<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 18, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
CORNING CONSUMER PRODUCTS COMPANY
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 3329 16-1403318
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>
--------------------------
E-BUILDING, HOUGHTON PARK
CORNING, NEW YORK 14831
(607) 974-8605
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
--------------------------
E-BUILDING, HOUGHTON PARK
CORNING, NEW YORK 14831
(607) 974-8605
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
WITH A COPY TO:
ARTHUR D. ROBINSON, ESQ.
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 455-2000
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE 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, check the following box and
list the Securities Act Registration number of the earlier effective
Registration Statement for the same offering: / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities
Registration Statement number of the earlier effective Registration Statement
for the same offering: / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER NOTE OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
9 5/8% Series B Senior Subordinated
Notes due 2008..................... $200,000,000 100% $200,000,000 $59,000.00
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO CHANGE, COMPLETION OR AMENDMENT
WITHOUT NOTICE. THIS PRELIMINARY OFFERING MEMORANDUM SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE
OF THESE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR
SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH JURISDICTION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED BEFORE THE OFFERING MEMORANDUM IS DELIVERED IN
FINAL FORM.
<PAGE>
PROSPECTUS
CORNING CONSUMER PRODUCTS COMPANY
OFFER TO EXCHANGE UP TO $200,000,000 OF ITS
9 5/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2008
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT,
FOR ANY AND ALL OF ITS OUTSTANDING
9 5/8% SENIOR SUBORDINATED NOTES DUE 2008
Corning Consumer Products Company (the "Company"), hereby offers, upon the terms
and subject to the conditions set forth in this Prospectus and the accompanying
Letter of Transmittal (which together constitute the "Exchange Offer"), to
exchange an aggregate of up to $200,000,000 principal amount of 9 5/8% Series B
Senior Subordinated Notes due 2008 (the "Exchange Notes") of the Company for an
identical face amount of the issued and outstanding 9 5/8% Senior Subordinated
Notes due 2008 (the "Old Notes", and together with the Exchange Notes, the
"Notes") of the Company from the holders thereof. As of the date of this
Prospectus, there is $200,000,000 aggregate principal amount of the Old Notes
outstanding. The terms of the Exchange Notes are identical in all material
respects to the Old Notes, except that the Exchange Notes have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), and
therefore will not bear legends restricting their transfer and will not contain
certain provisions providing for an increase in the interest rate on the Old
Notes under certain circumstances described in the Registration Rights Agreement
(as defined), which provisions will terminate as to all of the Notes upon the
consummation of the Exchange Offer.
Interest on the Exchange Notes will be payable semi-annually on May 1 and
November 1 of each year, commencing on November 1, 1998. The Exchange Notes will
mature on May 1, 2008. Except as described below, the Company may not redeem the
Exchange Notes prior to May 1, 2003. On or after such date, the Company may
redeem the Exchange Notes, in whole or in part, at the redemption prices set
forth herein, together with accrued and unpaid interest, if any, to the date of
redemption. In addition, at any time on or prior to May 1, 2001, the Company may
redeem up to 35% of the original aggregate principal amount of the Exchange
Notes with the net proceeds of one or more Equity Offerings (as defined), at a
price equal to 109.625% of the aggregate principal amount to be redeemed,
together with accrued and unpaid interest, if any, to the date of redemption;
provided that at least 65% of the original aggregate principal amount of the
Exchange Notes remains outstanding immediately after each such redemption. The
Exchange Notes will not be subject to any sinking fund requirement. Upon the
occurrence of a Change of Control (as defined), the Company will have the
option, at any time prior to May 1, 2003, to redeem the Exchange Notes, in whole
but not in part, at a redemption price equal to 100% of the principal amount
thereof plus the Applicable Premium (as defined), together with accrued and
unpaid interest, if any, to the date of redemption. Upon the occurrence of a
Change of Control, if the Company does not so redeem the Exchange Notes or if a
Change of Control occurs on or after May 1, 2003, the Company will be required
to make an offer to purchase the Exchange Notes at a price equal to 101% of the
original aggregate principal amount thereof, together with accrued and unpaid
interest, if any, to the date of purchase. See "Description of the Exchange
Notes."
The Exchange Notes will be unsecured, will be subordinated in right of payment
to all existing and future Senior Indebtedness (as defined) of the Company and
will be effectively subordinated to all obligations of the subsidiaries of the
Company. The Exchange Notes will rank PARI PASSU with any future Senior
Subordinated Indebtedness (as defined) of the Company and will rank senior to
all Subordinated Indebtedness (as defined) of the Company. The Indenture (as
defined) permits the Company to incur additional indebtedness, including up to
$278.4 million of Senior Indebtedness under the Credit Facilities (as defined),
subject to certain limitations. See "Description of the Exchange Notes." As of
March 31, 1998, on a pro forma basis after giving effect to the Transactions (as
defined), the aggregate amount of the Company's outstanding Senior Indebtedness
would have been approximately $271.6 million (excluding unused commitments), all
of which would have been secured indebtedness, and the Company would have had no
Senior Subordinated Indebtedness outstanding other than the Notes. As of March
31, 1998, after giving pro forma effect to the Transactions, the Company's
subsidiaries would have had total liabilities of $117.4 million (excluding
guarantees in respect of the Credit Facilities). See "Unaudited Pro Forma
Financial Information", "Risk Factors--Adverse Consequences of Holding Company
Structure" and "--Subordination."
The Old Notes were issued and sold on May 5, 1998 in a transaction not
registered under the Securities Act in reliance upon an exemption from the
registration requirements thereof. In general, the Old 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. The
Exchange Notes are being offered hereby in order to satisfy certain obligations
of the Company contained in the Registration Rights Agreement. Based on
interpretations by the staff of the Securities and Exchange Commission (the
"Commission") set forth in no-action letters issued to third parties, the
Company believes that the Exchange Notes issued pursuant to the Exchange Offer
in exchange for Old Notes may be offered for resale, resold or otherwise
transferred by any holder thereof (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 promulgated under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, PROVIDED that such Exchange Notes are acquired
in the ordinary course of such holder's business, such holder has no arrangement
with any person to participate in the distribution of such Exchange Notes and
neither such holder nor any such other person is engaging in or intends to
engage in a distribution of such Exchange Notes. However, the Company has not
sought, and does not intend to seek, its own no-action letter, and there can be
no assurance that the staff of the Commission would make a similar determination
with respect to the Exchange Offer. Notwithstanding the foregoing, 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 any resale of Exchange Notes
received in exchange for such Old Notes where such Old Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities (other than Old Notes acquired directly from the Company). A
broker-dealer may not participate in the Exchange Offer with respect to Old
Notes acquired other than as a result of market-making activities or other
trading activities. The Company has agreed that, for a period of 90 days after
the date of this Prospectus, it will make this Prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
The Old Notes are designated for trading in the Private Offerings, Resales and
Trading through Automated Linkages ("PORTAL") market. There is no established
trading market for the Exchange Notes. The Company currently does not intend to
list the Exchange Notes on any securities exchange or to seek approval for
quotation of the Exchange Notes through any automated quotation system.
Accordingly, there can be no assurance as to the development or liquidity of any
market for the Exchange Notes.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered for exchange. The date of acceptance and
exchange of the Old Notes (the "Exchange Date") will be the third business day
following the Expiration Date. Old Notes tendered pursuant to the Exchange Offer
may be withdrawn at any time prior to the Expiration Date. The Company will not
receive any proceeds from the Exchange Offer. The Company will pay all of the
expenses incident to the Exchange Offer. The Exchange Offer will expire 5:00
p.m., New York City Time, on , 1998 (the "Expiration Date"). The
Company does not currently intend to extend the Expiration Date.
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SEE "RISK FACTORS" BEGINNING ON PAGE 16 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER AND AN INVESTMENT IN
THE EXCHANGE NOTES.
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THE EXCHANGE NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE COMMISSION OR
ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1998
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (together with all amendments, exhibits, schedules and supplements thereto,
the "Registration Statement") under the Securities Act with respect to the
Exchange Notes being offered hereby. This Prospectus, which forms a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement. For further information with respect to the Company and
the Exchange Notes, reference is made to the Registration Statement. Statements
contained in this Prospectus as to the contents of any contract or other
document are not necessarily complete, and, where such contract or other
document is an exhibit to the Registration Statement, each such statement is
qualified in all respects by the provisions in such exhibit, to which reference
is hereby made. The Company is not currently subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Upon completion of the Exchange Offer, the Company will be subject to the
information requirements of the Exchange Act and, in accordance therewith, will
file periodic reports and other information with the Commission. The
Registration Statement, such reports and other information can be inspected and
copied at the Public Reference Section of the Commission located at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549 and at regional
public reference facilities maintained by the Commission located at Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven
World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material, including copies of all or any portion of the Registration Statement,
can be obtained from the Public Reference Section of the Commission at
prescribed rates. Such material may also be accessed electronically by means of
the Commission's home page on the Internet (http://www.sec.gov). In addition,
pursuant to the Indenture covering Old Notes and the Exchange Notes, the Company
has agreed to file with the Commission and provide to the Holders the annual
reports and the information, documents and other reports otherwise required
pursuant to Section 13 of the Exchange Act. Such requirements may be satisfied
through the filing and provision of such documents and reports which would
otherwise be required pursuant to Section 13 in respect of the Company.
UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
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i
<PAGE>
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 PROVIDES A "SAFE
HARBOR" FOR CERTAIN FORWARD-LOOKING STATEMENTS. THE FACTORS DISCUSSED UNDER
"RISK FACTORS," AMONG OTHERS, COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM FORWARD-LOOKING STATEMENTS MADE IN THIS PROSPECTUS, INCLUDING, WITHOUT
LIMITATION, IN "BUSINESS" AND "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS," IN THE COMPANY'S PRESS RELEASES AND IN
ORAL STATEMENTS MADE BY AUTHORIZED OFFICERS OF THE COMPANY. WHEN USED IN THIS
PROSPECTUS, THE WORDS "ESTIMATE," "PROJECT," "ANTICIPATE," "EXPECT," "INTEND,"
"BELIEVE" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING
STATEMENTS. ALL OF THESE FORWARD-LOOKING STATEMENTS ARE BASED ON ESTIMATES AND
ASSUMPTIONS MADE BY MANAGEMENT OF THE COMPANY, WHICH, ALTHOUGH BELIEVED TO BE
REASONABLE, ARE INHERENTLY UNCERTAIN. THEREFORE, UNDUE RELIANCE SHOULD NOT BE
PLACED UPON SUCH ESTIMATES AND STATEMENTS. NO ASSURANCE CAN BE GIVEN THAT ANY OF
SUCH STATEMENTS OR ESTIMATES WILL BE REALIZED AND ACTUAL RESULTS WILL DIFFER
FROM THOSE CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS. SEE "RISK
FACTORS--FORWARD-LOOKING STATEMENTS."
------------------------
CORELLE-Registered Trademark-, REVERE WARE-Registered Trademark-, AND
VISIONS-Registered Trademark- ARE REGISTERED TRADEMARKS OF THE COMPANY. THE
COMPANY LICENSES THE CORNING WARE-Registered Trademark-,
PYROCERAM-Registered Trademark- AND PYREX-Registered Trademark- TRADEMARKS FROM
CORNING.
ii
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL
STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS THE
CONTEXT OTHERWISE REQUIRES, REFERENCES TO THE "COMPANY" ARE REFERENCES TO
CORNING CONSUMER PRODUCTS COMPANY (AND, WHERE APPLICABLE, ITS PREDECESSORS,
INCLUDING THE UNINCORPORATED CONSUMER PRODUCTS BUSINESS OF CORNING) AND ITS
SUBSIDIARIES. THE COMPANY'S FISCAL YEAR IS THE CALENDAR YEAR. UNLESS OTHERWISE
INDICATED, INFORMATION PRESENTED ON A PRO FORMA BASIS GIVES EFFECT TO THE
TRANSACTIONS.
THE COMPANY
GENERAL
Corning Consumer Products Company, a business founded in 1915, is a leading
manufacturer and marketer of oven/bakeware ("bakeware"), dinnerware and rangetop
cookware. The Company believes that its brands, including Corning
Ware-Registered Trademark-, Pyrex-Registered Trademark-,
Corelle-Registered Trademark-, Revere Ware-Registered Trademark- and
Visions-Registered Trademark-, constitute one of the broadest and best
recognized collection of brands in the U.S. housewares industry. The Company has
leading positions in major channels of distribution for such products in the
United States and has also achieved a significant presence in certain
international markets, primarily Canada, Asia, Australia and Latin America. In
1997, on a pro forma basis after giving effect to the Transactions, the Company
recorded net sales, operating income and EBITDA (as defined) of $572.9 million,
$54.0 million and $89.7 million, respectively. For the three months ended March
31, 1998, on a pro forma basis after giving effect to the Transactions, the
Company recorded net sales, operating income and EBITDA of $116.5 million, $2.1
million and $11.1 million, respectively. In 1997, approximately 75% of the
Company's net sales were generated domestically and approximately 25%
internationally.
The Company's Corning Ware-Registered Trademark- and
Pyrex-Registered Trademark- products represent the two largest glass-ceramic and
glass bakeware brands (measured in dollar sales) in the United States, with
approximately 67% of all glass-ceramic and glass bakeware sales (and
approximately 29% of total bakeware sales) in 1997. The Company believes that
its Corelle-Registered Trademark- brand is the nation's largest selling
dinnerware brand in the mass merchant channel, with approximately 38% of mass
merchant dinnerware sales in 1997, over two times the sales of the next largest
mass merchant dinnerware competitor. The Company's core rangetop cookware brand,
Revere Ware-Registered Trademark-, is one of the nation's leading stainless
steel rangetop cookware brands, accounting for approximately 29% of stainless
steel rangetop cookware sales and 7% of total rangetop cookware sales among mass
merchant and department store customers in 1997.
Prior to the Recapitalization, the Company was a wholly owned subsidiary of
Corning Incorporated ("Corning"). On March 2, 1998, the Company, Corning,
Borden, Inc. ("Borden") and CCPC Acquisition Corp. ("CCPC Acquisition") entered
into the Recapitalization Agreement (as amended, the "Recapitalization
Agreement") pursuant to which on April 1, 1998 (the "Closing Date") CCPC
Acquisition acquired 92% of the outstanding shares of common stock, par value
$0.01 per share (the "Common Stock"), of the Company from Corning for $110.4
million (the "Stock Acquisition") and the Company paid a cash dividend to
Corning of $472.6 million (the "Cash Dividend"). The Stock Acquisition was
financed by an equity investment in CCPC Acquisition by BW Holdings LLC, an
affiliate of Kohlberg Kravis Roberts & Co., L.P. ("KKR") and the parent company
of Borden and CCPC Acquisition ("BW Holdings"). Under the 1998 Corning Consumer
Products Company Stock Purchase and Option Plan (the "1998 Plan"), CCPC
Acquisition is currently in the process of selling shares of Common Stock, and
the Company is making grants of options to purchase Common Stock, to certain
members of management of the Company, which will represent 12.4% of the fully
diluted Common Stock.
1
<PAGE>
U.S. HOUSEWARES INDUSTRY
According to management estimates, total retail sales in the U.S. housewares
industry were approximately $19.2 billion in 1997. The categories of the
housewares industry in which the Company's products compete--bakeware,
dinnerware and rangetop cookware--generated an estimated $4.3 billion in total
retail sales in 1997 compared to $4.1 billion in 1996. Retail sales in the U.S.
of bakeware, dinnerware and rangetop cookware have all exhibited a stable growth
pattern over the last ten years with growth in these segments linked to the rate
of household formations and gross domestic product growth. In the United States,
bakeware, dinnerware and rangetop cookware products are sold through three
primary channels, mass merchants (large national or regional discounters, such
as K-Mart), department stores and specialty retailers (full service retailers
providing a broad assortment in their specialty retail category, such as Bed
Bath & Beyond and Home Place), as well as through other channels, including
outlet stores, retail food stores, catalog showrooms and direct mail.
BAKEWARE. Total U.S. retail bakeware sales are estimated to have been $800
million in 1997. During this period, metal products and glass and glass-ceramic
products each represented an estimated 50% of U.S. retail bakeware sales. The
Company's bakeware sales are generated primarily from glass-ceramic and glass
products sold under the Corning Ware-Registered Trademark- and
Pyrex-Registered Trademark- brand names. The mass merchant channel is the
largest single channel for bakeware, accounting for an estimated 37% of domestic
retail bakeware sales in 1997.
DINNERWARE. Total U.S. retail dinnerware sales are estimated to have been
$1.7 billion in 1997. The Company's Corelle-Registered Trademark- glass
dinnerware products are sold as "everyday" products. "Everyday" dinnerware
products, which include glass, stoneware and plastic products, represented an
estimated 56% of domestic retail dinnerware sales in 1997. The mass merchant
channel is the largest channel for everyday dinnerware, accounting for an
estimated 33% of U.S. retail dinnerware sales in 1997.
RANGETOP COOKWARE. Total U.S. retail rangetop cookware sales are estimated
to have been $1.8 billion in 1997. Aluminum, which has been growing in
popularity due to the ease of cleaning and increased durability of non-stick
coatings, is the leading material for rangetop cookware (the other primary
material being stainless steel) and accounted for approximately 70% of U.S.
retail rangetop cookware sales in mass merchant and department store channels in
1997. The Company's rangetop cookware sales are generated primarily from
stainless steel products sold under the Revere Ware-Registered Trademark- brand
name and glass-ceramic products sold under the Visions-Registered Trademark-
brand name. To meet growing consumer demand, the Company introduced three full
lines of Revere Ware-Registered Trademark- non-stick aluminum products in 1998
to complement the Company's sales of individual items of non-stick rangetop
cookware. The mass merchant channel is the largest distribution channel in this
category, accounting for an estimated 45% of retail domestic rangetop cookware
sales in 1997.
COMPETITIVE STRENGTHS
The Company attributes its leadership in bakeware, dinnerware and stainless
steel rangetop cookware to the following competitive strengths:
LEADING BRAND NAMES. The Corning Ware-Registered Trademark-,
Pyrex-Registered Trademark-, Corelle-Registered Trademark-, Revere
Ware-Registered Trademark- and Visions-Registered Trademark- brands have
consistently been among the leaders in brand awareness and household penetration
in the respective product categories in which they compete in the United States.
The Company believes that this brand strength and household penetration results
from consumer experience with the high quality, durability and functionality of
the Company's products.
2
<PAGE>
BRAND CHARACTERISTICS
<TABLE>
<CAPTION>
TOTAL
BRAND AWARENESS(A) HOUSEHOLD PENETRATION(B)
- --------------------------------------------------- ----------------- ---------------------------
<S> <C> <C>
Corning Ware-Registered Trademark-................. 98% 82%
Pyrex-Registered Trademark-........................ 93% 73%
Corelle-Registered Trademark-...................... 91% 51%
Revere Ware-Registered Trademark-.................. 81% 36%
Visions-Registered Trademark-...................... 87% 33%
</TABLE>
- ------------------------
(a) Based on surveys conducted in 1997 of female heads of households by market
research firms using aided and unaided techniques.
(b) The percentage of the respondents aware of the applicable brand who
currently own a product of the applicable brand.
BROAD DISTRIBUTION IN U.S. CHANNELS. The Company sells its products in the
United States to most major U.S. mass merchant retailers and a broad array of
department stores, specialty retailers and retail food stores, as well as
through its outlet stores and other channels. The strength of the Company's
brand names and its presence in several houseware categories make the Company a
significant supplier to, and enhance the Company's relationship with, its
retailer customers. In 1997, approximately 32% of the Company's U.S. gross sales
(before deductions for trade allowances, customer-paid freight and discounts)
were generated through the mass merchant channel, approximately 34% were
generated by Company-operated outlet stores and approximately 34% were generated
by other domestic channels, including department stores, specialty retailers and
retail food stores. The Company's outlet stores carry an extensive range of the
Company's products and provide the Company with an additional distribution
channel, which allows the Company to profitably sell slower-moving inventory.
The Company believes that its outlet stores, which also sell complementary
kitchen accessories, have developed marketing and pricing strategies that
generate sales which supplement, rather than compete with, its retailer
customers. The broad distribution of the Company's products through the mass
merchant, department store and specialty retailer channels, together with the
sales made through the Company's outlet stores, reduces the Company's dependence
on any one channel of distribution.
EMPHASIS ON NEW PRODUCT DEVELOPMENT. Products introduced in 1996 and 1997
generated approximately 24% of the Company's 1997 gross sales. New products
include: (i) products introduced into new categories or serving new functions to
meet consumer needs not met by the Company's existing products; (ii) product
line extensions, which generally include manufacturing changes to existing
product lines such as glass color or shape changes and (iii) product renewals,
which generally include decorative changes to existing product lines such as
pattern changes. The Company's product development process incorporates
extensive use of qualitative and quantitative research and enhances the
Company's ability to (i) focus resources on projects with high market potential,
(ii) bring new products to market quickly and (iii) extend existing product
categories. For example, Pyrex Portables-Registered Trademark-
(Pyrex-Registered Trademark- branded portable food containers) went from concept
to national distribution in only 11 months and generated over $33 million in
gross sales in 1996, the first full calendar year after its introduction. In
addition, the Company launched three full lines of Revere
Ware-Registered Trademark- aluminum non-stick cookware in 1998 within nine
months of commencing product development. Another new product for 1998 currently
being shipped by the Company to major retailers is Corning
Ware-Registered Trademark- Pop-Ins-TM-, a line of products designed for storing,
serving and reheating meals either at home or away from home that leverages the
Company's traditional strength in cooking/serving containers.
HIGH QUALITY MANUFACTURING PROCESSES. The Company's manufacturing processes
enable the Company to produce products with performance and cost characteristics
that appeal to consumers. The Company believes it is recognized as one of the
highest quality manufacturers of bakeware, dinnerware
3
<PAGE>
and rangetop cookware products and has instituted a process for pursuing
continuous quality improvement throughout its manufacturing organization. All of
the Company's four domestic manufacturing facilities are ISO 9002 certified.
SIGNIFICANT PRESENCE IN INTERNATIONAL MARKETS. The Company's products are
sold in over 30 foreign countries, primarily in North America, Asia and Latin
America, with established positions in Canada, Korea, Australia, Japan,
Singapore, Taiwan, Hong Kong, Mexico and Brazil. The Company operates a
decorating facility in Malaysia and packaging and distribution facilities in
Canada, Singapore, Australia and Brazil. In Europe, Russia, the Middle East and
Africa, the Company's products are sold through a distribution agreement (which
accounted for less than 2% of net sales in 1997 and first quarter 1998) with
Newell Co. ("Newell") that was entered into when the Company sold its consumer
products business in those territories to Newell in November 1994.
PROVEN MANAGEMENT TEAM. In the spring of 1996, a new management team,
headed by chief executive officer Peter F. Campanella, implemented a
comprehensive program to refocus and redesign the operations and objectives of
the Company. Key members of management with operational responsibility,
including Mr. Campanella, have remained with the Company following the
Recapitalization. In addition, Borden will provide management, consulting and
financial services to the Company pursuant to an agreement entered into between
the Company and Borden in connection with the Recapitalization. See "Certain
Relationships and Related Party Transactions--Between Borden and the Company."
In addition, five individuals who are senior executives of Borden are members of
the nine person Board of Directors of the Company.
BUSINESS STRATEGY
In the second quarter of 1996, the Company began implementing a two-phase
program to redesign the operations and objectives of the Company (the "Business
Redesign Program") to, first, streamline the Company's business to focus on
profitable products and customers while reducing the Company's cost structure
and, second, adopt initiatives to increase sales while maintaining and improving
upon the cost efficiencies achieved in the first phase of the Business Redesign
Program. The first phase of the Business Redesign Program, which is largely
complete, focused on eliminating low volume, low profit products and customers,
reducing manufacturing costs and reducing selling, general, administrative and
research and development expenses ("SG&A"). From 1995 to 1997, the first phase
of the Business Redesign Program resulted in improvements in gross margin from
29% to 34% and operating margin from (2)% to 6%. The first phase of the Business
Redesign Program has included the following initiatives:
FOCUS ON PROFITABLE PRODUCTS AND CUSTOMERS. The Company has refocused its
sales efforts on higher margin products and profitable customer accounts while
continuing to actively manage its product assortment and customer base. To
eliminate low volume, low profit products, the Company has instituted a process
of continually evaluating the profitability of its individual products ("stock
keeping units" or "SKUs"). This process includes examining volume, gross and
operating profit and inventory carrying costs. As a result of this process, the
number of SKUs distributed by the Company has been reduced by 55%, from 3,088 at
the end of 1995 to 1,403 at December 31, 1997. In addition, based on analyses of
customer account profitability, the number of customers directly served by the
Company has been reduced by 43%, from approximately 1,048 at the end of 1995, to
approximately 599 at December 31, 1997. The discontinued accounts were generally
low volume customers, many of which were transferred to distributors.
REDUCE MANUFACTURING COSTS. From 1995 to 1997, the Company implemented
systematic productivity improvements which concentrated on reducing labor,
materials and overhead costs primarily through (i) process simplification, (ii)
better process control and discipline, (iii) workforce productivity improvements
and (iv) improved raw material sourcing. As a result of implementing the
foregoing, the
4
<PAGE>
Company has been able to reduce the number of manufacturing employees by 26%,
from 2,629 at the end of 1995 to 1,955 at December 31, 1997.
REDUCE SG&A COSTS. The Company has reduced its SG&A expenses by $30.9
million from 1995 to 1997. These reductions were realized primarily through the
redesign of sales and administrative functions and the refocus of the Company's
advertising program on print rather than media advertising as part of the
Business Redesign Program. As a result of these initiatives, the number of SG&A
employees was reduced from 1,284 in 1995 to 1,141 in 1997 and SG&A expenses
(excluding those estimated by management to be attributable to Company-operated
outlet stores) declined from 21.9% of 1995 gross sales to 16.5% of 1997 gross
sales.
IMPROVE CUSTOMER SERVICE. To improve customer service, the Company has
reorganized its sales force to better align account representatives with
specific customers' needs and has implemented an integrated supply chain
management process which utilizes enhanced information systems to predict
customers' future inventory requirements and permit the Company to maintain a
more efficient allocation between finished goods and work-in-process inventory.
The Company's supply chain management process also enables the Company to
improve the accuracy and timeliness of filling customer orders and is intended
to allow the Company and its customers to reduce finished goods inventory. Since
the end of 1995, the Company's average on-time delivery rate has improved from
approximately 75% to approximately 95% as of December 31, 1997.
With many of the objectives of the first phase of the Business Redesign
Program achieved, the Company has recently begun the second phase of the
Business Redesign Program by pursuing the following strategies:
FOCUS ON STRATEGIC ACCOUNTS. The Company intends to continue to focus on a
core group of strategic accounts identified during the first phase of the
Business Redesign Program based on their profitability, significant sales
volumes for multiple Company brands, commitment to active merchandising of
national brands and potential for growth. For each strategic account, the
Company has established a team of management, marketing and sales resources
dedicated to developing and executing a strategy to improve customer service and
increase sales to that account. Management believes that the Company's focus on
strategic accounts will improve sales by increasing shelf space at key retailers
while enhancing its brand image and presence.
