ALL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO JTM OR PERSONS
ACTING ON ITS BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY
STATEMENTS SET FORTH UNDER THE CAPTIONS "RISK FACTORS" AND "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
------------------------
No person is authorized in connection with any offering made hereby to give
any information or to make any representation not contained in this Prospectus,
and, if given or made, such other information or representation must not be
relied upon as having been authorized by JTM. The delivery of this Prospectus at
any time shall not, under any circumstances, create any implication that there
has been no change in the information set forth herein or in the affairs of JTM
since the date hereof.
------------------------
POWERLITE-REGISTERED TRADEMARK-, FLEXCRETE-REGISTERED TRADEMARK-,
GYPCEM-REGISTERED TRADEMARK-, ALSIL-REGISTERED TRADEMARK-, FLO
FIL-REGISTERED TRADEMARK-, PEANUT MAKER-REGISTERED TRADEMARK-,
ORBALOID-REGISTERED TRADEMARK- AND ENVIRA-CEMENT-REGISTERED TRADEMARK- ARE
REGISTERED TRADEMARKS OF JTM, AND CE-MENT-TM-, SAM-TM-, POZZALIME-TM-,
STABIL-FILL-TM-, FLEXBASE-TM- AND REDI-FILL-TM- ARE TRADEMARKS OF JTM.
<PAGE>
AVAILABLE INFORMATION
The Company and the Guarantors have filed with the Commission a Registration
Statement on Form S-4 (the "Exchange Offer Registration Statement," which term
shall encompass all amendments, exhibits, annexes and schedules thereto)
pursuant to the Securities Act, and the rules and regulations promulgated
thereunder, covering the Exchange Notes being offered hereby. This Prospectus
does not contain all the information set forth in the Exchange Offer
Registration Statement. For further information with respect to JTM, the
Guarantors and the Exchange Offer, reference is made to the Exchange Offer
Registration Statement. Statements made in this Prospectus as to the contents of
any contract, agreement or other document referred to are not necessarily
complete. With respect to each such contract, agreement or other document filed
as an exhibit to the Exchange Offer Registration Statement, reference is made to
the exhibit for a more complete description of the document or matter involved,
and each such statement shall be deemed qualified in its entirety by such
reference. The Exchange Offer Registration Statement, including the exhibits
thereto, can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Regional Offices of the Commission at Seven World Trade
Center, Suite 1300, New York, New York 10048 and at 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such materials can be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, the Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. The address of such Web site is: http://www.sec.gov.
As a result of the Exchange Offer, the Company will become subject to the
informational requirements of the Exchange Act, and in accordance therewith will
be required to file periodic reports and other information with the Commission.
The Company has agreed that, whether or not it is required to do so by the rules
and regulations of the Commission, for so long as any of the Notes remain
outstanding, the Company will furnish (excluding exhibits and schedules) to U.S.
Bank National Association, as trustee (the "Trustee"), and the holders of the
Notes and will file with the Commission (unless the Commission will not accept
such a filing) as specified in the Commission's rules and regulations: (i) all
quarterly and annual financial information that would be required to be
contained in a filing with the Commission if the Company were required to file
such information, including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and, with respect to the annual financial
information only, a report thereon by the Company's independent certified public
accountants and (ii) any other information, documents and other reports which
are otherwise required pursuant to Sections 13 and 15(d) of the Exchange Act.
1
<PAGE>
SUMMARY
IN MARCH 1998, JTM ACQUIRED TWO CCP (AS DEFINED) MANAGEMENT COMPANIES:
POZZOLANIC RESOURCES, INC. ("POZZOLANIC") AND POWER PLANT AGGREGATES OF IOWA,
INC. ("PPA"). CONCURRENTLY WITH THE CLOSING OF THE OFFERING, JTM ACQUIRED
ADDITIONAL CCP MANAGEMENT COMPANIES: MICHIGAN ASH SALES COMPANY, D.B.A. U.S. ASH
COMPANY, TOGETHER WITH TWO AFFILIATED COMPANIES, U.S. STABILIZATION, INC. AND
FLO FIL CO., INC. (COLLECTIVELY, THE "U.S. ASH GROUP") AND FLY ASH PRODUCTS,
INC. ("FLY ASH PRODUCTS"). SEE "--THE TRANSACTIONS." EXCEPT AS OTHERWISE
REQUIRED BY THE CONTEXT, REFERENCES IN "--THE COMPANY" AND "BUSINESS" TO (I)
"JTM" ARE TO JTM INDUSTRIES, INC. AND ITS CONSOLIDATED SUBSIDIARIES, AFTER
GIVING EFFECT TO THE INITIAL ACQUISITIONS (AS DEFINED) BUT PRIOR TO GIVING
EFFECT TO THE SUBSEQUENT ACQUISITIONS (AS DEFINED), AND (II) THE "COMPANY" ARE
TO JTM AND ITS CONSOLIDATED SUBSIDIARIES, AFTER GIVING EFFECT TO THE INITIAL
ACQUISITIONS AND THE SUBSEQUENT ACQUISITIONS. PROSPECTIVE INVESTORS SHOULD
CAREFULLY CONSIDER THE FACTORS SET FORTH HEREIN UNDER THE CAPTION "RISK FACTORS"
AND ARE URGED TO READ THIS PROSPECTUS IN ITS ENTIRETY.
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS AND
NOTES THERETO THAT APPEAR ELSEWHERE IN THIS PROSPECTUS. HISTORICAL FINANCIAL
INFORMATION OF JTM FOR THE QUARTER ENDED MARCH 31, 1998 AND THEREAFTER REFLECT
THE INITIAL ACQUISITIONS IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES. THE UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
INFORMATION APPEARING HEREIN IS PRESENTED AS IF THE JTM ACQUISITION (AS
DEFINED), THE INITIAL ACQUISITIONS, THE TRANSACTIONS (AS DEFINED) AND THE
OFFERING OCCURRED ON JANUARY 1, 1997. THE UNAUDITED PRO FORMA CONDENSED COMBINED
BALANCE SHEET APPEARING HEREIN IS PRESENTED AS IF THE SUBSEQUENT ACQUISITIONS
AND THE OFFERING OCCURRED ON MARCH 31, 1998. THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION CONTAINED HEREIN IS PRESENTED FOR ILLUSTRATIVE
PURPOSES ONLY, DOES NOT PURPORT TO BE INDICATIVE OF THE COMPANY'S FINANCIAL
POSITION OR RESULTS OF OPERATIONS AS OF THE DATE HEREOF, AS OF THE ISSUE DATE,
OR AS OF OR FOR ANY OTHER FUTURE DATE, AND IS NOT NECESSARILY INDICATIVE OF WHAT
THE COMPANY'S ACTUAL FINANCIAL POSITION OR RESULTS OF OPERATIONS WOULD HAVE BEEN
HAD THE JTM ACQUISITION, THE INITIAL ACQUISITIONS, THE SUBSEQUENT ACQUISITIONS,
THE TRANSACTIONS AND THE OFFERING BEEN CONSUMMATED ON SUCH DATES. "EBITDA" MEANS
EARNINGS BEFORE INCOME TAXES PLUS INTEREST EXPENSE, DEPRECIATION AND
AMORTIZATION.
THE COMPANY
The Company believes it is the largest manager and marketer of coal
combustion products ("CCPs") in North America. CCPs are the residual materials
created by coal-fired power generation. The Company enters into long-term CCP
management contracts, primarily with coal-fired electric generating utilities.
These utilities are required to manage, or contract to manage, CCPs in
accordance with state and federal environmental regulations. In addition, the
Company provides similar materials management services for other industrial
clients. The Company's revenue is derived from two principal sources: (i)
providing materials management services to CCP producing utilities, such as
American Electric Power Company, Inc., AES Corporation, Duke Power Company,
Entergy, Houston Industries, Ohio Edison Company, PacifiCorp, The Southern
Company and Texas Utilities Company, and other industrial clients, such as CSX
Transportation, Inc., E.I. du Pont de Nemours and Company ("Dupont"), Reynolds
Metals Co. and Union Pacific Resources Company; and (ii) marketing products
derived from CCPs and related industrial materials to consumers of building
materials and construction related products. The Company believes it is the most
geographically diverse corporation dedicated to the management of CCPs, managing
approximately 9.5 million tons annually through 69 contracts in 26 states. On a
pro forma basis, the Company's marketed tonnage represented approximately 15% of
the total industry CCP tonnage marketed during 1996, the year for which the most
recent market data is available. In 1997, on a pro forma basis, the Company
marketed 4.6 million tons, an increase of 18% over 1996. For the year ended
December 31, 1997, the Company had pro forma sales and adjusted EBITDA of $110.3
million and $21.5 million, respectively.
In an effort to maximize the percentage of products marketed to end-users
and minimize the amount of materials landfilled, the Company's focused research
and development efforts have created value-added products such as
ALSIL-Registered Trademark- (a patented processed fly ash filler for the asphalt
shingle and carpet industries),
2
<PAGE>
Powerlite-Registered Trademark- (lightweight aggregate for concrete block),
Flexbase-TM- (road base material) and Peanut Maker-Registered Trademark-
(agricultural soil-enhancer). In 1997, products marketed by the Company
represented approximately 68% of its total revenues. The Company markets CCP
tonnage under management to the building materials and construction related
products industry to be used in engineering applications, such as ready-mix
concrete, lightweight aggregate, stabilized road bases, flowable and structural
fill, and roofing shingles. The Company's major customers for its marketed
products include LaFarge Corporation, Consolidated Sugar Refineries ("CSR"), Elk
Corporation of Texas and GS Roofing Products Company, Inc.
INDUSTRY OVERVIEW
According to data compiled by the Energy Information Administration of the
United States Department of Energy (the "EIA"), of the 1,996 electric generating
units operating in the United States in 1996, 1,128 were coal-fired and
represented approximately 55% of the total electricity generated, an increase
from approximately 50% in 1995. Coal is the largest indigenous fossil fuel
resource in the United States, with current U.S. annual coal production in
excess of one billion tons. Approximately 80% of the coal produced is for
electric power generation, and its use has grown by almost 25% over the last
decade. The combustion of coal provides cost-effective electricity generation,
but results in a high percentage of residual material, which serves as the "raw
material" for the CCP industry. The industry manages these CCPs and related
materials by developing end-use markets for certain CCPs and providing storage
and disposal services for the remainder of such materials.
The primary CCPs managed by the Company are fly ash and bottom ash. Fly ash
is the fine residue and bottom ash is the heavier particles that result from the
combustion of coal. Utilities firing boilers with coal first pulverize the coal
and then blow the pulverized coal into a burning chamber where it immediately
ignites to heat the boiler tubes. The heavier bottom ash falls to the bottom of
the burning chamber while the lighter fly ash remains suspended in the exhaust
gases. Before leaving the exhaust stack, the fly ash particles are removed by an
electrostatic precipitator, bag house or other method. The bottom ash is
hydraulically conveyed to a collection area, while the fly ash is pneumatically
conveyed to a storage silo.
Fly ash is a pozzolan that, in the presence of water, will combine with an
activator (lime, portland cement or kiln dust) to produce a cement-like
material. It is this characteristic that allows fly ash to act as a
cost-competitive substitute for other more expensive cementitious building
materials. Concrete manufacturers can typically use fly ash as a substitute for
15% to 40% of their cement requirements, depending on the quality of the fly ash
and the proposed end-use application for the concrete. In addition to its cost
benefit, fly ash provides greater structural strength and durability in certain
construction applications, such as road construction. Bottom ash is utilized as
an aggregate in concrete block construction and road base construction.
According to the American Coal Ash Association (the "ACAA"), of the
approximately 100 million tons of CCPs that were generated in the United States
during 1996, fly ash accounted for approximately 59%, bottom ash accounted for
approximately 16% and flue gas desulphurization waste ("scrubber sludge") and
boiler slag accounted for approximately 25%.
COMPETITIVE STRENGTHS
In order to sustain its position in the CCP management industry, the Company
relies on the following competitive strengths:
LEADING MARKET POSITION. The Company believes it is a party to more CCP
management contracts and manages more CCP tonnage than any of its competitors.
JTM has aggressively penetrated its service areas and has won contracts based on
its "one-stop" approach to CCP and other industrial materials management
services. This approach combines the Company's marketing, materials handling and
technological capabilities to lower the client's cost of managing CCPs and other
industrial materials in accordance
3
<PAGE>
with applicable state and federal regulations. Consummation of the Initial
Acquisitions and the Subsequent Acquisitions has provided a broader platform for
the Company to market its one-stop approach.
GEOGRAPHIC DIVERSIFICATION. The Company believes it is the only firm in the
CCP management industry with a national scope. This national scope provides the
Company with several significant competitive benefits, including mitigation of
the effects of regional economic cyclicality and weather patterns. In addition,
the Company's national scope and storage capabilities will create incremental
revenue through the ability to shift products among regions to meet market
demand while minimizing transportation costs.
VALUE-ADDED PRODUCTS AND SERVICES. The Company's focused new product
development efforts have broadened the end-use market for CCPs and other
recyclable industrial materials. The Company has successfully introduced new
patented or trademarked products made from previously non-marketable materials
through proprietary processes. These product development efforts have reduced
the materials management cost to the Company's clients and improved the
Company's revenue mix and margins.
STRONG CLIENT RELATIONSHIPS. At December 31, 1997, on a pro forma basis,
the Company had contractual relationships with seven of the top 13 electrical
utilities in the United States, based on total electricity revenues. The Company
has maintained long-term contracts with certain utilities since 1968, and, among
contracts with terms of five years or more, the Company's renewal or extension
rate has been in excess of 94% during the last five years. The Company's clients
rely on its marketing, materials handling and technological capabilities to
extend the useful life of their landfill sites by creatively managing and
marketing a broader range of CCPs than competitors.
EXPERIENCED MANAGEMENT TEAM. The Company's senior management team,
including R Steve Creamer, Raul A. Deju, J.I. Everest, II, Clinton W. Pike and
Danny L. Gray, has an average of over 18 years experience in CCP management and
related industries. The management team has a proven record of developing
innovative, value-added operations, maintaining strong client relationships and
integrating strategic, opportunistic acquisitions.
BUSINESS STRATEGY
Capitalizing on its competitive strengths, the Company intends to grow
revenues and cash flow by implementing a business strategy that consists of the
following key elements:
MAINTAIN AND EXPAND LONG-TERM CONTRACTUAL RELATIONSHIPS. The Company's core
business is based on long-term materials management contracts with power
producers and industrial clients. As of March 15, 1998, on a pro forma basis,
the Company had 69 materials management contracts, 30 of which generated more
than $1.0 million of annual revenues each. Typical contract terms are from five
to 15 years and the weighted average contract life remaining on these large
contracts is over seven years. The Company is focused on serving its current
client base and plans to aggressively target additional contract opportunities
to increase both tonnage under management and revenues.
INCREASE PRODUCT SALES AND APPLICATIONS. The Company has a three-fold
approach to increasing its product sales and applications. The Company intends
to: first, apply JTM's proprietary technology to the products of the newly
acquired companies, thus enhancing their existing product offerings with the
benefits of its research and development program; second, cross-market JTM's
patented products in the new geographical markets accessed through its strategic
acquisitions; and third, continue to develop new applications for CCPs and
related industrial materials.
PURSUE STRATEGIC ACQUISITIONS. The Company operates in a highly fragmented
industry that is undergoing a period of consolidation. The Company intends to
pursue selective acquisitions of companies which will complement its planned
geographic expansion or will provide certain operating efficiencies in areas the
Company currently serves.
4
<PAGE>
THE TRANSACTIONS
Industrial Services Group, Inc. ("ISG") was formed in September 1997 by
Citicorp Venture Capital, Ltd. ("CVC") and certain members of JTM's management
team (together with CVC, the "Investors") to acquire the stock of JTM (the "JTM
Acquisition") from Laidlaw Transportation, Inc. ("Laidlaw"). Pursuant to the JTM
Acquisition, JTM became a wholly owned subsidiary of ISG. Laidlaw received from
ISG, as consideration for the JTM Acquisition, a $29.0 million senior bridge
note (the "ISG Bridge Note"), a $17.5 million 9% Junior Subordinated Promissory
Note due 2005 (together with any additional notes issued in respect of interest
thereon, the "ISG PIK Notes") and $5.8 million in cash. The equity investment in
ISG in connection with the financing of the JTM Acquisition was made by the
Investors through a purchase of common and preferred stock and warrants of ISG
for an aggregate purchase price of approximately $7.5 million.
On March 4, 1998, JTM acquired the stock of Pozzolanic (the "Pozzolanic
Acquisition") for $40.0 million, at which time Pozzolanic became a wholly owned
subsidiary of JTM. Pozzolanic is a leading provider of CCP marketing services in
the Pacific Northwest and in the Rocky Mountain area, operating nine contracts
representing 850,000 tons of CCPs in 1997. Financing for the Pozzolanic
Acquisition was provided through borrowings under a $42.0 million secured credit
facility provided by NationsBank, N.A., an affiliate of NationsBanc Montgomery
Securities LLC, and Canadian Imperial Bank of Commerce, an affiliate of CIBC
Oppenheimer Corp. (the "Secured Credit Facility").
On March 20, 1998, JTM acquired the stock of PPA (the "PPA Acquisition") for
$6.4 million (net of $2.1 million of cash acquired, for a total consideration of
$8.5 million), at which time PPA became a wholly owned subsidiary of JTM. PPA
and its subsidiary provide the personnel and equipment to service a large
contract recently awarded to JTM in Iowa. JTM partially financed the PPA
Acquisition through its borrowings under the Secured Credit Facility. The
Pozzolanic Acquisition and the PPA Acquisition are together referred to as the
"Initial Acquisitions."
On April 22, 1998, JTM acquired the stock of the U.S. Ash Group (the "U.S.
Ash Group Acquisition") for a total consideration of $24.6 million, at which
time the U.S. Ash Group became wholly owned subsidiaries of JTM. The U.S. Ash
Group is a leading provider of CCP management services in Michigan, Ohio and
Indiana, areas where JTM's current services are limited, operating six contracts
representing 870,000 tons of CCPs in 1997. Financing for the U.S. Ash Group
Acquisition was provided through proceeds from the Offering.
On April 22, 1998, JTM acquired the stock of Fly Ash Products (the "Fly Ash
Products Acquisition") for a total consideration of $9.5 million, at which time
Fly Ash Products became a wholly owned subsidiary of JTM. Fly Ash Products is
the leading provider of CCP management services in Arkansas, operating two
contracts representing 330,000 tons of CCPs in 1997. Financing for the Fly Ash
Products Acquisition was provided through proceeds from the Offering. The U.S.
Ash Group Acquisition and the Fly Ash Products Acquisition are together referred
to as the "Subsequent Acquisitions."
5
<PAGE>
The following table sets forth the sources and uses of funds in connection
with the Transactions and the Offering.
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
SOURCES OF FUNDS:
Proceeds from sale of Restricted Notes.......................................... $ 100,000
---------
---------
USES OF FUNDS:
Consideration for the U.S. Ash Group Acquisition, less deposit previously
paid.......................................................................... $ 24,300
Consideration for the Fly Ash Products Acquisition, less deposit previously
paid.......................................................................... 9,400
Repayment of existing debt(1)................................................... 62,500
Transaction expenses............................................................ 3,800
---------
Total uses.................................................................... $ 100,000
---------
---------
</TABLE>
- ------------------------
(1) Consists of a repayment in full of the ISG Bridge Note and accrued interest
thereon and a repayment of $32.0 million under the Secured Credit Facility.
With the consummation of the Transactions and the Offering, the Company had
approximately $10.0 million of indebtedness outstanding under the Secured
Credit Facility.
THE EXCHANGE OFFER
<TABLE>
<S> <C>
Issuer.......................... JTM Industries, Inc.
Securities Offered.............. $100.0 million in aggregate principal amount of 10% Senior
Subordinated Notes due 2008, which have been registered
under the Securities Act. The terms of the Exchange Notes
and the Restricted Notes are identical in all material
respects, except for certain transfer restrictions and
registration rights relating to the Restricted Notes and
except that, if the Exchange Offer is not consummated by
October 19, 1998, JTM will pay Liquidated Damages to the
holders of the Restricted Notes as described herein. See
"Description of Notes--Registration Rights; Liquidated
Damages."
The Exchange Offer.............. The Exchange Notes are being offered in exchange for a
like principal amount of Restricted Notes. The issuance of
the Exchange Notes is intended to satisfy obligations of
the Company contained in the Registration Rights
Agreement. For procedures for tendering, see "The Exchange
Offer."
Certain Conditions to the
Exchange Offer................ The Company's obligation to accept for exchange, or to
issue Exchange Notes in exchange for, any Restricted Notes
is subject to certain customary conditions, including
conditions relating to interpretations by the staff of the
Commission or any order of any governmental agency or
court of law, which may be waived by the Company in its
reasonable discretion. The Company currently expects that
each of the conditions will be satisfied and that no
waivers will be necessary. See "The Exchange
Offer--Certain Conditions to the Exchange Offer."
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Certain Tax Consequences........ The exchange of Restricted Notes for Exchange Notes
pursuant to the Exchange Offer will not be subject to
United States federal income tax. See "The Exchange
Offer--United States Federal Income Tax Consequences of
the Exchange of Notes."
Use of Proceeds................. There will be no proceeds to the Company from the exchange
pursuant to the Exchange Offer.
Exchange Agent.................. The U.S. Bank National Association is serving as exchange
agent (the "Exchange Agent") in connection with the
Exchange Offer.
</TABLE>
CONSEQUENCES OF EXCHANGING RESTRICTED NOTES
Holders of Restricted Notes who do not exchange their Restricted Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to the
provisions in the Indenture regarding transfer and exchange of the Restricted
Notes and the restrictions on transfer of such Restricted Notes as set forth in
the legend thereon as a consequence of the issuance of the Restricted Notes
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and applicable state securities
laws. In general, the Restricted Notes may not be offered or sold, unless
registered under the Securities Act, except pursuant to an exemption from, or in
a transaction not subject to, the Securities Act and applicable state securities
laws. The Company does not currently anticipate that it will register Restricted
Notes under the Securities Act. See "Description of Notes--Registration Rights;
Liquidated Damages." Based on interpretations by the staff of the Commission as
set forth in no-action letters issued to third parties, the Company believes
that Exchange Notes issued pursuant to the Exchange Offer in exchange for
Restricted Notes may be offered for resale, resold or otherwise transferred by
holders thereof (other than any holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) without compliance with
the registration and prospectus delivery provisions of the Securities Act,
provided that such Exchange Notes are acquired in the ordinary course of such
holders' business and such holders have no arrangement with any person to
participate in the distribution of such Exchange Notes. However, the Company
does not intend to request the Commission to consider, and the Commission has
not considered, the Exchange Offer in the context of a no-action letter and
there can be no assurance that the staff of the Commission would make a similar
determination with respect to the Exchange Offer as in such other circumstances.
Each holder, other than a broker-dealer, must acknowledge that it is not engaged
in, and does not intend to engage in, a distribution of Exchange Notes and has
no arrangement or understanding to participate in a distribution of Exchange
Notes. Each broker-dealer that receives Exchange Notes for its own account in
exchange for Restricted Notes must acknowledge that such Restricted Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities and that it will deliver a prospectus in connection with any
resale of such Exchange Notes. See "Plan of Distribution." In addition, to
comply with the state securities laws, the Exchange Notes may not be offered or
sold in any state unless they have been registered or qualified for sale in such
state or an exemption from registration or qualification is available and is
complied with. The offer and sale of the Exchange Notes to "qualified
institutional buyers" (as such term is defined under Rule 144A of the Securities
Act) is generally exempt from registration or qualification under the state
securities laws. The Company has agreed, pursuant to the Registration Rights
Agreement, to register or qualify the Exchange Notes for offer or sale under the
blue sky laws of such jurisdictions as are necessary to permit the consummation
of the Exchange Offer. See "The Exchange Offer--Consequences of Exchanging
Restricted Notes" and "Description of Notes--Registration Rights; Liquidated
Damages."
7
<PAGE>
THE NOTES
The terms of the Exchange Notes and the Restricted Notes are identical in
all material respects, except for certain transfer restrictions and registration
rights relating to the Restricted Notes and except that, if the Exchange Offer
is not consummated by October 19, 1998, JTM will pay Liquidated Damages to the
holders of the Restricted Notes as described under "Description of
Notes--Registration Rights; Liquidated Damages." Restricted Notes accepted for
exchange will cease to accrue interest from and after the date of consummation
of the Exchange Offer. Holders of Restricted Notes whose Restricted Notes are
accepted for exchange will not receive any payment in respect of interest on
such Restricted Notes otherwise payable on any interest payment date the record
date for which occurs on or after consummation of the Exchange Offer.
<TABLE>
<S> <C>
Maturity........................ April 15, 2008.
Interest........................ The Notes will bear interest at the rate of 10% per annum
and will be payable semiannually on April 15 and October
15 of each year, commencing October 15, 1998.
Optional Redemption............. The Notes may be redeemed at the option of the Company, in
whole or in part, on or after April 15, 2003, at the
redemption prices set forth herein, plus accrued and
unpaid interest thereon and Liquidated Damages, if any,
through the redemption date.
On or before April 15, 2001, the Company may, at its
option, redeem up to $35.0 million in aggregate principal
amount of Notes with the net proceeds of one or more
Public Offerings at the redemption price set forth herein,
plus accrued and unpaid interest thereon and Liquidated
Damages, if any, to the date of redemption; PROVIDED,
HOWEVER, that at least $65.0 million in aggregate
principal amount of Notes remain outstanding following
such redemption; and PROVIDED, FURTHER, that such
redemption shall occur within 60 days of the date of the
closing of such Public Offering. See "Description of
Notes--Optional Redemption."
Change of Control............... In the event of a Change of Control, the Company will be
required to make an offer to repurchase all outstanding
Notes at a purchase price equal to 101% of the principal
amount thereof, plus accrued and unpaid interest thereon
and Liquidated Damages, if any, to the date of repurchase.
There can be no assurance that the Company will have
sufficient funds to repurchase the Notes in the event of a
Change of Control. See "Risk Factors-- Purchase of Notes
Upon a Change of Control," "Description of
Notes--Repurchase at the Option of Holders--Change of
Control" and "Description of Secured Credit Facility."
Ranking......................... The Notes will be general unsecured obligations of the
Company, will be subordinated in right of payment to all
existing and future Senior Indebtedness, including
indebtedness under the Secured Credit Facility, will rank
PARI PASSU in right of payment with all existing and
future senior subordinated indebtedness of the Company,
and will rank senior in right of payment to all existing
and future subordinated indebtedness of the Company. As of
March 31, 1998, on a pro forma basis after giving effect
to the
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Transactions, the issuance of the Notes and the
application of the net proceeds therefrom, the aggregate
principal amount of Senior Indebtedness (excluding trade
payables and other accrued liabilities) of the Company and
its subsidiaries would have been approximately $9.2
million.
Guarantees...................... The Company's obligations under the Notes will be
guaranteed, jointly and severally, on a senior
subordinated basis by all existing and future domestic
Restricted Subsidiaries of the Company. The Guarantees
will be subordinated in right of payment to all existing
and future Senior Indebtedness of the Guarantors,
including all obligations of the Guarantors under the
Secured Credit Facility, will rank PARI PASSU in right of
payment with all existing and future senior subordinated
indebtedness of the Guarantors, and will rank senior in
right of payment to all existing and future subordinated
indebtedness of the Guarantors.
Certain Covenants............... The Indenture governing the Notes provides for certain
covenants that, among other things, limit the ability of
the Company and its Restricted Subsidiaries to incur
additional Indebtedness (as defined) and issue preferred
stock, pay dividends or make other distributions, create
certain liens, enter into certain transactions with
affiliates, sell assets of the Company or its Restricted
Subsidiaries, sell Equity Interests (as defined) of the
Company's Restricted Subsidiaries or enter into certain
mergers and consolidations. In addition, under certain
circumstances, the Company will be required to offer to
purchase Notes at a price equal to 100% of the principal
amount thereof, plus accrued and unpaid interest thereon
and Liquidated Damages, if any, to the date of purchase,
with the proceeds of certain Asset Sales (as defined). See
"Description of Notes."
Exchange Offer; Registration
Rights........................ Holders of Exchange Notes are not entitled to any
registration rights with respect to the Exchange Notes.
Pursuant to the Registration Rights Agreement, the Company
agreed to file with the Commission the registration
statement of which this Prospectus is a part with respect
to the Exchange Offer. See "Description of
Notes--Registration Rights; Liquidated Damages."
</TABLE>
RISK FACTORS
POTENTIAL INVESTORS IN THE EXCHANGE NOTES SHOULD CONSIDER CAREFULLY THE
INFORMATION SET FORTH UNDER THE CAPTION "RISK FACTORS" PRIOR TO MAKE AN
INVESTMENT DECISION TO TENDER THEIR RESTRICTED NOTES IN THE EXCHANGE OFFER.
9
<PAGE>
SUMMARY PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma statements of operations data, other
operating data and selected ratios are presented as if the JTM Acquisition, the
Initial Acquisitions, the Transactions and the Offering occurred on January 1,
1997. The following unaudited pro forma balance sheet data is presented as if
the Subsequent Acquisitions and the Offering occurred on March 31, 1998. The
unaudited summary pro forma condensed combined financial information contained
herein is presented for illustrative purposes only, does not purport to be
indicative of the Company's financial position or results of operations as of
the date hereof, as of the Issue Date, or as of or for any other future date,
and is not necessarily indicative of what the Company's actual financial
position or results of operations would have been had the JTM Acquisition, the
Initial Acquisitions, the Transactions and the Offering been consummated on such
dates. The unaudited pro forma condensed combined financial information set
forth below is based on the historical financial statements of JTM, Pozzolanic,
PPA, the U.S. Ash Group and Fly Ash Products and should be read in conjunction
with such Financial Statements and Notes thereto and the other information
included elsewhere in this Prospectus. See "Available Information," "Selected
Historical Financial Information," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Index to Financial
Statements."
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 1998 DECEMBER 31, 1997
------------------- -----------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Sales.................................................................... $ 21,799 $ 110,337
Cost of sales, excluding depreciation.................................... 16,469 79,998
Depreciation and amortization............................................ 2,648 10,072
Selling, general and administrative expenses............................. 2,648 10,179
Income from operations................................................... 34 10,088
Interest income.......................................................... 135 230
Interest expense......................................................... 2,832 11,329
Other income, net........................................................ 28 140
Income (loss) before income taxes........................................ (2,635) (872)
Income tax (expense) benefit............................................. 649 (467)
Net loss................................................................. (1,986) (1,339)
OTHER OPERATING DATA:
EBITDA (1)............................................................... 2,845 20,530
EBITDA margin............................................................ 13.1% 18.6%
Adjusted EBITDA (2)...................................................... 2,883 21,471
Capital expenditures..................................................... 743 2,474
Cash interest expense (3)................................................ 2,692 10,767
SELECTED RATIOS:
Ratio of earnings to fixed charges (4)................................... .21x .94x
Deficiency of earnings to fixed charges.................................. (2,635) (872)
Adjusted EBITDA/cash interest expense (3)................................ 1.07x 1.99x
Adjusted EBITDA less capital expenditures/cash interest expense (3)...... .79x 1.76x
BALANCE SHEET DATA:
Working capital.......................................................... 7,654
Total assets............................................................. 174,448
Total debt............................................................... 109,206
Stockholders' equity..................................................... 25,014
</TABLE>
- ------------------------
(1) EBITDA represents income before income taxes plus interest expense,
depreciation and amortization for the applicable company. EBITDA should not
be considered as an alternative measure of net income or cash provided by
operating activities (both as determined in accordance with generally
accepted accounting principles), but is presented to provide additional
information relating to the Company's debt service capability. EBITDA should
not be considered in isolation or as a substitute for other measures of
financial performance or liquidity.
(2) Pro forma adjusted EBITDA represents pro forma EBITDA net of estimated cost
savings anticipated to be realized by terminating certain transportation
costs paid to a related party by the U.S. Ash Group prior to consummation of
the Transactions.
(3) Represents interest expense net of debt issuance costs.
(4) The ratio of earnings to fixed charges is computed by dividing earnings by
fixed charges. For this purpose, earnings include pre-tax income from
continuing operations plus fixed charges. Fixed charges include interest,
whether expensed or capitalized, amortization of debt expense and that
portion of rental expense which is representative of the interest factor in
these rentals.
10
<PAGE>
SUMMARY HISTORICAL FINANCIAL INFORMATION
The following table sets forth summary consolidated financial information of
JTM for each of the five years in the period ended December 31, 1997 and for the
three month periods ended March 31, 1998 and 1997. Such information was derived
from the Consolidated Financial Statements and Notes thereto of JTM and the
Unaudited Condensed Consolidated Financial Statements and Notes thereto of JTM,
respectively, included elsewhere in this Prospectus. The summary consolidated
financial information set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the Consolidated Financial Statements and Notes thereto of JTM and
the Unaudited Condensed Consolidated Financial Statements and Notes thereto of
JTM included elsewhere in this Prospectus.
The summary financial information set forth below for the three months ended
March 31, 1998 and 1997 is unaudited and has been derived from the Company's
unaudited financial statements for those periods included elsewhere in this
Prospectus. In the opinion of the Company's management, the information for the
three months ended March 31, 1998 and 1997 includes all adjustments (consisting
only of normal recurring adjustments) considered necessary for a fair
presentation. Interim results are not necessarily indicative of results to be
expected for any fiscal year.
<TABLE>
<CAPTION>
THREE MONTHS 9 1/2
ENDED 2 1/2 MONTHS MONTHS
MARCH 31, ENDED ENDED YEAR ENDED DECEMBER 31,
-------------------- DECEMBER 31, OCTOBER 13, -------------------------------
1998 1997 1997 1997 1996 1995 1994
--------- --------- ------------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Sales.................................... 15,395 14,655 $ 12,643 $ 51,295 $ 62,841 $ 64,986 $ 60,784
Cost of sales, excluding depreciation.... 11,874 11,748 9,365 40,701 52,268 51,489 52,356
Depreciation and amortization............ 1,186 626 908 5,279 2,285 2,265 1,538
Selling, general and administrative
expenses............................... 1,651 1,431 1,256 3,633 5,667 9,692 --
Income from operations................... 684 850 1,114 1,682 2,621 1,540 6,890
Interest income.......................... 52 -- 31 -- -- -- --
Interest expense......................... 976 1,312 628 4,160 4,853 4,081 17
Income (loss) before income taxes........ (239) (462) 517 (2,478) (2,232) (2,541) 6,873
Income tax (expense) benefit............. (12) 99 (252) (612) 362 445 --
Net income (loss)........................ (251) (363) 265 (3,090) (1,870) (2,096) 6,873(1)
OTHER OPERATING DATA:
EBITDA (2)............................... 1,923 1,476 2,054 6,961 4,906 3,805 8,428
EBITDA margin............................ 15.2% 10.1% 16.2% 13.6% 7.8% 5.9% 13.9%
Capital expenditures..................... 536 103 19 681 4,357 4,589 905
Ratio of earnings to fixed
charges (3)............................ .83x .74x 1.49x 0.56x 0.68x 0.58x 5.21x
Deficit of earnings to fixed charges..... (239) (462) -- (2,478) (2,232) (2,541) --
BALANCE SHEET DATA: (AT PERIOD END)
Working capital (deficiency)............. (30,302 (4) (45,239) (21,648)(4) (43,594) (45,804) (42,268) 6,249
Total assets............................. 136,643 61,800 73,270 58,396 62,950 61,779 18,291
Total debt............................... 35,000 -- -- -- -- -- 2,976
Stockholders' equity..................... 25,014 6,350 25,265 3,623 6,713 8,033 17,831
<CAPTION>
1993
---------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Sales.................................... $ 48,521
Cost of sales, excluding depreciation.... 37,359
Depreciation and amortization............ 1,493
Selling, general and administrative
expenses............................... --
Income from operations................... 9,669
Interest income.......................... --
Interest expense......................... (18)
Income (loss) before income taxes........ 9,687
Income tax (expense) benefit............. --
Net income (loss)........................ 9,687(1)
OTHER OPERATING DATA:
EBITDA (2)............................... 11,162
EBITDA margin............................ 23.0%
Capital expenditures..................... 6,800
Ratio of earnings to fixed
charges (3)............................ 15.00x
Deficit of earnings to fixed charges..... --
BALANCE SHEET DATA: (AT PERIOD END)
Working capital (deficiency)............. 4,134
Total assets............................. 19,756
Total debt............................... 23,365
Stockholders' equity..................... 38,103
</TABLE>
- ------------------------
(1) During the year ended December 31, 1994 and 1993, JTM was a subsidiary of
Union Pacific Resources Company ("Union Pacific") and was not allocated any
income taxes.
(2) EBITDA represents income before income taxes plus interest expense,
depreciation and amortization. EBITDA should not be considered as an
alternative measure of net income or cash provided by operating activities
(both as determined in accordance with generally accepted accounting
principles), but is presented to provide additional information relating to
JTM's debt service capability. EBITDA should not be considered in isolation
or as a substitute for other measures of financial performance or liquidity.
(3) The ratio of earnings to fixed charges is computed by dividing earnings by
fixed charges. For this purpose, earnings include pre-tax income from
continuing operations plus fixed charges. Fixed charges include interest,
whether expensed or capitalized, amortization of debt expense and that
portion of rental expense which is representative of the interest factor in
these rentals.
(4) JTM is a guarantor of the ISG Bridge Note and as such the March 31, 1998 and
the December 31, 1997 working capital deficit reflects push-down accounting
treatment of the $29.0 million ISG Bridge Note, which was paid in full with
a portion of the proceeds from the Offering.
11
<PAGE>
RISK FACTORS
THE FOLLOWING FACTORS SHOULD BE CONSIDERED CAREFULLY BY HOLDERS TENDERING
THE RESTRICTED NOTES PURSUANT TO THE EXCHANGE OFFER, ALTHOUGH THE RISK FACTORS
SET FORTH BELOW ARE GENERALLY APPLICABLE TO THE RESTRICTED NOTES AS WELL AS THE
EXCHANGE NOTES.
CONSEQUENCES OF EXCHANGING RESTRICTED NOTES
Holders of Restricted Notes who do not exchange their Restricted Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to the
provisions in the Indenture regarding transfer and exchange of the Restricted
Notes and the restrictions on transfer of such Restricted Notes as set forth in
the legend thereon as a consequence of the issuance of the Restricted Notes
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and applicable state securities
laws. In general, the Restricted Notes may not be offered or sold, unless
registered under the Securities Act, except pursuant to an exemption from, or in
a transaction not subject to, the Securities Act and applicable state securities
laws. The Company does not currently anticipate that they will register
Restricted Notes under the Securities Act. Based on interpretations by the staff
of the Commission, as set forth in no-action letters issued to third parties,
the Company believes that Exchange Notes issued pursuant to the Exchange Offer
in exchange for Restricted Notes may be offered for resale, resold or otherwise
transferred by holders thereof (other than any such holder which is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery provisions
of the Securities Act, provided that such Exchange Notes are acquired in the
ordinary course of such holders' business and such holders have no arrangement
with any person to participate in the distribution of such Exchange Notes.
However, the Company does not intend to request the Commission to consider, and
the Commission has not considered, the Exchange Offer in the context of a
no-action letter and there can be no assurance that the staff of the Commission
would make a similar determination with respect to the Exchange Offer as in such
other circumstances. Each holder, other than a broker-dealer, must acknowledge
that it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes and has no arrangement or understanding to participate in a
distribution of Exchange Notes. If any holder is an affiliate of the Company, is
engaged in or intends to engage in or has any arrangement or understanding with
respect to the distribution of the Exchange Notes to be acquired pursuant to the
Exchange Offer, such holder (i) could not rely on the applicable interpretations
of the staff of the Commission and (ii) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. Each broker-dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that, by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Restricted Notes where
such Restricted Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, starting on the Expiration Date and ending on the 180th day after the
Expiration Date, it will make this Prospectus available to any broker-dealer.
See "Plan of Distribution." However, to comply with the state securities laws,
the Exchange Notes may not be offered or sold in any state unless they have been
registered or qualified for sale in such state or an exemption from registration
or qualification is available and is complied with. The offer and sale of the
Exchange Notes to "qualified institutional buyers" (as such term is defined
under Rule 144A of the Securities Act) is generally exempt from registration or
qualification under the state securities laws. See "The Exchange
Offer--Consequences of Exchanging Restricted Notes."
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LACK OF PUBLIC MARKET FOR NOTES
The Restricted Notes have not been registered with the Commission or with
the securities commission or regulatory authorities of any state and, therefore,
such securities will not be freely tradable in the United States upon their
acquisition. The Notes will constitute a new issue of securities with no
established trading market, and there can be no assurance as to (i) the
liquidity of any such market that may develop, (ii) the ability of holders of
the Notes to sell their Notes or (iii) the price at which the holders of the
Notes would be able to sell their Notes. If such a market were to exist, the
Notes could trade at prices that may be higher or lower than their principal
amount or purchase price, depending on many factors, including prevailing
interest rates, the market for similar notes and the financial performance of
JTM. The Restricted Notes are eligible for trading in the PORTAL market. JTM has
been advised by the Initial Purchasers that each of them intends to make a
market in the Restricted Notes and the Exchange Notes. However, none of the
Initial Purchasers is obligated to do so and any market making activity with
respect to the Restricted Notes, or the Exchange Notes, may be discontinued at
any time without notice. In addition, such market making activity will be
subject to the limits imposed by the Securities Act and the Exchange Act and may
be limited during the Exchange Offer and the pendency of any applicable Shelf
Registration Statement (as defined) covering resales of Notes. There can be no
assurance that even following registration of the Restricted Notes or the
Exchange Notes, as the case may be, an active trading market will exist for the
Restricted Notes or the Exchange Notes, as the case may be, or that any such
trading market will be liquid. See "Description of Notes--Registration Rights;
Liquidated Damages."
SUBSTANTIAL LEVERAGE
The Company is highly leveraged. On March 31, 1998, after giving pro forma
effect to the Transactions and the Offering, the Company would have had total
indebtedness of approximately $109.2 million and stockholders' equity of
approximately $25.0 million. In addition, for the year ended December 31, 1997,
on a pro forma basis assuming that the JTM Acquisition, the Initial
Acquisitions, the Transactions and the Offering had occurred on January 1, 1997,
the Company's ratio of earnings to fixed charges would have been .94x. Subject
to restrictions in the Secured Credit Facility and the Indenture, the Company
and its Restricted Subsidiaries are permitted to incur additional indebtedness
in the future. In addition, beginning in 2003 the Indenture will permit JTM to
distribute certain amounts to ISG to service the ISG PIK Notes. See "Description
of Notes" and "Description of Secured Credit Facility."
JTM's ability to make scheduled payments of principal of, or to pay the
interest or Liquidated Damages, if any, on, or to refinance, its indebtedness
(including the Notes), or to fund planned capital expenditures will depend on
its future performance, which, to a certain extent, is subject to general
economic, financial, competitive, legislative, regulatory and other factors that
are beyond its control. Based upon the current level of operations and
anticipated revenue growth, management believes that cash flow from operations
and available cash, together with available borrowings under the Secured Credit
Facility, will be adequate to meet JTM's future liquidity needs for at least the
next several years. JTM may, however, need to refinance all or a portion of the
principal of the Notes on or prior to maturity. There can be no assurance that
JTM's business will generate sufficient cash flow from operations, that
anticipated revenue growth and operating improvements will be realized or that
future borrowings will be available under the Secured Credit Facility in an
amount sufficient to enable JTM to service its indebtedness, including the
Notes, or to fund its other liquidity needs. In addition, there can be no
assurance that JTM will be able to effect any such refinancing on commercially
reasonable terms, if at all. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Pro Forma Liquidity and Capital
Resources."
The degree to which JTM is leveraged could have important consequences to
holders of the Notes, including, but not limited to: (i) making it more
difficult for JTM to satisfy its obligations with respect to the Notes, (ii)
increasing JTM's vulnerability to general adverse economic and industry
conditions,
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<PAGE>
(iii) limiting JTM's ability to obtain additional financing to fund future
working capital, capital expenditures, and other general corporate requirements,
(iv) requiring the dedication of a substantial portion of JTM's cash flow from
operations to the payment of principal of, and interest on, its indebtedness,
thereby reducing the availability of such cash flow to fund working capital,
capital expenditures, research and development or other general corporate
purposes, (v) limiting JTM's flexibility in planning for, or reacting to,
changes in its business and the industry and (vi) placing JTM at a competitive
disadvantage in relation to less leveraged competitors. In addition, the
Indenture and the Secured Credit Facility contain financial and other
restrictive covenants that, among other things, limit the ability of JTM to
borrow additional funds. Failure by JTM to comply with such covenants could
result in an event of default which, if not cured or waived, could have a
material adverse effect on JTM. In addition, the degree to which JTM is
leveraged could prevent it from repurchasing all of the Notes tendered to it
upon the occurrence of a Change of Control. See "Description of
Notes--Repurchase at the Option of Holders--Change of Control" and "Description
of Secured Credit Facility."
SUBORDINATION OF THE NOTES AND THE GUARANTEES
The Notes and the Guarantees will be unsecured and subordinated to the prior
right of payment of all existing and future Senior Indebtedness of JTM and the
Guarantors, including obligations under the Secured Credit Facility. The
indebtedness under the Secured Credit Facility will also become due prior to the
time the principal obligations under the Notes become due. Subject to certain
limitations, the Indenture permits JTM and the Guarantors to incur additional
Senior Indebtedness. See "Description of Notes--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock." Under certain circumstances, the
subordination provisions contained in the Indenture prohibit JTM and the
Guarantors from making distributions to the holders of the Notes. In addition,
in the event of a liquidation or insolvency, the assets of JTM and the
Guarantors will be available to pay obligations on the Notes only after all
Senior Indebtedness of JTM and the Guarantors has been paid in full, and there
may not be sufficient assets remaining to pay amounts due on any or all of the
Notes then outstanding. In addition, substantially all of the assets of JTM and
the Guarantors are, or may be in the future, pledged or granted as collateral to
secure other indebtedness of JTM and the Guarantors. Certain affiliates of the
Initial Purchasers are lenders under the Secured Credit Facility and as such
received a substantial portion of the net proceeds of the Offering. See
"Description of Secured Credit Facility" and "Description of Notes--
Subordination."
COVENANT RESTRICTIONS
The Secured Credit Facility and the Indenture impose certain operating and
financial restrictions on JTM. Such restrictions will affect, and in many
respects significantly limit or prohibit, among other things, the ability of JTM
to incur additional indebtedness, repay indebtedness (including the Notes) prior
to stated maturity, sell assets, make investments, engage in transactions with
shareholders and affiliates, issue capital stock, create liens or engage in
mergers or acquisitions. These restrictions could also limit the ability of JTM
to effect future financings, make needed capital expenditures, withstand a
future downturn in JTM's business or the economy in general, or otherwise
conduct necessary corporate activities. JTM's ability to comply with the
covenants and restrictions under the Secured Credit Facility and the Indenture
may be affected by events beyond its control, including prevailing economic and
financial conditions. A failure by JTM to comply with these restrictions could
lead to a default under the terms of the Secured Credit Facility and the Notes
notwithstanding the ability of JTM to meet its debt service obligations. In the
event of a default, the lenders under the Secured Credit Facility could elect to
declare all such indebtedness to be due and payable, together with accrued and
unpaid interest thereon, and the commitments of such lenders to make revolving
credit loans thereunder could be terminated. In such event, a significant
portion of JTM's other indebtedness (including the Notes) may become immediately
due and payable and there can be no assurance that JTM would be able to make
such payments from its own resources or to
14
<PAGE>
borrow sufficient funds from alternative sources to make any such payment. See
"Description of Notes" and "Description of Secured Credit Facility."
ACQUISITION RISKS
JTM intends to seek additional acquisition opportunities. There can be no
assurance, however, that JTM will be able to successfully identify suitable
acquisition candidates, negotiate appropriate acquisition terms, obtain
financing which may be needed to effect such acquisitions, complete
acquisitions, integrate acquired operations into its existing operations or
expand into new markets. In addition, there can be no assurance that JTM will be
able to successfully integrate Pozzolanic, PPA, the U.S. Ash Group and Fly Ash
Products into its operations. Acquisitions involve numerous risks, including
difficulties in the assimilation of the operations, technologies, services and
products of the acquired companies and the diversion of management's attention
from other business concerns. Future acquisitions by JTM could result in the
incurrence of substantial additional indebtedness, the amortization of expenses
related to goodwill and other intangible assets and other increased expenses,
particularly in the fiscal quarters immediately following the completion of such
acquisitions while the operations of the acquired business are being integrated
into JTM's operations, which could have a material adverse effect on JTM's
business, financial condition and results of operations. Once integrated,
acquired operations may not achieve levels of revenues, profitability or
productivity comparable with those achieved by JTM's existing operations, or
otherwise perform as expected. In addition, JTM competes for acquisition and
expansion opportunities with companies that have substantially greater
resources.
ELECTRIC UTILITY DEREGULATION
The electric utility industry is in the process of deregulation. This
process is presently being pursued more aggressively by states than the Federal
Government, with faster movement by some states such as California and Texas
than in others. The impact that full deregulation of the industry will have on
JTM is something that cannot be accurately projected. The major area of impact
is the individual source of CCPs that JTM uses to supply material and products
to various markets. Deregulation could result in some sources being put out of
service because they are not economically competitive. JTM believes that no
significant changes to the sources of CCPs under contract will occur. However,
since this change to the industry is still evolving, JTM could be materially
adversely impacted if major changes occur to specific sources.
IMPACT OF CLEAN AIR ACT AMENDMENTS ON COAL CONSUMPTION
The federal Clean Air Act of 1970 ("Clean Air Act") and Amendments to the
Clean Air Act ("Clean Air Act Amendments"), and corresponding state laws that
regulate the emissions of materials into the air, affect the coal industry both
directly and indirectly. The coal industry may be directly affected by Clean Air
Act permitting requirements and/or emissions control requirements relating to
particulate matter (e.g., "fugitive dust"). The coal industry may also be
impacted by future regulation of fine particulate matter measuring 2.5
micrometers in diameter or smaller. In July 1997, the United States
Environmental Protection Agency ("EPA") adopted new, more stringent National
Ambient Air Quality Standards ("NAAQS") for particulate matter and ozone. As a
result, states will be required to implement changes to their existing state
implementation plans to attain and maintain compliance with the new NAAQS.
Because electric utilities emit nitrogen oxides, which are precursors to ozone,
JTM's utility customers are likely to be affected when the revisions to the
NAAQS are implemented by the states. State and federal regulations relating to
fugitive dust and coal combustion emissions regulations relating to
implementation of the new NAAQS may reduce JTM's sources for its products. The
extent of the potential impact of the new NAAQS on the coal industry will depend
on the policies and control strategies associated with the state implementation
process under the Clean Air Act, as well as on pending legislative proposals to
delay
15
<PAGE>
or eliminate aspects of the standard. Nonetheless, the new NAAQS could have a
material adverse effect on JTM's financial condition and results of operations.
The Clean Air Act indirectly affects JTM's operations by extensively
regulating the air emissions of sulfur dioxides and other compounds emitted by
coal-fired utility power plants. Title IV of the Clean Air Act Amendments places
limits on sulfur dioxide emissions from electric power generation plants. The
limits set baseline emission standards for such facilities. Reductions in such
emissions will occur in two phases; the first began in 1995 ("Phase I") and
applies only to certain identified facilities and the second is currently
scheduled to begin in 2000 ("Phase II") and will apply to most remaining
facilities, including those subject to the 1995 restrictions. The affected
utilities have been and may be able to meet these requirements by, among other
ways, switching to lower sulfur fuels, installing pollution control devices such
as scrubbers, reducing electricity generating levels or purchasing or trading
"pollution credits." Specific emission sources will receive these credits, which
utilities and industrial concerns can trade or sell to allow other units to emit
higher levels of sulfur dioxide. The effect of the Clean Air Act Amendments on
JTM cannot be completely ascertained at this time.
The Clean Air Act Amendments also require that utilities that currently are
major sources of nitrogen oxides in moderate or higher ozone nonattainment areas
install reasonably available control technology for nitrogen oxides, which are
precursors of ozone. In addition, EPA currently plans to implement the recently
issued, stricter ozone standards (discussed above) by 2003. The Ozone Transport
Assessment Group ("OTAG"), formed to make recommendations to the EPA for
addressing ozone problems in the eastern United States, submitted its final
recommendations to the EPA in June 1997. Based on the OTAG's recommendations,
the EPA recently announced a proposal (the "SIP call") that would require 22
eastern states to make substantial reductions in nitrogen oxide emissions. Under
this proposal, the EPA expects that states will achieve these reductions by
requiring power plants to make substantial reductions in their nitrogen oxide
emissions. Installation of reasonably available control technology and
additional control measures required under the SIP call will make it more costly
to operate coal-fired utility power plants and, depending on the requirements of
individual state attainment plans and the development of revised new source
performance standards, could make coal a less attractive fuel alternative in the
planning and building of utility power plants in the future. Any reduction in
coal's share of the capacity for power generation could have a material adverse
effect on JTM's financial condition and results of operations. The effect such
regulation or other requirements that may be imposed in the future could have on
the coal industry in general and on JTM in particular cannot be predicted with
certainty. No assurance can be given that the implementation of the Clean Air
Act Amendments or any future regulatory provisions will not materially adversely
affect JTM.
In addition, the Clean Air Act Amendments require a study of utility power
plant emissions of certain toxic substances, including mercury, and direct the
EPA to regulate these substances, if warranted. In 1997, the EPA issued a report
on mercury emissions which concluded that coal-fired utility boilers accounted
for 32.6% of total United States emissions during 1994-95. Future federal or
state regulatory or legislative activity may seek to reduce mercury emissions
and such requirements, if enacted, could result in reduced use of coal if
utilities switch to other sources of fuel.
IMPACT OF THE FRAMEWORK CONVENTION ON GLOBAL CLIMATE CHANGE ON THE COAL INDUSTRY
The United States and over 160 other nations are signatories to the
Framework Convention on Global Climate Change (the "Convention") which is
intended to limit or capture emissions of greenhouse gases, such as carbon
dioxide. In December 1997, in Kyoto, Japan, the signatories to the Convention
established a binding set of emissions targets for developed nations (the "Kyoto
Agreement"). Although the specific limits vary from country to country, under
the terms of the Kyoto Agreement, the United States would be required to reduce
emissions by 7% below 1990 levels over a five-year budget period from 2008 to
2012. Although the United States has not ratified the Kyoto Agreement and no
comprehensive regulations focusing on greenhouse gas emissions are in place,
such restrictions, whether through ratification of the
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<PAGE>
Kyoto Agreement or other efforts to stabilize or reduce greenhouse gas
emissions, could adversely impact the price and demand for coal. According to
the Energy Information Administration Annual Energy Outlook for 1998, coal
accounts for 34% of greenhouse gas emissions in the United States, and efforts
to control greenhouse gas emissions could result in reduced use of coal because
of switching to lower carbon sources of fuel or other actions. It is unclear
what impact, if any, greenhouse gas restrictions may have on JTM's operations.
There is no guarantee, however, that such restrictions, if established through
regulation or legislation, will not have a material adverse effect on JTM's
financial condition and results of operations.
MATERIAL QUALITY AND QUANTITY
Coal-fired boilers have been impacted by the Clean Air Act and the Clean Air
Act Amendments, which established specific emissions levels concerning sulfur
dioxide (SO(2)) and nitrous oxides (NO) that each utility must meet. These
emissions levels have required utilities to undertake many of the following
changes: change their fuel source(s), add scrubbers to capture SO(2), add new
boiler burner systems to control NO, add or modify fuel pulverizers/air handling
systems to control NO, introduce flue gas conditioning materials to control
particulate emissions in conjunction with meeting SO(2) emissions targets and in
some very isolated cases shut down a plant. Recent amendments to existing
particulate matter standards may require retrofitting of baghouses to control
particulate emissions. All of these changes can impact the quantity and quality
of CCPs produced at a power plant and can add to the costs of operating a power
plant. Further, inappropriate use of a material can result in faulty end
products. Since most of the products marketed by JTM typically consist of a
mixture of client-supplied materials, JTM does not exclusively control the
quality of the final end product, but shares such control with the manufacturer
of the ingredient materials. Therefore, there is a risk of liability regarding
the quality of the materials and end products marketed by JTM. In cases where
JTM is responsible for end-product quality, such as a structural fill (where
material is used to fill a cavity or designated area), JTM depends solely on its
own quality assurance program.
PERSONAL INJURY CLAIMS; UNCERTAINTY OF INSURANCE COVERAGE
Most of the products produced with JTM's materials involve handling and
transportation of material to the end-product plant location. JTM usually
transports the materials by rail carrier or bulk transport company. There is a
risk of inappropriate handling of JTM's materials, spillage of the materials
and, as a result of such a spillage, personal injury--all of which JTM cannot
control. In the handling of the materials, some material is extremely reactive
to water, can cause second or third degree burns, can cause silicosis if inhaled
into the lungs over long periods of time, or can act like lime and cause burns,
if allowed to contact skin. JTM currently carries a combined aggregate of
$2,000,000 in general/product liability insurance to cover potential concerns in
this area. However, the current coverage is in force through December 31, 1998,
and JTM cannot assure that such insurance coverage will remain available after
such date, that JTM's insurer will remain viable or that the insured amounts
will be sufficient to cover all future claims in excess of JTM's uninsured
retention. Furthermore, future rate increases might make such insurance
uneconomical for JTM to maintain. There can be no assurance that one or more
meritorious claims against JTM for serious personal injury would not have an
adverse effect upon JTM's business, financial condition and results of
operation, or on its ability to pay principal and interest on the Notes.
ENVIRONMENTAL LIABILITY
Materials sold by JTM vary in chemical composition. Although the EPA has
excluded CCPs from regulation as hazardous wastes, fluidized bed ash, which is a
material derived from the use of advanced boiler technology (Fluidized Bed
Combustor, or "FBCs") that meets EPA clean air standards, has not been ruled on
as of this date. JTM manages approximately 700,000 tons of FBCs annually. Should
the EPA rule to include this material on its hazardous material list it is
likely to involve a testing protocol similar to
17
<PAGE>
the one used for cement kiln dust. JTM has, through the ACAA, maintained an
active role in providing information to aid in determining the final
categorization of FBCs. Based on scientific information compiled by JTM, JTM
believes material now managed by JTM for utility clients will not, as a
consequence of EPA rulings, impact JTM negatively. However, should the EPA rule
not to grandfather material produced and marketed for the past ten years, JTM
could become part of a group of utilities, marketers, manufacturers (petroleum)
and service companies that will have to meet the EPA mandate. The EPA will make
a report to Congress on this issue on September 30, 1998. A final ruling will be
made by the EPA no later than April 1, 1999.
While CCPs are not hazardous wastes, they contain small concentrations of
metals that are included in the list of "hazardous substances" under the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA").
Such concentrations are well below applicable cleanup criteria. Land application
of CCPs is regulated by a variety of federal and state statutes, which impose
testing and management requirements to ensure environmental protection. Under
limited circumstances, mismanagement of CCPs can give rise to CERCLA liability.
JTM has been active in a number of landfill operations where the permitting
and liability for such operations is contractually retained by the client. JTM
is active in one landfill that is "managed" as a hazardous waste landfill,
although it is not designated as such. This client processes spent aluminum pot-
liner, a hazardous waste, into a non-hazardous condition by use of their
patented process. JTM provides services to landfill residues of this treatment
process and operates certain in-plant equipment and systems for the client.
Because of recent rulings, JTM's operations are run as if the processed potliner
is a hazardous waste. All environmental liabilities surrounding this project are
assumed by the client, and JTM currently foresees no adverse effect upon its
business, financial condition or results of operation from this project. There
can be no assurance, however, that JTM will not be named in third-party claims
relating to its activities. See "Business--Environmental Liability."
DEPENDENCE ON KEY PERSONNEL
JTM's executive officers and certain key employees of JTM have been
primarily responsible for the development and expansion of its business, and the
loss of the services of a number of these individuals could have an adverse
effect on JTM. The consummation of the Initial Acquisitions and the Subsequent
Acquisitions combined management of five separate companies under the ownership
of JTM. JTM's future success will depend in part upon its continued ability to
recruit, motivate and retain qualified personnel, as well as the successful
integration of the five management teams. There can be no assurance that JTM
will be successful in this regard. JTM has employment and non-competition
agreements with certain key personnel and will enter into non-competition
agreements with owners of companies acquired. See "Management--Employment
Agreements."
COMPETITION
JTM competes both with respect to (i) obtaining materials management
contracts with utility and other industrial companies and (ii) the marketing of
CCPs and related industrial materials. The market for the management of CCPs and
related industrial materials is highly fragmented. Although JTM believes it is
the largest manager of CCPs in North America and the only company providing such
management services on a national basis, much of the competition in the CCP
management industry is regional. JTM has a presence in every region in the
United States. Although JTM typically has long-term contracts with its clients,
some of such contracts provide for the termination of such contract at the
convenience of the utility company upon a minimum 90-day notice. Moreover,
certain of JTM's most significant competitors on a regional basis appear to be
seeking a broader national presence. Certain of these competitors have
substantially greater resources than JTM, and there can be no assurance that if
they were to begin to compete in the national market, or in regions where they
currently do not have operations, JTM would not be adversely affected.
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<PAGE>
Generally, the markets for JTM's traditional CCPs are highly competitive,
with many local, regional and national companies that market CCPs, as well as
numerous products which are substitutable for CCPs, including cement and other
filler materials, such as limestone. JTM competes on the basis of price,
delivery and product quality. Due to the high cost of transportation relative to
sales price, competition is generally regional. Due to the industry's fragmented
nature and supply of product, within each region JTM and its competitors
typically deliver their traditional products to their customers directly from
the client's site at a regional market price. Many of JTM's competitors
(including manufacturers and marketers of substitutable products) have
substantially greater resources than JTM, and there can be no assurance that
these competitors will not utilize their resources to compete effectively in the
regions where JTM operates. See "Business--Competition."
SEASONALITY; CYCLICALITY
JTM's business consists of managing CCPs and other materials for utilities
and other industrial facilities and marketing CCPs and other materials to end
users. Materials management services often include disposal operations and
landfill services that are directly tied to year-round plant operations,
providing relatively evenly distributed revenue generation. However, CCP sales
are keyed to construction market demands that tend to generally follow national
trends in construction with predictable response to seasonal peaks. JTM's sales
have historically reflected these seasonal trends, with the largest percentage
of total annual revenues being realized in the second and third quarters. Low
seasonal demand normally results in reduced shipments and revenues in the first
quarter.
The CCP industry is cyclical and is affected by changes in general and local
economic conditions, such as new home construction and highway (infrastructure
repair) construction. A downturn in the economy in one or more markets served by
JTM could have a material adverse effect on JTM's sales. Unscheduled outages in
the utility industry can also impact quarterly performance by interrupting the
supply of CCPs. On-site storage of CCPs in silos can alleviate this effect but
is not available at or near all utility plant sites. Major planned outages at
utility plants occur at intervals and must be handled appropriately to keep
product supplied to customers. This cannot always be accomplished and sometimes
backup sources are shipped in at higher costs to JTM to retain the customer. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Seasonality of Business."
CONTROL BY PRINCIPAL STOCKHOLDERS
A limited number of stockholders of ISG beneficially and indirectly own or
control, in the aggregate, all of the outstanding shares of capital stock of
JTM. Because of their beneficial stock ownership, these stockholders will be
able to continue to elect the members of the Board of Directors and decide all
matters requiring stockholder approval. See "Security Ownership of Certain
Beneficial Owners and Management."
PURCHASE OF NOTES UPON A CHANGE OF CONTROL
JTM must offer to purchase the Notes upon the occurrence of a Change of
Control at a purchase price equal to 101% of the principal amount thereof, plus
accrued interest thereon and Liquidated Damages, if any, to the date of
purchase. See "Description of Notes--Repurchase at the Option of Holders--Change
of Control."
The Secured Credit Facility prohibits JTM from prepaying the Notes,
including prepayments pursuant to a Change of Control Offer. Prior to commencing
such an offer to purchase the Notes, JTM would be required to (i) repay in full
all indebtedness of JTM that would prohibit the purchase of the Notes, including
indebtedness under the Secured Credit Facility, or (ii) obtain any requisite
consent to permit the purchase. If JTM is unable to repay all of such
indebtedness or is unable to obtain the necessary consents, JTM will be unable
to offer to purchase the Notes and such failure will constitute an Event of
Default
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<PAGE>
under the Indenture. There can be no assurance that JTM will have sufficient
funds available at the time of any Change of Control to make any debt payment
(including purchases of Notes) as described above.
The events that constitute a Change of Control under the Indenture may also
be events of default under the Secured Credit Facility. Such events may permit
the lenders under the Secured Credit Facility to accelerate the debt and, if the
debt is not paid, to enforce security interests in the assets of JTM, thereby
limiting JTM's ability to raise cash to purchase the Notes and reducing the
practical benefit of the offer to purchase provisions to the holders of the
Notes.
FRAUDULENT TRANSFER CONSIDERATIONS; UNENFORCEABILITY OF SUBSIDIARY GUARANTEES
The obligations of any Guarantor as a guarantor under the Indenture may be
subject to review under applicable fraudulent transfer or similar laws, in the
event of the bankruptcy or other financial difficulty of any such Guarantor. In
the United States, under such laws, if a court in a lawsuit by an unpaid
creditor or representative of creditors of any such Guarantor, such as a trustee
in bankruptcy or any such person as debtor in possession, were to find that at
the time such Guarantor incurred its obligations under its Guarantee, it (i)
received less than fair consideration or reasonably equivalent value therefor,
and either (ii) (a) was insolvent, (b) was rendered insolvent, (c) was engaged
in a business or transaction for which its remaining unencumbered assets
constituted unreasonably small capital, or (d) intended to incur or believed
that it would incur debts beyond its ability to pay as such debts matured, such
court could void all or a portion of such obligations under its Guarantee and
direct the return of any amounts paid with respect thereof. Moreover, regardless
of the factors identified in the foregoing clauses (i) and (ii), a court could
take such action if it found that the Guarantee was entered into with actual
intent to hinder, delay or defraud creditors. The measure of insolvency for
purposes of the foregoing will vary depending on the law of the jurisdiction
being applied. Generally, however, an entity would be considered insolvent if
the sum of its debts (including contingent or unliquidated debts) is greater
than all of its property at a fair valuation or if the present fair salable
value of its assets is less than the amount that would be required to pay its
probable liability on its existing debts as they become absolute and matured.
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USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer.
CAPITALIZATION
The following table sets forth as of March 31, 1998, the consolidated
capitalization of (i) JTM on a historical basis and (ii) JTM on a pro forma
basis assuming that the Transactions and the Offering had occurred as of such
date.
The following table should be read in conjunction with the historical
financial statements of JTM, Pozzolanic, PPA, the U.S. Ash Group and Fly Ash
Products, the unaudited pro forma condensed combined financial information, and
the related notes thereto, and the other information contained elsewhere in this
Prospectus. See "Available Information," "Pro Forma Condensed Combined Financial
Information," "Selected Historical Financial Information," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Index to Financial Statments."
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
----------------------
<S> <C> <C>
ACTUAL PRO FORMA
--------- -----------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Current portion of long-term debt and note payable (1)................................... $ 36,000 $ 0
Long-term debt, excluding current maturities:
Secured Credit Facility.................................................................. 35,000 9,206
Notes offered hereby..................................................................... 0 100,000
--------- -----------
Total long-term debt excluding current maturities...................................... 35,000 109,206
--------- -----------
Total debt............................................................................. 71,000 109,206
Stockholders' equity....................................................................... 25,014 25,014
--------- -----------
Total capitalization................................................................... $ 96,014 $ 134,220
--------- -----------
--------- -----------
</TABLE>
- ------------------------
(1) Reflects the guarantee by the Company of the ISG Bridge Note.
21
<PAGE>
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The unaudited pro forma condensed combined statements of operations are
presented as if the JTM Acquisition, the Initial Acquisitions, the Transactions
and the Offering occurred on January 1, 1997. The unaudited pro forma condensed
combined balance sheet is presented as if the Subsequent Acquisitions and the
Offering occurred on March 31, 1998.
The unaudited pro forma condensed combined financial information contained
herein is presented for illustrative purposes only, does not purport to be
indicative of the Company's financial position or results of operations as of
the date hereof, as of the Issue Date, or as of or for any other future date,
and is not necessarily indicative of what the Company's actual financial
position or results of operations would have been had the JTM Acquisition, the
Initial Acquisitions, the Transactions and the Offering been consummated on such
dates. The unaudited pro forma condensed combined financial information set
forth below is based on the historical financial statements of JTM, Pozzolanic,
PPA, the U.S. Ash Group and Fly Ash Products and should be read in conjunction
with such Financial Statements and Notes thereto and the other information
included elsewhere in this Prospectus. See "Available Information," "Selected
Historical Financial Information," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Index to Financial
Statements."
The unaudited pro forma condensed combined balance sheet has been prepared
using the purchase method of accounting for the Subsequent Acquisitions, whereby
the total cost of each acquisition is allocated to the tangible and intangible
assets acquired and liabilities assumed based upon their respective estimated
fair values at March 31, 1998. For purposes of the unaudited pro forma condensed
combined balance sheet, such allocations have been made based upon currently
available information and management's estimates.
The unaudited pro forma condensed combined financial information reflects
all adjustments, consisting of normal recurring accruals, which in the opinion
of management of the applicable company are necessary for a presentation of
results for the respective periods in accordance with the basis of presentation
described in the respective company's financial statements.
The CCP management industry is seasonal in nature, with a higher proportion
of sales and earnings usually being generated in the second and third quarters
of the fiscal year than in other periods. Because of this seasonality and other
factors, results of operations for interim periods are not necessarily
indicative of results of operations for an entire fiscal year. See "Risk
Factors--Seasonality; Cyclicality" and "Management Discussion and Analysis of
Financial Condition and Results of Operations--Seasonality of Business."
22
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
INITIAL ACQUISITIONS SUBSEQUENT ACQUISITIONS
------------------------------------ ------------------------
POZZOLANIC PPA FLY ASH
JTM PRE-ACQUISITION PRE-ACQUISITION PRODUCTS U.S. ASH
HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL COMBINED
----------- ----------------- ----------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Sales............................... $ 15,395 $ 2,053 $ 751 $ 1,133 $ 2,560 $ 21,892
Cost of sales, excluding
depreciation...................... 11,874 1,449 821 719 1,965 16,828
Depreciation and amortization....... 1,186 100 9 129 16 1,440
Selling, general and
administrative.................... 1,651 625 298 214 353 3,139
Income from operations.............. 684 (121) (375) 71 226 485
Interest income................... 52 42 17 3 21 135
Interest expense.................. (976) -- -- (18)_ -- (994)
Other income (expense), net....... 1 1 -- 9 17 28
Income (loss) before income taxes... (239) (78) (358) 65 264 (346)
Income tax (expense) benefit........ (12) 30 134 -- (120) 32
----------- ------ ----- ----------- ----------- -----------
Net income (loss)................... $ (251) $ (48) $ (224) $ 65 $ 144 $ (314)
----------- ------ ----- ----------- ----------- -----------
----------- ------ ----- ----------- ----------- -----------
OTHER OPERATING DATA(4):
EBITDA.............................. $ 1,923 $ 22 $ (349) $ 212 $ 280 $ 2,085
Adjusted EBITDA..................... -- -- -- -- -- --
Capital expenditures................ 536 7 -- 180 20 743
Ratio of earnings to fixed
charges...........................
Deficiency of earnings to fixed
charges...........................
<CAPTION>
PRO FORMA
--------------------------
ADJUSTMENT COMBINED
------------- -----------
<S> <C> <C>
Sales............................... $ (93)(f) $ 21,799
Cost of sales, excluding
depreciation...................... (103)(f) 16,469
(127)(g)
(129)(h)
Depreciation and amortization....... 1,208(i) 2,648
Selling, general and
administrative.................... (27)(f) 2,648
(20)(g)
8(h)
(306)(j)
(66)(o)
(80)(p)
Income from operations.............. 34
Interest income................... 135
Interest expense.................. (1,838)(l) (2,832)
Other income (expense), net....... 28
Income (loss) before income taxes... (2,635)
Income tax (expense) benefit........ 642(m) 649
(25)(n)
-----------
Net income (loss)................... $ (1,986)
-----------
-----------
OTHER OPERATING DATA(4):
EBITDA.............................. $ 2,845
Adjusted EBITDA..................... 2,883
Capital expenditures................ 743
Ratio of earnings to fixed
charges........................... .21x
Deficiency of earnings to fixed
charges........................... (2,635)
</TABLE>
23
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SUBSEQUENT
JTM INITIAL ACQUISITIONS
------------------------------------------------------ ACQUISITIONS -----------
JANUARY 1- OCTOBER 14- ------------------------ FLY ASH
OCTOBER 13 DECEMBER 31 AS POZZOLANIC PPA PRODUCTS
HISTORICAL HISTORICAL ADJUSTMENTS ADJUSTED HISTORICAL HISTORICAL HISTORICAL
----------- ------------- ------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales.................... $ 51,295 $ 12,643 $ $ 63,938 $ 21,263 $ 7,878 $ 6,331
Cost of sales, excluding
depreciation........... 40,701 9,365 50,066 12,905 5,279 3,823
Depreciation and
amortization........... 5,279 908 (4,087)a 4,246 702 277 685
2,146b
Selling, general and
administrative
expenses............... 3,633 1,256 (236)c 4,653 2,898 2,016 980
Income from operations... 1,682 1,114 4,973 4,758 306 843
Interest income........ -- 31 31 38 69 197
Interest expense....... (4,160) (628) 1,864d (2,924) -- -- (94)
Other income (expense),
net.................. -- -- -- 63 -- --
Income before income
taxes.................. (2,478) 517 2,080 4,859 375 946
Income tax (expense)
benefit................ (612) (252) (160)e (1,024) (1,778) (143) --
----------- ------------- ----------- ----------- ----------- -----------
Net Income (loss)........ $ (3,090) $ 265 $ 1,056 $ 3,081 $ 232 $ 946
----------- ------------- ----------- ----------- ----------- -----------
----------- ------------- ----------- ----------- ----------- -----------
OTHER OPERATING DATA (4):
EBITDA................... $ 6,961 $ 2,053 $ 9,250 $ 5,561 $ 652 $ 1,725
Adjusted EBITDA.......... -- -- -- -- -- --
Capital expenditures..... 681 19 700 401 366 890
Ratio of earnings to
fixed charges..........
Deficiency of earnings to
fixed charges..........
<CAPTION>
U.S. ASH AS PRO FORMA
GROUP ADJUSTED --------------------------
HISTORICAL COMBINED ADJUSTMENTS COMBINED
----------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Sales.................... $ 11,436 $ 110,846 $ (509)f $ 110,337
Cost of sales, excluding
depreciation........... 10,006 82,079 (717)f 79,998
(871)g
(493)h
Depreciation and
amortization........... 63 5,973 (76)f 10,072
4,175i
Selling, general and
administrative
expenses............... 1,406 11,953 (174)f 10,179
(93)g
31h
(1,286)j
(252)o
Income from operations... (39) 10,841 10,088
Interest income........ 92 427 (197)k 230
Interest expense....... -- (3,018) (8,311)l (11,329)
Other income (expense),
net.................. 77 140 140
Income before income
taxes.................. 130 8,390 (872)
Income tax (expense)
benefit................ (49) (2,994) 2,890m (467)
(362)n
----------- ----------- -----------
Net Income (loss)........ $ 81 $ 5,396 $ (1,339)
----------- ----------- -----------
----------- ----------- -----------
OTHER OPERATING DATA (4):
EBITDA................... $ 193 $ 17,381 $ 20,530
Adjusted EBITDA.......... -- -- 21,471
Capital expenditures..... 117 2,474 2,474
Ratio of earnings to
fixed charges.......... .94x
Deficiency of earnings to
fixed charges.......... (872)
</TABLE>
24
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SUBSEQUENT
ACQUISITIONS
------------------------
FLY ASH PRO FORMA
JTM PRODUCTS U.S. ASH ------------------------
HISTORICAL HISTORICAL HISTORICAL COMBINED ADJUSTMENTS COMBINED
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents...................... $ 405 $ 355 $ 1,123 $ 1,883 $ 96,200s $ --
(34,755)q
(63,328)r
Accounts receivable............................ 13,183 714 1,874 15,771 (714)q 15,057
Prepaid expenses and other current assets...... 1,455 189 86 1,730 (189)q 1,541
----------- ----------- ----------- ----------- -----------
Total current assets....................... 15,043 1,258 3,083 19,384 16,598
Property, plant and equipment, net................. 20,485 1,473 361 22,319 (510)q 21,809
Intangible assets, net............................. 99,738 -- -- 99,738 31,126q 130,864
Other assets, net.................................. 1,377 585 -- 1,962 3,800s 5,177
(585)q
----------- ----------- ----------- ----------- -----------
Total assets............................... $ 136,643 $ 3,316 $ 3,444 $ 143,403 $ 174,448
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable............................... $ 3,361 $ 372 $ 744 $ 4,477 $ (372)q $ 4,105
Accrued expenses............................... 4,263 66 9 4,338 (66)q 2,738
(1,534)r
Current portion of long-term debt and note
payable...................................... 36,000 550 -- 36,550 (550)q --
(36,000)r
Other current liabilities...................... 1,721 60 380 2,161 (60)q 2,101
----------- ----------- ----------- ----------- -----------
Total current liabilities.................. 45,345 1,048 1,133 47,526 8,944
Long-term debt..................................... 35,000 526 -- 35,526 100,000s 109,206
(25,794)r
(526)q
Other non-current liabilities...................... 31,284 -- -- 31,284 31,284
----------- ----------- ----------- ----------- -----------
Total liabilities.......................... 111,629 1,574 1,133 114,336 149,434
Shareholders' equity:
Common stock................................... 3 3 (3)q --
Additional paid-in capital..................... 25,000 1 -- 25,001 (1)q 25,000
Retained earnings.............................. 14 4,462 2,308 6,784 (6,770)q 14
Receivable from shareholder.................... (2,721) -- (2,721) 2,721q --
----------- ----------- ----------- ----------- -----------
Total shareholders' equity................. 25,014 1,742 2,311 29,067 25,014
----------- ----------- ----------- ----------- -----------
Total liabilities and shareholders'
equity................................... $ 136,643 $ 3,316 $ 3,444 $ 143,403 $ 174,448
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
25
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
1. The unaudited pro forma condensed combined statements of operations are
presented as if the JTM Acquisition, the Initial Acquisitions, the
Transactions and the Offering occurred on January 1, 1997. The unaudited pro
forma condensed combined balance sheet is presented as if the Subsequent
Acquisitions and the Offering occurred on March 31, 1998. Pozzolanic and PPA
became wholly-owned subsidiaries of JTM on March 4, 1998 and March 20, 1998,
respectively, in transactions accounted for as purchase business
combinations in accordance with generally accepted accounting principles.
Accordingly, their assets and liabilities were adjusted to their estimated
fair values as of the respective dates and their results of operations for
the period subsequent to the respective dates have been included in the JTM
Historical amounts. U.S. Ash Group and Fly Ash Products became wholly-owned
subsidiaries of JTM subsequent to March 31, 1998 in transactions accounted
for as purchase business combinations in accordance with generally accepted
accounting principles, and, accordingly the assets and liabilities of the
U.S. Ash Group and Fly Ash Products are presented at their estimated fair
values at March 31, 1998.
JTM became a wholly owned subsidiary of ISG on October 14, 1997 in a
transaction accounted for as a purchase business combination in accordance
with generally accepted accounting principles and, accordingly, JTM assets
and liabilities were adjusted to their estimated fair values as of that
date. JTM's pre-acquisition operating results have been included in the
unaudited pro forma condensed combined statement of operations for the
twelve months ended December 31, 1997 and certain adjustments have been made
to reflect JTM's operating results as if the acquisition had occurred on
January 1, 1997.
Certain reclassifications of Pozzolanic, PPA, the U.S. Ash Group and Fly Ash
Products balances have been made to conform to the JTM reporting format.
The following adjustments have been made to arrive at the unaudited pro
forma condensed combined financial information.
2. PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS ADJUSTMENTS FOR THE
THREE MONTHS ENDED MARCH 31, 1998 AND THE TWELVE MONTHS ENDED DECEMBER 31,
1997.
(a) Reflects the goodwill amortization for the 9 1/2 month period ended October
13, 1997.
(b) Reflects the depreciation and amortization based on allocating the effective
purchase price to the fair values of assets purchased in the acquisition of
JTM by ISG on October 14, 1997.
(c) Reflects the reduction in insurance cost resulting from obtaining insurance
coverage directly from a third party carrier. This expense was previously
allocated from JTM's former parent.
(d) Reflects the reduction in interest expense resulting from elimination of
$49.4 million intercompany debt to the former parent of JTM and push down of
a $29.0 million ISG Bridge Note related to the acquisition of JTM by ISG.
(e) Reflects the income tax effects of the pro forma adjustments at an assumed
statutory rate of 35%.
(f) Elimination of revenues and expenses related to a division of PPA not
included in the PPA Acquisition pursuant to the purchase agreement.
(g) Reflects the termination of rental arrangements with related parties for
buildings and equipment pursuant to the purchase agreement for the U.S. Ash
Group.
(h) Reflects the termination of an employee leasing arrangement at the U.S. Ash
Group pursuant to the purchase agreement for the U.S. Ash Group. The
personnel became employees of JTM at acquisition. Payroll is processed by
JTM under its external payroll processing arrangement at no additional cost.
The reduction in expense is offset by the salaries and benefits of the 26
employees involved.
26
<PAGE>
(i) Reflects the increase in depreciation and amortization based upon allocating
the effective purchase price to the fair values of the assets purchased in
the acquisitions of Pozzolanic, PPA, the U.S. Ash Group and Fly Ash
Products.
(j) Reflects the reduction of expense related to termination of employment of
eight executive personnel pursuant to the purchase agreements for PPA,
Pozzolanic, the U.S. Ash Group and Fly Ash Products. JTM has a regional
management organization established and in place to manage the various
locations and, accordingly, the positions held by the eight personnel have
been eliminated. JTM has organized in this manner considering the long-term
nature of its contract relationships and the dependence of its customers on
location.
(k) Reflects the reduction of interest income related to a loan receivable not
included in the Fly Ash Products Acquisition.
(l) Reflects the increase in interest expense and amortization of debt issue
costs resulting from the issuance of the Notes and borrowings under the
Secured Credit Facility occurring concurrently with the Transactions. The
increase is offset by the elimination of interest expense on the $29.0
million ISG Bridge Note which was paid in full with a portion of the
proceeds of the Offering and certain interest bearing debt not assumed by
JTM in the Fly Ash Products Acquisition.
(m) Reflects the income tax effects of the pro forma adjustments.
(n) Reflects the increase in income tax for Fly Ash Products, an S Corporation.
(o) Reflects the reduction in expense related to renegotiated employment
contracts for two employees pursuant to the purchase agreement for PPA.
(p) To eliminate costs incurred by Pozzolanic prior to the Pozzolanic
Acquisition related to such acquisition consisting of legal, accounting and
related costs.
3. PRO FORMA CONDENSED COMBINED BALANCE SHEET ADJUSTMENTS AT MARCH 31, 1998.
(q) To record the U.S. Ash Group Acquisition and the Fly Ash Products
Acquisition, Goodwill was calculated as follows:
<TABLE>
<S> <C>
Consideration paid:
U.S. Ash Group................................................................. $ 24,600
Fly Ash Products............................................................... 9,500
Acquisition costs.............................................................. 300
Net assets purchased........................................................... (3,274)
---------
Goodwill....................................................................... $ 31,126
</TABLE>
The allocations of purchase prices in the pro forma condensed combined
financial statements are based on available information. JTM will arrange
for independent appraisals of the significant assets and liabilities of the
U.S. Ash Group and Fly Ash Products to determine the final allocations of
purchase prices.
(r) To adjust for repayment of the ISG Bridge Note and accrued interest thereon
and a portion of the Secured Credit Facility as such amounts were paid with
a portion of the proceeds of the Offering.
(s) Reflects the net cash proceeds of the Offering less estimated fees and
expenses which have been capitalized.
27
<PAGE>
4. Other Operating Data regarding EBITDA, capital expenditures, and fixed
charges has been presented with adjustments consistent with those shown in
the pro forma condensed combined statement of operations.
EBITDA represents income before income taxes plus interest expense,
depreciation and amortization for the applicable company. EBITDA should not
be considered as an alternative measure of net income or cash provided by
operating activities (both as determined in accordance with generally
accepted accounting principles), but is presented to provide additional
information relating to the Company's debt service capability. EBITDA should
not be considered in isolation or as a substitute for other measures of
financial performance or liquidity.
Pro forma adjusted EBITDA represents EBITDA net of estimated cost savings
anticipated to be realized by terminating certain transportation costs paid
to a related party by the U.S. Ash Group prior to consummation of the
Transactions.
The ratio of earnings to fixed charges is computed by dividing earnings by
fixed charges. For this purpose, earnings include pre-tax income from
continuing operations plus fixed charges. Fixed charges include interest,
whether expensed or capitalized, amortization of debt expense and a portion
of rental expense which is representative of the interest factor in these
rentals.
28
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION
The following table sets forth summary consolidated financial information of
JTM for each of the five years in the period ended December 31, 1997 and for the
three month ended March 31, 1998 and 1997. Such information was derived from the
Consolidated Financial Statements and Notes thereto of JTM and the Unaudited
Condensed Consolidated Financial Statements and Notes thereto of JTM,
respectively, included elsewhere in this Prospectus. The selected consolidated
financial information set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", the Consolidated Financial Statements and Notes thereto of JTM and
the Unaudited Condensed Consolidated Financial Statements and Notes thereto of
JTM included elsewhere in this Prospectus.
The selected financial information set forth below for the three months
ended March 31, 1998 and 1997 is unaudited and has been derived from the
Company's unaudited financial statements for those periods included elsewhere in
this Prospectus. In the opinion of the Company's management, the information for
the three months ended March 31, 1998 and 1997 includes all adjustments
(consisting only of normal recurring adjustments) considered necessary for a
fair presentation. Interim results are not necessarily indicative of results to
be expected for any fiscal year.
<TABLE>
<CAPTION>
THREE MONTHS 2 1/2 MONTHS 9 1/2 MONTHS YEAR ENDED DECEMBER
ENDED ENDED ENDED 31,
MARCH 31, DECEMBER 31, OCTOBER 13, --------------------
1998 1997 1997 1997 1996 1995
--------- --------- ------------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Sales............................................. $ 15,395 $ 14,655 $ 12,643 $ 51,295 $ 62,841 $ 64,986
Cost of sales, excluding depreciation............. 11,874 11,748 9,365 40,701 52,268 51,489
Depreciation and amortization..................... 1,186 626 908 5,279 2,285 2,265
Selling, general and administrative expenses...... 1,651 1,431 1,256 3,633 5,667 9,692
Income from operations............................ 684 850 1,114 1,682 2,621 1,540
Interest income................................... 52 -- 31 -- -- --
Interest expense.................................. 976 1,312 628 4,160 4,853 4,081
Income (loss) before income taxes................. (239) (462) 517 (2,478) (2,232) (2,541)
Income tax (expense) benefit...................... (12) 99 (252) (612) 362 445
Net income (loss)................................. (251) (363) 265 (3,090) (1,870) (2,096)
OTHER OPERATING DATA:
EBITDA (2)........................................ 1,923 1,476 2,054 6,961 4,906 3,805
EBITDA margin..................................... 15.2% 10.1% 16.2% 13.6% 7.8% 5.9%
Capital expenditures.............................. 536 103 19 681 4,357 4,589
Ratio of earnings to fixed
charges (3)..................................... 0.83x 0.74x 1.49x 0.56x 0.68x 0.58x
Deficit of earnings to fixed charges.............. (239) (462) -- (2,478) (2,232) (2,541)
BALANCE SHEET DATA: (AT PERIOD END)
Working capital (deficiency)...................... (30,302 (4) (45,239) (21,648)(4) (43,594) (45,804) (42,268)
Total assets...................................... 136,643 61,800 73,270 58,396 62,950 61,779
Total debt........................................ 35,000 -- -- -- -- --
Stockholders' equity.............................. 25,014 6,350 25,265 3,623 6,713 8,033
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales............................................. $ 60,784 $ 48,521
Cost of sales, excluding depreciation............. 52,356 37,359
Depreciation and amortization..................... 1,538 1,493
Selling, general and administrative expenses...... -- --
Income from operations............................ 6,890 9,669
Interest income................................... -- --
Interest expense.................................. 17 (18)
Income (loss) before income taxes................. 6,873 9,687
Income tax (expense) benefit...................... -- --
Net income (loss)................................. 6,873(1) 9,687(1)
OTHER OPERATING DATA:
EBITDA (2)........................................ 8,428 11,162
EBITDA margin..................................... 13.9% 23.0%
Capital expenditures.............................. 905 6,800
Ratio of earnings to fixed
charges (3)..................................... 5.21x 15.00x
Deficit of earnings to fixed charges.............. -- --
BALANCE SHEET DATA: (AT PERIOD END)
Working capital (deficiency)...................... 6,249 4,134
Total assets...................................... 18,291 19,756
Total debt........................................ 2,976 23,365
Stockholders' equity.............................. 17,831 38,103
</TABLE>
- ------------------------
(1) During the year ended December 31, 1994 and 1993, JTM was a subsidiary of
Union Pacific and was not allocated any income taxes.
(2) EBITDA represents income before income taxes plus interest expense,
depreciation and amortization. EBITDA should not be considered as an
alternative measure of net income or cash provided by operating activities
(both as determined in accordance with generally accepted accounting
principles), but is presented to provide additional information relating to
JTM's debt service capability. EBITDA should not be considered in isolation
or as a substitute for other measures of financial performance or liquidity.
(3) The ratio of earnings to fixed charges is computed by dividing earnings by
fixed charges. For this purpose, earnings include pre-tax income from
continuing operations plus fixed charges. Fixed charges include interest,
whether expensed or capitalized, amortization of debt expense and that
portion of rental expense which is representative of the interest factor in
these rentals.
(4) JTM is a guarantor of the ISG Bridge Note and as such the March 31, 1998 and
the December 31, 1997 working capital deficit reflects push-down accounting
treatment of the $29.0 million ISG Bridge Note, which was repaid in full
with a portion of the proceeds from the Offering.
29
<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
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO OF JTM, THE UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO OF JTM, "PRO FORMA
CONDENSED COMBINED FINANCIAL INFORMATION" AND THE OTHER FINANCIAL INFORMATION
APPEARING ELSEWHERE IN THIS PROSPECTUS.
GENERAL
The combination of JTM, Pozzolanic, PPA, the U.S. Ash Group and Fly Ash
Products has created the largest company managing CCPs in North America. In
addition, JTM expects to achieve cost savings and incremental profitability
through the integration of administration, purchasing, insurance, marketing and
other operations. JTM will operate the existing businesses on a combined basis
under a new capital structure. See "Capitalization" and "Pro Forma Condensed
Combined Financial Information." Accordingly, the financial condition and
results of operations of JTM after the Initial Acquisitions and the Subsequent
Acquisitions will not be directly comparable to the historical financial
conditions or results of operations of JTM or the acquired companies, either
individually or on a combined basis. See "Notes to Unaudited Pro Forma Condensed
Combined Financial Information."
RESULTS OF OPERATIONS
JTM generates revenues from marketing products to its customers and
providing materials management services to its clients. The services provided by
JTM consist primarily of on-site disposal of CCPs and other related industrial
materials, and include general contracting work utilizing surplus equipment at
nearby sites. JTM records sales upon shipment of products to its customers, in
the case of its marketing activities, and upon performance of services, in the
case of management services.
The following table presents certain statements of historical operations
data as a percentage of sales for the periods indicated and should be read in
conjunction with the other financial information of JTM contained elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
3 MONTHS ENDED MARCH 31,
12 MONTHS ENDED DECEMBER 31,
------------------------ -------------------------------------------------
1998 1997 1997 1996 1995
----------- ----------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Sales from marketing activities (1)........... 57.9% 43.0% 51.1% 40.6% 39.6%
Sales from services........................... 42.1 57.0 48.9 59.4 60.4
----- ----- ----- ----- -----
----- ----- ----- ----- -----
Sales......................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales, excluding depreciation......... 77.1 80.2 78.3 83.2 79.2
Depreciation and amortization................. 7.7 4.3 9.7 3.6 3.5
Selling, general and administrative
expenses.................................... 10.7 9.7 7.6 9.0 14.9
----- ----- ----- ----- -----
Income from operations........................ 4.5 5.8 4.4 4.2 2.4
Interest expense.............................. 6.0 9.0 7.5 7.7 6.3
----- ----- ----- ----- -----
Loss before income taxes...................... 1.5 3.2 3.1 3.5 3.9
Income tax benefit (expense).................. (0.1) 0.7 (1.4) 0.6 0.7
Net loss...................................... 1.6% 2.5% 4.4% 3.0% 3.2%
</TABLE>
- ------------------------
(1) Includes revenues allocated by JTM to transportation of products to its
customers.
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FIRST QUARTER 1998 COMPARED TO FIRST QUARTER 1997
SALES. Sales were $15.4 million in the first quarter of 1998, representing
an increase of $0.7 million or 5.0%, as compared to sales of $14.7 million in
the first quarter of 1997. This increase resulted from an increase of $2.6
million in sales from marketing activities (from $6.3 million in the first
quarter of 1997 to $8.9 million in the first quarter of 1998), which was
partially offset by a decrease of $1.9 million in sales from services (from $8.4
million in the first quarter of 1997 to $6.5 million in the first quarter of
1998). The increase in sales from marketing activities as well as the decrease
in sales from services reflects an increase in the percentage of materials
managed that was marketed by JTM instead of being landfilled.
COST OF SALES, EXCLUDING DEPRECIATION. Cost of sales, excluding
depreciation, was $11.9 million in the first quarter of 1998, representing an
increase $0.1 million or 1.1%, as compared to cost of sales, excluding
depreciation, of $11.8 million in the first quarter of 1997. As a percentage of
sales, cost of sales, excluding depreciation, decreased from 80.2% in the first
quarter of 1997 to 77.1% in the first quarter of 1998. This improvement in
margins was primarily due to an increase in the percentage of materials managed
that was marketed by JTM instead of being landfilled.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization was $1.2
million in the first quarter of 1998, representing an increase of $0.6 million
or 89%, as compared to depreciation and amortization of $0.6 million in the
first quarter of 1997. This increase resulted primarily from increased goodwill
due to the acquisition of JTM by ISG and the acquisitions of Pozzolanic and PPA
by JTM.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("SG&A") expenses were $1.6 million in the first quarter of 1998,
representing an increase of $0.2 million or 15.4%, as compared to SG&A expenses
of $1.4 million in the first quarter of 1997. As a percentage of sales, SG&A
expenses increased from 9.7% in the first quarter of 1997 to 10.7% in the first
quarter of 1998. This increase in SG&A expenses reflects incremental SG&A costs
resulting form the recent acquisitions of Pozzolanic and PPA and an increase in
management incentive compensation.
INTEREST EXPENSE. Interest expense decreased from $1.3 million in the first
quarter of 1997 to $1.0 million in the first quarter of 1998, primarily as a
result of a decrease in JTM's outstanding indebtedness during the two quarters.
INCOME TAX BENEFIT (EXPENSE). Income tax expense was $11,675 in the first
quarter of 1998, representing an increase of $110,341, as compared to an income
tax benefit of $98,666 in the first quarter of 1997. This increase reflects an
increase in JTM's taxable income in the first quarter of 1998 resulting from
increased sales and decreased interest expense.
NET INCOME (LOSS). As a result of the factors discussed above, net loss
decreased to $250,968 in the first quarter of 1998 from a net loss of $363,170
in the first quarter of 1997.
FISCAL YEAR 1997 COMPARED TO FISCAL YEAR 1996
SALES. Sales were $63.9 million in 1997, representing an increase of $1.1
million or 1.7%, as compared to sales of $62.8 million in 1996. This increase
resulted from an increase of $7.2 million in sales from marketing activities
(from $25.5 million in 1996 to $32.7 million in 1997), which was partially
offset by a decrease of $6.1 million in sales from services (from $37.3 million
in 1996 to $31.2 million in 1997). The increase in sales from marketing
activities reflects an increase in the percentage of materials managed that was
marketed by JTM, as well as an increase in sales of value-added products, such
as carpet backing and roofing shingles. The decrease in sales from services
reflects an increase in the percentage of materials managed that was marketed by
JTM instead of being landfilled.
COST OF SALES, EXCLUDING DEPRECIATION. Cost of sales was $50.1 million in
1997, representing a decrease of $2.2 million or 4.2%, as compared to cost of
sales, excluding depreciation, of $52.3 million in 1996. As a
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<PAGE>
percentage of sales, cost of sales, excluding depreciation, decreased from 83.2%
in 1996 to 78.3% in 1997. This decrease in cost of sales, excluding
depreciation, and consequent improvement in margins, was primarily due to (i) a
decrease in disposal volumes, and (ii) a $1.0 million settlement of a lawsuit
charged to cost of sales in 1996. See Note 6 to the Consolidated Financial
Statements of JTM for 1996.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization was $6.2
million in 1997, representing an increase of $3.9 million or 170%, as compared
to depreciation and amortization of $2.3 million in 1996. This increase resulted
primarily from a $3.3 million goodwill write-off by JTM's former parent in 1997
in connection with the sale of JTM to ISG. The remaining increase is due to a
slightly higher level of depreciation and an accelerated amortization rate of
goodwill by JTM after its acquisition by ISG.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("SG&A") expenses were $4.9 million in 1997, representing a
decrease of $0.8 million or 13.7%, as compared to SG&A expenses of $5.7 million
in 1996. As a percentage of sales, SG&A expenses decreased from 9.0% in 1996 to
7.6% in 1997. This decrease in SG&A expenses reflects lower administrative costs
incurred subsequent to the JTM Acquisition than the administrative and
management fees pushed down by JTM's former parent (which accounted for $2.7
million of SG&A expenses in 1996 and $740,000 in 1997), which was partially
offset by an increase in general and administrative expenses resulting primarily
from an increase in management incentive compensation.
INTEREST EXPENSE. Interest expense decreased from $4.9 million in 1996 to
$4.8 million in 1997, primarily as a result of a decrease in JTM's outstanding
indebtedness.
INCOME TAX BENEFIT (EXPENSE). Income tax expense was $864,000 in 1997,
representing an increase of $1.2 million, as compared to an income tax benefit
of $362,000 in 1996. This increase reflects an increase in JTM's taxable income
in 1997 resulting from increased sales and higher margins.
NET INCOME (LOSS). As a result of the factors discussed above, net loss
increased to $2.8 million in 1997 from a net loss of $1.9 million in 1996.
FISCAL YEAR 1996 COMPARED TO FISCAL YEAR 1995
SALES. Sales were $62.8 million in 1996, representing a decrease of $2.2
million or 3.3%, as compared to sales of $65.0 million in 1995. This decrease
was primarily due to the renegotiation of JTM's largest contract from a highly
profitable contract in 1995 to a pricing more consistent with the market in
1996.
COST OF SALES, EXCLUDING DEPRECIATION. Cost of sales, excluding
depreciation, was $52.3 million in 1996, representing an increase of $779,000 or
1.5%, as compared to cost of sales, excluding depreciation, of $51.5 million in
1995. As a percentage of sales, cost of sales increased from 79.2% in 1995 to
83.2% in 1996. This increase in cost of sales, excluding depreciation, and
consequent decrease in margin, was primarily due to a $1.0 million settlement of
a lawsuit charged to cost of sales, excluding depreciation, in 1996.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization remained
constant in 1995 and 1996 at $2.3 million.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses were $5.7
million in 1996, representing a decrease of $4.0 million or 41.2%, as compared
to SG&A expenses of $9.7 million in 1995. As a percentage of sales, SG&A
expenses decreased from 14.9% in 1995 to 9.0% in 1996. This decrease in SG&A
expenses reflects a $3.5 million decrease in management fees charged by ISG,
JTM's former parent, from $5.8 million in 1995 to $2.3 million in 1996, and a
decrease in management incentive compensation.
INTEREST EXPENSE. Interest expense increased from $4.1 million in 1995 to
$4.9 million in 1996 due to a $2.8 million increase in intercompany borrowings
from JTM's former parent.
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<PAGE>
INCOME TAX BENEFIT (EXPENSE). Income tax benefit was $362,000 in 1996,
representing a decrease of $83,000, as compared to a tax benefit of $445,000 in
1995. The effective tax rate was 16.2% in 1996 and 17.5% in 1995.
NET INCOME (LOSS). As a result of the factors discussed above, net loss
decreased to $1.9 million in 1996 from a net loss of $2.1 million in 1995.
PRO FORMA LIQUIDITY AND CAPITAL RESOURCES
JTM intends to use cash flow from operations and funds available under the
Secured Credit Facility to meet its working capital requirements, debt service
obligations and capital expenditure requirements. Approximately $26.5 million of
the Secured Credit Facility is currently available.
The Secured Credit Facility will mature on September 4, 2003. Interest on
the Secured Credit Facility will bear interest at rates based upon LIBOR or Base
Rate plus an applicable margin. The Secured Credit Facility will be guaranteed
by all existing and future subsidiaries of JTM and will be secured by
substantially all of the assets of JTM and its subsidiaries. See "Risk
Factors--Substantial Leverage" and "Description of Secured Credit Facility." JTM
does not currently have any outstanding letters of credit.
During 1997, capital expenditures amounted to $700,000, as compared to
capital expenditures of $4.4 million in 1996 and $4.6 million in 1995. This
substantial decrease in capital expenditures in 1997 was due to the then pending
sale of JTM by its former parent. The majority of such capital expenditures
during the years 1995 to 1997 was primarily used to replace existing equipment
and to install new equipment in some plants.
JTM intends to make capital expenditures over the next several years
principally to construct storage, loading, and processing facilities for CCPs
and to replace existing capital equipment. JTM anticipates that approximately
$6.0 million of capital expenditures will be made in fiscal year 1998 after
consummation of the Initial Acquisitions and the Subsequent Acquisitions. See
"Business--Business Strategy."
JTM intends to implement measures to improve economies of scale and
operating efficiencies, and to achieve cost savings, in the operation of the
businesses of JTM and the acquired companies. JTM anticipates that it will incur
certain restructuring charges related to the integration of the operations of
the acquired companies in 1998. These charges are estimated to total
approximately $500,000, of which $300,000 relate to cash items. Such unusual
charges include costs related to integration of management information systems,
employee relocations and severance obligations. Management expects these
nonrecurring costs to be initially funded through cash flow from operations and
borrowings under the Secured Credit Facility.
JTM is a wholly owned subsidiary of ISG. ISG is a holding company and
currently has no other source of cash other than the distributions from JTM.
While the agreements governing JTM's indebtedness restrict the amount of such
distributions, they do not prohibit such payments. The Indenture permits JTM to
make distributions to ISG to pay certain ordinary cash expenses and, beginning
in 2003, certain distributions to be utilized by ISG to service the ISG PIK
Notes. The ISG PIK Notes bear interest at 9% per annum (which may be paid in
kind) and mature in 2005. The ISG PIK Notes are not direct or indirect
obligations of JTM or any of its subsidiaries. See "Description of Notes."
JTM anticipates that its principal use of cash will be for working capital
requirements, debt service requirements, capital expenditures and expenditures
related to the acquisition and integration of acquired businesses. Based upon
current and anticipated levels of operations, JTM believes that its cash flow
from operations, together with amounts available under the Secured Credit
Facility, will be adequate to meet its anticipated requirements for working
capital, capital expenditures and interest payments for the next several years.
There can be no assurance, however, that JTM's business will continue to
generate sufficient cash flow from operations in the future to service its debt,
and JTM may be required to refinance all or a portion of its existing debt or to
obtain additional financing. These increased borrowings may result in
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<PAGE>
higher interest payments. There can be no assurance that any such refinancing
would be possible or that any additional financing could be obtained. The
inability to obtain additional financing could have a material adverse effect on
JTM.
SEASONALITY OF BUSINESS
JTM's business is subject to a pattern of minor seasonal fluctuation. JTM's
need for working capital accelerates moderately during the middle of the year
and, accordingly, total debt levels tend to peak in the second and third
quarters, falling off again in the fourth quarter of the year. The amount of
JTM's sales generated during the middle of the year generally depends upon a
number of factors, including the level of road and other construction using
concrete, weather conditions affecting the level of construction, general
economic conditions, and other factors beyond JTM's control. The businesses of
Pozzolanic, PPA, the U.S. Ash Group and Fly Ash Products are similarly seasonal,
experiencing stronger second and third quarters than first and fourth quarters.
34
<PAGE>
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Restricted Notes were issued and sold by the Company to the Initial
Purchasers on April 22, 1998 pursuant to the Purchase Agreement. The Initial
Purchasers subsequently resold the Restricted Notes in reliance on Rule 144A,
Regulation S and other exemptions from registration under the Securities Act.
The Company and the Initial Purchasers also entered into the Registration Rights
Agreement pursuant to which the Company agreed, with respect to the Restricted
Notes, to (i) cause to be filed, by June 6, 1998, the Exchange Offer
Registration Statement with the Commission under the Securities Act concerning
the Exchange Offer, and (ii) (a) to cause such registration statement to be
declared effective by the Commission by September 4, 1998 and (b) to cause the
Exchange Offer to remain open for a period of not less than 30 days (or longer
if required by applicable law). The Exchange Offer is intended to satisfy the
Company's exchange offer obligations under the Registration Rights Agreement.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Restricted Notes, where such Restricted Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution."
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING RESTRICTED NOTES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Company will accept for exchange Restricted Notes which are
properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used herein, the term "Expiration Date" means 5:00 p.m., New
York City time, on , 1998; provided, however, that if the Company, in its
sole discretion, has extended the period of time for which the Exchange Offer is
open, the term "Expiration Date" means the latest time and date to which the
Exchange Offer is extended.
As of the date of this Prospectus, an aggregate principal amount of $100.0
million in Restricted Notes is outstanding. This Prospectus, together with the
Letter of Transmittal, is first being sent on or about June , 1998, to all
holders of Restricted Notes known to the Company. The Company's obligation to
accept Restricted Notes for exchange pursuant to the Exchange Offer is subject
to certain conditions as set forth under "--Certain Conditions to the Exchange
Offer."
Restricted Notes tendered in the Exchange Offer must be in denominations of
principal amount of $1,000 and any integral multiple thereof.
The Company expressly reserves the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance for exchange of any Restricted Notes, by giving oral or
written notice of such extension to the holders thereof as described below.
During any such extension, all Restricted Notes previously tendered will remain
subject to the Exchange Offer and may be accepted for exchange by the Company.
The Company also expressly reserves the right to maintain an offer to exchange
Restricted Notes not tendered on or prior to the Expiration Date pursuant to the
Exchange Offer and accept for exchange any or all Restricted Notes properly
tendered on or prior to the Expiration Date in accordance with the terms of the
Exchange Offer and the Registration Rights Agreement. Any Restricted Notes not
accepted for exchange for any reason will be returned without expense to the
tendering holder thereof as soon as practicable after the expiration or
termination of the Exchange Offer.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Restricted Notes not theretofore
accepted for exchange, upon the occurrence of any of the events specified under
"--Certain Conditions to the Exchange Offer." The Company will give oral or
written notice of any extension, amendment, non-acceptance or termination to the
holders of the
35
<PAGE>
Restricted Notes as promptly as practicable, such notice in the case of any
extension to be issued by means of a press release or other public announcement
no later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date.
PROCEDURES FOR TENDERING RESTRICTED NOTES
The tender to the Company of Restricted Notes by a holder thereof as set
forth below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal. Except as set forth below, a holder who wishes to tender
Restricted Notes for exchange pursuant to the Exchange Offer must transmit a
properly completed and duly executed Letter of Transmittal, including all other
documents required by such Letter of Transmittal, to the Exchange Agent, at the
address set forth below under "--Exchange Agent" on or prior to the Expiration
Date. In addition, either (i) certificates for such Restricted Notes must be
received by the Exchange Agent along with the Letter of Transmittal, or (ii) a
timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of
such Restricted Notes, if such procedure is available, into the Exchange Agent's
account at The Depository Trust Company (the "Book-Entry Transfer Facility")
pursuant to the procedure for book-entry transfer described below, must be
received by the Exchange Agent prior to the Expiration Date. THE METHOD OF
DELIVERY OF RESTRICTED NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY IS BY
MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN
RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR RESTRICTED NOTES SHOULD BE
SENT TO THE COMPANY. FOR INSTRUCTIONS ON TENDERING RESTRICTED NOTES HELD THROUGH
POSITIONS AT CEDEL OR EUROCLEAR, SEE "--RESTRICTED NOTES HELD THROUGH CEDEL OR
EUROCLEAR."
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Restricted Notes surrendered for exchange
pursuant thereto are tendered (i) by a registered holder of the Restricted Notes
who has not completed the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution (as defined herein). In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case may
be, are required to be guaranteed, such guarantees must be by a firm which is a
member of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust company
having an office or correspondent in the United States (collectively, "Eligible
Institutions"). If Restricted Notes are registered in the name of a person other
than a signer of the Letter of Transmittal, the Restricted Notes surrendered for
exchange must be endorsed by, or be accompanied by a written instrument or
instruments of transfer or exchange, in satisfactory form as determined by the
Company in its sole discretion, duly executed by the registered holder, with the
signature thereon guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Restricted Notes tendered for exchange will be
determined by the Company in its sole discretion, which determination shall be
final and binding. The Company reserves the absolute right to reject any and all
tenders of any particular Restricted Notes not properly tendered or to not
accept any particular Restricted Notes which acceptance might, in the judgment
of the Company or its counsel, be unlawful. The Company also reserves the
absolute right to waive any defects or irregularities or conditions of the
Exchange Offer as to any particular Restricted Notes either before or after the
Expiration Date (including the right to waive the ineligibility of any holder
who seeks to tender Restricted Notes in the Exchange Offer). The interpretation
of the terms and conditions of the Exchange Offer as to any particular
Restricted Notes either before or after the Expiration Date (including the
Letter of Transmittal and the instructions thereto)
36
<PAGE>
by the Company shall be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Restricted Notes for
exchange must be cured within such reasonable period of time as the Company
shall determine. Neither the Company, the Exchange Agent nor any other person
shall be under any duty to give notification of any defect or irregularity with
respect to any tender of Restricted Notes, for exchange, nor shall any of them
incur any liability for failure to give such notification.
If the Letter of Transmittal is signed by a person or persons other than the
registered holder or holders of Restricted Notes, such Restricted Notes must be
endorsed or accompanied by a bond power, in either case signed exactly as the
name or names of the registered holder or holders that appear on the Restricted
Notes.
If the Letter of Transmittal, any Restricted Notes, bond powers or powers of
attorney are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and,
unless waived by the Company, proper evidence satisfactory to the Company of
their authority to so act must be submitted.
By tendering, each holder will represent to the Company that, among other
things, the Exchange Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the person receiving such
Exchange Notes, whether or not such person is the holder, and that neither the
holder nor such other person has any arrangement or understanding with any
person to participate in the distribution of the Exchange Notes. In the case of
a holder that is not a broker-dealer, or is a broker-dealer but will not receive
Exchange Notes for its own account in exchange for Restricted Notes, each such
holder, by tendering, will also represent to the Company that such holder is not
engaged in or intends to engage in, a distribution of the Exchange Notes. If any
holder or any such other person is an "affiliate," as defined under Rule 405 of
the Securities Act, of the Company, or is engaged in or intends to engage in or
has an arrangement or understanding with any person to participate in a
distribution of such Exchange Notes to be acquired pursuant to the Exchange
Offer, such holder or any such other person (i) cannot rely on the applicable
interpretations of the staff of the Commission and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives
Exchange Notes for its own account in exchange for Restricted Notes, where such
Restricted Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
See "Plan of Distribution." The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Restricted Notes and whose Restricted Notes
are not immediately available or who cannot deliver their Restricted Notes or
any other documents required by the Letter of Transmittal to the Exchange Agent
prior to 5:00 p.m., New York City time, on the Expiration Date (or complete the
procedure for book-entry transfer on a timely basis), may tender their
Restricted Notes according to the guaranteed delivery procedures set forth in
the Letter of Transmittal. Pursuant to such procedures: (i) such tender must be
made by or through an Eligible Institution and a Notice of Guaranteed Delivery
(as defined in the Letter of Transmittal) must be signed by such holder, (ii) on
or prior to the Expiration Date, the Exchange Agent must have received from the
holder and the Eligible Institution a properly completed and duty executed
Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number or
numbers of the tendered Restricted Notes, and the principal amount of tendered
Restricted Notes, stating that the tender is being made thereby and guaranteeing
that, within five business days after the date of delivery of the Notice of
Guaranteed Delivery, the tendered Restricted Notes, a duly executed Letter of
Transmittal and any other required documents will be deposited by the Eligible
Institution with the Exchange Agent, and (iii) such properly completed and
executed documents required by the Letter of Transmittal and the
37
<PAGE>
tendered Restricted Notes in proper form for transfer (or confirmation of a
book-entry transfer of such Restricted Notes into the Exchange Agent's account
at the Book-Entry Transfer Facility) must be received by the Exchange Agent
within five business days after the Expiration Date. Any holder who wishes to
tender Restricted Notes pursuant to the guaranteed delivery procedures described
above must ensure that the Exchange Agent receives the Notice of Guaranteed
Delivery and a Letter of Transmittal relating to such Restricted Notes prior to
5:00 p.m., New York City time, on the Expiration Date.
ACCEPTANCE OF RESTRICTED NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Restricted
Notes properly tendered and will issue the Exchange Notes promptly after
acceptance of the Restricted Notes. See "--Certain Conditions to the Exchange
Offer." For purposes of the Exchange Offer, the Company shall be deemed to have
accepted properly tendered Restricted Notes for exchange when, as and if the
Company has given oral or written notice thereof to the Exchange Agent, with
written confirmation of any oral notice to be given promptly thereafter.
For each Restricted Note accepted for exchange, the holder of such
Restricted Note will receive an Exchange Note having a principal amount equal to
that of the surrendered Restricted Note. Restricted Notes accepted for exchange
will cease to accrue interest from and after the date of consummation of the
Exchange Offer. Holders of Restricted Notes whose Restricted Notes are accepted
for exchange will not receive any payment in respect of accrued interest on such
Restricted Notes otherwise payable on any interest payment date the record date
for which occurs on or after consummation of the Exchange Offer. Interest on the
Exchange Notes will accrue from the last interest payment date on which interest
was paid on the Restricted Notes surrendered in exchange therefor or, if no
interest has been paid on the Restricted Notes, from the date of the original
issue of the Restricted Notes. If the Exchange Offer is not consummated by
October 19, 1998, JTM will pay Liquidated Damages to the holders of the
Restricted Notes as described under "Description of Notes--Registration Rights;
Liquidated Damages."
In all cases, issuance of Exchange Notes for Restricted Notes that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of certificates for such Restricted Notes
or a timely Book-Entry Confirmation of such Restricted Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility, a properly completed and
duly executed Letter of Transmittal and all other required documents. If any
tendered Restricted Notes are not accepted for any reason set forth in the terms
and conditions of the Exchange Offer or if Restricted Notes are submitted for a
greater principal amount than the holder desired to exchange, such unaccepted or
non-exchanged Restricted Notes will be returned without expense to the tendering
holder thereof (or, in the case of Restricted Notes tendered by book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the book-entry procedures described below, such non-exchanged
Restricted Notes will be credited to an account maintained with such Book-Entry
Transfer Facility) as soon as practicable after the expiration or termination of
the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Restricted Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Restricted Notes by causing
the Book-Entry Transfer Facility to transfer such Restricted Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility in accordance with
such Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Restricted Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof,
with any required signature guarantees and any
38
<PAGE>
other required documents, must, in any case, be transmitted to and received by
the Exchange Agent at one of the addresses set forth below under "--Exchange
Agent" on or prior to the Expiration Date.
RESTRICTED NOTES HELD THROUGH CEDEL OR EUROCLEAR
In case of Restricted Notes held through Cedel or Euroclear, holders of such
Restricted Notes wishing to tender such Restricted Notes for exchange pursuant
to the Exchange Offer must send instructions to Cedel or Euroclear, as the case
may be, to block the Restricted Notes in such holder's account at Cedel or
Euroclear. In addition, such holder of Restricted Notes must transmit a properly
completed and duly executed Letter of Transmittal, including all other documents
required by such Letter of Transmittal to the Exchange Agent.
WITHDRAWAL RIGHTS
Tenders of Restricted Notes may be withdrawn at any time prior to the
Expiration Date. For a withdrawal to be effective, a written notice of
withdrawal must be received by the Exchange Agent at the address set forth below
under "--Exchange Agent." Any such notice of withdrawal must specify the name of
the person having tendered the Restricted Notes to be withdrawn, identify the
Restricted Notes to be withdrawn (including the principal amount of such
Restricted Notes), and (where certificates for Restricted Notes have been
transmitted) specify the name in which such Restricted Notes are registered, if
different from that of the withdrawing holder. If certificates for Restricted
Notes have been delivered or otherwise identified to the Exchange Agent, then,
prior to the release of such certificates the withdrawing holder must also
submit the serial numbers of the particular certificates to be withdrawn and a
signed notice of withdrawal with signatures guaranteed by an Eligible
Institution unless such holder is an Eligible Institution. If Restricted Notes
have been tendered pursuant to the procedure for book-entry transfer described
above, any notice of withdrawal must specify the name and number of the account
at the Book-Entry Transfer Facility to be credited with the withdrawn Restricted
Notes and otherwise comply with the procedures of such facility. All questions
as to the validity, form and eligibility (including time of receipt) of such
notices will be determined by the Company, whose determination shall be final
and binding on all parties. Any Restricted Notes so withdrawn will be deemed not
to have been validly tendered for exchange for purposes of the Exchange Offer.
Any Restricted Notes which have been tendered for exchange but which are not
exchanged for any reason will be returned to the holder thereof without cost to
such holder (or, in the case of Restricted Notes tendered by book-entry transfer
into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant
to the book-entry transfer procedures described above, such Restricted Notes
will be credited to an account maintained with such Book-Entry Transfer
Facility) as soon as practicable after withdrawal, rejection of tender or
expiration or termination of the Exchange Offer. Properly withdrawn Restricted
Notes may be retendered by following one of the procedures described under
"--Procedures for Tendering Restricted Notes" above at any time on or prior to
the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company shall
not be required to accept for exchange, or to issue Exchange Notes in exchange
for, any Restricted Notes and may terminate, extend or amend the Exchange Offer,
if at any time before the acceptance of such Restricted Notes for exchange or
the exchange of the Exchange Notes for such Restricted Notes, any of the
following events shall occur:
(a) there shall be threatened, instituted or pending any action or
proceeding before, or any injunction, order of decree shall have been issued
by, any court or governmental agency or other governmental regulatory or
administrative agency or commission: (i) seeking to restrain or prohibit the
making or consummation of the Exchange Offer or any other transaction
contemplated by the Exchange Offer, or assessing or seeking any damages as a
result thereof, or (ii) resulting in a material
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delay in the ability of the Company to accept for exchange or exchange some
or all of the Restricted Notes pursuant to the Exchange Offer; or any
statute, rule, regulation, order or injunction shall be sought, proposed,
introduced, enacted, promulgated or deemed applicable to the Exchange Offer
or any of the transactions contemplated by the Exchange Offer by any
government or governmental authority, or any action shall have been taken,
proposed or threatened, by any government, governmental authority, agency or
court, that in the reasonable judgment of the Company might directly or
indirectly result in any of the consequences referred to in clauses (i) or
(ii) above or, in the reasonable judgment of the Company, might result in
the holders of Exchange Notes having obligations with respect to resales and
transfers of Exchange Notes which are greater than those described in the
interpretations of the Commission referred to on the cover page of this
Prospectus, or would otherwise make it inadvisable to proceed with the
Exchange Offer; or
(b) there shall have occurred (i) any general suspension of or general
limitation on prices for, or trading in, securities on any United States
national securities exchange or in the over-the-counter market, (ii) any
limitation by any governmental agency or authority which may adversely
affect the ability of the Company to complete the transactions contemplated
by the Exchange Offer, (iii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States or any
limitation by any governmental agency or authority which adversely affects
the extension of credit or (iv) a commencement of a war, armed hostilities
or other similar international calamity directly or indirectly involving the
United States, or, in the case of any of the foregoing existing at the time
of the commencement of the Exchange Offer, a material acceleration or
worsening thereof; or
(c) any change (or any development involving a prospective change) shall
have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Company taken as a whole that, in the reasonable judgment
of the Company, is or may be adverse to the Company, or the Company shall
have become aware of facts that, in the reasonable judgment of the Company,
have or may have adverse significance with respect to the value of the
Restricted Notes or the Exchange Notes;
which in the reasonable judgment of the Company, in any case, and regardless of
the circumstances (including any action by the Company) giving rise to any event
described above, makes it inadvisable to proceed with the Exchange Offer and/or
with such acceptance for exchange or with such exchange.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
In addition, the Company will not accept for exchange any Restricted Notes
tendered, and no Exchange Notes will be issued in exchange for any such
Restricted Notes, if at such time any stop order shall be threatened or in
effect with respect to the Registration Statement of which this Prospectus
constitutes a part or the qualification of the Indenture under the Trust
Indenture Act of 1939 (the "Trust Indenture Act").
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EXCHANGE AGENT
U.S. Bank National Association has been appointed as the Exchange Agent for
the Exchange Offer. All executed Letters of Transmittal should be directed to
the Exchange Agent at the address set forth below. Questions and requests for
assistance, requests for additional copies of this Prospectus or of the Letter
of Transmittal and requests for Notices of Guaranteed Delivery should be
directed to the Exchange Agent addressed as follows:
BY FIRST CLASS MAIL:
U.S. Bank National Association
P.O. Box 64485
St. Paul, MN 55164-9549
BY REGISTERED, CERTIFIED OR OVERNIGHT MAIL:
U.S. Bank National Association
Attn: Specialized Finance
180 East Fifth Street
St. Paul, MN 55101
Fax: 612-244-1537
Tel: 612-244-1197
Attn: Kevin Gorman
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
FEES AND EXPENSES
The Company will not make any payment to brokers, dealers, or others
soliciting acceptances of the Exchange Offer.
The estimated cash expenses to be incurred in connection with the Exchange
Offer and paid by the Company are estimated in the aggregate to be approximately
$[ ].
TRANSFER TAXES
Holders who tender their Restricted Notes for exchange will not be obligated
to pay any transfer taxes in connection therewith, except that if holders
instruct the Company to deliver to, register or issue Exchange Notes in the name
of, or request that Restricted Notes not tendered or not accepted in the
Exchange Offer be delivered to, registered or issued in the name of, any person
other than the registered holder, or if tendered Restricted Notes are registered
in the name of any person other than the person signing the Letter of
Transmittal, or if a transfer tax is imposed for any reason other than the
transfer of Restricted Notes to the Company or its order pursuant to the
Exchange Offer, the amount of any such transfer taxes (whether imposed on the
registered holder or any other person) will be payable by the tendering holder.
CONSEQUENCES OF EXCHANGING RESTRICTED NOTES
Holders of Restricted Notes who do not exchange their Restricted Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to the
provisions in the Indenture regarding transfer and exchange of the Restricted
Notes and the restrictions on transfer of such Restricted Notes as set forth in
the legend thereon as a consequence of the issuance of the Restricted Notes
pursuant to an exemption from, or in transactions not subject to, the
registration requirements of the Securities Act and applicable state securities
laws. In general, the Restricted Notes may not be offered or sold, unless
registered under
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the Securities Act, except pursuant to an exemption from, or in a transaction
not subject to, the Securities Act and applicable state securities laws. The
Company does not currently anticipate that it will register Restricted Notes
under the Securities Act. See "Description of Notes--Registration Rights;
Liquidated Damages." Based on interpretations by the staff of the Commission, as
set forth in no-action letters issued to third parties, the Company believes
that Exchange Notes issued pursuant to the Exchange Offer in exchange for
Restricted Notes may be offered for resale, resold or otherwise transferred by
holders thereof (other than any such holder which is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such Exchange Notes are acquired in the ordinary
course of such holders' business and such holders have no arrangement or
understanding with any person to participate in the distribution of such
Exchange Notes. However, the Company does not intend to request the Commission
to consider, and the Commission has not considered, the Exchange Offer in the
context of a no-action letter and there can be no assurance that the staff of
the Commission would make a similar determination with respect to the Exchange
Offer as in such other circumstances. Each holder, other than a broker-dealer,
must acknowledge that it is not engaged in, and does not intend to engage in, a
distribution of Exchange Notes and has no arrangement or understanding to
participate in a distribution of Exchange Notes. If any holder is an affiliate
of the Company, is engaged in or intends to engage in or has any arrangement or
understanding with respect to the distribution of the Exchange Notes to be
acquired pursuant to the Exchange Offer, such holder (i) cannot rely on the
applicable interpretations of the staff of the Commission and (ii) must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction. Each broker-dealer that receives
Exchange Notes for its own account in exchange for Restricted Notes, where such
Restricted Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
See "Plan of Distribution." In addition, to comply with state securities laws,
the Exchange Notes may not be offered or sold in any state unless they have been
registered or qualified for sale in such state or an exemption from registration
or qualification is available and is complied with. The offer and sale of the
Exchange Notes to "qualified institutional buyers" (as such term is defined
under Rule 144A of the Securities Act) is generally exempt from registration or
qualification under the state securities laws. The Company has agreed, pursuant
to the Registration Rights Agreement, to register or qualify the Exchange Notes
for offer or sale under the Blue Sky Laws of such jurisdictions as are necessary
to permit the consummation of the Exchange Offer.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OF NOTES
The exchange of the Restricted Notes for the Exchange Notes pursuant to the
Exchange Offer will not be treated as an exchange or other taxable event to
United States Holders for United States federal income tax purposes.
Consequently, for United States federal income tax purposes, no gain or loss
will be realized by a United States Holder upon receipt of an Exchange Note; the
holding period of the Exchange Note will include the holding period of the
Restricted Note exchanged therefor and the adjusted tax basis of the Exchange
Note will be the same as the adjusted tax basis of the Restricted Note exchanged
therefor immediately before the exchange.
As used in the preceding paragraph, a "United States Holder" means a holder
that is a citizen or resident of the United States, a corporation created or
organized in or under the laws of the United States or any political subdivision
thereof or a person that otherwise is subject to United States federal income
tax on a net income basis in respect of the Notes.
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BUSINESS
The Company believes it is the largest manager and marketer of CCPs in North
America. CCPs are the residual materials created by coal-fired power generation.
The Company enters into long-term CCP management contracts, primarily with
coal-fired electric generating utilities. These utilities are required to
manage, or contract to manage, CCPs in accordance with state and federal
environmental regulations. In addition, the Company provides similar materials
management services for other industrial clients. The Company's revenue is
derived from two principal sources: (i) providing materials management services
to CCP producing utilities, such as American Electric Power Company, Inc., AES
Corporation, Duke Power Company, Entergy, Houston Industries, Ohio Edison
Company, PacifiCorp, The Southern Company and Texas Utilities Company, and other
industrial clients, such as CSX Transportation, Inc., Dupont, Reynolds Metals
Co. and Union Pacific Resources Company; and (ii) marketing products derived
from CCPs and related industrial materials to consumers of building materials
and construction related products. The Company believes it is the most
geographically diverse corporation dedicated to the management of CCPs, managing
approximately 9.5 million tons annually through 69 contracts in 26 states. On a
pro forma basis, the Company's marketed tonnage represented approximately 15% of
the total industry CCP tonnage and 20% of the total fly ash tonnage marketed
during 1996, the year for which the most recent market data is available. In
1997, on a pro forma basis, the Company marketed 4.6 million tons, an increase
of 18% over 1996. For the year ended December 31, 1997, the Company had pro
forma sales and adjusted EBITDA of $110.3 million and $21.4 million,
respectively.
In an effort to maximize the percentage of products marketed to end-users
and minimize the amount of materials landfilled, the Company's focused research
and development efforts have created value-added products such as
ALSIL-Registered Trademark- (a patented processed fly ash filler for the asphalt
shingle and carpet industries), Powerlite-Registered Trademark- (lightweight
aggregate for concrete block), Flexbase-TM- (road base material) and Peanut
Maker-Registered Trademark- (agricultural soil-enhancer). In 1997, products
marketed by the Company represented approximately 68% of its total revenues. The
Company markets CCP tonnage under management to the building materials and
construction related products industry to be used in engineering applications,
such as ready-mix concrete, lightweight aggregate, stabilized road bases,
flowable and structural fill, and roofing shingles. The Company's major
customers for its marketed products include LaFarge Corporation, CSR, Elk
Corporation of Texas and GS Roofing Products Company, Inc.
COMPETITIVE STRENGTHS
In order to sustain its position in the CCP management industry, the Company
relies on the following competitive strengths:
LEADING MARKET POSITION. The Company believes it is a party to more CCP
management contracts and manages more CCP tonnage than any of its competitors.
JTM has aggressively penetrated its service areas and has won contracts based on
its "one-stop" approach to CCP and other industrial materials management
services. This approach combines the Company's marketing, materials handling and
technological capabilities to lower the client's cost of managing CCPs and other
industrial materials in accordance with applicable state and federal
regulations. Consummation of the Initial Acquisitions and the Subsequent
Acquisitions provides a broader platform for the Company to market its one-stop
approach.
GEOGRAPHIC DIVERSIFICATION. The Company believes it is the only firm in the
CCP management industry with a national scope. This national scope provides the
Company with several significant competitive benefits, including mitigation of
the effects of regional economic cyclicality and weather patterns. In addition,
the Company's national scope and storage capabilities will create incremental
revenue through the ability to shift products among regions to meet market
demand while minimizing transportation costs.
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VALUE-ADDED PRODUCTS AND SERVICES. The Company's focused new product
development efforts have broadened the end-use market for CCPs and other
recyclable industrial materials. The Company has successfully introduced new
patented or trademarked products made from previously non-marketable materials
through proprietary processes. These product development efforts have reduced
the materials management cost to the Company's clients and improved the
Company's revenue mix and margins.
STRONG CLIENT RELATIONSHIPS. At December 31, 1997, on a pro forma basis,
the Company had contractual relationships with seven of the top 13 electrical
utilities in the United States, based on total electricity revenues. The Company
has maintained long-term contracts with certain utilities since 1968, and, among
contracts with terms of five years or more, the Company's renewal or extension
rate has been in excess of 94% during the last five years. The Company's clients
rely on its marketing, materials handling and technological capabilities to
extend the useful life of their landfill sites by creatively managing and
marketing a broader range of CCPs than competitors.
EXPERIENCED MANAGEMENT TEAM. The Company's senior management team,
including R Steve Creamer, Raul A. Deju, J.I. Everest, II, Clinton W. Pike and
Danny L. Gray, has an average of over 18 years experience in CCP management and
related industries. The management team has a proven record of developing
innovative, value-added operations, maintaining strong client relationships and
integrating strategic, opportunistic acquisitions.
BUSINESS STRATEGY
Capitalizing on its competitive strengths, the Company intends to grow
revenues and cash flow by implementing a business strategy that consists of the
following key elements:
MAINTAIN AND EXPAND LONG-TERM CONTRACTUAL RELATIONSHIPS. The Company's core
business is based on long-term materials management contracts with power
producers and industrial clients. As of March 15, 1998, on a pro forma basis,
the Company had 69 materials management contracts, 30 of which generated more
than $1.0 million of annual revenues each. Typical contract terms are from five
to 15 years and the average weighted contract life remaining on these large
contracts is over seven years. The Company is focused on serving its current
client base and plans to aggressively target additional contract opportunities
to increase both tonnage under management and revenues.
INCREASE PRODUCT SALES AND APPLICATIONS. The Company has a three-fold
approach to increasing its product sales and applications. The Company intends
to: first, apply JTM's proprietary technology to the products of the newly
acquired companies, thus enhancing their existing product offerings with the
benefits of its research and development program; second, cross-market JTM's
patented products in the new geographical markets accessed through its strategic
acquisitions; and third, continue to develop new applications for CCPs and
related industrial materials.
PURSUE STRATEGIC ACQUISITIONS. The Company operates in a highly fragmented
industry that is undergoing a period of consolidation. The Company intends to
pursue selective acquisitions of companies which will complement its planned
geographic expansion or will provide certain operating efficiencies in areas the
Company currently serves.
INDUSTRY OVERVIEW
According to data compiled by the EIA, of the 1,996 electric generating
units operating in the United States in 1996, 1,128 were coal-fired and
represented approximately 55% of the total electricity generated, an increase
from approximately 50% in 1995. Coal is the largest indigenous fossil fuel
resource in the United States, with current U.S. annual coal production in
excess of one billion tons. Approximately 80% of the coal produced is for
electric power generation, and its use has grown by almost 25% over the last
decade. The combustion of coal provides cost-effective electricity generation,
but results in a high percentage of residual material, which serves as the "raw
material" for the CCP industry. The industry
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manages these CCPs and related materials by developing end-use markets for
certain CCPs and providing storage and disposal services for the remainder of
such materials.
The primary CCPs managed by the Company are fly ash and bottom ash. Fly ash
is the fine residue and bottom ash is the heavier particles that result from the
combustion of coal. Utilities firing boilers with coal first pulverize the coal
and then blow the pulverized coal into a burning chamber where it immediately
ignites to heat the boiler tubes. The heavier bottom ash falls to the bottom of
the burning chamber while the lighter fly ash remains suspended in the exhaust
gases. Before leaving the exhaust stack, the fly ash particles are removed by an
electrostatic precipitator, bag house or other method. The bottom ash is
hydraulically conveyed to a collection area, while the fly ash is pneumatically
conveyed to a storage silo.
Fly ash is a pozzolan that, in the presence of water, will combine with an
activator (lime, portland cement or kiln dust) to produce a cement-like
material. It is this characteristic that allows fly ash to act as a
cost-competitive substitute for other more expensive cementitious building
materials. Concrete manufacturers can typically use fly ash as a substitute for
15% to 40% of their cement requirements, depending on the quality of the fly ash
and the proposed end-use application for the concrete. In addition to its cost
benefit, fly ash provides greater structural strength and durability in certain
construction applications, such as road construction. Bottom ash is utilized as
an aggregate in concrete block construction and road base construction.
According to the ACAA, of the approximately 100 million tons of CCPs that
were generated in the United States during 1996, fly ash accounted for
approximately 59%, bottom ash accounted for approximately 16% and flue gas
desulphurization waste ("scrubber sludge") and boiler slag accounted for
approximately 25%.
MATERIALS
CCPs and other industrial materials are used primarily to replace materials
that are manufactured or mined, such as portland cement, lime, agricultural
gypsum, fired lightweight aggregate, granite aggregate or limestone. The
Company's focus on CCP and related industrial materials development has also
created a variety of applications, such as fillers in asphalt shingles and
related products, that extend beyond the traditional uses of CCPs and related
industrial materials.
TRADITIONAL PRODUCTS AND APPLICATIONS
Traditional products are CCPs and related industrial materials which
generally require minimal processing or additives to fulfill their applications.
The Company typically provides these products to its customers directly from its
clients' sites. Traditional products comprised approximately 90% of materials
marketed in 1997. The Company has been successful in selling significant
portions of the CCPs and other industrial materials it manages to traditional
markets (E.G., the use of fly ash as pozzolan in portland cement concrete and
the use of bottom ash as a lightweight aggregate).
FLY ASH is traditionally used as (i) a pozzolan to partially replace
portland cement in ready-mix concrete and concrete products (E.G., concrete
pipe); (ii) an additive to portland cement to produce I-P cement and blended
cements; (iii) an additive in down-hole cementing of oil wells; and (iv) a
primary constituent in flowable grout used to fill voids under concrete slabs
and underground tank voids.
BOTTOM ASH is traditionally used as (i) raw feed stock for the manufacture
of portland cement clinker; (ii) a lightweight aggregate for concrete and
concrete block; (iii) a filler in the manufacture of clay brick; and (iv) an
aggregate in asphaltic concrete. It can also be mixed with salt as an additive
to go on roads for ice and snow control or used as backfill for pipe bedding and
dry bed material.
FLUIDIZED BED ASH is traditionally used (i) for mud drying for
stabilization; (ii) as a reagent to solidify liquid wastes in petrochemical and
related areas; and (iii) for soil stabilization to create foundation for
vertical construction.
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SCRUBBER SLUDGE is traditionally used as cement stabilized road base
material and can be processed to be used in wallboard manufacture.
BOILER SLAG is traditionally used for a variety of applications, including
roofing shingles and cement.
CEMENT AND LIME KILN DUST AND RELATED INDUSTRIAL MINERALS are traditionally
used as cementitious binders for chemical fixation/solidification of hazardous
and non-hazardous wastes, soil stabilization and chemical processes.
VALUE-ADDED PRODUCTS AND APPLICATIONS
The Company develops and markets value-added products made from CCPs and
related industrial materials, and it continues to expand the breadth of
appropriate markets for these products. Through its research and development
program, the Company has broadened the end-use market for CCPs and related
industrial materials by introducing several proprietary products made from
previously non-marketable materials. The Company sells and distributes its
products to cement plants, ready-mix concrete plants, road contractors, carpet
manufacturers, roofing shingle producers, soil stabilization firms, utility
companies and other waste management firms. Several of its proprietary products
have been utilized by government agencies such as the Department of
Transportation, the Federal Aviation Administration, the Army Corps of Engineers
and the U.S. Bureau of Mines. The Company believes that its research and
development program will continue to develop profitable opportunities. The
Company's value-added products and applications comprised approximately 10% of
tonnage marketed in 1997.
The Company's research and development program and other dedicated efforts
have resulted in twelve patented products or processes and two U.S. patents and
five foreign patents pending, including the following proprietary value-added
products:
POWERLITE-REGISTERED TRADEMARK- is a client-generated pyrite free bottom ash
which, when processed by the Company, produces a high-quality aggregate for the
concrete block industry. Powerlite-Registered Trademark- has exhibited superior
flow characteristics, often making it more economical to use than other
aggregates. The Company has provided customers in the Atlanta, Georgia area
alone with more than two million tons of Powerlite-Registered Trademark- in the
past 15 years.
SAM-TM- (Stabilized Aggregate Material) is manufactured by the Company by
combining several industrial materials received from clients and transforming
them into a well-graded, highly desirable replacement for natural aggregate.
SAM-TM- can be used in many other applications, such as road base, sub-base,
parking areas, drainage media and rip-rap.
POZZALIME-TM-/ENVIRA-CEMENT-REGISTERED TRADEMARK- are the Company's
lime-based pozzolanic materials that contain significant moisture-reduction
properties. Pozzalime-TM- and Envira-Cement-Registered Trademark- have been
successfully utilized in road-base construction, road-sub-base construction,
chemical fixation, soil stabilization, moisture reduction, mud drying, pH
adjustments, acid neutralization, sewage treatment and mine reclamation.
GYPCEM-REGISTERED TRADEMARK- is the Company's processed gypsum, a highly
marketable product, registered and exclusively sold by the Company, that has
characteristics allowing it to be used in the manufacture of portland cement.
With considerable handling capabilities, the product is often more economical to
use than conventional mined gypsum. Under a long-term contract with Dupont, the
Company designed, constructed and currently operates an on-site processing
facility for the 100,000 tons of synthetic gypsum produced each year by this
client.
PEANUT MAKER-REGISTERED TRADEMARK- is a gypsum landplaster developed by the
Company for use in the agricultural market as a soil enhancer. During 1997,
under a contract with Dupont, the Company managed 47,000 tons of Dupont's
industrial material which Dupont historically paid to dispose. The Company has
transformed this previously unmarketable material into Peanut
Maker-Registered Trademark-, a beneficial-use, value-added product. Peanut
Maker-Registered Trademark- has been used successfully on over 60,000 acres of
peanut crops annually for the past 10 years. It
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continues to be in demand because of its high calcium content. The
disassociation rate afforded by Peanut Maker-Registered Trademark- makes it more
effective and economical than traditional calcium supplements. It has been a
recommended source of calcium by the Virginia and North Carolina Extension
Services since its invention.
ALSIL-REGISTERED TRADEMARK-/ORBALOID-REGISTERED TRADEMARK- industrial filler
were developed by the Company from processed client-generated materials for use
in filler applications such as roofing shingles, carpet and mat backing, and
ceramic products. The Company has two U.S. patents and one Canadian patent for
the use of ALSIL-Registered Trademark- in roofing shingles. The Company has
secured multiple contracts with various shingle manufacturers, with one
agreement extending for the life of the customer's manufacturing plant.
FLEXBASE-TM- is a mixture of fly ash and scrubber sludge which the Company
processes to form a road-base material.
STABIL-FILL-TM- is a lime-stabilized fly ash that the Company has developed
and sold for use as a fill material in lieu of natural borrow materials. The
resulting mixture is lightweight and compacts with standard construction
equipment. Applications include commercial or industrial property development,
roadway embankment and subgrade for parking lots, airport runways, golf courses
or driving ranges, and athletic fields.
REDI-FILL-TM-/FLO FIL-REGISTERED TRADEMARK- are the Company's processed fly
ash and bottom ash, sold for use as a structural fill and ready-mixed flowable
fill. Their consistent characteristics and inherent stability give these
products superior performance capabilities compared to natural borrow materials.
In addition to these value-added products, the Company uses its traditional
products for non-traditional applications. Non-traditional applications of fly
ash include: as mineral filler to replace fine aggregate in bituminous coatings
for roads (asphalt surface); as a primary constituent in flowable fill to
backfill around in-ground pipes and structures; for stabilization of soils with
high plasticity or low load bearing abilities; to produce a filler grade
material for a variety of products; and as a binder with calcium sulfate to
replace limestone road base materials.
CONTRACTS AND SERVICES
The Company has various types of source client contracts that range in
services provided and materials managed. The Company negotiates each contract
separately and terms and conditions vary substantially depending on the quality
of materials managed, the marketability of such materials and the cost to the
Company of processing such materials into marketable value-added products. The
services offered to the client meet the client's CCP management requirements.
SALES AND MARKETING
As of December 31, 1997, on a pro forma basis, the Company maintained a
sales and marketing staff of 40 employees. The Company has a centralized
marketing program which seeks to develop a customer base for its newly developed
products. Sales personnel are trained in the technical aspects of the proper use
of CCPs and related products as construction materials and offer this expertise
to utility and industrial customers as an integral part of the sales program.
However, consistent product availability and quality are key to customer
retention. The Company utilizes distribution and related terminals for storage
of products to provide more stable supplies to its customers. The Company also
routinely utilizes quality assurance programs to monitor product quality and
assure delivery of materials meeting required specifications.
CCPs and related products are typically sold directly from each source
plant. Available markets are comprised of the end-users located within a
competitive "transportation cost" radius from the source. Therefore, the
Company's CCP and related product sales and marketing programs are centered
regionally and utilize sales personnel located in local market areas. The
Company's strategic growth strategy has, and will continue to, put the Company
in an increasingly strong position to effect these sales.
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The Company utilizes a variety of marketing techniques to increase its
overall sales and stimulate increases in the sale of specific products. For
example, KBK Enterprises, Inc. ("KBK"), the Company's environmental engineering
subsidiary, complements the technical sales group by offering engineering
services to clients and customers tailored to the specific requirements of the
CCP being utilized. Through independent projects KBK serves as a separate
marketing tool by introducing clients to the Company through the construction
projects they complete. The Company focuses it sales and marketing efforts on
both increasing the proportion of CCPs used in various traditional applications,
such as the percentage of fly ash used in concrete, and increasing the usage of
CCPs as a whole. The Company works closely with state and federal departments of
transportation to develop cost-efficient approaches to the high volume of road
construction work. The Company is also an active participant in a variety of
trade associations.
RESEARCH AND DEVELOPMENT
The Company has made research and development a priority in its effort to
better serve clients and grow the business. The Company has invested
approximately $5.0 million in its Research and Development Program (the "R&D
Program") since 1990. With this relatively moderate investment of resources, the
Company has realized substantial benefits from its effort and believes that it
leads the industry in the development of non-traditional CCP and related
industrial material applications. As a part of its R&D Program, the Company
designed and constructed its Materials Testing and Research Facility, which is
fully furnished with certified equipment for both physical and chemical testing.
Using this facility, the Com-
pany's researchers and engineers continually explore potential applications and
processing technologies for its products and provide quality assurance and
control practices to ensure product and material performance. Further, KBK acts
to help implement the introduction of new products by providing engineering
support for materials handling systems and related CCP-specific requirements.
The Company's R&D Program is responsible for the development of numerous
trademarked, registered and/or patented products, derived from managed
industrial materials in conjunction with its proprietary processes. These
products are exclusively marketed by the Company for use in construction,
agricultural and building applications. For example,
Powerlite-Registered Trademark- lightweight aggregate is an ASTM C-331 approved
lightweight aggregate for use in concrete block, and Peanut
Maker-Registered Trademark- landplaster is a soil enhancer for use on peanut
crops. Through the efforts of its R&D Program, the Company has been able to
secure two United States patents and one Canadian patent for the use of
processed fly ash (developed and trademarked by the Company as
ALSIL-Registered Trademark- industrial filler) in roofing shingles.
The Company's R&D Program is currently in the process of testing the design
of thermal (dry) equipment that reduces carbon content in CCPs. Once this
technology becomes operational, the Company anticipates a two-fold benefit. In
addition to profits projected from the sale and installation of this equipment,
the Company expects to gain from the sale of the processed material that
previously would have been inappropriate for distribution into traditional
markets. In the first half of 1998, the Company anticipates completing
full-scale tests of its dry CCP carbon reduction technology under actual
operating conditions.
COMPETITION
The Company competes both with respect to (i) obtaining materials management
contracts with utility and other industrial companies and (ii) the marketing of
CCPs and related industrial materials. The market for the management of CCPs and
related industrial materials is highly fragmented. The Company believes it is
the largest manager of CCPs in North America and the only company providing such
management services on a national basis. However, much of the competition in the
CCP management industry is regional. The Company has a presence in every region
in the United States. Although the Company typically has long-term contracts
with its clients, some of such contracts provide for the termination of such
contract at the convenience of the utility company upon a minimum 90-day notice.
48
<PAGE>
Generally, the markets for the Company's traditional CCPs are highly
competitive, with many local, regional and national companies that market CCPs
as well as numerous products which are substitutable for CCPs, including cement
and other filler materials, such as limestone. The Company competes on the basis
of price, delivery and product quality. Due to the high cost of transportation
relative to sales price, competition is generally regional. Due to the
industry's fragmented nature and supply of product, within each region the
Company and its competitors typically deliver their traditional products to
their customers directly from the client's site at a regional market price. The
Company believes that its competitive strengths include its expertise in the
technology of a broad range of non-traditional value added products utilizing
CCPs and related industrial materials. This expertise has enabled the Company to
(i) secure materials management contracts in the regions in which it operates,
increasing the amount of traditional products that it can deliver into a given
market and (ii) improve the Company's revenue mix and margins relative to
companies which market only traditional products. However, many of the Company's
competitors (including manufacturers and marketers of substitutable products)
have substantially greater resources than the Company. See "Risk
Factors--Competition."
GOVERNMENT REGULATION
Industry trends, both in the power and industrial fields, present the
Company with important profit potential. Perhaps the most critical are the
changes confronting U.S. electrical utilities. Anticipated deregulation is
projected to reshape utility practices. The Company believes that in the more
competitive electricity production arena, utilities, in efforts to manage costs,
may downsize and outsource certain services. The Company believes this process
will heighten the appeal of the Company's enhanced service package, providing an
increase in business opportunities. Previously legislated regulations have
already opened up new business areas with the entry of cogenerators and
independent power producers into the market, bringing with them more CCP volume
and the need for Company-provided technologies and services for their unique
materials. Such opportunities are also introduced by the advent of clean coal/
clean air legislation. In the future, any tightening of environmental
regulations could make on-site CCP disposal less feasible, possibly requiring
clients to seek additional services from the Company.
In recent years, the power industry has been impacted by federal
legislation. The Clean Air Act of 1990 requires power producers to meet certain
emission levels on sulfur dioxide and nitrous oxides. This has caused some
utilities to modify fuel, equipment or change burner design parameters that has
usually resulted in a higher carbon-content CCP than acceptable for use in
traditional end-use markets. The Public Utilities Regulatory Policies Act has
opened the door for independent power producers, who typically utilize advanced
boiler technology, to enter the field and generate a higher calcium-content CCP
which exhibits handling characteristics requiring special knowledge and
expertise. Often looked upon by the Company's competition as problem materials,
the Company has recognized the opportunities presented by these new generation
materials. Advances in research and development and a strong engineering group
have prepared the Company for securing substantial, long-term contracts with
these new participants in the power field.
The production of these higher-calcium materials has already presented
opportunities for the Company, which can now design unique material handling
systems capable of processing, storing and disposing of these materials. The
Company anticipates continued efforts in this area and is now well-positioned to
be awarded the design, permitting and construction of landfills and handling
systems for disposal when these materials may not be utilized. As of December
31, 1997, the Company managed approximately 700,000 tons of such material on an
annual basis.
EMPLOYEES
Effective December 31, 1997, on a pro forma basis, the Company had 491
employees. Of all employees, 74% are involved in operations, 18% are in general
administrative functions and 8% are in
49
<PAGE>
sales and marketing. The Company considers relations with its employees
satisfactory. The employees of the Company currently are not under union
contract, nor are there any collective bargaining agreements in place, with the
exception of four collective bargaining agreements with PPA and its subsidiary.
Most employees are at will, with some key employees under employment contracts.
See "Management-- Employment Agreements."
PROPERTIES
The Company operates its corporate headquarters in Salt Lake City, Utah. The
Company is currently negotiating the terms of a three year lease. The following
table sets forth certain information regarding the Company's other principal
facilities as of December 31, 1997:
<TABLE>
<CAPTION>
LEASE
LOCATION FUNCTION OWNERSHIP TERMINATION DATE
- ----------------------- --------------------- ----------- ----------------------
<S> <C> <C> <C>
Kennesaw, GA Offices Leased July 17, 2000
San Bernardino, CA Rail Terminal Leased August 30, 1998
Delle, UT Storage Silos Leased November 1, 2001
Fargo, ND Fly Ash Storage Leased Month to Month
Good Spring, PA Silo Facility Leased August 15, 1999
Valley View, PA Rail Siding Leased December 31, 2015
Chester, VA Office/Rail Spur Leased November 30, 1999
Taylorsville, GA Rail Sidetrack Leased 30 days notice
Taylorsville, GA Lab Facility Owned --
Doraville, GA Terminal Facility Leased August 11, 2005
Leland, NC Transfer Facility Owned --
Franklin, VA Structural Fill Owned --
Clinton, TN Structural Fill Owned --
Mercer Island, WA Corporate Offices Leased June 30, 1999
Centralia, WA Storage Facility Owned --
Ogden, UT Storage Facility Owned --
Oregon City, OR Offices Leased Month to Month
Fresno, CA Terminal Facility Leased March 31, 2002
</TABLE>
Management believes its facilities are in good condition and that the
facilities are adequate for its operating needs for the foreseeable future
without significant modifications or capital investment.
LEGAL PROCEEDINGS
The Company is a party to various litigation matters incidental to the
conduct of its business. The Company does not believe that the outcome of any of
the matters in which it is currently involved will have a material adverse
effect on its financial condition or results of operations.
ENVIRONMENTAL LIABILITY
Materials sold by JTM vary in chemical composition. Although the EPA has
excluded CCPs from regulation as hazardous wastes, fluidized bed ash, which is a
material derived from the use of advanced boiler technology (Fluidized Bed
Combustor) that meets EPA clean air standards, has not been ruled on as of this
date. JTM manages approximately 700,000 tons of FBCs annually. Should the EPA
rule to include this material on its hazardous material list it is likely to
involve a testing protocol similar to the one used for cement kiln dust. JTM
has, through the ACAA, maintained an active role in providing information to aid
in determining the final categorization of FBCs. Based on scientific information
compiled by JTM, JTM believes material now managed by JTM for utility clients
will not, as a consequence of EPA rulings, impact JTM negatively. However,
should the EPA rule not to grandfather material produced and marketed
50
<PAGE>
for the past ten years, JTM could become part of a group of utilities,
marketers, manufacturers (petroleum) and service companies that will have to
meet the EPA mandate. The EPA will make a report to Congress on this issue on
September 30, 1998. A final ruling will be made by the EPA no later than April
1, 1999.
While CCPs are not hazardous wastes, they contain small concentrations of
metals that are included in the list of "hazardous substances" under CERCLA.
Such concentrations are well below applicable cleanup criteria. Land application
of CCPs is regulated by a variety of federal and state statutes, which impose
testing and management requirements to ensure environmental protection. Under
limited circumstances, mismanagement of CCPs can give rise to CERCLA liability.
JTM has been active in a number of landfill operations where the permitting
and liability for such operations is contractually retained by the client. JTM
is active in one landfill that is "managed" as a hazardous waste landfill,
although it is not designated as such. This client processes spent aluminum pot-
liner, a hazardous waste, into a non-hazardous condition by use of their
patented process. JTM provides services to landfill residues of this treatment
process and operates certain in-plant equipment and systems for the client.
Because of recent rulings, JTM's operations are run as if the processed potliner
is a hazardous waste. All environmental liabilities surrounding this project are
assumed by the client, and JTM currently foresees no adverse effect upon its
business, financial condition or results of operation from this project. There
can be no assurance, however, that JTM will not be named in third-party claims
relating to its activities. See "Risk Factors--Environmental Liability."
51
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names, ages and positions of each of the
individuals that currently serve as Directors and Executive Officers of JTM. All
Directors hold office until the next annual meeting of the Stockholders of JTM
and until any successors are duly elected and qualified. All Executive Officers
hold office at the pleasure of the Board of Directors. Ages are stated as of
December 31, 1997.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- ------------------------------------------ --- ---------------------------------------------------------------
<S> <C> <C>
R Steve Creamer........................... 46 Chairman of the Board and Chief Executive Officer
Raul A. Deju.............................. 51 President and Chief Operating Officer, Assistant Secretary and
Director
J.I. Everest, II.......................... 41 Chief Financial Officer and Assistant Secretary
Clinton W. Pike........................... 45 Executive Vice President
Danny L. Gray............................. 42 Senior Vice President, Eastern Operations
Brett A. Hickman.......................... 35 Senior Vice President, General Counsel and Secretary
Grover C. Dobbins, Jr..................... 49 Vice President, Administration and Assistant Secretary
Joseph M. Silvestri....................... 36 Director
Richard M. Cashin, Jr..................... 44 Director
Gerald A. Peabody, Jr..................... 66 Director
</TABLE>
R STEVE CREAMER. Mr. Creamer is the Chairman of the Board and Chief
Executive Officer of JTM and ISG. He is also founder and former CEO of ECDC
Environmental L.C., the largest rail-served industrial waste management facility
in North America. Prior to that, Mr. Creamer served as CEO of Creamer & Noble,
an engineering firm based in St. George, Utah. Mr. Creamer received the honor as
Ernst & Young's Entrepreneur of the Year in Utah in 1996. He earned a B.S.
degree in Civil and Environmental Engineering from Utah State University in
1973. Mr. Creamer is a P.E.
RAUL A. DEJU. Dr. Deju is the President and Chief Operating Officer of JTM
and ISG. Dr. Deju served as Director, Rockwell Hanford Operations through 1981,
Senior Vice President of International Technologies, Inc. through 1987 and
Regional President of several subsidiaries of WMX Technologies, Inc. through
1995. Dr. Deju served as Chairman and CEO of DGL International through 1997, and
retains an ownership position in DGL. Dr. Deju has been on the Board of
Directors of various national and international WMX subsidiaries, Advanced
Sciences, Inc. and Isadra, Inc. Dr. Deju is a member of both the JTM and ISG
Boards of Directors. Dr. Deju is an advisor to a committee of the U.S. Secretary
of Commerce and has served on the U.S. Environmental Protection Agency Advisory
Committee. Dr. Deju received a B.S. degree in Mathematics and Physics in 1966
and a Ph.D. degree in Engineering Geology in 1969 from the New Mexico Institute
of Mining and Technology.
J.I. EVEREST, II. Mr. Everest is the Chief Financial Officer and Corporate
Secretary of JTM and ISG. He is responsible for all financial functions of JTM.
Since 1993, he has served as Vice President of Finance for ECDC Environmental,
Inc. From 1988 to 1993, Mr. Everest was Director of Financial Analysis/ Treasury
of USPCI, Inc. Mr. Everest serves as Corporate Secretary of both JTM and ISG.
Mr. Everest earned an M.B.A. degree (Finance Concentration) in 1994 from the
University of Texas at Austin and a B.B.A. degree from Southern Methodist
University in 1979. Mr. Everest is a C.P.A.
CLINTON W. PIKE. Mr. Pike is the Executive Vice President of JTM. Since he
began his service in 1990, Mr. Pike has served as Vice President of Business
Development for JTM, establishing the Business and Product Development Program,
and spearheading nontraditional business advancement and growth through
acquisitions and the development of new markets. Mr. Pike invented a process for
the utilization of fly ash in roofing shingles, thereby winning for JTM the
award of the United States and Canadian patent for this process. Prior to his
service with JTM, he was Coordinator, Fuel and Ash Quality with Georgia
52
<PAGE>
Power Company, where he directed a total CCP management program. Mr. Pike earned
a B.S. degree in Biology (Chemistry minor) from Georgia Southwestern College in
1974.
DANNY L. GRAY. Mr. Gray is a Senior Vice President of JTM. From July 1994
until 1997, he served principally as President of KBK and also as Vice President
of JTM. Prior to joining JTM, Mr. Gray was a Civil Engineer with American
Electric Power in 1978 and was promoted to Senior Environmental Engineer,
Environmental Department of that company in 1980. Mr. Gray earned a B.S. degree
in Civil Engineering from Virginia Tech in 1977, graduating with honors.
BRETT A. HICKMAN. Mr. Hickman is the Senior Vice President, General Counsel
and Secretary of JTM. From December 1993 until February 1998, Mr. Hickman was
General Counsel, Western Division of Laidlaw Environmental Services, Inc. Prior
to that, Mr. Hickman was an attorney with Davis & Lavender in Columbia, South
Carolina. Mr. Hickman earned a B.A. degree in Political Science from The Citadel
in 1983 and a J.D. degree from the University of South Carolina in 1986.
GROVER C. DOBBINS, JR. Mr. Dobbins is the Vice President, Administration of
JTM. He joined JTM in 1989 as Manager of Project Development. He began work as
Vice President, Corporate Services in January, 1991. From 1992 to 1995, Mr.
Dobbins served as Director of Marketing. Effective January 1, 1996, he was
appointed Vice President, Administration. Prior to his service with JTM, he was
a Principal Engineer at Carolina Power and Light Company for 15 years. Mr.
Dobbins earned a Master of Civil Engineering degree in 1972 and a B.S. degree in
Civil Engineering in 1971 from North Carolina State University.
JOSEPH M. SILVESTRI. Mr. Silvestri has been a director of JTM since its
acquisition by ISG. Mr. Silvestri has been employed by CVC since 1990 and has
served as a Vice President there since 1995. Mr. Silvestri is a director of
International Media Group, Polyfibron Technologies, Frozen Specialties, Glenoit
Mills, Euramax and Triumph Group.
RICHARD M. CASHIN, JR. Mr. Cashin was appointed a director of JTM in March
1998. Mr. Cashin has been employed by CVC since 1980, and has been President
since 1994. Mr. Cashin is a director of Levitz Furniture Incorporated, Lifestyle
Furnishings International, Euramax and Titan Wheel International.
GERALD A. PEABODY, JR. Mr. Peabody was appointed a director of JTM in March
1998. For 21 years, Mr. Peabody was the President of Pozzolanic, which is now a
wholly owned subsidiary of JTM.
EMPLOYMENT AGREEMENTS
On October 14, 1997, JTM entered into employment agreements with the
following three executive officers: R Steve Creamer, Raul A. Deju and J.I.
Everest, II (the "Executives"). The employment agreements provide for an initial
base salary of $150,000, $140,000 and $125,000, respectively. In addition, the
employment agreements provide that each Executive may be entitled to receive a
discretionary annual bonus, which bonus is at the sole discretion of the
Compensation Committee of the Board of Directors. Each Executive is also
entitled to certain other standard employee benefits.
Each employment agreement provides for an initial employment term of three
years, with automatic extensions of one year thereafter. JTM or the Executive
may terminate the agreement, with or without cause, and with or without prior
notice. In the event JTM terminates the agreement or the Executive resigns from
employment, the Executive's rights and JTM's obligations under the employment
agreement cease as of the date of termination. Further, each Executive has
agreed that no severance or other similar damages of any kind will be payable to
the Executive in the event of the Executive's termination or resignation from
employment for any reason.
The employment agreement of each Executive also includes certain
noncompetition, nondisclosure and nonsolicitation provisions.
53
<PAGE>
In addition, JTM entered into employment agreements with Clinton W. Pike and
Danny L. Gray (collectively, the "Employees") on October 23, 1997 and November
5, 1997, respectively. The employment agreements provide for an initial base
salary of $160,000 and $120,000, respectively. The employment agreement of each
Employee provides for an annual performance bonus of up to 30% of the Employee's
base salary based on JTM's earnings before interest and taxes ("EBIT") within
the Employee's area of responsibility and personal performance goals set
annually by JTM and an additional incremental bonus of 50%, 100% or 200% of the
Employee's base salary if actual EBIT exceeds budgeted EBIT by 30%, 50% or 75%,
respectively. The Employees are also entitled to a new business procurement
incentive bonus for their efforts in procuring new contracts. Mr. Pike was
granted a $250,000 signing bonus, the last installment of which is due to him on
January 2, 1999. If Mr. Pike terminates his employment agreement or such
agreement is terminated for cause by JTM before October 23, 1998, Mr. Pike will
be obligated to repay to JTM the portion of the signing bonus paid by JTM prior
to such termination. Each Employee is also entitled to certain other standard
employee benefits.
The employment agreement of each Employee also grants to the Employee an
economic interest in one percent of all outstanding shares of JTM's stock as of
the date of such employment agreement, which interest becomes fully vested on
the first anniversary of such employment agreement. Such phantom stock right
represents a right of the Employee to receive payment if (i) all of the
outstanding stock of JTM or its parent company is sold to a third party or
entity that does not own such stock as of the date of the employment agreement,
or (ii) JTM or its parent complete a public offering of stock. Such interest may
be diluted through future issuances of shares of stock by JTM.
Each employment agreement provides for an initial employment term of five
years, with automatic extensions of one year thereafter. JTM or the Employee may
terminate the employment agreement with or without cause; however, if the
Employee is terminated without cause, he is still entitled to receive full
compensation for the balance of his employment term. Should JTM relocate Mr.
Gray to a location more than 50 miles from his current location, Mr. Gray may
terminate his employment and receive a severance package equal in duration to
one-half of the remaining term of his employment agreement, or one year,
whichever period is shorter. After a similar relocation, Mr. Pike will receive a
$100,000 lump sum payment in lieu of reimbursement by JTM of relocation costs
and expenses.
The Employees' employment agreements also contain certain noncompetition
provisions.
COMPENSATION OF DIRECTORS
JTM does not currently pay annual fees to non-employee directors. Directors
who are also employees of JTM do not receive compensation as directors. However,
JTM reimburses each director for ordinary and necessary travel expenses related
to such directors attendance at Board of Directors and committee meetings.
54
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth compensation earned for all services rendered
to JTM during fiscal year 1997 by JTM's chief executive officer and the three
most highly compensated executive officers other than JTM's chief executive
officer (collectively, the "Named Executives"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
OTHER ANNUAL
NAME AND PRINCIPAL POSITION(1) FISCAL YEAR SALARY(2) BONUS COMPENSATION(3)
- ----------------------------------------------------------- ------------- ---------- ---------- -----------------
<S> <C> <C> <C> <C>
R Steve Creamer (4)........................................ 1997 $ 24,231 $ 0 $ 0
Chairman, Chief Executive Officer
Clinton W. Pike............................................ 1997 149,255 119,492 4,374
Executive Vice President
Danny L. Gray.............................................. 1997 110,188 6,675 3,026
Senior Vice President
Grover C. Dobbins, Jr...................................... 1997 102,346 6,239 3,009
Vice President, Administration
</TABLE>
- ------------------------
(1) Positions indicated were as of December 31, 1997.
(2) Includes amounts, if any, deferred by the named individual for the period in
question pursuant to Section 401(k) of the Internal Revenue Code under the
JTM Industries, Inc. 401(k) Savings Plan (the "401(k) Plan").
(3) Amounts shown under Other Annual Compensation include amounts paid by JTM as
matching and/ or profit sharing contributions to the 401(k) Plan, but do not
include perquisites and other personal benefits provided to each of the
Named Executives, the aggregate value of which did not exceed the lesser of
$50,000 or 10% of any such Named Executive's annual salary and bonus.
(4) Mr. Creamer has been employed with JTM since October 14, 1997, and his
salary reflects the two and a half months he worked for JTM in 1997.
55
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
JTM is a wholly owned subsidiary of ISG. The following table sets forth
information regarding the beneficial ownership of the common stock of JTM
through ISG, by each person known to JTM to be the beneficial owner of more than
five percent of the common stock of JTM, each director of JTM, each Named
Executive and all directors and executive officers of JTM as a group. Except as
otherwise indicated, the beneficial owners of the voting stock listed below,
based on information furnished by such owners, have sole investment and voting
power with respect to such shares. The business address for each executive
officer of JTM is in care of JTM.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP OF BENEFICIAL OWNERSHIP OF
COMMON STOCK PREFERRED STOCK
------------------------ ------------------------
NUMBER OF NUMBER OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES PERCENT SHARES PERCENT
- ----------------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Citicorp Venture Capital, Ltd. (1)............................... 187,425 37.9 26,813 38.3
R Steve Creamer (2)(3)........................................... 197,836 40.0 27,684 39.6
J.I. Everest, II (3)............................................. 49,467 10.0 6,925 9.9
CCT Partners IV, LP (4).......................................... 33,075 6.7 4,732 6.7
Richard M. Cashin, Jr............................................ 7,840 1.6 1,122 1.6
Raul A. Deju (5)................................................. 2,667 0.5 373 0.5
Joseph M. Silvestri.............................................. 980 0.2 140 0.2
Gerald A. Peabody, Jr............................................ -- -- -- --
Clinton W. Pike (6).............................................. -- -- -- --
Danny L. Gray (6)................................................ -- -- -- --
All directors and executive officers as a group
(9 persons) (2)(3)(5)(6)....................................... 258,790 52.3 36,244 51.8
</TABLE>
- ------------------------
(1) The address of Citicorp Venture Capital, Ltd. is: 399 Park Avenue, 14th
Floor, New York, NY 10043.
(2) Includes 148,400 shares owned by Mr. Creamer's adult son and three minor
children.
(3) Messrs. Creamer and Everest beneficially own shares in ISG through RACT,
Inc., a Utah corporation ("RACT"), which directly owns shares in ISG. The
business address of RACT is: 127 South 500 East, Suite 675, Salt Lake City,
Utah 84102.
(4) The address of CCT Partners IV, LP is the same as that of Citicorp Venture
Capital, Ltd.
(5) In addition, Dr. Deju has the option to acquire an ownership interest in
RACT which would represent a total of 15% of the common stock and 15% of the
preferred stock of ISG.
(6) Messrs. Pike and Gray, pursuant to their employment contracts, have each
been granted an economic interest in one percent of all outstanding shares
of JTM's stock as of the date of their respective employment agreements. See
"Management--Employment Agreements."
CERTAIN TRANSACTIONS
CORPORATE SERVICES AND RE-AGENT AGREEMENTS
For the period from January 1, 1997 to October 13, 1997, JTM paid management
fees and administrative fees of $491,000 and $249,000, respectively, to Laidlaw
for certain corporate services. JTM has entered into a corporate services
agreement with Laidlaw in effect from October 14, 1997 to June 30, 1998. The
services provided by Laidlaw and its subsidiary, Laidlaw Environmental Services,
Inc ("LESI"), under the agreement include legal, accounting and management
information system support. LESI's management fee is $25,000 per month for the
term of the agreement. Also, as part of its acquisition by ISG from Laidlaw, JTM
agreed to a three-year commitment to sell cement kiln dust, cement, lime kiln
dust, fly ash and lime to LESI at market rates.
56
<PAGE>
DESCRIPTION OF NOTES
GENERAL
The form and terms of the Exchange Notes are the same as the form and terms
of the Restricted Notes except that (i) the Exchange Notes will have been
registered under the Securities Act and thus will not bear restrictive legends
restricting their transfer pursuant to the Securities Act and (ii) holders of
Exchange Notes will not be entitled to certain rights of holders of the
Restricted Notes under the Registration Rights Agreement which will terminate
upon the consummation of the Exchange Offer. The Restricted Notes have been, and
the Exchange Notes are to be, issued under the Indenture. The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act. The Notes are subject to all such terms,
and Holders of Notes are referred to the Indenture and the Trust Indenture Act
for a statement thereof. The definitions of certain terms used in the following
summary are set forth below under "--Certain Definitions." For purposes of this
summary, the term "Company" refers only to JTM Industries, Inc. and not to any
of its Subsidiaries.
The Notes will be general unsecured obligations of the Company, will be
subordinated in right of payment to all existing and future Senior Indebtedness
of the Company, including Senior Indebtedness under the Secured Credit Facility,
and will rank PARI PASSU in right of payment with all existing and future senior
subordinated Indebtedness of the Company and will rank senior in right of
payment to all existing and future subordinated Indebtedness of the Company. As
of December 31, 1997, on a pro forma basis after giving effect to the
Transactions, the issuance of the Notes and the application of the net proceeds
therefrom, the aggregate principal amount of Senior Indebtedness (excluding
trade payables and other accrued liabilities) of the Company would have been
approximately $8.9 million, all of which would have been Indebtedness secured by
substantially all of the assets of the Company and its subsidiaries pursuant to
the Secured Credit Facility. The terms of the Indenture will limit the ability
of the Company and its subsidiaries to incur additional Indebtedness. As of the
date of the Indenture, all of the Company's Subsidiaries will be Restricted
Subsidiaries. However, under certain circumstances, the Company will be able to
designate current or future Subsidiaries as Unrestricted Subsidiaries.
Unrestricted Subsidiaries will not be subject to many of the restrictive
covenants set forth in the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Restricted Notes in an aggregate principal amount $100.0 million were
issued in the Offering. The Notes will mature on April 15, 2008. The Indenture
provides for the issuance of up to $50.0 million aggregate principal amount of
additional Notes having identical terms and conditions to the Notes exchanged
hereby (the "Additional Notes"), subject to compliance with the covenants
contained in the Indenture. Any Additional Notes will be part of the same issue
as the Notes exchanged hereby and will vote on all matters with the Notes
exchanged hereby. For purposes of this "Description of Notes," references to the
Notes do not include Additional Notes. Interest on the Notes will accrue at the
rate of 10% per annum and will be payable semi-annually in arrears on April 15
and October 15 of each year, commencing on October 15, 1998, to Holders of
record on the immediately preceding April 1 and October 1. Interest on the Notes
will accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of original issuance. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Principal, premium, if any, and interest and Liquidated Damages, if any, on the
Notes will be payable at the office or agency of the Company maintained for such
purpose within the City and State of New York or, at the option of the Company,
payment of interest and Liquidated Damages, if any, may be made by check mailed
to the Holders of the Notes at their respective addresses set forth in the
register of Holders of Notes; PROVIDED that all payments of principal, premium,
interest and Liquidated Damages, if any, with respect to Notes the Holders of
which have given wire transfer instructions to the Company will be required to
be made by wire transfer of immediately available funds to the accounts
specified by the Holders thereof. Until otherwise designated by the Company, the
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Company's office or agency in New York will be the office of the Trustee
maintained for such purpose. The Notes will be issued in denominations of $1,000
and integral multiples thereof.
SUBORDINATION
The payment of principal of, premium, if any, interest and Liquidated
Damages, if any, on the Notes will be subordinated in right of payment, as set
forth in the Indenture, to the prior payment in full of all Senior Indebtedness,
whether outstanding on the date of the Indenture or thereafter incurred.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshaling of the Company's
assets and liabilities, the holders of Senior Indebtedness will be entitled to
receive payment in full of all Obligations due in respect of such Senior
Indebtedness (including interest after the commencement of any such proceeding
at the rate specified in the applicable Senior Indebtedness) before the Holders
of Notes will be entitled to receive any payment with respect to the Notes, and
until all Obligations with respect to Senior Indebtedness are paid in full, any
distribution to which the Holders of Notes would be entitled shall be made to
the holders of Senior Indebtedness (except that Holders of Notes may receive and
retain Permitted Junior Securities and payments made from the trust described
under the caption "--Legal Defeasance and Covenant Defeasance").