INTRODUCE NEW PRODUCTS THAT BUILD ON EXISTING BRANDS. The Company's new
product strategy capitalizes on the Company's strong brand names, broad
distribution and technical expertise to introduce and market products that offer
enhanced value to consumers through new design or new functionality. The Company
plans to accelerate the development of products that extend existing categories
or enter into new categories in order to gain incremental retail shelf space and
preserve sales of existing products. The Company's objective is to generate at
least 20% of its gross sales from products introduced in the two prior years
(including product line extensions and renewals). Management believes that the
new products the Company plans to introduce in the second half of 1998 and in
1999 will increase its shelf space at key retailers.
EXPAND IN INTERNATIONAL MARKETS. The Company has made, and will continue to
make, investments in localized marketing programs and distribution and sales
capabilities in international markets. As a result, the Company is an
established supplier of bakeware and dinnerware in a number of international
markets, including Canada, Korea, Australia, Japan, Singapore, Taiwan, Hong
Kong, Mexico and Brazil. The Company believes that demand in these markets has
been driven in large part by: (i) the expansion of the middle class in many
developing countries; (ii) a strong desire for U.S. branded goods by the
emerging middle class; and (iii) the expansion of western style merchandisers in
many of these regions. Despite recent economic disruptions in Asia, the Company
believes international markets, including Asia over the long term, represent
potential growth areas for the Company.
5
<PAGE>
CONTINUE TO IMPLEMENT COST REDUCTION INITIATIVES. The Company intends to
actively pursue opportunities to achieve further cost reductions in its
manufacturing operations through additional productivity improvements and
streamlining of manufacturing processes. The Company also intends to maintain or
lower SG&A as a percentage of net sales while pursuing its strategy of sales
growth through a renewed focus on strategic accounts, international expansion
and product introductions.
SELECTIVELY PURSUE ACQUISITIONS. The Company plans to selectively pursue
acquisitions which complement its business strategies. The Company believes
that, by taking advantage of its strong brand names, global sales capabilities
and retail store network, the Company can expand distribution of acquired
product lines.
THE TRANSACTIONS
On March 2, 1998, Corning, Borden, the Company and CCPC Acquisition entered
into the Recapitalization Agreement, pursuant to which on April 1, 1998 CCPC
Acquisition acquired 92.0% of the outstanding shares of Common Stock of the
Company from Corning for $110.4 million. The Stock Acquisition was financed by
an equity investment in CCPC Acquisition by BW Holdings, an affiliate of KKR and
the parent company of Borden and CCPC Acquisition. BW Holdings financed such
investment from cash on hand. Pursuant to the Recapitalization Agreement, on the
Closing Date prior to the consummation of the Stock Acquisition, the Company
paid the Cash Dividend to Corning of $472.6 million. The amount of the Cash
Dividend is subject to post-closing adjustment based on the Company's net worth
and outstanding indebtedness on the Closing Date. See "The Recapitalization." As
a result of the Recapitalization, Corning continues to hold 8.0% of the
outstanding shares of Common Stock.
The Cash Dividend, together with transaction and financing fees and expenses
of $8.0 million paid to Borden for the Recapitalization, approximately $17.0
million to pay other fees and expenses incurred in connection with the
Transactions and approximately $4.0 million of cash for operations, was financed
by the Company through (i) the issuance and sale to CCPC Acquisition of
1,200,000 shares of the Company's Junior Cumulative Pay-In-Kind Preferred Stock
(the "Junior Preferred Stock") for $30.0 million, which was contributed to CCPC
Acquisition by BW Holdings from its cash on hand and (ii) a $471.6 million
interim subordinated loan from Borden and BW Holdings (the "Interim Financing").
A portion of the Interim Financing was refinanced on April 9, 1998 with an
aggregate of approximately $259.6 million of bank borrowings by the Company,
including $200.0 million of senior secured term loans (the "Term Loans") and
$59.6 million of borrowings under a $275.0 million senior secured revolving
credit facility (the "Revolving Credit Facility;" together with the Term Loans,
the "Credit Facilities"). The remainder of the Interim Financing was refinanced
by the Old Notes, available cash and additional borrowings of approximately
$12.0 million under the Revolving Credit Facility. The Stock Acquisition, the
Cash Dividend and the Interim Financing are collectively referred to herein as
the "Recapitalization." The Offering of the Old Notes and borrowings under the
Credit Facilities together with the application of the proceeds therefrom are
collectively referred to herein as the "Refinancing." As part of the
Refinancing, the Company is in the process of contributing substantially all of
its operations, assets and liabilities (other than obligations in respect of the
Notes and the Credit Facilities) to its subsidiaries. The Recapitalization and
the Refinancing are collectively referred to herein as the "Transactions."
Under the 1998 Plan, CCPC Acquisition is currently in the process of selling
shares of Common Stock, and the Company is making grants of options to purchase
Common Stock, to certain members of management of the Company. In the aggregate,
the sales of shares of Common Stock by CCPC Acquisition and the option grants by
the Company will represent approximately 12.4% of the Company's fully diluted
Common Stock.
6
<PAGE>
The actual sources and uses of the funds for the Recapitalization were as
follows:
<TABLE>
<CAPTION>
(DOLLARS IN
SOURCES MILLIONS)
- ------------------------------------------------------------------------- -------------------
<S> <C>
Interim Financing........................................................ $ 471.6
Preferred Stock.......................................................... 30.0
Corning Retained Common Equity(1)........................................ 9.6
CCPC Acquisition Common Equity........................................... 110.4
-------
Total sources of funds............................................. $ 621.6
-------
-------
<CAPTION>
USES
- -------------------------------------------------------------------------
<S> <C>
Stock Acquisition........................................................ $ 110.4
Cash Dividend............................................................ 472.6
Transactions fees and expenses........................................... 8.0
Corning Retained Equity(1)............................................... 9.6
Increase to cash balance................................................. 21.0
-------
Total uses of funds................................................ $ 621.6
-------
-------
</TABLE>
The sources and uses for the Refinancing were as follow:
<TABLE>
<CAPTION>
(DOLLARS IN
SOURCES MILLIONS)
- ------------------------------------------------------------------------- -------------------
<S> <C>
Cash balances............................................................ $ 17.0
Revolving Credit Facility(2)............................................. 71.6
Term Loans............................................................... 200.0
Old Notes................................................................ 200.0
-------
Total sources of funds............................................. $ 488.6
-------
-------
</TABLE>
<TABLE>
<CAPTION>
USES
- ----------------------------------------------------------
<S> <C>
Interim Financing(3)...................................... $ 471.6
Estimated Transactions fees and expenses(4)............... 17.0
-------
Total uses of funds................................. $ 488.6
-------
-------
</TABLE>
- --------------------------
(1) As a result of the Recapitalization, Corning continues to own 8.0% of the
Common Stock of the Company.
(2) Total borrowings of up to $275.0 million under the Revolving Credit Facility
are available for working capital and general corporate purposes, including
$25.0 million for letters of credit. After giving effect to the Transactions
on a pro forma basis, $203.4 million would have been available as of March
31, 1998 under the Revolving Credit Facility. On April 9, 1998, the Company
borrowed $59.6 million under the Revolving Credit Facility in connection
with the Refinancing and the Company borrowed an additional $12.0 million
through the date of the closing of the Offering.
(3) Excludes accrued interest on the Interim Financing. As of May 5, 1998 (the
date of issuance of the Old Notes), accrued interest on the Interim
Financing was $1.8 million.
(4) Includes Initial Purchasers' discount and offering discount on the Old
Notes, fees related to the Credit Facilities and other fees and expenses
incurred in connection with the Transactions.
7
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
The Exchange Offer................ The Company is offering to exchange pursuant to the
Exchange Offer up to $200,000,000 aggregate principal
amount of its Exchange Notes for a like aggregate
principal amount of its Old Notes. The terms of the
Exchange Notes are identical in all material respects
(including principal amount, interest rate and maturity)
to the terms of the Old Notes for which they may be
exchanged pursuant to the Exchange Offer, except that
the Exchange Notes are freely transferrable by Holders
thereof (other than as provided herein), and are not
subject to any covenant regarding registration under the
Securities Act. See "The Exchange Offer."
Minimum Condition................. The Exchange Offer is not conditioned upon any minimum
aggregate principal amount of Old Notes being tendered
for exchange.
Expiration Date; Withdrawal of
Tender.......................... The Exchange Offer will expire at 5:00 p.m., New York
City time, on , 1998, unless the Exchange
Offer is extended, in which case the term "Expiration
Date" means the latest date and time to which the
Exchange Offer is extended. The Company does not
currently intend to extend the Expiration Date. Tenders
may be withdrawn at any time prior to 5:00 p.m., New
York City time, on the Expiration Date. See "The
Exchange Offer--Withdrawal Rights."
Exchange Date..................... The date of acceptance for exchange of the Old Notes
will be the third business day following the Expiration
Date.
Conditions to the Exchange
Offer........................... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. 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." The Company reserves the right to
terminate or amend the Exchange Offer at any time prior
to the Expiration Date upon the occurrence of any such
condition.
Procedures for Tendering
Old Notes....................... Each Holder wishing to accept the Exchange Offer must
complete, sign and date the Letter of Transmittal, or a
facsimile thereof, in accordance with the instructions
contained herein and therein, and mail or otherwise
deliver such Letter of Transmittal, or such facsimile,
together with the Old Notes and any other required
documentation to the Exchange Agent at the address set
forth therein. See "The Exchange Offer--Procedures for
Tendering Old Notes" and "Plan of Distribution."
Use of Proceeds................... There will be no proceeds to the Company from the
exchange of Notes pursuant to the Exchange Offer.
Federal Income Tax Consequences... The exchange of Notes pursuant to the Exchange Offer
will not be a taxable event for federal income tax
purposes.
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Special Procedures for Beneficial
Owners.......................... Any beneficial owner whose Old Notes are registered in
the name of a broker, dealer, commercial bank, trust
company or other nominee and who wishes to tender should
contact such registered holder promptly and instruct
such registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes to
tender on such beneficial owner's own behalf, such
beneficial owner must, prior to completing and executing
the Letter of Transmittal and delivering the Old Notes,
either make appropriate arrangements to register
ownership of the Old Notes in such beneficial owner's
name or obtain a properly completed bond power from the
registered holder. The transfer of registered ownership
may take considerable time. See "The Exchange
Offer--Procedures for Tendering Old Notes."
Guaranteed Delivery Procedures.... Holders of Old Notes who wish to tender their Old Notes
and whose Old Notes are not immediately available or who
cannot deliver their Old Notes, the Letter of
Transmittal or any other documents required by the
Letter of Transmittal to the Exchange Agent prior to the
Expiration Date must tender their Old Notes according to
the guaranteed delivery procedures set forth in "The
Exchange Offer--Procedures for Tendering Old Notes."
Acceptance of Old Notes and
Delivery of Exchange Notes...... The Company will accept for exchange any and all Old
Notes which are properly tendered in the Exchange Offer
prior to 5:00 p.m., New York City time, on the
Expiration Date. The Exchange Notes issued pursuant to
the Exchange Offer will be delivered promptly following
the Expiration Date. See "The Exchange Offer--Acceptance
of Old Notes for Exchange; Delivery of Exchange Notes."
Effect on Holders of Old Notes.... As a result of the making of, and upon acceptance for
exchange of all validly tendered Old Notes pursuant to
the terms of this Exchange Offer, the Company will have
fulfilled a covenant contained in the Exchange and
Registration Rights Agreement (the "Registration Rights
Agreement") dated as of May 5, 1998 among the Company
and Chase Securities Inc., Salomon Brothers Inc and
Citicorp Securities, Inc. (the "Initial Purchasers")
and, accordingly, there will be no increase in the
interest rate on the Old Notes pursuant to the terms of
the Registration Rights Agreement, and the holders of
the Old Notes will have no further registration or other
rights under the Registration Rights Agreement. Holders
of the Old Notes who do not tender their Old Notes in
the Exchange Offer will continue to hold such Old Notes
and will be entitled to all the rights and limitations
applicable thereto under the Indenture dated as of May
5, 1998 between the Company and The Bank of New York
relating to the Old Notes and the Exchange Notes (the
"Indenture"), except for any such rights under the
Registration Rights Agreement that by their terms
terminate or cease to have further effectiveness as a
result of the making of, and the acceptance for exchange
of all validly tendered Old
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
Notes pursuant to, the Exchange Offer. All untendered
Old Notes will continue to be subject to the
restrictions on transfer provided for in the Old Notes
and in the Indenture. To the extent that Old Notes are
tendered and accepted in the Exchange Offer, the trading
market for untendered Old Notes could be adversely
affected.
Consequence of Failure to
Exchange........................ Holders of Old Notes who do not exchange their Old Notes
for Exchange Notes pursuant to the Exchange Offer will
continue to be subject to the restrictions on transfer
of such Old Notes as set forth in the legend thereon. In
general, the Old 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. Other than in connection with the
Exchange Offer, the Company does not currently
anticipate that it will register the Old Notes under the
Securities Act.
Exchange Agent.................... The Bank of New York is serving as exchange agent (the
"Exchange Agent") in connection with the Exchange Offer.
See "The Exchange Offer--Exchange Agent."
TERMS OF THE EXCHANGE NOTES
Issuer............................ Corning Consumer Products Company.
Securities Offered................ $200,000,000 aggregate principal amount of 9 5/8% Series
B Senior Subordinated Notes due 2008.
Maturity Date..................... May 1, 2008.
Interest Payment Dates............ Interest on the Exchange Notes will be payable in cash
semi-annually in arrears on each May 1 and November 1,
commencing November 1, 1998.
Optional Redemption............... On or after May 1, 2003, the Exchange Notes will be
redeemable, in whole or in part, at the redemption
prices set forth herein, together with accrued and
unpaid interest, if any, to the date of redemption. In
addition, at any time on or prior to May 1, 2001, the
Company may redeem up to 35% of the original aggregate
principal amount of the Exchange Notes with the net
proceeds of one or more Equity Offerings, at a
redemption price equal to 109.625% of the aggregate
principal amount to be redeemed, together with accrued
and unpaid interest, if any, to the date of redemption;
PROVIDED that at least 65% of the original aggregate
principal amount of the Exchange Notes remains
outstanding immediately after each such redemption. See
"Description of the Exchange Notes-- Optional
Redemption."
Change of Control................. Upon the occurrence of a Change of Control, the Company
will have the option, at any time prior to May 1, 2003,
to redeem the Exchange Notes, in whole but not in part,
at a redemption price equal to 100% of the aggregate
principal amount thereof plus
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
the Applicable Premium, together with accrued and unpaid
interest, if any, to the date of redemption. Upon the
occurrence of a Change of Control, if the Company does
not so redeem the Exchange Notes or if a Change of
Control occurs on or after May 1, 2003, the Company will
be required to make an offer to purchase the Exchange
Notes at a price equal to 101% of the principal amount
thereof, together with accrued and unpaid interest, if
any, to the date of purchase. See "Description of the
Exchange Notes--Repurchase at the Option of Holders--
Change of Control."
Ranking........................... The Exchange Notes will be unsecured, will be
subordinated in right of payment to all existing and
future Senior Indebtedness of the Company and will be
effectively subordinated to all obligations of the
subsidiaries of the Company. The Exchange Notes will
rank PARI PASSU with any future Senior Subordinated
Indebtedness of the Company and will rank senior to all
Subordinated Indebtedness of the Company. The Indenture
permits the Company to incur additional indebtedness,
including up to $278.4 million of Senior Indebtedness
under the Credit Facilities, subject to certain
limitations. As of March 31, 1998, on a pro forma basis
after giving effect to the Transactions, the aggregate
amount of the Company's outstanding Senior Indebtedness
would have been approximately $271.6 million (excluding
unused commitments), all of which would have been
secured indebtedness, the Company would have had no
Senior Subordinated Indebtedness outstanding other than
the Notes, and the Company's subsidiaries would have had
total liabilities of $117.4 million (excluding
guarantees in respect of the Credit Facilities). See
"Unaudited Pro Forma Financial Information" and "Risk
Factors--Adverse Consequences of Holding Company
Structure" and "--Subordination."
Certain Covenants................. The Indenture contains covenants that will, subject to
certain exceptions, limit, among other things, the
ability of the Company and/or its Restricted
Subsidiaries to (i) pay dividends or make certain other
restricted payments or investments; (ii) incur
additional indebtedness and issue disqualified stock and
preferred stock; (iii) create liens on assets; (iv)
merge, consolidate, or sell all or substantially all of
their assets; (v) enter into certain transactions with
affiliates; (vi) create restrictions on dividends or
other payments by Restricted Subsidiaries to the
Company; (vii) incur guarantees of indebtedness by
Restricted Subsidiaries; and (viii) incur Indebtedness
senior to the Notes, but junior to Senior Indebtedness.
Absence of a Public Market for the
Exchange Notes.................. The Exchange Notes are new securities and there is
currently no established market for the Exchange Notes.
Accordingly, there can be no assurance as to the
development or liquidity of
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
any market for the the Exchange Notes. The Company does
not intend to apply for listing of the Exchange Notes on
any national securities exchange or for their quotation
on an automated dealer quotation system.
No Personal Liability of
Directors, Officers, Employees
and Stockholders................ No director, officer, employee, incorporator or
stockholder of the Company shall have any liability for
any obligations of the Company under the Exchange Notes
or the Indenture or any claim based on, in respect of,
or by reason of such obligation, or their creation. 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.
</TABLE>
RISK FACTORS
Prospective holders of the Exchange Notes should carefully consider the risk
factors set forth under the caption "Risk Factors" and the other information
included in this Prospectus prior to making an investment in the Notes. See
"Risk Factors."
------------------------
The principal executive offices of the Company are located at E-Building,
Houghton Park, Corning, New York 14831. The Company's telephone number is (607)
974-8605.
12
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL AND OTHER DATA
The following table sets forth summary historical financial and other data
of the Company. The historical financial and other data for the three years
ended December 31, 1997 have been derived from, and should be read in
conjunction with, the consolidated financial statements of the Company and notes
thereto which have been audited by Price Waterhouse LLP, independent
accountants, and which are included elsewhere in this Prospectus. The historical
unaudited financial and other data for the quarters ended March 31, 1998 and
1997 and as of March 31, 1998 have been derived from, and should be read in
conjunction with, the unaudited financial statements of the Company and the
notes thereto included elsewhere in this Prospectus. In the opinion of
management, all adjustments, consisting of only normal recurring adjustments,
considered necessary for the fair presentation have been included in the
unaudited financial statements of the Company. Results for the quarter ended
March 31, 1998 are not necessarily indicative of results that can be expected
for the year ended December 31, 1998.
The following table also presents certain summary unaudited pro forma
financial and other data of the Company. The unaudited pro forma financial and
other data for the three months ended March 31, 1998 and for the year ended
December 31, 1997 have been derived from the Pro Forma Financial Information (as
defined) and the notes thereto included elsewhere in this Prospectus. The
unaudited pro forma statement of operations data give effect to the Transactions
as if they had occurred as of January 1, 1997. The unaudited pro forma balance
sheet data give effect to the Transactions as if they had occurred on March 31,
1998. The summary pro forma financial data exclude the impact of (i) the
possible adjustment to the amount of the Cash Dividend, (ii) a potential payment
to Corning of up to $15.0 million in 2001 in the event the Company achieves a
cumulative gross margin in excess of $710.9 million for the three-year period
ended December 31, 2000, (iii) grants and anticipated grants of options to
purchase Common Stock to management and (iv) approximately $7.5 million of
expenditures to be made over the next three years in transition-related
expenditures as a result of the separation from Corning. See "The
Recapitalization" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Overview--Separation from Corning;
Transaction Related Charges." The summary unaudited pro forma financial data are
provided for informational purposes only and do not purport to be indicative of
the results that would have actually been obtained had the Transactions been
completed on the dates indicated or that may be expected to occur in the future.
The summary historical and pro forma financial and other data should be read
in conjunction with the historical consolidated financial statements of the
Company and notes thereto, "Selected Historical Consolidated Financial and Other
Data," "Management's Discussion and Analysis of Financial Condition and Results
of Operations," "Unaudited Pro Forma Financial Information" and "The
Recapitalization" contained elsewhere in this Prospectus.
13
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA
THREE THREE MONTHS YEAR ENDED
MONTHS ENDED MARCH 31, DECEMBER 31,
ENDED -------------------------
MARCH 31, -------------------- PRO FORMA
1998(1) 1998 1997 1997(1) 1997
-------------- --------- --------- -------------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales(2).............................................. $ 116.5 $ 116.5 $ 128.3 $ 572.9 $ 572.9
Cost of sales............................................. 77.1 77.7 83.6 374.3 377.0
------- --------- --------- ------- ---------
Gross profit.............................................. 39.4 38.8 44.7 198.6 195.9
Selling, general, administrative and research and
development expenses.................................... 36.7 37.1 32.8 144.2 137.3
Other corporate administrative expense(3)................. -- -- 4.6 -- 18.4
Provision for restructuring costs(4)...................... -- -- -- -- --
Transactions related expenses(5).......................... -- 1.4 -- -- --
Goodwill amortization..................................... 0.4 0.4 0.4 1.7 1.7
Other, net(6)............................................. 0.4 0.4 0.4 0.7 5.9
Royalty income............................................ (0.2) (0.2) (0.2) (2.0) (2.0)
------- --------- --------- ------- ---------
Operating income (loss)................................... 2.1 (0.3) 6.7 54.0 34.6
Interest expense, net..................................... 10.7 1.6 2.1 42.8 8.5
------- --------- --------- ------- ---------
Income (loss) before taxes on income...................... (8.6) (1.9) 4.6 11.2 26.1
Income tax expense (benefit).............................. (1.0) 1.7 2.8 6.8 12.8
------- --------- --------- ------- ---------
Income (loss) before minority interest.................... (7.6) (3.6) 1.8 4.4 13.3
Net income (loss)......................................... $ (7.6) $ (3.6) $ 1.8 $ 4.1 $ 13.0
------- --------- --------- ------- ---------
------- --------- --------- ------- ---------
OTHER FINANCIAL DATA:
Gross margin.............................................. 33.8% 33.3% 34.8% 34.7% 34.2%
Operating margin.......................................... 1.8% (0.3)% 5.2% 9.4% 6.0%
Depreciation and amortization............................. $ 9.0 $ 9.0 $ 10.3 $ 35.7 $ 35.7
Capital expenditures...................................... 7.9 7.9 4.1 28.6 28.6
Interest expense(7)....................................... 10.2 1.6 2.5 41.0 9.0
EBITDA(8)................................................. 11.1 8.7 17.0 89.7 70.3
Adjusted EBITDA(9)........................................ -- 10.1 19.9 -- 86.5
Adjusted EBITDA margin.................................... -- 8.7% 15.5% -- 15.1%
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales(2).............................................. $ 632.4 $ 608.7
Cost of sales............................................. 435.9 431.2
--------- ---------
Gross profit.............................................. 196.5 177.5
Selling, general, administrative and research and
development expenses.................................... 154.2 168.2
Other corporate administrative expense(3)................. 20.9 20.0
Provision for restructuring costs(4)...................... 2.1 --
Transactions related expenses(5).......................... -- --
Goodwill amortization..................................... 1.7 1.7
Other, net(6)............................................. 0.6 0.4
Royalty income............................................ (1.6) (1.6)
--------- ---------
Operating income (loss)................................... 18.6 (11.2)
Interest expense, net..................................... 10.7 8.8
--------- ---------
Income (loss) before taxes on income...................... 7.9 (20.0)
Income tax expense (benefit).............................. 6.2 (1.6)
--------- ---------
Income (loss) before minority interest.................... 1.7 (18.4)
Net income (loss)......................................... $ 1.6 $ (18.5)
--------- ---------
--------- ---------
OTHER FINANCIAL DATA:
Gross margin.............................................. 31.1% 29.2%
Operating margin.......................................... 2.9% (1.8)%
Depreciation and amortization............................. $ 35.8 $ 32.0
Capital expenditures...................................... 35.8 40.6
Interest expense(7)....................................... 12.4 11.0
EBITDA(8)................................................. 54.4 20.8
Adjusted EBITDA(9)........................................ 70.7 34.1
Adjusted EBITDA margin.................................... 11.2% 5.6%
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
----------------------
PRO
ACTUAL FORMA(1)
--------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
BALANCE SHEET DATA (at end of period):
Net working capital.............................................................. $ 60.4 $ 152.8
Adjusted working capital(10)..................................................... 159.9 143.8
Total assets..................................................................... 482.3 520.0
Total debt(11)................................................................... 106.4 481.8
Total stockholder's equity (deficit)(12)......................................... 226.7 (69.0)
</TABLE>
- --------------------------
(1) The Transactions will be recorded as a recapitalization for financial
reporting purposes, and, accordingly, the historical basis of the Company's
assets and liabilities will not be impacted by the Transactions, with the
exception of deferred taxes on income which will change to reflect the tax
basis step-up which occurred upon consummation of the Recapitalization.
(2) Gross sales (before deductions for trade allowances, customer-paid freight
and discounts) were $124.7 million, $139.3 million, $616.7 million, $690.0
million and $668.5 million for the three months ended March 31, 1998 and
1997 and the years ended December 31, 1997, 1996 and 1995, respectively.
(3) Other corporate administrative expenses represent an allocation of corporate
charges from Corning to the Company in respect of certain administrative
services provided to the Company by Corning. Corning calculated these
charges as a percentage of the Company's budgeted sales. Commencing on
January 1, 1998 Corning provided these services to the Company on the basis
of a service agreement containing terms similar to that entered into on the
date of the Recapitalization and expenses incurred under such agreement were
reflected as selling, general and administrative and research and
development expenses.
(4) The Company incurred net provisions for restructuring costs of $2.1 million
in 1996 ($4.2 million of gross charges offset by a $2.1 million reversal of
existing reserves) resulting from the implementation of the Business
Redesign Program. The major components of the 1996 charges were (i) costs
related to a reduction in the
14
<PAGE>
number of SG&A and manufacturing employees and (ii) expenses incurred to
close under-performing outlet stores.
(5) Reflects expenses incurred in connection with the Transactions.
(6) Other charges include miscellaneous expenses and miscellaneous income.
Included in the 1997 amount are $4.5 million of expenses related to
incremental incentive payments made to employees during the sale of the
Company.
(7) Interest expense represents interest expense exclusive of amortization of
deferred financing fees and the debt discount.