The Company also may not make any payment upon or in respect of the Notes
(except in Permitted Junior Securities or from the trust described under the
caption "--Legal Defeasance and Covenant Defeasance") if (i) a default in the
payment of the principal of, premium, if any, or interest on Designated Senior
Indebtedness occurs and is continuing beyond any applicable period of grace or
(ii) any other default occurs and is continuing with respect to Designated
Senior Indebtedness that permits holders of the Designated Senior Indebtedness
as to which such default relates to accelerate its maturity and the Trustee
receives a notice of such default (a "Payment Blockage Notice") from the Company
or the holders of any Designated Senior Indebtedness. Payments on the Notes may
and shall be resumed (a) in the case of a payment default, upon the date on
which such default is cured or waived and (b) in case of a nonpayment default,
the earlier of the date on which such nonpayment default is cured or waived or
179 days after the date on which the applicable Payment Blockage Notice is
received, unless the maturity of any Designated Senior Indebtedness has been
accelerated. No new period of payment blockage may be commenced unless and until
(i) 360 days have elapsed since the effectiveness of the immediately prior
Payment Blockage Notice and (ii) all scheduled payments of principal, premium,
if any, interest and Liquidated Damages, if any, on the Notes that have come due
have been paid in full in cash. No nonpayment default that existed or was
continuing on the date of delivery of any Payment Blockage Notice to the Trustee
shall be, or be made, the basis for a subsequent Payment Blockage Notice.
The Indenture further requires that the Company promptly notify holders of
Senior Indebtedness if payment of the Notes is accelerated because of an Event
of Default.
As a result of the subordination provisions described above, in the event of
a liquidation or insolvency, Holders of Notes may recover less ratably than
creditors of the Company who are holders of Senior Indebtedness. On a pro forma
basis, after giving effect to the Transactions, the issuance of the Notes and
the application of the net proceeds therefrom, the principal amount of Senior
Indebtedness outstanding at December 31, 1997 would have been approximately $8.9
million. The Indenture will limit, subject to certain financial tests, the
amount of additional Indebtedness, including Senior Indebtedness, that the
Company and its Subsidiaries can incur. See "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock."
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SUBSIDIARY GUARANTEES
The Company's payment obligations under the Notes will be jointly and
severally guaranteed on a senior subordinated basis (the "Subsidiary
Guarantees") by the Guarantors. The Subsidiary Guarantees will be subordinated
in right of payment to all existing and future Senior Indebtedness of the
Guarantors, including all obligations of the Guarantors under the Secured Credit
Facility and will rank PARI PASSU in right of payment with all existing and
future senior subordinated indebtedness of the Guarantors and will rank senior
in right of payment to all existing and future subordinated Indebtedness of the
Guarantors. The obligation of each Guarantor under its Subsidiary Guarantee will
be limited so as not to constitute a fraudulent conveyance under applicable law.
See "Risk Factors--Fraudulent Transfer Considerations; Unenforceability of
Subsidiary Guarantees."
The Indenture will provide that no Guarantor may consolidate with or merge
with or into (whether or not such Guarantor is the surviving Person) another
corporation, Person or entity whether or not affiliated with such Guarantor
unless (i) subject to the provisions of the following paragraph, the Person
formed by or surviving any such consolidation or merger (if other than such
Guarantor) assumes all the obligations of such Guarantor under the Notes and the
Indenture pursuant to a supplemental indenture in form and substance reasonably
satisfactory to the Trustee, and (ii) immediately after giving effect to such
transaction, no Default or Event of Default exists.
The Indenture will provide that in the event of a sale or other disposition
of all of the assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the capital stock of any
Guarantor, then such Guarantor (in the event of a sale or other disposition, by
way of such a merger, consolidation or otherwise, of all of the capital stock of
such Guarantor) or the corporation acquiring the property (in the event of a
sale or other disposition of all of the assets of such Guarantor) will be
released and relieved of any obligations under its Subsidiary Guarantee;
PROVIDED that the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of the Indenture. See "--Repurchase at
the Option of Holders--Asset Sales."
OPTIONAL REDEMPTION
The Notes will not be redeemable at the Company's option prior to April 15,
2003. Thereafter, the Notes will be subject to redemption at any time at the
option of the Company, in whole or in part, upon not less than 30 nor more than
60 days' notice, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the applicable redemption date, if redeemed during the
twelve-month period beginning on of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---------------------------------------------------------------------------------- -----------
<S> <C>
2003.............................................................................. 105.000%
2004.............................................................................. 103.333%
2005.............................................................................. 101.667%
2006 and thereafter............................................................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time on or before, April 15, 2001, the
Company may redeem up to $35.0 million in aggregate principal amount of Notes at
a redemption price of 110% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the redemption date,
with the net cash proceeds to the Company of one or more Public Offerings;
PROVIDED that at least $65.0 million in aggregate principal amount of Notes
remain outstanding immediately after the occurrence of such redemption
(excluding Notes held by the Company or any of its Subsidiaries); and PROVIDED,
FURTHER, that each such redemption shall occur within 60 days of the date of the
closing of each such Public Offering.
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SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; PROVIDED
that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of Notes to be redeemed at its registered
address. Notices of redemption may not be conditional. If any Note is to be
redeemed in part only, the notice of redemption that relates to such Note shall
state the portion of the principal amount thereof to be redeemed. A new Note in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Note. Notes called
for redemption become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on Notes or portions of them called
for redemption.
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Company to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of purchase (the
"Change of Control Payment"). Within 30 days following any Change of Control,
the Company will mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Notes on the date specified in such notice, which date shall be no earlier than
30 days and no later than 60 days from the date such notice is mailed (the
"Change of Control Payment Date"), pursuant to the procedures required by the
Indenture and described in such notice. The Company will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes as a result of a
Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail to each Holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; PROVIDED that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. The Indenture provides that,
prior to complying with the provisions of this covenant, but in any event within
90 days following a Change of Control, the Company will either repay all
outstanding Senior Indebtedness or obtain the requisite consents, if any, under
all agreements governing outstanding Senior Indebtedness to permit the
repurchase of Notes required by this covenant. The Company will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
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The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Notes to require that the Company
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction.
The Secured Credit Facility provides that certain change of control events
with respect to the Company would constitute a default thereunder. Any future
credit agreements or other agreements relating to Senior Indebtedness to which
the Company becomes a party may contain similar restrictions and provisions. In
the event a Change of Control occurs at a time when the Company is prohibited
from repurchasing Notes, the Company could seek the consent of its lenders to
the repurchase of Notes or could attempt to refinance the borrowings that
contain such prohibition. If the Company does not obtain such a consent or repay
such borrowings, the Company will remain prohibited from repurchasing Notes. In
such case, the Company's failure to repurchase tendered Notes would constitute
an Event of Default under the Indenture which would, in turn, constitute a
default under the Secured Credit Facility. In such circumstances, the
subordination provisions in the Indenture would likely restrict payments to
Holders of Notes.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a Holder of Notes to require the Company to
repurchase such Notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of the Company and its
Subsidiaries taken as a whole to another Person or group may be uncertain.
ASSET SALES
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company
(or the Restricted Subsidiary, as the case may be) receives consideration at the
time of such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of and (ii) at least 75% of the consideration therefor
received by the Company or such Restricted Subsidiary is in the form of cash;
PROVIDED that the amount of (x) any liabilities (as shown on the Company's or
such Restricted Subsidiary's most recent balance sheet), of the Company or any
Restricted Subsidiary (other than contingent liabilities and liabilities that
are by their terms subordinated to the Notes or any guarantee thereof) that are
assumed by the transferee of any such assets pursuant to a customary novation
agreement that releases the Company or such Restricted Subsidiary from further
liability and (y) any securities, notes or other obligations received by the
Company or any such Restricted Subsidiary from such transferee that are
contemporaneously (subject to ordinary settlement periods) converted by the
Company or such Restricted Subsidiary into cash (to the extent of the cash
received), shall be deemed to be cash for purposes of this provision.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds, at its option, (a) to permanently repay
(and reduce the commitments under) Senior Indebtedness of the Company or a
Guarantor or (b) to the acquisition of a majority of the assets of, or a
majority of the Voting Stock of, another Permitted Business, the making of a
capital expenditure or the
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acquisition of other long-term assets that are used or useful in a Permitted
Business. Pending the final application of any such Net Proceeds, the Company
may temporarily reduce revolving credit borrowings, including without
limitation, the Secured Credit Facility, or otherwise invest such Net Proceeds
in any manner that is not prohibited by the Indenture. Any Net Proceeds from
Asset Sales that are not applied or invested as provided in the first sentence
of this paragraph will be deemed to constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $5.0 million, the Company will be
required to make an offer to all Holders of Notes and all holders of other
Indebtedness containing provisions similar to those set forth in the Indenture
with respect to offers to purchase or redeem with the proceeds of sales of
assets (an "Asset Sale Offer") to purchase the maximum principal amount of Notes
and such other Indebtedness that may be purchased out of the Excess Proceeds, at
an offer price in cash in an amount equal to 100% of the principal amount
thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any,
to the date of purchase, in accordance with the procedures set forth in the
Indenture and such other Indebtedness. To the extent that any Excess Proceeds
remain after consummation of an Asset Sale Offer, the Company may use such
Excess Proceeds for any purpose not otherwise prohibited by the Indenture. If
the aggregate principal amount of Notes and such other Indebtedness tendered by
holders thereof in response to such Asset Sale Offer exceeds the amount of
Excess Proceeds, the Trustee shall select the Notes and such other Indebtedness
to be purchased on a pro rata basis. Upon completion of such offer to purchase,
the amount of Excess Proceeds shall be reset at zero.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any other payment or distribution on account of the Company's
or any of its Restricted Subsidiaries' Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation involving
the Company or any of its Restricted Subsidiaries) or to the direct or indirect
holders of the Company's or any of its Restricted Subsidiaries' Equity Interests
in their capacity as such (other than dividends or distributions payable in
Equity Interests (other than Disqualified Stock) of the Company or dividends or
other distributions payable to the Company or a Restricted Subsidiary of the
Company); (ii) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or consolidation
involving the Company) any Equity Interests of the Company or any direct or
indirect parent of the Company or other Affiliate of the Company (other than any
such Equity Interests owned by the Company or any Wholly Owned Restricted
Subsidiary of the Company); (iii) make any payment on or with respect to, or
purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is PARI PASSU with or subordinated to the Notes (other than
Notes), except a payment of interest or principal at Stated Maturity; or (iv)
make any Restricted Investment (all such payments and other actions set forth in
clauses (i) through (iv) above being collectively referred to as "Restricted
Payments"), unless, at the time of and after giving effect to such Restricted
Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have had a Fixed
Charge Coverage Ratio of at least 2.0 to 1.0; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of the Indenture (excluding Restricted Payments
permitted by clauses (ii), (iii), (iv), (viii) and (ix) of the next
succeeding paragraph), is less than the sum, without duplication, of (i) 50%
of the Consolidated Net Income of the Company for the period (taken as one
accounting period) from the beginning of the first fiscal
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quarter commencing after the date of the Indenture to the end of the
Company's most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100% of such
deficit), plus (ii) 100% of the aggregate net cash proceeds received by the
Company since the date of the Indenture as a contribution to its common
equity capital or from the issue or sale of Equity Interests of the Company
(other than Disqualified Stock) or from the issue or sale of Disqualified
Stock or debt securities of the Company that have been converted into such
Equity Interests (other than Equity Interests (or Disqualified Stock or
convertible debt securities) sold to a Subsidiary of the Company), plus
(iii) to the extent that any Restricted Investment that was made after the
date of the Indenture is sold for cash or otherwise liquidated or repaid for
cash, the lesser of (A) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any) and (B) the
initial amount of such Restricted Investment.
The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any PARI PASSU or subordinated Indebtedness or Equity Interests
of the Company in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Restricted Subsidiary of the
Company) of, other Equity Interests of the Company (other than any Disqualified
Stock); PROVIDED that the amount of any such net cash proceeds that are utilized
for any such redemption, repurchase, retirement, defeasance or other acquisition
shall be excluded from clause (c) (ii) of the preceding paragraph; (iii) the
defeasance, redemption, repurchase or other acquisition of PARI PASSU or
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness; (iv) the payment of any dividend by a
Restricted Subsidiary of the Company to the holders of its common Equity
Interests on a pro rata basis; (v) the repurchase, redemption or other
acquisition or retirement for value of any Equity Interests of the Company or
any Restricted Subsidiary of the Company held by any member of the Company's (or
any of its Restricted Subsidiaries') management pursuant to any management
equity subscription agreement or stock option agreement in effect as of the date
of the Indenture; PROVIDED that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not exceed
$250,000 in any twelve-month period and no Default or Event of Default shall
have occurred and be continuing immediately after such transaction; (vi)
dividends or other payments to ISG sufficient to enable ISG to pay accounting,
legal, corporate reporting and administrative expenses of ISG incurred in the
ordinary course of business in an amount not to exceed $500,000 in any
twelve-month period; (vii) payments to ISG by the Company or any Subsidiary with
respect to taxes (including estimated taxes) that are paid by ISG on a combined,
consolidated, unitary or similar basis, to the extent that such payments do not
exceed the amount that the Company or such Subsidiary would have paid to the
relevant taxing authority if the Company or such Subsidiary filed a separate tax
return for the period in question; (viii) the repayment by the Company on the
Issue Date of the ISG Bridge Note; and (ix) from and after April 15, 2003, the
payment of dividends by the Company to ISG the proceeds of which are utilized by
ISG solely to pay principal of or interest on the ISG PIK Notes, provided that
(x) such dividends shall not exceed $2.5 million in the aggregate in any fiscal
year of the Company or $10.0 million in the aggregate since the Issue Date, (y)
at the time of the making of any such dividend and immediately after giving
effect thereto, the Fixed Charge Coverage Ratio for the Company's most recently
ended four fiscal quarters for which internal financial statements are available
immediately preceding the date of such proposed dividend would have been at
least 2.25 to 1.0 and (z) immediately before and immediately after giving effect
to such proposed dividend no Default or Event of Default shall have occurred and
be continuing.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash) in
the Subsidiary so designated will be deemed to be Restricted Payments at the
time of such designation and will reduce the amount available for Restricted
Payments under the first paragraph of this covenant. All such
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outstanding Investments will be deemed to constitute Investments in an amount
equal to the fair market value of such Investments at the time of such
designation. Such designation will only be permitted if such Restricted Payment
would be permitted at such time and if such Restricted Subsidiary otherwise
meets the definition of an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any non-cash Restricted Payment shall be determined by the Board
of Directors whose resolution with respect thereto shall be delivered to the
Trustee, such determination to be based upon an opinion or appraisal issued by
an accounting, appraisal or investment banking firm of national standing if such
fair market value exceeds $1.0 million. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by the covenant "Restricted
Payments" were computed, together with a copy of any fairness opinion or
appraisal required by the Indenture.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) and that the Company will not issue any Disqualified Stock and
will not permit any of its Subsidiaries to issue any shares of preferred stock;
PROVIDED, HOWEVER, that the Company may incur Indebtedness (including Acquired
Debt) or issue shares of Disqualified Stock and the Guarantors may incur
Indebtedness or issue preferred stock if the Fixed Charge Coverage Ratio for the
Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock or preferred
stock is issued would have been at least 1.8 to 1.0 if such incurrence is on or
prior to April 15, 2000 or 2.0 to 1.0 if such incurrence is after April 15,
2000, determined on a pro forma basis (including a pro forma application of the
net proceeds therefrom), as if the additional Indebtedness had been incurred, or
the Disqualified Stock or preferred stock had been issued, as the case may be,
at the beginning of such four-quarter period. The foregoing provisions will not
apply to the incurrence of any of the following items of Indebtedness
(collectively, "Permitted Debt"):
(i) the incurrence by the Company of Indebtedness (including letters of
credit, with letters of credit being deemed to have a principal amount equal
to the maximum potential liability of the Company and its Restricted
Subsidiaries thereunder) under the Secured Credit Facility; PROVIDED that
the aggregate principal amount of all Indebtedness (including letters of
credit) outstanding under the Secured Credit Facility after giving effect to
such incurrence does not exceed an amount equal to $35.0 million less the
aggregate amount of all Net Proceeds of Asset Sales applied to permanently
repay any such Indebtedness pursuant to the covenant described above under
the caption "--Repurchase at the Option of Holders--Asset Sales";
(ii) the incurrence by the Company and its Restricted Subsidiaries of
the Existing Indebtedness;
(iii) the incurrence by the Company of Indebtedness represented by the
Notes (other than any Additional Notes) and the Exchange Notes (other than
any Additional Notes) and the incurrence by the Guarantors of Indebtedness
represented by the Subsidiary Guarantees;
(iv) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case incurred for the
purpose of financing all or any part of the purchase price or cost of
construction
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or improvement of property, plant or equipment used in the business of the
Company or such Subsidiary, in an aggregate principal amount not to exceed
$10.0 million at any time outstanding;
(v) the incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to refund, refinance or replace Indebtedness (other than
intercompany Indebtedness) that is either the Existing Indebtedness or was
permitted by the Indenture to be incurred under the first paragraph hereof
or clauses (iii), (iv) or (v) of this paragraph;
(vi) the incurrence by the Company or any of its Restricted Subsidiaries
of intercompany Indebtedness between or among the Company and any of its
Wholly Owned Restricted Subsidiaries; PROVIDED, HOWEVER, that (i) if the
Company is the obligor on such Indebtedness, such Indebtedness is expressly
subordinated to the prior payment in full in cash of all Obligations with
respect to the Notes and (ii)(A) any subsequent issuance or transfer of
Equity Interests that results in any such Indebtedness being held by a
Person other than the Company or a Restricted Subsidiary thereof and (B) any
sale or other transfer of any such Indebtedness to a Person that is not
either the Company or a Wholly Owned Restricted Subsidiary thereof shall be
deemed, in each case, to constitute an incurrence of such Indebtedness by
the Company or such Restricted Subsidiary, as the case may be, that was not
permitted by this clause (vi);
(vii) the incurrence by the Company or any of its Restricted Subsidiaries
of Hedging Obligations that are incurred for the purpose of fixing or
hedging interest rate risk with respect to any floating rate Indebtedness
that is permitted by the terms of the Indenture to be outstanding;
(viii) the guarantee by the Company or any of the Guarantors of
Indebtedness of the Company or a Restricted Subsidiary of the Company that
was permitted to be incurred by another provision of this covenant;
(ix) the incurrence by the Company or any of its Restricted Subsidiaries
of additional Indebtedness in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (ix), not to exceed $10.0
million; and
(x) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt, PROVIDED, HOWEVER, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company that was not permitted by this clause (x).
For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories of
Permitted Debt described in clauses (i) through (x) above or is entitled to be
incurred pursuant to the first paragraph of this covenant, the Company shall, in
its sole discretion, classify such item of Indebtedness in any manner that
complies with this covenant. Accrual of interest, accretion or amortization of
original issue discount, the payment of interest on any Indebtedness in the form
of additional Indebtedness with the same terms, and the payment of dividends on
Disqualified Stock in the form of additional shares of the same class of
Disqualified Stock will not be deemed to be an incurrence of Indebtedness or an
issuance of Disqualified Stock for purposes of this covenant; PROVIDED,in each
such case, that the amount thereof is included in Fixed Charges of the Company
as accrued.
LIENS
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien securing Indebtedness or trade payables on any asset now owned or
hereafter acquired, or any income or profits therefrom or assign or convey any
right to receive income therefrom, except Permitted Liens, unless all payments
due under the
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Indenture and the Notes are secured on an equal and ratable basis with the
Indebtedness so secured until such time as such is no longer secured by a Lien;
PROVIDED that if such Indebtedness is by its terms expressly subordinated to the
Notes or any Subsidiary Guarantee, the Lien securing such Indebtedness shall be
subordinate and junior to the Lien securing the Notes and the Subsidiary
Guarantees with the same relative priority as such subordinate or junior
Indebtedness shall have with respect to the Notes and the Subsidiary Guarantees.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries (1) on
its Capital Stock or (2) with respect to any other interest or participation in,
or measured by, its profits, or (b) pay any indebtedness owed to the Company or
any of its Restricted Subsidiaries, (ii) make loans or advances to the Company
or any of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries. However, the
foregoing restrictions will not apply to encumbrances or restrictions existing
under or by reason of (a) Existing Indebtedness as in effect on the date of the
Indenture, (b) the Secured Credit Facility, PROVIDED that such restrictions are
no more restrictive than those contained in the Secured Credit Facility as in
effect on the Issue Date, (c) the Indenture and the Notes, (d) applicable law,
(e) any instrument governing Indebtedness or Capital Stock of a Person acquired
by the Company or any of its Restricted Subsidiaries as in effect at the time of
such acquisition (except to the extent such Indebtedness was incurred in
connection with or in contemplation of such acquisition), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of the Person, so
acquired, PROVIDED that, in the case of Indebtedness, such Indebtedness was
permitted by the terms of the Indenture to be incurred, (f) customary non-
assignment provisions in leases entered into in the ordinary course of business
and consistent with past practices, (g) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (iii) above on the property so acquired, (h) any
agreement for the sale of a Restricted Subsidiary that restricts distributions
by that Restricted Subsidiary pending its sale, (i) Permitted Refinancing
Indebtedness, PROVIDED that the restrictions contained in the agreements
governing such Permitted Refinancing Indebtedness are no more restrictive, taken
as a whole, than those contained in the agreements governing the Indebtedness
being refinanced, (j) Liens securing Indebtedness otherwise permitted to be
incurred pursuant to the provisions of the covenant described above under the
caption "--Liens" that limits the right of the debtor to dispose of the assets
securing such Indebtedness, (k) provisions with respect to the disposition or
distribution of assets or property in joint venture agreements and other similar
agreements entered into in the ordinary course of business and (l) restrictions
on cash or other deposits or net worth imposed by customers under contracts
entered into in the ordinary course of business.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Indenture provides that the Company may not consolidate or merge with or
into (whether or not the Company is the surviving corporation), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Registration
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Rights Agreement, the Notes and the Indenture pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee; (iii) immediately
after such transaction no Default or Event of Default exists; and (iv) except in
the case of a merger of the Company with or into a Wholly Owned Restricted
Subsidiary of the Company, the Company or the entity or Person formed by or
surviving any such consolidation or merger (if other than the Company), or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made (A) will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of the Company
immediately preceding the transaction and (B) will, at the time of such
transaction and after giving pro forma effect thereto as if such transaction had
occurred at the beginning of the applicable four-quarter period, have a Fixed
Charge Coverage Ratio of at least 2.0 to 1.0.
TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"),
unless (i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $1.0 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5.0 million, an opinion as to the fairness
to the Holders of such Affiliate Transaction from a financial point of view
issued by an accounting, appraisal or investment banking firm of national
standing. Notwithstanding the foregoing, the following items shall not be deemed
to be Affiliate Transactions: (i) any employment agreement entered into by the
Company or any of its Restricted Subsidiaries in the ordinary course of business
and consistent with the past practice of the Company or such Restricted
Subsidiary, (ii) transactions between or among the Company and/or its Restricted
Subsidiaries, (iii) payment of reasonable directors fees to Persons who are not
otherwise Affiliates of the Company and (iv) Restricted Payments (other than
Restricted Investments) that are permitted by the provisions of the Indenture
described above under the caption "-- Restricted Payments."
LIMITATION ON ISSUANCES AND SALES OF EQUITY INTERESTS IN RESTRICTED
SUBSIDIARIES
The Indenture provides that the Company (i) will not, and will not permit
any Restricted Subsidiary of the Company to, transfer, convey, sell, lease or
otherwise dispose of any Equity Interests in any Restricted Subsidiary of the
Company to any Person (other than the Company or a Restricted Subsidiary of the
Company), unless (a) such transfer, conveyance, sale, lease or other disposition
is of all the Equity Interests in such Restricted Subsidiary and (b) the cash
Net Proceeds from such transfer, conveyance, sale, lease or other disposition
are applied in accordance with the covenant described above under the caption
"--Repurchase at the Option of Holders--Asset Sales," and (ii) will not permit
any Restricted Subsidiary of the Company to issue any of its Equity Interests
(other than, if necessary, shares of its Capital Stock constituting directors'
qualifying shares) to any Person other than to the Company or a Restricted
Subsidiary of the Company.
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BUSINESS ACTIVITIES
The Company will not, and will not permit any Subsidiary to, engage in any
business other than Permitted Businesses, except to such extent as would not be
material to the Company and its Subsidiaries taken as a whole.
NO SENIOR SUBORDINATED DEBT
The Indenture provides that (i) the Company will not incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to any Indebtedness of the Company and
senior in any respect in right of payment to the Notes and (ii) no Guarantor
will incur, create, issue, assume, guarantee or otherwise become liable for any
Indebtedness of such Guarantor that is subordinate or junior in right of payment
to any Indebtedness of such Guarantor and senior in any respect in right of
payment to the Subsidiary Guarantee of such Guarantor.
PAYMENTS FOR CONSENT
The Indenture provides that neither the Company nor any of its Subsidiaries
will, directly or indirectly, pay or cause to be paid any consideration, whether
by way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the Indenture or the Notes unless such consideration is offered to be paid or
is paid to all Holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the Company
will furnish to the Holders of Notes (i) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" that describes the financial condition and results of
operations of the Company and its consolidated Subsidiaries (showing in
reasonable detail, either on the face of the financial statements or in the
footnotes thereto and in Management's Discussion and Analysis of Financial
Condition and Results of Operations, the financial condition and results of
operations of the Company and its Restricted Subsidiaries separate from the
financial condition and results of operation of the Unrestricted Subsidiaries of
the Company) and, with respect to the annual information only, a report thereon
by the Company's certified independent accountants and (ii) all current reports
that would be required to be filed with the Commission on Form 8-K if the
Company were required to file such reports, in each case within the time periods
specified in the Commission's rules and regulations. In addition, following the
consummation of this Exchange Offer, whether or not required by the rules and
regulations of the Commission, the Company will file a copy of all such
information and reports with the Commission for public availability within the
time periods specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. In addition, the
Company and the Guarantors have agreed that, for so long as any Restricted Notes
remain outstanding, they will furnish to the Holders and to prospective
investors, upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act other than during any period in
which the Company is subject to Section 13 or 15(d) of the Exchange Act and in
compliance with the requirements thereof.
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ADDITIONAL SUBSIDIARY GUARANTEES
The Indenture provides that (i) the Company will not permit any of its
Restricted Subsidiaries that is not a Guarantor to Guarantee or secure through
the granting of Liens the payment of any Indebtedness of the Company or any
Guarantor and (ii) the Company will not and will not permit any of its
Restricted Subsidiaries to pledge any intercompany notes representing
obligations of any of its Restricted Subsidiaries, to secure the payment of any
Indebtedness of the Company or any Guarantor, in each case unless such
Subsidiary, the Company and the Trustee execute and deliver a supplemental
indenture evidencing such Subsidiary's Subsidiary Guarantee (providing for the
unconditional guarantee by such Restricted Subsidiary, on a senior subordinated
basis, of the Notes).
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes (whether or not prohibited by the
subordination provisions of the Indenture); (ii) default in payment when due of
the principal of or premium, if any, on the Notes (whether or not prohibited by
the subordination provisions of the Indenture); (iii) failure by the Company or
any of its Restricted Subsidiaries for 15 days after receipt of written notice
from the Trustee or Holders of at least 25% in aggregate principal amount of the
Notes then outstanding to comply with the provisions described under the
captions "--Repurchase at the Option of Holders--Change of Control,"
"--Repurchase at the Option of Holders--Asset Sales," "--Certain
Covenants--Restricted Payments" or "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock"; (iv) failure by the Company or
any of its Restricted Subsidiaries for 60 days after notice to comply with any
of its other agreements in the Indenture or the Notes; (v) default under any
mortgage, indenture or instrument under which there may be issued or by which
there may be secured or evidenced any Indebtedness for money borrowed by the
Company or any of its Restricted Subsidiaries (or the payment of which is
guaranteed by the Company or any of its Restricted Subsidiaries) whether such
Indebtedness or guarantee now exists, or is created after the date of the
Indenture, which default (a) is caused by a failure to pay principal of or
premium, if any, or interest on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such default (a
"Payment Default") or (b) results in the acceleration of such Indebtedness prior
to its express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $5.0 million or more; (vi) failure by the Company or
any of its Restricted Subsidiaries to pay judgments aggregating in excess of
$5.0 million, which judgments are not paid, discharged or stayed for a period of
60 days after such judgments become final and non-appealable; (vii) except as
permitted by the Indenture, any Subsidiary Guarantee shall be held in any
judicial proceeding to be unenforceable or invalid or shall cease for any reason
to be in full force and effect or any Guarantor, or any Person acting on behalf
of any Guarantor, shall deny or disaffirm its obligations under its Subsidiary
Guarantee; and (viii) certain events of bankruptcy or insolvency with respect to
the Company or any of its Restricted Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately. Notwithstanding the foregoing,
in the case of an Event of Default arising from certain events of bankruptcy or
insolvency, with respect to the Company, any Significant Restricted Subsidiary
or any group of Restricted Subsidiaries that, taken together, would constitute a
Significant Restricted Subsidiary, all outstanding Notes will become due and
payable without further action or notice. Holders of the Notes may not enforce
the Indenture or the Notes except as provided in the Indenture. Subject to
certain limitations, Holders of a majority in principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders of the Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal or interest) if it determines that withholding notice
is in their interest.
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In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to April
15, 2003 by reason of any willful action (or inaction) taken (or not taken) by
or on behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to April 15, 2003 then the premium specified in
the Indenture shall also become immediately due and payable to the extent
permitted by law upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Notes, 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.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
and Liquidated Damages, if any, on such Notes when such payments are due from
the trust referred to below, (ii) the Company's obligations with respect to the
Notes concerning issuing temporary Notes, registration of Notes, mutilated,
destroyed, lost or stolen Notes and the maintenance of an office or agency for
payment and money for security payments held in trust, (iii) the rights, powers,
trusts, duties and immunities of the Trustee, and the Company's obligations in
connection therewith and (iv) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have the
obligations of the Company released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default and
Remedies" will no longer constitute an Event of Default with respect to the
Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest and Liquidated Damages,
if any, on the outstanding Notes on the stated maturity or on the applicable
redemption date, as the case may be, and the Company must specify whether the
Notes are being defeased to maturity or to a particular redemption date; (ii) in
the case of Legal Defeasance, the Company shall have delivered to the Trustee an
opinion of counsel in the
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United States reasonably acceptable to the Trustee confirming that (A) the
Company has received from, or there has been published by, the Internal Revenue
Service a ruling or (B) since the date of the Indenture, there has been a change
in the applicable federal income tax law, in either case to the effect that, and
based thereon such opinion of counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred; (iii) in the
case of Covenant Defeasance, the Company shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that the Holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred; (iv) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit (other than a Default or
Event of Default resulting from the borrowing of funds to be applied to such
deposit) or insofar as Events of Default from bankruptcy or insolvency events
are concerned, at any time in the period ending on the 91st day after the date
of deposit; (v) such Legal Defeasance or Covenant Defeasance will not result in
a breach or violation of, or constitute a default under any material agreement
or instrument (other than the Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound; (vi) the Company must have delivered to the Trustee an opinion of counsel
to the effect that after the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally; (vii) the
Company must deliver to the Trustee an Officers' Certificate stating that the
deposit was not made by the Company with the intent of preferring the Holders of
Notes over the other creditors of the Company with the intent of defeating,
hindering, delaying or defrauding creditors of the Company or others; and (viii)
the Company must deliver to the Trustee an Officers' Certificate and an opinion
of counsel, each stating that all conditions precedent provided for relating to
the Legal Defeasance or the Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also, the Company is not required to transfer or exchange any
Note for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture, the
Notes and the Subsidiary Guarantees may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the Notes
then outstanding (including, without limitation, consents obtained in connection
with a purchase of, or tender offer or exchange offer for, Notes), and any
existing default or compliance with any provision of the Indenture, the Notes or
the Subsidiary Guarantees may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for, Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver, (ii) reduce the principal of or change the fixed maturity
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of any Note or alter the provisions with respect to the redemption of the Notes
(other than provisions relating to the covenants described above under the
caption "--Repurchase at the Option of Holders"), (iii) reduce the rate of or
change the time for payment of interest on any Note, (iv) waive a Default or
Event of Default in the payment of principal of or premium, if any, or interest
on the Notes (except a rescission of acceleration of the Notes by the Holders of
at least a majority in aggregate principal amount of the Notes and a waiver of
the payment default that resulted from such acceleration), (v) make any Note
payable in money other than that stated in the Notes, (vi) make any change in
the provisions of the Indenture relating to waivers of past Defaults or the
rights of Holders of Notes to receive payments of principal of or premium, if
any, or interest on the Notes, (vii) waive a redemption payment with respect to
any Note (other than a payment required by one of the covenants described above
under the caption "-- Repurchase at the Option of Holders"), (viii) release any
Guarantor from any of its obligations under its Subsidiary Guarantee or the
Indenture, except in accordance with the terms of the Indenture or (ix) make any
change in the foregoing amendment and waiver provisions. In addition, any
amendment to the provisions of Article 10 of the Indenture (which relate to
subordination) will require the consent of the Holders of at least 75% in
aggregate principal amount of the Notes then outstanding if such amendment would
adversely affect the rights of Holders of Notes.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company, a Guarantor with respect to a Subsidiary Guarantee or the Indenture
to which it is a party and the Trustee may amend or supplement the Indenture,
the Notes or any Subsidiary Guarantee to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Notes in addition to or in place of
certificated Notes, to provide for the assumption of the Company's or any
Guarantor's obligations to Holders of Notes in the case of a merger or
consolidation or sale of all or substantially all of the Company's assets, to
provide for the issuance of Additional Notes in accordance with the provisions
set forth in the Indenture on the Issue Date, to make any change that would
provide any additional rights or benefits to the Holders of Notes or that does
not adversely affect the legal rights under the Indenture of any such Holder, or
to comply with requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
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 man in the conduct
of his 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.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth under "--Exchange of Book-Entry Notes for Certificated
Notes" the Exchange Notes issued pursuant to the Exchange Offer will be issued
in the form of one or more global securities (collectively, the "Global Notes").
The Global Notes will be deposited upon issuance with the Trustee as custodian
for The Depository Trust Company ("DTC"), in New York, New York, and registered
in the name of DTC or its nominee, in each case for credit to an account of a
direct or indirect participant in
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DTC as described below. Except as set forth below, the Global Notes may be
transferred, in whole and not in part, only to another nominee of DTC or to a
successor of DTC or its nominee. Beneficial interests in the Global Notes may
not be exchanged for Notes in certificated form except in the limited
circumstances described below. See "--Exchange of Book-Entry Notes for
Certificated Notes." Except in the limited circumstances described below, owners
of beneficial interests in the Global Notes will not be entitled to receive
physical delivery of Certificated Notes (as defined below).
The Notes may be presented for registration of transfer and exchange at the
offices of the Registrar.
DEPOSITORY PROCEDURES
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic
book-entry changes in accounts of its Participants. The Participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. Access to DTC's system is also available to
other entities such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly (collectively, the "Indirect Participants"). Persons who are not
Participants may beneficially own securities held by or on behalf of DTC only
through the Participants or the Indirect Participants. The ownership interests
in, and transfers of ownership interests in, each security held by or on behalf
of DTC are recorded on the records of the Participants and Indirect
Participants.
DTC has also advised the Company that, pursuant to procedures established by
it, (i) upon deposit of the Global Notes, DTC will credit the accounts of
Participants with portions of the principal amount of the Global Notes and (ii)
ownership of such interests in the Global Notes will be shown on, and the
transfer of ownership thereof will be effected only through, records maintained
by DTC (with respect to the Participants) or by the Participants and the
Indirect Participants (with respect to other owners of beneficial interest in
the Global Notes). Investors in the Global Notes may hold their interests
therein directly through DTC, if they are Participants in such system, or
indirectly through organizations which are Participants in such system.
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Global Note to such persons will be limited
to that extent. Because DTC can act only on behalf of Participants, which in
turn act on behalf of Indirect Participants and certain banks, the ability of a
person having beneficial interests in a Global Note to pledge such interests to
persons or entities that do not participate in the DTC system, or otherwise take
actions in respect of such interests, may be affected by the lack of a physical
certificate evidencing such interests.
EXCEPT AS DESCRIBED BELOW, OWNERS OF AN INTEREST IN THE GLOBAL NOTES WILL
NOT HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
"HOLDERS" THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal of, and premium, if any, Liquidated
Damages, if any, and interest on a Global Note registered in the name of DTC or
its nominee will be payable to DTC in its capacity as the registered Holder
under the Indenture. Under the terms of the Indenture, the Company and the
Trustee will treat the persons in whose names the Notes, including the Global
Notes, are registered as the owners thereof for the purpose of receiving such
payments and for any and all other purposes whatsoever. Consequently, neither
the Company, the Trustee nor any agent of the Company or the Trustee has or will
have any responsibility or liability for (i) any aspect of DTC's records or any
Participant's or Indirect Participant's records relating to or payments made on
account of beneficial ownership interest in the Global Notes, or for
maintaining, supervising or reviewing any of DTC's records or any Participant's
or Indirect Participant's records relating to the beneficial ownership interests
in the Global Notes or (ii) any
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other matter relating to the actions and practices of DTC or any of its
Participants or Indirect Participants. DTC has advised the Company that its
current practice, upon receipt of any payment in respect of securities such as
the Notes (including principal and interest), is to credit the accounts of the
relevant Participants with the payment on the payment date, in amounts
proportionate to their respective holdings in the principal amount of beneficial
interest in the relevant security as shown on the records of DTC unless DTC has
reason to believe it will not receive payment on such payment date. Payments by
the Participants and the Indirect Participants to the beneficial owners of Notes
will be governed by standing instructions and customary practices and will be
the responsibility of the Participants or the Indirect Participants and will not
be the responsibility of DTC, the Trustee or the Company. Neither the Company
nor the Trustee will be liable for any delay by DTC or any of its Participants
in identifying the beneficial owners of the Notes, and the Company and the
Trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.
Interests in the Global Notes are expected to be eligible to trade in DTC's
Same-Day Funds Settlement System and secondary market trading activity in such
interests will, therefore, settle in immediately available funds, subject in all
cases to the rules and procedures of DTC and its Participants. See "--Same Day
Settlement and Payment." Transfers between Participants in DTC will be effected
in accordance with DTC's procedures, and will be settled in same day funds.
DTC has advised the Company that it will take any action permitted to be
taken by a Holder of Notes only at the direction of one or more Participants to
whose account DTC has credited the interests in the Global Notes and only in
respect of such portion of the aggregate principal amount of the Notes as to
which such Participant or Participants has or have given such direction.
However, if there is an Event of Default under the Notes, DTC reserves the right
to exchange the Global Notes for legended Notes in certificated form, and to
distribute such Notes to its Participants.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the Global Notes among Participants in DTC, it is under no
obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Company nor the Trustee
nor any of their respective agents 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.
EXCHANGE OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES
A Global Note is exchangeable for definitive Notes in registered
certificated form ("Certificated Notes") if (i) DTC (x) notifies the Company
that it is unwilling or unable to continue as depositary for the Global Notes
and the Company thereupon fails to appoint a successor depositary or (y) has
ceased to be a clearing agency registered under the Exchange Act, (ii) the
Company, at its option, notifies the Trustee in writing that it elects to cause
the issuance of the Certificated Notes or (iii) there shall have occurred and be
continuing a Default or Event of Default with respect to the Notes. In addition,
beneficial interests in a Global Note may be exchanged for Certificated Notes
upon request but only upon prior written notice given to the Trustee by or on
behalf of DTC in accordance with the Indenture. In all cases, Certificated Notes
delivered in exchange for any Global Note or beneficial interests therein will
be registered in the names, and issued in any approved denominations, requested
by or on behalf of the depositary (in accordance with its customary procedures).
SAME DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the Notes represented by
the Global Notes (including principal, premium, if any, interest and Liquidated
Damages, if any) be made by wire transfer of immediately available funds to the
accounts specified by the Global Note Holder. With respect to Certificated
Notes, the Company will make all payments of principal, premium, if any,
interest and
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Liquidated Damages, if any, by wire transfer of immediately available funds to
the accounts specified by the Holders thereof or, if no such account is
specified, by mailing a check to each such Holder's registered address. The
Notes represented by the Global Notes are expected to trade in the depositary's
Same-Day Funds Settlement System, and any permitted secondary market trading
activity in such Notes will, therefore, be required by the depositary to be
settled in immediately available funds. The Company expects that secondary
trading in any Certificated Notes will also be settled in immediately available
funds.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Company, the Guarantors and the Initial Purchasers entered into the
Registration Rights Agreement on April 22, 1998 (the "Closing Date"). Pursuant
to the Registration Rights Agreement, the Company and the Guarantors agreed to
file with the Commission the Exchange Offer Registration Statement on the
appropriate form under the Securities Act with respect to the Exchange Notes.
Upon the effectiveness of the Exchange Offer Registration Statement, the Company
and the Guarantors will offer to the Holders of Transfer Restricted Securities
pursuant to the Exchange Offer who are able to make certain representations the
opportunity to exchange their Transfer Restricted Securities for Exchange Notes.
If (i) the Company and the Guarantors are not required to file the Exchange
Offer Registration Statement or permitted to consummate the Exchange Offer
because the Exchange Offer is not permitted by applicable law or Commission
policy or (ii) any Holder of Transfer Restricted Securities notifies the Company
prior to the 20th day following consummation of the Exchange Offer that (A) it
is prohibited by law or Commission policy from participating in the Exchange
Offer or (B) that it may not resell the Exchange Notes acquired by it in the
Exchange Offer to the public without delivering a prospectus and the prospectus
contained in the Exchange Offer Registration Statement is not appropriate or
available for such resales or (C) that it is a broker-dealer and owns Notes
acquired directly from the Company or an affiliate of the Company, the Company
and the Guarantors will file with the Commission a Shelf Registration Statement
to cover resales of the Notes by the Holders thereof who satisfy certain
conditions relating to the provision of information in connection with the Shelf
Registration Statement. The Company and the Guarantors will use their best
efforts to cause the applicable registration statement to be declared effective
as promptly as possible by the Commission. For purposes of the foregoing,
"Transfer Restricted Securities" means each Note until (i) the date on which
such Note has been exchanged by a person other than a broker-dealer for an
Exchange Note in the Exchange Offer, (ii) following the exchange by a
broker-dealer in the Exchange Offer of a Note for an Exchange Note, the date on
which such Exchange Note is sold to a purchaser who receives from such
broker-dealer on or prior to the date of such sale a copy of the prospectus
contained in the Exchange Offer Registration Statement, (iii) the date on which
such Note has been effectively registered under the Securities Act and disposed
of in accordance with the Shelf Registration Statement or (iv) the date on which
such Note is distributed to the public pursuant to Rule 144 under the Act.
The Registration Rights Agreement provides that (i) the Company will file an
Exchange Offer Registration Statement with the Commission on or prior to 45 days
after the Closing Date, (ii) the Company and the Guarantors will use their best
efforts to have the Exchange Offer Registration Statement declared effective by
the Commission on or prior to 135 days after the Closing Date, (iii) unless the
Exchange Offer would not be permitted by applicable law or Commission policy,
the Company and the Guarantors will commence the Exchange Offer and use their
best efforts to issue on or prior to 45 business days after the date on which
the Exchange Offer Registration Statement was declared effective by the
Commission, Exchange Notes in exchange for all Notes tendered prior thereto in
the Exchange Offer and (iv) if obligated to file the Shelf Registration
Statement, the Company and the Guarantors will use their best efforts to file
the Shelf Registration Statement with the Commission on or prior to 45 days
after such filing obligation arises and to cause the Shelf Registration to be
declared effective by the Commission on or prior to 135 days after such
obligation arises. If (a) the Company fails to file any of the Registration
Statements required by the Registration Rights Agreement on or before the date
specified for such filing, (b) any of such Registration Statements is not
declared effective by the Commission on or prior to the date specified for such
effectiveness (the "Effectiveness Target Date"), or (c) the Company fails to
consummate
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the Exchange Offer within 45 business days of the Effectiveness Target Date with
respect to the Exchange Offer Registration Statement, or (d) the Shelf
Registration Statement or the Exchange Offer Registration Statement is declared
effective but thereafter ceases to be effective or usable in connection with
resales of Transfer Restricted Securities during the periods specified in the
Registration Rights Agreement (each such event referred to in clauses (a)
through (d) above a "Registration Default"), then the Company will pay
Liquidated Damages to each Holder of Notes, with respect to the first 90-day
period immediately following the occurrence of the first Registration Default in
an amount equal to $.05 per week per $1,000 principal amount of Notes held by
such Holder. The amount of the Liquidated Damages will increase by an additional
$0.05 per week per $1,000 principal amount of Notes with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up to
a maximum amount of Liquidated Damages for all Registration Defaults of $0.28
per week per $1,000 principal amount of Notes. All accrued Liquidated Damages
will be paid by the Company on each Damages Payment Date to the Global Note
Holder by wire transfer of immediately available funds or by federal funds check
and to Holders of Certificated Securities by wire transfer to the accounts
specified by them or by mailing checks to their registered addresses if no such
accounts have been specified. Following the cure of all Registration Defaults,
the accrual of Liquidated Damages will cease.
Holders of Notes will be required to make certain representations to the
Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver certain
information to be used in connection with the Shelf Registration Statement and
to provide comments on the Shelf Registration Statement within the time periods
set forth in the Registration Rights Agreement in order to have their Notes
included in the Shelf Registration Statement and benefit from the provisions
regarding Liquidated Damages set forth above.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"ACQUIRED DEBT" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"AFFILIATE" of any specified Person means any other 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"
(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 that
beneficial ownership of 10% or more of the Voting Stock of a Person shall be
deemed to be control.
"ASSET SALE" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory in the ordinary course of business
(PROVIDED that the sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole will be governed by the provisions of the Indenture described
above under the caption "--Repurchase at the Option of Holders-- Change of
Control" and/or the provisions described above under the caption "--Certain
Covenants-- Merger, Consolidation, or Sale of Assets" and not by the provisions
of the Asset Sale covenant), and (ii) the issue by any Restricted Subsidiaries
of the Company of any Equity Interests of such Restricted Subsidiary and the
sale by the Company or any of its Restricted Subsidiaries of Equity Interest of
any of
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the Company's Subsidiaries, in the case of either clause (i) or (ii), whether in
a single transaction or a series of related transactions that have a fair market
value or generate net proceeds in excess of $2.0 million in any twelve month
period. Notwithstanding the foregoing, the following items shall not be deemed
to be Asset Sales: (i) a transfer of assets by the Company to a Wholly Owned
Restricted Subsidiary or by a Wholly Owned Restricted Subsidiary to the Company
or to another Wholly Owned Restricted Subsidiary, (ii) an issuance of Equity
Interests by a Wholly Owned Restricted Subsidiary to the Company or to another
Wholly Owned Restricted Subsidiary and (iii) a Restricted Payment that is
permitted by the covenant described above under the caption "--Certain
Covenants--Restricted Payments."
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"CASH EQUIVALENTS" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof (provided that the full faith and credit
of the United States is pledged in support thereof) having maturities of not
more than six months from the date of acquisition, (iii) certificates of deposit
and eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any lender party to the Secured
Credit Facility or with any domestic commercial bank having capital and surplus
in excess of $500 million and a Thompson Bank Watch Rating of "B" or better,
(iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications specified
in clause (iii) above, (v) commercial paper having the highest rating obtainable
from Moody's Investors Service, Inc. or Standard & Poor's Corporation and in
each case maturing within six months after the date of acquisition and (vi)
money market funds the assets of which constitute Cash Equivalents of the kinds
described in clauses (i)-(v) of this definition.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act); (ii) the adoption of a plan relating to the liquidation or
dissolution of the Company; (iii) the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of which
is that any "person" (as defined above) becomes the "beneficial owner" (as such
term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that
a person shall be deemed to have "beneficial ownership" of all securities that
such person has the right to acquire, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 50% of the Voting Stock of the
Company (measured by voting power rather than number of shares); (iv) the first
day on which a majority of the members of the Board of Directors of the Company
are not Continuing Directors or; (v) the Company consolidates with, or merges
with or into, any Person, or any Person consolidates with, or merges with or
into, the Company, in any such event pursuant to a transaction in which any of
the outstanding Voting Stock of the Company is converted into or exchanged for
cash, securities or other property, other than any such transaction where the
Voting Stock of the Company outstanding immediately prior to such transaction is
converted into or exchanged for Voting Stock (other than Disqualified Stock) of
the surviving or transferee Person constituting a majority of the outstanding
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shares of such Voting Stock of such surviving or transferee Person (immediately
after giving effect to such issuance).
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Restricted Subsidiaries for such period, to the
extent that such provision for taxes was included in computing such Consolidated
Net Income, plus (iii) consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued and whether or
not capitalized (including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), to the extent that any such expense was deducted in computing such
Consolidated Net Income, plus (iv) depreciation, amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-cash
expenses (excluding any such non-cash expense to the extent that it represents
an accrual of or reserve for cash expenses in any future period or amortization
of a prepaid cash expense that was paid in a prior period) of such Person and
its Restricted Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income, minus (v) non-cash items increasing such
Consolidated Net Income for such period, in each case, on a consolidated basis
and determined in accordance with GAAP. Notwithstanding the foregoing, the
provision for taxes on the income or profits of, and the depreciation and
amortization and other non-cash expenses of, a Restricted Subsidiary of the
referent Person shall be added to Consolidated Net Income to compute
Consolidated Cash Flow only to the extent (and in the same proportion) that the
Net Income of such Restricted Subsidiary was included in calculating the
Consolidated Net Income of such Person and only if a corresponding amount would
be permitted at the date of determination to be dividended to the Company by
such Restricted Subsidiary without prior governmental approval (that has not
been obtained), and without direct or indirect restriction pursuant to the terms
of its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to that Restricted
Subsidiary or its stockholders.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
PROVIDED that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof that is a Guarantor, (ii) the Net Income of any Restricted
Subsidiary shall be excluded to the extent that the declaration or payment of
dividends or similar distributions by that Restricted Subsidiary of that Net
Income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Restricted Subsidiary or its stockholders, (iii) the Net Income of any Person
acquired in a pooling of interests transaction for any period prior to the date
of such acquisition shall be excluded, (iv) the cumulative effect of a change in
accounting principles shall be excluded and (v) the Net Income (but not loss) of
any Unrestricted Subsidiary shall be excluded, whether or not distributed to the
Company or one of its Subsidiaries.
"CONSOLIDATED NET WORTH" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with
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respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments) and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"CONTINUING DIRECTORS" means, as of any date of determination, any member of
the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"DEFAULT" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"DESIGNATED SENIOR INDEBTEDNESS" means (i) any Senior Indebtedness
outstanding under the Secured Credit Facility and (ii) any other Senior
Indebtedness permitted under the Indenture the aggregate principal amount of
which is $25.0 million or more and that has been designated by the Company as
"Designated Senior Indebtedness."
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature; PROVIDED, HOWEVER, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the right
to require the Company to repurchase such Capital Stock upon the occurrence of a
Change of Control or an Asset Sale shall not constitute Disqualified Stock if
the terms of such Capital Stock provide that the Company may not repurchase or
redeem any such Capital Stock pursuant to such provisions unless such repurchase
or redemption complies with the covenant described above under the caption
"--Certain Covenants-- Restricted Payments."
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EXISTING INDEBTEDNESS" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Secured Credit Facility) in
existence on the date of the Indenture, until such amounts are repaid.
"FIXED CHARGES" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated
interest of such Person and its Restricted Subsidiaries that was capitalized
during such period and (iii) any interest expense on Indebtedness of another
Person that is Guaranteed by such Person or one of its Restricted Subsidiaries
or secured by a Lien on assets of such Person or one of its Restricted
Subsidiaries and (iv) the product of (a) all dividend payments, whether or not
in cash, on any series of preferred stock of such Person or any of
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its Restricted Subsidiaries, other than dividend payments on Equity Interests
payable solely in Equity Interests of the Company (other than Disqualified
Stock) or to the Company or a Restricted Subsidiary of the Company, times (b) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local statutory tax rate of
such Person, expressed as a decimal, in each case, on a consolidated basis and
in accordance with GAAP.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person and
its Restricted Subsidiaries for such period. In the event that the referent
Person or any of its Restricted Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than temporary repayments under revolving credit
borrowings) or issues or redeems preferred stock subsequent to the commencement
of the period for which the Fixed Charge Coverage Ratio is being calculated but
prior to the date on which the event for which the calculation of the Fixed
Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge
Coverage Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, Guarantee or redemption of Indebtedness, or such issuance or
redemption of preferred stock, as if the same had occurred at the beginning of
the applicable four-quarter reference period. In addition, for purposes of
making the computation referred to above, (i) acquisitions that have been made
by the Company or any of its Restricted Subsidiaries, including through mergers
or consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated on a pro forma basis without giving effect
to clause (iii) of the proviso set forth in the definition of Consolidated Net
Income, and (ii) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, and (iii) the
Fixed Charges attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Restricted Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect.
"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, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"GUARANTORS" means (i) each domestic Subsidiary of the Company on the Issue
Date and (ii) any other domestic Subsidiary that executes a Subsidiary Guarantee
in accordance with the provisions of the Indenture, and their respective
successors and assigns.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or
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representing any Hedging Obligations, except any such balance that constitutes
an accrued expense or trade payable, if and to the extent any of the foregoing
(other than letters of credit and Hedging Obligations) would appear as a
liability upon a balance sheet of such Person prepared in accordance with GAAP,
as well as all Indebtedness of others secured by a Lien on any asset of such
Person (whether or not such Indebtedness is assumed by such Person) and, to the
extent not otherwise included, the Guarantee by such Person of any indebtedness
of any other Person. The amount of any Indebtedness outstanding as of any date
shall be (i) the accreted value thereof, in the case of any Indebtedness issued
with original issue discount, and (ii) the principal amount thereof, together
with any interest thereon that is more than 30 days past due, in the case of any
other Indebtedness.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Subsidiary of the Company sells or otherwise disposes of
any Equity Interests of any direct or indirect Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of the covenant described
above under the caption "--Certain Covenants--Restricted Payments."
"ISG" means Industrial Services Group, Inc., a Delaware corporation and
parent of the Company.
"ISG PIK NOTES" means the 9% Junior Subordinated Promissory Note due 2005 of
ISG issued on October 14, 1997, together with additional notes issued in respect
of interest thereon.
"ISSUE DATE" means the closing date for the sale and original issuance of
the Notes under the Indenture.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or nonrecurring gain (but not loss).
"NET PROCEEDS" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
(other than debt under the
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Secured Credit Facility) secured by a Lien on the asset or assets that were the
subject of such Asset Sale and any reserve for adjustment in respect of the sale
price of such asset or assets established in accordance with GAAP.
"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (iii) as to which the lenders have been notified in
writing that they will not have any recourse to the stock or assets of the
Company or any of its Restricted Subsidiaries.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"PERMITTED BUSINESS" means the business conducted by the Company and its
Restricted Subsidiaries on the Issue Date and businesses reasonably related
thereto.
"PERMITTED INVESTMENTS" means (a) any Investment in the Company or in a
Restricted Subsidiary of the Company that is a Guarantor; (b) any Investment in
Cash Equivalents; (c) any Investment by the Company or any Restricted Subsidiary
of the Company in a Person, if as a result of such Investment (i) such Person
becomes a Restricted Subsidiary of the Company and a Guarantor or (ii) 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 a Restricted Subsidiary of the Company that is a Guarantor; (d) any
Investment made as a result of the receipt of non-cash consideration from an
Asset Sale that was made pursuant to and in compliance with the covenant
described above under the caption "--Repurchase at the Option of Holders--Asset
Sales"; (e) any acquisition of assets solely in exchange for the issuance of
Equity Interests (other than Disqualified Stock) of the Company; and (f) other
Investments in any Person having an aggregate fair market value (measured on the
date each such Investment was made and without giving effect to subsequent
changes in value), when taken together with all other Investments made pursuant
to this clause (f) that are at the time outstanding, not to exceed $5.0 million.
"PERMITTED JUNIOR SECURITIES" means Equity Interests in the Company or debt
securities that are subordinated to all Senior Indebtedness (and any debt
securities issued in exchange for Senior Indebtedness) to substantially the same
extent as, or to a greater extent than, the Notes are subordinated to Senior
Indebtedness pursuant to the Indenture.
"PERMITTED LIENS" means (i) Liens on assets of the Company or any of the
Guarantors securing Senior Indebtedness under the Secured Credit Facility that
was permitted by the terms of the Indenture to be incurred; (ii) Liens in favor
of the Company; (iii) Liens on property of a Person existing at the time such
Person is merged into or consolidated with the Company or any Subsidiary of the
Company; PROVIDED that such Liens were in existence prior to the contemplation
of such merger or consolidation and do not extend to any assets other than those
of the Person merged into or consolidated with the Company; (iv) Liens on
property existing at the time of acquisition thereof by the Company or any
Subsidiary of the Company, PROVIDED that such Liens were in existence prior to
the contemplation of such acquisition; (v) Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business; (vi)
Liens to secure Indebtedness (including Capital Lease Obligations) permitted by
clause (iv) of the second paragraph of the covenant entitled "Incurrence of
Indebtedness and Issuance of Preferred Stock" covering only the assets acquired
with such Indebtedness; (vii) Liens existing on the date of the Indenture;
(viii) Liens for taxes, assessments or governmental charges or claims that are
not yet delinquent or that are being contested in good faith by
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appropriate proceedings promptly instituted and diligently concluded, PROVIDED
that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor; (ix) Liens incurred in the
ordinary course of business of the Company or any Subsidiary of the Company with
respect to obligations that do not exceed $5.0 million at any one time
outstanding and that (a) are not incurred in connection with the borrowing of
money or the obtaining of advances or credit (other than trade credit in the
ordinary course of business) and (b) do not in the aggregate materially detract
from the value of the property or materially impair the use thereof in the
operation of business by the Company or such Subsidiary; (x) Liens on assets of
Unrestricted Subsidiaries that secure Non-Recourse Debt of Unrestricted
Subsidiaries; (xi) Liens on assets of the Company securing Senior Indebtedness
of the Company that was permitted to be incurred by the terms of the Indenture
and Liens on assets of a Guarantor securing Senior Indebtedness of such
Guarantor that was permitted to be incurred by the terms of the Indenture; (xii)
judgment Liens not giving rise to an Event of Default so long as such Lien is
adequately bonded and any appropriate legal proceedings which may have been duly
initiated for the review of such judgment shall not have finally terminated or
other period within which such proceedings may be initiated shall not have
expired; (xiii) pledges or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other social
security legislation; and (xix) Liens securing Hedging Obligations otherwise
permitted under the Indenture.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); PROVIDED that: (i) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Indebtedness
does not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses incurred
in connection therewith); (ii) such Permitted Refinancing Indebtedness has a
final maturity date equal to or later than the final maturity date of, and has a
Weighted Average Life to Maturity equal to or greater than the Weighted Average
Life to Maturity of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; (iii) if the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded is subordinated in right of
payment to the Notes, such Permitted Refinancing Indebtedness is subordinated in
right of payment to the Notes, on terms at least as favorable to the Holders of
Notes as those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such
Indebtedness is incurred either by the Company or by the Restricted Subsidiary
who is the obligor on the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded.
"PUBLIC OFFERING" means an underwritten public offering of common stock
(other than Disqualified Stock) of the Company or ISG, pursuant to an effective
registration statement filed with the Commission in accordance with the
Securities Act; PROVIDED, HOWEVER, that, in case of a Public Offering by ISG,
ISG contributes to the capital of the Company the net cash proceeds therefrom.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"SECURED CREDIT FACILITY" means that certain Credit Agreement, dated as of
March 4, 1998, by and among the Company, NationsBank, N.A., as administrative
agent, Canadian Imperial Bank of Commerce, as documentation agent, and the other
lenders party thereto, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, and in
each case as amended, modified, renewed, refunded, replaced or refinanced (in
whole or in part) from time to time.
"SENIOR INDEBTEDNESS" means (i) all Indebtedness of the Company or any of
its Subsidiaries outstanding under the Secured Credit Facility and all Hedging
Obligations with respect thereto, (ii) any other
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Indebtedness permitted to be incurred by the Company or any of its Subsidiaries
under the terms of the Indenture, unless the instrument under which such
Indebtedness is incurred expressly provides that it is on a parity with or
subordinated in right of payment to the Notes or any Guarantor's Subsidiary
Guarantee of the Notes and (iii) all Obligations with respect to the foregoing.
Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness
will not include (w) any liability for federal, state, local or other taxes owed
or owing by the Company or any of its Subsidiaries, (x) any Indebtedness of the
Company or any of its Subsidiaries to any Subsidiary or other Affiliate, (y) any
trade payables or (z) any Indebtedness that is incurred in violation of the
Indenture.
"SIGNIFICANT RESTRICTED SUBSIDIARY" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the date of
the Indenture.
"STATED MATURITY" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution;
but only to the extent that such Subsidiary: (a) has no Indebtedness other than
Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the Company
unless the terms of any such agreement, contract, arrangement or understanding
are no less favorable to the Company or such Restricted Subsidiary than those
that might be obtained at the time from Persons who are not Affiliates of the
Company; (c) is a Person with respect to which neither the Company nor any of
its Restricted Subsidiaries has any direct or indirect obligation (x) to
subscribe for additional Equity Interests or (y) to maintain or preserve such
Person's financial condition or to cause such Person to achieve any specified
levels of operating results; and (d) has not guaranteed or otherwise directly or
indirectly provided credit support for any Indebtedness of the Company or any of
its Restricted Subsidiaries. Any such designation by the Board of Directors
shall be evidenced to the Trustee by filing with the Trustee a certified copy of
the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
conditions and was permitted by the covenant described above under the caption
"--Certain Covenants--Restricted Payments." If, at any time, any Unrestricted
Subsidiary would fail to meet the foregoing requirements as an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of the Indenture and any Indebtedness of such Subsidiary shall be
deemed to be incurred by a Restricted Subsidiary of the Company as of such date
(and, if such Indebtedness is not permitted to be incurred as of such date under
the covenant described under the caption "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock," the Company shall be in default
of such covenant). The Board of Directors of the Company may at any time
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED
that such designation shall be deemed to be an incurrence of Indebtedness by a
Restricted Subsidiary of the Company of any outstanding Indebtedness of such
Unrestricted Subsidiary and such designation shall only be permitted if (i) such
Indebtedness is permitted under the covenant described under the caption
"--Certain Covenants--
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Incurrence of Indebtedness and Issuance of Preferred Stock," calculated on a pro
forma basis as if such designation had occurred at the beginning of the
four-quarter reference period and (ii) no Default or Event of Default would be
in existence following such designation.
"VOTING STOCK" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries
of such Person.
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DESCRIPTION OF SECURED CREDIT FACILITY
GENERAL
To finance portions of the Initial Acquisitions, JTM (the "Borrower")
entered into the $42.0 million Secured Credit Facility on March 4, 1998, with a
syndicate of banks, as lenders, NationsBank, N.A., as administrative agent (the
"Agent"), and Canadian Imperial Bank of Commerce, as documentation agent. The
Secured Credit Facility enables the Borrower to obtain secured revolving loans
from time to time to finance certain permitted acquisitions, to repay existing
indebtedness, to pay fees and expenses incurred in connection with the Initial
Acquisitions and for working capital and general corporate purposes. At the
Borrower's option, the revolving credit loans may be maintained as (a)
Eurodollar Loans which bear interest at the Eurodollar Rate, PLUS a margin of
250 basis points or (b) Base Rate Loans which bear interest at a rate equal to
the higher of (i) the Agent's prime rate and (ii) the federal funds rate plus
0.5%, PLUS a margin of 125 basis points. The Borrower is also obligated to pay
certain fees with respect to the Secured Credit Facility. The Secured Credit
Facility has a term of five and one-half years from March 4, 1998. On the Issue
Date, JTM applied a portion of the proceeds from the Offering to repay a portion
of the $42.0 million outstanding under the Secured Credit Facility and the
borrowings available under the Secured Credit Facility were permanently reduced
to $35.0 million.
The obligations under the Secured Credit Facility are guaranteed by ISG and
the Guarantors. The obligations under the Secured Credit Facility are secured by
a first priority perfected security interest in 100% of the capital stock of the
Borrower (on a fully diluted basis) and 100% of the capital stock of each of the
Guarantors. Such capital stock is not subject to any other lien or encumbrance.
In addition, the Agent (on behalf of the Lenders) received a perfected security
interest in certain present and future assets and properties of the Borrower and
any domestic subsidiary of the Borrower. The Notes are effectively subordinated
to the obligations under the Secured Credit Facility to the extent of the value
of the assets securing the Secured Credit Facility. Up to 66.7% of JTM's
ownership in foreign subsidiaries may also be pledged.
CERTAIN COVENANTS
The Secured Credit Facility contains various covenants that restrict the
Borrower from taking various actions and that require the Borrower to achieve
and maintain certain financial covenants. The Secured Credit Facility contains
customary covenants and restrictions on the Borrower's ability to engage in
certain activities. In addition, the Secured Credit Facility provides that the
Borrower must meet certain financial conditions including (i) a maximum leverage
ratio, (ii) a minimum interest coverage ratio and (iii) minimum consolidated net
worth. The Secured Credit Facility also prohibits the Borrower from prepaying
the Notes, prohibits certain changes in control of JTM and prohibits the
Borrower from granting liens on its assets or those of the Guarantors, except as
provided under the Secured Credit Facility.
EVENTS OF DEFAULT
The Secured Credit Facility includes customary events of default, including
nonpayment of principal, interest or fees, violation of covenants, inaccuracy of
representations or warranties in any material respect, cross default and cross
acceleration to certain other indebtedness, bankruptcy, environmental matters,
material judgments and change of control.
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CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS FOR
NON-UNITED STATES HOLDERS
The following is a general discussion of certain United States federal
income and estate tax consequences of the acquisition, ownership and disposition
of Notes by an initial beneficial owner of Notes that, for United States federal
income tax purposes, is not a "United States person" (a "Non-United States
Holder"). This discussion is based upon the United States federal tax law now in
effect, which is subject to change, possibly retroactively. For purposes of this
discussion, a "United States person" means a citizen or resident of the United
States, a corporation, partnership or other entity created or organized in the
United States or under the laws of the United States or of any political
subdivision thereof, an estate whose income is includible in gross income for
United States federal income tax purposes regardless of its source or a trust,
if a U.S. court is able to exercise primary supervision over the administration
of the trust and one or more U.S. persons have the authority to control all
substantial decisions of the trust. The tax treatment of the holders of the
Notes may vary depending upon their particular situations. U.S. persons
acquiring the Notes are subject to different rules than those discussed below.
In addition, certain other holders (including insurance companies, tax exempt
organizations, financial institutions and broker-dealers) may be subject to
special rules not discussed below. PROSPECTIVE INVESTORS ARE URGED TO CONSULT
THEIR TAX ADVISORS REGARDING THE UNITED STATES FEDERAL TAX CONSEQUENCES OF
ACQUIRING, HOLDING AND DISPOSING OF NOTES, AS WELL AS ANY TAX CONSEQUENCES THAT
MAY ARISE UNDER THE LAWS OF ANY FOREIGN, STATE, LOCAL OR OTHER TAXING
JURISDICTION.
THE EXCHANGE OFFER
The exchange of Restricted Notes for Exchange Notes pursuant to the Exchange
Offer should be treated as a continuation of the corresponding Restricted Notes
because the terms of the Exchange Notes are not materially different from the
terms of the Restricted Notes. Accordingly, such exchange should not constitute
a taxable event to U.S. Holders and, therefore, (i) no gain or loss should be
realized by U.S. Holder upon receipt of a Exchange Note; (ii) the holding period
of the Exchange Note should include the holding period of the Restricted Note
exchanged therefor and (iii) the adjusted tax basis of the Exchange Note should
be the same as the adjusted tax basis of the Restricted Note exchanged therefor
immediately before the exchange.
INTEREST
Interest paid by JTM to a Non-United States Holder will not be subject to
United States federal income tax or withholding if such interest is not
effectively connected with the conduct of a trade or business in the United
States by such Non-United States Holder and such Non-United States Holder (i)
does not actually or constructively own 10% or more of the total combined voting
power of stock of all classes of stock of JTM; (ii) is not a controlled foreign
corporation with respect to which JTM is a "related person" within the meaning
of the United Sates Internal Revenue Code of 1986, as amended (the "Code"); and
(iii) certifies, under penalties of perjury, that such holder is not a United
States person and provides such holder's name and address.
GAIN ON DISPOSITION
A Non-United States Holder generally will not be subject to United States
federal income tax on gain recognized on a sale, redemption or other disposition
of a Note unless (i) the gain is effectively connected with the conduct of a
trade or business in the United States by the Non-United States Holder or (ii)
in the case of a Non-United States Holder who is a nonresident alien individual
and holds the Note as a capital asset, such holder is present in the United
States for at least 183 days in the taxable year and certain other requirements
are met.
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FEDERAL ESTATES TAXES
If interest on the Notes is exempt from withholding of United States federal
income tax under the rules described above, the Notes will not be included in
the estate of a deceased Non-United States Holder for United States federal
estate tax purposes.
INFORMATION REPORTING AND BACKUP WITHHOLDING
JTM will, where required, report to the holders of Notes and the Internal
Revenue Service the amount of any interest paid on the Notes in each calendar
year and the amounts of tax withheld, if any, with respect to such payments.
In the case of payments of interest to Non-United States Holders, temporary
Treasury regulations provide that 31% backup withholding tax and certain
information reporting requirements will not apply to such payments if either the
requisite certification, as described above, has been received or an exemption
has otherwise been established; provided that neither JTM nor its payment agent
has actual knowledge that the holder is a United States person or that the
conditions of any other exemption are not in fact satisfied. However, the
temporary Treasury regulations further provide that the information reporting
and backup withholding requirements will apply to the gross proceeds paid to a
Non-United States Holder on the disposition of the Notes by or through a United
States office of a United States or foreign broker, unless the holder certifies
to the broker under penalties of perjury as to its name, address and status as a
foreign person or the holder otherwise establishes an exemption. Information
reporting requirements, but not backup withholding, will also apply to a payment
of the proceeds of a disposition of the Notes by or through a foreign office of
a United States broker or foreign brokers with certain types of relationships to
the United States unless such broker has documentary evidence in its file that
the holder of the Notes is not a United States person, and such broker has no
actual knowledge to the contrary, or the holder establishes an exception.
Neither information reporting nor backup withholding generally will apply to a
payment of the proceeds of a disposition of the Notes by or through a foreign
office of a foreign broker not described in the preceding sentence.
Any amounts withheld under the backup withholding rules may be refunded or
credited against the Non-United States Holder's United States federal income tax
liability, provided that the required information is furnished to the Internal
Revenue Service.
The Treasury department has promulgated final regulations regarding the
withholding and information reporting rules discussed above. In general, the
final regulations do not significantly alter the substantive withholding and
information reporting requirements but rather unify current certification
procedures and forms and clarify reliance standards. The final regulations
generally are effective for payments made after December 31, 1998, subject to
certain transition rules. NON-UNITED STATES HOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT OF THE IMPACT, IF ANY, OF THE NEW FINAL REGULATIONS.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of Exchange Notes received in exchange for Restricted
Notes where such Restricted Notes were acquired as a result of market-making
activities or other trading activities. The Company has agreed that, for a
period of 180 days after Expiration Date, it will make this Prospectus, as
amended or supplemented, available to any broker-dealer or use in connection
with any such resale. In addition, until [ ], all dealers effecting
transactions in the Exchange Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of Exchange Notes by
broker-dealers. Any broker-dealer that resells Exchange Notes that were received
by it for its own account pursuant to the Exchange Offer and any broker-dealer
that participates in a distribution of such Exchange Notes may be deemed to be
an "underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commission or concessions received by any
such persons may be deemed to be an underwriting compensation under the
Securities Act. The Letter of Transmittal states that, by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incidental to the Exchange Offer (including the expenses of one counsel for the
holders of the Restricted Notes) other than commissions or concessions of any
brokers-dealers and will indemnify the holders of the Restricted Notes
(including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
The validity of the issuance of the Notes offered by JTM hereby will be
passed upon for JTM by Morgan, Lewis & Bockius LLP, New York, New York.
EXPERTS
The consolidated financial statements of JTM Industries, Inc. and Subsidiary
as of December 31, 1997 and for the period from October 14, 1997 to December 31,
1997, the consolidated financial statements of Pozzolanic Resources, Inc. and
Subsidiaries as of December 31, 1997 and 1996 and for the years then ended, the
consolidated financial statements of Power Plant Aggregates of Iowa, Inc. and
Subsidiary as of December 31, 1997 and March 31, 1997 and for the period from
April 1, 1997 to December 31, 1997 and for the year ended March 31, 1997, the
combined financial statements of Michigan Ash Sales Company (d.b.a. U.S. Ash
Company) and Affiliated Companies as of December 31, 1997 and 1996 and for the
years then ended, the financial statements of Fly Ash Products, Incorporated as
of December 31, 1997 and 1996 and for the years then ended, appearing in this
Prospectus and Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon appearing elsewhere
herein, and are included in reliance upon such reports given upon the authority
of such firm as experts in accounting and auditing.
The consolidated financial statements of JTM Industries, Inc. as of October
13, 1997 and December 31, 1996 and 1995 and for the period from January 1, 1997
to October 13, 1997 and for each of the two years in the period ended December
31, 1996, included herein have been included herein in reliance upon the report
of Coopers & Lybrand L.L.P., independent accountants, appearing elsewhere
herein, given on the authority of that firm as experts in accounting and
auditing.
89
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
JTM INDUSTRIES, INC. AND SUBSIDIARIES
Audited Consolidated Financial Statements as of December 31, 1997 and for
the Period From October 14, 1997 to December 31, 1997:
Report of Independent Auditors........................................ F-3
Consolidated Balance Sheet............................................ F-4
Consolidated Statement of Income...................................... F-5
Consolidated Statement of Shareholders' Equity........................ F-6
Consolidated Statement of Cash Flows.................................. F-7
Notes to Consolidated Financial Statements............................ F-8
Audited Consolidated Financial Statements as of October 13, 1997
and December 31, 1996 and 1995:
Report of Independent Accountants..................................... F-14
Consolidated Balance Sheets........................................... F-15
Consolidated Statements of Loss and Accumulated Deficit............... F-16
Consolidated Statements of Cash Flows................................. F-17
Notes to Consolidated Financial Statements............................ F-18
Unaudited Condensed Consolidated Financial Statements as of March 31, 1998
and 1997:
Unaudited Condensed Consolidated Balance Sheets as of March 31, 1998
and December 31, 1997................................................ F-23
Unaudited Condensed Consolidated Statements of Operations for the
Three Months Ended March 31, 1998 and 1997........................... F-24
Unaudited Condensed Consolidated Statement of Shareholders' Equity for
the Three Months Ended March 31, 1998................................ F-25
Unaudited Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1998 and 1997........................... F-26
Notes to Unaudited Condensed Consolidated Financial Statements........ F-27
POZZOLANIC RESOURCES, INC. AND SUBSIDIARIES
Audited Consolidated Financial Statements:
Report of Independent Auditors........................................ F-31
Consolidated Balance Sheets........................................... F-32
Consolidated Statements of Income and Retained Earnings............... F-34
Consolidated Statements of Cash Flows................................. F-35
Notes to Consolidated Financial Statements............................ F-36
POWER PLANT AGGREGATES OF IOWA, INC. AND SUBSIDIARY
Audited Consolidated Financial Statements:
Report of Independent Auditors........................................ F-39
Consolidated Balance Sheets........................................... F-40
Consolidated Statements of Income..................................... F-41
Consolidated Statements of Shareholders' Equity....................... F-42
Consolidated Statements of Cash Flows................................. F-43
Notes to Consolidated Financial Statements............................ F-44
</TABLE>
F-1
<PAGE>
<TABLE>
<S> <C>
MICHIGAN ASH SALES COMPANY (D.B.A. U.S. ASH COMPANY) AND AFFILIATED
COMPANIES
Audited Combined Financial Statements:
Report of Independent Auditors........................................ F-48
Combined Balance Sheets............................................... F-49
Combined Statements of Income and Retained Earnings................... F-50
Combined Statements of Cash Flows..................................... F-51
Notes to Combined Financial Statements................................ F-52
FLY ASH PRODUCTS, INCORPORATED
Audited Financial Statements:
Report of Independent Auditors........................................ F-56
Balance Sheets........................................................ F-57
Statements of Income.................................................. F-58
Statements of Shareholders' Equity.................................... F-59
Statements of Cash Flows.............................................. F-60
Notes to Financial Statements......................................... F-61
</TABLE>
F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
JTM Industries, Inc.
We have audited the accompanying consolidated balance sheet of JTM
Industries, Inc. and Subsidiary as of December 31, 1997, and the related
consolidated statements of income, shareholders' equity and cash flows for the
period from October 14, 1997 to December 31, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of JTM Industries,
Inc. and Subsidiary at December 31, 1997, and the consolidated results of their
operations and their cash flows for the period from October 14, 1997 to December
31, 1997 in conformity with generally accepted accounting principles.
Ernst & Young LLP
Salt Lake City, Utah
February 20, 1998, except for
Note 8, as to which the date is
March 27, 1998
F-3
<PAGE>
JTM INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................................... $3,068,980
Accounts receivable:
Trade, net of allowance for doubtful accounts of $206,000.................. 9,167,788
Retainage.................................................................. 517,695
Other...................................................................... 318,271
Deferred tax asset........................................................... 324,608
Other current assets......................................................... 216,225
----------
Total current assets........................................................... 13,613,567
Property, plant and equipment:
Land and improvements........................................................ 1,624,335
Buildings and improvements................................................... 3,145,031
Vehicles and other operating equipment....................................... 9,817,148
Furniture, fixtures and office equipment..................................... 1,115,721
----------
15,702,235
Accumulated depreciation..................................................... (453,516)
----------
15,248,719
Other assets:
Intangible assets, net....................................................... 44,385,492
Other assets................................................................. 22,335
----------
Total assets................................................................... $73,270,113
----------
----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................................. $1,806,678
Accrued expenses:
Payroll.................................................................... 1,693,953
Interest................................................................... 627,704
Other...................................................................... 1,604,879
Income taxes payable......................................................... 528,742
Note payable................................................................. 29,000,000
----------
Total current liabilities...................................................... 35,261,956
Accrued closure costs.......................................................... 306,098
Deferred tax liability......................................................... 12,437,297
Commitments and contingencies
Shareholders' equity:
Common stock, par value $1 per share;
100 shares authorized, issued and outstanding.............................. 100
Additional paid-in capital................................................... 24,999,950
Retained earnings............................................................ 264,712
----------
Total shareholders' equity..................................................... 25,264,762
----------
Total liabilities and shareholders' equity..................................... $73,270,113
----------
----------
</TABLE>
See accompanying notes.
F-4
<PAGE>
JTM INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
PERIOD FROM OCTOBER 14, 1997 TO DECEMBER 31, 1997
<TABLE>
<S> <C>
Revenues:
Product revenues............................................................. $7,059,063
Service revenues............................................................. 5,583,981
----------
12,643,044
Costs and expenses:
Cost of sales, excluding depreciation........................................ 9,365,118
Depreciation and amortization................................................ 908,619
Selling, general and administrative expenses................................. 1,255,680
----------
11,529,417
----------
1,113,627
Interest income................................................................ 31,286
Interest expense............................................................... (627,704)
----------
Income before income taxes..................................................... 517,209
Income taxes................................................................... (252,497)
----------
Net income..................................................................... $ 264,712
----------
----------
</TABLE>
See accompanying notes.
F-5
<PAGE>
JTM INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED SHAREHOLDERS'
STOCK CAPITAL EARNINGS EQUITY
----------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Balance at October 14, 1997................................. $ 100 $ 23,811,429 $ -- $ 23,811,529
Cash contribution......................................... -- 1,188,521 -- 1,188,521
Net income................................................ -- -- 264,712 264,712
----- ------------- ---------- -------------
Balance at December 31, 1997................................ $ 100 $ 24,999,950 $ 264,712 $ 25,264,762
----- ------------- ---------- -------------
----- ------------- ---------- -------------
</TABLE>
See accompanying notes.
F-6
<PAGE>
JTM INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
PERIOD FROM OCTOBER 14, 1997 TO DECEMBER 31, 1997
<TABLE>
<S> <C>
OPERATING ACTIVITIES:
Net income...................................................................... $ 264,712
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization............................................... 908,619
Deferred income taxes....................................................... (276,245)
Changes in operating assets and liabilities:
Receivables............................................................... 691,534
Other current and non-current assets...................................... (22,569)
Accounts payable.......................................................... (1,035,993)
Income taxes payable...................................................... 528,742
Accrued expenses.......................................................... 755,913
Accrued closure costs..................................................... 28,387
----------
Net cash provided by operating activities....................................... 1,843,100
INVESTING ACTIVITIES:
Purchases of property, plant and equipment...................................... (19,491)
FINANCING ACTIVITIES:
Cash contributions.............................................................. 1,188,521
----------
Net increase in cash and cash equivalents....................................... 3,012,130
Cash and cash equivalents at beginning of period................................ 56,850
----------
Cash and cash equivalents at end of period...................................... $3,068,980
----------
----------
Cash paid for interest.......................................................... $ --
----------
----------
Cash paid for income taxes...................................................... $ --
----------
----------
</TABLE>
See accompanying notes.
F-7
<PAGE>
JTM INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS
DESCRIPTION OF BUSINESS
JTM Industries, Inc. is a wholly owned subsidiary of Industrial Services
Group ("ISG"). These financial statements reflect the consolidated position and
results of operations of JTM Industries, Inc. and its wholly owned subsidiary,
KBK Enterprises, Inc. (collectively, the "Company").
The Company purchases, removes and sells fly ash and other by-products of
coal combustion primarily in the eastern United States.
ISG was formed in September 1997 to acquire the stock of the Company from
Laidlaw Transportation, Inc. ("Laidlaw") (the "Acquisition"). Pursuant to the
Acquisition, the Company became a wholly owned subsidiary of ISG. Laidlaw
received from ISG, as consideration for the Acquisition, a $29,000,000 senior
bridge note (the "Senior Bridge Note"), a $17,500,000 9% Junior Subordinated
Promissory Note due 2005 (the "Junior Subordinated Note") and $5,817,000 in
cash. The Senior Bridge Note has been pushed down to the Company as the proceeds
of a proposed future debt offering will be used to retire this note. The Junior
Subordinated Note has not been pushed down to the Company as such proceeds will
not be used to retire this note, the Company has not and does not plan to assume
the Junior Subordinated Note, and the Company does not guarantee or pledge its
assets as collateral for this note.
The accompanying consolidated financial statements account for the
Acquisition under the purchase method of accounting. At the date of the
Acquisition, asset and liability values were recorded at fair value with respect
to the purchase price. The price of the Acquisition includes $494,529 in
acquisition costs and was allocated as follows:
<TABLE>
<S> <C>
Working capital, excluding deferred taxes...................... $4,913,146
Property and equipment......................................... 15,682,754
Identifiable intangible assets................................. 30,200,000
Deferred tax assets............................................ 305,977
Deferred tax liabilities....................................... (12,694,911)
Other non-current assets and liabilities, net.................. (236,021)
Goodwill....................................................... 14,640,584
----------
$52,811,529
----------
----------
</TABLE>
PRINCIPLES OF CONSOLIDATION
The financial statements include the accounts of JTM Industries, Inc. and
KBK Enterprises, Inc. All significant intercompany accounts and transactions
have been eliminated in consolidation.
REVENUE RECOGNITION
Revenue for the Company's operations are recognized when the material or
services are provided to the customer. Disposal costs are accrued concurrently
with the recognition of revenue.
CASH EQUIVALENTS
Cash equivalents are highly liquid investments with maturities of three
months or less when purchased.
F-8
<PAGE>
JTM INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS
(CONTINUED)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment acquired in the Acquisition were recorded at
estimated fair value at the date of acquisition. Property, plant and equipment
acquired subsequent thereto, renewals and betterments are recorded at cost.
Maintenance and repairs are expensed as incurred. Depreciation is provided over
the estimated useful lives or lease terms, if less, using the straight line
method as follows:
<TABLE>
<S> <C>
Land improvements............................................ 1 to 15 years
Buildings.................................................... 13 to 49
years
Vehicles and other operating equipment....................... 3 to 10 years
Furniture, fixtures and office equipment..................... 1 to 5 years
Leasehold improvements....................................... 5 to 10 years
</TABLE>
INTANGIBLE ASSETS
Intangible assets consist of goodwill, contracts, patents and assembled work
force. Amortization is provided over the estimated period of benefit, using the
straight-line method, ranging from 8 to 25 years.
INCOME TAXES
Deferred tax assets and liabilities are provided for the future tax
consequences attributable to temporary differences between the carrying amounts
of assets and liabilities for financial statement and income tax purposes.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosure About Fair
Value of Financial Instruments" requires all entities to disclose the fair value
of financial instruments, both assets and liabilities recognized and not
recognized on the balance sheet, for which it is practicable to estimate fair
value. SFAS 107 defines fair value of a financial instrument as the amount at
which the instrument could be exchanged in a current transaction between willing
parties. At December 31, 1997, the carrying value of all financial instruments
(accounts receivable, accounts payable, accrued expenses and notes payable)
approximates fair value due to the short term nature of the instruments.
CONCENTRATIONS OF CREDIT RISK
Concentrations of credit risk in accounts receivable are limited due to the
large number of customers comprising the Company's customer base throughout the
eastern United States. The Company performs ongoing credit evaluations of its
customers, but does not require collateral to support customer accounts
receivable. Historically, the Company has not had significant uncollectable
accounts.
LONG-LIVED ASSETS
As required by Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," management evaluates the carrying value of all long-lived
assets to determine recoverability when indicators of impairment are present
based generally on an analysis of undiscounted cash flows. Management believes
no material impairment in the value of long-lived assets exists at December 31,
1997.
F-9
<PAGE>
JTM INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS
(CONTINUED)
USE OF ESTIMATES
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. INTANGIBLE ASSETS
Intangible assets consist of the following at December 31, 1997:
<TABLE>
<S> <C>
Goodwill....................................................... $14,640,584
Contracts...................................................... 26,700,000
Patents........................................................ 2,400,000
Assembled work force........................................... 1,100,000
----------
44,840,584
Less accumulated amortization.................................. (455,092)
----------
$44,385,492
----------
----------
</TABLE>
3. NOTE PAYABLE
The Senior Bridge Note had an original maturity of March 30, 1998, which has
been extended to April 30, 1998. The Senior Bridge Note bears interest at 1.5%
plus the prime rate (as determined by The Chase Manhattan Bank, N.A) through
March 30, 1998 and 2% plus the prime rate thereafter. Management intends to
refinance this obligation on a long-term basis.
4. ACCRUED CLOSURE COSTS
The Company, in the normal course of business, expends funds for site
restoration of certain property owned. The total anticipated site restoration
costs currently are approximately $1,883,000. As of December 31, 1997, $306,000
of anticipated site restoration costs have been accrued.
5. INCOME TAXES
Income tax expense (benefit) consists of the following for the period from
October 14, 1997 to December 31, 1997:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
---------- ----------- ----------
<S> <C> <C> <C>
U.S. Federal............................................ $ 459,626 $ (240,135) $ 219,491
State................................................... 69,116 (36,110) 33,006
---------- ----------- ----------
$ 528,742 $ (276,245) $ 252,497
---------- ----------- ----------
---------- ----------- ----------
</TABLE>
F-10
<PAGE>
JTM INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES (CONTINUED)
Reconciliation of income tax expense at the U.S. statutory rate to the
Company's tax expense for the period from October 14, 1997 to December 31, 1997
is as follows:
<TABLE>
<S> <C>
35% of income before income tax................................... $ 181,023
Add (deduct):
Goodwill amortization........................................... 42,702
Other permanent differences..................................... 7,318
State income taxes, net of federal benefit...................... 21,454
---------
$ 252,497
---------
---------
</TABLE>
The major components of the deferred tax assets and liabilities as of
December 31, 1997 are as follows:
<TABLE>
<S> <C>
Deferred Tax Assets:
Bad debt reserves............................................ $ 78,658
Accruals not currently deductible for tax purposes........... 387,053
-----------
Total gross deferred tax assets................................ 465,711
Less: Valuation allowance...................................... --
-----------
465,711
Deferred Tax Liabilities:
Fixed asset basis differences................................ 1,130,285
Intangible asset basis differences........................... 11,424,094
Other........................................................ 24,021
-----------
12,578,400
-----------
Net deferred tax liabilities................................... $(12,112,689)
-----------
-----------
</TABLE>
There was no change in the valuation allowance for the period from October
14, 1997 to December 31, 1997.
6. EMPLOYEE BENEFIT PLAN
Eligible employees of the Company may participate in a 401(k) savings plan
(the "Plan") sponsored by Laidlaw Environmental Services, Inc. ("LESI"), an
affiliate of Laidlaw. The Plan allows for participation by affiliates, as
defined, who adopt the Plan with the approval of LESI's board of directors. The
Plan requires the Company to match employee contributions, as defined, up to 3%
of the employees compensation. Expenses related to the Plan were $43,581 for the
period from October 14, 1997 to December 31, 1997.
7. COMMITMENTS AND CONTINGENCIES
LEASE OBLIGATIONS
Certain facilities and equipment are leased under noncancelable operating
leases expiring in various years through 2006.
F-11
<PAGE>
JTM INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
LEASE OBLIGATIONS (CONTINUED)
Future minimum payments under leases with initial terms of one year or more
consisted of the following at December 31, 1997:
<TABLE>
<S> <C>
1998........................................................... $4,008,675
1999........................................................... 2,578,542
2000........................................................... 1,542,705
2001........................................................... 1,308,292
2002........................................................... 1,054,452
Thereafter..................................................... 1,790,547
----------
Total minimum lease payments................................... $12,283,213
----------
----------
</TABLE>
Total rental expense was approximately $1,259,019 in the period from October
14, 1997 to December 31, 1997.
SENIOR SECURED REVOLVING CREDIT AGREEMENT
On October 14, 1997, the Company entered into the Senior Secured Revolving
Credit Agreement with Citicorp Venture Capital, Ltd., a major shareholder of
ISG. Under the terms of the Senior Secured Revolving Credit Agreement, the
Company may borrow up to an aggregate outstanding principal amount not to exceed
$5,000,000. Outstanding borrowings under the Senior Secured Revolving Credit
Agreement bear interest at 1.5% plus the prime rate (as determined by The Chase
Manhattan Bank, N.A.), are due March 30, 1998, and are secured by all accounts
receivable of the Company. At December 31, 1997, the Company had no borrowings
outstanding and had incurred no interest under the Senior Secured Revolving
Credit Agreement.
SALE AND PURCHASE COMMITMENTS
The Company's contracts with its customers and suppliers require the Company
to make minimum sales and purchases over ensuing years, as follows:
<TABLE>
<CAPTION>
MINIMUM MINIMUM
SALES PURCHASES
------------ -------------
<S> <C> <C>
1998............................................................. $ 1,192,300 $ 4,759,500
1999............................................................. 1,192,300 5,011,800
2000............................................................. 1,192,600 5,119,600
2001............................................................. 1,193,000 5,438,300
2002............................................................. 1,193,500 4,504,800
Thereafter....................................................... 1,213,700 914,000
------------ -------------
$ 7,177,400 $ 25,748,000
------------ -------------
------------ -------------
</TABLE>
Minimum sales and purchases under contracts with minimum requirements
approximated $248,600 and $318,000, respectively, for the period from October
14, 1997 to December 31, 1997.
LEGAL PROCEEDINGS
There are various legal proceedings against the Company arising in the
normal course of business. While it is not currently possible to predict or
determine the outcome of these proceedings, it is the opinion of management that
the outcome will not have a material adverse effect on the Company's results of
operations, financial position or liquidity.
F-12
<PAGE>
JTM INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
EMPLOYMENT AGREEMENTS
The Company has employment agreements with certain of its officers. The
employment agreements provide for total annual base compensation of $695,000 and
expire from 2000 to 2002.
8. SUBSEQUENT EVENTS
On March 4, 1998, the Company entered into a $42,000,000 Secured Credit
Facility provided by a syndicate of banks which replaced the Senior Secured
Revolving Credit Agreement discussed in Note 7. The Secured Credit Facility
enables the Company to obtain revolving secured loans from time to time to
finance certain permitted acquisitions, to repay existing indebtedness, to pay
fees and expenses incurred in connection with certain acquisitions and for
working capital and general corporate purposes. At the Company's option, the
revolving secured loans may be maintained as (a) Eurodollar Loans (as defined)
which will bear interest at a rate equal to the quotient obtained by dividing
LIBOR (as defined) by one minus the reserve requirement for such Eurodollar
Loan, plus a margin of 250 basis points or (b) Base Rate Loans (as defined)
which will have an interest rate equal to the higher of (i) the Nations Bank
N.A. prime rate and (ii) the federal funds rate plus 0.5%, plus a margin of 125
basis points. The Company will also pay certain fees with respect to the Secured
Credit Facility. The Secured Credit Facility has a term of five and one-half
years from the date of initial funding, is guaranteed by ISG and existing and
future subsidiaries of the Company (the Guarantors), and is secured by a first
priority perfected security interest in all of the capital stock of the Company
and all of the capital stock of each of the Guarantors, as well as certain
present and future assets and properties of the Company and any domestic
subsidiaries.
On March 4, 1998, the Company acquired all of the outstanding stock of
Pozzolanic Resources, Inc. ("Pozzolanic") for $40,000,000. Pozzolanic is a
distributor of fly ash in the western United States and British Columbia. The
purchase price was substantially funded by the Secured Credit Facility.
On March 20, 1998, the Company purchased all of the outstanding stock of
Power Plant Aggregates of Iowa, Inc. ("PPA") for $8,541,000. PPA is a provider
of coal combustion product management services in Iowa. The purchase price was
funded by the Secured Credit Facility and cash on hand.
On March 25, 1998, the Company signed an agreement to purchase all of the
outstanding stock of Michigan Ash Sales Company, d.b.a. U.S. Ash Company,
together with two affiliated companies, U.S. Stabilization, Inc. and Flo Fil
Co., Inc. ("U.S. Ash"), for approximately $25,400,000. U.S. Ash is a provider of
coal combustion product management services in Michigan, Ohio and Indiana.
On March 27, 1998, the Company signed an agreement to purchase all of the
outstanding stock of Fly Ash Products, Inc. ("Fly Ash Products") for
approximately $9,500,000. Fly Ash Products is a provider of coal combustion
product management services in Arkansas.
9. IMPACT OF YEAR 2000 (UNAUDITED)
Substantially all of the Company's computer processing is performed by LESI
under the Corporate Services Agreement, which requires LESI to provide certain
services to the Company for a monthly fee of $25,000. The Company is currently
selecting hardware and software to enable the performance of all computer
processing in-house. The Company will consider the Year 2000 issue when
selecting new software. This project is expected to be completed by June 1998,
which is prior to any anticipated Year 2000 related impact on its operating
systems. The Company believes that with the purchase of new software, the Year
2000 issue will not pose significant operational problems for its computer
systems.
F-13
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder
JTM Industries, Inc.:
We have audited the accompanying consolidated balance sheets of JTM
Industries, Inc. (a wholly owned subsidiary of Laidlaw, Inc. until October 13,
1997) and Subsidiary as of October 13, 1997; December 31, 1996 and 1995, and the
related consolidated statements of loss and accumulated deficit and cash flows
for the period from January 1, 1997 to October 13, 1997 and the years ended
December 31, 1996 and 1995. These financial statements are the responsibility of
the Company's management and the management of Laidlaw, Inc. and its majority
owned subsidiary, Laidlaw Environmental Services, Inc. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of JTM Industries,
Inc. as of October 13, 1997; December 31, 1996 and 1995, and the consolidated
results of their operations and their cash flows for the period from January 1,
1997 to October 13, 1997 and the years ended December 31, 1996 and 1995.
As discussed in Note 10, Laidlaw, Inc. sold the outstanding shares of JTM
Industries, Inc. on October 14, 1997.
COOPERS & LYBRAND L.L.P.
Charlotte, North Carolina
February 16, 1998
F-14
<PAGE>
JTM INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
($000'S OMITTED)
<TABLE>
<CAPTION>
OCTOBER 13 DECEMBER 31,
----------- --------------------
1997 1996 1995
----------- --------- ---------
<S> <C> <C> <C>
ASSETS
Current assets
Trade and other accounts receivable (net of allowance for doubtful accounts
October 13, 1997--$406; December 31, 1996--$392; Deember 31, 1995--$426)...... $ 9,726 $ 7,503 $ 8,014
Retainage receivable............................................................ 770 1,095 1,269
Deferred income taxes........................................................... 329 1,394 1,660
Other current assets............................................................ 354 441 535
----------- --------- ---------
Total current assets...................................................... 11,179 10,433 11,478
Fixed assets
Land and improvements........................................................... 1,798 1,443 2,030
Buildings....................................................................... 3,533 2,055 1,411
Vehicles and other equipment.................................................... 11,038 8,939 6,270
Construction in progress........................................................ 886 5,083 3,158
----------- --------- ---------
17,255 17,520 12,869
Less: Accumulated depreciation.................................................. (4,090) (3,142) (1,711)
----------- --------- ---------
13,165 14,378 11,158
Goodwill (net of accumulated amortization October 13, 1997--$6,095;
December 31, 1996--$2,008; December 31, 1995--$1,004.......................... 34,052 38,139 39,143
----------- --------- ---------
Total assets.............................................................. $ 58,396 $ 62,950 $ 61,779
----------- --------- ---------
----------- --------- ---------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable................................................................ $ 2,808 $ 2,071 $ 1,955
Accrued liabilities............................................................. 2,558 5,716 6,185
Intercompany notes payable...................................................... 49,407 48,450 45,606
----------- --------- ---------
Total current liabilities................................................. 54,773 56,237 53,746
----------- --------- ---------
Commitments and contingencies
Stockholder's equity
Common stock--authorized, issued and outstanding 100 shares..................... 1 1 1
Paid in capital................................................................. 10,678 10,678 10,128
Accumulated deficit............................................................. (7,056) (3,966) (2,096)
----------- --------- ---------
Total stockholder's equity................................................ 3,623 6,713 8,033
----------- --------- ---------
Total liabilities and stockholder's equity................................ $ 58,396 $ 62,950 $ 61,779
----------- --------- ---------
----------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-15
<PAGE>
JTM INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF LOSS AND ACCUMULATED DEFICIT
($000'S OMITTED)
<TABLE>
<CAPTION>
YEAR TO
DATE YEAR ENDED DECEMBER
OCTOBER 13, 31,
----------- --------------------
<S> <C> <C> <C>
1997 1996 1995
----------- --------- ---------
Revenue........................................................................ $ 51,295 $ 62,841 $ 64,986
----------- --------- ---------
Cost of sales, excluding depreciation.......................................... 40,701 52,268 51,489
Depreciation and amortization.................................................. 5,279 2,285 2,265
Selling, general and administrative expenses................................... 3,633 5,667 9,692
----------- --------- ---------
Income from operations......................................................... 1,682 2,621 1,540
Intercompany interest expense.................................................. 4,160 4,845 4,030
Interest expense............................................................... -- 8 51
----------- --------- ---------
(2,478) (2,232) (2,541)
Income tax benefit (expense)................................................... (612) 362 445
----------- --------- ---------
Net loss....................................................................... (3,090) (1,870) (2,096)
Accumulated deficit--beginning of year......................................... (3,966) (2,096) --
----------- --------- ---------
Accumulated deficit--end of year............................................... ($ 7,056) ($ 3,966) ($ 2,096)
----------- --------- ---------
----------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-16
<PAGE>
JTM INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
($000'S OMITTED)
<TABLE>
<CAPTION>
YEAR TO
DATE YEAR ENDED DECEMBER 31,
OCTOBER 13, --------------------------
1997 1996 1995
----------- ------------ ------------
<S> <C> <C> <C>
NET CASH PROVIDED BY (USED IN):
Operating activities.................................................... $ 521 $ 603 ($ 1,115)
Investing activities.................................................... (681) (3,869) (4,586)
----------- ------------ ------------
Net cash used by operating and investing activities..................... (160) (3,266) (5,701)
Non-cash activities..................................................... (797) 422 9,814
----------- ------------ ------------
(957) (2,844) 4,113
Intercompany notes payable--beginning of year........................... (48,450) (45,606) (49,719)
----------- ------------ ------------
Intercompany notes payable--end of year................................. ($ 49,407) ($ 48,450) ($ 45,606)
----------- ------------ ------------
----------- ------------ ------------
OPERATING ACTIVITIES:
Net loss................................................................ ($ 3,090) ($ 1,870) ($ 2,096)
Items not affecting cash:
Loss on disposal of fixed assets...................................... 305 -- --
Depreciation and amortization......................................... 5,279 2,285 2,265
Deferred income taxes................................................. 150 266 53
Cash provided by (used in) financing working capital:
Trade and other accounts receivable................................... (1,898) 685 557
Other current assets.................................................. 87 94 (535)
Accounts payable and accrued liabilities.............................. (312) (857) (1,359)
----------- ------------ ------------
Net cash provided by (used in) operating activities..................... $ 521 $ 603 ($ 1,115)
----------- ------------ ------------
----------- ------------ ------------
INVESTING ACTIVITIES:
Purchase of fixed assets................................................ ($ 681) ($ 4,357) ($ 4,589)
Proceeds from sale of fixed and other assets............................ -- 488 3
----------- ------------ ------------
Net cash used in investing activities................................... ($ 681) ($ 3,869) ($ 4,586)
----------- ------------ ------------
----------- ------------ ------------
Supplemental cash flow information:
Noncash transaction:
Transfers of fixed assets from parent............................... $ 107 $ 128 $ 315
Accounts payable related to fixed assets............................ $ -- $ 504 $ --
Cash paid (received) for:.............................................
Interest............................................................ $ 4,160 $ 4,845 $ 4,030
Income taxes to (from) parent....................................... $ 462 ($ 629) ($ 499)
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-17
<PAGE>
JTM INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000'S OMITTED)
1. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS
These financial statements reflect the consolidated financial position and
results of operations of JTM Industries, Inc. and its subsidiary, KBK
Enterprises, Inc. ("the Company") which until October 13, 1997 was an indirect
wholly owned subsidiary of Laidlaw Inc. The Company is involved in materials
management services to coal combustion by-products (CCPs) producing utilities
and marketing products derived from CCPs, principally in the United States.
Interest expense associated with intercompany financing by the Company's
former parent, Laidlaw, Inc. ("Laidlaw"), has been charged to the Company based
on prime rate plus 2% on the average outstanding balance.
The Company is included in the consolidated tax return of Laidlaw. Income
taxes have been calculated using applicable income tax rates on a separate
return basis.
The surplus funds of the Company are regularly transferred to Laidlaw, and
any financing requirements are provided by Laidlaw. Accordingly, no cash or bank
indebtedness balances are reported in these financial statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A) BASIS OF PRESENTATION
The consolidated financial statements of the Company have been prepared in
accordance with accounting principles generally accepted in the United States
and all figures are represented in U.S. dollars, as the Company's operating
assets are located in the United States.
The preparation of financial statements in accordance with generally
accepted accounting principles requires the Company to make estimates and
assumptions that affect reported amounts of assets, liabilities, income and
expenses, and disclosure of contingencies. Future events could alter such
estimates in the near term.
B) CONSOLIDATION
The consolidated financial statements include the accounts of JTM
Industries, Inc. and KBK Enterprises, Inc., its subsidiary company. All
significant intercompany transactions are eliminated.
C) FIXED ASSETS
Fixed assets are recorded at cost. Depreciation and amortization of other
property and equipment is provided substantially on a straight-line basis over
their estimated useful lives which are as follows:
<TABLE>
<S> <C>
Buildings.................................................... 20 to 40
years
Vehicles and other........................................... 3 to 15 years
</TABLE>
The company periodically reviews the carrying values of its fixed assets to
determine whether such values are recoverable. Any resulting write downs are
charged against income. Depreciation expense amounts to $1,191, $1,281, and
$1,261 for the period ended October 13, 1997, and the years ended December 31,
1996 and 1995, respectively.
F-18
<PAGE>
JTM INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
($000'S OMITTED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D) OTHER ASSETS
Goodwill is amortized on a straight-line basis over forty years. The amount
of any impairment is charged against income. In 1997, in connection with the
planned sale of the Company, Laidlaw wrote down the assets of the Company to
fair value which resulted in a charge against goodwill of $3,300.
E) INCOME TAXES
Deferred income taxes are provided for all significant temporary differences
arising from recognizing certain expenses and certain closure accruals in
different periods for income tax and financial reporting purposes.
F) REVENUE
Revenues which are primarily derived from the disposal and sale of fly ash,
bottom ash, fluidized bed ash, scrubber sludge, and industrial sludge, are
recognized when services are provided or materials are delivered to the
customer. Disposal costs are accrued concurrently with the recognition of
revenue.
G) CONCENTRATION OF CREDIT RISK
Concentrations of credit risk in accounts receivable are limited, due to the
large number of customers comprising the Company's customer base throughout the
United Sates. The Company performs ongoing credit evaluations of its customers,
but does not require collateral to support customer accounts receivable. The
Company establishes an allowance for doubtful accounts based on the credit risk
applicable to particular customers, historical trends, and other relevant
information.
3. ACQUISITION
On January 1, 1995, Laidlaw Environmental Service, Inc. ("LESI"), a
subsidiary of Laidlaw acquired 100% of the outstanding shares of USPCI, Inc. and
its wholly owned subsidiary JTM Industries, Inc. The acquisition was accounted
for using purchase method accounting. LESI elected to "push down" the purchase
price allocated to the Company's assets acquired and liabilities assumed, which
resulted in a new basis of accounting for the Company as of the acquisition
date. Goodwill was allocated by LESI to the USPCI, Inc. operating entities
acquired based upon each operating units estimated discounted future cash flows.
Goodwill is amortized using the straight-line method over forty years.
A summarized balance sheet as of January 1, 1995, adjusted for excess of
consideration over net assets acquired is as follows:
<TABLE>
<S> <C>
Current assets..................................................... $ 11,553
Fixed assets....................................................... 7,518
Goodwill........................................................... 40,147
Current liabilities................................................ (9,499)
---------
Allocated purchase price........................................... $ 49,719
---------
---------
</TABLE>
F-19
<PAGE>
JTM INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
($000'S OMITTED)
3. ACQUISITION (CONTINUED)
In 1995 and 1996, Laidlaw contributed additional capital of $10,129 and
$550, respectively, through a reduction in the intercompany note payable in a
non-cash transaction. On May 9, 1997, all of the outstanding shares of the
Company were transferred from LESI to Laidlaw Transportation, Inc., a direct,
wholly owned subsidiary of Laidlaw.
4. BENEFIT PLANS
Eligible employees of the Company may participate in a 401(k) savings plan
sponsored by Laidlaw. The 401(k) plan requires the Company to match employee
contributions as defined, up to 3% of the employees compensation. Expenses
related to the 401(k) plan were approximately $294, $266, and $198, for the
period ended October 13, 1997, the years ended December 31, 1996 and 1995,
respectively.
5. LEASE COMMITMENTS
Rental expense incurred under operating leases amounted to $4,334, $6,136,
and $6,048 for the period ended October 13, 1997; and the years ended December
31, 1996 and 1995, respectively.
Rentals payable under operating leases for premises and equipment are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING OCTOBER 13, 1997:
- -----------------------------------------------------------------------------------
<S> <C>
1998............................................................................... $ 4,518
1999............................................................................... 3,264
2000............................................................................... 1,553
2001............................................................................... 1,440
2002............................................................................... 753
Thereafter......................................................................... 1,600
---------
$ 13,128
---------
---------
</TABLE>
6. LEGAL PROCEEDINGS
The Company has various outstanding legal matters arising from the normal
course of business. Although the final outcome cannot be predicted with
certainty, the Company believes the ultimate disposition of the matters will not
have a material impact on the Company's financial position.
In January 1997, a third party filed suit against the Company for breach of
contract. The Company settled this claim for $1,000 in February 1997. The
Company accrued the loss as of December 31, 1996 as a component of cost of
sales.
F-20
<PAGE>
JTM INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
($000'S OMITTED)
7. RELATED PARTY TRANSACTIONS
Included in the financial statements are related party transactions between
the Company and Laidlaw. These related party transactions are as follows:
<TABLE>
<CAPTION>
YEAR TO DATE YEAR ENDED YEAR ENDED
OCTOBER 13, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Management fees.................................... $ 491 $ 2,320 $ 5,779
Administrative fees................................ $ 249 $ 423 $ 337
Intercompany sales................................. $ 2,814 $ 4,953 $ 1,406
Allocated insurance expense........................ $ 515 $ 772 $ 709
Interest expense................................... $ 4,160 $ 4,845 $ 4,030
</TABLE>
Management and administrative fees have been allocated to the Company based
upon the Company's share of Laidlaw's consolidated revenue. Management and
administrative fees are charged by Laidlaw to each of its operating groups in
order to recover its general and administrative costs. The services provided by
Laidlaw include treasury, taxation and insurance. The allocated charges may not
be indicative of the expenses the Company would have incurred if Laidlaw had not
provided the services.
In preparation for the disposal of the Company, certain closure liabilities
amounting to $1,650 were transferred to Laidlaw, net of the related deferred tax
asset of $578. Additionally, a long term receivable in the amount of $1,008, net
of an allowance of $963, was transferred to Laidlaw. A deferred tax asset of
$337 related to the allowance was also transferred Laidlaw.
8. INCOME TAXES
The components of income tax expense for the period from January 1, 1997 to
October 13, 1997 and for the years ended December 31, 1996 and 1995 are as
follows:
<TABLE>
<CAPTION>
YEAR TO DATE YEAR ENDED YEAR ENDED
OCTOBER 13, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Current federal provision (benefit)................ $ 421 ($ 676) ($ 579)
Current state provision............................ 41 48 81
Deferred federal provision......................... 150 266 53
----- ----- -----
Total income tax provision (benefit)............... $ 612 ($ 362) ($ 445)
----- ----- -----
----- ----- -----
</TABLE>
F-21
<PAGE>
JTM INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
($000'S OMITTED)
8. INCOME TAXES (CONTINUED)
Deferred income taxes arise from temporary differences between the tax basis
of assets and liabilities and their reported amounts in the financial
statements. Components of deferred tax liabilities and assets at October 13,
1997 and December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
OCTOBER 13, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Deferred tax assets:
Allowance for bad debts............................................... $ 142 $ 138 $ 149
Closure reserve....................................................... 97 640 918
Other accrued liabilities............................................. 91 654 688
Deferred tax liabilities:
Fixed assets.......................................................... (1) (38) (95)
----- ------ ------
Net deferred tax assets................................................. $ 329 $ 1,394 $ 1,660
----- ------ ------
----- ------ ------
</TABLE>
The difference between the federal statutory tax rate and the effective tax
rate on continuing operations for the period from January 1, 1997 to October 13,
1997 and for the years ended December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
YEAR TO
DATE YEAR ENDED YEAR ENDED
OCTOBER 13, DECEMBER 31, DECEMBER 31,
1997 1996 1995
----------- ------------- -------------
<S> <C> <C> <C>
Federal statutory tax rate............................................. 35.0% 35.0% 35.0%
Goodwill amortization not deductible for tax purposes.................. (57.7%) (15.7%) (13.8%)
State income taxes..................................................... (1.1%) (1.4%) (2.0%)
Other items--net....................................................... (0.9%) (1.7%) (1.6%)
----------- ------------- -------------
Effective tax rate..................................................... (24.7%) (16.2%) 17.6%
----------- ------------- -------------
----------- ------------- -------------
</TABLE>
9. ACCRUED CLOSURE COSTS
The Company, in the normal course of its business, expends funds for
remediation of certain property. The Company does not expect these expenditures
to have a materially adverse effect on its financial condition or results of
operations, since its business is based upon compliance with environmental laws
and regulations and its services are priced accordingly. The total anticipated
site restoration costs are approximately $1,900.
F-22
<PAGE>
JTM INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
-------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................................... $ 404,460 $ 3,068,980
Accounts receivable, net........................................................ 13,182,623 10,003,754
Inventory....................................................................... 762,298 --
Deferred tax asset.............................................................. 487,386 324,608
Other current assets............................................................ 205,548 216,225
-------------- -------------
Total current assets.............................................................. 15,042,315 13,613,567
Property, plant and equipment, net................................................ 20,484,700 15,248,719
Intangible assets, net............................................................ 99,738,337 44,385,492
Debt issuance costs, net.......................................................... 989,513 --
Other assets...................................................................... 387,746 22,335
-------------- -------------
Total assets...................................................................... $ 136,642,611 $ 73,270,113
-------------- -------------
-------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................................ $ 3,360,894 $ 1,806,678
Accrued expenses................................................................ 4,263,234 3,926,536
Current portion of long-term debt and note payable.............................. 36,000,000 29,000,000
Other current liabilities....................................................... 1,720,669 528,742
-------------- -------------
Total current liabilities......................................................... 45,344,797 35,261,956
Long-term Debt.................................................................... 35,000,000 --
Deferred tax liability............................................................ 28,699,059 12,437,297
Other liabilities................................................................. 2,584,961 306,098
Commitments and contingencies
Shareholders' equity:
Common stock, par value $1 per share; 100 shares authorized, issued and
outstanding................................................................... 100 100
Additional paid-in capital...................................................... 24,999,950 24,999,950
Retained earnings............................................................... 13,744 264,712
-------------- -------------
Total shareholders' equity........................................................ 25,013,794 25,264,762
-------------- -------------
Total liabilities and shareholders' equity........................................ $ 136,642,611 $ 73,270,113
-------------- -------------
-------------- -------------
</TABLE>
See accompanying notes.
F-23
<PAGE>
JTM INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
1998 1997
------------- -------------
<S> <C> <C>
Revenues:
Product revenues................................................................. $ 8,911,965 $ 6,302,259
Service revenues................................................................. 6,482,555 8,352,777
------------- -------------
15,394,520 14,655,036
Costs and expenses:
Cost of sales, excluding depreciation............................................ 11,873,764 11,747,829
Depreciation and amortization.................................................... 1,185,872 626,016
Selling, general and administrative expenses..................................... 1,651,099 1,430,625
------------- -------------
14,710,735 13,804,470
------------- -------------
Operating income................................................................... 683,785 850,566
Interest income.................................................................... 52,104 --
Interest expense................................................................... (976,304) (1,312,402)
Other income....................................................................... 1,122 --
Income (loss) before income taxes.................................................. (239,293) (461,836)
Income taxes benefit (expense)..................................................... (11,675) 98,666
------------- -------------
Net income (loss).................................................................. $ (250,968) $ (363,170)
------------- -------------
------------- -------------
</TABLE>
See accompanying notes.
F-24
<PAGE>
JTM INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED SHAREHOLDERS'
STOCK CAPITAL EARNINGS EQUITY
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1997............................... $ 100 $ 24,999,950 $ 264,712 $ 25,264,762
Net income............................................... -- -- (250,968) (250,968)
----- ------------- ----------- -------------
Balance at March 31, 1998.................................. $ 100 $ 24,999,950 $ 13,744 $ 25,013,794
----- ------------- ----------- -------------
----- ------------- ----------- -------------
</TABLE>
See accompanying notes.
F-25
<PAGE>
JTM INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------------
1998 1997
-------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss.......................................................................... $ (250,968) $ (363,170)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization................................................... 1,185,872 626,016
Amortization of debt issuance costs............................................. 12,987
Loss on sale of fixed assets.................................................... -- 222,645
Deferred income taxes........................................................... (368,379) 257,082
Changes in operating assets and liabilities:
Receivables................................................................... (1,110,197) (875,067)
Inventory..................................................................... 28,510
Other current and non-current assets.......................................... 104,109 62,306
Accounts payable.............................................................. 492,025 1,042,177
Accrued expenses.............................................................. 9,201 (2,842,956)
Other current and non-current liabilities..................................... 488,478 --
-------------- -------------
Net cash provided by (used in) operating activities............................... 591,638 (1,870,967)
INVESTING ACTIVITIES
Purchases of property, plant and equipment........................................ (536,080) (102,875)
Proceeds on sale of property, plant and equipment................................. 118,896 --
Acquisitions of businesses, net of cash acquired.................................. (43,691,366) --
Acquisition costs incurred on future acquisitions................................. (119,754) --
-------------- -------------
Net cash used in investing activities............................................. (44,228,304) (102,875)
FINANCING ACTIVITIES
Proceeds of notes payable......................................................... 42,000,000 --
Debt issuance costs incurred...................................................... (1,027,854) --
Change in intercompany notes payable.............................................. -- 1,973,842
-------------- -------------
Net cash provided by financing activities......................................... 40,972,146 1,973,842
Net decrease in cash and cash equivalents......................................... (2,664,520) --
Cash and cash equivalents at beginning of period.................................. 3,068,980 --
-------------- -------------
Cash and cash equivalents at end of period........................................ $ 404,460 $ --
-------------- -------------
-------------- -------------
Cash paid for interest............................................................ $ 57,164 $ --
-------------- -------------
-------------- -------------
Cash paid for income taxes........................................................ $ 465,707 $ --
-------------- -------------
-------------- -------------
</TABLE>
See accompanying notes.
F-26
<PAGE>
JTM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited interim condensed
consolidated financial statements reflect all adjustments, consisting of
normal recurring adjustments, necessary to present fairly the financial
position, results of operations and cash flows of JTM Industries, Inc.
("JTM" or the "Company") for the respective periods presented. The results
of operations for an interim period are not necessarily indicative of the
results which may be expected for any other interim period or for the year
as a whole.
Certain information and footnote disclosures normally included in financial
statements presented in accordance with generally accepted accounting
principles have been condensed or omitted. The accompanying unaudited
interim condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes in the
Registration Statement on Form S-4. All intercompany accounts and
transactions have been eliminated in consolidation.
The consolidated balance sheet at December 31, 1997 was derived from audited
consolidated financial statements, but does not include all disclosures
required under generally accepted accounting principles.
On October 14, 1997, the Company became a wholly owned subsidiary of
Industrial Services Group ("ISG"). The consideration paid to the former
owner consisted of a $29,000,000 senior bridge note (the "Senior Bridge
Note"), a $17,500,000 junior subordinated promissory note (the "Junior
Subordinated Note") and $5,817,000 in cash. The Senior Bridge Note has been
pushed down to the Company as the proceeds of a subsequent debt offering
were used to retire this note. The Junior Subordinated Note has not been
pushed down to the Company as such proceeds will not be used to retire this
note, the Company has not and does not plan to assume the Junior
Subordinated Note, and the Company does not guarantee or pledge its assets
as collateral for this note. The acquisition has been accounted for as a
purchase and, accordingly, the purchase price was allocated based on
estimated fair values at the date of the acquisition. Goodwill resulting
from this acquisition is being amortized on a straight-line basis over 25
years.
On March 4, 1998, the Company completed the acquisition of all the
outstanding shares of Pozzolanic Resources, Inc. ("Pozzolanic"). The
consideration paid consisted of approximately $40,000,000 in cash. The
acquisition has been accounted for as a purchase and, accordingly, the
results of operations of Pozzolanic have been included in the consolidated
financial statements since March 4, 1998. The purchase price was allocated
based on estimated fair values at the date of acquisition. During the one
year period following the acquisition of Pozzolanic, the Company will make
adjustments to the estimated fair values assigned to the assets acquired and
liabilities assumed from Pozzolanic based on appraisals and other
information received, which will result in changes to goodwill. Goodwill
resulting from this acquisition is being amortized on a straight-line basis
over 25 years.
On March 20, 1998, the Company completed the acquisition of all the
outstanding shares of Power Plant Aggregates of Iowa, Inc. ("PPA"). The
consideration paid consisted of approximately $8,500,000 in cash. The
acquisition has been accounted for as a purchase and, accordingly, the
results of operations of PPA have been included in the consolidated
financial statements since March 20, 1998. The purchase price was allocated
based on estimated fair values at the date of acquisition. During the one
year period following the acquisition of PPA, the Company will make
adjustments to the estimated fair values assigned to the assets acquired and
liabilities assumed from PPA based on
F-27
<PAGE>
JTM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
1. BASIS OF PRESENTATION (CONTINUED)
appraisals and other information received, which will result in changes to
goodwill. Goodwill resulting from this acquisition is being amortized on a
straight-line basis over 25 years.
2. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
------------- -------------
<S> <C> <C>
Goodwill....................................... $ 30,694,858 $ 14,640,584
Contracts...................................... 65,900,000 26,700,000
Patents........................................ 2,400,000 2,400,000
Assembled work force........................... 1,910,000 1,100,000
------------- -------------
100,904,858 44,840,584
Less accumulated amortization.................. (1,166,521) (455,092)
------------- -------------
$ 99,738,337 $ 44,385,492
------------- -------------
------------- -------------
</TABLE>
3. SECURED CREDIT FACILITY
On March 4, 1998, the Company entered into a $42,000,000 Secured Credit
Facility provided by a syndicate of banks which replaced the $5,000,000
Senior Secured Revolving Credit Agreement. The Secured Credit Facility
enables the Company to obtain revolving secured loans from time to time to
finance certain permitted acquisitions, to repay existing indebtedness, to
pay fees and expenses incurred in connection with certain acquisitions and
for working capital and general corporate purposes. At the Company's option,
the revolving secured loans may be maintained as (a) Eurodollar Loans (as
defined) which will bear interest at a rate equal to the quotient obtained
by dividing LIBOR (as defined) by one minus the reserve requirement for such
Eurodollar Loan, plus a margin of 250 basis points or (b) Base Rate Loans
(as defined) which will have an interest rate equal to the higher of (i) the
Nations Bank N.A. prime rate and (ii) the federal funds rate plus 0.5%, plus
a margin of 125 basis points. The Company will also pay certain fees with
respect to the Secured Credit Facility. The Security Credit Facility has a
term of five and one-half years from the date of initial funding, is
guaranteed by ISG and existing and future subsidiaries of the Company (the
"Guarantors"), and is secured by a first priority perfected security
interest in all of the capital stock of the Company and all of the capital
stock of each of the Guarantors, as well as certain present and future
assets and properties of the Company and any domestic subsidiaries. At March
31, 1998, $42,000,000 was outstanding under the Secured Credit Facility.
4. INCOME TAXES
Deferred income taxes arise from temporary differences between the tax basis
of assets and liabilities and their reported amounts in the financial
statements. Deferred tax assets and liabilities at March 31, 1998 and
December 31, 1997 arose primarily from temporary differences in fixed
assets, identifiable intangible assets, allowance for doubtful accounts and
accrued expenses.
F-28
<PAGE>
JTM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
The Company's effective tax rate for the three month periods ended March 31,
1998 and 1997 differs from the statutory rate of 35% due primarily to
non-deductible goodwill amortization and state income taxes.
5. SUBSEQUENT EVENTS
BUSINESS COMBINATIONS
On April 22, 1998, the Company acquired all of the outstanding stock of
Michigan Ash Sales Company, d.b.a. U.S. Ash Company, together with two
affiliated companies, U.S. Stabilization, Inc. and Flo Fil Co., Inc. ("U.S.
Ash"), for approximately $24,600,000. U.S. Ash is a provider of coal
combustion product management services in Michigan, Ohio and Indiana.
On April 22, 1998, the Company acquired all of the outstanding stock of Fly
Ash Products, Inc. ("Fly Ash Products") for approximately $9,500,000. Fly
Ash Products is a provider of coal combustion product management services in
Arkansas.
PRIVATE PLACEMENT OF SENIOR SUBORDINATED NOTES
On April 22, 1998, the Company completed a private placement of $100,000,000
aggregate principal amount of its 10% Senior Subordinated Notes due 2008
(the "Senior Subordinated Notes"). The proceeds were used to pay the Senior
Bridge Note, a portion of the Secured Credit Facility, consideration and
expenses related to the U.S. Ash and Fly Ash Products acquisitions and
transaction fees. Interest on the Senior Subordinated Notes is payable
semi-annually on April 15 and October 15 of each year, commencing October
15, 1998. The Senior Subordinated Notes mature on April 15, 2008.
The Senior Subordinated Notes are redeemable at the option of the Company,
in whole or in part, at any time on or after April 15, 2003 at redemption
prices of 105% in 2003, 103.333% in 2004, 101.667% in 2005 and 100%
thereafter plus accrued and unpaid interest and liquidated damages as
defined in the indenture, if any, to the date of redemption. Notwithstanding
the foregoing, at any time on or before April 15, 2001, the Company may
redeem up to $35,000,000 in agggregate principal amount of Senior
Subordinated Notes at a redemption price of 110% of the principal amount
thereof, plus accrued and unpaid interest and liquidated damages as defined
in the indenture, if any, to the date of redemption, with the net cash
proceeds to the Company of one or more Public Offerings; provided that at
least $65,000,000 in aggregate principal amount of Senior Subordinated Notes
remain outstanding immediately after the occurrence of such redemption; and
provided, further, that each such redemption shall occur within 60 days of
the date of the closing of each such Public Offering.
Upon the occurrence of a change of control as defined in the indenture, the
Company is required to make an offer to repurchase all or part of the Senior
Subordinated Notes at a price equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest and liquidated damages as
defined in the indenture, if any, to the date of repurchase. Upon the
occurrence of an asset sale as defined in the indenture, the Company is
required to make an offer to repurchase the maximum principal amount of
Senior Subordinated Notes as may be purchased out of the excess proceeds as
defined in the indenture, at a price equal to 100% of the principal amount
thereof plus accrued and unpaid interest and liquidated damages as defined
in the indenture, if any, to the date of repurchase.
The payment of principal, interest, and liquidated damages as defined in the
indenture, if any, on the Senior Subordinated Notes is subordinated in right
of payment to the prior payment of all senior
F-29
<PAGE>
JTM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
indebtedness as defined in the indenture, whether outstanding on the date of
the indenture or thereafter incurred. The Company's payment obligations
under the Senior Subordinated Notes are jointly and severally guaranteed on
a senior subordinated basis by each present domestic subsidiary and each
future domestic subsidiary that executes a subsidiary guarantee as defined
in the indenture. The indenture for the Company's Senior Subordinated Notes
contains various limitations on the incurrence of additional indebtedness,
the issuance of preferred stock, consolidations or mergers, sales of assets,
and restricted payments, including dividends, for the Company and restricted
subsidiaries as defined in the indenture.
In connection with the private placement of the Senior Subordinated Notes,
the Company entered into the Registration Rights Agreement, pursuant to
which the Company is required to file an exchange offer registration
statement with the Securities and Exchange Commission on or prior to 45 days
from the closing of the private placement and to use their best efforts to
have the exchange offer registration statement declared effective by the
Securities and Exchange Commission on or prior to 135 days from the closing
of the private placement.
Upon completion of the private placement of the Senior Subordinated Notes,
the Secured Credit Facility was permanently reduced to $35,000,000.
F-30
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Pozzolanic Resources, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Pozzolanic
Resources, Inc. and Subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of income and retained earnings and cash flows
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Pozzolanic
Resources, Inc. and Subsidiaries at December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for the years then
ended, in conformity with generally accepted accounting principles.
Ernst & Young LLP
Seattle, Washington
February 10, 1998, except for
Note 8, as to which
the date is March 4, 1998
F-31
<PAGE>
POZZOLANIC RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
<S> <C> <C>
1997 1996
------------- -------------
ASSETS
Current assets:
Cash.............................................................................. $ 40,399 $ 818
Short-term investments at cost.................................................... 2,850,330 3,568,020
Accounts receivable, less allowances for doubtful accounts of $47,000 and $26,000
in 1997 and 1996, respectively.................................................. 1,925,269 1,468,527
Deferred freight.................................................................. 402,958 294,814
Other receivables................................................................. 140,065 66,079
Amounts due from related parties.................................................. 3,760 --
Income taxes receivable........................................................... -- 425,469
Prepaid expenses.................................................................. 61,023 67,775
Current deferred income taxes..................................................... 41,250 27,650
------------- -------------
Total current assets................................................................ 5,465,054 5,919,152
Property, plant, and equipment:
Land.............................................................................. 107,777 107,777
Buildings......................................................................... 66,362 66,362
Plant equipment................................................................... 5,724,253 5,503,526
Automotive equipment.............................................................. 630,700 590,217
Office furniture and equipment.................................................... 357,848 400,561
Leasehold improvements............................................................ 247,406 247,406
------------- -------------
7,134,346 6,915,849
Accumulated depreciation and amortization......................................... (5,412,615) (4,902,359)
------------- -------------
1,721,731 2,013,490
Construction in progress.......................................................... -- 2,567
------------- -------------
1,721,731 2,016,057
Other assets:
Fly ash contracts, less accumulated amortization of $789,568 and $763,096 in 1997
and 1996, respectively.......................................................... 143,358 169,830
Deposits and other................................................................ 12,069 11,771
Notes receivable.................................................................. 9,604 --
Deferred income taxes............................................................. 58,406 19,766
------------- -------------
223,437 201,367
------------- -------------
Total assets........................................................................ $ 7,410,222 $ 8,136,576
------------- -------------
------------- -------------
</TABLE>
See accompanying notes.
F-32
<PAGE>
POZZOLANIC RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS--(CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------
<S> <C> <C>
1997 1996
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable.............................................................. $ 536,228 $ 429,101
Accrued expenses.................................................................... 298,025 184,566
Advances from suppliers............................................................. 410,509 306,923
Income taxes payable................................................................ 4,771 --
------------ ------------
Total current liabilities............................................................. 1,249,533 920,590
Deferred gains........................................................................ 700,000 700,000
Shareholders' equity:
Common stock, Class A, voting, $1 par value:
Authorized shares--1,000
Issued and outstanding shares--200................................................ 200 200
Preferred stock, Class C, nonvoting, $1 par value:
Authorized shares--15,000
Issued and outstanding shares--2,900.............................................. 2,900 2,900
Preferred stock, Class D, nonvoting, $1 par value:
Authorized shares--15,000
Issued and outstanding shares--5,800.............................................. 5,800 5,800
Retained earnings................................................................... 5,451,789 6,507,086
------------ ------------
Total shareholders' equity............................................................ 5,460,689 6,515,986
------------ ------------
Total liabilities and shareholders' equity............................................ $ 7,410,222 $ 8,136,576
------------ ------------
------------ ------------
</TABLE>
See accompanying notes.
F-33
<PAGE>
POZZOLANIC RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------
<S> <C> <C>
1997 1996
------------- -------------
Sales.............................................................................. $ 21,263,494 $ 17,993,543
Cost of goods sold................................................................. 13,607,238 11,684,111
------------- -------------
Gross profit....................................................................... 7,656,256 6,309,432
Selling, administrative, and general expenses...................................... 2,897,974 2,451,703
------------- -------------
Operating income................................................................... 4,758,282 3,857,729
Interest income.................................................................... 37,637 86,578
Other income....................................................................... 63,542 356,183
------------- -------------
Income before income taxes......................................................... 4,859,461 4,300,490
Provision for federal and state income taxes:
Current.......................................................................... 1,830,499 1,544,462
Deferred......................................................................... (52,241) (1,333)
------------- -------------
1,778,258 1,543,129
------------- -------------
Net income......................................................................... 3,081,203 2,757,361
Retained earnings at beginning of year............................................. 6,507,086 3,749,725
Less dividends paid................................................................ 4,136,500 --
------------- -------------
Retained earnings at end of year................................................... $ 5,451,789 $ 6,507,086
------------- -------------
------------- -------------
</TABLE>
See accompanying notes.
F-34
<PAGE>
POZZOLANIC RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------
<S> <C> <C>
1997 1996
-------------- --------------
OPERATING ACTIVITIES
Collection of trade receivables................................................... $ 20,925,826 $ 18,063,627
Payments to suppliers and employees............................................... (15,638,348) (13,719,586)
Income taxes paid................................................................. (1,400,259) (1,576,602)
Interest received................................................................. 34,429 87,324
Dividends received................................................................ 17,885 17,115
Interest paid..................................................................... (8,185) --
Other, net........................................................................ (73,322) 266,561
-------------- --------------
Net cash provided by operating activities......................................... 3,858,026 3,138,439
INVESTING ACTIVITIES
Purchases of property, plant, and equipment....................................... (401,144) (980,942)
Proceeds from sale of equipment................................................... 1,509 4,450
-------------- --------------
Net cash used in investing activities............................................. (399,635) (976,492)
FINANCING ACTIVITIES
Dividends paid.................................................................... (4,136,500) --
Line of credit advance............................................................ 755,000 --
Line of credit reduction.......................................................... (755,000) --
-------------- --------------
Net cash used in financing activities............................................. (4,136,500) --
-------------- --------------
Increase (decrease) in cash and short-term investments............................ (678,109) 2,161,947
Cash and short-term investments at beginning of year.............................. 3,568,838 1,406,891
-------------- --------------
Cash and short-term investments at end of year.................................... $ 2,890,729 $ 3,568,838
-------------- --------------
-------------- --------------
Reconciliation of net income to net cash provided by operating activities:
Net income...................................................................... $ 3,081,203 $ 2,757,361
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization................................................. 701,572 647,059
Loss on disposal of fixed assets.............................................. -- (3,424)
Other assets.................................................................. (298) (3)
Note receivable............................................................... (9,604) --
Deferred income taxes......................................................... 52,240 (1,333)
Net operating working capital items........................................... 32,913 (261,221)
-------------- --------------
Net cash provided by operating activities......................................... $ 3,858,026 $ 3,138,439
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes.
F-35
<PAGE>
POZZOLANIC RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION
Pozzolanic Resources, Inc. ("Resources" or the "Company") is a holding
company for Pozzolanic Northwest, Inc. ("Northwest") and St. Helens Investments,
Inc. ("St. Helens"), d.b.a. Pozzolanic International, whose purpose is the
distribution of fly ash, which is used in the production of concrete. The
companies have been selling fly ash in the western United States and British
Columbia since 1976. Resources also owns all the outstanding stock of Pozzolanic
Northwest Bulk Carriers, Inc. ("Bulk Carriers"). Bulk Carriers operates as a
common carrier, primarily in the Pacific Northwest.
2. ACCOUNTING POLICIES
FINANCIAL STATEMENT PRESENTATION
In addition to the accounts of Resources, the consolidated financial
statements include the accounts of Northwest and its wholly owned subsidiary,
Pozzolanic N.W. FSC, Inc. (a Foreign Sales Corporation-- "FSC"); St. Helens; and
Bulk Carriers. Significant intercompany transactions and accounts are eliminated
in consolidation.
REVENUE RECOGNITION
Revenue is recognized when title to products sold passes to the customer.
DEFERRED FREIGHT
Freight costs incurred moving fly ash to Resources' storage facilities are
deferred until the fly ash is sold. Such deferred freight is allocated to fly
ash sales on an average cost per ton basis.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are stated on the basis of cost. The
provision for depreciation is determined by straight-line and accelerated
methods over the estimated useful lives of the assets.
STATEMENTS OF CASH FLOWS
For purposes of the statement of cash flows, short-term, interest-bearing
investments with maturities on the date of purchase of less than three months
are considered cash equivalents. The fair values of cash and short-term
investments approximate their carrying values.
INCOME TAXES
The Company applies the liability method of accounting for income taxes as
prescribed by SFAS No. 109, "Accounting for Income Taxes." Under the liability
method, deferred tax assets and liabilities are recognized for the expected
future tax consequences of existing differences between the financial reporting
and tax reporting bases of assets and liabilities using enacted tax laws and
rates.
Deferred income taxes in 1997 and 1996 relate principally to differences in
the treatment between tax and book of depreciation and freight costs.
F-36
<PAGE>
POZZOLANIC RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates. The only
significant estimate made by management during 1997 and 1996 is the
determination of the allowance for doubtful accounts.
3. RELATED PARTIES
On October 1, 1980, Northwest transferred two of its fly ash contracts to
St. Helens. In return, St. Helens issued to Northwest nonvoting common stock
with a par value of $700,000. The related fly ash contracts have an unamortized
carrying value at December 31, 1997 and 1996 of approximately $143,000 and
$170,000, respectively. Since Northwest had no cost basis in the contracts and
is not assured of realization of the gain on this transaction, no gain on the
transfer has been recognized.
The above fly ash contracts are being amortized on a straight-line basis
over the lives of the contracts.
4. COMMITMENTS AND CONTINGENCIES
The Company has entered into operating leases for office space, storage
facilities, and rail cars through 2002. Aggregate minimum lease payments
required over the lives of the leases are as follows:
<TABLE>
<S> <C>
1998............................................................ $ 720,000
1999............................................................ 660,000
2000............................................................ 290,000
2001............................................................ 180,000
2002............................................................ 60,000
---------
$1,910,000
---------
---------
</TABLE>
Rental expense under operating leases was approximately $560,000 in 1997 and
$210,000 in 1996.
The Company's contracts with its suppliers require the Company to make
minimum purchases of fly ash over ensuing years as follows:
<TABLE>
<S> <C>
1998............................................................ $ 730,000
1999............................................................ 730,000
2000............................................................ 730,000
2001............................................................ 730,000
2002............................................................ 730,000
2003 and thereafter............................................. 15,000
---------
$3,665,000
---------
---------
</TABLE>
Fly ash purchases under supplier contracts with minimum purchase
requirements amounted to $1,010,000 and $1,915,000 in 1997 and 1996,
respectively.
F-37
<PAGE>
POZZOLANIC RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The supplier contracts provide for adjustment of the minimum purchase prices
based on changes in the specific price of Portland cement.
5. CREDIT AGREEMENT
Resources has entered into a credit agreement with a bank that expires June
30, 1998. The agreement provides for borrowings of up to $2,500,000. Borrowings
under the agreement are secured by accounts receivable and inventories and
require monthly payments of interest at the lending bank's prime rate. There
were no borrowings outstanding under this agreement at December 31, 1997 or
1996.
6. CAPITAL STOCK
Holders of Class A voting common stock are not entitled to receive
dividends. The holders of Class C nonvoting preferred stock and Class D
nonvoting preferred stock shall be entitled to dividends only when declared by
the Board of Directors with the unanimous approval of voting stockholders.
7. IMPACT OF THE YEAR 2000 (UNAUDITED)
The Company has completed an assessment of its computer programs and will
have to modify or replace portions of its software so that its computer systems
will function properly with respect to dates in the year 2000 and thereafter.
The total Year 2000 project cost is not expected to be significant. The project
is estimated to be completed no later than December 31, 1998, which is prior to
any anticipated impact on its operating systems. The Company believes that with
modifications to existing software, the Year 2000 Issue will not pose
significant operational problems for its computer systems.
8. SUBSEQUENT EVENT
On March 4, 1998, all of the Company's outstanding stock was purchased by an
unrelated third party.
F-38
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Power Plant Aggregates of Iowa, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheets of Power Plant
Aggregates of Iowa, Inc. and Subsidiary as of December 31, 1997 and March 31,
1997, and the related consolidated statements of income, shareholders' equity
and cash flows for the nine months ended December 31, 1997 and the year ended
March 31, 1997. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Power Plant
Aggregates of Iowa, Inc. and Subsidiary at December 31, 1997 and March 31, 1997,
and the results of their operations and their cash flows for the nine months and
year then ended, respectively, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Salt Lake City, Utah
March 13, 1998, except for
Note 10, as to which the
date is March 20, 1998
F-39
<PAGE>
POWER PLANT AGGREGATES OF IOWA, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31 MARCH 31
1997 1997
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................................... $1,884,267 $ 1,473,777
Accounts receivable................................................................. 793,779 473,330
Prepaid expenses, deposits and other................................................ 14,633 1,325
Income tax receivable............................................................... -- 138,439
------------ ------------
Total current assets.................................................................. 2,692,679 2,086,871
Property, plant and equipment:
Land................................................................................ 18,000 18,000
Building and improvements........................................................... 97,191 97,191
Equipment........................................................................... 2,689,724 2,494,871
Office equipment.................................................................... 104,231 104,231
------------ ------------
2,909,146 2,714,293
Accumulated depreciation............................................................ 1,820,425 1,655,489
------------ ------------
1,088,721 1,058,804
Other assets:
Deferred income taxes............................................................... 35,062 29,375
Cash value of life insurance........................................................ 228,850 197,240
Goodwill............................................................................ 33,735 53,975
Noncompete agreement, net........................................................... 32,500 40,000
Other............................................................................... 33,640 17,100
------------ ------------
363,787 337,690
------------ ------------
$4,145,187 $ 3,483,365
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................................... $ 222,474 $ 89,362
Accrued expenses.................................................................... 178,652 80,286
Income taxes payable................................................................ 53,818 --
Current portion of noncompete agreement............................................. 10,000 10,000
------------ ------------
Total current liabilities............................................................. 464,944 179,648
Deferred compensation................................................................. 87,656 73,439
Noncompete agreement, less current portion............................................ 20,000 30,000
Shareholders' equity:
Common stock, par value $100; 2,500 shares authorized, 242 issued and outstanding... 24,200 24,200
Additional paid-in capital.......................................................... 11,000 11,000
Retained earnings................................................................... 3,537,387 3,165,078
------------ ------------
3,572,587 3,200,278
------------ ------------
$4,145,187 $ 3,483,365
------------ ------------
------------ ------------
</TABLE>
See accompanying notes.
F-40
<PAGE>
POWER PLANT AGGREGATES OF IOWA, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
DECEMBER 31 MARCH 31
1997 1997
------------ ------------
<S> <C> <C>
Revenues............................................................................. $7,069,817 $ 7,007,347
Costs and expenses:
Cost of products and services sold................................................. 4,537,239 4,815,935
Selling, administrative and general................................................ 1,472,461 1,572,564
Depreciation and amortization expense.............................................. 228,959 241,874
------------ ------------
6,238,659 6,630,373
------------ ------------
831,158 376,974
Interest income...................................................................... 55,146 113,127
------------ ------------
Income from continuing operations before taxes....................................... 886,304 490,101
Income taxes......................................................................... 362,745 201,944
------------ ------------
Net income from continuing operations................................................ 523,559 288,157
Loss from discontinued operations, net of income tax benefit of $5,100............... -- (7,711)
------------ ------------
Net income........................................................................... $ 523,559 $ 280,446
------------ ------------
------------ ------------
</TABLE>
See accompanying notes.
F-41
<PAGE>
POWER PLANT AGGREGATES OF IOWA, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED SHAREHOLDERS'
STOCK CAPITAL EARNINGS EQUITY
--------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Balance at April 1, 1996...................................... $ 29,000 $ 11,000 $ 3,870,062 $ 3,910,062
Net income.................................................. -- -- 280,446 280,446
Dividends................................................... -- -- (181,250) (181,250)
Redemption of 48 shares of common stock..................... (4,800) -- (804,180) (808,980)
--------- ----------- ------------ -------------
BALANCE AT MARCH 31, 1997..................................... 24,200 11,000 3,165,078 3,200,278
NET INCOME.................................................. -- -- 523,559 523,559
DIVIDENDS................................................... -- -- (151,250) (151,250)
--------- ----------- ------------ -------------
BALANCE AT DECEMBER 31, 1997.................................. $ 24,200 $ 11,000 $ 3,537,387 $ 3,572,587
--------- ----------- ------------ -------------
--------- ----------- ------------ -------------
</TABLE>
See accompanying notes.
F-42
<PAGE>
POWER PLANT AGGREGATES OF IOWA, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
DECEMBER 31 MARCH 31
1997 1997
------------ -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income............................................................................ $ 523,559 $ 280,446
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization....................................................... 228,959 241,874
Loss on sale of equipment........................................................... 2,935 12,264
Changes in operating assets and liabilities:
Accounts receivable............................................................... (320,449) (79,081)
Prepaid expenses.................................................................. (13,308) 22,281
Income tax receivable............................................................. 138,439 (128,886)
Other assets...................................................................... (26,097) (40,306)
Accounts payable.................................................................. 133,112 60,863
Accrued expenses.................................................................. 98,366 (1,566)
Income taxes payable.............................................................. 53,818 (29,467)
Deferred compensation............................................................. 14,217 13,563
------------ -----------
Net cash provided by operating activities............................................. 833,551 351,985
INVESTING ACTIVITIES
Noncompete agreement payment.......................................................... (10,000) (10,000)
Purchase of property, plant, and equipment............................................ (271,111) (673,598)
Proceeds from sale of equipment....................................................... 9,300 17,450
------------ -----------
Net cash used in investing activities................................................. (271,811) (666,148)
FINANCING ACTIVITIES
Dividends............................................................................. (151,250) (181,250)
Redemption of stock................................................................... -- (808,980)
------------ -----------
Net cash used in financing activities................................................. (151,250) (990,230)
------------ -----------
Net increase (decrease) in cash and cash equivalents.................................. 410,490 (1,304,393)
Cash and cash equivalents at beginning of year........................................ 1,473,777 2,778,170
------------ -----------
Cash and cash equivalents at end of year.............................................. $1,884,267 $ 1,473,777
------------ -----------
------------ -----------
Cash paid during the year for income taxes............................................ $ 314,614 $ 368,407
</TABLE>
See accompanying notes.
F-43
<PAGE>
POWER PLANT AGGREGATES OF IOWA, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. SIGNIFICANT ACCOUNTING POLICIES
Power Plant Aggregates and its wholly owned subsidiary, Midwest Fly Ash and
Materials, Inc. (the "Company") purchase, remove, and sell ash from the
combustion of coal at electric generating plants. Sales of ash are primarily to
concrete construction companies in the midwest region. The Company also
purchases, crushes, and sells a by-product of cement processing plants. N-Viro
Minnesota, Inc. was liquidated in June 1996.
PRINCIPLES OF CONSOLIDATION
The financial statements include the accounts of Power Plant Aggregates and
its wholly owned subsidiary, Midwest Fly Ash and Materials, Inc. All significant
intercompany transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
Cash equivalents are highly liquid investments with maturities of three
months or less when purchased.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are recorded at cost. Depreciation is
provided using the straight-line method over estimated lives ranging from 3 to
32 years.
GOODWILL
Goodwill recognized on the purchase of the former co-venturer's interest in
the subsidiary, Midwest Fly Ash and Materials, Inc., is being amortized over ten
years.
DEFERRED COMPENSATION
The Company has an agreement with an employee which provides for deferred
compensation benefits to be paid in the event of the employee's death,
disability, termination or retirement. The benefits are accrued annually over
the term of the agreement as the liability is incurred. The provision for
deferred compensation was $14,217 for the nine months ended December 31, 1997
and $13,563 for the year ended March 31, 1997.
INCOME TAXES
Deferred tax assets and liabilities are provided for the future tax
consequences attributable to temporary differences between the carrying amounts
of assets and liabilities for financial statement and income tax purposes.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards ("SFAS") No. 107, "Disclosure
About Fair Value of Financial Instruments" requires all entities to disclose the
fair value of financial instruments, both assets and liabilities recognized and
not recognized on the balance sheet, for which it is practicable to estimate
F-44
<PAGE>
POWER PLANT AGGREGATES OF IOWA, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
fair value. SFAS 107 defines fair value of a financial instrument as the amount
at which the instrument could be exchanged in a current transaction between
willing parties. At December 31, 1997 and March 31, 1997, the carrying value of
all financial instruments (accounts receivable, accounts payable, accrued
expenses) approximates fair value.
LONG-LIVED ASSETS
As required by Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," management evaluates the carrying value of all long-lived
assets to determine recoverability when indicators of impairment are present
based generally on an analysis of undiscounted cash flows. Management believes
no material impairment in the value of long-lived assets exists at December 31,
1997 and March 31, 1997.
USE OF ESTIMATES
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates
2. RELATED PARTY TRANSACTIONS
The Company and its subsidiary maintain their corporate headquarters at
office facilities of an affiliated company. Payments for office services,
overhead and management services were $97,000 and $147,000 during the nine
months ended December 31, 1997 and the year ended March 31, 1997, respectively.
The Company has an agreement with an affiliated company to provide
management services. Management services income was $45,000 and $60,000 during
the nine months ended December 31, 1997 and the year ended March 31, 1997,
respectively.
3. MAJOR SUPPLIERS
During the nine months ended December 31, 1997 and the year ended March 31,
1997, the Company acquired approximately 98% of its material for sale to
customers from two electric utilities. Effective May 1998, the Company will lose
one of its utility contracts which represents approximately 60% of its material
for sale. The remaining utility contract expires December 31, 1998.
F-45
<PAGE>
POWER PLANT AGGREGATES OF IOWA, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. LEASES
The Company leases certain equipment under leases classified as operating.
The agreements require the Company to pay all taxes, insurance and maintenance
costs related to the equipment. Minimum future rents are as follows at December
31, 1997:
<TABLE>
<S> <C>
1998...................................................... $ 176,996
1999...................................................... 86,996
2000...................................................... 26,332
</TABLE>
5. NONCOMPETE AGREEMENT
The noncompete agreement calls for annual payments of $10,000 for a period
of five years beginning in 1996. The noncompete agreement is being amortized
over 60 months on a straight-line basis.
6. INCOME TAXES
Income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
DECEMBER 31, MARCH 31,
1997 1997
------------ -----------
<S> <C> <C>
Income tax provision (benefit):
Current:
Federal.......................................................... $ 299,134 $ 164,654
State............................................................ 69,298 37,327
------------ -----------
368,432 201,981
Deferred:
Federal.......................................................... (4,621) 5,388
State............................................................ (1,066) (5,425)
------------ -----------
(5,687) (37)
------------ -----------
$ 362,745 $ 201,944
------------ -----------
------------ -----------
</TABLE>
Reconciliation of income tax expense at the U.S. statutory rate to the
Company's tax expense is as follows:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
DECEMBER 31, MARCH 31,
1997 1997
------------ -----------
<S> <C> <C>
35% of income before income tax.................................... $ 310,206 $ 171,535
State taxes, net of federal income tax benefit..................... 52,539 30,409
------------ -----------
$ 362,745 $ 201,944
------------ -----------
------------ -----------
</TABLE>
F-46
<PAGE>
POWER PLANT AGGREGATES OF IOWA, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. COMMITMENTS
The Company has combined unsecured lines of credit with a bank in the amount
of $3,000,000. There were no borrowings on these lines as of December 31, 1997
and March 31, 1997.
The Company has entered into a three-year agreement to pay a locator fee for
the supply of raw material for its concrete crushing business. The maximum
obligation is $200,000 based on a per-ton rate. The agreement may be extended
one year if the supplier has not delivered sufficient material to reach the
maximum obligation.
8. PROFIT SHARING PLAN
The Company has adopted a 401(k) profit sharing plan covering all its
employees. Employees may elect to make salary deferral contributions limited to
15% of their wages. The plan permits the employer to make matching contributions
at its discretion. The Company made discretionary contributions to the plan of
$5,512 and $8,027 during the nine month period ended December 31, 1997 and the
year ended March 31, 1997, respectively.
9. IMPACT OF THE YEAR 2000 (UNAUDITED)
Substantially all of the Company's computer processing is performed using
programs provided by third party vendors. The Company is currently evaluating
the programs for Year 2000 compliance. The Company intends to utilize only Year
2000 compliant vendor programs and believes that the Year 2000 issue will not
pose significant operational problems for its computer systems.
10. SUBSEQUENT EVENTS
The Company purchased 12 shares of its outstanding stock on January 2, 1998
for $202,245.
On March 20, 1998, all the Company's outstanding stock was purchased by an
unrelated third party.
F-47
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Michigan Ash Sales Company (d.b.a. U.S. Ash Company), U.S. Stabilization, Inc.
and Flo Fil Company, Inc.
We have audited the accompanying combined balance sheets of Michigan Ash
Sales Company (d.b.a. U.S. Ash Company), U.S. Stabilization, Inc., and Flo Fil
Company, Inc. (the "Companies") as of December 31, 1997 and 1996, and the
related combined statements of income and retained earnings and cash flows for
the years then ended. These financial statements are the responsibility of the
Companies' management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Michigan Ash Sales
Company (d.b.a. U.S. Ash Company), U.S. Stabilization, Inc., and Flo Fil
Company, Inc. at December 31, 1997 and 1996, and the combined results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
Ernst & Young LLP
Salt Lake City, Utah
March 11, 1998, except
for Note 6, as to which
the date is March 25, 1998
F-48
<PAGE>
MICHIGAN ASH SALES COMPANY (D.B.A. U.S. ASH COMPANY) AND AFFILIATED COMPANIES
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------
<S> <C> <C>
1997 1996
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents........................................................... $ 3,136,041 $ 2,736,002
Accounts receivable (net of allowance for doubtful accounts of $34,458 in 1997 and
$40,343 in 1996).................................................................. 1,713,409 1,113,962
Other receivables................................................................... 51,901 53,423
Inventories......................................................................... 21,875 24,640
Deferred income tax................................................................. 42,116 49,129
------------ ------------
Total current assets.................................................................. 4,965,342 3,977,156
Property, plant, and equipment
Buildings........................................................................... 578,788 578,788
Plant equipment..................................................................... 207,334 217,415
Vehicles............................................................................ 138,124 120,142
------------ ------------
924,246 916,345
Accumulated depreciation............................................................ (567,369) (583,756)
------------ ------------
356,877 332,589
------------ ------------
Total assets.......................................................................... $ 5,322,219 $ 4,309,745
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Trade accounts payable.............................................................. $ 347,177 $ 230,701
Accrued expenses.................................................................... 592,309 324,353
Payables to affiliates.............................................................. 1,942,590 1,357,754
Current income tax.................................................................. 217,005 252,626
------------ ------------
Total current liabilities............................................................. 3,099,081 2,165,434
Deferred tax liability................................................................ 55,512 57,692
Commitments and contingencies
Shareholder's equity:
Common stock
Michigan Ash Sales Company, $1 par value;
50,000 shares authorized;
1,000 shares issued and outstanding............................................. 1,000 1,000
U.S. Stabilization, Inc., $1 par value;
50,000 shares authorized;
1,000 shares issued and outstanding............................................. 1,000 1,000
Flo Fil Company, Inc., $1 par value; 50,000 shares authorized; 1,000 shares issued
and outstanding................................................................. 1,000 1,000
Retained earnings................................................................... 2,164,626 2,083,619
------------ ------------
Total shareholder's equity............................................................ 2,167,626 2,086,619
------------ ------------
Total liabilities and shareholder's equity............................................ $ 5,322,219 $ 4,309,745
------------ ------------
------------ ------------
</TABLE>
See accompanying notes.
F-49
<PAGE>
MICHIGAN ASH SALES COMPANY (D.B.A. U.S. ASH COMPANY) AND AFFILIATED COMPANIES
COMBINED STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------
<S> <C> <C>
1997 1996
------------- ------------
Revenues:
Materials and services sold........................................................ $ 11,216,477 $ 7,535,232
Commissions........................................................................ 219,827 495,691
------------- ------------
Total revenues....................................................................... 11,436,304 8,030,923
Costs and expenses:
Cost of materials and services sold................................................ 10,006,618 6,298,862
Selling, general and administrative................................................ 1,469,009 1,039,363
------------- ------------
11,475,627 7,338,225
------------- ------------
(39,323) 692,698
Interest income...................................................................... 92,403 45,403
Other income......................................................................... 77,330 4,068
------------- ------------
Income before income taxes........................................................... 130,410 742,169
Income taxes
Current............................................................................ 44,570 299,712
Deferred........................................................................... 4,833 (34,268)
------------- ------------
49,403 265,444
------------- ------------
Net income........................................................................... 81,007 476,725
Shareholder distribution............................................................. -- (108,367)
Retained earnings at beginning of year............................................... 2,083,619 1,715,261
------------- ------------
Retained earnings at end of year..................................................... $ 2,164,626 $ 2,083,619
------------- ------------
------------- ------------
</TABLE>
See accompanying notes.
F-50
<PAGE>
MICHIGAN ASH SALES COMPANY (D.B.A. U.S. ASH COMPANY) AND AFFILIATED COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------
<S> <C> <C>
1997 1996
------------ ------------
OPERATING ACTIVITIES
Net income............................................................................ $ 81,007 $ 476,725
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation...................................................................... 63,073 46,025
Deferred income taxes............................................................. 4,833 (34,268)
Changes in operating assets and liabilities:
Accounts receivable............................................................. (597,925) (173,391)
Inventories..................................................................... 2,765 (2,778)
Trade accounts payable and payables to affiliates............................... 701,312 (184,845)
Income taxes payable............................................................ (35,621) 243,060
Accrued expenses................................................................ 267,956 37,018
------------ ------------
Net cash provided by operating activities............................................. 487,400 407,546
INVESTING ACTIVITIES
Purchases of property, plant and equipment............................................ (116,818) --
Proceeds from disposal of property, plant and equipment............................... 29,457 --
------------ ------------
Net cash used in investing activities................................................. (87,361) --
FINANCING ACTIVITIES
Shareholder distribution.............................................................. -- (75,000)
------------ ------------
Net increase in cash and cash equivalents............................................. 400,039 332,546
Cash and cash equivalents at beginning of year........................................ 2,736,002 2,403,456
------------ ------------
Cash and cash equivalents at end of year.............................................. $ 3,136,041 $ 2,736,002
------------ ------------
------------ ------------
Cash paid during the year for income taxes............................................ $ 80,191 $ 56,652
</TABLE>
See accompanying notes.
F-51
<PAGE>
MICHIGAN ASH SALES COMPANY (D.B.A. U.S. ASH COMPANY) AND AFFILIATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. SIGNIFICANT ACCOUNTING POLICIES
The accompanying combined financial statements include the accounts of
Michigan Ash Sales Company, U.S. Stabilization, Inc. and Flo Fil Company, Inc.
(the Companies). All three companies are wholly-owned by an individual
shareholder and have common management. Significant intercompany accounts and
transactions have been eliminated in combination. The operations of the
Companies are summarized below:
MICHIGAN ASH SALES COMPANY (DBA U.S. ASH COMPANY)--A Michigan corporation
involved primarily in the business of marketing, transporting and
disposing of fly ash and other coal byproducts generated by utilities,
primarily in the states of Michigan, Indiana and Ohio. Customers of the
company consist of concrete manufacturers, cement manufacturers,
construction contractors, and other affiliated companies.
U.S. STABILIZATION, INC.--A Michigan corporation in the business of
mixing fly ash with steel company waste byproducts to comply with
landfill disposal regulations for a steel company in Indiana.
FLO FIL COMPANY, INC.--A Michigan corporation involved primarily in the
business of mixing and selling a low-cost fly ash based concrete product
for use in applications with lower-grade product requirements.
REVENUE RECOGNITION
Revenues are recognized when materials or services are provided to
customers. Disposal costs are accrued concurrently with the recognition of
revenue.
CASH AND CASH EQUIVALENTS
Cash equivalents are highly liquid investments with maturities of
three-months or less when purchased.
INVENTORIES
Inventories consist of spare parts for equipment and are stated at cost.
PROPERTY, PLANT AND EQUIPMENT
Property, plant, and equipment are recorded at cost. Major renewals and
improvements are capitalized, while maintenance and repairs are expensed when
incurred. Depreciation is computed using the straight-line method over the
estimated useful lives of 5 to 10 years for vehicles, machinery and equipment
and 40 years for buildings and improvements.
As required by Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," management evaluates the carrying value of all long-lived
assets to determine recoverability when indicators of impairment are present
based generally on an analysis of undiscounted cash flows. Management believes
no material impairment in the value of long-lived assets exists at December 31,
1997 and 1996.
F-52
<PAGE>
MICHIGAN ASH SALES COMPANY (D.B.A. U.S. ASH COMPANY) AND AFFILIATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The Companies account for income taxes, using the provisions of Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes."
Deferred income taxes result primarily from temporary differences between the
financial statement bases and the tax bases of assets and liabilities using
enacted tax rates.
Prior to January 1, 1997, U.S. Stabilization, Inc. was taxed under the
provisions of subchapter S of the Internal Revenue Code. Under such provisions,
U.S. Stabilization, Inc. did not pay income taxes on its taxable income or
receive any benefit for losses. Instead, the sole shareholder of U.S.
Stabilization was liable for (benefited from) the full amount of its taxable
income (loss) on his individual income tax return.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosure About Fair
Value of Financial Instruments" (SFAS 107) requires the disclosure of the fair
value of financial instruments, both assets and liabilities recognized and not
recognized on the balance sheet, for which it is practicable to estimate fair
value. SFAS 107 defines fair value of a financial instrument as the amount at
which the instrument could be exchanged in a current transaction between willing
parties. At December 31, 1997 and 1996, the carrying value of all the Companies'
financial instruments (accounts receivable, accounts payable and accrued
expenses) approximates fair value.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
2. INCOME TAXES
Reconciliation of income tax expense at the U.S. statutory rate to the
Companies' tax expense follows for the years ended December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
34% of income before income tax $ 44,339 $ 252,337
Add (deduct):
Non-deductible expenses............................................. 2,954 2,391
Earnings of combined affiliate not subject to taxation because of
S-Corporation status.............................................. -- (629)
State income taxes, net of federal benefit.......................... 2,110 11,345
---------- ----------
$ 49,403 $ 265,444
---------- ----------
---------- ----------
</TABLE>
F-53
<PAGE>
MICHIGAN ASH SALES COMPANY (D.B.A. U.S. ASH COMPANY) AND AFFILIATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
2. INCOME TAXES (CONTINUED)
The major components of the deferred tax assets and liabilities as of
December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ---------
<S> <C> <C>
Deferred Tax Assets:
Bad debt reserves.................................................... $ 12,251 $ 14,321
Accruals not currently deductible for tax purposes................... 17,750 17,444
Net operating loss carryforwards..................................... 12,115 17,364
---------- ---------
Total gross deferred tax assets........................................ 42,116 49,129
Deferred Tax Liabilities:
Fixed asset basis differences........................................ 55,512 57,692
---------- ---------
Net deferred tax liabilities........................................... $ (13,396) $ (8,563)
---------- ---------
---------- ---------
</TABLE>
3. RELATED PARTY TRANSACTIONS
The following table summarizes revenues and expenses reported in the
accompanying combined statements of income that were either received or accrued
from, or paid or accrued to, the sole shareholder, individuals affiliated with
the sole shareholder, or companies owned by or affiliated with the sole
shareholder:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
RELATED PARTY NATURE OF TRANSACTION 1997 1996
- ------------------------------------------- ------------------------------------------- ---------- ----------
<S> <C> <C> <C>
COMMISSION REVENUES:
Wirt Transportation, Inc. Commissions on loads hauled by Wirt
Transportation, Inc. $ 219,827 $ 495,691
COST OF MATERIALS AND SERVICES SOLD:
Wirt Transportation, Inc. Trucking fees 2,489,134 1,868,055
Wirt Payroll Services and JAD Payroll
Services Fees for leased employees 1,485,181 1,080,769
JD Ash Equipment Co. Equipment rental and maintenance contract
fees 1,045,545 430,415
Sand and Stone Co. Purchases of materials 253,116 148,199
Wirt Trucking Co. Equipment rental 79,479 79,479
SELLING, GENERAL AND ADMINISTRATIVE:
Sand and Stone Co. Building rental 93,000 93,000
Bay Dock Company, Inc. Building rental 67,200 --
</TABLE>
Due to the related nature of these parties, the amounts received and paid
may not have been the same if similar activities had been undertaken with
unrelated parties. All leasing arrangements with related parties are cancelable.
Prior to January 2, 1997, U.S. Stabilization, Inc. was wholly-owned by the
president of Michigan Ash Sales Company and U.S. Stabilization, Inc. In April of
1996, the president received two distributions from the U.S. Stabilization
totaling $75,000. The remaining undistributed retained earnings of U.S.
Stabilization, Inc. as of December 31, 1996 totaled $33,367 and was accrued as
an additional distribution to the president
F-54
<PAGE>
MICHIGAN ASH SALES COMPANY (D.B.A. U.S. ASH COMPANY) AND AFFILIATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
3. RELATED PARTY TRANSACTIONS (CONTINUED)
on that date and is included in payables to affiliates in the accompanying
combined balance sheet as of December 31, 1996. The accrued distribution, plus
accrued interest, is included in payables to affiliates as of December 31, 1997.
On January 2, 1997, the president transferred all the outstanding shares of U.S.
Stabilization, Inc. to the sole shareholder of Michigan Ash Sales Company and
Flo Fil Company, Inc.
4. COMMITMENTS AND CONTINGENCIES
Michigan Ash Sales Company has a commitment to purchase equipment related to
a contract with a supplier. Under this commitment, the company will purchase
approximately $250,000 of equipment and the utility will provide a certain
amount of ash at no cost The equipment is necessary to fulfill the utility
contract.
5. CONCENTRATIONS OF CREDIT RISK
The Companies maintain their cash balances at two separate financial
institutions located in Michigan. Accounts at each institution are insured by
the Federal Deposit Insurance Corporation up to $100,000. At December 31, 1997
and 1996, the Companies uninsured cash balances totaled $2,287,000 and
$2,117,000, respectively.
Generally, the Companies do not require collateral or other security to
support customer trade accounts receivable. The Companies' five largest
customers accounted for approximately 25% of the revenues in 1997 and 1996.
Customers of the Companies are primarily concentrated in the public utility
industry. Customers are also concentrated in the states of Michigan, Illinois,
Indiana, and Ohio. Historically, the Companies have not had significant
uncollectable accounts.
6. SUBSEQUENT EVENT
On March 25, 1998, an agreement was signed to sell all the outstanding stock
of the Companies to an unrelated third party.
7. IMPACT OF THE YEAR 2000 (UNAUDITED)
The Companies have not completed an assessment of their computer programs to
determine if such programs will have to be modified or replaced so that the
computer systems will function properly with respect to dates in the year 2000
and thereafter. However, because of the limited use of computers and software in
the day to day operations of the Companies business, management does not believe
that the Year 2000 Issue will pose significant operational problems.
F-55
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Fly Ash Products, Incorporated
We have audited the accompanying balance sheets of Fly Ash Products,
Incorporated as of December 31, 1997 and 1996, and the related statements of
income, shareholders' equity and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Fly Ash Products, Incorporated
at December 31, 1997 and 1996, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Salt Lake City, Utah
March 6, 1998, except for Note 7, as to
which the date is March 27, 1998
F-56
<PAGE>
FLY ASH PRODUCTS, INCORPORATED
(AN S CORPORATION)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
<S> <C> <C>
1997 1996
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents......................................................... $ 248,352 $ 724,305
Accounts receivable (net of allowance for doubtful accounts 844,368 705,017
of $53,393 and $46,737 in 1997 and 1996, respectively)
Prepaid expenses.................................................................. 60,247 73,071
------------- -------------
Total current assets................................................................ 1,152,967 1,502,393
Property, plant and equipment:
Buildings......................................................................... 73,955 73,955
Machinery and equipment........................................................... 4,881,476 4,257,013
------------- -------------
4,955,431 4,330,968
Accumulated depreciation.......................................................... 3,555,604 3,097,368
------------- -------------
1,399,827 1,233,600
Other assets:
Land held for resale.............................................................. 100,000 100,000
Other............................................................................. 12,875 4,805
------------- -------------
112,875 104,805
------------- -------------
$ 2,665,669 $ 2,840,798
------------- -------------
------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................................. $ 92,177 $ 79,091
Accrued expenses.................................................................. 76,543 74,536
Current maturities of long-term debt.............................................. 549,481 463,744
------------- -------------
Total current liabilities........................................................... 718,201 617,371
Long-term debt, less current portion................................................ 390,882 476,884
Shareholders' equity:
Common stock, par value $.10; 1,000 shares authorized, 900 issued and 90 90
outstanding.....................................................................
Additional paid-in capital.......................................................... 810 810
Retained earnings................................................................... 4,301,377 3,965,136
Receivables from shareholders....................................................... (2,745,691) (2,219,493)
------------- -------------
1,556,586 1,746,543
------------- -------------
$ 2,665,669 $ 2,840,798
------------- -------------
------------- -------------
</TABLE>
See accompanying notes.
F-57
<PAGE>
FLY ASH PRODUCTS, INCORPORATED
(AN S CORPORATION)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------
<S> <C> <C>
1997 1996
------------ ------------
Revenues.............................................................................. $ 6,330,595 $ 7,945,990
Costs and expenses:
Cost of products and services sold.................................................. 2,584,181 3,033,134
Other operating costs............................................................... 1,238,598 1,478,761
Selling, administrative and general................................................. 979,618 1,188,661
Depreciation and amortization....................................................... 684,943 729,817
------------ ------------
5,487,340 6,430,373
------------ ------------
843,255 1,515,617
Interest income....................................................................... 196,883 145,290
Interest expense...................................................................... (93,697) (92,425)
------------ ------------
Net income............................................................................ $ 946,441 $ 1,568,482
------------ ------------
------------ ------------
</TABLE>
See accompanying notes.
F-58
<PAGE>
FLY ASH PRODUCTS, INCORPORATED
(AN S CORPORATION)
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN
STOCK CAPITAL RETAINED EARNINGS
------------- ------------- -----------------
<S> <C> <C> <C>
Balance at January 1, 1996.............................................. $ 90 $ 810 $ 2,817,404
Net income............................................................ 1,568,482
Dividends............................................................. (420,750)
--- ----- -----------------
BALANCE AT DECEMBER 31, 1996............................................ 90 810 3,965,136
NET INCOME............................................................ 946,441
DIVIDENDS............................................................. (610,200)
--- ----- -----------------
BALANCE AT DECEMBER 31, 1997............................................ $ 90 $ 810 $ 4,301,377
--- ----- -----------------
--- ----- -----------------
</TABLE>
See accompanying notes.
F-59
<PAGE>
FLY ASH PRODUCTS, INCORPORATED
(AN S CORPORATION)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------
<S> <C> <C>
1997 1996
------------- -------------
OPERATING ACTIVITIES
Net income.......................................................................... $ 946,441 $ 1,568,482
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization................................................... 684,943 729,817
Gain on sale of equipment....................................................... (9,324) (102,162)
Changes in operating assets and liabilities:
Accounts receivable......................................................... (139,351) 206,457
Interest receivable from shareholders....................................... (176,198) (124,843)
Prepaid expenses............................................................ 12,824 7,256
Accounts payable............................................................ 13,086 46,942
Accrued expenses............................................................ 2,007 (37,826)
------------- -------------
Net cash provided by operating activities........................................... 1,334,428 2,294,123
INVESTING ACTIVITIES
Purchases of property, plant and equipment.......................................... (889,904) (404,610)
Proceeds from disposal of property, plant and equipment............................. 48,058 227,652
Receivable from shareholders........................................................ (350,000) (825,000)
Other............................................................................... (8,070)
------------- -------------
Net cash used in investing activities............................................... (1,199,916) (1,001,958)
FINANCING ACTIVITIES
Proceeds from long-term debt........................................................ 556,700 959,309
Principal payments on long-term debt................................................ (556,965) (1,131,250)
Dividends........................................................................... (610,200) (420,750)
------------- -------------
Net cash used in financing activities............................................... (610,465) (592,691)
------------- -------------
Net increase (decrease) in cash and cash equivalents................................ (475,953) 699,474
Cash and cash equivalents at beginning of year...................................... 724,305 24,831
------------- -------------
Cash and cash equivalents at end of year............................................ $ 248,352 $ 724,305
------------- -------------
------------- -------------
Cash paid during the year for interest.............................................. $ 87,394 $ 93,577
</TABLE>
See accompanying notes.
F-60
<PAGE>
FLY ASH PRODUCTS, INCORPORATED
(AN S CORPORATION)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. SIGNIFICANT ACCOUNTING POLICIES
Fly Ash Products, Incorporated (the "Company") began operations in May 1987.
The Company purchases, removes, and sells ash from the combustion of coal at
electric generating plants in Arkansas. Sales of ash are primarily to concrete
companies in Arkansas and surrounding states.
CASH AND CASH EQUIVALENTS
Cash equivalents are highly liquid investments with maturities of three
months or less when purchased.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are recorded at cost. Depreciation is
provided using an accelerated method over estimated lives ranging from 3 to 7
years.
ADVERTISING
The Company charges the costs of advertising to expense as incurred.
Advertising expense for the years ended December 31, 1997 and 1996 was $7,408
and $3,522 respectively.