(8) EBITDA represents operating income (loss) plus depreciation and
amortization. EBITDA is presented because management understands that such
information is considered by certain investors to be an additional basis for
evaluating the Company's ability to pay interest and repay debt. EBITDA
should not be considered an alternative to measures of operating performance
as determined in accordance with generally accepted accounting principles,
including net income, as a measure of the Company's operating results and
cash flows or as a measure of the Company's liquidity. Because EBITDA is not
calculated identically by all companies, the presentation herein may not be
comparable to other similarly titled measures of other companies.
(9) Adjusted EBITDA represents EBITDA less adjustments to eliminate (i) other
corporate administrative expenses for certain services performed by Corning
for the Company; (ii) expenses related to incremental incentive payments
made to employees during the sale of the Company; (iii) expenses incurred in
connection with the Transactions; and (iv) provisions for restructuring
costs; net of (v) adjustments for expenses expected to be incurred by the
Company to replace the services previously performed by Corning described in
clause (i) above.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
MARCH 31 DECEMBER 31,
-------------------- -------------------------------
1998 1997 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
EBITDA........................................................ $ 8.7 $ 17.0 $ 70.3 $ 54.4 $ 20.8
Other corporate administrative expenses (See Note 3)......... -- 4.6 18.4 20.9 20.0
Incentive payment expenses (See Note 6)...................... -- -- 4.5 -- --
Transactions related expenses (5)............................ 1.4 -- -- -- --
Provision for restructuring costs (See Note 4)............... -- -- -- 2.1 --
Addition to SG&A............................................. -- (1.7) (6.7) (6.7) (6.7)
--------- --------- --------- --------- ---------
Adjusted EBITDA.............................................. $ 10.1 $ 19.9 $ 86.5 $ 70.7 $ 34.1
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
For a more complete description of the services performed by Corning after
the Recapitalization and the ability of the Company to achieve such cost
savings, see "Risk Factors--No Prior Operations as an Independent Company"
and "Management's Discussion and Analysis of Financial Condition and Results
of Operations-- Overview--Separation from Corning; Transaction Related
Charges."
(10) Adjusted working capital is calculated as (i) current assets excluding cash
and amounts due from Corning, less (ii) current liabilities excluding debt,
amounts due to Corning and payables to be reimbursed by Corning.
(11) As of March 31, 1998 on a historical basis, total debt included $10.2
million of industrial revenue bonds and $96.2 million due to Corning under
the $200.0 million intercompany revolving credit facility previously
provided by Corning.
(12) Upon consummation of the Recapitalization, CCPC Acquisition acquired 92.0%
of the outstanding shares of Common Stock of the Company for $110.4 million
and Corning retained 8.0% of the outstanding shares of Common Stock of the
Company (an implied value of $9.6 million). Under the 1998 Plan, CCPC
Acquisition is currently in the process of selling shares of Common Stock,
and the Company is making grants of options to purchase Common Stock, to
certain members of management of the Company. CCPC Acquisition also acquired
1,200,000 shares of the Company's Junior Preferred Stock for $30.0 million,
which is reflected in the pro forma total stockholder's equity (deficit).
15
<PAGE>
RISK FACTORS
HOLDERS OF OLD NOTES SHOULD CONSIDER CAREFULLY, IN ADDITION TO THE OTHER
INFORMATION CONTAINED IN THIS PROSPECTUS, THE FOLLOWING FACTORS BEFORE DECIDING
TO TENDER OLD NOTES IN THE EXCHANGE OFFER. THE RISK FACTORS SET FORTH BELOW ARE
GENERALLY APPLICABLE TO THE OLD NOTES AS WELL AS THE EXCHANGE NOTES.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon. In general,
Old 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
registration requirements of the Securities Act and applicable state securities
laws. The Company does not currently intend to register the Old Notes under the
Securities Act. Based on interpretations by the staff of the Commission, the
Company believes that Exchange Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale, resold or otherwise
transferred by Holders thereof (other than 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 Old Notes were 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. Each
broker-dealer that receives Exchange Notes for its own account in exchange for
Old Notes, where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution." To the extent that Old Notes are tendered and
accepted in the Exchange Offer, the trading market for untendered and tendered
but unaccepted Old Notes will be adversely affected.
SUBSTANTIAL LEVERAGE AND DEBT SERVICE
The Company incurred substantial indebtedness in connection with the
Recapitalization. See "The Recapitalization" and "Capitalization." As of March
31, 1998, after giving pro forma effect to the Transactions, the Company would
have had $481.8 million of consolidated indebtedness, a common stockholders'
deficit of $69.0 million and $203.4 million available to be borrowed under the
Revolving Credit Facility. Pro forma net income for the year ended December 31,
1997 would have been $4.1 million, as compared to net income of $13.0 million
for the same period on a historical basis, and pro forma interest expense, (net)
for 1997 would have been $42.8 million as compared to $8.5 million for the same
period on a historical basis. For the three months ended March 31, 1998, pro
forma net loss would have been $7.6 million, as compared to a net loss of $3.6
million for the same period on a historical basis. Pro forma interest expense
(net) would have been $10.7 million for the three months ended March 31, 1998,
as compared to $1.6 million on a historical basis for the same periods. See
"Capitalization" and "Unaudited Pro Forma Financial Information." The Company
and its subsidiaries may incur additional indebtedness (including certain Senior
Indebtedness) in the future, subject to certain limitations contained in the
instruments governing its indebtedness. Accordingly, the Company will have
significant debt service obligations.
The Company's debt service obligations will have important consequences to
holders of Exchange Notes, including the following: (i) a substantial portion of
the Company's cash flow from operations will be dedicated to the payment of
principal and interest on its indebtedness, thereby reducing the funds available
to the Company for operations, future business opportunities and other purposes
and increasing the Company's vulnerability to adverse general economic and
industry conditions; (ii) the Company's ability to obtain additional financing
in the future may be limited; (iii) certain of the Company's borrowings
(including, but not limited to, the amounts borrowed under the Credit
Facilities) will be at variable rates of interest, which will make the Company
vulnerable to increases in interest rates; (iv) all of the indebtedness incurred
in connection with the Credit Facilities will become due prior to the time the
16
<PAGE>
principal payment on the Exchange Notes will become due; (v) the Company will be
substantially more leveraged than certain of its competitors, which might place
the Company at a competitive disadvantage; and (vi) the Company may be hindered
in its ability to adjust rapidly to changing market conditions.
The Company's ability to make scheduled payments of the principal of, or to
pay interest on, or to refinance its indebtedness (including the Exchange Notes)
and to make scheduled payments under its operating leases or to fund planned
capital expenditures or finance acquisitions will depend on its future
performance, which to a certain extent is subject to economic, financial,
competitive and other factors beyond its control. Based upon the current level
of operations and anticipated growth, management believes that future cash flow
from operations, together with available borrowings under the Revolving Credit
Facility, will be adequate to meet the Company's anticipated requirements for
working capital, capital expenditures, lease payments, interest payments and
scheduled principal payments for the foreseeable future. Any future
acquisitions, joint ventures or other similar transactions will likely require
additional capital and there can be no assurance that any such capital will be
available to the Company on acceptable terms or at all. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources." In addition, there can be no
assurance that the Company's business will continue to generate sufficient cash
flow from operations in the future to service its debt, make necessary capital
expenditures or meet its other cash needs. If unable to do so, the Company may
be required to refinance all or a portion of its existing debt, including the
Exchange Notes, to sell assets or to obtain additional financing. There can be
no assurance that any such refinancing or that any such sale of assets or
additional financing would be possible on terms reasonably favorable to the
Company.
RESTRICTIVE LOAN COVENANTS
The Credit Facilities and the Indenture contain numerous financial and
operating covenants that will limit the discretion of the Company's management
with respect to certain business matters. These covenants will place significant
restrictions on, among other things, the ability of the Company to incur
additional indebtedness, pay dividends and other distributions, prepay
subordinated indebtedness, enter into sale and leaseback transactions, create
liens or other encumbrances, make capital expenditures, make certain investments
or acquisitions, engage in certain transactions with affiliates, sell or
otherwise dispose of assets and merge or consolidate with other entities and
otherwise restrict corporate activities. See "Description of Credit Facilities"
and "Description of the Exchange Notes--Certain Covenants." The Credit
Facilities also require the Company to meet certain financial ratios and tests.
The ability of the Company to comply with these and other provisions of the
Credit Facilities and the Indenture may be affected by changes in economic or
business conditions or other events beyond the Company's control. A failure to
comply with the obligations contained in the Credit Facilities or the Indenture
could result in an event of default under either the Credit Facilities or the
Indenture which could result in acceleration of the related debt and the
acceleration of debt under other instruments evidencing indebtedness that may
contain cross-acceleration or cross-default provisions. If, as a result thereof,
a default occurs with respect to Senior Indebtedness, the subordination
provisions in the Indenture would likely restrict payments to the holders of the
Exchange Notes. If the indebtedness under the Credit Facilities were to be
accelerated, there can be no assurance that the assets of the Company would be
sufficient to repay in full such indebtedness and the other indebtedness of the
Company, including the Exchange Notes.
ADVERSE CONSEQUENCES OF HOLDING COMPANY STRUCTURE
The Company is in the process of contributing substantially all of its
assets to its subsidiaries and thus will operate as a holding company which
conducts substantially all of its operations through its subsidiaries.
Consequently, the Exchange Notes will be effectively subordinated to the
obligations of the Company's subsidiaries, including the guarantee by its
subsidiaries of obligations under the Credit Facilities. The Exchange Notes will
not be guaranteed by any of the Company's subsidiaries. In the event
17
<PAGE>
of an insolvency, liquidation or other reorganization of any of the subsidiaries
of the Company, the creditors of the Company (including the holders of the
Exchange Notes), as well as stockholders of the Company, will have no right to
proceed against the assets of such subsidiaries or to cause the liquidation or
bankruptcy of such subsidiaries under Federal bankruptcy laws. Creditors of such
subsidiaries, including lenders under the Credit Facilities, would be entitled
to payment in full from such assets before the Company would be entitled to
receive any distribution therefrom. Except to the extent that the Company may
itself be a creditor with recognized claims against such subsidiaries, claims of
creditors of such subsidiaries will have priority with respect to the assets and
earnings of such subsidiaries over the claims of creditors of the Company,
including claims under the Exchange Notes. In addition, as a result of the
Company becoming a holding company, the Company's operating cash flow and its
ability to service its indebtedness, including the Exchange Notes, will be
dependent upon the operating cash flow of its subsidiaries and the payment of
funds by such subsidiaries to the Company in the form of loans, dividends or
otherwise. As of March 31, 1998, after giving pro forma effect to the
Transactions, the subsidiaries of the Company would have had total liabilities
of $117.4 million (excluding guarantees in respect of the Credit Facilities).
SUBORDINATION
The Company's obligations under the Exchange Notes will be subordinate and
junior in right of payment to all existing and future Senior Indebtedness of the
Company. As of March 31, 1998, on a pro forma basis after giving effect to the
Transactions, the aggregate amount of the Company's outstanding Senior
Indebtedness would have been approximately $271.6 million (excluding unused
commitments). Although the Indenture contains limitations on the amount of
additional indebtedness which the Company and its subsidiaries may incur, under
certain circumstances the amount of such indebtedness could be substantial and
such indebtedness could be Senior Indebtedness. By reason of such subordination,
in the event of an insolvency, liquidation, or other reorganization of the
Company, the lenders under the Credit Facilities and other creditors who are
holders of Senior Indebtedness must be paid in full before the Holders may be
paid; accordingly, there may be insufficient assets remaining after payment of
prior claims to pay amounts due on the Exchange Notes. In addition, under
certain circumstances, no payments may be made with respect to the Exchange
Notes if a default exists with respect to Senior Indebtedness. See "Description
of the Exchange Notes."
ENCUMBRANCES ON ASSETS TO SECURE CREDIT FACILITIES
In addition to being subordinated to all existing and future Senior
Indebtedness of the Company, the Exchange Notes will not be secured by any of
the Company's assets. The Company's obligations under the Credit Facilities are
required to be secured by a first priority pledge of and security interest in
(i) the stock of all the existing and subsequently acquired direct domestic
subsidiaries of the Company other than common stock of unrestricted subsidiaries
and certain subsidiaries created or acquired in connection with permitted
acquisitions, (ii) evidences of indebtedness in excess of $5 million received by
the Company in connection with asset sales other than sales in the ordinary
course of business or in connection with permitted sale-leasebacks and (iii) 65%
of the common stock of existing and subsequently acquired material direct
foreign subsidiaries. If the Company becomes insolvent or is liquidated, or if
payment under any of the Credit Facilities is accelerated, the lenders under the
Credit Facilities will be entitled to exercise the remedies available to a
secured lender under applicable law. See "Description of Credit Facilities" and
"Description of the Exchange Notes."
CHANGE OF CONTROL
The Indenture provides that, upon the occurrence of a Change of Control, the
Company will (unless the Company elects to redeem the Exchange Notes in the
event of a Change of Control prior to May 1, 2003) make an offer to purchase all
or any part of the Exchange Notes at a price in cash equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest, if any, to
the date of purchase.
18
<PAGE>
The Credit Facilities prohibit the Company from repurchasing any Exchange Notes,
except with the sum of $50.0 million, the proceeds of certain proceeds of one or
more Equity Offerings, a portion of excess cash flow and other amounts not
applied to repay borrowings under the Term Loan Facility less certain
investments in acquisition subsidiaries and minority investments. The Credit
Facilities also provide that certain change of control events with respect to
the Company constitute a default thereunder. Any future credit agreements or
other agreements relating to Senior Indebtedness to which the Company becomes a
party may contain similar restrictions and provisions. In the event a Change of
Control occurs at a time when the Company is prohibited from purchasing the
Exchange Notes, the Company could seek the consent of its lenders to purchase
the Exchange Notes or could attempt to refinance the borrowings that contain
such a prohibition. If the Company does not obtain such a consent or refinance
such borrowings, the Company would remain prohibited from purchasing the
Exchange Notes. In such case, the Company's failure to purchase tendered
Exchange Notes would constitute a default under the Indenture, which, in turn,
could result in amounts outstanding under the Credit Facilities being declared
due and payable. Any such declaration could have adverse consequences to the
Company and the Holders. In the event of a Change of Control, there can be no
assurance that the Company would have sufficient assets to satisfy all of its
obligations under the Credit Facilities and the Exchange Notes. If a default
occurs with respect to any Senior Indebtedness, the subordination provisions in
the Indenture would likely restrict payments to the Holders. The provisions
relating to a Change of Control included in the Indenture may increase the
difficulty of a potential acquiror obtaining control of the Company. See
"Description of the Exchange Notes--Repurchase at the Option of Holders--Change
of Control."
RISKS RELATED TO REALIZING OBJECTIVES OF THE BUSINESS REDESIGN PROGRAM
The two major objectives of the Company's Business Redesign Program are to,
first, streamline the Company's business to focus on profitable products and
customers while reducing the Company's cost structure and, second, adopt
initiatives to increase sales while maintaining and improving upon the cost
efficiencies achieved in the first phase of the Business Redesign Program. The
Company's ability to achieve these objectives is subject to the effects of a
number of business, industry, economic and other factors, many of which are
beyond the Company's control, such as general economic conditions, potential
revenue instability arising from cost savings initiatives or otherwise, labor
relations, the response of competitors or customers to the Company's Business
Redesign Program, delays in implementation of the second phase of the Business
Redesign Program, ability to retain cost savings previously achieved, retailer
consolidation or strategy changes, competition for retail shelf space and the
relative success of new product introductions. With the implementation of the
Business Redesign Program in 1996, management anticipated that the narrowing of
the Company's customer base and product offerings would lead to short-term sales
decreases. The Company has experienced sales decreases in excess of those
expected. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Overview" for a discussion of other factors affecting the
Company's recent and future financial performance.
RISKS ASSOCIATED WITH INTERNATIONAL MARKETS
A significant portion of the Company's sales is derived from international
markets. During 1997, approximately 25% of the Company's net sales were
generated outside the United States, including 5% in Korea, which was the
Company's largest market outside North America. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Overview--Other
Matters." Approximately 63% of the Company's international net sales in 1997
were made in U.S. dollars, with the balance realized in other currencies.
Currency exchange rate fluctuations may significantly affect the Company's
foreign sales and earnings. Increased strength of the U.S. dollar will increase
the effective price of the Company's products sold in U.S. dollars and therefore
may materially adversely affect sales. The Company's costs are predominantly
denominated in U.S. dollars. Thus, with respect to the sales conducted in
foreign currencies, increased strength of the U.S. dollar could decrease the
Company's
19
<PAGE>
reported revenues and margins in respect of such sales to the extent the Company
is unable or determines not to increase local currency prices.
Increasing its sales in international markets, particularly Latin America
and Asia, is a component of the Company's business strategy. As a result,
economic conditions in these markets could have an increasingly significant
effect on the Company's operating results. Certain Asian economies have
experienced recent economic disruptions, including significant currency
devaluation. For the first quarter of 1998, the Company recorded gross sales and
operating income (loss) (before allocation of manufacturing variances and
corporate overhead) of $4.1 million and $(0.1) million in Asian markets
(excluding Japan), respectively, compared to $16.7 million and $6.9 million in
the first quarter of 1997. For 1997, gross sales and operating income (before
allocation of manufacturing variances and corporate overhead) from Asian markets
(excluding Japan) were $58.1 million and $18.5 million, respectively. Results in
Japan in the first quarter of 1998 were substantially equivalent with those in
the prior year. Although the Company believes that Asian markets offer long term
growth potential, the current disruptions in Asia are expected to continue to
materially adversely affect the Company's results of operations in the short
term. Because international sales are among the Company's most profitable,
disruptions in international sales have a disproportionate effect on the Company
profits. A significant portion of the Company's operating income has
historically been derived from international sales. In addition, the Company
expects increased competition in domestic markets from Asian competitors. See
"--Potential for Increased Competition," and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Overview."
The Company's international sales and operations are also subject to other
risks, including new and different legal and regulatory requirements in local
jurisdictions; export duties or import quotas; domestic and foreign customs and
tariffs or other trade barriers; potential difficulties in staffing and labor
disputes; managing and obtaining support and distribution for local operations;
increased costs of transportation or shipping; credit risk or financial
condition of local customers and distributors; potential difficulties in
protecting intellectual property; risk of nationalization of private
enterprises; potential imposition of restrictions on investments; potentially
adverse tax consequences, including imposition or increase of withholding and
other taxes on remittances and other payments by subsidiaries; foreign exchange
restrictions; and local political and social conditions, including the
possibility of hyperinflationary conditions and political instability in certain
countries. There can be no assurance that the foregoing factors will not have a
material adverse effect on the Company's international operations or sales or
upon its financial condition and results of operations.
The Company's continued growth is dependent in part upon its ability to
expand its operations into international markets where it currently has little
presence. The Company may experience difficulty entering new international
markets due to greater regulatory barriers than in the United States, the
necessity of adapting to new regulatory systems and problems related to entering
new markets with different cultural bases and political systems. As the Company
continues to expand its international operations, these and other risks
associated with international operations are likely to increase. In addition, as
the Company enters new geographic markets, it may encounter significant
competition from the primary participants in such markets, some of which may
have substantially greater resources than the Company.
In November 1994, Corning and the Company sold their European, Russian,
Middle Eastern and African consumer products businesses to Newell, a significant
competitor of the Company, and agreed for a five-year period, subject to certain
distribution agreements with Newell, not to manufacture, sell or distribute
competing products in such territories. Sales of the Company's products in these
territories have not been significant and are not expected to be significant in
the foreseeable future. See "Business--Distribution Channels-International" and
"Business--Distribution Channels-European, Russian, Middle Eastern and African
Consumer Products Business."
20
<PAGE>
POTENTIAL FOR INCREASED COMPETITION
The market for the Company's products is highly competitive. Competition in
the United States is affected not only by the large number of domestic
manufacturers but also by the large volume of foreign imports. In addition,
recently the Company has experienced increased competition in the United States
from low-cost Asian competitors and expects this trend to continue in the
future. The Company's major bakeware, dinnerware and cookware competitors for
domestic sales include Newell, Rubbermaid Incorporated, Ekco Housewares Inc.,
Pfaltzgraff Co., Lenox Inc., The Meyer Corporation, Inc. and T-Fal Corporation.
The market for housewares outside the United States and Europe is relatively
fragmented. The competitive landscape differs by country and region.
Internationally, depending on the country or region, the Company competes with
other U.S. companies operating abroad, locally manufactured private label goods
and international companies competing in the worldwide bakeware, dinnerware and
rangetop cookware categories. Major competitors abroad include Durand Verrerie
Christallerie D'Arquey, Lipper International Inc., Newell, Vitro S.A., NEG
(Nippon Electric Glass) and Schott Glaswerke.
Several of the Company's competitors are larger and may be less leveraged
and have greater financial resources than the Company following the completion
of the Transactions. In addition, there are no substantial regulatory or other
barriers to the entry of new competitors into the industry.
A number of factors affect competition in the sale of bakeware, dinnerware
and rangetop cookware manufactured and/or sold by the Company, including
quality, price competition from competitors and price point parameters
established by the Company's various distribution channels. The Company has,
from time to time, experienced price and market share pressure from certain
competitors in certain product lines, particularly in the bakeware category
where metal products of competitors have created retailer price and margin
pressures, and in the rangetop cookware category where non-stick aluminum
products have increased their share of rangetop cookware sales at the expense of
stainless steel products due to the durability and ease of cleaning of new
non-stick coatings.
Shelf space is a key factor in determining retail sales of bakeware,
dinnerware and rangetop cookware products. A competitor that is able to maintain
or increase the amount of retail space allocated to its product may gain a
competitive advantage for that product, and in recent fiscal quarters the
Company has lost shelf space in its distribution channels to certain of its
competitors. See "--Risks Related to Realizing Objectives of the Business
Redesign Program" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations." The allocation of retail space is
influenced by many factors, including brand name recognition, quality and price
of the product, level of service by the manufacturer and promotions.
In addition, new product introductions are an important factor in the
categories in which the Company's products compete. Other important competitive
factors are brand identification, style, design, packaging and the level of
service provided to customers. The importance of these competitive factors
varies from customer to customer and from product to product. See "--Development
of New Products" and "Business--Competition." There can be no assurance that the
Company will be able to compete successfully against current and future sources
of competition or that the current and future competitive pressures faced by the
Company will not adversely affect its profitability or financial performance.
See "Business--Competition."
NO PRIOR OPERATIONS AS AN INDEPENDENT COMPANY
Prior to the Recapitalization, the Company was operated as a wholly owned
subsidiary of Corning. While owned by Corning, Corning provided the Company with
credit support, as well as certain technical, operational and administrative
support services, including the Company's financial reporting systems. Corning
has agreed to continue to provide many of these services for a limited time
after the Closing Date, after which time the Company will be required to provide
for such services either internally
21
<PAGE>
or through third parties. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Overview--Separation from Corning;
Transaction Related Charges" and "Certain Relationships and Related Party
Transactions." There can be no assurance that the Company will be able to obtain
replacement sources for such services, or that if obtained, such services will
be obtained on terms as favorable as those provided by Corning. In addition,
there can be no assurance that due to unanticipated occurrences the Company will
be able to achieve the cost savings in administrative services presented in the
historical and pro forma financial information included herein.
DEVELOPMENT OF NEW PRODUCTS
The development and introduction of new products (including product line
extensions and renewals) is a significant factor in expanding product categories
and successful competition within product categories. The Company budgets
expenditures for, and actively pursues, the development of new products. There
can be no assurance, however, that the Company will successfully develop new
products or, if developed, that new products will achieve market acceptance. The
Company's failure to develop new products that gain market acceptance could
adversely affect the Company's competitive position and could materially and
adversely affect the Company's results of operations.
DEPENDENCE ON SIGNIFICANT CUSTOMERS
In 1997, the Company's top two customers represented approximately 18% of
its gross sales and the Company's 25 largest domestic customers represented
approximately 35% of its gross sales. The further implementation of the Business
Redesign Program is likely to increase the percentage of sales to the Company's
top customers. The Company does not have long-term purchase agreements or other
contractual assurances as to future sales to these major customers. Decreased
levels or the deferral of orders by the Company's major customers in the past
have had, and in the future may have, a material adverse effect on the Company's
results of operations. In addition, due to the allocation of retail shelf space
to suppliers' products far in advance of the placement and shipment of orders
for such products, the Company's net sales are reliant to a certain extent on
the ability of its strategic accounts to successfully execute on such plans, and
any deferral of orders does not allow sufficient notice to obtain satisfactory
alternative sales arrangements for such products. See "Business--Distribution
Channels-- Domestic Wholesale."
In addition, continued consolidation within the retail industry may result
in an increasingly concentrated customer base. To the extent that such
consolidation continues to occur, the Company's net sales and profitability may
be increasingly sensitive to a deterioration in the financial condition of or
other adverse developments in its relationships with one or more customers.
RETAIL INDUSTRY
The Company's business depends on the strength of the retail economies in
various parts of the world, primarily in North America, and to a lesser extent
in Asia, Latin America and Australia, which are affected by such factors as
consumer demand, the condition of the retail industry and weather conditions.
Due to the recent economic conditions in Asia, the Company's net sales to Asian
markets have declined significantly due to overall declines in demand as well as
severe price competition. The Company's business is also sensitive to consumer
spending patterns, which in turn are subject to prevailing economic conditions.
Weak retail environments, whether due to economic or other conditions, may spur
manufacturers and marketers, including the Company, to increase their
discounting and promotional activities. The Company may also not be able to
fully offset the impact of inflation through price increases due to an
unfavorable retail environment. Future economic recessions could have a material
adverse effect on the Company's financial condition and results of operations.
Recently, the retail industry has been characterized by intense competition
and consolidation, whereby certain customers of the Company have incurred a
significant amount of debt, have entered bankruptcy or have liquidated and left
the retail market. As a result, the Company may be unable to
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<PAGE>
collect some or all amounts owed by these customers. Additionally, all or part
of the operations of a retailer that seeks bankruptcy or other debtor protection
may be discontinued or sales of the Company's products to such a retailer may be
curtailed or terminated as a result of such bankruptcy or insolvency
proceedings. In addition, the weakened financial condition of certain retailer
customers has caused the Company to decrease its sales to such retailers in an
effort to reduce the Company's credit risk.
Competition in the retail industry has in the past caused certain of the
Company's customers to engage in certain operational changes, including altering
their product mix (i.e., reducing the portion of shelf space allocated to the
Company's products or the categories in which the Company's products compete)
and significantly reducing inventory levels that have adversely affected the
Company's results of operations. There can be no assurance that the foregoing
factors will not continue to affect the Company.
As is customary in the retail industry, the Company generally does not enter
into written agreements with customers but relies on orders that are cancelable
until shipment. Decreased levels or the deferral of orders by the Company's
customers in the past have had, and in the future may have, a material adverse
effect on the Company's results of operations. See "Business--Distribution
Channels."
Company-operated outlet stores accounted for approximately 34% of the
Company's U.S. gross sales during 1997. If consumer preference and retail sales
volume were to shift away from outlet stores and outlet malls, the Company's
sales and results of operations could be materially adversely affected.
FLUCTUATIONS IN RAW MATERIAL COSTS
The Company purchases its raw materials on the spot market and through
long-term contracts with suppliers. The replacement of certain raw material
suppliers has in the past had, and may in the future have, an adverse effect on
the Company's operations and financial performance, and significant increases in
the cost of any of the principal raw materials used by the Company, namely sand,
soda ash, borax, limestone, lithia-containing spars, alumina, cullet, stainless
steel, copper and corrugated packaging materials, could have a material adverse
effect on its results of operations. The Company's molded plastic products and
certain components of its kitchenware products are manufactured from plastic
resin, which is produced from petrochemical intermediates. Plastic resin prices
may fluctuate as a result of changes in natural gas and crude oil prices and the
capacity, supply and demand for resin and the petrochemical intermediates from
which it is produced. Costs of steel, aluminum and copper, which are used in
manufacturing the Company's bakeware products, and corrugated boxes and
packaging, which are used in the display and distribution of the Company's
products, are also subject to market fluctuations. To the extent the Company is
unable to pass on increases in the cost of its raw materials to its customers,
such increases may have a material adverse effect on the profitability of the
Company. The Company does not engage in any hedging activities for commodity
trading relating to its supply of raw materials. See "Business--Raw Materials
and Supplies."
ACQUISITION RELATED RISKS
Although the Company has not historically relied on acquisitions to grow its
business, part of the Company's business strategy is to selectively acquire
other businesses that will complement its existing business. Management is
unable to predict whether or when any prospective acquisition candidates will
become available or the likelihood of a material transaction being completed
should any negotiations commence. The Company's ability to finance acquisitions
may be constrained by, among other things, its high degree of leverage following
the Transactions. The Credit Facilities and the Indenture may significantly
limit the Company's ability to make acquisitions and to incur indebtedness in
connection with acquisitions. In addition, acquisitions by the Company will
involve risks, including the successful integration and management of acquired
technology, operations and personnel. The integration of acquired businesses may
also lead to the loss of key employees of the acquired companies and diversion
of management attention from ongoing business concerns. There can be no
assurance that
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<PAGE>
any acquisition will be made, that the Company will be able to obtain additional
financing needed to finance any such acquisition and, if any acquisitions are so
made, that they will be successful.
LABOR RELATIONS
The Company currently is a party to several domestic and international
collective bargaining agreements, including agreements with the American Flint
Glass Workers Union, the Aluminum Brick & Glass Workers International Union, the
International Association of Machinists and Aerospace Workers and the Australia
Workers Union. These agreements will expire at various times in the future
between May 31, 1998 and April 2001. The inability of the Company to renew such
agreements could result in work stoppages and other labor disturbances, which
could disrupt the Company's business and adversely affect the Company's results
of operations. See "Business--Employees."
CONTROL BY KKR AFFILIATES
After the Recapitalization, 92% of the issued and outstanding shares of
Common Stock was held by CCPC Acquisition, a wholly-owned subsidiary of BW
Holdings. Under the 1998 Plan, CCPC Acquisition is currently in the process of
selling shares of Common Stock, and the Company is making grants of options to
purchase Common Stock, to certain members of management of the Company. BW
Holdings is a Delaware limited liability company whose members are certain
members of senior management of Borden, KKR Partners II, L.P. and Whitehall
Associates L.P. KKR Associates, L.P. is the sole general partner of each of KKR
Partners II, L.P. and Whitehall Associates L.P. KKR Associates, L.P. is a
Delaware limited partnership whose general partners are also the members of the
limited liability company which is the general partner of KKR. Accordingly,
affiliates of KKR will control the Company and have the power to elect all of
its directors, appoint new management and approve any action requiring the
approval of Company stockholders, including adopting amendments to the Company's
certificate of incorporation and approving mergers or sales of substantially all
of the Company's assets. There can be no assurance that the interests of KKR and
its affiliates will not conflict with the interests of the holders of the
Exchange Notes. See "Management," "Principal Stockholders" and "Certain
Relationships and Related Party Transactions."
DEPENDENCE UPON KEY MANAGEMENT; NEED TO HIRE ADDITIONAL QUALIFIED PERSONNEL
The Company is currently dependent upon the ability and experience of its
senior operations team and administrative services provided by Corning. The
Company is in the process of developing its organization to replace the services
presently provided by Corning. Competition for qualified personnel is intense,
and the process of hiring such qualified personnel can be lengthy. The loss of
the services of key personnel or the inability to attract and retain additional
qualified personnel could have an adverse effect on the Company's operations.
Pursuant to a transition services agreement entered into in connection with the
Recapitalization, Corning is continuing to provide certain administrative
services which it provided prior to the Recapitalization. There can be no
assurance, however, that after the termination of the transition services
agreement (on or before April 1, 2000) that the Company will be able to replace
Corning's services under such agreement for the fees charged by Corning, that
the functions assumed by the Company or to be outsourced to third parties will
not cost significantly in excess of the Company's estimates or that the
provision of such services during the transition period after the
Recapitalization will be performed without interruption or delay due to
unanticipated circumstances. The Company does not maintain key-man life
insurance policies on any of its executives nor has it entered into employment
agreements with any of its executives. See "Management."
SEASONALITY
Historically, the Company records its highest sales in its third and fourth
quarters as a result of the buying patterns associated with the holiday selling
season. The Company's need for working capital accelerates in the second half of
the year due to additional merchandising and promotional efforts
24
<PAGE>
associated with the holiday selling season and, accordingly, total debt levels
tend to peak in the third and fourth quarters, decreasing in the first quarter
of the following year. The amount of the Company's sales generated during the
second half of the year generally depends upon a number of factors, including
general economic conditions, existing retailer inventory levels and other
factors beyond the Company's control. The Company's results of operations would
be adversely and disproportionately affected if the Company's sales were
substantially lower than those normally expected during the second half of the
year. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations-- Seasonality."
INTELLECTUAL PROPERTY
The Company licenses from Corning on an exclusive basis the Corning
Ware-Registered Trademark- trademark, service mark and tradename, the
Pyroceram-Registered Trademark- trademark in the field of housewares and the
Pyrex-Registered Trademark- trademark in the field of durable consumer products
(which includes bakeware) in each case for ten years (each renewable at the
option of the Company on the same terms and conditions for an unlimited number
of successive ten-year terms). The success of the Company's various businesses
depends in part on the Company's ability to use these trademarks, tradenames,
service marks and licenses as well as certain proprietary designs and trademarks
on an exclusive basis in reliance upon the protections afforded by applicable
trademark laws and regulations. In the event of a bankruptcy of Corning or the
Company, the Company's right to use the Corning Ware-Registered Trademark-,
Pyrex-Registered Trademark- and Pyroceram-Registered Trademark- trademarks,
service mark and/or tradename may be limited or terminated during the course of
such bankruptcy proceedings under provisions of bankruptcy law applicable to
contracts such as the license agreement with Corning. The loss of certain of the
Company's rights to such trademarks, tradenames, servicemarks and licenses or
the inability of the Company to effectively protect or enforce such rights could
materially adversely affect the Company. See "Business--Intellectual Property."
On May 12, 1998, the Company received two letters from Rubbermaid
Incorporated alleging that Corning Ware-Registered Trademark- Pop-Ins-TM-
infringe four patents owned by Rubbermaid Incorporated. The letters request that
the Company cease and desist from making, using, offering to sell, and selling
Corning Ware-Registered Trademark- Pop-Ins-TM- and provide to Rubbermaid a full
accounting of sales of such products. The Company is in the process of
investigating the validity of this claim.
ENVIRONMENTAL REGULATION
The Company's facilities and operations are subject to certain federal,
state, local and foreign laws and regulations relating to environmental
protection and human health and safety, including those governing wastewater
discharges, air emissions, the use, generation, storage, treatment,
transportation and disposal of hazardous and non-hazardous materials and wastes
and the remediation of contamination associated with such disposal. Certain of
such laws and regulations and their interpretation by regulatory agencies and
courts are complex, may change frequently and historically have become
increasingly stringent. In addition, under certain environmental laws, a current
or previous owner or operator of property may be liable for the costs to remove
or remediate certain hazardous substances or petroleum products on, under or in
such property, without regard to whether the owner or operator knew of, or
caused, the presence of the contaminants, and regardless of whether the
practices that resulted in contamination were legal at the time they occurred.
The presence of, or failure to remediate properly, such contamination may
adversely affect the ability to sell or rent such property or to borrow using
such property as collateral. Owners or operators of such properties, as well as
persons who generate, arrange for the disposal or treatment of, or dispose of
hazardous substances, may be liable for the costs of investigation, remediation
or removal of hazardous substances at or from the properties where such
hazardous substances come to be located, whether or not such facility is owned
or operated by such person. Additionally, claims may be asserted by third
parties for various damages and costs resulting from contamination emanating
from a site owned or operated by, or containing hazardous substances originating
from, the Company. Because of the nature of its business, the Company has
incurred, and
25
<PAGE>
will continue to incur, capital and operating expenditures and other costs in
complying with and resolving liabilities under such laws and regulations,
including costs incurred to remediate historic contamination at certain of its
facilities. There can be no assurance that compliance with or liabilities under
such laws and regulations, or the discovery of contamination will not in the
future have a material adverse effect on the Company. See
"Business--Environmental Matters."
FRAUDULENT TRANSFER CONSIDERATIONS
The incurrence of indebtedness by the Company, such as the Exchange Notes,
may be subject to review under federal bankruptcy law or relevant state
fraudulent conveyance laws if a bankruptcy case or lawsuit is commenced by or on
behalf of unpaid creditors of the Company. Under these laws, if, in a bankruptcy
or reorganization case or a lawsuit by or on behalf of unpaid creditors of the
Company, a court were to find that, at the time the Company incurred
indebtedness, including indebtedness under the Exchange Notes, (i) the Company
incurred such indebtedness with the intent of hindering, delaying or defrauding
current or future creditors or (ii) (a) the Company received less than
reasonably equivalent value or fair consideration for incurring such
indebtedness and (b) the Company (1) was insolvent or was rendered insolvent by
reason of any of the transactions, (2) was engaged, or about to engage, in a
business or transaction for which its assets remaining with the Company
constituted unreasonably small capital to carry on its business, (3) intended to
incur, or believed that it would incur, debts beyond its ability to pay as such
debts matured (as all of the foregoing terms are defined in or interpreted under
the relevant fraudulent transfer or conveyance statutes) or (4) was a defendant
in an action for money damages, or had a judgment for money damages docketed
against it (if, in either case, after final judgment the judgment is
unsatisfied), then such court could avoid or subordinate the amounts owing under
the Exchange Notes to presently existing and future indebtedness of the Company
and take other actions detrimental to the holders of the Exchange Notes.
The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the law of the jurisdiction that is being applied in any
such proceeding. Generally, however, the Company would be considered insolvent
if, at the time it incurred the indebtedness, either (i) the sum of its debts
(including contingent liabilities) is greater than its assets, at a fair
valuation, or (ii) the present fair saleable value of its assets is less than
the amount required to pay the probable liability on its total existing debts
and liabilities (including contingent liabilities) as they become absolute and
matured. There can be no assurance as to what standards a court would use to
determine whether the Company was solvent at the relevant time, or whether,
whatever standard was used, the Exchange Notes would not be avoided or further
subordinated on another of the grounds set forth above. In rendering their
opinions in connection with the initial financing of the Recapitalization,
counsel for the Company and counsel for the lenders will not express any opinion
as to the applicability of federal or state fraudulent transfer and conveyance
laws.
The Company believes that at the time the indebtedness constituting the
Exchange Notes will be incurred initially by the Company, the Company (i) will
be (a) neither insolvent nor rendered insolvent thereby, (b) in possession of
sufficient capital to run its businesses effectively and (c) incurring debts
within its ability to pay as the same mature or become due and (ii) will have
sufficient assets to satisfy any probable money judgment against it in any
pending action. In reaching the foregoing conclusions, the Company has relied
upon its analyses of internal cash flow projections and estimated values of
assets and liabilities of the Company. There can be no assurance, however, that
a court passing on such questions would reach the same conclusions.
ABSENCE OF PUBLIC MARKET
The Exchange Notes are being offered to the holders of the Old Notes. The
Old Notes were offered and sold in May 1998 to a small number of institutional
investors and are eligible for trading in the PORTAL Market.
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<PAGE>
The Company does not intend to apply for a listing of the Exchange Notes on
a securities exchange. There is currently no established market for the Exchange
Notes and there can be no assurance as to the liquidity of markets that may
develop for the Exchange Notes, the ability of the holders of the Exchange Notes
to sell their Exchange Notes or the price at which such holders would be able to
sell their Exchange Notes. If such markets were to exist, the Exchange Notes
could trade at prices that may be lower than the initial market values thereof
depending on many factors, including prevailing interest rates and the markets
for similar securities. Although there is currently no market for the Exchange
Notes, the Initial Purchasers have advised the Company that they currently
intend to make a market in the Exchange Notes. However, the Initial Purchasers
are not obligated to do so, and any market making with respect to the Exchange
Notes may be discontinued at any time without notice.
The liquidity of, and trading market for, the Exchange Notes also may be
adversely affected by general declines in the market for similar securities.
FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements. Forward-looking
statements are not guarantees of future performance and are subject to risks,
uncertainties and other factors (many of which are beyond the Company's control)
that could cause actual results to differ materially from future results
expressed or implied by such forward-looking statements. Among these statements
are portions of this Prospectus concerning the Company's future operations,
economic performance and financial condition, including the Company's business
strategy and measures to implement such strategy, competitive strengths,
objectives, expansion, growth of the Company's business and operations,
acquisitions and references to future success. The forward-looking statements
regarding such matters are based on certain assumptions and analyses made by the
Company in light of its experience and its perception of historical trends,
current conditions and expected future developments, as well as other factors it
believes are appropriate in the circumstances. Whether actual results and
developments will conform with the Company's expectations and predictions,
however, is subject to a number of risks and uncertainties, in addition to the
risk factors discussed above, including: a global economic slowdown in any one,
or all, of the Company's sales categories; loss of sales as the Company
streamlines and focuses on strategic accounts; unpredictable difficulties or
delays in the development of new product programs; increased difficulties in
obtaining a consistent supply of basic raw materials such as sand, soda ash,
steel or copper and energy inputs such as electrical power or natural gas at
stable pricing levels; development by the Company of an adequate administrative
infrastructure; technological shifts away from the Company's technologies and
core competencies; unforeseen interruptions to the Company's business with its
largest customers resulting from, but not limited to, financial instabilities or
inventory excesses; the effects of extreme changes in monetary and fiscal
policies in the United States and abroad, including extreme currency
fluctuations and unforeseen inflationary pressures such as those recently
experienced by certain Asian economies; drastic and unforeseen price pressures
on the Company's products or significant cost increases that cannot be recovered
through price increases or productivity improvements; significant changes in
interest rates or in the availability of financing for the Company or certain of
its customers; loss of any material intellectual property rights; any
difficulties in obtaining or retaining the management or other human resource
competencies that the Company needs to achieve its business objectives; and
other factors, many of which are beyond the control of the Company.
Consequently, all of the forward-looking statements made in this Prospectus are
qualified by these cautionary statements, and there can be no assurance that the
actual results or developments anticipated by the Company will be realized or,
even if substantially realized, that they will have the expected consequences to
or effects on the Company and its subsidiaries or their business or operations.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
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<PAGE>
THE RECAPITALIZATION
The following is a summary of the Recapitalization and the material
provisions of the Recapitalization Agreement dated March 2, 1998 among Corning,
the Company, CCPC Acquisition and Borden. This summary does not purport to be
complete and is qualified in its entirety by reference to the Recapitalization
Agreement.
RECAPITALIZATION AGREEMENT
The Recapitalization was consummated on April 1, 1998 through (a) the
payment to Corning by the Company of the $472.6 million Cash Dividend and (b)
the purchase by CCPC Acquisition from Corning of 22,080,000 shares of Common
Stock (the "Acquired Shares") owned by Corning for $110.4 million in cash. The
Cash Dividend, together with transaction and financing fees and expenses of $8.0
million paid to Borden for the Recapitalization, approximately $17.0 million to
pay other fees and expenses incurred in connection with the Transactions and
approximately $4.0 million of cash for operations, was financed by the Company
through (i) the issuance and sale to CCPC Acquisition of 1,200,000 shares of the
Junior Preferred Stock for $30.0 million and (ii) the Interim Financing. The
purchase by CCPC Acquisition of the Acquired Shares and the shares of Junior
Preferred Stock was financed through an equity investment in CCPC Acquisition by
BW Holdings from its cash on hand.
The amount of the Cash Dividend is subject to post-closing adjustment based
on the Company's net worth and outstanding indebtedness on the Closing Date. In
addition, the Company has agreed to pay Corning the amount, up to $15.0 million,
by which the cumulative gross margin (net sales minus cost of sales, in each
case adjusted to exclude the effect of certain events) of the Company for the
three year period ended December 31, 2000 exceeds $710.9 million (the
"Contingent Payment").
Immediately prior to the Recapitalization, Corning contributed $124.0
million to the capital of the Company, consisting of the forgiveness of
intercompany indebtedness and the assumption of certain liabilities, including
pension and postretirement benefit obligations and liabilities for workers'
compensation and product liability incidents occurring prior to the Closing
Date. In addition, Corning will contribute $18.5 million related to incremental
incentive programs, of which $1.7 million was paid in the first quarter of 1998.
See Note (a) to the Pro Forma Consolidated Condensed Statement of Operations.
As a result of the Recapitalization, CCPC Acquisition owned 92.0% of the
outstanding shares of Common Stock and Corning holds 8.0% of the outstanding
shares of Common Stock. Under the 1998 Plan, CCPC Acquisition is currently in
the process of selling shares of Common Stock, and the Company is making grants
of options to purchase Common Stock, to certain members of management of the
Company.
For a period of five years after the Closing Date, Corning has agreed that,
with certain exceptions, it will not manufacture, sell or distribute any
products similar to consumer products of the Company. Corning also agreed that
it will not use the Corning-Registered Trademark- trademark in the field of
housewares so long as the licenses granted to the Company for the Corning
Ware-Registered Trademark- and Pyroceram-Registered Trademark- trademarks are in
effect.
For a period of five years after the Closing Date, the Company has agreed to
maintain salary and benefits levels for each employee that are substantially
similar in aggregate economic value to those provided to that employee prior to
the Closing Date. In addition, for one year following the Closing Date the
Company has agreed to maintain: (i) a defined benefit pension plan providing
pension benefits for each employee which are substantially similar in aggregate
economic value to those benefits provided by the Corning Pension Plan (as
defined) as of the Closing Date, and (ii) any pension plan of a foreign
subsidiary in effect on the Closing Date so that each current and former
employee of that subsidiary will have benefits substantially similar in
aggregate economic value to the benefits provided as of the Closing Date.
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The Recapitalization Agreement contains representations and warranties
customary for transactions of this nature. The representations and warranties of
Corning survive the Recapitalization for certain specified periods and Corning
has agreed to indemnify CCPC Acquisition and its affiliates (including the
Company) for losses arising from breaches of its representations and warranties,
to the extent such losses are above certain thresholds. The amount of such
indemnification is limited to 40% of the sum of (a) the amount payable to
Corning for the Acquired Shares and (b) the Cash Dividend.
Additionally, Corning has agreed to indemnify CCPC Acquisition and its
affiliates (including the Company) for certain pre-Recapitalization tax and
environmental matters. With respect to certain environmental losses arising from
pre-Recapitalization events, conditions, or matters and as to which notice is
provided within specified time periods, Corning has agreed to indemnify the
Company for (i) 80% of such losses up to an aggregate of $20.0 million and (ii)
100% of such losses in excess of $20.0 million.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations-- Overview--Separation from Corning; Transaction Related Charges"
and "Certain Relationships and Related Party Transactions" for a description of
certain agreements entered into by the Company with Corning and/or CCPC
Acquisition in connection with the Recapitalization.
STOCKHOLDERS' AGREEMENT; REGISTRATION RIGHTS AGREEMENT
The Company, CCPC Acquisition and Corning entered into a Stockholders'
Agreement, dated April 1, 1998 (the "Stockholders' Agreement"). The
Stockholders' Agreement provides for certain restrictions and rights regarding
the transfer of Common Stock, including a right of first refusal in favor of,
first, the Company and, if the Company refuses, then CCPC Acquisition with
respect to Common Stock owned by Corning. After the Closing Date, Corning will
have the right to participate pro rata in certain sales of Common Stock by CCPC
Acquisition (the "Corning Tag Along"), and CCPC Acquisition will have the right
to require Corning to participate pro rata in certain sales of Common Stock by
CCPC Acquisition (the "Corning Drag Along"). In addition, the Stockholders'
Agreement provides Corning with unlimited "piggy back" registration rights and
one demand registration right.
CCPC Acquisition has the right, under certain circumstances and subject to
certain conditions, to require the Company to register under the Securities Act
shares of Common Stock held by it pursuant to a registration rights agreement
entered into on the Closing Date (the "CCPC Acquisition Registration Rights
Agreement") in connection with the Recapitalization. Such registration rights
will generally be available to CCPC Acquisition until registration under the
Securities Act is no longer required to enable it to resell the Common Stock
owned by it without restriction. The CCPC Acquisition Registration Rights
Agreement provides, among other things, that the Company will pay all
registration expenses in connection with the first six demand registrations
requested by CCPC Acquisition and in connection with any registration commenced
by the Company as a primary offering in which CCPC Acquisition participates
through "piggyback" registration rights granted under the CCPC Acquisition
Registration Rights Agreement.
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USE OF PROCEEDS
There will be no proceeds to the Company from the exchange of Notes pursuant
to the Exchange Offer. The net proceeds from the issuance of the Old Notes were
approximately $193.4 million, after deducting fees and expenses related to such
issuance. Such net proceeds were applied to refinance remaining obligations
outstanding under the Interim Financing. For a further discussion of the sources
and uses of funds relating to the Transactions, see "Summary--The Transactions"
and "The Recapitalization."
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
31, 1998 on a historical basis and on a pro forma basis after giving effect to
the Transactions as if they had been consummated on such date. This table should
be read in conjunction with "Use of Proceeds," "Unaudited Pro Forma Financial
Information," "Selected Historical Consolidated Financial and Other Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's consolidated financial statements and the notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
------------------------
HISTORICAL PRO FORMA
---------- ------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Long-term debt (including current portion):
Revolving Credit Facility(a).......................... -- $ 71.6
Term Loans............................................ -- 200.0
Old Notes............................................. -- 200.0
Industrial revenue bonds.............................. $ 10.2 10.2
Due to Corning........................................ 96.2 --
---------- ------------
Total long-term debt.............................. 106.4 481.8
Stockholders' equity (deficit)(b)..................... 226.7 (69.0)
---------- ------------
Total capitalization.............................. $ 333.1 $ 412.8
---------- ------------
---------- ------------
</TABLE>
- ------------------------
(a) Total borrowings of up to $275.0 million under the Revolving Credit Facility
are available for working capital and general corporate purposes, including
$25.0 million for letters of credit. After giving effect to the Transactions
on a pro forma basis, $203.4 million would have been available as of March
31, 1998 under the Revolving Credit Facility. On April 9, 1998, the Company
borrowed $59.6 million under the Revolving Credit Facility in connection
with the Refinancing and the Company borrowed an additional $12.0 million
through the date of the closing of the Offering.
(b) Upon consummation of the Recapitalization, CCPC Acquisition acquired 92.0%
of the outstanding shares of Common Stock of the Company for $110.4 million
and Corning retained 8.0% of the outstanding shares of Common Stock of the
Company (an implied value of $9.6 million). CCPC Acquisition also acquired
1,200,000 shares of the Company's Junior Preferred Stock for $30.0 million,
which is reflected in the pro forma stockholders' equity (deficit).
Dividends on the Junior Preferred Stock may be paid, at the option of the
Company, in cash or in additional shares of Junior Preferred Stock. Under
the 1998 Plan, CCPC Acquisition is currently in the process of selling
shares of Common Stock, and the Company is making grants of options to
purchase Common Stock, to certain members of management of the Company.
30
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma consolidated condensed financial
information of the Company (the "Pro Forma Financial Information") has been
prepared to give effect to the Transactions. The pro forma adjustments presented
are based upon available information and certain assumptions that the Company
believes are reasonable under the circumstances. The pro forma financial data
exclude the impact of (i) the adjustment to the amount of the Cash Dividend,
(ii) a potential payment to Corning of up to $15.0 million in 2001 in the event
the Company achieves a cumulative gross margin in excess of $710.9 million for
the three-year period ended December 31, 2000, (iii) grants and anticipated
grants of options to purchase Common Stock to management and (iv) approximately
$7.5 million of expenditures to be made over the next three years in
transition-related expenditures as a result of the separation from Corning.
The unaudited pro forma consolidated condensed balance sheet of the Company
as of March 31, 1998 (the "Pro Forma Consolidated Balance Sheet") gives effect
to the Transactions as if they had been consummated on March 31, 1998. The
unaudited pro forma consolidated condensed statements of operations of the
Company for the three months ended March 31, 1998 and for the year ended
December 31, 1997 (the "Pro Forma Consolidated Statements of Operations") give
effect to the Transactions as if they had been consummated on January 1, 1997.
The Pro Forma Financial Information should be read in conjunction with the
historical consolidated financial statements of the Company and notes thereto,
"Selected Historical Consolidated Financial and Other Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations," "The
Recapitalization" and the other financial information included elsewhere in this
Offering Memorandum. This Pro Forma Financial Information and related notes are
provided for informational purposes only and do not purport to be indicative of
the results that would have actually been obtained had the Transactions been
completed on the dates indicated or that may be expected to occur in the future.