INCOME TAXES
The Company has elected to be taxed under the provisions of subchapter S of
the Internal Revenue Code. Accordingly, no provision or liability for federal
income taxes is reflected in the accompanying statements as the shareholders are
liable for individual federal income taxes on their respective share of the
Company's taxable income.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards ("SFAS") No. 107, "Disclosure
About Fair Value of Financial Instruments" requires all entities to disclose the
fair value of financial instruments, both assets and liabilities recognized and
not recognized on the balance sheet, for which it is practicable to estimate
fair value. SFAS 107 defines fair value of a financial instrument as the amount
at which the instrument could be exchanged in a current transaction between
willing parties. At December 31, 1997 and 1996, the carrying value of all
financial instruments (accounts receivable, accounts payable, accrued expenses
and notes payable) approximates fair value.
LONG-LIVED ASSETS
As required by Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," management evaluates the carrying value of all long-lived
assets to determine recoverability when indicators of impairment are present
based generally on an analysis of undiscounted cash flows. Management believes
no material impairment in the value of long-lived assets exists at December 31,
1997 and 1996.
F-61
<PAGE>
FLY ASH PRODUCTS, INCORPORATED
(AN S CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. LONG-TERM DEBT
Long-term debt at December 31, 1997 and 1996 consists of the following:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
10.00% note to NationsBank, payable in monthly installments of $999,
collateralized by a vehicle......................................... $ 8,634 $ 19,187
10.00% note to GMAC, payable in monthly installments of $220,
collateralized by a vehicle......................................... 6,352 9,856
8.50% note to Ford Motor Credit, payable in monthly installments of
$468, collateralized by a truck..................................... 3,185 8,293
8.75% note to NationsBank, payable in monthly installments of $350,
collateralized by a vehicle......................................... 11,582 14,617
9.25% note to NationsBank, payable in monthly installments of $15,961,
collateralized by equipment......................................... 234,265 408,198
8.50% note to NationsBank, payable in monthly installments of $6,313,
collateralized by equipment......................................... -- 66,659
9.50% note to NationsBank, payable in monthly installments of $714,
collateralized by a vehicle......................................... 22,301 28,436
8.87% note to Compass Bank, payable in monthly installments of $1,274,
collateralized by a vehicle......................................... -- 11,061
11.00% note to Navistar, payable in monthly installments of $4,992,
collateralized by 5 trucks.......................................... 33,698 86,687
9.80% note to Navistar, payable in monthly installments of $1,984,
collateralized by 2 trucks.......................................... 22,591 43,081
10.45% note to Ford Motor Credit, payable in monthly installments of
$561, collateralized by a vehicle................................... -- 15,625
</TABLE>
F-62
<PAGE>
FLY ASH PRODUCTS, INCORPORATED
(AN S CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. LONG-TERM DEBT (CONTINUED)
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
10.25% note to GMAC, payable in monthly installments of $485,
collateralized by a vehicle............................................. $ 3,742 $ 8,897
6.00% note to KDC Financial, payable in monthly installments of $3,766,
collateralized by equipment............................................. 104,700 --
8.50% note to Simmons First National Bank, payable in monthly installments
of $14,327, collateralized by equipment................................. 383,828 --
9.70% note to Clement Finance, payable in monthly installments of $8,923,
collateralized by trailers.............................................. 85,603 180,103
8.25% note to KDC Financial, payable in monthly installments of $1,882,
collateralized by equipment............................................. 19,882 39,928
---------- ----------
940,363 940,628
Less current portion...................................................... 549,481 463,744
---------- ----------
$ 390,882 $ 476,884
---------- ----------
---------- ----------
</TABLE>
The approximate aggregate maturities of long-term debt for the five years
subsequent to December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998.............................................................. $549,481
1999.............................................................. 269,153
2000.............................................................. 121,035
2001.............................................................. 694
---------
$940,363
---------
---------
</TABLE>
The Company has two lines of credit for $500,000 each at an interest rate of
5% over the federal discount rate and at a current rate of 8.5%. The lines are
secured by the Company's accounts receivable. One of the lines of credit expired
on January 25, 1998. The remaining line of credit expires on June 15, 1998.
There were no balances outstanding at December 31, 1997 on these lines of
credit.
F-63
<PAGE>
FLY ASH PRODUCTS, INCORPORATED
(AN S CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. RELATED PARTY TRANSACTIONS
The following entities are related to Fly Ash Products, Incorporated by
common ownership and/or management. For the years ended December 31, 1997 and
1996, the following amounts were paid by and/ or received by the Company to or
from these related entities.
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Amounts paid by Fly Ash to:
Delmar Investors--for rent and office cleaning........................ $ 10,800 $ 10,800
Key Company--for the following:
Equipment Lease..................................................... 40,679 --
Construction Expense................................................ -- 54,105
D.A. Thomas Enterprises, Inc.......................................... 1,183 7,161
--------- ---------
Total amount paid to related parties.................................... $ 52,662 $ 72,066
--------- ---------
--------- ---------
Amounts received by Fly Ash from:
Smithwick, Inc.--for miscellaneous reimbursements..................... $ 3,432 $ --
D.A. Thomas Enterprises, Inc.--expense reimbursements................. 6,027 --
--------- ---------
Total amount received from related parties.............................. $ 9,459 $ --
--------- ---------
--------- ---------
</TABLE>
At December 31, 1997 and 1996, the Company had loans receivable from
shareholders totaling $2,350,000 and $2,000,000, respectively. These unsecured
loans bear interest at 8.5% per annum, mature annually and have been renewed
without reduction. Interest accrued but unpaid at December 31, 1997 and December
31, 1996 was $395,691 and $219,493, respectively. Interest income related to
these loans totaled $176,198 and $124,843 in 1997 and 1996 respectively. The
Company is the guarantor of debt of D.A. Thomas Enterprises, Inc. totaling
$1,088,111 and $1,185,810 at December 31, 1997 and 1996, respectively.
4. MAJOR CUSTOMERS AND SUPPLIERS
During 1997 and 1996, the Company had sales to one customer which comprised
19% and 17%, respectively, of total sales for those years. Also during 1997 and
1996, the Company acquired 100% of its material for sale to customers from one
electric utility.
5. LEASES
The Company leases certain buildings and equipment under leases classified
as operating. Rental expense was $91,800 and $59,834 for 1997 and 1996
respectively.
6. IMPACT OF THE YEAR 2000 (UNAUDITED)
Substantially all of the Company's computer processing is performed using
programs provided by third party vendors. The Company is currently evaluating
the programs for Year 2000 compliance. The Company intends to utilize only Year
2000 compliant vendor programs and believes that the year 2000 issue will not
pose significant operational problems for its computer systems.
7. SUBSEQUENT EVENT
On March 27, 1998, an agreement was signed for purchase of all the Company's
outstanding stock by an unrelated third party.
F-64
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE EXCHANGE OFFER CONTAINED HEREIN, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE INITIAL PURCHASERS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE NOTES
IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS EXCHANGE OFFER NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information........................... 1
Summary......................................... 2
Risk Factors.................................... 12
Use of Proceeds................................. 21
Capitalization.................................. 21
Pro Forma Condensed Combined Financial
Information................................... 22
Selected Historical Financial Information....... 27
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 28
The Exchange Offer.............................. 32
Business........................................ 40
Management...................................... 49
Security Ownership of Certain Beneficial Owners
and Management................................ 53
Certain Transactions............................ 53
Description of Notes............................ 54
Description of Secured Credit Facility.......... 83
Certain United States Federal Tax Considerations
For Non-United States Holders................. 84
Plan of Distribution............................ 86
Legal Matters................................... 86
Experts......................................... 86
Index to Financial Statements................... F-1
</TABLE>
UNTIL [ ] ALL DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER
OR NOT PARTICIPATING IN THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS ON SUBSCRIPTIONS.
EXCHANGE OFFER
[LOGO]
OFFER TO EXCHANGE
10% SENIOR SUBORDINATED NOTES DUE 2008
FOR 10% SENIOR SUBORDINATED NOTES DUE 2008
---------------------
PROSPECTUS
---------------------
JUNE , 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. IDENTIFICATION OF OFFICERS AND DIRECTORS.
(A) JTM INDUSTRIES, INC.
JTM Industries, Inc. ("JTM") is a Texas corporation. Article 2.02-1.B of the
Texas Business Corporation Act, as amended (the "TBCA"), grants to a corporation
the power to indemnify a person who was, is or is threatened to be made a named
defendant or respondent in a proceeding because the person is or was a director
of the corporation against judgments, penalties (including excise and similar
taxes), fines, settlements and reasonable expenses actually incurred in
connection therewith, only if it is determined that the person (1) conducted
himself in good faith; (2) reasonably believed that (a) in the case of conduct
in his official capacity as a director of the corporation, his conduct was in
the corporation's best interests, and (b) in all other cases, his conduct was at
least not opposed to the corporation's best interests; and (3) in the case of
any criminal proceeding, he had no reasonable cause to believe that his conduct
was unlawful. Article 2.02-1.C limits the allowable indemnification by providing
that, except to the extent permitted by Article 2.02-1.E, a director may not be
indemnified in respect of a proceeding in which the person was found liable (1)
on the basis that he improperly received a personal benefit, whether or not the
benefit resulted from an action taken in his official capacity, or (2) to the
corporation. Article 2.02-1.E provides that if a director is found liable to the
corporation or is found liable on the basis that he received a personal benefit,
the permissible indemnification (1) is limited to reasonable expenses actually
incurred by the person in connection with the proceeding, and (2) shall not be
made in respect of any proceeding in which the person shall have been found
liable for willful or intentional misconduct in the performance of his duty to
the corporation. Finally, Article 2.02-1.H provides that a corporation shall
indemnify a director against reasonable expenses incurred by him in connection
with a proceeding in which he is a named defendant or respondent because he is
or was a director if he has been wholly successful, on the merits or otherwise,
in defense of the proceeding.
With respect to the officers of a corporation, Article 2.02-1.O of the TBCA
provides that a corporation may indemnify and advance expenses to an officer of
the corporation to the same extent that it may indemnify and advance expenses to
directors under Article 2.02-I. Further, Article 2.02-1.O provides that an
officer of a corporation shall be indemnified as, and to the same extent,
provided by Article 2.02-1.H for a director.
The Articles of Incorporation and Bylaws of JTM provide for indemnification
of officers and directors as and to the fullest extent permitted by the TBCA. In
addition, JTM maintains officers' and directors' insurance covering certain
liabilities that may be incurred by officers and directors in the performance of
their duties.
(B) POZZOLANIC RESOURCES, INC.
Pozzolanic Resources, Inc. ("Pozzolanic") is a Washington corporation.
Sections 23B.08.500 through 23B.08.600 of the Washington Business Corporation
Act (the "WBCA") authorize a court to award, or a corporation's board of
directors to grant, indemnification to directors and officers on terms
sufficiently broad to permit indemnification under certain circumstances for
liabilities arising under the Securities Act. Pozzolanic's Bylaws, as amended
(the "Bylaws"), provide for indemnification of its directors, officers,
employees and agents to the maximum extent permitted by Washington law.
Section 23B.08.320 of the WBCA authorizes a corporation to eliminate or
limit a director's personal liability to the corporation or its shareholders for
monetary damages for conduct as a director, except in certain circumstances
involving acts or omissions, intentional misconduct by a director or knowing
violations of law by a director or distributions illegal under Washington law,
or any transaction from which the director will personally receive a benefit in
money, property or services to which the director is not
II-1
<PAGE>
legally entitled. Pozzolanic's Articles of Incorporation contain provisions
implementing, to the fullest extent permitted by Washington law, such
limitations on a director's liability to Pozzolanic and its shareholders.
Officers and directors of Pozzolanic are covered by insurance (with certain
exceptions and certain limitations) that indemnifies them against losses and
liabilities arising from certain alleged "wrongful acts," including alleged
errors or misstatements, or certain other alleged wrongful acts or omissions
constituting neglect or breach of duty.
(C) POWER PLANT AGGREGATES OF IOWA, INC.
Power Plant Aggregates of Iowa, Inc. ("PPA") is an Iowa corporation. PPA's
Amended and Restated Bylaws and Restated Articles of Incorporation provide that
PPA shall indemnify its directors, officers, employees and agents to the fullest
extent permitted by the Iowa Business Corporation Act (the "IBCA"). The IBCA
provides that a company may indemnify its officers and directors if (i) the
person acted in good faith, and (ii) the person reasonably believed, in the case
of conduct in the person's official capacity with the company, that the conduct
was in the company's best interests, and in all other cases, that the person's
conduct was at least not opposed to the company's best interests, and (iii) in
the case of any criminal proceeding, the person had no reasonable cause to
believe the person's conduct was unlawful. The company is required to indemnify
officers and directors against reasonable expenses incurred in connection with
any proceeding in which they are wholly successful, on the merits or otherwise,
to which the person may be a party because of the person's position with the
company. If the proceeding is by or in the right of the company, indemnification
may be made only for reasonable expenses and may not be made in respect of any
proceeding in which the person shall have been adjudged liable to the company.
Further, any such person may not be indemnified in respect of any proceeding
that charges improper personal benefit to the person, in which the person shall
have been adjudged to be liable.
PPA maintains directors' and officers' liability insurance, which
indemnifies directors and officers of PPA against certain damages and expenses
relating to claims against them caused by negligent acts, errors or omissions.
(D) KBK ENTERPRISES, INC.
KBK Enterprises, Inc. ("KBK") is a Pennsylvania corporation. Sections 1741
and 1742 of the Pennsylvania Business Corporation Law of 1988, as amended (the
"BCL") provide that a business corporation may indemnify directors and officers
against liability they may incur as such provided that the particular person
acted in good faith and in a manner he or she reasonably believed to be in, or
not opposed to, the best interests of the corporation and, with respect to any
criminal proceeding, had no reasonable cause to believe his or her conduct was
unlawful. In the case of actions against a director or officer by or in the
right of the corporation, the power to indemnify extends only to expenses (not
judgments and amounts paid in the settlement) and such power generally does not
exist if the person otherwise entitled to indemnification shall have been
adjudged to be liable to the corporation unless it is judicially determined
that, despite the adjudication of liability but in view of all the circumstances
of the case, the person is fairly and reasonably entitled to indemnification for
specified expenses. Under Section 1743 of the BCL, the corporation is required
to indemnify directors and officers against expenses they may incur in defending
actions against them in such capacities if they are successful on the merits or
otherwise in the defense of such actions. Under Section 1745 of the BCL, a
corporation may pay the expenses of a director or officer incurred in defending
an action or proceeding in advance of the final amounts advanced unless it is
ultimately determined that such person is entitled to indemnification from the
corporation.
KBK's Articles of Incorporation and Bylaws do not address indemnification of
officers and directors.
II-2
<PAGE>
(E) FLY ASH PRODUCTS, INC.
Fly Ash Products, Inc. is an Arkansas corporation. Section 4-27-850 of the
Arkansas Business Corporation Act contains detailed provisions for
indemnification of directors and officers of Arkansas corporations against
expenses, judgments, fines and settlements in connection with litigation.
Article VIII of Fly Ash's Articles of Incorporation, as amended, provides for
indemnification of the directors and executive officers of Fly Ash to the
fullest extent legally permissible under the relevant provisions of the Arkansas
Business Corporation Act. Additionally, the Company has in place directors' and
officers' liability insurance coverage.
(F) MICHIGAN ASH SALES COMPANY, D.B.A. U.S. ASH COMPANY
Michigan Ash Sales Company, d.b.a. U.S. Ash Company ("U.S. Ash") is a
Michigan corporation. Section 561 of the Michigan Business Corporation Act
provides generally and in pertinent part that a Michigan corporation may
indemnify its directors and officers against expenses, including judgments,
penalties, fines, attorney's fees and amounts paid in settlement actually and
reasonably incurred by them in connection with any civil or criminal suit or
action, other than actions by or in the right of the corporation, if the person
acted in good faith and in a manner the person reasonably believed to be in or
not opposed to the best interests of the corporation or its shareholders, and
with respect to any criminal suit or proceeding, if the person had no reasonable
cause to believe his/her conduct was unlawful. Section 562 provides that, in
connection with the defense or settlement of any action by or in the right of
the corporation, a Michigan corporation may indemnify its directors and officers
against expenses actually and reasonably incurred by them in connection with the
matters in issue, 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 corporation or its
shareholders. The right to indemnification is mandatory in the case of a
director or officer who is successful on the merits or otherwise and if the
expenses are reasonable and actually incurred. Permissive indemnification is to
be made by a court of competent jurisdiction, the majority vote of a quorum of
disinterested directors, the written opinion of independent legal counsel, by
all independent directors who are not parties to or threatened to be made
parties to the action or suit, or by the disinterested shareholders or a
committee designated by the Board of Directors and consisting of directors who
are not parties to, or threatened to be made parties to, the proceedings.
U.S. Ash's Bylaws, as well as specific indemnification agreements with U.S.
Ash's directors and officers, provide that U.S. Ash shall indemnify such persons
to the fullest extent permitted by law.
(G) U.S. STABILIZATION, INC.
U.S. Stabilization, Inc. ("U.S. Stabilization") is a Michigan corporation.
Section 561 of the Michigan Business Corporation Act provides generally and in
pertinent part that a Michigan corporation may indemnify its directors and
officers against expenses, including judgments, penalties, fines, attorney's
fees and amounts paid in settlement actually and reasonably incurred by them in
connection with any civil or criminal suit or action, other than actions by or
in the right of the corporation, if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the corporation or its shareholders, and with respect to any
criminal suit or proceeding, if the person had no reasonable cause to believe
his/her conduct was unlawful. Section 562 provides that, in connection with the
defense or settlement of any action by or in the right of the corporation, a
Michigan corporation may indemnify its directors and officers against expenses
actually and reasonably incurred by them in connection with the matters in
issue, 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 corporation or its
shareholders. The right to indemnification is mandatory in the case of a
director or officer who is successful on the merits or otherwise and if the
expenses are reasonable and actually incurred. Permissive indemnification is to
be made by a court of competent jurisdiction, the majority vote of a quorum of
disinterested directors, the written opinion of independent legal counsel, by
all independent directors who are not parties to or threatened to be made
II-3
<PAGE>
parties to the action or suit, or by the disinterested shareholders or a
committee designated by the Board of Directors and consisting of directors who
are not parties to, or threatened to be made parties to, the proceedings.
U.S. Stabilization's Bylaws, as well as specific indemnification agreements
with U.S. Stabilization's directors and officers, provide that U.S.
Stabilization shall indemnify such persons to the fullest extent permitted by
law.
(H) FLO FIL CO., INC.
Flo Fil Co., Inc. ("Flo Fil") is a Michigan corporation. Section 561 of the
Michigan Business Corporation Act provides generally and in pertinent part that
a Michigan corporation may indemnify its directors and officers against
expenses, including judgments, penalties, fines, attorney's fees and amounts
paid in settlement actually and reasonably incurred by them in connection with
any civil or criminal suit or action, other than actions by or in the right of
the corporation, if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation or its shareholders, and with respect to any criminal suit or
proceeding, if the person had no reasonable cause to believe his/her conduct was
unlawful. Section 562 provides that, in connection with the defense or
settlement of any action by or in the right of the corporation, a Michigan
corporation may indemnify its directors and officers against expenses actually
and reasonably incurred by them in connection with the matters in issue, 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 corporation or its shareholders. The right
to indemnification is mandatory in the case of a director or officer who is
successful on the merits or otherwise and if the expenses are reasonable and
actually incurred. Permissive indemnification is to be made by a court of
competent jurisdiction, the majority vote of a quorum of disinterested
directors, the written opinion of independent legal counsel, by all independent
directors who are not parties to or threatened to be made parties to the action
or suit, or by the disinterested shareholders or a committee designated by the
Board of Directors and consisting of directors who are not parties to, or
threatened to be made parties to, the proceedings.
Flo Fil's Bylaws, as well as specific indemnification agreements with Flo
Fil's directors and officers, provide that Flo Fil shall indemnify such persons
to the fullest extent permitted by law.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<C> <S>
*3.1 Articles of Incorporation of JTM Industries, Inc.
*3.2 By Laws of JTM Industries, Inc.
*3.3 Articles of Incorporation of KBK Enterprises, Inc.
*3.4 By Laws of KBK Enterprises, Inc.
*3.5 Articles of Incorporation of Pozzolanic Resources, Inc.
*3.6 By Laws of Pozzolanic Resources, Inc.
*3.7 Articles of Incorporation of Power Plant Aggregates of Iowa, Inc.
*3.8 By Laws of Power Plant Aggregates of Iowa, Inc.
*3.9 Articles of Incorporation of Michigan Ash Sales Company, d.b.a. U.S. Ash Company.
*3.10 By Laws of Michigan Ash Sales Company, d.b.a. U.S. Ash Company.
*3.11 Articles of Incorporation of Flo Fil Co., Inc.
*3.12 By Laws of Flo Fil Co., Inc.
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <S>
*3.13 Articles of Incorporation of U.S. Stabilization, Inc.
*3.14 By Laws of U.S. Stabilization, Inc.
*3.15 Articles of Incorporation of Fly Ash Products, Inc.
*3.16 By Laws of Fly Ash Products, Inc.
*4.1 Indenture, dated as of April 22, 1998, by and among JTM Industries, Inc., the
Subsidiary Guarantors and U.S. Bank National Association, as Trustee.
**5.1 Opinion and consent of Morgan, Lewis & Bockius LLP as to the legality of the
securities being registered.
**5.2 Opinion and consent of McNaul, Ebel, Nawrot, Helgren & Vance PLLC as to matters of
the laws of Washington.
**5.3 Opinion and consent of Heidman, Redmond, Fredregill, Patterson, Plaza & Dykstra
L.L.P. as to matters of the laws of Iowa.
**5.4 Opinion and consent of Braun Kendrick Finkbeiner P.L.C. as to matters of the laws of
Michigan.
**5.5 Opinion and consent of Bridges, Young, Matthews & Drake P.L.C. as to matters of the
laws of Arkansas.
*10.1 Purchase Agreement dated as of April 17, 1998 by and among JTM Industries, Inc., the
Subsidiary Guarantors and NationsBanc Montgomery Securities LLC and CIBC Oppenheimer
Corp.
*10.2 Registration Rights Agreement dated as of April 22, 1998, by and among JTM
Industries, Inc., the Subsidiary Guarantors and NationsBanc Montgomery Securities
LLC and CIBC Oppenheimer Corp.
**12.1 Statement re Computation of Ratio of Earnings to Fixed Charges.
*21.1 Subsidiaries of JTM Industries, Inc.
**23.1 Consent of Morgan, Lewis & Bockius LLP (contained in Exhibit 5.1).
**23.2 Consent of McNaul, Ebel, Nawrot, Helgren & Vance PLLC (contained in Exhibit 5.2).
**23.3 Consent of Heidman, Redmond, Fredregill, Patterson, Plaza & Dykstra L.L.P.
(contained in Exhibit 5.3).
**23.4 Consent of Braun Kendrick Finkbeiner P.L.C. (contained in Exhibit 5.4).
**23.5 Consent of Bridges, Young, Matthews & Drake P.L.C. (contained in Exhibit 5.5).
*23.8 Consent of Ernst & Young LLP.
*23.9 Consent of Coopers & Lybrand L.L.P.
**24 Powers of Attorney.
*25.1 Statement of Eligibility of U.S. Bank National Association, as Trustee, on Form T-1.
*99.1 Form of Letter of Transmittal respecting the exchange of the 10% Senior Subordinated
Notes due 2008 which have been registered under the United States Securities Act of
1933 for 10% Senior Subordinated Notes due 2008.
*99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
- ------------------------
* Filed herewith.
** To be filed by amendment.
II-5
<PAGE>
ITEM 22. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of a
registrant pursuant to the foregoing provisions, or otherwise, each of the
undersigned registrants has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by a
registrant of expenses incurred or paid by a director, officer or controlling
person of a registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, each of the undersigned
registrants will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(b) Each of the undersigned registrants hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11 or 13 of this Form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
(c) Each of the undersigned registrants hereby undertakes to supply by means
of a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1993, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Salt Lake City, State of Utah, on
June 5, 1998.
JTM INDUSTRIES, INC.
(Registrant)
By: /s/ R STEVE CREAMER
-----------------------------------------
R Steve Creamer
CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE
OFFICER AND DIRECTOR
Pursuant to the requirements of the Securities Act of 1993, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
NAME TITLE DATE
- ------------------------------ --------------------------- -------------------
Chairman of the Board,
/s/ R STEVE CREAMER Chief Executive Officer
- ------------------------------ and Director (Principal June 5, 1998
R Steve Creamer Executive Officer)
Chief Financial Officer and
/s/ J.I. EVEREST, II Assistant Secretary
- ------------------------------ (Principal Financial June 5, 1998
J.I. Everest, II Officer)
/s/ RAUL A. DEJU President, Chief Operating
- ------------------------------ Officer, and Director June 5, 1998
Raul A. Deju
/s/ JOSEPH M. SILVESTRI Director
- ------------------------------ June 5, 1998
Joseph M. Silvestri
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1993, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Salt Lake City, State of Utah, on
June 5, 1998.
POZZOLANIC RESOURCES, INC.
(Registrant)
By: /s/ R STEVE CREAMER
-----------------------------------------
R Steve Creamer
CHIEF EXECUTIVE OFFICER AND DIRECTOR
Pursuant to the requirements of the Securities Act of 1993, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
NAME TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ R STEVE CREAMER Director and Chief
- ------------------------------ Executive Officer June 5, 1998
R Steve Creamer
/s/ JOSEPH M. SILVESTRI Director
- ------------------------------ June 5, 1998
Joseph M. Silvestri
/s/ J.I. EVEREST, II Chief Financial Officer
- ------------------------------ June 5, 1998
J.I. Everest, II
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1993, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Salt Lake City, State of Utah, on
June 5, 1998.
POWER PLANT AGGREGATES OF IOWA, INC.
(Registrant)
By: /s/ R STEVE CREAMER
-----------------------------------------
R Steve Creamer
CHIEF EXECUTIVE OFFICER AND DIRECTOR
Pursuant to the requirements of the Securities Act of 1993, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
NAME TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ R STEVE CREAMER Director and Chief
- ------------------------------ Executive Officer June 5, 1998
R Steve Creamer
/s/ JOSEPH M. SILVESTRI Director
- ------------------------------ June 5, 1998
Joseph M. Silvestri
/s/ J.I. EVEREST, II Chief Financial Officer
- ------------------------------ June 5, 1998
J.I. Everest, II
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1993, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Salt Lake City, State of Utah, on
June 5, 1998.
MICHIGAN ASH SALES COMPANY,
D/B/A U.S. ASH COMPANY
(Registrant)
By: /s/ R STEVE CREAMER
-----------------------------------------
R Steve Creamer
CHIEF EXECUTIVE OFFICER AND DIRECTOR
Pursuant to the requirements of the Securities Act of 1993, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
NAME TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ R STEVE CREAMER Director and Chief
- ------------------------------ Executive Officer June 5, 1998
R Steve Creamer
/s/ JOSEPH M. SILVESTRI Director
- ------------------------------ June 5, 1998
Joseph M. Silvestri
/s/ J.I. EVEREST, II Chief Financial Officer
- ------------------------------ June 5, 1998
J.I. Everest, II
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1993, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Salt Lake City, State of Utah, on
June 5, 1998.
U.S. STABILIZATION, INC.
(Registrant)
By: /s/ R STEVE CREAMER
-----------------------------------------
R Steve Creamer
CHIEF EXECUTIVE OFFICER AND DIRECTOR
Pursuant to the requirements of the Securities Act of 1993, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
NAME TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ R STEVE CREAMER Director and Chief
- ------------------------------ Executive Officer June 5, 1998
R Steve Creamer
/s/ JOSEPH M. SILVESTRI Director
- ------------------------------ June 5, 1998
Joseph M. Silvestri
/s/ J.I. EVEREST, II Chief Financial Officer
- ------------------------------ June 5, 1998
J.I. Everest, II
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1993, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Salt Lake City, State of Utah, on
June 5, 1998.
FLO FIL CO., INC.
(Registrant)
By: /s/ R STEVE CREAMER
-----------------------------------------
R Steve Creamer
CHIEF EXECUTIVE OFFICER AND DIRECTOR
Pursuant to the requirements of the Securities Act of 1993, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
NAME TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ R STEVE CREAMER Director and Chief
- ------------------------------ Executive Officer June 5, 1998
R Steve Creamer
/s/ JOSEPH M. SILVESTRI Director
- ------------------------------ June 5, 1998
Joseph M. Silvestri
/s/ J.I. EVEREST, II Chief Financial Officer
- ------------------------------ June 5, 1998
J.I. Everest, II
II-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1993, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Salt Lake City, State of Utah, on
June 5, 1998.
FLY ASH PRODUCTS, INC.
(Registrant)
By: /s/ R STEVE CREAMER
-----------------------------------------
R Steve Creamer
CHIEF EXECUTIVE OFFICER AND DIRECTOR
Pursuant to the requirements of the Securities Act of 1993, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
NAME TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ R STEVE CREAMER Director and Chief
- ------------------------------ Executive Officer June 5, 1998
R Steve Creamer
/s/ JOSEPH M. SILVESTRI Director
- ------------------------------ June 5, 1998
Joseph M. Silvestri
/s/ J.I. EVEREST, II Chief Financial Officer
- ------------------------------ June 5, 1998
J.I. Everest, II
II-13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1993, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Salt Lake City, State of Utah, on
June 5, 1998.
KBK ENTERPRISES, INC.
(Registrant)
By: /s/ R STEVE CREAMER
-----------------------------------------
R Steve Creamer
CHIEF EXECUTIVE OFFICER AND DIRECTOR
Pursuant to the requirements of the Securities Act of 1993, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
NAME TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ R STEVE CREAMER Director and Chief
- ------------------------------ Executive Officer June 5, 1998
R Steve Creamer
/s/ JOSEPH M. SILVESTRI Director
- ------------------------------ June 5, 1998
Joseph M. Silvestri
/s/ J.I. EVEREST, II Chief Financial Officer
- ------------------------------ June 5, 1998
J.I. Everest, II
II-14
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS PAGE
- --------- ---------
<C> <S> <C>
*3.1 Articles of Incorporation of JTM Industries, Inc.
*3.2 By Laws of JTM Industries, Inc.
*3.3 Articles of Incorporation of KBK Enterprises, Inc.
*3.4 By Laws of KBK Enterprises, Inc.
*3.5 Articles of Incorporation of Pozzolanic Resources, Inc.
*3.6 By Laws of Pozzolanic Resources, Inc.
*3.7 Articles of Incorporation of Power Plant Aggregates of Iowa, Inc.
*3.8 By Laws of Power Plant Aggregates of Iowa, Inc.
*3.9 Articles of Incorporation of Michigan Ash Sales Company, d.b.a. U.S. Ash Company.
*3.10 By Laws of Michigan Ash Sales Company, d.b.a. U.S. Ash Company.
*3.11 Articles of Incorporation of Flo Fil Co., Inc.
*3.12 By Laws of Flo Fil Co., Inc.
*3.13 Articles of Incorporation of U.S. Stabilization, Inc.
*3.14 By Laws of U.S. Stabilization, Inc.
*3.15 Articles of Incorporation of Fly Ash Products, Inc.
*3.16 By Laws of Fly Ash Products, Inc.
*4.1 Indenture, dated as of April 22, 1998, by and among JTM Industries, Inc., the Subsidiary
Guarantors and U.S. Bank National Association, as Trustee.
**5.1 Opinion and consent of Morgan, Lewis & Bockius LLP as to the legality of the securities being
registered.
**5.2 Opinion and consent of McNaul, Ebel, Nawrot, Helgren & Vance PLLC as to matters of the laws of
Washington.
**5.3 Opinion and consent of Heidman, Redmond, Fredregill, Patterson, Plaza & Dykstra L.L.P. as to
matters of the laws of Iowa.
**5.4 Opinion and consent of Braun Kendrick Finkbeiner P.L.C. as to matters of the laws of Michigan.
**5.5 Opinion and consent of Bridges, Young, Matthews & Drake P.L.C. as to matters of the laws of
Arkansas.
*10.1 Purchase Agreement dated as of April 17, 1998 by and among JTM Industries, Inc., the Subsidiary
Guarantors and NationsBanc Montgomery Securities LLC and CIBC Oppenheimer Corp.
*10.2 Registration Rights Agreement dated as of April 22, 1998, by and among JTM Industries, Inc.,
the Subsidiary Guarantors and NationsBanc Montgomery Securities LLC and CIBC Oppenheimer
Corp.
*10.3 Purchase Agreement dated as of February 27, 1998 by and among JTM Industries, Inc., Pozzolanic
Resources, Inc. and Gerald Peabody, Penelope Peabody and Kokan Company Limited.
*10.4 Stock Purchase Agreement from Power Plant Aggregates of Iowa, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS PAGE
- --------- ---------
<C> <S> <C>
*10.5 Purchase Agreement dated as of March 1998 between JTM Industries, Inc. and Jack Wirt
*10.6 Purchase Agreement dated as of March 27, 1998, between JTM Industries, Inc., Donald A. Thomas,
Phyllis S. Thomas and Donald W. Birge.
**12.1 Statement re Computation of Ratio of Earnings to Fixed Charges.
*21.1 Subsidiaries of JTM Industries, Inc.
**23.1 Consent of Morgan, Lewis & Bockius LLP (contained in Exhibit 5.1).
**23.2 Consent of McNaul, Ebel, Nawrot, Helgren & Vance PLLC (contained in Exhibit 5.2).
**23.3 Consent of Heidman, Redmond, Fredregill, Patterson, Plaza & Dykstra L.L.P. (contained in
Exhibit 5.3).
**23.4 Consent of Braun Kendrick Finkbeiner P.L.C. (contained in Exhibit 5.4).
**23.5 Consent of Bridges, Young, Matthews & Drake P.L.C. (contained in Exhibit 5.5). Z
*23.8 Consent of Ernst & Young LLP
*23.9 Consent of Coopers & Lybrand L.L.P.
**24 Powers of Attorney.
*25.1 Statement of Eligibility of U.S. Bank National Association, as Trustee, on Form T-1.
*99.1 Form of Letter of Transmittal respecting the exchange of the 10% Senior Subordinated Notes due
2008 which have been registered under the United States Securities Act of 1933 for 10% Senior
Subordinated Notes due 2008.
*99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
- ------------------------
* Filed herewith.
** To be filed by amendment.
<PAGE>
Exhibit 3.1
ARTICLES OF INCORPORATION
OF
JTM INDUSTRIES, INC.
We, the undersigned natural persons of the age of eighteen years or more,
acting as incorporators of a corporation under the Texas Business Corporation
Act, do hereby adopt the following Articles of Incorporation for such
corporation:
ARTICLE ONE
The name of the corporation is JTM INDUSTRIES, INC.
ARTICLE TWO
The period of its duration is perpetual.
ARTICLE THREE
The purpose or purposes for which the corporation is organized are:
To own and hold stock and to own and manage real estate pursuant to the
provisions of Part Four, Texas Miscellaneous Corporation Laws Act and to engage
in the transaction of any or all lawful business for which corporations may be
incorporated under the Texas Business Corporation Act.
ARTICLE FOUR
1. The corporation shall be authorized to issue two (2) classes of stock:
class A voting common stock and class B nonvoting preferred stock.
2. The following terms shall have the following meanings:
A. "Class A Stock": Class A Voting Common Stock.
<PAGE>
B. "Class B Stock": Class B Nonvoting Preferred Stock.
3. CLASS A VOTING COMMON STOCK
A. Number of Shares. The aggregate number of shares of Class A Stock
that the corporation shall have authority to issue shall be one thousand (1,000)
shares with a par value of One ($1.00) Dollar per share.
B. Voting Rights. The holders of Class A Stock shall be entitled to
notice of all meetings of stockholders. The holders of Class A Stock shall vote
with regard to all matters subject to stockholder vote or approval and shall be
entitled to one vote per share.
C. Dividend Rights. No dividends shall be paid to the holders of
Class A Stock with respect to any fiscal year of the Corporation unless the
dividend preference of Class B Stock has been paid in full. After such dividend
preference has been paid in full, any additional dividend paid with respect to
such fiscal year shall be distributed in an equal amount per share to the
holders of Class A Stock.
D. Liquidation Rights. The holders of Class A Stock shall not
receive any distributions in liquidation of the Corporation unless the
liquidation preference of Class B Stock has been paid in full. After such
liquidation preference has been paid in full, the residual value of the
Corporation shall be distributed to an equal amount per share to the holders of
Class A Stock.
4. CLASS B NONVOTING PREFERRED STOCK
A. Number of Shares. The aggregate number of shares of Class B Stock
that the Corporation shall have the authority to issue shall be five hundred
thousand (500,000) shares with a par value of One ($1.00) Dollar per share.
-2-
<PAGE>
B. Voting Rights. The holders of Class B Stock shall not be entitled
to any voting rights. The holders of Class B Stock shall not be entitled to
notice of any meeting of stockholders and shall not be entitled to vote on any
question whatsoever that may be presented to and decided upon by the
stockholders. The face of each certificate of Class B Stock shall be plainly
marked "NON-VOTING."
C. Dividend Rights. The holders of Class B Stock shall be entitled
to receive dividends equal to ten (10%) percent of the par value of each share
of Class B Stock ($0.10 per share) in a fiscal year before any dividends may be
paid to the holders of Class A Stock with respect to such fiscal year. The
dividends on the Class B Stock shall be cumulative, so that if the Corporation
fails in any fiscal year to pay the total amount of such dividends on the issued
and outstanding Class B Stock, such deficiency in the dividends shall be fully
paid, but without interest, before any dividends shall be paid on or set apart
for the Class A Stock. Except as provided in the preceding sentence, the holders
of the Class B Stock shall not be entitled to participate in dividends in excess
of their dividend preference with respect to any fiscal year of the Corporation.
D. Liquidation Rights. The holders of the Class B Stock shall be
entitled to receive a liquidation preference equal to the sum of (i) One ($1.00)
Dollar per share, plus (ii) the amount of all unpaid accrued dividends thereon,
without interest, before any liquidation distribution may be made to the holders
of Class A Stock.
5. BOTH CLASSES OF STOCK
The following shall apply to both classes of stock: For purposes of
determining the respective rights of the holders of any class of Common Stock or
Preferred Stock in the
-3-
<PAGE>
Corporation, dividends declared, regardless of when actually paid, within one
hundred twenty (120) days after the end of a fiscal year shall be deemed to have
been made with respect to that fiscal year.
The Board of Directors of the Corporation shall, in their sole and
absolute discretion, determine (i) whether or not dividends shall be paid with
respect to any fiscal year, and (ii) the amount of any such dividends. The
respective rights of the holders of the various classes of stock with respect to
any such dividends shall be determined in accordance with the specific
preferences, rights and limitations described above.
Notwithstanding anything to the contrary above, the holders of any class
of stock shall be entitled to vote in those circumstances in which voting rights
must be granted to such stockholders pursuant to the provisions of the Texas
Miscellaneous Corporation Laws Act.
ARTICLE FIVE
The corporation will not commence business until it has received for the
issuance of its shares consideration of the value of $1,000.00, consisting of
money, labor done or property actually received.
ARTICLE SIX
The street address of its initial registered office is Republic National
Bank Building, c/o C T Corporation System, Dallas, Texas 75201, and the name of
its initial registered agent at such address is C T Corporation System.
ARTICLE SEVEN
The number of directors of the corporation may be fixed by the by-laws.
-4-
<PAGE>
The number of directors constituting the initial board of directors is
three (3), and the name and address of each person who is to serve as director
until the first annual meeting of the shareholders or until a successor is
elected and qualified are:
Barton Thomas 6600 Powers Ferry Rd., N.W.
Suite 200
Atlanta, GA 30339
Dennis Jones 6600 Powers Ferry Rd., N.W.
Suite 200
Atlanta, GA 30339
Luciano A. Marcus 5119 Wightman Court
Houston, Texas
ARTICLE EIGHT
No shareholder shall be entitled as a matter of right to subscribe for or
receive additional shares of any class of stock of the corporation, whether now
or hereafter authorized, or any bonds, debentures or other securities
convertible into stock, but such additional shares of stock or other securities
convertible into stock may be issued or disposed of by the board of directors to
such persons and on such terms as in its discretion it shall deem advisable.
ARTICLE NINE
No shareholder shall have the right to cumulative voting at election of
directors.
ARTICLE TEN
The names and addresses of the incorporators are:
G. F. Robinson 1820 First National Bank Tower
Atlanta, GA 30383
-5-
<PAGE>
K. L. Slyman 1820 First National Bank Tower
Atlanta, GA 30383
L. A. Cancro 1820 First National Bank Tower
Atlanta, GA 30383
IN WITNESS WHEREOF, we have hereunto set our hands, this day
of 19 .
------------------------------------
G. F. Robinson
------------------------------------
K. L. Slayman
------------------------------------
L. A. Cancro
-6-
<PAGE>
State of Georgia )
) ss:
County of Fulton )
I, Charles A. Coyle, a notary public do hereby certify that on this 11th
day of February, 19 , personally appeared before me, C. F. Robinson, K. L.
Slayman and L. A. Cancro, who each being by me first duly sworn, severally
declared that they are the persons who signed the foregoing document as
incorporators, and that the statements therein contained are true.
------------------------------------
Notary Public
(Notarial Seal)
<PAGE>
To the Secretary of State of the State of Texas:
C T Corporation System, as the registered agent for the domestic and
foreign corporations named on the attached list, submits the following statement
for the purpose of changing the registered office for such corporations, in the
State of Texas:
1. The name of the corporation is See attached list
-------------------------------------------
2. The post office address of its present registered office is
Republic National Bank Building, c/o C T Corporation System, Dallas, Texas
--------------------------------------------------------------------------
75201
-----
3. The post office address to which its registered office is to be changed is
1601 Elm Street, c/o C T Corporation System, Dallas, Texas 75201
--------------------------------------------------------------------------
4. The name of its present registered agent is C T CORPORATION SYSTEM
------------------------------
5. The name of its successor registered agent is C T CORPORATION SYSTEM
----------------------------
6. The post office address of its registered office and the post office
address of the business office of its registered agent, as changed, will
be identical.
7. Notice of this change of address has been given in writing to each
corporation named on the attached list 10 days prior to the date of filing
of this certificate.
Dated January 6 , 1985
--------------------------
<PAGE>
#07050
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
JTM INDUSTRIES, INC.
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, the undersigned corporation adopts the following Articles of
Amendment to its Articles of Incorporation:
ARTICLE ONE. The name of the corporation is JTM Industries, Inc.
ARTICLE TWO. The following amendment to the Articles of
Incorporation was adopted by the shareholders of the corporation on April 17,
1986. The amendment alters or changes Article Four of the original Articles of
Incorporation and the Article is hereby amended to read as follows:
ARTICLE FOUR
1. The corporation shall be authorized to issue three (3)
classes of stock: class A voting common stock, class B nonvoting
preferred stock and class c nonvoting common stock.
2. The following terms shall have the following meanings:
A. "Class A Stock": Class A Voting Common Stock.
B. "Class B Stock": Class B Nonvoting Preferred Stock.
C. "Class C Stock": Class C Nonvoting Common Stock.
3. CLASS A VOTING COMMON STOCK
A. Number of Shares. The aggregate number of shares of
Class A Stock that the Corporation shall have authority to
issue shall be
<PAGE>
two hundred thousand (200,000) shares with a par value of One
($.01) Cent per share.
B. Voting Rights. The holders of Class A Stock shall be
entitled to notice of all meetings of stockholders. The
holders of Class A Stock shall vote with regard to all matters
subject to stockholder vote or approval and shall be entitled
to one vote per share.
C. Dividend Rights. No dividends shall be paid to the
holders of Class A Stock with respect to any fiscal year of
the Corporation unless the dividend preference of Class B
Stock has been paid in full. After such dividend premium has
been paid in full, any additional dividend paid with respect
to such fiscal year shall be distributed in an equal amount
per share to the holders of Class A Stock and Class C Stock.
D. Liquidation Rights. The holders of Class A Stock
shall not receive any distributions in liquidation of the
Corporation unless the liquidation preference of Class B Stock
has been paid in full. After such liquidation preference has
been paid in full, the residual value of the Corporation shall
be distributed in an equal amount per share to the holders of
Class A Stock and Class C Stock.
4. CLASS B NONVOTING PREFERRED STOCK
A. Number of Shares. The aggregate number of shares of
Class B Stock that the Corporation shall have the authority to
issue shall be five hundred thousand (500,000) shares with a
par value of One ($1.00) Dollar per share.
B. No Voting Rights. The holders of Class B Stock shall
not be entitled to any voting rights. The holders of Class B
Stock shall be entitled to notice of any meeting of
stockholders and shall not be entitled to vote on any question
whatsoever that may be presented to and decided upon by the
stockholders. The face of each certificate of Class B Stock
shall be plainly marked "NON-VOTING."
C. Dividend Rights. The holders of Class B Stock shall
be entitled to receive dividends equal to ten (10%) percent of
the par value of each share of Class B Stock ($0.10 per share)
in a fiscal year before any dividends may be paid to the
holders of Class A Stock and Class C Stock with respect to
such fiscal year. The dividends on the Class B Stock shall be
cumulative, so that if the Corporation fails in any fiscal
year to pay the total amount of such dividends on the issued
and outstanding Class B
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<PAGE>
Stock, such deficiency in the dividends shall be fully paid,
but without interest, before any dividends shall be paid on or
set apart for the Class A Stock and Class C Stock. Except as
provided in the preceding sentence, the holders of the Class B
Stock shall not be entitled to participate in dividends in
excess of their dividend preference with respect to any fiscal
year of the Corporation.
D. Liquidation Rights. The holders of the Class B Stock
shall be entitled to receive a liquidation preference equal to
the sum of (i) One ($1.00) Dollar per share, plus (ii) the
amount of all unpaid accrued dividends thereon, without
interest, before any liquidation distribution may be made to
the holders of Class A Stock and Class C Stock.
5. CLASS C NONVOTING COMMON STOCK
A. Number of Shares. The aggregate number of shares of
Class C Stock that the Corporation shall have the authority to
issue shall be two hundred thousand (200,000) shares with a
par value of One ($0.01) Cent per share.
B. No Voting Rights. The holders of Class C Stock shall
not be entitled to any voting rights. The holders of Class C
Stock shall not be entitled to notice of any meeting of
stockholders and shall not be entitled to vote on any question
whatsoever that may presented to and decided upon by the
stockholders. The face of each certificate of Class C Stock
shall be plainly marked "NON-VOTING."
C. Dividend Rights. No dividends shall be paid to the
holders of Class C Stock with respect to any fiscal year of
the Corporation unless the dividend preference of Class B
Stock has been paid in full. After such dividend preference
has been paid in full, any additional dividend paid with
respect to such fiscal year shall be distributed in an equal
amount per share to the holders of Class C Stock and Class A
Stock.
D. Liquidation Rights. The holders of Class C Stock
shall not receive any distributions in liquidation of the
Corporation unless the liquidation preference of Class B Stock
has been paid in full. After such liquidation preference has
been paid in full, the residual value of the Corporation shall
be distributed in an equal amount per share to the holders of
Class C Stock and Class A Stock.
6. ALL CLASSES OF STOCK
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<PAGE>
The following shall apply to all classes of stock:
For purposes of determining the respective rights of the holders of
any class of common stock or preferred stock in the Corporation, dividends
declared, regardless of when actually paid, within one hundred twenty (120) days
after the end of a fiscal year shall be deemed to have been made with respect to
that fiscal year.
The Board of Directors of the Corporation shall, in its sole and
absolute discretion, determine (i) whether or not dividends shall be paid with
respect to any fiscal year, and (ii) the amount of any such dividends. The
respective rights of the holders of the various classes of stock with respect to
any such dividends shall be determined in accordance with the specific
preferences, rights and limitations described above.
Notwithstanding anything to the contrary above, the holders of any
class of stock shall be entitled to vote in those circumstances in which voting
rights must be granted to such stockholders pursuant to the provisions of the
Texas Miscellaneous Corporation Laws Act.
ARTICLE THREE. The number of shares of the Class A Stock of the
Corporation outstanding at the time of adoption of these Articles of Amendment
was one hundred seventeen (117) shares, and the number of such shares entitled
to vote thereon was one hundred seventeen (117) shares. The number of shares of
the Class B Stock of the Corporation outstanding at the time of such adoption
was two hundred sixty thousand (260,000), and the number of such shares entitled
to vote thereon was zero (0).
ARTICLE FOUR. The number of shares of Class A Stock voted for such
amendment was one hundred seventeen (117); and the number of such shares voted
against such amendment was zero (0).
ARTICLE FIVE. Pursuant to the above Articles, the presently issued and
outstanding Class A Stock shall be canceled and the issuance of new Class A
Stock shall be authorized. The exchange will be effected through a
recapitalization pursuant to Internal Revenue Code Section 368(a)(1)(E) in the
following manner:
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<PAGE>
A. Barton Thomas will exchange his 59 shares of Class A
Stock for 59,000 shares of new Class A Stock to be issued by
the Corporation.
B. Luciano A. Marcuz will exchange his 29 shares of
Class A Stock for 29,000 shares of new Class A Stock to be
issued by the Corporation.
C. Dennis Jones will exchange his 29 shares of Class A
Stock for 29,000 shares of new Class A Stock to be issued by
the Corporation.
ARTICLE SIX. The recapitalization provided in this Amendment will
effect changes in the amount of the Corporation's stated capital. The
Corporation's stated capital prior to the recapitalization exchanges totaled
$260,117 (.17 shares of Class A Stock issued and outstanding at $1.00 par value
per share and 260,000 shares of Class B Stock issued and outstanding at $1.00
par value per share). The Corporation's stated capital immediately following the
recapitalization exchange will total $261,170, consisting of: (i) stated capital
for Class A Stock - $1,170 (117,000 shares issued at $0.01 par value per share);
and (ii) stated capital for Class B Stock - $260,000 (260,000 shares issued at
$1.00 par value per share).
-5-
<PAGE>
IN WITNESS WHEREOF, JTM Industries, Inc. has caused these Articles of
Amendment to the Articles of Incorporation to be executed and its corporate seal
to be affixed and has caused the foregoing to be attested, all by its duly
authorized officers on this the 17th day of April, 1986.
JTM INDUSTRIES, INC.
By:
-------------------------------
Barton A. Thomas, President
Attest:
---------------------------
Marilyn Kinnear, Secretary
(CORPORATE SEAL)
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<PAGE>
#06990
JOINT CORPORATE ACTION BY THE
STOCKHOLDERS AND BOARD OF DIRECTORS OF
JTM INDUSTRIES, INC.
The undersigned, being all the Stockholders and Directors of JTM
INDUSTRIES, INC., a Texas corporation (the "Corporation"), pursuant to Section
9.10A and 9.10B of the Texas Business Corporation Act and the By-laws of the
Corporation, do hereby waive any notice requirements and agree to, consent to,
adopt and order the following Joint Corporate Action without the necessity of
formal or informal meetings.
The following resolutions are hereby adopted:
RESOLVED, that all the Shareholders entitled to vote on the matter
contained herein and the Directors of the Corporation hereby
unanimously adopt the proposed Amendment to the Articles of
Incorporation of the Corporation, attached hereto as Exhibit "A" and
made a part hereof, which proposed amendment (i) increases the
number of shares of the Class A Voting Common Stock that the
Corporation will have the authority to issue to two hundred thousand
(200,000) shares with a par value of one ($.01) cent per share; (ii)
creates a third class of stock, designated as Class C Nonvoting
Common Stock, with a par value of one ($.01) cent per share and
gives the Corporation the authority to issue two hundred thousand
(200,000) shares of such stock; and (iii) provides for the exchange
by each shareholder of the Class A Voting Common Stock of the
Corporation of each share of such stock so held by such shareholder
for one thousand (1,000) shares of the Class A Voting Common Stock
of the Corporation; and it was
FURTHER RESOLVED, that the officers of the Corporation shall have
the authority to issue the share certificates necessary to reflect
the exchange of Class A Voting Common Stock referred to above; and
it was
FINALLY RESOLVED, that by this Joint Corporate Action the
Shareholders and Directors of the Corporation hereby authorize the
officers of the Corporation to execute the Amendment to the Articles
of Incorporation of the Corporation described hereinabove with such
changes as may be approved by the President of the Corporation.
<PAGE>
The Secretary of the Corporation is hereby directed to file this Joint Corporate
Action in the Minute Book of the Corporation.
IN WITNESS WHEREOF, the undersigned Shareholders and Directors of
the Corporation do hereby execute the foregoing Joint Corporate Action this 17th
day of April, 1986, for the purpose of giving their consent hereto.
- -------------------------------------
BARTON A. THOMAS,
Shareholder and Director
- -------------------------------------
DENNIS A. JONES,
Shareholder and Director
- -------------------------------------
LUCIANO A. MARCUZ,
Shareholder and Director
- -------------------------------------
ROBERT B. GOLDBERG, Director
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<PAGE>
Exhibit 3.2
BY-LAWS
OF
JTM INDUSTRIES, INC.
ARTICLE I
OFFICES
Section 1.1 Registered Office and Agent. The corporation shall maintain a
registered office and shall have a registered agent whose business office is
identical with such registered office.
Section 1.2 Other Offices. The corporation may have offices at such place
or places, within or without the State of Texas, as the Board of Directors may,
from time to time, appoint or as the business of the corporation may require or
make desirable.
ARTICLE II
CAPITAL STOCK
Section 2.1 Issuance and Notice. Certificates of stock shall be numbered
consecutively in the order in which they are issued. They shall be signed by the
President and Secretary and the seal of the corporation shall be affixed
thereto. In an appropriate place in the corporate records there shall be entered
the name of the person owning the shares, the number of shares and the date of
issue. Certificates of stock exchanged or returned shall be canceled by the
Secretary and placed in the corporate records. Facsimile signatures may be
utilized in accordance with Section 2.2 of this Article.
<PAGE>
Section 2.2 Transfer Agents and Registrars. The Board of Directors of the
corporation may appoint a transfer agent or agents and a registrar or registrars
of transfer (other than the corporation itself or an employee thereof) for the
issuance of shares of stock of the corporation and may require that all stock
certificates bear the signature of such transfer agent or registrar. In the
event such a transfer agent or registrar is thus appointed, any share
certificate may be signed by the facsimile of the signature of either or both of
the President and Secretary printed thereon. If the same is countersigned by the
transfer agent of the corporation, the certificates bearing the facsimile of the
signatures of the President and Secretary shall be valid in all respects as if
such person or persons were still in office even though such person or persons
shall have died or otherwise ceased to be officers.
Section 2.3 Transfer. Upon the surrender to the corporation or to the
transfer agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of assignment of authority to transfer, it shall
be the duty of the corporation to issue a certificate to the person entitled
thereto, to cancel the surrendered certificate and to record the transaction
upon its books.
Section 2.4 Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation that is alleged to have been
lost or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost or destroyed
certificate or certificates, or his legal representative, to (i) advertise the
same in such manner as it shall require, and/or (ii) give the corporation a bond
in such sum as it may direct as indemnity against any
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<PAGE>
claim that may be made against the corporation with respect to the certificate
alleged to have been lost or destroyed.
Section 2.5 Voting. The holders of the common stock shall be entitled to
one vote for each share of stock standing in their name. The holders of the
preferred stock shall not be entitled to vote on any question whatsoever that
may be presented to or decided upon by the Shareholders.
ARTICLE III
SHAREHOLDERS' MEETING
Section 3.1 Place of Meetings. All meetings of the Shareholders shall be
held at the registered office of the corporation or at such other place, either
within or without the State of Texas, as the Board of Directors or the
Shareholders may, from time to time, elect.
Section 3.2 Annual Meeting. An annual meeting of the common stock
Shareholders shall be held each year at 11:00 a.m. on the last Monday of the
last month in the fiscal year of the corporation. If such date is a legal
holiday, then the meeting shall be held at 11:00 a.m. on the next regular
business day following the legal holiday or at such other date and time as shall
be designated, from time to time, by the Board of Directors and stated in the
notice of the meeting. If an annual meeting has not been called and held within
six months after the time designated, any common stock Shareholder may call such
meeting.
Section 3.3 Special Meetings. Special meetings of the common stock
Shareholders may be called at any time by (i) the President, (ii) a majority of
the Board of Directors, or (iii) the
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<PAGE>
holder or holders of one-third or more of the capital stock of the corporation
outstanding and entitled to vote.
Section 3.4 Notice of Meeting. Written notice stating the place, day and
hour of the meeting, and, in the case of a special meeting, the purpose or
purposes for which the meeting is called, shall be given not less than ten nor
more than fifty days before the date of the meeting, either by hand or by
first-class mail, to each Shareholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail with first-class postage thereon, prepaid and
addressed to the Shareholder at his address as it appears on the stock transfer
books of the corporation.
Section 3.5 Waiver of Notice. Notice of a meeting need not be given to any
Shareholder who signs a waiver of notice, in person or by proxy, either before
or after the meeting; and a Shareholder's waiver shall be deemed the equivalent
of giving proper notice. Attendant of a Shareholder at a meeting, either in
person or by proxy, shall by itself constitute a waiver of notice and a waiver
of any and all objections to the time or place of the meeting or the manner in
which it has been called or convened, unless a Shareholder attends a meeting
solely for the purpose of stating, at the beginning of the meeting, any such
objection or objections to the transaction of business. Unless otherwise
specified herein, neither the business transacted nor the purpose of the meeting
need be specified in the waiver.
Section 3.6 Quorum. The majority of the shares entitled to vote,
represented in person or by proxy, shall constitute a quorum at any meeting of
Shareholders. If a quorum is present, the affirmative vote of the majority of
shares represented at the meeting and entitled to vote on the subject matter
shall be the act of the Shareholders. When a quorum is once present to
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<PAGE>
organize a meeting, the Shareholders present may continue to do business at the
meeting until adjournment even though enough Shareholders withdraw to leave less
than a quorum.
Section 3.7 Adjournment. Any meeting of the Shareholders may be adjourned
by the holders of a majority of the voting shares represented at a meeting,
whether or not a quorum is present. Notice of the adjourned meeting or of the
business to be transacted at such meeting shall not be necessary, provided the
time and place to which the meeting is adjourned are announced at the meeting at
which the adjournment is taken. At an adjourned meeting at which a quorum is
present or represented, any business may be transacted which could have been
transacted at the meeting originally called.
Section 3.8 Voting Rights. Each Shareholder shall be entitled at each
Shareholders' meeting to one vote for each share of the capital stock having
voting power held by such Shareholder.
Section 3.9 Proxies. A Shareholder entitled to vote may vote in person or
by proxy executed in writing by the Shareholder or by his attorney-in-fact. A
proxy shall not be valid after eleven months from the date of its execution
unless a longer period is expressly stated in such proxy.
Section 3.10 Action by Consent of Shareholders. Any action required or
permitted to be taken at a meeting of the Shareholders may be taken without a
meeting if a written consent setting forth the action shall be signed by all of
the Shareholders entitled to vote with respect to the subject matter thereof.
Any such consent shall be filed with the Secretary of the corporation and shall
have the same force and effect as a unanimous vote of the Shareholders.
-5-
<PAGE>
ARTICLE IV
DIRECTORS
Section 4.1 Management of Business. Subject to these by-laws or any lawful
agreement between the Shareholders, the full and entire management of the
affairs and business of the corporation shall be vested in the Board of
Directors which shall have and which may exercise all of the powers that may be
exercised or performed by the corporation.
Section 4.2 Number, Qualification and Term of Office. The business and
affairs of the corporation shall be managed by a Board of Directors which shall
consist of not less than three (3) nor more than nine (9) members unless the
number of Shareholders shall be less than three (3). In the event there shall be
less than three (3) Shareholders, the minimum number of the Board of Directors
may equal the number of Shareholders. Each member of the Board of Directors of
the corporation shall be elected by the affirmative vote of a majority of the
voting shares represented at the meeting at which such election is held. None of
the Directors need be a resident of the State of Texas or hold shares of stock
in the corporation. The Directors shall be elected at an annual meeting of the
Shareholders and shall serve for a term of one (1) year or until their
successors are elected and qualified.
Section 4.3 Vacancies. The Directors may fill the place of any Director
which may become vacant prior to the expiration of his term, such appointment by
the Directors to continue until the expiration of the term of the Director whose
place has become vacant.
Section 4.4 Compensation. For their services as Directors, the Directors
may receive a fixed sum salary and reimbursement of expenses of attendance at
each meeting of the Board in
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<PAGE>
accordance with directions from the Shareholders at a duly constituted meeting
of the Shareholders. A Director may serve the corporation in a capacity other
than that of Director and receive compensation for the services rendered in such
other capacity.
ARTICLE V
DIRECTORS' MEETINGS
Section 5.1 Place of Meetings. The meetings of the Board of Directors may
be held at the registered office of the corporation or at any place, within or
without the State of Texas, which a majority of the Board of Directors may, from
time to time, designate by resolution.
Section 5.2 Annual Meeting. The Board of Directors shall meet each year
immediately following the annual meeting of the Shareholders at the place such
Shareholders' meeting was held for the purpose of electing officers and for the
consideration of other business.
Section 5.3 Special Meetings. Special meetings of the Board of Directors
may be called at any time by (i) the President, (ii) any two Directors or (iii)
the sole Director in the event there shall be only one Director.
Section 5.4 Notice of Meeting. Notice of the annual meeting of the Board
of Directors need not be given. Written notice of each special meeting setting
forth the time and place of the meeting shall be given to each Director at least
24 hours before the meeting. This notice may be given either by hand or by
sending a copy of the notice through the United States mail or by telegram,
charges prepaid, to the address of each Director.
Section 5.5 Waiver of Notice. A Director may waive in writing notice of a
special meeting of the Board, either before or after the meeting, and his waiver
shall be deemed the
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<PAGE>
equivalent of giving notice. Attendance of a Director at a meeting shall
constitute a waiver of notice of that meeting unless he attends for the express
purpose of objecting to the transaction of business on the grounds that the
meeting has not been lawfully called or convened.
Section 5.6 Quorum. At meetings of the Board of Directors, a majority of
the Directors shall constitute a quorum for the transaction of business or in
the event that the minimum number of Directors shall be less than three (3),
then the presence of all the Directors shall be necessary to constitute a
quorum. If a quorum is present, the acts of a majority of Directors in
attendance shall be the acts of the Board.
Section 5.7 Adjournment. A meeting of the Board of Directors may be
adjourned. Notice of the time and the place of the adjourned meeting and of the
business to be transacted thereat, other than by announcement at the meeting at
which the adjournment is taken, shall not be necessary. At an adjourned meeting
at which a quorum is present, any business may be transacted which could have
been transacted at the meeting originally called.
Section 5.8 Action by Consent. If all the Directors, severally or
collectively, consent in writing to any action taken or to be taken by the
corporation and the writing or writings evidencing their consent are filed with
the Secretary of the corporation, the action shall be as valid as though it had
been authorized at a meeting of the Board of Directors.
ARTICLE VI
OFFICERS
Section 6.1 Officers. The officers of the corporation shall consist of a
President, Secretary and Treasurer. Upon action by the Board of Directors, the
officers of the corporation
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<PAGE>
may be extended to constitute, in addition to the President, Secretary and
Treasurer, a Vice President or Vice Presidents. The officers shall be elected by
and shall serve at the pleasure of the Board of Directors.
Section 6.2 President. The President shall be the chief executive officer
of the corporation and shall have the responsibility for the general supervision
of the business affairs of the corporation. He shall be responsible for the
administration of the corporation, including general supervision of the policies
of the corporation, general and active management of the financial affairs of
the corporation and shall execute bonds, mortgages or other contracts under the
seal of the corporation pursuant to authority which may be general authority
from the Board of Directors. He shall preside at all meetings of the
Shareholders and Directors (except when there is a separately elected Chairman
of the Board) and discharge the duties of a presiding officer. He shall present
at each annual meeting of the Shareholders a report of the business of the
corporation for the preceding fiscal year and shall perform whatever other
duties the Board of Directors may from time to time prescribe.
Section 6.3 Secretary. The Secretary shall (i) keep minutes of all
meetings of the Shareholders and Directors, (ii) have charge of the minute
books, stock books and seal of the corporation, and (iii) perform such other
duties and have such other powers as may, from time to time, be delegated to him
by the President or the Board of Directors.
Section 6.4 Treasurer. The Treasurer shall be charged with the management
of the financial affairs of the corporation and shall have the power to
recommend action concerning the corporation's affairs to the President.
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<PAGE>
Section 6.5 Assistant Secretary and Assistant Treasurer. Assistants to the
Secretary and Treasurer may be appointed and shall have such duties as shall be
delegated to them by the President or the Board of Directors.
Section 6.6 Vice Presidents. In the absence or disability of the
President, the Vice President or Vice Presidents shall perform the duties and
exercise the powers of the President. They shall perform such other duties and
have such other powers as the President or the Board of Directors may, from time
to time, prescribe. The Board of Directors may designate one or more Vice
Presidents and may specify the order of seniority of Vice Presidents. The duties
and powers of the President shall pass to the Vice Presidents in such specified
order of seniority.
Section 6.7 Vacancies. When a vacancy occurs in one of the executive
offices by death, resignation or otherwise, it shall be filled by the Board of
Directors. The officer so elected shall hold office until his successor is
chosen and qualified.
Section 6.8 Compensation. The Board of Directors shall prescribe or fix
the salaries, bonuses, pensions, benefits under pension plans and profit sharing
plans, stock option plans and all other plans, benefits and compensation to be
paid or allowed to or in respect of (i) all officers and any or all employees of
the corporation, including officers and employees who may also be Directors of
the corporation and (ii) the Directors of the corporation, as such. Directors of
the corporation shall not be disqualified from voting on their own or any other
person's plan, benefit or compensation to be paid by the corporation merely
because they or such other person is a Director or an officer or an employee of
the corporation. The Board of Directors may delegate these functions to any
officer not a Director except those determinations involving an officer or
Director.
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<PAGE>
ARTICLE VII
SEAL
Section 7.1 Seal. The seal of the corporation shall be in such form as the
Board of Directors may, from time to time, determine. In the event it is
inconvenient to use such a seal at any time, the signature of the corporation
followed by the words "Corporate Seal" enclosed in parentheses or scroll shall
be deemed the seal of the corporation. The seal shall be in the custody of the
Secretary and affixed by him or any Assistant Secretary on the certificates of
stock and such other papers as may be directed by law, by these by-laws or by
the President or Board of Directors.
ARTICLE VIII
AMENDMENTS
Section 8.1 Amendments. These by-laws may be amended at any meeting of the
Board of Directors by the affirmative vote of a majority of the Directors,
except as prohibited by law.
ARTICLE IX
INDEMNIFICATION
Section 9.1 Circumstances for Claim of Indemnification. Any person who was
or is a party to, or is threatened to be made a party to, any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by the
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<PAGE>
corporation) by reason of the fact that he or she is or was a director, officer,
employee or agent of this corporation, shall be indemnified by this corporation,
against all expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him or her in connection
with such action, suit or proceeding if he or she acted in a manner reasonably
believed by such person to be in or not opposed to the best interests of this
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe that his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in a manner which he or she reasonably
believed to be in or not opposed to the best interests of the corporation and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
Section 9.2 Determination of Right to Indemnification. Determination of
the right to indemnification and the amount thereof may be made, at the option
of the person to be indemnified, pursuant to procedure set forth from time to
time in the by-laws or by any of the following procedures: (i) order of the
court or administrative body or agency having jurisdiction of the action, suit
or proceeding, (ii) resolution adopted by a majority of a quorum of the Board of
Directors of the corporation without counting in such majority or quorum any
Directors who have incurred expenses in connection with such action, suit or
proceeding, (iii) resolution adopted by a majority of a quorum of the
Shareholders entitled to vote at any meeting, or (iv) order of any court having
jurisdiction over the corporation. Any such determination that a payment by way
of indemnity should be made shall be binding upon the corporation. Such right
-12-
<PAGE>
of indemnification shall not be exclusive of any other right which such
Directors, officers and employees of the corporation and the other persons above
mentioned may have or hereafter acquire and, without limiting the generality of
such statement, they shall be entitled to their respective rights of
indemnification or reimbursement under any by-laws, agreement or vote of the
Shareholders, their rights under this Article being cumulative. The provisions
of this Article shall apply to any member of any committee appointed by the
Board of Directors as fully as though such person had been a Director, officer
or employee of the corporation.
Section 9.3 Payment During Pendency of Action. A disinterested majority of
the Board of Directors of this corporation or a majority of a quorum of the
Shareholders entitled to vote at a meeting shall be authorized to pay to any
person entitled to indemnification under this Article all actual expenses
incurred in connection with such action, suit or proceeding during the pendency
thereof.
Section 9.4 Intent. It is the intention of this corporation that this
Article of the by-laws of this corporation and the indemnification hereunder
shall extend to the maximum indemnification possible under the laws of the State
of Texas and if one or more words, phrases, clauses, sentences or sections of
this Article should be held unenforceable for any reason, all of the remaining
portions of this Article shall remain in full force and effect.
ARTICLE X
DEALINGS
Section 10.1 Related Transactions. No contract or other transaction
between this corporation and any other firm, association or corporation shall be
affected or invalidated by the
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<PAGE>
fact that any of the members of the Board of Directors of this corporation are
interested in or are members, shareholders, governors or directors of such firm,
association or corporation; and no contract, act or transaction of this
corporation with any individual, firm, association or corporation shall be
affected or invalidated by the fact that any of the members of the Board of
Directors of this corporation are parties to or interested in such contract, act
or transaction or are in any way connected with such individual, firm,
association or corporation. Each and every individual who may become a member of
the Board of Directors of this corporation is hereby relieved from any liability
that might otherwise exist from contracting with this corporation for the
benefit of himself or herself or any firm, association or corporation in which
he or she may in any way be interested. Notwithstanding the above, the
provisions of this Section 10.1 shall be applicable only in the absence of fraud
and only where the interest in such transaction of an interested party has been
disclosed and the interested party, if a Director, has abstained from a vote
thereon.
ARTICLE XI
DIVIDENDS AND RESERVES
Section 11.1 Dividends. The Board of Directors of the corporation may from
time to time declare, and in such event the corporation shall pay, dividends on
the corporation's outstanding shares in cash, property, or the corporation's own
shares, except when the corporation is insolvent or when the declaration or
payment thereof would be contrary to any restrictions contained in the Articles
of Incorporation and subject to the following provisions: dividends may be
declared and paid in cash or property only out of the unreserved and
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<PAGE>
unrestricted earned surplus of the corporation or out of the unreserved and
unrestricted net earnings of the current fiscal year or the next preceding
fiscal year.
Section 11.2 Reserves. Before payment of any dividend, there may be set
aside out of any funds of the corporation available for dividends such sum or
sums as the Directors, from time to time, in their absolute discretion, think
proper as a reserve fund to meet contingencies or for equalizing dividends or
for repairing or maintaining any property of the corporation or for such other
purpose as the Directors shall think conducive to the interest of the
corporation, and the Directors may modify or abolish any such reserve in the
manner by which it was created.
ARTICLE XII
REIMBURSEMENT
Section 12.1 Disallowed Corporate Deductions. Any payments made to an
officer of the corporation such as a salary, commission, bonus, interest, rent
or entertainment expense incurred by him, which shall be disallowed in whole or
in part as a deductible expense by the Internal Revenue Service, shall be
reimbursed by such officer to the corporation to the full extent of such
disallowance. It shall be the duty of the Directors, as a Board, to enforce
payment of each such amount disallowed. In lieu of payment by the officer,
subject to the determination of the Directors, proportionate amounts may be
withheld from his future compensation payments until the amount owed to the
corporation has been recovered.
I, Michael J. Gross, Secretary of JTM Industries, Inc. formed and existing
under the laws of the State of Texas, do hereby certify that the foregoing is a
true and complete copy of the by-
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<PAGE>
laws of this corporation as submitted to and adopted as the by-laws of this
corporation by its Board of Directors on the 27th day of February, 1981.
IN WITNESS WHEREOF, I have hereunder subscribed my name and affixed the
seal of the corporation, this 27th day of February, 1981.
---------------------------------
Michael J. Gross, Secretary
(CORPORATE SEAL)
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<PAGE>
Exhibit 3.3
COMMONWEALTH OF PENNSYLVANIA
DEPARTMENT OF STATE
April 21, 1998
TO ALL WHOM THESE PRESENTS SHALL COME, GREETING:
K B K ENTERPRISES, INC.
I, Yvette Kane, Secretary of the Commonwealth of Pennsylvania do hereby
certify that the foregoing and annexed is a true and correct photocopy of
Articles of Incorporation and all Amendments.
which appear of record in this department.
IN TESTIMONY WHEREOF, I have
hereunto set my hand and caused
the Seal of the Secretary's
Office to be affixed, the day
and year above written.
------------------------------
Secretary of the Commonwealth
<PAGE>
ARTICLES OF INCORPORATION
COMMONWEALTH OF PENNSYLVANIA
DEPARTMENT OF STATE - CORPORATION BUREAU
K B K Enterprises, Inc.
7295 Old Berwick Road
Bloomsburg, PA 17815
(Columbia County)
EXPLAIN THE PURPOSE OR PURPOSES OF THE CORPORATION
The corporation shall have unlimited power to engage in and to do any lawful act
concerning any or all lawful business for which corporations may be incorporated
under the Pennsylvania Business Corporation Law of 1933, as amended.
The Aggregate Number Shares, Classes of Shares and Par Value of Shares Which the
Corporation Shall have Authority to have:
040 Number and Claim of Shares - 20,000 shares - no par value
042 Total Authorized Capital - $300.00
031 Terms of Enterprise - Perpetual
The Name and Address of Each Incorporator, and the Number and Class of Shares
Subscribed to by each Incorporator:
Stephen T. Benza - 150 shares - no par value
14 Ivey Court, R.D. #7
Bethlehem, PA 18015
James W. Knorr - 150 shares - no par value
7295 Old Berwick Road
Bloomsburg, PA 17815
Microfilm Number: 8343 908
<PAGE>
COMMONWEALTH OF PENNSYLVANIA 8343 909
Department of State
CERTIFICATE OF INCORPORATION
Office of the Secretary of the Commonwealth to All to Whom These Presents
Shall Come, Greeting:
WHEREAS, under the provisions of the Laws of the Commonwealth, the
Secretary of the Commonwealth is authorized and required to issue a "Certificate
of Incorporation" evidencing the incorporation of an entity.
WHEREAS, the stipulations and conditions of the Law have been fully
complied with by
K B K ENTERPRISES, INC.
THEREFORE, KNOW YE, that subject to the Constitution of this Commonwealth, and
under the authority of the Laws thereof, I do by these presents, which I have
caused to be sealed with the Great Seal of the Commonwealth, declare and certify
the creation, erection and incorporation of the above in deed and in law by the
name chosen hereinbefore specified.
Such corporation shall have and enjoy and shall be subject too all the
powers, duties, requirements, and restrictions, specified and enjoined in and by
the applicable laws of this Commonwealth.
GIVEN under my Hand and the Great Seal
of the Commonwealth, at the City
of Harrisburg, this 15th day of
July in the year of our Lord one
thousand nine hundred and
eighty-three and of the
Commonwealth the two hundred and
eighth.
------------------------------
Secretary of the Commonwealth
HUMMEL JAMES & MIHALIK ESQS
27 EAST MAIN STREET
BLOOMSBURG, PA 17815
<PAGE>
COMMONWEALTH OF PENNSYLVANIA 84091707
DEPARTMENT OF STATE
CORPORATION BUREAU
In compliance with the requirements of section 806 of the Business
Corporation Law, act of May 5, 1933 of L.________ P.S. ss.18061, the undersigned
corporation, desiring to amend its Articles does hereby certify that:
1. The name of the corporation is:
KBK Enterprises, Inc.
2. The location of its registered office __________ Commonwealth is the
Department of State is hereby authorized to correct the following statement to
conform to the records of the Department:
7295 Old Berwick Road
Bloosmburg, Pennsylvania 17815
3. The statute by or under which it was incorporated is:
15 P.S. 7001, as amended, Act of May 5, 1933, P.L. 364, as amended.
4. The date of its incorporation is: July 15, 1983.
5. (Check and if appropriate, complete one of the following):
|_| The meeting of the shareholders of the corporation at which the
amendment was adopted was held at the time and place and pursuant to the kind
and period of notice herein stated.
Time: The ___________ day of ______________________, 19__
Place:____________________________________________________
Kind and period of notice:________________________________
|X| The amendment was adopted by a consent in writing, setting forth the
action so taken, signed by all of the shareholders entitled to vote thereon and
filed with the Secretary of the corporation.
6. At the time of the action of shareholders:
(a) The total number of shares outstanding was: Three hundred (300);
(b) The number of shares entitled to vote was: Three hundred (300).
7. In the actual in the shareholders:
(a) The number of shares voted in favor of
Three hundred (300)
(b) The number of shares voted agtainst the amendment was: 0.
<PAGE>
8. The amendment adopted by the shareholders set forth in full is as follows:
RESOLVED, that the Articles of Incorporation be amended to show that the
capitalization of said corporation and the number of shares authorized to
be issued read as follows: 20,000 shares of common stock having a par
value of $1.00 each resulting in an authorized capital of $20,000.00.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these
Articles of Amendment to be signed by a duly authorized officer and its
corporate seal, duly attested by another such officer, to be hereunto afixed
this _________________ day of _________________,1984.
KBK ENTERPRISES, INC.
---------------------------
(Name of Corporation)
By:
----------------------------
James W. Knorr
Vice-President
Attest:
- ----------------------------
Stephen T. Benza
Secretary
INSTRUCTIONS FOR COMPLETION OF FORM
A. Any necessary copies of Form DSCB:17.2 (Consent to Appropriation of
Name) or Form DSCB:17.3 (Consent to Use of Similar Name) shall
accompany Articles of Amendment effecting a change of name.
B. Any necessary governmental approvals shall accompany this form.
C. Where action is taken by partial written consent pursuant to the
Articles, the second alternate of Paragraph 5 should be modified
accordingly.
D. If the shares of any class were entitled to vote as a class, the
number of shares of each class so entitled and the number of shares
of all other classes entitled to vote should be set forth in
Paragraph G(b).
E. If the shares of any class were entitled to vote as a class, the
number of shares of such class and the______________________________
set forth in Paragraphs 7(a) and 7(b).
F. BCL ss. 807 (15 P.S. ss.1807) requires that the corporation shall
advertise its intention to file or the filing of Articles of
Amendment. Proofs of publication of such advertising should not be
delivered to the Department, but should be filed with the minutes of
the corporation.
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<PAGE>
84091709
COMMONWEALTH OF PENNSYLVANIA
Department of State
To All to Whom These Presents Shall Come, Greeting:
WHEREAS, in and by Article VIII of the Business Corporation Law, approved the
fifth day of May, Anno Domini one thousand nine hundred and thirty-three, P.I.
364, as amended, the Department of State is authorized and required to issue a
CERTIFICATE OF AMENDMENT
evidencing the amendment of the Articles of Incorporation of a business
corporation organized under or subject to the provisions of that Law, and
WHEREAS, the stipulations and conditions of that Law pertaining to the amendment
of Articles of Incorporation have been fully complied with by
KBK Enterprises, Inc.
THEREFORE, KNOW YE, that subject to the Constitution of this Commonwealth, and
under the authority of the Business Corporation Law, I do by these presents,
which I have caused to be sealed with the Great Seal of the Commonwealth, extend
the rights and powers of the corporation named above, in accordance with the
terms and provisions of the Articles of Amendment presented by it to the
Department of State, with full power and authority to use and enjoy such rights
and powers, subject to all the provisions and restrictions of the Business
Corporation Law and all other applicable laws of this Commonwealth.
GIVEN under my Hand and the Great Seal
of the Commonwealth, at the City
of Harrisburg, this 2nd day of
February in the year of our Lord
one thousand nine hundred and
eighty-four and of the
Commonwealth the two hundred and
eighth.
------------------------------
Secretary of the Commonwealth
<PAGE>
CHANGE OF REGISTERED OFFICE
Commonwealth of Pennsylvania
Department of State-Corporation Bureau
308 North Office Bldg.
Harrisburg, PA 17120
|X| Domestic Business Corporation
|_| Foreign Business Corporation
|_| Domestic Non-Profit Corporation
|_| Foreign Non-Profit Corporation
Fee $40.00
1. Name of Corporation - KBK Enterprises, Inc.
2. Address of its present registered office in this Commonwealth is (the
Department of State is hereby authorized to correct the following statement to
conform to the records of the Dept).
7295 Old Berwick Road
Bloomburg, PA 17815
(Columbia County)
3. Address to which the registered office in this Commonwealth is to be
changed:
c/o C T Corporation System
123 South Broad Street
Philadelphia, PA 19109
(Philadelphia County)
4. (Check, and if appropriate, complete one of the following):
|_| Such change was authorized by resolution duly adopted by the Board
of Directors of the corporation.
|X| The procedure whereby such change was authorized was:
Directive received from CEO
IN TESTIMONY WHEREOF, the undersigned corporation has caused this statement to
be signed by a duly authorized officer, and its corporation seal, duly attested
by another such officer, to be hereunto affixed, this 26th day of July, 1989.
By KBK Enterprises, Inc.
BY:
---------------------------
Vice-President
ATTEST:
- -----------------------------
Secretary
<PAGE>
STATEMENT OF CHANGE OF REGISTERED OFFICE BY AGENT
In compliance with the requirements of with the requirements of 15 Pa.
C.S. ss. 108 (relating to change in location or status of registered office
provided by agent), the undersigned person who maintains the registered office
of an association and who desires to change the following with respect to such
agency hereby states that:
1. The name of the association represented by the undersigned person is KBK
ENTERPRISES, INC.
2. The address of the present registered office in this Commonwealth of the
above named association is:
123 South Broad Street
Philadelphia, PA 19109
(Philadelphia County)
3. (If the registered office address is to be changed, complete the
following):
The address in the same county to which the registered office in this
Commonwealth of the above-named association is to be changed is:
1635 Market Street
Philadelphia, PA 19103
(Philadelphia County)
4. The name of the person in care of the foregoing office is: CT CORPORATION
SYSTEM.
The person named immediately above in this paragraph has been designated
in fact as the agent in care of the registered office in the Commonwealth
of Pennsylvania of the corporation named in paragraph 2 of this statement.
5. (Check one or more of the following, as appropriate):
|_| This statement reflects a change in name of the agent.
|X| The change in registered office set forth in this statement reflects
the removal of the place of business of the agent to a new location
within the county.
|_| The status of the agent as the provider of the registered office of
the above-named association has been terminated.
IN TESTIMONY WHEREOF, the undersigned person has caused this statement to
be signed this 10th day of September 19__.
CT CORPORATION SYSTEM
------------------------------------
(Name)
BY:
---------------------------------
Assistant Secretary
<PAGE>
STATEMENT OF CHANGE OF REGISTERED OFFICE
Indicate type of entity (check one):
|X| Domestic Business Corporation (15 Pa.C.S. ss. 1507)
|_| Foreign Nonprofit Corporation (15 Pa.C.S. ss. 6144)
|_| Foreign Business Corporation (15 Pa.C.S. ss. 4144)
|_| Domestic Limited Partnership (15 Pa.C.S. ss. 8506)
|_| Domestic Nonprofit Corporation (15 Pa.C.S. ss. 5507)
In compliance with the requirements of the applicable provisions of 15 Pa.
C.S. (relating to corporations and unincorporated associations) the undersigned
corporation or limited partnership, desiring to effect a change of registered
office, hereby states that:
1. The name of the corporation or limited partnership is: KBK ENTERPRISES, INC.
2. The (a) address of this corporation's or limited partnership's current
registered office in this Commonwealth or (b) name of its commercial registered
office provider and the county of venue is: (the Department is hereby authorized
to connect the following information to conform to the records of the
Department):
(a) (address)
(b) CT Corporation System, Philadelphia County
For a corporation or a limited partnership represented by a commercial
registered office provider, the county in (b) shall be deemed the county in
which the corporation or limited partnership is located for venue and official
publication purposes.
3. (Complete part (a) or (b)):
(a) The address to which the registered office of the corporation or
limited partnership in this Commonwealth is to be changed is:
(address)
(b) The registered office of the corporation or limited partnership
shall be provided by:
The Prentice-Hall Corporation System, Inc., Dauphin County
For a corporation or a limited partnership represented by a commercial
registered office provider, the county in (b) shall be deemed the county in
which the corporation or limited partnership is located for venue and official
publication purposes.
4. (Strike out if a limited partnership): Such change was authorized by the
Board of Directors of the corporation.
IN TESTIMONY WHEREOF, the undersigned corporation or limited partnership
has caused this statement to be signed by a duly authorized officer this 28th
day of February, 1992.
KBK Enterprises, Inc.
---------------------------------------
Name of Corporation/Limited Partnership
BY:
-----------------------------------
(Signature)
TITLE:
-------------------------------
<PAGE>
CERTIFICATE OF CHANGE OF REGISTERED OFFICE
In compliance with the requirements of the 15 Pa.C.S. ss. 8906 (relating
to change of registered office) the undersigned foreign corporation desiring to
effect a change of registered office, hereby states that:
1. The name of the company is: KBK ENTERPRISES, INC.
2. The (a) address of this company's current registered office in this
Commonwealth or (b) roams of its commercial registered office provider and this
county of venue is: (the Department is hereby authorized to correct the
following information to conform to the records of the Department):
(a) ___________________________________________________________________
(b) c/o: The Prentice-Hall Corporation System, Inc.- (Dauphin County)
For a company represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the company is located
for venue and official publication purposes.
3. (Complete part (a) or (b)):
(a) ___________________________________________________________________
(b) The registered office of the company shall be provided by:
c/o: CT Corporation System - (Philadelphia County)
For a company represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the company is located
for venue and official publication purposes.
IN TESTIMONY WHEREOF, the undersigned company has caused this certificate
to be signed by a duly authorized member or manager thereof this 4th day of
November, 1996.
KBK ENTERPRISES, INC.
----------------------------------
(Name of Company)
BY:
----------------------------------
TITLE:
----------------------------------
<PAGE>
Exhibit 3.4
BY-LAWS
OF
K B K Enterprises, Inc.
ARTICLE I. OFFICES
The principal office of the corporation in the State of Pennsylvania
shall be located in the City of Bloomsburg, County of Columbia. The corporation
may have such other offices, either within or without the State of Pennsylvania,
as the Board of Directors may designate or as the business of the corporation
may require from time to time.
ARTICLE II. SHAREHOLDERS
SECTION 1. Annual Meeting. The annual meeting of the shareholders
shall be held on the second Monday in the month of February in each year,
beginning with the year 1984, at the hour of 7:00 o'clock P.M., for the purpose
of electing Directors and for the transaction of such other business as may come
before the meeting. If the day fixed for the annual meeting shall be a legal
holiday in the State of Pennsylvania, such meeting shall be held on the next
succeeding business day. If the election of Directors shall not be held on the
day designated herein for any annual meeting of the shareholders, or at any
adjournment thereof, the Board of Directors shall cause the election to be held
at a special meeting of the shareholders as soon thereafter as conveniently may
be.
SECTION 2. Special Meetings. Special meetings of the shareholders,
for any purpose or purposes, unless otherwise prescribed by statute, may be
called by the President or by the Board of Directors, and shall be called by the
President at the request of the holders of not
<PAGE>
less than fifty (50%) per cent of all the outstanding shares of the corporation
entitled to vote at the meeting.
SECTION 3. Place of Meeting. The Board of Directors may designate
any place, either within or without the State of Pennsylvania unless otherwise
prescribed by statute, as the place of meeting for any annual meeting or for any
special meeting called by the Board of Directors. A waiver of notice signed by
all shareholders entitled to vote at a meeting may designate any place, either
within or without the State of Pennsylvania, unless otherwise prescribed by
statute, as the place for the holding of such meeting. If no designation is
made, or if a special meeting be otherwise called, the place of meeting shall be
the principal office of the corporation in the State of Pennsylvania.
SECTION 4. Notice of Meeting. Written notice stating the place, day
and hour of the meeting and, in case of special meeting, the purpose or purposes
for which the meeting is called, shall unless otherwise prescribed by statute,
be delivered not less than seven days nor more than ten days before the date of
the meeting, either personally or by mail, by or at the direction of the
President, or the Secretary, or the persons calling the meeting, to each
shareholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail,
addressed to the shareholder at his address as it appears on the stock transfer
books of the corporation, with postage thereon prepaid.
SECTION 5. Closing of Transfer Books or Fixing of Record Date. For
the purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders of any adjournment thereof, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the
2
<PAGE>
Board of Directors of the corporation may provide that the stock transfer books
shall be closed for a stated period but not to exceed, in any case, five days.
If the stock transfer books shall be closed for the purpose of determining
shareholders entitled to notice of or to vote at a meeting of shareholders, such
books shall be closed for at least three days immediately preceding such
meeting. In lieu of closing the stock transfer books, the Board of Directors may
fix in advance a date as the record date for any such determination of
shareholders, such date in any case to be not more than five days and, in case
of a meeting of shareholders, not less than five days prior to the date on which
the particular action, requiring such determination of shareholders, is to be
taken. If the stock transfer books are not closed and no record date is fixed
for the determination of shareholders entitled to notice of or to vote at a
meeting of shareholders, or shareholders entitled to receive payment of a
dividend, the date on which notice of the meeting is mailed or the date on which
the resolution of the Board of Directors declaring such dividend is adopted, as
the case may be, shall be the record date for such determination of
shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof.
SECTION 6. Voting Lists. The officer or agent having charge of the
stock transfer books for shares of the corporation shall make a complete list of
the shareholders entitled to vote at each meeting of shareholders or any
adjournment thereof, arranged in alphabetical order, with the address of and the
number of shares held by each. Such list shall be produced and kept open at the
time and place of the meeting and shall be subject to the inspection of any
shareholder during the whole time of the meeting for the purposes thereof.
3
<PAGE>
SECTION 7. Quorum. A majority of the outstanding shares of the
corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If less than a majority of the
outstanding shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum.
SECTION 8. Proxies. At all meetings of shareholders, a shareholder
may vote in person or by proxy executed in writing by shareholder or by his duly
authorized attorney in fact. Such proxy shall be filed with the secretary of the
corporation before or at the time of the meeting. No proxy shall be valid after
three months from the date of its execution, unless otherwise provided in the
proxy.
SECTION 9. Voting of Shares. Subject to the provisions of Section 12
of this Article II, each outstanding share entitled to vote shall be entitled to
one vote upon each matter submitted to a vote at a meeting of shareholders.
SECTION 10. Voting Shares by Certain Holders. Shares standing in the
name of another corporation may be voted by such officer, agent or proxy as the
by-laws of such corporation may prescribe, or, in the absence of such provision,
as the board of directors of such corporation may determine.
4
<PAGE>
Shares held by an administrator, executor, guardian or conservator
may be voted by him, either in person or by proxy, without a transfer of such
shares into his name. Shares standing in the name of a trustee may be voted by
him, either in person or by proxy, but no trustee shall be entitled to vote
shares held by him without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his name if authority so to do
be contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote
such shares until the shares have been transferred into the name of the pledgee,
and thereafter the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to the corporation shall not be
voted, directly or indirectly, at any meeting, and shall not be counted in
determining the total number of outstanding shares at any given time.
SECTION 11. Informal Action by Shareholders. Unless otherwise
provided by law, any action required to be taken at a meeting of the
shareholders, or any other action which may be taken at a meeting of the
shareholders, may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all of the shareholders entitled
to vote with respect to the subject matter thereof.
SECTION 12. Cumulative Voting. Unless otherwise provided by law, at
each election for Directors every shareholder entitled to vote at such election
shall have the right to
5
<PAGE>
vote, in person or by proxy, the number of shares owned by him for as many
persons as there are Directors to be elected and for whose election he has a
right to vote, or to cumulate his votes by giving one candidate as many votes,
as the number of such Directors multiplied by the number of his shares shall
equal, or by distributing such votes on the same principal among any number of
candidates.
ARTICLE III. BOARD OF DIRECTORS
SECTION 1. General Powers. The business and affairs of the
corporation shall be managed by its Board of Directors.
SECTION 2. Number, Tenure and Qualifications. The number of
directors of the corporation shall be three. Each director shall hold office
until the next annual meeting of shareholders and until his successor shall have
been elected and qualified.
SECTION 3. Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than this by-law immediately after,
and at the same place as, the annual meeting of shareholders. The Board of
Directors may provide, by resolution, the time and place of the holding of
additional regular meetings without other notice than such resolution.
SECTION 4. Special Meetings. Special meetings of the Board of
Directors may be called by or at the request of the President or any two
directors. The person or persons authorized to call special meetings of the
Board of Directors may fix the place for holding any special meeting of the
Board of Directors called by them.
SECTION 5. Notice. Notice of any special meeting shall be given at
least five days previously thereto by written notice delivered personally or
mailed to each director at his business address, or by telegram. If mailed, such
notice shall be deemed to be delivered when
6
<PAGE>
deposited in the United States mail so addressed, with postage thereon prepaid.
If notice be given by telegram, such notice shall be deemed to be delivered when
the telegram is delivered to the telegraph company. Any director may waive
notice of any meeting. The attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a director attends a
meeting for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened.
SECTION 6. Quorum. A majority of the number of directors fixed by
Section 2 of this Article III shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors, but if less than such adjured
is present at a meeting, a majority of the directors present may adjourn the
meeting form time to time without further notice.
SECTION 7. Manner of Acting. The act of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors.
SECTION 8. Action Without A Meeting. Any action that may be taken by
the Board of Directors at a meeting may be taken without a meeting if a consent
in writing, setting forth the action so to be taken, shall be signed before such
action by all the Directors.
SECTION 9. Vacancies. Any vacancy occurring in the Board of
Directors may be filled by the affirmative vote of a majority of the remaining
directors though less than a quorum of the Board of Directors, unless otherwise
provided by law. A director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office. Any directorship to be filled by
reason of an increase in the number of directors may be filled by election by
the Board of Directors for a term of office continuing only until the next
election of Directors by the shareholders.
7
<PAGE>
SECTION 10. Compensation. By resolution of the Board of Directors,
each Director may be paid his expenses, if any, of attendance at each meeting of
the Board of Directors, and may be paid a stated salary as director or a fixed
sum for attendance at each meeting of the Board of Directors or both. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
SECTION 11. Presumption of Assent. A director of the corporation who
is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action taken
unless his dissent shall be entered in the minutes of the meeting or unless he
shall file his written dissent to such action with the person acting as the
secretary of the meeting before the adjournment thereof or shall forward such
dissent by registered mail to the Secretary of the corporation immediately after
the adjournment of the meeting. Such right to dissent shall not apply to a
Director who voted in favor of such action.
ARTICLE IV. OFFICERS
SECTION 1. Number. The officers of the corporation shall be a
President, a Vice-President, a Vice-President, a Secretary and a Treasurer, each
of whom shall be elected by the Board of Directors. Such other officers and
assistant officers as may be deemed necessary may be elected or appointed by the
Board of Directors.
SECTION 2. Election and Term of Office. The officers of the
corporation to be elected by the Board of Directors shall be elected annually by
the Board of Directors at the first meeting of the Board of Directors held after
each annual meeting of the shareholders. If the election of officers shall not
be held at such meeting, such election shall be held as soon
8
<PAGE>
thereafter as conveniently may be. Each officer shall hold office until his
successor shall have been duly elected and shall have qualified or until his
death or until he shall resign or shall have been removed in the manner
hereinafter provided.
SECTION 3. Removal. Any officer or agent may be removed by the Board
of Directors whenever in its judgment, the best interests of the corporation
will be served thereby, but such removal shall be without prejudice to the
contract rights, if any, of the person so removed. Election or appointment of an
officer or agent shall not of itself create contract rights.
SECTION 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.
SECTION 5. President. The President shall be the principal executive
officer of the corporation and, subject tot he control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the corporation. He shall, when present, preside at all meetings of
the shareholders and of the Board of Directors. He may sign, with the Secretary
or any other proper officer of the corporation thereunto authorized by the Board
of Directors, certificates thereunto authorized by the Board of Directors,
certificates for share of the corporation, any deeds, mortgages, bonds,
contracts, or other instruments which the Board of Directors has authorized to
be executed, except in cases where the singing and execution thereof shall be
expressly delegated by the Board of Directors or by these By-Laws to some other
officer or agent of the corporation, or shall be required by law to be otherwise
singed or executed; and in general shall perform all duties incident to the
office or President and such other duties as may be prescribed by the Board of
Directors from time to time.
9
<PAGE>
SECTION 6. Vice-President. In the absence of the President, or in event of
his death, inability or refusal to act, the Vice-President shall perform the
duties of the President, and when so acting, shall be all the powers of and be
subject to all the restrictions upon the President. The Vice-President shall
perform such other duties as from time to time may be assigned to him by the
President or by the Board of Directors.
SECTION 7. Secretary. The Secretary shall: (a) keep the minutes of the
proceedings of the shareholders and of the Board of Directors in one or more
books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these By-Laws or as required by law; (c) be
custodian of the corporation records and of the seal of the corporation and see
that the seal of the corporation is affixed to all documents the execution of
which on behalf of the corporation under its seal is duly authorized; (d) keep a
register of the postoffice address of each shareholder which shall be furnished
to the Secretary by such shareholders; (e) sign with the President, certificates
for shares of the corporation, the issuance of which shall have been authorized
by resolution of the Board of Directors; (f) have general charge of the stock
transfer books of the corporation; and (g) in general perform all duties
incident to the office of Secretary and such other duties as from time to time
may be assigned to him by the President or by the Board of Directors.
SECTION 8. Treasurer. The Treasurer shall: (a) have charge and custody of
and be responsible for all funds and securities of the corporation; (b) receive
and give receipts for money due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the corporation in such
banks, trust companies or other depositaries as shall be selected in accordance
with the provisions of Article V of these By-Laws; and (c) in general
10
<PAGE>
perform all of the duties incident to the office of Treasurer and such other
duties incident to the office of Treasurer and such other duties as from time to
time may be assigned to him by the President or by the Board of Directors. If
required by the Board of Directors, the Treasurer shall give a bond for the
faithful discharge of his duties in such sum and with such surety or sureties as
the Board of Directors shall determine.
SECTION 9. Salaries. The salaries of the officers shall be fixed from time
to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reasons of the fact that he is also a director of the
corporation.
ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. Contracts. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the corporation, and such authority
may be general or confined to specific instances.
SECTION 2. Loans. No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
SECTION 3. Checks, drafts, etc. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the corporation, shall be signed by such officer of officers, agents or agents
of the corporation and in such manner as shall from time to time be determined
by resolution of the Board of Directors.
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SECTION 4. Deposits. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies or their depositaries as the Board of Directors may
select.
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. Certificates for Shares. Certificates representing shares of
the corporation shall be in such form as shall be determined by the Board of
Directors. Such certificates shall be signed by the President and by the
Secretary or by such other officers authorized by law and by the Board of
Directors so to do, and sealed with the corporate seal. All certificate for
share shall be consecutively numbered or otherwise identified. The name and
address of the person to whom the shares represented thereby are issued, with
the number of shares and date of issue, shall be entered on he stock transfer
books of the corporation. All certificates surrendered to the corporation for
transfer shall be canceled and no new certificate shall be issued until the
former certificate for a like number of share shall have been surrendered and
canceled, except that in case of a lost, destroyed or mutilated certificate a
new on may be issued therefor upon such terms and indemnity to the corporation
as the Board of Directors may prescribe.
SECTION 2. Transfer of Shares. Transfer of shares of the corporation shall
be made only on the stock on the stock transfer books of the corporation by the
holder of record thereof or by his legal representative, who shall furnish
proper evidence of authority to transfer, or by his attorney thereunto
authorized by power of attorney duly executed and filed with the Secretary of
the corporation, and on surrender for cancellation of the certificate for such
shares. The person in whose name shares stand on the books of the corporation
shall be deemed by the corporation to be the owner thereof for all purposes.
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<PAGE>
ARTICLE VII. CALENDER YEAR
The calendar year of the corporation shall begin on the first day of
January and end on the 31st day of December in each year.
ARTICLE VIII. DIVIDENDS
The Board of Directors may from time to time declare, and the corporation
may pay, dividends on its outstanding shares in the manner and upon the terms
and conditions provided by law and its articles of incorporation.
ARTICLE IX. CORPORATE SEAL
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall be inscribed thereon the name of the corporation and
the state of incorporation and the words, "Corporate Seal".
ARTICLE X. WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is required to be
given to any shareholder or director of the corporation under the provisions of
these By-Laws or under the provisions of the articles of incorporation or under
the provisions of the Business Corporation Act, a waiver thereof in writing,
signed by the person or persons entitled to such notice, whether before or after
the time stated therein, shall be deemed equivalent to the giving of such
notice.
ARTICLE XI. AMENDMENTS
These By-Laws may be altered, amended repealed and new By-Laws may be
adopted by any ____________ special meeting of the Board of Directors. (This
section should be changed to require the By-Laws to be amended by the
shareholders by a majority vote or by such other
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<PAGE>
vote as may be rquired by law in those states where By-Laws are required to be
amended by the shareholders.)
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<PAGE>
Exhibit 3.5
I, RALPH MUNRO, Secretary of State of the State of Washington and
custodian of its seal, hereby certify this certificate that the attached is a
true and correct copy of
ARTICLES OF INCORPORATION
of
POZZOLANIC RESOURCES, INC.
as filed in this office on December 29, 1982.
Date: February 24, 1998
Given under my hand and the Seal of the
State Of Washington at Olympia, the State
Capital
-------------------------------------------
Ralph Munro, Secretary of State
<PAGE>
STATE OF WASHINGTON / DEPARTMENT OF STATE
I, RALPH MUNRO, Secretary of State of the State of Washington and
custodian of its seal, hereby certify that
-----------------------------
ARTICLES OF INCORPORATION
of POZZOLANIC RESOURCES, INC. a domestic corporation of Mercer Island,
Washington, was filed for record in this office on this date, and I further
certify that such Articles remain on file in this office.
In witness whereof I have signed and have
affixed the seal of the State of Washington
to this certificate at Olympia, the State
Capitol,
December 29, 1982
------------------------------------
------------------------------------
Ralph Munro
SECRETARY OF STATE
<PAGE>
ARTICLES OF INCORPORATION
OF
POZZOLANIC RESOURCES, INC.
KNOW ALL MEN BY THESE PRESENTS:
That GERALD A. PEABODY, Jr., being over the age of twenty-one (21) years
and for the purpose of forming a corporation under the Washington Business
Corporation Act hereby certifies and adopts in duplicate the following Articles
of Incorporation.
ARTICLE I
The name of the corporation shall be POZZOLANIC RESOURCES, INC., and its
existence shall be perpetual.
ARTICLE II
The purpose and object of this corporation shall be for a holding company,
and for all other lawful purposes under the law of the State of Washington.
PROVIDED, HOWEVER, that nothing herein contained shall be deemed to
authorize or permit the corporation to carry on any business, to exercise any
power or to do any act which a corporation formed under the Uniform Business
Corporation Act of the State of Washington, or any amendment thereto or
substitute therefore, may not at the time lawfully carry on or do.
ARTICLE III
The holders of each class of shares shall have pre-emptive rights to
acquire additional shares of the same class offered by the corporation.
ARTICLE IV
1. The location and post office address of the registered office of the
corporation in
<PAGE>
this State shall be 2448 76th Avenue Southeast, Suite 222; Mercer Island,
Washington 98040.
2. The registered agent of the corporation shall be Gerald A. Peabody,
Jr., whose address is 2448 76th Avenue Southeast, Suite 222; Mercer Island,
Washington 98040.
ARTICLE V
The aggregate number of shares which the corporation shall have authority
to issue is 50,000 shares as follows:
1. Class A: Voting Shares: The corporation shall be Authorized to issue
1,000 shares of "Voting Shares" with a par value of $1.00 each.
These shares shall not be entitled to any rights or privileges
except the power to vote, which right shall be exclusively vested in
these shares, each issued share being entitled to one (1) vote.
Upon liquidation, these shares shall participate to the extent of
par value only.
2. Class B: Regular Dividend Shares: The corporation shall be
authorized to issue 19,000 shares of "Regular Dividend Shares" with
a par value of $1.00 each.
These shares shall be entitled to dividends when and as declared by
the Board of Directors. These shares shall not be entitled to any
voting rights.
Each Class B share shall receive liquidating distributions equal to
those paid on Class C and Class D shares.
3. Class C: Special Dividend Shares: The corporation shall be
authorized to issue 15,000 shares of "Special Dividend Shares" with
a par value of $1.00 each.
These shares shall be entitled to dividends only when and as
declared by the Board of Directors with the unanimous approval of
all voting shares. These shares shall not be entitled to any voting
rights.
Each Class C share shall receive liquidating distributions equal to
those paid on Class B and Class D shares.
-2-
<PAGE>
4. Class D: Special Dividend Shares: The corporation shall be
authorized to issue 15,000 shares of "Special Dividend Shares" with
a par value of $1.00 each.
These shares shall be entitled to dividends only when and as
declared by the Board of Directors with the unanimous approval of
all voting shares. These shares shall not be entitled to any voting
rights.
Each Class D share shall receive liquidating distributions equal to
those paid on Class B and Class C shares.
The corporation will not commence business until consideration of the
value of at least five hundred dollars has been received for the issuance of
shares.
The corporation reserves the right to amend, alter, change or repeal any
provisions contained in its Articles of Incorporation in any manner now or
hereafter prescribed or permitted by statute. All rights of stockholders of the
corporation are granted subject to this reservation.
ARTICLE VI
1. The number of directors of this corporation shall be fixed as provided
in the By-Laws as therein provided, but the number of directors shall not be
less than two (2) or more than five (5).
2. The first directors of this corporation shall be two (2) in number and
their post office addresses are as follows:
Gerald A. Peabody, Jr. 2448 76th Avenue S.E., Suite 222
Mercer Island, Washington 98040
Terrance E. Peabody 2448 76th Avenue S.E., Suite 222
Mercer Island, Washington 98040
The term of the directors shall be until the first annual meeting of the
stockholders of the corporation, to be held on the second Wednesday in April
1983, and until their successors are elected and qualified.
-3-
<PAGE>
ARTICLE VII
The name and post office address of the incorporator is:
Gerald A. Peabody, Jr.
2448 76th Avenue, S.E., Suite 222
Mercer Island, Washington 98040
IN WITNESS WHEREOF, the incorporator hereinabove named as hereunto set his
hand, in duplicate, this 29th day of December, 1982.
-----------------------------
Gerald A. Peabody, Jr.
-4-
<PAGE>
CONSENT TO SERVE AS REGISTERED AGENT
I, GERALD A. PEABODY, JR., hereby consent to serve as Registered Agent, in
the State of Washington, for the following corporation: POZZOLANIC RESOURCES,
INC.
I understand that as agent for the corporation, it will be my
responsibility to receive service of process in the name of the corporation; to
forward all mail to the corporation; and to immediately notify the office of the
Secretary of State in the event of my resignation, or of any changes in the
registered office address of the corporation for which I am agent.
DATED this 29th day of December, 1982.
--------------------------------
Gerald A. Peabody, Jr.
2448 76th Avenue S.E., Suite 222
Mercer Island, WA. 98040
-5-
<PAGE>
Exhibit 3.6
BY-LAWS
OF
POZZOLANIC RESOURCES, INC.
*****
ARTICLE I
Meeting of Stockholders
Section 1. Place of Meeting. Stockholder's meeting shall be held at the
registered office of the corporation, 2448 76th Ave. S.E., Suite 222, Mercer
Island, WA. 98040, or at such other place as may be designated in the notice of
meeting.
Section 2. Annual Meeting. The annual meeting of the stockholders of the
corporation shall be held at the registered office on the 2nd Wednesday of the
month of April of each year, beginning with the year 1983, at which time there
shall be elected directors for the ensuing year, and the stockholders shall
transact such other business as shall properly come before them. If the meeting
day in any year falls on a holiday, the regular meeting of stockholders for such
year shall be held on the next business day thereafter, at the same hour.
Section 3. Special Meeting. Special meetings of the stockholders may be
called at any time by the president, or a majority of the directors, or the
holder of ten (10) percent or more of the voting stock of the corporation.
Section 4. Notice of Meetings. Unless shareholders waive notice of or
consent to a meeting, a notice stating the time and place of any annual or
special meeting of shareholders shall be mailed, postage prepaid, to each
stockholder of record at his address as the same appears
<PAGE>
on the stock book of the company, or, if no address appears, at his last known
place of residence, at least ten (10) days and not more than fifty (50) days
prior to the date of the meeting.
Section 5. Consent to Meeting. Any meeting of shareholders shall be valid
in all respects if all the stockholders entitled to vote are present in person
or by proxy, if such stockholders sign their written consent to such meeting and
such consent is made a part of the record of the meeting.
Section 6. Quorum. A majority of the voting stock issued and outstanding,
either in person or by proxy, shall constitute a quorum for the transaction of
business at any meeting of the stockholders.
Section 7. Voting Rights. Except in a situation where a corporate
stockholder cannot legally vote its shares in this corporation as provided in
RCW 23A.08.300, in any matter put to a vote at any meeting of the stockholders,
each stockholder shall be entitled to one vote for each full share of voting
stock standing in his name on the books of the corporation.
Section 8. Proxies. All proxies shall be in writing, signed by the
stockholder of record granting the proxy and filed with the secretary of the
corporation.
Section 9. Order of Business. The following order of business shall be
observed at all meetings of the stockholders as far as practicable, via:
(1) Calling the roll.
(2) Reading, correction and approval of minutes of previous
meeting.
(3) Reports of officers.
(4) Reports of committees.
(5) Election of directors.
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(6) Unfinished business.
(7) New Business.
Section 10. Adjournment. If a quorum be present at any annual or special
meeting of stockholders, they may adjourn from day to day as they see fit, and
notice of adjournment need to be given.
ARTICLE II
Stock
Section 1. Certificates. Certificates of stock shall be in form adopted by
the Board of Directors and shall be singed by the president or vice president
and secretary, and attested by the corporate seal.
Section 2. Issuance. Certificates of stock shall be issued only when fully
paid for.
Section 3. Records. The certificates of stock shall be consecutively
numbered. The name of the person owing the shares represented thereby with the
number of such shares and the date of issue shall appear on each certificate of
stock and shall be entered on the corporation books.
Section 4. Cancellation. All certificates of stock transferred by
endorsement therein shall be surrendered to the corporation for cancellation,
and new certificates shall be issued to the transferee.
Section 5. Transfer. Shares of stock shall be transferred on the books of
the corporation only upon the request of the holder thereof, or his attorney,
and no transfer shall be binding upon the corporation until the transfer of such
shares has been entered on the books of
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<PAGE>
the corporation.
Section 6. Lost Certificates. In the case of a lost or destroyed
certificate, the Board of Directors may require a bond from the claimant
indemnifying the corporation and other persons against loss in consequence of
the issuance of a duplicate certificate.
Section 7. Subscriptions. Subscriptions for shares of stock shall be in
writing and in such form and upon such conditions as the Board of Directors may
require.
ARTICLE III
Directors
Section 1. Board of Directors. The Board shall consist of not less than
two nor more than five directors, except that if all the shares of the
corporation are owned of record by less than 2 shareholders, the Board may be
composed solely of shareholders of record. The directors shall be elected each
year by the voting stockholders at the annual meeting to exercise the powers,
conduct the business, control the property and manage the affairs of the
corporation.
Section 2. Term of Office. The term of office of each directors shall be
one year, but directors shall serve until their successors are elected and
qualified.
Section 3. Qualification. Any person of lawful age, whether or not a
stockholder of this corporation, may serve as a director.
Section 4. Vacancies. Vacancies in the Board of Directors by reason of
death, resignation, or the causes, except by removal by the shareholders as
provided for in RCW 23A.08.030 may be filled by appointment of a majority of the
remaining directors, and such appointee shall hold office until his successor is
elected a the next annual meeting of
4
<PAGE>
stockholders or at any prior special meeting duly called for the purpose. Any
vacancy occurring due to resignation, death or disability where one director is
serving on the Board shall be appointed by the sole shareholder of record or the
sole shareholder's personal representative or guardian, until a successor is
elected at the next annual meeting of stockholders or at any prior special
meeting duly called for that purpose.
If all members of the Board of Directors shall be removed by the
shareholders, the shareholders shall elect a new Board at the same shareholders'
meeting and the newly elected Board shall serve until the next annual meeting of
shareholders.
If fewer than all members of the Board shall be removed by the
shareholders at their annual meeting, the shareholders shall elect at said
annual meeting only the number of directors required to fill vacancies created
by terms of office which expire at the time of said meeting. Any other vacancies
on the Board occasioned by removal by the shareholders at their annual or
special meeting shall be filled by appointment of the remaining directors at a
special meeting of directors to be held within thirty (30) days of the removal,
and the appointees shall serve until normal expiration of the terms of office,
or until the next annual meeting of stockholders, whichever event shall sooner
occur.
Appointees shall meeting the eligibility requirements of Section 3 hereof.
Section 5. Regular Meetings. A regular meeting of the Board of Director
shall be held at the registered office of the corporation immediately following
the regular annual meeting of stockholders, or at such other time and place as
the Board of Directors shall direct. At such meeting the directors shall elect
their officers of the ensuing year and transact such other business as may
properly come before them.
5
<PAGE>
Section 6. Special Meetings. Special meetings of the Board of Directors
may be called by the president or may two (2) directors by giving three (3)
days' notice of the time and place of meeting to each director. Said notice
shall be written and shall be mailed, telegraphed, or personally delivered to
each director.
Section 7. Waiver of Notice. If all the directors shall be present at any
directors' meeting, regardless of method of call or notice, or if a majority of
the directors are present and those absent sign a written waiver or notice of
such meeting, any business may be transacted at such meeting, and the
transactions at such meeting shall be valid. Such waiver may be signed prior to
or after the holding of such meeting and shall be filed in the minute book of
the corporation by the secretary.
Section 8. Quorum. A majority of the directors shall constitute a quorum.
Section 9. Powers and Duties. The directors shall have the general
management and control of the business and affairs of the corporation under the
laws of the State of Washington, the Articles of Incorporation, and the By-Laws.
ARTICLE IV
Officers
Section 1. Officers. The executive officers of this corporation shall
consist of a President, Vice President, Secretary and Treasurer, and such other
officers as shall from time to time by chosen and appointed by the Board of
Directors. Any two (2) of the offices may be held by the same person, except the
offices of President and Secretary which may not ordinarily be combined. When
all of the issued and outstanding stock of the corporation is owned of record by
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<PAGE>
one person, such person may hold all or may combination of offices.
Section 2. Terms of Office. The officers shall be elected at the first
meeting of the Board of Directors after organization of the corporation, and,
thereafter, at the first meeting after each annual election of directors, and
such officers shall hold office for one (1) year or until their successors are
elected and qualified.
Section 3. Duties of President. The president shall be elected from among
the members of the Board of Directors and shall preside at all meetings of the
directors and stockholders. He shall have general charge of and control over the
affairs of the corporation.
Section 4. Duties of Vice President. The vice president shall perform such
duties as may be assigned to him by the Board of Directors. In the case of
death, disability or absence of the President, he shall perform and be vested
with all the duties and powers of the president, provided, however, that he
shall not become a member of the Board of Directors solely in consequence of the
vesting of such powers.
Section 5. Duties of Secretary. The secretary shall keep a record of the
minutes of the proceedings of meeting of stockholders and directors, give notice
as required in these by-laws, of all such meeting, have custody of the corporate
seal, affix said seal to such instruments as are deemed proper by the Board of
Directors, have custody of all books, records and papers of the corporation,
except such as shall be in the custody of the treasurer of some other person
authorized to have custody and possession thereof by resolution of the Board of
Directors, and sign all certificates of stock of the corporation.
Section 6. Duties of Treasurer. The treasurer shall keep account of all
moneys of the corporation received or disbursed, and shall deposit all moneys
and valuables in the name of and
7
<PAGE>
to the credit of the corporation in such banks and depository as the Board of
Directors shall designate. The treasurer shall be responsible for the
maintenance of the corporation and shall make such periodic reports and render
such statements as the Board of Directors may require.
Section 7. Vacancy. In case of a vacancy occurring in any of the offices
of this corporation, such vacancy may be filled by the Board of Directors at its
discretion.
Section 8. Salaries. The salaries of all officers and agents of this
corporation shall be fixed by the Board of Directors and may be changed from
time to time by a majority vote of the Board.
Section 9. Removal. Any officer or agent of this corporation may be
removed by a majority vote of the Board of Directors whenever, in its judgment,
the best interest of the corporation will be served thereby. Such removal shall
be without prejudice to any contract rights of the person so removed.
ARTICLE V
Indemnification of Director, Officers & Other Persons
Section 1. Indemnification. The corporation shall be does hereby indemnify
each person (and his heirs, executors, administrators or other legal
representatives) who is, shall become or shall have been a director or officer
of this corporation, or any person who is serving, shall serve, or shall have
served at the request of this corporation as a director of officer of another
corporation in which it owns share of capital stock or of which it is a
creditor, against all liabilities and expenses (including judgments, fines,
penalties and attorney's fees, but excluding any amount paid to the corporation
in settlement) reasonablely incurred by any such director,
8
<PAGE>
officer or person in connection with, or arising out of any action, suit or
proceeding, whether civil, criminal or administrative, in which any such
director, officer or other person may be a party defendant or with which he may
be threatened or otherwise involved, directly or directly, by reason of his
being, becoming or having been a director or officer of this corporation or such
other corporation.
Section 2. Conditions of Indemnification. The indemnification provided for
in this Article V shall be subject to the following conditions:
(1) That said action, suit or proceeding shall be prosecuted against such
director, office or person to final determination, and it shall not be finally
adjudge in such action, suit or proceeding that he had been liable for
misconduct or negligence in the performance of his duty as such;
(2) That said action, suit or proceeding shall be compromised, settled or
otherwise terminated as against such director, officer or the person, and it
shall be not have been finally adjudged int such action, suit or proceeding that
such director, officer of person making such compromise or settlement or
participating in such termination was liable for misconduct or negligence, and
it shall be determined by majority of the directors of this corporation, acting
in good faith, that such director, officer or person was not liable for
misconduct or negligence in the performance of his duty as such director,
officer or person in connection with the matter or matters out of which such
compromise, settlement of determination arose.
Section 3. Advances. Upon request therefor by any director, officer or
person enumerated in Section 1 of this Article V, the corporation may, from time
to time prior to final adjudication or comprise or settlement of the matter or
matters as to which indemnification is
9
<PAGE>
claimed, advance to such director, officer or person all expenses imposed upon
or incurred by him to the date of such request if this corporation shall be have
received substantially concurrent with nay such request an opinion of counsel to
the effect that it is probable that upon the termination of the action, suit or
proceeding, or threatened action, suit or proceeding as to which reimbursement
is sought, such director, officer or person will be entitled to indemnity under
this Article V in respect to such advances and that such advances may properly
be made by this corporation. Any advance made pursuant to this Section 3 shall
be made on the condition that the director, officer or person receiving such
advance will repay to this corporation any amounts so advanced, if substantially
concurrent with the termination of the matter or matters as to which would
entitle such director, officer or person to indemnification under this Article
V.
Section 4. Rights Not Exclusive. The foregoing rights of indemnification
shall not be exclusive of other rights to which any director, officer or person
is entitled under any agreement or vote of stockholders, or statute, or as a
matter of law or otherwise; and the provisions of this Article V shall be
severable, and if any provision thereof shall for any reason be determined
invalid or ineffective, the remaining provisions shall not thereby be affected.
ARTICLE VI
Corporate Seal
The officer seal of this corporation shall be circular with the name of
the corporation around the border, the denomination. "CORPORATE", the work
"SEAL", and the state and year of its incorporation stated in the center. An
impression of such seal appears on the last page.
10
<PAGE>
ARTICLE VII
Amendments
Section 1. Stockholders' Amendments. The By-Laws of this corporation may
be amended by a majority vote of the stockholders at any annual meeting or any
special meeting called for that purpose.
Section 2. Directors' Amendments. The Board of Directors may adopt
additional By-Laws and may amend existing By-Laws by a majority vote of the
Board, but shall not change, alter or repeal any By-Laws adopted by the
stockholders or the corporation.
ADOPTED on this 1st day of January, 1983, by Resolution of the Directors
of this corporation.
--------------------
Secretary
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<PAGE>
Exhibit 3.7
IOWA
SECRETARY OF STATE
No. 00080910
Date: 04/21/1998
490 DP-000032822
EIDSMOE HEIDMAN ET AL
JULIE
701 PIERCE ST STE 200 BOX 3086
SIOUX CITY, IA 51102
CERTIFICATE OF EXISTENCE
Name: POWER PLANT AGGREGATES OF IOWA, INC.
Begin date: 19730518
Expiration: PERPETUAL
I, PAUL D. PATE, secretary of state of the state of Iowa, custodian of the
records of incorporations, certify that the corporation named on this
certificate is in existence and was duly incorporated under the laws of Iowa on
the date printed above, that all fees required by the Iowa business corporation
act have been paid by the corporation, that the most recent annual corporate
report has been filed by the secretary of state, and that articles of
dissolution have not been filed.
<PAGE>
POWER PLANT AGGREGATES OF IOWA, INC.
Officer's Certificate
I, the undersigned, the President of Power Plant Aggregates of Iowa,
Inc., an Iowa corporation ("Power Plant"), DO HEREBY CERTIFY THAT:
1. This Certificate is being delivered at the Closing today pursuant
to Section 4(1) of the Purchase Agreement dated as of march 20, 1998 (the
"Agreement") among Colin C. Jensen, Colin C. Jensen, Jr., Irving F. Jensen, Jr.,
Irving F. Jensen, III, Richard A. Everist and Leanette H. Everist, Trustees of
the Everist Family 1991 Trust Under Declaration of Trust Dated April 22, 1991,
Richard Everist, Jr., Tom Everist, Erik M. Jensen, Mark R. Jensen, and T.S.
"Steve" Everist (herein collectively called "Sellers") and JTM Industries, Inc.
a Texas corporation ("Buyer"). Unless otherwise defined herein, capitalized
terms used in this Certificate have the meanings given to them in the Agreement.
2. Attached hereto as Exhibits A-1, A-2 and A-3 are the correct and
complete copies of the Certificate of Incorporation of Power Plant, MWFA, and
LWM, as in effect on the date hereof.
3. Attached hereto as Exhibits B-1, and B-2 are the correct and
complete copies of the By-Laws of Power Plant, and MWFA, as in effect on the
date hereof.
4. Attached hereto as Exhibits C-1, C-2 and C-3 are the true,
complete and correct copies of the Certificates of Good Standing of Power Plant,
MWFA, and LWM, as in effect on the date hereof.
5. Attached hereto as Exhibits D-1, D-2 and D-3 are the persons that
have been duly elected (or appointed) qualified and acting officers of Power
Plant, MWFA, and LWM (to and including the date hereof), each holding the
respective offices set forth opposite their names.
6. Attached hereto as Exhibit E-1 is a copy of the Board of
Directors resolution of Power Plant authorizing the taking of action to
facilitate the Agreement.
IN WITNESS WHEREOF, the undersigned has duly executed this
Certificate as on March 20, 1998.
----------------------------------------------
President, Power Plant Aggregate of Iowa, Inc.
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<PAGE>
ARTICLES OF INCORPORATION
OF
POWER PLANT AGGREGATES OF IOWA, INC.
OF
SIOUX CITY, IOWA
We, the undersigned persons, acting as incorporators of a
corporation organized under the Iowa Business Corporation Act, Chapter 496A,
Code of Iowa, hereby adopt the following Articles of Incorporation for such
corporation.
ARTICLE I
The name of the corporation is:
"POWER PLANT AGGREGATES OF IOWA, INC."
ARTICLE II
The corporate existence shall commence upon the date of issuance of
Certificate of Incorporation by the Secretary of State of Iowa and shall be
perpetual thereafter. The corporation shall have unlimited power to engage in,
and do any lawful act concerning any and all lawful businesses for which
corporations may be organized under this Act.
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<PAGE>
ARTICLE III
The aggregate number of shares which the corporation shall have
authority to issue is 2,500 shares of par value of $100.00 each.
ARTICLE IV
The address of the initial registered office of the corporation is
2220 Hawkeye Drive, Sioux City, Woodbury County, Iowa, and the name of its
initial registered agent at such address is Irving F. Jensen, Jr.
The number of directors constituting the initial Board of Directors
of the corporation is four and the names and address ___________________________
Irving F. Jensen, Jr. 4320
Sioux City, Iowa; and
Richard Pollard, 2220 Hawkey Drive,
Sioux City, Iowa.
ARTICLE VI
The names and addresses of the incorporators are:
Byron J. Brower, 2000 Plum Creek Road,
Sioux City, Iowa;
Richard A. Everist, 37 McDonald Drive,
Sioux City, Iowa;
Irving F. Jensen, Jr., 4320 Perry Way,
Sioux City, Iowa;
Richard Pollard, 2220 Hawkeye Drive,
Sioux City, Iowa;
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<PAGE>
ARTICLE VII
No contract or other transaction between the corporation and any other
corporation shall be affected or invalidated by the fact that any one or more of
the directors of this corporation is or are interested in, or is a director or
officer, or are directors or officers of such other corporation, and any
director or directors, individually or jointly, may be a party or parties to or
may be interested in any contract or transaction of this corporation or in which
this corporation is interested; and no contract, act or transaction of this
corporation with any person or persons, firm or association and each and every
person who may become a director of this corp wise exist from
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<PAGE>
contracting with the corporation for the benefit of himself or any firm or
corporation in which he may be in any way interested.
Dated this 12th day of May, 1973.
------------------------
Byron J. Brower
------------------------
Richard A. Everist
------------------------
Irving F. Jensen, Jr.
------------------------
Richard Pollard
STATE OF IOWA )
: SS.
WOODBURY COUNTY )
On this 12th day of May, 1973, before me Robert Brower, a Notary Public,
personally appeared Byron J. Brower, Richard A. Everist, Irving F. Jensen, Jr.,
and Richard Pollard, to me known to the persons named in and who executed the
foregoing Articles of Incorporation, and acknowledged that they executed the
same as their voluntary acts and deeds.
-----------------------------
Notary Public in and for said
County and State
Roger Brower
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<PAGE>
RESTATED ARTICLES OF INCORPORATION
OF
POWER PLANT AGGREGATES OF IOWA, INC.
TO THE SECRETARY OF STATE OF THE STATE OF IOWA:
Pursuant to the provisions of Section 61 of the Iowa Business
Corporation Act, Chapter 496A, Code of Iowa, the undersigned corporation adopts
the following Restated Articles of Incorporation:
ARTICLE I . . . . . . . . Name
The name of the corporation is POWER PLANT AGGREGATES OF IOWA, INC.
ARTICLE II . . . . . . . Duration
The period of its duration is perpetual.
ARTICLE III . . . . . . . Powers and Purposes
The corporation shall have unlimited power to engage in and to do
any lawful acts concerning any or all lawful businesses for which corporations
may be organized under this Act.
ARTICLE IV . . . . . . . Capital Stock
4.01 The aggregate number of shares which the corporation shall have
authority to issue is 2,500 shares of par value of $100.00 each.
4.02 The Directors shall have authority to make provisions in the
By-laws of the corporation restricting the transfer of shares of this
corporation.
ARTICLE V . . . . . . . . Limitation of Liability of Directors
A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for a breach of the director's duty
of loyalty to the corporation or its shareholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or knowing violation
of the law, (iii) for a transaction from which the director derived an improper
personal ____________________________________________________________________.
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<PAGE>
STATE OF IOWA :
: ss
COUNTY OF WOODBURY :
I, Byron Brower, being first duly sworn on oath, depose and state
that I am the President of Power Plant Aggregates of Iowa, Inc. and that I
executed the foregoing Restated Articles of Incorporation as the President of
the corporation and that the statements contained therein are true.
------------------------------
Byron Brower
Subscribed and sworn to before me by the above-named Byron Brower this
12th day of May, 1968.
------------------------------
Marvin S. Berenstein
Notary Public in and for the
State of Iowa
` My Commission Expires:
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<PAGE>
ARTICLES OF AMENDMENT OF
POWER PLANT AGGREGATES OF IOWA, INC.
Pursuant to Section 496A.58 of the Iowa Business Corporation Act, the
above corporation hereby files the following Articles of Amendment:
1. The name of the corporation is Power Plant Aggregates of Iowa, Inc.,
and the effective date of its incorporation was May 18, 1973, and its original
name was Power Plant Aggregates of Iowa, Inc.
2. Article V of the Restated Articles of Incorporation was amended to read
as follows:
A director of this Corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for a breach
of the director's duty of loyalty to the Corporation or its
shareholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violations of law, (iii)
for a transaction from which the director derived an improper
personal benefit, or (iv) under Section 493B.833 of the Iowa
Business Corporation Act.
3. Article VIII was adopted to read as follows:
A majority of votes of all outstanding shares of each class of
shares entitled to vote shall be required to elect directors.
4. The date of the adoption of the Amendment by the shareholders was
December 13th, 1989.
5. The total number of shares outstanding is 288 and there being only one
class of stock, all shares were voted in favor of the amendment.
6. The amendment will become effective December 31, 1989.
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<PAGE>
Dated this 13th day of December, 1989.
POWER PLANT AGGREGATES OF IOWA, INC.
By:
------------------------------------
BRYON BROWER, President
By:
------------------------------------
IRVING F. JENSEN, JR., Secretary
STATE OF IOWA, WOODBURY COUNTY, ss:
On this 13th day of December, 1989, before me, the undersigned, a Notary
Public in and for the State of Iowa, personally appeared Byron Brower to me
personally known, who being by me duly sworn, did say that he is the president
of the corporation executing the within and foregoing instrument to which this
is attached, that no seal has been procured by the corporation; that said
instrument was signed on behalf of the corporation by authority of its Board of
Directors; and that such officer acknowledged the execution of the foregoing
instrument to be the voluntary act and deed of the corporation, by it and by him
voluntarily executed.
By:
------------------------------------
NOTARY PUBLIC in and for Said State
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<PAGE>
Exhibit 3.8
BY-LAWS
OF
POWER PLANT AGGREGATES OF IOWA, INC.
------------------------
ARTICLE I.
OFFICES
The principal office of the corporation in the State of Iowa shall be
located in the City of Sioux City, Woodbury County. The corporation may have
such other offices, within or without the State of Iowa, as the business of the
corporation may require from time to time.
The registered office of the corporation required by the Iowa Business
Corporation Act to be continuously maintained in Iowa shall be initially as
provided in the Articles of Incorporation, subject to change from time to time
by resolution by the board of directors and filing of statement of said change
as required by the Iowa Business Corporation Act.
ARTICLE II.
SHAREHOLDERS
Section 1. Annual Meeting.
The annual meeting of the shareholders shall be held on the first Monday
in May in each year, beginning with the year 1974, at the hour of 10:00 A.M.,
for the purpose of electing directors and for the transactions of such other
business as may come before the meeting. If the day fixed for the annual meeting
shall be a legal holiday, such meeting shall be held on the next succeeding
business day. If the election of directors shall not be held on the day
designated
<PAGE>
herein for any annual meeting, or at any adjournment thereof, the board of
directors shall cause the election to be held at a meeting of the shareholders
as soon thereafter as conveniently may be.
Section 2. Special Meetings.
Special meetings of the shareholders may be called by the president, by
the board of directors or by the holders of not less than one-tenth of all the
shares entitled to vote at the meeting.
Section 3. Place of Meeting.
The board of directors may designate any place, either within or without
the State of Iowa, as the place of meeting for any annual meeting or for any
special meeting called by the board of directors. A waiver of notice signed by
all shareholders may designate any place, either within or without the State of
Iowa, as the place for the holding of such meeting. If no designation is made,
or if a special meeting be otherwise called, the place of meeting shall be the
registered office of the corporation in the State of Iowa.
Section 4. Notice of Meetings.
Written or printed notice stating the place, day and hour of the meeting
and, in case of a special meeting, the purpose or purposes for which the meeting
is called, shall be delivered not less than ten nor more than fifty days before
the date of the meeting, either personally or by mail, by or at the direction of
the president, the secretary or the officer or persons calling the meeting, to
each shareholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail,
addressed to the shareholder at his address as it appears on the stock transfer
books of the corporation, with postage thereon prepaid.
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<PAGE>
Section 5. Closing of Transfer Books and Fixing Record Date.
For the purpose of determining shareholders entitled to notice of or to
vote at any meeting of shareholders or any adjournment thereof, or entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purposes, the board of directors may provide
that the stock transfer books shall be closed for the stated period but not to
exceed, in any case, fifty days. If the stock transfer books shall be closed for
the purpose of determining shareholders entitled to notice of or to vote at a
meeting of shareholders, such books shall be closed for at least ten days
immediately preceding such meeting. In lieu of closing the stock transfer books,
the board of directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than fifty
days and, in case of a meeting of shareholders, not less than ten days prior to
the date on which the particular action, requiring such determination of
shareholders, is to be taken. If the stock transfer books are not closed and no
record date is fixed for the determination of shareholders entitled to notice of
or to vote at a meeting of shareholders, or shareholders entitled to receive
payment of a dividend, the date on which notice of the meeting is mailed or the
date on which the resolution of the board of directors declaring such dividend
is adopted, as the case may be, shall be the record date for such determination
of shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof.
Section 6. Voting list.
The officer or agent having charge of the stock transfer books for shares
of a corporation shall make, at least ten days before each meeting of
shareholders, a complete list of the
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<PAGE>
shareholders entitled to vote at such meeting or any adjournment thereof,
arranged in alphabetical order, with the address of and the number of shares
held by each, which list for a period of ten days prior to such meeting, shall
be kept on file at the registered office of the corporation and shall be subject
to inspection by any shareholder at any time during usual business hours. Such
list shall also be produced and kept open at the time and place of the meeting
and shall be subject to the inspection of any shareholder during the whole time
of the meeting. The original stock transfer books shall be prima facie evidence
as to who are the shareholders entitled to examine such list or transfer books
or to vote at any meeting of the shareholders.
Section 7. Quorum of Shareholders.
A majority of the shares entitled to vote, represented in person or by
proxy, shall constitute a quorum at a meeting of shareholders. If a quorum is
present, the affirmative vote of the majority of the shares represented at the
meeting and entitled to vote on the subject matter shall be the act of the
shareholders, unless the vote of a greater number of voting by classes is
required by the Iowa Business Corporation Act, the Articles of Incorporation, or
the By-laws.
Section 8. Proxies.
At all meetings of the shareholders, a shareholder may vote either in
person or by proxy executed in writing by the shareholder or by his duly
authorized attorney-in-fact. No proxy shall be valid after eleven months from
the date of its execution, unless otherwise provided in the proxy.
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<PAGE>
Section 9. Voting of Shares.
Subject to the provisions of Section 10 of this Article, each outstanding
share, regardless of class, shall be entitled to one vote upon each matter
submitted to vote at a meeting of shareholders, except to the extent that the
voting rights of the shares of any class or classes are limited or denied by the
Articles of Incorporation.
Section 10. Voting of Shares by Certain Holders.
Neither treasury shares nor, unless the Articles of Incorporation
otherwise provide, shares held by another corporation if a majority of the
shares entitled to vote for the election of directors of such other corporation
is held by this corporation, shall be voted at any meeting or counted in
determining the total number of outstanding shares at any given time.
Subject to the provisions of the foregoing paragraph of this section,
shares standing in the name of another corporation, domestic or foreign, may be
voted by such officer, agent or proxy as the By-laws of such corporation may
prescribe, or, in the absence of such provision, as the board of directors of
such corporation may determine.
Shares held by an administrator, executor, guardian or conservator may be
voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his name if authority so to do be
contained in an appropriate order of the court by which such receiver was
appointed.
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<PAGE>
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Section 11. Informal Action by Shareholders.
Any action required by the Iowa Business Corporation Act to be taken at a
meeting of the shareholders, or any action which may be taken at a meeting of
the shareholders, may be taken without a meeting if a consent in writing setting
forth the action so taken, shall be singed by all the shareholders entitled to
vote with respect to the subject matter thereof.
Section 12. Voting by Ballot.
Voting on any question or in any election may be viva voce unless the
presiding officer shall order or any shareholder shall demand that voting be by
ballot.
ARTICLE III.
DIRECTORS
Section 1. General Powers.
The business and affairs of the corporation shall be managed by its board
of directors.
Section 2. Number and Election of Directors.
The number of directors of the corporation shall be no fewer than three
nor more than seven. At the first annual meeting of shareholders and at each
annual meeting thereafter the shareholders shall elect directors to hold office
until the next succeeding annual meeting, and each director shall hold office
for the term for which he is elected and until his successor shall have been
elected and qualified.
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<PAGE>
Section 3. Regular Meetings.
A regular meeting of the board of directors shall be held without other
notice than this by-law, immediately after, and at the same place as, the annual
meeting of shareholders. The board of directors may provide by resolution the
time and place, either within or without the State of Iowa, for the holding of
additional regular meetings without other notice than such resolution.
Section 4. Special Meetings.
Special meetings of the board of directors may be called by or at the
request of the president or any two directors. The person or persons authorized
to call special meetings of the board of directors may fix any place, either
within or without the State of Iowa, as the place for holding any special
meeting of the board of directors called by them.
Section 5. Notice.
Notice of any special meeting shall be given at least five days previous
thereto by written notice delivered personally or mailed to each director at his
business address, or by telegram. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail so addressed and the postage
prepaid. If notice be given by telegram, such notice shall be deemed to be
delivered when the telegram is delivered to the telegraph company. The
attendance of a director at any meeting shall constitute a waiver of notice of
such meeting, except where a director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the board of directors need be
specified in the notice or waiver of notice of such meeting.
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<PAGE>
Section 6. Quorum.
A majority of the number of the directors fixed by these By-laws shall
constitute a quorum for the transaction of business; provided, that if less than
a majority of such number of directors are present at said meeting, a majority
of the directors present may adjourn the meeting from time to time without
further notice.
Section 7. Manner of Acting.
The act of the majority of the directors present at a meeting at which a
quorum is present shall be the act of the board of directors.
Section 8. Vacancies.
Any vacancy occurring in the Board of Directors and any directorship to be
filled by reason or an increase in the number of directors may be filled by the
affirmative vote of a majority of the directors then in office, even if less
than quorum of the board of directors. A director so elected shall be elected
for the unexpired term of his predecessor in office or the full term of such new
directorship.
Section 9. Compensation.
The board of directors, by the affirmative vote of a majority of directors
then in office, and irrespective of any personal interest of any of its members,
shall have authority to establish reasonable compensation of all directors for
services to the corporation as directors, officers, or otherwise. By resolution
of the board of directors the directors may be paid their expenses, if any, of
attendance at each meeting of the board.
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<PAGE>
Section 10. Presumption of Assent.
A director of the corporation who is present at a meeting of its board of
directors at which action on any corporate matter is taken shall be presumed to
have assented to the action taken unless his dissent shall be entered in the
minutes of the meeting or unless he shall file his written dissent to such
action with the person acting as secretary of the meeting before the adjournment
thereof or shall forward such dissent by registered or certified mail to the
secretary of the corporation immediately after the adjournment of the meeting.
Such right to dissent shall not apply to a director who voted in favor of such
action.
Section 11. Informal Action by Directors.
Any action required by the Iowa Business Corporation Act to be taken at a
meeting of directors of the corporation, or any action which may be taken at a
meeting of the directors or of a committee of directors, may be taken without a
meeting if a consent in writing setting forth the action so taken, shall be
signed by all of the directors or all of the members of the committee of
directors, as the case may be.
ARTICLE IV.
OFFICERS
Section 1. Number.
The officers of the corporation shall consist of a President, one or more
Vice Presidents, a Secretary and a Treasurer, and such Assistant Treasurers,
Assistant Secretaries, or other officers as may be elected or appointed by the
board of directors. Any two or more offices may be held by the same person.
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<PAGE>
Section 2. Election and Term of Office.
The officers of the corporation shall be elected annually by the board of
directors at the first meeting of the board of directors held after each annual
meeting of shareholders. If the election of officers shall not be held at such
meeting, such election shall be held as soon thereafter as conveniently may be.
Vacancies may be filled or new offices created and filled at any meeting of the
board of directors. Each officer shall hold office until his successor shall
have been duly elected and qualified or until his death or until he shall resign
or shall have been removed in the manner hereinafter provided. Election or
appointment of an officer or agent shall not of itself create contract rights.
Section 3. Removal.
Any officer or agent may be removed by the board of directors whenever in
its judgment the best interests of the corporation will be served thereby, but
such removal shall be without prejudice to the contract rights, if any, of the
person so removed.
Section 4. Vacancies.
A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by the board of directors for the
unexpired portion of the term.
Section 5. President.
The President shall be the principal executive officer of the corporation
and shall in general supervise and control all of the business and affairs of
the corporation, subject to the general powers of the board of directors. He
shall preside at all meetings of the shareholders and of the board of directors.
He may sign, with the secretary or any other proper officer of the corporation
thereunto authorized by the board of directors, certificates for shares of the
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<PAGE>
corporation, deeds, mortgages, bonds, contracts, or other instruments which the
board of directors has authorized to be executed, except in cases where the
signing and execution thereof shall be expressly delegated by the board of
directors or by these By-laws to some other officer or agent of the corporation,
or shall be required by law to be otherwise signed or executed. In general he
shall perform all duties incident to the office of President and such other
duties as may be prescribed by the board of directors from time to time.
Section 6. The Vice President(s).
In the absence of the President or in the event of his inability or
refusal to act, the Vice President (or in the event there be more than one Vice
President, the Vice Presidents in the order designated, or in the absence of any
designation then in the order of their election) shall perform the duties of the
President, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the President. Any Vice President may sign, with the
Secretary or an Assistant Secretary, certificates for shares of the corporation;
and shall perform such other duties as from time to time may be assigned to him
by the President or by the board of directors.
Section 7. The Treasurer.
If required by the board of directors, the Treasurer shall give a bond for
the faithful discharge of his duties in such sum and with such surety or
sureties as the board of directors shall determine. He shall have charge and
custody of and be responsible for all funds and securities of the corporation;
receive and give receipts for moneys due and payable to the corporation; and
deposit all such moneys in the name of the corporation in such banks, trust
companies or other depositaries as shall be selected in accordance with the
provisions of Article V of these By-laws. He shall in general perform all duties
incident to the office of Treasurer and such other duties as from time to time
may be assigned to him by the President or by the board of directors.
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<PAGE>
Section 8. The Secretary.
The Secretary shall keep the minutes of the shareholders and of the board
of directors meetings in one or more books provided for that purpose; see that
all notices are duly given in accordance with the provisions of these By-laws or
as required by law; be custodian of the corporate records and of the seal of the
corporation and see that the seal of the corporation is affixed to all
certificates for shares prior to the issue thereof and to all documents, the
execution of which on behalf of the corporation under its seal is duly
authorized in accordance with the provisions of these By-laws; keep a register
of the post office address of each shareholder which shall be furnished to the
Secretary by such shareholder; sign with the President, or a Vice President,
certificates for shares of the corporation, the issue of which shall have been
authorized by resolution of the board of directors; have general charge of the
stock transfer books of the corporation; and in general perform all duties
incident to the office of Secretary and such other duties as from time to time
may be assigned to him by the President or by the board of Directors.
Section 9. Assistant Treasurers and Assistant Secretaries.
The Assistant Treasurers shall respectively, if required by the board of
directors, give bonds for the faithful discharge of their duties in such sums
and with such sureties as the board of directors shall determine. The Assistant
Secretaries as thereunto authorized by the board of directors may sign with the
President or a Vice President certificates for shares of the corporation, the
issue of which shall have been authorized by a resolution of the board of
directors. The Assistant Treasurers and Assistant Secretaries, in general, shall
perform such duties as shall be assigned to them by the Treasurer or the
Secretary, respectively, or by the President or the board of directors.
-12-
<PAGE>
Section 10. Salaries.
The salaries of the offices shall be fixed from time to time by the board
of directors and no officer shall be prevented from receiving such salary by
reason of the fact that he is also a director of the corporation.
ARTICLE V.
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts.
The board of directors may authorize any officer or officers, agent or
agents, to enter into any contract or execute and deliver any instrument in the
name of and on behalf of the corporation, and such authority may be general or
confined to specific instances.
Section 2. Loans.
No loans shall be contracted on behalf of the corporation and no evidence
of indebtedness shall be issued in its name unless authorized by a resolution of
the board of directors. Such authority may be general or confined to specific
instances.
Section 3. Checks, Drafts, Etc.
All checks, drafts, or other orders for the payment of money, notes or
other evidences of indebtedness issued in the name of the corporation, shall be
signed by such officer or officers, agent or agents of the corporation and in
such manner as shall from time to time be determined by resolution of the board
of directors.
-13-
<PAGE>
Section 4. Deposits.
All funds of the corporation not otherwise employed shall be deposited
from time to time to the credit of the corporation in such banks, trust
companies or other depositaries as the board of directors may select.
ARTICLE VI.
CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificates for Shares.
Subject to the provisions of Section 22 of the Iowa Business Corporation
Act, certificates representing shares of the corporation shall be in such form
as may be determined by the board of directors. Such certificates shall be
signed by the President or a Vice President and the Secretary or an Assistant
Secretary of the corporation and shall be sealed with the seal of the
corporation or a facsimile thereof. The signatures of the President or Vice
President and the Secretary or Assistant Secretary upon a certificate may be
facsimiles if the certificate is countersigned by a transfer agent, or
registered by a registrar, other than the corporation itself or an employee of
the corporation. All certificates for shares shall be consecutively numbered or
otherwise identified. The name of the person to whom the shares represented
thereby are issued, with the number of shares and date of issue, shall be
entered on the books of the corporation. All certificates surrendered to the
corporation for transfer shall be canceled and no new certificate shall be
issued until the former certificate for a like number of shares shall have been
surrendered and canceled, except that in case of a lost, destroyed or mutilated
certificate a new one may be issued therefor upon such terms and indemnity to
the corporation as the board of directors may prescribe.
-14-
<PAGE>
Section 2. Transfers of Shares.
Subject to the rights conferred by Iowa Code ss.ss.554.8101554.8406
(1966), transfers of shares of the corporation shall be made only on the books
of the corporation by the holder of record thereof or by his legal
representative, who shall furnish proper evidence of authority to transfer, or
by his attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the corporation, and only on surrender for
cancellation of the certificate for such shares. Except as otherwise provided by
law, the person in whose name shares stand on the books of the corporation shall
be deemed the owner thereof for all purposes as regards the corporation.
SEE SECTION 3 RESTRICTION OF SALE ON PAGE By-Laws #16
ARTICLE VII.
FISCAL YEAR
The fiscal year of the corporation shall begin on the first day of April
in each year and end on the last day of March in each year.
ARTICLE VIII.
DIVIDENDS
The board of directors may, from time to time, declare and the corporation
may pay dividends on its outstanding shares in the manner and upon the terms and
conditions provided by the Iowa Business Corporation Act.
ARTICLE IX.
SEAL
The corporation shall have no seal.
-15-
<PAGE>
ARTICLE X.
WAIVER OF NOTICE
Whenever any notice is required to be given to any shareholder or director
of the corporation under the provisions of the Iowa Business Corporation Act or
under the provisions of the Articles of Incorporation By-laws of the
corporation, a waiver thereof in writing signed by the person or persons
entitled to such notices, whether before or after the time stated therein, shall
be equivalent to the giving of such notice.
ARTICLE XI.
AMENDMENTS
These By-laws may be altered, amended or repealed and new By-laws may be
adopted at any meeting of the board of directors of the corporation by a
majority vote of the directors present at the meeting.
-16-
<PAGE>
STOCKHOLDERS MEETING January 26, 1977
AMENDMENT TO ARTICLE VI
Section 3 Restriction of Sale
"The sale of all issued and outstanding shares of the capital stock of the
Company shall be subject to the following restrictions:
A. No sale shall be made by a stockholder of any shares of the Company
owned by him before offering in writing to sell the shares to the other
stockholders of the Company pro-rata based upon such other stockholders
percentage of ownership of the then issued and outstanding shares of the
Company. Such offer must be made at a price of 75% of the book value of such
shares determined as of the year end of the fiscal year preceding offer and
shall be open for a period of 90 days from the date of the giving of written
notice of a desire to sell. Sales shall be for cash only. The percentage of
shares which are not purchased by stockholders having the right to do so may be
purchased by those stockholders desiring to so purchase shares upon a pro-rata
basis.
B. Upon the expiration of the 90 day period provided in A above, the
Company shall have a 90 day period during which to purchase the shares offered
for sale by a stockholder upon the same terms and conditions as provided in A
above.
C. Upon the expiration of the two 90 day periods set forth above, a
stockholder shall be free to sell his shares at any price to any person,
corporation, partnership, etc.
D. All stock certificates of the Company shall be inscribed with a legend
referring to this restriction of sale."
------------------------------------
Irving F. Jensen, Jr. -- Secretary
<PAGE>
POWER PLANT AGGREGATES OF IOWA, INC.
AMENDMENT OF BY-LAWS OF POWER PLANT AGGREGATES OF IOWA, INC.
ARTICLE XII.
INDEMNIFICATION
Each director and officer (whether or not he continues to be a director or
officer) shall be indemnified by the Corporation to the maximum extent
authorized under the Iowa Business Corporation Act, or as permitted by law. The
foregoing right of indemnification shall not be exclusive of other rights to
which any director or officer may be entitled as a matter of law, or other
appropriate corporate action.
(The Amendment will also apply to actions, suits, and proceedings based
upon alleged acts or omissions occurring prior to the adoption thereof.)
ADOPTED this 7th day of May 1979
----------------------------------
Irving F. Jensen, Jr., - Secretary
We the undersigned being the Board of Directors of said Corporation hereby
consent to the foregoing amendment to By-Laws.
- ---------------------------------
Byron Brower
- ---------------------------------
Richard A. Pollard, Jr.
- ---------------------------------
Irving F. Jensen, Jr.
- ---------------------------------
Richard A. Everist
<PAGE>
By-Laws #16
December 18, 1981
POWER PLANT AGGREGATES OF IOWA, INC.
AMENDMENT TO ARTICLE VI -- SECTION 3 RESTRICTION OF SALE
"The sale of all issued and outstanding shares of the capital stock of the
Company shall be subject to the following restrictions:
A. No sale shall be made by a stockholder of any shares of the Company
owned by him before offering in writing to sell the shares to the other
stockholders of the Company pro-rata based upon such other stockholders
percentage of ownership of the then issued and outstanding shares of the
Company. Such offer must be made at a price of 75% of the book value of such
shares determined as of the year end of the fiscal year preceding offer and
shall be open for a period of 90 days from the date of the giving of written
notice of a desire to sell. Sales shall be for cash only. The percentage of
shares which are not purchased by stockholders having the right to do so may be
purchased by those stockholders desiring to so purchase shares upon a pro-rata
basis.
B. Upon the expiration of the 90 day period provided in A above, the
Company shall have a 90 day period during which to purchase the shares offered
for sale by a stockholder upon the same terms and conditions as provided in A
above.
C. Upon the expiration of the two 90 day periods set forth above, a
stockholder shall be free to sell his shares at any price to any person,
corporation, partnership, etc.
D. All stock certificates of the Company shall be inscribed with a legend
referring to this restriction of sale."
----------------------------------
Irving F. Jensen, Jr., - Secretary
We the undersigned being the Board of Directors of said Corporation hereby
consent to the foregoing amendment to By-Laws.
- --------------------------------- ---------------------------------
Byron Brower Colin C. Jensen
- --------------------------------- ---------------------------------
T.S. Everist Irving F. Jensen, Jr.
- ---------------------------------
Richard E. Everist
<PAGE>
AMENDMENT OF BY-LAWS ARTICLE XII OF
POWER PLANT AGGREGATES OF IOWA, INC.
ARTICLE XII - of the By-Laws of the Corporation shall be amended to read as
follows:
INDEMNIFICATION
That each director and officer of the Corporation now or hereafter serving
as such, shall be indemnified by the corporation against any and all claims and
liabilities to which he has or shall become subject by reason of serving or
having served as such director or officer, or by reason of any action alleged to
have been taken, omitted, or neglected by him as such director or officer; and
the corporation shall reimburse each such person for all legal expenses
reasonably incurred by him in connection with any such claim or liability,
provided, however, that no such person shall be indemnified against, or be
reimbursed for any expense incurred in connection with, and claim or liability
arising out of a breach of the director's duty of loyalty to the corporation or
its stockholders, for the acts or omissions not in good faith or which involve
intentional misconduct or knowing violation of the law, for a transaction from
which the director derives an improper personal benefit or for liability arising
under 496A.44 of the Code of Iowa.
----------------------------------
Irving F. Jensen, Jr., - Secretary
- ----------------------------------
Byron Brower - President
<PAGE>
To whom it may concern:
The undersigned, constituting all of the holders of common stock of Power
Plan Aggregates of Iowa, Inc. agree with the corporation and with each other
that notwithstanding the provisions of Article VI of the By-laws of the
corporation, T.S. Everist may transfer by sale or gift all of his stock in the
corporation to his son, Thomas Everist, Jr., and all shareholders waive any
right to purchase the stock of T.S. Everist. It is understood and agreed that
the newly issued stock shall be subject to all restrictions for transfers set
forth in the By-laws and such a notation shall be placed on the stock
certificate.
Signed this ___ day of September, 1989.
----------------------------------
BYRON BROWER
----------------------------------
T.S. EVERIST
----------------------------------
RICHARDA. EVERIST
----------------------------------
COLIN C. JENSEN
----------------------------------
IRVING F. JENSEN, JR.
----------------------------------
ERIK M. JENSEN
<PAGE>
ADDENDUM TO BY-LAWS
The undersigned, constituting all of the holders of common stock of Power
Plant Aggregates of Iowa, Inc. and all the directors of same, agree with the
corporation and with each other that, notwithstanding the provisions of Article
VI of the By-laws of the corporation, stock may be transferred by T.S. Everist,
Thomas Everist, Jr., and Richard A. Everist to Thomas Everist, Jr., Robert
Everist or Richard Everist, and may be transferred by Colin C. Jensen, Irving F.
Jensen, Jr., and Erik Jensen to Mark Jensen, Irving F. Jensen, III, or Colin C.
Jensen, Jr. Further, any stockholder may transfer their stock into a trust for
the stockholder's benefit. Any transferee shall receive and hold the stock
subject to the terms of the By-laws and there shall be no further transfer of
the stock except in accordance with the terms of the By-laws.
This Addendum may be executed in counterparts.
Signed this 31st day of December, 1992.
POWER PLANT AGGREGATES OF IOWA, INC.
BY:
----------------------------------
BY:
----------------------------------
- ---------------------------------- ----------------------------------
Byron Brower Colin C. Jensen
- ---------------------------------- ----------------------------------
T.S. Everist Irving F. Jensen, Jr.
- ---------------------------------- ----------------------------------
Thomas Everist, Jr. Erik M. Jensen
- ---------------------------------- ----------------------------------
Richard E. Everist Mark R. Jensen
- ---------------------------------- ----------------------------------
Colin C. Jensen, Jr. Irving F. Jensen, III
<PAGE>
Exhibit 3.9
MICHIGAN DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES
Lansing, Michigan
This is to Certify That
MICHIGAN ASH SALES COMPANY
was incorporated on August 3, 1967, as a Michigan profit corporation, and said
corporation is in existence under the laws of this State.
This certificate is issued to attest to the fact that the corporation is in good
standing in this office as of this date and is duly authorized to transact
business or conduct affairs in Michigan and for no other purpose. It is in the
usual form, made by me as the proper officer, and is entitled to have full faith
and credit given it in every court and office within the United States.
In testimony whereof, I have hereunto set my hand
and affixed the Seal of the Department, in the City
of Lansing, this 19th day of February, 1998.
, Director
Corporation, Securities and Land Development Bureau
<PAGE>
MICHIGAN DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES
Lansing, Michigan
This is to Certify that the Annexed copy has been compared by me with the record
on file in this Department and that the same is a true copy thereof.
In testimony whereof, I have hereunto set my hand
and affixed the Seal of the Department, in the City
of Lansing, this 19th day of February, 1998.
, Director
Corporation, Securities and Land Development Bureau
-2-
<PAGE>
STATE OF MICHIGAN
CORPORATION AND SECURITIES COMMISSION
LANSING, MICHIGAN
- --------------------------------------------------------------------------------
DO NOT WRITE IN SPACE BELOW -- FOR COMMISSION USE
- --------------------------------------------------------------------------------
Compared by:
Date Received:
- ------------------------------------------------------------------
Date:
- -----------------------------------
- ------------------------------------------------------------------
Examiner:
- -----------------------------------
- -----------------------------------
- -----------------------------------
- --------------------------------------------------------------------------------
ARTICLES OF INCORPORATION
These Articles of Incorporation are signed and acknowledged by the incorporators
for the purpose of forming a corporation for profit under the provisions of Act
No. 327 of the Public Acts of 1931, as amended, as follows:
ARTICLE I.
The name of the corporation is MICHIGAN ASH SALES COMPANY
--------------------------------------------------
- --------------------------------------------------------------------------------
ARTICLE II.
The purpose or purposes for which the corporation is formed are as follows:
To buy, distribute, market, sell or otherwise dispose of at wholesale or retail,
fly ash materials and compounds, solutions, mixtures, liquids, articles,
materials, chemical supplies, preparations, and substances, of every nature and
description; to buy, sell, lease, and mortgage and deal in personal property or
real estate, in carrying on the business of the company; to own, buy and sell
stock in other corporations, and to invest in mortgages and land contracts.
In general to carry on any business in connection therewith and incident thereto
not forbidden by the laws of the State of Michigan and with all the powers
conferred upon corporation by the laws of the State of Michigan.
ARTICLE III.
Location of the first registered office in:
400 Martin Street, Bay City Bay Michigan 48706
- ------------------------------------------------------- ----------
(No.) (Street) (City) (County) (Zip Code)
Postoffice address of the first registered office is:
400 Martin Street, Bay City Michigan 48706
- ------------------------------------------------------- ----------
(No. and Street or P.O. Box) (City) (Zip Code)
- -------------------------------------------------------
ARTICLE IV.
The name of the first resident agent is Jack Wirt
----------------------------------------
-3-
<PAGE>
ARTICLE V.
The total authorized capital stock
(1) _________________________________ _______________________
per share
Common shs. 50,000 Par Value $1.00
--------------------- -------------
-------------
per share
-------------
--------------------
-------------
per share
-------------------- -------------
(3) A statement of all or any of the designation and the powers,
performances and rights, and the qualifications, limitations or restriction
thereof is as follows:
None
ARTICLE IV.
The names and places of residence or businesses of each of the Incorporators and
the number and class of shares subscribed for each are as follows: (Statute
requires one or more incorporators)
================================================================================
Number of Shares
Name Residence or Business Address
----------------------------
Par Stock
----------------------------
(No.) (Street) (City) (State)
----------------------------
Common
- --------------------------------------------------------------------------------
Jack Wirt, 400 Martin St. Bay City, Michigan 1000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ARTICLE VII.
The names and addresses of the first board of directors are as follows:
(Statute requires at least three directors)
================================================================================
Name Residence or Business Address
(No.) (Street) (City) (State)
- --------------------------------------------------------------------------------
Jack Wirt 400 Martin Street, Bay City, Michigan
- --------------------------------------------------------------------------------
Alice Wirt 400 Martin Street, Bay City, Michigan
- --------------------------------------------------------------------------------
Ralph J. Jackson 201 Phoenix Building, Bay City, Michigan
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ARTICLE VIII.
The term of the corporate existence is perpetual.
(If term is for a limited number of years, then state the number of years
instead of perpetual)
-4-
<PAGE>
ARTICLE IX.
Whenever a compromise or arrangement or any plan of reorganization of this
corporation is proposed between this corporation and its creditors of any class
of them and/or between this corporation and its shareholders or any class of
them, any court of equity jurisdiction within the State of Michigan, may on the
application of this corporation or of any creditor or any shareholder thereof,
or on the application of any receiver or receivers appointed for this
corporation, order a meeting of the creditors or class of creditors, and/or of
the shareholders or class of shareholders, as the case may be, to be affected by
the proposed compromise or arrangement or reorganization, to be summoned in such
manner as said court directs. If a majority in number representing three-fourths
in value of the creditors or class of creditors, and/or of the shareholders or
class shareholders, as the case may be, to be affected by the proposal
compromise or arrangement or reorganization, agree to any compromise or
arrangement or to any reorganization of this corporation as a consequence of
such compromise or arrangement, said compromise or arrangement and said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the shareholders or class of shareholder, as the case may be, and also on
this corporation.
ARTICLE X.
(Here insert any desired additional provisions authorized by the Act.)
We, the incorporators, sign our name this 1st day of August, 1967
(All parties appearing under Article VI are required to sign in this space)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Jack Wirt
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATE OF MICHIGAN ) (One or more of the parties signing must acknowledge
ss. before the Notary)
COUNTY OF BAY )
On this _____ day of August 1967 before me personally appeared ________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
to me known to be the persons described is and who executed the foregoing
instrument, and acknowledged that they executed the same as their free act and
deed.
-------------------------------
(Signature of Notary)
-------------------------------
(Print or type name of Notary)
MAIL THREE SIGNED AND ACKNOWLEDGED Notary Public for Bay County,
COPIES TO: State of Michigan.
Michigan Corporation & Securities Commission My commission expires _________
(Notarial seal required if
P.O. Box 898 Lansing, Michigan 48904 acknowledgment taken out of
State)
-5-
<PAGE>
- --------------------------------------------------------------------------------
MICHIGAN DEPARTMENT OF COMMERCE -- CORPORATION AND SECURITIES BUREAU
- --------------------------------------------------------------------------------
(FOR BUREAU USE ONLY) Date Received
--------------------------
--------------------------
--------------------------
- --------------------------------------------------------------------------------
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
For use by Domestic Corporations
(Please read information and instructions on last page)
Pursuant to the provisions of Act 284, Public Acts of 1972 (profit
corporations), or Act 162, Public Acts of 1982 (nonprofit corporations), the
undersigned corporation executes the following Certificate:
- --------------------------------------------------------------------------------
1. The present name of the corporation is: MICHIGAN ASH SALES COMPANY
2. The corporation identification number (CID) assigned by the Bureau is:
--------
005--309
--------
3. The location of its registered office is:
400 Martin Bay City , Michigan 48706
---------------------------------------------------- -------------
(Street) (City) (Zip Code)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. A new Article X of the Articles of Incorporation is hereby added to read
as follows:
See attached.
- --------------------------------------------------------------------------------
-6-
<PAGE>
Article X
No director of the Corporation shall be held personally liable to the
Corporation or its shareholders for monetary damages for any breach of fiduciary
duty as a director; provided, however, that this provision does not limit or
eliminate a director's liability for: breaching the duty of loyalty to the
Corporation or its shareholders, failing to act in good faith, engaging in
intentional misconduct, knowingly violating a law, violating Section 551(1) of
the Michigan Business Corporation Act or obtaining an improper personal benefit.
If the Michigan Business Corporation Act is amended to authorize corporate
action further eliminating or limiting the personal liability of directors, then
the liability of a director of the Corporation shall be eliminated or limited to
the fullest extent permitted by the Michigan Business Corporation Act, as so
amended.
Any repeal or modification of the foregoing paragraph shall not adversely
affect any right or protection of a director of the Corporation existing at the
time of such repeal or modification.
-7-
<PAGE>
5. COMPLETE SECTION (a) IF THE AMENDMENT WAS ADOPTED BY THE UNANIMOUS
CONSENT OF THE INCORPORATOR(S) BEFORE THE FIRST MEETING OF THE BOARD OF
DIRECTORS OR TRUSTEES; OTHERWISE, COMPLETE SECTION (b)
a. |_| The foregoing amendment to the Articles of Incorporation was duly adopted
on the ___ day of ______________, 19__, in accordance with the provisions
of the Act by the unanimous consent of the incorporator(s) before the
first meeting of the board of directors or trustees.
Signed this day of , 19
------- ---------------------------------------- --
--------------------------------- -----------------------------------
(Signature) (Signature)
--------------------------------- -----------------------------------
(Type or Print Name) (Type or Print Name)
--------------------------------- -----------------------------------
(Signature) (Signature)
--------------------------------- -----------------------------------
(Type or Print Name) (Type or Print Name)
b. |X| The foregoing amendment to the Articles of Incorporation was duly adopted
on the 6th day of December, 1991. The amendment: (check one of the
following)
|_| was duly adopted in accordance with Section 611(2) of the Act by the
vote of the shareholders if a profit corporation, or by the vote of
the shareholders or members if a nonprofit corporation, or by the
vote of the directors if a nonprofit corporation organized on a
nonstock directorship basis. The necessary votes were cast in favor
of the amendment.
|_| was duly adopted by the written consent of all the directors pursuant
to Section 525 of the Act and the corporation is a nonprofit
corporation organized on a nonstock directorship basis.
|_| was duly adopted by the written consent of the shareholders or
members having not less than the minimum number of votes required by
statute in accordance with Section 407(1) and (2) of the Act if a
nonprofit corporation, and Section 407(1) of the Act if a profit
corporation. Written notice to shareholders or members who have not
consented in writing has been given. (Note: Written consent by less
than all of the shareholders or members is permitted only is such
provision appears in the Articles of Incorporation.
-8-
<PAGE>
|_| was duly adopted by the written consent of all the shareholders or
members entitled to vote in accordance with Section 407(3) of the Act
if a non-profit corporation, and Section 407(2) of the Act is a
profit corporation.
Signed this 6th day of December, 1991
By
--------------------------------------------
(Only signature of: President,
Vice-President, Chairperson and
Vice-Chairperson)
--------------------------------------------
(Type or Print Name) (Type or Print Title)
-9-
<PAGE>
Exhibit 3.10
BY-LAWS OF MICHIGAN ASH SALES COMPANY
Adopted at a meeting of stockholders held on the 3rd day of August, 1967.
OFFICES
1. The principal office of the corporation shall be in the City of Bay
City, Bay County, Michigan, and the business office of the corporation shall be
in the City of Bay City, Bay County, Michigan. The corporation may also have
offices at such other places as the board of directors may from time to time
appoint or the business of the corporation may require.
MEETING OF STOCKHOLDERS
2. The annual meeting of the stockholders of the corporation for the
election of directors and the transaction of such other business as may properly
come before the meeting shall be held at the principal business office of the
corporation in the State of Michigan, on the 3rd Monday in May, at the hour of
2:00 P.M., in each year, commencing in 1968, if not a legal holiday, and if a
legal holiday, then on the next regular day following at 2:00 P.M. in the
afternoon. Notice of the annual meeting of the stockholders shall be given by
mailing at least ten (10) days previous to such meeting, postage prepaid, a
notice thereof addressed to each common stockholder at such address as shall
appear on the books of the corporation.
3. The holders of a majority of the voting stock issued and outstanding
present in person or represented by proxy is requisite and shall constitute a
quorum at all meetings of the stockholders for he transaction of business except
as otherwise provided by law or by the articles of incorporation or by these
by-laws. If such majority shall not be present or represented, those present in
person or by proxy shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until the requisite
amount of stock shall be present, when any business may be transacted which
might have been transacted at the meeting as originally notified.
4. Special meetings of the stockholders for any purpose or purposes other
than those regulated by statute, may be called by resolution of the board of
directors or by the president, and shall be called by the president and
secretary at the request in writing of a majority of the board of directors, or
at the request in writing by stockholders owning fifty (50) per cent of the
voting stock of the company issued and outstanding. In case of refusal of the
president or secretary to call a meeting when so requested, stockholders of
record owning twenty-five (25) per cent or more of outstanding voting shares may
call a meeting in the manner prescribed herein. Business transacted at all
special meetings shall be confined to the objects stated in the call and matters
germane thereto. Written notice of a special meeting of stockholders stating the
time, place and object thereof shall be mailed, postage prepaid, at least three
days before the meeting to each common stockholder at such address as shall
appear on the books of the company.
<PAGE>
DIRECTORS
5. In accordance with the articles of incorporation, the affairs of the
corporation shall be managed by a board of not less than three nor more than
five directors. Directors need not be stockholders and they shall be elected at
the annual meeting of the corporation, to serve for one year and until
successors are elected and qualified. Any director may be removed from office by
vote of a majority of outstanding voting shares at a meeting of stockholders
duly called for such purpose. A vacancy caused by such removal shall be filled
in like manner. The board of directors may designate an operating, financial, or
other committee from among the members of such board, upon proper resolution
defining and limiting the authority of such committee or committees, and action
duly taken by a majority of such committee or committees shall be deemed
corporate action and binding upon the corporation, if within the scope of the
resolution appointing such committee.
COMPENSATION OF DIRECTORS
6. Directors as such shall not receive any stated salary for their
service; by resolution of the board a fixed sum and expenses of attendance, if
any, may be allowed for attendance at any meeting. Nothing herein contained
shall be construed to preclude any director from serving the corporation in any
other capacity and receiving compensation therefor.
MEETINGS OF THE BOARD
7. Regular meetings of the board shall be held annually on the 3rd Monday
in May, at the hour of 3:00 P.M. in the afternoon, in each year, commencing in
1968, at the office of the company and/or at such other time as the board of
directors may by resolution appoint. Special meetings of the board may be called
by the president on three days' notice to each director, either personally or by
mail or by wire; special meetings shall be called by the president or secretary
on the written request of two directors. In case of refusal of the president or
secretary to call a meeting upon request of directors, call for such meeting may
be signed by two or more directors and notice given in the manner provided for
herein. At all meetings of the board the presence of a majority shall be
necessary to constitute a quorum and sufficient for the transaction of business
and any act of a majority present at a meeting, at which there is a quorum,
shall be the act of the board of directors, except as may be otherwise
specifically provided by statute, or by the Articles of Association or those
by-laws.
OFFICERS
8. The officers of the corporation shall be a president, vice-president,
secretary, and treasurer, who shall hold office for one year and until their
successors are chosen and qualified in the stand. Any officer elected or
appointed by the board of directors may be removed at any time by the
affirmative vote of a majority of the whole board of directors. Any two of the
above
- 2 -
<PAGE>
offices, except those of president and vice-president, may be held by the same
person, but no officer shall execute, acknowledge, or verify any instrument in
more than one capacity. The board of directors may fix the salaries of the
officers of the corporation.
9. The board of directors, immediately after each annual meeting of
stockholders, shall appoint from their own number a president, vice-president,
and secretary, and shall also choose a treasurer who need not be a member of the
board; and a majority of the whole number of directors shall be necessary for
appointment of each of said officers.
PRESIDENT
10. The president shall preside at meetings of the stockholders and
directors and shall see that all orders and resolutions of the board of
directors are carried into effect, subject, however, to the rights of the
directors to delegate any specific powers except as may be by law conferred upon
the president, to any other officer of the corporation.
VICE-PRESIDENT
11. The vice-president, in the absence of the president, shall perform the
duties and exercise the powers of the president.
SECRETARY
12. The secretary shall attend all sessions of the board and all meetings
of the stockholders and act as clerk thereof, and record all votes and the
minutes of all proceedings in a book to be kept for that purpose, and shall
perform like duties for any committee of the board when required. He shall cause
to be given notice of all meetings of the stockholders and directors and shall
perform such duties as pertaining to his office. He shall keep in safe custody
the said records of the corporation,; he shall countersign all deeds, leases,
and conveyance executed by the corporation, affix the seal of the corporation
thereto and to such other papers all shall be required or directed to be sealed
and to safely and systematically keep all books, papers, records and documents
belonging to the corporation or in any way pertaining to the business thereof.
TREASURER
13. The treasurer shall have the custody of all the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements and books belonging to the corporation and shall deposit all
monies and other valuable effects in the name and to the credit of the
corporation in such depositories as he may see fit. The board may secure the
fidelity of any officer by bond or otherwise.
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<PAGE>
VACANCIES
14. Except as otherwise provided by law or these by-laws if the office of
any director or president, vice-president, secretary, treasurer, or other
officer or agent is or remains unfilled or becomes vacant for any reason, the
directors in office, although less than a majority than the whole board, by a
majority vote may choose a director or successor officer who shall hold office
the unexpired term.
LOST CERTIFICATE
15. Any person claiming a certificate of stock to be lost or destroyed
shall make an affidavit or affirmation of that fact and advertise the same in
such manner as the board may required and shall give the corporation a bond of
indemnity in form and with one or more sureties satisfactory to the board, in at
least double the par value of the stock represented by said certificate,
whereupon a new certificate may be issued of the same tenor and for the same
number of shares as the one alleged to be lost or destroyed but always subject
to the approval of the board of directors.