31
<PAGE>
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
AS OF MARCH 31, 1998
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
-------------------------------
HISTORICAL PRE-RECAPITALIZATION(A) TRANSACTIONS PRO FORMA
---------- ------------------ ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents.......... $ 7,421 $ (7,421) $ 4,000(b) $ 4,000
Accounts receivable, net of
allowances....................... 55,267 15,681 -- 70,948
Inventories, net................... 150,430 -- -- 150,430
Prepaid expenses and other current
assets........................... 5,249 -- -- 5,249
Deferred taxes on income........... 7,799 (2,882) (4,917)(c) --
---------- ---------- ----------- ---------
Total current assets............. 226,166 5,378 (917) 230,627
---------- ---------- ----------- ---------
Property and equipment, net........ 150,510 -- -- 150,510
Deferred taxes on income........... 29,286 (19,601) 37,820(c) 47,505
Goodwill, net of accumulated
amortization..................... 59,997 -- -- 59,997
Other assets....................... 16,339 -- 15,000(d) 31,339
---------- ---------- ----------- ---------
Total assets..................... $ 482,298 $ (14,223) $ 51,903 $ 519,978
---------- ---------- ----------- ---------
---------- ---------- ----------- ---------
LIABILITIES AND STOCKHOLDER'S
EQUITY
Debt payable within one year....... $ 1,894 -- -- $ 1,894
Accounts payable and accrued
expenses......................... 67,693 $ 8,290 -- 75,983
Due to Corning Incorporated........ 96,224 (96,224) -- --
---------- ---------- ----------- ---------
Total current liabilities........ 165,811 (87,934) -- 77,877
---------- ---------- ----------- ---------
Long-term debt..................... 8,285 -- $ 471,600(b) 479,885
Accrued postretirement liability... 60,856 (32,589) -- 28,267
Other liabilities.................. 20,620 (17,669) -- 2,951
---------- ---------- ----------- ---------
Total liabilities................ 255,572 (138,192) 471,600 588,980
---------- ---------- ----------- ---------
Stockholder's equity (deficit)..... 226,726 123,969 (419,697)(e) (69,002)
---------- ---------- ----------- ---------
Total liabilities and
stockholder's equity......... $ 482,298 $ (14,223) $ 51,903 $ 519,978
---------- ---------- ----------- ---------
---------- ---------- ----------- ---------
</TABLE>
See Notes to Pro Forma Consolidated Condensed Balance Sheet
32
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
AS OF MARCH 31, 1998
(DOLLARS IN THOUSANDS)
The pro forma consolidated condensed balance sheet reflects pro forma
adjustments for the Transactions to the Company's historical consolidated
balance sheet as of March 31, 1998. The Transactions have not and will not
impact the historical basis of the Company's assets and liabilities with the
exception of deferred tax amounts.
(a) Pre-Recapitalization pro forma adjustments reflect the following:
<TABLE>
<S> <C>
Cash retained by Corning......................................... $ (7,421)
Liabilities retained by Corning.................................. 57,649
Deferred tax on liabilities retained............................. (22,483)
Intercompany loan forgiveness.................................... 96,224
---------
Total pre-Recapitalization adjustments........................... $ 123,969
---------
---------
</TABLE>
In addition, Corning will contribute $16,735 ($15,681 in cash and $1,054 in
non-cash) related to incremental incentive programs. See Note (a) to the Pro
Forma Consolidated Condensed Statement of Operations.
(b) The net sources and uses of cash reflect the following:
<TABLE>
<S> <C>
Sources:
Revolving Credit Facility............................. $ 71,600
Term Loans............................................ 200,000
Old Notes............................................. 200,000
Junior Preferred Stock................................ 30,000
Common Stock - CCPC Acquisition....................... 110,400
Common Stock - Corning................................ 9,600
-----------------
Total Sources..................................... $ 621,600
-----------------
-----------------
Uses:
Cash Dividend(1)...................................... $ 472,600
Stock Acquisition(2).................................. 110,400
Corning Retained Equity............................... 9,600
Estimated Transactions fees and expenses(3)........... 25,000
Increase to operating cash(4)......................... 4,000
-----------------
Total Uses........................................ $ 621,600
-----------------
-----------------
</TABLE>
- ------------------------
(1) The Cash Dividend of $472,600 is subject to post-closing adjustment
based on the Company's net worth and outstanding indebtedness on the
Closing Date. The Company cannot estimate at this time whether such
post-closing adjustment, if any, will require an additional payment to
Corning or a remittance from Corning.
(2) Under the 1998 Plan, CCPC Acquisition is currently in the process of
selling shares of Common Stock, and the Company is making grants of
options to purchase Common Stock, to certain members of management of the
Company, which in each case is not reflected in the Pro Forma Financial
Information. In the aggregate, the sales of shares of Common Stock by
CCPC Acquisition and the option grants by the Company will represent
approximately 12.4% of the Company's fully diluted Common Stock.
(3) Includes initial purchasers' discount and offering discount on the
Notes, fees related to the Credit Facilities and other fees and expenses
incurred in connection with the Transactions.
(4) Represents the $21,000 increase to the Company's cash balances at the
time of the Recapitalization, net of the application of $17,000 of such
balances to pay estimated Transactions fees and expenses in connection
with the Refinancing. See "Summary-The Transactions."
33
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET (CONTINUED)
AS OF MARCH 31, 1998
(DOLLARS IN THOUSANDS)
(c) Represents net current and non-current deferred taxes of $32,903 on the
estimated increase in tax basis of fixed assets and intangibles as a result
of the Section 338(h)(10) election made in connection with the
Recapitalization.
(d) Represents the portion of the estimated Transactions fees and expenses that
has been recorded as deferred financing costs and will be amortized over the
weighted average life of the related indebtedness.
(e) Represents an aggregate net change as a result of the Recapitalization:
<TABLE>
<S> <C>
Cash Dividend................................................... $(472,600)
Issuance of Preferred Stock..................................... 30,000
Net deferred tax asset for tax basis step-up.................... 32,903
Estimated Transactions fees and expenses(1)..................... (10,000)
---------
Total..................................................... $(419,697)
---------
---------
</TABLE>
- ------------------------
(1) Represents the portion of the total $25,000 of estimated Transactions
fees and expenses which has been recorded as an expense. Transactions
fees and expenses consist of (i) legal, accounting and investment banking
fees, certain taxes and other expenses, (ii) transaction and financing
fees and expenses payable to Borden and (iii) miscellaneous fees and
expenses such as printing and filing fees.
34
<PAGE>
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS(A) PRO FORMA
-------------- ------------------ --------------
<S> <C> <C> <C>
Net sales.................................................... $ 116,538 -- $ 116,538
Cost of sales................................................ 77,761 $ (664)(b) 77,097
-------------- -------- --------------
Gross margin................................................. 38,777 664 39,441
Selling, general, administrative and research and development
expenses................................................... 37,130 (398)(c) 36,732
Transactions related expenses................................ 1,384 (1,384)(e) --
Other, net................................................... 576 576
-------------- -------- --------------
Operating income (loss)...................................... (313) 2,446 2,133
Interest expense, net........................................ 1,574 9,107(f) 10,681
-------------- -------- --------------
Income (loss) before taxes on income......................... (1,887) (6,661) (8,548)
Income tax expense (benefit)................................. 1,731 (2,664)(g) (933)
-------------- -------- --------------
Income (loss) before minority interest....................... (3,618) (3,997) (7,615)
Minority interest in earnings of a subsidiary................ 36 -- 36
-------------- -------- --------------
Net income (loss)............................................ $ (3,582) $ (3,997) $ (7,579)
-------------- -------- --------------
-------------- -------- --------------
OTHER DATA:
EBITDA (h)................................................... $ 8,676 $ 11,122
EBITDA margin................................................ 7.4% 9.5%
Interest expense (i)......................................... $ 1,622 $ 10,239
Depreciation and amortization................................ 8,989 8,989
Capital expenditures......................................... 7,858 7,858
Ratio of earnings to fixed charges(j)........................ 0.4x 0.3x
Ratio of earnings to combined fixed charges and preferred
stock dividends(j)......................................... NA 0.3x
SHARE INFORMATION(k)
Basic and diluted loss per common share...................... $ (0.15) $ (0.32)
Weighted average number of common shares outstanding during
the period................................................. 24,000,000 24,000,000
</TABLE>
See Notes to Pro Forma Consolidated Condensed Statements of Operations
35
<PAGE>
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS(A) PRO FORMA
-------------- ------------------ --------------
<S> <C> <C> <C>
Net sales.................................................... $ 572,860 -- $ 572,860
Cost of sales................................................ 376,960 $ (2,657)(b) 374,303
-------------- -------- --------------
Gross margin................................................. 195,900 2,657 198,557
Selling, general, administrative and research and development
expenses................................................... 137,315 6,899(c) 144,214
Other corporate administrative expenses...................... 18,408 (18,408)(d) --
Other, net................................................... 5,629 (5,231)(e) 398
-------------- -------- --------------
Operating income............................................. 34,548 19,397 53,945
Interest expense, net........................................ 8,481 34,311(f) 42,792
-------------- -------- --------------
Income (loss) before taxes on income......................... 26,067 (14,914) 11,153
Income tax expense (benefit)................................. 12,734 (5,965)(g) 6,769
-------------- -------- --------------
Income (loss) before minority interest....................... 13,333 (8,949) 4,384
Minority interest in earnings of a subsidiary................ (295) -- (295)
-------------- -------- --------------
Net income (loss)............................................ $ 13,038 $ (8,949) $ 4,089
-------------- -------- --------------
-------------- -------- --------------
OTHER DATA:
EBITDA (h)................................................... $ 70,254 $ 89,651
EBITDA margin................................................ 12.3% 15.7%
Interest expense (i)......................................... $ 8,974 $ 41,023
Depreciation and amortization................................ 35,706 35,706
Capital expenditures......................................... 28,600 28,600
Ratio of earnings to fixed charges(j)........................ 2.4x 1.2x
Ratio of earnings to combined fixed charges and preferred
stock dividends(j)......................................... NA 1.0x
SHARE INFORMATION(k)
Basic and diluted earnings per common share.................. $ 0.54 $ 0.17
Weighted average number of common shares outstanding during
the period................................................. 24,000,000 24,000,000
</TABLE>
See Notes to Pro Forma Consolidated Condensed Statements of Operations
36
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
AND THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
(a) In connection with the Recapitalization, certain current employees of the
Company and certain union employees of Corning who accepted employment with
the Company received and will receive cash and non-cash benefits of $16,735
($15,681 in cash and $1,054 in non-cash) following the Closing Date in
addition to the $1,733 paid in the first quarter of 1998. The Company will
make these cash payments over the next two years and Corning will contribute
$17,414 in cash to the Company over the same period. Since the preponderance
of the payments represents consideration that is for future services
rendered to the Company, the related compensation expense is being recorded
primarily subsequent to the Closing Date and to a lesser extent was recorded
on or prior to the Closing Date. This charge has not been reflected in the
Pro Forma Consolidated Condensed Statements of Operations due to its
unusual, nonrecurring nature.
(b) Reflects the estimated decrease in cost of sales and selling, general,
administrative and research and development expenses, respectively, as a
result of Corning's retention of certain pension and postretirement
obligations which arose prior to the Recapitalization as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED
1998 DECEMBER 31, 1997
--------------- -------------------
<S> <C> <C>
Cost of sales............................................ $ 664 $ 2,657
Selling, general, administrative and research and
development expenses................................... 336 1,346
</TABLE>
(c) Reflects a net (decrease) increase in selling, general, administrative and
research and development expenses as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED
1998 DECEMBER 31, 1997
--------------- -------------------
<S> <C> <C>
Benefit expense reduction (see Note (b))................. $ (336) $ (1,346)
Estimated cost of replacing Corning administrative
services (see Note (d))................................ -- 6,745
Management fee to be paid to Borden (see Note (d))....... (62)(1) 1,500
------ -------
$ (398) $ 6,899
------ -------
------ -------
</TABLE>
- ------------------------
(1) Reflects the difference between the management fee charged by Corning
($437) for the three months ended March 31, 1998 and the quarterly
management fee to be charged by Borden ($375).
(d) Prior to the Recapitalization, Corning provided the Company with certain
administrative services which were not readily allocated to individual
transactions or events, such as legal, treasury and tax functions. For these
services the Company paid Corning the charges recorded as "Other corporate
administrative expenses," which charges were based on a percentage of the
Company's budgeted
37
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 1998
AND THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
sales. "Other corporate administrative expenses" were $18,408 in 1997.
Commencing on January 1, 1998, Corning provided these services to the
Company on the basis of a service agreement containing terms similar to that
entered into on the date of the Recapitalization and expenses incurred under
such agreement were reflected as selling, general and administrative and
research and development expenses. Under the transition services agreement
with Corning entered into on the date of the Recapitalization, Corning will
continue for a two-year period to provide a portion of these services at
negotiated rates. In addition, the Company is developing its administrative
infrastructure and certain of these functions will be assumed by the Company
or performed by third parties. The Company anticipates that the performance
of these administrative services (which are accounted for as selling,
general, administrative and research and development expenses following the
Recapitalization) as well as additional expenses associated with external
auditing and periodic filings with the Commission will cost the Company
(including amounts to be paid to Corning) approximately $6,745 per year, or
$1,686 per quarter, after the Recapitalization.
In addition, prior to the Recapitalization, Corning performed, and under the
transition services agreement continues to perform, certain process-oriented
administrative support services, such as benefits administration, accounts
payable and accounts receivable functions. Corning has agreed pursuant to
the transition services agreement to continue to provide such services for
up to two years following the Recapitalization at rates calculated on the
same basis as before the Recapitalization. The Company expensed $19,201 for
these services in 1997. These services will continue to be reflected as
expenses on the same terms as prior to the Recapitalization and therefore no
pro forma adjustment in respect of the expenses is reflected in the Pro
Forma Financial Information.
There can be no assurance, that after the termination of the transition
services agreement the Company will be able to replace Corning's services
under the transition services agreement for the fees charged by Corning.
Under the administrative services agreement the Company and Corning will
continue to provide to one another certain services internationally at
negotiated rates for up to two years. In addition, the Company will pay
$1,500 per year, or $375 per quarter, to Borden for management services
following the Recapitalization.
(e) For the year ended December 31, 1997, reflects a reduction for non-recurring
expenses of $4,476 related to incremental incentive payments made to
employees during the sale of the Company, $731 for sales commissions paid to
certain Corning subsidiaries that will no longer be incurred following the
Recapitalization and miscellaneous expenses. For the three months ended
March 31, 1998, represents $1,384 of expenses incurred in connection with
the sale of the Company.
38
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 1998
AND THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
(f) Pro forma interest expense reflects the following:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED
1998 DECEMBER 31, 1997
-------------- -------------------
<S> <C> <C>
Revolving Credit Facility ($71,600 at 7.40%)............. $ 1,325 $ 5,298
Term Loan ($200,000 at 7.65%)............................ 3,825 15,300
Senior Subordinated Notes ($200,000 at 9.625%)........... 4,812 19,250
Amortization of deferred financing, debt discount and
unused credit line fees................................ 633 2,532
-------------- --------
10,595 42,380
Less: Non-recurring historical interest expense, net..... 1,488 8,069
-------------- --------
$ 9,107 $ 34,311
-------------- --------
-------------- --------
</TABLE>
A 0.125% increase or decrease in the weighted average interest rate would
change interest expense by $148 for the three months ended March 31, 1998
and $590 for the year ended December 31, 1997. Each $5,000 increase or
decrease in borrowings under the Revolving Credit Facility would change pro
forma interest expense by $88 for the three months ended March 31, 1998 and
$351 for the year ended December 31, 1997.
(g) Reflects the pro forma adjustments assuming a 40% effective income tax rate.
(h) EBITDA represents operating income plus depreciation and amortization.
EBITDA is presented because management understands that such information is
considered by certain investors to be an additional basis for evaluating the
Company's ability to pay interest and repay debt. EBITDA should not be
considered an alternative to measures of operating performance as determined
in accordance with generally accepted accounting principles, including net
income, as a measure of the Company's operating results and cash flows or as
a measure of the Company's liquidity. Because EBITDA is not calculated
identically by all companies, the presentation herein may not be comparable
to other similarly titled measures of other companies.
(i) Interest expense represents interest expense exclusive of amortization of
deferred financing fees and the debt discount.
(j) For purposes of these computations, earnings consist of income (loss)
before taxes on income plus fixed charges (exclusive of capitalized
interest). Fixed charges consist of interest expense, whether capitalized or
expensed, including deferred financing costs and one-third of rental
expenses (the portion deemed representative of the interest factor). For
purposes of the computation of the ratio of earnings to combined fixed
charges and preferred stock dividends, the preferred stock dividend
requirements were increased by an amount representing the pre-tax earnings
which are required to cover such dividend requirements. For the three months
ended March 31, 1998, the deficiency of earnings to fixed charges was $2.1
on a historical basis and $8.6 on a pro forma basis. For the same period,
the deficiency of pro forma earnings to combined fixed charges and preferred
stock dividends was $10.9.
(k) Basic and diluted earnings (loss) per common share is calculated by dividing
net income by the weighted average number of common shares outstanding
during the period.
39
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA
The following table sets forth selected historical consolidated financial
and other data of the Company. The historical consolidated financial and other
data for the three years ended December 31, 1997 and as of December 31, 1997 and
December 31, 1996 have been derived from, and should be read in conjunction
with, the consolidated financial statements of the Company and notes thereto
which have been audited by Price Waterhouse LLP, independent accountants, and
which are included elsewhere in this Prospectus. The historical consolidated
financial and other data for the year ended December 31, 1994 and as of December
31, 1994 and 1995 have been derived from the consolidated financial statements
of the Company which have been audited by Price Waterhouse LLP, but which are
not contained herein. The historical consolidated financial and other data for
the three months ended March 31, 1998 and 1997 have been derived from, and
should be read in conjunction with the unaudited financial statements of the
Company and the notes thereto which are included elsewhere in this Prospectus.
Results for the quarter ended March 31, 1998 are not necessarily indicative of
results that can be expected for the year ended December 31, 1998. The
historical consolidated financial and other data for the year ended December 31,
1993 and as of December 31, 1993 have been derived from unaudited consolidated
financial statements of the Company, which are not contained herein. In the
opinion of management, all adjustments, consisting of only normal recurring
adjustments, considered necessary for a fair presentation have been included in
the unaudited consolidated financial statements of the Company. See "Unaudited
Pro Forma Financial Information," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the historical consolidated
financial statements of the Company and the notes thereto included elsewhere in
this Prospectus.
40
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
-------------------------- -------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 1997 1997 1996 1995 1994(1) 1993(1)(2)(3)
------------- ----------- --------- --------- --------- ----------- ---------------
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales(4)....................... $ 116.5 $ 128.3 $ 572.9 $ 632.4 $ 608.7 $ 608.2 $ 563.8
Cost of sales...................... 77.7 83.6 377.0 435.9 431.2 406.7 407.3
------------- ----------- --------- --------- --------- ----------- -------
Gross profit....................... 38.8 44.7 195.9 196.5 177.5 201.5 156.5
Selling, general, administrative
and research and development
expenses......................... 37.1 32.8 137.3 154.2 168.2 147.8 141.1
Other corporate administrative
expense(5)....................... -- 4.6 18.4 20.9 20.0 21.5 29.2
Provision for restructuring
costs(6)......................... -- -- -- 2.1 -- 10.5 25.1
Transactions related expenses(7)... 1.4 -- -- -- -- -- --
Goodwill amortization.............. 0.4 0.4 1.7 1.7 1.7 1.5 --
Other, net(8)...................... 0.4 0.4 5.9 0.6 0.4 0.3 10.8
Royalty income..................... (0.2) (0.2) (2.0) (1.6) (1.6) (0.9) (1.0)
------------- ----------- --------- --------- --------- ----------- -------
Operating income (loss)............ (0.3) 6.7 34.6 18.6 (11.2) 20.8 (48.7)
Interest expense, net.............. 1.6 2.1 8.5 10.7 8.8 10.0 9.9
------------- ----------- --------- --------- --------- ----------- -------
Income (loss) before taxes on
income........................... (1.9) 4.6 26.1 7.9 (20.0) 10.8 (58.6)
Income tax expense (benefit)....... 1.7 2.8 12.8 6.2 (1.6) 4.3 (21.6)
------------- ----------- --------- --------- --------- ----------- -------
Income (loss) before minority
interest......................... (3.6) 1.8 13.3 1.7 (18.4) 6.5 (37.0)
Net income (loss).................. $ (3.6) $ 1.8 $ 13.0 $ 1.6 $ (18.5) $ 6.5 $ (37.0)
------------- ----------- --------- --------- --------- ----------- -------
------------- ----------- --------- --------- --------- ----------- -------
OTHER FINANCIAL DATA:
Gross margin....................... 33.3% 34.8% 34.2% 31.1% 29.2% 33.1% 27.8%
Operating margin................... (0.3)% 5.2% 6.0% 2.9% (1.8% 3.4% (8.6)%
Depreciation and amortization...... $ 9.0 $ 10.3 $ 35.7 $ 35.8 $ 32.0 $ 29.1 $ 30.0
Capital expenditures............... 7.9 4.1 28.6 35.8 40.6 31.3 23.0
Interest expense................... 1.6 2.5 9.0 12.4 11.0 11.9 11.3
EBITDA(9).......................... 8.7 17.0 70.3 54.4 20.8 49.9 (18.7)
Adjusted EBITDA(10)................ 10.1 19.9 86.5 70.7 34.1 75.2 28.9
Adjusted EBITDA margin............. 8.7% 15.5% 15.1% 11.2% 5.6% 12.4% 5.1%
Ratio of earnings to fixed
charges(11)...................... 0.4x 2.0x 2.4x 1.3x -- 1.5x --
BALANCE SHEET DATA (at end of
period):
Net working capital................ $ 60.4 $ 41.2 $ 59.9 $ 32.1 $ 23.2 $ 60.7 $ 32.6
Adjusted working capital(12)....... 159.9 178.0 156.1 163.3 173.6 173.1 122.6
Total assets....................... 482.3 507.9 483.6 516.4 533.6 523.5 398.6
Total debt(13)..................... 106.4 119.3 97.4 110.6 134.1 88.4 79.9
Total stockholder's equity......... 226.7 220.1 230.1 217.7 215.2 233.8 145.6
CASH FLOW DATA:
Cash flows from operating
activities....................... $ 1.7 $ (5.9) $ 37.8 $ 57.0 $ 1.0 $ (2.7) N/A
Cash flows from investing
activities....................... (7.7) (4.2) (26.2) (35.6) (42.9) (28.9) N/A
Cash flows from financing
activities....................... 9.1 9.5 (14.3) (23.5) 42.7 25.1 N/A
</TABLE>
- ------------------------------
(1) Results exclude the results of the European, Russian, Middle Eastern and
African business that was sold in November 1994. As a result of this
transaction, the Company currently participates to a limited extent in the
European, Russian, Middle Eastern and African markets through exclusive
distributor and supply agreements with certain subsidiaries of Newell. See
"Business--Distribution Channels--European, Russian, Middle Eastern and
African Consumer Products Business." Sales and net income of the business
excluded were $46.4 million and $3.1 million in 1994 and $51.1 million and
$5.4 million in 1993.
(2) On January 3, 1993, Corning approved a restructuring plan to exit businesses
and operations in Brazil which were controlled by the Company. In addition
to consumer products, this operation produced and sold products in
non-consumer categories with aggregate sales of $10.8 million and operating
income of $3.2 million. The operating results of this business are
consolidated in 1993.
(3) Cash flows from operating, investing and financing activities not available.
41
<PAGE>
(4) Gross sales (before deductions for trade allowances, customer-paid freight
and discounts) were $124.7 million, $139.3 million, $616.7 million, $690.0
million and $668.5 million for the three months ended March 31, 1998 and
1997, and the years ended December 31, 1997, 1996 and 1995, respectively.
(5) Other corporate administrative expenses represent an allocation of corporate
charges from Corning to the Company in respect of certain administrative
services provided to the Company by Corning. Corning calculated these
charges as a percentage of the Company's budgeted sales.
(6) The Company incurred net provisions for restructuring costs of $2.1 million
($4.2 million of gross charges offset by a $2.1 million reversal of existing
reserves), $10.5 million and $25.1 million in 1996, 1994 and 1993,
respectively. The 1996 restructuring charges resulted from the
implementation of the Business Redesign Program. The major components of the
1996 charges were (i) costs related to a reduction in the number of SG&A and
manufacturing employees and (ii) expenses incurred to close under-performing
outlet stores. In 1994, the Company recorded a charge for a Company-wide
program to reduce overhead and manufacturing costs. The charge was comprised
of severance and voluntary retirement to reduce the number of employees. The
1993 restructuring charges were associated with a Company-wide restructuring
program to reduce costs and are comprised of certain asset reductions and
reserve provisions recorded in connection with such program.
(7) Reflects expenses incurred in connection with the Transactions.
(8) Other charges include miscellaneous expenses and miscellaneous income.
Included in the 1997 amount are $4.5 million of expenses related to
incremental incentive payments made to employees during the sale of the
Company.
(9) EBITDA represents operating income (loss) plus depreciation and
amortization. EBITDA is presented because management understands that such
information is considered by certain investors to be an additional basis for
evaluating the Company's ability to pay interest and repay debt. EBITDA
should not be considered an alternative to measures of operating performance
as determined in accordance with generally accepted accounting principles,
including net income, as a measure of the Company's operating results and
cash flows or as a measure of the Company's liquidity. Because EBITDA is not
calculated identically by all companies, the presentation herein may not be
comparable to other similarly titled measures of other companies.
(10) Adjusted EBITDA represents EBITDA less adjustments to eliminate (i) other
corporate administrative expenses for certain services performed by Corning
for the Company; (ii) expenses related to incremental incentive payments
made to employees during the sale of the Company; (iii) expenses incurred in
connection with the Transactions; and (iv) provisions for restructuring
costs, net of (v) adjustments for expenses expected to be incurred by the
Company to replace the services previously performed by Corning described in
clause (i) above.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
-------------------- -----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
EBITDA........................................ $ 8.7 $ 17.0 $ 70.3 $ 54.4 $ 20.8 $ 49.9 $ (18.7)
Other corporate administrative expenses (See
Note 5)..................................... -- 4.6 18.4 20.9 20.0 21.5 29.2
Incentive payment expenses (See Note 8)....... -- -- 4.5 -- -- -- --
Provision for restructuring costs (See Note
6).......................................... -- -- -- 2.1 -- 10.5 25.1
Addition to SG&A.............................. -- (1.7) (6.7) (6.7) (6.7) (6.7) (6.7)
Transactions related expenses (See Note 7).... 1.4 -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Adjusted EBITDA............................... $ 10.1 $ 19.9 $ 86.5 $ 70.7 $ 34.1 $ 75.2 $ 28.9
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
</TABLE>
For a more complete description of the services performed by Corning after
the Recapitalization and the ability of the Company to achieve such cost
savings, see "Risk Factors--No Prior Operations as an Independent Company"
and "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Overview--Separation from Corning; Transaction Related
Charges."
(11) For the purposes of computing the ratio of earnings to fixed charges,
earnings consist of income before taxes on income, minority interest on
earnings of a subsidiary, plus fixed charges (excluding capitalized
interest). Fixed charges consist of interest (whether capitalized or
expensed), including deferred financing costs and one-third of rental
expenses (the portion deemed representative of the interest factor). For the
years ended 1995 and 1993, the deficiency of earnings to fixed charges was
$21.7 million and $59.6 million, respectively. For the three months ended
March 31, 1998, the deficiency of earnings to fixed charges was $2.1
million.
(12) Adjusted working capital is calculated as (i) current assets excluding cash
and amounts due from Corning, less (ii) current liabilities excluding debt,
amounts due to Corning and payables to be reimbursed by Corning.