TRANSFER OF STOCK
16. Transfer of stock shall be made on the books of the corporation by the
person named in the certificate or by his attorney or by his attorneys, lawfully
constituted, and upon surrender of such certificate. Every transfer of stock
shall be entered on the stock book of the corporation which shall be kept at its
principal office of business in Michigan. The corporation shall be entitled to
treat the holder of record of any share or shares of stock as the holder in fact
thereof and accordingly shall not be bound to recognize any equitable or other
claim to or interest in such share on the part of any other person, unless it
shall have express or other notice thereof, or as provided by the laws of the
State of Michigan. The corporation shall have the first lien on all the shares
of the capital stock and upon all dividends declared upon the same for any
indebtedness of the respective holders there notice and proceedings as provided
by statute.
VOTING
17. Each holder of voting stock of record shall be entitled at every
meeting of the corporation to cast one vote for each share of stock outstanding
in the name of such stockholder and such voting may be cumulative and may be
either by person or by proxy, subject, however, to the limitations, restrictions
and preference as set forth in the Articles of Incorporation, and statutes of
the State of Michigan.
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<PAGE>
CHECKS, DRAFTS, PROMISSORY NOTES, ETC.
18. All monies of the corporation other than petty cash shall be disposed
of by check or draft only, same to be executed in the corporation by either the
president or the secretary, or those other officers as the board of directors
may from time to time determine. Promissory notes shall be signed on behalf of
the corporation by the president or secretary, or such other officers as the
directors may from time to time determine. Mortgages and conditional sales
contracts may be executed and assigned by the president or secretary, or such
other officers as the board may from time to time determine.
NOTICE
19. Whenever under the provisions of these by-laws notice is required to
be given to any director, officer or stockholder, it shall not be construed to
mean personal notice, but such notice may be given in writing by depositing the
same in a post office or letter box in a postpaid sealed wrapper, addressed to
such stockholder, officer or director at such address as appears on the books of
the corporation or in default of other address to such stockholder, officer or
director at such address, to such stockholder at the general post office in the
City of Bay City, Bay County, Michigan, and such notice shall be deemed to have
been given at the time when the same was thus mailed.
FISCAL YEAR
20. The fiscal year of the corporation shall commence on the first day of
April and end on the 31st day of March, of each year.
AMENDMENTS
21. These by-laws may not be amended, altered or repealed in any
particular without the affirmative vote of a majority of outstanding voting
stock of the corporation.
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<PAGE>
Exhibit 3.11
UNITED STATES OF AMERICA
Michigan Department of Consumer and Industry Services
Lansing, Michigan
This is to Certify That
FLO FIL CO., INC.
was incorporated on August 26, 1987, as a Michigan profit corporation,
and said corporation is
This certificate is issued to attest o the fact that the corporation is in good
standing in this office as of this date and is duly authorized to transaction
business or conduct affairs in Michigan and for no other purpose. It is in the
usual form, made by me as the proper officer, and is entitled to have full faith
and credit given it in every court and office within the United States.
In testimony whereof, I have hereunto set my
hand and affixed the Seal of the Department
in the City of Lansing, this 19th day of
February, 1998.
, Director
173 Corporation, Securities and Land Development Bureau
<PAGE>
UNITED STATES OF AMERICA
Michigan Department of Consumer and Industry Services
Lansing, Michigan
This is to Certify that the Annexed copy has been compared by me with the record
on file in this Department and that the same is a true copy thereof.
In testimony whereof, I have hereunto set my
hand and affixed the Seal of the Department
in the City of Lansing, this 19th day of
February, 1998.
, Director
172 Corporation, Securities and Land Development Bureau
<PAGE>
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MICHIGAN DEPARTMENT OF COMMERCE -- CORPORATION AND SECURITIES BUREAU
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(FOR BUREAU USE ONLY) Date Received
------------------
------------------
------------------
EFFECTIVE DATE:
- --------------------------------------------------------------------------------
CORPORATION IDENTIFICATION NUMBER 394--832
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ARTICLES OF INCORPORATION
For use by Domestic Profit Corporation
(Please read instructions and Paperwork Reduction Act notice on last page)
Pursuant to the provisions of Act 284, Public Acts of 1972, as amended,
the undersigned corporation executes the following Articles:
Article I
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The name of the corporation is:
FLO FIL Co., Inc.
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Article II
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The purpose or purposes for which the corporation is organized is to engage in
any activity withing the purposes for which corporations may be organized under
the Business Corporation Act of Michigan.
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Article III
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The total authorized capital stock is:
1. Common Shares 50,000 ParValue Per Share $ 1.00
--------------------------------- -------
Preferred Shares ParValue Per Share $
------------------------------- -------
and/or shares without part value as follows:
2. Common Shares ParValue Per Share $
--------------------------------- -------
Preferred Shares ParValue Per Share $
------------------------------- -------
3. A statement of all or any of the relative rights, preferences and
limitation of the shares of each class is as follow:
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<PAGE>
Article IV
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1. The address of the registered office is:
1088 Scheurmann Essexville Michigan 48732
-----------------------------------------------------------
(Street Address) (City) (State) (Zip Code)
2. The mailing address of the registered office if different than above:
Michigan
-----------------------------------------------------------
(Street Address) (City) (State) (Zip Code)
3. The name of the resident agent at the registered office is: Alan Falls
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Article V
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The name(s) and address(es) of the incorporator(s) is(are) as follows:
Name Residence or Business Address
Alan Falls, 1008 Scheurmann, Essexville, MI 48732
--------------------------------------------------------------------------
Robert Lee, 2323 Nurmi Drive, Bay City, MI 48708
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Article VI (Optional. Delete if not applicable)
- --------------------------------------------------------------------------------
When a compromise or arrangement or a plan of reorganization of this corporation
is proposed between this corporation and its creditors or any class of them or
between this corporation and its shareholders or any class of them, a court of
equity jurisdiction within the state, on application of this corporation or of a
creditor or shareholder thereof, or on application of a receiver appointed for
the corporation, may order a meeting of the creditors or class of creditors or
of the shareholders or class of shareholders to be affected by the proposed
compromise or arrangement or reorganization, to be summoned in such manner as
the court directs. If a majority in number representing 3/4 in value of the
creditors or class of creditors, or of the shareholders or class of shareholders
to be affected by the proposed compromise or arrangement or a reorganization,
agree to a compromise or arrangement or a reorganization of this corporation as
a consequence of the compromise or arrangement, the compromise or arrangement
and the reorganization, if sanctioned by the court to which the application has
been made, shall be binding on all the creditors or class of creditors, or on
all the shareholders or class of shareholders and also on this corporation.
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Article VII (Optional. Delete if not applicable)
- --------------------------------------------------------------------------------
Any action required or permitted by the Act to be taken at an annual or special
meeting of shareholders may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth action so taken, is
signed by the holders outstanding stock having not less than the minimum number
of votes that would be necessary to authorize or take the action at a meeting at
which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to shareholders who have not
consented in writing.
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<PAGE>
Use space below for additional Articles or for continuation of previous
Articles. Please identify any Article being continued or added. Attach
additional pages if needed.
I (We), the incorporator(s) sign my (our) name(s) this day of , 19 .
------ ------ --
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- ------------------------------------- ---------------------------------------
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<PAGE>
Article VIII
No director of the Corporation shall be held personally liable to the
Corporation or its shareholders for monetary damages for any breach of fiduciary
duty as a director; provided, however, that this provision does not limit or
eliminate a director's liability for: breaching the duty of loyalty to the
Corporation or its shareholders, failing to act in good faith, engaging in
intentional misconduct, knowingly violating a law, or obtaining an improper
personal benefit. If the Michigan Business Corporation Act or obtaining an
improper personal benefit. If the Michigan Business Corporation Act is amended
to authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the Michigan
Business Corporation Act, as so amended.
Any repeal or modification of the foregoing paragraph shall not adversely
affect any right or protection of a director of the Corporation existing at the
time of such repeal or modification.
<PAGE>
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MICHIGAN DEPARTMENT OF COMMERCE -- CORPORATION AND SECURITIES BUREAU
- --------------------------------------------------------------------------------
(FOR BUREAU USE ONLY) Date Received
------------------
------------------
------------------
- --------------------------------------------------------------------------------
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
For use by Domestic Corporation
(Please read information and instructions on last page)
Pursuant to the provisions of Act 284, Public Acts of 1972 (profit
corporations), or Act 162, Public Acts of 1982 (nonprofit corporations), the
undersigned corporation executes the following Articles:
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1. The present name of the corporation is: FLO FIL COMPANY, INC.
2. The corporation identification number (CID) assigned by the Bureau is:
--------
394--832
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3. The location of its registered office is:
1008 Scheurmann, Essexville , Michigan 48732
---------------------------------------------- ---------------
(Street Address) (City) (State) (Zip Code)
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- --------------------------------------------------------------------------------
4. Article VIII of the Articles of Incorporation is hereby amended to read as
follows:
See Attached
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<PAGE>
5. COMPLETE SECTION (a) IF THE AMENDMENT WAS ADOPTED BY THE UNANIMOUS
CONSENT OF THE INCORPORATOR(S) BEFORE THE FIRST MEETING OF THE BOARD OF
DIRECTORS OR TRUSTEES; OTHERWISE, COMPLETE SECTION (b)
a. [ ] The foregoing amendment to the Articles of Incorporation was duly adopted
on the day of _____________________, 19__, in accordance with the
provisions of the Act by the unanimous consent of the incorporator(s)
before the first meeting of the board of directors or trustees.
Signed this _____day of ______________________________. 19__
----------------------------------- ----------------------------------
(Signature) (Signature)
----------------------------------- ----------------------------------
(Type or Print Name) (Type or Print Name)
----------------------------------- ----------------------------------
(Signature) (Signature)
----------------------------------- ----------------------------------
(Type or Print Name) (Type or Print Name)
b. [ ] The foregoing amendment to the Articles of Incorporation was duly adopted
on the day of _____________________, 19__. The amendment: (check
one of the following):
[ ] was duly adopted in accordance with Section 611(2) of the Act by the
vote of the shareholders if a profit corporation, or by the vote of
the shareholders or members if a nonprofit corporation, or by the
vote of the directors if a nonprofit corporation formed on a
nonstock directorship basis. The necessary votes were cast in favor
of the amendment.
[ ] was duly adopted by the written consent of all the directors
pursuant to Section 525 of the Act and the corporation is a
nonprofit corporation formed on a nonstock directorship basis.
[ ] was duly adopted by the written consent of the shareholders or
members having not less than the minimum number of votes required by
statute in accordance with Section 407 (1) and (2) of the Act, if a
nonprofit corporation, and Section 407 (1) of the Act if a profit
corporation. Written notice to shareholders or members who have not
consented in writing has been given. (Note: Written consent by less
than all of the shareholders or members is permitted only if such
provision appears in the Articles of Incorporation.)
[ ] was duly adopted by the written consent of all the shareholders or
members entitled to vote in accordance with Section 407 (3) of the
Act if a nonprofit corporation, and Section 407 (20 of the Act if a
profit corporation.
Signed this____ day of____________, July 19__
By
-------------------------------------------
(only signature of President,
Vice-President, Chairperson
and Vice-Chairperson)
-------------------------------------------
(Type or Print Name) (Type or Print Title)
<PAGE>
Exhibit 3.12
BY-LAWS
OF
FLO FIL CO., INC.
* * * * * *
ARTICLE I
OFFICES
SECTION 1. Registered Office. The registered office of the Corporation in
the State of Michigan shall be in the City of Essexville, County of Bay.
SECTION 2. Other Offices. The Corporation may also have an office of
offices at such other place of places both within and without the State of
Michigan, as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II
MEETING OF SHAREHOLDERS
SECTION 1. Place of Meetings. All meetings of the shareholders of the
Corporation for the election of Directors shall be held at the office of the
Corporation in Essexville, Michigan. All other meetings of the shareholders
shall be held at such place, within or without the State of Michigan, as shall
be specified or fixed in the respective notices or waivers of notice thereof.
SECTION 2. Annual Meetings. The annual meeting of the shareholders for the
election of Directors and for the transaction of such other business as may come
before the meeting shall be held on the 15th day of March each year, or such
other date as may be set by the Board of Directors upon due notice to the
Shareholders.
SECTION 3. Special Meetings. A special meeting of the shareholders for any
purpose or purposes, unless otherwise prescribed by l aw, or by the Articles of
Incorporation of the Corporation as from time to time amended (hereinafter in
these By-laws called the Articles of Incorporation), may be called at any time
by the President and shall be called by the President or by the Secretary upon
the written request of a majority of the Board of Directors or upon the written
request of a shareholder or shareholders owning a majority of the shares of the
Corporation issued and outstanding and entitled to vote at such meeting. Such
request shall state the purpose or purposes of the proposed meeting. Business
transacted at any such special meeting of shareholders shall be limited to the
purpose or purposes stated in the notice thereof.
<PAGE>
SECTION 4. Notice of Meetings. Except as otherwise provided by law, notice
of each meeting of the shareholders, whether annual or special, shall be given
not less than ten, nor more than sixty, days before the day on which the meeting
is to be held to each shareholder of record entitled to voter at such meeting by
delivering a written or printed notice thereof to him personally, or by mailing
such notice, postage prepaid, addressed to him at his post office address
furnished by him to the Secretary for such purpose, or if he shall not have
furnished to the Secretary his address for such purpose, then at his post office
address last known to the Secretary of the Corporation. Every such notice shall
state the time and place of the meeting and, in the case of special meetings,
the purpose or purposes of such special meeting. Notice of any adjourned meeting
of the shareholders shall not be required to be given, unless otherwise provided
in these By-laws.
SECTION 5. New Shareholders. Every person becoming a shareholder in this
Corporation shall be deemed to assent to these By-laws and shall designate to
the Secretary the address to which he desires that notice herein required to be
given may be sent, and all notices mailed to such addresses, with postage
prepaid, shall be considered as duly given at the date of mailing, and any
person failing to so designate his address shall be deemed to have waived notice
of such meeting.
SECTION 6. Quorum. At any meeting of the shareholders, the holders of a
majority of the voting shares of the Capital Stock of the Corporation issued and
outstanding, present in person or represented by proxy, shall constitute a
quorum. Meetings at which less than a quorum is represented may, however, be
adjourned from time to time to a further date by those who attend, without
further notice other than the announcement at such meeting, and when a quorum
shall be presented upon any such adjourned day, any business may be transacted
which might have been transacted at the meeting as originally called.
SECTION 7. Organization. At each meeting of the shareholders, the
President, or, in his absence, a chairman chosen by the majority vote of the
shareholders present in person or represented by proxy and entitled to vote
thereat shall act as chairman, and the Secretary, or in his absence, an
Assistant Secretary of the Corporation, or in the absence of the Secretary and
all Assistant Secretaries, a person whom the Chairman shall appoint, shall act
as Secretary of the meeting.
SECTION 8. Voting. Except as otherwise required by law or by the Articles
of Incorporation or by these By-laws, each shareholder of the Corporation
entitled to vote on any matter at a meeting of the shareholders shall, at such
meeting and on such matter, be entitled to one vote in person or by proxy for
each share of stock of the Corporation held by him and registered in his name on
the books of the Corporation at the date of such meeting. At all meetings of
shareholders any vote may be given by the shareholder entitled thereto in person
or by his proxy appointed by an instrument in writing, subscribed by such
shareholder or by his attorney thereunto authorized and delivered to the
Secretary of the meeting. At all meetings of the shareholders, all matters
(except where other provision is made by law or by the Articles of
Incorporation) shall be decided by a majority of the votes cast by the
shareholders present in person or represented by proxy and entitled to vote
thereat on such matter, a quorum being present.
2
<PAGE>
SECTION 9. Presence at Meeting. A shareholder shall be deemed to be
present in person at a meeting by use of a conference telephone or similar
communications equipment by which all persons participating in the meeting may
communicate with each other provided all participants are advised of the
communications equipment and provided the names of the participants in the
conference are divulged to all participants.
SECTION 10. Action by Unanimous Consent of Shareholders. To the extent
permitted by law, any action required by the Michigan Business Corporation Act
to be taken at a meeting of the shareholders, or any action which may be taken
at a meeting of shareholders, may be taken without a meeting if consent in
writing, setting forth the actions so taken, shall be signed by all the
shareholders entitled to vote with respect to the subject thereof and such
consent shall have the same effect as a unanimous vote of the shareholders.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. General Powers. The business of the Corporation shall be
managed by the Board of Directors which may exercise all such powers of the
Corporation and do all such lawful acts and things as not by statute or by the
Articles of Incorporation or by these By-laws directed or required to be
exercised or done by the shareholders.
SECTION 2. Number, Qualification and Term of Office. The number of
Directors shall be not less than not more than three, as determined by the
shareholders, but may from time to time be changed by amendment of these
By-laws. Except as otherwise provided in the Articles of Incorporation or in
these By-laws, Directors shall be elected by a plurality of the votes of the
shareholders entitled to vote at each meeting of shareholders for the election
of a Director of Directors. Directors need not be shareholders. Each Director
shall hold office until the first annual meeting of the shareholders and/or
until a successor is elected and qualified, or until his death or until he shall
resign. At each annual election the successors of the Directors shall be elected
to hold office until the annual meeting held next after his election and/or
until his successor is elected and qualified, or until his death or until he
shall resign.
SECTION 3. Quorum and Manner of Acting. Except as otherwise provided by
law or by the Articles of Incorporation or by these By-laws a majority of the
total number of Directors shall be necessary to constitute a quorum for the
transaction of business at any meeting of the Board of Directors, and the acts
of a majority of the Directors present at a meeting at which a quorum is present
shall be the acts of the Board of Directors; provided, that if the Directors
shall severally and/or collectively consent in writing to any action to be taken
by the Corporation such action shall be as valid corporate action as though it
had been authorized at a meeting of the Directors. In the absence of a quorum, a
majority of the Directors present may adjourn any meeting from time to time
until a quorum be had. Notice of any adjourned meeting need not be given. The
Directors shall act only as a Board and the individual Directors shall have no
powers as such.
3
<PAGE>
SECTION 4. Place of Meeting Offices. Except as otherwise specifically
provided by statute, the Board of Directors may hold its meetings and have one
or more offices at such place or places, whether in the State of Michigan or
elsewhere, as a majority of the Directors may from time to time determine.
SECTION 5. Meetings. Meetings of the Board of Directors may be called at
any time by the President or Secretary, or by a majority of the Board of
Directors. Directors shall be notified of the date, time and place of all
meetings of the Board at least 24 hours prior thereto, except that no noticed
will be required in connection with regular meetings of the Board if so provided
by appropriate resolution by the Board, and if the date, time and place of such
meetings are also covered by Board resolution. Any Director, however, shall be
deemed to have waived such notice by his attendance at any meeting. Annual
meetings of the Board shall be held immediately after the annual meetings of the
shareholders.
SECTION 6. Organization. At each meeting of the Board of Directors, the
President, or in his absence, a Director chosen by a majority of the Directors
present, shall act as chairman. The Secretary, or in his absence, an Assistant
Secretary of the Corporation, or in the absence of the Secretary and all
Assistant Secretaries, a person appointed by the chairman, shall act as
Secretary of the meeting.
SECTION 7. Order of Business. At all meetings of the Board of Directors
business shall be transacted in the order determined by the chairman of the
meeting subject to the approval of the Board.
SECTION 8. Resignation. Any Director of the Corporation may resign at any
time by giving written notice to the Board, or to the President or to the
Secretary of the Corporation. The resignation of any Director shall take effect
at the time specified therein; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 9. Removal. At any meeting of the shareholders of the Corporation
called for the purpose of removing any Director, such Director may, by a vote of
a majority of all the shares of stock outstanding and entitled to vote, be
removed from office with or without cause and another be elected in the place of
such Director.
SECTION 10. Vacancies. Except as otherwise provided in these By-laws,
vacancies in the Board of Directors shall be filled by the remaining members of
the Board, and each Director so elected shall be a Director until his successor
is elected by the shareholders who may make such election at the next annual
meeting of the shareholders, or at any special meeting duly called for that
purpose and held prior thereto; provide, however, that vacancies in the Board
caused by an increase in the number of Directors shall be filled by the
shareholders at a special meeting thereof duly called for the purpose or at the
next annual meeting of shareholders.
4
<PAGE>
SECTION 11. Compensation. The compensation of Directors, officers and
agents may be fixed by the Board.
SECTION 12. Committees. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate two or more of their number to
constitute an executive and/or any other committee which, to the extent provided
in said resolution, shall have and exercise the authority of the Board of
Directors in the management of the business of the Corporation between the
meetings of the Board.
ARTICLE IV
OFFICERS
SECTION 1. Number and Election. The officers of the Corporation shall be
elected by the Board of Directors and shall be a President, a Secretary and a
Treasurer. The Board of Directors may also elect one or more Vice Presidents,
Assistant Secretaries and Assistant Treasurers. Any two of the above offices,
except those of President and Vice President, may be held by the same person,
but no officer shall execute, acknowledge or verify any instrument in more than
one capacity.
SECTION 2. Term of Office and Qualification. The officers shall be elected
by the Board at the first meeting thereof after each annual meeting of
shareholders. Each officer, except such officers as may be appointed in
accordance with the provisions of Section 3 of this Article IV, shall hold
office until the next annual election of officers and until his successor shall
have been duly elected and qualified, or until his death, or until he shall
resign, or until he shall have been removed in the manner hereinafter provided.
None of the officers, except the President, need by a Director, but the Vice
President, if one has been elected, who is not a Director shall not succeed to
or fill the office of the President.
SECTION 3. Other Officers. The Board of Directors may also appoint such
other officers and agents as it may deem necessary for the transaction of the
business of the Corporation. Such officers and agents shall hold office for such
period, have such authority and perform such duties as shall be determined form
time to time by the Board.
SECTION 4. Removal. Any officer may be removed, either with or without
cause, by the vote of a majority of the whole Board of Directors.
SECTION 5. Resignation. Any officer may resign at any time by giving
notice in writing to the Board of Directors or to the President or to the
Secretary of the Corporation. Any such resignation shall take effect at the time
specified therein; and unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
5
<PAGE>
SECTION 6. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled for
the unexpired portion of the term by the Board of Directors.
SECTION 7. The President. The President shall be the chief executive
officer of the Corporation, and subject tot he control of the Board of Directors
and the retention of particular powers by the Board or the delegation thereof to
other officers of the Corporation, shall have general direction and supervision
over the business and affairs of the Corporation. He shall perform such other
duties and have such other responsibilities as the Board of Directors may from
time to time determine.
SECTION 8. Vice Presidents. The Vice President, if one has been elected,
shall perform such duties as from time to time may be assigned to him by the
Board of Directors or as may be prescribed by these By-laws. In the absence of
the President or in case of his inability to act, the Vice President, or if
there be more than one, the Vice President designated by the Board, shall
perform all the duties of the President and, when so acting, shall have all the
powers of and be subject to all the restrictions placed upon the President.
SECTION 9. The Secretary. The Secretary shall record or cause to be
recorded in books provided for the purpose all the proceedings of the meetings
of the Corporation, including those of the shareholders, the Board of Directors
and all committees of which notices are duly given in accordance with the
provisions of these By-laws and as required by law; shall be custodian of the
records (other than financial) and of the seal of the Corporation and see that
the seal is affixed to all documents the execution of which on behalf of the
Corporation under its seal is duly authorized in accordance with the provisions
of these By-laws; shall see that the books, reports, statements, certificates
and all other documents and records required by law are properly kept and filed;
and in general, the Secretary shall perform all duties incident to the office of
Secretary and such other duties as may, from time to time, be assigned to him by
the Board of Directors or the President.
SECTION 10. Treasurer. The Treasurer shall have custody and keep account
of all money, funds and property of the Corporation, unless otherwise determined
by the Board of Directors, and he shall render such accounts and present such
statement to the Directors and President as may be required of him. He shall
deposit all funds from the Corporation which may come into his hands in such
bank or banks as the Board of Directors may designate. He shall keep his bank
accounts in the name of the Corporation, and shall exhibit his books and
accounts, at all reasonable times, to any Director of the Corporation upon
application at the office of the Corporation during business hours. He shall pay
out money as the business may require upon the order of the properly constituted
officer or officers of the Corporation, taking proper vouchers therefor;
provided, however, that the Board of Directors shall have the power by
resolution to delegate any of the duties of the Treasurer to other officers, and
to provide by what officers, if any, all bills, notes, checks, vouchers, orders
or other instruments shall be countersigned. He shall perform, in addition, such
other duties as may be delegated to him by the Board of Directors.
6
<PAGE>
SECTION 11. Assistant Secretary and Assistant Treasurer. The Assistant
Secretary, in the absence or disability of the Secretary, shall perform the
duties and exercise the powers of the Secretary. The Assistant Treasurer, in the
absence or disability of the Treasurer, shall perform the duties and exercise
the powers of the Treasurer.
SECTION 12. Salaries. The salaries of the officers shall be fixed from
time to time by the Board of Directors. No officer shall be prevented from
receiving such salary by reason of the fact that he is also a Director of the
Corporation or a member of any committee.
ARTICLE V
EXECUTION OF INSTRUMENTS
SECTION 1. Checks, etc. All checks, drafts and orders for payment of money
shall be signed in the name of the Corporation by such officers or agents as the
Board of Directors shall from time to time designate for that purpose.
SECTION 2. Contracts, Conveyances, etc. Contracts, conveyances, notes,
bills and other instruments may be executed by the President or any Vice
President, and the Secretary or any Assistant Secretary, with authority to affix
the corporate seal thereto, provided, however, that if, in any case, the
Directors or executive committee shall see fit to direct a different method of
execution or signature, then execution may be in that manner, notwithstanding
any other provisions of these By-laws relating thereto.
ARTICLE VI
BOOKS AND RECORDS
SECTION 1. Place, Inspection by Shareholders. The Board of Directors may
keep the books and records of the Corporation at such places within or without
the State of Michigan as it may from time to time determine; provided, however,
that the original or duplicate stock ledger or a list containing the names and
addresses of the shareholders, and the number of shares held by them,
respectively, shall, at all times, be kept at the registered office of the
Corporation in the State of Michigan.
SECTION 2. Addresses of Shareholders. Each shareholder shall designate to
the Secretary of the Corporation an address at which notices of meetings and all
other corporation notices may be served upon or mailed to him, and if any
shareholder shall fail to designate such address, corporate notices may be
served upon him by mail directed to his last known post office address.
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<PAGE>
ARTICLE VII
SHARES OF STOCK
SECTION 1. Certificate of Shareholders. The certificates for shares of the
Capital Stock of this Corporation shall be in such form, not inconsistent with
the Articles of Incorporation of the Corporation, as shall be prepared or be
approved by the Board of Directors. The certificates shall be signed by the
President or a Vice President, if one has been elected, and may also be signed
by another officer of the corporation.
SECTION 2. Transfer of Shares. Shares of Capital Stock of the Corporation
shall be transferred by endorsement of the certificates or by assignment
separate from the certificates representing said shares by the registered holder
thereof or his attorney, and its surrender to the Secretary for cancellation.
Whereupon the Secretary shall issue to the transferee or transferees, as
specified by the endorsement, new certificates for a like number of shares.
Transfers shall be made only upon the books of the Corporation and upon said
surrender and cancellation; and shall entitle the transferee to all the
privileges, rights and interests of a shareholder of this Corporation.
SECTION 3. Closing of Transfer Books. The stock transfer books for
meetings of the shareholders may be closed as follows:
The Board of Directors is authorized to fix in advance a date, not more
than sixty or less than ten days preceding the date of any meeting of
shareholders, or the date for the payment of any dividend, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
capital stock shall go into effect, or a date in connection with obtaining such
consent, as a record date for the determination of the shareholders entitled to
notice of, and to vote at, any such meeting and any adjournment thereof, or
entitled to receive payment of any such dividend, or to any such allotment of
rights, or to exercise the rights in respect of any such change, conversion or
exchange of Capital Stock, or to give such consent, and in such case such
shareholders and only such shareholders as shall be shareholders of record on
the date so fixed, shall be entitled to such notice of, and to vote at, such
meeting and any adjournment thereof, or to receive payment of such dividend, or
to receive such allotment of rights, or to exercise such rights, or to give such
consent, as the case may be, notwithstanding any transfer of any stock on the
books of the corporation after any such record date fixed as aforesaid.
SECTION 4. Registered Shareholders. The Corporation shall be entitled to
treat the holder of record of any share or shares of stock as the holder in fact
thereof and accordingly, shall not be bound to recognize any equitable or other
claim to or interest in such share on the part of any other person, whether or
not it shall have express or other notice thereof, save as expressly provided by
the law of Michigan.
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SECTION 5. Lien. The Corporation shall have a lien, subject to the
provisions of the Michigan Uniform Commercial Code, upon all stock or property
of its members invested therein, for all debts due to it by the owners thereof.
SECTION 6. Lost Certificates. In case of the loss of any certificate of
shares of stock, upon due proof by the registered holder or his representatives,
by affidavit of such loss, the Secretary shall issue a duplicate certificate in
its place, upon the Corporation being fully indemnified therefor, but indemnity
may be waived by the Board of Directors.
ARTICLE VIII
SEAL
Corporate Seal. The Board of Directors shall provide a suitable corporate seal,
which seal shall be in the charge of the Secretary, and shall be used by him.
ARTICLE IX
DIVIDENDS
The Board of Directors, in its discretion, from time to time, may declare
dividends upon the Capital Stock from the earned surplus and net profits of the
Corporation.
ARTICLE X
FISCAL YEAR
The fiscal year of the Corporation shall end on the 30th day of June of
each year.
ARTICLE XI
WAIVER OF NOTICE
Notice of time, place and purpose of any meeting of the shareholders on of
the Board of Directors may be waived by telegram, radiogram, cablegram or other
writing by those note present and entitled to vote thereat either before or
after the holding thereof.
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<PAGE>
ARTICLE XII
INDEMNIFICATION
Any person shall be indemnified and reimbursed by this Company for
expenses actually and reasonably incurred by him or her and labilities imposed
upon him or her in connection with or arising out of any action, suit or
proceeding, civil or criminal, or threat thereof, in which he or she may be
involved by reason of his or her being or having been a Director, officer, or
employee of this Company, or of any firm, corporation or organization which he
or she served in any capacity at the request of the Company, to the maximum
disclosed, or shall have been known to the Directors or a majority thereof. A
general notice that a Director or officer is interested in any corporation or
other concern of any kind above referred to shall be sufficient disclosure as to
such Director or officer, with respect to all contracts and transactions with
such corporation or other concern. No Director shall be disqualified from
holding office as Director or officer of the Corporation by reason of any such
adverse interest. In the absence of fraud, no Director, officer or shareholder
having such adverse interest shall be liable to the corporation or to any
shareholder or creditor thereof, or to any other person, for any loss incurred
by it under or by reason of such contract or transaction, nor shall any such
Director, officer, or shareholder be accountable for any gains or profits
realized thereon.
ARTICLE XIII
AMENDMENTS
These By-laws, or any of them, may be altered, amended or repealed, or new
By-laws may be made, at any annual meeting of the shareholders or at any regular
meeting of the Board of Directors, or at any special meeting of the shareholders
or the Board of Directors, if notice thereof be contained in the notice of such
special meeting; provided, however, that the Board of Directors shall not make
or alter any By-laws fixing their qualifications, classifications or term of
office.
10
<PAGE>
Exhibit 3.13
UNITED STATES OF AMERICA
Michigan Department of Consumer and Industry Services
Lansing, Michigan
This is to Certify That
U.S. STABILIZATION, INC.
was incorporated on August 17, 1989, as a Michigan profit corporation, and said
corporation is in existence under the laws of this State.
This certificate is issued to attest to the fact that the corporation is in good
standing in this office as of this date and is duly authorized to transaction
business or conduct affairs in Michigan and for no other purpose. It is in the
usual form, made by me as the proper officer, and is entitled to have full faith
and credit given it in every court and office within the United States.
In testimony whereof, I have hereunto set my
hand and affixed the Seal of the Department
in the City of Lansing, this 19th day of
February, 1998.
, Director
173 Corporation, Securities and Land Development Bureau
<PAGE>
UNITED STATES OF AMERICA
Michigan Department of Consumer and Industry Services
Lansing, Michigan
This is to Certify that the Annexed copy has been compared by me with the record
on file in this Department and that the same is a true copy thereof.
In testimony whereof, I have hereunto set my
hand and affixed the Seal of the Department
in the City of Lansing, this 19th day of
February, 1998.
, Director
172 Corporation, Securities and Land Development Bureau
<PAGE>
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MICHIGAN DEPARTMENT OF COMMERCE -- CORPORATION AND SECURITIES BUREAU
- --------------------------------------------------------------------------------
(FOR BUREAU USE ONLY) Date Received
--------------------
--------------------
EFFECTIVE DATE:
- --------------------------------------------------------------------------------
CORPORATION IDENTIFICATION NUMBER 168-092
- --------------------------------------------------------------------------------
ARTICLES OF INCORPORATION
For use by Domestic Profit Corporation
(Please read instructions and Paperwork Reduction Act notice on last page)
Pursuant to the provisions of Act 284, Public Acts of 1972, as amended,
the undersigned corporation executes the following Articles:
Article I
- --------------------------------------------------------------------------------
The name of the corporation is:
U.S. Stabilization, Inc.
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Article II
- --------------------------------------------------------------------------------
The purpose or purposes for which the corporation is organized is to engage in
any activity within the purposes for which corporations may be organized under
the Business Corporation Act of Michigan.
- --------------------------------------------------------------------------------
Article III
- --------------------------------------------------------------------------------
The total authorized capital stock is:
1. Common Shares 50,000 ParValue Per Share $ 1.00
--------------------------------- -------
Preferred Shares ParValue Per Share $
--------------------------------- -------
and/or shares without part value as follows:
2. Common Shares ParValue Per Share $
--------------------------------- -------
Preferred Shares ParValue Per Share $
--------------------------------- -------
3. A statement of all or any of the relative rights, preferences and limitation
of the shares of each class is as follow:
None
- --------------------------------------------------------------------------------
<PAGE>
Article IV
- --------------------------------------------------------------------------------
1. The address of the registered office is:
1088 Scheurmann Essexville Michigan 48732
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(Street Address) (City) (State) (Zip Code)
2. The mailing address of the registered office if different than above:
Michigan
-----------------------------------------------------------
(Street Address) (City) (State) (Zip Code)
3. The name of the resident agent at the registered office is: Michael J. Adams
- --------------------------------------------------------------------------------
Article V
- --------------------------------------------------------------------------------
The name(s) and address(es) of the incorporator(s) is(are) as follows:
Name Residence or Business Address
Michael J. Adams 4670 Birchwood, Bay City, Michigan 48706
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Article VI (Optional. Delete if not applicable)
- --------------------------------------------------------------------------------
When a compromise or arrangement or a plan of reorganization of this corporation
is proposed between this corporation and its creditors or any class of them or
between this corporation and its shareholders or any class of them, a court of
equity jurisdiction within the state, on application of this corporation or of a
creditor or shareholder thereof, or on application of a receiver appointed for
the corporation, may order a meeting of the creditors or class of creditors or
of the shareholders or class of shareholders to be affected by the proposed
compromise or arrangement or reorganization, to be summoned in such manner as
the court directs. If a majority in number representing 3/4 in value of the
creditors or class of creditors, or of the shareholders or class of shareholders
to be affected by the proposed compromise or arrangement or a reorganization,
agree to a compromise or arrangement or a reorganization of this corporation as
a consequence of the compromise or arrangement, the compromise or arrangement
and the reorganization, if sanctioned by the court to which the application has
been made, shall be binding on all the creditors or class of creditors, or on
all the shareholders or class of shareholders and also on this corporation.
- --------------------------------------------------------------------------------
Article VII (Optional. Delete if not applicable)
- --------------------------------------------------------------------------------
Any action required or permitted by the Act to be taken at an annual or special
meeting of shareholders may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth action so taken, is
signed by the holders outstanding stock having not less than the minimum number
of votes that would be necessary to authorize or take the action at a meeting at
which all shares entitled to vote thereon were present and voted. Prompt notice
of the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to shareholders who have not consented in
writing.
- --------------------------------------------------------------------------------
<PAGE>
Use space below for additional Articles or for continuation of previous
Articles. Please identify any Article being continued or added. Attach
additional pages if needed.
I (We), the incorporator(s) sign my (our) name(s) this 14th day of August, 1989.
- ------------------------------------- ---------------------------------------
Michael J. Adams
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
<PAGE>
Exhibit 3.14
BY-LAWS
OF
U.S. STABILIZATION, INC.
* * * * *
ARTICLE I
OFFICES
SECTION 1. Registered Office. The registered office of the Corporation in
the State of Michigan shall be in the City of the Essexville, County of Bay.
SECTION 2. Other Offices. The Corporation may also have an office or
offices at such other place or places both within and without the state of
Michigan, as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II
MEETING OF SHAREHOLDERS
SECTION 1. Place of Meetings. All meetings of the shareholders of the
Corporation for the election of directors shall be held at the office of the
Corporation in Essexville, Michigan. All other meetings of the shareholders
shall be held at such place, within or without the State of Michigan, as shall
be specified or fixed in the respective notices or waivers of notice thereof.
SECTION 2. Annual Meetings. The annual meeting of the shareholders for the
election of Directors and for the transaction of such other business as may come
before the meeting shall
<PAGE>
be held on the 15th day of March of each year, or such other date as may be set
by the Board of Directors upon due notice to the Shareholders.
SECTION 3. Special Meetings. A special meeting of the shareholders for any
purpose or purposes, unless otherwise prescribed by law, or by the Articles of
Incorporation of the Corporation as from time to time amended (hereinafter in
these By-Laws called the Articles of Incorporation), may be called at any time
by the President and shall be called by the President or by the Secretary upon
the written request of the majority of the Board of Directors or upon the
written request of a shareholder or shareholders owning a majority of the shares
of the Corporation issued and outstanding and entitled to vote at such meeting.
Such request shall state the purpose or purposes of the proposed meeting.
Business transacted at any such special meeting of shareholders shall be limited
to the purpose or purposes stated in the notice thereof.
SECTION 4. Notice of Meetings. Except as otherwise provided by law, notice
of each meeting of the shareholders, whether annual or special, shall be given
not less than, nor more than sixty, days before the day on which the meeting is
to be held to each shareholder of record entitled to vote at such meeting by
delivering a written or printed notice thereof to him personally, or by making
such notice, postage prepaid, addressed to him at his post office address
furnished by him to the Secretary for such purpose, or if he shall be have
furnished to the Secretary his address for such purpose, then at his post office
address last know to the Secretary of the Corporation. Every such notice shall
state the time and place of the meeting and, in the case of special meetings,
the purpose or purposes of such special meeting. Notice of any adjourned meeting
of the shareholders shall not be required to be given, unless otherwise provided
in these By-laws.
2
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SECTION 5. New Shareholders. Every person becoming a shareholder in this
company shall be deemed to assent to these By-laws and shall designate to the
Secretary the address to which he desires that notice herein required to be
given may be sent, and all notices mailed to such addresses, with postage
prepaid, shall be considered as duly given at the date of mailing, and any
person failing to so designate his address shall be deemed to have waived notice
of such meeting.
SECTION 6. Quorum. At any meeting of the shareholders, the holders of a
majority of the voting shares of the Capital Stock of the company issued and
outstanding, present in person or represented by proxy, shall constitute a
quorum. Meetings at which less that a quorum is represented may, however, be
adjourned from time to time to a further date by those who attend, without
further notice other than the announcement at such meeting, and when a quorum
shall be presented upon any such adjourned day, any business may be transacted
which might have been transacted at the meeting as ordinally called.
SECTION 7. Organization. At each meeting of the shareholders, the
President, or, in his absence, a chairman chosen by the majority vote of the
shareholders present in person or represented by proxy and entitled to vote
thereat shall act as chairman, and the Secretary, or in his absence, an
Assistant Secretary of the Corporation, or in the absence of the Secretary and
all Assistant Secretaries, a person whom the Chairman shall appoint, shall act
as Secretary of the meeting.
SECTION 8. Voting. Except as otherwise required by law or by the Articles
of Incorporation or by these By-laws, each shareholder of the Corporation
entitled to vote on any matter at a meeting of the shareholders shall, at such
meeting and on such matter, be entitled to
3
<PAGE>
one vote in person or by proxy for each share of stock of the Corporation held
by him and registered in his name on the books of the Corporation at the date of
such meeting. At all meetings of shareholders any vote may be given by the
shareholder entitled thereto in person or by his proxy appointed by an
instrument in writing, subscribed by such shareholder or by his attorney
thereunto authorized and delivered to the Secretary of the meeting. At all
meetings of the shareholders, all matters (except where other provision is made
by law or by the Articles of Incorporation) shall be decided by a majority of
the votes cast by the shareholders present in person or represented by proxy and
entitled to vote thereat on such matter, a quorum being present.
SECTION 9. Presence at Meeting. A shareholder shall be deemed to be
present in person at a meeting by use of a conference telephone or similar
communications equipment by which all persons participating in the meeting may
hear each other provided all participants are advised of the communications
equipment and provided the names of the participants in the conference are
divulged to all participants.
SECTION 10. Action by Unanimous Consent of Shareholders. To the extent
permitted by law, any action required by the Michigan Business Corporation Act
to be taken at a meeting of the shareholders, or any action which may be taken
at a meeting of shareholders, may be taken without a meeting if consent in
writing, setting forth the actions so taken, shall be signed by all the
shareholders entitled to vote with respect to the subject thereof and such
consent shall have the same effect as a unanimous vote of the shareholders.
4
<PAGE>
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. General Powers. The business of the Corporation shall be
managed by the Board of Directors which may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by statute or by
the Articles of Incorporation or by these By-laws directed or required to be
exercised or done by the shareholders.
SECTION 2. Number, Qualification and Term of Office. The number of
directors shall be one but may from time to time be changed by amendment of
these By-laws. Except as otherwise provided in the Articles of Incorporation or
in these By-laws, directors shall be elected by a plurality of the votes of the
shareholders entitled to vote at each meeting of shareholders for the election
of a director or directors. Directors need not be shareholders. Each director
shall hold office until the first annual meeting of the shareholders and/or
until a successor is elected and qualified, or until his death or until he shall
resign. At each annual election the successors of the directors shall be elected
to hold office until the annual meeting held next after his election and/or
until his successor is elected and qualified, or until his death or until he
shall resign.
SECTION 3. Quorum and Manner of Acting. Except as otherwise provided by
law or by the Articles of Incorporation or by these By-laws a majority of the
total number of directors shall be necessary to constitute a quorum for the
transaction of business at any meeting of the Board of Directors, and the acts
of majority of the directors present at a meeting at which a quorum is present
shall be the acts of the Board of Directors; provided, that if the directors
shall severally and/or collectively consent in writing to any action to be taken
by the Corporation such action shall be as valid corporate action as though it
had been authorized at a meeting of the directors.
5
<PAGE>
In the absence of a quorum, a majority of the directors present may adjourn any
meeting from time to time until a quorum be had. Notice of any adjourned meeting
need not be given. The directors shall act only as a Board and the individual
directors shall have no powers as such.
SECTION 4. Place of Meeting Offices. Except as otherwise specifically
provided by statute, the Board of Directors may hold its meetings and have one
or more offices as such place or places, whether in the State of Michigan or
elsewhere, as a majority of the directors may from time to time determine.
SECTION 5. Meetings. Meetings of the Board of Directors may be called at
any time by the President or Secretary, or by a majority of the Board of
Directors. Directors shall be notified of the date, time and place of all
meetings of the Board at least 24 hours prior thereto, except that no notice
will be required in connection with regular meetings of the Board if so provided
by appropriate resolution by the Board, and if the date, time and place of such
meetings are also covered by Board resolution. Any director, however, shall be
deemed to have waived such notice by his attendance at any meeting. Annual
meetings of the Board shall be held immediately after the annual meetings of the
shareholders.
SECTION 6. Organization. At each meeting of the Board of Directors, the
President, or in his absence, a director chosen by a majority of the directors
present, shall act as chairman. The Secretary, or in his absence, an Assistant
Secretary of the Corporation, or in the absence of the Secretary and all
Assistant Secretaries, a person appointed by the chairman, shall act as
Secretary of the meeting.
6
<PAGE>
SECTION 7. Order of Business. At all meetings of the Board of Directors
business shall be transacted in the order determined by the chairman of the
meeting subject to the approval of the Board.
SECTION 8. Resignation. Any director of the Corporation may resign at any
time by giving written notice to the Board, or to the President or to the
Secretary of the Corporation. The resignation of any director shall take effect
at the time specified therein; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 9. Removal. At any meeting of the shareholders of the Corporation
called for the purpose of removing any director, such director may, by a vote of
a majority of all shares of stock outstanding and entitled to vote, be removed
from office with or without cause and another be elected in the place of such
director.
SECTION 10. Vacancies. Except as otherwise provided in these By-laws,
vacancies in the Board of Directors shall be filled by the remaining members of
the Board, and each director so elected shall be a director until his successor
is elected by the shareholders who may make such election at the next annual
meeting of the shareholders, or at any special meeting duly called for that
purpose and held prior thereto; provided, however, that vacancies in the Board
caused by an increase in the number of directors shall be filled by the
shareholders at a special meeting thereof duly called for that purpose or at the
next annual meeting of shareholders.
SECTION 11. Compensation. The compensation of directors, officers and
agents may be fixed by the Board.
SECTION 12. Committees. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate two or more of their number to
constitute an executive
7
<PAGE>
and/or any other committee which, to the extent provided in said resolution,
shall have and exercise the authority of the Board of Directors in the
management of the business of the Corporation between the meetings of the Board.
ARTICLE IV
OFFICERS
SECTION 1. Number and Election. The officers of the Corporation shall be
elected by the Board of Directors and shall be a President, a Secretary and a
Treasurer. The Board of Directors may also elect one or more Vice Presidents,
Assistant Secretaries and Assistant Treasurers. Any two of the above offices,
except those of President and Vice President, may be held by the same person,
but no officer shall execute, acknowledge or verify any instrument in more than
one capacity.
SECTION 2. Term of Office and Qualification. The officers shall be elected
by the Board at the first meeting thereof after each annual meeting of
shareholders. Each officer, except such officers as may be appointed in
accordance with the provisions of Section 3 of this Article IV, shall hold
office until the next annual election of officers and until his successor shall
have been duly elected and qualified, or until his death, or until he shall
resign, or until he shall have been removed in the manner hereinafter provided.
None of the officers, except the President, need be a director, but the Vice
President, if one has been elected, who is not a director shall not succeed to
or fill the office of the President.
SECTION 3. Other Officers. The Board of Directors may also appoint such
other officers and agents as it may deem necessary for the transaction of the
business of the
8
<PAGE>
Corporation. Such officers and agents shall hold office for such period, have
such authority and perform such duties as shall be determined from time to time
by the Board.
SECTION 4. Removal. Any officer may be removed, either with or without
cause, by the vote of a majority of the whole Board of Directors.
SECTION 5. Resignation. Any officer may resign at any time by giving
notice in writing to the Board of Directors or to the President or to the
Secretary of the Corporation. Any such resignation shall take effect at the time
specified therein; and unless otherwise specified therein, the acceptance of
such resignation shall be not necessary to make it effective.
SECTION 6. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled for
the unexpired portion of the term by the Board of Directors.
SECTION 7. The President. The President shall be the chief executive
officer of the Corporation, and subject to the control of the Board of Directors
and the retention of particular powers by the Board or the delegation thereof to
other officers so the Corporation, shall have general direction and supervision
over the business and affairs of the Corporation. He shall perform such other
duties and have such other responsibilities as the Board of Directors may from
time to time determine.
SECTION 8. Vice President. The Vice President, if one has been elected,
shall perform such duties as from time to time may be assigned to him by the
Board of Directors or as may be prescribed by these By-laws. In the absence of
the President or in case of his inability to act, the Vice President, or if
there be more than one, the Vice President designated by the Board, shall
9
<PAGE>
perform all the duties of the President and, when so acting, shall have all the
powers of and be subject to all the restrictions placed upon the President.
SECTION 9. The Secretary. The Secretary shall record or cause to be
recorded in books provided for the purpose all the proceedings of the meetings
of the Corporation, including those of the shareholders, the Board of Directors
and all committees of which a secretary shall not have been appointed; shall see
that all notice are duly given in accordance with the provisions of these
By-laws and as required by law; shall be custodian of the records (other than
financial) and of the seal of the Corporation and see that the seal is affixed
to all documents the execution of which on behalf of the Corporation under its
seal is duly authorized in accordance with the provisions of these By-laws;
shall see that books, reports, statements, certificates and all other documents
and records required by law are properly kept and filed; and in general, the
Secretary shall perform all duties incident to the office of Secretary and such
other duties as may, from time to time, be assigned to him by the Board of
Directors or the President.
SECTION 10. Treasurer. The Treasurer shall have custody and keep account
of all money, funds and property of the company, unless otherwise determined by
the Board of Directors, and he shall render such accounts and present such
statement to the directors and President as may be required of him. He shall
deposit all funds from the company which may come into his hands in such bank or
banks as the Board of Directors may designate. He shall keep his bank accounts
in the name of the company, and shall exhibit his books and accounts, at all
reasonable times, to any director of the company upon application at the office
of the company during business hours. He shall pay out money as the business may
require upon the order of the properly constituted officer or officers of the
company, taking proper vouchers
10
<PAGE>
therefor; provided, however, that the Board of Directors shall have the power by
resolution to delegate any of the duties of the Treasurer to other officers, and
to provide by what officers, if any, all bills, notes, checks, vouchers, orders
or other instruments shall be countersigned. He shall perform, in addition, such
other duties as may be delegated to him by the Board of Directors.
SECTION 11. Assistant Secretary and Assistant Treasurer. The Assistant
Secretary, in the absence or disability of the Secretary, shall perform the
duties and exercise the powers of the Secretary. The Assistant Treasurer, in the
absence or disability of the Treasurer, shall perform the duties and exercise
the powers of the Treasurer.
SECTION 12. Salaries. The salaries of the officers shall be fixed from
time to time by the Board of Directors. No officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
Corporation or a member of any committee.
ARTICLE V
EXECUTION OF INSTRUMENTS
SECTION 1. Checks, etc. All checks, drafts and orders for payment of money
shall be signed in the name of the company by such officers or agents as the
Board of Directors shall from time to time designate for that purpose.
SECTION 2. Contracts, Conveyances, etc. Contracts, conveyances, notes,
bills and other instruments may be executed by the President or any Vice
President, and the Secretary or any Assistant Secretary, with authority to affix
the corporate seal thereto, provided, however, that if, in any case, the
directors or executive committee shall see fit to direct a different method of
11
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execution or signature, then execution may be in the manner, notwithstanding any
other provisions of these By-laws relating thereto.
ARTICLE VI
BOOKS AND RECORDS
SECTION 1. Place, Inspection by Shareholders. The Board of Directors may
keep the books and records of the Corporation at such places within or without
the State of Michigan as it may from time to time determine; provided, however,
that the original or duplicate stock ledger or a list containing the names and
addresses of the shareholders, and the number shares held by them, respectively,
shall, at all times, be kept at the registered office of the Corporation in the
State of Michigan.
SECTION 2. Addresses of Shareholders. Each shareholder shall designate to
the Secretary of the Corporation an address at which notices of meetings and all
other corporate notices may be served upon or mailed to him, and if any
shareholder shall fail to designate such address, corporate notices may be
served upon him by mail directed to his last known post office address.
ARTICLE VII
SHARES OF STOCK
SECTION 1. Certificate of Shareholders. The certificates for shares of the
Capital Stock of this company shall be in such form, not inconsistent with the
Articles of Incorporation of the company, as shall be prepared or be approved by
the Board of Directors. The certificates
12
<PAGE>
shall be signed by the President or a Vice President, if one has been elected,
and also by the Secretary or an Assistant Secretary.
SECTION 2. Transfer of Shares. Shares of Capital Stock of the company
shall be transferred by endorsement of the certificates or by assignment
separate from the certificates representing said shares by the registered holder
thereof or his attorney, and its surrender to the Secretary for cancellation.
Whereupon, the Secretary shall issue to the transferee or transferees, as
specified by the endorsement, new certificates for a like number of shares.
Transfers shall be made only upon the books of the company and upon said
surrender and cancellation; and shall entitle the transferee to all the
privileges, rights and interests of a shareholder of this company.
SECTION 3. Closing of Transfer Books. The stock transfer books for
meetings of the shareholders may be closed as follows:
The Board of Directors is authorized to fix in advance a date, not more
than sixty or less than ten days preceding the date of any meeting of
shareholders, or the date of the payment of any dividend, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
capital stock shall go into effect, or a date in connection with obtaining such
consent, as a record date for the determination of the shareholders entitled to
notice of, and to vote at, any such meeting and any adjournment thereof, or
entitled to receive payment of any such dividend, or to any such allotment of
rights, or to exercise the rights in respect of any such change, conversion or
exchange of Capital Stock, or to give such consent, and in such case such
shareholders and only such shareholders as shall be shareholders of record on
the date so fixed, shall be entitled to such notice of, and to vote at, such
meeting and any adjournment thereof, or to receive payment of such dividend, or
to receive such allotment of rights, or to exercise such
13
<PAGE>
rights, or to give such consent, as the case may be, notwithstanding any
transfer of any stock on the books of the corporation after any such record date
fixed as aforesaid.
SECTION 4. Registered Shareholders. The Corporation shall be entitled to
treat the holder of record of any share or shares of stock as the holder in fact
thereof and accordingly, shall be bound to recognize any equitable or other
claim to or interest in such share on the part of any other person, whether or
not it shall have express or other notice thereof; save as expressly provided by
the law of Michigan.
SECTION 5. Lien. The Corporation shall be a lien, subject to the
provisions of the Michigan Uniform Commercial Code, upon all stock or property
of its members invested therein, for all debts due to it by the owners thereof.
SECTION 6. Lost Certificates. In case of the loss of any certificate of
shares of stock, upon due proof by the registered holder or his representatives,
by affidavit of such loss, the Secretary shall issue a duplicate certificate in
its place, upon the Corporation being fully indemnified therefor, but indemnity
may be waived by the Board of Directors.
ARTICLE VIII
SEAL
Corporate Seal. The Board of Directors shall provide a suitable corporate
seal, which seal shall be in the charge of the Secretary, and shall be used by
him.
14
<PAGE>
ARTICLE IX
DIVIDENDS
The Board of Directors, in its discretion, from time to time, may declare
dividends upon the Capital Stock from the earned surplus and net profits of the
company.
ARTICLE X
FISCAL YEAR
The fiscal year of the company shall end on the 31st day of December of
each year.
ARTICLE XI
WAIVER OF NOTICE
Notice of time, place and purpose of any meeting of the shareholders or of
the Board of Directors may be waived by telegram, radiogram, cablegram m or
other writing by those not present and entitled to vote thereat either before or
after the holding thereof.
ARTICLE XII
INDEMNIFICATION
Any person shall be indemnified and reimbursed by this Company for
expenses actually and reasonably incurred by him or her and liabilities imposed
upon him or her in connection with or arising out of any action, suit or
proceeding, civil or criminal, or threat thereof, in which he or she may be
involved by reason of his or her being or having been a director, officer, or
employee of this Company, or of any firm, corporation or organization which he
or she served in any
15
<PAGE>
capacity at the request of the Company, to the maximum extent permitted by, and
in accordance with, the relevant provisions of the Michigan Business Corporation
Act. Neither this Company nor its directors or officers shall be liable to
anyone for any determination of such directors or officers as to the existence
or absence of conduct which would provide a basis for making or refusing to make
any payment hereunder or for taking or omitting to take any other action
hereunder, in reliance upon the advice of counsel. A court of competent
jurisdiction may make a determination as to the right of a person to
indemnification and reimbursement hereunder in any specific case upon the
application of such person, despite the failure or refusal of the directors and
shareholders to make provision therefor. The foregoing right of indemnification
and reimbursement shall not be exclusive of other rights to which such person
may be entitled as a matter of law and shall inure to the benefit of his or her
heirs, executors and administrators. Notwithstanding anything herein to the
contrary, the right of indemnification herein provided shall be applicable only
to the extent that such liabilities and expenses are not otherwise recoverable
by or through (i) policies of insurance which may be carried by or for the
benefits of such persons or this corporation, or any other corporation or
organization, or (ii) other rights against unrelated third parties. The
indemnification rights covered herein shall continue to apply to an individual
who has ceased to be a director, officer or employee.
ARTICLE XIII
CONTRACTS WITH DIRECTORS
A director of the Corporation shall not, in the absence of fraud, be
disqualified by this office from dealing or contracting with the Corporation,
either as a vendor, purchaser, supplier of
16
<PAGE>
services or otherwise, nor in the absence of fraud shall insofar as permitted by
statute, any transaction or contract of the Corporation be void or voidable or
affected by the reason of the fact that any director, or any firm of which any
director is a member, or any corporation of which any director is an officer,
director or shareholder, is in any way interested in such transaction or
contract; even thought ht vote or action of directors, officers or shareholders
having such adverse interest may have been necessary to obligate the corporation
upon such contract or transaction. At any meeting of the Board of Directors of
the Corporation (or any duly authorized committee thereof) which shall authorize
or ratify any such contractor transaction, any such director or directors may
vote or act thereat with like force and effect as if he had not such interest,
provided in such case, the nature of such interest (though not necessarily the
extent or details thereof) shall be disclosed, or shall have been known to the
directors or a majority thereof. A general notice that a director or officer is
interested in any corporation or other concern of any kind above referred to
shall be sufficient disclosure as to such director or officer, with respect to
all contracts and transactions with such corporation or other concern. No
director shall be disqualified from holding office as director or officer of the
Corporation by reason of any such adverse interest. In the absence of fraud, no
director, officer or shareholder having such adverse interest shall be liable to
the corporation or to any shareholder or creditor thereof, or to any other
person, for any loss incurred by it under or by reason of such contract or
transaction, nor shall any such director, officer, or shareholder be accountable
for any gains or profits realized thereon.
17
<PAGE>
ARTICLE XIV
AMENDMENTS
These By-laws, or any of them, may be altered, amended or repealed, or new
By-laws may be made, at any annual meeting of the shareholders or at any regular
meeting of the Board of Directors, or at any special meeting of the shareholders
or the Board of Directors, if notice thereof be contained in the notice of such
special meeting; provided, however, that the Board of Directors shall not make
or alter any By-laws fixing their qualifications, classifications or term of
office.
18
<PAGE>
Exhibit 3.15
STATE OF ARKANSAS
SECRETARY OF STATE
W. J. "Bill" McCuen
Secretary of State
To All to Whom These Presents Shall Come. Greeting:
I, Bill McCuen, Secretary of State of the State of Arkansas, do hereby
certify that the following and hereto attached instrument of writing is a true
and perfect copy of
ARTICLES OF INCORPORATION
OF
FLY ASH PRODUCTS, INCORPORATED
Original Articles filed:
June 2, 1987
In Testimony Whereof, I have hereunto
set my hand and affixed my official
seal. Done at office in the City of
Little Rock, this 8th day of June
1987
-------------------------------------
Secretary of State
<PAGE>
ARTICLES OF INCORPORATION
OF
FLY ASH PRODUCTS, INCORPORATED
FILED JUNE 2, 1987
W. J. "Bill" McCuen
Secretary of State
By:________________
THE UNDERSIGNED, acting as the incorporator, in order to form a business
corporation for the purposes stated, pursuant to all of the provisions of the
Arkansas Business Corporation Act, ARK. ACTS 1965, No. 576 as amended [codified
as Ark. Stat. Ann. ss. 65-101, et seq. (1980 Repl.)], and the Arkansas
Professional Association Statute [codified as Ark. Stat. Ann. ss. 64-2001, et
seq.,] hereby certifies as follows:
I. NAME OF THE CORPORATION
The name of the corporation is FLY ASH PRODUCTS, INCORPORATED (hereinafter
referred to as the "Corporation").
II. DURATION OF CORPORATION
The period of duration of the Corporation shall be perpetual.
III. PURPOSES OF THE CORPORATION
The primary purpose or purposes for which the Corporation is organized,
the nature of the business of the Corporation and the objects or purposes
proposed to be transacted, promoted or carried on by it are:
To conduct the sale, both retail and wholesale, and disposal of fuel
consumption by-products.
<PAGE>
To take, lease, purchase or otherwise acquire, and to own, use, hold,
sell, convey, exchange, lease, mortgage, work, improve, develop, divide
and otherwise handle, deal in or dispose of real estate, real property,
and any interest in or right therein through one or more wholly-owned,
majority-owned or controlled corporations or other entities as may be
deemed appropriate, and to otherwise directly engage in the real estate
business as a principal agent, or broker.
To take, lease, purchase, or otherwise acquire, and to own, use, hold,
sell convey, exchange, hire, lease, pledge, mortgage, and otherwise deal
in or dispose of such personal property, chattels, chattels real, rights,
easements, privileges, choses in action, notes, bonds, mortgages, and
securities as may be lawfully acquired, held, or disposed of by the
Corporation under the law.
To acquire and take over the whole or any part of the business, property,
assets, contracts, or liabilities or any firm, person, or other
corporation engaged in the same or any other business within the scope of
the purposes described herein; to acquire any property, real or personal,
necessary or reasonably convenient for the carrying on of such business;
and generally to do and perform all acts proper or necessary for the
purposes of such business.
To engage in any lawful business for the purpose of making a profit either
in this State or any other state or country.
The foregoing purposes of the Corporation shall be liberally construed
both as to objects and powers, and it is hereby expressly and specifically
provided that the foregoing enumeration of specific powers, and purposes
of the Corporation shall not be held to limit or restrict in any manner
the powers of the Corporation conferred by law, whether the same be set
forth herein or not.
IV. AUTHORIZED CAPITAL STOCK
The aggregate number of shares which the Corporation shall have authority
to issue is One Thousand (1,000) shares of common stock which shall have a par
value of Ten Cents ($.10) per share and shall be equal in all respects.
V. PAID IN CONSIDERATION
The Corporation will not commence business until consideration of the
value of at least $300.00 has been received by the Corporation for the issuance
of its shares.
VI. ELIMINATION OF PREEMPTIVE RIGHTS
2
<PAGE>
No holder of shares of the Corporation shall be entitled as of right to
subscribe for or purchase any of the Corporation's unissued or treasury shares
of the same class or of other classes, whether now or hereafter authorized, or
any bonds, debentures or other evidences of indebtedness, whether or not
convertible into or exchangeable for shares of any class of the Corporation,
except to the extent, if any, that the Bylaws of the Corporation may provide.
VII. ADDITIONAL POWERS AND LIMITATIONS
A. POWER OF BOARD OF DIRECTORS TO RESTRICT SHARE TRANSFERS: The Board of
Directors of the Corporation shall from time to time in connection with the sale
or issuance of shares of the Corporation have the authority to limit or restrict
the same from sale, assignment, pledge or hypothecation in such manner and
according to such price or terms as the Board of Directors, in its sole
discretion, shall deem fit, so long as any such limitation or restriction shall
be reasonable and provided that any such limitation or restriction shall be
evidenced by a notation to such effect on any certificate evidencing ownership
of such shares issued upon which such limitation or restriction may exist.
B. POWER TO ENTER PARTNERSHIP: The Corporation, acting through its Board
of Directors, shall be authorized to enter into any general or limited
partnership with any other person, firm or corporation for the purposes of
carrying out any of the objects or purposes of the Corporation.
C. QUORUM AT SHAREHOLDER MEETINGS: Unless the Bylaws of the Corporation
otherwise provide for a greater number, a quorum at any meeting of the
shareholders of the Corporation shall consist of a majority of the shares
entitled to vote thereat, represented in person or by duly-authorized proxy at
such meeting.
D. AUTHORIZATION OF BOARD OF DIRECTORS TO REPURCHASE SHARES OF THE
CORPORATION: The Board of Directors of the Corporation shall be authorized as it
deems fit within its discretion to authorize the Corporation to repurchase or
redeem shares of the Corporation whether the same be done from earned surplus or
capital
3
<PAGE>
surplus, other than revaluation surplus, of the Corporation, so long as the same
shall otherwise be authorized by law and in conformity with the provisions of
the Articles of Incorporation of the Corporation or any amendment thereof;
provided, however, such provisions shall not be construed as a right of the
Corporation to repurchase or redeem any share of the Corporation without the
consent of the holder of such share unless such share shall have been issued
with a right of repurchase or redemption reserved to the Corporation or pursuant
to any lawful agreement between the Corporation and such shareholder.
E. INFORMAL ACTION OF THE BOARD OF DIRECTORS: Action taken by a majority
of the Board of Directors without a meeting shall be valid with respect to any
corporate matter as the action of the Board of Directors if, either before or
after such action is taken, all members of the Board of Directors sign and file
with the Secretary of the Corporation for inclusion in the minute book a
memorandum showing the nature of the action taken and their written consent to
the Board of Directors acting informally with respect to such matters, but such
written memorandum shall show whether or not such director approves of the
action to be taken by the Board of Directors so that the Secretary shall note in
the minutes of the Corporation the names of those directors approving the action
of the Board of Directors and the names of those opposing it:
VIII. REGISTERED OFFICE AND AGENT OF THE CORPORATION
The address of the registered office of the Corporation shall be 511
Commerce Street, P.O. Drawer 8597, Pine Bluff, Arkansas 71611. The registered
agent of the Corporation at such address is Donald A. Thomas.
IX. NUMBER OF DIRECTORS OF INITIAL BOARD OF DIRECTORS
The number of directors constituting the Board of Directors of the
Corporation is three (3), and will serve as directors until the first annual
meeting of shareholders or until their successors are duly elected and
qualified.
4
<PAGE>
At any annual meeting or special meeting, called for that purpose, of the
shareholders following the time when the shares of the corporation shall become
owned of record by more than three shareholders, the number of directors may be
increased not to exceed ten members.
X. INCORPORATOR
The name and address of the incorporator of the Corporation is:
NAME ADDRESS
---- -------
Richard M. Grasby 1819 North Fillmore
Little Rock, Arkansas 72207
IN WITNESS WHEREOF, the undersigned being the Incorporator of the
Corporation has hereunto set his hand this 2nd day of June, 1987.
------------------------
RICHARD M. GRASBY
5
<PAGE>
ACKNOWLEDGMENT
STATE OF ARKANSAS )
) ss.
COUNTY OF PULASKI )
NOW on this day personally appeared before the undersigned Notary Public
within and for the County and State aforesaid, Richard M. Grasby, known to me
personally as the Incorporator who executed the foregoing Articles of
Incorporation of Fly Ash Products, Incorporated, who affirmed that he was of the
age of twenty-one (21) years or more and acknowledged that he had executed the
same for the purposes therein expressed.
WITNESS my hand and seal in testimony thereof this 2nd day of May, 1987.
------------------------------
Notary Public
[SEAL]
My Commission expires:
- -----------------------
6
<PAGE>
STATE OF ARKANSAS
SECRETARY OF STATE
W. J. "Bill" McCuen
Secretary of State
To All to Whom These Presents Shall Come. Greeting:
I, Bill McCuen, Secretary of State of the State of Arkansas, do hereby
certify that the following and hereto attached instrument of writing is a true
and perfect copy of
CERTIFICATE OF AMENDMENT
OF
FLY ASH PRODUCTS, INCORPORATED
Filed in this office:
February 19, 1988
In Testimony Whereof, I have hereunto
set my hand and affixed my official
seal. Done at office in the City of
Little Rock, this 19th day of
February 1988
-------------------------------------
Secretary of State
<PAGE>
ARTICLES OF AMENDMENT
TO FLY ASH PRODUCTS, INC.
ARTICLES OF INCORPORATION
Fly Ash Products, Inc., does hereby amend its Articles of Incorporation
for the purpose of electing to be governed by the Arkansas Business Corporation
Act of 1987 (Sections 4-27-122 through 4-27-1706 of the Arkansas Code of 1947)
and for the other purposes herein stated:
FIRST: The name of this corporation shall be Fly Ash Products, Inc.
SECOND: The following shall be treated as additional amendments to the
Articles of Incorporation:
(a) The purpose for which the corporation is organized is to conduct the
business of selling and disposing of coal ash.
(b) The aggregate number of shares which the Corporation shall have
authority to issue is 900 shares of common stock which shall have a par value of
ten cents (.10) per share, each of which shares shall have identical rights and
limitations.
(c) No holder of shares of the Corporation shall be entitled as of right
to subscribe for or purchase any of the corporation's unauthorized and unissued
shares whether now or hereafter authorized, or any bonds, debentures or other
evidence of indebtedness, whether or not convertible into or exchangeable for
shares of any class of the Corporation.
(d) The holder of each share of the common stock of the Corporation shall
be entitled to one vote on each matter voted on at a shareholders meeting for
each such share.
(e) Shares of stock of the Corporation shall be subject to the following
restrictions and limitations on transfer, in addition to any limitations which
may be provided by laws:
(1) In the event that any shareholder desires to sell, assign,
transfer, or make any other disposition of any of his shares (the
"Offering Shareholder") the Offering Shareholder shall give least
thirty (30) days' notice in writing by registered or certified mail
to the Corporation and each other registered shareholder setting
forth the number of shares that the Offering Shareholder desires to
sell or dispose of together with the specific terms of a bona fide
offer from a third party which the Offering Shareholder is willing
to accept. Provided, however, that any transfer by a Shareholder to
his or her spouse at the time such shares were issued (but not to
subsequent spouses), to a child, grandchild, father, mother, sister
or brother or to a trust whose sole beneficiaries are one of this
<PAGE>
designated group, shall not give rise to the option herein provided
for. Within this thirty (30) day period, the Corporation shall call
a meeting of the board of directors to which all shareholders shall
be invited upon not less than five (5) days nor more than ten (10)
days written notice to all of the directors and such shareholders.
This meeting shall be held at the Corporation's principal office or
such other place as may be designated in the notice, during normal
business hours. At the meeting, the shares of the Offering
Shareholder shall be offered to the Corporation upon the identical
terms represented by the bona fide offer of the intended third party
purchaser. Should the Corporation elect to exercise its option to
purchase the offered shares, it shall do so not later than ten (10)
days following the date of such meeting or any adjournment thereof.
(2) If the Corporation does not elect to purchase all of the shares
offered for sale by the Offering Shareholder, the nonpurchased
shares shall be offered for sale and shall be subject to an option
in favor of the remaining shareholders to purchase all or a
proportionate share of any such nonpurchased shares. Following the
thirty (30) day notice period to the Corporation the Offering
Shareholder shall give at least thirty (30) days additional notice
in writing by registered or certified mail to the remaining
shareholders setting forth the identical information contained in
the original notice to the Corporation of the intended sale or other
disposition of the offered shares and including a recital of the
number of such shares, if any, purchased by the Corporation pursuant
to its option to purchase such offered shares. Each such shareholder
shall have the right to purchase his proportionate share or up to
all of the remaining unpurchased shares so offered on like terms as
the intended sale or disposition by the offering shareholder. A
remaining shareholder desiring to exercise the option to purchase
his proportionate share or up to all of the remaining shares shall
so indicate by a written notice delivered by registered or certified
mail or delivered in person to the Offering Shareholder and the
other shareholders of the Corporation which, if mailed, shall be
postmarked within the thirty (30) day period following the giving of
such notice by the Offering Shareholder. The term "proportionate
share" as used in this provision shall mean that portion of the
shares of the Corporation offered for sale which the shares then
owned by each of the nonselling shareholders bear to the total of
the nonoffered shares of the shareholders not proposing to sell any
part thereof. A stockholder electing to
2
<PAGE>
exercise the option may purchase, in addition to his proportionate
share, any of the offered shares which are not being purchased by
other offering shareholders by stating in his exercise of the option
his intention so to do. Should more than one offeree shareholder
elect to purchase up to all of the unpurchased offered shares and
one or more other shareholders elect not to so purchase such
unpurchased offered shares, then the purchasing shareholders shall
be entitled to purchase the offered and unpurchased shares
proportionately to their then number of shares of the Corporation
compared with the number of shares held by the other purchasing
shareholders.
(3) If the Corporation or any of the nonoffering shareholders elect
to purchase any or all of the offered shares, the Offering
Shareholder shall deliver to the indicated purchaser share
certificates duly endorsed evidencing such shares accompanied by any
documents necessary to effect a transfer. Simultaneously with such
transfer, the Corporation or the purchasing shareholder or
shareholders shall pay to the Offering Shareholder the entire
purchase price and/or such evidence of debt and cash as may have
been the basis of the proposed sale terms accepted by the
Corporation and/or the purchasing shareholders.
(4) If after having first offered the shares intended for sale by
the Offering Shareholder to the Corporation and to the remaining
shareholders in the manner herein specified there remain any of the
offered shares which have not been purchased by the Corporation or
the remaining shareholders, then within thirty (30) days following
expiration of the time for exercise of the option in favor of the
remaining shareholders, the Offering Shareholder may sell such
shares to the intended purchaser for the price and on the terms
originally proposed to the Corporation and the remaining
shareholders, but such shares in the hands of the purchaser shall
continue to be subject to the options retained herein with respect
to such shares in connection with any subsequent transfer.
(5) All certificates evidencing shares shall bear on the face, in
the margin or as a legend the following language:
"The shares evidenced by this certificate are subject to the
restrictions and limitations on the transfer thereof set forth
in the Articles of Incorporation of the issuing Corporation."
(6) No restriction contained herein shall be binding or effective
against any pledgee of the outstanding shares of the Corporation at
3
<PAGE>
the time of this amendment, but shall become effective with respect
to such shares when they have been acquired by the pledgee or any
purchaser thereof in the exercise of any power of sale or
foreclosure with respect to such pledge.
THIRD: The amendments herein contained shall constitute an entire
restatement of the Articles of Incorporation of this Corporation and no
provision of the original Articles of Incorporation which in any manner alter,
conflict with, derogate from or limit any of the provisions hereof or any right
granted to corporations, generally, under the provisions of the Arkansas
Business Corporation Act of 1987, shall be deemed applicable to this
Corporation.
FOURTH: This amendment was adopted at meeting of the shareholders of the
Corporation duly called and held at which a proper quorum of the shareholders
was present. At the time of the meeting of the shareholders there were nine
hundred (900) shares of the corporation's common stock outstanding of which 900
shares were cast for this amendment. The number of votes cast for this amendment
by the only class of stock of the Corporation authorized to vote thereon was
sufficient for approval.
FIFTH: The Board of Directors of the Corporation shall have authority to
adopt any Bylaws, not in contravention of the law, which they may deem
appropriate for the governance of the affairs of the Corporation.
SIXTH: The address of the registered office of the Corporation shall be
511 Commerce Street, P.O. Drawer 8597, Pine Bluff, Arkansas 71611.
SEVENTH: The registered agent of the Corporation shall be Donald A.
Thomas, 511 Commerce Street, Pine Bluff, Arkansas 71601.
EIGHTH: No officer or director of the Corporation shall be liable to the
shareholders of the Corporation for breach of his or her fiduciary duty as such
director or officer except:
(a) For any breach of the directors or officers duty of loyalty to the
Corporation or its stockholders;
4
<PAGE>
(b) For acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
(c) Under Section 4-27-833 of the Arkansas Business Corporation Act of
1987;
(d) For any transaction from which the director derived an improper
personal benefit; or
(e) For any action, omission, transaction or breach of a director's or
officer's duty creating any third party liability to any person or entity other
than the Corporation or its shareholders.
IN WITNESS WHEREOF, the undersigned officers of the Corporation have
hereunto placed the name of the Corporation as they are thereunto duly
authorized this 15th day of February, 1988.
FLY ASH PRODUCTS, INC.
By:
-------------------------------
President
ATTEST:
- ----------------------
Secretary
5
<PAGE>
Exhibit 3.16
BY-LAWS
OF
FLY ASH PRODUCTS, INCORPORATED
ARTICLE I
Name, purpose and location
SECTION I: The name of this corporation is FLY ASH PRODUCTS, INCORPORATED.
SECTION II: The nature of the business of the corporation, its objects,
powers, and purposes to be transacted, promoted, or carried on by it are set
forth in the Articles of Incorporation.
SECTION III: The corporation's principal office shall be located at 511
Commerce Street, P. O. Drawer 8597, Pine Bluff, Jefferson County, Arkansas,
until changed or additional offices authorized by action of the Board of
Directors.
ARTICLE II
Capital Stock
SECTION I: The amount of capital stock shall be 1,000 shares of common
stock at a par value of $ .10 per share.
SECTION II: All certificates of stock shall be signed by the President and
Secretary- Treasurer, and shall be sealed with the corporate seal.
SECTION III: Transfers of stock shall be made only on the books of the
corporation; and any purported transfer shall not be complete until transferred
on such books and the old
<PAGE>
certificates, properly endorsed, shall have been surrendered and canceled before
a new certificate is issued. The stock books of the corporation shall be closed
against transfers for a period of 30 days prior to the date of payment of a
dividend and for 10 days before each annual meeting of the stockholders. Any and
all transfer tax that may be required on any transfer must be paid before
transfer and paper record is made thereof.
SECTION IV: That 30 days prior to the annual stockholders' meeting, any
stock paid for to that date but unissued upon any subscription contract or
otherwise, shall be forthwith issued and delivered to the subscribing
stockholder, who shall be entitled to participate in the annual stockholders'
meeting and to receive a pro rata share of the dividends as if the stock had
been issued for the entire year preceding.
SECTION V: In case of loss or destruction of a certificate of stock, no
new certificate shall be issued in lieu thereof except upon satisfactory proof
to the Board of Directors of such loss or destruction, and upon the giving of
satisfactory security, by bond or otherwise, against loss to the corporation.
Any such certificate shall be marked "Duplicate" on its face.
SECTION VI: No stock shall be issued on original issue to any person not a
bona fide resident of the State of Arkansas and then only after satisfactory
investigation of his residency shall have been made.
SECTION VII: Certificates of stock shall be issued in numerical order from
the stock book on a form not inconsistent with the Articles of Incorporation and
shall be prepared and approved by the Board of Directors. A record of each
certificate shall be kept on the stock certificate book.
- 2 -
<PAGE>
SECTION VIII: Dividends to be paid on stock shall be paid pro rata for
each share and in such amounts as may be declared by the Board of Directors,
either in cash, or by stock dividend. No dividend shall be made which would
impair the capital of the corporation.
SECTION IX: Each share of stock shall entitle its holder, as shown on the
corporate records, to vote one vote, either in person or by proxy at any
stockholders' meeting. Unissued stock shall be non-voting. Treasurer's stock
shall be non-voting.
SECTION X: No stock shall be issued without payment in cash, or property,
or services.
ARTICLE III
Officers and their Duties
SECTION I: The officers of this corporation shall be a President, a
Vice-President, a Secretary and a Treasurer, who shall be elected by the Board
of Directors for a term of one year. The office of the Secretary and Treasurer
may be occupied by the same individual. Upon proper authorization of the Board
of Directors, the Board of Directors may elect a Chairman of the Board of
Directors.
SECTION II: The offices to be filled shall be by majority vote of the
Board of Directors at the annual Board of Directors' meeting. Vacancies may be
filled by the Board of Directors for the balance of the year prior to the next
annual Board of Directors' meeting when such vacancy occurs or the office is
declared to be vacant for the first time.
SECTION III: The President shall preside at all Directors' meetings,
provided a Chairman of the Board shall not have been elected, and at all
Stockholders' meetings; sign all stock certificates; have general supervisory
duties over the affairs of the corporation and over the
- 3 -
<PAGE>
other officers and directors; and shall perform the general overall duties
commensurate with his office and as required in the regular course of business
of the corporation, including the purchase, acquisition or disposition of the
properties of the corporation. He shall co-sign checks, unless otherwise
designated by the Board of Directors.
SECTION IV: The Vice-President shall assume all duties of the President in
his absence or incapacity, and shall perform such duties as may be assigned by
the President.
SECTION V: The Secretary shall give all notices required by the By-laws,
Board of Directors, and the President. He shall keep accurate and complete
minutes of all meetings subject to the examination of any stockholder, officer,
or director at any time after reasonable notice of such demand for examination.
The Secretary shall sign all stock certificates and keep accurate record of all
stock transactions, and perform all required duties commensurate with the
issuance of stock and the ordinary duties of a corporate secretary.
SECTION VI: The Treasurer shall keep an accurate record of the finances of
the corporation, maintain a bank account and the records of financial standing
of the corporation and make a report thereof to the Board of Directors at each
regular meeting thereof; and shall furnish an annual report thereof to the
stockholders at the annual meeting; and furnish such other reports as required
by the President. The annual report to the stockholders shall be audited by a
certified public accountant prior to its submission, unless the Board of
Directors otherwise directs. The Treasurer shall sign all checks of the
corporation, unless the Board of Directors otherwise directs.
SECTION VII: Upon proper motion and direction of the Board of Directors,
an Assistant Treasurer and an Assistant Secretary may be authorized and their
duties shall be the same as the Treasurer and Secretary respectively.
- 4 -
<PAGE>
SECTION VIII: Provided a Chairman of the Board of Directors be established
by the Board of Directors, his duties shall consist of the general supervision
of the Board of Directors, the preparation of and submission of such business as
should properly come before the Board of Directors and he shall preside over
each meeting of the Board of Directors.
SECTION IX: The officers of the corporation shall receive such
compensation for their services as may be set by unanimous vote of the Board of
Directors. All officers shall be stockholders.
ARTICLE IV
Directors and Directors' Meetings
SECTION I: The business and property of the corporation shall be generally
managed by the Board of Directors of a minimum of 3 and a maximum of 7 members,
who shall be elected by the stockholders for the term of one year at the annual
stockholders' meeting. Each director must be a stockholder of the corporation.
The President shall be governed in his activity of management of the corporate
affairs by the Board of Directors.
SECTION II: The Board of Directors shall hold an annual meeting
immediately subsequent to the annual meeting of the stockholders at which time
the newly elected members thereof shall take office for the ensuing year. No
notice of this meeting shall be required in advance of the annual stockholders'
meeting.
SECTION III: The Board of Directors shall hold such other meetings as
called by the Board of Directors, the President or, in the President's absence,
by the Secretary, and the Chairman of the Board, if elected. Notice of the place
and time and purpose of any call meeting of the Board shall be mailed to the
also known address of each member of the Board of Directors
- 5 -
<PAGE>
at least 2 days in advance of such meeting date by the Secretary. Notice of any
meeting of the Board of Directors may be waived prior to, at, or after the
meeting.
SECTION IV: Two-thirds of the number of elected members of the Board of
Directors shall constitute a quorum for any meeting and a majority of those
present shall constitute an active Board.
SECTION V: The Board of Directors shall at each annual Board of Directors'
meeting pass upon the advisability of declaring dividends, either cash or stock.
ARTICLE V
Stockholders and Stockholders' Meetings
SECTION I: Each Stockholder of this corporation, upon any original issue
of stock, shall be a bona fide resident of the State of Arkansas, as of the time
of its issue.
SECTION II: Any holder of stock, as shown upon the stock book of the
corporation, shall be entitled to one vote for each share of stock at any
meeting of the stockholders. Each shall be entitled to all other rights and
privileges afforded by ownership of stock in the Corporation.
SECTION III: An annual meeting of the stockholders shall be held on the
date set by the Board of Directors during the fourth week of January of each
year. Notice of the time and place of said meeting shall be mailed to the last
known address, as shown upon the records of the corporation, of each stockholder
by the Secretary at least 10 days prior to such meeting. Notice may be waived in
writing before, at, or after such meeting in the presence, either in person or
by proxy, shall constitute waiver of such notice.
- 6 -
<PAGE>
SECTION IV: Special meetings of the stockholders may be called by the
Board of Directors at designated times and places as may be set. Notice of such
special meetings of the stockholders shall be mailed to the last known address,
as shown on the records of the corporation, at least 10 days in advance of such
meeting. The notice shall include the purposes of said meeting. Notice may be
waived in writing before, at, or after such meeting in presence in person or by
proxy and shall constitute waiver of notice.
SECTION V: The stockholders shall elect a minimum of 3 and a maximum of 7
directors at each annual meeting by majority vote. Each stockholder shall be
entitled to vote for each director.
SECTION VI: A majority vote of outstanding stock may amend the Articles of
Incorporation.
ARTICLE VI
Amendments
SECTION I: These By-laws may be amended by 3/5 vote of the filled
positions of the Board of Directors. Notice of the amendments so made shall be
announced at each subsequent annual meeting of the stockholders.
Adopted this _____ day ____________, 19__.
--------------------------------------
Secretary
- 7 -
<PAGE>
Exhibit 4.1
EXECUTION COPY
JTM INDUSTRIES, INC.
THE GUARANTORS PARTY HERETO
$100,000,000
10% SENIOR SUBORDINATED NOTES DUE 2008
INDENTURE
DATED AS OF APRIL 22, 1998
U.S. BANK NATIONAL ASSOCIATION
Trustee
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE........................1
SECTION 1.01. DEFINITIONS..................................................1
SECTION 1.02. OTHER DEFINITIONS...........................................15
SECTION 1.03. TRUST INDENTURE ACT PROVISIONS..............................16
SECTION 1.04. RULES OF CONSTRUCTION.......................................16
ARTICLE 2. THE NOTES........................................................16
SECTION 2.01. FORM AND DATING.............................................16
SECTION 2.02. EXECUTION AND AUTHENTICATION................................18
SECTION 2.03. REGISTRAR AND PAYING AGENT..................................18
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.........................18
SECTION 2.05. HOLDER LISTS................................................19
SECTION 2.06. TRANSFER AND EXCHANGE.......................................19
SECTION 2.07. REPLACEMENT NOTES...........................................31
SECTION 2.08. OUTSTANDING NOTES...........................................31
SECTION 2.09. TREASURY NOTES..............................................31
SECTION 2.10. TEMPORARY NOTES.............................................32
SECTION 2.11. CANCELLATION................................................32
SECTION 2.12. DEFAULTED INTEREST..........................................32
ARTICLE 3. REDEMPTION AND PREPAYMENT........................................32
SECTION 3.01. NOTICES TO TRUSTEE..........................................32
SECTION 3.02. SELECTION OF NOTES BE REDEEMED..............................33
SECTION 3.03. NOTICE OF REDEMPTION........................................33
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION..............................34
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.................................34
SECTION 3.06. NOTES REDEEMED IN PART......................................34
SECTION 3.07. OPTIONAL REDEMPTION.........................................34
SECTION 3.08. MANDATORY REDEMPTION........................................35
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.........35
ARTICLE 4. COVENANTS........................................................37
SECTION 4.01. PAYMENT OF NOTES............................................37
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.............................37
SECTION 4.03. REPORTS.....................................................38
SECTION 4.04. COMPLIANCE CERTIFICATE......................................38
SECTION 4.05. TAXES.......................................................39
SECTION 4.06. STAY, EXTENSION AND USURY LAWS..............................39
SECTION 4.07. RESTRICTED PAYMENTS.........................................39
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES................................................41
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK..42
SECTION 4.10. ASSET SALES.................................................44
SECTION 4.11. TRANSACTIONS WITH AFFILIATES................................45
SECTION 4.12. LIENS.......................................................45
i
<PAGE>
SECTION 4.13. ADDITIONAL SUBSIDIARY GUARANTEES............................45
SECTION 4.14. CORPORATE EXISTENCE.........................................46
SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL..................46
SECTION 4.16. NO SENIOR SUBORDINATED DEBT.................................47
SECTION 4.17. LIMITATION ON ISSUANCES AND SALES OF EQUITY INTERESTS IN
RESTRICTED SUBSIDIARIES.....................................47
SECTION 4.18. PAYMENTS FOR CONSENT........................................47
SECTION 4.19. BUSINESS ACTIVITIES.........................................47
ARTICLE 5. SUCCESSORS.......................................................47
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS....................47
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED...........................48
ARTICLE 6. DEFAULTS AND REMEDIES............................................48
SECTION 6.01. EVENTS OF DEFAULT...........................................48
SECTION 6.02. ACCELERATION................................................50
SECTION 6.03. OTHER REMEDIES..............................................50
SECTION 6.04. WAIVER OF PAST DEFAULTS.....................................51
SECTION 6.05. CONTROL BY MAJORITY.........................................51
SECTION 6.06. LIMITATION ON SUITS.........................................51
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT...............52
SECTION 6.08. COLLECTION SUIT BY TRUSTEE..................................52
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM............................52
SECTION 6.10. PRIORITIES..................................................52
SECTION 6.11. UNDERTAKING FOR COSTS.......................................53
ARTICLE 7. TRUSTEE..........................................................53
SECTION 7.01. DUTIES OF TRUSTEE...........................................53
SECTION 7.02. RIGHTS OF TRUSTEE...........................................54
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE................................55
SECTION 7.04. TRUSTEE'S DISCLAIMER........................................55
SECTION 7.05. NOTICE OF DEFAULTS..........................................55
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES..................55
SECTION 7.07. COMPENSATION AND INDEMNITY..................................56
SECTION 7.08. REPLACEMENT OF TRUSTEE......................................56
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC............................57
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION...............................57
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY...........58
SECTION 7.12. DEFAULT RATE OF INTEREST....................................58
SECTION 7.13. RECEIPT OF DOCUMENTS........................................58
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.........................58
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE....58
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE..............................59
SECTION 8.03. COVENANT DEFEASANCE.........................................59
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE..................59
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN
TRUST; OTHER MISCELLANEOUS PROVISIONS.......................61
ii
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SECTION 8.06. REPAYMENT TO COMPANY........................................61
SECTION 8.07. REINSTATEMENT...............................................61
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER.................................62
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES.........................62
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES............................63
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.........................64
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS...........................64
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES............................65
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.............................65
ARTICLE 10. SUBORDINATION...................................................65
SECTION 10.01. AGREEMENT TO SUBORDINATE...................................65
SECTION 10.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY.......................65
SECTION 10.03. DEFAULT ON DESIGNATED SENIOR INDEBTEDNESS..................66
SECTION 10.04. ACCELERATION OF SECURITIES.................................66
SECTION 10.05. WHEN DISTRIBUTION MUST BE PAID OVER........................66
SECTION 10.06. NOTICE BY COMPANY..........................................67
SECTION 10.07. SUBROGATION................................................67
SECTION 10.08. RELATIVE RIGHTS............................................67
SECTION 10.09. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY...............68
SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE...................68
SECTION 10.11. RIGHTS OF TRUSTEE AND PAYING AGENT.........................68
SECTION 10.12. AUTHORIZATION TO EFFECT SUBORDINATION......................68
SECTION 10.13. AMENDMENTS.................................................69
ARTICLE 11. SUBSIDIARY GUARANTEES...........................................69
SECTION 11.01. GUARANTEE..................................................69
SECTION 11.02. SUBORDINATION OF SUBSIDIARY GUARANTEE......................70
SECTION 11.03. LIMITATION ON GUARANTOR LIABILITY..........................70
SECTION 11.04. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE.............70
SECTION 11.05. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.........71
SECTION 11.06. RELEASES FOLLOWING SALE OF ASSETS..........................72
ARTICLE 12. MISCELLANEOUS...................................................72
SECTION 12.01. TRUST INDENTURE ACT CONTROLS...............................72
SECTION 12.02. NOTICES....................................................72
SECTION 12.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF
NOTES......................................................73
SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.........73
SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION..............74
SECTION 12.06. RULES BY TRUSTEE AND AGENTS................................74
SECTION 12.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS...............................................74
SECTION 12.08. GOVERNING LAW..............................................74
SECTION 12.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS..............75
SECTION 12.10. SUCCESSORS.................................................75
SECTION 12.11. SEVERABILITY...............................................75
SECTION 12.12. COUNTERPART ORIGINALS......................................75
iii
<PAGE>
SECTION 12.13. TABLE OF CONTENTS, HEADINGS, ETC...........................75
EXHIBITS
Exhibit A: FORM OF NOTE
Exhibit B: FORM OF CERTIFICATE OF TRANSFER
Exhibit C: FORM OF CERTIFICATE OF EXCHANGE
Exhibit D: FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Exhibit E: FORM OF SUBSIDIARY GUARANTEE
Exhibit F: FORM OF SUPPLEMENTAL INDENTURE
iv
<PAGE>
CROSS-REFERENCE TABLE*
Trust Indenture Act Section
Indenture Section
310(a)(1)...........................................................7.10
(a)(2)...............................................................7.10
(a)(3)..............................................................N.A.
(a)(4)..............................................................N.A.
(a)(5)..............................................................7.10
(i)(b)..............................................................7.10
(ii)(c).............................................................N.A.
311(a)..............................................................7.11
(b).................................................................7.11
(iii)(c)............................................................N.A.
312(a)..............................................................2.05
(b).................................................................11.03
(iv)(c).............................................................11.03
313(a)..............................................................7.06
(b)(1)..............................................................10.03
(b)(2)..............................................................7.07
(v)(c)..............................................................7.06; 11.02
(vi)(d).............................................................7.06
314(a)..............................................................4.03; 11.02
(A)(b)..............................................................10.02
(c)(1)..............................................................11.04
(c)(2)..............................................................11.04
(c)(3)..............................................................N.A.
(vii)(e)............................................................11.05
(f).................................................................NA
315(a)..............................................................7.01
(b).................................................................7.05; 11.02
(B)(c)..............................................................7.01
(d).................................................................7.01
(e).................................................................6.11
316(a)(last sentence)...............................................2.09
(a)(1)(A)...........................................................6.05
(a)(1)(B)...........................................................6.04
(a)(2)..............................................................N.A.
(b).................................................................6.07
(C)(c)..............................................................2.12
317(a)(1)...........................................................6.08
(a)(2)..............................................................6.09
(b).................................................................2.04
318(a)..............................................................11.01
(b).................................................................N.A.
(c).................................................................11.01
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
v
<PAGE>
INDENTURE dated as of April 22, 1998 by and among JTM Industries,
Inc., a Texas corporation (the "Company"), each domestic Subsidiary of the
Company listed on the signature page of this Indenture (together, the "Initial
Guarantors") and U.S. Bank National Association, as trustee (the "Trustee").
The Company, the Initial Guarantors and the Trustee agree as follows
for the benefit of each other and for the equal and ratable benefit of the
Holders of the 10% Series A Senior Subordinated Notes due 2008 (the "Series A
Notes") and the 10% Series B Senior Subordinated Notes due 2008 (the "Series B
Notes" and, together with the Series A Notes, the "Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"144A Global Note" means a global note in the form of Exhibit A-1
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary or
its nominee that shall be issued in a denomination equal to the outstanding
principal amount of the Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Additional Notes" means up to $50.0 million in aggregate principal
amount of Notes (other than the Initial Notes) issued under this Indenture in
accordance with Sections 2.02 and 4.09 hereof.
"Affiliate" of any specified Person means any other 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"
(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 that
beneficial ownership of 10% or more of the Voting Stock of a Person shall be
deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and Cedel that apply to such transfer or
exchange.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets or rights (including, without limitation, by way of a
sale and leaseback) other than sales of inventory in the ordinary course of
business (provided that the sale, lease, conveyance or other disposition of all
or substantially all of the assets of the Company and its Restricted
Subsidiaries taken as a whole shall be governed by the provisions of Sections
4.15 and 5.01 hereof and not by the provisions of Section 4.10 hereof), and (ii)
the issue by any Restricted Subsidiaries of the Company of any Equity Interests
of such
<PAGE>
Restricted Subsidiary and the sale by the Company or any of its Restricted
Subsidiaries of Equity Interest of any of the Company's Subsidiaries, in the
case of either clause (i) or (ii), whether in a single transaction or a series
of related transactions that have a fair market value or generate net proceeds
in excess of $2.0 million in any twelve month period. Notwithstanding the
foregoing, the following items shall not be deemed to be Asset Sales: (i) a
transfer of assets by the Company to a Wholly Owned Restricted Subsidiary or by
a Wholly Owned Restricted Subsidiary to the Company or to another Wholly Owned
Restricted Subsidiary, (ii) an issuance of Equity Interests by a Wholly Owned
Restricted Subsidiary to the Company or to another Wholly Owned Restricted
Subsidiary and (iii) a Restricted Payment that is permitted by Section 4.07
hereof.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company, or
any authorized committee of the Board of Directors.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof (provided that the full
faith and credit of the United States is pledged in support thereof) having
maturities of not more than six months from the date of acquisition, (iii)
certificates of deposit and eurodollar time deposits with maturities of six
months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case
with any lender party to the Secured Credit Facility or with any domestic
commercial bank having capital and surplus in excess of $500 million and a
Thompson Bank Watch Rating of "B" or better, (iv) repurchase obligations with a
term of not more than seven days for underlying securities of the types
described in clauses (ii) and (iii) above entered into with any financial
institution meeting the qualifications specified in clause (iii) above, (v)
commercial paper having the highest rating obtainable from Moody's Investors
Service, Inc. or Standard & Poor's Corporation and in each case maturing within
six months after the date of acquisition and (vi) money market funds the assets
of which constitute Cash Equivalents of the kinds described in clauses (i)-(v)
of this definition.
"Cedel" means Cedel Bank, SA.
"Change of Control" means the occurrence of any of the following:
(i) the sale, lease, transfer, conveyance or other disposition (other than by
way of merger or consolidation), in one or a
2
<PAGE>
series of related transactions, of all or substantially all of the assets of the
Company and its Restricted Subsidiaries taken as a whole to any "person" (as
such term is used in Section 13(d)(3) of the Exchange Act); (ii) the adoption of
a plan relating to the liquidation or dissolution of the Company; (iii) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" (as defined above)
becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule
13d-5 under the Exchange Act, except that a person shall be deemed to have
"beneficial ownership" of all securities that such person has the right to
acquire, whether such right is currently exercisable or is exercisable only upon
the occurrence of a subsequent condition), directly or indirectly, of more than
50% of the Voting Stock of the Company (measured by voting power rather than
number of shares); (iv) the first day on which a majority of the members of the
Board of Directors of the Company are not Continuing Directors; or (iv) the
Company consolidates with, or merges with or into, any Person, or any Person
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which any of the outstanding Voting Stock of the
Company is converted into or exchanged for cash, securities or other property,
other than any such transaction where the Voting Stock of the Company
outstanding immediately prior to such transaction is converted into or exchanged
for Voting Stock (other than Disqualified Stock) of the surviving or transferee
Person constituting a majority of the outstanding shares of such Voting Stock of
such surviving or transferee Person (immediately after giving effect to such
issuance).
"Company" means JTM Industries, Inc., Texas corporation, and any and
all permitted successors thereto.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus (i) an
amount equal to any extraordinary loss plus any net loss realized in connection
with an Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Restricted Subsidiaries for such period, to the
extent that such provision for taxes was included in computing such Consolidated
Net Income, plus (iii) consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued and whether or
not capitalized (including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), to the extent that any such expense was deducted in computing such
Consolidated Net Income, plus (iv) depreciation, amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-cash
expenses (excluding any such non-cash expense to the extent that it represents
an accrual of or reserve for cash expenses in any future period or amortization
of a prepaid cash expense that was paid in a prior period) of such Person and
its Restricted Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income, minus (v) non-cash items increasing such
Consolidated Net Income for such period, in each case, on a consolidated basis
and determined in accordance with GAAP. Notwithstanding the foregoing, the
provision for taxes on the income or profits of, and the depreciation and
amortization and other non-cash expenses of, a Restricted Subsidiary of the
referent Person shall be added to Consolidated Net Income to compute
Consolidated Cash Flow only to the extent (and in the same proportion) that the
Net Income of such Restricted Subsidiary was included in calculating the
Consolidated Net Income of such Person and only if a corresponding amount would
be permitted at the date of determination to be dividended to the Company by
such Restricted Subsidiary without prior governmental approval (that has not
been obtained),
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and without direct or indirect restriction pursuant to the terms of its charter
and all agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Restricted Subsidiary or its
stockholders.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the Net Income (but not loss) of any Person that is
not a Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof that is a Guarantor, (ii) the Net Income of any Restricted
Subsidiary shall be excluded to the extent that the declaration or payment of
dividends or similar distributions by that Restricted Subsidiary of that Net
Income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Restricted Subsidiary or its stockholders, (iii) the Net Income of any Person
acquired in a pooling of interests transaction for any period prior to the date
of such acquisition shall be excluded, (iv) the cumulative effect of a change in
accounting principles shall be excluded and (v) the Net Income (but not loss) of
any Unrestricted Subsidiary shall be excluded, whether or not distributed to the
Company or one of its Subsidiaries.
"Consolidated Net Worth" means, with respect to any Person as of any
date, the sum of (i) the consolidated equity of the common stockholders of such
Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date hereof in the book value of any asset
owned by such Person or a consolidated Subsidiary of such Person, (y) all
investments as of such date in unconsolidated Subsidiaries and in Persons that
are not Subsidiaries (except, in each case, Permitted Investments), and (z) all
unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date hereof or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address of
the Trustee specified in Section 11.02 hereof or such other address as to which
the Trustee may give notice to the Company.
"Custodian" means the Trustee, as custodian with respect to the
Notes in global form, or any successor entity thereto.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
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"Definitive Note" means a certificated Note registered in the name
of the Holder thereof and issued in accordance with Section 2.06 hereof, in the
form of Exhibit A-1 hereto except that such Note shall not bear the Global Note
Legend and shall not have the "Schedule of Exchanges of Interests in the Global
Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 hereof as
the Depositary with respect to the Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Designated Senior Indebtedness" means (i) any Senior Indebtedness
outstanding under the Secured Credit Facility and (ii) any other Senior
Indebtedness permitted under this Indenture the aggregate principal amount of
which is $25.0 million or more and that has been designated by the Company as
"Designated Senior Indebtedness."
"Disqualified Stock" means any Capital Stock that, by its terms (or
by the terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature; provided, however, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the right
to require the Company to repurchase such Capital Stock upon the occurrence of a
Change of Control or an Asset Sale shall not constitute Disqualified Stock if
the terms of such Capital Stock provide that the Company may not repurchase or
redeem any such Capital Stock pursuant to such provisions unless such repurchase
or redemption complies with Section 4.07 hereof.
"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).
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Notes" means the Notes issued in the Exchange Offer
pursuant to Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the Registration
Rights Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in
the Registration Rights Agreement.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Secured Credit Facility) in
existence on the date hereof, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period,
the sum, without duplication, of (i) the consolidated interest expense of such
Person and its Restricted Subsidiaries for
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<PAGE>
such period, whether paid or accrued (including, without limitation,
amortization of debt issuance costs and original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations), and (ii) the consolidated interest of
such Person and its Restricted Subsidiaries that was capitalized during such
period, and (iii) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a
Lien on assets of such Person or one of its Restricted Subsidiaries and (iv) the
product of (a) all dividend payments, whether or not in cash, on any series of
preferred stock of such Person or any of its Restricted Subsidiaries, other than
dividend payments on Equity Interests payable solely in Equity Interests of the
Company (other than Disqualified Stock) or to the Company or a Restricted
Subsidiary of the Company, times (b) a fraction, the numerator of which is one
and the denominator of which is one minus the then current combined federal,
state and local statutory tax rate of such Person, expressed as a decimal, in
each case, on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for
any period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person and
its Restricted Subsidiaries for such period. In the event that the referent
Person or any of its Restricted Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than temporary repayments under revolving credit
borrowings) or issues or redeems preferred stock subsequent to the commencement
of the period for which the Fixed Charge Coverage Ratio is being calculated but
prior to the date on which the event for which the calculation of the Fixed
Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge
Coverage Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, Guarantee or redemption of Indebtedness, or such issuance or
redemption of preferred stock, as if the same had occurred at the beginning of
the applicable four-quarter reference period. In addition, for purposes of
making the computation referred to above, (i) acquisitions that have been made
by the Company or any of its Restricted Subsidiaries, including through mergers
or consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated on a pro forma basis without giving effect
to clause (iii) of the proviso set forth in the definition of Consolidated Net
Income, and (ii) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, and (iii) the
Fixed Charges attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Restricted Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, which are in effect from time to time.
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<PAGE>
"Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
"Global Note Legend" means the legend set forth in Section
2.06(g)(ii), which is required to be placed on all Global Notes issued under
this Indenture.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.
"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, by way of a
pledge of assets or through letters of credit or reimbursement agreements in
respect thereof), of all or any part of any Indebtedness.
"Guarantors" means (i) each domestic Subsidiary of the Company on
the Issue Date and (ii) any other domestic subsidiary that executes a Subsidiary
Guarantee in accordance with the provisions of this Indenture, and their
respective successors and assigns.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Holder" means a Person in whose name a Note is registered.
"IAI Global Note" means the global Note in the form of Exhibit A-1
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee that shall be issued in a denomination equal to the outstanding
principal amount of the Notes sold to Institutional Accredited Investors.
"Indebtedness" means, with respect to any Person, any Indebtedness
of such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of the foregoing (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the Guarantee
by such Person of any Indebtedness of any other Person. The amount of any
Indebtedness outstanding as of any date shall be (i) the accreted value thereof,
in the case of any Indebtedness issued with original issue discount, and (ii)
the principal amount thereof, together with any interest thereon that is more
than 30 days past due, in the case of any other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from
time to time.
"Indirect Participant" means a Person who holds a beneficial
interest in a Global Note through a Participant.
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<PAGE>
"Initial Guarantors" means the Guarantors who executed this
Indenture on the Issue Date.
"Initial Notes" means $100,000,000 in aggregate principal amount of
Notes issued under this Indenture on the date hereof.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who are not also QIBs.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Subsidiary of the Company sells or otherwise disposes of
any Equity Interests of any direct or indirect Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in Section 4.07 hereof.
"ISG" means Industrial Services Group, Inc., a Delaware corporation
and parent of the Company.
"ISG Bridge Note" means the $29.0 million senior bridge note of ISG.
"ISG PIK Notes" means the 9% Junior Subordinated Promissory Note due
2005 of ISG issued on October 14, 1997, together with additional notes issued in
respect of interest thereon.
"Issue Date" means the closing date for the sale and original
issuance of the Notes under this Indenture.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed, or a day on which the
payment system of the Federal Reserve is not operational. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue on
such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be
prepared by the Company and sent to all Holders of the Notes for use by such
Holders in connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
8
<PAGE>
"Liquidated Damages" means all liquidated damages then owing
pursuant to Section 5 of the Registration Rights Agreement.
"Net Income" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however, (i) any
gain (but not loss), together with any related provision for taxes on such gain
(but not loss), realized in connection with (a) any Asset Sale (including,
without limitation, dispositions pursuant to sale and leaseback transactions) or
(b) the disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness (other than debt under the Secured Credit
Facility) secured by a Lien on the asset or assets that were the subject of such
Asset Sale and any reserve for adjustment in respect of the sale price of such
asset or assets established in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries (a) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise), or (c) constitutes the lender; and (ii) no default with respect
to which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (iii) as to which the lenders have been notified in
writing that they shall not have any recourse to the stock or assets of the
Company or any of its Restricted Subsidiaries.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Notes" has the meaning assigned to it in the preamble to this
Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Notes by the Company.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or any Vice-President of such Person.
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"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 12.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
12.05 hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
"Participant" means, with respect to the Depositary, Euroclear or
Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and Cedel).
"Participating Broker-Dealer" has the meaning set forth in the
Registration Rights Agreement.
"Permitted Business" means the business conducted by the Company and
its Restricted Subsidiaries on the Issue Date and businesses reasonably related
thereto.
"Permitted Investments" means (a) any Investment in the Company or
in a Restricted Subsidiary of the Company that is a Guarantor; (b) any
Investment in Cash Equivalents; (c) any Investment by the Company or any
Restricted Subsidiary of the Company in a Person, if as a result of such
Investment (i) such Person becomes a Restricted Subsidiary of the Company and a
Guarantor or (ii) 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 a Restricted Subsidiary of the Company that is a
Guarantor; (d) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in compliance
with Sections 3.09 and 4.10 hereof; (e) any acquisition of assets solely in
exchange for the issuance of Equity Interests (other than Disqualified Stock) of
the Company; and (f) other Investments in any Person having an aggregate fair
market value (measured on the date each such Investment was made and without
giving effect to subsequent changes in value), when taken together with all
other Investments made pursuant to this clause (f) that are at the time
outstanding, not to exceed $5.0 million.
"Permitted Junior Securities" means Equity Interests in the Company
or debt securities that are subordinated to all Senior Indebtedness (and any
debt securities issued in exchange for Senior Indebtedness) to substantially the
same extent as, or to a greater extent than, the Notes are subordinated to
Senior Indebtedness pursuant to this Indenture.
"Permitted Liens" means (i) Liens on assets of the Company or any of
the Guarantors securing Senior Indebtedness under the Secured Credit Facility
that was permitted by the terms of this Indenture to be incurred; (ii) Liens in
favor of the Company; (iii) Liens on property of a Person existing at the time
such Person is merged into or consolidated with the Company or any Subsidiary of
the Company; provided that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not extend to any assets
other than those of the Person merged into or consolidated with the Company;
(iv) Liens on property existing at the time of acquisition thereof by the
Company or any Subsidiary of the Company, provided that such Liens were in
existence prior to the contemplation of such acquisition; (v) Liens to secure
the performance of statutory obligations, surety or appeal bonds, performance
bonds or other obligations of a like nature incurred in the ordinary course of
business;
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(vi) Liens to secure Indebtedness (including Capital Lease Obligations)
permitted by clause (iv) of the second paragraph of Section 4.09 hereof covering
only the assets acquired with such Indebtedness; (vii) Liens existing on the
date hereof; (viii) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded, provided
that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor; (ix) Liens incurred in the
ordinary course of business of the Company or any Subsidiary of the Company with
respect to obligations that do not exceed $5.0 million at any one time
outstanding and that (a) are not incurred in connection with the borrowing of
money or the obtaining of advances or credit (other than trade credit in the
ordinary course of business) and (b) do not in the aggregate materially detract
from the value of the property or materially impair the use thereof in the
operation of business by the Company or such Subsidiary; (x) Liens on assets of
Unrestricted Subsidiaries that secure Non-Recourse Debt of Unrestricted
Subsidiaries; (xi) Liens on assets of the Company securing Senior Indebtedness
of the Company that was permitted to be incurred by the terms of this Indenture
and Liens on assets of a Guarantor securing Senior Indebtedness of such
Guarantor that was permitted to be incurred by the terms of this Indenture;
(xii) judgment Liens not giving rise to an Event of Default so long as such Lien
is adequately bonded and any appropriate legal proceedings which may have been
duly initiated for the review of such judgment shall not have finally terminated
or other period within which such proceedings may be initiated shall not have
expired; (xiii) pledges or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other social
security legislation; and (xiv) Liens securing Hedging Obligations otherwise
permitted under this Indenture.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that: (i) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Indebtedness
does not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of premium and reasonable
expenses incurred in connection therewith); (ii) such Permitted Refinancing
Indebtedness has a final maturity date equal to or later than the final maturity
date of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness is subordinated in right of payment to, the Notes on terms at least
as favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred either by the
Company or by the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision thereof (including any subdivision
or ongoing business of any such entity or substantially all of the assets of any
such entity, subdivision or business).
"Private Placement Legend" means the legend set forth in Section
2.06(g)(i) to be placed on all Notes issued under this Indenture except where
otherwise permitted by the provisions of this Indenture.
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"Public Offering" means an underwritten public offering of common
stock (other than Disqualified Stock) of the Company or ISG, pursuant to an
effective registration statement filed with the Commission in accordance with
the Securities Act; provided, however, that, in the case of an Initial Public
Offering by ISG, ISG contributes to the capital of the Company the net cash
proceeds therefrom.
"QIB" means a "qualified institutional buyer" as defined in Rule
144A.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of April 22, 1998, by and among the Company and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time and, with respect to any Additional
Notes, one or more registration rights agreements between the Company and the
other parties thereto, as such agreement(s) may be amended, modified or
supplemented from time to time, relating to rights given by the Company to the
purchasers of Additional Notes to register such Additional Notes under the
Securities Act.
"Regulation S" means Regulation S promulgated under the Securities
Act.
"Regulation S Global Note" means a Regulation S Temporary Global
Note or Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global Note
in the form of Exhibit A-1 hereto bearing the Global Note Legend and the Private
Placement Legend and deposited with or on behalf of and registered in the name
of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary global Note
in the form of Exhibit A-2 hereto bearing the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee, issued in a denomination equal to the outstanding principal amount
of the Notes initially sold in reliance on Rule 903 of Regulation S.
"Representative" means the indenture trustee or other trustee, agent
or representative for any Senior Indebtedness.
"Responsible Officer," when used with respect to the Trustee, means
any officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing the
Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private
Placement Legend.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Period" means the 40-day restricted period as defined in
Regulation S.
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"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Secured Credit Facility" means that certain Credit Agreement, dated
as of March 4, 1998, by and among the Company, NationsBank, N.A., as
administrative agent, Canadian Imperial Bank of Commerce, as documentation
agent, and the other lenders party thereto, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced or refinanced (in whole or in part) from time to time.
"Senior Indebtedness" means (i) all Indebtedness of the Company or
any of its Subsidiaries outstanding under the Secured Credit Facility and all
Hedging Obligations with respect thereto, (ii) any other Indebtedness permitted
to be incurred by the Company or any of its Subsidiaries under the terms of this
Indenture, unless the instrument under which such Indebtedness is incurred
expressly provides that it is on a parity with or subordinated in right of
payment to the Notes or any Guarantor's Subsidiary Guarantee of the Notes and
(iii) all Obligations with respect to the foregoing. Notwithstanding anything to
the contrary in the foregoing, Senior Indebtedness shall not include (w) any
liability for federal, state, local or other taxes owed or owing by the Company
or any of its Subsidiaries, (x) any Indebtedness of the Company or any of its
Subsidiaries to any Subsidiary or other Affiliate, (y) any trade payables or (z)
any Indebtedness that is incurred in violation of this Indenture.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Registration Rights Agreement.
"Significant Restricted Subsidiary" means any Subsidiary that would
be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation
S-X, promulgated pursuant to the Act, as such Regulation is in effect on the
date hereof.
"Stated Maturity" means, with respect to any installment of interest
or principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or
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trustees thereof is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that Person (or a
combination thereof) and (ii) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person or of one or
more Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantee" means the Guarantee by each Guarantor of the
Company's payment obligations under this Indenture and the Notes, executed
pursuant to the provisions of this Indenture.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Unrestricted Global Note" means a permanent global Note in the form
of Exhibit A-1 attached hereto that bears the Global Note Legend and that has
the "Schedule of Exchanges of Interests in the Global Note" attached thereto,
and that is deposited with or on behalf of and registered in the name of the
Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"Unrestricted Definitive Note" means one or more Definitive Notes
that do not bear and are not required to bear the Private Placement Legend.
"Unrestricted Subsidiary" means (i) any Subsidiary that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
Board Resolution; but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Company; (c) is a Person with respect to which
neither the Company nor any of its Restricted Subsidiaries has any direct or
indirect obligation (x) to subscribe for additional Equity Interests or (y) to
maintain or preserve such Person's financial condition or to cause such Person
to achieve any specified levels of operating results; and (d) has not guaranteed
or otherwise directly or indirectly provided credit support for any Indebtedness
of the Company or any of its Restricted Subsidiaries. Any such designation by
the Board of Directors shall be evidenced to the Trustee by filing with the
Trustee a certified copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions and was permitted by Section 4.07 hereof.
If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of
such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under Section 4.09 hereof, the Company shall be in
default of such covenant). The Board of Directors of the Company may at any time
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided
that such designation shall be deemed to be an incurrence of Indebtedness by a
Restricted Subsidiary of the Company of any outstanding Indebtedness of such
Unrestricted Subsidiary and such designation shall only be permitted if (i) such
Indebtedness is permitted under Section 4.09 hereof, calculated on a pro forma
basis as
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if such designation had occurred at the beginning of the four-quarter reference
period and (ii) no Default or Event of Default would be in existence following
such designation.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under
the Securities Act.
"Voting Stock" of any Person as of any date means the Capital Stock
of such Person that is at the time entitled to vote in the election of the Board
of Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a
Restricted Subsidiary of such Person all of the outstanding Capital Stock or
other ownership interests of which (other than directors' qualifying shares)
shall at the time be owned by such Person or by one or more Wholly Owned
Restricted Subsidiaries of such Person and one or more Wholly Owned Restricted
Subsidiaries of such Person.
SECTION 1.02. OTHER DEFINITIONS.
Defined in
Term Section
"Affiliate Transaction"..............................4.11
"Asset Sale Offer"...................................3.09
"Authentication Order"...............................2.02
"Change of Control Offer"............................4.15
"Change of Control Payment"..........................4.15
"Change of Control Payment Date" ....................4.15
"Covenant Defeasance"................................8.03
"DTC" ...............................................2.03
"Event of Default"...................................6.01
"Excess Proceeds"....................................4.10
"incur"..............................................4.09
"Legal Defeasance" ..................................8.02
"Offer Amount".......................................3.09
"Offer Period".......................................3.09
"Payment Blockage Notice"............................10.03
"Payment Default" ...................................6.01
"Paying Agent".......................................2.03
"Permitted Debt".....................................4.09
"Purchase Date"......................................3.09
"Registrar"..........................................2.03
"Restricted Payments"................................4.07
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SECTION 1.03. TRUST INDENTURE ACT PROVISIONS
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
and
"obligor" on the Notes and the Subsidiary Guarantees means the
Company and the Guarantors, respectively, and any successor obligor upon the
Notes and the Subsidiary Guarantees, respectively.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular;
(5) provisions apply to successive events and transactions;
and
(6) references to sections of or rules under the Securities
Act shall be deemed to include substitute, replacement of successor
sections or rules adopted by the SEC from time to time.
ARTICLE 2.
THE NOTES
SECTION 2.01. FORM AND DATING.
(a) General. The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Notes may have
notations, legends or endorsements required by
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law, stock exchange rule or usage. Each Note shall be dated the date of its
authentication. The Notes shall be in denominations of $1,000 and integral
multiples thereof.
The terms and provisions contained in the Notes shall constitute, and are
hereby expressly made, a part of this Indenture and the Company, the Guarantors
and the Trustee, by their execution and delivery of this Indenture, expressly
agree to such terms and provisions and to be bound thereby. However, to the
extent any provision of any Note conflicts with the express provisions of this
Indenture, the provisions of this Indenture shall govern and be controlling.
(b) Global Notes. Notes issued in global form shall be substantially in
the form of Exhibits A-1 or A-2 attached hereto (including the Global Note
Legend thereon and the "Schedule of Exchanges of Interests in the Global Note"
attached thereto). Notes issued in definitive form shall be substantially in the
form of Exhibit A-1 attached hereto (but without the Global Note Legend thereon
and without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time endorsed
thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the aggregate principal amount of
outstanding Notes represented thereby shall be made by the Trustee or the
Custodian, at the direction of the Trustee, in accordance with instructions
given by the Holder thereof as required by Section 2.06 hereof.
(c) Temporary Global Notes. Notes offered and sold in reliance on
Regulation S shall be issued initially in the form of the Regulation S Temporary
Global Note, which shall be deposited on behalf of the purchasers of the Notes
represented thereby with the Trustee, at its New York office, as custodian for
the Depositary, and registered in the name of the Depositary or the nominee of
the Depositary for the accounts of designated agents holding on behalf of
Euroclear or Cedel Bank, duly executed by the Company and authenticated by the
Trustee as hereinafter provided. The Restricted Period shall be terminated upon
the receipt by the Trustee of (i) a written certificate from the Depositary,
together with copies of certificates from Euroclear and Cedel Bank certifying
that they have received certification of non-United States beneficial ownership
of 100% of the aggregate principal amount of the Regulation S Temporary Global
Note (except to the extent of any beneficial owners thereof who acquired an
interest therein during the Restricted Period pursuant to another exemption from
registration under the Securities Act and who will take delivery of a beneficial
ownership interest in a 144A Global Note or an IAI Global Note bearing a Private
Placement Legend, all as contemplated by Section 2.06(a)(ii) hereof), and (ii)
an Officers' Certificate from the Company. Following the termination of the
Restricted Period, beneficial interests in the Regulation S Temporary Global
Note shall be exchanged for beneficial interests in Regulation S Permanent
Global Notes pursuant to the Applicable Procedures. Simultaneously with the
authentication of Regulation S Permanent Global Notes, the Trustee shall cancel
the Regulation S Temporary Global Note. The aggregate principal amount of the
Regulation S Temporary Global Note and the Regulation S Permanent Global Notes
may from time to time be increased or decreased by adjustments made on the
records of the Trustee and the Depositary or its nominee, as the case may be, in
connection with transfers of interest as hereinafter provided.
(d) Euroclear and Cedel Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be
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applicable to transfers of beneficial interests in the Regulation S Temporary
Global Note and the Regulation S Permanent Global Notes that are held by
Participants through Euroclear or Cedel Bank.
SECTION 2.02 EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Notes for the Company by manual or
facsimile signature.
If an Officer whose signature is on a Note no longer holds that
office at the time a Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers (an "Authentication Order"), authenticate Notes for original issue up
to the aggregate principal amount stated in paragraph 4 of the Notes, plus up to
$50.0 million of Additional Notes issued pursuant to this Section 2.02 and
Section 4.09 hereof. The aggregate principal amount of Notes outstanding at any
time may not exceed such amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders or an
Affiliate of the Company.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall notify
the Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any of
its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC")
to act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar
and Paying Agent and to act as Custodian with respect to the Global Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee
to agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Liquidated Damages, if any, or interest on the
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Notes, and will notify the Trustee of any default by the Company in making any
such payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or a
Subsidiary) shall have no further liability for the money. If the Company or a
Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust
fund for the benefit of the Holders all money held by it as Paying Agent. Upon
any bankruptcy or reorganization proceedings relating to the Company, the
Trustee shall serve as Paying Agent for the Notes.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Company shall otherwise comply with TIA ss. 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, the Depositary or any such nominee to a successor Depositary or a
nominee of such successor Depositary. All Global Notes will be exchanged by the
Company for Definitive Notes if (i) the Company delivers to the Trustee notice
from the Depositary that it is unwilling or unable to continue to act as
Depositary or that it is no longer a clearing agency registered under the
Exchange Act and, in either case, a successor Depositary is not appointed by the
Company within 120 days after the date of such notice from the Depositary or
(ii) the Company in its sole discretion determines that the Global Notes (in
whole but not in part) should be exchanged for Definitive Notes and delivers a
written notice to such effect to the Trustee; provided that in no event shall
the Regulation S Temporary Global Note be exchanged by the Company for
Definitive Notes prior to (x) the expiration of the Restricted Period and (y)
the receipt by the Registrar of any certificates required pursuant to Rule
903(c)(3)(ii)(B) under the Securities Act. Upon the occurrence of either of the
preceding events in (i) or (ii) above, Definitive Notes shall be issued in such
names as the Depositary shall instruct the Trustee. Global Notes also may be
exchanged or replaced, in whole or in part, as provided in Sections 2.07 and
2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu
of, a Global Note or any portion thereof, pursuant to this Section 2.06 or
Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form
of, and shall be, a Global Note. A Global Note may not be exchanged for another
Note other than as provided in this Section 2.06(a); however, beneficial
interests in a Global Note may be transferred and exchanged as provided in
Section 2.06(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global
Notes. The transfer and exchange of beneficial interests in the Global Notes
shall be effected through the Depositary, in accordance with the provisions of
this Indenture and the Applicable Procedures. Beneficial interests in the
Restricted Global Notes shall be subject to restrictions on transfer comparable
to those set forth herein to the extent required by the Securities Act.
Transfers of beneficial interests in the Global Notes
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also shall require compliance with either subparagraph (i) or (ii) below, as
applicable, as well as one or more of the other following subparagraphs, as
applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in
the same Restricted Global Note in accordance with the transfer
restrictions set forth in the Private Placement Legend; provided, however,
that prior to the expiration of the Restricted Period, transfers of
beneficial interests in the Temporary Regulation S Global Note may not be
made to a U.S. Person or for the account or benefit of a U.S. Person
(other than an Initial Purchaser). Beneficial interests in any
Unrestricted Global Note may be transferred to Persons who take delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Note. No written orders or instructions shall be required to be delivered
to the Registrar to effect the transfers described in this Section
2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in
Global Notes. In connection with all transfers and exchanges of beneficial
interests that are not subject to Section 2.06(b)(i) above, the transferor of
such beneficial interest must deliver to the Registrar either (A) (1) a written
order from a Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to credit or
cause to be credited a beneficial interest in another Global Note in an amount
equal to the beneficial interest to be transferred or exchanged and (2)
instructions given in accordance with the Applicable Procedures containing
information regarding the Participant account to be credited with such increase
or (B) (1) a written order from a Participant or an Indirect Participant given
to the Depositary in accordance with the Applicable Procedures directing the
Depositary to cause to be issued a Definitive Note in an amount equal to the
beneficial interest to be transferred or exchanged and (2) instructions given by
the Depositary to the Registrar containing information regarding the Person in
whose name such Definitive Note shall be registered to effect the transfer or
exchange referred to in (1) above; provided that in no event shall Definitive
Notes be issued upon the transfer or exchange of beneficial interests in the
Regulation S Temporary Global Note prior to (x) the expiration of the Restricted
Period and (y) the receipt by the Registrar of any certificates required
pursuant to Rule 903 under the Securities Act. Upon consummation of an Exchange
Offer by the Company in accordance with Section 2.06(f) hereof, the requirements
of this Section 2.06(b)(ii) shall be deemed to have been satisfied upon receipt
by the Registrar of the instructions contained in the Letter of Transmittal
delivered by the Holder of such beneficial interests in the Restricted Global
Notes. Upon satisfaction of all of the requirements for transfer or exchange of
beneficial interests in Global Notes contained in this Indenture and the Notes
or otherwise applicable under the Securities Act, the Trustee shall adjust the
principal amount of the relevant Global Note(s) pursuant to Section 2.06(h)
hereof.
(iii) Transfer of Beneficial Interests to Another Restricted Global
Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of Section 2.06(b)(ii) above and the
Registrar receives the following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Note, then the transferor
must deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (1) thereof;
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(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Temporary Global Note or the
Regulation S Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (2) thereof; and
(C) if the transferee will take delivery in the form of a
beneficial interest in the IAI Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
certifications and certificates and Opinion of Counsel required by
item (3) thereof, if applicable.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted
Global Note for Beneficial Interests in the Unrestricted Global Note. A
beneficial interest in any Restricted Global Note may be exchanged by any
holder thereof for a beneficial interest in an Unrestricted Global Note or
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note if the exchange or
transfer complies with the requirements of Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of the beneficial interest to be transferred, in the
case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not (1)
a broker-dealer, (2) a Person participating in the distribution of
the Exchange Notes or (3) a Person who is an affiliate (as defined
in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest for a
beneficial interest in an Unrestricted Global Note, a certificate from
such holder in the form of Exhibit C hereto, including the certifications
in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial interest to a
Person who shall take delivery thereof in the form of a beneficial
interest in an Unrestricted Global Note, a certificate from such holder in
the form of Exhibit B hereto, including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to the
effect that such exchange or transfer is in compliance with the Securities
Act and that the restrictions on transfer contained herein and in the
Private Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
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If any such transfer is effected pursuant to subparagraph (B) or (D)
above at a time when an Unrestricted Global Note has not yet been issued, the
Company shall issue and, upon receipt of an Authentication Order in accordance
with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive
Notes.
(i) Beneficial Interests in Restricted Global Notes to Restricted
Definitive Notes. If any holder of a beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a Restricted
Definitive Note or to transfer such beneficial interest to a Person who
takes delivery thereof in the form of a Restricted Definitive Note, then,
upon receipt by the Registrar of the following documentation:
(A) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
Restricted Definitive Note, a certificate from such holder in the
form of Exhibit C hereto, including the certifications in item
(2)(a) thereof;
(B) if such beneficial interest is being transferred to a QIB
in accordance with Rule 144A under the Securities Act, a certificate
to the effect set forth in Exhibit B hereto, including the
certifications in item (1) thereof;
(C) if such beneficial interest is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule
903 or Rule 904 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications
in item (2) thereof;
(D) if such beneficial interest is being transferred pursuant
to an exemption from the registration requirements of the Securities
Act in accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from
the registration requirements of the Securities Act other than those
listed in subparagraphs (B) through (D) above, a certificate to the
effect set forth in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3) thereof, if
applicable;
(F) if such beneficial interest is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item
(3)(b) thereof; or
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(G) if such beneficial interest is being transferred pursuant
to an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable
Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof,
and the Company shall execute and the Trustee shall authenticate and
deliver to the Person designated in the instructions a Definitive Note in
the appropriate principal amount. Any Definitive Note issued in exchange
for a beneficial interest in a Restricted Global Note pursuant to this
Section 2.06(c) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Registrar through instructions from the
Depositary and the Participant or Indirect Participant. The Trustee shall
deliver such Definitive Notes to the Persons in whose names such Notes are
so registered. Any Definitive Note issued in exchange for a beneficial
interest in a Restricted Global Note pursuant to this Section 2.06(c)(i)
shall bear the Private Placement Legend and shall be subject to all
restrictions on transfer contained therein.
(ii) Notwithstanding Sections 2.06(c)(i)(A) and (c) hereof, a
beneficial interest in the Regulation S Temporary Global Note may not be
exchanged for a Definitive Note or transferred to a Person who takes
delivery thereof in the form of a Definitive Note prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Registrar
of any certificates required pursuant to Rule 903(c)(3)(ii)(B) under the
Securities Act, except in the case of a transfer pursuant to an exemption
from the registration requirements of the Securities Act other than Rule
903 or Rule 904.
(iii) Beneficial Interests in Restricted Global Notes to
Unrestricted Definitive Notes. A holder of a beneficial interest in a
Restricted Global Note may exchange such beneficial interest for an
Unrestricted Definitive Note or may transfer such beneficial interest to a
Person who takes delivery thereof in the form of an Unrestricted
Definitive Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of such beneficial interest, in the case of an
exchange, or the transferee, in the case of a transfer, certifies in
the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined in
Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest for a
Definitive Note that does not bear the
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Private Placement Legend, a certificate from such holder in the form of
Exhibit C hereto, including the certifications in item (1)(b) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial interest to a
Person who shall take delivery thereof in the form of a Definitive Note
that does not bear the Private Placement Legend, a certificate from such
holder in the form of Exhibit B hereto, including the certifications in
item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained
herein and in the Private Placement Legend are no longer required in
order to maintain compliance with the Securities Act.
(iv) Beneficial Interests in Unrestricted Global Notes to
Unrestricted Definitive Notes. If any holder of a beneficial interest in
an Unrestricted Global Note proposes to exchange such beneficial interest
for a Definitive Note or to transfer such beneficial interest to a Person
who takes delivery thereof in the form of a Definitive Note, then, upon
satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof,
the Trustee shall cause the aggregate principal amount of the applicable
Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof,
and the Company shall execute and the Trustee shall authenticate and
deliver to the Person designated in the instructions a Definitive Note in
the appropriate principal amount. Any Definitive Note issued in exchange
for a beneficial interest pursuant to this Section 2.06(c)(iii) shall be
registered in such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall instruct the
Registrar through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such Definitive Notes to
the Persons in whose names such Notes are so registered. Any Definitive
Note issued in exchange for a beneficial interest pursuant to this Section
2.06(c)(iii) shall not bear the Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial
Interests.
(i) Restricted Definitive Notes to Beneficial Interests in
Restricted Global Notes. If any Holder of a Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a Restricted
Global Note or to transfer such Restricted Definitive Notes to a Person
who takes delivery thereof in the form of a beneficial interest in a
Restricted Global Note, then, upon receipt by the Registrar of the
following documentation:
(A) if the Holder of such Restricted Definitive Note proposes
to exchange such Note for a beneficial interest in a Restricted
Global Note, a certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being transferred to
a QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (1) thereof;
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(C) if such Restricted Definitive Note is being transferred to
a Non-U.S. Person in an offshore transaction in accordance with Rule
903 or Rule 904 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications
in item (2) thereof;
(D) if such Restricted Definitive Note is being transferred
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities Act,
a certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (3)(a) thereof;
(E) if such Restricted Definitive Note is being transferred to
an Institutional Accredited Investor in reliance on an exemption
from the registration requirements of the Securities Act other than
those listed in subparagraphs (B) through (D) above, a certificate
to the effect set forth in Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel required by item
(3) thereof, if applicable;
(F) if such Restricted Definitive Note is being transferred to
the Company or any of its Subsidiaries, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in item
(3)(b) thereof; or
(G) if such Restricted Definitive Note is being transferred
pursuant to an effective registration statement under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or cause
to be increased the aggregate principal amount of, in the case of clause
(A) above, the appropriate Restricted Global Note, in the case of clause
(B) above, the 144A Global Note, in the case of clause (C) above, the
Regulation S Global Note, and in all other cases, the IAI Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global
Note or transfer such Restricted Definitive Note to a Person who takes
delivery thereof in the form of a beneficial interest in an Unrestricted
Global Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in
the case of a transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a
Person who is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
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(1) if the Holder of such Definitive Notes proposes to
exchange such Notes for a beneficial interest in the Unrestricted Global
Note, a certificate from such Holder in the form of Exhibit C hereto,
including the certifications in item (1)(c) thereof; or
(2) if the Holder of such Definitive Notes proposes to
transfer such Notes to a Person who shall take delivery thereof in the
form of a beneficial interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit B hereto, including
the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to the
effect that such exchange or transfer is in compliance with the Securities
Act and that the restrictions on transfer contained herein and in the
Private Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global
Note or transfer such Definitive Notes to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Note at any time. Upon receipt of a request for such an exchange or
transfer, the Trustee shall cancel the applicable Unrestricted Definitive
Note and increase or cause to be increased the aggregate principal amount
of one of the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes.
Upon request by a Holder of Definitive Notes and such Holder's
compliance with the provisions of this Section 2.06(e), the Registrar shall
register the transfer or exchange of Definitive Notes. Prior to such
registration of transfer or exchange, the requesting Holder shall present or
surrender to the Registrar the Definitive Notes duly endorsed or accompanied by
a written instruction of transfer in form satisfactory to the Registrar duly
executed by such Holder or by his attorney, duly authorized in writing. In
addition, the requesting Holder shall provide any additional certifications,
documents and information, as applicable, required pursuant to the following
provisions of this Section 2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive Notes. Any
Restricted Definitive Note may be transferred to and registered in the
name of Persons who take delivery thereof in the form of a Restricted
Definitive Note if the Registrar receives the following:
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(A) if the transfer will be made pursuant to Rule 144A under
the Securities Act, then the transferor must deliver a certificate
in the form of Exhibit B hereto, including the certifications in
item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule
904, then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (2) thereof;
and
(C) if the transfer will be made pursuant to any other
exemption from the registration requirements of the Securities Act,
then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications, certificates and
Opinion of Counsel required by item (3) thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive Notes.
Any Restricted Definitive Note may be exchanged by the Holder thereof for
an Unrestricted Definitive Note or transferred to a Person or Persons who
take delivery thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in
the case of a transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a
Person who is an affiliate (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration Statement
in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes
proposes to exchange such Notes for an Unrestricted Definitive Note, a
certificate from such Holder in the form of Exhibit C hereto, including
the certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive Notes
proposes to transfer such Notes to a Person who shall take delivery
thereof in the form of an Unrestricted Definitive Note, a certificate from
such Holder in the form of Exhibit B hereto, including the certifications
in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests, an Opinion of Counsel in form reasonably acceptable
to the Company to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are no longer
required in order to maintain compliance with the Securities Act.
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(iii) Unrestricted Definitive Notes to Unrestricted Definitive
Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes
to a Person who takes delivery thereof in the form of an Unrestricted
Definitive Note. Upon receipt of a request to register such a transfer,
the Registrar shall register the Unrestricted Definitive Notes pursuant to
the instructions from the Holder thereof.
(f) Exchange Offer.
Upon the occurrence of the Exchange Offer in accordance with the
Registration Rights Agreement, the Company shall issue and, upon receipt of an
Authentication Order in accordance with Section 2.02, the Trustee shall
authenticate (i) one or more Unrestricted Global Notes in an aggregate principal
amount equal to the principal amount of the beneficial interests in the
Restricted Global Notes tendered for acceptance by Persons that certify in the
applicable Letters of Transmittal that (x) they are not broker-dealers, (y) they
are not participating in a distribution of the Exchange Notes and (z) they are
not affiliates (as defined in Rule 144) of the Company, and accepted for
exchange in the Exchange Offer and (ii) Definitive Notes in an aggregate
principal amount equal to the principal amount of the Restricted Definitive
Notes accepted for exchange in the Exchange Offer. Concurrently with the
issuance of such Notes, the Trustee shall cause the aggregate principal amount
of the applicable Restricted Global Notes to be reduced accordingly, and the
Company shall execute and the Trustee shall authenticate and deliver to the
Persons designated by the Holders of Definitive Notes so accepted Definitive
Notes in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each Global
Note and each Definitive Note (and all Notes issued in exchange
therefor or substitution thereof) shall bear the legend in
substantially the following form:
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR IN ACCORDANCE WITH AN APPLICABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (SUBJECT TO THE
DELIVERY OF SUCH EVIDENCE, IF ANY, REQUIRED UNDER THE INDENTURE PURSUANT
TO WHICH THIS NOTE IS ISSUED) AND IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
JURISDICTION. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER ("RULE 144A") OR ANOTHER EXEMPTION UNDER THE SECURITIES ACT.
THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF JTM
THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED
ONLY (1) (a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
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INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT (c) OUTSIDE
THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE
WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF JTM SO REQUESTS),
(2) TO JTM OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN
EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE
HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE."
(B) Notwithstanding the foregoing, any Global Note or
Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(ii),
(c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this
Section 2.06 (and all Notes issued in exchange therefor or
substitution thereof) shall not bear the Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON
AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS
GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION
2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE
TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND
(IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH
THE PRIOR WRITTEN CONSENT OF JTM."
(iii) Regulation S Temporary Global Note Legend. The Regulation S
Temporary Global Note shall bear a legend in substantially the following
form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES,
ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER
NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL
BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON."
(a) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
canceled in whole and not in part, each such Global Note shall be
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returned to or retained and canceled by the Trustee in accordance with Section
2.11 hereof. At any time prior to such cancellation, if any beneficial interest
in a Global Note is exchanged for or transferred to a Person who will take
delivery thereof in the form of a beneficial interest in another Global Note or
for Definitive Notes, the principal amount of Notes represented by such Global
Note shall be reduced accordingly and an endorsement shall be made on such
Global Note by the Trustee or by the Depositary at the direction of the Trustee
to reflect such reduction; and if the beneficial interest is being exchanged for
or transferred to a Person who will take delivery thereof in the form of a
beneficial interest in another Global Note, such other Global Note shall be
increased accordingly and an endorsement shall be made on such Global Note by
the Trustee or by the Depositary at the direction of the Trustee to reflect such
increase.
(b) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Global Notes and
Definitive Notes upon the Company's order or at the Registrar's request.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Note or to a Holder of a Definitive Note for any
registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes
or similar governmental charge payable upon exchange or transfer pursuant
to Sections 2.10, 3.06, 3.09, 4.10, 4.15 and 9.05 hereof).
(iii) The Registrar shall not be required to register the transfer
of or exchange any Note selected for redemption in whole or in part,
except the unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive Notes
shall be the valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Global
Notes or Definitive Notes surrendered upon such registration of transfer
or exchange.
(v) The Company shall not be required (A) to issue, to register the
transfer of or to exchange any Notes during a period beginning at the
opening of business 15 days before the day of any selection of Notes for
redemption under Section 3.02 hereof and ending at the close of business
on the day of selection, (B) to register the transfer of or to exchange
any Note so selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part or (C) to register
the transfer of or to exchange a Note between a record date and the next
succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer of
any Note, the Trustee, any Agent and the Company may deem and treat the
Person in whose name any Note is registered as the absolute owner of such
Note for the purpose of receiving payment of principal of and interest on
such Notes and for all other purposes, and none of the Trustee, any Agent
or the Company shall be affected by notice to the contrary.
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(vii) The Trustee shall authenticate Global Notes and Definitive
Notes in accordance with the provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Registrar pursuant to this Section 2.06 to
effect a registration of transfer or exchange may be submitted by
facsimile.
SECTION 2.07. REPLACEMENT NOTES
If any mutilated Note is surrendered to the Trustee or the Company
and the Trustee receives evidence to its satisfaction of the destruction, loss
or theft of any Note, the Company shall issue and the Trustee, upon receipt of
an Authentication Order, shall authenticate a replacement Note if the Trustee's
requirements are met. If required by the Trustee or the Company, an indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and the Company to protect the Company, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Note is
replaced. The Company and the Trustee may charge for their respective expenses
in replacing a Note.
Every replacement Note is an additional obligation of the Company
and shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those canceled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note
does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Note; however, Notes held by the Company or a Subsidiary of
the Company shall not be deemed to be outstanding for purposes of Section
3.07(b) hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to
be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section
4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal amount
of Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, or by any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company, shall be considered as
though not outstanding, except that for the purposes of determining whether the
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Trustee shall be protected in relying on any such direction, waiver or consent,
only Notes that the Trustee actually knows are so owned shall be so disregarded.
SECTION 2.10. TEMPORARY NOTES.
Until certificates representing Notes are ready for delivery, the
Company may prepare and the Trustee, upon receipt of an Authentication Order,
shall authenticate temporary Notes. Temporary Notes shall be substantially in
the form of certificated Notes but may have variations that the Company
considers appropriate for temporary Notes and as shall be reasonably acceptable
to the Trustee. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits
of this Indenture.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
canceled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all canceled Notes shall be delivered
to the Company. The Company may not issue new Notes to replace Notes that it has
paid or that have been delivered to the Trustee for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in
writing of the amount of defaulted interest proposed to be paid on each Note and
the date of the proposed payment. The Company shall fix or cause to be fixed
each such special record date and payment date, provided that no such special
record date shall be less than 10 days prior to the related payment date for
such defaulted interest. At least 15 days before the special record date, the
Company (or, upon the written request of the Company, the Trustee in the name
and at the expense of the Company) shall mail or cause to be mailed to Holders a
notice that states the special record date, the related payment date and the
amount of such interest to be paid.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 30 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant to
which the redemption shall occur, (ii) the redemption date, (iii) the principal
amount of Notes to be redeemed and (iv) the redemption price.
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SECTION 3.02. SELECTION OF NOTES BE REDEEMED.
If less than all of the Notes are to be redeemed or purchased in an
offer to purchase at any time, the Trustee shall select the Notes to be redeemed
or purchased among the Holders of the Notes in compliance with the requirements
of the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not so listed, on a pro rata basis, by lot or in
accordance with any other method the Trustee considers fair and appropriate. In
the event of partial redemption by lot, the particular Notes to be redeemed
shall be selected, unless otherwise provided herein, not less than 30 nor more
than 60 days prior to the redemption date by the Trustee from the outstanding
Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the
Notes selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION
Subject to the provisions of Section 3.09 hereof, at least 30 days
but not more than 60 days before a redemption date, the Company shall mail or
cause to be mailed, by first class mail, a notice of redemption to each Holder
whose Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the redemption date upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption payment,
interest on Notes called for redemption ceases to accrue on and after the
redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture pursuant
to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy of
the CUSIP number, if any, listed in such notice or printed on the Notes.
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At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE
One Business Day prior to the redemption date, the Company shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall promptly return to the Company any
money deposited with the Trustee or the Paying Agent by the Company in excess of
the amounts necessary to pay the redemption price of, and accrued interest on,
all Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is redeemed
on or after an interest record date but on or prior to the related interest
payment date, then any accrued and unpaid interest shall be paid to the Person
in whose name such Note was registered at the close of business on such record
date. If any Note called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the redemption
date until such principal is paid, and to the extent lawful on any interest not
paid on such unpaid principal, in each case at the rate provided in the Notes
and in Section 4.01 hereof.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and, upon the Company's written request, the Trustee shall authenticate
for the Holder at the expense of the Company a new Note equal in principal
amount to the unredeemed portion of the Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this Section 3.07, the Company
shall not have the option to redeem the Notes pursuant to this Section 3.07
prior to April 15, 2003. Thereafter, the Company shall have the option to redeem
the Notes, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the applicable redemption date, if redeemed during the twelve-month
period beginning on April 15 of the years indicated below:
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Year Percentage
---- ----------
2003.............................................105.000%
2004.............................................103.333%
2005.............................................101.667%
2006 and thereafter..............................100.000%
(b) Notwithstanding the provisions of clause (a) of this Section 3.07, at
any time on or before April 15, 2001, the Company may redeem up to $35.0 million
in aggregate principal amount of Notes originally issued under this Indenture at
a redemption price of 110% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the redemption date,
with the net cash proceeds to the Company of one or more Public Offerings;
provided that at least $65.0 million of the aggregate principal amount of Notes
originally issued remain outstanding immediately after the occurrence of such
redemption (excluding Notes held by the Company or any of its Subsidiaries); and
provided, further, that such redemption shall occur within 60 days of the date
of the closing of each such Public Offering.
(c) Any redemption pursuant to this Section 3.07 shall be made pursuant to
the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08. MANDATORY REDEMPTION.
The Company shall not be required to make mandatory redemption or
sinking fund payments with respect to the Notes.
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the Company
shall be required to commence an offer to all Holders to purchase Notes (an
"Asset Sale Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Offer Period"). No later than
five Business Days after the termination of the Offer Period (the "Purchase
Date"), the Company shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Notes tendered in response to the Asset
Sale Offer. Payment for any Notes so purchased shall be made in the same manner
as interest payments are made.
If the Purchase Date is on or after an interest record date and on
or before the related interest payment date, any accrued and unpaid interest
shall be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall
send, by first class mail, a notice to the Trustee and each of the Holders, with
a copy to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
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(a) that the Asset Sale Offer is being made pursuant to this Section 3.09
and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain
open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue to
accrete or accrue interest;
(d) that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to accrete or
accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an Asset
Sale Offer may only elect to have all of such Note purchased and may not elect
to have only a portion of such Note purchased;
(f) that Holders electing to have a Note purchased pursuant to any Asset
Sale Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer by book-entry transfer, to the Company, a depositary, if appointed by
the Company, or a Paying Agent at the address specified in the notice at least
three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Company shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be issued
new Notes equal in principal amount to the unpurchased portion of the Notes
surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale
Offer, or if less than the Offer Amount has been tendered, all Notes tendered,
and shall deliver to the Trustee an Officers' Certificate stating that such
Notes or portions thereof were accepted for payment by the Company in accordance
with the terms of this Section 3.09. The Company, the Depositary or the Paying
Agent, as the case may be, shall promptly (but in any case not later than five
days after the Purchase Date) mail or deliver to each tendering Holder an amount
equal to the purchase price of the Notes tendered by such Holder and accepted by
the Company for purchase, and the Company shall promptly issue a new Note, and
the Trustee, upon written request from the Company shall authenticate and mail
or deliver such new Note to such Holder, in a principal amount equal to any
unpurchased portion of the Note surrendered. Any Note not so accepted shall be
promptly
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mailed or delivered by the Company to the Holder thereof. The Company shall
publicly announce the results of the Asset Sale Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made pursuant to the provisions
of Sections 3.01 through 3.06 hereof.
ARTICLE 4.
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Company shall pay or cause to be paid the principal of, premium,
if any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company or a Subsidiary thereof,
holds as of 10:00 a.m. Eastern Time on the due date money deposited by the
Company in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest then due. The Company shall pay all
Liquidated Damages, if any, in the same manner on the dates and in the amounts
set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal at the rate equal
to 1% per annum in excess of the then applicable interest rate on the Notes to
the extent lawful; it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace period) at the same
rate to the extent lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the City of
New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes. The Company shall give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with Section
2.03.
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SECTION 4.03. REPORTS.
(a) Whether or not required by the rules and regulations of the SEC,
so long as any Notes are outstanding, the Company shall furnish to the Holders
of Notes (i) all quarterly and annual financial information that would be
required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the
Company were required to file such forms, including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and, with respect
to the annual information only, a report thereon by the Company's certified
independent accountants and (ii) all current reports that would be required to
be filed with the SEC on Form 8-K if the Company were required to file such
reports, in each case, within the time periods specified in the SEC's rules and
regulations. In addition, following consummation of the Exchange Offer, whether
or not required by the rules and regulations of the SEC, the Company shall file
a copy of all such information and reports with the SEC for public availability
within the time periods specified in the SEC's rules and regulations (unless the
SEC will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. The Company shall at
all times comply with TIA ss. 314(a).
(b) For so long as any Notes remain outstanding, the Company and the
Guarantors shall furnish to the Holders and to prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act other than during any period in which the Company is
subject to Section 13 or 15(d) of the Exchange Act and in compliance with the
requirements thereof.
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) The Company and each Guarantor (to the extent that such
Guarantor is so required under the TIA) shall deliver to the Trustee, within 90
days after the end of each fiscal year, an Officers' Certificate stating that a
review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Indenture, and further
stating, as to each such Officer signing such certificate, that to the best of
his or her knowledge the Company has kept, observed, performed and fulfilled
each and every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions of this
Indenture (or, if a Default or Event of Default shall have occurred, describing
all such Defaults or Events of Default of which he or she may have knowledge and
what action the Company is taking or proposes to take with respect thereto) and
that to the best of his or her knowledge no event has occurred and remains in
existence by reason of which payments on account of the principal of or
interest, if any, on the Notes is prohibited or if such event has occurred, a
description of the event and what action the Company is taking or proposes to
take with respect thereto.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
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(c) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
SECTION 4.05. TAXES.
The Company shall pay, and shall cause each of its Subsidiaries to
pay, prior to delinquency, all material taxes, assessments, and governmental
levies except such as are contested in good faith and by appropriate proceedings
or where the failure to effect such payment is not adverse in any material
respect to the Holders of the Notes.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Company and each of the Guarantors covenants (to the extent that
it may lawfully do so) that it shall not at any time insist upon, plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law wherever enacted, now or at any time hereafter in force,
that may affect the covenants or the performance of this Indenture; and the
Company and each of the Guarantors (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and covenants
that it shall not, by resort to any such law, hinder, delay or impede the
execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law has been enacted.
SECTION 4.07. RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving the Company or
any of its Restricted Subsidiaries) or to the direct or indirect holders of the
Company's or any of its Restricted Subsidiaries' Equity Interests in their
capacity as such (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company or dividends or other
distributions payable to the Company or a Restricted Subsidiary of the Company);
(ii) purchase, redeem or otherwise acquire or retire for value (including,
without limitation, in connection with any merger or consolidation involving the
Company) any Equity Interests of the Company or any direct or indirect parent of
the Company or other Affiliate of the Company (other than any such Equity
Interests owned by the Company or any Wholly Owned Restricted Subsidiary of the
Company); (iii) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is pari
passu with or subordinated to the Notes (other than Notes), except a payment of
interest or principal at Stated Maturity; or (iv) make any Restricted Investment
(all such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments"), unless, at the time of
and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
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(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had been
made at the beginning of the applicable four-quarter period, have had a Fixed
Charge Coverage Ratio of at least 2.0 to; and
(c) such Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of this Indenture (excluding Restricted Payments
permitted by clauses (ii), (iii), (iv), (viii) and (ix) of the next succeeding
paragraph), is less than the sum, without duplication, of (i) 50% of the
Consolidated Net Income of the Company for the period (taken as one accounting
period) from the beginning of the first fiscal quarter commencing after the date
of this Indenture to the end of the Company's most recently ended fiscal quarter
for which internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such period is a
deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net cash
proceeds received by the Company since the date of this Indenture as a
contribution to its common equity capital or from the issue or sale of Equity
Interests of the Company (other than Disqualified Stock) or from the issue or
sale of Disqualified Stock or debt securities of the Company that have been
converted into such Equity Interests (other than Equity Interests (or
Disqualified Stock or convertible debt securities) sold to a Subsidiary of the
Company), plus (iii) to the extent that any Restricted Investment that was made
after the date of this Indenture is sold for cash or otherwise liquidated or
repaid for cash, the lesser of (A) the cash return of capital with respect to
such Restricted Investment (less the cost of disposition, if any) and (B) the
initial amount of such Restricted Investment.
The foregoing provisions shall not prohibit (i) the payment of
any dividend within 60 days after the date of declaration thereof, if at said
date of declaration such payment would have complied with the provisions of this
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any pari passu or subordinated Indebtedness or Equity Interests
of the Company in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Restricted Subsidiary of the
Company) of, other Equity Interests of the Company (other than any Disqualified
Stock); provided that the amount of any such net cash proceeds that are utilized
for any such redemption, repurchase, retirement, defeasance or other acquisition
shall be excluded from clause (c) (ii) of the preceding paragraph; (iii) the
defeasance, redemption, repurchase or other acquisition of pari passu or
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness; (iv) the payment of any dividend by a
Restricted Subsidiary of the Company to the holders of its common Equity
Interests on a pro rata basis; (v) the repurchase, redemption or other
acquisition or retirement for value of any Equity Interests of the Company or
any Restricted Subsidiary of the Company held by any member of the Company's (or
any of its Restricted Subsidiaries') management pursuant to any management
equity subscription agreement or stock option agreement in effect as of the date
hereof; provided that the aggregate price paid for all such repurchased,
redeemed, acquired or retired Equity Interests shall not exceed $250,000 in any
twelve-month period and no Default or Event of Default shall have occurred and
be continuing immediately after such transaction; (vi) dividends or other
payments to ISG sufficient to enable ISG to pay accounting, legal, corporate
reporting and administrative expenses of ISG incurred in the ordinary course of
business in an amount not to exceed $500,000 in any twelve-month period; (vii)
payments to ISG by the Company or any Subsidiary with respect to taxes
(including estimated taxes) that are paid by ISG on a combined, consolidated,
unitary or similar basis, to the extent that such payments do not exceed the
amount that the Company or such Subsidiary would have paid to the relevant
taxing authority if the Company or such Subsidiary filed a separate tax return
for the period in question; (viii) the repayment by the Company on the Issue
Date of the ISG Bridge Note; and (ix) from and after April 15, 2003, the payment
of dividends
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by the Company to ISG the proceeds of which are utilized by ISG solely to pay
principal of or interest on the ISG PIK Notes, provided that (x) such dividends
shall not exceed $2.5 million in the aggregate in any fiscal year of the Company
or $10 million in the aggregate since the Issue Date, (y) at the time of the
making of any such dividend and immediately after giving effect thereto, the
Fixed Charge Coverage Ratio for the Company's most recently ended four fiscal
quarters for which internal financial statements are available immediately
preceding the date of such proposed dividend would have been at least 2.25 to
1.0 and (z) immediately before and immediately after giving effect to such
proposed dividend no Default or Event of Default shall have occurred and be
continuing.
The Board of Directors may designate any Restricted Subsidiary
to be an Unrestricted Subsidiary if such designation would not cause a Default.
For purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash) in
the Subsidiary so designated will be deemed to be Restricted Payments at the
time of such designation and will reduce the amount available for Restricted
Payments under the first paragraph of this covenant. All such outstanding
Investments will be deemed to constitute Investments in an amount equal to the
fair market value of such Investments at the time of such designation. Such
designation will only be permitted if such Restricted Payment would be permitted
at such time and if such Restricted Subsidiary otherwise meets the definition of
an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) shall
be the fair market value on the date of the Restricted Payment of the asset(s)
or securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any non-cash Restricted Payment shall be determined by
the Board of Directors whose resolution with respect thereto shall be delivered
to the Trustee, such determination to be based upon an opinion or appraisal
issued by an accounting, appraisal or investment banking firm of national
standing if such fair market value exceeds $1.0 million. Not later than the date
of making any Restricted Payment, the Company shall deliver to the Trustee an
Officers' Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the calculations required by this Section
4.07 were computed, together with a copy of any fairness opinion or appraisal
required by this Indenture.
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (i)(a) pay dividends or make any other distributions to
the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or
(2) with respect to any other interest or participation in, or measured by, its
profits, or (b) pay any indebtedness owed to the Company or any of its
Restricted Subsidiaries, (ii) make loans or advances to the Company or any of
its Restricted Subsidiaries or (iii) transfer any of its properties or assets to
the Company or any of its Restricted Subsidiaries. However, the foregoing
restrictions will not apply to encumbrances or restrictions existing under or by
reason of (a) Existing Indebtedness as in effect on the date of this Indenture,
(b) the Secured Credit Facility, provided that such restrictions are no more
restrictive than those contained in the Secured Credit Facility as in effect on
the Issue Date, (c) this Indenture and the Notes, (d) applicable law, (e) any
instrument governing Indebtedness or Capital Stock of a Person acquired by the
Company or any of its Restricted Subsidiaries as in effect at the time of such
acquisition (except to the extent such Indebtedness was incurred in connection
with or in contemplation of such acquisition), which encumbrance or restriction
is not applicable to any Person, or the properties or assets of any Person,
other than the Person, or the property or assets
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of the Person, so acquired, provided that, in the case of Indebtedness, such
Indebtedness was permitted by the terms of this Indenture to be incurred, (f)
customary non-assignment provisions in leases entered into in the ordinary
course of business and consistent with past practices, (g) purchase money
obligations for property acquired in the ordinary course of business that impose
restrictions of the nature described in clause (iii) above on the property so
acquired, (h) any agreement for the sale of a Restricted Subsidiary that
restricts distributions by that Restricted Subsidiary pending its sale, (i)
Permitted Refinancing Indebtedness, provided that the restrictions contained in
the agreements governing such Permitted Refinancing Indebtedness are no more
restrictive, taken as a whole, than those contained in the agreements governing
the Indebtedness being refinanced, (j) Liens securing Indebtedness otherwise
permitted to be incurred pursuant to the provisions of Section 4.12 herein that
limits the right of the debtor to dispose of the assets securing such
Indebtedness, (k) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements and other similar agreements
entered into in the ordinary course of business and (l) restrictions on cash or
other deposits or net worth imposed by customers under contracts entered into in
the ordinary course of business.
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt) and the
Company shall not issue any Disqualified Stock and shall not permit any of its
Subsidiaries to issue any shares of preferred stock; provided, however, that the
Company may incur Indebtedness (including Acquired Debt) or issue shares of
Disqualified Stock and the Guarantors may incur Indebtedness or issue preferred
stock if the Fixed Charge Coverage Ratio for the Company's most recently ended
four full fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is incurred
or such Disqualified Stock or preferred stock is issued would have been at least
1.8 to 1.0 if such incurrence is on or prior to April 15, 2000 or 2.0 to 1.0 if
such incurrence is after April 15, 2000, determined on a pro forma basis
(including a pro forma application of the net proceeds therefrom), as if the
additional Indebtedness had been incurred, or the Disqualified Stock or
preferred stock had been issued, as the case may be, at the beginning of such
four-quarter period.
The foregoing provisions will not apply to the incurrence of any of
the following items of Indebtedness (collectively, "Permitted Debt"):
(i) the incurrence by the Company of Indebtedness (including
letters of credit, with letters of credit being deemed to have a principal
amount equal to the maximum potential liability of the Company and its
Restricted Subsidiaries thereunder) under the Secured Credit Facility; provided
that the aggregate principal amount of all Indebtedness (including letters of
credit) outstanding under the Secured Credit Facility after giving effect to
such incurrence does not exceed an amount equal to $35.0 million less the
aggregate amount of all Net Proceeds of Asset Sales applied to permanently repay
any such Indebtedness pursuant to Section 4.10 hereof;
(ii) the incurrence by the Company and its Restricted
Subsidiaries of the Existing Indebtedness;
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(iii) the incurrence by the Company of Indebtedness
represented by the Notes (other than any Additional Notes) and the Exchange
Notes (other than any Additional Notes) and the incurrence by the Guarantors of
Indebtedness represented by the Subsidiary Guarantees;
(iv) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case incurred for the purpose
of financing all or any part of the purchase price or cost of construction or
improvement of property, plant or equipment used in the business of the Company
or such Subsidiary, in an aggregate principal amount not to exceed $10.0 million
at any time outstanding;
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net
proceeds of which are used to refund, refinance or replace Indebtedness (other
than intercompany Indebtedness) that is either the Existing Indebtedness or was
permitted by this Indenture to be incurred under the first paragraph hereof or
clauses (iii), (iv) or (v) of this paragraph;
(vi) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and any
of its Wholly Owned Restricted Subsidiaries; provided, however, that (i) if the
Company is the obligor on such Indebtedness, such Indebtedness is expressly
subordinated to the prior payment in full in cash of all Obligations with
respect to the Notes and (ii)(A) any subsequent issuance or transfer of Equity
Interests that results in any such Indebtedness being held by a Person other
than the Company or a Restricted Subsidiary thereof and (B) any sale or other
transfer of any such Indebtedness to a Person that is not either the Company or
a Wholly Owned Restricted Subsidiary thereof shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or such Restricted
Subsidiary, as the case may be, that was not permitted by this clause (vi);
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of fixing
or hedging interest rate risk with respect to any floating rate Indebtedness
that is permitted by the terms of this Indenture to be outstanding;
(viii) the guarantee by the Company or any of the Guarantors
of Indebtedness of the Company or a Restricted Subsidiary of the Company that
was permitted to be incurred by another provision of this Section 4.09;
(ix) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal amount (or
accreted value, as applicable) at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (ix), not to exceed $10.0 million;
and
(x) the incurrence by the Company's Unrestricted Subsidiaries
of Non-Recourse Debt, provided, however, that if any such Indebtedness ceases to
be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed
to constitute an incurrence of Indebtedness by a Restricted Subsidiary of the
Company that was not permitted by this clause (x).
For purposes of determining compliance with this Section 4.09, in
the event that an item of Indebtedness meets the criteria of more than one of
the categories of Permitted Debt described in clauses (i) through (x) above or
is entitled to be incurred pursuant to the first paragraph of this Section 4.09,
the
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Company shall, in its sole discretion, classify such item of Indebtedness in any
manner that complies with this Section 4.09. Accrual of interest, accretion or
amortization of original issue discount, the payment of interest on any
Indebtedness in the form of additional Indebtedness with the same terms, and the
payment of dividends on Disqualified Stock in the form of additional shares of
the same class of Disqualified Stock shall not be deemed to be an incurrence of
Indebtedness or an issuance of Disqualified Stock for purposes of this Section
4.09; provided, in each such case, that the amount thereof is included in Fixed
Charges of the Company as accrued.
SECTION 4.10. ASSET SALES
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the
Restricted Subsidiary, as the case may be) receives consideration at the time of
such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of and (ii) at least 75% of the consideration therefor
received by the Company or such Restricted Subsidiary is in the form of cash;
provided that the amount of (x) any liabilities (as shown on the Company's or
such Restricted Subsidiary's most recent balance sheet), of the Company or any
Restricted Subsidiary (other than contingent liabilities and liabilities that
are by their terms subordinated to the Notes or any guarantee thereof) that are
assumed by the transferee of any such assets pursuant to a customary novation
agreement that releases the Company or such Restricted Subsidiary from further
liability and (y) any securities, notes or other obligations received by the
Company or any such Restricted Subsidiary from such transferee that are
contemporaneously (subject to ordinary settlement periods) converted by the
Company or such Restricted Subsidiary into cash (to the extent of the cash
received), shall be deemed to be cash for purposes of this provision.
Within 365 days after the receipt of any Net Proceeds from an Asset
Sale, the Company may apply such Net Proceeds, at its option, (a) to permanently
repay (and reduce the commitments under) Senior Indebtedness of the Company or a
Guarantor or (b) to the acquisition of a majority of the assets of, or a
majority of the Voting Stock of, another Permitted Business, the making of a
capital expenditure or the acquisition of other long-term assets that are used
or useful in a Permitted Business. Pending the final application of any such Net
Proceeds, the Company may temporarily reduce revolving credit borrowings,
including without limitation, the Secured Credit Facility, or otherwise invest
such Net Proceeds in any manner that is not prohibited by the Indenture. Any Net
Proceeds from Asset Sales that are not applied or invested as provided in the
first sentence of this paragraph shall be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0 million,
the Company shall be required to make an offer to all Holders of Notes and all
holders of other Indebtedness containing provisions similar to those set forth
in this Indenture with respect to offers to purchase or redeem with the proceeds
of sales of assets (an "Asset Sale Offer") to purchase the maximum principal
amount of Notes and such other Indebtedness that may be purchased out of the
Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date of purchase, in accordance with the procedures set
forth in this Indenture and such other Indebtedness. To the extent that any
Excess Proceeds remain after consummation of an Asset Sale Offer, the Company
may use such Excess Proceeds for any purpose not otherwise prohibited by this
Indenture. If the aggregate principal amount of Notes and such other
Indebtedness tendered by holders thereof in response to such Asset Sale Offer
exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and
such other Indebtedness to be purchased on a pro rata basis. Upon completion of
such offer to purchase, the amount of Excess Proceeds shall be reset at zero.
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SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(i) such Affiliate Transaction is on terms that are no less favorable to the
Company or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $1.0 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5.0 million, an opinion as to the fairness
to the Holders of such Affiliate Transaction from a financial point of view
issued by an accounting, appraisal or investment banking firm of national
standing. Notwithstanding the foregoing, the following items shall not be deemed
to be Affiliate Transactions: (i) any employment agreement entered into by the
Company or any of its Restricted Subsidiaries in the ordinary course of business
and consistent with the past practice of the Company or such Restricted
Subsidiary, (ii) transactions between or among the Company and/or its Restricted
Subsidiaries, (iii) payment of reasonable directors fees to Persons who are not
otherwise Affiliates of the Company and (iv) Restricted Payments (other than
Restricted Investments) that are permitted by the provisions of Section 4.07
hereof.
SECTION 4.12. LIENS.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, assume or suffer to exist any Lien
securing Indebtedness or trade payables on any asset now owned or hereafter
acquired, or any income or profits therefrom or assign or convey any right to
receive income therefrom, except Permitted Liens, unless all payments due under
the Indenture and the Notes are secured on an equal and ratable basis with the
Indebtedness so secured until such time as such is no longer secured by a Lien;
provided that if such Indebtedness is by its terms expressly subordinated to the
Notes or any Subsidiary Guarantee, the Lien securing such Indebtedness shall be
subordinate and junior to the Lien securing the Notes and the Subsidiary
Guarantees with the same relative priority as such subordinate or junior
Indebtedness shall have with respect to the Notes and the Subsidiary Guarantees.
SECTION 4.13. ADDITIONAL SUBSIDIARY GUARANTEES
The Company (i) shall not permit any of its Restricted Subsidiaries
that is not a Guarantor to Guarantee or secure through the granting of Liens the
payment of any Indebtedness of the Company or any Guarantor and (ii) shall not
and shall not permit any of its Restricted Subsidiaries to pledge any
intercompany notes representing obligations of any of its Restricted
Subsidiaries, to secure the payment of any Indebtedness of the Company or any
Guarantor, in each case unless such Subsidiary, the Company and the Trustee
execute and deliver a supplemental indenture evidencing such Subsidiary's
Subsidiary Guarantee (providing for the unconditional guarantee by such
Restricted Subsidiary, on a senior subordinated basis, of the Notes).
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SECTION 4.14. CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to be
done all things necessary to preserve and keep in full force and effect (i) its
corporate existence, and the corporate, partnership or other existence of each
of its Subsidiaries, in accordance with the respective organizational documents
(as the same may be amended from time to time) of the Company or any such
Subsidiary and (ii) the rights (charter and statutory), licenses and franchises
of the Company and its Subsidiaries; provided, however, that the Company shall
not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Subsidiaries, if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries,
taken as a whole, and that the loss thereof is not adverse in any material
respect to the Holders of the Notes.
SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, each Holder of Notes will
have the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the
offer described in this Section 4.15 (the "Change of Control Offer") at an offer
price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of purchase (the "Change of Control Payment"). Within 30 days following any
Change of Control, the Company shall mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase the Notes on the date specified in such notice, which date shall
be no earlier than 30 days and no later than 60 days from the date such notice
is mailed (the "Change of Control Payment Date"), pursuant to the procedures
required by this Indenture and described in such notice. The Company shall
comply with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations are applicable in connection with the repurchase
of the Notes as a result of a Change of Control.
(b) On the Change of Control Payment Date, the Company shall, to the
extent lawful, (1) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee shall
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that each such new Note shall be in a
principal amount of $1,000 or an integral multiple thereof. Prior to complying
with the provisions of this Section 4.15, but in any event within 90 days
following a Change of Control, the Company shall either repay all outstanding
Senior Indebtedness or obtain the requisite consents, if any, under all
agreements governing outstanding Senior Indebtedness to permit the repurchase of
Notes required by this Section 4.15. The Company shall publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Payment Date.
(c).Notwithstanding anything to the contrary in this Section 4.15, the
Company shall not be required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in the manner, at the
times and otherwise in compliance with the requirements set forth
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in this Section 4.15 and Section 3.09 hereof and purchases all Notes validly
tendered and not withdrawn under such Change of Control Offer.
SECTION 4.16. NO SENIOR SUBORDINATED DEBT.
The Company shall not incur, create, issue, assume, guarantee or
otherwise become liable for any Indebtedness that is subordinate or junior in
right of payment to any Indebtedness of the Company and senior in any respect in
right of payment to the Notes and no Guarantor shall incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness of such
Guarantor that is subordinate or junior in right of payment to any Indebtedness
of such Guarantor and senior in any respect in right of payment to the
Subsidiary Guarantee of such Guarantor.
SECTION 4.17. LIMITATION ON ISSUANCES AND SALES OF EQUITY INTERESTS IN
RESTRICTED SUBSIDIARIES.
The Company (i) shall not, and shall not permit any Restricted
Subsidiary of the Company to, transfer, convey, sell, lease or otherwise dispose
of any Equity Interests in any Restricted Subsidiary of the Company to any
Person (other than the Company or a Restricted Subsidiary of the Company),
unless (a) such transfer, conveyance, sale, lease or other disposition is of all
the Equity Interests in such Restricted Subsidiary and (b) the cash Net Proceeds
from such transfer, conveyance, sale, lease or other disposition are applied in
accordance with Section 4.10 hereof and (ii) shall not permit any Restricted
Subsidiary of the Company to issue any of its Equity Interests (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than to the Company or a Restricted Subsidiary of
the Company.
SECTION 4.18. PAYMENTS FOR CONSENT.
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of this
Indenture or the Notes unless such consideration is offered to be paid or is
paid to all Holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
SECTION 4.19. BUSINESS ACTIVITIES.
The Company shall not, and shall not permit any Subsidiary to,
engage in any business other than Permitted Businesses, except to such extent as
would not be material to the Company and its Subsidiaries taken as a whole.
ARTICLE 5.
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Company shall not consolidate or merge with or into (whether or
not the Company is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions, to another corporation, Person or
entity unless (i) the Company is the surviving corporation or the entity or the
Person formed by or surviving any
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such consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Registration Rights Agreement, the Notes and this Indenture
pursuant to a supplemental indenture in a form reasonably satisfactory to the
Trustee; (iii) immediately after such transaction no Default or Event of Default
exists; and (iv) except in the case of a merger of the Company with or into a
Wholly Owned Restricted Subsidiary of the Company, the Company or the entity or
Person formed by or surviving any such consolidation or merger (if other than
the Company), or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made (A) will have Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated Net
Worth of the Company immediately preceding the transaction and (B) will, at the
time of such transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter period,
have a Fixed Charge Coverage Ratio of at least 2.0 to 1.0.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.01 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
the predecessor Company shall not be relieved from the obligation to pay the
principal of and interest on the Notes except in the case of a sale of all of
the Company's assets that meets the requirements of Section 5.01 hereof.
ARTICLE 6.
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(a) the Company defaults in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes (whether or not permitted by the
subordination provisions of this Indenture) and such default continues for a
period of 30 days;
(b) the Company defaults in the payment when due of principal of or
premium, if any, on the Notes when the same becomes due and payable at maturity,
upon redemption (including in connection with an offer to purchase) or otherwise
(whether or not permitted by the subordination provisions of this Indenture);
(c) the Company or any of its Restricted Subsidiaries fails to comply for
15 days after receipt of written notice from the Trustee or Holders of at least
25% in aggregate principal amount of the Notes then outstanding with any of the
provisions of Section 4.07, 4.09, 4.10 or 4.15 hereof;
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(d) the Company or any of its Restricted Subsidiaries fails to observe or
perform any other covenant, representation, warranty or other agreement in this
Indenture or the Notes for 60 days after notice to the Company by the Trustee or
the Holders of at least 25% in aggregate principal amount of the Notes then
outstanding voting as a single class;
(e) a default occurs under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or
is created after the date hereof, which default (a) is caused by a failure to
pay principal of or premium, if any, or interest on such Indebtedness prior to
the expiration of the grace period provided in such Indebtedness on the date of
such default (a "Payment Default") or (b) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $5.0 million or more;
(f) a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the Company or
any of its Restricted Subsidiaries and such judgment or judgments remain
undischarged for a period (during which execution shall not be effectively
stayed) of 60 days, provided that the aggregate of all such undischarged
judgments exceeds $5.0 million;
(g) the Company or any of its Restricted Subsidiaries pursuant to or
within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in an
involuntary case,
(iii) consents to the appointment of a Custodian of it or for all or
substantially all of its property,
(iv) makes a general assignment for the benefit of its creditors, or
(v) generally is not paying its debts as they become due; or
(h) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(i) is for relief against the Company or any of its Restricted
Subsidiaries in an involuntary case;
(ii) appoints a Custodian of the Company or any of its Restricted
Subsidiaries or for all or substantially all of the property of the
Company or any of its Restricted Subsidiaries or
(iii) orders the liquidation of the Company or any of its Restricted
Subsidiaries;
and the order or decree remains unstayed and in effect for 60 consecutive
days; or
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(i) except as permitted by this Indenture, any Subsidiary Guarantee is
held in any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect or any Guarantor, or any Person
acting on behalf of any Guarantor, shall deny or disaffirm its obligations under
such Subsidiary Guarantee.
SECTION 6.02. ACCELERATION.
If any Event of Default (other than an Event of Default specified in
clause (g) or (h) of Section 6.01 hereof with respect to the Company, any
Significant Subsidiary or any group of Significant Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary) occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the then
outstanding Notes may declare all the Notes to be due and payable immediately.
Upon any such declaration, the Notes shall become due and payable immediately.
Notwithstanding the foregoing, if an Event of Default specified in clause (g) or
(h) of Section 6.01 hereof occurs with respect to the Company, any of its
Significant Restricted Subsidiaries or any group of Restricted Subsidiaries
that, taken as a whole, would constitute a Significant Restricted Subsidiary,
all outstanding Notes shall be due and payable immediately without further
action or notice. The Holders of a majority in aggregate principal amount of the
then outstanding Notes by written notice to the Trustee may on behalf of all of
the Holders rescind an acceleration and its consequences if the rescission would
not conflict with any judgment or decree and if all existing Events of Default
(except nonpayment of principal, interest or premium that has become due solely
because of the acceleration) have been cured or waived.
If an Event of Default occurs on or after April 15, 2003 by reason
of any willful action (or inaction) taken (or not taken) by or on behalf of the
Company with the intention of avoiding payment of the premium that the Company
would have had to pay if the Company then had elected to redeem the Notes
pursuant to Section 3.07 hereof, then, upon acceleration of the Notes, an
equivalent premium shall also become and be immediately due and payable, to the
extent permitted by law, anything in this Indenture or in the Notes to the
contrary notwithstanding. If an Event of Default occurs prior to April 15, 2003
by reason of any willful action (or inaction) taken (or not taken) by or on
behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to such date, then, upon acceleration of the
Notes, an additional premium shall also become and be immediately due and
payable, to the extent permitted by law, in an amount, for each of the years
beginning on April 1 of the years set forth below, as set forth below (expressed
as a percentage of the principal amount of the Notes to the date of payment that
would otherwise be due but for the provisions of this sentence):
Year Percentage
---- ----------
1998...............................................110.00%
1999...............................................109.00%
2000...............................................108.00%
2001...............................................107.00%
2002...............................................106.00%
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal, premium, if
any, and interest on the Notes or to enforce the performance of any provision of
the Notes or this Indenture.
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The Trustee may maintain a proceeding even if it does not possess
any of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal amount of
the then outstanding Notes by notice to the Trustee may on behalf of the Holders
of all of the Notes waive an existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in the
payment of the principal of, premium and Liquidated Damages, if any, or interest
on, the Notes (including in connection with an offer to purchase) (provided,
however, that the Holders of a majority in aggregate principal amount of the
then outstanding Notes may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration).
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture that the Trustee determines may be unduly
prejudicial to the rights of other Holders of Notes or that may involve the
Trustee in personal liability.
SECTION 6.06. LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this
Indenture or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue
the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against
any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the
provision of indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a
direction inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the
rights of another Holder of a Note or to obtain a preference or priority over
another Holder of a Note.
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SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b) occurs
and is continuing, the Trustee is authorized to recover judgment in its own name
and as trustee of an express trust against the Company for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Notes and interest on overdue principal and, to the extent lawful,
interest and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due
under Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
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Second: to Holders of Notes for amounts due and unpaid on the Notes
for principal, premium and Liquidated Damages, if any, and interest, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium, and Liquidated Damages, if any and
interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment
to Holders of Notes pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
ARTICLE 7.
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liabilities for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
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(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document believed by it to
be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company shall be sufficient if signed by
an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities that might be
incurred by it in compliance with such request or direction.
(g) In no event shall the Trustee be required to take notice of any
default or breach hereof or any Event of Default hereunder, except for Events of
Default specified in Sections 6.01(a) and (b) hereof, unless and until the
Trustee shall have received from a Holder or from the Company express written
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notice of the circumstances constituting the breach, default or Event of Default
and stating that said circumstances constitute an Event of Default hereunder.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with like
rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it
is known to the Trustee, or if appropriate notice is provided in writing in
accordance with Section 7.02(g), as applicable, the Trustee shall mail to
Holders of Notes a notice of the Default or Event of Default within 90 days
after it occurs. Except in the case of a Default or Event of Default in payment
of principal of, premium, if any, or interest on any Note, the Trustee may
withhold the notice if and so long as a committee of its Responsible Officers in
good faith determines that withholding the notice is in the interests of the
Holders of the Notes.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each May 15 beginning with the May 15 following
the date hereof, and for so long as Notes remain outstanding, the Trustee shall
mail to the Holders of the Notes a brief report dated as of such reporting date
that complies with TIA ss. 313(a) (but if no event described in TIA ss. 313(a)
has occurred within the twelve months preceding the reporting date, no report
need be transmitted). The Trustee also shall comply with TIA ss. 313(b)(2). The
Trustee shall also transmit by mail all reports as required by TIA ss. 313(c).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to the Company and filed with the SEC and each stock
exchange on which the Notes are listed in accordance with TIA ss. 313(d). The
Company shall promptly notify the Trustee when the Notes are listed on any stock
exchange.
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SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company (including
this Section 7.07) and defending itself against any claim (whether asserted by
the Company or any Holder or any other person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its
negligence or bad faith. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify the
Company shall not relieve the Company of its obligations hereunder. The Company
shall defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive
the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(g) or (h) hereof occurs, the expenses and
the compensation for the services (including the fees and expenses of its agents
and counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA ss. 313(b)(2) to
the extent applicable.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. The Holders of Notes of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company in writing. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
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(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any bankruptcy law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Notes of at least 10% in principal amount of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder of a Note who
has been a Holder of a Note for at least six months, fails to comply with
Section 7.10, such Holder of a Note may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee, provided all sums
owing to the Trustee hereunder have been paid and subject to the Lien provided
for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant
to this Section 7.08, the Company's obligations under Section 7.07 hereof shall
continue for the benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities and that has a combined capital and surplus of at
least $100 million as set forth in its most recent published annual report of
condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA
ss. 310(b).
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SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
SECTION 7.12. DEFAULT RATE OF INTEREST
All sums of money owed to the Trustee shall bear interest from the
date on which the same are due and payable until the date of payment at a rate
equal to the "Base Rate" of U.S. Bank National Association as such rate is
announced from time to time, plus two percent (2%), said rate to change when and
as the said Base Rate changes.
SECTION 7.13. RECEIPT OF DOCUMENTS
In no event shall receipt by the Trustee of financial and other
reports from the Company as provided in this Indenture, review of which could
lead to the conclusion that an Event of Default exists hereunder, result,
without further action, in the occurrence of an Event of Default, or impose upon
the Trustee the obligation to review and examine the same, it being understood
that all such information shall be received by the Trustee as repository for
said information and documents with no obligation on the part of the Trustee to
review the same.
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced
by a resolution set forth in an Officers' Certificate, at any time, elect to
have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article 8.
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SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Notes to receive payments in respect of the principal of, premium,
if any, and interest and Liquidated Damages on such Notes when such payments are
due from the trust referred to below, (b) the Company's obligations with respect
to the Notes concerning issuing temporary Notes, registration of Notes,
mutilated, destroyed, lost or stolen Notes and the maintenance of an office or
agency for payment and money for security payments held in trust, (c) the
rights, powers, trusts, duties and immunities of the Trustee, and the Company's
obligations in connection therewith and (d) this Article 8. Subject to
compliance with this Article 8, the Company may exercise its option under this
Section 8.02 notwithstanding the prior exercise of its option under Section 8.03
hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10,
4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.18, 4.19 and 5.01 hereof with respect to
the outstanding Notes on and after the date the conditions set forth in Section
8.04 are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Notes shall not be deemed outstanding for accounting purposes). For this
purpose, Covenant Defeasance means that, with respect to the outstanding Notes,
the Company may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such covenant, whether
directly or indirectly, by reason of any reference elsewhere herein to any such
covenant or by reason of any reference in any such covenant to any other
provision herein or in any other document and such omission to comply shall not
constitute a Default or an Event of Default under Section 6.01 hereof, but,
except as specified above, the remainder of this Indenture and such Notes shall
be unaffected thereby. In addition, upon the Company's exercise under Section
8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, Sections
6.01(d) through 6.01(f) hereof shall not constitute Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either
Section 8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
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(a) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders, cash in United States dollars, non-callable
Government Securities, or a combination thereof, in such amounts as shall be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium and Liquidated Damages, if any,
and interest on the outstanding Notes on the stated date for payment thereof or
on the applicable redemption date, as the case may be, and the Company must
specify whether the Notes are being defeased to maturity or to a particular
redemption date;
(b) in the case of an election under Section 8.02 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date hereof, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based thereon
such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such Legal Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have been the
case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit (other than a Default or Event of Default resulting
from the incurrence of Indebtedness all or a portion of the proceeds of which
will be used to defease the Notes pursuant to this Article Eight concurrently
with such incurrence) or insofar as Sections 6.01(g) or 6.01(h) hereof is
concerned, at any time in the period ending on the 91st day after the date of
deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement or
instrument (other than this Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound;
(f) the Company shall have delivered to the Trustee an Opinion of Counsel
(which may be subject to customary exceptions) to the effect that on the 91st
day following the deposit, the trust funds will not be subject to the effect of
any applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Company; and
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(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable
Government Securities (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, collectively for purposes of this Section
8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the
outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the payment,
either directly or through any Paying Agent (including the Company acting as
Paying Agent) as the Trustee may determine, to the Holders of such Notes of all
sums due and to become due thereon in respect of principal, premium, if any, and
interest, but such money need not be segregated from other funds except to the
extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.04 hereof or the principal
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or non-callable Government Securities held by it as
provided in Section 8.04 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 8.04(a) hereof), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
SECTION 8.06. REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of, premium, if
any, or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as a
secured creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Company cause to be
published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
shall be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03 hereof, as the case may be, by
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reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, then the
Company's obligations under this Indenture and the Notes shall be revived and
reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03
hereof until such time as the Trustee or Paying Agent is permitted to apply all
such money in accordance with Section 8.02 or 8.03 hereof, as the case may be;
provided, however, that, if the Company makes any payment of principal of,
premium, if any, or interest on any Note following the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the money held by the Trustee or Paying
Agent.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, the Company, the
Guarantors and the Trustee may amend or supplement this Indenture, the
Subsidiary Guarantees or the Notes without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes or to alter the provisions of Article 2 hereof (including the
related definitions) in a manner that does not materially adversely affect any
Holder;
(c) to provide for the assumption of the Company's or a Guarantor's
obligations to the Holders of the Notes by a successor to the Company or a
Guarantor pursuant to Article 5 or Article 10 hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights hereunder of any Holder of the Note;
(e) to comply with requirements of the SEC in order to effect or maintain
the qualification of this Indenture under the TIA;
(f) to provide for the issuance of Additional Notes in accordance with the
limitations set forth in this Indenture as of the date hereof; or
(g) to allow any Guarantor to execute a supplemental indenture and/or a
Subsidiary Guarantee with respect to the Notes.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
7.02 hereof, the Trustee shall join with the Company and the Guarantors in the
execution of any amended or supplemental Indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.
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SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02, the Company and the
Trustee may amend or supplement this Indenture (including Sections 3.09, 4.10
and 4.15 hereof), the Subsidiary Guarantees and the Notes may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the Notes (including Additional Notes, if any) then outstanding voting
as a single class (including consents obtained in connection with a tender offer
or exchange offer for, or purchase of, the Notes), and, subject to Sections 6.04
and 6.07 hereof, any existing Default or Event of Default (other than a Default
or Event of Default in the payment of the principal of, premium, if any, or
interest on the Notes, except a payment default resulting from an acceleration
that has been rescinded) or compliance with any provision of this Indenture, the
Subsidiary Guarantees or the Notes may be waived with the consent of the Holders
of a majority in principal amount of the then outstanding Notes (including
Additional Notes, if any) voting as a single class (including consents obtained
in connection with a tender offer or exchange offer for, or purchase of, the
Notes). Without the consent of at least 75% in principal amount of the Notes
then outstanding (including consents obtained in connection with a tender offer
or exchange offer for, or purchase of, such Notes), no waiver or amendment to
this Indenture may make any change in the provisions of Article 10 hereof that
adversely affects the rights of any Holder of Notes. Section 2.08 hereof shall
determine which Notes are considered to be "outstanding" for purposes of this
Section 9.02.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.02 hereof, the Trustee shall
join with the Company in the execution of such amended or supplemental Indenture
unless such amended or supplemental Indenture directly affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise, in which case
the Trustee may in its discretion, but shall not be obligated to, enter into
such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes
under this Section 9.02 to approve the particular form of any proposed amendment
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Notes (including Additional Notes,
if any) then outstanding voting as a single class may waive compliance in a
particular instance by the Company with any provision of this Indenture or the
Notes. However, without the consent of each Holder affected, an amendment or
waiver under this Section 9.02 may not (with respect to any Notes held by a
non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver;
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(b) reduce the principal of or change the fixed maturity of any Note or
alter or waive any of the provisions with respect to the redemption of the
Notes, except as provided above with respect to Sections 3.09, 4.10 and 4.15
hereof;
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Notes (except a rescission of acceleration
of the Notes by the Holders of at least a majority in aggregate principal amount
of the then outstanding Notes (including Additional Notes, if any) and a waiver
of the payment default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in the Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive payments
of principal of, interest, or premium, if any, on the Notes;
(g) waive a redemption payment with respect to any Note (other than a
payment required by Section 3.07 hereof);
(h) make any change in Section 6.04 or 6.07 hereof or in the foregoing
amendment and waiver provisions;
(i) release any Guarantor from any of its obligations under its Subsidiary
Guarantee or this Indenture, except in accordance with the terms of this
Indenture; or
(j) amend this Section 9.02.
(k) In addition, any amendment to the provisions of Article 10 hereof
(which relate to subordination) will require the consent of the Holders of at
least 75% in aggregate principal amount of the Notes then outstanding if such
amendment would adversely affect the rights of Holders of Notes.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes shall
be set forth in a amended or supplemental Indenture that complies with the TIA
as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder of a
Note and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
is not made on any Note. However, any such Holder of a Note or subsequent Holder
of a Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
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SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall
not affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article Nine if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Company may not sign an amendment or supplemental Indenture until the Board
of Directors approves it. In executing any amended or supplemental indenture,
the Trustee shall be entitled to receive and (subject to Section 7.01 hereof)
shall be fully protected in relying upon, in addition to the documents required
by Section 12.04 hereof, an Officer's Certificate and an Opinion of Counsel
stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture.
ARTICLE 10.
SUBORDINATION
SECTION 10.01. AGREEMENT TO SUBORDINATE.
The Company agrees, and each Holder by accepting a Note agrees, that
the Indebtedness evidenced by the Notes is subordinated in right of payment, to
the extent and in the manner provided in this Article 10, to the prior payment
in full of all Senior Indebtedness (whether outstanding on the date hereof or
hereafter created, incurred, assumed or guaranteed), and that the subordination
is for the benefit of the holders of Senior Indebtedness.
SECTION 10.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any distribution to creditors of the Company in a liquidation
or dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, in
an assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities:
(1) holders of Senior Indebtedness shall be entitled to receive payment
in full of all Obligations due in respect of such Senior
Indebtedness (including interest after the commencement of any such
proceeding at the rate specified in the applicable Senior
Indebtedness) before Holders of the Notes shall be entitled to
receive any payment with respect to the Notes (except that Holders
may receive (i) Permitted Junior Securities and (ii) payments and
other distributions made from any defeasance trust created pursuant
to Section 8.01 hereof); and
(2) until all Obligations with respect to Senior Indebtedness (as
provided in subsection (1) above) are paid in full, any distribution
to which Holders would be entitled but for this
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Article 10 shall be made to holders of Senior Indebtedness (except
that Holders of Notes may receive (i) Permitted Junior Securities
and (ii) payments and other distributions made from any defeasance
trust created pursuant to Section 8.01 hereof), as their interests
may appear.
SECTION 10.03. DEFAULT ON DESIGNATED SENIOR INDEBTEDNESS.
The Company may not make any payment or distribution to the Trustee
or any Holder in respect of Obligations with respect to the Notes and may not
acquire from the Trustee or any Holder any Notes for cash or property (other
than (i) Permitted Junior Securities and (ii) payments and other distributions
made from any defeasance trust created pursuant to Section 8.01 hereof) until
all principal and other Obligations with respect to the Senior Indebtedness have
been paid in full if:
(i) a default in the payment of any principal or other Obligations
with respect to Designated Senior Indebtedness occurs and is continuing
beyond any applicable grace period in the agreement, indenture or other
document governing such Designated Senior Indebtedness; or
(ii) a default, other than a payment default, on Designated Senior
Indebtedness occurs and is continuing that then permits holders of the
Designated Senior Indebtedness to accelerate its maturity and the Trustee
receives a notice of the default (a "Payment Blockage Notice") from the
holders (or a Representative of the holders) of the Designated Senior
Indebtedness. If the Trustee receives any such Payment Blockage Notice, no
subsequent Payment Blockage Notice shall be effective for purposes of this
Section unless and until (i) at least 360 days shall have elapsed since
the effectiveness of the immediately prior Payment Blockage Notice and
(ii) all scheduled payments of principal, premium, if any, and interest on
the Securities that have come due have been paid in full in cash. No
nonpayment default that existed or was continuing on the date of delivery
of any Payment Blockage Notice to the Trustee shall be, or be made, the
basis for a subsequent Payment Blockage Notice.
The Company may and shall resume payments on and distributions in
respect of the Notes and may acquire them upon the earlier of:
(1) the date upon which the default is cured or waived, or
(2) in the case of a default referred to in Section 10.04(ii) hereof,
179 days pass after notice is received if the maturity of such
Designated Senior Indebtedness has not been accelerated, if this
Article 10 otherwise permits the payment, distribution or
acquisition at the time of such payment or acquisition.
SECTION 10.04. ACCELERATION OF SECURITIES.
If payment of the Securities is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Indebtedness of the
acceleration.
SECTION 10.05. WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee or any Holder receives any payment of
any Obligations with respect to the Notes at a time when the Trustee or such
Holder, as applicable, has actual knowledge
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(provided by formal notice in accordance with Section 10.05 hereof in the case
of the Trustee) that such payment is prohibited by Section 10.04 hereof, such
payment shall be held by the Trustee or such Holder, in trust for the benefit
of, and shall be paid forthwith over and delivered, upon written request, to,
the holders of Senior Indebtedness as their interests may appear or their
Representative under the indenture or other agreement (if any) pursuant to which
Senior Indebtedness may have been issued, as their respective interests may
appear, for application to the payment of all Obligations with respect to Senior
Indebtedness remaining unpaid to the extent necessary to pay such Obligations in
full in accordance with their terms, after giving effect to any concurrent
payment or distribution to or for the holders of Senior Indebtedness.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform only such obligations on the part of the Trustee as are
specifically set forth in this Article 10, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness, and shall not be
liable to any such holders if the Trustee shall pay over or distribute to or on
behalf of Holders or the Company or any other Person money or assets to which
any holders of Senior Indebtedness shall be entitled by virtue of this Article
10, except if such payment is made as a result of the willful misconduct or
gross negligence of the Trustee.
SECTION 10.06. NOTICE BY COMPANY.
The Company shall promptly notify the Trustee and the Paying Agent
of any facts known to the Company that would cause a payment of any Obligations
with respect to the Notes to violate this Article 10, but failure to give such
notice shall not affect the subordination of the Notes to the Senior
Indebtedness as provided in this Article 10.
SECTION 10.07. SUBROGATION.
After all Senior Indebtedness is paid in full and until the Notes
are paid in full, Holders of Notes shall be subrogated (equally and ratably with
all other Indebtedness pari passu with the Notes) to the rights of holders of
Senior Indebtedness to receive distributions applicable to Senior Indebtedness
to the extent that distributions otherwise payable to the Holders of Notes have
been applied to the payment of Senior Indebtedness. A distribution made under
this Article 10 to holders of Senior Indebtedness that otherwise would have been
made to Holders of Notes is not, as between the Company and Holders, a payment
by the Company on the Notes.
SECTION 10.08. RELATIVE RIGHTS.
This Article 10 defines the relative rights of Holders of Notes and
holders of Senior Indebtedness. Nothing in this Indenture shall:
(1) impair, as between the Company and Holders of Notes, the obligation
of the Company, which is absolute and unconditional, to pay
principal of and interest on the Notes in accordance with their
terms;
(2) affect the relative rights of Holders of Notes and creditors of the
Company other than their rights in relation to holders of Senior
Indebtedness; or
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(3) prevent the Trustee or any Holder of Notes from exercising its
available remedies upon a Default or Event of Default, subject to
the rights of holders and owners of Senior Indebtedness to receive
distributions and payments otherwise payable to Holders of Notes.
If the Company fails because of this Article 10 to pay principal of
or interest on a Note on the due date, the failure is still a Default or Event
of Default.
SECTION 10.09. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any holder of Senior Indebtedness to enforce the
subordination of the Indebtedness evidenced by the Notes shall be impaired by
any act or failure to act by the Company or any Holder or by the failure of the
Company or any Holder to comply with this Indenture.
SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders
of Senior Indebtedness, the distribution may be made and the notice given to
their Representative.
Upon any payment or distribution of assets of the Company referred
to in this Article 10, the Trustee and the Holders of Notes shall be entitled to
rely upon any order or decree made by any court of competent jurisdiction or
upon any certificate of such Representative or of the liquidating trustee or
agent or other Person making any distribution to the Trustee or to the Holders
of Notes for the purpose of ascertaining the Persons entitled to participate in
such distribution, the holders of the Senior Indebtedness and other Indebtedness
of the Company, the amount thereof or payable thereon, the amount or amounts
paid or distributed thereon and all other facts pertinent thereto or to this
Article 10.
SECTION 10.11. RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Notes to violate this Article 10. Only the Company or a
Representative may give the notice. Nothing in this Article 10 shall impair the
claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights.
SECTION 10.12. AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of Notes, by the Holder's acceptance thereof, authorizes
and directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10, and appoints the Trustee to act as such Holder's attorney-in-fact
for any and all such purposes. If the Trustee does not file a proper proof of
claim or proof of debt in the form required in any proceeding referred to in
Section 6.09 hereof at least 30 days
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before the expiration of the time to file such claim, a representative of
Designated Senior Indebtedness is hereby authorized to file an appropriate claim
for and on behalf of the Holders of the Notes.
SECTION 10.13. AMENDMENTS.
Neither the provisions of this Article 10 nor of Section 11.02 shall
be amended or modified without the written consent of the holders of all Senior
Indebtedness. In addition, the provisions of Section 8.04(e) shall not be
amended without the consent of the holders (or a Representative of the holders)
of Designated Senior Indebtedness in a manner which would permit the defeasance
of the Notes in violation of such Designated Senior Indebtedness.
ARTICLE 11.
SUBSIDIARY GUARANTEES
SECTION 11.01. GUARANTEE.
Subject to this Article 11, each of the Guarantors hereby, jointly
and severally, unconditionally guarantees to each Holder of a Note authenticated
and delivered by the Trustee and to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of this Indenture, the Notes or
the obligations of the Company hereunder or thereunder, that: (a) the principal
of and interest on the Notes shall be promptly paid in full when due, whether at
maturity, by acceleration, redemption or otherwise, and interest on the overdue
principal of and interest on the Notes, if any, if lawful, and all other
obligations of the Company to the Holders or the Trustee hereunder or thereunder
shall be promptly paid in full or performed, all in accordance with the terms
hereof and thereof; and (b) in case of any extension of time of payment or
renewal of any Notes or any of such other obligations, that same shall be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise.
Failing payment when due of any amount so guaranteed or any performance so
guaranteed for whatever reason, the Guarantors shall be jointly and severally
obligated to pay the same immediately. Each Guarantor agrees that this is a
guarantee of payment and not a guarantee of collection.
The Guarantors hereby agree that their obligations hereunder shall
be unconditional, irrespective of the validity, regularity or enforceability of
the Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the recovery of any judgment against the Company, any action
to enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor. Each Guarantor hereby
waives diligence, presentment, demand of payment, filing of claims with a court
in the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands whatsoever
and covenant that this Subsidiary Guarantee shall not be discharged except by
complete performance of the obligations contained in the Notes and this
Indenture.
If any Holder or the Trustee is required by any court or otherwise
to return to the Company, the Guarantors or any custodian, trustee, liquidator
or other similar official acting in relation to either the Company or the
Guarantors, any amount paid by either to the Trustee or such Holder, this
Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated
in full force and effect.
Each Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations guaranteed
hereby until payment in full of all obligations
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guaranteed hereby. Each Guarantor further agrees that, as between the
Guarantors, on the one hand, and the Holders and the Trustee, on the other hand,
(x) the maturity of the obligations guaranteed hereby may be accelerated as
provided in Article 6 hereof for the purposes of this Subsidiary Guarantee,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the obligations guaranteed hereby, and (y) in the
event of any declaration of acceleration of such obligations as provided in
Article 6 hereof, such obligations (whether or not due and payable) shall
forthwith become due and payable by the Guarantors for the purpose of this
Subsidiary Guarantee. The Guarantors shall have the right to seek contribution
from any non-paying Guarantor so long as the exercise of such right does not
impair the rights of the Holders under the Guarantee.
SECTION 11.02. SUBORDINATION OF SUBSIDIARY GUARANTEE.
The Obligations of each Guarantor under its Subsidiary Guarantee
pursuant to this Article 11 shall be junior and subordinated to the Senior
Indebtedness of such Guarantor on the same basis as the Notes are junior and
subordinated to Senior Indebtedness of the Company. For the purposes of the
foregoing sentence, the Trustee and the Holders shall have the right to receive
and/or retain payments by any of the Guarantors only at such times as they may
receive and/or retain payments in respect of the Notes pursuant to this
Indenture, including Article 10 hereof.
SECTION 11.03. LIMITATION ON GUARANTOR LIABILITY.
Each Guarantor, and by its acceptance of Notes, each Holder, hereby
confirms that it is the intention of all such parties that the Subsidiary
Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance
for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act or any similar federal or state law to the
extent applicable to any Subsidiary Guarantee. To effectuate the foregoing
intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree
that the obligations of such Guarantor under its Subsidiary Guarantee and this
Article 11 shall be limited to the maximum amount as will, after giving effect
to such maximum amount and all other contingent and fixed liabilities of such
Guarantor that are relevant under such laws, and after giving effect to any
collections from, rights to receive contribution from or payments made by or on
behalf of any other Guarantor in respect of the obligations of such other
Guarantor under this Article 11, result in the obligations of such Guarantor
under its Subsidiary Guarantee not constituting a fraudulent transfer or
conveyance.
SECTION 11.04. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE.
To evidence its Subsidiary Guarantee set forth in Section 11.01
hereof, each Guarantor hereby agrees that a notation of such Subsidiary
Guarantee substantially in the form included in Exhibit E shall be endorsed by
an Officer of such Guarantor on each Note authenticated and delivered by the
Trustee and that this Indenture shall be executed on behalf of such Guarantor by
its President or one of its Vice Presidents.
Each Guarantor hereby agrees that its Subsidiary Guarantee set forth
in Section 11.01 hereof shall remain in full force and effect notwithstanding
any failure to endorse on each Note a notation of such Subsidiary Guarantee.
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If an Officer whose signature is on this Indenture or on the
Subsidiary Guarantee no longer holds that office at the time the Trustee
authenticates the Note on which a Subsidiary Guarantee is endorsed, the
Subsidiary Guarantee shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Subsidiary Guarantee set
forth in this Indenture on behalf of the Guarantors.
In the event that the Company creates or acquires any new
Subsidiaries subsequent to the date of this Indenture, if required by Section
4.24 hereof, the Company shall cause such Subsidiaries to execute supplemental
indentures to this Indenture and Subsidiary Guarantees in accordance with
Section 4.24 hereof and this Article 11, to the extent applicable.
SECTION 11.05. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.
No Guarantor may consolidate with or merge with or into (whether or
not such Guarantor is the surviving Person) another corporation, Person or
entity whether or not affiliated with such Guarantor unless:
(1) subject to Section 11.05 hereof, the Person formed by or surviving
any such consolidation or merger (if other than a Guarantor or the
Company) unconditionally assumes all the obligations of such
Guarantor, pursuant to a supplemental indenture in form and
substance reasonably satisfactory to the Trustee, under the Notes,
this Indenture and the Subsidiary Guarantee on the terms set forth
herein or therein; and
(2) immediately after giving effect to such transaction, no Default or
Event of Default exists.
In case of any such consolidation, merger, sale or conveyance and
upon the assumption by the successor Person, by supplemental indenture, executed
and delivered to the Trustee and satisfactory in form to the Trustee, of the
Subsidiary Guarantee endorsed upon the Notes and the due and punctual
performance of all of the covenants and conditions of this Indenture to be
performed by the Guarantor, such successor Person shall succeed to and be
substituted for the Guarantor with the same effect as if it had been named
herein as a Guarantor. Such successor Person thereupon may cause to be signed
any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee. All the Subsidiary Guarantees so issued shall in
all respects have the same legal rank and benefit under this Indenture as the
Subsidiary Guarantees theretofore and thereafter issued in accordance with the
terms of this Indenture as though all of such Subsidiary Guarantees had been
issued at the date of the execution hereof.
Except as set forth in Articles 4 and 5 hereof, and notwithstanding
clauses (a) and (b) above, nothing contained in this Indenture or in any of the
Notes shall prevent any consolidation or merger of a Guarantor with or into the
Company or another Guarantor, or shall prevent any sale or conveyance of the
property of a Guarantor as an entirety or substantially as an entirety to the
Company or another Guarantor.
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SECTION 11.06. RELEASES FOLLOWING SALE OF ASSETS.
In the event of a sale or other disposition of all of the assets of
any Guarantor, by way of merger, consolidation or otherwise, or a sale or other
disposition of all of the capital stock of any Guarantor, then such Guarantor
(in the event of a sale or other disposition, by way of merger, consolidation or
otherwise, of all of the capital stock of such Guarantor) or the corporation
acquiring the property (in the event of a sale or other disposition of all or
substantially all of the assets of such Guarantor) shall be released and
relieved of any obligations under its Subsidiary Guarantee; provided that the
Net Proceeds of such sale or other disposition are applied in accordance with
the applicable provisions of this Indenture, including without limitation
Section 4.10 hereof. Upon delivery by the Company to the Trustee of an Officers'
Certificate and an Opinion of Counsel to the effect that such sale or other
disposition was made by the Company in accordance with the applicable provisions
of this Indenture, including without limitation Section 4.10 hereof, the Trustee
shall execute any documents reasonably required in order to evidence the release
of any Guarantor from its obligations under its Subsidiary Guarantee.
Any Guarantor not released from its obligations under its Subsidiary
Guarantee shall remain liable for the full amount of principal of and interest
on the Notes and for the other obligations of any Guarantor under this Indenture
as provided in this Article 11.
ARTICLE 12.
MISCELLANEOUS
SECTION 12.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts
with the duties imposed by TIA ss. 318(c), the imposed duties shall control.
SECTION 12.02. NOTICES.
Any notice or communication by the Company, any Guarantor or the
Trustee to the others is duly given if in writing and delivered in Person or
mailed by first class mail (registered or certified, return receipt requested),
telex, telecopier or overnight air courier guaranteeing next day delivery, to
the others' address
If to the Company and/or any Guarantor:
JTM Industries, Inc.
1000 Cobb Place Boulevard
Kennesaw, Georgia 30144
Telecopier No.: (770) 218-6590
Attention: Secretary
With a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Telecopier No.: (212) 309-6273
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Attention: David P. Blea
If to the Trustee:
U.S. Bank National Association
107 South Main Street, Suite 303
Salt Lake City, Utah 84111
Telecopier No. (801) 534-6208
Attention: Kim Galbraith
The Company, any Guarantor or the Trustee, by notice to the others
may designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first
class mail, certified or registered, return receipt requested, or by overnight
air courier guaranteeing next day delivery to its address shown on the register
kept by the Registrar. Any notice or communication shall also be so mailed to
any Person described in TIA ss. 313(c), to the extent required by the TIA.
Failure to mail a notice or communication to a Holder or any defect in it shall
not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
SECTION 12.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA ss. 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and anyone else shall have the protection of
TIA ss. 312(c).
SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set
forth in Section 12.05 hereof) stating that, in the
73
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opinion of the signers, all conditions precedent and covenants, if
any, provided for in this Indenture relating to the proposed action
have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory
to the Trustee (which shall include the statements set forth in
Section 12.05 hereof) stating that, in the opinion of such counsel,
all such conditions precedent and covenants have been satisfied.
SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA ss. 314(a)(4)) shall comply with the provisions of TIA
ss. 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has made
such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
SECTION 12.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting
of Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 12.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No past, present or future director, officer, employee, incorporator
or stockholder of the Company or any Guarantor, as such, shall have any
liability for any obligations of the Company or such Guarantor under the Notes,
the Subsidiary Guarantees, this Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes.
SECTION 12.08. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED
TO CONSTRUE THIS INDENTURE, THE NOTES AND THE GUARANTEES WITHOUT GIVING EFFECT
TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION
OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
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SECTION 12.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture,
loan or Indebtedness agreement of the Company or its Subsidiaries or of any
other Person. Any such indenture, loan or Indebtedness agreement may not be used
to interpret this Indenture.
SECTION 12.10. SUCCESSORS.
All agreements of the Company in this Indenture and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors.
SECTION 12.11. SEVERABILITY.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 12.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 12.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
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SIGNATURES
Dated as of April 22, 1998
Very truly yours,
JTM INDUSTRIES, INC.
BY: /s/ J.I. Everest II
-----------------------------------
Name: J.I. Everest II
Title: Treasurer & CFO
POZZOLANIC RESOURCES, INC.
BY: /s/ J.I. Everest II
-----------------------------------
Name: J.I. Everest II
Title: Treasurer & CFO
POWER PLANT AGGREGATES OF IOWA, INC.
BY: /s/ J.I. Everest II
-----------------------------------
Name: J.I. Everest II
Title: Treasurer & CFO
KBK ENTERPRISES, INC.
BY: /s/ J.I. Everest II
-----------------------------------
Name: J.I. Everest II
Title: Treasurer & CFO
MICHIGAN ASH SALES COMPANY, D.B.A.
U.S. ASH COMPANY
BY: /s/ J.I. Everest II
-----------------------------------
Name: J.I. Everest II
Title: Treasurer & CFO
U.S. STABILIZATION, INC.
BY: /s/ J.I. Everest II
-----------------------------------
Name: J.I. Everest II
Title: Treasurer & CFO
<PAGE>
FLO FIL CO., INC.
BY: /s/ J.I. Everest II
-----------------------------------
Name: J.I. Everest II
Title: Treasurer & CFO
FLY ASH PRODUCTS, INC.
BY: /s/ J.I. Everest II
-----------------------------------
Name: J.I. Everest II
Title: Treasurer & CFO
U.S. BANK NATIONAL ASSOCIATION
BY:
-----------------------------------
Name:
Title:
<PAGE>
FLO FIL CO., INC.
BY:
-----------------------------------
Name:
Title:
FLY ASH PRODUCTS, INC.
BY:
-----------------------------------
Name:
Title:
U.S. BANK NATIONAL ASSOCIATION
BY: /s/ Geovanni Barris
------------------------------------
Name: Geovanni Barris
Title: Assistant Vice President
<PAGE>
EXHIBIT A-1
(Face of Global Note)
================================================================================
CUSIP/CINS____________
10% Series A Senior Subordinated Notes due 2008
No.___ $____________
JTM INDUSTRIES, INC.
promises to pay to Cede & Co., or registered assigns, the principal sum of
_____________________ Dollars on April 15, 2008.
Interest Payment Dates: April 15 and October 15
Record Dates: April 1 and October 1
DATED: APRIL __, 1998
JTM INDUSTRIES, INC.
BY:
-----------------------------
Name:
Title:
BY:
-----------------------------
Name:
Title:
This is one of the Global Notes referred to
in the within-mentioned Indenture:
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
By:
-------------------------------
Name:
Title:
================================================================================
A1-1
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(Back of Note)
10% Series A Senior Subordinated Notes due 2008
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE,
(III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO
A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR
IN ACCORDANCE WITH AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT (SUBJECT TO THE DELIVERY OF SUCH EVIDENCE, IF ANY, REQUIRED
UNDER THE INDENTURE PURSUANT TO WHICH THIS NOTE IS ISSUED) AND IN ACCORDANCE
WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER JURISDICTION. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER ("RULE 144A")
OR ANOTHER EXEMPTION UNDER THE SECURITIES ACT. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF JTM THAT (A) SUCH SECURITY MAY BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) (a) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d)
IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF JTM SO REQUESTS), (2) TO
JTM OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY
EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
Capitalized terms used herein shall have the meanings assigned to
them in the Indenture referred to below unless otherwise indicated.
A1-2
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1. INTEREST. JTM Industries, Inc., a Texas corporation (the
"Company"), promises to pay interest on the principal amount of this Note at 10%
per annum from the Issue Date until maturity and shall pay the Liquidated
Damages payable pursuant to Section 5 of the Registration Rights Agreement
referred to below. The Company shall pay interest and Liquidated Damages, if
any, semi-annually on April 15 and October 15 of each year (the "Interest
Payment Date"), or if any such day is not a Business Day, on the next succeeding
Business Day. Interest on the Notes will accrue from the most recent Interest
Payment Date to which interest has been paid or, if no interest has been paid,
from the date of issuance; provided that if there is no existing Default in the
payment of interest, and if this Note is authenticated between a record date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment Date; provided,
further, that the first Interest Payment Date shall be October 15, 1998. The
Company shall pay interest (including post-petition interest in any proceeding
under any Bankruptcy Law) on overdue principal and premium, if any, from time to
time on demand at a rate that is 1% per annum in excess of the rate then in
effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the April 1 or October 1
next preceding the Interest Payment Date, even if such Notes are canceled after
such record date and on or before such Interest Payment Date, except as provided
in Section 2.12 of the Indenture with respect to defaulted interest. The Notes
will be payable as to principal, premium and Liquidated Damages, if any, and
interest at the office or agency of the Company maintained for such purpose
within or without the City and State of New York, or, at the option of the
Company, payment of interest and Liquidated Damages may be made by check mailed
to the Holders at their addresses set forth in the register of Holders, and
provided that payment by wire transfer of immediately available funds will be
required with respect to principal of and interest, premium and Liquidated
Damages, if any, on, all Global Notes and all other Notes the Holders of which
shall have provided wire transfer instructions to the Company or the Paying
Agent. Such payment shall be in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private Indebtedness.
3. PAYING AGENT AND REGISTRAR. Initially, U.S. Bank National
Association, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated
as of April 22, 1998 ("Indenture") among the Company, the Guarantors on the
signature pages thereto (the "Guarantors") and the Trustee. The terms of the
Notes include those stated in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss.
77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred
to the Indenture and such Act for a statement of such terms. To the extent any
provision of this Note conflicts with the express provisions of the Indenture,
the provisions of the indenture shall govern and be controlling. The Notes are
general, unsecured obligations of the Company limited to $100.0 million in
aggregate principal amount, plus amounts, if any, issued to pay Liquidated
Damages on outstanding Notes as set forth in Paragraph 2 hereof.
A1-3
<PAGE>
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraph (b) of this paragraph 5, the
Company shall not have the option to redeem the Notes prior to April 15, 2003.
Thereafter, the Company shall have the option to redeem the Notes, in whole or
in part, upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the
applicable redemption date, if redeemed during the twelve-month period beginning
on April 15 of the years indicated below:
Year Percentage
---- ----------
2003.............................................105.000%
2004.............................................103.333%
2005.............................................101.667%
2006 and thereafter..............................100.000%
(b) Notwithstanding the provisions of subparagraph (a) of this paragraph
5, at any time on or before April 15, 2001, the Company may redeem up to $35.0
million in aggregate principal amount of Notes originally issued under this
Indenture at a redemption price of 110% of the principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the
redemption date, with the net cash proceeds to the Company of one or more Public
Offerings; provided that at least $65.0 million of the aggregate principal
amount of Notes originally issued remain outstanding immediately after the
occurrence of such redemption (excluding Notes held by the Company or any of its
Subsidiaries); and provided, further, that such redemption shall occur within 60
days of the date of the closing of each such Public Offering.
6. MANDATORY REDEMPTION. Except as set forth in paragraph 7 below,
the Company shall not be required to make mandatory redemption payments with
respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) Upon the occurrence of a Change of Control, each Holder of Notes
will have the right to require the Company to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to
the offer described in Section 4.15 of the Indenture (the "Change of Control
Offer") at an offer price in cash equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the date of purchase (the "Change of Control Payment"). Within 20
days following any Change of Control, the Company shall mail a notice to each
Holder describing the transaction or transactions that constitute the Change of
Control and offering to repurchase the Notes on the date specified in such
notice, which date shall be no earlier than 30 days and no later than 60 days
from the date such notice is mailed (the "Change of Control Payment Date"),
pursuant to the procedures required by the Indenture and described in such
notice.
(b) Within 365 days after the receipt of any Net Proceeds from an
Asset Sale, the Company may apply such Net Proceeds, at its option, (a) to
permanently repay (and reduce the commitments under) Senior Indebtedness of the
Company or a Guarantor or (b) to the acquisition of a Permitted Business, or a
majority of the Voting Stock of, a Permitted Business, the making of a capital
expenditure or the acquisition of other long-term assets that are used or useful
in a Permitted Business.
A1-4
<PAGE>
Pending the final application of any such Net Proceeds, the Company may
temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by this Indenture. Any Net
Proceeds from Asset Sales that are not applied or invested as provided in the
first sentence of this paragraph shall be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0 million,
the Company shall be required to make an offer to all Holders of Notes and all
holders of other Indebtedness containing provisions similar to those set forth
in this Indenture with respect to offers to purchase or redeem with the proceeds
of sales of assets (an "Asset Sale Offer") to purchase the maximum principal
amount of Notes and such other Indebtedness that may be purchased out of the
Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date of purchase, in accordance with the procedures set
forth in this Indenture and such other Indebtedness. To the extent that any
Excess Proceeds remain after consummation of an Asset Sale Offer, the Company
may use such Excess Proceeds for any purpose not otherwise prohibited by this
Indenture. If the aggregate principal amount of Notes and such other
Indebtedness tendered into such Asset Sale Offer surrendered by Holders thereof
exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and
such other Indebtedness to be purchased on a pro rata basis. Holders of Notes
that are the subject of an offer to purchase may elect to have such Notes
purchased by completing the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes or
portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
10. SUBORDINATION. Each Holder by accepting a Note agrees that the
payment of principal of and premium, interest and Liquidated Damages, if any, on
each Note is subordinated in right of payment, to the extent and in the manner
provided in Article 10 of the Indenture, prior to the payment in full of all
Senior Indebtedness of the Issuers (whether outstanding on the date of the
Indenture or thereafter incurred assumed or guaranteed), and the subordination
is for the benefit of the holders of such Senior Indebtedness.
11. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture, the Subsidiary Guarantees or the Notes may be amended or
supplemented with the consent of
A1-5
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the Holders of at least a majority in principal amount of the then outstanding
Notes and Additional Notes, if any, voting as a single class, and any existing
default or compliance with any provision of the Indenture, the Subsidiary
Guarantees or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes and Additional Notes,
if any, voting as a single class. Without the consent of any Holder of a Note,
the Indenture, the Subsidiary Guarantees or the Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's or Guarantor's obligations to
Holders of the Notes in case of a merger or consolidation, to make any change
that would provide any additional rights or benefits to the Holders of the Notes
or that does not adversely affect the legal rights under the Indenture of any
such Holder, to comply with the requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the Trust Indenture
Act, to provide for the issuance of Additional Notes in accordance with the
limitations set forth in the Indenture, or to allow any Guarantor to execute a
supplemental indenture to the Indenture and/or a Subsidiary Guarantee with
respect to the Notes.
13. DEFAULTS AND REMEDIES. Events of Default include: (i) defaults
in the payment when due of interest on, or Liquidated Damages with respect to,
the Notes (whether or not permitted by the subordination provisions of the
Indenture) and such default continues for a period of 30 days; (ii) defaults in
the payment when due of principal of or premium, if any, on the Notes when the
same becomes due and payable at maturity, upon redemption (including in
connection with an offer to purchase) or otherwise (whether or not permitted by
the subordination provisions of the Indenture); (iii) failure by the Company or
any of its Restricted Subsidiaries fails to comply with any of the provisions of
Section 4.07, 4.09, 4.10 or 4.15 of the Indenture; (iv) failure by the Company
or any of its Restricted Subsidiaries to observe or perform any other covenant,
representation, warranty or other agreement in the Indenture or the Notes for 60
days after notice to the Company by the Trustee or the Holders of at least 25%
in aggregate principal amount of the Notes (including Additional Notes, if any)
then outstanding voting as a single class; (v) default under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company or any
of its Restricted Subsidiaries (or the payment of which is guaranteed by the
Company or any of its Restricted Subsidiaries) whether such Indebtedness or
guarantee now exists, or is created after the date hereof, which default (a) is
caused by a failure to pay principal of or premium, if any, or interest on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b) results in
the acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated, aggregates $7.5
million or more; (vi) a final judgment or final judgments for the payment of
money are entered by a court or courts of competent jurisdiction against the
Company or any of its Restricted Subsidiaries and such judgment or judgments
remain undischarged for a period (during which execution shall not be
effectively stayed) of 60 days, provided that the aggregate of all such
undischarged judgments exceeds $7.5 million; (vii) certain events of bankruptcy
or insolvency as described in the Indenture; (viii) and except as permitted by
the Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding
to be unenforceable or invalid or shall cease for any reason to be in full force
and effect or any Guarantor or any Person acting on its behalf shall deny or
disaffirm its obligations under such Guarantor's Subsidiary Guarantee. If any
Event of Default (other than certain events of bankruptcy or insolvency) occurs
and is continuing, the Trustee or the Holders of at least 25% in principal
amount of the then outstanding Notes may declare all the Notes to be due and
payable immediately. Upon any such declaration, the Notes shall become due and
payable immediately. Notwithstanding the foregoing, in the case of an Event of
Default arising from certain events of
A1-6
<PAGE>
bankruptcy or insolvency, all outstanding Notes shall be due and payable
immediately without further action or notice. The Holders of a majority in
aggregate principal amount of the then outstanding Notes by written notice to
the Trustee may on behalf of all of the Holders rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default (except nonpayment of principal, interest
or premium that has become due solely because of the acceleration) have been
cured or waived. The Company is required to deliver to the Trustee annually a
statement regarding compliance with the Indenture, and the Company is required
upon becoming aware of any Default or Event of Default to deliver to the Trustee
a statement specifying such Default or Event of Default.
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
15. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
16. AUTHENTICATION. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
18. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Registration Rights
Agreement dated as of April 22, 1998, between the Company and the parties named
on the signature pages thereof or, in the case of Additional Notes, Holders of
Restricted Global Notes and Restricted Definitive Notes shall have the rights
set forth in one or more registration rights agreements, if any, between the
Company and the other parties thereto, relating to rights given by the Company
to the purchasers of any Additional Notes (collectively, the "Registration
Rights Agreement").
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
A1-7
<PAGE>
JTM Industries, Inc.
1000 Cobb Place Boulevard
Kennesaw, Georgia 30144
Attention: Secretary
A1-8
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date: Your Signature:______________________________________________
(Sign exactly as your name appears on the Note)
Tax Identification No:_______________________________________
Signature Guarantee.
Medallion No.:
Notice: Signature must be guaranteed by a member firm of
the STAMP, SEMP OR MSP signature guaranty medallion program.
A1-9
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
[_] Section 4.10 [_] Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $________
Date: Your Signature:
_______________________________________________
(Sign exactly as your name appears on the Note)
Tax Identification No:________________________________________
Signature Guarantee.
Medallion No.:
Notice: Signature must be guaranteed by a member firm of
the STAMP, SEMP OR MSP signature guaranty medallion program.
A1-10
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an
interest in another Global Note or for a Definitive Note, or exchanges of a part
of another Global Note or Definitive Note for an interest in this Global Note,
have been made:
<TABLE>
Amount of Amount of increase Principal Amount
decrease in in Principal of this Global Signature of
Principal Amount Amount Note following authorized officer
of this of this such decrease of Trustee or
Date of Exchange Global Note Global Note (or increase) Custodian
- ---------------- ----------- ----------- ------------- ---------
<S> <C> <C> <C> <C>
</TABLE>
A1-11
<PAGE>
EXHIBIT A-2
(Face of Regulation S Temporary Global Note)
================================================================================
CUSIP/CINS____________
10% Series A Senior Subordinated Notes due 2008
No.____ $___________
JTM INDUSTRIES, INC.
promises to pay to Cede & Co., or registered assigns, the principal sum of
____________ Dollars on April 15, 2008.
Interest Payment Dates: April 15 and October 15
Record Dates: April 1 and October 1
DATED: APRIL __, 1998
JTM INDUSTRIES, INC.
BY:
-----------------------------------
Name:
Title:
BY:
-----------------------------------
Name:
Title:
This is one of the Global Notes referred to
in the within-mentioned Indenture:
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
By:
------------------------------
Name:
Title:
================================================================================
A2-1
<PAGE>
(Back of Regulation S Temporary Global Note)
10% Series A Senior Subordinated Notes due 2008
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL NOTE
SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR
TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF
THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") AND THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED
OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
OR IN ACCORDANCE WITH AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT (SUBJECT TO THE DELIVERY OF SUCH EVIDENCE, IF ANY,
REQUIRED UNDER THE INDENTURE PURSUANT TO WHICH THIS NOTE IS ISSUED) AND IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY OTHER JURISDICTION. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER
OR ANOTHER EXEMPTION UNDER THE SECURITIES ACT. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY
MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1)(a) TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d)
IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS),
A2-2
<PAGE>
SUBJECT TO THE RECEIPT BY THE REGISTRAR OF A CERTIFICATION OF THE TRANSFEROR AND
AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT, (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B)
THE HOLDER WILL AND EACH SUBSEQUENT HOLDER IS REQUIRED TO NOTIFY ANY PURCHASER
FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN
(A) ABOVE.
Capitalized terms used herein shall have the meanings assigned to
them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. JTM Industries, Inc., a Texas corporation (the
"Company"), promises to pay interest on the principal amount of this Note at 10%
per annum from the Issue Date until maturity and shall pay the Liquidated
Damages payable pursuant to Section 5 of the Registration Rights Agreement
referred to below. The Company shall pay interest and Liquidated Damages, if
any, semi-annually on April 15 and October 15 of each year (each an "Interest
Payment Date"), or if any such day is not a Business Day, on the next succeeding
Business Day. Interest on the Notes will accrue from the most recent Interest
Payment Date to which interest has been paid or, if no interest has been paid,
from the date of issuance; provided that if there is no existing Default in the
payment of interest, and if this Note is authenticated between a record date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment Date; provided,
further, that the first Interest Payment Date shall be October 15, 1998. The
Company shall pay interest (including post-petition interest in any proceeding
under any Bankruptcy Law) on overdue principal and premium, if any, from time to
time on demand at a rate that is 1% per annum in excess of the rate then in
effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the April 1 or October 1
next preceding the Interest Payment Date, even if such Notes are canceled after
such record date and on or before such Interest Payment Date, except as provided
in Section 2.12 of the Indenture with respect to defaulted interest. The Notes
will be payable as to principal, premium and Liquidated Damages, if any, and
interest at the office or agency of the Company maintained for such purpose
within or without the City and State of New York, or, at the option of the
Company, payment of interest and Liquidated Damages may be made by check mailed
to the Holders at their addresses set forth in the register of Holders, and
provided that payment by wire transfer of immediately available funds will be
required with respect to principal of and interest, premium and Liquidated
Damages, if any, on, all Global Notes and all other Notes the Holders of which
shall have provided wire transfer instructions to the Company or the Paying
Agent. Such payment shall be in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private Indebtedness.
3. PAYING AGENT AND REGISTRAR. Initially, U.S. Bank National
Association, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any
A2-3
<PAGE>
Paying Agent or Registrar without notice to any Holder. The Company or any of
its Subsidiaries may act in any such capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated
as of April 22, 1998 ("Indenture") among the Company, the Guarantors on the
signature pages thereto (the "Guarantors") and the Trustee. The terms of the
Notes include those stated in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss.
77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred
to the Indenture and such Act for a statement of such terms. To the extent any
provision of this Note conflicts with the express provisions of the Indenture,
the provisions of the indenture shall govern and be controlling. The Notes are
general, unsecured obligations of the Company limited to $100.0 million in
aggregate principal amount, plus amounts, if any, issued to pay Liquidated
Damages on outstanding Notes as set forth in Paragraph 2 hereof.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraph (b) of this paragraph 5, the
Company shall not have the option to redeem the Notes prior to April 15, 2003.
Thereafter, the Company shall have the option to redeem the Notes, in whole or
in part, upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the
applicable redemption date, if redeemed during the twelve-month period beginning
on April 15 the years indicated below:
Year Percentage
---- ----------
2003.............................................105.000%
2004.............................................103.333%
2005.............................................101.667%
2006 and thereafter..............................100.000%
(b) Notwithstanding the provisions of subparagraph (a) of this
paragraph 5, at any time on or before April 15, 2001, the Company may redeem up
to $35.0 million in aggregate principal amount of Notes originally issued under
this Indenture at a redemption price of 110% of the principal amount thereof,
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the
redemption date, with the net cash proceeds to the Company of one or more Public
Offerings; provided that at least $65.0 million of the aggregate principal
amount of Notes originally issued remain outstanding immediately after the
occurrence of such redemption (excluding Notes held by the Company or any of its
Subsidiaries); and provided, further, that such redemption shall occur within 60
days of the date of the closing of each such Public Offering.
(c) Any redemption pursuant to this subparagraph 5 shall be made
pursuant to the provisions of Section 3.01 through 3.06 of the Indenture.
6. MANDATORY REDEMPTION. Except as set forth in paragraph 7 below,
the Company shall not be required to make mandatory redemption payments with
respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
A2-4
<PAGE>
(a) Upon the occurrence of a Change of Control, each Holder of Notes
will have the right to require the Company to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to
the offer described in Section 4.15 of the Indenture (the "Change of Control
Offer") at an offer price in cash equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the date of purchase (the "Change of Control Payment"). Within 20
days following any Change of Control, the Company shall mail a notice to each
Holder describing the transaction or transactions that constitute the Change of
Control and offering to repurchase the Notes on the date specified in such
notice, which date shall be no earlier than 30 days and no later than 60 days
from the date such notice is mailed (the "Change of Control Payment Date"),
pursuant to the procedures required by the Indenture and described in such
notice.
(b) Within 365 days after the receipt of any Net Proceeds from an
Asset Sale, the Company may apply such Net Proceeds, at its option, (a) to
permanently repay (and reduce the commitments under) Senior Indebtedness of the
Company or a Guarantor or (b) to the acquisition of a Permitted Business, or a
majority of the Voting Stock of, a Permitted Business, the making of a capital
expenditure or the acquisition of other long-term assets that are used or useful
in a Permitted Business. Pending the final application of any such Net Proceeds,
the Company may temporarily reduce revolving credit borrowings or otherwise
invest such Net Proceeds in any manner that is not prohibited by this Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as provided
in the first sentence of this paragraph shall be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0 million,
the Company shall be required to make an offer to all Holders of Notes and all
holders of other Indebtedness containing provisions similar to those set forth
in this Indenture with respect to offers to purchase or redeem with the proceeds
of sales of assets (an "Asset Sale Offer") to purchase the maximum principal
amount of Notes and such other Indebtedness that may be purchased out of the
Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date of purchase, in accordance with the procedures set
forth in this Indenture and such other Indebtedness. To the extent that any
Excess Proceeds remain after consummation of an Asset Sale Offer, the Company
may use such Excess Proceeds for any purpose not otherwise prohibited by this
Indenture. If the aggregate principal amount of Notes and such other
Indebtedness tendered into such Asset Sale Offer surrendered by Holders thereof
exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and
such other Indebtedness to be purchased on a pro rata basis. Holders of Notes
that are the subject of an offer to purchase may elect to have such Notes
purchased by completing the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes or
portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note
A2-5
<PAGE>
selected for redemption, except for the unredeemed portion of any Note being
redeemed in part. Also, the Company need not exchange or register the transfer
of any Notes for a period of 15 days before a selection of Notes to be redeemed
or during the period between a record date and the corresponding Interest
Payment Date.
10. SUBORDINATION. Each Holder by accepting a Note agrees that the
payment of principal of and premium, interest and Liquidated Damages, if any, on
each Note is subordinated in right of payment, to the extent and in the manner
provided in Article 10 of the Indenture, prior to the payment in full of all
Senior Indebtedness of the Issuers (whether outstanding on the date of the
Indenture or thereafter incurred assumed or guaranteed), and the subordination
is for the benefit of the holders of such Senior Indebtedness.
11. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture, the Subsidiary Guarantees or the Notes may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the then outstanding Notes and Additional Notes, if any, voting as a
single class, and any existing default or compliance with any provision of the
Indenture, the Subsidiary Guarantees or the Notes may be waived with the consent
of the Holders of a majority in principal amount of the then outstanding Notes
and Additional Notes, if any, voting as a single class. Without the consent of
any Holder of a Note, the Indenture, the Subsidiary Guarantees or the Notes may
be amended or supplemented to cure any ambiguity, defect or inconsistency, to
provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Company's or Guarantor's obligations
to Holders of the Notes in case of a merger or consolidation, to make any change
that would provide any additional rights or benefits to the Holders of the Notes
or that does not adversely affect the legal rights under the Indenture of any
such Holder, to comply with the requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the Trust Indenture
Act, to provide for the issuance of Additional Notes in accordance with the
limitations set forth in the Indenture, or to allow any Guarantor to execute a
supplemental indenture to the Indenture and/or a Subsidiary Guarantee with
respect to the Notes.
13. DEFAULTS AND REMEDIES. Events of Default include: (i) defaults
in the payment when due of interest on, or Liquidated Damages with respect to,
the Notes (whether or not permitted by the subordination provisions of the
Indenture) and such default continues for a period of 30 days; (ii) defaults in
the payment when due of principal of or premium, if any, on the Notes when the
same becomes due and payable at maturity, upon redemption (including in
connection with an offer to purchase) or otherwise (whether or not permitted by
the subordination provisions of the Indenture); (iii) failure by the Company or
any of its Restricted Subsidiaries fails to comply with any of the provisions of
Section 4.07, 4.09, 4.10 or 4.15 of the Indenture; (iv) failure by the Company
or any of its Restricted Subsidiaries to observe or perform any other covenant,
representation, warranty or other agreement in the Indenture or the Notes for 60
days after notice to the Company by the Trustee or the Holders of at least 25%
in aggregate principal amount of the Notes (including Additional Notes, if any)
then outstanding voting as a single class; (v) default under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company or any
of its Restricted Subsidiaries (or the payment of which is guaranteed by the
Company or any of its Restricted Subsidiaries) whether such Indebtedness or
guarantee now exists, or is created after the date hereof, which default (a) is
caused by a failure to pay principal of or premium, if any, or interest on
A2-6
<PAGE>
such Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b) results in
the acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated, aggregates $7.5
million or more; (vi) a final judgment or final judgments for the payment of
money are entered by a court or courts of competent jurisdiction against the
Company or any of its Restricted Subsidiaries and such judgment or judgments
remain undischarged for a period (during which execution shall not be
effectively stayed) of 60 days, provided that the aggregate of all such
undischarged judgments exceeds $7.5 million; (vii) certain events of bankruptcy
or insolvency as described in the Indenture; (viii) and except as permitted by
the Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding
to be unenforceable or invalid or shall cease for any reason to be in full force
and effect or any Guarantor or any Person acting on its behalf shall deny or
disaffirm its obligations under such Guarantor's Subsidiary Guarantee. If any
Event of Default (other than certain events of bankruptcy or insolvency) occurs
and is continuing, the Trustee or the Holders of at least 25% in principal
amount of the then outstanding Notes may declare all the Notes to be due and
payable immediately. Upon any such declaration, the Notes shall become due and
payable immediately. Notwithstanding the foregoing, in the case of an Event of
Default arising from certain events of bankruptcy or insolvency, all outstanding
Notes shall be due and payable immediately without further action or notice. The
Holders of a majority in aggregate principal amount of the then outstanding
Notes by written notice to the Trustee may on behalf of all of the Holders
rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default
(except nonpayment of principal, interest or premium that has become due solely
because of the acceleration) have been cured or waived. The Company is required
to deliver to the Trustee annually a statement regarding compliance with the
Indenture, and the Company is required upon becoming aware of any Default or
Event of Default to deliver to the Trustee a statement specifying such Default
or Event of Default.
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
15. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
16. AUTHENTICATION. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
18. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set
A2-7
<PAGE>
forth in the Registration Rights Agreement dated as of April 22, 1998, between
the Company and the parties named on the signature pages thereof, or, in the
case of Additional Notes, Holders of Resticted Global Notes and Restricted
Definitive Notes shall have the rights set forth in one or more registration
rights agreements, if any, between the Company and the other parties thereto,
relating to rights given by the Company to the purchasers of any Additional
Notes (collectively, the "Registration Rights Agreement").
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
JTM Industries, Inc.
1000 Cobb Place Boulevard
Kennesaw, Georgia 30144
Attention: Secretary
A2-8
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date: Your Signature:_______________________________________________
(Sign exactly as your name appears on the Note)
Tax Identification No:________________________________________
Signature Guarantee.
Medallion No.:
Notice: Signature must be guaranteed by a member firm of
the STAMP, SEMP OR MSP signature guaranty medallion program.
A2-9
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
[_] Section 4.10 [_] Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $________
Date: Your Signature:_______________________________________________
(Sign exactly as your name appears on the Note)
Tax Identification No:________________________________________
Signature Guarantee.
Medallion No.:
Notice: Signature must be guaranteed by a member firm of
the STAMP, SEMP OR MSP signature guaranty medallion program.
A2-10
<PAGE>
SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE
The following exchanges of a part of this Regulation S Temporary
Global Note for an interest in another Global Note, or of other Restricted
Global Notes for an interest in this Regulation S Temporary Global Note, have
been made:
<TABLE>
Amount of Amount of increase Principal Amount
decrease in in Principal of this Global Signature of
Principal Amount Amount Note following authorized officer
of this of this such decrease of Trustee or
Date of Exchange Global Note Global Note (or increase) Custodian
- ---------------- ----------- ----------- ------------- ---------
<S> <C> <C> <C> <C>
</TABLE>
A2-11
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
JTM Industries, Inc.
1000 Cobb Place Boulevard
Kennesaw, Georgia 30144
U.S. Bank National Association
107 South Main Street, Suite 303
Salt Lake City, Utah 84111
Re: 10% Senior Subordinated Notes Due 2008
Reference is hereby made to the Indenture, dated as of April 22,
1998 (the "Indenture"), among JTM Industries, Inc. (the "Company"), as issuer,
Pozzolanic Resources, Inc., Power Plant Aggregates of Iowa, Inc., KBK
Enterprises, Inc., Michigan Ash Sales Company, d.b.a. U.S. Ash Company, U.S.
Stabilization, Inc., Flo Fil Co., Inc., and Fly Ash Products, Inc. (the
"Guarantors"), as guarantors, and U.S. Bank National Association, as trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
______________, (the "Transferor") owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interests (the "Transfer"),
to __________ (the "Transferee"), as further specified in Annex A hereto. In
connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [_] Check if Transferee will take delivery of a beneficial interest in the
144A Global Note or a Definitive Note Pursuant to Rule 144A. The Transfer is
being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
2. [_] Check if Transferee will take delivery of a beneficial interest in the
Temporary Regulation S Global Note, the Regulation S Global Note or a Definitive
Note pursuant to Regulation S. The Transfer is being effected pursuant to and in
accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly,
the Transferor hereby further certifies that (i) the Transfer is
B-1
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not being made to a person in the United States and (x) at the time the buy
order was originated, the Transferee was outside the United States or such
Transferor and any Person acting on its behalf reasonably believed and believes
that the Transferee was outside the United States or (y) the transaction was
executed in, on or through the facilities of a designated offshore securities
market and neither such Transferor nor any Person acting on its behalf knows
that the transaction was prearranged with a buyer in the United States, (ii) no
directed selling efforts have been made in contravention of the requirements of
Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act and (iii)
the transaction is not part of a plan or scheme to evade the registration
requirements of the Securities Act and (iv) if the proposed transfer is being
made prior to the expiration of the Restricted Period, the transfer is not being
made to a U.S. Person or for the account or benefit of a U.S. Person (other than
an Initial Purchaser). Upon consummation of the proposed transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will be subject to the restrictions on Transfer enumerated in
the Private Placement Legend printed on the Regulation S Global Note , the
Temporary Regulation S Global Note and/or the Definitive Note and in the
Indenture and the Securities Act.
3. [_] Check and complete if Transferee will take delivery of a beneficial
interest in the IAI Global Note or a Definitive Note pursuant to any provision
of the Securities Act other than Rule 144A or Regulation S. The Transfer is
being effected in compliance with the transfer restrictions applicable to
beneficial interests in Restricted Global Notes and Restricted Definitive Notes
and pursuant to and in accordance with the Securities Act and any applicable
blue sky securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) such Transfer is being effected pursuant to and in accordance with
Rule 144 under the Securities Act;
or
(b) such Transfer is being effected to the Company or a subsidiary
thereof;
or
(c) such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance
with the prospectus delivery requirements of the Securities Act;
or
(d) such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or
Rule 904, and the Transferor hereby further certifies that it has
not engaged in any general solicitation within the meaning of
Regulation D under the Securities Act and the Transfer complies with
the transfer restrictions applicable to beneficial interests in a
Restricted Global Note or Restricted Definitive Notes and the
requirements of the exemption claimed, which certification is
supported by (1) a certificate executed by the Transferee in the
form of Exhibit D to the Indenture and (2) if such Transfer is in
respect of a principal amount of Notes at the time of transfer of
less than $250,000, an Opinion of Counsel provided by the Transferor
or the Transferee (a copy of which the Transferor has attached to
this certification), to the effect that such Transfer is in
compliance with the Securities Act. Upon consummation of the
proposed transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will be subject
to the restrictions on transfer enumerated in the Private
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Placement Legend printed on the IAI Global Note and/or the
Definitive Notes and in the Indenture and the Securities Act.
4. Check if Transferee will take delivery of a beneficial interest in an
Unrestricted Global Note or of an Unrestricted Definitive Note.
(a) [_] Check if Transfer is pursuant to Rule 144. (i) The Transfer
is being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.
(b) [_] Check if Transfer is Pursuant to Regulation S. (i) The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and in compliance with the transfer restrictions
contained in the Indenture and any applicable blue sky securities laws of any
state of the United States and (ii) the restrictions on transfer contained in
the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Notes, on Restricted Definitive Notes and in the
Indenture.
(c) [_] Check if Transfer is Pursuant to Other Exemption. (i) The
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act other than Rule 144, Rule
903 or Rule 904 and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any State of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will not be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes or Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company.
--------------------------------------
[Insert Name of Transferor]
BY:
-----------------------------------
Name:
Title:
Dated: _________, ____
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<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) a beneficial interest in the:
(i) [_] 144A Global Note (CUSIP ______), or
(ii) [_] Regulation S Global Note (CUSIP ______), or
(iii) [_] IAI Global Note (CUSIP ______); or
(b) a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) a beneficial interest in the:
(i) [_] 144A Global Note (CUSIP ______), or
(ii) [_] Regulation S Global Note (CUSIP ______), or
(iii) [_] IAI Global Note (CUSIP ______); or
(iv) [_] Unrestricted Global Note (CUSIP ______); or
(b) a Restricted Definitive Note; or
(c) an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-4
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
JTM Industries, Inc.
1000 Cobb Place Boulevard
Kennesaw, Georgia 30144
U.S. Bank National Association
107 South Main Street, Suite 303
Salt Lake City, Utah 84111
Re: 10% Senior Subordinated Notes Due 2008
(CUSIP______________)
Reference is hereby made to the Indenture, dated as of April 22,
1998 (the "Indenture"), among JTM Industries, Inc. (the "Company"), as issuer,
Pozzolanic Resources, Inc., Power Plant Aggregates of Iowa, Inc., KBK
Enterprises, Inc., Michigan Ash Sales Company, d.b.a. U.S. Ash Company, U.S.
Stabilization, Inc., Flo Fil Co., Inc., and Fly Ash Products, Inc. (the
"Guarantors"), as guarantors, and U.S. Bank National Association, as trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
____________, (the "Owner") owns and proposes to exchange the
Note[s] or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "Exchange"). In connection with
the Exchange, the Owner hereby certifies that:
1. Exchange of Restricted Definitive Notes or Beneficial Interests in a
Restricted Global Note for Unrestricted Definitive Notes or Beneficial Interests
in an Unrestricted Global Note
(a) [_] Check if Exchange is from beneficial interest in a
Restricted Global Note to beneficial interest in an Unrestricted Global Note. In
connection with the Exchange of the Owner's beneficial interest in a Restricted
Global Note for a beneficial interest in an Unrestricted Global Note in an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer, (ii) such Exchange
has been effected in compliance with the transfer restrictions applicable to the
Global Notes and pursuant to and in accordance with the United States Securities
Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
beneficial interest in an Unrestricted Global Note is being acquired in
compliance with any applicable blue sky securities laws of any state of the
United States.
(b) [_] Check if Exchange is from beneficial interest in a
Restricted Global Note to Unrestricted Definitive Note. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for an
Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and
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<PAGE>
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Definitive Note is being acquired in compliance with any applicable blue sky
securities laws of any state of the United States.
(c) [_] Check if Exchange is from Restricted Definitive Note to
beneficial interest in an Unrestricted Global Note. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) [_] Check if Exchange is from Restricted Definitive Note to
Unrestricted Definitive Note. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. Exchange of Restricted Definitive Notes or Beneficial Interests in Restricted
Global Notes for Restricted Definitive Notes or Beneficial Interests in
Restricted Global Notes
(a) [_] Check if Exchange is from beneficial interest in a
Restricted Global Note to Restricted Definitive Note. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for a
Restricted Definitive Note with an equal principal amount, the Owner hereby
certifies that the Restricted Definitive Note is being acquired for the Owner's
own account without transfer. Upon consummation of the proposed Exchange in
accordance with the terms of the Indenture, the Restricted Definitive Note
issued will continue to be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the Restricted Definitive Note and in
the Indenture and the Securities Act.
(b) [_] Check if Exchange is from Restricted Definitive Note to
beneficial interest in a Restricted Global Note. In connection with the Exchange
of the Owner's Restricted Definitive Note for a beneficial interest in the
[CHECK ONE] "144A Global Note", "Regulation S Global Note", "IAI Global Note"
with an equal principal amount, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer and (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, and in compliance with any applicable blue sky securities
laws of any state of the United States. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the beneficial interest
issued will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the relevant Restricted Global Note and in the
Indenture and the Securities Act.
C-2
<PAGE>
C-3
<PAGE>
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company.
--------------------------------------
[Insert Name of Owner]
BY:
-----------------------------------
Name:
Title:
Dated: __________, ____
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<PAGE>
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
JTM Industries, Inc.
1000 Cobb Place Boulevard
Kennesaw, Georgia 30144
U.S. Bank National Association
107 South Main Street, Suite 303
Salt Lake City, Utah 84111
Re: 10% Senior Subordinated Notes Due 2008
Reference is hereby made to the Indenture, dated as of April 22, 1998 (the
"Indenture"), among JTM Industries, Inc. (the "Company"), as issuer, Pozzolanic
Resources, Inc., Power Plant Aggregates of Iowa, Inc., KBK Enterprises, Inc.,
Michigan Ash Sales Company, d.b.a. U.S. Ash Company, U.S. Stabilization, Inc.,
Flo Fil Co., Inc., and Fly Ash Products, Inc. (the "Guarantors"), as guarantors,
and U.S. Bank National Association, as trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
In connection with our proposed purchase of $____________ aggregate
principal amount of:
(a) [_] a beneficial interest in a Global Note, or
(b) [_] a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or any
interest therein is subject to certain restrictions and
conditions set forth in the Indenture and the undersigned
agrees to be bound by, and not to resell, pledge or otherwise
transfer the Notes or any interest therein except in
compliance with, such restrictions and conditions and the
United States Securities Act of 1933, as amended (the
"Securities Act").
2. We understand that the offer and sale of the Notes have not
been registered under the Securities Act, and that the Notes
and any interest therein may not be offered or sold except as
permitted in the following sentence. We agree, on our own
behalf and on behalf of any accounts for which we are acting
as hereinafter stated, that if we should sell the Notes or any
interest therein, we will do so only (A) to the Company or any
subsidiary thereof, (B) in accordance with Rule 144A under the
Securities Act to a "qualified institutional buyer" (as
defined therein), (c) to an institutional "accredited
investor" (as defined below) that, prior to such transfer,
furnishes (or has furnished on its behalf by a U.S.
broker-dealer) to you and to the Company a signed letter
substantially in
D-1
<PAGE>
the form of this letter and, if such transfer is in respect of
a principal amount of Notes, at the time of transfer of less
than $250,000, an Opinion of Counsel in form reasonably
acceptable to the Company to the effect that such transfer is
in compliance with the Securities Act, (D) outside the United
States in accordance with Rule 904 of Regulation S under the
Securities Act, (E) pursuant to the provisions of Rule 144(k)
under the Securities Act or (F) pursuant to an effective
registration statement under the Securities Act, and we
further agree to provide to any person purchasing the
Definitive Note or beneficial interest in a Global Note from
us in a transaction meeting the requirements of clauses (A)
through (E) of this paragraph a notice advising such purchaser
that resales thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Notes or
beneficial interest therein, we will be required to furnish to
you and the Company such certifications, legal opinions and
other information as you and the Company may reasonably
require to confirm that the proposed sale complies with the
foregoing restrictions. We further understand that the Notes
purchased by us will bear a legend to the foregoing effect. We
further understand that any subsequent transfer by us of the
Notes or beneficial interest therein acquired by us must be
effected through one of the Placement Agents.
4. We are an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act) and have such knowledge and experience in
financial and business matters as to be capable of evaluating
the merits and risks of our investment in the Notes, and we
and any accounts for which we are acting are each able to bear
the economic risk of our or its investment.
5. We are acquiring the Notes or beneficial interest therein
purchased by us for our own account or for one or more
accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment
discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official
inquiry with respect to the matters covered hereby.
-----------------------------------------
[Insert Name of Accredited Investor]
By:
--------------------------------------
Name:
Title:
Dated: __________________, ____
D-2
<PAGE>
EXHIBIT E
FORM OF NOTATION OF GUARANTEE
For value received, each Guarantor (which term includes any
successor Person under the Indenture) has, jointly and severally,
unconditionally guaranteed, to the extent set forth in the Indenture and subject
to the provisions in the Indenture dated as of April 22, 1998 (the "Indenture")
among JTM Industries, Inc., Pozzolanic Resources, Inc., Power Plant Aggregates
of Iowa, Inc., Michigan Ash Sales Company, d.b.a. U.S. Ash Company, U.S.
Stabilization, Inc., Flo Fil Co., Inc., Fly Ash Products, Inc. and U.S. Bank
National Association, as trustee (the "Trustee"), (a) the due and punctual
payment of the principal of, premium, if any, and interest on the Notes (as
defined in the Indenture), whether at maturity, by acceleration, redemption or
otherwise, the due and punctual payment of interest on overdue principal and
premium, and, to the extent permitted by law, interest, and the due and punctual
performance of all other obligations of the Company to the Holders or the
Trustee all in accordance with the terms of the Indenture and (b) in case of any
extension of time of payment or renewal of any Notes or any of such other
obligations, that the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. The obligations of the Guarantors to the
Holders of Notes and to the Trustee pursuant to the Subsidiary Guarantee and the
Indenture are expressly set forth in Article 11 of the Indenture and reference
is hereby made to the Indenture for the precise terms of the Subsidiary
Guarantee. Each Holder of a Note, by accepting the same, (a) agrees to and shall
be bound by such provisions, (b) authorizes and directs the Trustee, on behalf
of such Holder, to take such action as may be necessary or appropriate to
effectuate the subordination as provided in the Indenture and (c) appoints the
Trustee attorney-in-fact of such Holder for such purpose; provided, however,
that the Indebtedness evidenced by this Subsidiary Guarantee shall cease to be
so subordinated and subject in right of payment upon any defeasance of this Note
in accordance with the provisions of the Indenture.
E-1
<PAGE>
POZZOLANIC RESOURCES, INC.
BY:
-----------------------------------
Name:
Title:
POWER PLANT AGGREGATES OF IOWA, INC.
BY:
-----------------------------------
Name:
Title:
KBK ENTERPRISES, INC.
BY:
-----------------------------------
Name:
Title:
MICHIGAN ASH SALES COMPANY, D.B.A.
U.S. ASH COMPANY
BY:
-----------------------------------
Name:
Title:
U.S. STABILIZATION, INC.
BY:
-----------------------------------
Name:
Title:
FLO FIL CO., INC.
BY:
-----------------------------------
Name:
Title:
FLY ASH PRODUCTS, INC.
BY:
-----------------------------------
Name:
Title:
E-2
<PAGE>
EXHIBIT F
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
________________, among __________________ (the "Guarantor"), JTM Industries,
Inc., (the "Company"), the other Guarantors (as defined in the Indenture
referred to herein) and U.S. Bank National Association, as trustee under the
indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture (the "Indenture"), dated as of April 22, 1998 providing for
the issuance of an aggregate principal amount of up to $100.0 million of 10%
Notes due 2008 (the "Notes");
WHEREAS, the Indenture provides that under certain circumstances the
Guarantor shall execute and deliver to the Trustee a supplemental indenture
pursuant to which the Guarantor shall unconditionally guarantee all of the
Company's Obligations under the Notes and the Indenture on the terms and
conditions set forth herein (the "Subsidiary Guarantee"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Guarantor and the Trustee mutually covenant and agree for the equal and ratable
benefit of the Holders of the Notes as follows:
1. Capitalized Terms. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
2. Agreement to Guarantee. The Guarantor hereby agrees as follows:
(a) Along with all Guarantors named in the Indenture, to jointly and
severally Guarantee to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors and
assigns, irrespective of the validity and enforceability of the
Indenture, the Notes or the obligations of the Company hereunder or
thereunder, that:
(i) the principal of and interest on the Notes will be
promptly paid in full when due, whether at maturity, by
acceleration, redemption or otherwise, and interest on
the overdue principal of and interest on the Notes, if
any, if lawful, and all other obligations of the Company
to the Holders or the Trustee hereunder or thereunder
will be promptly paid in full or performed, all in
accordance with the terms hereof and thereof; and
(ii) in case of any extension of time of payment or renewal
of any Notes or any of such other obligations, that same
will be promptly paid in full when due or performed in
accordance with the terms of the extension or
F-1
<PAGE>
renewal, whether at stated maturity, by acceleration or
otherwise. Failing payment when due of any amount so
guaranteed or any performance so guaranteed for whatever
reason, the Guarantors shall be jointly and severally
obligated to pay the same immediately.
(b) The obligations hereunder shall be unconditional, irrespective of
the validity, regularity or enforceability of the Notes or the
Indenture, the absence of any action to enforce the same, any waiver
or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the recovery of any judgment against the Company,
any action to enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a
guarantor.
(c) The following is hereby waived: diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first
against the Company, protest, notice and all demands whatsoever.
(d) This Subsidiary Guarantee shall not be discharged except by complete
performance of the obligations contained in the Notes and the
Indenture.
(e) If any Holder or the Trustee is required by any court or otherwise
to return to the Company, the Guarantors, or any Custodian, Trustee,
liquidator or other similar official acting in relation to either
the Company or the Guarantors, any amount paid by either to the
Trustee or such Holder, this Subsidiary Guarantee, to the extent
theretofore discharged, shall be reinstated in full force and
effect.
(f) The Guarantor shall not be entitled to any right of subrogation in
relation to the Holders in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby.
(g) As between the Guarantors, on the one hand, and the Holders and the
Trustee, on the other hand, (x) the maturity of the obligations
guaranteed hereby may be accelerated as provided in Article 6 of the
Indenture for the purposes of this Subsidiary Guarantee,
notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the obligations guaranteed hereby,
and (y) in the event of any declaration of acceleration of such
obligations as provided in Article 6 of the Indenture, such
obligations (whether or not due and payable) shall forthwith become
due and payable by the Guarantors for the purpose of this Subsidiary
Guarantee.
(h) The Guarantors shall have the right to seek contribution from any
non-paying Guarantor so long as the exercise of such right does not
impair the rights of the Holders under the Subsidiary Guarantee.
(i) Pursuant to Section 11.03 of the Indenture, after giving effect to
any maximum amount and any other contingent and fixed liabilities
that are relevant under any applicable Bankruptcy or fraudulent
conveyance laws, and after giving effect to any collections from,
rights to receive contribution from or payments made by or on behalf
of any other Guarantor in respect of the obligations of such other
Guarantor under Article 11 of the Indenture shall result in the
obligations of such Guarantor under its Subsidiary Guarantee not
constituting a fraudulent transfer or conveyance.
F-2
<PAGE>
3 EXECUTION AND DELIVERY. Each Guarantor agrees that the Subsidiary
Guarantees shall remain in full force and effect notwithstanding any failure to
endorse on each Note a notation of such Subsidiary Guarantee.
4. GUARANTOR MAY CONSOLIDATE, ETC. ON CERTAIN TERMS.
(a) The Guarantor may not consolidate with or merge with or into
(whether or not such Guarantor is the surviving Person) another
corporation, Person or entity whether or not affiliated with such
Guarantor unless:
(i) subject to Section 11.05 of the Indenture, the Person formed
by or surviving any such consolidation or merger (if other
than a Guarantor or the Company) unconditionally assumes all
the obligations of such Guarantor, pursuant to a supplemental
indenture in form and substance reasonably satisfactory to the
Trustee, under the Notes, the Indenture and the Subsidiary
Guarantee on the terms set forth herein or therein; and
(ii) immediately after giving effect to such transaction, no
Default or Event of Default exists.
(b) In case of any such consolidation, merger, sale or conveyance and
upon the assumption by the successor corporation, by supplemental
indenture, executed and delivered to the Trustee and satisfactory in
form to the Trustee, of the Subsidiary Guarantee endorsed upon the
Notes and the due and punctual performance of all of the covenants
and conditions of the Indenture to be performed by the Guarantor,
such successor corporation shall succeed to and be substituted for
the Guarantor with the same effect as if it had been named herein as
a Guarantor. Such successor corporation thereupon may cause to be
signed any or all of the Subsidiary Guarantees to be endorsed upon
all of the Notes issuable hereunder which theretofore shall not have
been signed by the Company and delivered to the Trustee. All the
Subsidiary Guarantees so issued shall in all respects have the same
legal rank and benefit under the Indenture as the Subsidiary
Guarantees theretofore and thereafter issued in accordance with the
terms of the Indenture as though all of such Subsidiary Guarantees
had been issued at the date of the execution hereof.
(c) Except as set forth in Articles 4 and 5 of the Indenture, and
notwithstanding clauses (a) and (b) above, nothing contained in the
Indenture or in any of the Notes shall prevent any consolidation or
merger of a Guarantor with or into the Company or another Guarantor,
or shall prevent any sale or conveyance of the property of a
Guarantor as an entirety or substantially as an entirety to the
Company or another Guarantor.
5. RELEASES.
(a) In the event of a sale or other disposition of all of the assets of
any Guarantor, by way of merger, consolidation or otherwise, or a
sale or other disposition of all to the capital stock of any
Guarantor, then such Guarantor (in the event of a sale or other
disposition, by way of merger, consolidation or otherwise, of all of
the capital stock of such Guarantor) or the corporation acquiring
the property (in the event of a sale or other disposition of all or
substantially all of the assets of such Guarantor) will be released
and relieved of any obligations under its Subsidiary Guarantee;
provided that the Net Proceeds of such sale or other disposition are
applied in accordance with the applicable provisions of the
Indenture,
F-3
<PAGE>
including without limitation Section 4.10 of the Indenture. Upon
delivery by the Company to the Trustee of an Officers' Certificate
and an Opinion of Counsel to the effect that such sale or other
disposition was made by the Company in accordance with the
provisions of the Indenture, including without limitation Section
4.10 of the Indenture, the Trustee shall execute any documents
reasonably required in order to evidence the release of any
Guarantor from its obligations under its Subsidiary Guarantee.
(b) Any Guarantor not released from its obligations under its Subsidiary
Guarantee shall remain liable for the full amount of principal of
and interest on the Notes and for the other obligations of any
Guarantor under the Indenture as provided in Article 10 of the
Indenture.
6. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator, stockholder or agent of the Guarantor, as such,
shall have any liability for any obligations of the Company or any Guarantor
under the Notes, any Subsidiary Guarantees, the Indenture or this Supplemental
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of the 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.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
8. COUNTERPARTS The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
9. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not affect the construction hereof.
10. THE TRUSTEE. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Guarantor and the Company.
F-4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: _______________, 1998
[GUARANTOR]
By:
-------------------------------------
Name:
Title:
JTM Industries, Inc.
By:
-------------------------------------
Name:
Title:
[EXISTING GUARANTORS]
By:
-------------------------------------
Name:
Title:
[TRUSTEE]
as Trustee
By:
-------------------------------------
Name:
Title:
F-5
<PAGE>
Exhibit 10.1
Execution Copy
JTM INDUSTRIES, INC.
$100,000,000
10% SENIOR SUBORDINATED NOTES DUE 2008
PURCHASE AGREEMENT
April 17, 1998
NationsBanc Montgomery Securities LLC
CIBC Oppenheimer Corp.
c/o NationsBanc Montgomery Securities LLC
100 North Tryon Street
Charlotte, North Carolina 28255
Ladies and Gentlemen:
JTM Industries, Inc., a Texas corporation (the "Company"), proposes
to issue and sell to you (the "Initial Purchasers") $100,000,000 in aggregate
principal amount of its 10% Senior Subordinated Notes due 2008 (the "Notes").
The Notes will be fully and unconditionally guaranteed (the "Subsidiary
Guarantees" and, collectively with the Notes, the "Securities") on a senior
subordinated unsecured basis, jointly and severally, by all existing and future
domestic subsidiaries of the Company (the "Subsidiary Guarantors" and, together
with the Company, the "Issuers"). The Securities are to be issued pursuant to an
indenture, dated as of April 22, 1998 (the "Indenture"), by and among the
Company, the Subsidiary Guarantors and U.S. Bank National Association, as
trustee (the "Trustee").
The sale of the Securities to the Initial Purchasers will be made
without registration of the Securities under the Securities Act of 1933, as
amended (the "Securities Act"), in reliance upon exemptions from the
registration requirements of the Securities Act. You have advised the Issuers
that you will offer and sell the Securities purchased by you hereunder in
accordance with Section 3 hereof as soon as you deem advisable.
In connection with the sale of the Securities, the Issuers have
prepared a preliminary offering memorandum, dated March 27, 1998 (the
"Preliminary Memorandum"), and a final offering memorandum, dated the date
hereof (the "Final Memorandum"). Each of the Preliminary Memorandum and the
Final Memorandum sets forth certain information concerning the Issuers and the
Securities. The Issuers hereby confirm that they have authorized the use of the
Preliminary Memorandum and the Final Memorandum, and any amendment or supplement
thereto, in connection with the offer and sale of the Securities by the Initial
Purchasers in accordance with Section 3 hereof. Unless stated to the contrary,
all references herein to the Final Memorandum are to the Final Memorandum at the
time of execution and delivery of this Agreement (the "Execution Time") and are
not meant to include any amendment or supplement, or any information
incorporated by reference therein, subsequent to the Execution Time.
<PAGE>
The Initial Purchasers and their direct and indirect transferees
will be entitled to the benefits of the Registration Rights Agreement,
substantially in the form attached hereto as Exhibit A (the "Registration Rights
Agreement"), pursuant to which the Issuers will agree to use their best efforts
to commence an offer to exchange the Securities for Exchange Securities (the
"Exchange Securities") that have been registered under the Securities Act, and
that otherwise are identical in all respects to the Securities, or, under
certain circumstances, to cause a shelf registration statement to become
effective under the Securities Act and to remain effective for the period
designated in such Registration Rights Agreement.
The offering of the Securities is being made in connection with (i)
the acquisition (the "U.S. Ash Acquisition") by the Company of Michigan Ash
Sales Company, d.b.a. U.S. Ash Company, a Michigan corporation, together with
two affiliated companies, U.S. Stabilization, Inc. and Flo Fil Co., Inc., each a
Michigan corporation (collectively, "U.S. Ash"), pursuant to that certain Stock
Purchase Agreement, dated as of March 25, 1998 (the "U.S. Ash Acquisition
Agreement"), and (ii) the acquisition (the "Fly Ash Acquisition" and, together
with the U.S. Ash Acquisition, the "Acquisitions") by the Company of Fly Ash
Products, Inc., an Arkansas corporation ("Fly Ash"), pursuant to that certain
Stock Purchase Agreement, dated as of March 27, 1998 (the "Fly Ash Acquisition
Agreement," and, together with the U.S. Ash Acquisition Agreement, the
"Acquisition Agreements"). References in this Agreement to subsidiaries of the
Company or to "Issuers" or "Subsidiary Guarantors" shall be deemed to be
references (i) to such entities before giving effect to the Acquisitions in the
case of statements with respect to periods before the Closing Date and (ii) to
such entities immediately after giving effect to the Acquisitions in the case of
statements with respect to periods on or after the Closing Date.
1. Representations and Warranties.
The Issuers, jointly and severally, represent and warrant to the
Initial Purchasers that:
(a) All of the representations and warranties of the parties to each
of the Acquisition Agreements are true and correct as if made on and as of the
date hereof and the Closing Date.
(b) The Preliminary Memorandum, at the date thereof, did not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The Final Memorandum, at the date
hereof, does not, and at the Closing Date (as defined below) will not (and any
amendment or supplement thereto, at the date thereof and at the Closing Date,
will not), contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however that
the Issuers make no representation or warranty as to the information relating to
the Initial Purchasers contained in or omitted from the Preliminary Memorandum
or the Final Memorandum, or any amendment or supplement thereto, in reliance
upon and in conformity with information furnished in writing to the Issuers by
or on behalf of the Initial Purchasers specifically for inclusion therein.
(c) Neither the Issuers, nor any of their "Affiliates" (as defined
in Rule 501(b) of Regulation D under the Securities Act ("Regulation D")), nor
any person acting on their behalf has, directly or indirectly, made offers or
sales of any security, or solicited offers to buy any security, under
circumstances that would require the registration of the Securities under the
Securities Act. Neither the Issuers, nor any of their Affiliates, nor any person
acting on their behalf has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D) in connection with any
offer or sale of the Securities, provided, that the Issuers make no
representation in this sentence
2
<PAGE>
regarding the Initial Purchasers. The Securities satisfy the eligibility
requirements of Rule 144A(d)(3) under the Securities Act. The Final Memorandum
and each amendment or supplement thereto, as of its date, contains the
information specified in Rule 144A(d)(4) under the Securities Act. The Issuers
have been advised by the National Association of Securities Dealers, Inc.
Private Offerings, Resales and Trading through the Automated Linkages Market
("PORTAL") that the Securities have been designated PORTAL eligible securities
in accordance with the rules and regulations of the National Association of
Securities Dealers, Inc.
(d) None of the Issuers nor any of their respective affiliates or
any person acting on its or their behalf (other than the Initial Purchasers, as
to whom the Issuers make no representation) has engaged or will engage in any
directed selling efforts within the meaning of Regulation S under the Securities
Act ("Regulation S") with respect to the Securities. To the knowledge of the
Issuers, the Securities offered and sold in reliance on Regulation S have been
and will be offered and sold only in offshore transactions. The sale of the
Securities pursuant to Regulation S is not part of a plan or scheme to evade the
registration provisions of the Securities Act. No registration under the
Securities Act of the Securities is required for the sale of the Securities to
the Initial Purchasers as contemplated hereby or for the Exempt Resales (as
defined below) assuming the accuracy of, and compliance with, the Initial
Purchasers' representations, warranties and agreements set forth in this
Agreement. The Securities sold pursuant to Regulation S will initially be
represented by a temporary global security as required by Rule 903 of Regulation
S.
(e) Neither the Company nor any of its subsidiaries is, or will be
after giving effect to the Acquisitions, the offering and sale of the Securities
and the application of the proceeds therefrom as described in the Final
Memorandum, an "investment company" within the meaning of the Investment Company
Act of 1940, as amended (the "Investment Company Act").
(f) Assuming (i) that the representations and warranties and
covenants of the Initial Purchasers contained in Section 3 hereof are true and
correct and (ii) that the Initial Purchasers comply with their agreements
contained in Section 3 hereof, (A) registration under the Securities Act of the
Securities or qualification of the Indenture under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"), is not required in connection with
the offer and sale of the Securities to the Initial Purchasers in the manner
contemplated by the Final Memorandum or this Agreement and (B) initial resales
of the Securities by the Initial Purchasers on the terms and in the manner set
forth in the Final Memorandum and Section 3 hereof are exempt from the
registration requirements of the Securities Act.
(g) Since the respective dates as of which information is given in
the Preliminary Memorandum and the Final Memorandum, except as otherwise stated
therein, (i) there has been and, immediately after giving effect to the
Acquisitions, will be no material adverse change in the condition (financial or
otherwise), results of operations, affairs or business prospects of the Company
and its subsidiaries considered as a whole, whether or not arising in the
ordinary course of business and (ii) there have been no material transactions
entered into by the Company or any of its subsidiaries (collectively, a
"Material Adverse Change").
(h) The Company has been and, immediately after giving effect to the
Acquisitions, will be duly organized and is validly existing as a corporation in
good standing under the laws of the state of its incorporation with corporate
power and authority to own, lease and operate its properties and conduct its
business as described in the Preliminary Memorandum and the Final Memorandum;
and the Company is duly qualified as a foreign corporation to transact business
and is in good standing in each jurisdiction in which the conduct of its
business requires such qualification, except to the extent that the failure to
be so qualified or be in good standing would not, singly or in the aggregate,
reasonably be
3
<PAGE>
expected to have a material adverse effect on the condition (financial or
otherwise), results of operations, affairs or business prospects of the Company
and its subsidiaries considered as a whole (a "Material Adverse Effect").
(i) All of the issued and outstanding capital stock of the Company
at December 31, 1997, was as set forth in the "Actual" column under the caption
"Capitalization" in the Preliminary Memorandum and the Final Memorandum. All of
the outstanding shares of capital stock of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. Attached as Schedule A
hereto is a complete and accurate list of each subsidiary of the Company both
before and immediately after giving effect to the Acquisitions. Each of the
subsidiaries of the Company has been duly organized and is validly existing and
in good standing under the laws of the jurisdiction of its organization, has the
requisite power and authority to own, lease and operate its properties and
conduct its business as described in the Preliminary Memorandum and the Final
Memorandum and is duly qualified as a foreign organization to transact business
and is in good standing in each jurisdiction in which the conduct of its
business requires such qualification, except to the extent that the failure to
be so qualified or be in good standing would not, singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect. All of the issued and
outstanding capital stock of each subsidiary has been duly authorized and
validly issued and is fully paid and nonassessable, and, except as described in
the Preliminary Memorandum and the Final Memorandum, all shares of capital stock
of each subsidiary are owned by the Company, directly or through subsidiaries,
free and clear of any mortgage, pledge, lien, encumbrance, claim or equity.
(j) This Agreement has been duly authorized, executed and delivered
by the Issuers and constitutes the valid and binding agreement of the Issuers,
enforceable against the Issuers in accordance with its terms, except that (i)
enforcement thereof may be subject to (A) bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws now or hereafter
in effect relating to or affecting creditors' rights generally and (B) general
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law) and (ii) the enforceability of any
indemnification or contribution provisions thereof may be limited under
applicable securities laws or the public policies underlying such laws.
(k) The Notes have been duly authorized by the Company, and, when
executed and authenticated in accordance with the provisions of the Indenture
and delivered to and paid for by the Initial Purchasers in accordance with this
Agreement, will constitute the valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, and will be
entitled to the benefits, of the Indenture, except that enforcement thereof may
be subject to (A) bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws now or hereafter in effect relating to or
affecting creditors' rights generally and (B) general principles of equity
(regardless of whether enforceability is considered in a proceeding in equity or
at law).
(l) The Subsidiary Guarantees endorsed on the Notes have been duly
authorized by each Subsidiary Guarantor and when the Notes are executed and
authenticated in accordance with the provisions of the Indenture and delivered
to the Initial Purchasers in accordance with this Agreement, the Subsidiary
Guarantees will constitute the valid and binding obligation of the Subsidiary
Guarantors enforceable against the Subsidiary Guarantors in accordance with
their terms and will be entitled to the benefits of the Subsidiary Guarantees
except that enforcement thereof may be subject to (A) bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws now or
hereafter in effect relating to or affecting creditors' rights generally and (B)
general principles of equity (regardless of whether enforceability is considered
in a proceeding in equity or at law).
4
<PAGE>
(m) The Indenture has been duly authorized by the Issuers. When the
Securities are delivered and paid for pursuant to this Agreement on the Closing
Date, the Indenture will have been duly executed and delivered by the Issuers
and, assuming the due execution and delivery thereof by the Trustee, will
constitute a valid and binding agreement of the Issuers, enforceable against the
Issuers in accordance with its terms, except that enforcement thereof may be
subject to (A) bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws now or hereafter in effect relating to or
affecting creditors' rights generally and (B) general principles of equity
(regardless of whether enforceability is considered in a proceeding in equity or
at law).
(n) The Exchange Securities have been duly authorized and, when duly
executed, authenticated, issued and delivered, will be validly issued and
outstanding, and will constitute the valid and binding obligations of the
Issuers, entitled to the benefits of the Indenture and enforceable against the
Issuers in accordance with their terms except that enforcement thereof may be
subject to (A) bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws now or hereafter in effect relating to or
affecting creditors' rights generally and (B) general principles of equity
(regardless of whether enforceability is considered in a proceeding in equity or
at law).
(o) The Registration Rights Agreement has been duly authorized by
the Company and the Subsidiary Guarantors, and when duly executed and delivered
by the Issuers (assuming the due execution and delivery by the Initial
Purchasers), will constitute a valid and binding agreement of the Issuers,
enforceable against the Issuers in accordance with its terms except that (i)
enforcement thereof may be subject to (A) bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws now or hereafter
in effect relating to or affecting creditors' rights generally and (B) general
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law) and (ii) the enforceability of any
indemnification or contribution provisions thereof may be limited under
applicable securities laws or the public policies underlying such laws.
(p) On the Closing Date, the Secured Credit Facility (as defined in
the Final Memorandum) and the guarantee of the obligations thereunder by the
Subsidiary Guarantors (a) shall have been duly authorized, executed and
delivered by the Company and the Subsidiary Guarantors, respectively, and will
constitute the valid and binding agreement of the Company and the Subsidiary
Guarantors, respectively, enforceable against the Company and the Subsidiary
Guarantors, as applicable, in accordance with their terms except that (i)
enforcement thereof may be subject to (A) bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws now or hereafter
in effect relating to or affecting creditors' rights generally and (B) general
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law) and (ii) the enforceability of any
indemnification or contribution provisions thereof may be limited under
applicable securities laws or public policies; and (b) shall be in full force
and effect. On the Closing Date, no event of default or event which, with the
giving of notice or passage of time or both, would constitute an event of
default shall have occurred under the Secured Credit Facility or the guarantees
thereof by the Subsidiary Guarantors and all conditions to the extension of
credit thereunder still have been satisfied without waiver.
(q) The execution, delivery and performance of this Agreement, the
Indenture, the Registration Rights Agreement and each of the Acquisition
Agreements by the Issuers (to the extent each is a party thereto), and the
consummation of the transactions contemplated hereby and thereby does not and,
after giving effect to the Acquisitions, will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan or credit agreement
or other agreement or instrument to which either the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries is
bound or to which any of the properties
5
<PAGE>
or assets of the Company or any of its subsidiaries are subject, nor will such
actions result in any violation of the provisions of the charter or by-laws of
the Company or any of its subsidiaries or any statute to which they may be
subject or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Company or any of its subsidiaries or any of
their properties or assets (except to the extent any such conflict, breach,
violation or default singly or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect); and except for such consents,
approvals, authorizations, registrations or qualifications as may be required
under applicable state securities and Blue Sky laws in connection with the
purchase and distribution of the Securities by the Initial Purchasers or as set
forth in the Registration Rights Agreement, no consent, approval, authorization
or order of, or filing or registration with, any such court or governmental
agency or body is required for the execution, delivery and performance of this
Agreement, the Indenture and the Registration Rights Agreement by the Issuers
(to the extent each is a party thereto), the consummation of the transactions
contemplated hereby and thereby, and the issuance and sale of the Notes and
Exchange Securities by the Issuers, except such as have been or will be obtained
and made on or prior to the Closing Date or the date specified in the
Registration Rights Agreement.
(r) Neither the Company nor any of its subsidiaries is in breach or
violation of any of the terms or provisions of any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the Company or
any of its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the properties or assets of the Company
or any of its subsidiaries are subject, nor is the Company or any of its
subsidiaries in violation of the provisions of its respective charter or by-laws
or any statute or any judgment, order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company, any of its
subsidiaries or any of their properties or assets, except to the extent any such
conflict, breach, violation or default is cured at or prior to the Closing Date
and within the grace period applicable thereto or would not, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(s) As of the Closing Date, the Securities and the Indenture will
conform in all material respects to the descriptions thereof contained in the
Final Memorandum. As of the Closing Date, the provisions of the Registration
Rights Agreement and the Secured Credit Facility, to the extent that such
provisions are summarized in the Final Memorandum, will conform in all material
respects to the descriptions thereof contained in the Final Memorandum.
(t) Except as set forth in the Registration Rights Agreement, there
are no contracts, agreements or understandings between the Company or any of its
subsidiaries and any person granting such person the right to require the
Company or any of its subsidiaries to file a registration statement under the
Securities Act with respect to any securities owned or to be owned by such
person or to require the Company or any of its subsidiaries to include such
securities in any securities being registered pursuant to any registration
statement filed by the Company or any of its subsidiaries under the Securities
Act.
(u) Except as set forth in the Preliminary Memorandum and the Final
Memorandum, there is and, immediately after giving effect to the Acquisitions,
will be no action, suit or proceeding before or by any court or governmental
agency or body, domestic or foreign, now pending or, to the knowledge of the
Issuers, threatened against or affecting the Company or any of its subsidiaries,
which would reasonably be expected, singly or in the aggregate, to have a
Material Adverse Effect or materially and adversely affect the offering of the
Securities.
(v) The Company and each of its subsidiaries has and, after giving
effect to the Acquisitions, will have good and indefeasible title in fee simple
to all real property and good and
6
<PAGE>
indefeasible title to all personal property owned by it and necessary in the
conduct of the business of the Company or such subsidiary, in each case free and
clear of all liens, encumbrances and defects except (i) such as are referred to
in the Final Memorandum or (ii) such as do not materially and adversely affect
the value of such property to the Company or such subsidiary, and do not
interfere with the use made and proposed to be made of such property by the
Company or such subsidiary to an extent that such interference would, singly or
in the aggregate, reasonably be expected to have a Material Adverse Effect. All
leases to which the Company or its subsidiaries is a party are and, after giving
effect to the Acquisitions, will be valid and binding, and no default has
occurred or is continuing thereunder which could, singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect or materially and
adversely affect the offering of the Securities, and the Company and its
subsidiaries enjoy peaceful and undisturbed possession under all such leases to
which any of them is a party as lessee (with such exceptions as do not
materially interfere with the use made by the Company or such subsidiary). The
Company and its subsidiaries possess and, after giving effect to the
Acquisitions, will possess adequate certificates, authorizations or permits
issued by the appropriate state, federal or foreign regulatory agencies or
bodies necessary to conduct the business now operated by them, and except as set
forth in the Final Memorandum, neither the Company nor any of its subsidiaries
has received any notice of proceedings relating to the revocation or
modification of any such certificate, authority or permit which, singly or in
the aggregate, if the subject of an unfavorable decision, ruling or finding,
would reasonably be expected to have a Material Adverse Effect.
(w) Each of Ernst & Young LLP and Coopers & Lybrand L.L.P., who have
certified certain financial statements of the Company and its subsidiaries
included in the Final Memorandum, are independent public accountants within the
meaning of the Securities Act and the rules and regulations thereunder. The
financial statements included in the Preliminary Memorandum and the Final
Memorandum present fairly in all material respects the consolidated financial
position of the Company and its subsidiaries, on a consolidated basis, as at the
dates indicated and the results of their respective operations and the changes
in their consolidated financial position for the periods specified; said
financial statements have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis during the periods involved,
except as indicated therein, and comply as to form in all material respects with
the requirements applicable to such financial statements included in
registration statements under the Securities Act.
The pro forma financial statements included in the Preliminary
Memorandum and the Final Memorandum have been prepared on a basis consistent
with the historical financial statements of the Company and its subsidiaries and
give effect to assumption used in the preparation thereof on a reasonable basis
and in good faith and present fairly the historical and proposed transactions
contemplated by the Preliminary Memorandum and the Final Memorandum; and such
pro forma financial statements comply as to form in all material respects with
the requirements applicable to pro forma financial statements included in
registration statements on Form S-1 under the Act. The other pro forma financial
and statistical information and data included in the Preliminary Memorandum and
the Final Memorandum are, in all material respects, accurately presented and
prepared on a basis consistent with the pro forma financial statements.
To the knowledge of the Issuers, the historical and pro forma
financial statements included in the Preliminary Memorandum and the Final
Memorandum constitute all of the financial statements that would be required to
be included in a registration statement on Form S-1 under the Securities Act.
(x) Neither the Company nor any of its subsidiaries is now or, after
giving effect to the issuance of the Securities, and the application of the
proceeds thereof, will be (i) insolvent, (ii) left
7
<PAGE>
with unreasonably small capital with which to engage in its anticipated
businesses or (iii) incurring debts beyond its ability to pay such debts as they
become due.
(y) Except as would not reasonably be expected to have a Material
Adverse Effect, the Company and its subsidiaries own, or otherwise possess the
right to use, all patents, trademarks, service marks, trade names and
copyrights, all applications and registrations for each of the foregoing, and
all other proprietary rights and confidential information used in the conduct of
their respective businesses as currently conducted; and neither the Company nor
any of its subsidiaries has received any notice or is otherwise aware, of any
infringement of or conflict with the rights of any third party with respect to
any of the foregoing which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would reasonably be expected to have a
Material Adverse Effect. The Company and its subsidiaries do not own or
otherwise possess the right to use any patents, trademarks, service marks, trade
names and copyrights, the loss of which would result in a Material Adverse
Effect.
(z) The Company and its subsidiaries are (i) in compliance with any
and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) are in compliance with all terms and conditions
of any such permit, license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses or other
approvals or failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, reasonably be
expected to have a Material Adverse Effect. In the ordinary course of its
business, the Company conducts a periodic review of the effect of Environmental
Laws on the business, operations and properties of the Company and its
subsidiaries, in the course of which it identifies and evaluates associated
costs and liabilities (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related constraints
on operating activities and any potential liabilities to third parties). On the
basis of such review, the Company has reasonably concluded that such associated
costs and liabilities would not, singly or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(aa) No labor problem or disturbance with the employees of the
Company or any of its subsidiaries exists or, immediately after giving effect to
the Acquisitions, will exist, or, to the knowledge of the Issuers, is threatened
which, singly or in the aggregate, would reasonably be expected to have a
Material Adverse Effect.
(ab) Neither the Company nor any of its subsidiaries has taken, and
none of them will take, any action that would cause this Agreement or the
issuance or sale of the Securities and Exchange Securities to violate Regulation
G, T, U or X of the Board of Governors of the Federal Reserve System or
analogous foreign laws and regulations.
(ac) The Company and its subsidiaries have complied with all
provisions of Section 517.075, Florida Statutes (Chapter 92-198, Laws of
Florida) relating to doing business with the Government of Cuba or with persons
or affiliates located in Cuba.
(ad) Other than as set forth on in the Final Memorandum, neither the
Company nor any subsidiary is a party to any contract or agreement that would be
required to be filed with the
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Commission as an exhibit to a registration statement on Form S-1 pursuant to
entries (2), (4) and (10) of the Exhibit Table of Item 601 of Regulation S-K
under the Securities Act.
(ae) No Issuer or Affiliate of any Issuer has sold, offered for sale
or solicited offers to buy or otherwise negotiated in respect of any security
(as defined in the Securities Act) in a transaction would require the
registration under the Securities Act of the Securities.
(af) Neither the Company nor any subsidiary is a "public utility" or
a "holding company" within the meaning of the Public Utility Holding Company Act
of 1935, as amended.
2. Purchase and Sale. On the basis of the representations and
warranties contained in, and subject to the terms and conditions of, this
Agreement, the Issuers agree to sell to the Initial Purchasers and the Initial
Purchasers agree to purchase the aggregate principal amount of Securities set
forth opposite its name as shown in Schedule B hereto, at a purchase price equal
to 97% of the principal amount thereof.
The Issuers shall not be obligated to deliver any of the Securities
to be delivered except upon payment for all the Securities to be purchased as
provided herein.
3. Sale and Resale of the Securities by the Initial Purchaser. Each
of the Initial Purchasers represents and warrants to the Issuers that:
(a) It will offer the Securities to be purchased hereunder for
resale only upon the terms and conditions set forth in this Agreement and in the
Final Memorandum.
(b) It, nor any of its "Affiliates" (as defined in Rule 501(b) of
Regulation D), nor any person acting on its behalf, (i) will not solicit offers
for, or offer or sell, the Notes by means of any form of general solicitation or
general advertising within the meaning of Regulation D or in any manner
involving a public offering within the meaning of Section 4(2) of the Securities
Act, and (ii) will solicit offers for the Notes only from, and will offer, sell
or deliver (the "Exempt Resales") the Notes, as part of its initial offering,
only to the following persons (each an "Eligible Purchaser") (A) persons whom
such Initial Purchaser reasonably believes to be qualified institutional buyers
("QIBs") as defined in Rule 144A under the Securities Act, as such rule may be
amended from time to time ("Rule 144A") or, if any such person is buying for one
or more institutional accounts for which such person is acting as fiduciary or
agent, only when such person has represented to such Initial Purchaser that each
such account is a QIB, to whom notice has been given that such sale or delivery
is being made in reliance on Rule 144A, (B) to a limited number of institutional
accredited investors as defined in Rule 501(a) (1), (2), (3) or (7) under
Regulation D ("Accredited Investors") that, prior to their purchase of the
Securities, execute and deliver a letter containing certain representations and
agreements in the form attached as Annex A to the Final Memorandum and (C)
outside the United States in offshore transactions to non-U.S. persons in
reliance on Regulation S.
(c) With respect to Securities sold in reliance on Regulation S, (i)
neither such Initial Purchaser nor any of its affiliates nor anyone acting on
its behalf has offered or sold, or will offer or sell, any Securities by means
of any directed selling efforts (as defined in Rule 902 of Regulation S) in the
United States, (ii) at or prior to confirmation of all sales of Securities made
in reliance on Regulation S, it will have sent to each distributor, dealer or
person receiving a selling concession, fee or other remuneration that purchases
the Securities from it during the restricted period a confirmation or notice to
substantially the following effect:
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"The Securities covered hereby have not been registered under the U.S.
Securities Act of 1933 (the "Securities Act") and may not be offered or
sold within the United States or to, or for the account or benefit of,
U.S. persons (i) as part of a distribution thereof at any time or (ii)
otherwise until 40 days after the later of the date of the commencement of
the offering and the closing date, except in either case in accordance
with an exemption from or in a transaction not subject to the Securities
Act. Terms used above have the meanings given them by Regulation S."
The sale of the Securities to non-U.S. persons in offshore transactions is not
part of a plan or scheme to avoid the registration requirements of the
Securities Act.
(d) (i) It has not solicited, and will not solicit, offers to
purchase any of the Securities from, (ii) it has not sold, and will not sell,
any of the Securities to, and (iii) it has not distributed, and will not
distribute, the Preliminary Memorandum or the Final Memorandum to, any person or
entity in any jurisdiction outside of the United States except, in each case, in
compliance in all material respects with all applicable laws of such
jurisdiction. For purposes of this Agreement, "United States" means the United
States of America, its territories, its possessions (including the Commonwealth
of Puerto Rico), and other areas subject to its jurisdiction.
(e) Unless prohibited by applicable law, (i) it will furnish to each
person to whom it offers any Securities, a copy of the Preliminary Memorandum
(as amended or supplemented) or Final Memorandum or (unless delivery of such
Preliminary Memorandum is required by applicable law) shall inform each such
person that a copy of such Preliminary Memorandum or the Final Memorandum will
be available upon request and (ii) it will furnish to each person to whom it
sells Securities a copy of the Final Memorandum (as then amended or supplemented
by applicable law) and shall inform each such person that a copy of such Final
Memorandum will be available upon request.
4. Delivery of and Payment for the Notes. Delivery of and payment
for the Securities shall be made at the office of Latham & Watkins, 885 Third
Avenue, New York, New York at 9:00 A.M., New York City time, on April 22, 1998,
or at such other date or place as shall be determined by agreement between the
Initial Purchasers and the Company. This date and time are sometimes referred to
as the "Closing Date." On the Closing Date, the Issuers shall deliver or cause
to be delivered the Securities to the Initial Purchasers for the account of the
Initial Purchasers against payment to or upon the order of the Company of the
purchase price by wire transfer in federal (same-day) funds. Time shall be of
the essence, and delivery at the time and place specified pursuant to this
Agreement is a further condition of the obligation of the Initial Purchasers
hereunder. Upon delivery, the Securities shall be in the form required by the
Indenture and registered in the name of Cede & Co., as nominee of the Depository
Trust Company ("DTC"), or such other name or names and in such denominations as
the Initial Purchasers shall request in writing not less than one business day
prior to the Closing Date. For the purpose of expediting the checking and
packaging of the Securities, the Issuers shall make the Securities available for
inspection by the Initial Purchasers in New York, New York, not later than 2:00
P.M., New York City time, on the business day prior to the Closing Date.
5. Further Agreements of the Issuers. The Issuers jointly and
severally agree with each Initial Purchaser as set forth below in this Section
5:
(a) The Issuers will furnish to the Initial Purchasers, without
charge, as many copies of the Final Memorandum and any supplements and
amendments thereto as they may reasonably request.
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(b) Prior to making any amendment or supplement to the Preliminary
Memorandum or the Final Memorandum, the Issuers shall furnish a copy thereof to
the Initial Purchasers and counsel to the Initial Purchasers and will not effect
any such amendment or supplement to which the Initial Purchasers shall
reasonably object by notice to the Company after a reasonable period to review.
(c) If, at any time prior to completion of the distribution of the
Securities by the Initial Purchasers, any event shall occur or condition exist
as a result of which it is necessary, in the opinion of counsel for the Initial
Purchasers or counsel for the Issuers, to amend or supplement the Final
Memorandum in order that the Final Memorandum will not include an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein not misleading in light of the circumstances
existing at the time it is delivered to a purchaser, or if it is necessary to
amend or supplement the Final Memorandum to comply with applicable law, the
Issuers will promptly prepare such amendment or supplement as may be necessary
to correct such untrue statement or omission or so that the Final Memorandum, as
so amended or supplemented, will comply with applicable law and furnish to the
Initial Purchasers such number of copies of such amendment or supplement as they
may reasonably request.
(d) So long as any Securities are outstanding and are "Restricted
Securities" within the meaning of Rule 144(a)(3) under the Securities Act and
during any period in which the Issuers are not subject to Section 13 or 15(d) of
the Exchange Act of 1934, as amended (the "Exchange Act"), the Issuers will
furnish to holders of the Securities and prospective purchasers of Securities
designated by such holders, upon request of such holders or such prospective
purchasers, the information, if any, required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
(e) So long as the Securities and Exchange Securities are
outstanding, the Issuers will furnish to the Initial Purchasers copies of any
annual reports, quarterly reports and current reports filed with the Securities
and Exchange Commission ("SEC") on Forms 10-K, 10-Q and 8-K, or such other
similar forms as may be designated by the SEC, and such other documents, reports
and information as shall be furnished by the Issuers to the Trustee or to the
holders of the Securities and Exchange Securities pursuant to the Indenture.
(f) The Issuers will use their best efforts at the Initial
Purchasers' reasonable request to qualify the Securities for sale under the
securities or Blue Sky laws of such jurisdictions as the Initial Purchasers
reasonably designate and to continue such qualifications in effect so long as
reasonably required for the distribution of the Securities. The Issuers will
also arrange for the determination of the eligibility for investment of the
Securities under the laws of such jurisdictions as the Initial Purchasers
reasonably request. Notwithstanding the foregoing, the Issuers shall not be
obligated to qualify as a foreign corporation in any jurisdiction in which they
are not so qualified or to file a general consent to service of process or to
subject themselves to taxation in respect of doing business in any jurisdiction
in which it is not otherwise subject.
(g) The Issuers will use their best efforts to permit the Securities
to be designated PORTAL securities in accordance with the rules and regulations
adopted by the National Association of Securities Dealers, Inc. relating to
trading in the PORTAL market and to permit the Securities to be eligible for
clearance and settlement through DTC.
(h) Except following the effectiveness of any Registration Statement
(as defined in the Registration Rights Agreement) and except for such offers as
may be made as a result of, or subsequent to, filing such Registration Statement
or amendments thereto prior to the effectiveness thereof, the Issuers will not,
and will cause their affiliates not to, solicit any offer to buy or offer to
sell the
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Securities by means of any form of general solicitation or general advertising
(as those terms are used in Regulation D under the Securities Act) or in any
manner involving a public offering within the meaning of Section 4(2) of the
Securities Act.
(i) The Company will apply the net proceeds from the sale of the
Securities as set forth in the Final Memorandum.
(j) The Issuers will take such steps as shall be necessary to ensure
that neither the Company nor any of its subsidiaries shall become (i) an
"investment company" within the meaning of the Investment Company Act, or (ii) a
"holding company" or a "subsidiary company" or an "affiliate" of a holding
company within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
(k) The Company and its subsidiaries will not, and will cause their
affiliates not to, take any action that would require the registration under the
Securities Act of the Securities (other than pursuant to the Registration Rights
Agreement) including, without limitation, (i) engaging in any directed selling
efforts (within the meaning of Regulation S) during any applicable restricted
period or (ii) offering any other securities in a manner that would be
integrated with the transactions contemplated hereby.
(l) The Issuers will do all things reasonably necessary to satisfy
the closing conditions set forth in Section 7 hereof.
6. Expenses. The Issuers, jointly and severally, agree to pay (a)
the costs incident to the authorization, issuance, sale and delivery of the
Securities and Exchange Securities and any issue or stamp taxes payable in that
connection; (b) the costs incident to the preparation and printing of the
Preliminary Memorandum, the Final Memorandum and any amendments, supplements and
exhibits thereto; (c) the costs of distributing the Preliminary Memorandum, the
Final Memorandum and any amendment or supplement thereto; (d) the fees and
expenses of qualifying the Securities and Exchange Securities under the
securities laws of the several jurisdictions as provided in Section 5(f) and of
preparing, printing and distributing a Blue Sky Memorandum (including reasonable
related fees and expenses of counsel to the Initial Purchasers); (e) the cost of
printing the Securities and the Exchange Securities; (f) the fees and expenses
of the Trustee and any agent of the Trustee and the fees and disbursements of
any counsel for the Trustee in connection with the Indenture and the Securities
and Exchange Securities; (g) any fees paid to rating agencies in connection with
the rating of the Securities and Exchange Securities; (h) the costs and expenses
of DTC and its nominee, including its book-entry system; (i) all expenses and
listing fees incurred in connection with the application for quotation of the
Securities on the PORTAL market; and (j) all other costs and expenses incident
to the performance of the obligations of the Issuers under this Agreement,
including the fees and expenses of Latham & Watkins, counsel to the Initial
Purchasers (up to a maximum of $225,000).
7. Conditions of Initial Purchaser's Obligations. The obligations of
the Initial Purchasers to purchase the Securities shall be subject to the
accuracy of the representations and warranties on the part of the Issuers
contained herein at the Execution Time and the Closing Date, to the accuracy of
the statements of the Issuers made in any certificates pursuant to the
provisions hereof, to the performance by the Issuers of their obligations
hereunder in all material respects and to the following additional conditions:
(a) The Initial Purchasers shall not have discovered and disclosed
to the Company on or prior to the Closing Date that the Final Memorandum or any
amendment or supplement thereto contains an untrue statement of a fact which, in
the opinion of Latham & Watkins, counsel for the Initial
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<PAGE>
Purchasers, is material or omits to state a fact which, in the opinion of such
counsel, is material and is necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(b) The Final Memorandum shall have been printed and copies
distributed to the Initial Purchasers as soon as practicable but in no event
later than on the Business Day following the date of this Agreement or at such
later date and time as to which the Initial Purchasers may agree, and no stop
order suspending the qualification or exemption from qualification of the
Securities in any jurisdiction referred to in Section 5(f) shall have been
issued and no proceeding for that purpose shall have been commenced or shall be
pending or threatened.
(c) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental agency
which would, as of the Closing Date, singly or in the aggregate, reasonably be
expected to have a Material Adverse Effect or prevent the issuance of the Notes
or the Subsidiary Guarantees or the consummation of the Acquisitions; no action,
suit or proceeding shall have been commenced and be pending against or affecting
or, to the knowledge of the Company, threatened against, the Company or any of
its subsidiaries before any court or arbitrator or any governmental body, agency
or official that, singly or in the aggregate, if adversely determined, would
reasonably be expected to result in a Material Adverse Effect; and no stop order
shall have been issued by the SEC or any governmental agency of any jurisdiction
referred to in Section 5(f) preventing the use of the Final Memorandum, or any
amendment or supplement thereto, or which would reasonably be expected to have a
Material Adverse Effect.
(d) Since the dates as of which information is given in the Final
Memorandum and other than as set forth in the Final Memorandum, (i) there shall
not have been any Material Adverse Change, or any development that is reasonably
likely to result in a Material Adverse Change, or any material change in the
long-term debt, or material increase in the short-term debt, from that set forth
in the Final Memorandum; (ii) no dividend or distribution of any kind shall have
been declared, paid or made by the Company on any class of its capital stock;
(iii) the Company and its subsidiaries shall not have incurred any liabilities
or obligations, direct or contingent, that are material, individually or in the
aggregate, to the Company and its subsidiaries, taken as a whole, and that are
required to be disclosed on a balance sheet or notes thereto in accordance with
generally accepted accounting principles and are not disclosed on the latest
balance sheet or notes thereto included in the Final Memorandum.
(e) The Initial Purchasers shall have received a certificate, dated
the Closing Date, signed on behalf of the Company by (i) R Steve Creamer, Chief
Executive Officer and (ii) J.I. Everest, II, Chief Financial Officer, confirming
that (A) such officers have participated in conferences with other officers and
representatives of the Issuers, representatives of the independent public
accountants of the Issuers and representatives of counsel to the Issuers at
which the contents of the Final Memorandum and related matters were discussed
and (B) the matters set forth in paragraphs (b), (c) and (d) of this Section 7
are true and correct as of the Closing Date.
(f) All corporate proceedings and other legal matters incident to
the authorization, form and validity of this Agreement, the Securities, the
Exchange Securities, the Indenture, the Registration Rights Agreement, the Final
Memorandum and all other legal matters relating to this Agreement and the
transactions contemplated hereby and thereby, shall be reasonably satisfactory
in all material respects to counsel for the Initial Purchasers, and the Issuers
shall have furnished to such counsel all documents and information that they may
reasonably request to enable them to pass upon such matters.
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(g) Morgan, Lewis & Bockius LLP, counsel for the Issuers, shall have
furnished to the Initial Purchasers its written opinion substantially in the
form of Exhibit B hereto.
(h) Brett A. Hickman, Vice President and General Counsel of the
Company, shall have furnished to the Initial Purchasers his written opinion
substantially in the form of Exhibit C hereto.
(i) McNaul, Ebel, Nawrot, Helgren & Vance PLLC shall have furnished
to the Initial Purchasers its written opinion, as special Washington counsel to
Pozzolanic Resources, Inc., a written opinion substantially in form of Exhibit D
hereto.
(j) Heidman, Redmond, Fredregill, Patterson, Plaza & Dykstra L.L.P.
shall have furnished to the Initial Purchasers its written opinion, as special
Iowa counsel to Power Plant Aggregates of Iowa, Inc., a written opinion
substantially in form of Exhibit E hereto.
(k) Braun Kendrick Finkbeiner P.L.C. shall have furnished to the
Initial Purchasers its written opinion, as special Michigan counsel to U.S. Ash,
a written opinion substantially in form of Exhibit F hereto.
(l) Bridges, Young, Matthews & Drake P.L.C. shall have furnished to
the Initial Purchasers its written opinion, as special Arkansas counsel to Fly
Ash, a written opinion substantially in form of Exhibit G hereto.
(m) You shall have received on the Closing Date an opinion of Latham
& Watkins, counsel for the Initial Purchasers, dated the Closing Date and
addressed to you, in form and substance reasonably satisfactory to you.
(n) The Initial Purchasers shall have received a certificate, dated
the Closing Date and signed on behalf of the Company by J.I. Everest, II, Chief
Financial Officer, in form and substance satisfactory to the Initial Purchasers
and counsel for the Initial Purchasers, as to the solvency of the Company
following consummation of the Acquisitions.
(o) The Issuers and the Trustee shall have entered into the
Indenture and the Initial Purchasers shall have received counterparts, conformed
as executed, thereof.
(p) The Issuers and the Initial Purchasers shall have entered into
the Registration Rights Agreement and the Initial Purchasers shall have received
counterparts, conformed as executed, thereof.
(q) The Acquisitions shall be consummated prior to, or
simultaneously with, the Closing of the offering of the Notes on the terms
described in the Offering Memorandum in all material respects and the Initial
Purchasers shall have received counterparts, conformed as executed, of the
Acquisition Agreements and such other documentation as they deem necessary to
evidence the consummation thereof.
(r) There shall exist at and as of the Closing Date no conditions
that would constitute a default (or an event that with notice or the lapse of
time, or both, would constitute a default) under the Secured Credit Facility. On
the Closing Date, the Secured Credit Facility shall be in full force and effect
and shall not have been modified.
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(s) At the Execution Time and at the Closing Date, Ernst & Young,
LLP and Coopers & Lybrand L.L.P. shall have furnished to the Initial Purchasers
a letter or letters, dated respectively as of the Execution Time and as of the
Closing Date, in form and substance reasonably satisfactory to the Initial
Purchasers, confirming that they are independent accountants within the meaning
of the Securities Act and the Exchange Act and the applicable rules and
regulations thereunder and Rule 101 of the Code of Professional Conduct of the
American Institute of Certified Public Accountants (the "AICPA") and otherwise
reasonably satisfactory in form and substance to the Initial Purchasers and
their counsel.
(t) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest financial statements included in the
Final Memorandum losses or interferences with their businesses, taken as a
whole, from fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order or
decree, otherwise than as set forth or contemplated in the Final Memorandum and
(ii) since such date there shall not have been any change in the capital stock
or long-term debt of the Company or any of its subsidiaries or any change, or
any development involving a prospective change, in or affecting the general
affairs, management, financial position, stockholders' equity or results of
operations of the Company or its subsidiaries, taken as a whole, otherwise than
as set forth or contemplated in the Final Memorandum, the effect of which, in
any such case described in clause (i) or (ii), is, in the reasonable judgment of
the Initial Purchasers, so material and adverse as to make it impracticable or
inadvisable to proceed with the offering or the delivery of the Securities being
delivered on the Closing Date on the terms and in the manner contemplated herein
and in the Final Memorandum.
(u) Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the following: (i) trading in securities
generally on the New York Stock Exchange or The NASDAQ Stock Market's National
Market or in the over-the-counter market shall have been suspended or materially
limited, or minimum prices shall have been established on such exchange by the
SEC, or by such exchange or by any other regulatory body or governmental
authority having jurisdiction, (ii) a banking moratorium shall have been
declared by Federal or state authorities, (iii) the United States shall have
become engaged in hostilities, there shall have been an escalation in
hostilities involving the United States or there shall have been a declaration
of a national emergency or war by the United States or (iv) there shall have
occurred such a material adverse change in general economic, political or
financial conditions (or the effect of international conditions on the financial
markets in the United States shall be such) as to make it, in the reasonable
judgment of the Initial Purchasers, impracticable or inadvisable to proceed with
the offering or delivery of the Securities being delivered on the Closing Date
on the terms and in the manner contemplated herein and in the Final Memorandum.
(v) As of the Closing Date, no "nationally recognized statistical
rating organization" as such term is defined for purposes of Rule 436(g)(2)
under the Securities Act (i) will have imposed (or will have informed the
Company or any Subsidiary Guarantor that it is considering imposing) any
condition (financial or otherwise) on the Company's or any Subsidiary
Guarantor's retaining any rating assigned to the Company or any Subsidiary
Guarantor, any securities of the Company or any Subsidiary Guarantor or (ii)
will have indicated to the Company or any Subsidiary Guarantor that it is
considering (a) the downgrading, suspension, or withdrawal of, or any review for
a possible change that does not indicate the direction of the possible change
in, any rating so assigned or (b) any change in the outlook for any rating of
the Company, any Subsidiary Guarantor or any securities of the Company or any
Subsidiary Guarantor.
(w) Latham & Watkins shall have been furnished with such documents,
in addition to those set forth above, as they may reasonably require for the
purpose of enabling them to review or
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pass upon the matters referred to in this Section 7 and in order to evidence the
accuracy, completeness or satisfaction in all material respects of any of the
representations, warranties or conditions herein contained.
(x) Prior to the Closing Date, the Issuers shall have furnished to
the Initial Purchasers such further information, certificates and documents as
the Initial Purchasers may reasonably request.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Initial Purchasers.
8. Indemnification and Contribution. (a) The Issuers jointly and
severally agree to indemnify and hold harmless the Initial Purchasers, the
directors, officers, employees and agents (including, without limitation,
attorneys) of the Initial Purchasers and each person who controls any Initial
Purchaser within the meaning of either the Securities Act or the Exchange Act
against any and all losses, claims, damages or liabilities, joint or several, to
which they or any of them may become subject under the Securities Act, the
Exchange Act or other Federal or state statutory law or regulation, at common
law or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the Preliminary
Memorandum, the Final Memorandum or any information provided by the Issuers to
any holder or prospective purchaser of Notes pursuant to Section 5(e), or in any
amendment thereof or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and agree to reimburse
each such indemnified party, as incurred, for any reasonable legal or other
expenses, reasonably incurred by them, in connection with investigating or
defending any such loss, claim, damage, liability or action: provided, however,
that the Issuers will not be liable in any such case to any Initial Purchaser to
the extent that any such loss, claim, damage, liability or action arises out of
or is based upon any such untrue statement or alleged untrue statement or
omission or alleged omission relating to such Initial Purchaser made in the
Preliminary Memorandum or the Final Memorandum, or in any amendment thereof or
supplement thereto, in reliance upon and in conformity with written information
furnished to the Issuers by or on behalf of such Initial Purchaser specifically
for inclusion therein; provided, that the indemnification contained in this
paragraph (a) with respect to the Preliminary Memorandum shall not inure to the
benefit of the Initial Purchasers (or to the benefit of any person controlling
the Initial Purchasers) on account of any such loss, claim, damage, liability or
expense arising from the sale of the Securities by the Initial Purchasers to any
person if a copy of the Final Memorandum shall not have been delivered or sent
to such person and each untrue statement of a material fact contained in, and
each omission or alleged omission of a material fact from, such Preliminary
Memorandum was corrected in the Final Memorandum and it shall have been
determined that any Initial Purchaser and each person, if any, who controls such
Initial Purchaser would not have incurred such losses, claims, damages,
liabilities and expenses had the Final Memorandum been delivered or sent. The
foregoing indemnity agreement shall be in addition to any liability which the
Company may otherwise have.
(b) Each Initial Purchaser agrees severally and not jointly to
indemnify and hold harmless the Issuers, their directors, officers, employees
and agents (including, without limitation, attorneys), and each person who
controls the Issuers within the meaning of either the Securities Act or
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the Exchange Act, to the same extent as the foregoing indemnity from the Issuers
to each Initial Purchaser, but only with reference to written information
relating to such Initial Purchaser furnished to the Issuers by or on behalf of
the Initial Purchaser specifically for inclusion in the Preliminary Memorandum
or the Final Memorandum (or in any amendment or supplement thereto). This
indemnity agreement will be in addition to any liability which any Initial
Purchaser may otherwise have. The Issuers and the Initial Purchasers acknowledge
that the statements set forth in the last paragraph of the cover page and under
the heading "Plan of Distribution" in the Preliminary Memorandum and the Final
Memorandum constitute the only information furnished in writing by or on behalf
of the Initial Purchasers for inclusion in the Preliminary Memorandum or the
Final Memorandum (or any amendment or supplement thereto).
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof, but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above unless and
to the extent such failure results in the forfeiture by the indemnifying party
of substantial rights and defenses and (ii) will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a) or (b) above. The
indemnifying party shall be entitled to appoint counsel of the indemnifying
party's choice at the indemnifying party's expense to represent the indemnified
party in any action for which indemnification is sought (in which case the
indemnifying party shall not thereafter be responsible for the fees and expenses
of any separate counsel retained by the indemnified party or parties except as
set forth below); provided, however that such counsel shall be reasonably
satisfactory to the indemnified party. Notwithstanding the indemnifying party's
election to appoint counsel to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel (including
local counsel), and the indemnifying party shall bear the reasonable fees, costs
and expenses of such separate counsel if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would, in the opinion of
legal counsel to the indemnified party, present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have been informed in writing by legal counsel that
there may be legal defenses available to it and/or other indemnified parties
which are different from or additional to those available to the indemnifying
party, (iii) the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of the institution of such action or (iv) the
indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party. An indemnifying party will
not, without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Issuers and the Initial Purchasers agree
to contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in connection with
investigating or defending same) (collectively "Losses") to which the Issuers
and one or more of the Initial Purchasers may be subject in such proportion as
is appropriate to reflect the relative benefits received by the Issuers on the
one hand
17
<PAGE>
and by the Initial Purchasers on the other from the offering of the Securities;
provided, however, that in no case shall any Initial Purchaser be responsible
for any amount in excess of the purchase discount or commission applicable to
the Securities purchased by the such Initial Purchaser hereunder. If the
allocation provided by the immediately preceding sentence is unavailable for any
reason, the Issuers and the Initial Purchasers shall contribute in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Issuers and of the Initial Purchaser in connection
with the statements or omissions which resulted in such Losses as well as any
other relevant equitable considerations. Benefits received by the Issuers shall
be deemed to be equal to the total net proceeds from the offering (before
deducting expenses), and benefits received by the Initial Purchasers shall be
deemed to be equal to the total purchase discounts and commissions received by
the Initial Purchasers from the Issuers in connection with the purchase of the
Securities hereunder. Relative fault shall be determined by reference to whether
any alleged untrue statement or omission relates to information provided by the
Issuers or the Initial Purchasers. The Issuers and the Initial Purchasers agree
that it would not be just and equitable if contribution were determined by pro
rata allocation or any other method of allocation that does not take account of
the equitable considerations referred to above. Notwithstanding the provisions
of this paragraph (d), no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 8, each person who controls an
Initial Purchaser within the meaning of either the Securities Act or the
Exchange Act and each director, officer, employee and agent of an Initial
Purchaser shall have the same rights to contribution as such Initial Purchaser,
and each person who controls the Issuers within the meaning of either the
Securities Act or the Exchange Act and each partner, officer, director, employee
and agent of the Issuers shall have the same rights to contribution as the
Issuers, subject in each case to the applicable terms and conditions of this
paragraph (d).
9. Termination. The obligations of the Initial Purchasers hereunder
may be terminated by the Initial Purchasers by notice given to and received by
the Company prior to delivery of and payment for the Securities if, prior to
that time, any of the events described in Sections 7(n) or 7(o) shall have
occurred or if the Initial Purchasers shall decline to purchase the Securities
for any reason permitted under this Agreement.
10. Reimbursement of Initial Purchaser's Expenses. If (a) the
Issuers shall fail to tender the Securities for delivery to the Initial
Purchasers otherwise than for any reason permitted under this Agreement or (b)
the Initial Purchasers shall decline to purchase the Securities for any reason
permitted under this Agreement, the Issuers shall reimburse the Initial
Purchasers for the reasonable fees and expenses of their counsel (up to a
maximum of $225,000) and for such other reasonable out-of-pocket expenses as
shall have been incurred by them in connection with this Agreement and the
proposed purchase of the Securities, and upon demand the Issuers shall pay the
full amount thereof to the Initial Purchasers.
11. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Initial Purchasers, shall be delivered or sent by
mail, telex or facsimile transmission to NationsBanc Montgomery Securities LLC,
100 North Tryon Street, 20th Floor, Charlotte, North Carolina 28255, Attention:
Scott Holmes, with a copy to Latham & Watkins, 885 Third Avenue, New York, New
York 10022, Attention: Kirk A. Davenport;
(b) if to the Company, shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the Final
Memorandum, Attention: R Steve
18
<PAGE>
Creamer, with a copy to Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York,
New York 10178, Attention: David P. Blea.
Any such statements, requests, notices or agreements shall take
effect at the time of receipt thereof. The Issuers shall be entitled to act and
rely upon any request, consent, notice or agreement given or made on behalf of
the Initial Purchasers.
12. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the Initial Purchasers, the Issuers
and their respective successors. This Agreement and the terms and provisions
hereof are for the sole benefit of only those persons, except that (A) the
representations, warranties, indemnities and agreements of the Issuers contained
in this Agreement shall also be deemed to be for the benefit of directors,
officers, employees and agents (including, without limitation, attorneys) of the
Initial Purchasers and the person or persons, if any, who control an Initial
Purchasers within the meaning of Section 15 of the Securities Act and (B) the
indemnity agreement of the Initial Purchasers contained in Section 8(b) of this
Agreement shall be deemed to be for the benefit of directors of the Issuers,
officers, employees and agents (including, without limitation, attorneys) of the
Issuers and any person controlling any of the Issuers within the meaning of
Section 15 of the Securities Act. Nothing in this Agreement is intended or shall
be construed to give any person, other than the persons referred to in this
Section 12, any legal or equitable right, remedy or claim under or in respect of
this Agreement or any provision contained herein.
13. Survival. The respective indemnities, representations,
warranties and agreements of the Issuers and the Initial Purchasers contained in
this Agreement or made by or on behalf on them, respectively, pursuant to this
Agreement, shall survive the delivery of and payment for the Securities and
shall remain in full force and effect, regardless of any investigation made by
or on behalf of any of them or any person controlling any of them.
14. Definition of "Business Day." For purposes of this Agreement,
"business day" means each Monday, Tuesday, Wednesday, Thursday and Friday that
is not a day on which banking institutions in The City of New York, New York are
authorized or obligated by law, executive order or regulation to close.
15. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
16. Counterparts. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
17. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
[Signature page follows]
19
<PAGE>
If the foregoing correctly sets forth the agreement between the
Issuers and the Initial Purchaser, please indicate your acceptance in the space
provided for that purpose below.
Very truly yours,
JTM INDUSTRIES, INC.
By: /s/ J.I. Everest II
-------------------------------
Name: J.I. Everest II
Title: Treasurer & CFO
POZZOLANIC RESOURCES, INC.
By: /s/ J.I. Everest II
-------------------------------
Name: J.I. Everest II
Title: Treasurer & CFO
POWER PLANT AGGREGATES OF IOWA, INC.
By: /s/ J.I. Everest II
-------------------------------
Name: J.I. Everest II
Title: Treasurer & CFO
KBK ENTERPRISES, INC.
By: /s/ J.I. Everest II
-------------------------------
Name: J.I. Everest II
Title: Treasurer & CFO
<PAGE>
The foregoing Purchase Agreement
is hereby confirmed and accepted
as of the date first above written.
NATIONSBANC MONTGOMERY SECURITIES LLC
By: /s/ J. Scott Holmes
------------------------------
Name: J. Scott Holmes
Title: Principal
CIBC OPPENHEIMER CORP.
By:
------------------------------
Name:
Title:
<PAGE>
The foregoing Purchase Agreement
is hereby confirmed and accepted
as of the date first above written.
NATIONSBANC MONTGOMERY SECURITIES LLC
By:
------------------------------
Name:
Title:
CIBC OPPENHEIMER CORP.
By: /s/ Edward Levy
------------------------------
Name: Edward Levy
Title: Managing Director
<PAGE>
To be executed on the Closing Date:
The undersigned hereby confirms that the
the foregoing letter, as of the date thereof,
correctly sets forth the agreement between
the Initial Purchasers, the Issuers, the
Subsidiary Guarantors and the undersigned
MICHIGAN ASH SALES COMPANY, D.B.A
U.S. ASH COMPANY
By: /s/ J.I. Everest II
-------------------------------
Name: J.I. Everest II
Title: Treasurer & CFO
U.S. STABILIZATION, INC.
By: /s/ J.I. Everest II
-------------------------------
Name: J.I. Everest II
Title: Treasurer & CFO
FLO FIL CO., INC.
By: /s/ J.I. Everest II
-------------------------------
Name: J.I. Everest II
Title: Treasurer & CFO
FLY ASH PRODUCTS, INC.
By: /s/ J.I. Everest II
-------------------------------
Name: J.I. Everest II
Title: Treasurer & CFO
<PAGE>
EXHIBIT A
Registration Rights Agreement
<PAGE>
EXHIBIT B
Form of Opinion of Morgan, Lewis & Bockius LLP
<PAGE>
EXHIBIT B
[MLB letterhead]
April __, 1998
NationsBanc Montgomery Securities LLC
100 North Tryon Street
7th Floor
Charlotte, NC 28255
CIBC Oppenheimer Corp.
425 Lexington Avenue
3rd Floor
New York, NY 10017
Ladies and Gentlemen:
We have acted as special counsel to JTM Industries, Inc., a Texas
corporation (the "Company"), in connection with the issuance and sale by the
Company, pursuant to the Purchase Agreement (the "Purchase Agreement"), dated
April __, 1998, among the Company, certain subsidiaries of the Company, and
NationsBanc Montgomery Securities LLC and CIBC Oppenheimer Corp. (collectively,
the "Initial Purchasers") of $100,000,000 aggregate principal amount of the
Company's __% Senior Subordinated Notes due 2008 (the "Notes"), being issued
pursuant to an Indenture (the "Indenture"), dated as of the date hereof, among
the Company, the Subsidiary Guarantors (as defined) and U.S. Bank National
Association, as trustee (the "Trustee"). The Notes are guaranteed (the
"Subsidiary Guarantees"), jointly and severally, on a senior subordinated basis
by all existing domestic subsidiaries of the Company (including U.S. Ash and
Fly Ash) (the "Subsidiary Guarantors").
This opinion is being rendered to you, as Initial Purchasers of the Notes,
pursuant to Section 7(g) of the Purchase Agreement. Except as otherwise
specified, terms used herein have the respective meanings ascribed to them in
the Purchase Agreement.
For the purposes of this opinion, we have examined, among other things:
(i) the preliminary offering memorandum, dated March 27, 1998, and the final
offering memorandum, dated April __,1998 (the "Offering Memorandum"), each
relating to the Notes to be issued by the Company in a private placement under
the Securities Act of 1933, as amended (the "Securities Act"); (ii) the Purchase
Agreement; (iii) the Indenture: and (iv) the Registration Rights Agreement (the
"Registration Rights Agreement"), dated the date hereof, among the Company, the
Subsidiary Guarantors and the Initial Purchasers, providing for the registration
of the Notes under the Securities Act (collectively, the "Transaction
Documents").
<PAGE>
We have also examined originals, or copies certified or otherwise
identified to our satisfaction, of the corporate charter of the Company and each
Subsidiary Guarantor and certain resolutions adopted by the boards of directors
of the Company and each Subsidiary Guarantor. We have also examined and relied
upon representations by the Company and each Subsidiary Guarantor as to factual
matters contained in the Purchase Agreement and upon representations by the
Company and each Subsidiary Guarantor in certificates of officers of the Company
and of the Subsidiary Guarantors delivered pursuant to the Purchase Agreement.
We have also relied upon certificates of public officers and of officers and
other representatives of the Company and of the Subsidiary Guarantors, which
have been furnished to you.
In connection with our examination of the foregoing, we have assumed,
without any investigation, the genuineness of all signatures, the authenticity
of all documents submitted to us as originals, the conformity to original
documents of all documents submitted to us as certified or photostatic copies
and the authenticity of the originals of such latter documents.
Based upon the foregoing, we are of the following opinion:
(i) the statements in the Offering Memorandum under the heading
"Business-Government Regulation" to the extent that they constitute
summaries of matters of law or regulation or legal conclusions, have been
reviewed by us and fairly summarize the matters described therein in all
material respects and nothing has been omitted from such statements which
would make the same misleading in any material respect; and we do not have
actual knowledge of any current or pending material legal or governmental
actions, suits or proceedings which would be required to be described in
the Offering Memorandum if the Offering Memorandum were a prospectus
included in a registration statement on Form S-1 and which are not
described as so required;
(ii) assuming due authorization, execution and delivery of the
Registration Rights Agreement by the parties thereto, the Registration
Rights Agreement constitutes a valid and legally binding agreement of the
Company and each of the Subsidiary Guarantors enforceable against the
Company and each of the Subsidiary Guarantors, respectively, in accordance
with its terms, except as (A) such enforceability may be limited by
bankruptcy, insolvency, fraudulent transfer, fraudulent conveyance,
reorganization, arrangement, moratorium or similar laws relating to or
affecting the enforcement of creditors' rights generally and may be
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law), and (B)
the availability of equitable remedies may be limited by equitable
principles of general applicability; and except to the extent that the
indemnification or contribution provisions thereof may be unenforceable;
(iii) assuming due authorization, execution and delivery of the
Indenture by the parties hereto, the indenture constitutes a valid and
legally binding agreement of the Company and each of the Subsidiary
Guarantors, respectively, enforceable against the
-2-
<PAGE>
Company and each of the Subsidiary Guarantors, respectively, in accordance
with its terms, except as (A) such enforceability may be limited by
bankruptcy, insolvency, fraudulent transfer, fraudulent conveyance,
reorganization, arrangement, moratorium or similar laws relating to or
affecting the enforcement of creditors' rights generally and may be
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law), and (B)
the availability of equitable remedies may be limited by equitable
principles of general applicability;
(iv) assuming due authorization, execution and delivery of the
Exchange Notes by the parties thereto and due authentication of the Notes
by the Trustee, the Exchange Notes will constitute valid and legally
binding agreements of the Company and each of the Subsidiary Guarantors,
respectively, enforceable against the Company and each of the Subsidiary
Guarantors, respectively, in accordance with their terms, except as (A)
such enforceability may be limited by bankruptcy, insolvency, fraudulent
transfer, fraudulent conveyance, reorganization, arrangement, moratorium
or similar laws relating to or affecting the enforcement of creditors'
rights generally and may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding
in equity or at law), and (B) the availability of equitable remedies may
be limited by equitable principles of general applicability;
(v) assuming due authorization, execution and delivery of the Notes
by the Company and the Subsidiary Guarantees by the Subsidiary Guarantors
and due authentication of the Notes by the Trustee and upon payment and
delivery in accordance with the Purchase Agreement the Notes and
Subsidiary Guarantees constitute legally binding obligations of the
Company and the Subsidiary Guarantors, respectively, entitled to the
benefits of the Indenture and enforceable against the Company and the
Subsidiary Guarantors, respectively, in accordance with their terms,
except as (A) such enforceability may be limited by bankruptcy,
insolvency, fraudulent transfer, fraudulent conveyance, reorganization,
arrangement, moratorium or similar laws relating to or affecting the
enforcement of creditors' rights generally and may be subject to general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law), and (B) the availability
of equitable remedies may be limited by equitable principles of general
applicability;
(vi) each Transaction Document conforms in all material respects to
the description thereof contained in the Offering Memorandum;
(vii) no consent, approval, authorization or order of, or filing or
registration with, any court or arbitrator or governmental agency or body
is required for the execution, delivery and performance by the Company and
each of the Subsidiary Guarantors of each of the Transaction Documents to
which it is a party, the issuance, sale and delivery of the Securities and
compliance by the Company and each of the Subsidiary Guarantors with the
terms thereof and the consummation of the transactions contemplated by the
-3-
<PAGE>
Transaction Documents, except for such consents, approvals,
authorizations, filings, registrations or qualifications as may be
required to be obtained or made under the Securities Act as provided in
the Registration Rights Agreement and applicable state securities laws;
(viii) none of the Company or the Subsidiary Guarantors is, or will
be, after giving effect to the Offering and the application of the net
proceeds therefrom, (A) an "investment company" or a company "controlled
by" an investment company within the meaning of the Investment Company Act
and the rules and regulations of the Commission thereunder, without taking
account of any exemption under the Investment Company Act arising out of
the number of holders of the securities of the Company or the Subsidiary
Guarantors or (B) a "holding company" or a "subsidiary company" of a
holding company or an "affiliate" thereof within the meaning of the Public
Utility Holding Company Act of 1935, as amended;
(ix) assuming the accuracy of the representations and warranties of
the Initial Purchasers contained in the Purchase Agreement and their
compliance with the agreements and restrictions set forth therein and in
the Offering Memorandum, it is not necessary, in connection with the
issuance and sale of the Securities to the Initial Purchasers and the
offer, resale and delivery of the Securities by the Initial Purchasers in
the manner contemplated by the Purchase Agreement and the Offering
Memorandum, (i) to register the Securities under the Securities Act or
(ii) to qualify the Indenture or the Subsidiary Guarantees under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), provided,
however that such registration and qualification may otherwise be required
as a result of the Exchange Offer Registration Statement or the Shelf
Registration Statement, as the case may be, to be filed pursuant to the
Registration Rights Agreement;
(x) the execution and delivery by the Company and each of the
Subsidiary Guarantors of the Purchase Agreement, the Indenture, the
Registration Rights Agreement, each of the Acquisition Agreements and the
Secured Credit Facility (or, in the case of the Subsidiary Guarantors, the
guarantees related thereto), the consummation by the Company and the
Subsidiary Guarantors of the transactions contemplated hereby and thereby
and by the Final Memorandum will not (A) to our knowledge, result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, any material agreement or instrument of the Company or any
of its subsidiaries or (B) result in any violation of the provisions of
the charter, partnership agreement or bylaws of the Company or any of its
subsidiaries, or, to our knowledge, any applicable law, rule or regulation
(other than Securities Laws (as defined below) as to which an opinion is
given in paragraph (ix) above) with respect to the Company or any of its
subsidiaries or, to our knowledge, any rule or regulation (other than
Securities Laws (as defined below) as to which an opinion is given in
paragraph (ix) above) or order of any court or governmental agency having
jurisdiction over the Company or any of its subsidiaries, except for such
-4-
<PAGE>
violations that would not, singly or in the aggregate, reasonably be
expected to have a Material Adverse Effect; and, to our knowledge, except
for such consents, approvals or authorizations of, or filings,
registrations or qualifications with, governmental authorities as may be
required under the Securities Act and the rules and regulations
thereunder, the Trust Indenture Act and the rules and regulations
thereunder or applicable states securities or Blue Sky laws, rules or
regulations (all of such laws, rules and regulations are collectively
referred to herein as "Securities Laws") in connection with the purchase
and distribution of the Notes by the Initial Purchasers and as set forth
in, and in order to consummate the transactions contemplated by, the
Registration Rights Agreement, no consent, approval, authorization or
order of, or filing or registration with, any such court or governmental
agency or body is required in connection with the execution and delivery
by the Company and the Subsidiary Guarantors of the Purchase Agreement,
the Indenture, the Registration Rights Agreement or the Secured Credit
Facility, the consummation by the Company and the Subsidiary Guarantors of
the transactions contemplated hereby and thereby and the issuance and sale
of the Securities and Exchange Securities by the Company and the
Subsidiary Guarantors; and
(xi) Assuming the Initial Purchasers purchase the Securities in
accordance with Rule 144A under the Securities Act, neither the issuance
or sale of the Securities nor the application by the Company of the net
proceeds thereof as set forth in the Offering Memorandum will violate
Regulation T, U or X of the Board of Governors of the Federal Reserve
System.
We have participated in conferences with officers and other
representatives of the Company, its auditors, and your representatives at which
the contents of the Offering Memorandum and related matters were discussed.
Based upon such participation and review, and relying as to materiality in part
upon the factual statements of officers and other representatives of the
Company, we advise you that no facts have come to our attention that have caused
us to believe that the Offering Memorandum (except for the financial statements,
schedules and related data and other financial or statistical data, as to which
we have not been asked to comment), as of the date of such Offering Memorandum
and as of the date hereof, contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they Were made, not
misleading. However, because the primary purpose of our engagement was not to
confirm factual matters or financial or accounting matters and because of the
wholly or partially non-legal character of many of the statements contained in
the Offering Memorandum, we are not passing upon and do not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Offering Memorandum (except to the extent expressly set forth
in paragraph (i) above), and we have not independently verified the accuracy,
completeness or fairness of such statements (except as aforesaid). Without
limiting the foregoing, we assume no responsibility for, have not independently
verified and have not been asked to comment on the accuracy, completeness or
fairness of the financial statements, schedules and other financial or
statistical data included in the Offering Memorandum, and we have not examined
the accounting,
-5-
<PAGE>
financial or other records from which such financial statements, schedules and
other financial or statistical data and information were derived. We note that,
although certain portions of the Offering Memorandum (including financial
statements and related data) have been included therein on the authority of
"experts" within the meaning of the Securities Act, we are not experts with
respect to any portion of the Offering Memorandum, including, without
limitation, such financial statements and related data and other financial or
accounting data included therein.
We render the foregoing opinions as members of the Bar of the State of New
York and express no opinion as to laws other than the laws of the State of New
York and the Federal laws of the United States of America.
Our opinion is given as of the date hereof and we assume no obligation to
update or supplement this opinion to reflect any facts or circumstances which
may hereafter come to our attention or changes in law which may hereafter occur.
This opinion may not be used, circulated, quoted or otherwise referred to for
any purpose without our prior written consent.
Except as provided in the succeeding sentence, this opinion is solely for
the benefit of the addressees hereof and may not be used, circulated, quoted or
otherwise referred to for any purpose without our prior written consent. U.S.
Bank National Association, in its capacity as Trustee under the Indenture, may
rely upon paragraphs (iii), (iv) and (viii) of this opinion as though it were
addressed to it.
Very truly yours,
-6-
<PAGE>
EXHIBIT C
Form of Opinion of Brett A. Hickman
<PAGE>
EXHIBIT C
[JTM letterhead]
April __, 1998
Nationsbanc Montgomery Securities LLC
100 North Tryon Street
7th Floor
Charlotte, NC 28255
CIBC Oppenheimer Corp.
425 Lexington Avenue
3rd Floor
New York, NY 10017
Ladies and Gentlemen:
I am the Vice President and General Counsel of JTM Industries, Inc., a
Texas corporation (the "Company") and in that capacity am familiar with the
issuance and sale by the Company, pursuant to the Purchase Agreement (the
"Purchase Agreement"), dated April 17, 1998, among the Company, certain
subsidiaries of the Company, and Nationsbanc Montgomery Securities LLC and CIBC
Oppenheimer Corp. (collectively, the "Initial Purchasers") of $100,000,000
aggregate principal amount of the Company's 10% Senior Subordinated Notes due
2008 (the "Notes"), being issued pursuant to an Indenture (the "Indenture"),
dated as of the date hereof, among the Company, the Subsidiary Guarantors (as
defined) and U.S. Bank National Association, as trustee (the "Trustee"). The
Notes are guaranteed (the "Subsidiary Guarantees"), jointly and severally, on a
senior subordinated basis by all existing domestic subsidiaries of the Company
(the "Subsidiary Guarantors").
This opinion is furnished to you pursuant to Section 7(h) of the Purchase
Agreement. Except as otherwise specified, terms used herein have the meanings
ascribed to them in the Purchase Agreement.
In giving the opinions expressed below, I have examined, among other
things: (i) the preliminary offering memorandum, dated March 27, 1998, and the
final offering memorandum, dated April 17, 1998 (the "Offering Memorandum"),
each relating to the Notes being issued by the Company in a private placement
under the Securities Act of 1933, as amended (the "Securities Act"); (ii) the
Purchase Agreement; (iii) the Indenture; and (iv) the Registration Rights
Agreement (the "Registration Rights Agreement"), dated the date hereof, among
the Company, the Subsidiary Guarantors and the Initial Purchasers, providing for
the registration of the Notes under the Securities Act (collectively, the
"Transaction Documents").
I have also examined originals, or copies satisfactory to me, of all such
corporate records, agreements, certificates, governmental orders, permits and
other documents as I have deemed relevant and necessary as a basis for the
opinions hereinafter expressed. In such examination I
<PAGE>
have assumed the genuineness of all signatures, the authenticity of all
documents submitted to me as originals and the conformity with the original
documents of all documents submitted to me as copies. As to any facts material
to such opinions (including determinations with respect to the question of
materiality to the Company's business), I have relied upon the representations
and warranties in the Purchase Agreement, certificates of public officials and
certificates, oaths and declarations of officers or other representatives of the
Company and the Subsidiary Guarantors.
In rendering the opinions expressed below, I have assumed (i) the due
authorization, execution and delivery by each party thereto other than the
Company of the Purchase Agreement, the Registration Rights Agreement, and the
Indenture, and (ii) the legal right and power of such persons under all
applicable laws and regulations to execute, deliver and perform their respective
obligations under, and the validity, binding effect and enforceability against
such persons in accordance with their terms of, the Purchase Agreement, the
Registration Rights Agreement, and the Indenture.
Based on and subject to the foregoing, and subject to the limitations,
qualifications, assumptions and exceptions set forth herein, I am of the opinion
that as of the date hereof:
(i) The Company is validly existing as a corporation and is in good
standing under the laws of the State of Texas. The Company and each of its
subsidiaries are duly qualified to do business and in good standing as
foreign organizations in each jurisdiction in which they own property,
maintain a business or have employees (except where failure to so qualify
would not, singly or in the aggregate, reasonably be expected to have a
Material Adverse Effect).
(ii) The Company has the corporate power and authority to execute
and deliver, and to consummate the transactions contemplated by, the
Purchase Agreement, and the Company has the corporate power and authority
to issue and deliver the Notes as contemplated by the Purchase Agreement.
(iii) The execution and delivery of the Purchase Agreement have been
duly authorized by all requisite corporate action of the Company, and the
Purchase Agreement has been duly executed and delivered by the Company.
(iv) The execution and delivery of the Indenture have been duly
authorized by all requisite corporate action of the Company; and the
Indenture has been duly executed and delivered by the Company.
(v) The execution and delivery of the Notes have been duly
authorized by all requisite corporate action of the Company; and the Notes
have been duly executed and delivered by the Company.
(vi) The execution and delivery of the Registration Rights Agreement
have been duly authorized by all requisite corporate action of the
Company; and the Registration Rights Agreement has been duly executed and
delivered by the Company.
(vii) All of the capital stock of the Company's subsidiaries is
owned of record by the Company. All shares of capital stock of the
Company's subsidiaries have been duly
2
<PAGE>
authorized and validly issued, are fully paid and nonassessable and, except as
disclosed in the Offering Memorandum, to my knowledge, all such shares are owned
by the Company free and clear of any security interests, liens, pledges or
encumbrances.
(viii) The Company and each of its subsidiaries has obtained each material
license, permit, patent, certificate, franchise or other governmental
authorization or permit (collectively, "Permits") necessary to ownership of its
properties or to the conduct of its business as described in the Offering
Memorandum, other than Permits being applied for in the ordinary course of
business and other than Permits the violation of or failure to obtain which
would not, singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(ix) To my knowledge, neither the Company nor any of its subsidiaries is
in violation of its corporate charter or by-laws, or in default under any
agreement (including loan and credit agreements), indenture or instrument known
to me, which default could, singly or in the aggregate, reasonably be expected
to have a Material Adverse Effect; to the best of my knowledge, the Company and
each of its subsidiaries is not in violation of any material law, ordinance,
governmental rule or regulation or court decree to which it may be subject which
violation, singly or in the aggregate, would reasonably be expected to have a
Material Adverse Effect.
(x) To my knowledge, the Company and its subsidiaries own or otherwise
possess the right to use all patents, trademarks, service marks, trade names and
copyrights, any applications and registrations for each of the foregoing, used
in the conduct of their respective businesses as currently conducted; and, to my
knowledge, neither the Company nor any of its subsidiaries has received any
notice, of any infringement of or conflict with the rights of any third party
with respect to any of the foregoing which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a Material
Adverse Effect on the Company.
(xi) To my knowledge, there are no pending actions or suits or judicial,
arbitral, rule-making, administrative or other proceedings to which the Company
or any of its subsidiaries is a party or of which any properties or assets of
the Company or any of its subsidiaries is the subject which (A) singularly or in
the aggregate, if determined adversely to the Company or any of its
subsidiaries, could reasonably be expected to have a Material Adverse Effect or
(B) question the validity or enforceability of any of the Transaction Documents
or any action taken or to be taken pursuant thereto; and to my knowledge, no
such proceedings are threatened or contemplated by governmental authorities or
threatened by others.
(xii) The execution, delivery and performance by the Company and each
Subsidiary Guarantor of each of the Transaction Documents to which it is a
party, the issuance, sale and delivery of the Securities and compliance by the
Company and the Subsidiary Guarantors with the terms thereof and the
consummation of the transactions contemplated by the Transaction Documents will
not conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any properties or assets of
3
<PAGE>
the Company or any of the Subsidiary Guarantors pursuant to, any
indenture, mortgage, deed of trust, loan agreement, lease, charter or
other material agreement or instrument, known to me and to which the
Company or any of the Subsidiary Guarantors is a party or by which the
Company or any of the Subsidiary Guarantors is bound or to which any of
the properties or assets of the Company or any of the Subsidiary
Guarantors is subject.
I express no opinion as to the enforceability of any provisions of the
Indenture, the Securities, the Registration Rights Agreement or the Purchase
Agreement. My opinions are limited to matters expressly stated herein, no
opinion may be inferred or implied beyond the matters expressly stated.
This opinion is given as of the date hereof and I assume no obligation to
update or supplement this opinion to reflect any facts or circumstances which
may hereafter come to my attention or changes in law which may hereafter occur.
Except as provided in the succeeding sentence, this opinion is solely for
the benefit of the addressees hereof and may not be used, circulated, quoted or
otherwise referred to for any purpose without my prior written consent. U.S.
Bank National Association, in its capacity as Trustee under the Indenture, may
rely upon paragraphs (ii), (iv), (v) and (xii) of this opinion as though it were
addressed to it.
Very truly yours,
---------------------------------------
Brett A. Hickman
4
<PAGE>
EXHIBIT D
Form of Opinion of McNaul, Ebel, Nawrot, Heigren & Vance PLLC
<PAGE>
EXHIBIT D
[McNaul, Ebel, Nawrot, Heigren & Vance PLLC letterhead]
April ___,1998
Nationsbanc Montgomery Securities LLC
100 North Tryon Street
7th Floor
Charlotte, NC 28255
CIBC Oppenheimer Corp.
425 Lexington Avenue
3rd Floor
New York, NY 10017
Ladies and Gentlemen:
We have acted as special Washington counsel to Pozzolanic Resources,
Inc., a Washington corporation (the "Company"), in connection with the issuance
and sale by JTM Industries, Inc. ("JTM"), pursuant to the Purchase Agreement
(the "Purchase Agreement"), dated April 17, 1998, among JTM, the Company,
certain other subsidiaries of JTM, and Nationsbanc Montgomery Securities LLC and
CIBC Oppenheimer Corp. (collectively, the "Initial Purchasers") of $100,000,000
aggregate principal amount of JTM's 10% Senior Subordinated Notes due 2008 (the
"Notes"), being issued pursuant to an Indenture (the "Indenture"), dated as of
the date hereof, among JTM, the Company, the other Subsidiary Guarantors (as
defined) and U.S. Bank National Association, as trustee (the "Trustee"). The
Notes are guaranteed (the "Subsidiary Guarantees"), jointly and severally, on a
senior subordinated basis by all existing domestic subsidiaries of JTM (the
"Subsidiary Guarantors"), including the Company.
This opinion is furnished to you pursuant to Section 7(i) of the Purchase
Agreement. Except as otherwise specified, terms used herein have the meanings
ascribed to them in the Purchase Agreement.
In giving the opinions expressed below, we have examined, among other
things: (i) the preliminary offering memorandum, dated March 27, 1998, and the
final offering memorandum, dated April 17, 1998 (the "Offering Memorandum"),
each relating to the Notes being issued by JTM in a private placement under the
Securities Act of 1933, as amended (the "Securities Act"); (ii) the Purchase
Agreement; (iii) the Indenture; and (iv) the Registration Rights Agreement (the
"Registration Rights Agreement"), dated the date hereof, among JTM, the Company,
the other Subsidiary Guarantors and the Initial
<PAGE>
Purchasers, providing for the registration of the Notes under the Securities Act
(collectively, the "Transaction Documents").
We have also examined originals, or copies satisfactory to us, of all such
corporate records, agreements, certificates, governmental orders, permits and
other documents as we have deemed relevant and necessary as a basis for the
opinions hereinafter expressed. In such examination we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity with the original documents of all documents
submitted to us as copies. As to any facts material to such opinions (including
determinations with respect to the question of materiality to the Company's
business), we have relied upon the representations and warranties in the
Purchase Agreement, certificates of public officials and certificates, oaths and
declarations of officers or other representatives of the Company.
The opinions expressed below are limited to the laws of the state of
Washington. In rendering the opinions expressed below, we have assumed (i) the
due authorization, execution and delivery by each party thereto other than the
Company of the Purchase Agreement, the Registration Rights Agreement, and the
Indenture, (ii) the legal right and power of such persons under all applicable
laws and regulations to execute, deliver and perform their respective
obligations under, and the validity, binding effect and enforceability against
such persons in accordance with their terms of, the Purchase Agreement, the
Registration Rights Agreement, and the Indenture, and (iii) that the Articles of
Incorporation and By-Laws of the Company furnished to us are complete, and the
minutes of the Board of Directors meetings of the Company furnished to us
accurately reflect actions taken at meetings at which a quorum was present.
We express no opinion regarding the securities laws issues related to the
issuance of the Notes or the Indenture or the transactions related thereto.
Based upon and subject to the foregoing, we are of the opinion that:
(i) The Company is validly existing as a corporation and is in good
standing under the laws of Washington.
(ii) The Company has the corporate power and authority to execute
and deliver, and to consummate the transactions contemplated by, the
Purchase Agreement, and the Company has the corporate power and authority
to issue and deliver its Subsidiary Guarantee as contemplated by the
Purchase Agreement.
(iii) The execution and delivery of the Purchase Agreement have been
duly authorized by all requisite corporate action of the Company, and the
Purchase Agreement has been duly executed and delivered by the Company.
(iv) The execution and delivery of the Indenture (including the
Company's Subsidiary Guarantee) have been duly authorized by all requisite
corporate action of the Company, and the Indenture (including the
Company's Subsidiary Guarantee) has been duly executed and delivered by
the Company.
2
<PAGE>
(v) The execution and delivery of the Registration Rights Agreement
have been duly authorized by all requisite corporate action of the
Company, and the Registration Rights Agreement has been duly executed and
delivered by the Company.
(vi) All shares of capital stock of the Company have been duly
authorized and validly issued, and are fully paid and nonassessable.
(vii) The Company has obtained each material license, permit,
patent, certificate, franchise or other governmental authorization or
permit (collectively, "Permits") necessary under the laws of the state of
Washington to ownership of its properties or to the conduct of its
business as described in the Offering Memorandum, other than Permits being
applied for in the ordinary course of business and other than Permits the
violation of or failure to obtain which would not, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(viii) To our knowledge, the Company is not in violation of its
corporate charter or by-laws, or in default under any agreement (including
loan and credit agreements), indenture or instrument known to us, which
default could, singly or in the aggregate, reasonably be expected to have
a Material Adverse Effect; to the best of our knowledge, the Company is
not in violation of any material law, ordinance, governmental rule or
regulation or court decree to which it may be subject which violation,
singly or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
(ix) To our knowledge, there are no pending actions or suits or
judicial, arbitral, rule-making, administrative or other proceedings to
which the Company is a party or of which any properties or assets of the
Company is the subject which (A) singularly or in the aggregate, if
determined adversely to the Company, could reasonably be expected to have
a Material Adverse Effect or (B) question the validity or enforceability
of any of the Transaction Documents or any action taken or to be taken
pursuant thereto; and to our knowledge, no such proceedings are threatened
or contemplated by governmental authorities or threatened by others.
We express no opinion as to the enforceability of any provisions of the
Indenture, the Subsidiary Guarantees, the Registration Rights Agreement or the
Purchase Agreement. Our opinions are limited to matters expressly stated herein,
no opinion may be inferred or implied beyond the matters expressly stated.
This opinion is given as of the date hereof and we assume no obligation to
update or supplement this opinion to reflect any facts or circumstances which
may hereafter come to our attention or changes in law which may hereafter occur.
3
<PAGE>
Except as provided in the succeeding sentence, this opinion is solely for
the benefit of the addressees hereof and may not be used, circulated, quoted or
otherwise referred to for any purpose without our prior written consent. U.S.
Bank National Association, in its capacity as Trustee under the Indenture, may
rely upon paragraph (iv) of this opinion as though it were addressed to it.
Very truly yours,
---------------------------------------
4
<PAGE>
EXHIBIT E
Form of Opinion of Heidman, Redmond, Fredregill, Patterson, Plaza & Dykstra,
L.L.P.
<PAGE>
EXHIBIT E
[Heidman, Redmond, Fredregill, Patterson, Plaza & Dykstra L.L.P. letterhead]
April 1998
Nationsbanc Montgomery Securities LLC
100 North Tryon Street
7th Floor
Charlotte, NC 28255
CIBC Oppenheimer Corp.
425 Lexington Avenue
3rd Floor
New York, NY 10017
Ladies and Gentlemen:
We have acted as special Iowa counsel to Power Plant Aggregates of Iowa,
Inc., an Iowa corporation (the "Company"), in connection with the issuance and
sale by JTM Industries, Inc. ("JTM"), pursuant to the Purchase Agreement (the
"Purchase Agreement"), dated April 17, 1998, among JTM, the Company, certain
other subsidiaries of JTM, and Nationsbanc Montgomery Securities LLC and CIBC
Oppenheimer Corp. (collectively, the "Initial Purchasers") of $100,000,000
aggregate principal amount of JTM's 10% Senior Subordinated Notes due 2008 (the
"Notes"), being issued pursuant to an Indenture (the "Indenture"), dated as of
the date hereof, among JTM, the Company, the other Subsidiary Guarantors (as
defined) and U.S. Bank National Association, as trustee (the "Trustee"). The
Notes are guaranteed (the Subsidiary Guarantees"), jointly and severally, on a
senior subordinated basis by all existing domestic subsidiaries of JTM (the
"Subsidiary Guarantors"), including the Company.
This opinion is furnished to you pursuant to Section 7(j) of the Purchase
Agreement. Except as otherwise specified, terms used herein have the meanings
ascribed to them in the Purchase Agreement.
In giving the opinions expressed below, we have examined, among other
things: (i) the preliminary offering memorandum, dated March 27, 1998, and the
final offering memorandum, dated April 17, 1998 (the "Offering Memorandum"),
each relating to the Notes being issued by JTM in a private placement under the
Securities Act of 1933, as amended (the "Securities Act"); (ii) the Purchase
Agreement; (iii) the Indenture; and (iv) the Registration Rights Agreement (the
"Registration Rights Agreement"), dated the date hereof, among JTM, the Company,
the other Subsidiary Guarantors and the Initial Purchasers, providing for the
registration of the Notes under the Securities Act (collectively, the
"Transaction Documents").