(13) As of March 31, 1998 on a historical basis, total debt included $10.2
million of industrial revenue bonds and $96.2 million due to Corning under a
$200.0 million intercompany revolving credit facility previously provided by
Corning.
42
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company's financial condition
and results of operations covers periods prior to the consummation of the
Transactions. Accordingly, the discussion and analysis of historical periods
does not reflect the significant impact that the Transactions will have on the
Company, including significantly increased leverage and liquidity requirements.
See "Risk Factors," "Selected Consolidated Historical Financial and Other Data,"
"Unaudited Pro Forma Financial Information" and "--Liquidity and Capital
Resources" as well as the consolidated financial statements of the Company and
the notes thereto contained elsewhere in this Prospectus.
OVERVIEW
BUSINESS REDESIGN PROGRAM. In response to a period of low profitability in
the early 1990s, the Company, led by a new management team, began implementing
its Business Redesign Program in the second quarter of 1996 to, first,
streamline the Company's business to focus on profitable products and customers
while reducing the Company's cost structure and, second, adopt initiatives to
increase sales while maintaining and improving upon the cost efficiencies
achieved in the first phase of the Business Redesign Program. The first phase of
the Business Redesign Program, which is largely complete, focused on eliminating
low volume, low profit products and customers, reducing manufacturing costs and
reducing SG&A. From 1995 to 1997, the first phase of the Business Redesign
Program has achieved improvements in gross margins from 29% to 34% and operating
margin from (2)% to 6%. The first phase of the Business Redesign Program has
included the following initiatives:
- FOCUS ON PROFITABLE PRODUCTS AND CUSTOMERS. The Company has refocused its
sales efforts on higher margin products and profitable customer accounts
while continuing to actively manage its product assortment and customer
base. To eliminate low volume, low profit products, the Company has
instituted a process of continually evaluating the profitability of its
SKUs. This process includes examining volume, gross and operating profit
and inventory carrying costs. As a result of this process, the number of
SKUs distributed by the Company has been reduced by 55%, from 3,088 at the
end of 1995 to 1,403 at December 31, 1997. In addition, based on analyses
of customer account profitability, the number of customers directly served
by the Company has been reduced by 43%, from approximately 1,048 at the
end of 1995, to approximately 599 at December 31, 1997. The discontinued
accounts were generally low volume customers, many of which were
transferred to distributors.
- REDUCE MANUFACTURING COSTS. From 1995 to the first quarter of fiscal
1998, the Company implemented systematic productivity improvements which
concentrated on reducing labor, materials and overhead costs primarily
through (i) process simplification, (ii) better process control and
discipline, (iii) workforce productivity improvements and (iv) improved
raw material sourcing. As a result of implementing the foregoing, the
Company has been able to reduce the number of manufacturing employees by
26%, from 2,629 at the end of 1995 to 1,955 at December 31, 1997.
- REDUCE SG&A COSTS. The Company has reduced its SG&A expenses by $30.9
million from 1995 to 1997. These reductions were realized primarily
through the redesign of sales and administrative functions and the refocus
of the Company's advertising program on print rather than media
advertising as part of the Business Redesign Program. As a result of these
initiatives, the number of SG&A employees was reduced from 1,284 in 1995
to 1,141 in 1997 and SG&A expenses (excluding those estimated by
management to be attributable to Company-operated outlet stores) declined
from 21.9% of 1995 gross sales to 16.5% of 1997 gross sales.
- IMPROVE CUSTOMER SERVICE. To improve customer service, the Company has
reorganized its sales force to better align account representatives with
specific customers' needs and has implemented an integrated supply chain
management process which utilizes enhanced information systems to predict
customers' future inventory requirements and permit the Company to
43
<PAGE>
maintain a more efficient allocation between finished goods and
work-in-process inventory. The Company's supply chain management process
also enables the Company to improve the accuracy and timeliness of filling
customer orders and is intended to allow the Company and its customers to
reduce finished goods inventory. Since the end of 1995, the Company's
average on-time delivery rate has improved from approximately 75% to
approximately 95% as of December 31, 1997.
The Company made capital expenditures of $6.1 million and $2.3 million in
1996 and 1997 on programs related to the Business Redesign Program. In addition,
in 1996 the Company recorded a $4.2 million provision for restructuring costs
related to the Business Redesign Program (offset in part by a $2.1 million
reversal of an existing provision). The Company intends to actively pursue
opportunities to achieve further cost reductions in its manufacturing operations
through additional productivity improvements and streamlining of manufacturing
processes, which may result in charges in future periods.
RESULTS - SECOND HALF OF 1997. For the second half of 1997, the Company
recorded net sales, operating income and EBITDA of $319.0 million, $24.4 million
and $41.6 million, respectively, compared to $366.7 million, $31.0 million and
$49.7 million for the second half of 1996. The decline in net sales in the
second half of 1997 was partly attributable to planned reductions associated
with the Company's strategic decision to focus on profitable customers and
products as part of the Business Redesign Program. However, in addition, the
Company's financial performance was adversely affected by (i) loss of shelf
space and lower retailer participation in promotional programs, (ii) unexpected
inventory reductions by certain key customers, (iii) significantly lower sales
in parts of Asia resulting from the recent economic disruptions in that region
and (iv) the liquidation or bankruptcy of certain of the Company's key
customers. The Company believes that the loss of shelf space in 1997 was
primarily due to a lack of new products (other than product line extensions and
renewals) being introduced to retailer customers in the fall of 1996, which is
the period when key customers were finalizing plan-o-grams for the 1997 selling
season. In addition, retailer strategy changes and disruptions caused by a
reorganization of the sales force contributed to the decline in shelf space. In
response to these developments, the Company accelerated the development of new
products, improved its supply chain management and focused on strategic accounts
to improve results in 1998.
SEPARATION FROM CORNING; TRANSACTION RELATED CHARGES. Prior to the
Recapitalization, the Company operated as a wholly owned subsidiary of Corning.
During this period, Corning provided the Company with certain administrative
services which were not readily allocated to individual transactions or events,
such as legal, treasury and tax functions. For these services the Company paid
Corning the charges recorded as "Other corporate administrative expenses," which
charges were based on a percentage of the Company's budgeted sales. "Other
corporate administrative expenses" were $18.4 million, $20.9 million and $20.0
million in 1997, 1996 and 1995, respectively. Under the transition services
agreement with Corning entered into on the date of the Recapitalization, Corning
will continue for a two-year period to provide a portion of these services at
negotiated rates. In addition, the Company is developing its administrative
infrastructure and certain of these functions will be assumed by the Company or
performed by third parties. The Company anticipates that the performance of
these administrative services (which are accounted as SG&A following the
Recapitalization) as well as additional expenses associated with external
auditing and periodic filings with the Commission will cost the Company
(including amounts to be paid to Corning) approximately $6.7 million per year
after the Recapitalization.
In addition, prior to the Recapitalization, Corning performed, and under the
transition services agreement continues to perform, certain process-oriented
administrative support services, such as benefits administration, accounts
payable and accounts receivable functions. Corning has agreed pursuant to the
transition services agreement to continue to provide such services for up to two
years at rates calculated on the same basis as before the Recapitalization. The
Company expensed $19.2 million for these services in 1997. These services will
continue to be reflected as expenses on the same terms as prior to the
Recapitalization.
44
<PAGE>
The Company believes that prior to the termination of the transition
services agreement it will replace the services provided by Corning with
arrangements with third parties or services provided internally at costs
consistent with the fees charged by Corning. However, there can be no assurance
that after the termination of the transition services agreement the Company will
be able to replace Corning's services under the transition services agreement
for the fees charged by Corning, or that the functions assumed by the Company
after the Recapitalization or to be outsourced to third parties will not cost
significantly in excess of the Company's estimates or that the provision of such
services during the transition period after the Recapitalization will be
performed without interruption or delay due to unanticipated occurrences. In
addition, under the administrative services agreement the Company and Corning
will continue to provide to one another certain services internationally at
negotiated rates for up to two years.
Pursuant to the Recapitalization Agreement, the Company agreed to change its
corporate name to remove the word "Corning" within three years of the Closing
Date (although the Company has retained the right to use the word "CorningWare"
in its corporate name) and to move its headquarters from the Corning campus
within 18 months of the Closing Date. Subsequent to the Recapitalization, the
Company estimates that it will incur $7.5 million in transition related
expenditures as well as capital expenditures, as a result of its separation from
Corning over the next three fiscal years, but primarily over the next four
fiscal quarters. These costs will include information technology consulting and
implementation in connection with the establishment of independent financial
systems, new signage, relocation of its headquarters and other separation
related expenditures.
In connection with the Recapitalization prior to, on or subsequent to the
Closing Date the Company will record a charge of $18.5 million for certain cash
and non-cash benefits ($17.4 million of which will be paid or reimbursed by
Corning). See Note (a) to the Pro Forma Consolidated Condensed Statement of
Operations. These cash and non-cash compensation expenses are associated with
arrangements entered into by Corning.
The Company also estimates it will incur transaction-related fees and
expenses of approximately $25.0 million, approximately $10.0 million of which
will be charged to income in the second quarter of 1998. The remainder will be
capitalized and amortized over the terms of the related debt instruments.
TAXES; BASIS OF PRESENTATION. The Company has been included in the
consolidated federal income tax returns filed by Corning. The Company and its
subsidiaries have had a tax sharing arrangement with Corning pursuant to which
the Company was required to compute its provision for income taxes on a separate
return basis and pay to, or receive from, Corning the separate U.S. federal
income tax return liability or benefit so computed, if any. In connection with
the Recapitalization, CCPC Acquisition and Corning will make a joint election
under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended, which
will result in the Company recording an increase in the tax basis of its fixed
assets and intangibles. As a result, for tax purposes, the Company will be able
to depreciate assets with a higher tax basis after the Recapitalization,
resulting in a significant deferred tax asset. See "Unaudited Pro Forma
Financial Information."
The Recapitalization of the Company will have no impact on the historical
basis of assets and liabilities as reflected in the consolidated financial
statements of the Company, with the exception of deferred taxes on income which
will change to reflect the tax basis step-up which occurred upon the
consummation of the Recapitalization.
OTHER MATTERS. As outlined in the table below, a significant portion of the
Company's net sales is derived from international markets. The Company's
international sales have historically had higher margins than domestic sales and
historically a significant portion of the Company's operating income has been
derived from international sales. Despite recent economic disruptions in Asia,
the Company believes international markets, including Asia over the long term,
represent potential growth areas for the Company. For the first quarter of 1998,
the Company recorded net sales and operating income (loss) (before allocation of
manufacturing variances and corporate overhead) of $3.8 million and $(0.1)
million
45
<PAGE>
in Asian markets (excluding Japan), respectively, compared to $16.7 million and
$6.9 million in the first quarter of 1997. For 1997, net sales and operating
income (before allocation of manufacturing variances and corporate overhead)
from Asian markets (excluding Japan) were $57.7 million and $18.5 million,
respectively. Results in Japan in the first quarter of 1998 were substantially
equivalent with those in the prior year. Although the Company believes that such
markets offer long term growth potential, the current disruptions in Asia are
expected to continue to materially adversely affect the Company's results of
operations in the short term. See "Risk Factors-- Risks Associated With
International Markets."
<TABLE>
<CAPTION>
INTERNATIONAL NET SALES
-----------------------------------------------------
FOR THE THREE MONTHS
FOR THE YEARS ENDED
ENDED MARCH 31, DECEMBER 31,
-------------------- -------------------------------
1998 1997 1997 1996 1995
--------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS)
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Asia:
Korea................................ $ 1.0 $ 9.2 $ 30.3 $ 25.3 $ 17.3
All Other............................ 2.8 7.5 27.4 28.7 26.1
Japan.................................. 2.4 2.1 8.9 8.6 8.8
Canada................................. 7.1 7.6 33.4 33.1 33.1
Latin America:
Brazil............................... 0.1 0.2 1.8 1.5 1.5
Mexico............................... 2.1 0.8 4.8 3.4 1.0
All Other............................ 4.0 3.6 11.1 9.8 10.6
South Pacific.......................... 2.4 2.9 13.0 14.6 13.5
Europe(1).............................. 1.0 2.9 10.2 7.0 11.0
--------- --------- --------- --------- ---------
Total International.................... $ 22.9 $ 36.8 $ 140.9 $ 132.0 $ 122.9
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
- --------------------------
(1) Comprised of revenues from Europe, Russia, Middle East and Africa from the
distribution agreement with Newell. See "Business--Distribution
Channels--European, Russian, Middle Eastern and African Consumer Products
Business."
SECOND QUARTER FORECAST. In the second quarter of 1998 the Company expects
that continuing softness in the Asian market will offset performance
improvements in the Domestic retail market and Company-operated outlet stores
and result in a decline in net sales, operating income and EBITDA for the second
quarter of fiscal 1998 compared to the same period of the prior year. The second
quarter is not complete and, as such, historical results may vary from such
forecast and Investors are cautioned not to place undue reliance on such
forecast. The Company believes that its results of operations for future periods
will improve, although it is currently analyzing an accelerated inventory
reduction program that would entail temporarily reducing the Company's rate of
production. This program would have the temporary effect of increasing costs of
production per unit while improving cash flows and lowering inventory carrying
costs. In the longer term the Company believes it will benefit from (i) the
increase in allotted shelf space at key retailers, which the Company believes is
evidenced by an increase in shipments to mass merchants in the second quarter of
1998, (ii) an increase in the number of Company-operated outlet stores planned
for 1998, (iii) future manufacturing costs reductions through further
streamlining of the Company's plants and facilities and (iv) continued
development of a series of new products that the Company plans to introduce over
the next two years. The Company believes that the effect of such factors will be
partially offset by continuing weakness in Asia and increased promotional
expenses to support the introduction of new products. There can be no assurance
that these or other efforts will result in improved financial performance. See
"Risk Factors--Forward-Looking Statements."
46
<PAGE>
RESULTS OF OPERATIONS
The following table summarizes the Company's historical results of
operations as a percentage of net sales for the three months ended March 31,
1998 and 1997.
<TABLE>
<CAPTION>
PERCENTAGE OF NET
SALES FOR
THE THREE MONTHS
ENDED
MARCH 31,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
Net sales.................................................................................... 100.0% 100.0%
Cost of sales................................................................................ 66.7 65.2
Gross profit................................................................................. 33.3 34.8
Selling, general, administrative and research and development expenses....................... 31.9 25.6
Other corporate administrative expenses...................................................... -- 3.6
Transactions related expenses................................................................ 1.3 --
Goodwill amortization........................................................................ 0.3 0.3
Other, net................................................................................... 0.3 0.3
Royalty income............................................................................... (0.2) (0.2)
--------- ---------
Operating income (loss)...................................................................... (0.3) 5.2
Interest expense, net........................................................................ 1.3 1.6
--------- ---------
Income (loss) before taxes on income......................................................... (1.6) 3.6
Income tax expense........................................................................... 1.5 2.2
--------- ---------
Income (loss) before minority interest....................................................... (3.1) 1.4
Net income (loss)............................................................................ (3.1)% 1.4%
--------- ---------
--------- ---------
</TABLE>
THREE MONTHS ENDED MARCH 31, 1998 ("FIRST QUARTER 1998") COMPARED WITH THREE
MONTHS ENDED MARCH 31, 1997 ("FIRST QUARTER 1997")
NET SALES. Net sales decreased by $11.8 million, or 9.2%, to $116.5 million
in first quarter 1998 from $128.3 million in first quarter 1997. The decline in
sales was principally due to a significant decline in Asian sales as a result of
continued weakness in the Korean and Indonesian markets. For the first quarter
1998, the Company recorded net sales of $3.8 million in Asian markets (excluding
Japan) compared to $16.7 million in the first quarter 1997. Results in Japan
were substantially equivalent to the prior year. Although the Company believes
that Asian markets offer long-term growth potential, the current disruptions in
Asia are expected to continue to materially adversely affect sales in the short
term. The decline in net trade sales for the first quarter of 1998 was partially
offset by (i) improved sales by the Company operated outlet stores and (ii)
increased shipments in March 1998 to mass merchants reflecting improved
allocations of shelf space for the 1998 selling season. The Company believes
that the increased shipments in March 1998 to mass merchants reflects the
implementation by certain key accounts of plan-o-grams finalized in the fall of
1997, on which planned shelf space allocation for the four quarters beginning
April 1998 is based. The Company introduced Corning Ware-Registered Trademark-
Pop-Ins-TM- and three full lines of Revere Ware aluminum non-stick lines to the
retail trade during the fall of 1997 to coincide with the development of such
plan-o-grams. While the Company believes that it has regained a significant
portion of the shelf space lost in 1997, due to the inherent uncertainty
regarding sales of consumer products there can be no assurance that the
improvement in shelf space indicated by the plan-o-grams will result in
additional sales.
COST OF SALES. Cost of sales decreased by $5.9 million, or 7.0%, to $77.7
million in 1998 from $83.6 million in 1997. The decrease in cost of sales was
due to the decrease in first quarter 1998 sales volume. Cost of sales as a
percentage of net sales increased to 66.7% in 1998 from 65.2% in 1997 as a
47
<PAGE>
result of the significant decline in higher margin Asian sales as discussed
above, offsetting the effects of cost saving initiatives.
GROSS PROFIT. Primarily as a result of the factors discussed above, gross
profit decreased to $38.8 million in first quarter 1998 from $44.7 million in
first quarter 1997, while gross profit as a percentage of net sales decreased to
33.3% in first quarter 1998 from 34.8% in first quarter 1997.
SELLING, GENERAL, ADMINISTRATIVE AND RESEARCH AND DEVELOPMENT
EXPENSES. Selling, general, administrative and research and development
expenses increased by $4.3 million, or 13.1%, in first quarter 1998 compared to
first quarter 1997. Beginning in first quarter 1998 the Company was no longer
allocated corporate administrative charges for certain administrative services
performed by Corning. Charges relating to these services previously allocated by
Corning were charged on a direct basis based on a new Transition Service
Agreement negotiated between Corning and the Company. These direct charges were
reflected in selling, general, administrative and research and development
expense in first quarter 1998. Selling, general, administrative and research and
development expense as a percentage of net sales in 1998 increased to 31.9% in
first quarter 1998 from 29.2% in first quarter 1997 (including other corporate
administrative expenses for purposes of such comparison). This increase is due
principally to increased expenses related to outlet stores to support increased
sales and increased costs related to the 1998 new product introductions.
OTHER CORPORATE ADMINISTRATIVE EXPENSE. Other corporate administrative
expense represents an allocation of corporate charges from Corning to the
Company based on an agreement between the companies. Corning calculated these
charges as a percentage of budgeted sales. Other corporate administrative
expenses were zero in first quarter 1998 compared to $4.6 million in first
quarter 1997. Beginning on January 1, 1998, the Company was no longer allocated
corporate administrative charges from Corning. Charges relating to these
services previously performed by Corning were classified as selling, general,
administrative and research and development expense in first quarter 1998 and
were calculated on the basis of agreed upon prices in a transition services
agreement.
OTHER NET AND ROYALTY INCOME. Other, net and royalty income represents
other miscellaneous operating expenses and royalty income, and did not fluctuate
materially when comparing first quarter 1998 to first quarter 1997.
OPERATING INCOME. Primarily as a result of the factors discussed above,
operating income decreased by $7.0 million to a loss of $0.3 million in first
quarter 1998 from income of $6.7 million in first quarter 1997. As a percentage
of net sales operating income decreased to (0.3)% in 1998 from 5.2% in 1997.
NET INTEREST EXPENSE. Net interest expense decreased by $0.5 million, or
23.8%, to $1.6 million in first quarter 1998 from $2.1 million in first quarter
1997. The decrease was principally due to a reduction in the Company's average
outstanding indebtedness in the first quarter 1998 compared to the first quarter
1997.
INCOME TAX EXPENSE. The incurred income tax expense of $1.7 million on a
pre-tax loss of $(1.9) million in first quarter 1998, and the effective tax rate
of 60.2% in first quarter 1997 which was substantially higher than the combined
state and federal rate, were a result of charges related to a tax sharing
agreement with Corning.
Primarily as a result of the above factors, net income for first quarter
1998 decreased $5.4 million to a loss of $(3.6) million in first quarter 1998
from income of $1.8 million in first quarter 1997.
48
<PAGE>
The following table summarizes the Company's historical results of
operations as a percentage of net sales for 1997, 1996 and 1995.
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES FOR
THE YEARS ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1997 1996 1995
--------- --------- ---------
Net sales........................................................................... 100.0% 100.0% 100.0%
Cost of sales....................................................................... 65.8 68.9 70.8
--------- --------- ---------
Gross profit........................................................................ 34.2 31.1 29.2
Selling, general, administrative and research and
development expenses.............................................................. 24.0 24.4 27.6
Other corporate administrative expense.............................................. 3.2 3.3 3.3
Provision for restructuring costs................................................... -- 0.3 --
Goodwill amortization............................................................... 0.3 0.3 0.3
Other, net.......................................................................... 1.0 0.1 0.1
Royalty income...................................................................... (0.3) (0.2) (0.3)
--------- --------- ---------
Operating income (loss)............................................................. 6.0 2.9 (1.8)
Interest expense, net............................................................... 1.5 1.6 1.5
--------- --------- ---------
Income (loss) before taxes on income................................................ 4.5 1.3 (3.3)
Income tax expense (benefit)........................................................ 2.2 1.0 (0.3)
--------- --------- ---------
Income (loss) before minority interest.............................................. 2.3 0.3 (3.0)
--------- --------- ---------
Net income (loss)................................................................... 2.3% 0.3% (3.0)%
--------- --------- ---------
--------- --------- ---------
</TABLE>
YEAR ENDED DECEMBER 31, 1997 COMPARED WITH YEAR ENDED DECEMBER 31, 1996
NET SALES. Net sales decreased by $59.5 million, or 9.4%, to $572.9 million
in 1997 from $632.4 million in 1996. This decline was primarily due to decreased
volume through the mass merchant, department store and catalog showroom channels
caused by the elimination of SKUs and customer accounts in accordance with the
Business Redesign Program, as well as unplanned inventory reductions and shelf
space losses due to competitive factors, strategy changes at certain key
customers (such as lower retailer participation in promotional programs) and the
liquidation or bankruptcy of certain customers. Decreased sales through the mass
merchant, department store and catalog showroom channels were partially offset
by increased sales through the international and Company operated outlet store
channels. The Company's average prices for products in 1997 remained comparable
with average prices in 1996, although the Company reduced prices on Pyrex
Portables-Registered Trademark- to compete with an entry in this category by a
competitor.
COST OF SALES. Cost of sales decreased by $58.9 million, or 13.5%, to
$377.0 million in 1997 from $435.9 million in 1996. The decrease in cost of
sales was due to the decrease in sales volume as well as cost savings resulting
from the Business Redesign Program. Cost of sales as a percentage of net sales
declined to 65.8% in 1997 from 68.9% in 1996 as a result of the continued impact
of the Company's Business Redesign Program and associated manufacturing cost
reductions resulting from systematic productivity improvements concentrated on
reducing labor, materials and overhead costs through (i) process simplification,
(ii) better process control and discipline, (iii) workforce productivity
improvements and (iv) improved raw material sourcing. For example, due in part
to modifications to the Pyrex Portables-Registered Trademark- line to reduce
manufacturing costs, the Company was generally able to maintain margins on Pyrex
Portables-Registered Trademark- despite the price decrease discussed above.
GROSS PROFIT. Primarily as a result of the factors discussed above, gross
profit decreased slightly to $195.9 million in 1997 from $196.5 million in 1996,
while the gross profit as a percentage of net sales increased to 34.2% in 1997
from 31.1% in 1996.
SELLING, GENERAL, ADMINISTRATIVE AND RESEARCH AND DEVELOPMENT
EXPENSES. Selling, general, administrative and research and development
expenses decreased by $16.9 million, or 11.0%, to $137.3
49
<PAGE>
million in 1997 from $154.2 million in 1996, and as a percentage of net sales
declined to 24.0% in 1997 from 24.4% in 1996. The reduction in these expenses
was primarily achieved through the redesign of sales and administrative
functions and the elimination or outsourcing of non-critical administrative
functions in accordance with the Business Redesign Program's objectives of cost
reduction and improved customer service. The decline was also attributable to
decreased outlet store expenses due to a reduced number of outlet stores. These
decreases were partially offset by increased expenses associated with
incremental investment in international operations to support international
sales growth.
OTHER CORPORATE ADMINISTRATIVE EXPENSE. Other corporate administrative
expense represents an allocation of corporate charges from Corning to the
Company. Corning calculated these charges as a percentage of the Company's
budgeted sales. Corporate administrative expense decreased by $2.5 million, or
12.0%, to $18.4 million in 1997 from $20.9 million in 1996. The decrease was
primarily due to lower budgeted sales which resulted in lower charges from
Corning.
OTHER, NET. Other, net represents miscellaneous expenses, including $4.5
million related to incremental incentive payments made to employees during the
sale of the Company.
OPERATING INCOME. Primarily as a result of the factors discussed above,
operating income increased by $16.0 million to $34.6 million in 1997 from $18.6
million in 1996 while operating income as a percentage of net sales increased to
6.0% in 1997 from 2.9% in 1996.
NET INTEREST EXPENSE. Net interest expense decreased by $2.2 million, or
20.6%, to $8.5 million in 1997 from $10.7 million in 1996. The decrease was
principally due to a reduction in the Company's average outstanding indebtedness
in 1997 as compared to 1996, which was attributable to improved operating
performance and asset management that generated positive cash flow in 1997.
INCOME TAX EXPENSE. The Company's effective income tax rate was 49.0% for
1997 and was significantly lower than the effective tax rate of 78.5% in 1996.
The Company's tax provision has been calculated on a separate company basis and
does not reflect the potential benefits that the Company could realize if the
provision was determined on a consolidated basis with Corning. The 1996
effective rate was significantly higher than the combined state and federal rate
primarily as a result of significant foreign dividends in relation to profit
before tax combined with the inability of the Company to use foreign tax
credits.
Primarily as a result of the above factors, net income for 1997 increased
$11.4 million to $13.0 million in 1997 from $1.6 million in 1996.
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1995
NET SALES. Net sales increased by $23.7 million, or 3.9%, to $632.4 million
in 1996 from $608.7 million in 1995. The increase was principally attributable
to the introduction of Pyrex Portables-Registered Trademark-, which experienced
its first full year of sales in 1996 (compared to one month of sales in 1995),
and growth in the Corelle-Registered Trademark- line of dinnerware as the
Company expanded the range of Corelle-Registered Trademark- patterns with the
addition of more advanced decorating equipment. Sales growth in the bakeware and
dinnerware categories was partially offset by declines in sales of
Visions-Registered Trademark- rangetop cookware (due to the Company's decision
to significantly reduce the number of SKUs offered in this line) and the
Company's decision to discontinue selling to certain department store accounts
that were determined not to be profitable. The Company's average prices for
products in 1996 remained comparable with average prices in 1995.