<PAGE>
We have also examined originals, or copies satisfactory to us, of all such
corporate records, agreements, certificates, governmental orders, permits and
other documents as we have deemed relevant and necessary as a basis for the
opinions hereinafter expressed. In such examination we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity with the original documents of all documents
submitted to us as copies. As to any facts material to such opinions (including
determinations with respect to the question of materiality to the Company's
business), we have relied upon the representations and warranties in the
Purchase Agreement, certificates of public officials and certificates, oaths and
declarations of officers or other representatives of the Company.
The opinions expressed below are limited to the laws of the state of Iowa.
In rendering the opinions expressed below, we have assumed (i) the due
authorization, execution and delivery by each party thereto other than the
Company of the Purchase Agreement, the Registration Rights Agreement, and the
Indenture, (ii) the legal right and power of such persons under all applicable
laws and regulations to execute, deliver and perform their respective
obligations under, and the validity, binding effect and enforceability against
such persons in accordance with their terms of, the Purchase Agreement, the
Registration Rights Agreement, and the Indenture, and (iii) that the Articles of
Incorporation and By-Laws of the Company furnished to us are complete, and the
minutes of the Board of Directors meetings of the Company furnished to us
accurately reflect actions taken at meetings at which a quorum was present.
We express no opinion regarding the securities laws issues related to the
issuance of the Notes or the Indenture or the transactions related thereto.
Based upon and subject to the foregoing, we are of the opinion that:
(i) The Company is validly existing as a corporation and is in good
standing under the laws of Iowa.
(ii) The Company has the corporate power and authority to execute
and deliver, and to consummate the transactions contemplated by, the
Purchase Agreement, and the Company has the corporate power and authority
to issue and deliver its Subsidiary Guarantee as contemplated by the
Purchase Agreement.
(iii) The execution and delivery of the Purchase Agreement have been
duly authorized by all requisite corporate action of the Company, and the
Purchase Agreement has been duly executed and delivered by the Company.
(iv) The execution and delivery of the Indenture (including the
Company's Subsidiary Guarantee) have been duly authorized by all requisite
corporate action of the Company, and the Indenture (including the
Company's Subsidiary Guarantee) has been duly executed and delivered by
the Company.
(v) The execution and delivery of the Registration Rights Agreement
have been duly authorized by all requisite corporate action of the
Company, and the
2
<PAGE>
Registration Rights Agreement has been duly executed and delivered by the
Company.
(vi) All shares of capital stock of the Company have been duly
authorized and validly issued, and are fully paid and nonassessable.
(vii) The Company has obtained each material license, permit,
patent, certificate, franchise or other governmental authorization or
permit (collectively, "Permits") necessary under the laws of the state of
Iowa to ownership of its properties or to the conduct of its business as
described in the Offering Memorandum, other than Permits being applied for
in the ordinary course of business and other than Permits the violation of
or failure to obtain which would not, singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(viii) To our knowledge, the Company is not in violation of its
corporate charter or by-laws, or in default under any agreement (including
loan and credit agreements), indenture or instrument known to us, which
default could, singly or in the aggregate, reasonably be expected to have
a Material Adverse Effect; to the best of our knowledge, the Company is
not in violation of any material law, ordinance, governmental rule or
regulation or court decree to which it may be subject which violation,
singly or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
(ix) To our knowledge, there are no pending actions or suits or
judicial, arbitral, rule-making, administrative or other proceedings to
which the Company is a party or of which any properties or assets of the
Company is the subject which (A) singularly or in the aggregate, if
determined adversely to the Company, could reasonably be expected to have
a Material Adverse Effect or (B) question the validity or enforceability
of any of the Transaction Documents or any action taken or to be taken
pursuant thereto; and to our knowledge, no such proceedings are threatened
or contemplated by governmental authorities or threatened by others.
We express no opinion as to the enforceability of any provisions of the
Indenture, the Subsidiary Guarantees, the Registration Rights Agreement or the
Purchase Agreement. Our opinions are limited to matters expressly stated herein,
no opinion may be inferred or implied beyond the matters expressly stated.
This opinion is given as of the date hereof and we assume no obligation to
update or supplement this opinion to reflect any facts or circumstances which
may hereafter come to our attention or changes in law which may hereafter occur.
3
<PAGE>
Except as provided in the succeeding sentence, this opinion is solely for
the benefit of the addressees hereof and may not be used, circulated, quoted or
otherwise referred to for any purpose without our prior written consent. U.S.
Bank National Association, in its capacity as Trustee under the Indenture, may
rely upon paragraph (iv) of this opinion as though it were addressed to it.
Very truly yours,
--------------------------------------
4
<PAGE>
EXHIBIT F
Form of Opinion of Braun Kendrick Finkbeiner P.L.C.
<PAGE>
EXHIBIT F
[Braun Kendrick Finkbeiner P.L.C. letterhead]
April 1998
Nationsbanc Montgomery Securities LLC
100 North Tryon Street
7th Floor
Charlotte, NC 28255
CIBC Oppenheimer Corp.
425 Lexington Avenue
3rd Floor New York, NY 10017
Ladies and Gentlemen:
We have acted as special Michigan counsel to Michigan Ash Sales Company,
d.b.a. U.S. Ash Company, together with two affiliated companies, U.S.
Stabilization, Inc. and Flo Fil Co., Inc., a Michigan corporation (the
"Company"), in connection with the issuance and sale by JTM Industries, Inc.
("JTM"), pursuant to the Purchase Agreement (the "Purchase Agreement"), dated
April 17, 1998, among JTM, the Company, certain other subsidiaries of JTM, and
Nationsbanc Montgomery Securities LLC and CIBC Oppenheimer Corp. (collectively,
the "Initial Purchasers") of $l00,000,000 aggregate principal amount of JTM's
10% Senior Subordinated Notes due 2008 (the "Notes"), being issued pursuant to
an Indenture (the "Indenture"), dated as of the date hereof, among JTM, the
Company, the other Subsidiary Guarantors (as defined) and U.S. Bank National
Association, as trustee (the "Trustee"). The Notes are guaranteed (the
"Subsidiary Guarantees"), jointly and severally, on a senior subordinated basis
by all existing domestic subsidiaries of JTM (the "Subsidiary Guarantors"),
including the Company.
This opinion is furnished to you pursuant to Section 7(k) of the Purchase
Agreement. Except as otherwise specified, terms used herein have the meanings
ascribed to them in the Purchase Agreement.
In giving the opinions expressed below, we have examined, among other
things: (i) the preliminary offering memorandum, dated March 27, 1998, and the
final offering memorandum, dated April 17, 1998 (the "Offering Memorandum"),
each relating to the Notes being issued by JTM in a private placement under the
Securities Act of 1933, as amended (the "Securities Act"); (ii) the Purchase
Agreement; (iii) the Indenture; and (iv) the
<PAGE>
Registration Rights Agreement (the "Registration Rights Agreement"), dated the
date hereof, among JTM, the Company, the other Subsidiary Guarantors and the
Initial Purchasers, providing for the registration of the Notes under the
Securities Act (collectively, the "Transaction Documents").
We have also examined originals, or copies satisfactory to us, of all such
corporate records, agreements, certificates, governmental orders, permits and
other documents as we have deemed relevant and necessary as a basis for the
opinions hereinafter expressed. In such examination we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity with the original documents of all documents
submitted to us as copies. As to any facts material to such opinions (including
determinations with respect to the question of materiality to the Company's
business), we have relied upon the representations and warranties in the
Purchase Agreement, certificates of public officials and certificates, oaths and
declarations of officers or other representatives of the Company.
The opinions expressed below are limited to the laws of the state of
Michigan. In rendering the opinions expressed below, we have assumed (i) the due
authorization, execution and delivery by each party thereto other than the
Company of the Purchase Agreement, the Registration Rights Agreement, and the
Indenture, (ii) the legal right and power of such persons under all applicable
laws and regulations to execute, deliver and perform their respective
obligations under, and the validity, binding effect and enforceability against
such persons in accordance with their terms of, the Purchase Agreement, the
Registration Rights Agreement, and the Indenture, and (iii) that the Articles of
Incorporation and By-Laws of the Company furnished to us are complete, and the
minutes of the Board of Directors meetings of the Company furnished to us
accurately reflect actions taken at meetings at which a quorum was present.
We express no opinion regarding the securities laws issues related to the
issuance of the Notes or the Indenture or the transactions related thereto.
Based upon and subject to the foregoing, we are of the opinion that:
(i) The Company is validly existing as a corporation and is in good
standing under the laws of Michigan.
(ii) The Company has the corporate power and authority to execute
and deliver, and to consummate the transactions contemplated by, the
Purchase Agreement, and the Company has the corporate power and authority
to issue and deliver its Subsidiary Guarantee as contemplated by the
Purchase Agreement.
(iii) The execution and delivery of the Purchase Agreement have been
duly authorized by all requisite corporate action of the Company, and the
Purchase Agreement has been duly executed and delivered by the Company.
(iv) The execution and delivery of the Indenture (including the
Company's Subsidiary Guarantee) have been duly authorized by all requisite
corporate action of
2
<PAGE>
the Company, and the Indenture (including the Company's Subsidiary Guarantee)
has been duly executed and delivered by the Company.
(v) The execution and delivery of the Registration Rights Agreement
have been duly authorized by all requisite corporate action of the
Company, and the Registration Rights Agreement has been duly executed and
delivered by the Company.
(vi) All shares of capital stock of the Company have been duly
authorized and validly issued, and are fully paid and nonassessable.
(vii) The Company has obtained each material license, permit,
patent, certificate, franchise or other governmental authorization or
permit (collectively, "Permits") necessary under the laws of the state of
Michigan to ownership of its properties or to the conduct of its business
as described in the Offering Memorandum, other than Permits being applied
for in the ordinary course of business and other than Permits the
violation of or failure to obtain which would not, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(viii) To our knowledge, the Company is not in violation of its
corporate charter or by-laws, or in default under any agreement (including
loan and credit agreements), indenture or instrument known to us, which
default could, singly or in the aggregate, reasonably be expected to have
a Material Adverse Effect; to the best of our knowledge, the Company is
not in violation of any material law, ordinance, governmental rule or
regulation or court decree to which it may be subject which violation,
singly or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
(ix) To our knowledge, there are no pending actions or suits or
judicial, arbitral, rule-making. administrative or other proceedings to
which the Company is a party or of which any properties or assets of the
Company is the subject which (A) singularly or in the aggregate, if
determined adversely to the Company, could reasonably be expected to have
a Material Adverse Effect or (B) question the validity or enforceability
of any of the Transaction Documents or any action taken or to be taken
pursuant thereto; and to our knowledge, no such proceedings are threatened
or contemplated by governmental authorities or threatened by others.
We express no opinion as to the enforceability of any provisions of the
Indenture, the Subsidiary Guarantees, the Registration Rights Agreement or the
Purchase Agreement. Our opinions are limited to matters expressly stated herein,
no opinion may be inferred or implied beyond the matters expressly stated.
This opinion is given as of the date hereof and we assume no obligation to
update or supplement this opinion to reflect any facts or circumstances which
may hereafter come to our attention or changes in law which may hereafter occur.
Except as provided in the succeeding sentence, this opinion is solely for
the benefit of the addressees hereof and may not be used, circulated, quoted or
otherwise referred to for
3
<PAGE>
any purpose without our prior written consent. U.S. Bank National Association,
in its capacity as Trustee under the Indenture, may rely upon paragraph (iv) of
this opinion as though it were addressed to it.
Very truly yours,
----------------------------------------
4
<PAGE>
EXHIBIT G
Form of Opinion of Bridges, Young, Matthews & Drake P.L.C.
<PAGE>
EXHIBIT G
[Bridges, Young, Matthews & Drake letterhead]
April __, 1998
Nationsbanc Montgomery Securities LLC
100 North Tryon Street
7th Floor
Charlotte, NC 28255
CIBC Oppenheimer Corp.
425 Lexington Avenue
3rd Floor
New York, NY 10017
Ladies and Gentlemen:
We have acted as special Arkansas counsel to Fly Ash Products, Inc., an
Arkansas corporation (the "Company"), in connection with the issuance and sale
by JTM Industries, Inc. "JTM" pursuant to the Purchase Agreement (the "Purchase
Agreement"), dated April 17, 1998, among JTM, the Company, certain other
subsidiaries of JTM, and Nationsbanc Montgomery Securities LLC and CIBC
Oppenheimer Corp. (collectively, the "Initial Purchasers") of $100,000,000
aggregate principal amount of JTM's 10% Senior Subordinated Notes due 2008 (the
"Notes"), being issued pursuant to an Indenture (the "Indenture"), dated as of
the date hereof, among JTM, the Company, the other Subsidiary Guarantors (as
defined) and U.S. Bank National Association, as trustee (the "Trustee"). The
Notes are guaranteed (the "Subsidiary Guarantees"), jointly and severally, on a
senior subordinated basis by all existing domestic subsidiaries of JTM (the
"Subsidiary Guarantors"), including the Company.
This opinion is furnished to you pursuant to Section 7(1) of the Purchase
Agreement. Except as otherwise specified, terms used herein have the meanings
ascribed to them in the Purchase Agreement.
In giving the opinions expressed below, we have examined, among other
things: (i) the preliminary offering memorandum, dated March 27, 1998, and the
final offering memorandum, dated April 17, 1998 (the "Offering Memorandum"),
each relating to the Notes being issued by JTM in a private placement under the
Securities Act of 1933, as amended (the "Securities Act"); (ii) the Purchase
Agreement; (iii) the Indenture; and (iv) the Registration Rights Agreement (the
"Registration Rights Agreement"), dated the date hereof, among JTM, the Company,
the other Subsidiary Guarantors and the Initial Purchasers, providing for the
registration of the Notes under the Securities Act (collectively, the
"Transaction Documents").
<PAGE>
We have also examined originals, or copies satisfactory to us, of all
such corporate records, agreements, certificates, governmental orders, permits
and other documents as we have deemed relevant and necessary as a basis for the
opinions hereinafter expressed. In such examination we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity with the original documents of all documents
submitted to us as copies. As to any facts material to such opinions (including
determinations with respect to the question of materiality to the Company's
business), we have relied upon the representations and warranties in the
Purchase Agreement, certificates of public officials and certificates, oaths and
declarations of officers or other representatives of the Company.
The opinions expressed below are limited to the laws of the state of
Arkansas. In rendering the opinions expressed below, we have assumed (i) the due
authorization, execution and delivery by each party thereto other than the
Company of the Purchase Agreement, the Registration Rights Agreement, and the
Indenture, (ii) the legal right and power of such persons under all applicable
laws and regulations to execute, deliver and perform their respective
obligations under, and the validity, binding effect and enforceability against
such persons in accordance with their terms of, the Purchase Agreement, the
Registration Rights Agreement, and the Indenture, and (iii) that the Articles of
Incorporation and By-Laws of the Company furnished to us are complete, and the
minutes of the Board of Directors meetings of the Company furnished to us
accurately reflect actions taken at meetings at which a quorum was present.
We express no opinion regarding the securities laws issues related to the
issuance of the Notes or the Indenture or the transactions related thereto.
Based upon and subject to the foregoing, we are of the opinion that:
(i) The Company is validly existing as a corporation and is in good
standing under the laws of Arkansas.
(ii) The Company has the corporate power and authority to execute
and deliver, and to consummate the transactions contemplated by, the
Purchase Agreement, and the Company has the corporate power and authority
to issue and deliver its Subsidiary Guarantee as contemplated by the
Purchase Agreement.
(iii) The execution and delivery of the Purchase Agreement have been
duly authorized by all requisite corporate action of the Company, and the
Purchase Agreement has been duly executed and delivered by the Company.
(iv) The execution and delivery of the Indenture (including the
Company's Subsidiary Guarantee) have been duly authorized by all requisite
corporate action of the Company, and the Indenture (including the
Company's Subsidiary Guarantee) has been duly executed and delivered by
the Company.
(v) The execution and delivery of the Registration Rights Agreement
have been duly authorized by all requisite corporate action of the
Company, and the
2
<PAGE>
Registration Rights Agreement has been duly executed and delivered by the
Company.
(vi) All shares of capital stock of the Company have been duly
authorized and validly issued, and are fully paid and nonassessable.
(vii) The Company has obtained each material license, permit,
patent, certificate, franchise or other governmental authorization or
permit (collectively, "Permits") necessary under the laws of the state of
Arkansas to ownership of its properties or to the conduct of its business
as described in the Offering Memorandum, other than Permits being applied
for in the ordinary course of business and other than Permits the
violation of or failure to obtain which would not, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(viii) To our knowledge, the Company is not in violation of its
corporate charter or by-laws, or in default under any agreement (including
loan and credit agreements), indenture or instrument known to us, which
default could, singly or in the aggregate, reasonably be expected to have
a Material Adverse Effect; to the best of our knowledge, the Company is
not in violation of any material law, ordinance, governmental rule or
regulation or court decree to which it may be subject which violation,
singly or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
(ix) To our knowledge, there are no pending actions or suits or
judicial, arbitral, rule-making, administrative or other proceedings to
which the Company is a party or of which any properties or assets of the
Company is the subject which (A) singularly or in the aggregate, if
determined adversely to the Company, could reasonably be expected to have
a Material Adverse Effect or (B) question the validity or enforceability
of any of the Transaction Documents or any action taken or to be taken
pursuant thereto; and to our knowledge, no such proceedings are threatened
or contemplated by governmental authorities or threatened by others.
We express no opinion as to the enforceability of any provisions of the
Indenture, the Subsidiary Guarantees, the Registration Rights Agreement or the
Purchase Agreement. Our opinions are limited to matters expressly stated herein,
no opinion may be inferred or implied beyond the matters expressly stated.
This opinion is given as of the date hereof and we assume no obligation to
update or supplement this opinion to reflect any facts or circumstances which
may hereafter come to our attention or changes in law which may hereafter occur.
3
<PAGE>
Except as provided in the succeeding sentence, this opinion is solely for
the benefit of the addressees hereof and may not be used, circulated, quoted or
otherwise referred to for any purpose without our prior written consent. U.S.
Bank National Association, in its capacity as Trustee under the Indenture, may
rely upon paragraph (iv) of this opinion as though it were addressed to it.
Very truly yours,
---------------------------------------
4
<PAGE>
SCHEDULE A
Subsidiaries
Name Jurisdiction of Incorporation
- ---- -----------------------------
Pozzolanic Resources, Inc. Washington
Power Plant Aggregates of Iowa, Inc. Iowa
KBK Enterprises, Inc. Pennsylvania
Michigan Ash Sales Company,
d.b.a. U.S. Ash Company Michigan
U.S. Stabilization, Inc. Michigan
Flo Fil Co., Inc. Michigan
Fly Ash Products, Inc. Arkansas
<PAGE>
SCHEDULE B
JTM INDUSTRIES, INC.
Initial Purchaser Amount
- ----------------- ------
NationsBanc Montgomery Securities LLC ............... $ 65,000,000.00
CIBC Oppenheimer Corp................................ $ 35,000,000.00
$100,000,000.00
===============
<PAGE>
Exhibit 10.2
Execution Copy
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of April 22, 1998
by and among
JTM Industries, Inc.
The Guarantors Signatories Hereto
and
NationsBanc Montgomery Securities LLC
and
CIBC Oppenheimer Corp.
================================================================================
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and entered
into as of April 22, 1998, by and among JTM Industries, Inc., a Texas
corporation (the "Company"), the Guarantors signatories hereto (each a
"Guarantor" and, collectively, the "Guarantors"), and NationsBanc Montgomery
Securities LLC and CIBC Oppenheimer Corp. (the "Initial Purchasers"), each of
whom has agreed to purchase the Company's 10% Senior Subordinated Notes due 2008
(the "Series A Notes") pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to that certain Purchase Agreement, dated
April 17, 1998 (the "Purchase Agreement"), by and among the Company, the
Guarantors and the Initial Purchasers. In order to induce the Initial Purchasers
to purchase the Series A Notes, the Company has agreed to provide the
registration rights set forth in this Agreement. The execution and delivery of
this Agreement is a condition to the obligations of the Initial Purchasers set
forth in Section 7 of the Purchase Agreement. Capitalized terms used herein and
not otherwise defined shall have the meaning assigned to them in the Indenture,
dated April 22, 1998, between the Company, the Guarantors and U.S. Bank National
Association, as Trustee, relating to the Series A Notes and the Series B Notes
(the "Indenture").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933, as amended.
Affiliate: As defined in Rule 144 of the Act.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Business Day: Any day except a Saturday, Sunday or other day in the City
of New York on which banks are authorized or ordered to close.
Certificated Securities: Definitive Notes, as defined in the Indenture.
Closing Date: The date hereof.
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated" for purposes of this
Agreement upon the occurrence of (a) the filing and effectiveness under the Act
of the Exchange Offer Registration Statement relating to the Series B Notes to
be issued in the Exchange Offer, (b) the maintenance of such Exchange Offer
Registration Statement to be continuously effective and the keeping of the
Exchange Offer open for a period not less than the period required pursuant to
Section 3(b) hereof and (c) the delivery by the Company to the Registrar under
the
<PAGE>
Indenture of Series B Notes in the same aggregate principal amount as the
aggregate principal amount of Series A Notes tendered by Holders thereof
pursuant to the Exchange Offer.
Consummation Deadline: As defined in Section 3(b) hereof.
Effectiveness Deadline: As defined in Section 3(a) and 4(a) hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Offer: The exchange and issuance by the Company of a principal
amount of Series B Notes (which shall be registered pursuant to the Exchange
Offer Registration Statement) equal to the outstanding principal amount of
Series A Notes that are tendered by such Holders in connection with such
exchange and issuance.
Exchange Offer Registration Statement: The Registration Statement relating
to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers propose
to sell the Series A Notes to certain "qualified institutional buyers," as such
term is defined in Rule 144A under the Act, to certain "accredited investors,"
as such term is defined in Rule 501(a)(1), (2), (3) and (7) of Regulation D
under the Act and pursuant to Regulation S under the Act.
Filing Deadline: As defined in Sections 3(a) and 4(a) hereof.
Holders: As defined in Section 2 hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Indemnified Party: As defined in Section 8(c) hereof.
Indemnifying Party: As defined in Section 8(c) hereof.
Indenture: The Indenture, dated as of the Closing Date, between the
Company, the Guarantors and U.S. Bank, National Association, as trustee (the
"Trustee"), pursuant to which the Notes are to be issued, as such Indenture is
amended or supplemented from time to time in accordance with the terms therein.
Liquidated Damages: As defined in Section 5 hereof.
Notes: Series A and Series B Notes.
Prospectus: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such prospectus.
Recommencement Date: As defined in Section 6(d) hereof.
2
<PAGE>
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Company and the
Guarantors relating to (a) an offering of Series B Notes pursuant to an Exchange
Offer or (b) the registration for resale of Transfer Restricted Securities
pursuant to the Shelf Registration Statement, in each case, (i) that is filed
pursuant to the provisions of this Agreement and (ii) including the Prospectus
included therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and material incorporated by
reference therein.
Regulation S: Regulation S promulgated under the Act.
Restricted Broker-Dealer: Any Broker-Dealer that holds Series B Notes that
were acquired in the Exchange Offer in exchange for Series A Notes that such
Broker-Dealer acquired for its own account as a result of market making
activities or other trading activities (other than Series A Notes acquired
directly from the Company or any of its affiliates).
Rule 144: Rule 144 promulgated under the Act.
Series B Notes: The Company's 10% Series B Senior Subordinated Notes due
2008 to be issued pursuant to the Indenture in the Exchange Offer or as
contemplated by Section 4 hereof.
Shelf Registration Statement: As defined in Section 4 hereof.
Suspension Notice: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as
in effect on the date of the Indenture.
Transfer Restricted Securities: Each Note, until the earliest to occur of
(a) the date on which such Note is exchanged in the Exchange Offer for a Series
B Note and entitled to be resold to the public by the Holder thereof without
complying with the prospectus delivery requirements of the Act, (b) the date on
which such Note has been disposed of in accordance with a Shelf Registration
Statement, (c) the date on which such Series A Note is disposed of by a
Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the
Exchange Offer Registration Statement (including delivery of the Prospectus
contained therein) or (d) the date on which such Series A Note is distributed to
the public pursuant to Rule 144 under the Act.
Trustee: As set forth in the Indenture and shall also include any of its
successors.
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities (a
"Holder") whenever such Person owns Transfer Restricted Securities.
3
<PAGE>
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable federal
law (after the procedures set forth in Section 6(a)(i) below have been complied
with), the Company and the Guarantors shall (i) cause the Exchange Offer
Registration Statement to be filed with the Commission as soon as practicable
after the Closing Date, but in no event later than 45 days after the Closing
Date (such 45th day being the "Filing Deadline"), (ii) use its best efforts to
cause such Exchange Offer Registration Statement to become effective at the
earliest possible time, but in no event later than 135 days after the Closing
Date (such 135th day being the "Effectiveness Deadline"), (iii) in connection
with the foregoing, (A) file all pre-effective amendments to such Exchange Offer
Registration Statement as may be necessary in order to cause it to become
effective, (B) file, if applicable, a post-effective amendment to such Exchange
Offer Registration Statement pursuant to Rule 430A under the Act and (C) cause
all necessary filings, if any, in connection with the registration and
qualification of the Series B Notes to be made under the Blue Sky laws of such
jurisdictions as are necessary to permit Consummation of the Exchange Offer, and
(iv) upon the effectiveness of such Exchange Offer Registration Statement,
commence and Consummate the Exchange Offer. The Exchange Offer shall be on the
appropriate form permitting (i) registration of the Series B Notes to be offered
in exchange for the Series A Notes that are Transfer Restricted Securities and
(ii) resales of Series B Notes by Broker-Dealers that tendered into the Exchange
Offer Series A Notes that such Broker-Dealer acquired for its own account as a
result of market making activities or other trading activities (other than
Series A Notes acquired directly from the Company or any of its Affiliates) as
contemplated by Section 3(c) below.
(b) The Company and the Guarantors shall use their respective best efforts
to cause the Exchange Offer Registration Statement to be effective continuously,
and shall keep the Exchange Offer open for a period of not less than the minimum
period required under applicable federal and state securities laws to Consummate
the Exchange Offer; provided, however, that in no event shall such period be
less than 30 Business Days. The Company and the Guarantors shall cause the
Exchange Offer to comply with all applicable federal and state securities laws.
No securities other than the Series B Notes and the guarantee thereof shall be
included in the Exchange Offer Registration Statement. The Company and the
Guarantors shall use their respective best efforts to cause the Exchange Offer
to be Consummated on the earliest practicable date after the Exchange Offer
Registration Statement has become effective, but in no event later than 45
business days thereafter (such 45th day being the "Consummation Deadline").
(c) (1) The Company shall include a Plan of "Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Broker-Dealer who holds Transfer Restricted Securities that
were acquired for the account of such Broker-Dealer as a result of market-making
activities or other trading activities (other than Transfer Restricted
Securities acquired directly from the Company or any Affiliate of the Company)
may exchange such Transfer Restricted Securities pursuant to the Exchange Offer;
however, such Broker-Dealer may be deemed to be an "underwriter" within the
meaning of the Act and must, therefore, deliver a prospectus meeting the
requirements of the Act in connection with its initial resale of any Series B
Notes received by such Broker-Dealer in the Exchange
4
<PAGE>
Offer, and that the Prospectus contained in the Exchange Offer Registration
Statement may be used to satisfy such prospectus delivery requirement. Such
"Plan of Distribution" section shall also contain all other information with
respect to such sales by such Broker-Dealers that the Commission may require in
order to permit such sales pursuant thereto, but such "Plan of Distribution"
shall not name any such Broker-Dealer or disclose the amount of Transfer
Restricted Securities held by any such Broker-Dealer, except to the extent
required by the Commission as a result of a change in policy, rules or
regulations after the date of this Agreement.
(2) To the extent necessary to ensure that the Exchange Offer Registration
Statement is available for sales of Series B Notes by Broker-Dealers, upon the
reasonable request of any Broker-Dealer who certifies in writing to the Company
that it anticipates it will be a Restricted-Broker Dealer, the Company and the
Guarantors agree to use their respective best efforts to keep the Exchange Offer
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Section 6(c) hereof and in conformity with the
requirements of this Agreement, the Act and the policies, rules and regulations
of the Commission as announced from time to time, for a period of one year from
the date on which the Exchange Offer is Consummated, or such shorter period as
will terminate when all Transfer Restricted Securities covered by such
Registration Statement have been sold pursuant thereto. The Company and the
Guarantors shall promptly provide sufficient copies of the latest version of
such Prospectus to such Broker-Dealers promptly upon request, and in no event
later than one Business Day after such request, at any time during such period.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Exchange Offer is not permitted by
applicable law (after the Company and the Guarantors have complied with the
procedures set forth in Section 6(a)(i) below) or (ii) if any Holder of Transfer
Restricted Securities shall notify the Company within 20 Business Days following
the Consummation Deadline that (A) such Holder was prohibited by law or
Commission policy from participating in the Exchange Offer or (B) such Holder
may not resell the Series B Notes acquired by it in the Exchange Offer to the
public without delivering a prospectus and the Prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resales by such Holder or (C) such Holder is a Broker-Dealer and holds Series A
Notes acquired directly from the Company or any of its Affiliates, then the
Company and the Guarantors shall:
(x) cause to be filed, on or prior to 45 days after the earlier of (i) the
date on which the Company determines that the Exchange Offer Registration
Statement cannot be filed as a result of clause (a)(i) above and (ii) the date
on which the Company receives the notice specified in clause (a)(ii) above,
(such earlier date, the "Filing Deadline"), a shelf registration statement
pursuant to Rule 415 under the Act (which may be an amendment to the Exchange
Offer Registration Statement (the "Shelf Registration Statement")), relating to
all Transfer Restricted Securities, and
5
<PAGE>
(y) shall use their respective best efforts to cause such Shelf
Registration Statement to become effective on or prior to 135 days after the
earlier of (i) the date on which the Company determines that the Exchange Offer
Registration Statement cannot be filed as a result of clause (a)(i) above and
(ii) the date on which the Company receives the notice specified in clause
(a)(ii) above (such 135th day the "Effectiveness Deadline").
If, after the Company and the Guarantors have filed an Exchange Offer
Registration Statement that satisfies the requirements of Section 3(a) above,
the Company and the Guarantors are required to file and make effective a Shelf
Registration Statement solely because the Exchange Offer is not permitted under
applicable federal law (i.e., clause (a)(i) above), then the filing of the
Exchange Offer Registration Statement shall be deemed to satisfy the
requirements of clause (x) above; provided that, in such event, the Company and
the Guarantors shall remain obligated to meet the Effectiveness Deadline set
forth in clause (y).
The Company and the Guarantors shall use their respective best efforts to
keep any Shelf Registration Statement required by this Section 4(a) continuously
effective, supplemented and amended as required by and subject to the provisions
of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is
available for sales of Transfer Restricted Securities by the Holders thereof
entitled to the benefit of this Section 4(a), in order to ensure that it
conforms with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of at least two years (as extended pursuant to Section 6(c)(i)) following
the date on which such Shelf Registration Statement first becomes effective
under the Act, or such shorter period as will terminate when all Transfer
Restricted Securities covered by such Registration Statement have been sold
pursuant thereto.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, the
information specified in Item 507 or 508 of Regulation S-K, as applicable, of
the Act for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein. No Holder of Transfer
Restricted Securities shall be entitled to Liquidated Damages pursuant to
Section 5 hereof unless and until such Holder shall have provided all such
information. Each selling Holder agrees to promptly furnish additional
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not filed
with the Commission on or prior to the applicable Filing Deadline, (ii) any such
Registration Statement has not been declared effective by the Commission on or
prior to the applicable Effectiveness Deadline, (iii) the Exchange Offer has not
been Consummated on or prior to the Consummation Deadline or (iv) any
Registration Statement required by this Agreement is filed and declared
effective but shall thereafter cease to be effective or fail to be usable for
its intended purpose
6
<PAGE>
without being succeeded immediately by a post-effective amendment to such
Registration Statement that cures such failure and that is itself declared
effective immediately (each such event referred to in clauses (i) through (iv),
a "Registration Default"), then the Company and the Guarantors hereby jointly
and severally agree to pay to each Holder of Transfer Restricted Securities
affected thereby Liquidated Damages in an amount equal to $.05 per week per
$1,000 in principal amount of Transfer Restricted Securities held by such Holder
for each week or portion thereof that the Registration Default continues for the
first 90-day period immediately following the occurrence of such Registration
Default ("Liquidated Damages"). The amount of the Liquidated Damages shall
increase by an additional $.05 per week per $1,000 in principal amount of
Transfer Restricted Securities with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of
Liquidated Damages of $.28 per week per $1,000 in principal amount of Transfer
Restricted Securities; provided that the Company and the Guarantors shall in no
event be required to pay Liquidated Damages for more than one Registration
Default at any given time. Notwithstanding anything to the contrary set forth
herein, (1) upon filing of the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration Statement), in the case of (i) above, (2)
upon the effectiveness of the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration Statement), in the case of (ii) above, (3)
upon Consummation of the Exchange Offer, in the case of (iii) above, or (4) upon
the filing of a post-effective amendment to the Registration Statement or an
additional Registration Statement that causes the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement) to again be
declared effective or made usable in the case of (iv) above, the Liquidated
Damages payable with respect to the Transfer Restricted Securities as a result
of such clause (i), (ii), (iii) or (iv), as applicable, shall cease.
All accrued Liquidated Damages shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Indenture, on
each Interest Payment Date, as more fully set forth in the Indenture and the
Notes. All obligations of the Company and the Guarantors set forth in the
preceding paragraph that are outstanding with respect to any Transfer Restricted
Security at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such obligations with respect to such
Transfer Restricted Security shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the Exchange
Offer, the Company and the Guarantors shall (x) comply with all applicable
provisions of Section 6(c) below, (y) use their respective best efforts to
effect such exchange and to permit the resale of Series B Notes by
Broker-Dealers that tendered in the Exchange Offer Series A Notes that such
Broker-Dealer acquired for its own account as a result of its market making
activities or other trading activities (other than Series A Notes acquired
directly from the Company or any of its Affiliates) being sold in accordance
with the intended method or methods of distribution thereof and (z) comply with
all of the following provisions:
(i) If, following the Closing Date, there has been announced a
change in Commission policy with respect to exchange offers such as the
Exchange Offer, that in
7
<PAGE>
the reasonable opinion of counsel to the Company raises a substantial
question as to whether the Exchange Offer is permitted by applicable
federal law, the Company and the Guarantors hereby agree to seek a
no-action letter or other favorable decision from the Commission allowing
the Company and the Guarantors to Consummate an Exchange Offer for such
Transfer Restricted Securities. The Company and the Guarantors hereby
agree to pursue the issuance of such a decision to the Commission staff
level. In connection with the foregoing, the Company and the Guarantors
hereby agree to take all such other actions as may be requested by the
Commission or otherwise required in connection with the issuance of such
decision, including without limitation (A) participating in telephonic
conferences with the Commission, (B) delivering to the Commission staff an
analysis prepared by counsel to the Company setting forth the legal bases,
if any, upon which such counsel has concluded that such an Exchange Offer
should be permitted and (C) diligently pursuing a resolution (which need
not be favorable) by the Commission staff.
(ii) As a condition to its participation in the Exchange Offer, each
Holder of Transfer Restricted Securities (including, without limitation,
any Holder who is a Broker Dealer) shall furnish, upon the request of the
Company, prior to the Consummation of the Exchange Offer, a written
representation to the Company and the Guarantors (which may be contained
in the letter of transmittal contemplated by the Exchange Offer
Registration Statement) to the effect that (A) it is not an Affiliate of
the Company, (B) it is not engaged in, and does not intend to engage in,
and has no arrangement or understanding with any person to participate in,
a distribution of the Series B Notes to be issued in the Exchange Offer
and (C) it is acquiring the Series B Notes in its ordinary course of
business. As a condition to its participation in the Exchange Offer, each
Holder using the Exchange Offer to participate in a distribution of the
Series B Notes shall acknowledge and agree that, if the resales are of
Series B Notes obtained by such Holder in exchange for Series A Notes
acquired directly from the Company or an Affiliate thereof, it (1) could
not, under Commission policy as in effect on the date of this Agreement,
rely on the position of the Commission enunciated in Morgan Stanley and
Co., Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation
(available May 13, 1988), as interpreted in the Commission's letter to
Shearman & Sterling dated July 2, 1993, and similar no-action letters
(including, if applicable, any no-action letter obtained pursuant to
clause (i) above) and (2) must comply with the registration and prospectus
delivery requirements of the Act in connection with a secondary resale
transaction and that such a secondary resale transaction must be covered
by an effective registration statement containing the selling security
holder information required by Item 507 or 508 of Regulation S-K, as
applicable.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company and the Guarantors shall provide a supplemental
letter to the Commission (A) stating that the Company and the Guarantors
are registering the Exchange Offer in reliance on the position of the
Commission enunciated in Exxon Capital Holdings Corporation (available May
13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991), as
interpreted in the Commission's letter to Shearman & Sterling dated July
2,
8
<PAGE>
1993, and, if applicable, any no-action letter obtained pursuant to clause
(i) above, (B) including a representation that neither the Company nor any
Guarantor has entered into any arrangement or understanding with any
Person to distribute the Series B Notes to be received in the Exchange
Offer and that, to the best of the Company's and each Guarantor's
information and belief, each Holder participating in the Exchange Offer is
acquiring the Series B Notes in its ordinary course of business and has no
arrangement or understanding with any Person to participate in the
distribution of the Series B Notes received in the Exchange Offer and (C)
any other undertaking or representation required by the Commission as set
forth in any no-action letter obtained pursuant to clause (i) above, if
applicable.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company and the Guarantors shall comply with all the
provisions of Section 6(c) below and shall use their respective best efforts to
effect such registration to permit the sale of the Transfer Restricted
Securities being sold in accordance with the intended method or methods of
distribution thereof (as indicated in the information furnished to the Company
pursuant to Section 4(b) hereof), and pursuant thereto the Company and the
Guarantors shall prepare and file with the Commission a Registration Statement
relating to the registration on any appropriate form under the Act, which form
shall be available for the sale of the Transfer Restricted Securities in
accordance with the intended method or methods of distribution thereof within
the time periods and otherwise in accordance with the provisions hereof.
(c) General Provisions. In connection with any Registration Statement and
any related Prospectus required by this Agreement, the Company and the
Guarantors shall:
(i) use their respective best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements for the period specified in Section 3 or 4 of this Agreement,
as applicable. Upon the occurrence of any event that would cause any such
Registration Statement or the Prospectus contained therein (A) to contain
an untrue statement of material fact or omit to state any material fact
necessary to make the statements therein not misleading or (B) not to be
effective and usable for resale of Transfer Restricted Securities during
the period required by this Agreement, the Company and the Guarantors
shall file promptly an appropriate amendment to such Registration
Statement curing such defect and, if Commission review is required, use
their respective best efforts to cause such amendment to be declared
effective as soon as practicable;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the applicable Registration Statement as may
be necessary to keep such Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, as the case may be;
cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under
the Act, and to comply fully with Rules 424, 430A and 462, as applicable,
under the Act in a timely manner; and comply with the provisions of the
Act with respect to the disposition of all securities covered by such
Registration Statement during the applicable
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period in accordance with the intended method or methods of distribution
by the sellers thereof set forth in such Registration Statement or
supplement to the Prospectus;
(iii) advise each Holder promptly and, if requested by such Holder,
confirm such advice in writing, (A) when the Prospectus or any Prospectus
supplement or post-effective amendment has been filed and, with respect to
any applicable Registration Statement or any post-effective amendment
thereto, when the same has become effective, (B) of any request by the
Commission for amendments to the Registration Statement or amendments or
supplements to the Prospectus or for additional information relating
thereto, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement under the Act
or of the suspension by any state securities commission of the
qualification of the Transfer Restricted Securities for offering or sale
in any jurisdiction, or the initiation of any proceeding for any of the
preceding purposes and (D) of the existence of any fact or the happening
of any event that makes any statement of a material fact made in the
Registration Statement, the Prospectus, any amendment or supplement
thereto or any document incorporated by reference therein untrue, or that
requires the making of any additions to or changes in the Registration
Statement in order to make the statements therein not misleading, or that
requires the making of any additions to or changes in the Prospectus in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading. If at any time the Commission
shall issue any stop order suspending the effectiveness of the
Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification or
exemption from qualification of the Transfer Restricted Securities under
state securities or Blue Sky laws, then the Company and the Guarantors
shall use their respective best efforts to obtain the withdrawal or
lifting of such order at the earliest possible time;
(iv) subject to Section 6(c)(i) hereof, if any fact or event
contemplated by Section 6(c)(iii)(D) hereof shall exist or have occurred,
prepare a supplement or post-effective amendment to the Registration
Statement or related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter
delivered to the purchasers of Transfer Restricted Securities, the
Prospectus will not contain any untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading;
(v) furnish to each Holder in connection with such exchange or sale,
if any, before filing with the Commission, copies of any Shelf
Registration Statement or any Prospectus included therein or any
amendments or supplements to any such Shelf Registration Statement or
Prospectus (including all documents incorporated by reference after the
initial filing of such Shelf Registration Statement), which documents
shall be subject to the review and comment of such Holders in connection
with such sale, if any, for a period of two Business Days, and the Company
and the Guarantors shall not file any such Shelf Registration Statement or
Prospectus or any amendment or supplement to any such Shelf Registration
Statement or Prospectus (including all such documents
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incorporated by reference) to which such Holders shall reasonably object
within three Business Days after the receipt thereof. A selling Holder
shall be deemed to have reasonably objected to such filing if such Shelf
Registration Statement, amendment, Prospectus or supplement, as
applicable, as proposed to be filed, contains an untrue statement of
material fact or omits to state any material fact necessary to make the
statements therein not misleading or fails to comply with the applicable
requirements of the Act;
(vi) promptly prior to the filing of any document that is to be
incorporated by reference into a Shelf Registration Statement or
Prospectus, provide copies of such document to each Holder in connection
with such exchange or sale, if any, make the Company's and the Guarantors'
representatives available for discussion of such document and other
customary due diligence matters, and include such information in such
document prior to the filing thereof as such Holders may reasonably
request;
(vii) make available, at reasonable times, for inspection by each
Holder and any attorney or accountant retained by such Holders all
financial and other records and pertinent corporate documents of the
Company and the Guarantors and cause the Company's and the Guarantors'
officers, directors and employees to supply all information reasonably
requested by any such Holder, attorney or accountant in connection with
such Registration Statement or any post-effective amendment thereto
subsequent to the filing thereof and prior to its effectiveness;
(viii) if requested by any Holders in connection with such exchange
or sale, promptly include in any Registration Statement or related
Prospectus, pursuant to a supplement or post-effective amendment if
necessary, such information as such Holders may reasonably request to have
included therein, including, without limitation, information relating to
the "Plan of Distribution" of the Transfer Restricted Securities; and make
all required filings of such Prospectus supplement or post-effective
amendment as soon as practicable after the Company and the Guarantors are
notified of the matters to be included in such Prospectus supplement or
post-effective amendment;
(ix) furnish to each Holder in connection with such exchange or
sale, without charge, at least one copy of the Registration Statement, as
first filed with the Commission, and of each amendment thereto, including
all documents incorporated by reference therein and all exhibits
(including exhibits incorporated therein by reference);
(x) deliver to each Holder, without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such Persons reasonably may request; the Company and
the Guarantors hereby consent to the use (in accordance with law) of the
Prospectus and any amendment or supplement thereto by each selling Holder
in connection with the offering and the sale of the Transfer Restricted
Securities covered by the Prospectus or any amendment or supplement
thereto;
(xi) upon the request of any Holder, enter into such agreements
(including underwriting agreements) and make such representations and
warranties and take all such
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other actions in connection therewith in order to expedite or facilitate
the disposition of the Transfer Restricted Securities pursuant to any
applicable Registration Statement contemplated by this Agreement as may be
reasonably requested by any Holder in connection with any sale or resale
pursuant to any applicable Registration Statement, and in such connection
the Company and the Guarantors shall:
(A) upon the request of any Holder, furnish (or in the case of
paragraphs (2) and (3) below, use their respective best efforts to
cause to be furnished) to each Holder, upon Consummation of the
Exchange Offer or upon the effectiveness of the Shelf Registration
Statement, as the case may be:
(1) a certificate, dated such date, signed on behalf of
the Company and the Guarantors by (x) a principal operating or
executive officer of the Company and the Guarantors and (y) a
principal financial or accounting officer of the Company and
the Guarantors, confirming, as of the date thereof, the
matters set forth in paragraphs (b) through (d) of Section 7
of the Purchase Agreement and such other similar matters as
such Holders may reasonably request;
(2) an opinion, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, of counsel for the
Company and the Guarantors covering matters similar to those
set forth in Sections 7(g)-(l) of the Purchase Agreement and
such other matters as such Holder may reasonably request, and
in any event including a statement to the effect that such
counsel has participated in conferences with officers and
other representatives of the Company and the Guarantors and
representatives of the independent public accountants for the
Company and the Guarantors and has considered the matters
required to be stated therein and the statements contained
therein, although such counsel has not independently verified
the accuracy, completeness or fairness of such statements; and
that such counsel advises that, on the basis of the foregoing,
no facts came to such counsel's attention that caused such
counsel to believe that the applicable Registration Statement,
at the time such Registration Statement or any post-effective
amendment thereto became effective and, in the case of the
Exchange Offer Registration Statement, as of the date of
Consummation of the Exchange Offer, contained an untrue
statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus
contained in such Registration Statement as of its date and,
in the case of the opinion dated the date of Consummation of
the Exchange Offer, as of the date of Consummation, contained
an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements
therein, in the light of the circumstances under which they
were made, not misleading. Without limiting the foregoing,
such counsel may state
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further that such counsel assumes no responsibility for, and
has not independently verified, the accuracy, completeness or
fairness of the financial statements, notes and schedules and
other financial data included in any Registration Statement
contemplated by this Agreement or the related Prospectus; and
(3) a customary comfort letter, dated the date of
Consummation of the Exchange Offer, or as of the date of
effectiveness of the Shelf Registration Statement, as the case
may be, from the Company's independent accountants, in the
customary form and covering matters of the type customarily
covered in comfort letters to underwriters in connection with
underwritten offerings, and affirming the matters set forth in
the comfort letters delivered pursuant to Section 7(s) of the
Purchase Agreement; and
(B) deliver such other documents and certificates as may be
reasonably requested by the selling Holders to evidence compliance
with the matters covered in clause (A) above and with any customary
conditions contained in the any agreement entered into by the
Company and the Guarantors pursuant to this clause (xi);
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders and their counsel in
connection with the registration and qualification of the Transfer
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders may request and do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Transfer Restricted Securities covered by the
applicable Registration Statement; provided, however, that neither the
Company nor any Guarantors shall be required to register or qualify as a
foreign corporation where it is not now so qualified or to take any action
that would subject it to the service of process in suits or to taxation,
other than as to matters and transactions relating to the Registration
Statement, in any jurisdiction where it is not now so subject;
(xiii) issue, upon the request of any Holder of Series A Notes
covered by any Shelf Registration Statement contemplated by this
Agreement, Series B Notes having an aggregate principal amount equal to
the aggregate principal amount of Series A Notes surrendered to the
Company by such Holder in exchange therefor or being sold by such Holder;
such Series B Notes to be registered in the name of such Holder or in the
name of the purchaser(s) of such Series B Notes, as the case may be; in
return, the Series A Notes held by such Holder shall be surrendered to the
Company for cancellation;
(xiv) in connection with any sale of Transfer Restricted Securities
that will result in such securities no longer being Transfer Restricted
Securities, cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Transfer Restricted
Securities to be sold and not bearing any restrictive legends; and to
register such Transfer Restricted Securities in such denominations and
such names as the
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selling Holders may request at least two Business Days prior to such sale
of Transfer Restricted Securities;
(xv) use their respective best efforts to cause the disposition of
the Transfer Restricted Securities covered by the Registration Statement
to be registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof to
consummate the disposition of such Transfer Restricted Securities, subject
to the proviso contained in clause (xii) above;
(xvi) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of a Registration Statement covering
such Transfer Restricted Securities and provide the Trustee under the
Indenture with printed certificates for the Transfer Restricted Securities
which are in a form eligible for deposit with The Depository Trust
Company;
(xvii) otherwise use their respective best efforts to comply with
all applicable rules and regulations of the Commission, and make generally
available to their security holders with regard to any applicable
Registration Statement, as soon as practicable, a consolidated earnings
statement meeting the requirements of Rule 158 (which need not be audited)
covering a twelve-month period beginning after the effective date of the
Registration Statement (as such term is defined in paragraph (c) of Rule
158 under the Act);
(xviii) make appropriate officers of the Company available to the
selling Holders for meetings with prospective purchasers of the Transfer
Restricted Securities and prepare and present to potential investors
customary "road show" material in a manner consistent with other new
issuances of other securities similar to the Transfer Restricted
Securities;
(xix) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by
this Agreement and, in connection therewith, cooperate with the Trustee
and the Holders to effect such changes to the Indenture as may be required
for such Indenture to be so qualified in accordance with the terms of the
TIA; and execute, and use best efforts to cause the Trustee to execute,
all documents that may be required to effect such changes and all other
forms and documents required to be filed with the Commission to enable
such Indenture to be so qualified in a timely manner; and
(xx) provide promptly to each Holder upon request each document
filed with the Commission pursuant to the requirements of Section 13 or
Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(iii)(C) or any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof (in each case, a
"Suspension Notice"), such Holder will forthwith discontinue disposition of
Transfer Restricted Securities pursuant to the applicable Registration Statement
until (i) such Holder has
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received copies of the supplemented or amended Prospectus contemplated by
Section 6(c)(iv) hereof, or (ii) such Holder is advised in writing by the
Company that the use of the Prospectus may be resumed, and has received copies
of any additional or supplemental filings that are incorporated by reference in
the Prospectus (in each case, the "Recommencement Date"). Each Holder receiving
a Suspension Notice hereby agrees that it will either (i) destroy any
Prospectuses, other than permanent file copies, then in such Holder's possession
which have been replaced by the Company with more recently dated Prospectuses or
(ii) deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such Holder's possession of the Prospectus
covering such Transfer Restricted Securities that was current at the time of
receipt of the Suspension Notice. The time period regarding the effectiveness of
such Registration Statement set forth in Section 3 or 4 hereof, as applicable,
shall be extended by a number of days equal to the number of days in the period
from and including the date of delivery of the Suspension Notice to the
Recommencement Date.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and the Guarantors' performance
of or compliance with this Agreement shall be borne by the Company, regardless
of whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses, (ii) all fees and
expenses of compliance with federal securities and state Blue Sky or securities
laws, (iii) all expenses of printing (including printing certificates for the
Series B Notes to be issued in the Exchange Offer and printing of Prospectuses,
messenger and delivery services and telephone, (iv) all fees and disbursements
of counsel for the Company, the Guarantors and the Holders of Transfer
Restricted Securities and fees and disbursements of the Trustee and counsel and
(v) all fees and disbursements of independent certified public accountants of
the Company and the Guarantors (including the expenses of any special audit and
comfort letters required by or incident to such performance) and underwriting
discounts and commissions and transfer taxes, if any, relating to the sale or
disposition of the Series B Notes by a Holder.
The Company shall, in any event, bear its and the Guarantors' internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company or the Guarantors.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company and the Guarantors
shall reimburse the Initial Purchasers and the Holders of Transfer Restricted
Securities who are tendering Series A Notes into the Exchange Offer and/or
selling or reselling Series A Notes or Series B Notes pursuant to the "Plan of
Distribution" contained in the Exchange Offer Registration Statement or the
Shelf Registration Statement, as applicable, for the reasonable fees and
disbursements of not more than one counsel, who shall be Latham & Watkins,
unless another firm shall be chosen by the Holders of a majority in principal
amount of the Transfer Restricted Securities for whose benefit such Registration
Statement is being prepared.
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SECTION 8. INDEMNIFICATION
(a) The Company and the Guarantors agree, jointly and severally, to
indemnify and hold harmless (i) each Holder, (ii) each person, if any, who
controls (within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act) any Holder (any of the persons referred to in this clause (ii)
being hereinafter referred to as a "controlling person") and (iii) the
respective officers, directors, partners, employees, representatives and agents
of any Holder or any controlling person (any person referred to in clause (i),
(ii) or (iii) may hereinafter be referred to as an "Indemnified Holder") from
and against any and all losses, claims, damages, liabilities, judgments,
(including without limitation, any legal or other expenses incurred in
connection with investigating or defending any matter, including any action that
could give rise to any such losses, claims, damages, liabilities or judgments)
caused by any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement, preliminary prospectus or Prospectus
(or any amendment or supplement thereto) provided by the Company to any holder
or any prospective purchaser of Series B Notes, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages, liabilities or judgments are caused by an untrue
statement or omission or alleged untrue statement or omission that is based upon
information relating to any of the Holders furnished in writing to the Company
by any of the Holders.
(b) Each Holder of Transfer Restricted Securities agrees, severally and
not jointly, to indemnify and hold harmless the Company and the Guarantors, and
their respective directors and officers, and each person, if any, who controls
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
the Company or the Guarantors, to the same extent as the foregoing indemnity
from the Company and the Guarantors to each of the Indemnified Holders, but only
with reference to information relating to such Indemnified Holder furnished in
writing to the Company by such Indemnified Holder expressly for use in any
Registration Statement. In no event shall any Indemnified Holder be liable or
responsible for any amount in excess of the amount by which the total amount
received by such Indemnified Holder with respect to its sale of Transfer
Restricted Securities pursuant to a Registration Statement exceeds (i) the
amount paid by such Indemnified Holder for such Transfer Restricted Securities
and (ii) the amount of any damages that such Indemnified Holder has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission.
(c) In case any action shall be commenced involving any person in respect
of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying party") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), an Indemnified Holder shall not be required to
assume the defense of such action pursuant to this Section 8(c), but may employ
separate counsel and participate in the defense thereof, but the fees and
expenses of such counsel, except as provided below, shall be at the
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expense of the Indemnified Holder). Any indemnified party shall have the right
to employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
the indemnified party unless (i) the employment of such counsel shall have been
specifically authorized in writing by the indemnifying party, (ii) the
indemnifying party shall have failed to assume the defense of such action or
employ counsel reasonably satisfactory to the indemnified party or (iii) the
named parties to any such action (including any impleaded parties) include both
the indemnified party and the indemnifying party, and the indemnified party
shall have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party (in which case the indemnifying party shall
not have the right to assume the defense of such action on behalf of the
indemnified party). In any such case, the indemnifying party shall not, in
connection with any one action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for all indemnified parties
and all such fees and expenses shall be reimbursed as they are incurred. Such
firm shall be designated in writing by a majority of the Indemnified Holders, in
the case of the parties indemnified pursuant to Section 8(a), and by the
Company, in the case of parties indemnified pursuant to Section 8(b). The
indemnifying party shall indemnify and hold harmless the indemnified party from
and against any and all losses, claims, damages, liabilities and judgments by
reason of any settlement of any action (i) effected with its written consent or
(ii) effected without its written consent if the settlement is entered into more
than twenty business days after the indemnifying party shall have received a
request from the indemnified party for reimbursement for the fees and expenses
of counsel (in any case where such fees and expenses are at the expense of the
indemnifying party) and, prior to the date of such settlement, the indemnifying
party shall have failed to comply with such reimbursement request. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement or compromise of, or consent to the entry of
judgment with respect to, any pending or threatened action in respect of which
the indemnified party is or could have been a party and indemnity or
contribution may be or could have been sought hereunder by the indemnified
party, unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability on claims that
are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) To the extent that the indemnification provided for in this Section 8
is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or judgments (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Guarantors, on the one hand, and the Holders, on the other hand, from their sale
of Transfer Restricted Securities or (ii) if the allocation provided by clause
8(d)(i) is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause 8(d)(i) above
but also the relative fault of the Company and the Guarantors, on the one hand,
and of the Indemnified Holder, on the other hand, in connection with the
statements or omissions which resulted in such
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losses, claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative fault of the Company and the Guarantors,
on the one hand, and of the Indemnified Holder, on the other hand, shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or such
Guarantors, on the one hand, or by the Indemnified Holder, on the other hand,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid or
payable by a party as a result of the losses, claims, damages, liabilities and
judgments referred to above shall be deemed to include, subject to the
limitations set forth in the second paragraph of Section 8(a), any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.
The Company, the Guarantors and each Holder agree that it would not be
just and equitable if contribution pursuant to this Section 8(d) were determined
by pro rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any matter, including any
action that could have given rise to such losses, claims, damages, liabilities
or judgments. Notwithstanding the provisions of this Section 8, no Holder or its
related Indemnified Holders shall be required to contribute, in the aggregate,
any amount in excess of the amount by which the total received by such Holder
with respect to the sale of its Transfer Restricted Securities pursuant to a
Registration Statement exceeds the sum of (A) the amount paid by such Holder for
such Transfer Restricted Securities plus (B) the amount of any damages which
such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Holders' obligations to contribute pursuant to
this Section 8(c) are several in proportion to the respective principal amount
of Transfer Restricted Securities held by each of the Holders hereunder and not
joint.
SECTION 9. RULE 144A AND RULE 144
The Company and each Guarantor agrees with each Holder, for so long as any
Transfer Restricted Securities remain outstanding and during any period in which
the Company or such Guarantor (i) is not subject to Section 13 or 15(d) of the
Exchange Act, to make available, upon request of any Holder, to such Holder or
beneficial owner of Transfer Restricted Securities in connection with any sale
thereof and any prospective purchaser of such Transfer Restricted Securities
designated by such Holder or beneficial owner, the information required by Rule
144A(d)(4) under the Act in order to permit resales of such Transfer Restricted
Securities pursuant to Rule 144A and (ii) is subject to Section 13 or 15 (d) of
the Exchange Act, to make all
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filings required thereby in a timely manner in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144.
SECTION 10. MISCELLANEOUS
(a) Remedies. The Company and the Guarantors acknowledge and agree that
any failure by the Company and/or the Guarantors to comply with their respective
obligations under Sections 3 and 4 hereof may result in material irreparable
injury to the Initial Purchasers or the Holders for which there is no adequate
remedy at law, that it will not be possible to measure damages for such injuries
precisely and that, in the event of any such failure, the Initial Purchasers or
any Holder may obtain such relief as may be required to specifically enforce the
Company's and the Guarantors' obligations under Sections 3 and 4 hereof. The
Company and the Guarantors further agree to waive the defense in any action for
specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any Guarantor
shall, on or after the date of this Agreement, enter into any agreement with
respect to its securities that is inconsistent with the rights granted to the
Holders in this Agreement or otherwise conflicts with the provisions hereof.
Neither the Company nor any Guarantor has previously entered into any agreement
granting any registration rights with respect to its securities to any Person.
The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's and
the Guarantors' securities under any agreement in effect on the date hereof.
(c) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given, unless (i) in the case of Section 5
hereof and this Section 10(c)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities (excluding Transfer Restricted Securities held by the
Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent
to departure from the provisions hereof that relates exclusively to the rights
of Holders whose Transfer Restricted Securities are being tendered pursuant to
the Exchange Offer, and that does not affect directly or indirectly the rights
of other Holders whose Transfer Restricted Securities are not being tendered
pursuant to such Exchange Offer, may be given by the Holders of a majority of
the outstanding principal amount of Transfer Restricted Securities subject to
such Exchange Offer.
(d) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company and the
Guarantors, on the one hand, and the Initial Purchasers, on the other hand, and
shall have the right to enforce such agreements directly to the extent they may
deem such enforcement necessary or advisable to protect their rights or the
rights of Holders hereunder.
19
<PAGE>
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company or the Guarantors:
JTM Industries, Inc.
1000 Cobb Place Boulevard
Kennesaw, Georgia 30144
Telecopier No.: (770) 218-6590
Attention: Secretary
With a copy to:
Morgan, Lewis & Bockius
101 Park Avenue
New York, New York 10178
Telecopier No.:(212) 309-6273
Attention: David P. Blea, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
Upon the date of filing of the Exchange Offer or a Shelf Registration
Statement, as the case may be, notice shall be delivered to the Initial
Purchasers in the form attached hereto as Exhibit A.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders; provided, that nothing herein shall be deemed to permit any assignment,
transfer or other disposition of Transfer Restricted Securities in violation of
the terms hereof or of the Purchase Agreement or the Indenture. If any
transferee of any Holder shall acquire Transfer Restricted Securities in any
manner, whether by operation of law or otherwise, such Transfer Restricted
Securities shall be held subject to all of the terms of this Agreement, and by
taking and holding such Transfer Restricted Securities such Holder shall be
conclusively deemed to have agreed to be bound by and to perform all of the
20
<PAGE>
terms and provisions of this Agreement, including the restrictions on resale set
forth in this Agreement and, if applicable, the Purchase Agreement, and such
Holder shall be entitled to receive the benefits hereof.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
21
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
JTM INDUSTRIES, INC.
By: /s/ J.I. Everest II
-------------------------------
Name: J.I. Everest II
Title: Treasurer & CFO
POZZOLANIC RESOURCES, INC.
By: /s/ J.I. Everest II
-------------------------------
Name: J.I. Everest II
Title: Treasurer & CFO
POWER PLANT AGGREGATES OF IOWA, INC.
By: /s/ J.I. Everest II
-------------------------------
Name: J.I. Everest II
Title: Treasurer & CFO
KBK ENTERPRISES, INC.
By: /s/ J.I. Everest II
-------------------------------
Name: J.I. Everest II
Title: Treasurer & CFO
MICHIGAN ASH SALES COMPANY, D.B.A.
U.S. ASH COMPANY
By: /s/ J.I. Everest II
-------------------------------
Name: J.I. Everest II
Title: Treasurer & CFO
U.S. STABILIZATION, INC.
By: /s/ J.I. Everest II
--------------------------------
Name: J.I. Everest II
Title: Treasurer & CFO
<PAGE>
FLO FIL CO., INC.
By: /s/ J.I. Everest II
-------------------------------
Name: J.I. Everest II
Title: Treasurer & CFO
FLY ASH PRODUCTS, INC.
By: /s/ J.I. Everest II
-------------------------------
Name: J.I. Everest II
Title: Treasurer & CFO
NATIONSBANC MONTGOMERY SECURITIES LLC
By:
---------------------------------
Name:
Title:
CIBC OPPENHEIMER CORP.
By:
---------------------------------
Name:
Title:
<PAGE>
FLO FIL CO., INC.
By:
-------------------------------
Name:
Title:
FLY ASH PRODUCTS, INC.
By:
-------------------------------
Name:
Title:
NATIONSBANC MONTGOMERY SECURITIES LLC
By: /s/ J. Scott Holmes
---------------------------------
Name: J. Scott Holmes
Title: Principal
CIBC OPPENHEIMER CORP.
By:
---------------------------------
Name:
Title:
<PAGE>
FLO FIL CO., INC.
By:
-------------------------------
Name:
Title:
FLY ASH PRODUCTS, INC.
By:
-------------------------------
Name:
Title:
NATIONSBANC MONTGOMERY SECURITIES LLC
By:
---------------------------------
Name:
Title:
CIBC OPPENHEIMER CORP.
By: /s/ Edward Levy
---------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
NOTICE OF FILING OF REGISTRATION STATEMENT
To: NationsBanc Montgomery Securities LLC
CIBC Oppenheimer Corp.
From: JTM Industries, Inc.
Re: 10% Senior Subordinated Series A Notes Due 2008
Date:________________, 199__
For your information only (NO ACTION REQUIRED):
Today, ________________, 199__, we filed [an Exchange Registration
Statement] [a Shelf Registration Statement] with the Securities and Exchange
Commission. We currently expect this registration statement to be declared
effective by __________________________, 199__.
A-1
<PAGE>
Exhibit 10.3
EXECUTION COPY
================================================================================
PURCHASE AGREEMENT
dated as of February 27, 1998
by and among
JTM INDUSTRIES, INC.,
POZZOLANIC RESOURCES, INC.
and
THE SELLERS NAMED HEREIN
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
SALE OF PURCHASED STOCK; CLOSING......................................2
1.1 Sale and Purchase..............................................2
1.2 Purchase Price.................................................2
1.3 Closing........................................................2
1.4 Escrows........................................................2
ARTICLE II
RESERVED..............................................................3
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS.........................3
3.1 Organization and Qualification.................................3
3.2 Capital Stock..................................................4
3.3 Authority Relative to this Agreement and the Operative
Agreements.....................................................4
3.4 Business.......................................................5
3.5 No Conflicts...................................................6
3.6 Governmental Approvals and Filings.............................6
3.7 Books and Records..............................................7
3.8 Financial Statements...........................................7
3.9 Absence of Changes.............................................7
3.10 No Undisclosed Liabilities.....................................9
3.11 Taxes..........................................................9
3.12 Legal Proceedings.............................................11
3.13 Compliance with Laws and Orders...............................11
3.14 Benefit Plans; ERISA..........................................11
3.15 Real Property.................................................12
3.16 Tangible Personal Property....................................13
3.17 Intellectual Property Rights..................................13
3.18 Contracts.....................................................13
3.19 Licenses......................................................15
3.20 Insurance.....................................................15
3.21 Affiliate Transactions........................................16
3.22 Employees; Labor Relations....................................16
3.23 Environmental Matters.........................................17
3.24 Substantial Customers and Suppliers...........................18
3.25 Accounts Receivable...........................................18
3.26 Other Negotiations; Brokers...................................19
3.27 Holding Company Act and Investment Company Act Status.........19
<PAGE>
3.28 Restrictions on Conduct of Business...........................19
3.29 Bank and Brokerage Accounts; Investment Assets................19
3.30 Disclosure....................................................19
ARTICLE IV
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF EACH SELLER.............20
4.1 Organization and Qualification................................20
4.2 Capacity Relative to this Agreement and the Operative
Agreements; Options ..........................................20
4.3 No Conflicts..................................................20
4.4 Governmental Approvals and Filings............................21
4.5 Taxes.........................................................21
4.6 Legal Proceedings.............................................21
4.7 Title to Common Stock.........................................22
4.8 Ownership.....................................................22
4.9 Other Negotiations; Brokers...................................22
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER..............................23
5.1 Organization and Qualification................................23
5.2 Authority Relative to this Agreement and the Operative
Agreements..... ..............................................23
5.3 No Conflicts..................................................23
5.4 Governmental Approvals and Filings............................23
5.5 Legal Proceedings.............................................24
5.6 Brokers.......................................................24
5.7 Purchase for Investment.......................................24
5.8 Financing of Purchase Price...................................24
ARTICLE VI
COVENANTS............................................................24
6.1 Access to Information.........................................24
6.2 Conduct of Business...........................................25
6.3 Certain Restrictions..........................................26
6.4 Governmental and Other Approvals..............................26
6.5 Notice and Cure...............................................26
6.6 Audited Financial Statements..................................27
6.7 Efforts to Consummate Transaction.............................27
6.8 No Solicitations..............................................27
6.9 Noncompetition; Non Solicitation; Trade Secrets; Discoveries
and Works. ...................................................27
6.10 Buyer's Covenant..............................................30
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF BUYER; DELIVERIES AT THE CLOSING
.....................................................................31
<PAGE>
7.1 Representations and Warranties.................................31
7.2 Performance....................................................31
7.3 Officers' Certificates.........................................31
7.4 Orders and Laws................................................31
7.5 Consents and Approvals.........................................32
7.6 Opinion of Sellers' Counsel....................................32
7.7 Operative Agreements...........................................32
7.8 Release of Claims..............................................32
7.9 Resignations...................................................32
7.10 Good Standing Certificates.....................................32
7.11 Transfer to BVI; Receipt of Purchased Stock and Minute Books...33
7.12 Payment of Indebtedness........................................33
7.13 Additional Requirements........................................33
7.14 Proceedings....................................................33
7.15 Completion of Diligence........................................33
7.16 Tax Status Certificate.........................................34
7.17 Audited Financial Statements...................................34
7.18 No Adverse Change..............................................34
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF SELLERS; DELIVERIES AT THE CLOSING
......................................................................34
8.1 Representations and Warranties.................................34
8.2 Performance....................................................34
8.3 Officers' Certificates.........................................34
8.4 Orders and Laws................................................34
8.5 Governmental Consents and Approvals............................34
8.6 Opinion of Buyer's Counsel.....................................35
8.7 Operative Agreements...........................................35
8.8 Receipt of the Purchase Price..................................35
ARTICLE IX
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS..............................................35
9.1 Survival of Representations, Warranties, Covenants
and Agreements.................................................35
ARTICLE X
INDEMNIFICATION.......................................................36
10.1 Indemnification................................................36
10.2 Method of Asserting Claims.....................................37
ARTICLE XI
CERTAIN TAX MATTERS...................................................39
<PAGE>
11.1 Allocation of Tax Liability....................................39
11.2 Preparation and Filing of Tax Returns; Refunds.................40
11.3 Tax Contests...................................................41
11.4 Cooperation Regarding Tax Matters..............................42
11.5 Other Tax Covenants............................................43
11.6 Conflict.......................................................43
ARTICLE XII
DEFINITIONS...........................................................44
12.1 Definitions....................................................44
ARTICLE XIII
TERMINATION...........................................................55
13.1 Termination....................................................55
13.2 Effect of Termination..........................................55
ARTICLE XIV
MISCELLANEOUS.........................................................56
14.1 Notices........................................................56
14.2 Entire Agreement...............................................57
14.3 Expenses.......................................................57
14.4 Confidentiality................................................57
14.5 Further Assurances; Post-Closing Cooperation...................57
14.6 Certain Assets and Properties..................................57
14.7 Waiver.........................................................58
14.8 Amendment......................................................58
14.9 No Third Party Beneficiary.....................................58
14.10 No Assignment; Binding Effect..................................58
14.11 Limited Recourse...............................................58
14.12 Public Announcements...........................................58
14.13 Headings.......................................................59
14.14 Invalid Provisions.............................................59
14.15 Governing Law..................................................59
14.16 Consent to Jurisdiction and Service of Process.................59
14.17 Construction...................................................60
14.18 Counterparts...................................................60
ANNEX I Phase II Contract List
ANNEX II Refund Event Contract List
ANNEX III Finaning Commitment Letter
EXHIBIT A Form of Certificate of Sellers and the Company
EXHIBIT B Form of Secretary's Certificate
EXHIBIT C-1 Form of Opinion of Counsel to the Company, Subsidiaries and
Sellers (other than BVI)
EXHIBIT C-2 Form of Opinion of Counsel to BVI
<PAGE>
EXHIBIT C-3 Form of Opinion of Counsel to Guarantor
EXHIBIT D Form of Assignment and Release of Claims
EXHIBIT E Form of FIRPTA Certificate
EXHIBIT F Form of Certificate of Buyer
EXHIBIT G Form of Opinion of Counsel to Buyer
EXHIBIT H Form of Phase II Escrow Agreement
EXHIBIT I Form of Tax Escrow Agreement
EXHIBIT J Form of Kokan Escrow Agreement
DISCLOSURE SCHEDULE
Section 3.1 - Organization and Qualification
Section 3.2 - Capital Stock
Section 3.4 - Business
Section 3.5 - No Conflicts
Section 3.6 - Governmental Approvals and Filings
Section 3.9 - Absence of Changes
Section 3.10 - No Undisclosed Liabilities
Section 3.11 - Taxes
Section 3.12 - Legal Proceedings
Section 3.13 - Compliance with Laws and Orders
Section 3.14 - Benefit Plans; ERISA
Section 3.15 - Real Property
Section 3.16 - Tangible Personal Property
Section 3.17 - Intellectual Property Rights
Section 3.18 - Contracts
Section 3.19 - Licenses
Section 3.20 - Insurance
Section 3.21 - Affiliate Transactions
Section 3.22 - Employees; Labor Relations
Section 3.23 - Environmental Matters
Section 3.24 - Substantial Customers and Suppliers
Section 3.25 - Accounts Receivable
Section 3.28 - Restrictions on Conduct of Business
Section 3.29 - Bank and Brokerage Accounts; Investment Assets
Section 4.3 - No Conflicts
Section 4.4 - Governmental Approvals and Filings
Section 4.5 - Taxes
Section 4.6 - Legal Proceedings
Section 4.8 - Ownership
<PAGE>
THIS PURCHASE AGREEMENT, dated as of February 27, 1998 (the
"Effective Date"), is by and among JTM Industries, Inc., a Texas corporation
("Buyer"), Pozzolanic Resources, Inc., a Washington corporation (the "Company"),
and those Persons listed under the heading "Sellers" on the signature page
hereto (collectively, "Sellers" and each, "Seller").
WHEREAS, Gerald A. Peabody, Jr., Penelope A. Peabody and another
entity collectively own all the issued and outstanding shares of the capital
stock of the Company, consisting in the aggregate of 200 shares of Class A
Voting Shares, par value $1 per share ("Class A Stock"), 0 shares of Class B
Regular Dividend Shares, par value $1 per share ("Class B Stock"), 2,900 shares
of Class C Special Dividend Shares, par value $1 per share ("Class C Stock"),
and 5,800 shares of Class D Special Dividend Shares, par value $1 per share
("Class D Stock").
WHEREAS, prior to the Closing, one of the current stockholders of
the Company shall contribute (the "Contribution") all of its interest in Class A
Stock and Class D Stock to BVI.
WHEREAS, Sellers desire to sell to Buyer, and Buyer desires to
purchase from Sellers, all Class A Stock, Class B Stock, Class C Stock and Class
D Stock issued and outstanding as of the Effective Date (collectively, the
"Purchased Stock").
WHEREAS, the Company is the owner of all of the issued and
outstanding shares of common stock of (i) St. Helens Investments, Inc., a
Washington corporation doing business as Pozzolanic International ("St.
Helens"), (ii) Pozzolanic Northwest, Inc., a Washington corporation
("Northwest"), and (iii) Pozzolanic Northwest Bulk Carriers, Inc., a Washington
corporation ("PNBC").
WHEREAS, Northwest is the owner of (i) all of the issued and
outstanding shares of the preferred stock of St. Helens and (ii) all of the
issued and outstanding shares of Pozzolanic N.W. FSC Inc., a Guam corporation
("FSC") which shares of the FSC shall be sold by Northwest to Joe Dawson or his
Affiliate or Associate (the "FSC Disposition") prior to the Closing.
WHEREAS, the parties contemplate (i) that from the Effective Date
hereunder through the date (the "Phase I Completion Date") that is the earlier
of (A) the end of the second preceding Business Day prior to the Closing Date
and (B) such earlier date as is agreed to between the Company and the Buyer
(such period being herein referred to as "Phase I"), Buyer shall have access to
Phase I Material and (ii) that from the date (the "Phase II Commencement Date")
of payment of the Phase II Deposit until the Closing (such period being herein
referred to as "Phase II"), which Closing shall occur not later than the second
succeeding Business Day (which shall be the second succeeding calendar day)
following the Phase II Commencement Date (unless an extension is agreeable to
both Buyer and the Company), Buyer shall have access to Phase II Material.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency
<PAGE>
of which are hereby acknowledged, the parties, intending to be legally bound,
hereto agree as follows (capitalized terms used and not otherwise defined herein
have the meanings set forth in Section 12.1):
ARTICLE I
SALE OF PURCHASED STOCK; CLOSING
1.1 Sale and Purchase. Each Seller individually agrees to sell and
transfer to Buyer, and Buyer agrees to purchase from each Seller, the Purchased
Stock at the Closing on the terms and subject to the conditions set forth in
this Agreement.
1.2 Purchase Price. The aggregate purchase price (the "Purchase
Price") for the Purchased Stock being purchased hereunder is $40,000,000 United
States dollars.
1.3 Closing. The purchase and sale of the Purchased Stock (the
"Closing") will take place at the offices of Morgan Lewis & Bockius LLP at 101
Park Avenue, NY, NY 10178, on March 4, 1998 at 10:00 A.M. local time, or at such
other place, date or time as Buyer and the Sellers shall mutually agree (the
"Closing Date"). At the Closing, Buyer will pay to each Seller, by wire transfer
of immediately available funds to such account as such Seller may reasonably
direct by notice delivered to Buyer at least three (3) Business Days prior to
the Closing Date, an amount equal to (i) the Purchase Price less the Tax Escrow
Funds multiplied by (ii) a fraction, the numerator of which is the number of
shares of Class C Stock and Class D Stock set forth opposite such Seller's name
on the signature page hereto and the denominator of which is the aggregate
shares of Class C Stock and Class D Stock. In accordance with the provisions of
the Phase II Escrow Agreement, the Phase II Deposit may be applied to the
payment of the Purchase Price. As provided in Section 1.4(c) below, at closing
$5,000,000 of the Purchase Price payable to BVI under this Section 1.3 will be
deposited with the BVI Escrow Agent under the BVI Escrow Agreement.
Simultaneously, Sellers will sell and transfer to Buyer the Purchased Stock free
and clear of all Liens, by delivering to Buyer (i) certificates representing the
Purchased Stock, together with all necessary instruments of transfer, in form
and substance reasonably satisfactory to Buyer, and (ii) stock certificates,
registered in the name of Buyer, representing the Purchased Stock. At the
Closing, there shall also be delivered the opinions, certificates and other
Contracts, documents and instruments to be delivered under Articles VII and
VIII.
1.4 Escrows.
(a) At the Closing, $900,000 of the Purchase Price in immediately
available funds (the "Tax Escrow Funds") will be delivered to The Chase
Manhattan Bank, N.A., as escrow agent (the "Tax Escrow Agent"), to be held in
accordance with the provisions of an escrow agreement substantially in the form
of Exhibit I hereto (the "Tax Escrow Agreement").
2
<PAGE>
(b) The Tax Escrow Funds shall be held by the Tax Escrow Agent in
escrow and applied towards the payment of any tax indemnification obligations of
the Sellers under Section 11.1 of this Agreement.
(c) At Closing, $5,000,000 of the Purchase Price payable to BVI
hereunder (the "BVI Escrow Funds"), will be delivered in immediately available
funds to an United Kingdom Affiliate of The Chase Bank of Manhattan, N.A., as
escrow agent (the "BVI Escrow Agent"), to be held until released in accordance
with the provisions of an escrow agreement substantially in the form of Exhibit
J hereto (the "BVI Escrow Agreement").
(d) The BVI Escrow Funds shall be held by the BVI Escrow Agent in
escrow and applied towards the payment by BVI or Guarantor of any
indemnification obligations of BVI or Guarantor under Article X or Article XI of
this Agreement or any guarantee obligations of Guarantor under the Guarantee
Agreement.
ARTICLE II
RESERVED
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Unless otherwise specified herein, each Seller hereby represents and
warrants, jointly and severally, to Buyer (i) that the statements contained in
Sections 3.1 (other than 3.1(a)(iv) with respect to the Subsidiaries), 3.2, 3.3,
3.4, 3.5(i), 3.5(ii), 3.8(a), 3.9(a), 3.9(b), 3.9(j), 3.9(l), 3.13, 3.18(b) and
3.18(c) of this Article III are true and correct as of the Effective Date, and
will be true and correct as of the Closing Date, (ii) that the statements
contained in the Sections of this Article III not otherwise identified in clause
(i) above (except with respect to Sections 3.17, 3.18(a) and 3.24 which will be
true and correct as of the Closing Date to the extent any such representation or
warranty relates to any Phase II Materials) will be true and correct as of the
Phase I Completion Date and the Closing Date (schedules called for in this
Article III that pertain to disclosure of (i) Phase I Materials and (ii) Phase
II Materials will be delivered prior to the Phase I Completion Date and prior to
the Closing Date, respectively), and (iii) as follows:
3.1 Organization and Qualification.
(a) Section 3.1(a) of the Disclosure Schedule contains an accurate
and complete list for the Company and each Subsidiary of its (i) name, (ii)
trade name(s), (iii) jurisdiction of incorporation, and (iv) each jurisdiction
where it is authorized to do business. The Company and each Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has full corporate power and authority
to conduct its business as and to the extent now conducted and to own, use and
lease its Assets and Properties. The
3
<PAGE>
Company and each Subsidiary is duly qualified, licensed or admitted to do
business and is in good standing in each jurisdiction in which the ownership,
use or leasing of its Assets and Properties, or the conduct or nature of its
business, makes such qualification, licensing or admission necessary. Prior to
the Effective Date, Sellers have caused to be delivered to Buyer true and
complete copies of the certificate or articles of incorporation or formation of
the Company and each Subsidiary, in each case as in effect on the Effective
Date. Sellers will have caused to be delivered to Buyer true and complete copies
of the by-laws of the Company prior to the Effective Date and each Subsidiary
prior to the Phase I Completion Date, in each case as in effect on the Effective
Date or the Phase I Completion Date, as applicable.
(b) With respect to the Company and each Subsidiary, the name of
each (i) member of the board of directors and (ii) officer (including
position(s) held) is listed in Section 3.1(b) of the Disclosure Schedule.
3.2 Capital Stock. The authorized capital stock of the Company
consists only of 1,000 shares of Class A Stock, 19,000 shares of Class B Stock,
15,000 shares of Class C Stock, and 15,000 shares of Class D Stock (the Class D
Stock together with Class A Stock, Class B Stock, and Class C Stock, the
"Capital Stock"). The only issued and outstanding shares of the Company are the
shares of Capital Stock as indicated on the signature page hereto, all of which
are validly issued, fully paid and nonassessable, and the issuance thereof was
in compliance with all applicable Laws. Except for the Capital Stock, no shares
of capital stock have been issued or reserved for issuance. On the Closing Date,
the Capital Stock will consist only of the shares of Purchased Stock. Section
3.2 of the Disclosure Schedule sets forth for the Company and each Subsidiary
(i) the amount of its authorized capital stock, (ii) the amount of its issued
and outstanding capital stock and (iii) the identity and the respective
ownership interests of the stockholders of the Company and each Subsidiary. All
of the outstanding equity interests of each Subsidiary have been duly authorized
and validly issued, are fully paid and nonassessable, and the issuance thereof
was in compliance with all applicable Laws, and, except as disclosed in Section
3.2 of the Disclosure Schedule, are owned, beneficially and of record, by the
Company, or Subsidiaries wholly owned, directly or indirectly by the Company,
free and clear of all Liens. There are no outstanding Options with respect to
the Company or any Subsidiary or agreements, arrangements or understandings to
issue Options with respect to the Company or any Subsidiary and there are no
preemptive rights or agreements, arrangements or understandings to issue
preemptive rights with respect to the issuance or sale of capital stock other
than the preemptive rights set forth in the articles of incorporation. Sellers
will disclaim all such preemptive rights in favor of Buyer at the Closing.
Sellers own the Purchased Stock beneficially and of record and free and clear of
all Liens. The delivery of the certificates representing the Purchased Stock
purchased hereunder to Buyer will transfer to Buyer good and valid title to the
Purchased Stock, free and clear of all Liens and the Purchased Stock will have
been duly authorized, validly issued, fully paid and nonassessable.
3.3 Authority Relative to this Agreement and the Operative
Agreements.
4
<PAGE>
(a) The Company has full corporate power and authority to execute
and deliver this Agreement and the Operative Agreements to which it is party and
to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Operative Agreements by the Company and the performance of its
obligations hereunder and thereunder and the consummation by the Company of the
transactions contemplated hereby and thereby, have been duly and validly
authorized and approved by all necessary actions by the board of directors of
the Company and by the stockholders of the Company, and no other action on the
part of the Company or any of its stockholders is necessary to authorize and
approve the execution, delivery and performance of this Agreement and the
Operative Agreements and the consummation by the Company of the transactions
contemplated hereby and thereby. This Agreement and the Operative Agreements
have been duly and validly executed and delivered by the Company and constitute
legal, valid and binding obligations of the Company enforceable against the
Company in accordance with their respective terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws relating to the enforcement of
creditors' rights generally and by general principles of equity.
(b) Sellers Gerald A. Peabody, Jr. and Penelope A. Peabody represent
that they have full legal capacity to execute and deliver this Agreement and the
Operative Agreements to which they are parties and to perform their obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. This Agreement and the Operative Agreements have been duly and
validly executed and delivered by said Sellers and constitute legal, valid and
binding obligations of the said Sellers enforceable against said Sellers in
accordance with their respective terms, except as the enforceability thereof may
be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws relating to the enforcement of creditors'
rights generally and by general principles of equity.
(c) BVI represents that it has the full corporate power and
authority to execute and deliver this Agreement and the Operative Agreements to
which it is party and to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Operative Agreements to which BVI is a party
and the performance by BVI of its obligations hereunder and thereunder and the
consummation by BVI of the transactions contemplated hereby and thereby, have
been duly and validly authorized and approved by all necessary actions by the
board of directors and by the stockholders of BVI, and no other action on the
part of BVI or any of its stockholders is necessary to authorize and approve the
execution, delivery and performance of this Agreement and the Operative
Agreements and the consummation by BVI of the transactions contemplated hereby
and thereby. This Agreement and the Operative Agreements have been duly and
validly executed and delivered by BVI and constitute legal, valid and binding
obligations of the said party enforceable against said party in accordance with
their respective terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws relating to the enforcement of creditors' rights generally
and by general principles of equity.
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3.4 Business. Section 3.4 of the Disclosure Schedule lists material
lines of business other than the processing, purchase and sale of CCBs in the
ordinary course of business in which the Company and each Subsidiary is
participating or engaged or has participated or engaged in the three years
preceding the Effective Date. Except for the Subsidiaries, the Company holds no
equity, partnership, joint venture or other interest in any Person.
3.5 No Conflicts. The execution and delivery by each of the Company
and Sellers of this Agreement do not, and the execution and delivery by each of
the Company and Sellers of the Operative Agreements to which it, he or she is a
party, the performance by each of the Company and Sellers of its, his or her
respective obligations under this Agreement and such Operative Agreements and
the consummation of the transactions contemplated hereby and thereby did not, do
not and will not:
(i) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the certificate or articles of incorporation
or by-laws (or other comparable corporate charter documents) of the Company and
the Subsidiaries;
(ii) subject to obtaining the consents, approvals and actions,
making the filings and giving the notices referred to in Section 3.6 below or
disclosed in Section 3.6 of the Disclosure Schedule, if any, conflict with or
result in a violation or breach of any term or provision of any Law or Order
applicable to the Company, any of its Subsidiaries or any of their respective
Assets and Properties; or
(iii) except as disclosed in Section 3.5 of the Disclosure Schedule,
(a) conflict with or result in a violation or breach of, (b) constitute (with or
without notice or lapse of time or both) a default under, (c) require the
Company, any of the Subsidiaries or any Seller to obtain any consent, approval
or action of, make any filing with or give any notice to any Person as a result
or under the terms of, (d) result in or give to any Person any right of
termination, cancellation, acceleration or modification in or with respect to,
(e) result in or give to any Person any additional rights or entitlement to
increased, additional, accelerated or guaranteed payments under, or (f) result
in the creation or imposition of any Lien upon the Company, any of the
Subsidiaries or any of Sellers or any of their respective Assets and Properties
under any Contract or License to which the Company, any of the Subsidiaries, or
any of Sellers is a party or by which any of their respective Assets and
Properties is bound.
3.6 Governmental Approvals and Filings. Except as disclosed in
Section 3.6 of the Disclosure Schedule, no consent, approval or action of,
filing with or notice to any Governmental or Regulatory Authority on the part of
the Company, any of the Subsidiaries or any of Sellers is required in connection
with the execution, delivery and performance of this Agreement or any of the
Operative Agreements to which it, he or she is a party or the consummation of
transactions contemplated hereby or thereby, provided that the Company and
Sellers make no representation as to whether any filing is required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976,
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as amended (the "Hart-Scott-Rodino Act"). The Company and Sellers shall make
available to Buyer such sales or asset data as may be necessary for Buyer to
determine whether such Hart-Scott-Rodino Act filing is required.
3.7 Books and Records. The minute books and other similar records of
the Company and the Subsidiaries to be provided to Buyer prior to the Phase I
Completion Date have been and will be maintained in accordance with sound
business practices and will contain a true and complete record of all action
taken at all meetings and by all written consents in lieu of meetings of the
stockholders, directors and committees of the boards of directors (or other
similar governing entities) of the Company and the Subsidiaries.
3.8 Financial Statements.
(a) Prior to the Effective Date, the Company has delivered to Buyer
true and complete copies of the audited consolidated balance sheets of the
Company as of December 31, 1994, December 31, 1995 and December 31, 1996 (the
"1996 Audited Balance Sheet") and the related consolidated statements of
operations and cash flows, together with the notes thereto, of the Company for
the fiscal years ended December 31, 1994, December 31, 1995 and December 31,
1996 (collectively, the "Audited Financial Statements"), setting forth, in each
case, in comparative form the corresponding figures for the corresponding dates
and periods of the previous fiscal year, together with reports of auditors
thereon, and (ii) the unaudited consolidated balance sheet of the Company as of
November 30, 1997, and the related consolidated statements of operations of the
Company for the eleven-month period ending November 30, 1997, setting forth, in
each case, in comparative form the corresponding figures for the corresponding
date and period of the previous fiscal year, certified on behalf of the Company
by the Chief Executive Officer of the Company (the "Unaudited Financial
Statements"). The Audited Financial Statements and the Unaudited Financial
Statements fairly present the consolidated financial position of the Company as
of the respective dates thereof, and the results of operations and cash flows
for the periods set forth therein, all in conformity with GAAP subject to normal
year-end adjustments in the case of the Unaudited Financial Statements.
(b) The results of the Company's operations for the fiscal year
ending December 31, 1997 are substantially in accordance with the business plan
of the Company for such fiscal year, which business plan will be delivered to
Buyer prior to the Phase I Completion Date.
(c) Prior to the Closing Date, the Company will deliver to Buyer
true and complete copies of the audited consolidated balance sheets of the
Company as of December 31, 1997 (the "1997 Audited Balance Sheet"), and the
related consolidated statements of operations and cash flow, together with the
notes thereto, setting forth in comparative form the corresponding figures for
the corresponding dates and periods of the previous fiscal year, together with
reports of auditors thereon (collectively, the "1997 Audited Financial
Statements"). The 1997 Audited Financial Statements fairly present the
consolidated financial position of the Company as of December 31,
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1997, and the results of operations and cash flows for the periods set forth
therein, all in conformity with GAAP.
3.9 Absence of Changes. From December 31, 1997 through the Closing
Date, there has not been, to the Knowledge of the Company, any material adverse
change, or any event or development which, individually or together with other
such events, could reasonably be expected to result in a material adverse change
in the Business or Condition of the Company. None of the other representations
or warranties set forth in this Agreement shall be deemed to limit the
foregoing. In addition, without limiting the foregoing, except as expressly
contemplated hereby and by the Operative Agreements and except as disclosed, or
as will be disclosed, in Section 3.9 of the Disclosure Schedule, there has not
occurred since December 31, 1997:
(a) (i) any declaration, setting aside or payment of any dividend or
other distribution in respect of the capital stock (or equity interests) of the
Company or any Subsidiary, or (ii) any direct or indirect redemption, purchase
or other acquisition by the Company or any Subsidiary of any capital stock (or
equity interests) of the Company or any Subsidiary except consistent with the
terms of this Agreement, and the Operative Agreements;
(b) except for the execution, delivery and performance by the
Company or any Subsidiary of this Agreement and the Operative Agreements, and
the transactions contemplated hereby or thereby, (i) any change in the
authorized or issued capital stock of the Company or any Subsidiary, or (ii) any
issuance of either a right to acquire shares of or a security convertible into
capital stock of the Company or any Subsidiary;
(c) (i) any increase in the salaries, commissions, consulting fees,
or other compensation payable to any employees, consultants, directors or
officers of the Company or any Subsidiary except in the ordinary course of
business consistent with past practices, (ii) any payment of consideration of
any nature whatsoever (other than salaries, commissions, consulting fees,
bonuses or other compensation paid to any employees or consultants of the
Company or any Subsidiary) to any officer, director, stockholder, employee or
consultant of the Company or any Subsidiary, (iii) other than in the ordinary
course of business, any establishment or material modification of (A) targets,
goals, pools or similar provisions under or (B) salary ranges, increase
guidelines or similar provisions in respect of any Benefit Plan, employment
Contract or other employee compensation arrangement, or (iv) other than in the
ordinary course of business, any adoption, entering into, material amendment,
material modification or termination (partial or complete) of any Benefit Plan;
(d) (i) incurrence by the Company or any Subsidiary of Indebtedness
except in the ordinary course of business consistent with past practices or (ii)
any complete or partial discharge of any Indebtedness owing to the Company or
any Subsidiary;
(e) any physical damage, destruction or other casualty loss (whether
or not covered by insurance) affecting any of the real or personal property or
equipment of the Company
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or any Subsidiary which may have a material adverse affect on the Business or
Condition of the Company;
(f) any write-off or write-down of the Assets and Properties of the
Company or any Subsidiary in an aggregate amount exceeding $50,000;
(g) any purchase of or disposition of any Assets and Properties in
an aggregate amount exceeding $50,000, other than acquisitions or dispositions
of inventory or tangible personal property in the ordinary course of business
consistent with past practice and the terms of this Agreement, and the Operative
Agreements;
(h) any material amendment, waiver under or consent with respect to
(i) any Contract which is required to be disclosed in the Disclosure Schedule,
pursuant to Section 3.18(a), (ii) any License held by the Company or any
Subsidiary or (iii) any Intellectual Property;
(i) any capital expenditures or commitments for additions to
property, plant or equipment of the Company or any Subsidiary constituting
capital assets in an aggregate amount exceeding $50,000;
(j) any commencement or termination by the Company or any Subsidiary
of any line of business;
(k) any transaction by the Company or any Subsidiary with any
officer, director, stockholder, Affiliate or Associate of the Company or any
Subsidiary, other than pursuant to any Contract in effect on December 31, 1997
and disclosed to Buyer pursuant to Section 3.18(a)(viii) of the Disclosure
Schedule or other than pursuant to any contract of employment and listed
pursuant to Section 3.18(a)(i) of the Disclosure Schedule; or
(l) any material change in the accounting methods or procedures of
the Company or any Subsidiary.
3.10 No Undisclosed Liabilities. To the Knowledge of the Company,
except as (i) reflected or reserved against in the 1997 Audited Balance Sheet,
(ii) will be disclosed in Section 3.10 of the Disclosure Schedule, or (iii)
expressly contemplated hereby and by the Operative Agreements, there are no
Liabilities (other than Liabilities incurred in the ordinary course of business
consistent with past practice since December 31, 1997) of, relating to or
affecting the Company or any Subsidiary or any of their respective Assets and
Properties, (A) which in the aggregate are material to the Business or Condition
of the Company or (B) which are material and are for tort or for breach of
contract.
3.11 Taxes. Except as will be disclosed in Section 3.11 of the
Disclosure Schedule (with paragraph references corresponding to those set forth
below):
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(a) All Tax Returns required to have been filed by or with respect
to the Company or any Subsidiary or any affiliated, combined, consolidated,
unitary or similar group of which the Company or any Subsidiary is or was a
member (a "Relevant Group") have been duly and timely filed, and each such Tax
Return correctly and completely reflects the income, franchise or other Tax
liability and all other information required to be reported thereon. All Taxes
due and payable by the Company or any Subsidiary or any Relevant Group (whether
or not reflected on a Tax Return) have been paid.
(b) All Tax Returns required to be filed by the Company or
Subsidiary covering periods which end on or before December 31, 1997 will
correctly reflect the income, franchise or other Tax liability and all other
information required to be reported thereon.
(c) The current liability for Taxes due by the Company or any
Subsidiary in the Unaudited Financial Statements for the period ended November
30, 1997, is believed by Sellers to be sufficient for all current Taxes paid or
to be paid at that date by the Company or any Subsidiary.
(d) The Company and any Subsidiary have withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, creditor, independent contractor or other third party.
(e) The Company does not expect any Taxing Authority to assess
additional Taxes against or in respect of it or any Subsidiary for any past
period. There is no dispute concerning any Tax liability of the Company or any
Subsidiary either (i) threatened, claimed or raised by any Taxing Authority or
(ii) of which the Company, any Subsidiary or any Seller is or reasonably should
be aware. There are no Liens for Taxes upon the Assets or Properties of the
Company or any Subsidiary. Section 3.11 of the Disclosure Schedule will indicate
those Tax Returns, if any, of the Company or any Subsidiary that have been
audited since January 1, 1992, and those Tax Returns of the Company or any
Subsidiary that currently are the subject of audit. The Company has delivered to
Buyer complete and correct copies of all federal, state, local and foreign
income Tax Returns filed by, all Tax examination reports and statements of
deficiencies assessed against or agreed to by, and any written ruling from or
agreement with a Taxing Authority received by, the Company or any Subsidiary
since January 1, 1992.
(f) Neither the Company nor any Subsidiary has any liability for
Taxes of any Person other than the Company or such Subsidiary (i) as a
transferee or successor, (ii) by Contract or (iii) otherwise.
(g) None of the Company or any of the Subsidiaries agreed to, is
required to, or reasonably expects that it might have to, make any adjustment
under Section 481 of the Code (or any comparable provision of state, local or
foreign law) by reason of a change in accounting method.
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(h) With respect to the current taxable year, the Company has not
made any payments, nor is it obligated to make any payments, nor is it a party
to any agreement that under certain circumstances could require it to make any
payments, that are not deductible under Section 280G of the Code.
3.12 Legal Proceedings.
(a) Except as will be disclosed in Section 3.12(a) of the Disclosure
Schedule (with paragraph references corresponding to those set forth below):
(i) there are no Actions or Proceedings pending or, to the
Knowledge of the Company, threatened, that either (A) are against, relating to
or affecting the Company, any Subsidiary or any Seller, or any of their
respective Assets and Properties, or (B) challenge the validity of the
transactions contemplated by this Agreement or the Operative Agreements; and to
the Knowledge of the Company there are no facts or circumstances that could
reasonably be expected to give rise to any such Action or Proceeding;
(ii) neither the Company nor any Subsidiary nor any Seller has
received notice, or has Knowledge, of any Orders outstanding against the
Company, any Subsidiary or any Seller;
(iii) neither the Company nor any Subsidiary nor any Seller
has received notice or has Knowledge, of (A) any defects, dangerous or
substandard conditions in the products or materials sold, distributed, or to be
sold or distributed by the Company or any Subsidiary that could cause bodily
injury, sickness, disease, death, or damage to property, or result in loss of
the use of property, if handled and used properly, or (B) any claim, suit,
demand for arbitration or notice seeking damages for any such event; and
(iv) the Company is not in default with respect to any Order
of any Governmental or Regulatory Authority and there are no unsatisfied
judgments against the Company.
(b) Prior to the Phase I Completion Date, the Company will deliver
to Buyer all responses of counsel (together with any updates provided by such
counsel) for the Company and the Subsidiaries to auditors' requests for
information regarding Actions or Proceedings pending or threatened against,
relating to or affecting the Company and the Subsidiaries during the three-year
period prior to the Phase I Completion Date. Section 3.12(b) of the Disclosure
Schedule will set forth all Actions or Proceedings relating to or affecting the
Company or any Subsidiary or any of its or their respective Assets and
Properties during the five-year period prior to the Effective Date which
resulted in judgments or settlements in excess of $50,000.
3.13 Compliance with Laws and Orders. To the Knowledge of the
Company, except as will be disclosed in Section 3.13 of the Disclosure Schedule,
neither the Company nor any Subsidiary is or has been at any time within the
last three years, or at any time prior to such date has
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received notice that it is or has been, in material violation of or in material
default under, any Law or Order applicable to the Company or any Subsidiary or
any of their respective Assets and Properties.
3.14 Benefit Plans; ERISA. All Benefit Plans of the Company or any
Subsidiary will be listed in Section 3.14 of the Disclosure Schedule, and copies
of all documentation relating to such Benefit Plans will be delivered or made
available to Buyer. Except as disclosed in Section 3.14 of the Disclosure
Schedule: (a) each Benefit Plan and the administration and operation thereof
complies, and to the Knowledge of the Company has at all times complied, in all
material respects with the requirements of all applicable Law, including ERISA
and the Code; (b) each Benefit Plan intended to qualify under Section 401(a) of
the Code has at all times since its adoption been so qualified, and each trust
which forms a part of any such plan has at all times since its adoption been
tax-exempt under Section 501(a) of the Code; (c) neither the Company nor any
Subsidiary is now, nor to the Knowledge of the Company at any time has been, a
member of a controlled group, as defined in Section 412(n)(6)(B) of the Code,
with any other enterprise; (d) neither the Company nor any Subsidiary presently
maintains or contributes to, nor at any time has maintained or contributed to
any employee pension benefit plan, as defined in Section 3(2) of ERISA, other
than the Pozzolanic Resources, Inc. Progress Sharing & Salary Savings Plan; (e)
neither the Company nor any Subsidiary has incurred any liability for any tax
imposed under Sections 4971 through 4980B of the Code or civil liability under
Section 502(i) or (l) of ERISA which could have a material adverse effect on the
Business or Condition of the Company; and (f) no suit, actions or other
litigation (excluding claims for benefits incurred in the ordinary course of
plan activities) have been brought against or with respect to any Benefit Plan.
3.15 Real Property.
(a) Section 3.15(a) of the Disclosure Schedule will contain a true
and correct list of (i) the only two parcels of real property owned by the
Company and Subsidiaries, (ii) the parcels of real property occupied by the
Company and Subsidiaries as tenant, other than the "adjacent rail facilities"
occupied as tenant under 30-60 day leases (the "Leased Real Property" and
together with the Owned Real Property, the "Real Property"), and (iii) all Liens
relating to or affecting any parcel of Real Property.
(b) Section 3.15(b) of the Disclosure Schedule will contain a true
and correct list of the leases (and all amendments, modifications or extensions)
relating to the Leased Real Property and the Company will deliver to Buyer true
and complete copies of such leases (and all amendments, modifications or
extensions). None of the Company, any Subsidiary or any Seller has assigned,
sublet, transferred, hypothecated or otherwise disposed of their interest in any
Real Property Lease. To the Knowledge of the Company, no penalties are accrued
and unpaid under any Real Property Lease.
(c) Except as will be disclosed in Section 3.15(c) of the Disclosure
Schedule, there is (i) no claim, Action or Proceeding, actual or to the
Knowledge of the Company threatened,
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against the Company, any Subsidiary or the Real Property by any Person which
would materially affect the future use, occupancy or value of the Real Property
or any part thereof and (ii) no condemnation or appropriation proceeding pending
or threatened against Real Property or the improvements thereon.
3.16 Tangible Personal Property. The Company and each Subsidiary is
in possession of and has good and marketable title to, or has valid leasehold
interests in or valid rights under Contract to use (except to the extent that
failure to have such possession, title, valid interest or valid rights would not
have a material adverse effect on the Business or Condition of the Company), the
tangible personal property used in the conduct of its business or otherwise
having market value exceeding $50,000 ("Relevant Tangible Personal Property"),
including all tangible personal property reflected on the 1997 Audited Financial
Statements and tangible personal property acquired since December 31, 1997 other
than property disposed of since such date in the ordinary course of business
consistent with past practice and the terms of this Agreement and the Operative
Agreements. To the Knowledge of the Company, all such Relevant Tangible Personal
Property referred to in the preceding sentence is free and clear of all Liens,
other than Permitted Liens and Liens that will be disclosed in Section 3.16 of
the Disclosure Schedule, and is adequate and suitable for the conduct by the
Company and the Subsidiaries of the business presently conducted by them, and is
in good working order and condition for the purpose of conducting the business,
ordinary wear and tear excepted, and its use complies in all material respects
with all applicable Laws.
3.17 Intellectual Property Rights. The only Intellectual Property
owned or licensed for use by the Company or the Subsidiaries which is material
to the Business or Condition of the Company will be disclosed in Section 3.17(i)
of the Disclosure Schedule. The Company and the Subsidiaries have all right,
title and interest in each item of Intellectual Property disclosed in Section
3.17(i) of the Disclosure Schedule material to the Business or Condition of the
Company and, except as disclosed in Section 3.17(ii) of the Disclosure Schedule,
all such Intellectual Property is free and clear of all Liens, other than
Permitted Liens. No other Intellectual Property is used or necessary in the
conduct of the business of the Company and the Subsidiaries other than
Intellectual Property which in the aggregate is insignificant to the Business or
Condition of the Company. Except as disclosed in Section 3.17(ii) of the
Disclosure Schedule, the Company and the Subsidiaries have the right to use and
to transfer the Intellectual Property disclosed therein. Neither the Company nor
any Subsidiary has granted any license, agreement or other permission to a third
party to use such Intellectual Property. To the Knowledge of the Company,
neither it nor any Subsidiary is infringing on any Intellectual Property of any
other Person and no claim is pending or, to the Knowledge of the Company, has
been threatened with respect to the Company's or a Subsidiary's ownership,
validity, license or use of the Intellectual Property.
3.18 Contracts.
(a) Section 3.18(a) of the Disclosure Schedule (with paragraph
references corresponding to those set forth below) contains a true and complete
list of each of the following Contracts or other arrangements (true and complete
copies or, if none, reasonably complete and
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accurate written descriptions of which, together with all amendments and
supplements thereto and all waivers of any terms thereof, have been delivered to
Buyer prior to the Phase I Completion Date; provided, that, Contracts identified
on Annex I hereto shall be made fully available to Buyer and Buyer's Advisors
prior to the Closing Date) to which the Company or any Subsidiary is a party or
by which any of their respective Assets and Properties is bound:
(i) Contracts (other than purchase orders issued in the ordinary
course of business) that are necessary to the operations of the business
including Contracts with customers, independent contractors, and distributors
that involve the payment or potential payment, pursuant to the terms of any such
Contract, by or to the Company or any Subsidiary of more than $10,000 and all
powers of attorney and comparable delegations of authority;
(ii) all Contracts with any Person containing any provision or
covenant prohibiting or limiting the ability of the Company or any Subsidiary to
engage in any business activity or compete with any Person or prohibiting or
limiting the ability of any Person to compete with the Company, any Subsidiary,
any Seller or prohibiting or limiting disclosure of confidential or proprietary
information;
(iii) (A) all Contracts (excluding Benefit Plans) providing for a
commitment of employment or consultation services for a specified or unspecified
term, the name, position and rate of compensation of each Person party to such a
Contract and the expiration date of each such Contract; and (B) any written or
oral validly binding agreements involving an obligation of the Company or any
Subsidiary to make payments (with or without notice, passage of time or both) to
any Person in connection with, or as a consequence of, the transactions
contemplated hereby or by the Operative Agreements or to any employee who is
disclosed on Section 3.22(a) of the Disclosure Schedule, other than with respect
to salary or incentive compensation payments in the ordinary course of business
consistent with past practice;
(iv) all Contracts relating to Indebtedness of the Company or any
Subsidiary;
(v) all guarantees of any Indebtedness or other obligations of the
Company, any Subsidiary or any third Person;
(vi) all Contracts relating to (A) the future disposition or
acquisition of any Assets and Properties having a stated contract value of over
$50,000, other than dispositions or acquisitions in the ordinary course of
business consistent with past practice and the provisions of this Agreement and
the Operative Agreements, and (B) any Business Combination;
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(vii) all Contracts between or among the Company or any Subsidiary,
on the one hand, and any current or former officer, director, stockholder,
Affiliate or Associate of the Company or any Subsidiary or any Associate of any
such officer, director, stockholder or Affiliate (other than the Company or any
Subsidiary), on the other hand, other than Contracts disclosed pursuant to
Section 3.18(a)(i);
(viii) any other Contracts involving either the receipt or the
payment by the Company or any Subsidiary of over $50,000, other than Contracts
made in the ordinary course of business consistent with past practices.
(b) To the Knowledge of the Company, each Contract required to be
disclosed in Section 3.18(a) of the Disclosure Schedule is in full force and
effect and constitutes a legal, valid and binding agreement, enforceable in
accordance with its terms, of each party thereto. Except as disclosed in Section
3.18(b) of the Disclosure Schedule, none of the Company, any Subsidiary, any
Seller or, to the Knowledge of the Company, any other party to such Contract has
received notice that it is in violation or breach of or default under any such
Contract (or with notice or lapse of time or both, would be in violation or
breach of or default under any such Contract).
(c) Except as disclosed in Section 3.18(c) of the Disclosure
Schedule, neither the Company nor any Subsidiary is a party to or bound by any
Contract that has been or could reasonably be expected to be, individually or in
the aggregate with any other such Contracts, materially adverse to the Business
or Condition of the Company.
3.19 Licenses. Section 3.19 of the Disclosure Schedule will contain
a true and complete list of all Licenses (including, without limitation, any
issued by the Federal Highway Administration or by the Department of
Transportation) used in and material to the business or operations of the
Company and the Subsidiaries, setting forth the owner, the function and the
expiration and renewal date of each. As soon as possible during Phase I, the
Company will deliver to Buyer true and complete copies of all such Licenses.
Except as will be disclosed in Section 3.19 of the Disclosure Schedule:
(a) the Company and the Subsidiaries own or validly hold all
Licenses that are material to their respective business or operations;
(b) each License listed in Section 3.19 of the Disclosure Schedule
is valid, binding and in full force and effect; and
(c) to the Knowledge of the Company, neither the Company nor any
Subsidiary is, or has received any notice that it is, in default (or with the
giving of notice or lapse of time or both, would be in default) under any such
License.
3.20 Insurance. Section 3.20 of the Disclosure Schedule will contain
a true and complete list (including the names and addresses of the insurers, the
expiration dates thereof, the
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annual premiums and payment terms thereof, the period of time covered thereby
and a brief description of the interests insured thereby) of all liability,
property, workers' compensation, directors' and officers' liability and other
insurance policies currently in effect that insure the business, operations or
employees of the Company and the Subsidiaries or affect or relate to the
ownership, use or operation of any of the Assets and Properties of the Company
or any Subsidiary and that (i) have been issued to the Company or any Subsidiary
or (ii) have been issued to any Person (other than the Company or any
Subsidiary) for the benefit of the Company or any Subsidiary. To the Knowledge
of the Company, each policy listed in Section 3.20 of the Disclosure Schedule is
valid and binding and in full force and effect, all premiums due thereunder have
been paid when due and no notice of cancellation or termination in respect of
any such policy has been received. To the Knowledge of the Company, the
insurance policies listed in Section 3.20 of the Disclosure Schedule are in
amounts and have coverages as required by any Contract to which the Company or
any Subsidiary is a party. Section 3.20 of the Disclosure Schedule contains a
list of all claims, individually or in the aggregate in excess of $100,000, made
within the three most recent fiscal years under any insurance policies covering
the Company and the Subsidiaries. The Company and any Subsidiary or any Seller
has not received notice that any insurer under any policy referred to in this
Section is denying liability with respect to a claim thereunder or defending
under a reservation of rights clause.
3.21 Affiliate Transactions.
(a) Except as will be disclosed in Section 3.21(a) of the Disclosure
Schedule, (i) to the Knowledge of the Company, there are no Liabilities between
the Company or any Subsidiary on the one hand, and any current or former
officer, director, stockholder, Affiliate (other than the Company and the
Subsidiaries) or Associate of the Company or any Subsidiary or any Associate of
any such officer, director, stockholder or Affiliate on the other, (ii) neither
the Company nor any Subsidiary provides or causes to be provided any assets,
services or facilities to any such current or former officer, director,
stockholder, Affiliate or Associate and (iii) neither the Company nor any
Subsidiary beneficially owns, directly or indirectly, any Investment Assets of
any such current or former officer, director, stockholder, Affiliate or
Associate.
(b) Except as will be disclosed in Section 3.21(b) of the Disclosure
Schedule, each of the Liabilities and transactions listed in Section 3.21(a) of
the Disclosure Schedule was incurred or engaged in, as the case may be, on an
arm's-length basis on competitive terms.
3.22 Employees; Labor Relations.
(a) Section 3.22(a) of the Disclosure Schedule will contain a list
of the name of each officer, employee and consultant of the Company and the
Subsidiaries, together with such person's position or function, annual base
salary or wages and any incentives or bonus arrangement with respect to such
person. To the Knowledge of the Company, no person, with the exception of Gerald
A. Peabody, Jr., currently employed by the Company or any Subsidiary will or may
cease to be engaged by the Company or any Subsidiary, or will refuse offers of
engagement by the
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Company or any Subsidiary, for any reason, including, without limitation,
because of the consummation of the transactions contemplated by this Agreement
and the Operative Agreements.
(b) Except as will be disclosed in Section 3.22(b) of the Disclosure
Schedule, (i) to the Knowledge of the Company, there are no material
controversies between the Company or any Subsidiary, on the one hand, and any
employee or consultant (other than the Company's or any Subsidiary's independent
tax, legal, employee benefit or accounting consultant) of the Company or any
Subsidiary, on the other hand, (ii) no employee of the Company or any Subsidiary
is presently a member of a collective bargaining unit or party to a collective
bargaining agreement or similar labor Contract relating to such employee's
employment with the Company or any Subsidiary and, to the Knowledge of the
Company there are no threatened or contemplated attempts to organize for
collective bargaining purposes any of the employees of the Company or any
Subsidiary and (iii) no unfair labor practice complaint or sex or age
discrimination claim is pending against the Company or any Subsidiary before the
National Labor Relations Board or any other Governmental or Regulatory Authority
and to the Knowledge of the Company there are no facts or circumstances that
could reasonably be expected to give rise to such complaint or claim.
There has been no work stoppage, strike or other concerted action by
employees of the Company or any Subsidiary.
3.23 Environmental Matters.
(a) To the Knowledge of the Company, the Company and the
Subsidiaries have obtained and hold all necessary Environmental Permits, copies
of which will be attached hereto in Section 3.23(a) of the Disclosure Schedule.
(b) To the Knowledge of the Company, the Company and the
Subsidiaries are in compliance with all terms, conditions and provisions of all
applicable (i) Environmental Permits and (ii) Environmental Laws, except for
such noncompliance which would not have a material adverse effect on the
Business or Condition of the Company.
(c) To the Knowledge of the Company and with respect to previously
owned properties, except for such matters as individually or in the aggregate
would not have a material adverse effect on the Business or Condition of the
Company:
(i) there are no past or pending Environmental Claims against
the Company or any Subsidiary, and there are no facts or circumstances which
could reasonably be expected to form the basis for any Environmental Claim
against the Company or any Subsidiary;
(ii) there have been no Releases of Hazardous Materials at,
from, in, to, on, or under any Site, and no Hazardous Materials are present in,
on, about or migrating to or from any Site that could reasonably be expected to
give rise to an Environmental Claim against the Company or any Subsidiary,
except that, in the ordinary course of business, vehicles and equipment
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fueled and lubricated with petroleum products have been and are involved in the
Company's operations, which may have caused de minimis surface releases of
petroleum products;
(iii) neither the Company, any Subsidiary, any predecessor of
the Company or any Subsidiary, nor any entity previously owned by the Company or
any Subsidiary, has transported or arranged for the treatment, storage,
handling, disposal, or transportation of any Hazardous Material to any off-Site
location which could result in an Environmental Claim against the Company or any
Subsidiary, except that, in the ordinary course of business, vehicles and
equipment fueled and lubricated with petroleum products have been and are
involved in the Company's operations, which may have caused de minimis surface
releases of petroleum products;
(iv) no Site is a current or proposed Environmental Clean-up
Site;
(v) there are no Liens, other than Permitted Liens, arising
under or pursuant to any Environmental Law on any Site and there are no facts,
circumstances, or conditions known to Sellers that could reasonably be expected
to restrict, encumber, or result in the imposition of special conditions under
any Environmental Law with respect to the ownership, occupancy, development,
use, or transferability of any Site; and
(vi) there are no active underground storage tanks at any
property currently owned by the Company or any Subsidiary, and there are no
underground storage tanks at any such property that have been closed or
abandoned by the Company or any Subsidiary.
3.24 Substantial Customers and Suppliers. Section 3.24(a) of the
Disclosure Schedule will list the 10 largest customers of the Company and the
Subsidiaries on the basis of revenues for goods sold or services provided for
the most recent fiscal year. Section 3.24(b) of the Disclosure Schedule will
list the 10 largest suppliers of the Company and the Subsidiaries on the basis
of cost of goods or services purchased for the most recent fiscal year. Except
as will be disclosed in Section 3.24(c) of the Disclosure Schedule, no such
customer or supplier has ceased or materially reduced its purchases from or
sales or provision of services to the Company or any Subsidiary since December
31, 1997, or to the Knowledge of the Company, has threatened to cease or
materially reduce such purchases or sales or provision of services after the
Closing Date. Except as will be disclosed in Section 3.24(d) of the Disclosure
Schedule, to the Knowledge of the Company, no such customer or supplier is
threatened with bankruptcy or insolvency.
3.25 Accounts Receivable. Except as will be set forth in Section
3.25 of the Disclosure Schedule, the accounts and notes receivable of the
Company and the Subsidiaries reflected on the 1997 Audited Balance Sheet, and
all accounts and notes receivable arising subsequent to December 31, 1997, (i)
arose from sales transactions in the ordinary course of business consistent with
past practice and are payable on ordinary trade terms, (ii) to the Knowledge of
the Company, are legal, valid and binding obligations of the respective debtors
enforceable in accordance with their respective terms, (iii) are not subject to
any valid set-off or counterclaim, (iv) do not represent obligations for goods
sold on consignment, on approval or on a sale-or-return
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basis or subject to any other repurchase or return arrangement, (v) to the
Knowledge of the Company, are collectible in the ordinary course of business
consistent with past practice in the aggregate recorded amounts thereof, net of
any applicable reserve reflected in the 1997 Audited Balance Sheet, and (vi) to
the Knowledge of the Company, are not the subject of any Actions or Proceedings
brought by or on behalf of the Company or any Subsidiary. Section 3.25 of the
Disclosure Schedule will set forth a description of any security arrangements
and collateral securing the repayment or other satisfaction of receivables of
the Company or any Subsidiary. All steps reasonably necessary to render all such
security arrangements legal, valid, binding and enforceable, and to give and
maintain for the Company or any Subsidiary a perfected security interest in the
related collateral, have been taken.
3.26 Other Negotiations; Brokers. Neither the Company, nor any
Subsidiary, nor any Seller nor any of their respective Affiliates (nor any
investment banker, financial advisor, attorney, accountant or other Person
retained by or acting for or on behalf of the Company, any Subsidiary, any
Seller or any such Affiliate) has entered into any agreement or had any
discussions with any third party regarding any transaction involving the Company
or any Subsidiary which could result in the Company, Buyer or its stockholders
or any general partner, limited partner, officer, director, employee, agent or
Affiliate of any of them being subject to any claim for liability to said third
party as a result of entering into this Agreement or the Operative Agreements or
consummating the transactions contemplated hereby or thereby. No agent, broker,
finder, investment banker, financial advisor or other similar Person will be
entitled to any fee, commission or other compensation in connection with the
transactions contemplated by this Agreement or the Operative Agreements on the
basis of any act or statement made by the Company, any Subsidiary, any Seller or
any of their respective Affiliates, or any investment banker, financial advisor,
attorney, accountant or other Person retained by or acting for or on behalf of
the Company, any Subsidiary, any Seller or any such Affiliate.
3.27 Holding Company Act and Investment Company Act Status. Neither
the Company nor any Subsidiary is a "holding company" or a "public utility
company" as such terms are defined in the Public Utility Company Act of 1935, as
amended. Neither the Company nor any Subsidiary is an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
3.28 Restrictions on Conduct of Business. Except as provided in this
Agreement and as will be set forth in Section 3.28 of the Disclosure Schedule,
neither the Company nor any Subsidiary is prohibited or otherwise restricted
from conducting its business as presently conducted or intended to be conducted
by any Contract, any Governmental or Regulatory Authority or any Law.
3.29 Bank and Brokerage Accounts; Investment Assets. Section 3.29 of
the Disclosure Schedule will set forth (or will set forth not less than 10 days
prior to the Closing Date) (a) a true and complete list of the names and
locations of all banks, trust companies, securities brokers and other financial
institutions at which the Company or any Subsidiary has an account or
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safe deposit box or maintains a banking, custodial, trading or other similar
relationship; (b) a true and complete list and description of each such account,
box and relationship, indicating in each case the account number and the names
of the respective officers, employees, agents or other similar representatives
of the Company or any Subsidiary having signatory power with respect thereto;
and (c) a list of each Investment Asset, the name of the record and beneficial
owner thereof, the location of the certificates, if any, therefor, the maturity
date, if any, and any stock or bond powers or other authority for transfer
granted with respect thereto.
3.30 Disclosure. No representation or warranty contained in this
Agreement, and no statement contained in the Disclosure Schedule or in any
certificate, list or other writing furnished to Buyer pursuant to any provision
of this Agreement (including without limitation the Unaudited Financial
Statements), contains any statement of a material fact that to the Knowledge of
the Company is untrue.
ARTICLE IV
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF EACH SELLER
Unless otherwise specified herein, each Seller represents and
warrants individually and severally to Buyer as follows:
4.1 Organization and Qualification. BVI represents and warrants that
it is a corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation or formation. BVI represents and
warrants that is duly qualified, licensed or admitted to do business and is in
good standing in each jurisdiction in which the ownership, use or leasing of its
Assets or Properties, or the conduct or nature of its business, makes such
qualification, licensing or admission necessary, except for failures to be so
qualified, licensed or admitted in good standing which, individually or in the
aggregate, could not reasonably be expected to have a material adverse effect on
the validity or enforceability of this Agreement or the Operative Agreements or
on the ability of BVI to perform its obligations hereunder or thereunder.
4.2 Capacity Relative to this Agreement and the Operative
Agreements; Options. Each Seller has the full legal capacity (or the full
corporate power, as the case may be) to execute and deliver this Agreement and
the Operative Agreements to which it, he or she is a party and to perform its,
his or her obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. This Agreement has been duly and
validly executed and delivered by such Seller and constitutes, and upon the
execution and delivery by such Seller of the Operative Agreements to which it,
he or she is a party, such Operative Agreements will constitute, the legal,
valid and binding obligations of such Seller enforceable against it, him or her
in accordance with their respective terms.
4.3 No Conflicts. The execution and delivery by each Seller of this
Agreement does not, and the execution and delivery by such Seller of the
Operative Agreements to which such Seller is a party, the performance by such
party of its, his or her obligations under this Agreement
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and such Operative Agreements and the consummation of the transactions
contemplated hereby and thereby did not, do not and will not:
(a) subject to obtaining the consents, approvals and actions, making
the filings and giving the notices referred to in Section 4.3 or disclosed in
Section 4.3 of the Disclosure Schedule, if any, conflict with or result in a
violation or breach of any term or provision of any Law or Order applicable to
such party or any Assets and Properties of such party; or
(b) except as disclosed in Section 4.3 of Disclosure Schedule, (i)
conflict with or result in a violation or breach of, (ii) constitute (with or
without notice or lapse of time or both) a default under, (iii) require such
party to obtain any consent, approval or action of, make any filing with or give
any notice to any Person as a result or under the terms of, (iv) result in or
give to any Person any right of termination, cancellation, acceleration or
modification in or with respect to, (v) result in or give to any Person any
additional rights or entitlement to increased, additional, accelerated or
guaranteed payments under, or (vi) result in the creation or imposition of any
Lien upon such party or any of the Assets and Properties of such party under,
any Contract or License to which such party is a party or by which any of the
Assets and Properties of such party is bound.
4.4 Governmental Approvals and Filings. Except as disclosed in
Section 4.4 of the Disclosure Schedule, no consent, approval or action of,
filing with or notice to any Governmental or Regulatory Authority on the part of
any Seller is required in connection with the execution, delivery and
performance of this Agreement or any of the Operative Agreements to which such
is a party or the consummation of transactions contemplated hereby or thereby.
4.5 Taxes. Except as disclosed in Section 4.5 of the Disclosure
Schedule, there is no dispute or claim concerning any Tax liability with respect
to items of income, gain, loss or deduction attributable to any of Sellers'
stock interest in the Company either (i) threatened, claimed or raised by any
taxing authority or (ii) of which such Seller is or reasonably should be aware.
4.6 Legal Proceedings.
(a) Except as disclosed in Section 4.6(a) of the Disclosure Schedule
(with paragraph references corresponding to those set forth below), Gerald A.
Peabody, Jr. and Penelope A. Peabody represent and warrant jointly and severally
that:
(i) there are no Actions or Proceedings pending or, to the
knowledge of any of such Sellers threatened against, relating to or affecting
any of such Sellers or any of their respective Assets and Properties, as the
case may be, which (A) could reasonably be expected to result in the issuance of
an Order restraining, enjoining or otherwise prohibiting or making illegal any
of the transactions contemplated by this Agreement or any of the Operative
Agreements or otherwise result in a material diminution of the benefits
contemplated by this Agreement or any of the Operative Agreements to Buyer, or
(B) if determined adversely to any of such Sellers, could reasonably be expected
to result in (x) any injunction or other equitable relief against the Company
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or any of such Sellers or (y) Losses by the Company individually, or in the
aggregate with Losses in respect of other such Actions or Proceedings, exceeding
$10,000;
(ii) there are no facts or circumstances known to such Sellers
that could reasonably be expected to give rise to any Action or Proceeding that
would be required to be disclosed pursuant to clause (a) (i) above; and
(iii) such Sellers have not received notice, and are not
aware, of any Orders outstanding against the Company.
(b) Except as disclosed in Section 4.6(b) of the Disclosure Schedule
(with paragraph references corresponding to those set forth below), BVI
represents and warrants that:
(i) there are no Actions or Proceedings pending or, to the
knowledge of such party threatened against, relating to or affecting such party
or any of its respective Assets and Properties, as the case may be, which (A)
could reasonably be expected to result in the issuance of an Order restraining,
enjoining or otherwise prohibiting or making illegal any of the transactions
contemplated by this Agreement or any of the Operative Agreements or otherwise
result in a material diminution of the benefits contemplated by this Agreement
or any of the Operative Agreements to Buyer, or (B) if determined adversely to
such party, could reasonably be expected to result in (x) any injunction or
other equitable relief against the Company or such party or (y) Losses by the
Company or its Subsidiaries individually, or in the aggregate with Losses in
respect of other such Actions or Proceedings, exceeding $10,000;
(ii) there are no facts or circumstances known to such party
that could reasonably be expected to give rise to any Action or Proceeding that
would be required to be disclosed pursuant to clause (a) (i) above; and
(iii)such party has not received notice, and is not aware, of
any Orders outstanding against the Company or its Subsidiaries.
4.7 Title to Common Stock. Gerald A. Peabody, Jr. and Penelope A.
Peabody represent and warrant jointly and severally on the one hand, and BVI
represents and warrants on the other hand, that Seller is or immediately
following the Contribution will be the record and beneficial owner of the shares
of Capital Stock indicated next to such Seller's name on the signature page
hereto, and immediately prior to Closing, such Seller will own such shares of
Capital Stock free and clear of all Liens (other than the rights of Buyer under
this Agreement), and the delivery of the stock certificates representing the
Purchased Stock owned by Buyer will transfer to Buyer good and valid title to
such shares of Purchased Stock free and clear of all Liens. From and after the
Closing, no Seller or any other Person (other than Buyer) will have any rights
whatsoever to the Capital Stock or any other securities of the Company, if any.
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4.8 Ownership. Gerald A. Peabody, Jr. and Penelope A. Peabody
represent and warrant jointly and severally on the one hand, and BVI represents
on the other hand that except as disclosed in Section 4.8 of the Disclosure
Schedule, no Seller nor any of its, his or her Affiliates or Associates (other
than the Company), as the case may be, has any interest of any nature in any of
the Assets and Properties used for or related to the business or operations of
the Company or any of the Subsidiaries.
4.9 Other Negotiations; Brokers. No Seller or any of its Affiliates
(or any investment banker, financial advisor, attorney, accountant or other
Person retained by or acting for or on behalf of any Seller or any such
Affiliate) (i) has entered into any agreement that conflicts with any of the
transactions contemplated by this Agreement or any of the Operative Agreements
or (ii) has entered into any agreement or had any discussions with any third
party regarding any transaction involving the Company or any Subsidiary which
could result in the Company, Buyer or its stockholders or any general partner,
limited partner, officer, director, employee, agent or Affiliate of any of them
being subject to any claim for liability to said third party as a result of
entering into this Agreement or the Operative Agreements or consummating the
transactions contemplated hereby or thereby. No agent, broker, finder,
investment banker, financial advisor or other similar Person will be entitled to
any fee, commission or other compensation in connection with the transactions
contemplated by this Agreement or the Operative Agreements on the basis of any
act or statement made by any Seller, any of its, his or her respective
Affiliates, or any investment banker, financial advisor, attorney, accountant or
other Person retained by or acting for or on behalf of such Seller or any such
Affiliate.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
5.1 Organization and Qualification. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation.
5.2 Authority Relative to this Agreement and the Operative
Agreements. Buyer has full corporate power and authority to enter into this
Agreement and the Operative Agreements to which it is a party and to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance of this
Agreement and the Operative Agreements to which it is a party by Buyer and the
consummation by Buyer of the transactions contemplated hereby and thereby have
been duly and validly approved by Buyer's board of directors. This Agreement and
the Operative Agreements to which Buyer is a party have been duly and validly
executed and delivered by Buyer and constitute the legal, valid and binding
obligation of Buyer enforceable against Buyer in accordance with their
respective terms.
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5.3 No Conflicts. The execution and delivery by Buyer of this
Agreement do not, and the execution and delivery by Buyer of the Operative
Agreements to which Buyer is a party and the consummation of the transactions
contemplated hereby and thereby does not (i) conflict with or result in a
violation or breach of any of the terms, conditions or provisions of the
certificate of incorporation or by-laws of Buyer; (ii) conflict with or result
in a violation or breach of any of the terms, conditions or provisions of any
Law or Order applicable to Buyer and (iii) conflict with or result in a
violation or breach of, constitute (with or without notice or lapse of time or
both) a default under, require Buyer to obtain any consent, approval or action
under the terms of, any Contract to which Buyer is a party the effect of which,
individually or in the aggregate, would reasonably be expected to have a
materially adverse effect on the Business or Condition of Buyer.
5.4 Governmental Approvals and Filings. No consent, approval or
action of, filing with or notice to any Governmental or Regulatory Authority on
the part of Buyer is required in connection with the execution, delivery and
performance of this Agreement or the Operative Agreements to which it is a party
or the consummation of the transactions contemplated hereby or thereby.
5.5 Legal Proceedings. There are no Actions or Proceedings pending
or, to the knowledge of Buyer, threatened against, relating to or affecting
Buyer or any of its Assets and Properties which (i) could reasonably be expected
to result in the issuance of an Order restraining, enjoining or otherwise
prohibiting or making illegal the consummation of any of the transactions
contemplated by this Agreement or any of the Operative Agreements or (ii) could
reasonably be expected, individually or in the aggregate with other such Actions
or Proceedings, to have a material adverse effect on the business or condition
of Buyer.
5.6 Brokers. No agent, broker, finder, investment banker, financial
advisor or other similar Person will be entitled to any fee, commission or other
compensation in connection with any of the transactions contemplated by this
Agreement or the Operative Agreements on the basis of any act or statement made
by Buyer.
5.7 Purchase for Investment. The Purchased Stock will be acquired by
Buyer for its own account for the purpose of investment and not with a view to
the resale or distribution of all or any part of the Purchased Stock in
violation of the Securities Act.
5.8 Financing of Purchase Price. Buyer has received a financing
commitment, attached hereto as Annex III, in an amount sufficient to consummate
the transaction contemplated by this Agreement.
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ARTICLE VI
COVENANTS
With respect to Sections 6.1 through 6.9, each Seller, jointly and
severally, and (during the period from the Effective Date through the Closing)
the Company hereby covenants and agrees with Buyer that, at all times from and
after the Effective Date until the Closing Date each Seller and the Company
shall comply with all the covenants and provisions of this Article VI except to
the extent Buyer may otherwise consent in writing.
6.1 Access to Information.
(a) From the Effective Date to the Phase I Completion Date, Sellers
will, and will cause the Company, its Subsidiaries and the representatives of
the Company or its Subsidiaries to, (i) afford Buyer, its representatives and
prospective lenders and their representatives (collectively, "Buyer's Advisors")
full and free access to Phase I Material, (ii) furnish Buyer and Buyer's
Advisors with copies of all Contracts, Books and Records, and other existing
documents and data as Buyer may reasonably request consistent with the scope of
Phase I Material, (iii) furnish Buyer and Buyer's Advisors with such additional
financial, operating, and other data and information as Buyer may reasonably
request consistent with the scope of Phase I Material and (iv) allow Buyer to
engage an environmental engineer to conduct an environmental investigation of
any property owned, operated or leased by the Company and its Subsidiaries
relating to the business, including but not limited to, subsurface soil,
groundwater, surface water or air sampling and analysis.
(b) From the Phase II Commencement Date through the Closing Date,
Sellers will, and will cause the Company, its Subsidiaries and the
representatives of the Company or its Subsidiaries to, (i) afford Buyer, and
Buyer's Advisors full and free access to Phase II Material, (ii) furnish Buyer
and Buyer's Advisors with copies of all Contracts, Books and Records, and other
existing documents and data consistent with the scope of Phase II Material, and
(iii) furnish Buyer and Buyer's Advisors with such additional financial,
operating, and other data and information as Buyer may reasonably request
consistent with the scope of Phase II Material.
6.2 Conduct of Business. Except for the transactions contemplated by
this Agreement and the Operative Agreements, including without limitation the
FSC Disposition, from the Effective Date through the Closing Date, the Company
and its Subsidiaries shall conduct business only in the ordinary course
consistent with past practice and the terms of this Agreement and the Operative
Agreements. Without limiting the generality of the foregoing, the Company and
its Subsidiaries shall:
(a) use its best efforts to (i) preserve intact the business
organization and reputation of the Company and its Subsidiaries, (ii) keep
available (subject to dismissals and retirements in the ordinary course of
business consistent with past practice) the services of the present officers,
employees and consultants of the Company and its Subsidiaries with the exception
of Gerald A. Peabody, Jr., (iii) maintain the Assets and Properties of the
Company and its
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Subsidiaries in good working order and condition, ordinary wear and tear
excepted, (iv) maintain the goodwill of customers, suppliers, lenders and other
Persons with whom Sellers have significant business relationships with respect
to the Company and its Subsidiaries and (v) continue all current sales,
marketing and promotional activities relating to the business and operations of
the Company and the Subsidiaries;
(b) except to the extent required by applicable Law or except such
changes as are reasonably necessary and practicable so as to enable the Company
and its Subsidiaries to conduct its business in a manner consistent with current
practices, (i) cause the Books and Records of the Company and its Subsidiaries
to be maintained in the usual, regular and ordinary manner and (ii) not permit
any material change in the Company's and its Subsidiaries' (x) pricing,
investment, accounting, financial reporting, inventory, credit, allowance or Tax
practice or policy, or (y) method of calculating any bad debt, contingency or
other reserves for accounting, financial reporting or Tax purposes or (z) fiscal
year; and
(c) comply, in all material respects, with all Laws and Orders
applicable to the business and operations of the Company and its Subsidiaries
and, promptly following receipt thereof, furnish Buyer with copies of any notice
received from any Governmental or Regulatory Authority or other Person alleging
any material violation of any such Law or Order.
6.3 Certain Restrictions. Except for the transactions contemplated
by this Agreement and the Operative Agreements, from the Effective Date through
the Closing Date, the Company and its Subsidiaries, will refrain from, without
the prior consent of Buyer, (a) amending their certificates or articles of
organization or incorporation, limited liability company agreement or by-laws
(or other comparable charter documents) or taking any action with respect to any
such amendment or any reorganization, liquidation or dissolution of any such
entity; (b) taking any of the actions listed in Section 3.9 hereof; (c)
violating, breaching, or defaulting under, in any material respect, or taking or
failing to take any action that (with or without notice or lapse of time or
both) would constitute a material violation or breach of, or default under, any
term or provision of any Permit held or used by the Company or any Subsidiary or
any Contract to which the Company or any Subsidiary is a party or by which any
of its Assets and Properties is bound; (d) (i) taking or agreeing or committing
to take or omitting or agreeing or committing to omit any action that would make
any representation or warranty of the Company hereunder inaccurate in any
material respect; or (ii) taking any action or course of action inconsistent
with compliance with the covenants and agreements of the Company herein or which
might adversely affect the interests of Buyer hereunder; and (e) entering into
any agreement to engage in any of the activities listed in this Section 6.3.
6.4 Governmental and Other Approvals. Each Seller will (a) take all
reasonable steps necessary or desirable, and proceed diligently and in good
faith and use its best efforts, as promptly as practicable to obtain all
consents, approvals or actions of, to make all filings with and to give all
notices to Governmental or Regulatory Authorities or any other Person required
on the part of any Seller, the Company or any Subsidiary to consummate the
transactions contemplated hereby and by the Operative Agreements and those
described in Sections 3.5 and 3.6 of the
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Disclosure Schedule, (b) provide such other information and communications to
such Governmental or Regulatory Authorities or other Persons as Buyer or such
Governmental or Regulatory Authorities or other Persons may reasonably request
and (c) cooperate with Buyer as promptly as practicable in obtaining all
consents, approvals or actions of, making all filings with and giving all
notices to Governmental or Regulatory Authorities or other Persons required to
consummate the transactions contemplated hereby and by the Operative Agreements.
The Company or each Seller will provide prompt notification to Buyer when any
such consent, approval, action, filing or notice referred to in this Section 6.4
is obtained, taken, made or given, as applicable, and will advise Buyer of any
communications (and, unless precluded by Law, provide copies of any such
communications that are in writing) with any Governmental or Regulatory
Authority or other Person regarding any of the transactions contemplated by this
Agreement or any of the Operative Agreements.
6.5 Notice and Cure. Each Seller will promptly notify Buyer of, and
contemporaneously will provide Buyer with true and correct copies of any and all
information or documents relating to, and will use all commercially reasonable
efforts to cure before the Closing Date, any event, transaction or circumstance
occurring on or after the Effective Date that causes or will cause any covenant
or agreement to be breached or that renders or will render untrue any
representation or warranty contained in Article III or IV as if the same were
made on or as of the date of such event, transaction or circumstance. Nothing
contained in this Section 6.5 or any other notice shall affect the survival of
or modify, limit or create any exception to the representations, warranties,
covenants, and agreements of the Company and each Seller hereunder or the
conditions to the obligations of Buyer to close as set forth in Article VII or
Buyer's right to seek indemnity under Article X.
6.6 Audited Financial Statements. Sellers shall deliver to Buyer
prior to February 17, 1998, the 1997 Audited Financial Statements, all audited
by Ernst & Young LLP or other independent public accountants of recognized
national standing acceptable to Buyer and accompanied by an opinion of such
accountants (which shall not be qualified in any material respect) to the effect
that such financial statements fairly present in all material respects the
Business and Condition of the Company on a combined basis in accordance with
GAAP consistently applied.
6.7 Efforts to Consummate Transaction. Each Seller and the Company
shall take all reasonable action, and do all things reasonably necessary or
advisable in order to consummate the transactions contemplated by this Agreement
and the Operative Agreements including, without limitation, the satisfaction of
each condition to the obligation of Buyer pursuant to Article VII, and shall not
fail to take any action that could reasonably be expected to result in the
nonfulfillment of any such condition.
6.8 No Solicitations. From the Effective Date until March 4, 1998,
or the earlier termination of this Agreement, no Seller or any Affiliate will
take (nor will any Seller authorize or permit any Affiliate or authorize or
permit any investment banker, financial advisor, attorney, accountant or other
Person retained by or acting for or on behalf of any Seller or any such
Affiliate to take) directly or indirectly, any action to initiate, assist,
solicit, receive, negotiate, encourage or
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accept any offer or inquiry from any Person (a) to engage in any Business
Combination with respect to the Company or any Subsidiary, (b) to reach any
agreement or understanding (whether or not such agreement or understanding is
absolute, revocable, contingent or conditional) for, or otherwise attempt to
consummate, any Business Combination with the Company or any Subsidiary or (c)
to furnish or cause to be furnished any information with respect to the Company
or any Subsidiary to any Person (other than as contemplated by Section 6.1) who
any Seller or any Affiliate (or any such Person acting for or on their behalf)
knows or has reason to believe is in the process of, or may be, considering any
Business Combination with the Company or any Subsidiary. If any Seller or any
such Affiliate (or any such Person acting for or on their behalf) receives from
any Person (other than Buyer or any other Person referred to in Section 6.1) any
offer, inquiry or informational request referred to above, such Seller will
promptly advise such Person, by written notice, of the terms of this Section 6.8
and will promptly, orally and in writing, advise Buyer of all the terms of such
offer, inquiry or request (including, without limitation, the identity of the
Person making such offer, inquiry or request) and deliver a copy of such notice
to Buyer.
6.9 Noncompetition; Non Solicitation; Trade Secrets; Discoveries and
Works.
(a) For a period of five years from the Closing Date, each of the
Sellers (collectively, for the purposes of Section 6.9, the "Non-Competing
Parties", and, individually, a "Non-Competing Party") will not (except as an
officer, director, stockholder, member, manager, employee, agent or consultant
of the Company, any Subsidiary or any Affiliate thereof) directly or indirectly,
own, manage, operate, join, or have a financial interest in, control or
participate in the ownership, management, operation or control of, or be
employed as an employee, agent or consultant, or in any other individual or
representative capacity whatsoever, or use or permit his or her name to be used
in connection with, or be otherwise connected in any manner with (i) any
business or enterprise engaged within the Canadian province of British Columbia
or any portion of the United States (whether or not such business is physically
located within British Columbia or the United States) in the design,
development, manufacture, distribution or sale of any products, or the provision
of any services, which the Company was designing, developing, manufacturing,
distributing, selling or providing at any time up to and including the Closing
Date or (ii) any business which is (A) providing coal combustion by-product
("CCB") management services, including the collection, storage, marketing,
removal, disposal of fly-ash and other CCBs, or (B) competitive with the
business carried on or planned by the Company at any time up to and including
the Closing Date, provided that the foregoing restriction shall not be construed
to prohibit (x) the marketing and sale of cement and (y) the ownership by any
Non-Competing Party together with its Affiliates and Associates, as the case may
be, of not more than 2% of any class of securities of any corporation which is
engaged in any of the foregoing businesses, having a class of securities
registered pursuant to the Securities Exchange Act of 1934, as amended, which
securities are publicly owned and regularly traded on any national exchange or
in the over-the-counter market, provided further, that such ownership represents
a passive investment and that any such Non-Competing Party together with its
Affiliates and Associates or any group of Persons including such Non-Competing
Party together with its Affiliates and Associates in any way, either directly or
indirectly, does not manage or exercise control of any such corporation,
guarantees any of its
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financial obligations, otherwise takes part in its business other than
exercising rights as a shareholder, or seeks to do any of the foregoing.
(b) For a period of five years from such Non-Competing Party's
termination of employment with the Company or any Subsidiary, each Non-Competing
Party agrees, with respect to any and all products sold by the Company in the
regular course of business at any time within five years prior to the Closing
Date, not to, directly or indirectly, whether for his or her own account or for
the account of any other individual or entity, solicit the trade, business or
patronage of, or sell any to, any Persons that were either customers of the
Company or any Subsidiary at or prior to the Effective Date, or prospective
customers with respect to whom a sales effort, presentation or proposal was made
or planning to be made by the Company or any Subsidiary at or prior to the
Effective Date. Such Non-Competing Party further agrees that during such
five-year period he or she shall not, directly or indirectly, (i) solicit or
provide financial incentives to any individual who was an employee or consultant
of the Company or any Subsidiary at any time during the time such Non-Competing
Party was employed by or an owner of securities of the Company, to terminate his
or her employment or consulting relationship with the Company or any Subsidiary
or to become employed by or a consultant to, direct or indirectly, such
Non-Competing Party, any of his or her Affiliates or any Person by which such
Non-Competing Party or any of his or her Affiliates is employed or a consultant
to or (ii) interfere in any other way with the employment, or other
relationship, of any employee or consultant of the Company or any Subsidiary.
(c) Each Non-Competing Party recognizes that it is in the legitimate
business interest of the Company and its Subsidiaries to restrict his or her
disclosure or use of Trade Secrets or other Confidential Information relating to
the Company and its Subsidiaries for any purpose other than in connection with
his or her performance of his or her duties to the Company and its Subsidiaries,
and to limit any potential appropriation of such Trade Secrets or other
Confidential Information by such Non-Competing Party. Such Non-Competing Party
therefore agrees that all Trade Secrets or other Confidential Information
relating to the Company and its Subsidiaries heretofore or in the future
obtained by such Non-Competing Party shall be considered confidential and the
proprietary information of the Company and its Subsidiaries. Such Non-Competing
Party shall not use or disclose, or authorize any other person or entity to use
or disclose, any Trade Secrets or other Confidential Information, other than as
necessary to further the business objectives of the Company and its
Subsidiaries. The term "Trade Secrets or other Confidential Information", by way
of example and without limitation, includes the whole or any portion or phase of
any scientific or technical information, design, process, procedure, formula,
machine, invention, improvement, manufacturing technique, manufacturing or test
data, confidential business or financial information, listing of names,
addresses, or telephone numbers, or other information relating to any business
or profession which is secret and of value. The term "Trade Secrets or other
Confidential Information", does not, however, include data or information that
is known or becomes known, through no action of the Non-Competing Parties, to
persons or entities other than the Company and its Subsidiaries, nor does it
include the general industry expertise and experience of the Non-Competing
Parties to the extent such does not include secret or proprietary information
relating to the Company.
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(d) All Discoveries and Works made or conceived by each
Non-Competing Party during his or her employment by or service as a director of
the Company or any Subsidiary, jointly or with others, that relate to the
present or anticipated activities of the Company or its Subsidiary, or are used
or usable by the Company or any Subsidiary shall be owned by the Company or any
Subsidiary. The term "Discoveries and Works" means Trade Secrets or other
Confidential Information, patents and patent applications, trademarks and
trademark registrations and applications, service marks and service mark
registrations and applications, trade names, copyrights and copyright
registrations and applications, but, for the purposes of this Agreement, does
not include the name or mark "Pozzolanic" in geographic areas other than those
in which the Company was doing business as of the Effective Date. Such
Non-Competing Party shall (a) promptly notify, make full disclosure to, and
execute and deliver any documents requested by the Company or any Subsidiary, as
the case may be, to evidence or better assure title to Discoveries and Works in
the Company or any Subsidiary, as so requested, (b) renounce any and all claims,
including but not limited to claims of ownership and royalty, with respect to
all Discoveries and Works and all other property owned or licensed by the
Company or any Subsidiary, (c) assist the Company or any Subsidiary in obtaining
or maintaining for itself at its own expense United States and foreign patents,
copyrights, trade secret protection or other protection of any and all
Discoveries and Works, and (d) promptly execute, whether during his or her
employment with or service as a director of the Company or any Subsidiary or
thereafter, all applications or other endorsements necessary or appropriate to
maintain patents and other rights for the Company or any Subsidiary and to
protect the title of the Company or any Subsidiary thereto, including but not
limited to assignments of such patents and other rights. Any Discoveries and
Works which, within six months after the termination of such Non-Competing
Party's employment with or service as a director of the Company or any
Subsidiary, are made, disclosed, reduced to a tangible or written form or
description, or are reduced to practice by such Non-Competing Party and which
pertain to the business carried on or products or services being sold or
developed by the Company or any Subsidiary at the time of such termination
shall, as between such Non-Competing Party and the Company or any Subsidiary, as
the case may be, be presumed to have been made during such Non-Competing Party's
employment by or service as a director of the Company or any Subsidiary. Such
Non-Competing Party acknowledges that all Discoveries and Works shall be deemed
"works made for hire" under the Copyright Act of 1976, as amended, 17 U.S.C. ss.
101.
(e) Each Non-Competing Party agrees that Buyer's remedies at law for
any breach or threat of breach by him or her of any of the provisions of this
Section 6.9 will be inadequate, and that, in addition to any other remedy to
which Buyer may be entitled at law or in equity, Buyer shall be entitled to a
temporary or permanent injunction or injunctions or temporary restraining order
or orders to prevent breaches of the provisions of this Section 6.9 and to
enforce specifically the terms and provisions hereof, in each case without the
need to post any security or bond. Nothing herein contained shall be construed
as prohibiting Buyer from pursuing, in addition, any other remedies available to
the Company or any Subsidiary for such breach or threatened breach. A waiver by
Buyer of any breach of any provision hereof shall not operate or be construed as
a waiver of a breach of any other provision of this Agreement or of any
subsequent breach by such Non-Competing Party.
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(f) It is expressly understood and agreed that although the parties
hereto consider the restrictions contained in this Section 6.9 hereof to be
reasonable for the purpose of preserving the goodwill, proprietary rights and
going concern value of the Company and the Subsidiaries, if a final judicial
determination is made by a court having jurisdiction that the time or territory
or any other restriction contained in this Section 6.9 is an unenforceable
restriction on such Non-Competing Party's activities, the provisions of this
Section 6.9 shall not be rendered void but shall be deemed amended to apply as
to such maximum time and territory and to such other extent as such court may
judicially determine or indicate to be reasonable. Alternatively, if the court
referred to above finds that any restriction contained in this Section 6.9 or
any remedy provided herein is unenforceable, and such restriction or remedy
cannot be amended so as to make it enforceable, such finding shall not affect
the enforceability of any of the other restrictions contained therein or the
availability of any other remedy. The provisions of this Section 6.9 shall in no
respect limit or otherwise affect such Non-Competing Party's obligations under
other agreements with the Company or any Subsidiary or any of its respective
present or future Affiliates.
6.10 Buyer's Covenant.
(a) At the initiation of Phase II, Buyer shall deliver to The Chase
Manhattan Bank, N.A., as escrow agent (the "Phase II Escrow Agent"), $1,000,000
in immediately available funds (the "Phase II Deposit"), to be held and applied
by the Phase II Escrow Agent in accordance with the provisions of an escrow
agreement substantially in the form of Exhibit H hereto (the "Phase II Escrow
Agreement").
(b) The Phase II Deposit shall be held by the Phase II Escrow Agent
in escrow and managed pursuant to the terms of the Phase II Escrow Agreement.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF BUYER; DELIVERIES AT THE CLOSING
The obligations of Buyer hereunder are subject to the fulfillment,
at or before the Closing, of each of the following conditions (all or any of
which may be waived in whole or in part by Buyer in its sole discretion):
7.1 Representations and Warranties. Each of the representations and
warranties made in Articles III and IV herein shall be true and correct in all
material respects (if not qualified by materiality) and in all respects (if
qualified by materiality) on and as of the Closing Date as though such
representation or warranty was made on and as of the Closing Date, and any
representation or warranty made as of a specified date earlier than the Closing
Date shall also have been true and correct in all material respects on and as of
such earlier date.
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7.2 Performance. Sellers and the Company shall have performed and
complied with each agreement, covenant and obligation required by this Agreement
to be so performed or complied with by Sellers or the Company, as the case may
be, at or before the Closing.
7.3 Officers' Certificates. Each of Sellers and the Company shall
have delivered to Buyer, a certificate, dated the Closing Date and executed by
the President of the Company, each Seller that is an individual and the
President or any Vice President of BVI, substantially in the form and to the
effect of Exhibit A hereto, (ii) certificates, dated the Closing Date and
executed by the Secretary or any Assistant Secretary of the Company and BVI,
respectively, substantially in the form and to the effect of Exhibit B hereto
and (iii) a certificate of the Company's chief financial officer certifying (i)
the satisfaction on the Closing Date of Section 7.13 and (ii) that the assets of
the FSC have been transferred to Northwest.
7.4 Orders and Laws. There shall not be in effect on the Closing
Date any Order or Law restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement or any of the Operative Agreements or which could reasonably be
expected to otherwise result in a material diminution of the benefits of the
transactions contemplated by this Agreement or any of the Operative Agreements
to Buyer, and there shall not be pending or threatened on the Closing Date any
Action or Proceeding or any other action (i) which could reasonably be expected
to result in the issuance of any such Order or the enactment, promulgation or
deemed applicability to Buyer any Seller, the Company or any Subsidiaries, or
the transactions contemplated by this Agreement or any of the Operative
Agreements of any such Law; or (ii) wherein an unfavorable judgment, decree or
Order would prevent the carrying out of this Agreement or any of the Operative
Agreements or any of the transactions or events contemplated hereby or thereby,
declare unlawful the transactions or events contemplated by this Agreement or
present a risk of damages to Buyer.
7.5 Consents and Approvals. All (A) consents, approvals and actions
of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit the parties hereto to perform their respective obligations
under this Agreement and the Operative Agreements and to consummate the
transactions contemplated hereby and thereby and (B) consents (or in lieu
thereof waivers) and notices relating to the performance by Sellers of their
respective obligations under this Agreement and the Operative Agreements or
relating to the consummation of the transactions contemplated hereby and thereby
as are required under any Contract to which the Company, any Subsidiary or any
Seller is a party or by which any of their respective Assets and Properties are
bound and where the failure to obtain any such consent (or in lieu thereof
waiver) or deliver any such notice could be expected, individually or in the
aggregate with other such failures, to materially adversely affect Buyer or the
Business or Condition of the Company (i) shall have been duly obtained, made or
given in form and substance satisfactory to Buyer, (ii) shall not be subject to
the satisfaction of any condition that has not been satisfied or waived or
otherwise impose any liabilities or restrictions on Buyer and (iii) shall be in
full force and effect. All terminations or expirations of waiting periods
imposed by any Governmental or Regulatory Authority necessary for the
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consummation of the transactions contemplated by this Agreement and the
Operative Agreements shall have occurred.
7.6 Opinion of Sellers' Counsel. Buyer shall have received the
opinion of (i) Bradley D. Stam, counsel to the Company, the Subsidiaries and
Sellers (other than BVI), (ii) counsel to BVI, and (iii) counsel to Guarantor,
in connection with this Agreement and the Operative Agreements to which it, he
or she is a party, dated the Closing Date, substantially in the form and to the
effect of Exhibits C-1, C-2 and C-3 hereto and to such further effect as Buyer
may reasonably request.
7.7 Operative Agreements. All Operative Agreements shall have been
duly executed and delivered by the respective parties thereto other than Buyer
and shall be in full force and effect, and the Tax Escrow Funds and the BVI
Escrow Funds shall have been deposited with the applicable escrow agents in
accordance with the Tax Escrow Agreement and the BVI Escrow Agreement.
7.8 Release of Claims. Each Seller shall have executed and delivered
to Buyer an Assignment and Release of Claims in the form of Exhibit D hereto.
7.9 Resignations. Sellers shall have delivered to Buyer duly signed
resignations, effective at the Closing, of each of the officers and directors of
the Company and its Subsidiaries.
7.10 Good Standing Certificates. Sellers shall have delivered to
Buyer (a) copies of the certificate or articles of incorporation (or other
comparable corporate charter documents), including all amendments thereto of
BVI, the Company and the Subsidiaries certified by the Secretary of State or
other appropriate government official of the jurisdiction of incorporation or
organization, (b) certificates from the Secretary of State or other appropriate
government official to the effect that BVI, the Company and each Subsidiary is
in good standing or subsisting in such jurisdiction of incorporation or
formation, listing all charter documents of BVI, the Company and each Subsidiary
on file and attesting to the payment of all franchise or similar Taxes, and (c)
certificates from the Secretary of State or other appropriate official in each
jurisdiction in which the Company and its Subsidiaries are qualified or admitted
to do business to the effect that the Company and its Subsidiaries are duly
qualified or admitted and in good standing in such jurisdiction.
7.11 Transfer to BVI; Receipt of Purchased Stock and Minute Books.
BVI shall provide Buyer evidence satisfactory to Buyer of the Contribution. The
Purchased Stock shall have been transferred to Buyer in accordance with the
terms of this Agreement. The minute books of each of the Company and its
Subsidiaries shall have been delivered to the location or locations designated
by Buyer.
7.12 Payment of Indebtedness. Sellers shall deliver to Buyer
evidence, satisfactory to Buyer, of the complete and absolute repayment,
discharge and extinguishment of all the outstanding Indebtedness of the Company
and its Subsidiaries.
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7.13 Additional Requirements. Sellers shall deliver to Buyer
evidence, satisfactory to Buyer, that available cash of the Company shall remain
on hand, and such amount shall not be less than the sum of (a) $3,000,000, plus
(b) an amount necessary to satisfy the Expenses, which as of the Closing Date
will not exceed $150,000 plus (c) at Sellers' election, an amount sufficient to
pay the Company's liability for Taxes for Tax periods ending on or before
December 31, 1997, together with all costs and expenses (excluding internal
costs, such as staff time and internal expenses) incurred by the Company or its
Affiliates (other than members of the Seller Group) relating to the preparation
and filing of Tax Returns and payment of Taxes with respect to such Tax periods
minus (d) the total of material costs and freight charges paid by the Company,
prior to the Closing Date, with respect to fly ash in storage, as of the Closing
Date, at the Company's Sacramento, California terminal, provided, that the total
costs and charges under clause (d) shall not exceed $350,000. In the event that
the cash on hand shall be less than said total, the Purchase Price shall be
reduced, on a dollar-for-dollar basis, to the extent of such shortfall.
7.14 Proceedings. All proceedings to be taken on the part of either
Seller in connection with the transactions contemplated by this Agreement and
the Operative Agreements and all documents incident thereto shall be reasonably
satisfactory in form and substance to Buyer, and Buyer shall have received
copies of all such documents and other evidences as Buyer may reasonably request
in order to establish the consummation of such transactions and the taking of
all proceedings in connection therewith.
7.15 Completion of Diligence. Buyer shall have been satisfied, in
its sole discretion, with (i) the results of its and its advisors' legal,
business, environmental and accounting due diligence investigations and (ii) its
and its advisors' review of complete disclosure schedules to the Agreement.
7.16 Tax Status Certificate. Buyer shall receive from the Company at
the Closing a duly executed certificate substantially in the form and to the
effect of Exhibit E.
7.17 Audited Financial Statements. The 1997 Audited Financial
Statements shall have been delivered to the Buyer on or before February 17,
1998.
7.18 No Adverse Change. There shall have occurred no material
adverse change in the Business or Condition of the Company since December 31,
1997.
7.19 Transfer of FSC's Assets. Buyer shall have been satisfied, in
its sole discretion, that all of the assets of the FSC, including but not
limited to a $150,000 receivable due to FSC, shall have been transferred to
Northwest in the form of a dividend.
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ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF SELLERS; DELIVERIES AT THE CLOSING
The obligations hereunder of Sellers are subject to the fulfillment,
at or before the Closing, of each of the following conditions (all or any of
which may be waived in whole or in part by the Sellers, on the other hand, in
their sole discretion):
8.1 Representations and Warranties. Each of the representations and
warranties made by Buyer in this Agreement shall be true and correct on and as
of the Closing Date as though such representation or warranty was made on and as
of the Closing Date.
8.2 Performance. Buyer shall have performed and complied with each
agreement, covenant and obligation required by this Agreement to be so performed
or complied with by it at or before the Closing.
8.3 Officers' Certificates. Buyer shall have delivered to each
Seller a certificate, dated the Closing Date and executed by the President or
any Vice President of Buyer, substantially in the form and to the effect of
Exhibit F hereto, and a certificate, dated the Closing Date and executed by the
Secretary or Assistant Secretary of Buyer, substantially in the form and to the
effect of Exhibit B hereto.
8.4 Orders and Laws. There shall not be in effect on the Closing
Date any Order or Law restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement or any of the Operative Agreements.
8.5 Governmental Consents and Approvals. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit the parties hereto to perform their respective obligations
under this Agreement and the Operative Agreements and to consummate the
transactions contemplated hereby and thereby (a) shall have been duly obtained,
made or given, (b) shall not be subject to the satisfaction of any condition
that has not been satisfied or waived and (c) shall be in full force and effect,
and all terminations or expirations of waiting periods imposed by any
Governmental or Regulatory Authority necessary for the consummation of the
transactions contemplated by this Agreement and the Operative Agreements shall
have occurred.
8.6 Opinion of Buyer's Counsel. Sellers shall have received the
opinion of Morgan, Lewis & Bockius LLP, counsel to Buyer, in connection with
this Agreement and the Operative Agreements to which it is a party, dated the
Closing Date, substantially in the form and to the effect of Exhibit G hereto.
8.7 Operative Agreements. All Operative Agreements shall have been
duly executed by their respective parties other than Sellers and shall be in
full force and effect.
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8.8 Receipt of the Purchase Price. In accordance with Article I,
Buyer shall have delivered to Sellers the Purchase Price less the Tax Escrow
Funds, the BVI Escrow Funds and the Phase II Deposit (which Phase II Deposit
shall be released to Sellers at Closing).
ARTICLE IX
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS
9.1 Survival of Representations, Warranties, Covenants and
Agreements. Notwithstanding any right of Buyer and its Affiliates (whether or
not exercised) to investigate the affairs of each Seller, the Company or any
Subsidiary or any right of any party (whether or not exercised) to investigate
the accuracy of the representations and warranties of the other party contained
in this Agreement or the waiver of any provision hereof, each Seller and the
Company on the one hand, and Buyer, on the other, have the right to rely fully
upon the representations, warranties, covenants and agreements of the other
contained in this Agreement. The representations, warranties, covenants and
agreements of each Seller, the Company and Buyer contained in this Agreement
will survive the Closing (a) until 60 calendar days after the expiration of all
applicable statutes of limitation (including all periods of extension, whether
automatic or permissive) with respect to representations and warranties
contained in Sections 3.1 (organization), 3.2 (capital stock), 3.11 (taxes),
3.14 (benefit plans), 3.23 (environmental) and 3.30 (disclosure) (to the extent
it relates to the foregoing Sections) and 4.5 (taxes, and 4.7 (title to common
stock)), (b) until the fifteen-month anniversary of the Closing Date with
respect to all other representations and warranties and any covenant or
agreement to the extent performed, in whole or in part, on or prior to the
Closing, and (c) indefinitely with respect to all remaining covenants and
agreements, except that any representation, warranty, covenant or agreement that
would otherwise terminate in accordance with clause (a) or (b) above will
continue to survive if a Claim Notice or Indemnity Notice (as applicable) shall
have been timely given under Article X on or prior to such termination date,
until the related claim for indemnification has been satisfied or otherwise
resolved as provided in Article X, but only with respect to matters described in
the Claim Notice or Indemnity Notice.
ARTICLE X
INDEMNIFICATION
10.1 Indemnification.
(a) Each party hereto (other than the Buyer) shall jointly and
severally indemnify Buyer and its stockholders and the general partners, limited
partners, officers, directors, employees, agents, stockholders and Affiliates of
each of them, in respect of, and hold each of them harmless from and against,
any and all Losses suffered, incurred or sustained by any of them or to which
any of them becomes subject, resulting from, arising out of or relating to any
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misrepresentation or breach of warranty or nonfulfillment of or failure to
perform any covenant or agreement by such party contained in this Agreement or
any of the Operative Agreements (including, without limitation, any certificate
delivered in connection herewith or therewith); provided, however, that if and
to the extent that any indemnification hereunder is unenforceable, Seller Group
shall make the maximum contribution to the payment and satisfaction of the
indemnified Losses as shall be permissible under applicable Laws; and further,
provided, that in the case of a representation, warranty, covenant or agreement
given or made solely by either BVI, on the one hand, or Gerald A. Peabody, Jr.
and Penelope A. Peabody, on the other hand, the aforementioned indemnification
responsibility for Losses suffered, incurred or sustained by any Indemnified
Parties on account of any misrepresentation or breach of warranty by said party
or nonfulfillment of or failure to perform any covenant or agreement on the part
of said party shall be several as between BVI and the Peabodys and joint and
several as between Gerald A. Peabody, Jr. and Penelope A. Peabody.
(b) Buyer agrees to indemnify Sellers in respect of, and hold each
of them harmless from and against, any and all Losses suffered, incurred or
sustained by any of them or to which any of them becomes subject, resulting
from, arising out of or relating to any misrep resentation or breach of warranty
or nonfulfillment of or failure to perform any covenant or agreement on the part
of Buyer contained in this Agreement or the Operative Agreements (including,
without limitation, any certificate delivered in connection herewith or
therewith). Buyer further agrees to indemnify Gerald A. Peabody, Jr. and
Penelope A. Peabody in respect of, and hold him or her harmless from and
against, any all losses suffered, incurred or sustained by him or her or to
which he or she becomes subject, resulting exclusively from, arising solely out
of acts or omissions of Buyer occurring post-Closing and relating solely to the
operations or business of the Company, except in respect of any legal
proceedings, Liabilities or other actual or potential Losses of which Sellers
had knowledge prior to the Closing, but which Sellers did not disclose to Buyer
prior to Closing.
(c) No amounts of indemnity shall be payable as a result of a claim
under Section 10.1(a) in respect of a misrepresentation or breach of warranty in
Article III or Article IV (other than a claim based upon fraud or willful or
criminal misconduct or pursuant to Sections 3.1, 3.2, and 3.30 (to the extent it
relates to the foregoing Sections) or Section 4.7, unless and until the
Indemnified Parties have suffered, incurred, sustained or become subject to
Losses with respect thereto in excess of $200,000 in the aggregate, in which
case the Indemnified Parties shall be entitled to seek indemnity for the entire
amount of such Losses.
(d) The joint and several indemnification obligations of Gerald A.
Peabody, Jr. and Penelope A. Peabody under Section 10.1 shall not exceed the
greater of $2,000,000 or 1/3 of the amount of the Loss claimed.
(e) No amounts of indemnity shall be payable as a result of a claim
under Section 10.1(b) in respect of a misrepresentation or breach of warranty in
Article V (other than a claim based upon fraud or willful or criminal misconduct
or pursuant to Section 5.1), unless and until the Indemnified Parties have
suffered, incurred, sustained or become subject to Losses with respect
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thereto in excess of $200,000 in the aggregate, in which case the Indemnified
Parties shall be entitled to seek indemnity for the entire amount of such
Losses.
10.2 Method of Asserting Claims. All claims for indemnification by
any Indemnified Party under Section 10.1 will be asserted and resolved as
follows:
(a) In order for an Indemnified Party to be entitled to any
indemnification provided for under Section 10.1 in respect of, arising out of or
involving a claim or demand made by any Person not a party to this Agreement
against the Indemnified Party (a "Third Party Claim"), the Indemnified Party
must deliver a Claim Notice to the Indemnifying Party within 15 Business Days
after receipt by such Indemnified Party of written notice of the Third Party
Claim; provided, however, that failure to give such Claim Notice shall not
affect the indemnification provided hereunder except to the extent the
Indemnifying Party shall have been actually prejudiced as a result of such
failure.
(b) If a Third Party Claim is made against an Indemnified Party, the
Indemnifying Party shall be entitled to participate in the defense thereof and,
if it so chooses, to assume the defense thereof with counsel selected by the
Indemnifying Party, which counsel must be reasonably satisfactory to the
Indemnified Party. Should the Indemnifying Party so elect to assume the defense
of a Third Party Claim, the Indemnifying Party shall not be liable to the
Indemnified Party for legal expenses subsequently incurred by the Indemnified
Party after such assumption in connection with the defense thereof, but shall
continue to pay for any expenses of investigation or any Loss suffered. If the
Indemnifying Party assumes such defense, the Indemnified Party shall have the
right to participate in the defense thereof and to employ counsel, at its own
expense, separate from the counsel employed by the Indemnifying Party. If (i)
the Indemnifying Party shall not assume the defense of a Third Party Claim with
counsel satisfactory to the Indemnified Party within 10 Business Days of any
Claim Notice, or (ii) legal counsel for the Indemnified Party notifies the
Indemnifying Party that there are or may be legal defenses available to the
Indemnified Party or to other Indemnified Parties which are different from or
additional to those available to the Indemnifying Party, which, if the
Indemnified Party and the Indemnifying Party were to be represented by the same
counsel, would constitute a conflict of interest for such counsel or prejudice
prosecution of the defenses available to such Indemnified Party, or (iii) the
Indemnifying Party shall assume the defense of a Third Party Claim and fail to
diligently prosecute such defense, then in each such case the Indemnified Party,
by notice to the Indemnifying Party, may employ its own counsel and control the
defense of the Third Party Claim and the Indemnifying Party shall be liable for
the reasonable fees, charges and disbursements of counsel employed by the
Indemnified Party; and the Indemnified Party shall be promptly reimbursed for
any such reasonable fees, charges and disbursements, as and when incurred;
provided that if the Indemnifying Party shall not be actually prejudiced, the
Indemnified Party's right to assume the defense after 10 Business Days of any
Claim Notice shall not be limited by (i) above. Whether the Indemnifying Party
or the Indemnified Party controls the defense of any Third Party Claim, the
parties hereto shall cooperate in the defense thereof. Such cooperation shall
include the retention and provision to the counsel of the controlling party of
records and information which are reasonably relevant to such Third Party
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Claim, and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder. The
Indemnifying Party shall have the right to settle, compromise or discharge a
Third Party Claim (other than any such Third Party Claim in which criminal
conduct is alleged) without the Indemnified Party's consent if such settlement,
compromise or discharge (i) constitutes a complete and unconditional discharge
and release of the Indemnified Party, and (ii) provides for no relief other than
the payment of monetary damages and such monetary damages are paid in full by
the Indemnifying Party.
(c) In the event any Indemnified Party should have a claim under
Section 10.1 against any Indemnifying Party that does not involve a Third Party
Claim, the Indemnified Party shall deliver an Indemnity Notice to the
Indemnifying Party with reasonable promptness following the Indemnified Party's
awareness of such claim. The failure by any Indemnified Party to give the
Indemnity Notice shall not impair such party's rights hereunder except to the
extent that an Indemnifying Party demonstrates that it has been irreparably
prejudiced thereby. If the Indemnifying Party notifies the Indemnified Party
that it does not dispute the claim described in such Indemnity Notice or fails
to notify the Indemnified Party within the Dispute Period whether the
Indemnifying Party disputes the claim described in such Indemnity Notice, then
the Loss in the amount specified in the Indemnity Notice will be conclusively
deemed a liability of the Indemnifying Party under Section 10.1 and the
Indemnifying Party shall pay the amount of such Loss to the Indemnified Party on
demand. If the Indemnifying Party has timely disputed its liability with respect
to such claim, the Indemnifying Party and the Indemnified Party will proceed in
good faith to negotiate a resolution of such dispute, and if not resolved
through negotiations within the Resolution Period, such dispute shall be
resolved by litigation commenced by the Indemnified Party within 180 days of end
of Resolution Period in a court of competent jurisdiction.
(d) Except with respect to matters involving fraud or criminal
misconduct, the rights accorded to Indemnified Parties hereunder shall be the
exclusive remedy for monetary damages available to the Indemnified Parties
against the Indemnifying Party with respect to any matter for which indemnity is
provided hereunder. Except as limited by the preceding sentence, each
Indemnified Party shall retain all rights that it may have at law or in equity,
under federal and state securities laws, or by separate agreement, including,
without limitation, under the Operative Agreements or otherwise.
(e) Notwithstanding anything contained in this Agreement to the
contrary, Liabilities of the Company and of Subsidiaries relating to this
Agreement or any Operative Agreement shall be the joint and several
responsibility solely of Sellers. No Seller shall be entitled to any
indemnification, right of contribution or other right of recovery from the
Company or any of the Subsidiaries in connection with any claim made by an
Indemnified Party hereunder.
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ARTICLE XI
CERTAIN TAX MATTERS
11.1 Allocation of Tax Liability.
(a) Subject to Section 11.1(b), Seller shall pay or cause to be
paid, and indemnifies each Tax Indemnitee, jointly and severally, and agrees to
protect, save and hold each Tax Indemnitee harmless from and against:
(i) any Tax imposed upon or relating to the Company for any
Tax period ending on or before December 31, 1997;
(ii) any Tax arising directly or indirectly from a breach of a
representation or warranty set out in Section 3.11 of this Agreement; and
(iii) with respect to any Tax period or portion thereof ending
after December 31, 1997 and on or before the Closing Date, any Tax arising
directly or indirectly from a breach of Section 6.2; provided, however, that an
election by the Company to be a "consenting corporation" within the meaning of
Section 341(f)(1) of the Code or comparable provisions of any state statutes
shall not be in breach of Section 6.2 or otherwise be a basis for
indemnification of any Tax Indemnitee under this Article XI.