COST OF SALES. Cost of sales increased $4.7 million, or 1.1%, to $435.9
million in 1996 from $431.2 million in 1995. The increase in cost of sales was
due to increased volumes partially offset by cost savings resulting from the
Business Redesign Program as well as the absence of increased expenses relating
to a new supplier of sand incurred in 1995. Costs of sales as a percentage of
net sales decreased
50
<PAGE>
to 68.9% in 1996 from 70.8% in 1995, in part due to the absorption of fixed
costs over a higher volume of sales as well as cost reductions and productivity
improvements associated with the Business Redesign Program as well as the
absence of increased expenses relating to a new supplier of sand incurred in
1995. The effect of these cost reductions and productivity improvements was
partially offset by higher expenses associated with higher than average repairs
of the Company's glass melting tanks due to a confluence of tank repair cycles
and expenses associated with major capital projects, including the installation
of rotary screening equipment to decorate Corelle-Registered Trademark-
dinnerware and the reconfiguration of certain manufacturing processes to reduce
costs.
GROSS PROFIT. Primarily as a result of the factors discussed above, gross
profit increased $19.0 million, or 10.7%, to $196.5 million in 1996 from $177.5
million in 1995, while the gross profit percentage increased to 31.1% in 1996
from 29.2% in 1995.
SELLING, GENERAL, ADMINISTRATIVE AND RESEARCH AND DEVELOPMENT
EXPENSE. Selling, general, administrative and research and development expenses
decreased by $14.0 million, or 8.3%, to $154.2 million in 1996 from $168.2
million in 1995, and as a percentage of net sales declined to 24.4% in 1996 from
27.6% in 1995. The decline in these expenses was primarily attributable to
decreased administrative expense resulting from personnel reduction as part of
the Business Redesign Program. These reductions were partially offset by higher
outlet store operating expenses, which grew in 1996 due to an increase in the
number of outlet stores operated, and higher expenses relating to international
operations, which increased as a result of sales and marketing investments made
in Southeast Asia, Japan, China and Latin America.
OTHER CORPORATE ADMINISTRATIVE EXPENSE. As a result of the Company's
increased budgeted sales for 1996, other corporate administrative expense
increased by $0.9 million, or 4.5%, to $20.9 million in 1996 from $20.0 million
in 1995.
RESTRUCTURING EXPENSES. The Company incurred net restructuring expenses of
$2.1 million in 1996 ($4.2 million of gross charges offset by a $2.1 million
reversal of existing reserves). The restructuring charges resulted from the
implementation of the Business Redesign Program. The major components of the
charges were (i) costs related to a reduction in the number of SG&A and
manufacturing employees and (ii) expenses incurred to close underperforming
stores. See note 14 to the consolidated financial statements of the Company
included elsewhere herein.
OPERATING INCOME. Primarily as a result of the factors discussed above,
operating income increased by $29.8 million to $18.6 million in 1996 from an
operating loss of $11.2 million in 1995, while operating income as a percentage
of net sales was 2.9% in 1996 compared to (1.8)% in 1995. Excluding the net
restructuring expenses in 1996, operating income increased by $31.9 million to
$20.7 million in 1996 from an operating loss of $11.2 million in 1995.
NET INTEREST EXPENSE. Net interest expense increased by $1.9 million, or
21.6%, to $10.7 million in 1996 from $8.8 million in 1995. The increase was
principally due to an increase in the Company's average outstanding indebtedness
as operating performance and working capital requirements resulted in net cash
outflows in 1995.
INCOME TAX EXPENSE. The Company's effective income tax rate was 78.5% for
1996 and was significantly higher than the combined state and federal rate
primarily as a result of significant foreign dividends in relation to profit
before tax. The Company recorded an income tax benefit for 1995 as a result of
operating losses.
NET INCOME. Primarily as a result of the above factors, net income for 1996
increased $20.1 million to $1.6 million from a net loss of $18.5 million in
1995.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
On March 2, 1998, Corning, Borden, the Company and CCPC Acquisition entered
into the Recapitalization Agreement, pursuant to which on April 1, 1998 CCPC
Acquisition acquired 92.0% of the outstanding shares of Common Stock of the
Company from Corning for $110.4 million. The Stock Acquisition was financed by
an equity investment in CCPC Acquisition by BW Holdings, an affiliate of KKR and
the parent company of Borden and CCPC Acquisition. BW Holdings financed such
investment from cash on hand. Pursuant to the Recapitalization Agreement, on the
Closing Date prior to the consummation of the Stock Acquisition, the Company
paid the Cash Dividend to Corning of $472.6 million. The amount of the Cash
Dividend is subject to a post-closing adjustment based on the Company's net
worth and outstanding indebtedness on the Closing Date. See "The
Recapitalization." As a result of the Recapitalization, Corning continues to
hold 8.0% of the outstanding shares on Common Stock.
The Company currently believes that cash flow from operating activities,
together with borrowings available under the Revolving Credit Facility, will be
sufficient to fund the Company's currently anticipated working capital, capital
expenditures, interest payments and scheduled principal payments. Any future
acquisitions, joint ventures or other similar transactions will likely require
additional capital and there can be no assurance that any such capital will be
available to the Company on acceptable terms or at all. In addition, the Company
will require liquidity to fund payments due under noncancellable lease
agreements ($17.4 million and $13.1 million due throughout 1998 and 1999,
respectively). The Company may also require cash for a possible post-closing
adjustment to the Cash Dividend based on the Company's net worth and outstanding
indebtedness on the Closing Date and a potential payment of up to $15.0 million
to Corning in 2001 in the event the Company achieves a cumulative gross margin
in excess of $710.9 million for the three-year period ended December 31, 2000.
See "The Recapitalization."
The Company incurred substantial indebtedness in connection with the
Recapitalization. As of March 31, 1998, after giving pro forma effect to the
Transactions, the Company would have had $481.8 million of consolidated
indebtedness and a common stockholders' deficit of $69.0 million. Following the
Transactions, the Company's liquidity requirements will be significantly
increased, primarily due to increased interest expense obligations. Had the
Transactions been consummated on January 1, 1997, interest expense, (net)
incurred in 1997 and the three months ended March 31, 1998 associated with
indebtedness under the Notes, the Credit Facilities and the Company's industrial
development bonds would have been $42.8 million and $10.7 million, respectively,
compared with the $8.5 million and $1.6 million, respectively of interest
expense (net) actually incurred. See "Unaudited Pro Forma Financial
Information." The Credit Facilities and the Indenture will permit the Company to
incur or guarantee certain additional indebtedness, subject to certain
limitations. See "Description of Credit Facilities" and "Description of the
Exchange Notes."
On April 9, 1998, the Company entered into the Credit Facilities under which
the Company borrowed $200.0 million under the Term Loans and $59.6 million under
the Revolving Credit Facility. The Company borrowed an additional $12.0 million
under the Revolving Credit Facility through the date of the closing of the
Offering. The Revolving Credit Facility provides for $275.0 million of
commitments, $71.6 million of which would have been drawn on a pro forma basis
if the Transactions occurred on March 31, 1998. The remaining commitments under
the Revolving Credit Facility are available to fund the working capital, capital
expenditures, general corporate and other cash needs of the Company.
Borrowings under the Credit Facilities bear interest at a rate per annum
equal (at the Company's option) to a margin over either a base rate or LIBOR.
The Term Loans mature on the date that is 8 1/2 years after the closing of the
Credit Facilities and provides for nominal annual amortization. All outstanding
revolving credit borrowings under the Revolving Credit Facility will become due
on the date that is seven years after the closing of the Credit Facilities. The
Company expects that its working capital needs and other cash requirements will
require it to obtain replacement revolving credit facilities at that time. No
52
<PAGE>
assurance can be given that any such replacement can be successfully
accomplished. See "Description of Credit Facilities."
The Exchange Notes will mature in 2008. The Company's obligations under the
Exchange Notes are subordinate and junior in right of payment to all existing
and future Senior Indebtedness of the Company, including all indebtedness under
the Credit Facilities. The obligations of the Company under the Notes and the
Indenture have not been guaranteed by subsidiaries of the Company. The Credit
Facilities and the Indenture contain numerous financial and operating covenants
that will limit the discretion of the Company's management with respect to
certain business matters. These covenants place significant restrictions on,
among other things, the ability of the Company to incur additional indebtedness,
pay dividends and other distributions, prepay subordinated indebtedness, enter
into sale and leaseback transactions, create liens or other encumbrances, make
capital expenditures, make certain investments or acquisitions, engage in
certain transactions with affiliates, sell or otherwise dispose of assets and
merge or consolidate with other entities and otherwise restrict corporate
activities. The Credit Facilities also require the Company to meet certain
financial ratios and tests. The Credit Facilities and the Indenture contain
customary events of default. See "Description of Credit Facilities" and
"Description of the Exchange Notes."
Capital expenditures were $7.9 million for the first quarter of 1998
compared to $4.1 million for the comparable period of 1997. The increase in
capital expenditures reflect lower first quarter 1997 capital spending as the
Company was in the early stages of the sale process. In addition, first quarter
1998 capital expenditures include approximately $2.0 million relating to the
implementation of information systems. The Company currently anticipates
investing approximately $26.0 million in capital equipment projects in 1998.
Capital expenditures were $28.6 million, $35.8 million and $40.6 million in
1997, 1996 and 1995, respectively. Higher capital expenditures in 1996 and 1995
were the result of glass melting tank repairs and the cost reduction initiatives
in manufacturing facilities. The most significant capital expenditures in 1997
were for glass melting tank repairs and the installation of new rotary screening
machinery. The Company currently anticipates investing approximately $26.0
million in capital equipment projects in 1998, which includes approximately
$14.0 million directed toward maintenance expenditures, which the Company
believes is a normal level of maintenance capital expenditures.
In the first quarter of 1998 the Company's operating activities provided
$1.7 million in cash compared to a use of $5.9 million in the first quarter of
1997. Despite the decrease in net income in 1998 operating cash flows increased
as a result of (i) lower advertising and promotional spending from lower sales
and fewer customers and (ii) lower incentive payments resulting from lower
earnings.
In 1997 the Company's operating activities provided $37.8 million in cash
compared to $57.0 million in 1996. Despite an increase in net income, operating
cash flows decreased as a result of $30.7 million in net outflows to Corning to
settle certain intercompany trade liabilities. Investing activities used $26.2
million in cash in 1997 compared to a use of $35.6 million in 1996. This
decrease was primarily the result of higher 1996 capital expenditures resulting
from the continuation of cost reduction initiatives in manufacturing facilities
and a decrease in capitalizable maintenance.
Cash provided from operating activities equaled $57.0 million in 1996
compared to $1.0 million in 1995. This increase was attributable to an increase
in net income in 1996 compared to a net loss in 1995, improved working capital
levels and a lower level of intercompany trade payments. Investing activities
used cash of $35.6 million in 1996 compared to $42.9 million in 1995. This
difference was the result of higher capital expenditures in 1995 associated with
the implementation of cost reduction initiatives in manufacturing facilities.
The Company's ability to fund its working capital needs, planned capital
expenditures, scheduled debt payments, lease payments and other cash payments to
continue its Business Redesign Program and to comply with all of the financial
covenants under its debt agreements, depends on its future
53
<PAGE>
operating performance and cash flow, which in turn are subject to prevailing
economic conditions and to financial, business and other factors, some of which
are beyond the Company's control. See "Risk Factors."
SEASONALITY
Historically, the Company records its highest sales in its third and fourth
quarters as a result of the buying patterns associated with the holiday selling
season (as reflected in the table below). The Company's need for working capital
accelerates in the second half of the year due to additional merchandising and
promotional efforts associated with the holiday selling season and, accordingly,
total debt levels tend to peak in the third and fourth quarters, decreasing in
the first quarter of the following year. The amount of the Company's sales
generated during the second half of the year generally depends on a number of
factors, including general economic conditions, existing retailer inventory
levels and other factors beyond the Company's control. The Company's results of
operations would be adversely and disproportionately affected if the Company's
sales were substantially lower than those normally expected during the second
half of the year.
<TABLE>
<CAPTION>
1997 NET SALES 1996 NET SALES
------------------------ ------------------------
<S> <C> <C> <C> <C>
AMOUNT % OF YEAR AMOUNT % OF YEAR
--------- ------------- --------- -------------
First quarter.................................... $ 128.3 22% $ 133.1 21%
Second quarter................................... 125.6 22 132.5 21
Third quarter.................................... 145.3 26 165.2 26
Fourth quarter................................... 173.7 30 201.6 32
--------- --- --------- ---
$ 572.9 100% $ 632.4 100%
--------- --- --------- ---
--------- --- --------- ---
</TABLE>
IMPACT OF THE YEAR 2000 ISSUE
The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year, as well as hardware
that is designed with similar constraints. Any of the Company's computer
programs and hardware that have date-sensitive functions may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result in a
system failure or miscalculations causing disruptions in operations including,
among other things, a temporary inability to process transactions, send
invoices, or engage in similar normal business activities.
Corrective action to address the year 2000 issue began in the second quarter
of 1996, with the establishment of a program office to manage year 2000
activities. The Company is utilizing both internal and external resources to
identify, correct and test the Company's hardware and software for year 2000
compliance. In April 1997, the Company completed a comprehensive inventory of
its computer systems. The inventory resulted in an impact assessment that was
completed in October 1997. The findings of the assessment, together with the
need to establish system independence from Corning, led the Company to embark on
a comprehensive systems replacement project.
The Company is in the process of implementing a comprehensive enterprise
resource management system. This system will replace roughly 90% of the
Company's business transaction systems. The remaining 10%, comprised of benefits
administration and payroll, will be outsourced to a year 2000 compliant service
bureau. Implementation of these new systems is expected to be completed by April
1, 1999. In addition, the Company is resolving year 2000 issues related to plant
process control systems, non-data related computer control systems and supplier
and customer year 2000 compliance. While management cannot reasonably estimate
the cost of implementation of all systems necessary to comply with year 2000
dating, significant investments in information systems will total in excess of
$16.5 million by the year 2000. Any remaining costs are not expected to have a
material impact on the financial position or results of operations of the
Company in any year.
54
<PAGE>
The Company intends its year 2000 date conversion project to be completed on
a timely basis so as to not significantly impact business operations. If the
necessary modifications and conversions are not completed as planned, the year
2000 issue may have a material impact on the Company. Also, although the
Company's systems do not rely significantly on systems of other companies, the
Company cannot provide assurance that failure of third parties to address the
year 2000 issue will not have an adverse impact on the Company.
FOREIGN CURRENCY RISK
Currency exchange rate fluctuations may significantly affect the Company's
foreign sales and earnings. Increased strength of the U.S. dollar will increase
the effective price of the Company's products sold in U.S. dollars and therefore
may materially adversely affect sales. The Company's costs are predominantly
denominated in U.S. dollars. Thus, with respect to the sales conducted in
foreign currencies, increased strength of the U.S. dollar could decrease the
Company's reported revenues and margins in respect of such sales to the extent
the Company is unable or determines not to increase local currency prices.
55
<PAGE>
BUSINESS
GENERAL
The Company is a leading manufacturer and marketer of bakeware, dinnerware
and rangetop cookware. The Company believes that its brands, including Corning
Ware-Registered Trademark-, Pyrex-Registered Trademark-,
Corelle-Registered Trademark-, Revere Ware-Registered Trademark- and
Visions-Registered Trademark-, constitute one of the broadest and best
recognized collection of brands in the U.S. housewares industry. The Company has
leading positions in the major channels of distribution for such products in the
United States and has also achieved a significant presence in certain
international markets, primarily Canada, Asia, Australia and Latin America. In
1997, on a pro forma basis after giving effect to the Transactions, the Company
recorded net sales, operating income and EBITDA of $572.9 million, $54.0 million
and $89.7 million, respectively. For the three months ended March 31, 1998, on a
pro forma basis after giving effect to the Transactions, the Company recorded
net sales, operating income and EBITDA of $116.5 million, $2.1 million and $11.1
million, respectively. In 1997, approximately 75% of the Company's net sales
were generated domestically and approximately 25% internationally.
The Company's Corning Ware-Registered Trademark- and
Pyrex-Registered Trademark- products represent the two largest glass-ceramic and
glass bakeware brands (measured in dollar sales) in the United States, with
approximately 67% of all glass-ceramic and glass bakeware sales (and
approximately 29% of total bakeware sales) in 1997. The Company believes that
its Corelle-Registered Trademark- brand is the nation's largest selling
dinnerware brand in the mass merchant channel, with approximately 38% of mass
merchant dinnerware sales in 1997, over two times the sales of the next largest
mass merchant dinnerware competitor. The Company's core rangetop cookware brand,
Revere Ware-Registered Trademark-, is one of the nation's leading stainless
steel rangetop cookware brands, accounting for approximately 29% of stainless
steel rangetop cookware sales and 7% of total rangetop cookware sales among mass
merchant and department store customers in 1997.
U.S. HOUSEWARES INDUSTRY
According to management estimates, total retail sales in the U.S. housewares
industry were approximately $19.2 billion in 1997. The categories of the
housewares industry in which the Company's products compete--bakeware,
dinnerware and rangetop cookware--generated an estimated $4.3 billion in total
retail sales in 1997 compared to $4.1 billion in 1996. Retail sales in the U.S.
of bakeware, dinnerware and rangetop cookware have all exhibited a stable growth
pattern over the last ten years with growth in these segments linked to the rate
of household formations and gross domestic product growth. In the United States,
bakeware, dinnerware and rangetop cookware products are sold through three
primary channels, mass merchants (large national or regional discounters, such
as K-Mart), department stores and specialty retailers (full service retailers
providing a broad assortment in their specialty retail category, such as Bed
Bath & Beyond and Home Place), as well as through other channels, including
outlet stores, retail food stores, catalog showrooms and direct mail.
BAKEWARE. Total U.S. retail bakeware sales are estimated to have been
$800.0 million in 1997. During this period, metal products and glass and
glass-ceramic products each represented an estimated 50% of U.S. retail bakeware
sales. The Company's bakeware sales are generated primarily from glass-ceramic
and glass products sold under the Corning Ware-Registered Trademark- and
Pyrex-Registered Trademark- brand names. The mass merchant channel is the
largest single channel for bakeware, accounting for an estimated 37% of domestic
retail bakeware sales in 1997.
DINNERWARE. Total U.S. retail dinnerware sales are estimated to have been
$1.7 billion in 1997. The Company's Corelle-Registered Trademark- glass
dinnerware products are sold as "everyday" products. "Everyday" dinnerware
products, which include glass, stoneware and plastic products, represented an
estimated 56% of domestic retail dinnerware sales in 1997. The mass merchant
channel is the largest channel for everyday dinnerware, accounting for an
estimated 33% of U.S. retail dinnerware sales in 1997.
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<PAGE>
RANGETOP COOKWARE. Total U.S. retail rangetop cookware sales are estimated
to have been $1.8 billion in 1997. Aluminum, which has been growing in
popularity due to the ease of cleaning and increased durability of non-stick
coatings, is the leading material for rangetop cookware (the other primary
material being stainless steel) and accounted for approximately 70% of U.S.
retail rangetop cookware sales in mass merchant and department store channels in
1997. The Company's rangetop cookware sales are generated primarily from
stainless steel products sold under the Revere Ware-Registered Trademark- brand
name and glass-ceramic products sold under the Visions-Registered Trademark-
brand name. To meet growing consumer demand, the Company introduced three full
lines of Revere Ware-Registered Trademark- non-stick aluminum products in 1998
to complement the Company's sales of individual items of non-stick rangetop
cookware. The mass merchant channel is the largest distribution channel in this
category, accounting for an estimated 45% of retail domestic rangetop cookware
sales in 1997.
COMPETITIVE STRENGTHS
The Company attributes its leadership in bakeware, dinnerware and stainless
steel rangetop cookware to the following competitive strengths:
LEADING BRAND NAMES. The Corning Ware-Registered Trademark-,
Pyrex-Registered Trademark-, Corelle-Registered Trademark-, Revere
Ware-Registered Trademark- and Visions-Registered Trademark- brands have
consistently been among the leaders in brand awareness and household penetration
in the respective product categories in which they compete in the United States.
The Company believes that this brand strength and household penetration results
from consumer experience with the high quality, durability and functionality of
the Company's products.
BRAND CHARACTERISTICS
<TABLE>
<CAPTION>
TOTAL
BRAND AWARENESS(A) HOUSEHOLD PENETRATION(B)
- --------------------------------------------------- ----------------- ---------------------------
<S> <C> <C>
Corning Ware-Registered Trademark-................. 98% 82%
Pyrex-Registered Trademark-........................ 93% 73%
Corelle-Registered Trademark-...................... 91% 51%
Revere Ware-Registered Trademark-.................. 81% 36%
Visions-Registered Trademark-...................... 87% 33%
</TABLE>
- ------------------------
(a) Based on surveys conducted in 1997 of female heads of households by market
research firms using aided and unaided techniques.
(b) The percentage of the respondents aware of the brand who currently own a
product of the applicable brand.
BROAD DISTRIBUTION IN U.S. CHANNELS. The Company sells its products in the
United States to most major U.S. mass merchant retailers and a broad array of
department stores, specialty retailers and retail food stores, as well as
through its outlet stores and other channels. The strength of the Company's
brand names and its presence in several houseware categories make the Company a
significant supplier to, and enhance the Company's relationship with, its
retailer customers. In 1997, approximately 32% of the Company's U.S. gross sales
(before deductions for trade allowances, customer-paid freight and discounts)
were generated through the mass merchant channel, approximately 34% were
generated by Company-operated outlet stores and approximately 34% were generated
by other domestic channels, including department stores, specialty retailers and
retail food stores. The Company's outlet stores carry an extensive range of the
Company's products and provide the Company with an additional distribution
channel, which allows the Company to profitably sell slower-moving inventory.
The Company believes that its outlet stores, which also sell complementary
kitchen accessories, have developed marketing and pricing strategies that
generate sales which supplement, rather than compete with, its retailer
customers. The broad distribution of the Company's products through the mass
merchant,
57
<PAGE>
department store and specialty retailer channels, together with the sales made
through the Company's outlet stores, reduces the Company's dependence on any one
channel of distribution.
EMPHASIS ON NEW PRODUCT DEVELOPMENT. Products introduced in 1996 and 1997
generated approximately 24% of the Company's 1997 gross sales. New products
include: (i) products introduced into new categories or serving new functions to
meet consumer needs not met by the Company's existing products; (ii) product
line extensions, which generally include manufacturing changes to existing
product lines such as glass color or shape changes; and (iii) product renewals,
which generally include decorative changes to existing product lines such as
pattern changes. The Company's product development process incorporates
extensive use of qualitative and quantitative research and enhances the
Company's ability to (i) focus resources on projects with high market potential,
(ii) bring new products to market quickly and (iii) extend existing product
categories. For example, Pyrex Portables-Registered Trademark-
(Pyrex-Registered Trademark- branded portable food containers) went from concept
to national distribution in only 11 months and generated over $33 million in
gross sales in 1996, the first full calendar year after its introduction. In
addition, the Company launched three full lines of Revere
Ware-Registered Trademark- aluminum non-stick cookware in 1998 within nine
months of commencing product development. Another new product for 1998 currently
being shipped by the Company to major retailers is Corning
Ware-Registered Trademark- Pop-Ins-TM-, a line of products designed for storing,
serving and reheating meals either at home or away from home that leverages the
Company's traditional strength in cooking/serving containers.
HIGH QUALITY MANUFACTURING PROCESSES. The Company's manufacturing processes
enable the Company to produce products with performance and cost characteristics
that appeal to consumers. The Company believes it is recognized as one of the
highest quality manufacturers of bakeware, dinnerware and rangetop cookware
products and has instituted a process for pursuing continuous quality
improvement throughout its manufacturing organization. All of the Company's four
domestic manufacturing facilities are ISO 9002 certified.
SIGNIFICANT PRESENCE IN INTERNATIONAL MARKETS. The Company's products are
sold in over 30 foreign countries, primarily in North America, Asia and Latin
America, with established positions in Canada, Korea, Australia, Japan,
Singapore, Taiwan, Hong Kong, Mexico and Brazil. The Company operates a
decorating facility in Malaysia and packaging and distribution facilities in
Canada, Singapore, Australia and Brazil. In Europe, Russia, the Middle East and
Africa, the Company's products are sold through a distribution agreement (which
accounted for less than 2% of net sales in 1997 and first quarter 1998) with
Newell that was entered into when the Company sold its consumer products
business in those territories to Newell in November 1994.
PROVEN MANAGEMENT TEAM. In the spring of 1996, a new management team,
headed by chief executive officer Peter F. Campanella, implemented a
comprehensive program to refocus and redesign the operations and objectives of
the Company. Key members of management with operational responsibility,
including Mr. Campanella, have remained with the Company following the
Recapitalization. In addition, Borden will provide management, consulting and
financial services to the Company pursuant to an agreement entered into between
the Company and Borden in connection with the Recapitalization. See "Certain
Relationships and Related Party Transactions--Between Borden and the Company."
In addition, five individuals who are senior executives of Borden are members of
the nine-person Board of Directors of the Company.
BUSINESS STRATEGY
In the second quarter of 1996, the Company began implementing the Business
Redesign Program to, first, streamline the Company's business to focus on
profitable products and customers while reducing the Company's cost structure
and, second, adopt initiatives to increase sales while maintaining and improving
upon the cost efficiencies achieved in the first phase of the Business Redesign
Program. The first phase of the Business Redesign Program, which is largely
complete, focused on eliminating low
58
<PAGE>
volume, low profit products and customers, reducing manufacturing costs and
reducing SG&A. From 1995 to 1997, the first phase of the Business Redesign
Program resulted in improvements in gross margin from 29% to 34% and operating
margin from (2)% to 6%. The first phase of the Business Redesign Program has
included the following initiatives:
FOCUS ON PROFITABLE PRODUCTS AND CUSTOMERS. The Company has refocused its
sales efforts on higher margin products and profitable customer accounts while
continuing to actively manage its product assortment and customer base. To
eliminate low volume, low profit products, the Company has instituted a process
of continually evaluating the profitability of its SKUs. This process includes
examining volume, gross and operating profit and inventory carrying costs. As a
result of this process, the number of SKUs distributed by the Company has been
reduced by 55%, from 3,088 at the end of 1995 to 1,403 at December 31, 1997. In
addition, based on analyses of customer account profitability, the number of
customers directly served by the Company has been reduced by 43%, from
approximately 1,048 at the end of 1995, to approximately 599 at December 31,
1997. The discontinued accounts were generally low volume customers, many of
which were transferred to distributors.
REDUCE MANUFACTURING COSTS. From 1995 to 1997, the Company implemented
systematic productivity improvements which concentrated on reducing labor,
materials and overhead costs primarily through (i) process simplification, (ii)
better process control and discipline, (iii) workforce productivity improvements
and (iv) improved raw material sourcing. As a result of implementing the
foregoing, the Company has been able to reduce the number of manufacturing
employees by 26%, from 2,629 at the end of 1995 to 1,955 at December 31, 1997.