(b) The Sellers' payment and indemnification obligation for any Tax
under Section 11.1(a) shall be reduced by, and shall not include, an amount
equal to the sum of:
(i) any actual reduction in the Company's current liability
for Tax (net of any actual increase in such liability) in any tax period ending
after the Closing Date arising from any adjustments to income or to any other
tax base required by the Final Determination resolving the Tax with respect to
which the Section 11.1(a) payment is to be made; and
(ii) any projected reduction in the Company's current or
future liability for Taxes (net of any projected increase in such liability) in
any tax period ending after the Closing Date arising from any adjustments to
income or to any other tax base required by the Final Determination resolving
the Tax with respect to which the Section 11.1(a) payment is to be made. This
projected reduction will be computed by applying the Company's upper marginal
tax rate for the year in which the indemnification payment is to be made to the
adjustment in the relevant tax base. The resulting amount will then be
discounted over the future portion of the reversal period at an annual rate of
12 percent.
Any dispute regarding the applicability or amount of reduction in Sellers'
obligations pursuant to this paragraph (b) shall be resolved by an independent
accounting firm jointly engaged by Sellers and Company. Each of Sellers and the
Company shall bear and pay one-half of the fees and other
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costs charged by the independent accounting firm, and the determination of the
independent accounting firm shall be final and binding on the parties hereto.
(c) Except as otherwise provided in Section 11.3(d), payment in full
of any amount due from Sellers under this Section 11.1 shall be made from the
Tax Escrow Funds, and, to the extent such Tax Escrow Funds are no longer
available, by Sellers, in each case, to the affected Tax Indemnitee in
immediately available funds at least five (5) Business Days before the date
payment of the Taxes to which such payment relates is due.
11.2 Preparation and Filing of Tax Returns; Refunds.
(a) Seller shall prepare or cause to be prepared, consistent with
past practices, all Tax Returns of, or that include, the Company or any
Subsidiary for all taxable periods that end on or before December 31, 1997 and
shall deliver such Tax Returns to the Company for filing. To the extent that the
amount reserved for pursuant to clause (d) of Section 7.13 is insufficient for
such payments, with respect to Tax Returns filed after the Closing, Seller shall
deliver funds to the Company sufficient to pay all Tax liabilities shown by such
Tax Returns to be due and all costs and expenses (excluding internal costs, such
as staff time and internal expenses) incurred by the Company or its Affiliates
(other than members of the Seller Group) with respect to the preparation and
filing of such Tax Returns. With respect to filings after the Effective Date,
Seller will allow Buyer an opportunity to review and comment upon such Tax
Returns (including any amended Returns) prior to filing.
(b) Buyer shall file or cause to be filed all Tax Returns of, or
that include, the Company or its Subsidiaries for taxable periods ending after
December 31, 1997.
(c) Any refund of Taxes (including any interest thereon) that
relates to the Company and that is attributable to a Tax period ending after
December 31, 1997, including any such refund or other benefit realized by the
Company that results from the carry forward of any tax attribute from a Tax
period ending on or before December 31, 1997, shall be the property of the
Company and shall be retained by the Company (or, if applicable, promptly paid
by Seller to the Company if any such refund (or interest thereon) is received by
Seller or Affiliates).
(d) If (i) after the Closing Date, the Company receives any refund
of Taxes (including any interest thereon) that relates to, and that was
previously paid by or on behalf of, the Company and that is attributable to a
Tax period ending on or before December 31, 1997 and (ii) the Tax was paid (A)
by any member of Seller Group (including by a payment to the Company pursuant to
Section 11.2(a)) or from the amount reserved for such Taxes pursuant to clause
(d) of Section 7.13 after the Closing Date, or (B) by any member of Seller Group
or the Company on or before the Closing Date, then the Company promptly shall
pay or cause to be paid to Seller the amount of such refund, but net of any
Taxes imposed on any Tax Indemnitee with respect thereto. If there is a
subsequent adjustment to any such refund, then any payment or payments
theretofore made with respect to such refund pursuant to this Section 11.2(d)
promptly shall be adjusted appropriately by
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means of a payment from Seller to the Company or the Company to Seller, as the
case may be. Except as provided in this Section 11.2(d), any refund of Taxes
that relates to the Company and that is attributable to a Tax period ending on
or before December 31, 1997 (such as a refund (x) for a tax period ending after
December 31, 1997, that relates to a tax attribute or tax basis item arising in
a Tax period ending on or before December 31, 1997, or (y) of a Tax that was
paid by the Company (without reimbursement by the Sellers or provision of a
reserved amount pursuant to clause (d) of Section 7.13) after the Closing Date)
shall be the property of the Company and shall be retained by or promptly paid
to the Company.
11.3 Tax Contests.
(a) If any Tax Authority or other person asserts a Tax Claim, then
the party hereto first receiving notice of such Tax Claim promptly shall provide
written notice thereof to the other party or parties hereto. Such notice shall
specify in reasonable detail the basis for such Tax Claim and shall include a
copy of any relevant correspondence received from the Tax Authority or other
person.
(b) If, within 30 calendar days after Seller receives or delivers,
as the case may be, notice of a Tax Claim, Seller provides to the Company an
Election Notice, then, subject to the provisions of this Section 11.4, Seller
shall have the right to defend or prosecute, at its sole cost, expense and risk,
such Tax Claim by all appropriate proceedings, which proceedings shall be
defended or prosecuted diligently by Seller to a Final Determination; provided,
however, that Seller shall not, without the prior written consent of the
Company, enter into any compromise or settlement of such Tax Claim that would
result in any Tax detriment to any Tax Indemnitee. So long as Seller is
defending or prosecuting a Tax Claim, the Company shall provide or cause to be
provided to Seller any information reasonably requested by Seller relating to
such Tax Claim, and the Company shall otherwise cooperate with Seller and its
representatives in good faith in order to contest effectively such Tax Claim.
Seller shall inform the Company of all developments and events relating to such
Tax Claim (including, without limitation, providing to the Company copies of all
written materials relating to such Tax Claim), and the Company or its authorized
representatives shall be entitled, at the expense of the Company, to attend, but
not participate in or control, all conferences, meetings and proceedings
relating to such Tax Claim.
(c) If, with respect to any Tax Claim, Seller fails to deliver an
Election Notice to the Company within the period provided in Section 11.4(b) or,
after delivery of such Election Notice, Seller fails diligently to defend or
prosecute such Tax Claim to a Final Determination, then the Company shall at any
time thereafter have the right (but not the obligation) to defend or prosecute,
at the sole cost, expense and risk of Seller, such Tax Claim. The Company shall
have full control of such defense or prosecution and such proceedings, including
any settlement or compromise thereof. If requested by the Company, Seller Group
shall cooperate in good faith with the Company and its authorized
representatives in order to contest effectively such Tax Claim. Seller may
attend, but not participate in or control, any defense, prosecution, settlement
or compromise of any Tax Claim controlled by the Company pursuant to this
Section 11.4(c), and shall
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bear its own costs and expenses with respect thereto. In the case of any Tax
Claim that is defended or prosecuted by the Company pursuant to this Section
11.4(c), the Company shall, from time to time, be entitled to current payment
from Seller with respect to costs and expenses incurred by the Company in
connection with such defense or prosecution (including, without limitation,
reasonable attorneys', accountants' and experts' fees and disbursements,
settlement costs, court costs and any other costs or expenses for investigating,
defending or prosecuting such Tax Claim, and any Taxes imposed on a Tax
Indemnitee as a result of receiving a payment from Seller pursuant to this
Section 11.4, but excluding any internal costs (e.g., staff time and internal
expenses) incurred by the Buyer, the Company, or any Subsidiary of the Buyer or
the Company) (collectively, "Associated Costs").
(d) In the case of any Tax Claim that is defended or prosecuted to a
Final Determination by Seller pursuant to this Section 11.4, Seller shall pay to
the appropriate Tax Indemnitee, in immediately available funds, the full amount
of any Tax arising or resulting from such Tax Claim within five Business Days
after such Final Determination. In the case of any Tax Claim that is defended or
prosecuted to a Final Determination by the Company pursuant to the terms of this
Section 11.4, Seller shall pay to the appropriate Tax Indemnitee, in immediately
available funds, the full amount of any Tax arising or resulting from such Tax
Claim, together with any Associated Costs that have not theretofore been paid by
Seller to the Company, within five Business Days after such Final Determination.
In the case of any Tax Claim not covered by the two preceding sentences, Seller
shall pay to the appropriate Tax Indemnitee, in immediately available funds, the
full amount of any Tax arising or resulting from such Tax Claim (reduced as
required by Section 11.1(b)), together with any Associated Costs that have not
theretofore been paid by Seller to the Company, at least five Business Days
before the date payment of such Tax is due from any Tax Indemnitee.
(e) Notwithstanding anything contained in this Article XI to the
contrary, the rights of Seller under this Section 11.4 to defend or prosecute,
or to control the defense or prosecution of, any Tax Claim shall be no greater
than those rights that the Company would have to defend or prosecute, or to
control the defense or prosecution of, such Tax Claim.
11.4 Cooperation Regarding Tax Matters. Each party hereto shall, and
shall cause its Affiliates to, provide to each of the other parties hereto such
cooperation and information as any of them reasonably may request in filing any
Tax Return, amended Tax Return or claim for refund, in determining a liability
for Taxes or a right to refund of Taxes or in conducting any audit or other
proceeding in respect of Taxes. Such cooperation and information shall include
providing copies of all relevant portions of relevant Tax Returns, together with
relevant accompanying schedules and relevant work papers, relevant documents
relating to rulings or other determinations by Tax Authorities and relevant
records concerning the ownership and Tax basis of property, which any such party
may possess. Each party shall make its employees reasonably available on a
mutually convenient basis at its cost to provide an explanation of any documents
or information so provided. Subject to the preceding sentences, each party
required to file Tax Returns pursuant to this Article XI shall bear all costs of
filing such Tax Returns.
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11.5 Other Tax Covenants.
(a) Without the prior written consent of Buyer, neither any Seller
nor any Affiliate of a Seller shall, to the extent it may affect or relate to
the Company, make or change any tax election, change any annual tax accounting
period, adopt or change any method of tax accounting, file any amended Tax
Return, enter into any method of tax accounting, file any amended Tax Return,
enter into any closing agreement, settle any Tax claim, assessment or proposed
assessment, surrender any right to claim a Tax refund, consent to any extension
or waiver of the limitation period applicable to any Tax claim or assessment or
take or omit to take any other action, if any such action or omission would have
the effect of increasing any Tax liability of Buyer or the Company or of any
Affiliate of any such party for any Tax period ending after December 31, 1997.
(b) Without the prior written consent of Seller, neither Buyer nor
the Company shall, to the extent it may affect or relate to the Company, make or
change any tax election, file any amended Return, enter into any Closing
Agreement, settle any Tax claim, assessment or proposed assessment, surrender
any right to claim a Tax refund, consent to any extension or waiver of the
limitation period applicable to any Tax claim or assessment or take or omit to
take any other action, if any such action or omission would affect a Tax period
ending on or before December 31, 1997.
(c) Seller shall be responsible for (and indemnify Buyer against)
any sales, transfer, recording or other similar tax imposed as a result of the
consummation of the transactions contemplated by this Agreement and the
Operative Agreements; provided, that Buyer shall be responsible for applicable
New York State sales and transfer taxes.
11.6 Conflict. In the event of a conflict between the provisions of
this Article XI and any other provision of this Agreement, such provisions of
this Article XI shall control. Without limiting the foregoing, nothing in
Article X of this Agreement shall limit, modify or in any way affect the
provisions of this Article XI.
ARTICLE XII
DEFINITIONS
12.1 Definitions.
(a) As used in this Agreement, the following defined terms shall
have the meanings indicated below:
"1996 Audited Balance Sheet" has the meaning ascribed to it in
Section 3.8(a).
"1997 Audited Balance Sheet" has the meaning ascribed to it in
Section 3.8(c).
"1997 Audited Financial Statements" has the meaning ascribed to it
in Section 3.8(c).
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"Actions or Proceedings" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation or audit.
"Affiliate" means, as applied to any Person, (a) any other Person
directly or indirectly controlling, controlled by or under common control with,
that Person, (b) any other Person that owns or controls (i) 5% or more of any
class of equity securities of that Person or any of its Affiliates or (ii) 5% or
more of any class of equity securities (including any equity securities issuable
upon the exercise of any option or convertible security) of that Person or any
of its Affiliates, or (c) any director, partner, officer, agent, employee or
relative of such Person. For the purposes of this definition, "control"
(including with correlative meanings, the terms "controlling", "controlled by",
and "under common control with") as applied to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through ownership of voting
securities or by contract or otherwise.
"Agreement" means this Purchase Agreement, the Exhibits and the
Disclosure Schedule and the certificates delivered in connection herewith, as
the same may be amended, modified or restated from time to time in accordance
with the terms hereof.
"Assets and Properties" of any Person means all assets and
properties of every kind, nature, character and description (whether real,
personal or mixed, whether tangible or intangible, whether absolute, accrued,
contingent, fixed or otherwise and wherever situated), including the goodwill
related thereto, operated, owned or leased by such Person, including without
limitation cash, cash equivalents, Investment Assets, accounts and notes
receivable, chattel paper, documents, instruments, general intangibles, real
estate, equipment, inventory, goods and Intellectual Property.
"Assignment and Release of Claims" means the assignment of Assets
and Properties used by the Company or the Subsidiaries and the release of claims
executed and delivered by each Seller, substantially in the form and to the
effect of Exhibit D hereto, as such assignment and release of claims may be
amended, modified or restated from time to time.
"Associate" means, with respect to any Person, any corporation or
other business organization of which such Person is an officer or partner or is
the beneficial owner, directly or indirectly, of 10% or more of any class of
equity securities, any trust or estate in which such Person has a substantial
beneficial interest or as to which such Person serves as a trustee or in a
similar capacity and any relative or spouse of such Person, or any relative of
such spouse, who has the same home as such Person.
"Associated Costs" has the meaning ascribed to it in Section
11.3(c).
"Audited Financial Statements" has the meaning ascribed to it in
Section 3.8(a).
"Benefit Plan" means any Plan established by the Company, any
Subsidiary or any predecessor or Affiliate of the Company or any Subsidiary,
existing at the Closing Date or prior
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thereto, to which the Company or any Subsidiary contributes or has contributed,
or under which any employee, former employee or director of the Company or any
Subsidiary or any beneficiary thereof is covered, is eligible for coverage or
has benefit rights.
"Books and Records" means all files, documents, instruments, papers,
books and records relating to the Business or Condition of the Company,
including without limitation financial statements, Tax Returns and related work
papers and letters from accountants, budgets, pricing guidelines, ledgers,
journals, deeds, title policies, minute books, stock certificates and books,
stock transfer ledgers, Contracts, Licenses, customer lists, computer files and
programs, retrieval programs, operating data and plans and environmental studies
and plans.
"Business Combination" means, with respect to any Person, (i) any
merger, consolidation or combination to which such Person is a party, (ii) any
sale, dividend, split or other disposition of any capital stock or other equity
interests of such Person, (iii) any tender offer (including without limitation a
self-tender), exchange offer, recapitalization, liquidation, dissolution or
similar transaction, (iv) any sale, dividend or other disposition of all or a
material portion of the Assets and Properties of such Person or (v) the entering
into of any agreement or understanding, or the granting of any rights or
options, with respect to any of the foregoing.
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in the State of New York are authorized or obligated to
close.
"Business or Condition of the Company" means the business, condition
(financial or otherwise), results of operations, Assets and Properties and
prospects of the Company and its Subsidiaries.
"Buyer" has the meaning ascribed to it in the forepart of this
Agreement.
"Buyer's Advisors " has the meaning ascribed to it in Section 6.1.
"BVI" means Kokan Company Limited, a company organized under the
laws of the British Virgin Islands and its successors and assigns.
"BVI Escrow Agent" has the meaning ascribed to it in Section 1.4(c).
"BVI Escrow Agreement" has the meaning ascribed to it in Section
1.4(c).
"BVI Escrow Funds" has the meaning ascribed to it in Section 1.4(c).
"Capital Stock" has the meaning ascribed to it in Section 3.2.
"CCB" has the meaning ascribed to it in Section 6.9(a).
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"Claim Notice" means written notification pursuant to Section
10.2(a) of a Third Party Claim as to which indemnity under Section 10.1 is
sought by an Indemnified Party, enclosing a copy of all papers served, if any,
on the Indemnified Party and for the Indemnified Party's claim against the
Indemnifying Party under Section 10.1.
"Class A Stock" has the meaning ascribed to it in the forepart of
this Agreement.
"Class B Stock" has the meaning ascribed to it in the forepart of
this Agreement.
"Class C Stock" has the meaning ascribed to it in the forepart of
this Agreement.
"Class D Stock" has the meaning ascribed to it in the forepart of
this Agreement.
"Closing" has the meaning ascribed to it in Section 1.3.
"Closing Date" has the meaning ascribed to it in Section 1.3.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor law and the rules and regulations promulgated thereunder.
"Company" has the meaning ascribed to it in the forepart of this
Agreement (and, unless the context otherwise requires, shall include any
predecessor of the Company).
"Contract" means any agreement, obligation, undertaking, lease,
evidence of Indebtedness, mortgage, indenture, security agreement or other
contract (whether written or oral and whether expressed or implied).
"Contribution" has the meaning ascribed to it in the forepart of
this Agreement.
"Disclosure Schedule" means the schedules delivered to Buyer by or
on behalf of the Company and Sellers, containing all lists, descriptions,
exceptions and other information and materials as are required to be included
therein pursuant to this Agreement.
"Discoveries and Works" has the meaning ascribed to it in Section
6.9(d).
"Dispute Period" means the period ending thirty (30) calendar days
following receipt by an Indemnifying Party of either a Claim Notice or an
Indemnity Notice.
"Effective Date" has the meaning ascribed to it in the forepart of
this Agreement.
"Election Notice" means a written notice provided by Seller in
respect of a Tax Claim to the effect that (i) Seller acknowledges its indemnity
obligation under this Agreement with respect
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to such Tax Claim and (ii) Seller elects to contest, and to control the defense
or prosecution of, such Tax Claim at the sole risk and sole cost and expense of
Seller.
"Environment" means all air, surface water, groundwater, or land,
including land surface or subsurface, including all fish, wildlife, biota and
all other natural resources.
"Environmental Claim" means any and all administrative or judicial
actions, suits, orders, claims, liens, notices, notices of violations,
investigations, complaints, requests for information, proceedings, or other
communication (written or oral), whether criminal or civil, (collectively,
"Claims") pursuant to or relating to any applicable Environmental Law by any
person (including but not limited to any Governmental or Regulatory Authority,
private person and citizens' group) based upon, alleging, asserting, or claiming
any actual or potential (i) violation of or liability under any Environmental
Law, (ii) violation of any Environmental Permit, or (iii) liability for
investigatory costs, cleanup costs, removal costs, remedial costs, response
costs, natural resource damages, property damage, personal injury, fines, or
penalties arising out of, based on, resulting from, or related to the presence,
Release, or threatened Release into the Environment, of any Hazardous Materials
at any location, including but not limited to any off-Site location to which
Hazardous Materials or materials containing Hazardous Materials were sent for
handling, storage, treatment, or disposal.
"Environmental Clean-up Site" means any location which is listed or
proposed for listing on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System, or on any
similar state list of sites requiring investigation or cleanup, or which is the
subject of any pending or threatened action, suit, proceeding, or investigation
related to or arising from any alleged violation of any Environmental Law, or at
which there has been a Release, threatened or suspected Release of a Hazardous
Material.
"Environmental Law" means all federal, state, local and foreign
environmental, health and safety Laws, common law orders, decrees, judgments,
codes and ordinances and all rules and regulations promulgated thereunder, civil
or criminal, including, without limitation, Laws relating to emissions,
discharges, releases or threatened releases of Hazardous Materials, pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials, pollutants, contaminants, chemicals, or industrial, solid,
toxic or hazardous substances or wastes.
"Environmental Permit" means any federal, state, local, provincial,
or foreign permits, licenses, approvals, consents or authorizations required by
any Governmental or Regulatory Authority under or in connection with any
Environmental Law and includes any and all orders, consent orders or binding
agreements issued or entered into by a Governmental or Regulatory Authority
under any applicable Environmental Law.
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"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, or any successor law and the rules and regulations promulgated
thereunder.
"Expenses" means all costs and expenses of the Company or any of the
Subsidiaries incurred in connection with this Agreement, the Operative
Agreements or the transactions contemplated hereby or thereby.
"Final Determination" means (i) a decision, judgment, decree or
other order by any court of competent jurisdiction, which decision, judgment,
decree or other order has become final after all allowable appeals by either
party to the action have been exhausted or the time for filing such appeals has
expired, (ii) a closing agreement entered into under Section 7121 of the Code or
any other settlement agreement entered into in connection with an administrative
or judicial proceeding, (iii) the expiration of the time for instituting suit
with respect to a claimed deficiency or (iv) the expiration of the time for
instituting a claim for refund, or if such a claim was filed, the expiration of
the time for instituting suit with respect thereto.
"FSC" has the meaning ascribed to it in the forepart of this
Agreement.
"FSC Disposition" has the meaning ascribed to it in the forepart of
this Agreement.
"GAAP" means generally accepted accounting principles in the United
States, consistently applied.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, any foreign country or any domestic or foreign state, county,
city or other political subdivision, and shall include, without limitation, any
stock exchange, quotation service and the National Association of Securities
Dealers.
"Guarantee Agreement" means the Indemnification and Guarantee
Agreement dated as of the date hereof by and among the Company, Buyer and
Guarantor.
"Guarantor" means Greensburg Trust, a trust formed under the laws of
Hong Kong.
"Hart-Scott-Rodino Act" has the meaning ascribed to it in Section
3.6.
"Hazardous Material" means (A) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation and transformers or other equipment that
contain dielectric fluid containing levels of polychlorinated biphenyls (PCBs);
(B) any chemicals, materials, substances or wastes which are now defined as or
included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances," "toxic pollutants" or words of similar import,
under any Environmental Law; and (C) any other chemical, material,
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substance or waste, exposure to which is now prohibited, limited or regulated by
any Governmental or Regulatory Authority.
"Indebtedness" of any Person means all obligations of such Person
(i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(iv) under capital leases and (v) in the nature of guarantees of the obligations
described in clauses (i) through (iv) above of any other Person.
"Indemnified Party" means any Person claiming indemnification under
any provision of Article X.
"Indemnifying Party" means any Person against whom a claim for
indemnification is being asserted under any provision of Article X.
"Indemnity Notice" means written notification pursuant to Section
10.2(c) of a claim for indemnity under Article X by an Indemnified Party,
specifying the nature of and basis for such claim, together with the amount or,
if not then reasonably ascertainable, the estimated amount, determined in good
faith, of such claim.
"Intellectual Property" means all trademarks and trademark rights,
trade names and trade name rights, service marks and service mark rights,
service names and service name rights, copyrights and copyright rights, patents
and patent rights, brand names, product designs, product packaging, business and
product names, logos, slogans, rights of publicity, trade secrets, inventions,
processes, formulae, industrial models, processes, designs, specifications,
data, technology, methodologies, computer programs and any other confidential
and proprietary right or information, whether or not subject to statutory
registration, and all related technical information, manufacturing, engineering
and technical drawings, know-how and all pending applications for and
registrations of patents, trademarks, service marks and copyrights, and the
right to sue for past infringement, if any, in connection with any of the
foregoing, and all documents, disks and other media on which any of the
foregoing is stored.
"Investment Assets" means all debentures, notes and other evidences
of Indebtedness, stocks, securities (including rights to purchase and securities
convertible into or exchangeable for other securities), interests in joint
ventures and general and limited partnerships, mortgage loans and other
investment or portfolio assets owned of record or beneficially by the Company.
"Knowledge" or "Knowledge of the Company" means (A) with respect to
representations and warranties set forth herein made as of the Effective Date
and for the period ending as of the Phase I Completion Date, the actual
knowledge of Gerald A. Peabody, Jr., and Penelope A. Peabody, (B) with respect
to representations and warranties set forth herein made as of the Phase I
Completion Date and for the period ending as of the Closing Date, the actual
knowledge of Clinton A. Kurtz, Gerald A. Peabody, Jr., and Penelope A. Peabody,
and (C) with respect to
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representations and warranties set forth herein made as of the Closing Date, the
actual knowledge after due inquiry of Clinton A. Kurtz, Gerald A. Peabody, Jr.,
and Penelope A. Peabody after discussions with Renee Bertheau (Vice-President
Transportation), Denis Augustine (Vice-President Sales), Tom Fox (Vice-President
Product Development) and H.E. Coder (Operations Manager).
"Laws" means all laws, statutes, rules, regulations, ordinances and
other pronouncements having the effect of law of the United States, any foreign
country or any domestic or foreign state, county, city or other political
subdivision or of any Governmental or Regulatory Authority.
"Liabilities" means all Indebtedness, obligations and other
liabilities (or contingencies that have not yet become liabilities) of a Person
(whether absolute, accrued, contingent (or based upon any contingency), fixed or
otherwise, or whether due or to become due).
"Licenses" means all licenses, permits, certificates of authority,
authorizations, approvals, registrations, franchises and similar consents
granted or issued by any Governmental or Regulatory Authority.
"Liens" means any mortgage, pledge, assessment, security interest,
lease, lien, adverse claim, levy, option, right of first refusal, restriction on
the exercise of any attribute of ownership, charge or other encumbrance of any
kind, or any conditional sale Contract, title retention Contract or other
Contract to give any of the foregoing.
"Loss" means any and all damages, fines, fees, penalties,
deficiencies, diminution in value of investment, losses and expenses, including
without limitation, interest, reasonable expenses of investigation, court costs,
reasonable fees and expenses of attorneys, accountants and other experts or
other expenses of litigation or other proceedings or of any claim, default or
assessment (such fees and expenses to include without limitation, all fees and
expenses, including, without limitation fees and expenses of attorneys, incurred
in connection with (i) the investigation or defense of any Third Party Claims or
(ii) asserting or disputing any rights under this Agreement or the
Indemnification and Guarantee Agreement dated as of the date hereof by and among
Buyer and the other parties named therein (the "Guarantee Agreement") against
any party hereto or otherwise).
"Non-Competing Party" has the meaning ascribed to it in Section
6.9(a).
"Northwest" has the meaning ascribed to it in the forepart of this
Agreement.
"Operative Agreements" means this Agreement, the Assignment and
Release of Claims, the BVI Escrow Agreement, the Phase II Escrow Agreement, the
Tax Escrow Agreement, the Guarantee Agreement and any other agreements to be
entered into in connection with the transactions contemplated by this Agreement.
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"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to (i) purchase or otherwise receive or be issued any shares of
capital stock or other equity interests of such Person or any security of any
kind convertible into or exchangeable or exercisable for any shares of capital
stock or other equity interests of such Person or (ii) receive any benefits or
rights similar to any rights enjoyed by or accruing to the holder of shares of
capital stock or other equity interests of such Person, including without
limitation any rights to participate in the equity, income or election of
directors or officers of such Person.
"Order" means any writ, judgment, decision, ruling, decree,
injunction or similar order of any Governmental or Regulatory Authority (in each
such case whether preliminary or final).
"Permitted Lien" means (i) any Lien for Taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP, and (ii) any
minor imperfection of title or similar Lien which individually or in the
aggregate with other such Liens does not impair the value or marketability of
the property subject to such Lien or interfere with the use of such property in
the conduct of the business of the Company and which do not secure obligations
for money borrowed.
"Person" means any natural person, corporation, general or limited
partnership, limited liability company or partnership, proprietorship, other
business organization, estate, trust, union, association or Governmental or
Regulatory Authority.
"Phase I" has the meaning ascribed to it in the forepart of this
Agreement.
"Phase I Completion Date" has the meaning ascribed to it in the
forepart of this agreement.
"Phase I Material" shall mean (i) any and all documents and written
or oral information or data (other than Phase II Material) relating to the
Business or Condition of the Company, and (ii) information obtained from
communications with Gerald A. Peabody, Jr. or Clinton A. Kurtz.
"Phase II" has the meaning ascribed to it in the forepart of this
Agreement.
"Phase II Commencement Date" has the meaning ascribed to it in the
forepart of this Agreement.
"Phase II Deposit" has the meaning ascribed to it in Section
6.10(a).
"Phase II Escrow Agent" has the meaning ascribed to it in Section
6.10(a).
"Phase II Escrow Agreement" has the meaning ascribed to it in
Section 6.10(a).
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"Phase II Material" means (i) any and all documents and written or
oral information or data relating to (A) the contents of the Contracts
identified on Annex I hereto, (B) the identities of the Company's and
Subsidiaries' customers, (C) the prices paid or charged by the Company and
Subsidiaries for products it sells or has sold in the ordinary course of
business, and (D) the costs charged by suppliers to the Company and its
Subsidiaries, and (ii) any information obtained from communications with
employees (including Gerald A. Peabody, Jr.) of the Company.
"Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, leave of absence,
layoff, vacation, day or dependent care, legal services, cafeteria, life,
health, accident, disability, workmen's compensation or other insurance,
severance, separation or other employee benefit plan, practice, policy or
arrangement of any kind, whether written or oral, including, but not limited to,
any "employee benefit plan" within the meaning of Section 3(3) of ERISA.
"PNBC" has the meaning ascribed to it in the forepart of this
Agreement.
"Purchase Price" has the meaning ascribed to it in Section 1.2.
"Purchased Stock" has the meaning ascribed to it in the forepart of
this Agreement.
"Refund Event" means any of (i) a breach by the Company or any
Seller of Sections 6.1(b)(i), 6.1(b)(ii), 6.3(a), 6.3(b), provided, that, the
breach of Section 6.3(b) relates to or is descriptive of Sections 3.9(a),
3.9(b), 3.9(d) (excluding Indebtedness of the Company and its Subsidiaries
incurred under the current line of credit with US Bank of Washington, N.A.),
3.9(e) (to the extent involving uninsured damages and Losses in the aggregate
exceeding $100,000) and 3.9(g) (to the extent involving the disposition of
Assets and Properties having a value in the aggregate exceeding $100,000) and
3.9(k) (to the extent involving payments in the aggregate exceeding $100,000),
6.3(e) (to the extent such relates to activities listed in Section 6.3(a) or
6.3(b) as limited by the proviso contained in clause (i)) and 6.8 (resulting in
a failure to consummate the transactions contemplated hereby), as to which Buyer
did not have actual knowledge which it waived in writing prior to Phase II; or
(ii) the discovery that any Contract listed on Annex II hereto is not, or on the
Closing Date will not be, in full force and effect and constitute a legal, valid
and binding agreement of, enforceable in accordance with its terms against, each
party (other than the Company and its Subsidiaries) thereto, or any such
Contract by its terms will be terminated, breached or violated as a result of
the Company entering into this Agreement or the consummation of any of the
transactions contemplated hereby and Buyer terminates this Agreement in
accordance with Section 13.1, or (iii) the Company or any Seller terminates this
Agreement in violation of Section 13.1.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing of a
Hazardous Material into the Environment.
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"Relevant Group" has the meaning ascribed to it in Section 3.11(a).
"Resolution Period" means the period ending 60 calendar days
following receipt by an Indemnified Party of a dispute notice.
"Securities Act" means the Securities Act of 1933, as amended, or
any successor law and the rules and regulations thereunder.
"Seller" or "Sellers" has the meaning ascribed to it in the forepart
of this Agreement.
"Seller Group" means any affiliated, combined, consolidated, unitary
or similar group of which the Company is or was, prior to the Closing Date, a
member for purposes of federal income taxation.
"Site" means any of the real properties currently or previously
owned by the Company or any Subsidiary, any predecessors of the Company or any
Subsidiary, or any entities previously owned by the Company or any Subsidiary,
including all soil, subsoil, surface waters and groundwater thereat.
"St. Helens" has the meaning ascribed to it in the forepart of this
Agreement.
"Subsidiary" means (i) with respect to the Company, any Person in
which the Company, directly or indirectly through Subsidiaries or otherwise,
beneficially owns at least 50% of either the equity interest in, or the voting
control of, such Person, whether or not existing on the Effective Date,
including, without limitation, each of St. Helens, Northwest, PNBC and FSC; and
(ii) with respect to any Person other than the Company, any Person which,
directly or indirectly through subsidiaries or otherwise, beneficially owns at
least 50% of either the equity interest in, or the voting control of, such
Person, whether or not existing on the Effective Date.
"Tax" or "Taxes" means all federal, state, local or foreign net or
gross income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
alternative or add-on minimum, environmental or other taxes, assessments,
duties, fees, levies or other governmental charges of any nature whatever,
whether disputed or not, together with any interest, penalties, additions to tax
or additional amounts with respect thereto.
"Tax Claim" means any notice by any Tax Authority or other Person
that a Tax Return for a tax period ending on or before December 31, 1997 is to
be audited, examined or reviewed, and any claim with respect to Taxes
attributable to a tax period ending on or before December 31, 1997, made by any
Tax Authority or any Person, if such audit, examination, review or claim, if
pursued successfully, could serve as the basis for a claim for indemnification,
under this Agreement, of a Tax Indemnitee.
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"Tax Escrow Agent" has the meaning ascribed to it in Section 1.4(a).
"Tax Escrow Agreement" has the meaning ascribed to it in Section
1.4(a).
"Tax Escrow Funds" shall have the meaning set forth in Section
1.4(a).
"Tax Indemnitee" means the Company, Buyer and their respective
stockholders (other than Sellers), and the general partners, limited partners,
officers, directors, employees, agents and Affiliates of each of them (other
than Sellers).
"Tax Returns" means any returns (including any information returns),
reports or statements required to be filed for purposes of a particular Tax.
"Taxing Authority" means any governmental agency, board, bureau,
body, department or authority of any United States federal, state or local
jurisdiction or any foreign jurisdiction, having or purporting to exercise
jurisdiction with respect to any Tax.
"Third Party" shall mean any Person other than the parties hereto
and other than the Company.
"Third Party Claim" has the meaning ascribed to it in Section 10.2.
"Trade Secrets or other Confidential Information" has the meaning
ascribed to it in Section 6.9(c).
"Unaudited Financial Statements" has the meaning ascribed to it in
Section 3.8(a).
(b) Unless the context of this Agreement otherwise requires, (i)
words of any gender include each other gender; (ii) words using the singular or
plural number also include the plural or singular number, respectively; (iii)
the terms "hereof," "herein," "hereby" and derivative or similar words refer to
this entire Agreement; (iv) the terms "Article" or "Section" refer to the
specified Article or Section of this Agreement; and (v) the phrases "ordinary
course of business" and "ordinary course of business consistent with past
practice" refer to the business and practice of the Company. All accounting
terms used herein and not expressly defined herein shall have the meanings given
to them under GAAP.
(c) Without limiting the phrase "Knowledge of the Company", when
used herein, the phrase "to the knowledge of" any Person, "to the best knowledge
of" any Person or any similar phrase, means (i) with respect to any Person who
is an individual, the actual knowledge of such Person, (ii) with respect to any
other Person, the actual knowledge of the directors, officers, members,
managers, general partners, and other similar Person in a similar position or
having similar powers and duties.
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ARTICLE XIII
TERMINATION
13.1 Termination. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned:
(a) at any time before the Closing, by mutual written agreement of
the Sellers, on the one hand, and Buyer, on the other hand;
(b) at any time before the Closing, by the Sellers, on the one hand,
or Buyer, on the other hand, in the event (i) of a material breach hereof or of
the Guarantee Agreement by the non-terminating party if such non-terminating
party fails to cure such breach within five (5) Business Days following
notification thereof by the terminating party or (ii) upon notification of the
non-terminating party by the terminating party that the satisfaction of any
condition to the terminating party's obligations under this Agreement becomes
impossible or impracticable with the use of commercially reasonable efforts if
the failure of such condition to be satisfied is not caused by a breach hereof
by the terminating party; and
(c) at any time after March 4, 1998, by the Sellers, on the one
hand, or Buyer, on the other hand, upon notification of the non-terminating
party by the terminating party if the Closing shall not have occurred on or
before such date and such failure to consummate is not caused by a breach of
this Agreement by the terminating party.
13.2 Effect of Termination. If this Agreement is validly terminated
pursuant to Section 13.1, this Agreement will forthwith become null and void,
and there will be no liability or obligation on the part of each Seller, the
Company or Buyer, except that the provisions with respect to expenses in Section
14.3 and confidentiality in Section 14.4 will continue to apply following any
such termination; provided, however, that, notwithstanding any other provision
in this Agreement to the contrary, upon termination of this Agreement after the
Phase II Commencement Date for a Refund Event, the Buyer may recover the Phase
II Deposit in its entirety in accordance with the Phase II Escrow Agreement.
ARTICLE XIV
MISCELLANEOUS
14.1 Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally against written receipt or by facsimile transmission or
mailed by prepaid first class certified mail, return receipt requested, or
mailed by overnight courier prepaid, to the parties at the following addresses
or facsimile numbers:
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(a) If to the Company, Pozzolanic Resources, Inc.
prior to Closing: 7525 SE 24th Street, Suite 630
Mercer Island, WA 98040
Facsimile No: (206) 232-5869
Attn: Gerald A. Peabody, Jr.
with a copy to: Bradley D. Stam
2038 139th Place S.E.
Bellevue, WA 98005-4036
Facsimile No: (425) 747-4378
(b) If to Buyer, to: JTM Industries, Inc.
127 South 500 East, Suite 675
Salt Lake City, UT 84102
Facsimile No: (801) 355-9167
Attn: Jean I. Everest II
with a copy to: Citicorp Venture Capital, Ltd.
399 Park Avenue - 14th Floor
New York, NY 10043
Facsimile No: (212) 888-2940
Attn: Joseph M. Silvestri
and with a copy to: Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
Facsimile No: (212) 309-6273
Attn: Philip H. Werner
(c) If to any Seller to the address as it appears in the records of
the Company.
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided for in this Section, be deemed given upon receipt, (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given on the earlier of the third Business Day following
mailing or upon receipt and (iv) if delivered by overnight courier to the
address as provided for in this Section, be deemed given on the earlier of the
first Business Day following the date sent by such overnight courier or upon
receipt (in each case regardless of whether such notice, request or other
communication is received by any other Person to whom a copy of such notice is
to be delivered pursuant to this Section). Any party from time to time may
change its address, facsimile number or other information for the purpose of
notices to that party by giving notice specifying such change to the other party
hereto.
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14.2 Entire Agreement. This Agreement and the Operative Agreements
supersede all prior discussions and agreements between the parties with respect
to the subject matter hereof and thereof and contain the sole and entire
agreement between the parties hereto with respect to the subject matter hereof
and thereof; provided, that, Buyer shall remain bound by the confidentiality
agreement between Buyer and the Company in existence on the date hereof.
14.3 Expenses. Except as otherwise expressly provided in this
Agreement, the Company shall pay the costs and expenses of Sellers and Buyer
will pay its own costs and expenses incurred in connection with this Agreement,
the Operative Agreements, and the transactions contemplated hereby and thereby.
14.4 Confidentiality. Each Seller will hold in strict confidence
from any Person (other than any Affiliate of Buyer, representative of Buyer or
such Affiliate, or any Buyer's Advisors), unless (i) compelled to disclose by
judicial or administrative process (including without limitation in connection
with obtaining the necessary approvals of this Agreement and the transactions
contemplated hereby of Governmental or Regulatory Authorities) or by other
requirements of Law or (ii) disclosed in an Action or Proceeding brought by a
party hereto in pursuit of its rights or in the exercise of its remedies
hereunder, all documents and information concerning Buyer or any of its
Affiliates furnished to it by the other party or such other party's
representatives in connection with this Agreement or the transactions
contemplated hereby, except to the extent that such documents or information can
be shown to have been (a) previously known by the party receiving such documents
or information, (b) in the public domain (either prior to or after the
furnishing of such documents or information hereunder) through no fault of such
receiving party or (c) later acquired by the receiving party from another source
if the receiving party is not aware that such source is under an obligation to
another party hereto to keep such documents and information confidential.
14.5 Further Assurances; Post-Closing Cooperation. At any time or
from time to time after the Closing, Sellers shall execute and deliver to Buyer
such other documents and instruments, provide such materials and information and
take such other actions as Buyer may reasonably request to consummate the
transactions contemplated by this Agreement and the Operative Agreements and
otherwise to cause Sellers to fulfill each of their respective obligations under
this Agreement and the Operative Agreements.
14.6 Certain Assets and Properties. Each Seller hereby transfers,
conveys, assigns and delivers to the Company, free and clear of all Liens, all
of such Seller's respective Assets and Properties, if any, used, held for use or
related to the business or operations of the Company or the Subsidiaries.
14.7 Waiver. Any term or condition of this Agreement may be waived
at any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party of any term or condition of this Agreement, in any one or more
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instances, shall be deemed to be or construed as a waiver of the same or any
other term or condition of this Agreement on any future occasion. All remedies,
either under this Agreement or by Law or otherwise afforded, will be cumulative
and not alternative.
14.8 Amendment. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of Buyer and
the Sellers.
14.9 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights, and this Agreement does not
confer any such rights, upon any other Person other than any Person entitled to
indemnity under Article X.
14.10 No Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned (by operation of law or
otherwise) by any Seller or the Company without the prior written consent of
Buyer and any attempt to do so will be void. Buyer may assign any or all of its
rights, interests and obligations hereunder (including without limitation its
rights under Article X) to (i) the parent of or any wholly-owned Subsidiary of
Buyer, (ii) any post-Closing purchaser of all or a substantial part of the
Assets or Properties of Buyer or (iii) any financial institution providing
purchase money or other financing to Buyer from time to time as collateral
security for such financing, but no such assignment referred to in clause (i) or
(ii) above shall relieve the assigning party of its obligations hereunder.
Subject to the preceding sentence, this Agreement is binding upon, inures to the
benefit of and is enforceable by the parties hereto and their respective
successors and assigns.
14.11 Limited Recourse. Notwithstanding anything in this Agreement
to the contrary, (i) the obligations and liabilities of the parties hereunder
shall be without recourse to any stockholder of Buyer or any of such
stockholder's Affiliates, directors, employees, officers or agents and shall be
limited to the assets of such party and (ii) the stockholder of Buyer or any of
such stockholder's Affiliates, directors, employees, officers or agents have
made no (and shall not be deemed to have made any) representations, warranties
or covenants (express or implied) under or in connection with this Agreement.
14.12 Public Announcements. At all times at or before the Closing,
none of the parties hereto will issue or make any statements or releases to the
public with respect to this Agreement or the transactions contemplated hereby
without the consent of the other parties hereto, which consent in each case
shall not be unreasonably withheld. If any party hereto is unable to obtain the
approval of its public statement or release from the other parties hereto and
such statement or release is, in the opinion of legal counsel to such party,
required by Law in order to discharge such party's disclosure obligations, then
such party may make or issue the legally required statement or release and
promptly furnish the other parties hereto with a copy thereof. Each of Sellers
and Buyer will also obtain the other's prior approval of any press release to be
issued immediately following the Closing announcing the consummation of the
transactions contemplated by this Agreement.
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<PAGE>
14.13 Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
14.14 Invalid Provisions. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under any present or future Law, and if
the rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
14.15 Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Washington,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Washington or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Washington.
14.16 Consent to Jurisdiction and Service of Process. EACH SELLER
AND THE COMPANY CONSENT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED WITHIN THE COUNTY OF KING, STATE OF WASHINGTON AND IRREVOCABLY AGREES
THAT ALL ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT OR THE OPERATIVE
AGREEMENTS MAY BE LITIGATED IN SUCH COURTS. THE COMPANY AND EACH SELLER ACCEPTS
FOR ITSELF AND HIMSELF (OR HERSELF) AND IN CONNECTION WITH ITS AND HIS (OR HER)
RESPECTIVE PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY
IN CONNECTION WITH THIS AGREEMENT OR THE OPERATIVE AGREEMENTS. EACH SELLER AND
THE COMPANY FURTHER IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS OUT OF ANY OF
THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE PARTY AT
THE ADDRESS SPECIFIED IN THIS AGREEMENT, SUCH SERVICE TO BECOME EFFECTIVE 15
DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT THE
ABILITY OF ANY PARTY HERETO TO SERVE ANY SUCH LEGAL PROCESS, SUMMONS, NOTICES
AND DOCUMENTS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW OR TO OBTAIN
JURISDICTION OVER OR TO BRING ACTIONS, SUITS OR PROCEEDINGS AGAINST ANY OF THE
OTHER PARTIES HERETO
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IN SUCH OTHER JURISDICTIONS, AND IN SUCH MANNER, AS MAY BE PERMITTED BY ANY
APPLICABLE LAW.
14.17 Construction. The parties hereto agree that this Agreement is
the product of negotiation between sophisticated parties and individuals, all of
whom were represented by counsel, and each of whom had an opportunity to
participate in and did participate in, the drafting of each provision hereof.
Accordingly, ambiguities in this Agreement, if any, shall not be construed
strictly or in favor of or against any party hereto but rather shall be given a
fair and reasonable construction without regard to the rule of contra
proferentum.
14.18 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
[Signature Page to Follow]
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the undersigned parties hereto as of the date first above written.
JTM INDUSTRIES, INC.
By:
-------------------------
Name:
Title:
SELLERS:
Shares of Capital Stock Transferred
-----------------------------------
Class A Class C Class D
------- ------- -------
-----------------------------
99 2900 ----- Gerald A. Peabody, Jr.
-----------------------------
1 ----- ----- Penelope A. Peabody
100 ----- 5800 KOKAN COMPANY LIMITED
By:
-------------------------
Name:
Title:
<PAGE>
POZZOLANIC RESOURCES, INC.
-----------------------------
Name:
Title:
<PAGE>
Annex I
Phase II Contract List
Power Plant Contracts
1. Jim Bridger Power Plant (purchase and resale of fly ash by St. Helens
Investments, Inc. ("St. Helens"); purchase and resale of bottom ash by St.
Helens with occasional sales to date)
2. Naughton Power Plant (purchase and resale of fly ash by St. Helens;
purchase and resale of bottom ash by St. Helens with occasional sales to
date)
3. I.P.S.C. Power Plant (purchase and resale of fly ash by St. Helens;
purchase and resale of bottom ash by St. Helens with no sales to date)
4. Craig Power Plant (purchase and resale of fly ash by St. Helens)
5. Hayden Power Plant (purchase and resale of fly ash occasionally by St.
Helens)
6. Centralia Power Plant (purchase and resale of fly ash by Pozzolanic
Northwest Inc. ("Northwest"))
7. Healy Power Plant (purchase and resale of fly ash by Northwest)
8. Dave Johnston Plant (purchase and resale of fly ash by St. Helens under
verbal agreement - no written agreement in effect)
9. Hunter Power Plant (purchase and resale of fly ash occasionally by St.
Helens; contract for bottom ash by St. Helens but no sales to date)
10. Huntington Power Plant (purchase and resale of fly ash by St. Helens but
not sales to date; contract for purchase and resale of bottom ash by St.
Helens)
11. Carbon Power Plant (purchase and resale of fly ash occasionally by St.
Helens; contract for purchase and resale of bottom ash sales by St. Helens
but no sales to date)
12. Laramie River Power Plant (purchase and resale of fly ash occasionally by
St. Helens)
<PAGE>
Annex II
Refund Event Contract List
- --------------------------------------------------------------------------------
Fly Ash
Plant Contract End Date
- --------------------------------------------------------------------------------
Centralia February 28, 2012
with continuous extensions
under certain conditions
- --------------------------------------------------------------------------------
Jim Bridger May 31, 2008
and extended to May 31, 2013
if performing in accordance
with Agreement
- --------------------------------------------------------------------------------
I.P.S.C. January 2002
with minimum 5-year extension plan
under certain conditions
- --------------------------------------------------------------------------------
Craig July 31, 2006
- --------------------------------------------------------------------------------
Naughton March 12, 2000
with 5-year extensions
under certain conditions
- --------------------------------------------------------------------------------
Healy July 27, 2000
- --------------------------------------------------------------------------------
<PAGE>
Annex III
Financing Commitment Letter
[Previously delivered to Seller]
<PAGE>
Exhibit 10.4
POWER PLANT AGGREGATES OF IOWA, INC.
STOCK PURCHASE AGREEMENT
Colin C. Jensen, Colin C. Jensen, Jr., Irving F. Jensen, Jr., Irving F.
Jensen, III, Richard A. Everist, Richard Everist, Jr., Tom Everist, Erik M.
Jensen, Mark R. Jensen, and T. S. "Steve" Everist (herein collectively called
"Sellers") and JTM Industries, Inc. (hereinafter called "Buyer") hereby agree as
follows:
1. SELLERS: Sellers represent and warrant that Sellers own or will on
the Closing Date own all of the issued stock (hereinafter "Shares")
in Power Plant Aggregate of Iowa, Inc., an Iowa corporation
(hereinafter called "Company"). As used herein, "Company" includes
Midwest Fly Ash & Materials, Inc. (hereinafter called "MWFA"), a
wholly owned subsidiary of Company and the only subsidiary of the
Company.
2. SALE: Subject to the conditions and upon the terms and provisions
set forth in this Stock Purchase Agreement, Buyer agrees to purchase
from Sellers, and Sellers agree to sell to Buyer, the Shares, free
and clear of any and all claims, liens, security interests, rights
or encumbrances. The consideration to be paid in connection with the
acquisition shall be $6,000,000 (Six Million Dollars) $100,000 of
which has been received as a good faith deposit, for the stock of
Company, plus or minus additional cash (not to exceed $500,000) in
an amount equal to the working capital of the Company on the Closing
Date. Exhibit A will set forth the calculations of the purchase
price. The working capital shall be defined as the amount of current
assets less current liabilities (including liabilities for taxes
through the Closing). The purchase price will be paid by wire to the
Sellers to an account designated by Sellers. At Closing, the Company
will have no debts or liabilities that have not been assumed by
Sellers (including interest payable) or any intercompany accounts,
affiliate accounts, or any obligations for taxes. In order to
provide collateral for open tax years, Buyer is hereby granted the
right to offset any monies owed to Sellers under the consultation
agreement attached hereto as Exhibit D against any taxes determined
by the IRS to be delinquent and unpaid and which are not under
protest, appeal, or review by Sellers. If Sellers are in compliance
with the terms of this Agreement and Closing does not occur, the
$100,000 deposit referenced above will be forfeited by Buyer and
retained by Sellers.
3. CLOSING DATE: The closing (herein called the "Closing") of the
principal transaction herein provided for shall take place at 10:00
a.m. on March 20, 1998, at the offices of Heidman, Redmond,
Fredregill, Patterson, Plaza & Dykstra, L.L.P., or at such other
time and place as may be agreed upon by Buyer and Sellers in
writing.
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<PAGE>
The date and time at which the Closing is to occur is herein
sometimes referred to as the "Closing Date".
4. TRANSACTION AT CLOSING: At the Closing, the following transactions
shall be effected:
a. Shares: Sellers shall deliver to Buyer certificates
representing all the Shares, in marketable form and without
restrictions. Each of the stock certificates representing the
Shares shall be duly endorsed to Buyer, or accompanied by a
duly executed stock power in form sufficient to permit
transfer of the Shares to Buyer.
b. Payment: The remaining purchase price, as shown on Exhibit A,
shall be paid by wire at the Closing.
c. Dividends: All dividends now due or to become due on the
Shares shall belong to and be collectable by Buyer.
d. Corporate Status: Sellers shall deliver to Buyer a certificate
of good standing as to Company from the State of Iowa, and
certificates from duly constituted authorities of each other
state in which the Company (including subsidiaries) does
business, stating that the Company (or the subsidiary) is duly
qualified and admitted in good standing in each such state.
e. Assets Removed from Company: Only the cash in the accounts of
Company and MWFA, and the assets relevant to the continued
business and operation of MWFA shall remain in the Company and
MWFA at the time of the transfer. The net of current assets
less current liabilities will be treated as cash. Equipment
related to the rock crushing operations(RAP), accounts
receivable from RAP, life insurance policies and their cash
values, leasehold improvements, building and related land,
memberships, and miscellaneous equipment and other items shall
be transferred from Company and MWFA to the Sellers' designee
prior to the Closing, based upon a disclosure list to be shown
as Exhibit B. Any tax payable as a result of such transfers,
pursuant to IRC ss. 336(a) or any other applicable provision,
shall be calculated and treated as a current liability of the
Company that has the effect of reducing its working capital.
f. Short Term Lease: Sellers will deliver a short term lease of
Company's existing corporate offices in Sioux City, Iowa to
Buyer for a term no longer than thirty (30) days after closing
with no rent to be paid.
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<PAGE>
g. Resignations of Officers and Directors: Resignations of all
current officers and directors of Company and MWFA, effective
as of the Closing Date.
h. Opinion of Counsel: Buyer shall have received the opinion of
Heidman, Redmond, Fredregill, Patterson, Plaza & Dykstra,
L.L.P., counsel to the Company in connection with this
Agreement, dated the Closing Date, substantially in the form
attached as Exhibit C.
i. Consultation Agreement: Sellers shall deliver to Buyer a
Consultation and Royalty Agreement substantially in the form
of Exhibit D executed by Sellers.
j. Officers Certificate: Buyer shall deliver to Sellers a
certificate, dated the Closing Date and executed by the
president or vice-president of Buyer substantially in the form
of Exhibit E.
k. Opinion of Counsel: The Sellers shall receive the opinion of
Parsons Behle & Latimer, counsel of the Buyer in connection
with this Agreement, dated the Closing Date, substantially in
the form of Exhibit F.
l. Officers Certificates: Sellers shall have delivered to Buyer a
certificate dated the Closing Date and executed by the
president of a vice president of Company substantially in the
form of Exhibit G, and a certificate from the chief financial
officer of Company substantially in the form of Exhibit H.
m. Good Standing Certificates: Buyer shall have delivered to
Sellers (i) a copy of Buyer's certificate of incorporation,
including all amendments thereto, certified by the Secretary
of State of the State of Texas, and (b) a certificate from the
Texas Secretary of State to the effect that Buyer is in good
standing or subsisting in such jurisdiction, listing all
charter documents of Buyer on file.
n. Employees: Buyer shall have reached agreements with key
Company employees on terms reasonably satisfactory to Buyer.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLERS: Sellers
represent, warrant, and covenant, jointly and severally, to Buyer,
as of the date of this Stock Purchase Agreement that all of the
following are true, accurate, and complete statements in all
respects:
3
<PAGE>
a. Corporate Standing: Company is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Iowa with full power and authority:
i) To own and operate its assets, properties and business;
ii) To conduct its business as the same is now being
conducted; and
iii) To conduct its business in each jurisdiction where the
nature of its business or ownership of properties
requires such qualification, excepting only instances in
which a failure to qualify is not material.
b. Capitalization: The Company has only authorized a single class
of common stock (and no other stock or securities), of which
230 Shares are issued and outstanding, all of which are owned
by Sellers. MWFA has authorized a single class of common stock
which 50 shares are issued and outstanding and are owned by
Company. There are no outstanding options, warrants, calls,
subscriptions, commitments, agreements or other rights to
purchase or dispose of Company or MWFA common stock or other
securities which are, or may at any time be, convertible into
stock or other securities in Company or MWFA.
c. Title to Shares: Sellers on the Closing Date will:
i) Be the record owner of the Shares, and
ii) Have good and marketable title to all Shares, free and
clear of any and all claims, rights, encumbrances,
restrictions, rights of first refusal or options, and
iii) Have the full right, power and authority to sell, assign
and transfer the Shares so that as a result of the
Closing, Buyer shall be the absolute owner of the
Shares, free and clear of all liens, claims, security
interests, redemption rights, charges, options,
restrictions and any other encumbrances.
d. No Violation, Breach, Etc.: The performance of this Stock
Purchase Agreement will not:
i) Violate any provision of the Company's or MWFA's
Articles of Incorporation or Bylaws, or
4
<PAGE>
ii) Result in a breach or constitute a default under (or an
event which with notice or lapse of time would become a
default) any agreement, indenture, mortgage, lease, or
other obligation or instrument to which the Company, or
the Sellers are subject or a party. By execution hereof
the Sellers waive the terms of their existing
Stockholder Agreement, or
iii) Require the consent, approval or action of, or filing
with or notice to, any governmental or regulatory
authority.
e. Legal, Binding and Valid Obligation: This Stock Purchase
Agreement has been duly executed and delivered by Sellers and
constitutes the legal, binding and valid obligation of
Sellers, enforceable in accordance with its terms (subject, as
to the enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium, or other laws
affecting the enforcement of creditor's rights generally and
to possible limitations on the availability of equitable
remedies including specific performance).
f. Compliance with Laws, Etc.: Company is in compliance with all
material and applicable laws, regulations, ordinances, and
rules of each local, state and federal government or
administrative body having jurisdiction over the Company and
its business.
g. Litigation, Claims, Etc.: Except as set forth on Exhibit I,
there are no proceedings, actions, litigations, judgments or
claims of any nature whatsoever against the Company pending
before any government or any administrative forum or before
any court or, to the best of Sellers' knowledge, threatened
against the Company and Sellers do not know of any basis for
any such proceedings, actions, litigations, judgments or
claims involving or affecting the Company or its business.
h. Officers and Directors: The officers and directors of Company
and of MWFA are the persons listed on Exhibit J.
i. Financial Condition: Sellers have provided to Buyer audited
consolidated financial statements for Company and MWFA for the
fiscal years ending March 31, 1997, 1996 and 1995 and
unaudited financial statements for the nine months ending
December 31, 1997. Sellers further represent that the combined
operating revenue for all operations (including RAP) for the
fiscal period 1997 exceeded $6,900,000 (6.9 Million Dollars).
A restated EBIT for a fiscal year 1997, when certain expenses
not likely to be incurred by Buyer and profits (or losses) of
RAP operations are removed,
5
<PAGE>
would be in excess of $1,000,000 (1 Million Dollars). These
financials (herein "Financial Statements"):
i) Fairly present the Company's financial condition and
operations as of and through the respective dates and
periods therein delineated, and the results of Company's
operations and changes in financial position for the
periods then ended, and
ii) Have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis.
As of the Closing Date, no material adverse change in the
financial condition or operations of the Company will have
occurred from that shown on the December 31, 1997 financial
statements. The parties acknowledge that the Mid-America
contract with Company expires May 1, 1998.
j. Liabilities: Except as set forth in Exhibit K, or except to
the extent reflected or reserved against in the Financial
Statements, the Company has incurred no debts, liabilities or
obligations of any nature, whether accrued, absolute, known or
unknown, contingent or otherwise, and whether due or to become
due, including, but not limited to, liabilities or obligations
on account of taxes or other governmental charges, or
penalties, interest or fines thereon or in respect thereof,
except those in the aggregate, are not material to the
Company. Buyer and Sellers acknowledge that debts, liabilities
or obligations unknown by Sellers on the Closing Date which
total less than $30,000 in the aggregate are deemed
non-material.
k. Absence of Changes: Except as described on Exhibit L, between
January 1, 1998, and the Closing Date, Company has not:
i) Declared or paid any dividend or made any other
distribution on, or in respect to, shares of its common
stock or redeemed or purchased any shares of its common
stock;
ii) Increased the compensation or the rate of compensation
or commissions payable, or to become payable to Sellers,
any director or officer, or caused:
a) Any general increase in the compensation or in the
rate of compensation payable or to become payable
to employees, or
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<PAGE>
b) Any payment of any bonus, profit-sharing or other
extraordinary compensation to any Sellers or
employees;
iii) Made any change in the accounting methods or practices
followed by the Company, wrote-up or down any assets, or
changed any depreciation or amortization policies or
rates theretofore adopted;
iv) Increased any debt, obligation or liability (whether
accrued, absolute or contingent, whether or not
presently outstanding);
v) Sold, assigned, licensed, leased, abandoned, mortgaged,
pledged or subjected to any lien, security interest or
other charges or encumbrances or otherwise disposed of,
other than in the ordinary course of business, any
machinery, equipment, operating properties or other
assets, tangible or intangible;
vi) Issued, sold, purchased or acquired any shares of its
stock, warranties, options, notes, or other corporate
securities, or borrowed any money or guaranteed or
become surety on any obligation;
vii) Discharged or satisfied any lien or encumbrance, or paid
any obligation or liability (absolute or contingent)
other than current liabilities;
viii) Used less than its best efforts to preserve the goodwill
of its suppliers, distributors, and customers;
ix) Adopted or amended any collective bargaining, bonus,
profit sharing, compensation, stock option, pension,
retirement, deferred compensation or other plan,
agreement, trust, fund or arrangement for the benefit of
employees;
x) Adopted any shareholder or board of director resolutions
taking action out of the ordinary course, except for
resolutions with respect to the transactions
contemplated by this Stock Purchase Agreement or
reasonably related thereto;
7
<PAGE>
(xi) Suffered any physical damage, destruction or other
casualty loss (whether or not covered by insurance)
affecting any of the Assets of the Company in an
aggregate amount exceeding $25,000;
(xii) Made any purchase of any assets from any person or
entity, or disposed of, or incurred a lien on, any
Company assets, other than acquisitions or dispositions
of inventory in the ordinary course of business
consistent with past practice;
(xiii) Entered into, amended, modified, terminated (partial or
complete) or granted a waiver under or gave any consent
with respect to (i) any Contract which is required (or
had it been in effect on the date hereof would have been
required) to be disclosed in Exhibit N, (ii) any license
held by Company, or (iii) any intellectual property
rights owned by the Company;
(xiv) Made any capital expenditures or commitments for
additions to property, plant or equipment of Company
constituting capital assets in an aggregate amount
exceeding $10,000;
(xv) Commenced, terminated or changed any line of business of
Company;
xvi) Loaned money or property to, or engaged in any other
transaction with, any officer, shareholder, director,
employee, consultant or agent, or any affiliate or any
shareholder, officer or director; or
xvii) Entered into any transactions other than in the ordinary
course of business, or agreed to do or to engaging any
of the foregoing.
l. Title to Properties: Exhibit M contains a list of all real and
personal property of Company. Company has good and marketable
title to, and complete right to possession of, all of its real
and personal properties, tangible and intangible:
i) Reflected in its books and records and in the Financial
Statements,
ii) Used in the operation of its ordinary business
activities, or
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<PAGE>
iii) In possession of Company at any time during the period
beginning January 1, 1998 and ending on the Closing
Date, free and clear of all security interests, liens,
encumbrances, mortgages, pledges, equities, charges,
security interests, title retention agreements,
assessments, covenants, restrictions, liabilities and
other burdens of every nature, except unpaid, current
(not delinquent) taxes of record, all as set forth on
Exhibit M.
m. Contracts, Leases, Etc.: Set forth on Exhibit N is a list of
all:
i) Contracts, agreements, or commitments involving payments
of receipts of more than $100 in the case of any single
contract, agreement or commitment, or $500 in the
aggregate,
ii) Leases with respect to any real or personal property,
iii) Agreements and/or licenses with or from any federal,
state, municipal or foreign government or agency, and
iv) Indentures, agreements, notes, mortgages, guarantees or
other writings which evidence or relate to the borrowing
of money or indebtedness by the Company.
All items described in Exhibit N are valid, binding and in
full force and effect; and true and complete copies of all
written agreements shall be delivered to Buyer prior to
Closing.
n. Taxes: Company has filed all federal, state and local tax
returns required to be filed, such returns are complete and
correct, and all taxes shown by such returns or claimed by any
taxing authority to be due and payable have been paid,
including all income, payroll, sales and employment tax
returns. Except to the extent that provisions therefor are
specifically reflected on the Financial Statements, there are
no federal, state or local tax liabilities due or which will
become due for any period commencing prior to the date of the
Financial Statements. Sellers shall have complete access to
all tax records for purposes of making copies and addressing
any audit or other tax return.
No taxing authority is now asserting or threatening to assert
against Company any deficiency, claim or liability for
additional taxes or any adjustment of taxes, and there is no
reasonable basis for any such assertion of which Sellers
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<PAGE>
should reasonably be aware. No issues have been raised in any
examination by any taxing authority with respect to Company
which, by application of similar principles, reasonably could
be expected to result in a proposed deficiency for any other
period not so examined. The federal income tax returns of
Company disclose (in accordance with Section 6662(d)(2)(B) of
the Internal Revenue Code ("Code")) all positions taken
therein that could give rise to a substantial understatement
of federal income tax within the meaning of Section 6662(d) of
the Code. No claim has been made by any taxing authority in a
jurisdiction in which the Company does not file tax returns
that it is or may be subject to taxation by that jurisdiction.
Exhibit O lists all federal, state, local and foreign income
Tax Returns filed by or with respect to the Company for all
taxable periods ended on or after March 31, 1995, indicates
those Tax Returns, if any, that have been audited, and
indicates those Tax Returns that currently are the subject of
audit. Sellers have delivered to Buyer complete and correct
copies of all federal, state, local and foreign income Tax
Returns filed by or with respect to, and all Tax examination
reports and statements of deficiencies assessed against or
agreed to by, Company since March 31, 1995. There are no liens
for taxes upon the assets of Company. Company is not (i) a
party to or bound by any obligations under any tax sharing,
tax indemnity or similar agreement or arrangement, (ii)
subject to any election under Sections 338(e) or 341(f) of the
Code or the regulations thereunder, (iii) required to make, or
reasonably expects that it might have to make, any adjustment
under Section 481 of the Code (or any comparable provision of
state, local or foreign law) by reason of a change in
accounting method or otherwise, (iv) subject to any agreement
or arrangement that could result separately or in the
aggregate in the payment of any "excess parachute payments"
within the meaning of Section 280G of the Code, (v) and at no
time has ever been, a "United States real property holding
corporation" within the meaning of Section 897(c)(2) of the
Code, (vi) a party to any "safe harbor lease" that is subject
to the provisions of Section 168(f)(8) of the Internal Revenue
Code as in effect prior to the Tax Reform Act of 1986 or to
any "long-term contract" within the meaning of Section 460 of
the Code, (vii) a party to any joint venture, partnership or
other arrangement that is treated as a partnership for federal
income tax purposes, or (viii) nor are they a member of any
affiliated, consolidated, combined, unitary or similar group
for any tax purpose except for the consolidated return of
Company.
o. Insurance: Set forth as Exhibit P, which is attached hereto
and by this reference incorporated herein, is a true and
accurate schedule setting forth all insurance policies
maintained by Company on its properties, assets, business and
personnel; all of said insurance policies are in full force
and effect, and all premiums due thereon have been paid, or
the unpaid
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<PAGE>
amounts thereof shall be reflected in the Financial Statements
(and listed prior to Closing), and Company has received no
notice of cancellation of such policies. Company has
maintained since 1994 and is now maintaining with financially
responsible insurance companies amounts and coverages of
insurance against risk and losses reasonably prudent for its
business; said policies shall be maintained in full force and
effect up to and including the date of the Closing.
p. Employee Benefit Plans and Labor Matters: The Company has
entered into, and is not otherwise a party (either directly or
indirectly) to, any deferred compensation plans, profit
sharing plans, pension plans, insurance plans, employee bonus
compensation plans, or any other employee benefit plans, or to
any collective bargaining agreement except those shown on
Exhibit Q. Except as disclosed on Exhibit Q:
i) each benefit plan, and the administration thereof,
complies, and has at all times complied, with the
requirements of all applicable law, including ERISA and
the Code, and each benefit plan intended to qualify
under Section 401(a) of the Code has at all times since
its adoption been so qualified, and each trust which
forms a part of any such plan has at all times since its
adoption been tax-exempt under Section 501(a) of the
Code;
ii) no benefit plan has incurred any "accumulated funding
deficiency" within the meaning of Section 302 of ERISA
or Section 412 of the Code;
iii) no direct, contingent or secondary liability has been
incurred or is expected to be incurred by the Company or
MWFA under Title IV of ERISA to any party with respect
to any benefit plan, or with respect to any other plan
presently or heretofore maintained or contributed to by
any ERISA affiliate;
iv) the "amount of unfunded benefit liabilities" within the
meaning of Section 4001(a)(18) of ERISA does not exceed
zero with respect to any benefit plan subject to Title
IV of ERISA;
v) no "reportable event" (within the meaning of Section
4043 of ERISA) has occurred with respect to any benefit
plan or any plan maintained by an ERISA affiliate since
the effective date of said Section 4043;
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<PAGE>
vi) no benefit plan is a multi employer plan within the
meaning of Section 3(37) of ERISA;
vii) neither the Company, MWFA, nor any ERISA affiliate has
incurred any liability for any tax imposed under Section
4971 through 4980B of the Code or civil liability under
Section 502(i) or (l) of ERISA;
viii) no benefit under any benefit plan, including, without
limitation, any severance or parachute payment plan or
agreement, will be established or become accelerated,
vested or payable by reason of any transaction
contemplated under this Agreement;
ix) no tax has been incurred under Section 511 of the Code
with respect to any benefit plan (or trust or other
funding vehicle pursuant thereto);
x) no benefit plan provides health or death benefit
coverage beyond the termination of an employee's
employment, except as required by Part 6 of Subtitle B
of Title I of ERISA or Section 4980B of the Code or any
state laws requiring continuation of benefits coverage
following termination of employment;
xi) no suit, actions or other litigation (excluding claims
for benefits incurred in the ordinary course of plan
activities) have been brought or, to the knowledge of
Sellers, threatened against or with respect to any
benefit plan and there are not facts or circumstances
known to Sellers that could reasonably be expected to
give rise to any such suit, action or other litigation;
and
xii) all contributions to benefit plans that were required to
be made under such benefit plans have been made, and all
benefits accrued under any unfunded benefit plan have
been paid, accrued or otherwise adequately reserved in
accordance with GAAP, and the Company and MWFA have
performed all material obligations required to be
performed under all benefit plans.
q. Access to Books, Records, Equipment: Between the date hereof
and the Closing, Sellers shall cause the Company to allow
Buyer and its representatives, including Ernst & Young, LLP,
during normal business hours at Company's places of business,
free and full access to the Company's books, records,
documents, employees, minute books, buildings, equipment, and
properties, and to furnish all such information concerning the
Company's
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affairs as Buyer may request, from time to time, all subject
to the executed confidentiality agreement. The minute all
books and similar records contain a true and complete record
of all actions of the directors and stockholders of the
Company and of MWFA and are true and accurate.
r. Notice of Certain Events; Best Efforts: Promptly upon the
occurrence of, or promptly upon their becoming aware of the
impending or threatened occurrence of, any event which would
cause or constitute any breach of any of Sellers'
representation, warranties, covenants, agreements or
conditions contained in this Agreement, Sellers shall give
detailed written notice thereof to Buyer, and Sellers shall
use their best efforts to prevent or promptly remedy the same.
s. Further Assurances: Sellers shall promptly and duly execute
and deliver to Buyer such further documents and assurances and
take such further action as Buyer may from time to time
reasonably request in order to carry out more effectively the
intent and purpose of this Agreement and to establish and
protect the rights and remedies created or intended to be
created in favor of Buyer and/or Company and MWFA. Such
assurances shall include the execution and delivery of
management representation letters by appropriate officers of
the Company to Ernst & Young, LLP, with respect to the two
most recent fiscal years, and copies of the Company's legal
response letters to auditors for the same period.
t. Intellectual Property Rights: The Company has interests in or
uses only the intellectual property described in Exhibit R.
The Company either has all right, title and interest in or a
valid and binding license to use such intellectual property.
No other intellectual property is used in or necessary to the
conduct of the business of the Company. All registrations,
pending applications, registered rights and executed
agreements related to intellectual property are listed in
Exhibit R. Except as disclosed therein, (i) the Company has
the right to use the intellectual property described therein,
(ii) all registrations on behalf of the Company with and
applications to governmental or regulatory authorities in
respect of such intellectual property are valid and in full
force and effect and are not subject to the payment of any
Taxes or maintenance fees or the taking of any other actions
by the Company to maintain their validity or effectiveness,
(iii) all copyrightable materials used by the Company are
works-for-hire and are owned by the Company, (iv) there are no
restrictions on the direct or indirect transfer of any
License, or any interest therein, held by the Company in
respect of such intellectual property, (v) the Sellers have
delivered, or have caused the Company to
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deliver, to Buyer prior to the execution of this Agreement
documentation with respect to any invention, process, design,
computer program or other know-how or trade secret included in
such intellectual property, which documentation is accurate
and complete and sufficient in detail and content to identify
and explain such invention, process, design, computer program
or other know-how or trade secret, (vi) the Sellers and the
Company have taken reasonable security measures to protect the
secrecy, confidentiality and value of their trade secrets,
(vii) neither any Seller nor the Company is or has received
any notice that it is, in default (or with the giving of
notice or lapse of time or both, would be in default) under
any License to use such intellectual property and (viii)
neither any Seller nor the Company has any knowledge that such
intellectual property is being infringed by any other person.
To the knowledge of each Seller and the Company, the Company
is not infringing any intellectual property of any person or
entity, and no litigation is pending and no claim has been
made or, to the knowledge of any Seller or of the Company, has
been threatened to such effect.
u. Disclosure: The representations and warranties contained in
this Agreement, and the statements contained in the exhibits
and in the certificates, lists and other writings furnished to
Buyer pursuant to any provision of this Agreement (including
the Financial Statements), when taken together, do not contain
any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements herein
and therein, in the light of the circumstances under which
they were made, not misleading.
v. Environmental Matters:
i) The Company and MWFA have obtained and hold all
necessary Environmental Permits.
ii) Except as disclosed on Exhibit S:
(a) Company and MWFA are, and at all times have been,
in full compliance with, and have not been and are
not in violation of or liable under, any
environmental law. Neither any Seller not the
Company nor MWFA has any basis to expect, nor has
any of them or any other person for whose conduct
it may be held to be responsible received, any
actual or threatened order, notice, or other
communication from any governmental body, or the
current or prior owner or operator of any assets,
of any actual or potential violation or failure to
comply with any environmental law, or of any
actual or threatened obligation
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to undertake or bear the cost of any environmental
liabilities with respect to any of the properties
or assets (whether real, personal, or mixed) in
which the Company or MWFA has had an interest, or
with respect to any property at or to which
hazardous materials were generated, manufactured,
refined, transferred, imported, used, or processed
by the Company or MWFA or any other person for
whose conduct they are or may be held responsible,
or from which hazardous materials have been
transported, treated, stored, handled,
transferred, disposed, recycled, or received.
(b) There are no pending or, to the knowledge of any
Seller, threatened claims, encumbrances, or other
restrictions of any nature, resulting from any
environmental liabilities or arising under or
pursuant to any environmental law, with respect to
or affecting any of the properties and assets
(whether real, personal, or mixed) in which
Company or MWFA has or had an interest.
(c) Neither any Seller nor the Company has knowledge
of or any basis to expect, nor has any of them or
any other person for whose conduct they are or may
be held responsible received any citation,
directive, inquiry, notice, order, summons,
warning, or other communications that relates to
Hazardous Activity, Hazardous Materials, or any
alleged, actual, or potential violation or failure
to comply with any Environmental Law, or of any
Environmental, Health, and Safety Liabilities with
respect to any of its facilities or any other
assets in which the Company had an interest, or
with respect to any facility to which Hazardous
Materials generated, manufactured, refined,
transferred, imported, used, or processed by any
Seller, the Company, or any other person for whose
conduct it or they are or may be held responsible,
have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.
(d) Neither the Company nor any other person for whose
conduct it may be held responsible, has any
Environmental, Health, and Safety Liabilities with
respect to the Facilities or with respect to any
other assets (whether real, personal, or mixed) in
which Company (or any
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<PAGE>
predecessor thereof), has or had an interest, or
at any property geologically or hydrologically
adjoining the facilities or any such assets.
iii) There are no hazardous materials present on or in the
environment at Company's and MWFA's properties or at any
geologically or hydrologically adjoining property,
including any hazardous materials contained in barrels,
above or underground storage tanks, landfills, land
deposits, dumps, equipment (whether moveable or fixed)
or other containers, either temporary or permanent, and
deposited or located in land, water, sumps, or any other
part of the property or such adjoining property, or
incorporated into any structure therein or thereon.
Neither the Company, MWFA, nor any other person for
whose conduct it may be held responsible, has permitted
or conducted, or is aware of, any hazardous activity
conducted with respect to the property or any other
properties or assets (whether real, personal, or mixed)
in which Company or MWFA has or had an interest except
in full compliance with all applicable environmental
laws.
iv) There has been no release or, to the knowledge of any
Seller, any threat of release of any hazardous materials
at or from the property or at any other locations where
any hazardous materials were generated, manufactured,
refined, transferred, produced, imported, used, or
processed from or by the property, or from or by any
other properties and assets (whether real, personal, or
mixed) in which the Company and MWFA has or had an
interest, or any geologically or hydrologically
adjoining property.
v) Sellers have delivered to Buyer true and complete copies
and results of any reports, studies, analyses, tests,
and monitoring possessed or initiated by any Seller or
the Company pertaining to hazardous materials or
hazardous activities in, on, or under the property, or
concerning compliance by any Seller, the Company, MWFA,
or any other person for whose conduct it or they are or
may be held responsible, with environmental laws.
vi) There are no liens arising under or pursuant to any
environmental law on any real property owned or leased
and there are no facts, circumstances, or conditions
that could reasonably be expected to restrict, encumber,
or result in the imposition of special conditions that
could reasonably be expected to restrict, encumber, or
result in the imposition of special conditions under any
16
<PAGE>
environmental law with respect to the ownership,
occupancy, development, use, or transferability of any
real property.
vii) There are no underground storage tanks, active or
abandoned, polychlorinated biphenyl containing
equipment, or asbestos containing material, at any real
property.
viii) There have been no environmental investigations,
studies, audits, tests, reviews or other analyses
conducted by, on behalf of, or which are in the
possession of any Seller or the Company or MWFA with
respect to any asset of or property that is adjacent to,
an asset of the Company or MWFA which have not been
delivered to Buyer prior to execution of this Agreement.
w. Other Negotiations; Brokers: No Seller (nor any investment
banker, financial advisor, attorney, accountant or other
person retained by or acting for or on behalf of any Seller)
has entered into any agreement or had any discussions with any
third party regarding any transaction involving the Company
which could result in any party hereto being subject to any
claim for liability to said third party as a result of
entering into this Agreement or consummating the transactions
contemplated hereby.
6. REPRESENTATIONS AND WARRANTIES OF BUYER: Buyer represents and
warrants that:
a. Organization: Buyer is a duly organized corporation in good
standing with the State of Texas;
b. Authority: Buyer has obtained all necessary corporate approval
(or will have done so by Closing) to complete this
transaction;
c. Securities Laws: Buyer has taken all necessary action with
respect to this transaction required by securities laws;
d. Further Assurances: Buyer shall promptly and duly execute and
deliver to Sellers such further documents and assurances and
take such further action as Sellers may from time to time
reasonably request in order to carry out more effectively the
intent and purpose of this Agreement and to establish and
protect the rights and remedies created or intended to be
created in favor of Sellers.
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<PAGE>
e. Other Negotiations; Brokers: Buyer and no investment banker,
financial advisor, attorney, accountant or other person
retained by or acting for or on behalf of Buyer has entered
into any agreement or had any discussions with any third party
regarding any transaction involving the Company which could
result in any party hereto being subject to any claim for
liability to said third party as a result of entering into
this Agreement or consummating the transactions contemplated
hereby.
7 REPRESENTATIONS, WARRANTIES, AND COVENANTS:
a. Accuracy; Survival: The representations, warranties, and
covenants, made by Sellers and Buyer herein shall be true and
correct in all respects on, and as of, the Closing Date with
the same force and effect as though all such representations
and warranties had been made on and as of the Closing Date and
the covenants required by this Stock Purchase Agreement to be
performed and complied with by Sellers on or prior to the
Closing shall have been duly performed or complied with. All
representations, warranties and covenants shall survive the
Closing, unless otherwise provided herein.
b. Non-Compete:
(i) For a period of five (5) years from the Closing Date,
except as requested by Buyer or furnished pursuant to
Exhibit D, no Seller, alone or in conjunction with any
other person, or directly or indirectly through his or
her present or future affiliates, will directly or
indirectly own, manage, operate, join, have a financial
interest in, control or participate in the ownership,
management, operation or control of, or use or permit
his or her name to be used in connection with, or be
otherwise connected in any manner with, (A) any business
or enterprise engaged in the design, development,
manufacture, distribution or sale of any products, or
the provision of any services, which the Company was
designing, developing, manufacturing, distributing,
selling or providing at any time subsequent to December
31, 1996 up to and including the Closing Date, or (B)
any business which is similar to the business of
disposing or selling coal combustion by-products or
competitive with the business carried on or planned by
Company at any time subsequent to December 31, 1996 up
to and including the Closing Date, provided that the
foregoing restriction shall not be construed to prohibit
the ownership, in the aggregate, of not more than two
percent (2%) of any class of securities of any
corporation which is engaged in any of the businesses or
enterprises described in clauses (A) and (B) above,
having a class of securities registered pursuant to the
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<PAGE>
Securities Exchange Act of 1934, as amended, which
securities are publicly owned and regularly traded on
any national exchange or in the over-the-counter market.
(ii) For a period of five (5) years from the Closing Date, no
Seller shall directly or indirectly, or through an
affiliate, (A) influence any individual who was an
employee or consultant of the Company at any time during
the time any Seller was an indirect or direct owner of
securities of the Company, to terminate his or her
employment or consulting relationship with the Company,
(B) interfere in any other way with the employment, or
other relationship, of any employee or consultant of the
Company or (C) cause or attempt to cause or participate
in any way in any discussion or negotiation concerning
(X) any client, customer or supplier of the Company or
(Y) any prospective client, customer or supplier of the
Company from engaging in business with the Company.
(iii) Each Seller agrees that Buyer's remedies at law for any
breach or threat of breach by it of any of the
provisions of this Section 7.b will be inadequate, and
that, in addition to any other remedy to which Buyer may
be entitled at law or in equity, Buyer shall be entitled
to a temporary or permanent injunction or injunctions or
temporary restraining orders or orders to prevent
breaches of the provisions of this Section 7.b and to
enforce specifically the terms and provisions hereof, in
each case without the need to post any security or bond.
Nothing herein contained shall be construed as
prohibiting Buyer from pursuing, in addition, any other
remedies available to it for such breach or threatened
breach. A waiver by the Buyer of any breach of any
provision hereof shall not operate or be construed as a
waiver of a breach of any other provisions of this
Agreement or of any subsequent breach thereof.
(iv) The parties hereto consider the restrictions contained
in this Section 7.b hereof to be reasonable for the
purpose of preserving the goodwill, proprietary rights
and going concern value of Company, but if a final
judicial determination is made by a court having
jurisdiction that the time or territory or any other
restriction contained in this Section 7.b is an
unenforceable restriction on the Sellers' activities,
the provisions of this Section 7.b shall not be rendered
void but shall be deemed amended to apply as to such
maximum time and territory and to such other extent as
such court
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<PAGE>
may judicially determine or indicate to be reasonable.
Alternatively, if the court referred to above finds that
any restriction contained in this Section 7.b or any
remedy provided herein is unenforceable, and such
restriction or remedy cannot be amended so as to make it
enforceable, such finding shall not affect the
enforceability of any of the other restrictions
contained therein or the availability of any other
remedy. The provisions of this Section 7.b shall in no
respect limit or otherwise affect the Sellers
obligations under other agreements with the Company.
8. TERMINATION:
a. Termination Events: This Agreement may, by notice given prior
to or at the Closing, be terminated:
i) by either Buyer or by Sellers if a material breach of
any provision of this Agreement has been committed by
the other party and such breach has not been waived;
ii) (i) by Buyer if any of the conditions contained in this
Agreement to be performed by Sellers has not been
satisfied as of the Closing Date or if satisfaction of
such a condition is or becomes impossible (other than
through the failure of Buyer to comply with its
obligations under this Agreement) and Buyer has not
waived such condition on or before the Closing Date, or
(ii) by Sellers, if any of the contained in this
Agreement to be performed by Buyer has not been
satisfied as of the Closing Date or if satisfaction of
such a condition is or becomes impossible (other than
through the failure of a Seller to comply with his or
her obligations under this Agreement) and Sellers have
not waived such condition on or before the Closing Date;
iii) by mutual consent of Buyer and Sellers; or
iv) by Buyer or by Sellers if the Closing has not occurred
(other than through the failure of any party seeking to
terminate this Agreement to comply fully with its
obligations under this Agreement) on or before April 30,
1998, or such later date as the parties may agree upon.
b. Effect of Termination: Each party's right of termination under
Section 8.a is in addition to any other rights it may have
under this Agreement or otherwise, and the exercise of a right
of termination will not be an election of remedies. If this
Agreement is terminated pursuant to Section
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8.a, all further obligations of the parties under this
Agreement will terminate, except that the obligations in
Sections 10.a, 10.k and 18 will survive; provided, however,
that if this Agreement is terminated by a party because of a
breach of the Agreement by the other party or because one or
more of the conditions to the terminating party's obligations
under this Agreement is not satisfied as a result of the other
party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal
remedies (including specific performance) will survive such
termination unimpaired.
9. WAIVERS: Either Buyer or Sellers may, by written notice to the other
party hereto, extend the time for performance of any of the
obligations or other actions of the other parties under this
Agreement, or waive any inaccuracies in this representations and
warranties of the other contained in this Agreement or in any
documents delivered pursuant to this Agreement, or waive compliance
with any of the conditions or covenants of the other contained in
this Agreement, or waive or modify performance of any of the
obligations of the other parties under this Agreement, which written
notice must delineate with specificity, such waiver. Except as
provided in the preceding sentence, no action taken pursuant to this
Agreement, including, without limitation, any investigation or
action by or on behalf of any party, shall constitute a waiver by
any party taking such action of compliance with any representations,
warranties, covenants or agreements set forth in this Agreement. The
waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any
subsequent breach of such provision.
10. MISCELLANEOUS: Buyer and Sellers hereby agree to the following
miscellaneous provisions:
a. Cost; Expenses: Buyer and Sellers shall each bear their own
respective costs and expenses incurred in connection with this
Stock Purchase Agreement, including, but not limited to
attorney and accountant fees. Seller shall be solely
responsible for any sales, stock transfer or other transfer
taxes related to the consummation or the principal transaction
contemplated by this Stock Purchase Agreement. Buyer will be
responsible for all compliance costs and expenses related to
its public registration. Notwithstanding anything herein or
contained in any other agreement, neither Sellers nor Buyer
makes any representation that may be relied upon by any third
party.
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b. Notices: Any notice or other communication required or
permitted by any provision of this Agreement shall be in
writing and shall be deemed to have been given or served for
all purposes:
i) When delivered by hand or sent by facsimile; or
ii) When delivered by prepaid nationally recognized courier
service; or
iii) If sent by certified mail, postage prepaid, return
receipt requested, when 3 days have elapsed after such
mailing:
To Buyer:
JTM, Inc.
127 South 500 East, Suite 675
Salt Lake City, UT 84102
Attn: Brett A. Hickman
Fax - (801) 323-8035
With a copy to:
Parsons, Behle & Latimer
201 South Main Street, Suite 1800
Salt Lake City, UT 84145
Attn: J. Gordon Hansen
Fax - (801) 536-6111
To Sellers:
with a copy to:
Daniel D. Dykstra
701 Pierce Street, Suite 200
P.O. Box 3086
Sioux City, IA 51102-3086
Fax - (712) 258-6714
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<PAGE>
or such other address as any of the parties hereto shall have
designated in writing for notices in accordance with this
paragraph.
c. Successors and Assigns: This Stock Purchase Agreement shall
inure to the benefit of, and be binding upon, the parties
hereto and their respective heirs, successors and assigns. No
assignment by Buyer may be made without the prior written
consent of Sellers, except to an affiliate of Buyer. Any
Seller may assign his rights hereunder, but no such assignment
shall diminish his liabilities or commitments contained
herein.
d. Entire Agreement: This Agreement (including the exhibits
hereto) sets forth the entire understanding and agreement of
the parties hereto with respect to the subject matters covered
hereby and supersedes all prior or contemporaneous agreements,
arrangements, letters of intent or communications, whether
oral or written in form. This Agreement is made in fulfillment
of a Letter of Understanding dated February 20, 1998.
e. Amendments: This Agreement shall not be modified or amended
except by written agreement executed by the parties hereto.
f. Counterparts: This Agreement may be executed in any number of
counterparts, all of which shall be considered one and the
same agreement.
g. Governing Law: This Agreement shall be governed by and
construed in accordance with the laws of the State of Iowa.
h. Partial Invalidity: If any provision of this Agreement shall
be or become illegal, invalid or unenforceable in whole or in
part, the remaining provisions of this Agreement shall
nevertheless be deemed valid, binding, subsisting and
enforceable.
i. Delay; Partial Exercise: No failure or delay by any party
hereto in exercising any right, power or privilege under this
Agreement shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege
hereunder preclude any other or further exercise thereof or
the exercise of any other right, power or privilege.
j. Authority: Irving F. Jensen, Jr. Shall be authorized to act on
behalf of all Sellers with respect to any election, notice or
other matter concerning this Agreement, and through the
Closing Buyer may rely on any
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<PAGE>
written statement from him as having been authorized by all
Sellers, even though not confirmed by the other Sellers.
k. Confidentiality: Buyer and each of the Sellers will hold in
strict confidence from any person or entity all documents and
information concerning the other party hereto furnished to it
by or on behalf of the other party in connection with this
Agreement or the transactions contemplated hereby, except to
the extent the disclosing party can demonstrate that such
documents or information was (1) previously known by the party
receiving such documents or information, (2) in the public
domain (either prior to or after the furnishing of such
documents or information hereunder) through no fault of such
receiving party or (3) later acquired by the receiving party
from another source if the receiving party is not aware that
such source is under an obligation to another party hereto to
keep such documents and information confidential. Such
covenant of confidentiality will remain in effect unless a
party is compelled to disclose by judicial or administrative
process (including in connection with obtaining the necessary
approvals of this Agreement and the transactions contemplated
hereby of governmental or regulatory authorities) or by other
requirements of law.
11. INDEMNIFICATION:
a. Each of the Sellers, jointly and severally, will indemnify the
Company. Buyer and their respective stockholders (other than
Sellers) and the officers, directors, employees, agents and
affiliates of each of them in respect of and hold each of them
harmless from and against, any and all losses suffered,
incurred or sustained by any of them or to which any of them
becomes subject, resulting from, arising out of relating to
any misrepresentation or breach of warranty or nonfulfillment
of or failure to perform any covenant or agreement on the a
part of any Sellers contained in this Agreement (including,
without limitation, any certificate delivered in connection
herewith or therewith).
b. Buyer will indemnify each of the Sellers in respect of, and
hold him or her harmless from and against, any and all losses
suffered, incurred or sustained by him or her or to which he
or she becomes subject, resulting from, arising out of or
relating to any misrepresentation or breach of warranty or
nonfulfillment of or failure to perform any covenant or
agreement on the part of Buyer contained in this Agreement
(including, without limitation, any certificate delivered in
connection herewith or therewith).
c. Notwithstanding anything in this Agreement to the contrary,
Sellers' obligations, including taxes and penalties and paid
costs of defense
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<PAGE>
under this indemnity agreement shall be limited and, if
finally determined to be owed, to $2,500,000, except that
Seller's obligations related in any way to assets transferred
by the Company to Sellers, pursuant to Section 4.e, income tax
liabilities with respect to the Company's short year ending on
the Closing Date, and any willful, intentional or fraudulent
act, are not limited.
12. METHOD OF ASSERTING CLAIMS: All claims for indemnification will be
asserted and resolved as follows:
a. In order for a party to be entitled to any indemnification
arising out of or involving a claim or demand made by any
person not a party to this Agreement against the indemnified
party (a "Third Party Claim"), the indemnified party shall
deliver a claim notice to the indemnifying party promptly
after receipt by such indemnified party of written notice of
the Third Party Claim; provided, that failure to give such
Claim Notice shall not affect the indemnification provided
hereunder except to the extent the indemnifying party shall
have been actually prejudiced as a result of such failure.
b. If a Third Party Claim is made against an indemnified party,
the indemnifying party shall be entitled to participate in the
defense thereof and, if it so chooses, to assume the defense
thereof with counsel selected by the indemnifying party, which
counsel must be reasonably satisfactory to the indemnified
party. Should the indemnifying party so elect to assume the
defense of a Third Party Claim, the indemnifying party shall
not be liable to the indemnified party for legal expenses
subsequently incurred by the indemnified party in connection
with the defense thereof, but shall continue to pay for any
expenses of investigation or any loss suffered. If the
indemnifying party assumes such defense, the indemnified party
shall have the right to participate in the defense thereof and
to employ counsel, at its own expense, separate from the
counsel employed by the indemnifying party. If (i) the
indemnifying party shall not assume the defense of a Third
Party Claim with counsel satisfactory to the indemnified party
within five business days of any claim notice, or (ii) legal
counsel for the indemnified party notifies the indemnifying
party that there are or may be legal defenses available to the
indemnifying party or to other indemnified parties which are
different from or additional to those available to the
indemnified party, which, if the indemnified party and the
indemnifying party were to be represented by the same counsel,
would constitute a conflict of interest for such counsel or
prejudice prosecution of the defenses available to such
indemnified party, or (iii) if the indemnifying party shall
assume the defense
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<PAGE>
of a Third Party Claim and fail to diligently prosecute such
defense, then in each such case the indemnified party, by
notice to the indemnifying party, may employ its own counsel
and control the defense of the Third Party Claim and the
indemnifying party shall be liable for the reasonable fees,
charges and disbursements of counsel employed by the
indemnified party, and the indemnified party shall be promptly
reimbursed for any such fees, charges and disbursements, as
and when incurred. Whether the indemnifying party or the
indemnified party control the defense of any Third Party
Claim, the parties hereto shall cooperate in the defense
thereof. Such cooperation shall include the retention and
provision to the counsel of the controlling party of records
and information which are reasonably relevant to such Third
Party Claim, and making employees available on a mutually
convenient basis to provide additional information and
explanation or any material provided hereunder. The
indemnifying party shall have the right to settle, compromise
or discharge a Third Party Claim (other than any such Third
Party Claim in which criminal conduct is alleged) without the
indemnified party's consent if such settlement, compromise or
discharge (i) constitutes a complete and unconditional
discharge and release of the indemnified party, and (ii)
provides for no relief other than the payment of monetary
damage and such monetary damages are paid in full by the
indemnifying party.
c. In the event either party should have a claim that does not
involve a Third Party Claim, the indemnified party shall
promptly deliver an indemnity notice to the indemnifying
party. The failure by any indemnified party to give the
indemnity notice shall not impair such party's rights
hereunder except to the extent that an indemnifying party
demonstrates that it has been prejudiced thereby. If the
indemnifying party notifies the indemnified party that it does
not dispute the claim described in such indemnity notice or
fails to notify the indemnified party within thirty (30) days
whether the indemnifying party disputes the claim described in
such indemnity notice, the loss in the amount specified in the
indemnity notice will be conclusively deemed a liability of
the indemnifying party and the indemnifying party shall pay
the amount of such loss to the indemnified party on demand. If
the indemnifying party has timely disputed its liability with
respect to such claim, the indemnifying party and the
indemnified party will proceed in good faith to negotiate a
resolution of such dispute, and if not resolved through
negotiations within thirty (30) days, such dispute shall be
resolved as provided herein and by law.
13. ALLOCATION OF TAX LIABILITY:
a. In the case of taxes with respect to or payable by the Company
with respect to a period that includes but does not end on the
Closing Date, the allocation of such taxes between the
pre-closing period and the post-
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closing period shall be made on the basis of an interim
closing of the books of the Company and MWFA as of the close
of business on the Closing Date. In the case of (i) franchise
taxes based on capitalization, debt or shares of stock
authorized, issue or outstanding and (ii) ad valorem taxes, in
either situation attributable to any taxable period that
includes but does not end on the Closing Date, the portion of
such taxes attributable to the pre-closing period shall be the
amount of such taxes for the entire taxable period, multiplied
by a fraction the numerator of which is the number of days in
such taxable period ending on and including the Closing Date
and the denominator of which is the entire number of days in
such taxable period; provided, that if any company asset is
sold or otherwise transferred prior to the Closing Date, then
ad valorem taxes pertaining to such property, asset or other
right shall be attributed entirely to the pre-closing period.
b. Except to the extent a reserve for taxes is reflected on the
Financial Statements, the Sellers shall be responsible for and
pay and shall indemnify and hold harmless Buyer and the
Company and MWFA with respect to (i) any and all taxes imposed
on any of the Company, or for which the Company is liable with
respect to any periods ending on or before the Closing Date;
provided, that in the case of any adjustment to any item of
loss or expense for any such years, which gives rise to
corresponding and offsetting items of loss or expense in
subsequent years the benefit of which is or will be actually
realized by the Company (other than upon liquidation of the
Company) including by reason of any increase in a net
operating loss, the Sellers' obligations shall be limited to
the amount of interest (computed at the appropriate statutory
rates) and penalties actually paid to the appropriate taxing
authorities by the Company as a result of such timing
differences in the case of audit adjustments, or at a rate of
eight percent (8%) per annum in the case of other adjustments,
(ii) without duplication (subject to the same proviso), all
taxes arising out of a breach of the representations,
warranties or covenants contained herein, (iii) any tax
liability resulting from any ongoing state audits that exceed,
in the aggregate, any reserve therefore set forth on the
Financial Statements, and (iv) any reasonable out-of-pocket
costs or expenses with respect to taxes indemnified hereunder.
c. From and after the Closing Date, Buyer shall cause the Company
and MWFA to prepare, or cause to be prepared, and shall file,
or cause to be filed, all reports and returns of the Company
required to be filed. Buyer shall cause the Company and MWFA
to pay the appropriate taxing authorities the taxes shown to
be due and payable on all tax returns of the Company filed
after the Closing Date, concurrent with the filing of such tax
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returns. Tax returns of the Company and MWFA for a period
ending on or before the Closing Date shall be prepared on a
basis consistent with the tax returns filed by the Company for
previous taxable periods, subject to the requirements of
applicable law.
14. TAX CONTESTS:
a. If any taxing authority or other person asserts a tax claim,
then the party hereto first receiving notice of such tax claim
shall promptly provide written notice thereof to the other
parties hereto. Such notice shall specify in reasonable detail
the basis for such tax claim and shall include a copy of any
relevant correspondence received from the taxing authority or
other person.
b. If, within 30 calendar days after any Seller receives or
delivers, as the case may be, notice of a tax claim, Sellers
provide to the Buyer an election notice, Sellers shall defend
or prosecute, at their sole cost, expense and risk, such tax
claim by all appropriate proceedings, which proceedings shall
be defended or prosecuted diligently by Sellers to a final
determination; provided, that Sellers shall not, without the
prior written consent of the Company and MWFA, enter into any
compromise or settlement of such tax claim that would result
in any tax detriment to the Company and MWFA. So long as
Sellers are defending or prosecuting a tax claim, with respect
to the Company and MWFA, the Company and MWFA shall provide or
cause to be provided to Sellers any information reasonably
requested by Sellers relating to such tax claim and shall
otherwise cooperate with Sellers and their representatives in
good faith in order to contest effectively such tax claim.
Sellers shall inform the Company and MWFA of all developments
and events relating to such tax claim (including, without
limitation, providing copies of written materials relating to
such tax claim) and the Company and MWFA or its authorized
representatives shall be entitled, at their expense, to
attend, but not to participate in or control, all conferences,
meetings and proceedings relating to such tax claim.
c. If, with respect to any tax claim, Sellers fail to deliver an
election notice within the period provided in Section 13.04(b)
or, after delivery of such election notice, Sellers fail
diligently to defend or prosecute such tax claim to a final
determination, then the Company and MWFA shall at any time
thereafter have the right (but not the obligation) to defend
or prosecute, at the sole cost, expense and risk of Sellers,
such tax claim. The Company and MWFA shall have full control
of such defense or prosecution and such proceedings, including
any settlement or compromise thereof. If requested, the
Sellers shall cooperate in good faith with the Company and
MWFA and its authorized representatives in order to contest
effectively such
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tax claim. Sellers may attend, but not participate in or
control, any defense, prosecution, settlement or compromise of
any tax claim pursuant to this paragraph, and shall bear their
own costs and expenses with respect thereto.
d. In the case of any tax claim that is defended or prosecuted to
a final determination by Sellers, Sellers shall pay to the
appropriate tax indemnitees, the full amount of any tax
arising or resulting from such tax claim within five business
days after such final determination. In the case of any tax
claim that is defended or prosecuted to a final determination
by the Company and MWFA pursuant to the terms of Section
13.04, Sellers shall pay to the appropriate indemnified party,
together with any associated costs that have not theretofore
been paid by Sellers to the Company and MWFA, within five
business days after such final determination. In the case of
any tax claim not covered by the two preceding sentences,
Sellers shall pay to the Company and MWFA in immediately
available funds the full amount of any tax arising or
resulting from such tax claim (calculated after taking into
account any actual reduction in the current liability for
taxes of such tax indemnitee for tax arising out of or
resulting from such payment or such tax claim), together with
any associated costs that have not theretofore been paid by
Sellers to the Company and MWFA, at least five business days
before the date payment of such tax is due from any tax
indemnitee.
e. Notwithstanding anything contained in this Section 13 to the
contrary, the rights of Sellers to defend or prosecute, or to
control the defense or prosecution of, any tax claim shall be
no greater than those rights that the Company and MWFA would
have to defend or prosecute, or to control the defense or
prosecution of, such tax claim.
15. COOPERATION REGARDING TAX MATTERS: Each party hereto shall provide
to the other parties hereto and Company and MWFA such cooperation
and information as any of them reasonably may request related to the
filing of any tax return, amended tax return or claim for refund,
determining a liability for taxes or a right to refund of taxes or
in conducting any audit or other proceeding in respect to taxes.
Such cooperation and information shall include providing copies of
all relevant portions of relevant tax returns, together with
relevant accompanying schedules, workpapers and relevant documents
relating to rulings or other determinations by taxing authorities
and relevant records concerning the ownership and tax basis of
property, which any such party may possess. Each party shall make
its employees reasonably available on a mutually convenient basis at
its cost to provide explanation of any documents or information so
provided. Subject to the
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preceding sentence, each party required to file tax returns pursuant
to this paragraph 13 shall bear all costs of filing such tax
returns.
16. PAYMENT OF TRANSFER TAXES AND FEES: Sellers shall pay all sales,
use, transfer, stamp, documentary or similar taxes imposed upon or
arising out of or in connection with the transactions effected
pursuant to this Agreement.
17. OTHER TAX COVENANTS:
a. Without the prior written consent of Buyer, no Seller shall,
to the extent it may affect or relate to the Company or MWFA,
make or change any tax election, change any annual tax
accounting period, adopt or change any method of tax
accounting, file any amended tax return, enter into any method
of tax accounting, enter into any closing agreement, settle
any tax claim, assessment or proposed assessment, surrender
any right to claim a tax refund, consent to any extension or
waiver of the limitation period applicable to any tax claim or
assessment or take or omit to take any other action, if any
such action or omission would have the effect of increasing
any post-closing tax liability of the Buyer, of the Company or
MWFA unless required by applicable law.
b. Without the prior written consent of Sellers, neither the
Buyer nor the Company or MWFA shall, to the extent it may
affect or relate to the Company or MWFA, make or change any
tax election, file any amended tax return, enter into any
closing agreement, settle any tax claim, assessment or
proposed assessment, surrender any right to claim a tax
refund, consent to any extension or waiver of the limitation
period applicable to any tax claim or assessment or take or
omit to take any other action, if any such action or omission
would affect a pre-closing period, unless required by
applicable law.
c. So long as any books, records and files retained by any Seller
relating to the business of the Company or MWFA or the books,
records and files delivered to the control of the Buyer
pursuant to this Agreement to the extent they relate to the
operations of the Company or MWFA prior to the Closing Date,
remain in existence and are available, each party (at its own
expense) shall have the right upon prior notice to inspect and
to make copies of the same at any time during business hours
for any proper purpose. The Buyer and the Sellers shall use
reasonable efforts not to destroy or all the destruction of
any such books, records, and files without first providing 60
days written notice of intention to destroy to the other, and
allowing such other party to take possession of such records.
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18. MEDIATION: In the event there is a dispute under the Agreement, the
disagreeing parties shall meet with one another and diligently
attempt to resolve their disagreements. If they are unable to do so,
then upon request of either party to the dispute made within twenty
(20) days of the failure of negotiations, they will mediate the
dispute, utilizing an impartial mediator pursuant to the rules of
the American Arbitration Association ("AAA") or any other reputable
organization that sponsors mediation. If, after thirty (30) days the
mediation is not successful, or if no mediation has been elected,
then any party to the dispute may file a legal action in any court
of competent jurisdiction to resolve the dispute.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the _______ day of March, 1998.
SELLERS: BUYER:
JTM INDUSTRIES, INC.
- -----------------------------
Colin C. Jensen
- -----------------------------
Colin C. Jensen, Sr.
- -----------------------------
Irving F. Jensen, Jr.
- -----------------------------
Irving F. Jensen, III
- -----------------------------
Richard A. Everist
- -----------------------------
Richard Everist, Jr.
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- -----------------------------
Tom Everist
- -----------------------------
Erik M. Jensen
- -----------------------------
Mark R. Jensen
- -----------------------------
T. S. "Steve" Everist
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Exhibit 10.5
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT is dated March ___, 1998, between JTM INDUSTRIES,
INC., a Texas corporation ("Purchaser"), and JACK WIRT, an individual residing
in Bay City, Michigan ("Seller").
RECITALS:
A. Seller owns and desires to sell to Purchaser, and Purchaser desires to
purchase from Seller, all of the issued and outstanding shares of capital stock
of Flo Fil Co., Inc. ("Flo Fil"), Michigan Ash Sales Company ("Michigan Ash"),
and U.S. Stabilization, Inc. ("USS"), all Michigan corporations. Flo Fil,
Michigan Ash and USS are referred to herein collectively as the "Acquired
Companies" and individually as an "Acquired Company." References to an Acquired
Company or to the Acquired Companies shall include all Subsidiaries thereof,
unless the context indicates otherwise;
B. The Acquired Companies have the numbers of issued and outstanding
shares of capital stock listed below:
Flo Fil 1,000 shares of common stock, par value $1.00 per share
Michigan Ash 1,000 shares of common stock, par value $1.00 per share
USS 1,000 shares of common stock, par value $1.00 per share
All of such shares are referred to herein as the "Purchased Stock."
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C. Unless otherwise defined in this Agreement, the capitalized terms used
in this Agreement have the meanings given in Article VIII below.
NOW THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
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ARTICLE I
SALE OF PURCHASED STOCK; CLOSING
1.01 Purchase and Sale. At the Closing, on the terms of and subject to the
conditions set forth in this Agreement, Seller will sell to Purchaser, and
Purchaser will purchase from Seller, the Purchased Stock.
1.02 Purchase Price. The aggregate purchase price (the "Purchase Price")
for the Purchased Stock is $24,600,000 in cash. The Purchase Price shall be
allocated among the Purchased Stock of each of the Acquired Companies, as
follows:
Flo Fil$550,000
Michigan Ash$20,350,000
USS$3,700,000
The Purchase Price is payable in the manner provided in Section 1.03.
1.03 Closing. The Closing (the "Closing") of the purchase and sale of the
Purchased Stock will take place at the offices of Braun Kendrick Finkbeiner
P.L.C. at Saginaw, Michigan or at such other place as Purchaser and the Seller
shall mutually agree, at 10:00 A.M. local time, on the latest to occur of the
following dates (the "Closing Date"):
(a) Five days after the receipt by Purchaser or Seller of a written
termination of the waiting period issued by the Federal Trade Commission or the
United States Department of Justice pursuant to
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the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or the
expiration of the waiting period described therein.
(b) The satisfaction or waiver of all conditions precedent to
closing specified in Article V.
(c) Such other date as the parties shall agree upon.
Seller shall be entitled to elect not to close hereunder if all conditions
to Closing have not been met by April 30, 1998 (other than conditions to be
satisfied by Seller).
Prior to the execution of this Agreement, the Purchaser has paid to the
Seller a non-refundable earnest money deposit ("Deposit") of $50,000, which
Deposit shall be credited against the Purchase Price if the transactions
contemplated by this Agreement are consummated. Simultaneously with the
execution of this Agreement, the Purchaser and the Seller will execute an escrow
agreement (the "Escrow Agreement") in the form annexed hereto as Exhibit A and
Purchaser will, by wire transfer of immediately available funds, deposit with
the Escrow Agent (as defined in the Escrow Agreement) the sum of $250,000 (the
"Escrow Deposit"). The Escrow Deposit (including any earnings thereon) will be
credited against the Purchase Price if the transactions contemplated by this
Agreement are consummated and, together with the earnings thereon, will be
delivered to Seller at the Closing. As further provided in the Escrow Agreement,
the Escrow Deposit (including any earnings thereon) will be delivered to Seller
if the transactions contemplated by this Agreement are not consummated on or
before April 30, 1998, for any reason other than Seller's failure to satisfy the
conditions set forth in Section 5.01 below (except for subparagraphs (c), (d),
(e), (m) and (n), which, for purposes of this sentence, will be deemed to have
been satisfied) or his refusal or inability to complete the Closing, in which
event, the Escrow Deposit, together with the earnings thereon, will be delivered
to Purchaser. The retention by Seller of the Deposit and the transfer of the
Escrow Deposit, together with the
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earnings thereon, to Seller, as provided herein, will be Seller's sole remedy
for Purchaser's failure to complete the Closing. At the Closing, Purchaser will
pay the balance of the Purchase Price due at Closing to Seller by wire transfer
of immediately available funds to such account as Seller may reasonably direct
by written notice delivered to Purchaser by Seller at least three (3) Business
Days before the Closing Date. Simultaneously, the Seller will sell to Purchaser
the Purchased Stock free and clear of all Liens, by delivering to Purchaser
three stock certificates, registered in the name of Purchaser, representing the
Purchased Stock. At the Closing, there shall also be delivered the opinions,
certificates and other Contracts, documents and instruments to be delivered
pursuant to Article V.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE SELLER
Seller hereby represents and warrants to Purchaser as follows:
2.01 Organization and Qualification. Each of the Acquired Companies is a
corporation duly organized, validly existing and in good standing under the laws
of the state of Michigan and has full corporate power and authority to conduct
its business as and to the extent now conducted and to own, use and lease its
Assets. Each Acquired Company is duly qualified, licensed or admitted to do
business and is in good standing in each jurisdiction in which the ownership,
use or leasing of its Assets, or the conduct or nature of its business, makes
such qualification, licensing or admission necessary, except for such failures
to be so qualified, licensed or admitted and in good standing
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which, individually or in the aggregate, (i) are not having and could not be
reasonably expected to have a material adverse effect on the business or
condition of the Acquired Company and (ii) could not be reasonably expected to
have a material adverse effect on the validity or enforceability of this
Agreement or any other agreement to which it is a party or on the ability of the
Acquired Company to perform its obligations hereunder or thereunder.
2.02 Capital Stock. The authorized capital stock of each Acquired Company
consists of the following number of shares of capital stock:
Flo Fil -- 50,000 shares of common stock, par value $1.00 per share
Michigan Ash -- 50,000 shares of common stock, par value $1.00 per
share
USS -- 50,000 shares of common stock, par value $1.00 per share
The only issued and outstanding shares of capital stock of the Acquired
Companies are the shares of Purchased Stock, all of which are validly issued,
fully paid and nonassessable, issued in compliance with all applicable Laws and
no additional shares of capital stock have been reserved for issuance. There are
no outstanding Options with respect to the stock of any Acquired Company or
agreements, arrangements or understandings to issue Options with respect to the
stock of any Acquired Company, nor are there any preemptive rights or
agreements, arrangements or understandings to issue preemptive rights with
respect to the issuance or sale of the capital stock of any Acquired Company.
Seller is the record and beneficial owner of the shares of Purchased Stock, free
and clear of all Liens. The delivery to Purchaser of the certificates
representing the Purchased Stock purchased hereunder will transfer to Purchaser
good and valid title to all shares of the Purchased Stock, free and clear of all
Liens and after such transfer the Purchased Stock, in the hands of Purchaser,
will have been duly authorized, validly issued, fully paid and nonassessable.
From and
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after the Closing, neither Seller nor any other Person (other than the
Purchaser) will have any rights whatsoever with respect to the Purchased Stock
or to any other securities of any of the Acquired Companies.
2.03 Authority Relative to This Agreement. The Seller has full authority
to enter into this Agreement, to perform his obligations hereunder and to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by the Seller and constitutes his legal,
valid and binding obligations, enforceable against the Seller in accordance with
its terms.
2.04 Subsidiaries; Company; Business. Section 2.04 of the Disclosure
Schedule lists the name of each Subsidiary of any of the Acquired Companies and
all lines of business in which such Acquired Company and each Subsidiary is
participating or engaged or has participated or engaged in the preceding three
years. Each Subsidiary is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation set forth
opposite its name in Section 2.04 of the Disclosure Schedule, and has full power
and authority to conduct its business as and to the extent now conducted and to
own, use and lease its Assets and Properties. Each Subsidiary is duly qualified,
licensed and admitted to do business and is in good standing in each
jurisdiction in which the ownership, use or leasing of its Assets and
Properties, or the conduct or nature of its business, makes such qualification,
licensing or admission necessary, except for such failures to be so qualified,
licensed or admitted and in good standing which, individually or in the
aggregate, are not having and could not be reasonably expected to have a
material adverse effect on the business or condition of such entity and could
not be reasonably expected to have a material adverse effect on the validity or
enforceability of this Agreement or the ability of any such Subsidiary to
perform its obligations. Section 2.04 of the Disclosure Schedule lists for each
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Subsidiary the amount of its authorized and outstanding equity interests. Except
as disclosed on Section 2.04 of the Disclosure Schedule, all of the outstanding
equity interests of each Subsidiary have been duly authorized and validly
issued, are fully paid and nonassessable, and are owned, beneficially and of
record, by an Acquired Company free and clear of all Liens. Other than as
contemplated by this Agreement, there are no outstanding Options with respect to
the capital stock of any Subsidiary or agreements, arrangements or
understandings to issue Options with respect to the capital stock of any
Subsidiary and there are no preemptive rights or agreements, arrangements or
understandings to issue preemptive rights with respect to the issuance or sale
of any Subsidiary's equity interests in favor of any Person except Seller. The
name of each director and officer of each Acquired Company and of each
Subsidiary on the date hereof, and the position with such Acquired Company and
such Subsidiary held by each, are listed in Section 2.04 of the Disclosure
Schedule. The Seller has delivered to Purchaser true and complete copies of the
certificate or articles of incorporation and by-laws (or other comparable
corporate charter documents) of each Acquired Company and each Subsidiary,
including all amendments thereto effected through the Closing Date. Except for
the Subsidiaries, the Acquired Companies hold no equity, partnership, joint
venture or other interest in any Person.
2.05 No Conflicts. The execution and delivery by the Seller of this
Agreement does not, and the performance by Seller of his obligations under this
Agreement and the consummation of the transactions contemplated hereby, do not
and will not:
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the certificate or articles of incorporation
or by-laws (or other comparable corporate charter documents) of any of the
Acquired Companies or the Subsidiaries;
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(b) subject to obtaining the consents, approvals and actions, making
the filings and giving the notices referred to in Section 2.06 below or
disclosed in Section 2.06 of the Disclosure Schedule, if any, conflict with or
result in a violation or breach of any term or provision of any law or Order
applicable to the Seller or to any Acquired Company, any of its Subsidiaries or
any of their respective Assets and Properties; or
(c) except as disclosed in Section 2.05 of the Disclosure Schedule,
(i) conflict with or result in a violation or breach of, (ii) constitute (with
or without notice or lapse of time or both) a default under, (iii) require the
Seller, any Acquired Company, or any of the Subsidiaries to obtain any consent,
approval or action of, make any filing with or give any notice to any Person as
a result or under the terms of, (iv) result in or give to any Person any right
of termination, cancellation, acceleration or modification in or with respect
to, (v) result in or give to any Person any additional rights or entitlement to
increased, additional, accelerated or guaranteed payments under, or (f) result
in the creation or imposition of any Lien upon any of the Acquired Companies,
any of the Subsidiaries or any of their respective Assets under, any Contract or
License to which the Seller, any of the Acquired Companies or any of the
Subsidiaries is a party or by which any of their respective Assets is bound,
except for such conflicts, violations, breaches, defaults, consents, approvals,
actions, filings, notices, terminations, cancellations, accelerations,
modifications, additional rights or entitlements or Liens that, individually or
in the aggregate, (A) are not having and could not be reasonably expected to
have a material adverse effect on the business or condition of any of the
Acquired Companies, and (B) could not be reasonably expected to have a material
adverse effect on the validity or enforceability of this Agreement or on the
ability of the Seller to perform his obligations hereunder.
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2.06 Governmental Approvals and Filings. Except as disclosed in Section
2.06 of the Disclosure Schedule, and in reliance on Purchaser's representations
and warranties set forth in Section 3.04 below, no consent, approval or action
of, filing with or notice to any Governmental or Regulatory Authority on the
part of the Seller, any of the Acquired Companies or any of the Subsidiaries is
required in connection with the execution, delivery and performance of this
Agreement or the consummation of transactions contemplated hereby.
2.07 Books and Records. The minute books and other similar records of the
Acquired Companies and the Subsidiaries provided to Purchaser prior to the
execution of this Agreement contain a true and complete record, in all material
respects, of all action taken by the stockholders, the boards of directors and
committees of the boards of directors (or other similar governing entities) of
the Acquired Companies and the Subsidiaries.
2.08 Financial Statements. Seller has caused each of the Acquired
Companies to furnish to Purchaser true and complete copies of (i) the audited
consolidated balance sheets of each Acquired Company and its Subsidiaries as of
December 31, 1996 and December 31, 1997 and the related consolidated statements
of operations and cash flows, accompanied by the opinions thereon of Ernst &
Young LLP, independent certified public accountants, together with the notes
thereto, of each Acquired Company and its Subsidiaries for the fiscal years then
ended (the "Audited Financial Statements"), and (ii) the unaudited consolidated
balance sheet at January 31, 1998 of each Acquired Company and its Subsidiaries
and the related consolidated statements of operations and cash flows of each
Acquired Company and its Subsidiaries for the 31 days then ended, certified on
behalf of each Acquired Company by its President (the "Unaudited Financial
Statements"). The Audited Financial Statements and the Unaudited Financial
Statements (collectively, the "Financial Statements") are in accordance with the
Books and Records of the subject Acquired Company and fairly present in all
material respects the consolidated financial position of each Acquired Company
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and its Subsidiaries as of the dates thereof and for the periods covered thereby
and the results of operations and cash flows of the Acquired Companies and their
Subsidiaries for the periods set forth therein, all in conformity with GAAP,
except as specifically noted in the notes thereto.
2.09 Absence of Changes. Since December 31, 1997, except as disclosed in
Section 2.09 of the Disclosure Schedule, there has not been any material adverse
change, or any event or development which, individually or together with other
such events, could reasonably be expected to result in a material adverse
change, in the business or condition of any of the Acquired Companies. In
addition, except as expressly contemplated hereby and except as disclosed in
Section 2.09 of the Disclosure Schedule, there has not occurred since December
31, 1997:
(a) any declaration, setting aside or payment of any dividend or
other distribution in respect of the capital stock (or other equity interests)
of any Acquired Company or any direct or indirect redemption, purchase or other
acquisition by any Acquired Company of any such capital stock (or other equity
interests) of any Acquired Company;
(b) any authorization, issuance, sale or other disposition by any of
the Acquired Companies of any shares of its capital stock (or other equity
interests), or any modification or amendment of any right of any holder of any
outstanding shares of capital stock (or other equity interests) of such Acquired
Company;
(c) (i) any increase in salary, rate of commissions or rate of
consulting fees of any employee or consultant of any Acquired Company; (ii) any
payment of consideration of any nature whatsoever (other than salary,
commissions or consulting fees paid to any employee or consultant of an Acquired
Company) to any officer, director, stockholder, employee or consultant of any
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Acquired Company; (iii) any establishment or modification of (A) targets, goals,
pools or similar provisions under any Benefit Plan, employment contract or other
employee compensation arrangement or (B) salary ranges, increase guidelines or
similar provisions in respect of any Benefit Plan, employment contract or other
employee compensation arrangement; or (iv) any adoption, entering into,
amendment, modification or termination (partial or complete) of any Benefit
Plan;
(d) (i) incurrences by an Acquired Company of Indebtedness or (ii)
any voluntary purchase, cancellation, prepayment or complete or partial
discharge in advance of a scheduled payment date with respect to, or waiver of
any right of an Acquired Company under, any Indebtedness of or owing to an
Acquired Company;
(e) any physical damage, destruction or other casualty loss (whether
or not covered by insurance) affecting any of the Assets of an Acquired Company
in an aggregate amount exceeding $25,000;
(f) any write-off or write-down of or any determination to write off
or write down any of the Assets of an Acquired Company;
(g) any purchase of any Assets of any Person or disposition of, or
incurrence of a Lien on, any Assets of an Acquired Company, other than
acquisitions or dispositions of inventory in the ordinary course of business of
the Acquired Company consistent with past practice;
(h) any entering into, amendment, modification, termination (partial
or complete) or granting of a waiver under or giving any consent with respect to
(i) any Contract which is required (or had it been in effect on the date hereof
would have been required) to be disclosed in the Disclosure Schedule pursuant to
Section 2.18(a), (ii) any License held by an Acquired Company, or (iii) any
intellectual property rights of such Acquired Company;
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(i) any capital expenditures or commitments for additions to
property, plant or equipment of an Acquired Company constituting capital assets
in an aggregate amount exceeding $10,000;
(j) any commencement, termination or change by an Acquired Company
of any line of business;
(k) any transaction by an Acquired Company with any officer,
director, stockholder or Affiliate of any Acquired Company, other than pursuant
to a Contract or arrangement in effect on December 31, 1997 and disclosed to
Purchaser pursuant to Section 2.18(a)(viii) or other than pursuant to any
Contract of employment and listed pursuant to Section 2.18(a)(i) of the
Disclosure Schedule;
(l) any entering into of an agreement to do or engage in any of the
foregoing, including without limitation with respect to any merger, sale of
substantially all assets or other business combination not otherwise restricted
by the foregoing paragraphs; or
(m) any change in the accounting methods or procedures of any
Acquired Company or any other transaction involving or development affecting an
Acquired Company outside the ordinary course of business, consistent with past
practice.
2.10 No Undisclosed Liabilities. Except as reflected or reserved against
in the December 31, 1997 balance sheet included in the Audited Financial
Statements or as disclosed in Section 2.10 of the Disclosure Schedule, or as
expressly contemplated hereby, there are no Liabilities of, relating to or
affecting any Acquired Company or any of their respective Assets, other than
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Liabilities incurred in the ordinary course or business consistent with past
practice since December 31, 1997 and in accordance with the provisions of this
Agreement which in the aggregate are not material to the business or condition
of any Acquired Company and are not for tort or for breach of contract.
2.11 Taxes.
(a) Except as disclosed in Section 2.11 of the Disclosure Schedule,
all Tax Returns required to have been filed by or with respect to any of the
Acquired Companies or any affiliated, combined, consolidated, unitary or similar
group of which an Acquired Company is or was a member (a "Relevant Group") with
any Taxing Authority have been duly and timely filed, and each such Tax Return
correctly and completely reflects the income, franchise or other Tax liability
and all other information required to be reported thereon. All Taxes owed by
each Acquired Company or any member of a Relevant Group (whether or not shown on
any Tax Return) have been paid. All monies required to be withheld by any
Acquired Company from employees, independent contractors, creditors or other
third parties for Taxes have been collected or withheld, and either duly and
timely paid to the appropriate Taxing Authority or (if not yet due for payment)
set aside in accounts for such purposes. No Acquired Company has any liability
for Taxes for any Person other than such Acquired Company (i) solely as a
present or former member of a Relevant Group, (ii) as a transferee or successor,
(iii) by Contract or (iv) otherwise.
(b) The provisions for current Taxes in the Financial Statements of
each Acquired Company are sufficient for the payments of all accrued and unpaid
Taxes not yet due and payable as of their dates, whether or not disputed. As of
the Closing Date, such provisions, as adjusted for the passage of time through
the Closing Date, will be sufficient for the then-accrued and unpaid Taxes not
yet due and payable of each Acquired Company.
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(c) No Acquired Company is a party to any agreement extending, or
having the effect of extending, the time within which to file any Tax Return or
the period of assessment or collection of any Taxes. No Acquired Company has
received any written ruling of a Taxing Authority related to Taxes or entered
into any written and legally binding agreement with a Taxing Authority relating
to Taxes.
(d) No Taxing Authority is now asserting or threatening to assert
against any Relevant Group or any Acquired Company any deficiency, claim or
liability for additional Taxes or any adjustment of Taxes, and there is no
reasonable basis for any such assertion of which the Seller is or reasonably
should be aware. No issues have been raised in any examination by any Taxing
Authority with respect to any Relevant Group or any Acquired Company which, by
application of similar principles, reasonably could be expected to result in a
proposed deficiency for any other period not so examined. The federal income Tax
Returns of or including each Acquired Company (including Tax Returns of Relevant
Groups) disclose (in accordance with Section 6662(d)(2)(B)(ii) of the Code) all
positions taken therein that could give rise to a substantial understatement of
federal income Tax within the meaning of section 6662(d) of the Code. No claim
has ever been made by any Taxing Authority in a jurisdiction in which an
Acquired Company does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. Schedule 2.11 of the Disclosure Schedule lists
all federal, state, and local income Tax Returns filed by or with respect to
each Acquired Company (including Tax Returns of Relevant Groups) for all taxable
periods ended on or after December 31, 1995; indicates those Tax Returns, if
any, that have been audited, and indicates those Tax Returns that currently are
the subject of audit. Seller has delivered to Purchaser complete and correct
copies of all federal, state, local and foreign income Tax Returns filed by or
with respect to, and all Tax examination reports and statements of deficiencies
assessed against or
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agreed to by, each Acquired Company since December 31, 1995. There are no Liens
for Taxes upon the Assets or Properties of any Acquired Company.
(e) Except as disclosed in Section 2.11 of the Disclosure Schedule,
no Acquired Company (i) is a party to or is bound by any obligations under any
tax sharing, tax indemnity or similar agreement or arrangement, (ii) has made or
is subject to any election under section 341(f) of the Code, (iii) has made or
is subject to any election or deemed election under sections 338 or 336(e) of
the Code or the regulations thereunder, (iv) has agreed to or is required to
make, or reasonably expects that it might have to make, any adjustment under
section 481 of the Code (or any comparable provision of state, local or foreign
law) by reason of a change in accounting method or otherwise, (v) has ever
entered into any agreement or arrangement that could result separately or in the
aggregate in the payment of any "excess parachute payments" within the meaning
of section 280G of the Code, (vi) is, or at any time has been, a "United States
real property holding corporation" within the meaning of section 897(c)(2) of
the Code, (vii) is a party to any "safe harbor lease" that is subject to the
provisions of section 168(f)(8) of the Internal Revenue Code as in effect prior
to the Tax Reform Act of 1986 or to any "long-term contract" within the meaning
of section 460 of the Code, (viii) is a party to any joint venture, partnership
or other arrangement that is treated as a partnership for federal income Tax
purposes, or (ix) has ever been a member of any affiliated, consolidated,
combined, unitary or similar group for any Tax purpose.
2.12 Legal Proceedings.
(a) Except as disclosed in Section 2.12 of the Disclosure Schedule
(with paragraph references corresponding to those set forth below):
(i) there are no actions or proceedings pending or, to the
knowledge of the Seller threatened against, relating to or affecting the
Acquired Companies, or any of their respective
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Assets which (A) could reasonably be expected to result in the issuance of an
Order restraining, enjoining or otherwise prohibiting or making illegal any of
the transactions contemplated by this Agreement or otherwise result in a
material diminution of the benefits contemplated by this Agreement to Purchaser,
or (B) if determined adversely to any Acquired Company, could reasonably be
expected to result in (x) any injunction or other equitable relief against such
Acquired Company, or (y) Losses by such Acquired Company, individually or in the
aggregate with Losses in respect of other such actions or proceedings, exceeding
$10,000;
(ii) there are no facts or circumstances known to the Seller
that could reasonably be expected to give rise to any action or proceeding that
would be required to be disclosed pursuant to clause (a)(i) above;
(iii) neither the Seller nor any Acquired Company has received
notice, or is aware of any Orders outstanding against an Acquired Company; and
(iv) neither the Seller nor any Acquired Company has received
notice or is aware of any defects, dangerous or substandard conditions in the
products or materials sold, distributed, or to be sold or distributed by any
Acquired Company that could cause bodily injury, sickness, disease, death, or
damage to property, or result in loss of use of property, or any claim, suit,
demand for arbitration or notice seeking damages for bodily injury, sickness,
disease, death, or damage to property, or loss of use or property.
(b) Prior to the execution of this Agreement, the Seller and/or each
Acquired Company has delivered all responses of counsel for the Acquired
Companies to auditors' requests for information regarding actions or proceedings
pending or threatened against, relating to or
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affecting the Acquired Companies during the period commencing January 1, 1995.
Section 2.12(b) of the Disclosure Schedule sets forth all actions or proceedings
relating to or affecting any Acquired Companies and any Subsidiary or any of
their respective Assets during the period commencing January 1, 1995 prior to
the date hereof.
2.13 Compliance with Laws and Orders. Except as disclosed in Section 2.13
of the Disclosure Schedule, none of the Seller or the Acquired Companies has
received at any time since January 1, 1995 any notice that any Acquired Company
is or has been at any time since such date, in violation of or in default under,
any Law or Order applicable to an Acquired Company or any of its respective
Assets. In furtherance and not in limitation of the foregoing, neither the
Seller nor any Acquired Company has violated any federal or state securities law
in connection with the offer, sale or purchase of any securities.
2.14 Benefit Plans; ERISA. All Benefit Plans relating to each of the
Acquired Companies and Subsidiaries are listed in Section 2.14 of the Disclosure
Schedule, and copies of all documentation relating to such Benefit Plans have
been delivered or made available to Purchaser (including copies of written
Benefit Plans, written descriptions of oral Benefit Plans, summary plan
descriptions, trust agreements, the three most recent annual returns, employee
communications, and IRS determination letters). Except as disclosed in Section
2.14 of the Disclosure Schedule:
(a) each Benefit Plan, and the administration thereof, complies, and
has at all times complied, in all material respects with the requirements of all
applicable Law, including ERISA and the Code, and each Benefit Plan intended to
qualify under section 401(a) of the Code has at all times since its adoption
been so qualified, and each trust which forms a part of any such plan has at all
times since its adoption been tax-exempt under section 501(a) of the Code;
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(b) no Benefit Plan has incurred any "accumulated funding
deficiency" within the meaning of section 302 of ERISA or section 412 of the
Code;
(c) no direct, contingent or secondary liability has been incurred
or is expected to be incurred by any Acquired Company under Title IV of ERISA to
any party with respect to any Benefit Plan, or with respect to any other Plan
presently or heretofore maintained or contributed to by any ERISA affiliate;
(d) the "amount of unfunded benefit liabilities" within the meaning
of section 4001(a)(18) of ERISA does not exceed zero with respect to any Benefit
Plan subject to Title IV of ERISA;
(e) no "reportable event" (within the meaning of section 4043 of
ERISA) has occurred with respect to any Benefit Plan or any Plan maintained by
an ERISA affiliate since the effective date of said section 4043;
(f) no Benefit Plan is a multiemployer plan within the meaning of
section 3(37) of ERISA;
(g) no Acquired Company nor any ERISA affiliate has incurred any
liability for any Tax imposed under section 4971 through 4980B of the Code or
civil liability under section 502(i) or (l) of ERISA;
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(h) no benefit under any Benefit Plan, including, without
limitation, any severance or parachute payment plan or agreement, will be
established or become accelerated, vested or payable by reason of any
transaction contemplated under this Agreement;
(i) no Tax has been incurred under section 511 of the Code with
respect to any Benefit Plan (or trust or other funding vehicle pursuant
thereto);
(j) no Benefit Plan provides health or death benefit coverage beyond
the termination of an employee's employment, except as required by Part 6 of
Subtitle B of Title I of ERISA or section 4980B of the Code or any state laws
requiring continuation of benefits coverage following termination of employment;
(k) no suit, actions or other litigation (excluding claims for
benefits incurred in the ordinary course of plan activities) have been brought
or, to the knowledge of the Seller, threatened against or with respect to any
Benefit Plan and there are no facts or circumstances known to the Seller that
could reasonably be expected to give rise to any such suit, action or other
litigation; and
(l) all contributions to Benefit Plans that were required to be made
under such Benefit Plans have been made, and all benefits accrued under any
unfunded Benefit Plan have been paid, accrued or otherwise adequately reserved
in accordance with GAAP, all of which accruals under unfunded Benefit Plans are
as disclosed in Section 2.14 of the Disclosure Schedule, and each of the
Acquired Companies has performed all material obligations required to be
performed under all Benefit Plans.
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2.15 Real Property.
(a) Section 2.15(a) of the Disclosure Schedule contains a true and
correct list of (i) each parcel of real property owned (the "Owned Real
Property") by each Acquired Company, (ii) each parcel of real property leased or
subleased or otherwise occupied by each Acquired Company as tenant or subtenant
(the "Leased Real Property"; together with the Owned Real Property, the "Real
Property") together with a true and correct list of all such leases, subleases
or other similar agreements and any amendments, modifications or extensions
thereto (the "Real Property Leases"), and (iii) all Liens relating to or
affecting any parcel of Real Property, in each case identifying the owner,
lessor and lessee thereof.
(b) Each Acquired Company has good and marketable title to its Owned
Real Property, free and clear of all Liens, other than as specifically listed in
Section 2.15(b) of the Disclosure Schedule.
(c) Subject to the terms of their respective leases, each Acquired
Company has a valid and subsisting leasehold estate in and the right to quiet
enjoyment to the Leased Real Property for the full term of the lease thereof.
Each Real Property Lease is a legal, valid and binding agreement, enforceable in
accordance with its terms, of each Acquired Company and of each other Person
that is a party thereto, and except as set forth in Section 2.15(c) of the
Disclosure Schedule, there is no, and Seller has no knowledge of, nor has any
Acquired Company received any notice of any, default (or any condition or event
which, after notice or lapse of time or both, would constitute a default)
thereunder. No Acquired Company has assigned, sublet, transferred, hypothecated
or otherwise disposed of its interest in any Real Property Lease. No penalties
are accrued and unpaid under any Real Property Lease.
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(d) Seller has delivered to Purchaser prior to the execution of this
Agreement true and complete copies of all (i) title policies, mortgages, deeds
of trust, deeds, leases, easements, restrictive covenants, certificates of
occupancy, and similar documents, and all amendments thereto concerning the
Owned Real Property, and (ii) Real Property Leases and, to the extent reasonably
available, all other documents referred to in clause (i) of this paragraph (f)
with respect to the Leased Real Property.
(e) Except as disclosed in Section 2.15(e) of the Disclosure
Schedule, the improvements on the Real Property are in good operating condition
and in a state of good maintenance and repair, ordinary wear and tear excepted,
are adequate and suitable for the purposes for which they are presently being
used and, to the knowledge of Seller, there are no condemnation or appropriation
proceedings pending or threatened against Real Property or the improvements
thereon.
(f) Seller has no knowledge of any claim, action or proceeding,
actual or threatened, against any Acquired Company or Subsidiary or the Real
Property by any Person which would materially adversely affect the future use,
occupancy or value of the Real Property or any part thereof.
2.16 Tangible Personal Property. Each Acquired Company is in possession of
and has good and marketable title to, or has valid leasehold interests in or
valid rights under contract to use, all tangible personal property used in the
conduct of its business, including all tangible personal property reflected on
the Financial Statements and tangible personal property acquired since January
31, 1998 other than property disposed of since such date in the ordinary course
of business consistent with past practice and the terms of this Agreement. All
such tangible personal property is free and clear of all Liens, other than Liens
disclosed in Section 2.16 of the Disclosure Schedule, and is
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adequate and suitable for the conduct by such Acquired Company of the business
presently conducted by it, and is in good working order and condition, ordinary
wear and tear excepted, and its use complies in all material respects with all
applicable Laws.
2.17 Intellectual Property Rights. The Acquired Companies have interests
in or use only the intellectual property described in Section 2.17(a) of the
Disclosure Schedule. Such Acquired Company either has all right, title and
interest in or a valid and binding license to use such intellectual property. No
other intellectual property is used in or necessary to the conduct of the
business of any Acquired Company in any material respect. All registrations,
pending applications, registered rights and executed agreements related to
intellectual property are listed in Section 2.17(a) of the Disclosure Schedule.
Except as disclosed in Section 2.17(b) of the Disclosure Schedule, (i) the
Acquired Companies have the right to use the intellectual property disclosed
therein, (ii) all registrations, on behalf of an Acquired Company, with and
applications to Governmental or Regulatory Authorities in respect of such
intellectual property are valid and in full force and effect and are not subject
to the payment of any Taxes or maintenance fees or the taking of any other
actions by an Acquired Company to maintain their validity or effectiveness,
(iii) all copyrightable materials used by an Acquired Company are works-for-hire
and are owned by such Acquired Company, (iv) there are no restrictions on the
direct or indirect transfer of any License, or any interest therein, held by an
Acquired Company in respect of such intellectual property, (v) the Seller has
delivered, or has caused each Acquired Company to deliver, to Purchaser prior to
the execution of this Agreement documentation with respect to any invention,
process, design, computer program or other know-how or trade secret included in
such intellectual property, which documentation is accurate and complete and
sufficient in detail and content to identify and explain such invention,
process, design, computer program or other know-how or trade secret, (vi) the
Seller and each Acquired Company have taken reasonable security measures to
protect the secrecy, confidentiality
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and value of their trade secrets, (vii) neither the Seller nor any Acquired
Company is or has received any notice that it is, in default (or with the giving
of notice or lapse of time or both, would be in default) under any License to
use such intellectual property and (viii) Seller has no knowledge that such
intellectual property is being infringed by any other Person. To the knowledge
of the Seller, no Acquired Company is infringing any intellectual property of
any Person, and no litigation is pending and no claim has been made or, to the
knowledge of the Seller, has been threatened to such effect.
2.18 Contracts.
(a) Section 2.18(a) of the Disclosure Schedule (with paragraph
references corresponding to those set forth below) contains a true and complete
list of each of the following Contracts or other arrangements (true and complete
copies, or, if none, reasonably complete and accurate written descriptions of
which, together with all amendments and supplements thereto and all waivers of
any terms thereof, have been delivered to Purchaser prior to the execution of
this Agreement), to which any Acquired Company is a party or by which any of
their respective Assets and Properties is bound.
(i)(A) all Contracts (excluding Benefit Plans) providing for a
commitment of employment or consultation services for a specified or unspecified
term, the name, position and rate of compensation of each Person party to such a
Contract and the expiration date of each such Contract; and (B) any written or
unwritten representations, commitments, promises, communications or courses of
conduct involving an obligation of any Acquired Company to make payments (with
or without notice, passage of time or both) to any Person in connection with, or
as a consequence of, the transactions contemplated hereby or to any employee,
other than with respect to salary or incentive compensation payments in the
ordinary course of business consistent with past practice;
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(ii) all Contracts with any Person containing any provision or
covenant prohibiting or limiting the ability of any Acquired Company to engage
in any business activity or compete with any Person or prohibiting or limiting
the ability of any Person to compete with any Acquired Company or prohibiting or
limiting disclosure of confidential or proprietary information;
(iii) all partnership, joint venture, shareholders' or other
similar Contracts with any Person;
(iv) all Contracts relating to Indebtedness of an Acquired
Company;
(v) all Contracts with independent contractors, distributors,
dealers, manufacturers' representatives, sales agencies or franchisees;
(vi) all guarantees of any Indebtedness or other obligations
of any Acquired Company or any third Person;
(vii) all Contracts relating to the future disposition or
acquisition of any Assets, other than dispositions or acquisitions in the
ordinary course of business consistent with past practice and the provisions of
this Agreement;
(viii) all Contracts between or among any Acquired Company and
the Seller, on the one hand, and any current or former officer, director,
stockholder or Affiliate of any Acquired Company or of any such officer,
director, stockholder or Affiliate, on the other hand, other than Contracts
disclosed pursuant to Section 2.18(a)(i);
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(ix) all collective bargaining or similar labor Contracts;
(x) all Contracts that (A) limit or contain restrictions on
the ability of any Acquired Company to declare or pay dividends on, to make any
other distribution in respect of, or to issue or purchase, redeem or otherwise
acquire its capital stock, to incur Indebtedness, to incur or suffer to exist
any Lien, to purchase or sell any Assets or to change the lines of business, (B)
require any Acquired Company to maintain specified financial ratios or levels of
net worth or other indicia of financial condition or (C) require any Acquired
Company to maintain insurance in certain amounts or with certain coverages; and
(xi) all other Contracts, including but not limited to,
Contracts with customers, that involve the payment or potential payment,
pursuant to the terms of any such Contract, by or to any Acquired Company of
more than $10,000 and all powers of attorney and comparable delegations of
authority.
(b) Each Contract required to be disclosed in Section 2.18(a) of the
Disclosure Schedule is in full force and effect and constitutes a legal, valid
and binding agreement, enforceable in accordance with its terms, of each party
thereto; and except as disclosed in Section 2.18(b) of the Disclosure Schedule,
no Acquired Company nor, to the knowledge of the Seller, any other party to such
Contract is, or has received notice that it is, in violation or breach of or
default under any such Contract (or with notice or lapse of time or both, would
be in violation or breach of or default under any such Contract).
(c) Except as disclosed in Section 2.18(c) of the Disclosure
Schedule, no Acquired Company is a party to or bound by any Contract that has
been or could reasonably be expected to be, individually or in the aggregate
with any other such Contracts, materially adverse to the business or condition
of the Acquired Company.
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(d) To the extent any of the guaranties for the benefit of any
Acquired Company or any of its Assets are not integrated with Contracts
disclosed in Section 2.18(a) to the Disclosure Schedule, each such guaranty is
in full force and effect and constitutes a legal, valid and binding agreement,
enforceable in accordance with its terms, of each party thereto; and neither the
guarantor thereunder nor, to the knowledge of the Seller or any other party to
such guaranty is, or has received notice that it is, in violation or breach of
or in default under any such guaranty (or with notice or lapse of time or both,
would be in violation or breach or default under any such guaranty).
2.19 Licenses. Section 2.19 of the Disclosure Schedule contains a true and
complete list of all Licenses used in and material to the business or operations
of the Acquired Companies, setting forth the owner, the function and the
expiration and renewal date of each. Prior to the execution of this Agreement,
the Seller or the Acquired Companies have delivered to Purchaser true and
complete copies of all such Licenses. Except as disclosed in Section 2.19 of the
Disclosure Schedule:
(a) each Acquired Company owns or validly holds all Licenses that
are material to its respective business or operations;
(b) Each license listed in Section 2.19 of the Disclosure Schedule
is valid, binding and in full force and effect;
(c) neither the Seller nor any Acquired Company is, or has received
any notice that it is, in default (or with the giving of notice of lapse of time
or both, would be in default) under any such License; and
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(d) the transactions contemplated in this Agreement will not violate
any such License or give the other party thereto rights to terminate the License
or change the terms thereof.
2.20 Insurance. Section 2.20 of the Disclosure Schedule contains a true
and complete list (including the names of the insurers, the expiration dates
thereof, the period of time covered thereby and a brief description of the
interests insured thereby) of all liability, property, workers' compensation,
directors' and officers' liability and other insurance policies currently in
effect that insure the business, operations or employees of any Acquired Company
or affect or relate to the ownership, use or operation of any of the Assets of
any Acquired Company and that (i) have been issued to any Acquired Company, or
(ii) have been issued to any Person (other than an Acquired Company) for the
benefit of an Acquired Company. Each policy listed in Section 2.20 of the
Disclosure Schedule is valid and binding and in full force and effect, all
premiums due thereunder have been paid when due and none of the Sellers or
Acquired Company or the Person to whom such policy has been issued has received
any notice of cancellation or termination in respect of any such policy or is in
default thereunder, and Seller knows of no reason or state of facts that could
lead to the cancellation of such policies. The insurance policies listed in
Section 2.20 of the Disclosure Schedule (i) in light of the business, operations
and Assets of each Acquired Company are in amounts and have coverages that are
reasonable and customary for Persons engaged in such businesses and operations
and having such Assets and (ii) are in amounts and have coverages as required by
any Contract to which an Acquired Company is a party. Section 2.20 of the
Disclosure Schedule contains a list of all claims made under any insurance
policies covering an Acquired Company or Subsidiary since January 1, 1995.
Neither the Seller nor an Acquired Company has received notice that any insurer
under any policy referred to in this Section is denying liability with respect
to a claim thereunder or defending under a reservation of rights clause. Since
January 1, 1995, each Acquired Company has, in light of its business, location,
operations and Assets
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maintained, at all times, without interruption appropriate insurance, in scope
and amount of coverages.
2.21 Affiliate Transactions.
(a) Except as disclosed in Section 2.21(a) of the Disclosure
Schedule (i) there are no Liabilities between any Acquired Company and any
current or former officer, director, stockholder, Affiliate of such Acquired
Company or any Affiliate of any such officer, director, stockholder or
Affiliate, and (ii) no Acquired Company provides or causes to be provided any
assets, services or facilities to any such current or former officer, director,
stockholder or Affiliate.
(b) Except as disclosed in Section 2.21(b) of the Disclosure
Schedule, each of the Liabilities and transactions listed in Section 2.21(a) of
the Disclosure Schedule was incurred or engaged in, as the case may be, on an
arm's-length basis on competitive terms.
2.22 Employees; Labor Relations. None of the Acquired Companies, is
engaged in any unfair labor practice. There is (i) no unfair labor practice
complaint pending or, to the knowledge of the Seller, threatened against any
Acquired Company before the National Labor Relations Board, and no grievance or
arbitration proceeding arising out of or under any collective bargaining
agreements is so pending or, to the knowledge of the Seller, threatened against
any Acquired Company, (ii) no strike, labor dispute, slowdown or stoppage is
pending or, to the knowledge of the Seller, threatened against any Acquired
Company, and (iii) no union representation question exists with respect to the
employees of any Acquired Company and, to the knowledge of the Seller, no union
organization activities are taking place.
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2.23 Environmental Matters.
(a) Each Acquired Company has obtained and holds all necessary
Environmental Permits.
(b) Except as disclosed in Section 2.23(b) of the Disclosure
Schedule:
(i) Each Acquired Company is, and at all times has been, in
full compliance with, and has not been and is not in violation of or liable
under, any Environmental Law. Neither Seller nor any Acquired Company has any
basis to expect, nor has any of them or, to the best knowledge of Seller, any
other Person for whose conduct it may be held to be responsible received, any
actual or threatened Order, notice, or other communication from (A) any
Governmental Body or private citizen acting in the public interest, or (B) the
current or prior owner or operator of any Facilities, of any actual or potential
violation or failure to comply with any Environmental Law, or of any actual or
threatened obligation to undertake or bear the cost of any Environmental,
Health, and Safety Liabilities with respect to any of the Facilities or any
other properties or assets (whether real, personal, or mixed) in which any
Acquired Company has had an interest, or with respect to any property or
Facility at or to which Hazardous Materials were generated, manufactured,
refined, transferred, imported, used, or processed by any Acquired Company and
any other Person for whose conduct they are or may be held responsible, or from
which Hazardous Materials have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.
(ii) There are no pending or, to the knowledge of Seller,
threatened claims, encumbrances, or other restrictions of any nature, resulting
from any Environmental, Health, and Safety Liabilities or arising under or
pursuant to any Environmental Law, with respect to or affecting any of the
Facilities or any other properties and assets (whether real, personal, or mixed)
in which any Acquired Company has or had an interest.
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(iii) Seller has no knowledge of or any basis to expect, nor
has any Acquired Company or, to the knowledge of Seller, any other Person for
whose conduct they are or may be held responsible received any citation,
directive, inquiry, notice, Order, summons, warning, or other communications
that relates to Hazardous Activity, Hazardous Materials, or any alleged, actual,
or potential violation or failure to comply with any Environmental Law, or of
any Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other Assets in which any Acquired Company has or had an
interest, or with respect to any Facility to which Hazardous Materials
generated, manufactured, refined, transferred, imported, used, or processed by
any Acquired Company, or any other Person for whose conduct it or they are or
may be held responsible, have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.
(iv) No Acquired Company or any other Person for whose conduct
it may be held responsible, has any Environmental, Health, and Safety
Liabilities with respect to the Facilities or with respect to any other
properties and assets (whether real, personal, or mixed) in which any Acquired
Company (or any predecessor thereof), has or had an interest, or, to the best
knowledge of Seller, at any property geologically or hydrologically adjoining
the Facilities or any such other property or assets.
(c) There are no Hazardous Materials present on or in the
Environment at the Facilities or, to the best knowledge of Seller, at any
geologically or hydrologically adjoining property, including any Hazardous
Materials contained in barrels, above or underground storage tanks, landfills,
land deposits, dumps, equipment (whether moveable or fixed) or other containers,
either temporary or permanent, and deposited or located in land, water, sumps,
or any other part of the Facilities or such adjoining property, or incorporated
into any structure therein or thereon. No
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Acquired Company or any other Person for whose conduct it may be held
responsible, has permitted or conducted, or is aware of, any Hazardous Activity
conducted with respect to the Facilities or any other properties or assets
(whether real, personal, or mixed) in which any Acquired Company has or had an
interest except in full compliance with all applicable Environmental Laws.
(d) There has been no Release or, to the knowledge of Seller, threat
of Release of any Hazardous Materials at or from the Facilities or at any other
locations where any Hazardous Materials were generated, manufactured, refined,
transferred, produced, imported, used, or processed from or by the Facilities,
or from or by any other properties and assets (whether real, personal, or mixed)
in which any Acquired Company has or had an interest, or, to the best knowledge
of Seller, any geologically or hydrologically adjoining property.
(e) Seller has delivered to Purchaser true and complete copies and
results of any reports, studies, analyses, tests, or monitoring possessed or
initiated by Seller or any Acquired Company pertaining to Hazardous Materials or
Hazardous Activities in, on, or under the Facilities, or concerning compliance
by any Acquired Company or any other Person for whose conduct they are or may be
held responsible, with Environmental Laws.
(f) There are no Liens arising under or pursuant to any
Environmental Law on any Owned Real Property or Leased Real Property and there
are no facts, circumstances, or conditions under any Environmental Law with
respect to the ownership, occupancy, development, use, or transferability of any
Real Property.
(g) There are no (i) underground storage tanks, active or abandoned,
(ii) polychlorinated biphenyl containing equipment, or (iii) asbestos containing
material at any Real Property.
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(h) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted by, on behalf of, or which
are in the possession of the Seller or any Acquired Company with respect to any
Asset of, or property that is adjacent to, an Asset of an Acquired Company which
have not been delivered to Purchaser prior to execution of this Agreement.
2.24 Substantial Customers and Suppliers. Section 2.24(a) of the
Disclosure Schedule lists the ten (10) largest customers of each Acquired
Company on the basis of revenues for goods sold or services provided for the
most recent fiscal year. Section 2.24(b) of the Disclosure Schedule lists the
ten (10) largest suppliers of each Acquired Company on the basis of cost of
goods or services purchased for the most recent fiscal year. Except as disclosed
in Section 2.24(c) of the Disclosure Schedule, to the knowledge of the Seller,
no such customer or supplier is insolvent or threatened with bankruptcy or
insolvency.
2.25 Accounts Receivable. Except as set forth in Section 2.25(a) of the
Disclosure Schedule, the accounts and notes receivable of each Acquired Company
reflected on the balance sheets included in the Audited Financial Statements for
the period ended December 31, 1997, and all accounts and notes receivable
arising subsequent to such date, (i) arose from bona fide sales transactions in
the ordinary course of business consistent with past practice and are payable on
ordinary trade terms, (ii) are legal, valid and binding obligations of the
respective debtors enforceable in accordance with their respective terms, (iii)
are not subject to any valid set-off or counterclaim, (iv) do not represent
obligations for goods sold on consignment, on approval or on a sale-or-return
basis or subject to any other repurchase or return arrangements, and (v) are not
subject of any Actions or Proceedings brought by or on behalf of any Acquired
Company. Section 2.25(b) of the Disclosure Schedule sets forth (x) a description
of any security arrangements and collateral
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securing the repayment or other satisfaction of receivables of each Acquired
Company and (y) all jurisdictions in which the records relating to accounts and
notes receivable are located.
2.26 Other Negotiations. Neither the Seller, nor any Acquired Company, nor
any of their respective Affiliates (nor any investment banker, financial
advisor, attorney, accountant or other Person retained by or acting for or on
behalf of Seller or any Acquired Company or any such Affiliate) has entered into
any agreement or had any discussions with any third party regarding any
transaction involving any Acquired Company which could result in such Acquired
Company, Purchaser or its stockholders, or any officer, director, employee,
agent or Affiliate of any of them, being subject to any claim for liability to
said third party as a result of entering into this Agreement or consummating the
transactions contemplated hereby or thereby.
2.27. Holding Company Act and Investment Company Act Status. No Acquired
Company is a "holding company" or a "public utility company" as such terms are
defined in the Public Utility Company Act of 1935, as amended. No Acquired
Company is an "investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
2.28 Bank and Brokerage Accounts. Section 2.28(a) of the Disclosure
Schedule sets forth (i) a list of the names and locations of all banks,
securities brokers and other financial institutions at which any Acquired
Company has an account or safe deposit box or maintains a banking, custodial,
trading or other similar relationship; and (ii) a true and complete list and
description of each such account, box and relationship, indicating in each case
the account number and the names of all persons having signatory power and
respect thereto.
2.29 Exemption from Registration. The offer and sale of the Purchased
Stock made pursuant to this Agreement are exempt from the registration
requirements of the Securities Act.
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Neither the Seller nor any Acquired Company nor any Person authorized to act on
behalf of any of the foregoing has, in connection with the offering of the
Purchased Stock, engaged in (i) any form of general solicitation or general
advertising (as those terms are used within the meaning of Rule 501(c) under the
Securities Act), (ii) any action involving a public offering within the meaning
of section 4(2) of the Securities Act, or (iii) any action that would require
the registration under the Securities Act of the offering and sale of the
Purchased Stock pursuant to this Agreement or that would violate applicable
state securities or "blue sky" laws.
2.30 Disclosure. The representations and warranties contained in this
Agreement, and the statements contained in the Disclosure Schedule or in the
certificates, lists and other writings furnished to Purchaser pursuant to any
provision of this Agreement (including the Financial Statements), when taken
together, do not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements herein and
therein, in the light of the circumstances under which they were made, not
misleading.
2.31 Survival of Representations, Warranties, Covenants and Agreements.
Even though the Purchaser may investigate the affairs of each Acquired Company
and confirm the accuracy of the representations and warranties of Seller, the
Purchaser, nonetheless, shall have the right to rely fully upon the
representations, warranties, covenants and agreements of the Seller contained in
this Agreement. All such representations, warranties, covenants and agreements
will survive the Closing.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
3.01 Organization and Qualification. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas. Purchaser is duly qualified, licensed or admitted to do business and is
in good standing in each jurisdiction in which the ownership, use or leasing of
its Assets, or the conduct or nature of its business, makes such qualification,
licensing or admission necessary, except for such failures to be so qualified,
licensed or admitted and in good standing which, individually or in the
aggregate, could not be reasonably expected to have a material adverse effect on
the validity or enforceability of this Agreement or on the ability of Purchaser
to perform its obligations hereunder or thereunder.
3.02 Authority Relative to this Agreement. Purchaser has full corporate
power and authority to enter into this Agreement and to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement by Purchaser and the consummation by
Purchaser of the transactions contemplated hereby and have been duly and validly
approved by its board of directors and no other corporate proceedings on the
part of Purchaser or its stockholders are necessary to authorize the execution,
delivery and performance of this Agreement by Purchaser and the consummation by
Purchaser of the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Purchaser and constitutes a legal, valid
and binding obligation of Purchaser enforceable against Purchaser in accordance
with its terms.
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3.03 No Conflicts. The execution and delivery by Purchaser of this
Agreement do not, and the performance by Purchaser of its obligations under this
Agreement and the consummation of the transactions contemplated hereby, do not
and will not:
(a) conflict or result in a violation or breach of any of the terms,
conditions or provisions of the certificate of incorporation or by-laws of
Purchaser;
(b) subject to obtaining the consents, approvals and actions, making
the filings and giving the notices referred to in Section 3.04 below or
disclosed in Section 3.04 of the Disclosure Schedule, if any, conflict with or
result in a violation or breach of any term or provision of any Law or Order
applicable to Purchaser or its Assets and Properties; or
(c) except as disclosed in Section 3.03 of the Disclosure Schedule,
(i) conflict with or result in a violation or breach of, (ii) constitute (with
or without notice or lapse of time or both) a default under, or (iii) require
Purchaser to obtain any consent, approval or action of, make any filing with or
give any notice to any Person as a result or under the terms of any Contract or
License to which Purchaser is a party, or by which it is bound.
3.04 Governmental Approvals and Filings. Except as disclosed in Section
3.04 of the Disclosure Schedule, no consent, approval or action of, filing with
or notice to any Governmental or Regulatory Authority on the part of Purchaser
is required in connection with the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby, other
than filings with the Federal Trade Commission and the United States Department
of Justice under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
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3.05 Legal Proceedings. There are no Actions or Proceedings pending or, to
the knowledge of Purchaser, threatened against, relating to or affecting
Purchaser or any of its Assets which (i) could reasonably be expected to result
in the issuance of an Order restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated by this
Agreement, or (ii) could reasonably be expected, individually or in the
aggregate with other such Actions or Proceedings, to have a material adverse
effect on the business or condition of Purchaser.
3.06 Brokers. No agent, broker, finder, investment banker, financial
advisor or other similar Person will be entitled to any fee, commission or other
compensation in connection with any of the transactions contemplated by this
Agreement on the basis of any act or statement made by Purchaser.
3.07 Purchase for Investment. The Purchased Stock will be acquired by
Purchaser for its own account for the purpose of investment and not with a view
to the resale or distribution of all or any part of the Purchased Stock in
violation of the Securities Act.
3.08 Survival of Representations, Warranties, Covenants and Agreements.
Even though the Seller may investigate the affairs of the Purchaser and confirm
the accuracy of the representations and warranties of the Purchaser contained in
this Agreement, the Seller, nonetheless, shall have the right to rely fully upon
the representations, warranties, covenants and agreements of the Purchaser
contained in this Agreement. All such representations, warranties, covenants and
agreements will survive the Closing.
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ARTICLE IV
COVENANTS BY SELLER
4.01 Noncompetition; Non Solicitation.
(a) For a period of five (5) years from the Closing Date, the
Seller, alone or in conjunction with any other Person, or directly or indirectly
through his present or future Affiliates, will not directly or indirectly, own,
manage, operate, join, have a financial interest in, control or participate in
the ownership, management, operation or control of, or use or permit his name to
be used in connection with, or be otherwise connected in any manner with (i) any
business or enterprise conducting business in the Territory engaged in the
design, development, manufacture, distribution or sale of any products, or the
provision of any services, which any Acquired Company was designing, developing,
manufacturing, distributing, selling or providing at any time up to and
including the Closing Date or (ii) any business conducting business in the
Territory which is similar to the business of disposing or selling coal
combustion by-products or competitive with the business carried on or planned by
any Acquired Company at any time up to and including the Closing Date, provided
that the foregoing restriction shall not be construed to prohibit the ownership,
in the aggregate, of not more than five percent (5%) of any class of securities
of any corporation which is engaged in any of the businesses or enterprises
described in clauses (i) and (ii) above, having a class of securities registered
pursuant to the Securities Exchange Act of 1934, as amended, which securities
are publicly owned and regularly traded on any national exchange or in the
over-the-counter market.
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(b) For a period of five (5) years from the Closing Date, the Seller
shall not, directly or indirectly, by himself or through an Affiliate, (i)
influence any individual who was an employee or consultant of any Acquired
Company at any time during the time the Seller was an indirect or direct owner
of securities of such Acquired Company, to terminate his or her employment or
consulting relationship with such Acquired Company, (ii) interfere in any other
way with the employment, or other relationship, of any employee or consultant of
an Acquired Company or (iii) cause or attempt to cause or participate in any way
in any discussion or negotiation concerning (x) any client, customer or supplier
of an Acquired Company or (y) any prospective client, customer or supplier of an
Acquired Company from engaging in business with such Acquired Company.
(c) Seller agrees that Purchaser's remedies at law for any breach or
threat of breach by him of any of the provisions of this Section 4.01 will be
inadequate, and that, in addition to any other remedy to which Purchaser may be
entitled at law or in equity, Purchaser shall be entitled to a temporary or
permanent injunction or injunctions or temporary restraining order or orders to
prevent breaches of the provisions of this Section 4.01 and to enforce
specifically the terms and provisions hereof, in each case without the need to
post any security or bond. Nothing herein contained shall be construed as
prohibiting Purchaser from pursuing, in addition, any other remedies available
to an Acquired Company for such breach or threatened breach. A waiver by the
Purchaser of any breach of any provision hereof shall not operate or be
construed as a waiver of a breach of any other provisions of this Agreement or
of any subsequent breach thereof.
(d) The parties hereto consider the restrictions contained in this
Section 4.01 hereof to be reasonable for the purpose of preserving the goodwill,
proprietary rights and going concern value of the Acquired Companies, but if a
final judicial determination is made by a court having jurisdiction that the
time or territory or any other restriction contained in this Section 4.01 is an
unenforceable restriction on the Seller's activities, the provisions of this
Section 4.01 shall not be
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rendered void but shall be deemed amended to apply as to such maximum time and
territory and to such other extent as such court may judicially determine or
indicate to be reasonable. Alternatively, if the court referred to above finds
that any restriction contained in this Section 4.01 or any remedy provided
herein is unenforceable, and such restriction or remedy cannot be amended so as
to make it enforceable, such finding shall not affect the enforceability of any
of the other restrictions contained therein or the availability of any other
remedy. The provisions of this Section 4.01 shall in no respect limit or
otherwise affect the Seller's obligations under other agreements with any
Acquired Company.
4.02 Regulatory and Other Approvals. The Seller shall, and shall cause
each Acquired Company to, (a) take all necessary or desirable steps and proceed
diligently and in good faith and use its best efforts, as promptly as
practicable, to obtain all consents, approvals or actions of, to make all
filings with and to give all notices to, Governmental or Regulatory Authorities
or any other Person required of each Acquired Company to consummate the
transactions contemplated hereby and those described in Sections 2.05 and 2.06
of the Disclosure Schedule, (b) provide such other information and
communications to such Governmental or Regulatory Authorities or other Persons
as Purchaser or such Governmental or Regulatory Authorities or other Persons may
reasonably request and (c) cooperate with Purchaser as promptly as practicable
in obtaining all consents, approvals or actions of, making all filings with and
giving all notices to, Governmental or Regulatory Authorities or other Persons
required of Purchaser to consummate the transactions contemplated hereby. Seller
will provide prompt notification to Purchaser when any such consent, approval,
action, filing or notice referred to in clause (a) above is obtained, taken,
made or given, as applicable, and will advise Purchaser of any communications
(and, unless precluded by Law, provide copies of any such communications that
are in writing) with any Governmental or
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Regulatory Authority or other Person regarding any of the transactions
contemplated by this Agreement.
4.03 Investigation by Purchaser. From the date hereof until the Closing
and thereafter for so long as Purchaser owns any equity interest in any Acquired
Company or Subsidiary, the Seller shall: (a) provide Purchaser and its
representatives with full access, upon reasonable prior notice and during normal
business hours, to all officers, employees, agents and accountants of each
Acquired Company and its Assets and Books and Records and to officers,
employees, agents and accountants, and (b) furnish Purchaser and such
representatives with all such information and data (including copies of
Contracts, Benefit Plans and other Books and Records) concerning the business
and operations of each Acquired Company, as Purchaser or any of such other
representatives reasonably may request in connection with such investigation.
ARTICLE V
CLOSING CONDITIONS
5.01 Condition to the Obligations of the Purchaser. The obligations of
Purchaser hereunder to purchase the Purchased Stock are subject to the
fulfillment, at or prior to the Closing, of the following conditions precedent
(any or all of which may be waived in whole or in part by Purchaser in its sole
discretion):
(a) Representations and Warranties. Each of the representations and
warranties made by the Seller in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and on and as of the Closing
Date as though each such representation and warranty was made on and as of the
Closing Date.
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(b) Performance. The Seller shall have performed and complied with
each agreement, covenant and obligation required by this Agreement to be so
performed or complied with by Seller at or before the Closing.
(c) Orders and Laws. There shall not be in effect on the Closing
Date any Order or Law restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement or which could reasonably be expected to otherwise result in a
material diminution of the benefits of the transactions contemplated by this
Agreement to Purchaser, and there shall not be pending or threatened on the
Closing Date any Action or Proceeding (i) which could reasonably be expected to
result in the issuance of any such Order or the enactment, promulgation or
deemed applicability to Purchaser, any of the Acquired Companies, the Seller or
the transactions contemplated by this Agreement of any such Law; or (ii) wherein
an unfavorable judgment, decree or Order would prevent the carrying out of this
Agreement or any of the transactions or events contemplated hereby or declare
unlawful any of the transactions or events contemplated by this Agreement or
present a risk of damages to the Purchaser.
(d) Regulatory Consents and Approvals. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit Purchaser and Seller to perform their obligations under this
Agreement and to consummate the transactions contemplated hereby (i) shall have
been duly obtained, made or given, (ii) shall be in form and substance
reasonably satisfactory to Purchaser, (iii) shall not impose any limitations or
restrictions on Purchaser, (iv) shall not be subject to the satisfaction of any
condition that has not been satisfied or waived, and (v) shall be in full force
and effect, and all terminations or expirations of waiting periods imposed by
any Governmental or Regulatory Authority necessary for the consummation for the
transactions contemplated by this Agreement shall have occurred.
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(e) Third Party Consents. The consents (or waivers) identified in
Sections 2.05 of the Disclosure Schedule, and all other consents (or waivers) to
the performance by the Purchaser of its obligations under this Agreement, or to
the consummation of the transactions contemplated hereby as are required under
any Contract or License to which the Purchaser is a party or by which any of its
Assets are bound and where the failure to obtain any such consent (or in lieu
thereof waiver) could reasonably be expected, individually or in the aggregate
with other such failures, to materially adversely affect the Purchaser or the
business or condition of an Acquired Company or otherwise result in a material
diminution of the benefits of the transactions contemplated by this Agreement to
the Purchaser in its sole discretion, (i) shall have been obtained, (ii) shall
be in form and substance satisfactory to the Purchaser in its sole discretion,
(iii) shall not be subject to the satisfaction of any condition that has not
been satisfied or waived and (iv) shall be in full force and effect.
(f) Seller's Certificates. Seller shall have delivered to Purchaser
(i) certificates, dated the Closing Date and executed by an executive officer of
each Acquired Company, substantially in the form and to the effect of Exhibit B
hereto and (ii) certificates, dated the Closing Date and executed by the chief
financial officer of each Acquired Company, substantially in the form of Exhibit
C hereto.
(g) Resignations of Officers and Directors. Purchaser shall have
received the resignations of all current officers and directors of each Acquired
Company, effective as of the Closing Date;
(h) Opinion of Counsel. Purchaser shall have received the opinion of
Braun Kendrick Finkbeiner, P.L.C., counsel to Seller, in connection with this
Agreement, dated the Closing Date,
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substantially in the form and to the effect of Exhibit D hereto, and to such
further effect as Purchaser may reasonably request;
(i) Disclosure Schedule. Purchaser shall have received a copy of the
Disclosure Schedule, updated and current through the Closing Date;
(j) Good Standing Certificates. The Seller shall have delivered to
Purchaser (i) copies of the certificate or articles of incorporation (or other
comparable corporate charter documents), including all amendments thereto of
each Acquired Company and Subsidiary certified by the applicable Secretary of
State or other appropriate governmental official, (ii) certificates from the
applicable Secretary of State or other appropriate governmental official to the
effect that each Acquired Company and Subsidiary is in good standing in such
jurisdiction, listing all charter documents of each Acquired Company and
Subsidiary on file and attesting to its payment of all franchise or similar
Taxes, and (iii) certificates from the Secretary of State or other appropriate
official in each jurisdiction in which an Acquired Company or Subsidiary are
qualified or admitted to do business to the effect that such Acquired Company
and Subsidiary is duly qualified or admitted in good standing in such
jurisdiction.
(k) Receipt of Purchased Stock. Certificates representing the
Purchased Stock shall have been transferred to Purchaser in accordance with the
terms of this Agreement.
(l) Payment of Indebtedness. Delivery of evidence satisfactory to
Purchaser that, except as disclosed in Section 5.01(l) of the Disclosure
Schedule, (i) all indebtedness owed by each Acquired Company or Subsidiary, on
the one hand, to the Seller or to any Affiliate of the Seller or any of the
Acquired Companies or Subsidiaries, on the other hand, has been cancelled or
otherwise
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paid in full, and is of no further force and effect, (ii) all other indebtedness
owing by an Acquired Company or Subsidiary has been retired, released or repaid,
and (iii) each Acquired Company and Subsidiary has been unconditionally released
from all obligations any of them may have in respect of (i) and (ii) above.
(m) No Adverse Change. There shall have occurred no material adverse
change in the business or condition of any Acquired Company since December 31,
1997.
(n) Employment Agreement. Purchaser shall have received an
Employment Agreement satisfactory to Purchaser, between Purchaser and Michael
Adams that has been executed by Mr. Adams.
(o) Rolling Stock. Seller shall have caused Wirt Transport Co. to
execute and deliver to Purchaser a Bill of Sale in the form of Exhibit E hereto,
transferring the Rolling Stock identified on such Exhibit to Purchaser or its
designee.
5.02 Conditions to the Obligations of the Seller. The obligations of the
Seller hereunder to sell the Purchased Stock to the Purchaser are subject to the
fulfillment, at or prior to the Closing, of the following conditions precedent
(any or all of which may be waived in whole or in part by the Seller in his sole
discretion):
(a) Representations and Warranties. Each of the representations and
warranties made by Purchaser in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and on and as of the Closing
Date as though each such representation and warranty was made on and as of the
Closing Date.
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(b) Performance. Purchaser shall have performed and complied with
each agreement, covenant and obligation required by this Agreement to be so
performed or complied with by Purchaser at or before the Closing.
(c) Orders and Laws. There shall not be in effect on the Closing
Date any Orders or Laws restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated by this
Agreement, and there shall not be pending or threatened on the Closing Date any
Action or Proceeding or any other action (i) which could reasonably be expected
to result in the issuance of any such Order or the enactment, promulgation or
deemed applicability to Purchaser, an Acquired Company, the Seller or the
transactions contemplated by this Agreement of any such Law; or (ii) wherein an
unfavorable judgment, decree or Order would prevent the carrying out of this
Agreement or any of the transactions or events contemplated hereby or declare
unlawful any of the transactions or events contemplated by this Agreement or
present a risk of damages to the Seller.
(d) Regulatory Consents and Approvals. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit Purchaser and Seller to perform their obligations under this
Agreement and to consummate the transactions contemplated hereby (i) shall have
been duly obtained, made or given, (ii) shall be in form and substance
reasonably satisfactory to Seller, (iii) shall not be subject to the
satisfaction or any condition that has not been satisfied or waived, and (iv)
shall be in full force and effect, and all terminations or expirations of
waiting periods imposed by any Governmental or Regulatory Authority necessary
for the consummation of the transactions contemplated by this Agreement shall
have occurred.
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(e) Officers' Certificates. Purchaser shall have delivered to Seller
a certificate, dated the Closing Date and executed by the chairman, president or
a vice president of Purchaser, substantially in the form of Exhibit F hereto.
(f) Opinion of Counsel. The Seller shall have received the opinion
of Parsons Behle & Latimer, counsel of the Purchaser in connection with this
Agreement, dated the Closing Date, substantially in the form and to the effect
of Exhibit G hereto.
(g) Good Standing Certificates. Purchaser shall have delivered to
Seller (a) copies of the certificate of incorporation, including all amendments
thereto of Purchaser certified by the Secretary of State of the State of Texas,
and (b) certificates from the Secretary of State of the State of Texas to the
effect that Purchaser is in good standing in such jurisdiction.
ARTICLE VI
TERMINATION
6.01 Termination Events. This Agreement may, by notice given prior to or
at the Closing, be terminated:
(a) by either Purchaser or by Seller if a material breach of any
provision of this Agreement has been committed by the other party and such
breach has not been waived;
(b) (i) by Purchaser if any of the conditions in Section 5.01 has
not been satisfied as of the Closing Date or if satisfaction of such a condition
is or becomes impossible (other than through the failure of Purchaser to comply
with its obligations under this Agreement) and Purchaser has not waived such
condition on or before the Closing Date, or (ii) by Seller, if any of
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the conditions in Section 5.02 has not been satisfied as of the Closing Date or
if satisfaction of such a condition is or becomes impossible (other than through
the failure of a Seller to comply with his or her obligations under this
Agreement) and Seller has not waived such condition on or before the Closing
Date;
(c) by mutual consent of Purchaser and Seller; or
(d) by either Purchaser or by Seller if the Closing has not occurred
(other than through the failure of any party seeking to terminate this Agreement
to comply fully with its obligations under this Agreement) on or before April
30, 1998, or such later date as the parties may agree upon.
(e) by Purchaser if it shall have discovered, as a result of its
investigation and review pursuant to Section 4.03 hereof, any condition
(financial or otherwise) relating in any way to any Acquired Company, its
Assets, business or prospects, that convinces Purchaser, in its sole discretion,
that it is not advisable to complete the Closing. If Purchaser terminates the
Agreement pursuant to this subparagraph (e), then Seller, in addition to the
non-refundable Deposit, shall be entitled to receive the Escrow Deposit,
together with the earnings thereon.
6.02 Termination by Purchaser. Purchaser's right of termination under
Section 6.01 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated by Purchaser pursuant to Section
6.01, all further obligations of the parties under this Agreement will
terminate, except that the obligations in Sections 9.03, 9.04, 9.13 and Article
X will survive; provided, however, that if this Agreement is terminated by
Purchaser because of a breach of the
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Agreement by Seller or because one or more of the conditions to Purchaser's
obligations under this Agreement is not satisfied as a result of Seller's
failure to comply with its obligations under this Agreement, Purchaser's right
to pursue all legal remedies (including specific performance) will survive such
termination unimpaired.
6.03 Termination by Seller. If this Agreement is terminated by Seller
pursuant to Section 6.01, then Seller's sole remedy will be as provided in
Section 1.03.
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ARTICLE VII
INDEMNIFICATION; TAX MATTERS
7.01 Indemnification.
(a) Seller will indemnify each Acquired Company, the Purchaser and
their respective stockholders (other than the Seller) and the officers,
directors, employees, agents and Affiliates of each of them (other than the
Seller) in respect of, and hold each of them harmless from and against, any and
all Losses suffered, incurred or sustained by any of them or to which any of
them becomes subject, resulting from, arising out of relating to any
misrepresentation or breach of warranty or nonfulfillment of or failure to
perform any covenant or agreement on the part of the Seller contained in this
Agreement (including, without limitation, any certificate delivered in
connection herewith or therewith).
(b) Purchaser will indemnify the Seller in respect of, and hold him
harmless from and against, any and all Losses suffered, incurred or sustained by
him or to which he becomes subject, resulting from, arising out of or relating
to any misrepresentation or breach of warranty or nonfulfillment of or failure
to perform any covenant or agreement on the part of Purchaser contained in this
Agreement (including, without limitation, any certificate delivered in
connection herewith or therewith).
7.02 Method of Asserting Claims. All claims for indemnification by any
Indemnified Party under Section 7.01 will be asserted and resolved as follows:
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(a) In order for an Indemnified Party to be entitled to any
indemnification provided for under Section 7.01 in respect of, arising out of or
involving a claim or demand made by any Person not a party to this Agreement
against the Indemnified Party, including a Claim relating to the Environment (a
"Third Party Claim"), the Indemnified Party must deliver a Claim Notice to the
Indemnifying Party promptly after receipt by such Indemnified Party of written
notice of the Third Party Claim; provided, that failure to give such Claim
Notice shall not affect the indemnification provided hereunder except to the
extent the Indemnifying Party shall have been actually prejudiced as a result of
such failure.
(b) If a Third Party Claim is made against an Indemnified Party, the
Indemnifying Party shall be entitled to participate in the defense thereof and,
if it so chooses, to assume the defense thereof with counsel selected by the
Indemnifying Party, which counsel must be reasonably satisfactory to the
Indemnified Party. Should the Indemnifying Party so elect to assume the defense
of a Third Party Claim, the Indemnifying Party shall not be liable to the
Indemnified Party for legal expenses subsequently incurred by the Indemnified
Party in connection with the defense thereof, but shall continue to pay for any
expenses of investigation or any Loss suffered. If the Indemnifying Party
assumes such defense, the Indemnified Party shall have the right to participate
in the defense thereof and to employ counsel, at its own expense, separate from
the counsel employed by the Indemnifying Party. If (i) the Indemnifying Party
shall not assume the defense of a Third Party claim with counsel satisfactory to
the Indemnified Party within five Business Days of any Claim Notice, or (ii)
legal counsel for the Indemnified Party notifies the Indemnifying Party that
there are or may be legal defenses available to the Indemnifying Party or to
other Indemnified Parties which are different from or additional to those
available to the Indemnified Party, which, if the Indemnified Party and the
Indemnifying Party were to be represented by the same counsel, would constitute
a conflict of interest for such counsel or prejudice prosecution of the defenses
available to such Indemnified Party, or (iii) if the Indemnifying Party shall
assume the defense of a Third Party Claim
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and fail to diligently prosecute such defense, then in each such case the
Indemnified Party, by notice to the Indemnifying Party, may employ its own
counsel and control the defense of the Third Party Claim and the Indemnifying
Party shall be liable for the reasonable fees, charges and disbursements of
counsel employed by the Indemnified Party, and the Indemnified Party shall be
promptly reimbursed for any such fees, charges and disbursements, as and when
incurred. Whether the Indemnifying Party or the Indemnified Party control the
defense of any Third Party Claim, the parties hereto shall cooperate in the
defense thereof. Such cooperation shall include the retention and provision to
the counsel of the controlling party of records and information which are
reasonably relevant to such Third Party Claim, and making employees available on
a mutually convenient basis to provide additional information and explanation or
any material provided hereunder. The Indemnifying Party shall have the right to
settle, compromise or discharge a Third Party Claim (other than any such Third
Party Claim in which criminal conduct is alleged) without the Indemnified
Party's consent if such settlement, compromise or discharge (i) constitutes a
complete and unconditional discharge and release of the Indemnified Party, and
(ii) provides for no relief other than the payment of monetary damage and such
monetary damages are paid in full by the Indemnifying Party.
(c) In the event any Indemnified Party should have a claim under
Section 7.01 against any Indemnifying Party that does not involve a Third Party
Claim, the Indemnified Party shall promptly deliver an Indemnity Notice to the
Indemnifying Party. The failure by any Indemnified Party to give the Indemnity
Notice shall not impair such party's rights hereunder except to the extent that
an Indemnifying Party demonstrates that it has been irreparably prejudiced
thereby. If the Indemnifying Party notifies the Indemnified Party that it does
not dispute the claim described in such Indemnity Notice or fails to notify the
Indemnified Party within the Dispute Period whether the Indemnifying Party
disputes the claim described in such Indemnity Notice, the Loss in the amount
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specified in the Indemnity Notice will be conclusively deemed a liability of the
Indemnifying Party under Section 7.01 and the Indemnifying Party shall pay the
amount of such Loss to the Indemnified Party on demand. If the Indemnifying
Party has timely disputed its liability with respect to such claim, the
Indemnifying Party and the Indemnified Party will proceed in good faith to
negotiate a resolution of such dispute, and if not resolved through negotiations
within thirty (30) days, such dispute shall be resolved as provided in Article X
hereof.
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7.03 Limitations on Indemnities.
(a) Except with respect to (i) representations of title, (ii)
intentional breaches of a representation, warranty or covenant, and (iii) the
obligations of Seller regarding tax matters in Sections 7.04(b) and 7.05, all
indemnities contained in this Article VII are subject to limitation in
accordance with this Section 7.03.
(b) No party shall make any claim for indemnification under Section
7.01(a) until it shall have accumulated such claims equal in the aggregate to
$75,000 (the "Basket") and then only for the amount by which such claims exceed
the Basket. Neither party shall make any claim for an amount that is less than
$5,000 for a single claim, nor shall any claim for an amount that is less than
$5,000 count towards the Basket.
(c) The obligations to indemnify and hold harmless a party hereto
shall terminate on the third anniversary of the Closing Date, except that claims
with respect to Sections 2.23, 7.04(b) and 7.05, shall terminate on the
expiration of the applicable statute of limitations with respect to the matter
giving right to the Claim, such as the statute of limitations regarding the
collection of taxes (including any extension thereof). An obligation to
indemnify and hold harmless shall not terminate with respect to any item as to
which an Indemnified Party shall have, before the expiration of the three year
period commencing on the Closing Date, previously submitted a Claim Notice
pursuant to Section 7.02.
7.04 Allocation of Tax Liability.
(a) In the case of Taxes for the Acquired Companies with respect to
a period that
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includes but does not end on the Closing Date, the allocation of such Taxes
between the Pre-Closing Period and the Post-Closing Period shall be made on the
basis of an interim closing of the books as of the close of business on the
Closing Date. In the case of (i) franchise Taxes based on capitalization, debt
or shares of stock authorized, issued or outstanding and (ii) ad valorem Taxes,
in either case attributable to any taxable period that includes but does not end
on the Closing Date, the portion of such Taxes attributable to the Pre-Closing
Period shall be the amount of such Taxes for the entire taxable period,
multiplied by a fraction the numerator of which is the number of days in such
taxable period ending on and including the Closing Date and the denominator of
which is the entire number of days in such taxable period; provided, that if any
Asset of an Acquired Company is sold or otherwise transferred prior to the
Closing Date, then ad valorem Taxes pertaining to such property, asset or other
right shall be attributed entirely to the Pre-Closing Period.
(b) Except to the extent a reserve for Taxes is reflected on the
Financial Statements, the Seller shall be responsible for and pay and shall
indemnify and hold harmless Purchaser and the Acquired Companies with respect to
(i) any and all Taxes imposed on any of the Acquired Companies, or for which an
Acquired Company is liable with respect to any periods ending on or before the
Closing Date; provided, that in the case of any adjustment to any item of loss
or expense for any such years, which gives rise to corresponding and offsetting
items of loss or expense in subsequent years the benefit of which is or will be
actually realized by one of the Acquired Companies (other than upon liquidation
of such Acquired Company) including by reason of any increase in a net operating
loss, Seller's obligations shall be limited to the amount of interest (computed
at the appropriate statutory rates) and penalties actually paid to the
appropriate taxing authorities by such Acquired Company as a result of such
timing differences in the case of audit adjustments, or at a rate of eight
percent (8%) per annum in the case of other adjustments, (ii) without
duplication (subject to the same proviso), all Taxes arising out of a breach of
the representations, warranties or covenants contained herein, (iii) any Tax
liability resulting from any
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ongoing state audits that exceed, in the aggregate, any reserve therefore set
forth on the Financial Statements, and (iv) any reasonable out-of-pocket costs
or expenses with respect to Taxes indemnified hereunder.
(c) From and after the Closing Date, Purchaser shall cause the
Acquired Companies to prepare, or cause to be prepared, and shall file, or cause
to be file, all reports and returns of the Acquired Companies required to be
filed. Purchaser shall cause the Acquired Companies to pay the appropriate
taxing authorities the Taxes shown to be due and payable on all Tax Returns of
the Acquired Companies filed after the Closing Date, concurrent with the filing
of such Tax Returns. Tax Returns of the Acquired Companies for periods ending on
or before the Closing Date shall be prepared on a basis consistent with the Tax
Returns filed by the Acquired Companies for previous taxable periods, subject to
the requirements of applicable law.
7.05 Tax Contests.
(a) If any Taxing Authority or other Person asserts a Tax Claim,
then the party hereto first receiving notice of such Tax Claim shall promptly
provide written notice thereof to the other party or parties hereto. Such notice
shall specify in reasonable detail the basis for such Tax Claim and shall
include a copy of any relevant correspondence received from the Taxing Authority
or other Person.
(b) If, within 30 calendar days after Seller receives or delivers,
as the case may be, notice of a Tax Claim, and if, within such time period,
Seller provides to the Purchaser an Election Notice, then subject to the
provisions of this Section 7.05, Seller shall have the right to defend or
prosecute, at its sole cost, expense and risk, such Tax Claim by all appropriate
proceedings, which
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proceedings shall be defended or prosecuted diligently by Seller to a Final
Determination; provided, that Seller shall not, without the prior written
consent of the Acquired Company, enter into any compromise or settlement of such
Tax Claim that would result in any Tax detriment to any Acquired Company. So
long as Seller is defending or prosecuting a Tax Claim with respect to an
Acquired Company, such Acquired Company shall provide or cause to be provided to
Seller any information reasonably requested by Seller relating to such Tax
Claim, and shall otherwise cooperate with Seller and its representatives in good
faith in order to contest effectively such Tax Claim, including, but not limited
to, causing the execution and filing with any Taxing Authority of any and all
consents extending the applicable statute of limitations to permit the continued
prosecution of any such Tax Claim to a Final Determination. Seller shall inform
the Acquired Company of all developments and events relating to such Tax Claim
(including, without limitation, providing to the Acquired Company copies of all
written materials relating to such Tax Claim) and the Acquired Company or its
authorized representatives shall be entitled, at the expense of the Acquired
Company, to attend, but not participate in or control, all conferences, meetings
and proceedings relating to such Tax Claim.
(c) If, with respect to any Tax Claim, Seller fails to deliver an
Election Notice to an Acquired Company within the period provided in Section
7.05(b) or, after delivery of such Election Notice to that Acquired Company,
Seller fails diligently to defend or prosecute such Tax Claim to a Final
Determination, then the Acquired Company shall at any time thereafter have the
right (but not the obligation) to defend or prosecute, at the sole cost, expense
and risk of Seller, such Tax Claim. Such Acquired Company shall have full
control of such defense or prosecution and such proceedings, including any
settlement or compromise thereof. If requested by the Acquired Company, the
Seller shall cooperate in good faith with the Acquired Company and its
authorized representatives in order to contest effectively such Tax Claim.
Seller may attend, but not participate in or control, any defense, prosecution,
settlement or compromise of any Tax Claim controlled by the Acquired Company
pursuant to this Section 7.05(c), and shall bear its own costs and expenses
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with respect thereto. In the case of any Tax Claim that is defended or
prosecuted by the Acquired Company pursuant to this Section 7.05(c), the
Acquired Company shall, from time to time, be entitled to receive current
payments from Seller with respect to costs and expenses incurred by the Acquired
Company in connection with such defense or prosecution (including, without
limitation, reasonable attorneys', accountants' and experts' fees and
disbursements, settlement costs, court costs and any other costs or expenses for
investigating, defending or prosecuting such Tax Claim, and any Taxes imposed on
an Acquired Company as a result of receiving a payment from Seller pursuant to
this Section 7.05) (collectively, "Associated Costs").
(d) In the case of any Tax Claim that is defended or prosecuted to a
Final Determination by Seller pursuant to this Section 7.05, Seller shall pay to
the appropriate Tax Indemnitees, in immediately available funds, the full amount
of any Tax arising or resulting from such Tax Claim within five Business Days
after such Final Determination. In the case of any Tax Claim that is defended or
prosecuted to a Final Determination by the Acquired Company pursuant to the
terms of this Section 7.05, Seller shall pay to the appropriate Tax Indemnitee,
in immediately available funds, the full amount of any Tax arising or resulting
from such Tax Claim, together with any Associated Costs that have not
theretofore been paid by Seller to the Acquired Company, within five Business
Days after such Final Determination. In the case of any Tax Claim not covered by
the two preceding sentences, Seller shall pay to the appropriate Acquired
Company, in immediately available funds, the full amount of any Tax arising or
resulting from such Tax Claim (calculated after taking into account any actual
reduction in the current liability for Taxes of such Tax Indemnitee for Tax
arising out of or resulting from such payment or such Tax Claim), together with
any Associated Costs that have not theretofore been paid by Seller to such
Acquired Company, at least five Business Days before the date payment of such
Tax is due from any Tax Indemnitee.
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(e) Notwithstanding anything contained in this Article VII to the
contrary, the rights of Seller under this Section 7.05 to defend or prosecute,
or to control the defense or prosecution of, any Tax Claim shall be no greater
than those rights that the Acquired Company would have to defend or prosecute,
or to control the defense or prosecution of, such Tax Claim.
7.06 Cooperation Regarding Tax Matters. Each party hereto shall, and shall
cause its subsidiaries and Affiliates to, provide to the other party hereto and
the Acquired Companies such cooperation and information as any of them
reasonably may request related to the filing of any Tax Return, amended Tax
Return or claim for refund, determining a liability for Taxes or a right to
refund of Taxes or in conducting any audit or other proceeding in respect of
Taxes. Such cooperation and information shall include providing copies of all
relevant portions of relevant Tax Returns, together with relevant accompanying
schedules and relevant workpapers, relevant documents relating to rulings or
other determinations by Taxing Authorities and relevant records concerning the
ownership and Tax basis of property, which any such party may possess. Each
party shall make its employees reasonably available on a mutually convenient
basis at its cost to provide explanation of any documents or information so
provided. Subject to the preceding sentence, each party required to file Tax
Returns pursuant to this Article VII shall bear all costs of filing such Tax
Returns.
7.07 Payment of Transfer Taxes and Fees. Seller shall pay all sales, use,
transfer, stamp, documentary or similar Taxes imposed upon or arising out of or
in connection with the transactions effected pursuant to this Agreement, and
shall indemnify, defend, and hold harmless the Purchaser, the Acquired Companies
and their Subsidiaries and Affiliates with respect to such Taxes. Seller shall
file all necessary documentation and Tax Returns with respect to such Taxes and
provide to Purchaser copies of all such Tax Returns.
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7.08 Other Tax Covenants.
(a) Without the prior written consent of Purchaser, neither the
Seller nor any Affiliate of the Seller shall, to the extent it may affect or
relate to any Acquired Company, make or change any tax election, change any
annual tax accounting period, adopt or change any method of tax accounting, file
any amended Tax Return, enter into any method of tax accounting, enter into any
closing agreement, settle any Tax Claim, assessment or proposed assessment,
surrender any right to claim a Tax refund, consent to any extension or waiver of
the limitation period applicable to any Tax Claim or assessment or take or omit
to take any other action, if any such action or omission would have the effect
of increasing any post-closing Tax Liability of the Purchaser, of any Acquired
Company or any Affiliate of Purchaser.
(b) Without the prior written consent of the Seller, neither the
Purchaser nor the Acquired Companies shall, to the extent it may affect or
relate to an Acquired Company, make or change any tax election, file any amended
Tax Return, enter into any closing Agreement, settle any Tax claim, assessment
or proposed assessment, surrender any right to claim a Tax refund, consent to
any extension or waiver of the limitation period applicable to any Tax claim or
assessment or take or omit to take any other action, if any such action or
omission would affect a Pre-Closing Tax Period, unless required by applicable
law.
(c) So long as any books, records and files retained by the Seller
and his Affiliates relating to the business of an Acquired Company or the books,
records and files delivered to the control of the Purchaser pursuant to this
Agreement to the extent they relate to the operations of an Acquired Company
prior to the Closing Date, remain in existence and available, each party (at its
own expense) shall have the right upon prior notice to inspect and to make
copies of the same at any
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time during business hours for any proper purpose. The Purchaser and the Seller
and their respective Affiliates shall use reasonable efforts not to destroy or
allow the destruction of any such books, records and files without first
providing 60 days' written notice of intention to destroy to the other, and
allowing such other party to take possession of such records.
7.09 Conflict. In the event of a conflict between the provisions of
Sections 7.04 through 7.08 of this Article VII and any other provision of this
Agreement, such provisions of this Article VII shall control.
ARTICLE VIII
DEFINITIONS
8.01 Definitions.
(a) As used in this Agreement, the following defined terms shall
have the meanings indicated below:
"Acquired Companies" and "Acquired Company" have the meanings
ascribed to them in the forepart of this Agreement (and, unless the context
otherwise requires, shall include any predecessor of an Acquired Company).
"Actions or Proceedings" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation or audit.
"Affiliate" means, as applied to any Person, (a) any other Person
directly or indirectly controlling, controlled by or under common control with,
that Person, (b) any other Person that owns
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or controls 5% or more of any class of equity securities (including any equity
securities issuable upon the exercise of any option or convertible security) of
that Person or any of its Affiliates, or (c) any director, partner, officer,
agent, employee or relative of such Person. For the purposes of this definition,
"control" (including with correlative meanings, the terms "controlling",
"controlled by", and "under common control with") as applied to any Person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of that Person, whether through
ownership of voting securities, by contract or otherwise.
"Agreement" means this Purchase Agreement, the Exhibits and the
Disclosure Schedule and the certificates delivered in connection herewith, as
the same may be amended from time to time in accordance with the terms hereof.
"Assets" of any Person means all assets and properties of every
kind, nature, character and description, including goodwill and other
intangibles operated, owned or leased by such Person, including cash and cash
equivalents, investments, accounts and notes receivable, chattel paper,
documents, instruments, real estate, equipment, inventory, goods and
intellectual property.
"Associated Costs" has the meaning ascribed to it in Section
7.04(c).
"Audited Financial Statements" has the meaning ascribed to it in
Section 2.08.
"Benefit Plan" means any Plan, existing at the Closing Date or prior
thereto, established or to which contributions have at any time been made by any
Acquired Company, or its predecessor, or under which any employee, former
employee or director of an Acquired Company or any beneficiary thereof is
covered, is eligible for coverage or has benefit rights.
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"Books and Records" means all files, documents, instruments, papers,
books and records relating to an Acquired Company, including financial
statements, Tax Returns and related work papers and letters from accountants,
budgets, pricing guidelines, ledgers, journals, deeds, title policies, minute
books, stock certificates and books, stock transfer ledgers, Contracts,
Licenses, customer lists, computer files and programs, retrieval programs,
operating data and plans and environmental studies and plans.
"Business Day" means a day on which commercial banks are open for
the transaction of business in Saginaw, Michigan.
"Claim" or "Claim Notice" means written notification pursuant to
Section 7.02(a) of a Third Party Claim as to which indemnity under Section 7.01
is sought by an Indemnified Party.
"Closing" has the meaning ascribed to it in Section 1.03.
"Closing Date" has the meaning ascribed to it in Section 1.03.
"Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Contract" means any agreement, lease, evidence of indebtedness,
mortgage, indenture, security agreement or other contract (whether written or
oral).
"Disclosure Schedule" means the schedules delivered to Purchaser by
or on behalf of any of the Acquired Companies and Seller, and the schedules
delivered by or on behalf of Purchaser, containing all lists, descriptions,
exceptions and other information and materials as are required to be included
therein pursuant to this Agreement.
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"Election Notice" means a written notice provided by Seller in
respect of a Tax Claim to the effect that (i) Seller acknowledges its indemnity
obligation under this Agreement with respect to such Tax Claim and (ii) Seller
elects to contest, and to control the defense or prosecution of, such Tax Claim
at the sole risk and sole cost and expense of Seller.
"Environment" means all air, surface water, groundwater, drinking
water supply, stream sediments, or land, including soil, land surface or
subsurface strata, all fish, wildlife, biota and all other environmental medium
or natural resources.
"Environmental, Health and Safety Liabilities" means any cost,
damages, expense, liability, obligation, or other responsibility arising from or
under any Environmental Law or Occupational Safety and Health Law and consisting
of or relating to (i) any environmental, health or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products); (ii) fines, penalties,
judgments, awards, settlements, legal or administrative proceedings, damages,
losses, claims, demands and response, investigative, remedial, or inspection
costs and expenses arising under Environmental Law or Occupational Safety and
Health Law; (iii) financial responsibility under Environmental Law or
Occupational Safety and Health Law for clean-up costs or corrective action,
including any investigation, clean-up, removal, containment, or other
remediation or response actions required by Environmental Law or Occupational
Safety and Health Law (whether or not such clean-up has been required or
requested by any governmental body or any other Person) and for any natural
resource damages; or (iv) any other compliance, corrective, investigative, or
remedial measures required under Environmental Law or Occupational Safety and
Health Law. The terms "removal," "remedial," and "response action" include the
types of activities covered by the United States
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Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
Section 9601 et seq., as amended (CERCLA).
"Environmental Law" means all federal, state and local
environmental, health and safety laws, common law orders, decrees, judgments,
codes and ordinances and all rules and regulations promulgated thereunder, civil
or criminal, including, without limitation, Laws relating to emissions,
discharges, releases or threatened releases of Hazardous Materials, pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the Environment or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials, pollutants, contaminants, chemicals, or industrial, solid,
toxic or hazardous substances or wastes.
"Environmental Permit" means any federal, state or local permits,
licenses, approvals, consent or authorizations required by any Governmental or
Regulatory Authority under or in connection with any Environmental Law and
includes any and all orders, consent orders or binding agreements issued or
entered into by a Governmental or Regulatory Authority under any applicable
Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations promulgated thereunder.
"Facilities" means any real property, leaseholds, or other interests
currently or formerly owned or operated by any Acquired Company and any
buildings, plants, structures or equipment (including motor vehicles, tank cars
and rolling stock) currently or formerly owned or operated by any Acquired
Company.
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"Final Determination" means (i) a decision, judgment, decree or
other Order by any court of competent jurisdiction, which decision, judgment,
decree or other Order has become final after all allowable appeals by either
party to the action have been exhausted or the time for filing such appeals has
expired, (ii) a closing agreement entered into under Section 7121 of the Code or
any other settlement agreement entered into in connection with an administrative
or judicial proceeding, (iii) the expiration of the time for instituting suit
with respect to a claimed deficiency or (iv) the expiration of the time for
instituting a claim for refund, or if such a claim was filed, the expiration of
the time for instituting suit with respect thereto.
"Financial Statements" means the Audited Financial Statements and
the Unaudited Financial Statements.
"GAAP" means generally accepted accounting principles of the United
States, consistently applied.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States or any state, county, city or other political subdivision.
"Hazardous Activity" means the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment, or use (including any
withdrawal or other use of groundwater) of Hazardous Materials in, on, under,
about, or from the Facilities or any part thereof into the Environment, and any
other act, business, operation, or thing that increases the danger, or risk of
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danger, or poses an unreasonable risk of harm to persons or property on or off
the Facilities, or that may affect the value of the Facilities or the Acquired
Companies.
"Hazardous Material" means (i) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation and transformers or other equipment that
contain dielectric fluid containing levels of polychlorinated biphenyls (PCBs);
(ii) any chemicals, materials, substances or wastes which are defined as or
included in the definition of "hazardous substances, "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances," "toxic pollutants" or words of similar import,
under any Environmental Law; and (iii) any other chemical, material, substance
or waste, exposure to which is prohibited, limited or regulated by any
Governmental or Regulatory Authority.
"Indebtedness" of any Person means all obligations of such Person
(i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(iv) under capital leases and (v) in the nature of guarantees of the obligations
described in clauses (i) through (iv) above of any other Person.
"Indemnified Party" means any Person claiming indemnification under
any provision of Article VII.
"Indemnifying Party" means any Person against whom a claim for
indemnification is being asserted under any provision of Article VII.
"Indemnity Notice" means written notification pursuant to Section
7.02(c) of a claim for indemnity under Article VII by an Indemnified Party,
specifying the nature of and basis for such
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claim, together with the amount or, if not then reasonably ascertainable, the
estimated amount, determined in good faith, of such claim.
"Laws" means all laws, statutes, rules, regulations, ordinances and
other pronouncements having the effect of law of the United States or any state,
county, city or other political subdivision or of any Governmental or Regulatory
Authority.
"Leased Real Property" has the meaning ascribed to it in Section
2.15.
"Liabilities" means all Indebtedness, obligations and other
liabilities (or contingencies that have not yet become liabilities) of a Person
(whether absolute, accrued, contingent (or based upon any contingency), known or
unknown, fixed or otherwise, or whether due or to become due).
"Licenses" means all licenses, permits, certificates of authority,
authorizations, approvals, registrations, franchises and similar consents
granted or issued by any Governmental or Regulatory Authority.
"Liens" means any mortgage, pledge, assessment, security interest,
lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or
any conditional sale Contract, title retention Contract or other Contract to
give any of the foregoing.
"Loss" means any and all damages, fines, fees, penalties,
deficiencies, diminution in value of investment, losses and expenses, including
without limitation, interest, reasonable expenses of investigation, court costs,
reasonable fees and expenses of attorneys, accountants and other experts or
other expenses of litigation or other proceedings or of any claim, default or
assessment (such fees
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and expenses to include all fees and expenses, such as fees and expenses of
attorneys, incurred in connection with (i) the investigation or defense of any
Third Party Claims or (ii) asserting or disputing any rights under this
Agreement against any party hereto or otherwise).
"Occupational Safety and Health Law" means any Law designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards, and any program, whether governmental or private (including
those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to (i) purchase or otherwise receive or be issued any shares of
capital stock or other equity interests of such Person or any security of any
kind convertible into or exchangeable or exercisable for any shares of capital
stock or other equity interests of such Person, or (ii) receive any benefits or
rights similar to those enjoyed by or accruing to the holder of shares of
capital stock or other equity interests of such Person, including without
limitation, any rights to participate in the equity, income or election of
directors or officers of such Person.
"Order" means any writ, judgment, decree, injunction or similar
order of any Governmental or Regulatory Authority (in each such case whether
preliminary or final).
"Owned Real Property" has the meaning ascribed to it in Section
2.15.
"Person" means any natural person, corporation, general partnership,
limited partnership, limited liability company or partnership, proprietorship,
other business organization, trust, union, association or Governmental or
Regulatory Authority.
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"Plan" means any bonus, compensation, pension, profit sharing,
retirement, stock purchase or cafeteria, life, health, accident, disability,
workmen's compensation or other insurance, severance, separation or other
employee benefit plan, practice, policy or arrangement of any kind, whether
written or oral, or whether for the benefit of a single individual or more than
one individual including, but not limited to, any "employee benefit plan" within
the meaning of Section 3(3) of ERISA.
"Post-Closing Period" means any taxable period or portion thereof
beginning after the Closing Date. If a taxable period begins on or before the
Closing Date and ends after the Closing Date, then the portion of the taxable
period that begins on the day following the Closing Date shall constitute a
Post-Closing Period.
"Pre-Closing Period" means any taxable period or portion thereof
that is not a Post-Closing Period.
"Purchase Price" has the meaning ascribed to it in Section 1.02.
"Purchased Stock" has the meaning ascribed to it in the forepart of
this Agreement.
"Purchaser" has the meaning ascribed to it in the forepart of this
Agreement.
"Real Property" has the meaning ascribed to it in Section 2.15.
"Real Property Leases" has the meaning ascribed to it in Section
2.15.
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"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing of a
Hazardous Material into the Environment.
"Relevant Group" has the meaning ascribed to it in Section 2.11.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations thereunder.
"Seller" has the meaning ascribed to it in the forepart of this
Agreement.
"Subsidiary" means any Person in which another Person, directly or
indirectly through Subsidiaries or otherwise, beneficially owns at least fifty
percent (50%) of either the equity interest in, or the voting control of, such
Person, whether or not existing on the date hereof.
"Tax" or "Taxes" means all federal, state or local net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, withholding, payroll, employment, excise, property, alternative or
add-on minimum, environmental or other taxes, assessments, duties, fees, levies
or other governmental charges of any nature whatever, whether disputed or not,
together with any interest, penalties, additions to tax or additional amounts
with respect thereto.
"Tax Claim" means any written claim with respect to Taxes
attributable to a Pre-Closing Period made by any Taxing Authority or any Person
that, if pursued successfully, could serve as the basis for a claim for
indemnification, under this Agreement, of Purchaser, an Acquired Company and
other Indemnified Parties specified in Section 7.01 of this Agreement.
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"Tax Indemnitee" means an Acquired Company, the Purchaser and their
respective shareholders, officers, directors, employees, agents and Affiliates
of each of them (other than the Seller).
"Tax Returns" means any returns, reports or statements (including
any information returns) required to be filed for purposes of a particular Tax.
"Taxing Authority" means any governmental agency, board, bureau,
body, department or authority of any United States federal, state or local
jurisdiction having or purporting to exercise jurisdiction with respect to any
Tax.
"Territory" means Michigan, Illinois, Indiana and Ohio.
"Third Party Claim" has the meaning ascribed to it in Section 7.02.
"Unaudited Financial Statements" has the meaning ascribed to it in
Section 2.08(b).
(b) Unless the context of this Agreement otherwise requires, (i)
words of any gender include each other gender; (ii) words using the singular or
plural number also include the plural or singular number, respectively; (iii)
the terms "hereof," "herein," "hereby" and derivative or similar words refer to
this entire Agreement; (iv) the terms "Article" or "Section" refer to the
specified Article or Section of this Agreement; and (v) the phrases "ordinary
course of business" and "ordinary course of business consistent with past
practice" refer to the business and practice of the Acquired Company. All
accounting terms used herein and not expressly defined herein shall have the
meanings given to them under GAAP.
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(c) When used herein, the phrase "to the knowledge of" any Person,
"to the best knowledge of" any Person or any similar phrase, means (i) with
respect to any Person who is an individual, the actual knowledge of such Person,
provided, the Seller shall be assumed to have actual knowledge of matters that
are known by the directors, officers, managers, and other Persons having similar
powers and duties with respect to the Acquired Companies, (ii) with respect to
any other Person, the actual knowledge of the directors, officers, managers and
other Persons having similar powers and duties, and (iii) in the case of each of
(i) and (ii), the knowledge of facts that such individuals should have after
reasonable inquiry.
ARTICLE IX
MISCELLANEOUS
9.01 Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally against written receipt or by facsimile transmission or mailed by
prepaid first class certified mail, return receipt requested, or mailed by
overnight courier prepaid, to the parties at the following addresses or
facsimile numbers:
(a) If to Purchaser, to:
JTM Industries, Inc.
127 South 500 East, Suite 675
Salt Lake City, UT 84102
Facsimile No.: (801) 323-8035
Attn.: Brett A. Hickman, Esq.
with a copy to:
Parsons Behle & Latimer
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201 South Main Street, Suite 1800
Salt Lake City, UT 84145
Facsimile No.: (801) 536-6111
Attn.: J. Gordon Hansen
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(b) If to Seller, to:
Jack Wirt
Wirt Transport Co.
400 Martin Street
Bay City, Michigan 48706
Facsimile No.: (517) 684-9037
with a copy to:
Braun Kendrick Finkbeiner P.L.C.
101 N. Washington, Suite 812
Saginaw, Michigan 48607
Facsimile No: (517) 753-3951
Attn: David L. Turner
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided for in this Section, be deemed given upon receipt, (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given upon receipt and (iv) if delivered by overnight courier
to the address as provided for in this Section, be deemed given on the earlier
of the first Business Day following the date sent by such overnight courier or
upon receipt. Any party from time to time may change its address, facsimile
number or other information for the purpose of notices to that party by giving
notice specifying such change to the other party hereto.
9.02 Entire Agreement. This Agreement supersedes all prior discussions and
agreements between the parties with respect to the subject matter hereof and
thereof and contains the sole and entire agreement between the parties hereto
with respect to the subject matter hereof and thereof.
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9.03 Expenses. Except as otherwise expressly provided in this Agreement
(including without limitation as provided in Article VII), each party will pay
its own costs and expenses incurred in connection with this Agreement, and the
transactions contemplated hereby and thereby; provided, Seller will pay all
expenses relating hereto and thereto of the Acquired Companies incurred in
respect of the period prior to the Closing.
9.04 Confidentiality. Purchaser and Seller will hold in strict confidence
from any Person (other than its Affiliates or representatives) all documents and
information concerning the other party hereto or any of its Affiliates furnished
to it by or on behalf of the other party in connection with this Agreement or
the transactions contemplated hereby, except to the extent the disclosing party
can demonstrate that such documents or information was (a) previously known by
the party receiving such documents or information, (b) in the public domain
(either prior to or after the furnishing of such documents or information
hereunder) through no fault of such receiving party or (c) later acquired by the
receiving party from another source if the receiving party is not aware that
such source is under an obligation to another party hereto to keep such
documents and information confidential. Such covenant of confidentiality will
remain in effect unless a party is compelled to disclose by judicial or
administrative process (including in connection with obtaining the necessary
approvals of this Agreement and the transactions contemplated hereby of
Governmental or Regulatory Authorities) or by other requirements of Law.
9.05 Set-Off. If from time to time and at any time any party shall be
entitled (as either agreed upon by the parties or finally adjudicated in a court
of competent jurisdiction) to be paid any amount under the provisions of Section
7.01(a), such party shall be entitled, if it so elects, to set off such amount
against any amounts owing to the other party.
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9.06 Further Assurances; Post-Closing Cooperation. At any time or from
time to time after the Closing, Seller shall execute and deliver to Purchaser
such other documents and instruments, provide such materials and information and
take such other actions as Purchaser may reasonably request to consummate the
transactions contemplated by this Agreement and otherwise to cause Seller to
fulfill each of his obligations under this Agreement.
9.07 Waiver. Any term or condition of this Agreement may be waived at any
time by the party that is entitled to the benefit thereof, but no such waiver
shall be effective unless set forth in a written instrument duly executed by or
on behalf of the party waiving such term or condition. No waiver by any party of
any term or condition of this Agreement, in any one or more instances, shall be
deemed to be or construed as a waiver of the same or any other term or condition
of this Agreement on any future occasion. All remedies, either under this
Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
9.08 Amendment. This Agreement may be amended, supplemented or modified
only by a written instrument duly executed by or on behalf of the parties
hereto.
9.09 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights, and this Agreement does not
confer any such rights, upon any other Person other than any Person entitled to
indemnity under Article VII.
9.10 No Assignment; Binding Effect. Neither this Agreement nor any right,
interest or obligation hereunder may be assigned (by operation of law or
otherwise) by either of the parties without the prior written consent of the
other party and any attempt to do so will be void, except that Purchaser may
assign any or all of its rights, interests and obligations under this Agreement
to any
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of its Affiliates, provided, however, that any such assignment by Purchaser
shall not relieve Purchaser of its obligations under this Agreement. Subject to
the preceding sentence, this Agreement is binding upon, inures to the benefit of
and is enforceable by the parties hereto and their respective successors and
assigns.
9.11 Headings. The headings used in this Agreement have been inserted for
convenience of reference only and do not define or limit the provisions hereof.
9.12 Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
9.13 Limited Recourse. Regardless of anything in this Agreement to the
contrary, (i) obligations and liabilities of Purchaser hereunder shall be
without recourse to any stockholder of Purchaser or any of such stockholder's
Affiliates, directors, employees, officers or agents and shall be limited to the
assets of such party and (ii) the stockholders of Purchaser have made no (and
shall not be deemed to have made any) representations, warranties or covenants
(express or implied) under or in connection with this Agreement or any other
operative agreement.
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9.14 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
ARTICLE X
REMEDIES, JURISDICTION
AND SERVICE OF PROCESS
The provisions of this Article X shall be the sole and exclusive remedy
for any default under or breach by any party of any term or provision of this
Agreement, and no claim may be brought under this Agreement except in accordance
with and pursuant to these terms.
10.01 Mediation. In the event there is a dispute under this Agreement, the
disagreeing parties shall meet with one another and diligently attempt to
resolve their disagreements. If they are unable to do so, then upon request of
either party to the dispute made within twenty (20) days of the failure of
negotiations, they will mediate the dispute, utilizing an impartial mediator
pursuant to the rules of the American Arbitration Association ("AAA") or any
other reputable organization that sponsors mediation. If, after thirty (30) days
the mediation is not successful, or if no mediation has been elected, then any
party to the dispute may file a legal action to resolve the dispute as
contemplated by Section 10.02 below.
10.02 Jurisdiction and Governing Law, etc. If a dispute is not resolved
pursuant to Section 10.01, then the state or federal courts located within the
Counties of Bay or Salt Lake, States of Michigan or Utah, shall have
jurisdiction to resolve such dispute, depending on whether Purchaser or Seller,
respectively, institutes the proceeding, and each party irrevocably agrees that
all actions
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or proceedings relating to this Agreement may be litigated in such courts. Each
party hereto accepts for itself and himself and in connection with its and his
respective properties, generally and unconditionally, the jurisdiction of the
aforesaid courts and waives any defense of forum non conveniens, and irrevocably
agrees to be bound by any judgment rendered thereby in connection with this
Agreement. Each party further irrevocably consents to the service of process out
of any of the aforementioned courts in any such action or proceeding by the
delivery of copies thereof in the manner provided in this Agreement for giving
notices, such service to become effective twenty (20) days after such delivery.
This Agreement shall be governed by and construed in accordance with the
domestic laws of the state in which the matter is litigated, without giving
effect to any choice of law or conflict of law provision or rule that would
cause the application of the laws of any other jurisdiction. Nothing herein
shall in any way be deemed to limit the ability of any party hereto to serve any
such legal process, summons, notices and documents in any other manner permitted
by applicable law.
PURCHASER:
JTM INDUSTRIES, INC.
By:_________________________________
Name:
Title:
SELLER:
By:_________________________________
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Jack Wirt
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Exhibit 10.6
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT is dated March 27, 1998, between JTM INDUSTRIES,
INC., a Texas corporation ("Purchaser"), and DONALD A. THOMAS, PHYLLIS S. THOMAS
AND DONALD W. BIRGE, individuals residing in Pine Bluff, Arkansas (collectively,
"Sellers").
RECITALS:
A. Sellers own and desire to sell to Purchaser, and Purchaser desires to
purchase from Sellers, all of the issued and outstanding shares of capital stock
of Fly Ash Products, Inc. (the "Company"), an Arkansas corporation.
B. The Company has 900 issued and outstanding shares of common stock, all
of which are owned by Sellers. All of such shares are referred to herein as the
"Purchased Stock."
C. Unless otherwise defined in this Agreement, the capitalized terms used
in this Agreement have the meanings given in Article VIII below.
NOW THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
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ARTICLE I
SALE OF PURCHASED STOCK; CLOSING
1.01 Purchase and Sale. At the Closing, on the terms of and subject to the
conditions set forth in this Agreement, Sellers will sell to Purchaser, and
Purchaser will purchase from Sellers, the Purchased Stock.
1.02 Purchase Price.
(a) The aggregate purchase price (the "Purchase Price") for the
Purchased Stock is $9,500,000 in cash, subject to adjustment as set forth in
Section 1.02(b) below.
(b) The Purchase Price will increase or decrease, as the case may
be, dollar for dollar based upon changes in the net book value of the tangible
Assets owned by the Company at the Closing based upon the December 31, 1997,
Financial Statement (defined in Section 2.08) adjusted forward to the Closing
but excluding, as of each date, the Distributed Assets and Liabilities, and
depreciation with respect to periods after December 31, 1997. To determine
whether an adjustment is appropriate, Purchaser will promptly engage Ernst &
Young, LLP. or another independent accounting firm reasonably satisfactory to
Sellers, to audit the financial records of the Company as of the Closing in
accordance with GAAP, on a basis consistent with the Financial Statements.
Within forty-five (45) days after Closing, such accounting firm will prepare and
deliver a report to all parties which will detail any Purchase Price adjustments
it deems to be necessary. The report will be final and binding on both parties,
absent fraud or material error. In preparing its report, the accounting firm
will disregard the Assets and Liabilities described on Exhibit A hereto (the
"Distributed Assets and Liabilities") which will be distributed by the Company
to the Sellers at the Closing.
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1.03 Closing. The Closing (the "Closing") of the purchase and sale of the
Purchased Stock will take place at the offices of Bridges, Young, Mathews &
Drake, PLC, at 315 East Eighth Avenue, Pine Bluff, Arkansas, or at such other
place as Purchaser and the Sellers shall mutually agree, at 10:00 A.M. local
time, on April 22, 1998, or on such other date as the parties shall agree upon
(the "Closing Date"). At the Closing, Purchaser will pay the Purchase Price to
Sellers by wire transfer of immediately available funds to such account as
Sellers may reasonably direct by written notice delivered to Purchaser by
Sellers at least three (3) Business Days before the Closing Date.
Simultaneously, the Sellers will sell to Purchaser the Purchased Stock free and
clear of all Liens, by delivering to Purchaser all stock certificates
representing the Purchased Stock, registered in the name of Purchaser. At the
Closing, the parties shall also deliver the opinions, certificates, Contracts,
documents and instruments to be delivered pursuant to Article V.
1.04 Post Closing Payment. Within ten (10) days after delivery of the
report referred to in Section 1.02(b), the appropriate party or parties will
deliver to the other party or parties cash in the amount of the adjustment
specified in the report, unless there is a bona fide dispute as to such
adjustment, which the parties may choose to resolve by negotiation, arbitration
or litigation.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE SELLERS
The Sellers hereby represent and warrant jointly and severally to
Purchaser that, except as set forth in the Disclosure Schedule attached hereto,
the following statements are true and accurate:
2.01 Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation and has full corporate power and authority to conduct its
business as and to the extent now conducted and to
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own, use and lease its Assets. The Company is duly qualified, licensed or
admitted to do business and is in good standing in each jurisdiction in which
the ownership, use or leasing of its Assets, or the conduct or nature of its
business, makes such qualification, licensing or admission necessary, except for
such failures to be so qualified, licensed or admitted and in good standing
which, individually or in the aggregate, (i) are not having and could not be
reasonably expected to have a material adverse effect on the business or
condition of the Company and (ii) could not be reasonably expected to have a
material adverse effect on the validity or enforceability of this Agreement or
any other agreement to which it is a party or on the ability of the Sellers or
the Company to perform their obligations hereunder or thereunder.
2.02 Capital Stock. The authorized capital stock of the Company consists
of 900 shares of common stock and no shares of preferred stock. The Purchased
Stock constitutes all of the issued and outstanding shares of capital stock of
the Company. The shares of Purchased Stock are validly issued, fully paid and
nonassessable, issued in compliance with all applicable Laws, and no additional
shares of capital stock have been reserved for issuance. There are no
outstanding Options with respect to the stock of the Company or agreements,
arrangements or understandings to issue Options with respect to the Company, nor
are there any preemptive rights or agreements, arrangements or understandings to
issue preemptive rights with respect to the issuance or sale of the capital
stock of the Company. Sellers are the record and beneficial owners of all of the
shares of Purchased Stock, free and clear of all Liens. The delivery to
Purchaser of the certificates representing the Purchased Stock will transfer to
Purchaser good and valid title to all shares of the Purchased Stock, free and
clear of all Liens, and after such transfer the Purchased Stock, in the hands of
Purchaser, will have been duly authorized, validly issued, fully paid and
nonassessable. From and after the Closing, no Seller nor any other Person (other
than the Purchaser) will have any rights whatsoever with respect to the
Purchased Stock or to any other securities of the Company.
2.03 Authority Relative to This Agreement. Each of the Sellers has full
authority to enter into this Agreement, to perform his or her obligations
hereunder and to consummate the transactions
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contemplated hereby. This Agreement has been duly and validly executed and
delivered by the Sellers and constitutes the legal, valid and binding
obligations of the Sellers, enforceable against them in accordance with its
terms.
2.04 Company; Business. The Disclosure Schedule lists all lines of
business in which the Company and each Subsidiary is participating or engaged or
has participated or engaged in the preceding three years. The Company has no
subsidiaries.
2.05 No Conflicts. The execution and delivery by the Sellers of this
Agreement do not, and the consummation of the transactions contemplated hereby
will not:
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the certificate or articles of incorporation
or by-laws (or other comparable corporate charter documents) of the Company;
(b) subject to obtaining all required consents, approvals and
actions, and making any required filings and notices, conflict with or result in
a violation or breach of any term or provision of any law or Order applicable to
any Seller or to the Company, or any of its Assets; or
(c) (i) conflict with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time or both) a default under,
(iii) require any Seller or the Company to obtain any consent, approval or
action of, make any filing with or give any notice to any Person as a result or
under the terms of, (iv) result in or give to any Person any right of
termination, cancellation, acceleration or modification in or with respect to,
(v) result in or give to any Person any additional rights or entitlement to
increased, additional, accelerated or guaranteed payments under, or (f) result
in the creation or imposition of any Lien upon the Company or any of its Assets
under, any Contract or License to which any Seller or the Company is a party or
by which any of their respective Assets is bound except for such conflicts,
violations, breaches, defaults, consents,
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approvals, actions, filings, notices, terminations, cancellations,
accelerations, modifications, additional rights or entitlements or Liens that,
individually or in the aggregate, (A) are not having and could not be reasonably
expected to have a material adverse effect on the business or condition of the
Company, and (B) could not be reasonably expected to have a material adverse
effect on the validity or enforceability of this Agreement or on the ability of
any Seller or the Company to perform its obligations hereunder.
2.06 Governmental Approvals and Filings. No consent, approval or action
of, filing with or notice to any Governmental or Regulatory Authority on the
part of any Seller or the Company is required in connection with the execution,
delivery and performance of this Agreement or the consummation of transactions
contemplated hereby or thereby. However, Purchaser shall be solely responsible
for compliance with any applicable antitrust laws.
2.07 Books and Records. The minute books and other similar records of the
Company provided to Purchaser prior to the execution of this Agreement contain a
true and complete record, in all material respects, of all action taken by the
stockholders, the board of directors and committees of the board of directors
(or other similar governing entities) of the Company.
2.08 Financial Statements. Sellers have caused the Company to furnish to
Purchaser true and complete copies of the unaudited balance sheets of the
Company as of December 31, 1996 and (prior to Closing) December 31, 1997 and the
related statements of operations and cash flows. Additional December 31, 1997
statements will be audited by Ernst & Young, LLP, independent certified public
accountants, together with the notes thereto as soon as possible (collectively,
the "Financial Statements"). Purchaser will be responsible for the charges of
Ernst & Young, LLP. The Financial Statements are in accordance with the Books
and Records of the Company and fairly present the consolidated financial
position of the Company as of the dates thereof, for the periods covered thereby
and the results of operations and cash flows of the Company for the periods set
forth therein, all in conformity with GAAP, except as specifically noted in the
notes thereto.
6
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2.09 Absence of Changes. Since December 31, 1997, there has not been any
material adverse change, or any event or development which, individually or
together with other such events, could reasonably be expected to result in a
material adverse change, in the business or condition of any of the Company
(other than changes affecting Distributed Assets). In addition, there has not
occurred since December 31, 1997 any of the following:
(a) any declaration, setting aside or payment of any dividend or
other distribution in respect of the capital stock (or other equity interests)
of the Company or any direct or indirect redemption, purchase or other
acquisition by the Company of any such capital stock (or other equity interests)
of the Company;
(b) any authorization, issuance, sale or other disposition by any of
the Company of any shares of its capital stock (or other equity interests), or
any modification or amendment of any right of any holder of any outstanding
shares of capital stock (or other equity interests) of the Company;
(c) (i) any increase in salary, rate of commissions or rate of
consulting fees of any employee or consultant of the Company; (ii) any payment
of consideration of any nature whatsoever (other than salary, commissions or
consulting fees paid to any employee or consultant of the Company) to any
officer, director, stockholder, employee or consultant of the Company; (iii) any
establishment or modification of (A) targets, goals, pools or similar provisions
under any Benefit Plan, employment contract or other employee compensation
arrangement or (B) salary ranges, increase guidelines or similar provisions in
respect of any Benefit Plan, employment contract or other employee compensation
arrangement; or (iv) any adoption, entering into, amendment, modification or
termination (partial or complete) of any Benefit Plan;
(d) (i) incurrences by the Company of Indebtedness or (ii) any
voluntary purchase, cancellation, prepayment or complete or partial discharge in
advance of a scheduled
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payment date with respect to, or waiver of any right of the Company under, any
Indebtedness of or owing to the Company;
(e) any physical damage, destruction or other casualty loss (whether
or not covered by insurance) affecting any of the Assets of the Company in an
aggregate amount exceeding $25,000;
(f) any write-off or write-down of or any determination to write off
or write down any of the Assets of the Company;
(g) any purchase of any Assets of any Person or disposition of, or
incurrence of a Lien on, any Company Assets, other than acquisitions or
dispositions of inventory in the ordinary course of business by the Company
consistent with past practice;
(h) any entering into, amendment, modification, termination (partial
or complete) or granting of a waiver under or giving any consent with respect to
(i) any Contract which is required (or had it been in effect on the date hereof
would have been required) to be disclosed in the Disclosure Schedule, (ii) any
License held by the Company, or (iii) any intellectual property rights owned by
the Company;
(i) any capital expenditures or commitments for additions to
property, plant or equipment of the Company constituting capital assets in an
aggregate amount exceeding $10,000;
(j) any commencement, termination or change by the Company of any
line of business;
(k) any transaction by the Company with any of its officers,
directors, stockholders or Affiliates, other than pursuant to a Contract or
arrangement in effect on December
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31, 1997 and disclosed to Purchaser other than pursuant to any Contract of
employment, listed on the Disclosure Schedule;
(l) any entering into of an agreement to do or engage in any of the
foregoing, including without limitation with respect to any merger, sale of
substantially all assets or other business combination not otherwise restricted
by the foregoing paragraphs; or
(m) any change in the accounting methods or procedures of the
Company or any other transaction involving or development affecting the Company
outside the ordinary course of business.
2.10 No Undisclosed Liabilities. Except as reflected or reserved against
in the December 31, 1997 balance sheet included in the Financial Statements or
as disclosed in the Disclosure Schedule, the Company has no Liabilities, nor are
there any Liabilities relating to or affecting the Company or any of its Assets.
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2.11 Taxes.
(a) All Tax Returns required to have been filed by or with respect
to the Company with any Taxing Authority have been duly and timely filed, and
each such Tax Return correctly and completely reflects the income, franchise or
other Tax liability and all other information required to be reported thereon.
The Company is not and has never been a member of any affiliated, combined,
consolidated, unitary or similar group with respect to the filing of tax returns
or otherwise with respect to any Taxing Authority. All Taxes owed by the Company
(whether or not shown on any Tax Return) have been paid. All monies required to
be withheld by the Company from employees, independent contractors, creditors or
other third parties for Taxes have been collected or withheld, and either duly
and timely paid to the appropriate Taxing Authority or (if not yet due for
payment) set aside in accounts for such purposes. The Company has no liability
for Taxes for any Person other than the Company (i) solely as a present or
former member of a consolidated group, (ii) as a transferee or successor, (iii)
by Contract or (iv) otherwise.
(b) The provisions for current Taxes in the Financial Statements are
sufficient for the payments of all accrued and unpaid Taxes not yet due and
payable as of their dates, whether or not disputed. As of the Closing Date, such
provisions, as adjusted for the passage of time through the Closing Date, will
be sufficient for the then-accrued and unpaid Taxes not yet due and payable of
the Company.
(c) The Company is not a party to any agreement extending, or having
the effect of extending, the time within which to file any Tax Return or the
period of assessment or collection of any Taxes. The Company has not received
any written ruling of a Taxing Authority related to Taxes or entered into any
written and legally binding agreement with a Taxing Authority relating to Taxes.
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(d) No Taxing Authority is now asserting or threatening to assert
against the Company any deficiency, claim or liability for additional Taxes or
any adjustment of Taxes, and there is no reasonable basis for any such assertion
of which a Seller or the Company is or reasonably should be aware. No issues
have been raised in any examination by any Taxing Authority with respect to the
Company which, by application of similar principles, reasonably could be
expected to result in a proposed deficiency for any other period not so
examined. The federal income Tax Returns of the Company disclose (in accordance
with Section 6662(d)(2)(B) of the Code) all positions taken therein that could
give rise to a substantial understatement of federal income Tax within the
meaning of section 6662(d) of the Code. No claim has ever been made by any
Taxing Authority in a jurisdiction in which the Company does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction. Sellers
have delivered to Purchaser complete and correct copies of all federal, state,
local and foreign income Tax Returns filed by or with respect to, and all Tax
examination reports and statements of deficiencies assessed against or agreed to
by, the Company since December 31, 1995. There are no Liens for Taxes upon the
Assets of the Company.
(e) The Company is not (i) a party to or bound by any obligations
under any tax sharing, tax indemnity or similar agreement or arrangement, (ii)
subject to any election under sections 338(e) or 341(f) of the Code or the
regulations thereunder, (iii) required to make, or reasonably expects that it
might have to make, any adjustment under section 481 of the Code (or any
comparable provision of state, local or foreign law) by reason of a change in
accounting method or otherwise, (iv) subject to any agreement or arrangement
that could result separately or in the aggregate in the payment of any "excess
parachute payments" within the meaning of section 280G of the Code, (v) and at
no time has ever been, a "United States real property holding corporation"
within the meaning of section 897(c)(2) of the Code, (vi) a party to any "safe
harbor lease" that is subject to the provisions of section 168(f)(8) of the
Internal Revenue Code as in effect prior to the Tax Reform Act of 1986 or to any
"long-term contract" within the meaning of section 460 of the Code, (vii) a
party to any joint venture, partnership or other arrangement that is treated as
a
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partnership for federal income Tax purposes, or (viii) nor has it ever been, a
member of any affiliated, consolidated, combined, unitary or similar group for
any Tax purpose.
2.12 Legal Proceedings.
(a) (i) there are no actions or proceedings pending or, to the
knowledge of any Seller or the Company, threatened against, relating to or
affecting the Company, or any of its Assets which (A) could reasonably be
expected to result in the issuance of an Order restraining, enjoining or
otherwise prohibiting or making illegal any of the transactions contemplated by
this Agreement or otherwise result in a material diminution of the benefits
contemplated by this Agreement to Purchaser, or (B) if determined adversely to
the Company, could reasonably be expected to result in (x) any injunction or
other equitable relief against the Company, or (y) Losses by the Company,
individually or in the aggregate with Losses in respect of other such actions or
proceedings, exceeding $10,000;
(ii) there are no facts or circumstances known to any Seller
or to the Company that could reasonably be expected to give rise to any action
or proceeding that would be required to be disclosed pursuant to clause (a)(i)
above;
(iii) neither any Seller nor the Company has received notice,
or is aware of any Orders outstanding against the Company; and
(iv) neither any Seller nor the Company has received notice or
is aware of any defects, dangerous or substandard conditions in the products or
materials sold, distributed, or to be sold or distributed by the Company that
could cause bodily injury, sickness, disease, death, or damage to property, or
result in loss of use of property, or any claim, suit, demand for arbitration or
notice seeking damages for bodily injury, sickness, disease, death, or damage to
property, or loss of use or property.
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(b) Prior to the execution of this Agreement, each Seller and the
Company has delivered all responses of counsel for the Company to auditors'
requests for information regarding actions or proceedings pending or threatened
against, relating to or affecting the Company during the period commencing
January 1, 1995.
2.13 Compliance with Laws and Orders. None of the Sellers or the Company
has received at any time since January 1, 1995 any notice that the Company is or
has been at any time since such date, in violation of or in default under, any
Law or Order applicable to the Company or any of its Assets. In furtherance and
not limitation of the foregoing, neither any Seller nor the Company has violated
any federal or state securities law in connection with the offer, sale or
purchase of any securities.
2.14 Benefit Plans; ERISA. The Company has no ERISA benefit plan.
2.15 Real Property. Except for property described on Exhibit A as part of
the Distributed Assets:
(a) The Disclosure Schedule lists (i) each parcel of real property
owned (the "Owned Real Property") by the Company, (ii) each parcel of real
property leased or subleased or otherwise occupied by the Company as tenant or
subtenant (the "Leased Real Property"; together with the Owned Real Property,
the "Real Property") together with a true and correct list of all such leases,
subleases or other similar agreements and any amendments, modifications or
extensions thereto (the "Real Property Leases"), and (iii) all Liens relating to
or affecting any parcel of Real Property, in each case identifying the owner,
lessor and lessee thereof.
(b) The Company has good and marketable title to its Owned Real
Property, free and clear of all Liens.
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(c) Subject to the terms of its leases, the Company has a valid and
subsisting leasehold estate in and the right to quiet enjoyment to the Leased
Real Property for the full term of the lease thereof. Each Real Property Lease
is a legal, valid and binding agreement, enforceable in accordance with its
terms, of the Company and of each other Person that is a party thereto, and
there is no, and neither any Seller nor the Company has knowledge of any nor
received any notice of any, default (or any condition or event which, after
notice or lapse of time or both, would constitute a default) thereunder. The
Company has not assigned, sublet, transferred, hypothecated or otherwise
disposed of its interest in any Real Property Lease. No penalties are accrued
and unpaid under any Real Property Lease.
(d) Sellers have delivered to Purchaser prior to the execution of
this Agreement true and complete copies of all (i) title policies, mortgages,
deeds of trust, deeds, leases, easements, restrictive covenants, certificates of
occupancy, and similar documents, and all amendments thereto concerning the
Owned Real Property, and (ii) Real Property Leases and, to the extent reasonably
available, all other documents referred to in clause (i) of this paragraph (f)
with respect to the Leased Real Property.
(e) The improvements on the Real Property are in good operating
condition and in a state of good maintenance and repair, ordinary wear and tear
excepted, are adequate and suitable for the purposes for which they are
presently being used and, to the knowledge of each Seller and of the Company,
there are no condemnation or appropriation proceedings pending or threatened
against Real Property or the improvements thereon.
(f) Neither any Seller nor the Company has any knowledge of any
claim, action or proceeding, actual or threatened, against the Company or the
Real Property by any Person which would materially affect the future use,
occupancy or value of the Real Property or any part thereof.
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2.16 Personal Property. The Company is in possession of and has good and
marketable title to, or has valid leasehold interests in or valid rights under
contract to use, all personal property used in the conduct of its business,
including all personal property reflected on the Financial Statements and
personal property acquired since January 31, 1998 other than property disposed
of since such date in the ordinary course of business consistent with past
practice and the terms of this Agreement. All such personal property is free and
clear of all Liens, and is adequate and suitable for the conduct by the Company
of the business presently conducted by it, and is in good working order and
condition, ordinary wear and tear excepted, and its use complies in all material
respects with all applicable Laws. After the distribution of the Distributed
Assets, the Company's equipment and vehicles will have a book value (computed
per GAAP) or market value (whichever is greater) of at least $2.5 million. The
Distributed Assets have not been used in the conduct of the Fly Ash Business,
except for incidental uses in the Company's business generally.
2.17 Intellectual Property Rights. The Company has no interests in, or
uses no intellectual property, except as described in the Disclosure Schedule.
The Company either has all right, title and interest in or a valid and binding
license to use such intellectual property. Except as disclosed therein, (i) the
Company has the right to use the intellectual property described therein, (ii)
all registrations on behalf of the Company with and applications to Governmental
or Regulatory Authorities in respect of such intellectual property are valid and
in full force and effect and are not subject to the payment of any Taxes or
maintenance fees or the taking of any other actions by the Company to maintain
their validity or effectiveness, (iii) all copyrightable materials used by the
Company are works-for-hire and are owned by the Company, (iv) there are no
restrictions on the direct or indirect transfer of any License, or any interest
therein, held by the Company in respect of such intellectual property, (v) the
Sellers have delivered, or have caused the Company to deliver, to Purchaser
prior to the execution of this Agreement documentation with respect to any
invention, process, design, computer program or other know-how or trade secret
included in such intellectual property, which documentation is accurate and
complete and sufficient in detail and content to identify and explain such
invention, process, design, computer program or other know-how or trade
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secret, (vi) the Sellers and the Company have taken reasonable security measures
to protect the secrecy, confidentiality and value of their trade secrets, (vii)
neither any Seller nor the Company is or has received any notice that it is, in
default (or with the giving of notice or lapse of time or both, would be in
default) under any License to use such intellectual property and (viii) neither
any Seller nor the Company has any knowledge that such intellectual property is
being infringed by any other Person. To the knowledge of each Seller and the
Company, the Company is not infringing any intellectual property of any Person,
and no litigation is pending and no claim has been made or, to the knowledge of
any Seller or of the Company, has been threatened to such effect.
2.18 Contracts.
(a) The Disclosure Schedule contains a true and complete list of
each of the following Contracts or other arrangements (true and complete copies,
or, if none, reasonably complete and accurate written descriptions of which,
together with all amendments and supplements thereto and all waivers of any
terms thereof, have been delivered to Purchaser prior to the execution of this
Agreement), to which the Company is a party or by which any of its Assets is
bound.
(i) (A) all Contracts providing for a commitment of employment
or consultation services for a specified or unspecified term, the name, position
and rate of compensation of each Person party to such a Contract and the
expiration date of each such Contract; and (B) any written or unwritten
representations, commitments, promises, communications or courses of conduct
involving an obligation of the Company to make payments (with or without notice,
passage of time or both) to any Person in connection with, or as a consequence
of, the transactions contemplated hereby or to any employee, other than with
respect to salary or incentive compensation payments in the ordinary course of
business consistent with past practice;
(ii) all Contracts with any Person containing any provision or
covenant prohibiting or limiting the ability of the Company to engage in any
business activity or compete with
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any Person or prohibiting or limiting the ability of any Person to compete with
the Company or prohibiting or limiting disclosure of confidential or proprietary
information;
(iii) all partnership, joint venture, shareholders' or other
similar Contracts with any Person;
(iv) all Contracts relating to Indebtedness of the Company;
(v) all Contracts with independent contractors, distributors,
dealers, manufacturers' representatives, sales agencies or franchisees;
(vi) all guarantees of any Indebtedness or other obligations
of the Company or any third Person;
(vii) all Contracts relating to the future disposition or
acquisition of any Assets, other than dispositions or acquisitions in the
ordinary course of business consistent with past practice and the provisions of
this Agreement;
(viii)all Contracts between or among the Company and any
Seller, any current or former officer, director, stockholder or Affiliate of the
Company or of any such officer, director, stockholder or Affiliate, on the other
hand;
(ix) all collective bargaining or similar labor Contracts;
(x) all Contracts that (A) limit or contain restrictions on
the ability of the Company to declare or pay dividends on, to make any other
distribution in respect of or to issue or purchase, redeem or otherwise acquire
its capital stock, to incur Indebtedness, to incur or suffer to exist any Lien,
to purchase or sell any Assets or to change the lines of business, (B) require
the Company to maintain specified financial ratios or levels of net worth or
other indicia of financial
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condition or (C) require the Company to maintain insurance in certain amounts or
with certain coverages; and
(xi) all other Contracts, including but not limited to
Contracts with customers, that involve the payment or potential payment,
pursuant to the terms of any such Contract, by or to the Company of more than
$10,000 and all powers of attorney and comparable delegations of authority.
(b) Each material Contract is in full force and effect and
constitutes a legal, valid and binding agreement, enforceable in accordance with
its terms, of each party thereto; and neither the Company nor, to the knowledge
of any Seller, no other party to such Contract is, or has received notice that
it is, in violation or breach of or default under any such Contract (or with
notice or lapse of time or both, would be violation or breach of or default
under any such Contract).
(c) The Company is not a party to or bound by any Contract that has
been or could reasonably be expected to be, individually or in the aggregate
with any other such Contracts, materially adverse to the business or condition
of the Company.
(d) To the extent any of the guaranties for the benefit of the
Company or any of its Assets are not integrated with Contracts disclosed on the
Disclosure Schedule, each such guaranty is in full force and effect and
constitutes a legal, valid and binding agreement, enforceable in accordance with
its terms, or each party thereto; and neither the guarantor thereunder nor, to
the knowledge of any Seller or the Company or any other party to such guaranty
is, or has received notice that it is, in violation or breach of or default
under any such guaranty (or with notice or lapse of time or both, would be in
violation or breach of default under any such guaranty).
2.19 Licenses. The Disclosure Schedule contains a true and complete list
of all Licenses used in and material to the business or operations of the
Company, setting forth the owner, the
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function and the expiration and renewal date of each. Prior to the execution of
this Agreement, the Sellers or the Company has delivered to Purchaser true and
complete copies of all such Licenses.
Except as disclosed on the Disclosure Schedule:
(a) the Company owns or validly holds all Licenses that are material
to its respective business or operations, and after the Closing, the Company
will continue to hold all existing permits to transport fly ash, bottom ash and
other coal combustion byproducts and cement and cement products;
(b) each license is valid, binding and in full force and effect;
(c) neither any Seller nor the Company is, or has received any
notice that it is, in default (or with the giving of notice of lapse of time or
both, would be in default) under any such License; and
(d) the transactions contemplated in this Agreement will not violate
any such License or give any other party thereto rights to terminate the License
or change the terms thereof.
2.20 Insurance. The Disclosure Schedule contains a true and complete list
(including the names of the insurers, the expiration dates thereof, the period
of time covered thereby and a brief description of the interests insured
thereby) of all liability, property, workers' compensation, directors' and
officers' liability and other insurance policies currently in effect that insure
the business, operations or employees of the Company or affect or relate to the
ownership, use or operation of any of the Assets of the Company and that (i)
have been issued to the Company, or (ii) have been issued to any Person (other
than the Company) for the benefit of the Company. Each policy is valid and
binding and in full force and effect, all premiums due thereunder have been paid
when due and none of the Sellers or the Company or the Person to whom such
policy has been issued has received any notice of cancellation or termination in
respect of any such policy or is in
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default thereunder, and the Company does not know of any reason or state of
facts that could lead to the cancellation of such policies. The insurance
policies (i) in light of the business, operations and Assets of the Company are
in amounts and have coverages that are reasonable and customary for Persons
engaged in such businesses and operations and having such Assets, and (ii) are
in amounts and have coverages as required by any Contract to which the Company
is a party. The Disclosure Schedule lists all claims made under any insurance
policies covering the Company since January 1, 1995. Neither any Seller nor the
Company has received notice that any insurer under any policy referred to in
this Section is denying liability with respect to a claim thereunder or
defending under a reservation of rights clause. Since January 1, 1995, the
Company has, in light of its business, location, operations and Assets
maintained, at all times, without interruption appropriate insurance, in scope
and amount of coverages.
2.21 Affiliate Transactions. Except for the Distributed Assets and
Liabilities described on Exhibit A, there are no Liabilities between the Company
and any current or former officer, director, stockholder, Affiliate of the
Company or any Affiliate of any such officer, director, stockholder or
Affiliate, and the Company does not provide or cause to be provided any assets,
services or facilities to any such current or former officer, director,
stockholder or Affiliate.
2.22 Employees; Labor Relations. The Company is not engaged in any unfair
labor practice. There is (i) no unfair labor practice complaint pending or, to
the knowledge of any Seller or the Company, threatened against the Company
before the National Labor Relations Board or comparable or similar state agency,
and no grievance or arbitration proceeding arising out of under collective
bargaining agreements is so pending or, to the knowledge of any Seller or of the
Company, threatened against the Company, (ii) no strike, labor dispute, slowdown
or stoppage pending or, to the knowledge of any Seller or the Company,
threatened against the Company, and (iii) no union representation question with
respect to the employees of the Company or, to the knowledge of any Seller or
the Company, no union organization activities are taking place.
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2.23 Environmental Matters.
(a) The Company has obtained and holds all necessary Environmental
Permits.
(b) Except as described on the Disclosure Schedule:
(i) The Company is, and at all times has been, in full
compliance with, and has not been and is not in violation of or liable under,
any Environmental Law. Neither any Seller nor the Company has any basis to
expect, nor has any of them or any other Person for whose conduct it may be held
to be responsible received, any actual or threatened Order, notice, or other
communication from (A) any Governmental Body or private citizen acting in the
public interest, or (B) the current or prior owner or operator of any
Facilities, of any actual or potential violation or failure to comply with any
Environmental Law, or of any actual or threatened obligation to undertake or
bear the cost of any Environmental, Health, and Safety Liabilities with respect
to any of the Facilities or any other properties or assets (whether real,
personal, or mixed) in which the Company has had an interest, or with respect to
any property or Facility at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used, or processed by the Company
or any other Person for whose conduct they are or may be held responsible, or
from which Hazardous Materials have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.
(ii) There are no pending or, to the knowledge of any Seller
or the Company, threatened claims, encumbrances, or other restrictions of any
nature, resulting from any Environmental, Health, and Safety Liabilities or
arising under or pursuant to any Environmental Law, with respect to or affecting
any of the Facilities or any other properties and assets (whether real,
personal, or mixed) in which any Seller or the Company has or had an interest.
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(iii) Neither any Seller nor the Company has knowledge of or
any basis to expect, nor has any of them or any other Person for whose conduct
they are or may be held responsible received any citation, directive, inquiry,
notice, Order, summons, warning, or other communication that relates to
Hazardous Activity, Hazardous Materials, or any alleged, actual, or potential
violation or failure to comply with any Environmental Law, or of any
Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other Assets in which the Company had an interest, or with
respect to any location to which Hazardous Materials generated, manufactured,
refined, transferred, imported, used, or processed by the Company or any other
Person for whose conduct it may be held responsible, have been transported,
treated, stored, handled, transferred, disposed, recycled, or received.
(iv) Neither the Company nor any other Person for whose
conduct it may be held responsible has any Environmental, Health, and Safety
Liabilities with respect to the Facilities or with respect to any other Assets
(whether real, personal, or mixed) in which the Company (or any predecessor
thereof), has or had an interest, or at any property geologically or
hydrologically adjoining the Facilities or any such Assets.
(c) To Seller's knowledge, there are no Hazardous Materials present
on or in the Environment at the Facilities or at any geologically or
hydrologically adjoining property, including any Hazardous Materials contained
in barrels, above or underground storage tanks, landfills, land deposits, dumps,
equipment (whether moveable or fixed) or other containers, either temporary or
permanent, and deposited or located in land, water, sumps, or any other part of
the Facilities or such adjoining property, or incorporated into any structure
therein or thereon. Neither the Company nor any other Person for whose conduct
it may be held responsible, or any other Person, has permitted or conducted, or
is aware of, any Hazardous Activity conducted with respect to the Facilities or
any other properties or assets (whether real, personal, or mixed) in which any
Seller or the Company has or had an interest except in full compliance with all
applicable Environmental Laws.
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(d) There has been no Release or, to the Knowledge of any Seller or
of the Company, any threat of Release of any Hazardous Materials at or from the
Facilities or at any other locations where any Hazardous Materials were
generated, manufactured, refined, transferred, produced, imported, used, or
processed from or by the Facilities, or from or by any other properties and
assets (whether real, personal, or mixed) in which the Company has or had an
interest, or any geologically or hydrologically adjoining property.
(e) Sellers have delivered to Purchaser true and complete copies and
results of any reports, studies, analyses, tests, and monitoring possessed or
initiated by any Seller or the Company pertaining to Hazardous Materials or
Hazardous Activities in, on, or under the Facilities, or concerning compliance
by any Seller, the Company or any other Person for whose conduct it or they are
or may be held responsible, with Environmental Laws.
(f) There are no Liens arising under or pursuant to any
Environmental Law on any Owned Real Property or Leased Real Property and there
are no facts, circumstances, or conditions that could reasonably be expected to
restrict, encumber, or result in the imposition of special conditions that could
reasonably be expected to restrict, encumber, or result in the imposition of
special conditions under any Environmental Law with respect to the ownership,
occupancy, development, use, or transferability of any Real Property.
(g) There are no (i) underground storage tanks, active or abandoned,
(ii) polychlorinated biphenyl containing equipment, or (iii) asbestos containing
material, at any Real Property.
(h) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted by, on behalf of, or which
are in the possession of any Seller or the Company with respect to any Asset of,
or property that is adjacent to, an Asset of the Company which have not been
delivered to Purchaser prior to execution of this Agreement.
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2.24 Substantial Customers and Suppliers. Prior to Closing, the Company or
the Sellers will deliver to Purchaser a list of the ten (10) largest customers
of the Company on the basis of revenues for goods sold or services provided for
1997, as well as a list of the ten (10) largest suppliers of the Company on the
basis of cost of goods or services purchased for 1997. To the knowledge of each
Seller and the Company, no such customer or supplier is insolvent or threatened
with bankruptcy or insolvency.
2.25 Accounts Receivable. The accounts and notes receivable of the Company
reflected on the balance sheets included in the Financial Statements for the
period ended December 31, 1997, and all accounts and notes receivable arising
subsequent to such date, (i) arose from bona fide sales transactions in the
ordinary course of business consistent with past practice and are payable on
ordinary trade terms, (ii) are legal, valid and binding obligations of the
respective debtors enforceable in accordance with their respective terms, (iii)
are not subject to any valid set-off or counterclaim, (iv) do not represent
obligations for goods sold on consignment, on approval or on a sale-or-return
basis or subject to any other repurchase or return arrangements, and (v) are not
subject of any Actions or Proceedings brought by or on behalf of the Company.
2.26 Other Negotiations; Brokers. No Seller, nor the Company, nor any of
their respective Affiliates (nor any investment banker, financial advisor,
attorney, accountant or other Person retained by or acting for or on behalf of
any Seller or the Company or any such Affiliate) has entered into any agreement
or had any discussions with any third party regarding any transaction involving
the Company which could result in the Company, Purchaser or its stockholders, or
any officer, director, employee, agent or Affiliate of any of them, being
subject to any claim for liability to said third party as a result of entering
into this Agreement or consummating the transactions contemplated hereby or
thereby. No agent, broker, finder, investment banker, financial advisor or other
Person will be entitled to any fee, commission or other compensation in
connection with the transactions contemplated by this Agreement on the basis of
any act or statement made by any Seller, the Company or any of their respective
Affiliates, or any investment banker, financial advisor,
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attorney, accountant or other Person retained by or acting for or on behalf of a
Seller, the Company, or any such Affiliate.
2.27. Holding Company Act and Investment Company Act Status. The Company
is not a "holding company" or a "public utility company" as such terms are
defined in the Public Utility Company Act of 1935, as amended. The Company is
not an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
2.28 Bank and Brokerage Accounts. The Company or Sellers with deliver to
Purchaser prior to Closing a list of the names and locations of all banks,
securities brokers and other financial institutions at which the Company has an
account or safe deposit box or maintains a banking, custodial, trading or other
similar relationship; and a true and complete list and description of each such
account, box and relationship, indicating in each case the account number and
the names of all persons having signatory power and respect thereto.
2.29 Exemption from Registration. The offer and sale of the Purchased
Stock made pursuant to this Agreement are exempt from the registration
requirements of the Securities Act. Neither any Seller, nor the Company nor any
Person authorized to act on behalf of any of the foregoing has, in connection
with the offering of the Purchased Stock, engaged in (i) any form of general
solicitation or general advertising (as those terms are used within the meaning
of Rule 501(c) under the Securities Act), (ii) any action involving a public
offering within the meaning of section 4(2) of the Securities Act, or (iii) any
action that would require the registration under the Securities Act of the
offering and sale of the Purchased Stock pursuant to this Agreement or that
would violate applicable state securities or "blue sky" laws.
2.30 Disclosure. The representations and warranties contained in this
Agreement, and the statements contained in the Disclosure Schedule or in the
certificates, lists and other writings
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furnished to Purchaser pursuant to any provision of this Agreement (including
the Financial Statements), when taken together, do not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements herein and therein, in the light of the circumstances
under which they were made, not misleading.
2.31 Survival of Representations, Warranties, Covenants and Agreements.
Even though the Purchaser may investigate the affairs of the Company and attempt
to confirm the accuracy of the representations and warranties of the Sellers,
except to the extent Purchaser may have actual contrary knowledge at the time of
Closing, the Purchaser shall have the right to rely fully upon the
representations, warranties, covenants and agreements of the Sellers contained
in this Agreement. All such representations, warranties, covenants and
agreements will survive the Closing. Neither party may assert a claim based on
information the other party can show was known by such party on the date of the
Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Sellers as follows:
3.01 Organization and Qualification. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas. Purchaser is duly qualified, licensed or admitted to do business as in
good standing in each jurisdiction in which the ownership, use or leasing of its
Assets, or the conduct or nature of its business, makes such qualification,
licensing or admission necessary, except for such failures to be so qualified,
licensed or admitted and in good standing which, individually or in the
aggregate, could not be reasonably expected to have a material adverse effect on
the validity or enforceability of this Agreement or on the ability of Purchaser
to perform its obligations hereunder or thereunder.
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3.02 Authority Relative to this Agreement. Purchaser has full corporate
power and authority to enter into this Agreement and to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement by Purchaser and the consummation by
Purchaser of the transactions contemplated hereby have been duly and validly
approved by its board of directors and no other corporate proceedings on the
part of Purchaser or its stockholders are necessary to authorize the execution,
delivery and performance of this Agreement by Purchaser and the consummation by
Purchaser of the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Purchaser and constitutes a legal, valid
and binding obligation of Purchaser enforceable against Purchaser in accordance
with its terms.
3.03 No Conflicts. The execution and delivery by Purchaser of this
Agreement do not, and the performance by Purchaser of its obligations under this
Agreement and the consummation of the transactions contemplated hereby, do not
and will not:
(a) conflict or result in a violation or breach of any of the terms,
conditions or provisions of the certificate of incorporation or by-laws of
Purchaser;
(b) subject to obtaining the required consents, approvals and
actions, and giving all required notices, if any, conflict with or result in a
violation or breach of any term or provision of any Law or Order applicable to
Purchaser or its Assets and Properties; or
(c) (i) conflict with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time or both) a default under, or
(iii) require Purchaser to obtain any consent, approval or action of, make any
filing with or give any notice to any Person as a result or under the terms of
any Contract or License to which Purchaser is a party, or by which it is bound.
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3.04 Governmental Approvals and Filings. No consent, approval or action
of, filing with or notice to any Governmental or Regulatory Authority on the
part of Purchaser is required in connection with the execution, delivery and
performance of this Agreement to which it is a party or the consummation of the
transactions contemplated hereby or thereby, and the transaction contemplated
hereby does not violate any state or federal antitrust laws.
3.05 Legal Proceedings. There are no Actions or Proceedings pending or, to
the knowledge of Purchaser, threatened against, relating to or affecting
Purchaser or any of its Assets which (i) could reasonably be expected to result
in the issuance of an Order restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated by this
Agreement, or (ii) could reasonably be expected, individually or in the
aggregate with other such Actions or Proceedings, to have a material adverse
effect on the business or condition of Purchaser.
3.06 Brokers. No agent, broker, finder, investment banker, financial
advisor or other similar Person will be entitled to any fee, commission or other
compensation in connection with any of the transactions contemplated by this
Agreement on the basis of any act or statement made by Purchaser.
3.07 Purchase for Investment. The Purchased Stock will be acquired by
Purchaser for its own account for the purpose of investment and not with a view
to the resale or distribution of all or any part of the Purchased Stock in
violation of the Securities Act.
3.08 Survival of Representations, Warranties, Covenants and Agreements.
Even though the Sellers may investigate the affairs of the Purchaser and confirm
the accuracy of the representations and warranties of the Purchaser contained in
this Agreement, except to the extent Sellers may have actual contrary knowledge
at the time of Closing, the Sellers shall have the right to rely fully upon the
representations, warranties, covenants and agreements of the Purchaser
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contained in this Agreement. All such representations, warranties, covenants and
agreements will survive the Closing. Neither party may assert a claim based on
information the other party can show was known by such party on the date of the
Closing.
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ARTICLE IV
COVENANTS BY SELLERS
4.01 Noncompetition; Non Solicitation.
(a) (i) Except as set forth in subsection 4.01(a)(ii) below, for a
period of five (5) years from the Closing Date, no Seller, alone or in
conjunction with any other Person, or directly or indirectly through his or her
present or future Affiliates, will directly or indirectly own, manage, operate,
join, have a financial interest in, control or participate in the ownership,
management, operation or control of, or use or permit his or her name to be used
in connection with, or be otherwise connected in any manner with, (A) any
business or enterprise engaged in the design, development, manufacture,
distribution or sale of any products, or the provision of any services, which
the Company was designing, developing, manufacturing, distributing, selling or
providing at any time subsequent to December 31, 1996 up to and including the
Closing Date, or (B) any business which is similar to the business of disposing
or selling coal combustion by-products or competitive with the business carried
on or planned by the Company at any time subsequent to December 31, 1996 up to
and including the Closing Date, provided that the foregoing restriction shall
only apply to businesses or enterprises with active operations located within a
750 mile radius of Pine Bluff, Arkansas and shall not be construed to prohibit
the ownership, in the aggregate, of not more than two percent (2%) of any class
of securities of any corporation which is engaged in any of the businesses or
enterprises described in clauses (A) and (B) above, having a class of securities
registered pursuant to the Securities Exchange Act of 1934, as amended, which
securities are publicly owned and regularly traded on any national exchange or
in the over-the-counter market.
(ii) The restriction of subsection 4.01(a)(i) above shall not
apply to the following activities: (A) the furnishing of over-the-road
transportation services with respect to commodities other than fly ash, bottom
ash, BAB, other coal combustion byproducts, CKD and
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LKD, (B) the selling or leasing of equipment (such as backhoes, dozers, tractors
and front end loaders), (C) road construction (but not stabilization), and (D)
general contracting activities such as light construction, installing sewer and
water lines, small building, etc., but not with respect to any electric power
plant.
(b) Except as set forth in the Disclosure Schedule, for a period of
five (5) years from the Closing Date, no Seller shall directly or indirectly, or
through an Affiliate, (i) influence any individual who was an employee or
consultant of the Company at any time during the time any Seller was an indirect
or direct owner of securities of the Company, to terminate his or her employment
or consulting relationship with the Company, (ii) interfere in any other way
with the employment, or other relationship, of any employee or consultant of the
Company or (iii) cause or attempt to cause or participate in any way in any
discussion or negotiation concerning (x) any client, customer or supplier of the
Company or (y) any prospective client, customer or supplier of the Company from
engaging in business with the Company.
(c) Each Seller agrees that Purchaser's remedies at law for any
breach or threat of breach by it of any of the provisions of this Section 4.01
will be inadequate, and that, in addition to any other remedy to which Purchaser
may be entitled at law or in equity, Purchaser shall be entitled to a temporary
or permanent injunction or injunctions or temporary restraining orders or orders
to prevent breaches of the provisions of this Section 4.01 and to enforce
specifically the terms and provisions hereof, in each case without the need to
post any security or bond. Nothing herein contained shall be construed as
prohibiting Purchaser from pursuing, in addition, any other remedies available
to it for such breach or threatened breach. A waiver by the Purchaser of any
breach of any provision hereof shall not operate or be construed as a waiver of
a breach of any other provisions of this Agreement or of any subsequent breach
thereof.
(d) The parties hereto consider the restrictions contained in this
Section 4.01 hereof to be reasonable for the purpose of preserving the goodwill,
proprietary rights and going
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concern value of the Company, but if a final judicial determination is made by a
court having jurisdiction that the time or territory or any other restriction
contained in this Section 4.01 is an unenforceable restriction on the Sellers'
activities, the provisions of this Section 4.01 shall not be rendered void but
shall be deemed amended to apply as to such maximum time and territory and to
such other extent as such court may judicially determine or indicate to be
reasonable. Alternatively, if the court referred to above finds that any
restriction contained in this Section 4.01 or any remedy provided herein is
unenforceable, and such restriction or remedy cannot be amended so as to make it
enforceable, such finding shall not affect the enforceability of any of the
other restrictions contained therein or the availability of any other remedy.
The provisions of this Section 4.01 shall in no respect limit or otherwise
affect the Seller's obligations under other agreements with the Company.
4.02 Regulatory and Other Approvals. Each Seller shall, and shall cause
the Company to, (a) take all necessary or desirable steps and proceed diligently
and in good faith and use its best efforts, as promptly as practicable, to
obtain all consents, approvals or actions of, to make all filings with and to
give all notices to, Governmental or Regulatory Authorities or any other Person
required to consummate the transactions contemplated hereby, (b) provide such
other information and communications to such Governmental or Regulatory
Authorities or other Persons as Purchaser or such Governmental or Regulatory
Authorities or other Persons may reasonably request and (c) cooperate with
Purchaser as promptly as practicable in obtaining all consents, approvals or
actions of, making all filings with and giving all notices to, Governmental or
Regulatory Authorities or other Persons required of Purchaser to consummate the
transactions contemplated hereby. Sellers will provide prompt notification to
Purchaser when any such consent, approval, action, filing or notice referred to
in clause (a) above is obtained, taken, made or given, as applicable, and will
advise Purchaser of any communications (and, unless precluded by Law, provide
copies of any such communications that are in writing) with any Governmental or
Regulatory Authority or other Person regarding any of the transactions
contemplated by this Agreement.
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4.03 Investigation by Purchaser. From the date hereof until the Closing
and thereafter for so long as Seller owns any equity interest in the Company,
each of the Sellers shall: (a) cooperate with and provide Purchaser and its
representatives full access, upon reasonable prior notice and during normal
business hours, to all officers, employees, agents and accountants of the
Company and its Assets and Books and Records and to officers, employees, agents
and accountants, and (b) furnish Purchaser and such representatives with all
such information and data (including copies of Contracts, Benefit Plans and
other Books and Records) concerning the business and operations of the Company,
as Purchaser or any of such other representatives reasonably may request in
connection with such investigation.
ARTICLE V
CLOSING CONDITIONS
5.01 Condition to the Obligations of the Purchaser. The obligations of
Purchaser hereunder to purchase the Purchased Stock are subject to the
fulfillment, at or prior to the Closing, of the following conditions precedent
(any or all of which may be waived in whole or in part by Purchaser in its sole
discretion):
(a) Representations and Warranties. Each of the representations and
warranties made by Sellers in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and on and as of the Closing
Date as though each such representation and warranty was made on and as of the
Closing Date.
(b) Performance. The Sellers shall have performed and complied with
each agreement, covenant and obligation required by this Agreement to be so
performed or complied with them at or before the Closing.
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(c) Orders and Laws. There shall not be in effect on the Closing
Date any Order or Law restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement or which could reasonably be expected to otherwise result in a
material diminution of the benefits of the transactions contemplated by this
Agreement to Purchaser, and there shall not be pending or threatened on the
Closing Date any Action or Proceeding (i) which could reasonably be expected to
result in the issuance of any such Order or the enactment, promulgation or
deemed applicability to Purchaser, the Company, any Seller or the transactions
contemplated by this Agreement of any such Law; or (ii) wherein an unfavorable
judgment, decree or Order would prevent the carrying out of this Agreement or
any of the transactions or events contemplated hereby or declare unlawful any of
the transactions or events contemplated by this Agreement or present a risk of
damages to the Purchaser.
(d) Regulatory Consents and Approvals. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit Purchaser and Sellers to perform their obligations under
this Agreement and to consummate the transactions contemplated hereby (i) shall
have been duly obtained, made or given, (ii) shall be in form and substance
reasonably satisfactory to Purchaser, (iii) shall not impose any limitations or
restrictions on Purchaser, (iv) shall not be subject to the satisfaction of any
condition that has not been satisfied or waived, and (v) shall be in full force
and effect, and all terminations or expirations of waiting periods imposed by
any Governmental or Regulatory Authority necessary for the consummation for the
transactions contemplated by this Agreement shall have occurred.
(e) Third Party Consents. All consents (or waivers) to the
performance by the Purchaser of its obligations under this Agreement, or to the
consummation for the transactions contemplated hereby as are required under any
Contract or License to which the Purchaser is a party or by which any of its
Assets are bound and where the failure to obtain any such consent (or in lieu
thereof waiver) could reasonably be expected, individually or in the aggregate
with other such failures, to materially adversely affect the Purchaser or the
business or condition of the Company
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or otherwise result in a material diminution of the benefits of the transactions
contemplated by this Agreement to the Purchaser in its sole discretion, (i)
shall have been obtained, (ii) shall be in form and substance satisfactory to
the Purchaser in its sole discretion, (iii) shall not be subject to the
satisfaction of any condition that has not been satisfied or waived and (iv)
shall be in full force and effect.
(f) Purchaser's Investigation. Purchaser shall not have discovered,
as a result of its investigation and review pursuant to Section 4.03 hereof, any
material condition (financial or otherwise) relating in any way to the Company,
its Assets, business or prospects, that convinces Purchaser, in its reasonable
discretion, that it is not advisable to complete the Closing.
(g) 1997 Operating Results. The Purchase Price is based upon the
assumption that calendar 1997 EBIT (defined as net income plus owner
compensation, direct or indirect) is greater than $1.4 million with revenues of
at least $8.7 million. If Purchaser discovers that either of such conditions has
not been fulfilled, then Purchaser may elect not to complete the Closing.
(h) Sellers' Certificates. Sellers shall have delivered to Purchaser
(i) a certificate, dated the Closing Date and executed by an executive officer
of the Company, substantially in the form and to the effect of Exhibit B hereto
and (ii) a certificate, dated the Closing Date and executed by the chief
financial officer of the Company, substantially in the form of Exhibit C hereto.
(i) Resignations of Officers and Directors. Receipt by Purchaser of
resignations of all current officers and directors of the Company, effective as
of the Closing Date.
(j) Opinion of Counsel. Purchaser shall have received the opinion of
Joseph A. Strode, Esq., counsel to the Company in connection with this
Agreement, dated the Closing Date,
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substantially in the form and to the effect of Exhibit D hereto, and to such
further effect as Purchaser may reasonably request.
(k) Disclosure Schedule. Receipt by Purchaser of a copy of the
Disclosure Schedule, updated and current through the Closing Date.
(l) Good Standing Certificates. Sellers shall have delivered to
Purchaser (i) copies of the certificate or articles of incorporation (or other
comparable corporate charter documents), including all amendments thereto of the
Company certified by the applicable Secretary of State or other appropriate
governmental official, (ii) certificates from the applicable Secretary of State
or other appropriate governmental official to the effect that the Company is in
good standing in such jurisdiction, listing all charter documents of the Company
on file and attesting to its payment of all franchise or similar Taxes, and
(iii) certificates from the Secretary of State or other appropriate official in
each jurisdiction in which the Company is qualified or admitted to do business
to the effect that the Company is duly qualified or admitted in good standing in
such jurisdiction.
(m) Receipt of Purchased Stock. Certificates representing the
Purchased Stock shall have been transferred to Purchaser in accordance with the
terms of this Agreement.
(n) Distributed Assets and Liabilities. Sellers shall have caused
the Company to execute and deliver to Sellers and to Purchaser an Assignment and
Assumption Agreement in substantially the form of Exhibit E hereto, transferring
the Distributed Assets and Liabilities to Sellers.
(o) Payment of Indebtedness. Delivery of an undertaking executed by
all Sellers in the form and to the effect of Exhibit F hereto. Purchaser must
also receive evidence satisfactory to Purchaser that, except as disclosed on the
Disclosure Schedule, (i) all intercompany indebtedness owed by the Company to
any Seller has been cancelled or otherwise paid in full, and is of no further
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force and effect, (ii) all other indebtedness owing by the Company has been
retired, released or repaid, and (iii) the Company has been unconditionally
released from all obligations it may have in respect of (i) and (ii) above.
(p) No Adverse Change. There shall have occurred no material adverse
change in the business or condition of the Company between December 31, 1997 and
the Closing.
(q) Entergy Arkansas Consent. Purchaser shall have received a
consent executed by Entergy Arkansas, Inc. in favor of Purchaser acknowledging
that Key Company, Inc. may assign to the Company the "Replacement Ash
Marketing/Disposal Agreement" dated December 23, 1996, confirming that such
agreement is in full force and effect with no defaults.
Sellers shall be entitled to retain the $100,000 nonrefundable
deposit if the transaction contemplated hereby fails to close prior to May 1,
1998 for any reason other than Sellers' fraud, intentional misrepresentations,
refusal of any Seller to comply with the terms of this Agreement, or failure to
obtain the consent referred to in Section 5.01(q) above.
5.02 Conditions to the Obligations of the Sellers. The obligations of the
Sellers hereunder to sell the Purchased Stock to the Purchaser are subject to
the fulfillment, at or prior to the Closing, of the following conditions
precedent (any or all of which may be waived in whole or in part by the Sellers
in their sole discretion; any one of the Sellers may waive any of the following
conditions on behalf of all Sellers, but only in the manner specified in Section
9.07 hereof.):
(a) Representations and Warranties. Each of the representations and
warranties made by Purchaser in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and on and as of the Closing
Date as though each such representation and warranty was made on and as of the
Closing Date.
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(b) Performance. Purchaser shall have performed and complied with,
in all material respects, each agreement, covenant and obligation required by
this Agreement to be so performed or complied with by Purchaser at or before the
Closing.
(c) Orders and Laws. There shall not be in effect on the Closing
Date any Orders or Laws restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated by this
Agreement, and there shall not be pending or threatened on the Closing Date any
Action or Proceeding or any other action (i) which could reasonably be expected
to result in the issuance of any such Order or the enactment, promulgation or
deemed applicability to Purchaser, the Company, any Seller or the transactions
contemplated by this Agreement of any such Law; or (ii) wherein an unfavorable
judgment, decree or Order would prevent the carrying out of this Agreement or
any of the transactions or events contemplated hereby or declare unlawful any of
the transactions or events contemplated by this Agreement.
(d) Regulatory Consents and Approvals. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit Purchaser and Sellers to perform their obligations under
this Agreement and to consummate the transactions contemplated hereby (i) shall
have been duly obtained, made or given, (ii) shall not be subject to the
satisfaction or any condition that has not been satisfied or waived, and (iii)
shall be in full force and effect, and all terminations or expirations of
waiting periods imposed by any Governmental or Regulatory Authority necessary
for the consummation of the transactions contemplated by this Agreement shall
have occurred.
(e) Officers' Certificates. Purchaser shall have delivered to
Sellers a certificate, dated the Closing Date and executed by the president or
vice-president of Purchaser, substantially in the form and to the effect of
Exhibit G hereto.
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(f) Opinion of Counsel. The Sellers shall have received the opinion
of Parsons Behle & Latimer, counsel of the Purchaser in connection with this
Agreement, dated the Closing Date, substantially in the form and to the effect
of Exhibit H hereto.
(g) Good Standing Certificates. Purchaser shall have delivered to
Sellers a copy of the certificate of incorporation, including all amendments
thereto of Purchaser certified by the Secretary of State of the State of Texas.
(h) Distributed Assets and Liabilities. Sellers shall have caused
the Company to execute and deliver to Sellers and to Purchaser an Assignment and
Assumption Agreement in substantially the form of Exhibit E hereto, transferring
the Distributed Assets and Liabilities to Sellers.
(i) Employment Agreement, Consulting Agreement. Purchaser shall have
executed Employment Agreements with Greg Thomas and each of the Sellers which
are mutually agreeable to the parties.
ARTICLE VI
TERMINATION
6.01 Termination Events. This Agreement may, by notice given prior to or
at the Closing, be terminated:
(a) by either Purchaser or by Sellers if a material breach of any
provision of this Agreement has been committed by the other party and such
breach has not been waived;
(b) (i) by Purchaser if any of the conditions in Section 5.01 has
not been satisfied as of the Closing Date or if satisfaction of such a condition
is or becomes impossible (other than
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through the failure of Purchaser to comply with its obligations under this
Agreement) and Purchaser has not waived such condition on or before the Closing
Date, or (ii) by Sellers, if any of the conditions in Section 5.02 has not been
satisfied as of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of a Seller to comply with
his or her obligations under this Agreement) and Sellers have not waived such
condition on or before the Closing Date;
(c) by mutual consent of Purchaser and Sellers; or
(d) by either Purchaser or by Sellers if the Closing has not
occurred (other than through the failure of any party seeking to terminate this
Agreement to comply fully with its obligations under this Agreement) on or
before April 30, 1998, or such later date as the parties may agree upon.
6.02 Effect of Termination. Each party's right of termination under
Section 6.01 is in addition to any other rights it may have under this Agreement
or otherwise, and its exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to Section 6.01, all
further obligations of the parties under this Agreement will terminate, except
that the obligations in Sections 9.03, 9.04 and 9.13 will survive; provided,
however, that if this Agreement is terminated by a party because of a breach of
the Agreement by the other party or because one or more of the conditions to the
terminating party's obligations under this Agreement is not satisfied as a
result of the other party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies (including
specific performance) will survive such termination unimpaired. On any
termination hereof, Seller may retain the $100,000 nonrefundable deposit, except
as provided in the final sentence of Section 5.01.
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ARTICLE VII
INDEMNIFICATION; TAX MATTERS
7.01 Indemnification.
(a) Each of the Sellers, jointly and severally, will indemnify the
Company, the Purchaser and their respective stockholders (other than the
Sellers) and the officers, directors, employees, agents and Affiliates of each
of them (other than the Sellers) in respect of, and hold each of them harmless
from and against, any and all Losses suffered, incurred or sustained by any of
them or to which any of them becomes subject, resulting from, arising out of
relating to any misrepresentation or breach of warranty or nonfulfillment of or
failure to perform any covenant or agreement on the part of any Sellers
contained in this Agreement (including, without limitation, any certificate
delivered in connection herewith or therewith). This indemnity is in addition to
the undertaking attached hereto as Exhibit F.
(b) Purchaser will indemnify each of the Sellers in respect of, and
hold him or her harmless from and against, any and all Losses suffered, incurred
or sustained by him or her or to which he or she becomes subject, resulting
from, arising out of or relating to any misrepresentation or breach of warranty
or nonfulfillment of or failure to perform any covenant or agreement on the part
of Purchaser contained in this Agreement (including, without limitation, any
certificate delivered in connection herewith or therewith).
(c) No party shall make any claim for indemnification under Section
7.01 until it shall have accumulated claims against another party equal in the
aggregate to $25,000 and then only for the amount by which such claims exceed
$25,000. Neither party shall make any single claim for an amount that is less
than $2,500.
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7.02 Method of Asserting Claims. All claims for indemnification by any
Indemnified Party under Section 7.01 will be asserted and resolved as follows:
(a) In order for an Indemnified Party to be entitled to any
indemnification provided for under Section 7.01 in respect of, arising out of or
involving a claim or demand made by any Person not a party to this Agreement
against the Indemnified Party, including a Claim relating to the Environment (a
"Third Party Claim"), the Indemnified Party shall deliver a Claim Notice to the
Indemnifying Party promptly after receipt by such Indemnified Party of written
notice of the Third Party Claim; provided, that failure to give such Claim
Notice shall not affect the indemnification provided hereunder except to the
extent the Indemnifying Party shall have been actually prejudiced as a result of
such failure.
(b) If a Third Party Claim is made against an Indemnified Party, the
Indemnifying Party shall be entitled to participate in the defense thereof and,
if it so chooses, to assume the defense thereof with counsel selected by the
Indemnifying Party, which counsel must be reasonably satisfactory to the
Indemnified Party. Should the Indemnifying Party so elect to assume the defense
of a Third Party Claim, the Indemnifying Party shall not be liable to the
Indemnified Party for legal expenses subsequently incurred by the Indemnified
Party in connection with the defense thereof, but shall continue to pay for any
expenses of investigation or any Loss suffered. If the Indemnifying Party
assumes such defense, the Indemnified Party shall have the right to participate
in the defense thereof and to employ counsel, at its own expense, separate from
the counsel employed by the Indemnifying Party. If (i) the Indemnifying Party
shall not assume the defense of a Third Party claim with counsel satisfactory to
the Indemnified Party within five Business Days of any Claim Notice, or (ii)
legal counsel for the Indemnified Party notifies the Indemnifying Party that
there are or may be legal defenses available to the Indemnifying Party or to
other Indemnified Parties which are different from or additional to those
available to the Indemnified Party, which, if the Indemnified Party and the
Indemnifying Party were to be represented by the same counsel, would constitute
a conflict of interest for such counsel or prejudice prosecution of the defenses
available to such
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Indemnified Party, or (iii) if the Indemnifying Party shall assume the defense
of a Third Party Claim and fail to diligently prosecute such defense, then in
each such case the Indemnified Party, by notice to the Indemnifying Party, may
employ its own counsel and control the defense of the Third Party Claim and the
Indemnifying Party shall be liable for the reasonable fees, charges and
disbursements of counsel employed by the Indemnified Party, and the Indemnified
Party shall be promptly reimbursed for any such fees, charges and disbursements,
as and when incurred. Whether the Indemnifying Party or the Indemnified Party
control the defense of any Third Party Claim, the parties hereto shall cooperate
in the defense thereof. Such cooperation shall include the retention and
provision to the counsel of the controlling party of records and information
which are reasonably relevant to such Third Party Claim, and making employees
available on a mutually convenient basis to provide additional information and
explanation or any material provided hereunder. The Indemnifying Party shall
have the right to settle, compromise or discharge a Third Party Claim (other
than any such Third Party Claim in which criminal conduct is alleged) without
the Indemnified Party's consent if such settlement, compromise or discharge (i)
constitutes a complete and unconditional discharge and release of the
Indemnified Party, and (ii) provides for no relief other than the payment of
monetary damage and such monetary damages are paid in full by the Indemnifying
Party.
(c) In the event any Indemnified Party should have a claim under
Section 7.01 against any Indemnifying Party that does not involve a Third Party
Claim, the Indemnified Party shall promptly deliver an Indemnity Notice to the
Indemnifying Party. The failure by any Indemnified Party to give the Indemnity
Notice shall not impair such party's rights hereunder except to the extent that
an Indemnifying Party demonstrates that it has been prejudiced thereby. If the
Indemnifying Party notifies the Indemnified Party that it does not dispute the
claim described in such Indemnity Notice or fails to notify the Indemnified
Party within the Dispute Period whether the Indemnifying Party disputes the
claim described in such Indemnity Notice, the Loss in the amount specified in
the Indemnity Notice will be conclusively deemed a liability of the Indemnifying
Party under Section 7.01 and the Indemnifying Party shall pay the amount of such
Loss to the Indemnified
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Party on demand. If the Indemnifying Party has timely disputed its liability
with respect to such claim, the Indemnifying Party and the Indemnified Party
will proceed in good faith to negotiate a resolution of such dispute, and if not
resolved through negotiations within thirty (30) days, such dispute shall be
resolved as provided herein.
7.03 Allocation of Tax Liability.
(a) In the case of Taxes with respect to or payable by the Company
with respect to a period that includes but does not end on the Closing Date, the
allocation of such Taxes between the Pre-Closing Period and the Post-Closing
Period shall be made on the basis of an interim closing of the books of the
Company as of the close of business on the Closing Date. In the case of (i)
franchise Taxes based on capitalization, debt or shares of stock authorized,
issued or outstanding and (ii) ad valorem Taxes, in either situation
attributable to any taxable period that includes but does not end on the Closing
Date, the portion of such Taxes attributable to the Pre-Closing Period shall be
the amount of such Taxes for the entire taxable period, multiplied by a fraction
the numerator of which is the number of days in such taxable period ending on
and including the Closing Date and the denominator of which is the entire number
of days in such taxable period; provided, that if any Company Asset is sold or
otherwise transferred prior to the Closing Date, then ad valorem Taxes
pertaining to such property, asset or other right shall be attributed entirely
to the Pre-Closing Period.
(b) Except to the extent a reserve for Taxes is reflected on the
Financial Statements, the Sellers shall be responsible for and pay and shall
indemnify and hold harmless Purchaser and the Company with respect to (i) any
and all Taxes imposed on any of the Company, or for which the Company is liable
with respect to any periods ending on or before the Closing Date; provided, that
in the case of any adjustment to any item of loss or expense for any such years,
which gives rise to corresponding and offsetting items of loss or expense in
subsequent years the benefit of which is or will be actually realized by the
Company (other than upon liquidation of the Company) including by reason of any
increase in a net operating loss, the Sellers' obligations shall
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be limited to the amount of interest (computed at the appropriate statutory
rates) and penalties actually paid to the appropriate taxing authorities by the
Company as a result of such timing differences in the case of audit adjustments,
or at a rate of eight percent (8%) per annum in the case of other adjustments,
(ii) without duplication (subject to the same proviso), all Taxes arising out of
a breach of the representations, warranties or covenants contained herein, (iii)
any Tax liability resulting from any ongoing state audits that exceed, in the
aggregate, any reserve therefore set forth on the Financial Statements, and (iv)
any reasonable out-of-pocket costs or expenses with respect to Taxes indemnified
hereunder.
(c) From and after the Closing Date, Purchaser shall cause the
Company to prepare, or cause to be prepared, and shall file, or cause to be
filed, all reports and returns of the Company required to be filed. Purchaser
shall cause the Company to pay the appropriate taxing authorities the Taxes
shown to be due and payable on all Tax Returns of the Company filed after the
Closing Date, concurrent with the filing of such Tax Returns. Tax Returns of the
Company for a period ending on or before the Closing Date shall be prepared on a
basis consistent with the Tax Returns filed by the Company for previous taxable
periods, subject to the requirements of applicable law.
7.04 Tax Contests.
(a) If any Taxing Authority or other Person asserts a Tax Claim,
then the party hereto first receiving notice of such Tax Claim shall promptly
provide written notice thereof to the other parties hereto. Such notice shall
specify in reasonable detail the basis for such Tax Claim and shall include a
copy of any relevant correspondence received from the Taxing Authority or other
Person.
(b) If, within 30 calendar days after any Seller receives or
delivers, as the case may be, notice of a Tax Claim, Sellers provide to the
Purchaser an Election Notice, then subject to
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the provisions of this Section 7.04, Sellers shall defend or prosecute, at their
sole cost, expense and risk, such Tax Claim by all appropriate proceedings,
which proceedings shall defended or prosecuted diligently by Sellers to a Final
Determination; provided, that Sellers shall not, without the prior written
consent of the Company, enter into any compromise or settlement of such Tax
Claim that would result in any Tax detriment to the Company. So long as Sellers
are defending or prosecuting a Tax Claim, with respect to the Company, the
Company shall provide or cause to be provided to Sellers any information
reasonably requested by Sellers relating to such Tax Claim, and shall otherwise
cooperate with Sellers and their representatives in good faith in order to
contest effectively such Tax Claim. Sellers shall inform the Company of all
developments and events relating to such Tax Claim (including, without
limitation, providing to the Company copies of all written materials relating to
such Tax Claim) and the Company or its authorized representatives shall be
entitled, at the expense of the Company, to attend, but not to participate in or
control, all conferences, meetings and proceedings relating to such Tax Claim.
(c) If, with respect to any Tax Claim, Sellers fail to deliver an
Election Notice to the Company within the period provided in Section 7.04(b) or,
after delivery of such Election Notice to the Company, Sellers fail diligently
to defend or prosecute such Tax Claim to a Final Determination, then the Company
shall at any time thereafter have the right (but not the obligation) to defend
or prosecute, at the sole cost, expense and risk of Sellers, such Tax Claim. The
Company shall have full control of such defense or prosecution and such
proceedings, including any settlement or compromise thereof. If requested by the
Company, the Sellers shall cooperate in good faith with the Company and its
authorized representatives in order to contest effectively such Tax Claim.
Sellers may attend, but not participate in or control, any defense, prosecution,
settlement or compromise of any Tax Claim controlled by the Company pursuant to
this Section 7.04(c), and shall bear their own costs and expenses with respect
thereto. In the case of any Tax Claim that is defended or prosecuted by the
Company pursuant to this Section 7.04(c), the Company shall, from time to time,
be entitled to receive current payments from Sellers with respect to costs and
expenses incurred by the Company in connection with such defense or prosecution
(including, without limitation,
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reasonable attorneys', accountants' and experts' fees and disbursements,
settlement costs, court costs and any other costs or expenses for investigating,
defending or prosecuting such Tax Claim, and any Taxes imposed on the Company as
a result of receiving a payment from Sellers pursuant to this Section 7.04)
(collectively, "Associated Costs").
(d) In the case of any Tax Claim that is defended or prosecuted to a
Final Determination by Sellers pursuant to this Section 7.04, Sellers shall pay
to the appropriate Tax Indemnitees, in immediately available funds, the full
amount of any Tax arising or resulting from such Tax Claim within five Business
Days after such Final Determination. In the case of any Tax Claim that is
defended or prosecuted to a Final Determination by the Company pursuant to the
terms of this Section 7.04, Sellers shall pay to the appropriate Tax Indemnitee,
in immediately available funds, the full amount of any Tax arising or resulting
from such Tax Claim, together with any Associated Costs that have not
theretofore been paid by Sellers to the Company, within five Business Days after
such Final Determination. In the case of any Tax Claim not covered by the two
preceding sentences, Sellers shall pay to the Company, in immediately available
funds, the full amount of any Tax arising or resulting from such Tax Claim
(calculated after taking into account any actual reduction in the current
liability for Taxes of such Tax Indemnitee for Tax arising out of or resulting
from such payment or such Tax Claim), together with any Associated Costs that
have not theretofore been paid by Sellers to the Company, at least five Business
Days before the date payment of such Tax is due from any Tax Indemnitee.
(e) Notwithstanding anything contained in this Article VII to the
contrary, the rights of Sellers under this Section 7.04 to defend or prosecute,
or to control the defense or prosecution of, any Tax Claim shall be no greater
than those rights that the Company would have to defend or prosecute, or to
control the defense or prosecution of, such Tax Claim.
7.05 Cooperation Regarding Tax Matters. Each party hereto shall, and shall
cause its subsidiaries and Affiliates to, provide to the other parties hereto
and the Company such cooperation
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and information as any of them reasonably may request related to the filing of
any Tax Return, amended Tax Return or claim for refund, determining a liability
for Taxes or a right to refund of Taxes or in conducting any audit or other
proceeding in respect of Taxes. Such cooperation and information shall include
providing copies of all relevant portions of relevant Tax Returns, together with
relevant accompanying schedules, workpapers and relevant documents relating to
rulings or other determinations by Taxing Authorities and relevant records
concerning the ownership and Tax basis of property, which any such party may
possess. Each party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents or
information so provided. Subject to the preceding sentence, each party required
to file Tax Returns pursuant to this Article VII shall bear all costs of filing
such Tax Returns.
7.06 Payment of Transfer Taxes and Fees. Sellers shall pay all sales, use,
transfer, stamp, documentary or similar Taxes imposed upon or arising out of or
in connection with the transactions effected pursuant to this Agreement, and
shall indemnify, defend, and hold harmless the Purchaser, the Company and their
Affiliates with respect to such Taxes. Sellers shall file all necessary
documentation and Tax Returns with respect to such Taxes and provide to
Purchaser copies of all such Tax Returns.
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7.07 Other Tax Covenants.
(a) Without the prior written consent of Purchaser, no Seller nor
any Affiliate of any Seller shall, to the extent it may affect or relate to the
Company, make or change any tax election, change any annual tax accounting
period, adopt or change any method of tax accounting, file any amended Tax
Return, enter into any method of tax accounting, enter into any closing
agreement, settle any Tax Claim, assessment or proposed assessment, surrender
any right to claim a Tax refund, consent to any extension or waiver of the
limitation period applicable to any Tax Claim or assessment or take or omit to
take any other action, if any such action or omission would have the effect of
increasing any post-closing Tax Liability of the Purchaser, of the Company or
any Affiliate of Purchaser.
(b) Without the prior written consent of Sellers, neither the
Purchaser nor the Company shall, to the extent it may affect or relate to the
Company, make or change any tax election, file any amended Tax Return, enter
into any closing Agreement, settle any Tax claim, assessment or proposed
assessment, surrender any right to claim a Tax refund, consent to any extension
or waiver of the limitation period applicable to any Tax claim or assessment or
take or omit to take any other action, if any such action or omission would
affect a Pre-Closing Tax Period, unless required by applicable law.
(c) So long as any books, records and files retained by any Seller
or and his or her Affiliates relating to the business of the Company or the
books, records and files delivered to the control of the Purchaser pursuant to
this Agreement to the extent they relate to the operations of the Company prior
to the Closing Date, remain in existence and are available, each party (at its
own expense) shall have the right upon prior notice to inspect and to make
copies of the same at any time during business hours for any proper purpose. The
Purchaser and the Sellers and their respective Affiliates shall use reasonable
efforts not to destroy or allow the destruction of any such books,
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records and files without first providing 60 days' written notice of intention
to destroy to the other, and allowing such other party to take possession of
such records.
7.08 Conflict. In the event of a conflict between the provisions of
Sections 7.03 through 7.07 of this Article VII and any other provision of this
Agreement, such provisions of this Article VII shall control.
ARTICLE VIII
DEFINITIONS
8.01 Definitions.As used in this Agreement, the following defined terms
shall have the meanings indicated below:
"Actions or Proceedings" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation or audit.
"Affiliate" means, as applied to any Person, (a) any other Person
directly or indirectly controlling, controlled by or under common control with,
that Person, (b) any other Person that owns or controls (i) 5% or more of any
class of equity securities of that Person or any of its Affiliates, or (ii) 5%
or more of any class of equity securities (including any equity securities
issuable upon the exercise of any option or convertible security) of that Person
or any of its Affiliates, or (c) any director, partner, officer, agent, employee
or relative of such Person. For the purposes of this definition, "control"
(including with correlative meanings, the terms "controlling", "controlled by",
and "under common control with") as applied to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through ownership of voting
securities, by contract or otherwise.
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"Agreement" means this Purchase Agreement, the Exhibits and the
Disclosure Schedule and the certificates delivered in connection herewith, as
the same may be amended from time to time in accordance with the terms hereof.
"Assets" of any Person means all assets and properties of every
kind, nature, character and description, including goodwill and other
intangibles, operated, owned or leased by such Person, including cash and cash
equivalents, investments, accounts and notes receivable, chattel paper,
documents, instruments, real estate, equipment, inventory, goods and
intellectual property.
"Associated Costs" has the meaning ascribed to it in Section
7.04(c).
"Benefit Plan" means any Plan, existing at the Closing Date or prior
thereto, established or to which contributions have at any time been made by the
Company or under which any employee, former employee or director of the Company
or any beneficiary thereof is covered, is eligible for coverage or has benefit
rights.
"Books and Records" means all files, documents, instruments, papers,
books and records relating to the Company, including financial statements, Tax
Returns and related work papers and letters from accountants, budgets, pricing
guidelines, ledgers, journals, deeds, title policies, minute books, stock
certificates and books, stock transfer ledgers, Contracts, Licenses, customer
lists, computer files and programs, retrieval programs, operating data and plans
and environmental studies and plans.
"Claim Notice" means written notification pursuant to Section
7.02(a) of a Third Party Claim as to which indemnity under Section 7.01 is
sought by an Indemnified Party.
"Closing" has the meaning ascribed to it in Section 1.03.
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"Closing Date" has the meaning ascribed to it in Section 1.03.
"Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Company" has the meaning ascribed to it in the first recital of
this Agreement (and, unless the context otherwise requires, shall include all
predecessors and Subsidiaries of the Company).
"Contract" means any agreement, lease, evidence of indebtedness,
mortgage, indenture, security agreement or other contract (whether written or
oral).
"Disclosure Schedule" means the schedule delivered to Purchaser by
or on behalf of the Company and Sellers containing all lists, descriptions,
exceptions and other information and materials as are required to be included
therein pursuant to this Agreement.
"Dispute Period" means the period ending thirty (30) calendar days
following receipt by an Indemnifying Party of either a Claim Notice or an
Indemnity Notice.
"Distributed Assets and Liabilities" has the meaning ascribed to it
in Section 1.02(b).
"Election Notice" means a written notice provided by Sellers in
respect of a Tax Claim to the effect that (i) Sellers acknowledge their
indemnity obligation under this Agreement with respect to such Tax Claim and
(ii) Sellers elect to contest, and to control the defense or prosecution of,
such Tax Claim at their sole risk and sole cost and expense.
"Environment" means all air, surface water, groundwater, drinking
water supply, stream sediments, or land, including soil, land surface or
subsurface strata, all fish, wildlife, biota and all other environmental medium
or natural resources.
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"Environmental, Health and Safety Liabilities" means any cost,
damages, expense, liability, obligation, or other responsibility arising from or
under any Environmental Law or Occupational Safety and Health Law and consisting
of or relating to (i) any environmental, health or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products); (ii) fines, penalties,
judgments, awards, settlements, legal or administrative proceedings, damages,
losses, claims, demands and response, investigative, remedial, or inspection
costs and expenses arising under Environmental Law or Occupational Safety and
Health Law; (iii) financial responsibility under Environmental Law or
Occupational Safety and Health Law for clean-up costs or corrective action,
including any investigation, clean-up, removal, containment, or other
remediation or response actions required by Environmental Law or Occupational
Safety and Health Law (whether or not such clean-up has been required or
requested by any governmental body or any other Person) and for any natural
resource damages; or (iv) any other compliance, corrective, investigative, or
remedial measures required under Environmental Law or Occupational Safety and
Health Law. The terms "removal," "remedial," and "response action" include the
types of activities covered by the United States Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as
amended (CERCLA).
"Environmental Law" means all federal, state, local and foreign
environmental, health and safety laws, common law orders, decrees, judgments,
codes and ordinances and all rules and regulations promulgated thereunder, civil
or criminal, including, without limitation, Laws relating to emissions,
discharges, releases or threatened releases of Hazardous Materials, pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the Environment or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials, pollutants, contaminants, chemicals, or industrial, solid,
toxic or hazardous substances or wastes.
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"Environmental Permit" means any federal, state, local, provincial,
or foreign permits, licenses, approvals, consent or authorizations required by
any Governmental or Regulatory Authority under or in connection with any
Environmental Law and includes any and all orders, consent orders or binding
agreements issued or entered into by a Governmental or Regulatory Authority
under any applicable Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations promulgated thereunder.
"Facilities" means any real property, leaseholds, or other interests
currently or formerly owned or operated by the Company and any buildings,
plants, structures or equipment (including motor vehicles, tank cars and rolling
stock) currently or formerly owned or operated by the Company, but does not
include property or facilities owned by Entergy or any of its affiliates.
"Final Determination" means (i) a decision, judgment, decree or
other Order by any court of competent jurisdiction, which decision, judgment,
decree or other Order has become final after all allowable appeals by either
party to the action have been exhausted or the time for filing such appeals has
expired, (ii) a closing agreement entered into under Section 7121 of the Code or
any other settlement agreement entered into in connection with an administrative
or judicial proceeding, (iii) the expiration of the time for instituting suit
with respect to a claimed deficiency or (iv) the expiration of the time for
instituting a claim for refund, or if such a claim was filed, the expiration of
the time for instituting suit with respect thereto.
"Financial Statements" has the meaning ascribed to it in Section
2.08.
"Fly Ash Business" means any and all activities related to
recycling, storage, sale, marketing, use, reuse and/or processing of fly ash,
bottom ash, other coal combustion byproducts,
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cement, cement kiln dust, lime, lime kiln dust, ancillary and support services
related to any of the foregoing, and services performed for or on behalf of any
electric power plant.
"GAAP" means generally accepted accounting principles of the United
States, consistently applied.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, any foreign country or any domestic or foreign state, county,
city or other political subdivision.
"Hazardous Activity" means the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment, or use (including any
withdrawal or other use of groundwater) of Hazardous Materials in, on, under,
about, or from the Facilities or any part thereof into the Environment, and any
other act, business, operation, or thing that increases the danger, or risk of
danger, or poses an unreasonable risk of harm to persons or property on or off
the Facilities, or that may affect the value of the Facilities or the Company.
"Hazardous Material" means (i) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation and transformers or other equipment that
contain dielectric fluid containing levels of polychlorinated biphenyls (PCBs);
(ii) any chemicals, materials, substances or wastes which are now or hereafter
become defined as or included in the definition of "hazardous substances,
"hazardous wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic pollutants" or words
of similar import, under any Environmental Law; and (iii) any other chemical,
material, substance or waste, exposure to which is now or hereafter prohibited,
limited or regulated by any Governmental or Regulatory Authority.
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"Indebtedness" of any Person means all obligations of such Person
(i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(iv) under capital leases and (v) in the nature of guarantees of the obligations
described in clauses (i) through (iv) above of any other Person.
"Indemnified Party" means any Person claiming indemnification under
any provision of Article VII.
"Indemnifying Party" means any Person against whom a claim for
indemnification is being asserted under any provision of Article VII.
"Indemnity Notice" means written notification pursuant to Section
7.02(c) of a claim for indemnity under Article VII by an Indemnified Party,
specifying the nature of and basis for such claim, together with the amount or,
if not then reasonably ascertainable, the estimated amount, determined in good
faith, of such claim.
"Laws" means all laws, statutes, rules, regulations, ordinances and
other pronouncements having the effect of law of the United States, any foreign
country or any domestic or foreign state, county, city or other political
subdivision or of any Governmental or Regulatory Authority.
"Leased Real Property" has the meaning ascribed to it in Section
2.15.
"Liabilities" means all Indebtedness, obligations and other
liabilities (or contingencies that have not yet become liabilities) of a Person
(whether absolute, accrued, contingent (or based upon any contingency), known or
unknown, fixed or otherwise, or whether due or to become due).
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"Licenses" means all licenses, permits, certificates of authority,
authorizations, approvals, registrations, franchises and similar consents
granted or issued by any Governmental or Regulatory Authority.
"Liens" means any mortgage, pledge, assessment, security interest,
lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or
any conditional sale Contract, title retention Contract or other Contract to
give any of the foregoing.
"Loss" means any and all damages, fines, fees, penalties,
deficiencies, diminution in value of investment, losses and expenses, including
without limitation, interest, reasonable expenses of investigation, court costs,
reasonable fees and expenses of attorneys, accountants and other experts or
other expenses of litigation or other proceedings or of any claim, default or
assessment (such fees and expenses to include all fees and expenses, such as
fees and expenses of attorneys, incurred in connection with (i) the
investigation or defense of any Third Party Claims or (ii) asserting or
disputing any rights under this Agreement against any party hereto or
otherwise).
"Note" has the meaning ascribed to it in Section 1.02.
"Occupational Safety and Health Law" means any Law designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards, and any program, whether governmental or private (including
those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to (i) purchase or otherwise receive or be issued any shares of
capital stock or other equity interests of such Person or any security of any
kind convertible into or exchangeable or exercisable for any shares of capital
stock or other equity interests of such Person, or (ii) receive any benefits or
rights similar to those enjoyed
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by or accruing to the holder of shares of capital stock or other equity
interests of such Person, including without limitation, any rights to
participate in the equity, income or election of directors or officers of such
Person.
"Order" means any writ, judgment, decree, injunction or similar
order of any Governmental or Regulatory Authority (in each such case whether
preliminary or final).
"Owned Real Property" has the meaning ascribed to it in Section
2.15.
"Person" means any natural person, corporation, general partnership,
limited partnership, limited liability company or partnership, proprietorship,
other business organization, trust, union, association or Governmental or
Regulatory Authority.
"Plan" means any bonus, compensation, pension, profit sharing,
retirement, stock purchase or cafeteria, life, health, accident, disability,
workmen's compensation or other insurance, severance, separation or other
employee benefit plan, practice, policy or arrangement of any kind, whether
written or oral, or whether for the benefit of a single individual or more than
one individual including, but not limited to, any "employee benefit plan" within
the meaning of Section 3(3) of ERISA.
"Post-Closing Period" means any taxable period or portion thereof
beginning after the Closing Date. If a taxable period begins on or before the
Closing Date and ends after the Closing Date, then the portion of the taxable
period that begins on the day following the Closing Date shall constitute a
Post-Closing Period.
"Pre-Closing Period" means any taxable period or portion thereof
that is not a Post-Closing Period.
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"Purchase Price" has the meaning ascribed to it in Section 1.02.
"Purchased Stock" has the meaning ascribed to it in the second
recital of this Agreement.
"Purchaser" has the meaning ascribed to it in the first paragraph of
this Agreement.
"Real Property" has the meaning ascribed to it in Section 2.15.
"Real Property Leases" has the meaning ascribed to it in Section
2.15.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing of a
Hazardous Material into the Environment.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations thereunder.
"Sellers" has the meaning ascribed to it in the first paragraph of
this Agreement.
"Subsidiary" means any Person in which another Person, directly or
indirectly through Subsidiaries or otherwise, beneficially owns at least fifty
percent (50%) of either the equity interest in, or the voting control of, such
Person, whether or not existing on the date hereof. Unless the context otherwise
requires a different interpretation, references to a "Subsidiary" mean a
Subsidiary of the Company.
"Tax" or "Taxes" means all federal, state, local or foreign net or
gross income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, withholding, payroll, employment, excise, property, alternative or
add-on minimum, environmental or other taxes,
60
<PAGE>
assessments, duties, fees, levies or other governmental charges of any nature
whatever, whether disputed or not, together with any interest, penalties,
additions to tax or additional amounts with respect thereto.
"Tax Claim" means any written claim with respect to Taxes
attributable to a Pre-Closing Period made by any Taxing Authority or any Person
that, if pursued successfully, could serve as the basis for a claim for
indemnification, under this Agreement, of Purchaser, the Company and other
Indemnified Parties specified in Section 7.01 of this Agreement.
"Tax Indemnitee" means the Company, the Purchaser and their
respective stockholders, officers, directors, employees, agents and Affiliates
of each of them (other than the Sellers).
"Tax Returns" means any returns, reports or statements (including
any information returns) required to be filed for purposes of a particular Tax.
"Taxing Authority" means any governmental agency, board, bureau,
body, department or authority of any United States federal, state or local
jurisdiction or any foreign jurisdiction, having or purporting to exercise
jurisdiction with respect to any Tax.
"Third Party Claim" has the meaning ascribed to it in Section 7.02.
8.02 Interpretation of Agreement.
(a) Unless the context of this Agreement otherwise requires, (i)
words of any gender include each other gender; (ii) words using the singular or
plural number also include the plural or singular number, respectively; (iii)
the terms "hereof," "herein," "hereby" and derivative or similar words refer to
this entire Agreement; (iv) the terms "Article" or "Section" refer to the
61
<PAGE>
specified Article or Section of this Agreement; (v) the word "including" does
not imply any limitation to the item or matter mentioned; and (vi) the phrases
"ordinary course of business" and "ordinary course of business consistent with
past practice" refer to the business and practice of the Company. All accounting
terms used herein and not expressly defined herein shall have the meanings given
to them under GAAP.
(b) When used herein, the phrase "to the knowledge of" any Person,
"to the best knowledge of" any Person or any similar phrase, means (i) with
respect to any Person who is an individual, the actual knowledge of such Person,
(ii) with respect to any other Person, the actual knowledge of the directors,
officers, managers, and other similar Persons in a similar position or having
similar powers and duties, and (iii) in the case of each of (i) and (ii), the
knowledge of facts that such individuals should have after reasonable inquiry.
ARTICLE IX
MISCELLANEOUS
9.01 Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or mailed by prepaid first class
certified mail, return receipt requested, or sent by prepaid courier, to the
parties at the following addresses or facsimile numbers:
(a) If to Purchaser, to:
JTM Industries, Inc.
127 South 500 East, Suite 675
Salt Lake City, UT 84102
Facsimile No.: 801/323-8035
Attn.: Brett A. Hickman, Esq.
with a copy to:
62
<PAGE>
Parsons Behle & Latimer
201 South Main Street, Suite 1800
Salt Lake City, UT 84145
Facsimile No.: (801) 536-6111
Attn.: J. Gordon Hansen
(b) If to Sellers, to:
Phyllis S. Thomas
P.O. Box 9027
511 Commerce Street
Pine Bluff, Arkansas 71611
Facsimile No.: (870) 534-4817
with a copy to:
Joseph A. Strode
P.O. Box 8708
Pine Bluff, Arkansas 71611
Facsimile No.: (870) 534-5582
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided for in this Section, be deemed given upon receipt, (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given upon receipt and (iv) if delivered by courier to the
address as provided for in this Section, be deemed given on the earlier of the
second Business Day following the date sent by such courier or upon receipt. Any
party from time to time may change its address, facsimile number or other
information for the purpose of notices to that party by giving notice specifying
such change to the other parties hereto.
9.02 Entire Agreement. Except as set forth in Section 9.04, this Agreement
supersedes all prior discussions and agreements between the parties with respect
to the subject matter hereof and thereof and contains the sole and entire
agreement between the parties hereto with respect to the subject matter hereof
and thereof.
63
<PAGE>
9.03 Expenses. Except as otherwise expressly provided in this Agreement
(including without limitation as provided in Article VII), each party will pay
its own costs and expenses incurred in connection with this Agreement, and the
transactions contemplated hereby and thereby; provided, Sellers will pay all
expenses relating hereto of the Company incurred in respect of the period prior
to the Closing. Purchaser will pay all fees and expenses of Ernst & Young, LLP
as provided in Section 1.02(b).
9.04 Confidentiality. Purchaser and each of the Sellers, as well as their
respective Affiliates, agents and others in privity, will hold in strict
confidence from any Person (other than its Affiliates or agents) all documents
and information concerning the other party hereto or any of its Affiliates
furnished to it by or on behalf of the other party in connection with this
Agreement or the transactions contemplated hereby, except to the extent the
disclosing party can demonstrate that such documents or information was (a)
previously known by the party receiving such documents or information, (b) in
the public domain (either prior to or after the furnishing of such documents or
information hereunder) through no fault of such receiving party or (c) later
acquired by the receiving party from another source if the receiving party is
not aware that such source is under an obligation to another party hereto to
keep such documents and information confidential. Such covenant of
confidentiality will remain in effect unless a party is compelled to disclose by
judicial or administrative process (including in connection with obtaining the
necessary approvals of this Agreement and the transactions contemplated hereby
of Governmental or Regulatory Authorities) or by other requirements of Law. This
provision is intended to supplement, and not to supersede, the written
Nondisclosure Agreement dated February 3, 1998 between the Purchaser and the
Company.
9.05 Set-Off. If from time to time and at any time any party shall be
entitled (as either agreed upon by the parties or finally adjudicated in a court
of competent jurisdiction) to be paid any amount under the provisions of Section
7.01(a), such party shall be entitled, if it so elects, to set off such amount
against any amounts owing to the other party.
64
<PAGE>
9.06 Further Assurances; Post-Closing Cooperation. At any time or from
time to time after the Closing, Sellers shall execute and deliver to Purchaser
such other documents and instruments, provide such materials and information and
take such other actions as Purchaser may reasonably request to consummate the
transactions contemplated by this Agreement and otherwise to cause each Seller
to fulfill its obligations under this Agreement.
9.07 Waiver. Any term or condition of this Agreement may be waived at any
time by the party that is entitled to the benefit thereof, but no such waiver
shall be effective unless set forth in a written instrument duly executed by or
on behalf of the party waiving such term or condition. No waiver by any party of
any term or condition of this Agreement, in any one or more instances, shall be
deemed to be or construed as a waiver of the same or any other term or condition
of this Agreement on any future occasion. All remedies, either under this
Agreement or by Law or otherwise afforded, will be cumulative and not
alternative. Any waiver hereunder, or notice of an election or decision under
Article V hereof, given by any of the Sellers shall be binding upon all of the
Sellers.
9.08 Amendment. This Agreement may be amended, supplemented or modified
only by a written instrument duly executed by or on behalf of the parties
hereto.
9.09 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights, and this Agreement does not
confer any such rights, upon any other Person other than any Person entitled to
indemnity under Article VII.
9.10 No Assignment; Binding Effect. Neither this Agreement nor any right,
interest or obligation hereunder may be assigned (by operation of law or
otherwise) by any party without the prior written consent of all other parties,
and any attempt to do so will be void, provided, that
65
<PAGE>
Purchaser may transfer its rights hereunder to its parent or subsidiary, without
diminishing Purchaser's obligations hereunder. Subject to the preceding
sentence, this Agreement is binding upon, inures to the benefit of and is
enforceable by the parties hereto and their respective successors and assigns.
9.11 Headings. The headings used in this Agreement have been inserted for
convenience of reference only and do not define or limit the provisions hereof.
9.12 Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
9.13 Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Arkansas, without giving
effect to any choice of law or conflict of law provision or rule that would
cause the application of the laws of any jurisdiction other than the State of
Arkansas.
9.14 Limited Recourse. Regardless of anything in this Agreement to the
contrary, (i) obligations and liabilities of Purchaser hereunder shall be
without recourse to any stockholder of Purchaser or any of such stockholder's
Affiliates, directors, employees, officers or agents and shall be limited to the
assets of such party and (ii) the stockholders of Purchaser have made no (and
shall
66
<PAGE>
not be deemed to have made any) representations, warranties or covenants
(express or implied) under or in connection with this Agreement or any other
Operative Agreement.
9.15 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth on the first page hereof.
PURCHASER:
JTM INDUSTRIES, INC.
By:_________________________________
Name:
Title:
SELLERS:
Donald A. Thomas
Phyllis S. Thomas
Donald W. Birge
67
<PAGE>
Exhibit 21.1
Subsidiaries of JTM Industries, Inc.
Pozzolanic Resources, Inc.
Power Plant Aggregates of Iowa, Inc.
Michigan Ash Sales Company, d.b.a. U.S. Ash Company
U.S. Stabilization, Inc.
Flo Fil Co., Inc.
Fly Ash Products, Inc.
KBK Enterprises, Inc.
<PAGE>
EXHIBIT 23.8
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports on
1) the consolidated financial statements of JTM Industries, Inc. and Subsidiary,
dated February 20, 1998, except for Note 8, as to which the date is March 27,
1998, 2) the consolidated financial statements of Pozzolanic Resources, Inc. and
Subsidiaries, dated February 10, 1998, except for Note 8, as to which the date
is March 4, 1998, 3) the consolidated financial statements of Power Plant
Aggregates of Iowa, Inc. and Subsidiary, dated March 13, 1998, except for Note
10, as to which the date is March 20, 1998, 4) the combined financial statements
of Michigan Ash Sales Company (d.b.a U.S. Ash Company) and Affiliated Companies,
dated March 11, 1998, except for Note 6, as to which the date is March 25, 1998,
and 5) the financial statements of Fly Ash Products, Incorporated, dated March
6, 1998, except for Note 7, as to which the date is March 27, 1998, in the
Registration Statement (Form S-4) and related Prospectus of JTM Industries, Inc.
dated June 5, 1998.
/s/ Ernst & Young L.L.P.
Salt Lake City, Utah
June 5, 1998
<PAGE>
EXHIBIT 23.9
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 (File No.
333- ) of our report dated February 16, 1998, on our audits of the
consolidated financial statements of JTM Industries, Inc. and Subsidiary. We
also consent to the reference to our firm under the caption "Experts".
COOPERS & LYBRAND L.L.P.
Charlotte, North Carolina
June 5, 1998
<PAGE>
Exhibit 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM T-1
Statement of Eligibility and Qualification Under the
Trust Indenture Act of 1939 of a Corporation
Designated to Act as Trustee
U.S. BANK NATIONAL ASSOCIATION
(Exact name of Trustee as specified in its charter)
United States 41-0417860
(State of Incorporation) (I.R.S. Employer
Identification No.)
U.S. Bank Trust Center
180 East Fifth Street
St. Paul, Minnesota 55101
(Address of Principal Executive Offices) (Zip Code)
JTM INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Texas 72-2164490
(State of Incorporation) (I.R.S. Employer
Identification No.)
127 South 500 East
Suite 675
Salt Lake City, Utah 84102
(Address of Principal Executive Offices) (Zip Code)
10% Senior Subordinated Notes Due 2008
(Title of the Indenture Securities)
<PAGE>
GENERAL
1. General Information Furnish the following information as to the Trustee.
(a) Name and address of each examining or supervising authority to which
it is subject.
Comptroller of the Currency
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes
2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS If the obligor or any
underwriter for the obligor is an affiliate of the Trustee, describe each
such affiliation.
None
See Note following Item 16.
Items 3-15 are not applicable because to the best of the Trustee's
knowledge the obligor is not in default under any Indenture for which the
Trustee acts as Trustee.
16. LIST OF EXHIBITS List below all exhibits filed as a part of this statement
of eligibility and qualification.
1. Copy of Articles of Association. *
2. Copy of Certificate of Authority to Commence Business. *
3. Authorization of the Trustee to exercise corporate trust powers
(included in Exhibits 1 and 2; no separate instrument).*
4. Copy of existing By-Laws. *
5. Copy of each Indenture referred to in Item 4. N/A.
6. The consents of the Trustee required by Section 321(b) of the act.
7. Copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or examining
authority incorporated by reference to File Number 333-26679.
* Incorporated by reference to File Number 333-30939
<PAGE>
NOTE
The answers to this statement insofar as such answers relate to what
persons have been underwriters for any securities of the obligors within three
years prior to the date of filing this statement, or what persons are owners of
10% or more of the voting securities of the obligors or affiliates, are based
upon information furnished to the Trustee by the obligors, While the Trustee has
no reason to doubt the accuracy of any such information, it cannot accept any
responsibility therefor.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, U.S. Bank National Association, an Association organized and existing
under the laws of the United States, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, and its seal to be hereunto affixed and attested, all
in the City of Salt Lake City and State of Utah on the ____st day of June, 1998.
U.S. BANK NATIONAL ASSOCIATION
[SEAL]
/s/ Kim R. Galbraith
--------------------
Kim R. Galbraith
Vice President
/s/ Vash Brumitt
- ----------------
Vash Brumitt
Vice President
<PAGE>
EXHIBIT 6
CONSENT
In accordance with Section 321(b) of the Trust Indenture Act of 1939, the
undersigned, U.S. BANK NATIONAL ASSOCIATION hereby consents that reports of
examination of the undersigned by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon its request therefor.
Dated: June ___, 1998
U.S. BANK NATIONAL ASSOCIATION
/s/ Kim R. Galbraith
--------------------
Kim R. Galbraith
Vice President
<PAGE>
EX-99.1
LETTER OF TRANSMITTAL
LETTER OF TRANSMITTAL
JTM INDUSTRIES, INC.
OFFER TO EXCHANGE 10% SENIOR SUBORDINATED NOTES DUE 2008, WHICH HAVE BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), FOR 10% SENIOR SUBORDINATED NOTES DUE 2008
- --------------------------------------------------------------------------------
THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1998 UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN
PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
U.S. Bank National Association
BY FIRST CLASS MAIL:
U.S. Bank National Association
P.O. Box 64485
St. Paul, MN 55164-9549
BY REGISTERED, CERTIFIED OR OVERNIGHT MAIL:
U.S. Bank National Association
Attn: Specialized Finance
180 East Fifth Street
St. Paul, MN 55101
BY FACSIMILE: (612) 244-1537
Attn: Kevin Gorman
FOR INFORMATION, CALL:
(612) 244-1197
(Originals of all documents sent by facsimile should be sent
promptly by registered or certified mail, by hand or by overnight courier)
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY OF THIS LETTER OF TRANSMITTAL. THE
INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE EXCHANGE NOTES FOR THEIR
RESTRICTED NOTES PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER
(AND NOT WITHDRAW) THEIR RESTRICTED NOTES TO THE EXCHANGE
AGENT PRIOR TO THE EXPIRATION DATE.
<PAGE>
The undersigned acknowledges receipt of the prospectus dated June , 1998
(the "Prospectus") of JTM Industries, Inc., a Texas corporation (the "Company"),
and this Letter of Transmittal (this "Letter"), which together constitute the
Company's offer (the "Exchange Offer") to exchange an aggregate principal amount
of up to $100 million of 10% Senior Subordinated Notes due 2008 (the "Exchange
Notes") of the Company which have been registered under the Securities Act for a
like principal amount of the issued and outstanding 10% Senior Subordinated
Notes due 2008 (the "Restricted Notes" and together with the Exchange Notes, the
"Notes") of the Company. Capitalized terms used but not defined herein have the
meanings given to them in the Prospectus.
For each Restricted Note accepted for exchange and not validly withdrawn,
the holder of such Restricted Note will receive an Exchange Note having a
principal amount equal to that of the surrendered Restricted Note. Restricted
Notes accepted for exchange will cease to accrue interest from and after the
date of consummation of the Exchange Offer. Holders of Restricted Notes whose
Restricted Notes are accepted for exchange will not receive any payment in
respect of interest on such Restricted Notes otherwise payable on any interest
payment date the record date for which occurs on or after consummation of the
Exchange Offer. Interest on the Exchange Notes will accrue from the last
interest payment date on which interest was paid on the Restricted Notes
surrendered in exchange therefor or, if no interest has been paid on the
Restricted Notes, from the date of original issue of the Restricted Notes. The
Company reserves the right, at any time or from time to time, to extend the
Exchange Offer at its discretion, in which event the term "Expiration Date"
shall mean the latest time and date to which the Exchange Offer is extended. The
Company shall notify the holders of the Restricted Notes of any extension by
means of a press release or other public announcement prior to 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date.
This Letter is to be used by a holder of Restricted Notes if: (i)
certificates representing Restricted Notes are to be forwarded herewith; (ii)
tender of Restricted Notes is to be made by book-entry transfer to the account
maintained by the Exchange Agent at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in the
Prospectus under "The Exchange Offer-- Book-Entry Transfer" by any financial
institution that is a participant in the Book-Entry Transfer Facility and whose
name appears on a security position listing as the owner of Restricted Notes; or
(iii) tender of Restricted Notes is to be made according to the guaranteed
delivery procedures set forth in the Prospectus under "The Exchange
Offer--Guaranteed Delivery Procedures." DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY
TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
Holders of Restricted Notes whose Restricted Notes are held through
positions at Cedel or Euroclear must tender such Restricted Notes according to
the procedures for tendering set forth in the Prospectus under "The Exchange
Offer--Restricted Notes Held Through Cedel or Euroclear."
The term "holder" with respect to the Exchange Offer means any person: (i)
in whose name Restricted Notes are registered on the books of the Company or any
other person who has obtained a proper completed bond power from the registered
holder; or (ii) whose Restricted Notes are held of record by the Book-Entry
Transfer Facility who desires to deliver such Restricted Notes by book-entry
transfer at the Book-Entry Transfer Facility. The undersigned has completed,
executed and delivered this Letter to indicate the action the undersigned
desires to take with respect to the Exchange Offer.
Questions and requests for assistance or for additional copies of the
Prospectus, this Letter and the Notice of Guaranteed Delivery may be directed to
the Exchange Agent. See Instruction 10 herein.
2
<PAGE>
Listed below are the Restricted Notes to which this Letter relates.
HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER THEIR RESTRICTED
NOTES MUST COMPLETE THIS LETTER IN ITS ENTIRETY.
PLEASE READ THIS ENTIRE LETTER CAREFULLY
BEFORE COMPLETING ANY BOX BELOW
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
DESCRIPTION OF RESTRICTED NOTES
-------------------------------------------------------------------------------------------
1 2 3 4
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
<CAPTION>
AGGREGATE
PRINCIPAL
AMOUNT OF
RESTRICTED
NAME(S) AND ADDRESS(ES) NOTES PRINCIPAL
OF REGISTERED HOLDER(S) CERTIFICATE REPRESENTED BY AMOUNT
(PLEASE FILL IN, IF BLANK) NUMBER(S)* CERTIFICATE(S) TENDERED**
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
TOTAL
- ---------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed if Restricted Notes are being tendered by book-entry
transfer.
** Unless otherwise indicated in this column, any tendering holder of
Restricted Notes will be deemed to have tendered ALL of the Restricted Notes
indicated in column 3. See Instruction 2. If the space provided above is
inadequate, the certificate numbers and principal amount of Restricted Notes
should be listed on a separate signed schedule affixed hereto. Restricted
Notes tendered hereby must be in denominations of principal amount of $1,000
and any integral multiple thereof. See Instruction 1.
3
<PAGE>
- -------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
To be completed ONLY if certificates for Restricted Notes not tendered
or not accepted for exchange, or Exchange Notes are to be issued in the name
of someone other than the undersigned, or if Restricted Notes tendered by
book-entry transfer which are not accepted for exchange are to be credited
to an account maintained by the Book-Entry Transfer Facility other than the
account indicated above.
Issue Exchange Notes and/or Restricted Notes to:
Name _______________________________________________________________________
(PLEASE PRINT)
Address ____________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
(INCLUDE ZIP CODE)
__________________________________________________________________________
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
Credit unexchanged Restricted Notes delivered by book-entry transfer to
the Book-Entry Transfer Facility account set forth below.
____________________________________________________________________________
(BOOK-ENTRY TRANSFER FACILITY
ACCOUNT NUMBER, IF APPLICABLE)
- ------------------------------------------------------
- ------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
To be completed ONLY if certificates for Restricted Notes not tendered
or not accepted for exchange, or Exchange Notes are to be sent to someone
other than the undersigned, or to the undersigned at an address other than
that shown in the box entitled "Description of Restricted Notes" above.
Mail Exchange Notes and/or Restricted Notes to:
Name _______________________________________________________________________
(PLEASE PRINT)
Address ____________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
(INCLUDE ZIP CODE)
__________________________________________________________________________
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
- -----------------------------------------------------
/ / CHECK HERE IF TENDERED RESTRICTED NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER TO THE EXCHANGE AGENT'S ACCOUNT AT THE BOOK-ENTRY TRANSFER FACILITY
AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: _____________________________________________
Transfer Facility Book-Entry Account No.: __________________________________
Transaction Code No.: ______________________________________________________
/ / CHECK HERE IF YOU ARE A HOLDER OF RESTRICTED NOTES THROUGH A POSITION AT
CEDEL OR EUROCLEAR AND TENDERED RESTRICTED NOTES ARE BEING DELIVERED
PURSUANT TO THE PROCEDURES PRESCRIBED BY SUCH INSTITUTIONS.
Please check the appropriate box:
/ / Euroclear / / Cedel
Name of Tendering Institution: _____________________________________________
Account Number: ____________________________________________________________
(Holders of Restricted Notes must inform Euroclear or Cedel, as the case
may be, of any tender of Restricted Notes by them including the account
number and the principal amount tendered by such holder.)
4
<PAGE>
/ / CHECK HERE IF TENDERED RESTRICTED NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s): ___________________________________________
Window Ticket Number (if any): _____________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
IF DELIVERED BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING:
Account Number: _________________ Transaction Code Number: ________________
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: ______________________________________________________________________
Address: ___________________________________________________________________
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Restricted Notes that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Notes; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
5
<PAGE>
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Company the aggregate principal amount of Restricted Notes
indicated above. Subject to, and effective upon, the acceptance for exchange of
the Restricted Notes tendered in accordance with this Letter, the undersigned
hereby sells, assigns and transfers to, or upon the order of, the Company, all
right, title and interest in and to such Restricted Notes tendered hereby. The
undersigned hereby irrevocably constitutes and appoints the Exchange Agent its
agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Company and as Trustee under the Indenture for the
Restricted Notes and Exchange Notes) with respect to the tendered Restricted
Notes with full power of substitution to (i) deliver certificates for such
Restricted Notes to the Company, or transfer ownership of such Restricted Notes
on the account books maintained by the Book-Entry Transfer Facility and deliver
all accompanying evidence of transfer and authenticity to, or upon the order of,
the Company and (ii) present such Restricted Notes for transfer on the books of
the Company and receive all benefits and otherwise exercise all rights of
beneficial ownership of such Restricted Notes, all in accordance with the terms
and subject to the conditions of the Exchange Offer. The power of attorney
granted in this paragraph shall be deemed irrevocable and coupled with an
interest.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Restricted Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim when the same are accepted by the Company. The
undersigned hereby further represents that (i) any Exchange Notes acquired in
exchange for Restricted Notes tendered hereby will have been acquired in the
ordinary course of business of the person receiving such Exchange Notes, whether
or not such person is the holder, (ii) neither the holder of such Restricted
Notes nor any such other person has an arrangement or understanding with any
person to participate in the distribution of such Exchange Notes, (iii) if the
holder of Restricted Notes is not a broker-dealer, or is a broker-dealer but
will not receive Exchange Notes for its own account in exchange for Restricted
Notes, neither the holder nor any such other person is engaged in or intends to
engage in the distribution of such Exchange Notes and (iv) neither the holder of
such Restricted Notes nor any such other person is an "affiliate," as defined in
Rule 405 under the Securities Act, of the Company.
The undersigned also acknowledges that this Exchange Offer is being made in
reliance on interpretations by the staff of the Securities and Exchange
Commission (the "SEC"), as set forth in no-action letters issued to third
parties, that the Exchange Notes issued in exchange for the Restricted Notes
pursuant to the Exchange Offer may be offered for resale, resold and otherwise
transferred by holders thereof (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of such holders' business and such holders have no
arrangement with any person to participate in the distribution of such Exchange
Notes. However, the Company does not intend to request the SEC to consider, and
the SEC has not considered the Exchange Offer in the context of a no-action
letter and there can be no assurance that the staff of the SEC would make a
similar determination with respect to the Exchange Offer as in other
circumstances. If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage in, a
distribution of Exchange Notes. If any holder is an affiliate of the Company, is
engaged in or intends to engage in or has any arrangement or understanding with
respect to the distribution of the Exchange Notes to be acquired pursuant to the
Exchange Offer, such holder (i) could not rely on the applicable interpretations
of the staff of the SEC and (ii) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction and that such a resale transaction must be covered by an
effective registration statement containing the selling security holder
information required by the applicable regulation. If the undersigned is a
broker-dealer that will receive Exchange Notes for its own account in
6
<PAGE>
exchange for Restricted Notes, that were acquired by it as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus in connection with any resale of such Exchange Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
The undersigned will, upon request, execute and deliver any additional
documents reasonably deemed by the Exchange Agent or the Company to be necessary
or desirable to complete the assignment, transfer and purchase of the Restricted
Notes tendered hereby. All authority conferred or agreed to be conferred in this
Letter shall survive the death, incapacity or dissolution of the undersigned and
every obligation of the undersigned hereunder shall be binding upon the
undersigned's heirs, personal representatives, successors and assigns, trustees
in bankruptcy or other legal representatives of the undersigned. This tender may
be withdrawn only in accordance with the procedures set forth under the caption
"The Exchange Offer--Withdrawal Rights" in the Prospectus.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted properly tendered Restricted Notes for exchange when, as and if the
Company has given oral or written notice thereof to the Exchange Agent with
written confirmation of any oral notice to be given promptly thereafter.
The undersigned understands that tenders of Restricted Notes pursuant to the
procedures described under the caption "The Exchange Offer--Procedures for
Tendering Restricted Notes" in the Prospectus and in the instructions hereto
will constitute a binding agreement between the undersigned and the Company upon
the terms and subject to the conditions of the Exchange Offer.
Unless otherwise indicated under "Special Issuance Instructions," please
issue the certificates representing the Exchange Notes issued in exchange for
the Restricted Notes accepted for exchange and return any Restricted Notes not
tendered or not exchanged in the name(s) of the undersigned (or in either such
event in the case of the Restricted Notes tendered by the Book-Entry Transfer
Facility, by credit to the undersigned's account, at the Book-Entry Transfer
Facility). Similarly, unless otherwise indicated under "Special Delivery
Instructions," please send the certificates representing the Exchange Notes
issued in exchange for the Restricted Notes accepted for exchange and any
certificates for Restricted Notes not tendered or not exchanged (and
accompanying documents, as appropriate) to the undersigned at the address shown
below the undersigned's signature(s), unless, in either event, tender is being
made through the Book-Entry Transfer Facility. In the event that both "Special
Issuance Instructions" and "Special Delivery Instructions" are completed, please
issue the certificates representing the Exchange Notes issued in exchange for
the Restricted Notes accepted for exchange and return any Restricted Notes not
tendered or not exchanged in the name(s) of, and send such certificates to, the
person(s) so indicated. The undersigned recognizes that the Company has no
obligation pursuant to the "Special Issuance Instructions" and "Special Delivery
Instructions" to transfer any Restricted Notes from the name of the registered
holder(s) thereof if the Company does not accept for exchange any of the
Restricted Notes so tendered.
Holders of Restricted Notes whose certificates are not immediately
available, or who are unable to deliver their certificates or confirmation of
the book-entry tender of their Restricted Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility (a "Book-Entry Confirmation") and
all other documents required by this Letter to the Exchange Agent on or prior to
the Expiration Date, must tender their Restricted Notes according to the
guaranteed delivery procedures set forth in the Prospectus under "The Exchange
Offer--Guaranteed Delivery Procedures." See Instruction 1.
7
<PAGE>
- --------------------------------------------------------------------------------
PLEASE SIGN HERE WHETHER OR NOT
RESTRICTED NOTES ARE BEING TENDERED HEREBY
<TABLE>
<S> <C>
X
DATE
X
SIGNATURE(S) OF REGISTERED HOLDER(S) DATE
OR AUTHORIZED SIGNATORY
</TABLE>
Area Code and Telephone Number: ____________________
The above lines must be signed by the registered holder(s) of Restricted
Notes as their name(s) appear(s) on the Restricted Notes or, if the
Restricted Notes are tendered by a participant in the Book-Entry Transfer
Facility, as such participant's name appears on a security position listing
as the owner of Restricted Notes, or by person(s) authorized to become
registered holder(s). If Restricted Notes to which this Letter relates are
held of record by two or more joint holders, then all such holders must sign
this Letter. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or other person acting
in a fiduciary or representative capacity, such person must (i) set forth
his or her full title below and (ii) unless waived by the Company, submit
evidence satisfactory to the Company of such person's authority as to act.
See Instruction 3 regarding the completion of this Letter.
Name(s): ___________________________________________________________________
(PLEASE PRINT)
Capacity: __________________________________________________________________
Address: ___________________________________________________________________
(INCLUDE ZIP CODE)
Signature(s) Guaranteed by an Eligible Institution: (If required by
Instruction 3)
__________________________________________________________________________
(AUTHORIZED SIGNATURE)
__________________________________________________________________________
(TITLE)
__________________________________________________________________________
(NAME OF FIRM)
__________________________________________________________________________
(ADDRESS (INCLUDING ZIP CODE) AND TELEPHONE NUMBER (INCLUDING AREA CODE)
OF FIRM)
Date: _________________, 1998
- --------------------------------------------------------------------------------
8
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE
EXCHANGE OFFER
1. DELIVERY OF THIS LETTER AND NOTES; GUARANTEED DELIVERY PROCEDURES.
This Letter is to be completed by holders (which term, for purposes of the
Exchange Offer, includes any participant in the Book-Entry Transfer Facility
system whose name appears on a security position listing as the holder of such
Restricted Notes) either if certificates are to be forwarded herewith or if
tenders are to be made pursuant to the procedures for delivery by book-entry
transfer set forth in the Prospectus under the caption "The Exchange
Offer--Book-Entry Transfer." Certificates for all physically tendered Restricted
Notes or Book-Entry Confirmation, as the case may be, as well as this properly
completed and duly executed Letter (or manually signed facsimile hereof) and any
other documents required by this Letter, must be received by the Exchange Agent
at the address set forth herein on or prior to 5:00 p.m., New York City time, on
the Expiration Date, or the tendering holder must comply with the guaranteed
delivery procedures set forth below. Restricted Notes tendered hereby must be in
denominations of principal amount of $1,000 and any integral multiple thereof.
Holders of Restricted Notes whose certificates for Restricted Notes are not
immediately available or who cannot deliver their certificates and all other
required documents to the Exchange Agent on or prior to 5:00 p.m., New York City
time, on the Expiration Date, or who cannot complete the procedure for
book-entry transfer on a timely basis, may tender their Restricted Notes
pursuant to the guaranteed delivery procedures set forth in the Prospectus under
the caption "The Exchange Offer--Guaranteed Delivery Procedures." Pursuant to
such procedures, (i) such tender must be made by or through an Eligible
Institution and a Notice of Guaranteed Delivery must be signed by such holder;
(ii) on or prior to the Expiration Date, the Exchange Agent must receive from
such holder and Eligible Institution a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form provided by the Company
below (by facsimile transmission, mail or hand delivery), setting forth the name
and address of the holder of Restricted Notes, the certificate number(s) of the
tendered Restricted Notes, and the amount of Restricted Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within five
business days after the date of delivery of the Notice of Guaranteed Delivery,
the certificates for all physically tendered Restricted Notes, or a Book-Entry
Confirmation, this duly executed Letter (or a facsimile thereof) and any other
documents required by this Letter will be deposited by the Eligible Institution
with the Exchange Agent; and (iii) the certificates for all physically tendered
Restricted Notes, in the proper form for transfer, or Book-Entry Confirmation,
as the case may be, and all other properly completed and executed documents
required by this Letter, are received by the Exchange Agent within five business
days after the Expiration Date. Any holder who wishes to tender Restricted Notes
pursuant to the guaranteed delivery procedures described above must ensure that
the Exchange Agent receives the Notice of Guaranteed Delivery and this Letter
relating to such Restricted Notes prior to 5:00 p.m., New York City time, on the
Expiration Date.
In the case of Restricted Notes held through Cedel or Euroclear, holders of
such Restricted Notes wishing to tender such Restricted Notes for exchange
pursuant to the Exchange Offer must send instructions to Cedel or Euroclear, as
the case may be, to block the Restricted Notes in such holder's account at Cedel
or Euroclear. In addition, such holder of Restricted Notes must transmit this
properly completed and duly executed Letter, including all other documents
required by this Letter to the Exchange Agent. See "The Exchange
Offer--Restricted Notes Held Through Cedel or Euroclear" section of the
Prospectus.
The method of delivery of this Letter, the Restricted Notes and all other
required documents is at the election and risk of the tendering holders, and the
delivery will be deemed made only when actually received or confirmed by the
Exchange Agent. If Restricted Notes are sent by mail, it is suggested that the
9
<PAGE>
mailing be made sufficiently in advance of the Expiration Date to permit
delivery to the Exchange Agent prior to 5:00 p.m., New York City time, on the
Expiration Date.
2. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER).
If less than all of the Restricted Notes evidenced by a submitted
certificate are to be tendered, the tendering holder(s) should fill in the
aggregate principal amount of Restricted Notes to be tendered in the box above
entitled "Description of Restricted Notes." A reissued certificate representing
the balance of nontendered Restricted Notes will be sent to such tendering
holder, unless otherwise provided in the appropriate box on this Letter,
promptly after the Expiration Date. All of the Restricted Notes delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
3. SIGNATURES ON THIS LETTER; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF
SIGNATURES.
If this Letter is signed by the registered holder of the Restricted Notes
tendered hereby, the signature must correspond exactly with the name as written
on the face of the certificates without any change whatsoever.
If any tendered Restricted Notes are owned of record by two or more joint
owners, all such owners must sign this Letter.
If any tendered Restricted Notes are registered in different names on
several certificates, it will be necessary to complete, sign and submit as many
separate copies of this Letter as there are different registrations of
certificates.
When this Letter is signed by the registered holder or holders of the
Restricted Notes specified herein and tendered hereby, no endorsements of
certificates or separate bond powers are required. If, however, the Exchange
Notes are to be issued, or any untendered Restricted Notes are to be reissued,
to a person other than the registered holder, then endorsements of any
certificates transmitted hereby or separate bond powers are required. Signatures
on such certificate(s) or bond powers must be guaranteed by an Eligible
Institution.
If this Letter is signed by a person or persons other than the registered
holder or holders of any certificate(s) specified herein, such certificate(s)
must be endorsed or accompanied by appropriate bond powers, in either case
signed exactly as the name or names of the registered holder or holders
appear(s) on the certificate(s). Signatures on such certificate(s) or bond
powers must be guaranteed by an Eligible Institution.
If this Letter, any certificates, bond powers or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Company, proper evidence satisfactory to the Company of their authority to
so act must be submitted.
Endorsements on certificates for Restricted Notes or signatures on bond
powers required by this Instruction 3 must be guaranteed by a firm which is a
member of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust company
having an office or correspondent in the United States (an "Eligible
Institution").
Signatures on this Letter need not be guaranteed by an Eligible Institution,
provided the Restricted Notes are tendered: (i) by a registered holder of
Restricted Notes who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on this Letter; or (ii) for the
account of an Eligible Institution.
10
<PAGE>
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
Tendering holders of Restricted Notes should indicate in the applicable box
the name and address to which Exchange Notes issued pursuant to the Exchange
Offer and/or substitute certificates evidencing Restricted Notes not exchanged
are to be issued or sent, if different from the name or address of the person
signing this Letter. In the case of issuance in a different name, the employer
identification number or social security number of the person named must also be
indicated. Holders tendering Restricted Notes by book-entry transfer may request
that Restricted Notes not exchanged be credited to such account maintained at
the Book-Entry Transfer Facility as such holder may designate hereon. If no such
instructions are given, such Restricted Notes not exchanged will be returned to
the name or address of the person signing this Letter.
5. TAX IDENTIFICATION NUMBER.
United States federal income tax law may require that a tendering holder
whose Restricted Notes are accepted for exchange provide the Company (as payor)
with such holder's correct Taxpayer Identification Number ("TIN") on Substitute
Form W-9 below, which, in the case of a tendering holder who is an individual,
is his or her social security number. If the Company is not provided with the
current TIN or an adequate basis for an exemption, such tendering holder may be
subject to a $50 penalty imposed by the United States Internal Revenue Service
(the "IRS"). In addition, such tendering holder may be subject to backup
withholding in an amount equal to 31% of all reportable payments made after the
exchange. If withholding results in an overpayment for taxes, a refund may be
obtained.
Exempt holders of Restricted Notes (including, among others, all
corporations) are not subject to these backup withholding requirements. See the
enclosed Guidelines For Certification of Taxpayer Identification Number on
Substitute Form W-9 (the "Guidelines") for additional instructions.
To prevent backup withholding, each tendering holder of Restricted Notes
should provide its correct TIN by completing the Substitute Form W-9 set forth
below, certifying that the TIN provided is correct. If the tendering holder of
Restricted Notes is a nonresident alien or foreign entity not subject to backup
withholding, such holder should provide a completed Form W-8, Certificate of
Foreign Status. These forms may be obtained from the Exchange Agent. If the
Restricted Notes are held in more than one name or are not held in the name of
the actual owner, such holder should consult the Guidelines for information on
which TIN to report. If such holder does not have a TIN, such holder should
consult the Guidelines for instructions on applying for a TIN, check the box in
Part 2 of the Substitute Form W-9 and write "applied for" in lieu of its TIN.
6. TRANSFER TAXES.
The Company will pay all transfer taxes, if any, applicable to the transfer
of Exchange Notes in exchange for Restricted Notes pursuant to the Exchange
Offer. If, however, Exchange Notes or Restricted Notes not tendered or not
accepted are to be delivered to, or are to be registered or issued in the name
of, any person other than the registered holder of the Restricted Notes tendered
hereby, or if tendered Restricted Notes are registered in the name of any person
other than the person signing this Letter, or if a transfer tax is imposed for
any reason other than the transfer of Restricted Notes to the Company or its
order pursuant to the Exchange Offer, the amount of any such transfer taxes
(whether imposed on the registered holder or any other person) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted herewith, the amount of such transfer taxes
will be billed directly to such tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Restricted Notes specified in this
Letter.
11
<PAGE>
7. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive satisfaction of any or all
conditions enumerated in the Prospectus.
8. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Restricted Notes, by execution of this
Letter, shall waive any right to receive notice of the acceptance of their
Restricted Notes for exchange.
Neither the Company, the Exchange Agent nor any other person is obligated to
give notice of any defect or irregularity with respect to any tender of
Restricted Notes, nor shall any of them incur any liability for failure to give
any such notice.
9. MUTILATED, LOST, STOLEN OR DESTROYED RESTRICTED NOTES.
Any holder whose Restricted Notes have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above for
further instructions.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter, may be directed to the
Exchange Agent, at the address and telephone number indicated above.
(DO NOT WRITE IN THE SPACE BELOW)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
CERTIFICATE RESTRICTED NOTES RESTRICTED NOTES
SURRENDERED TENDERED ACCEPTED
<S> <C> <C>
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
</TABLE>
Delivery Prepared by ______________ Checked By ______________ Date _____________
12
<PAGE>
<TABLE>
<C> <S>
- ----------------------------------------------------------------------------------------------------------
Name (if joint names, list first and circle the name of the person or entity whose number you enter below)
- ----------------------------------------------------------------------------------------------------------
Business Name (Sole proprietors see the instructions in the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 (the "Guidelines"))
- ----------------------------------------------------------------------------------------------------------
Address
- ----------------------------------------------------------------------------------------------------------
City, State and Zip Code
- ----------------------------------------------------------------------------------------------------------
PART I--TAXPAYER IDENTIFICATION NUMBER
Enter your taxpayer identification number in the appropriate
box. For individuals, this is your social security number. For
sole proprietors, see the instructions in the Guidelines. For
other entities, it is your employer identification number. If
you do not have a number, see
SUBSTITUTE "Obtaining a Number" in the Guidelines.
FORM W-9
Department of the Treasury Note: If the account is in more than one name, see the chart on
Internal Revenue Service page 1 of the Guidelines on whose number to enter.
Request for Taxpayer
Identification Number and
Certification Social Security Number
OR
Employer Identification Number
- --------------------------------------------------------------------------------------
PART II--FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING (SEE
INSTRUCTIONS IN THE GUIDELINES)
- --------------------------------------------------------------------------------------
CERTIFICATION--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification number (or I am waiting for a
number to be issued to me), and
(2) I am not subject to backup withholding because (a) I am exempt from backup withholding or (b) I have
not been notified by the Internal Revenue Service ("IRS") that I am subject to backup withholding as a
result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no
longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have been notified by the IRS that
you are currently subject to backup withholding because of underreporting interest or dividends on your
tax return.
SIGNATURE: DATE: , 199
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF CERTAIN
PAYMENTS MADE TO YOU. PLEASE REVIEW THE GUIDELINES FOR ADDITIONAL DETAILS.
- --------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
EX-99.2
NOTICE OF GUARANTEED DELIVERY
NOTICE OF GUARANTEED DELIVERY
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of JTM Industries, Inc. (the "Company") made pursuant to the
Prospectus, dated June _, 1998 (the "Prospectus"), if certificates for
Restricted Notes of the Company are not immediately available or if the
procedure for book-entry transfer cannot be completed on a timely basis or time
will not permit all required documents to reach the Company prior to 5:00 p.m.,
New York City time, on the Expiration Date of the Exchange Offer. This form may
be delivered or transmitted by facsimile transmission, mail, or hand delivery to
U.S. Bank National Association (the "Exchange Agent") as set forth below. In
addition, in order to utilize the guaranteed delivery procedure to tender
Restricted Notes pursuant to the Exchange Offer, a completed, signed and dated
Letter of Transmittal (or facsimile thereof) must also be received by the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
Capitalized terms used but not defined herein have the meanings given to them in
the Prospectus.
DELIVERY TO: U.S. BANK NATIONAL ASSOCIATION, EXCHANGE AGENT
BY MAIL OR OVERNIGHT COURIER OR HAND:
BY FIRST CLASS MAIL:
U.S. Bank National Association
P.O. Box 64485
St. Paul, MN 55164-9549
BY REGISTERED, CERTIFIED OR OVERNIGHT MAIL:
U.S. Bank National Association
Attn: Specialized Finance
180 East Fifth Street
St. Paul, MN 55101
Attention: Kevin Gorman
Telephone: (612) 244-1197
By Facsimile: (612) 244-1537
(Originals of all documents sent by facsimile should be sent
promptly by registered or certified mail, by hand or by overnight courier)
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the
Company the principal amount of Restricted Notes set forth below, pursuant to
the guaranteed delivery procedure described in "The Exchange Offer--Guaranteed
Delivery Procedures" section of the Prospectus.
Principal Amount of Outstanding Notes Tendered:(*/)
$___________________________________________
If Restricted Notes will be
delivered by book-entry transfer to
the Depository Trust Company,
provide account number.
Certificate Nos. (if available):
<TABLE>
<S> <C>
Account Number
Total Principal Amount Represented by
Restricted Notes Certificate(s):
</TABLE>
*/Must be in denominations of principal amount of $1,000 and any integral
multiple thereof.
<PAGE>
ALL AUTHORITY HEREIN CONFERRED OR AGREED TO BE CONFERRED SHALL SURVIVE THE DEATH
OR INCAPACITY OF THE UNDERSIGNED AND EVERY OBLIGATION OF THE UNDERSIGNED
HEREUNDER SHALL BE BINDING UPON THE HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS
AND ASSIGNS OF THE UNDERSIGNED.
PLEASE SIGN HERE
X_______________________________________________________________________________
X_______________________________________________________________________________
Signature(s) of Owner(s) Date
or Authorized Signatory
Area Code and Telephone Number:
Must be signed by the holder(s) of Restricted Notes as their name(s)
appear(s) on certificates for Restricted Notes or on a security position
listing, or by person(s) authorized to become registered holder(s) by
endorsement and documents transmitted with this Notice of Guaranteed Delivery.
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer or the person acting in a fiduciary or representative
capacity, such person must set forth his or her full title below.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s): _______________________________________________________________________
Capacity: ______________________________________________________________________
Address(es): ___________________________________________________________________
<PAGE>
GUARANTEE
The undersigned, a member of a registered national securities exchange, or a
member of the National Association of Securities Dealers, Inc., or a commercial
bank or trust company having an office or correspondent in the United States,
hereby guarantees that the certificates representing the principal amount of
Restricted Notes tendered hereby in proper form for transfer, or timely
confirmation of the book-entry transfer of such Restricted Notes into the
Exchange Agent's account at the Depository Trust Company pursuant to the
procedures set forth in "The Exchange Offer--Guaranteed Delivery Procedures"
section of the Prospectus, together with a properly completed and duly executed
Letter of Transmittal (or a manually signed facsimile thereof) with any required
signature guarantee and any other documents required by the Letter of
Transmittal, will be received by the Exchange Agent at the address set forth
above, no later than five business days after the date of the delivery hereof.
Name of Firm: __________________________________________________________________
Authorized Signature: __________________________________________________________
Title: _________________________________________________________________________
Name: __________________________________________________________________________
Address: _______________________________________________________________________
(Please Type or Print)
Area Code and Tel. No. _________________________________________________________
Dated: _________________________________________________________________________
NOTE: DO NOT SEND CERTIFICATES FOR RESTRICTED NOTES WITH THIS FORM. CERTIFICATES
FOR RESTRICTED NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL.