REDUCE SG&A COSTS. The Company has reduced its SG&A expenses by $30.9
million from 1995 to 1997. These reductions were realized primarily through the
redesign of sales and administrative functions and the refocus of the Company's
advertising program on print rather than media advertising as part of the
Business Redesign Program. As a result of these initiatives, the number of SG&A
employees was reduced from 1,284 in 1995 to 1,141 in 1997 and SG&A expenses
(excluding those estimated by management to be attributable to Company-operated
outlet stores) declined from 21.9% of 1995 gross sales to 16.5% of 1997 gross
sales.
IMPROVE CUSTOMER SERVICE. To improve customer service, the Company has
reorganized its sales force to better align account representatives with
specific customers' needs and has implemented an integrated supply chain
management process which utilizes enhanced information systems to predict
customers' future inventory requirements and permit the Company to maintain a
more efficient allocation between finished goods and work-in-process inventory.
The Company's supply chain management process also enables the Company to
improve the accuracy and timeliness of filling customer orders and is intended
to allow the Company and its customers to reduce finished goods inventory. Since
the end of 1995, the Company's average on-time delivery rate has improved from
approximately 75% to approximately 95% as of December 31, 1997.
With many of the objectives of the first phase of the Business Redesign
Program achieved, the Company has recently begun the second phase of the
Business Redesign Program by pursuing the following strategies:
FOCUS ON STRATEGIC ACCOUNTS. The Company intends to continue to focus on a
core group of strategic accounts identified during the first phase of the
Business Redesign Program based on their profitability, significant sales
volumes for multiple Company brands, commitment to active merchandising of
national brands and potential for growth. For each strategic account, the
Company has established a team of management, marketing and sales resources
dedicated to developing and executing a strategy to improve customer service and
increase sales to that account. Management believes that the Company's focus on
strategic accounts will improve sales by increasing shelf space at key retailers
while enhancing its brand image and presence.
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<PAGE>
INTRODUCE NEW PRODUCTS THAT BUILD ON EXISTING BRANDS. The Company's new
product strategy capitalizes on the Company's strong brand names, broad
distribution and technical expertise to introduce and market products that offer
enhanced value to consumers through new design or new functionality. The Company
plans to accelerate the development of products that extend existing categories
or enter into new categories in order to gain incremental retail shelf space and
preserve sales of existing products. The Company's objective is to generate at
least 20% of its gross sales from products introduced in the two prior years
(including product line extensions and renewals). Management believes that the
new products the Company plans to introduce in the second half of 1998 and in
1999 will increase its shelf space at key retailers.
EXPAND IN INTERNATIONAL MARKETS. The Company has made, and will continue to
make, investments in localized marketing programs and distribution and sales
capabilities in international markets. As a result, the Company is an
established supplier of bakeware and dinnerware in a number of international
markets, including Canada, Korea, Australia, Japan, Singapore, Taiwan, Hong
Kong, Mexico and Brazil. The Company believes that demand in these markets has
been driven in large part by: (i) the expansion of the middle class in many
developing countries; (ii) a strong desire for U.S. branded goods by the
emerging middle class; and (iii) the expansion of western style merchandisers in
many of these regions. Despite recent economic disruptions in Asia, the Company
believes international markets, including Asia over the long term, represent
potential growth areas for the Company.
CONTINUE TO IMPLEMENT COST REDUCTION INITIATIVES. The Company intends to
actively pursue opportunities to achieve further cost reductions in its
manufacturing operations through additional productivity improvements and
streamlining of manufacturing processes. The Company also intends to maintain or
lower SG&A as a percentage of net sales while pursuing its strategy of sales
growth through a renewed focus on strategic accounts, international expansion
and product introductions.
SELECTIVELY PURSUE ACQUISITIONS. The Company plans to selectively pursue
acquisitions which complement its business strategies. The Company believes
that, by taking advantage of its strong brand names, global sales capabilities
and retail store network, the Company can expand distribution of acquired
product lines.
HISTORY
The Company's business began as an unincorporated division of Corning in
1915 with the invention of the heat-resistant glass that has become known as
Pyrex-Registered Trademark- brand glassware. In 1958, Corning introduced Corning
Ware-Registered Trademark- bakeware, a versatile glass-ceramic cookware product
evolved from materials originally developed for a U.S. ballistic missile
program. Corelle-Registered Trademark- dinnerware, a proprietary three-layer,
two-glass product with high mechanical strength properties and designed for
everyday use, was launched in 1970. Visions-Registered Trademark- cookware, a
lower cost, clear glass-ceramic cookware line, was introduced in 1982. In 1988,
Corning supplemented its cookware product lines with the acquisition of the
Revere business, which manufactures and distributes stainless steel cookware and
rangetop products (including, more recently, non-stick aluminum products) under
the Revere Ware-Registered Trademark- brand.
The Company was formed in 1991 when Corning, in an effort to expand the
international sales of its consumer products, entered into a joint venture with
Vitro S.A., the leading glass manufacturer in Mexico. In connection with that
joint venture (which was unwound in 1993 when it did not achieve its strategic
and financial objectives), Corning contributed or licensed to the Company
substantially all of its assets used in the Corning's consumer products
business. In November 1994, Corning and the Company sold their European,
Russian, Middle Eastern and African consumer products business to Newell. See
"Business--Distribution Channels--European, Russian, Middle Eastern and African
Consumer Products Business."
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Pursuant to the Recapitalization Agreement, the Company will change its
corporate name to remove the word "Corning" within three years of the Closing
Date (although the Company has retained the right to use the word "CorningWare"
in its corporate name). The Company is currently in the process of determining
its new corporate name.
PRODUCTS
The Company's products are sold primarily in the bakeware, dinnerware and
rangetop cookware categories under five core brand names. The following table
sets forth the sales of the Company's products in their primary segments from
1993 through 1997.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(in millions)
Bakeware....................................... $ 206.5 $ 235.3 $ 212.9 $ 202.9 $ 175.6
Dinnerware..................................... 186.6 187.2 169.9 167.4 149.0
Rangetop Cookware.............................. 109.7 140.6 151.6 175.2 157.4
Other(1)....................................... 70.1 69.3 74.3 62.7 71.0
--------- --------- --------- --------- ---------
Total(2)....................................... $ 572.9 $ 632.4 $ 608.7 $ 608.2 $ 553.0
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
- ------------------------
(1) "Other" sales include selected table top and kitchen accessories
manufactured by third parties which are coordinated with the
Corelle-Registered Trademark- line of dinnerware and the Revere
Ware-Registered Trademark- line of stainless steel cookware.
(2) Excludes $10.8 million of revenues in 1993 related to nonconsumer business
in Brazil.
BAKEWARE
CORNING WARE-REGISTERED TRADEMARK-. Corning Ware-Registered Trademark-
bakeware was introduced in 1958 as a cookware that "does it all," going from
freezer to oven to stovetop to refrigerator to table. This versatility results
from the Corning Ware-Registered Trademark- manufacturing process, which creates
a glass-ceramic material with high resistance to thermal shock. This
glass-ceramic material was originally fabricated for missile nose cones due to
its ability to withstand thermal extremes.
Corning Ware-Registered Trademark- products include round, oval and square
cooking/serving vessels with glass and plastic covers and comprise three product
lines: Corning Ware-Registered Trademark- French White-TM-, Corning
Ware-Registered Trademark- Classics-TM- and Corning Ware-Registered Trademark-
Casual Elegance.-TM- Introduced in 1981, Corning Ware-Registered Trademark-
French White-TM- is a line of white fluted cooking/serving vessels. This product
line currently represents the majority of Corning Ware-Registered Trademark-
sales and is available in capacities ranging from 15 ounces to 4.5 quarts.
Corning Ware-Registered Trademark- Classics-TM-, available in white or in
decorated patterns, is comprised of a broad line of cooking/serving products
with capacities ranging from 15 ounces to five quarts. Corning
Ware-Registered Trademark- Classics-TM- products coordinate with
Corelle-Registered Trademark- dinnerware. Corning Ware-Registered Trademark-
Casual Elegance-TM-, introduced in 1995, is an upscale embossed product line
with capacities ranging from 12.5 ounces to 2.5 quarts. Another new product for
1998 currently being shipped by the Company to major retailers is Corning
Ware-Registered Trademark- Pop-Ins-TM-, a line of products designed for storing,
serving and reheating meals either at home or away from home that leverages the
Company's traditional strength in cooking/serving containers. Corning
Ware-Registered Trademark- products represented approximately 50.5% of the
Company's 1997 bakeware sales.
PYREX-REGISTERED TRADEMARK-. Pyrex-Registered Trademark- products are made
of borosilicate and tempered soda lime glass and are available in a number of
colors, shapes and sizes. The Company's Pyrex-Registered Trademark- products
comprise four product lines: Pyrex-Registered Trademark- Originals-TM-,
Sculptured Pyrex-TM-, Storage Plus-Registered Trademark- and Pyrex
Portables-Registered Trademark-. Pyrex-Registered Trademark- Originals-TM-
currently generates the largest portion of Pyrex-Registered Trademark- sales and
is available in several colors. Introduced in 1991, Sculptured Pyrex-TM-, which
is also available in several colors, has plastic covers and sells at higher
price points than Pyrex-Registered Trademark- Originals-TM-. Storage
Plus-Registered Trademark-, a line of versatile food storage containers
introduced in 1987, competes in the storage and vessel bakeware categories.
Pyrex Portables-Registered Trademark-, introduced in the fall
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of 1995, is a food transportation system combining a glass bakeware vessel in an
insulated carrying case with hot/cold packs. Pyrex-Registered Trademark-
products represented approximately 49.5% of the Company's 1997 bakeware sales.
Corning Ware-Registered Trademark- and Pyrex-Registered Trademark- products
are primarily distributed through mass merchants, department stores, specialty
retailers and the Company's outlet stores.
DINNERWARE
CORELLE-REGISTERED TRADEMARK-. Corelle-Registered Trademark-, the Company's
dinnerware product line developed in 1971, is produced using a proprietary
manufacturing process. This manufacturing process combines three layers of glass
and allows the Company to manufacture a dinnerware that is durable and
break/chip resistant, as well as light, thin and stackable.
The Company markets a wide range of Corelle-Registered Trademark- dinnerware
products, including plates, bowls, cups and saucers.
Corelle-Registered Trademark- dinnerware is available in more than 20 patterns,
with six to eight patterns being introduced each year to keep up with new trends
in the market. Corelle-Registered Trademark- dinnerware is available in open
stock and in sets in both the Corelle-Registered Trademark- Livingware-TM- and
the higher-end Corelle Impressions-Registered Trademark- product lines. Although
sold in various channels, the primary channels of distribution for
Corelle-Registered Trademark- dinnerware are through mass merchants and the
Company's outlet stores.
RANGETOP COOKWARE
REVERE WARE-REGISTERED TRADEMARK-. The Company's Revere
Ware-Registered Trademark- brand products include stainless steel cookware that
is manufactured by the Company and aluminum non-stick cookware that is made by
other manufacturers. Non-stick skillets have experienced strong growth and
consumer acceptance since their introduction. In 1997 Revere's 12-inch polished
aluminum non-stick skillet was the best selling open stock rangetop item among
mass merchant consumers. In addition, the Company recently introduced three full
lines of non-stick aluminum cookware to leverage its success in non-stick
aluminum skillets.
The Company's Revere Ware-Registered Trademark- stainless steel cookware
products are comprised of the traditional Revere Ware-Registered Trademark-
product line and the Revere Ware-Registered Trademark- Solutions-TM- and Revere
Ware-Registered Trademark- Proline-TM- product lines. The traditional Revere
Ware-Registered Trademark- line is sold to both mass merchants and department
stores and represents the majority of Revere Ware-Registered Trademark- sales.
Revere Ware-Registered Trademark- Solutions-TM-, a department store only
offering, is a cookware line that leverages classic Revere
Ware-Registered Trademark- features with contemporary styling. Certain Revere
Ware-Registered Trademark- Solutions-TM- products feature patented double
pourspouts and steam holes, steam venting nozzles and textured handles. Both the
traditional Revere Ware-Registered Trademark- and Revere
Ware-Registered Trademark- Solutions-TM- lines are available in copper clad and
aluminum disk bottom options, and in sets and open stock with capacities ranging
from 1 to 12 quarts. Revere Ware-Registered Trademark- Proline-TM- products are
professional style, stainless steel products which compete at higher price
points and are sold through department and specialty stores.
VISIONS-REGISTERED TRADEMARK-. Introduced in the United States in 1982,
Visions-Registered Trademark- products are made with a translucent glass-ceramic
material that allows customers to see what they are cooking. Products sold under
the Visions-Registered Trademark- brand include a line of rangetop cookware
manufactured in two color schemes, as well as a line of casserole products.
Visions-Registered Trademark- products are positioned as a high quality,
"starter" rangetop cookware set and, in addition, share the refrigerator/freezer
to oven versatility of Corning Ware-Registered Trademark- bakeware.
Visions-Registered Trademark- products have experienced particularly strong
sales in international markets where water-based cooking and simmering are
prevalent. The Company manages Visions-Registered Trademark- as a specialty line
focused on promotional programs and markets Visions-Registered Trademark-
products in areas where water-based cooking and simmering are relevant to a
market's or community's culture.
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<PAGE>
OTHER
The Company's "Other" sales include selected table top and kitchen
accessories manufactured by third parties which are coordinated with the
Corelle-Registered Trademark- line of dinnerware and the Revere
Ware-Registered Trademark- line of stainless steel cookware. These products,
which include ceramics, flatware, linens, storage ware, teapots and products for
the food service industry, are sold primarily in the Company's outlet stores and
a small portion is redistributed to other retailers.
NEW PRODUCT DEVELOPMENT
New products are defined by the Company as products introduced in the last
two years. New products can be classified into three groups: (i) products
introduced into new categories or serving new functions to meet consumer needs
not met by the Company's existing products, (ii) product line extensions and
(iii) product renewals. Product line extensions generally include manufacturing
changes to existing product lines, such as glass color or shape changes, whereas
product renewals generally include decorative changes to existing product lines,
such as pattern changes. Sales generated by products introduced into new
categories or serving new functions are largely incremental. Product line
extensions and product renewals often result in sales of the new product
replacing sales of an existing product.
The Company emphasizes developing products that can extend existing
categories or enter new categories. Products introduced in 1996 and 1997
(including product line extensions and product renewals) generated approximately
24% of the Company's 1997 gross sales.
New products are developed using a disciplined development process adopted
by the Company. This process is designed to reduce the risk associated with new
product development projects through the early assessment of a product's market
viability, and to compress product development cycle time through the use of the
Company's proprietary design and modeling software. This new product development
process leverages the Company's extensive qualitative and quantitative research
knowledge and has reduced development time, focused resources on projects with
high market potential and decreased large expenditures on product concepts with
low market viability. Under this approach, cycle time for
Corelle-Registered Trademark- decoration introductions has been cut in half from
12 months to six months and mold development time has been reduced from 18 to 12
months. The Company launched its line of Pyrex Portables-Registered Trademark-
within 11 months of developing the concept and began shipments of its full lines
of Revere Ware-Registered Trademark- aluminum non-stick cookware within nine
months of commencing product development.
The Company has introduced three full lines of Revere
Ware-Registered Trademark- aluminum non-stick cookware in 1998. In order to
minimize the capital commitment required for the launch of these new lines, the
Company arranged for the manufacture of this product to be outsourced to a third
party manufacturer. In addition, the Company has begun the shipment of Corning
Ware-Registered Trademark- Pop-Ins-TM-, a line of products designed for storing,
serving and reheating meals either at home or away from home that leverages the
Company's traditional strength in cooking/serving containers. In the last six
months of 1998, the Company plans to introduce a combination of various products
serving new functions to meet consumer needs not met by the Company's existing
products, product line extensions and product renewals.
In addition to developing products with new functionality, the Company has
from time to time generated revenues from new categories by licensing the
Company's brand names to manufacturers of tabletop and kitchen accessories. Due
to the strength of the Company's brands, the Company expects to seek additional
licensing opportunities in future periods. In 1997, licensing revenue was
immaterial to the Company.
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<PAGE>
DISTRIBUTION CHANNELS
The Company's products are sold in the United States and in over 30 foreign
countries. In the United States (which accounted for approximately 75% of the
Company's net sales in 1997), the Company sells both on a wholesale basis to
retailers, distributors and other accounts that resell the Company's products
and on a retail basis through Company-operated outlet stores. During 1997,
approximately 32% of the Company's U.S. gross sales (before deductions for trade
allowances, customer-paid freight and discounts) were generated through the mass
merchant channel, approximately 34% were generated by Company-operated outlet
stores and approximately 34% were generated by other domestic channels,
including department stores, specialty retailers and retail food stores.
DOMESTIC WHOLESALE
In the United States, the Company sells to approximately 517 customers made
up primarily of mass merchants, department stores, specialty retailers, as well
as through other channels, including retail food stores, catalog showrooms and
direct mail.
During the last two years, the Company has significantly narrowed the number
of U.S. customers it services directly (from approximately 937 accounts in 1995
to approximately 517 as of December 31, 1997) enabling the Company to focus on
high profit accounts while shifting many lower profit accounts to distributors
of the Company. In 1997, the Company's 25 largest domestic customers represented
approximately 35% of the Company's gross sales. In 1997, Wal-Mart Stores, Inc.
accounted for approximately 12% of the Company's gross sales.
DOMESTIC RETAIL
The Company operates a network of outlet stores in 48 states, located
primarily in outlet malls. The Company's outlet stores carry an extensive range
of the Company's products and provide the Company with an additional
distribution channel which allows the Company to profitably sell slower-moving
inventory. The Company believes that its outlet stores, which also sell
complementary kitchen accessories, have developed marketing and pricing
strategies that generate sales which supplement, rather than compete with, its
retail customers. The Company-operated outlet stores also promote and strengthen
the Company's brands, enabling the Company to provide customers a broader
assortment of products beyond products that are commonly stocked by third party
retailers.
In 1998, the Company expects to close approximately five of its outlet
stores and open 10 to 15 new outlet stores. The Company continually reviews the
operating performance of its individual stores and whether any store is a
candidate for investment, remodeling or closing.
INTERNATIONAL
The Company's 30-person international sales force, together with localized
distribution and marketing capabilities, have allowed the Company to become an
established marketer of bakeware and dinnerware in Canada, Korea, Australia,
Japan, Singapore, Taiwan, Hong Kong, Mexico and Brazil. The Company believes
that developing localized distribution capabilities is critical to continued
growth in international markets and, as a result, has made investments in
localized distribution facilities in Brazil and Asia. For example, in an effort
to more effectively target local customers in Asia, the Company together with
Iwaki Glass Company Ltd., formed Iwaki Corning (Malaysia) Sdn. Bhd. ("ICM") in
1988. ICM, 80% owned by the Company, operates a decorating facility in Malaysia
that decorates the Corelle-Registered Trademark- and Corning
Ware-Registered Trademark- product lines to meet regional tastes and that also
houses a regional distribution facility. The Company also operates packaging and
distribution facilities in Canada, Brazil, Singapore and Australia to provide
higher levels of service to wholesale accounts in those regions. The Company
anticipates making additional future investments in overseas markets as it
develops its infrastructure to oversee and manage future international sales.
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EUROPEAN, RUSSIAN, MIDDLE EASTERN AND AFRICAN CONSUMER PRODUCTS BUSINESS
In November 1994, Corning and the Company sold to Newell all of the
outstanding stock of Corning Consumer Limited ("CC Limited"), Corning Consumer
GmbH ("CC GmbH") and Corning Consumer S.A ("CCSA"), subsidiaries of Corning and
the Company through which the Company's consumer products business was conducted
in Europe, Russia, the Middle East, and Africa (collectively, the "Territory").
Corning and the Company granted to Newell, CC Limited, CC GmbH and CCSA the
exclusive right to use certain trademarks within the Territory. In addition,
Corning and the Company agreed for a five-year period (which expires in November
1999), subject to certain distribution agreements with Newell, not to
manufacture, sell or distribute competing products in the Territory. Currently,
Newell serves as the exclusive sales representative and distributor for certain
of the Company's products in the Territory, which represented approximately 2%
of the Company's net sales in 1997.
CUSTOMER SERVICE: SALES AND MARKETING SUPPORT
Management believes that service is a key part of the Company's product
offering. The close relationships and frequent contact with its large customers
provide the Company with sales opportunities and application ideas. The Company,
through its sales team, provides its customers with sales and marketing support.
In addition, the Company has a dedicated consumer information center in
Waynesboro, Virginia staffed by approximately 60 consumer service
representatives who may be contacted through a toll-free number. The consumer
facility responds to consumer inquiries on topics such as warranty claims,
rebate programs and store referrals.
SALES
The Company's domestic customers are served by a combination of Company
salespeople and independent, commissioned representatives. The Company's top 100
accounts are serviced by the Company's direct sales force teams, each consisting
of four or five salespeople which are organized (i) by account, for the
Company's most significant customers and (ii) by region, for the balance of the
top 100 accounts. The teams are directly accountable for revenues, allowances,
promotional spending and account profitability. The Company's sales teams
dedicate their primary focus to the top 25 customers. Members of the sales teams
regularly call on the Company's customers to develop an in-depth understanding
of each customer's competitive environment and opportunities. In October 1996,
the Company reorganized its sales force to better align the strengths of account
representatives with specific customer account needs. Smaller wholesale accounts
are serviced by approximately 40 independent, commissioned sales
representatives. The Company's 30-person international sales force, with
personnel located in ten countries, work with local retailers and distributors
to optimize product assortment, consumer promotions and advertising for local
preferences.
MARKETING SUPPORT
The Company provides its customers with extensive marketing support. The
Company conducts extensive research on housewares industry trends, including
consumer color and design preferences. The Company uses this data to optimize
its product mix and selection. The Company also develops distinct packaging and
product assortments for certain customer segments so that they may differentiate
themselves from other retailers selling Company products.
The Company collaborates with its largest customers to develop and implement
effective merchandising strategies, providing, for example, plan-o-grams and
computerized shelf planning. Furthermore, for such strategic accounts, the
Company designs and sets up in-store promotional displays for products,
including new product introductions. Due to the Company's knowledge of consumer
trends and marketing expertise in the dinnerware category, the Company has been
appointed the category manager for dinnerware by a leading mass merchant. As
category manager, the Company, using the
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knowledge and expertise it has assembled in its business, along with retail
point of sale information, develops and presents analyses and proposals
regarding merchandising, pricing and marketing strategies for that customer.
The Company's marketing support includes a broad program of advertising, as
well as the promotions described above. The Company funds national television
and print advertising campaigns, linked to major spring and fall buying periods,
provides cooperative advertising allowances to its customers and arranges
campaigns that advertise Company products in conjunction with complementary
products. The Company's recent joint Corning Ware-Registered Trademark-/Campbell
Soup campaign is an example of promotions conducted with complementary products.
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MANUFACTURING AND DISTRIBUTION FACILITIES
The Company utilizes five primary manufacturing facilities (four in the
United States and one outside of the United States) and seven principal
packaging and distribution centers (two in the United States and five outside of
the United States).
The table below summarizes certain data for each of the Company's principal
properties, including its manufacturing and distribution facilities.
<TABLE>
<CAPTION>
LOCATION PRIMARY USE FACILITY
- ------------------------------------- ------------------------------ --------------------------
<S> <C> <C> <C>
SQ. FEET OWN/LEASE
----------- -------------
DOMESTIC:
Charleroi, Pennsylvania.............. Manufacturing 603,332 Own
Clinton, Illinois.................... Manufacturing/Distribution 660,000 Own
Corning, New York.................... Manufacturing 375,000 Own
Corning, New York(1)................. Headquarters 50,000 Lease
Greencastle, Pennsylvania............ Distribution 1,210,000 Own
Martinsburg, West Virginia........... Manufacturing 416,000 Own
Waynesboro, Virginia................. Consumer Service Center 89,800 Own
INTERNATIONAL:
Johor, Malaysia(2)................... Manufacturing/Distribution 64,000 Own/Lease
Ontario, Canada...................... Distribution 94,349 Lease
Singapore............................ Distribution 63,700 Lease
Sao Paulo, Brazil.................... Distribution 2,000 Lease
Sydney, Australia.................... Distribution 66,000 Lease
</TABLE>
- ------------------------------
(1) The Company will lease its corporate headquarters from Corning until October
1, 1999.
(2) The building housing the Malaysia facility is owned by ICM, a subsidiary
that is 80% owned by the Company. The land on which the facility is located
is leased pursuant to a 60-year lease expiring in 2048.
In addition, the Company and Corning have entered into a supply contract
pursuant to which Corning will supply manufacturing capacity for
Pyrex-Registered Trademark- bakeware products at Corning's Greenville, Ohio
facility to the Company for three years.
INFORMATION TECHNOLOGY
The Company leverages information technology to reduce complexity, speed
processes and provide valued services and information to its customers. The
Company employs a supply chain management system that integrates demand
forecasting, inventory planning and distribution requirement planning. This
system directly links the material resource planning, master production
scheduling and capacity resource planning systems. Computer-aided coordination
of these systems allows the Company to optimize its inventory mix to reduce the
risk of products being out-of-stock and, when integrated with the Company's
order fulfillment system described below, results in enhanced customer service
levels while reducing inventory levels. In addition, the Company's information
systems are used to track future inventory requirements to permit the Company to
maintain a more efficient allocation between finished goods and work-in-process
inventory.
Increasingly, the Company's customers desire to purchase products on a "just
in time" basis, leading to more frequent, smaller orders and reduced lead times.
The Company operates advanced electronic data interchange ("EDI") and order
fulfillment systems, which allow the Company to improve the accuracy and
timeliness of order fulfillment despite an increased number of orders and
reduced lead times. The Company receives approximately 87% of all customer order
items via EDI. The Company's EDI system allows customers to monitor the status
of their orders from purchase order to shipment and
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<PAGE>
to receive advance shipment notices that aid customer ability to manage their
inventories. These processes have improved the Company's customer service levels
and have enhanced the ability of the Company and its customers to reduce their
inventories.
Another aspect of the Company's use of information systems to enhance
customer service is the Company's vendor managed inventory ("VMI") system. With
its VMI system, the Company electronically monitors inventory levels of
participating customers and places orders for the customer (or in the case of
customers participating in the Company's co-managed inventory system, formulates
and proposes orders for the customer's approval). This monitoring, made possible
by the VMI system, also allows the Company to anticipate the needs of its
customers and enhances the Company's ability to manage production scheduling.
The EDI and VMI systems allow less costly order placement and increase the
accuracy and timeliness of order processing while enabling the customer and the
Company to decrease inventory levels without losing sales due to products being
out of stock. In addition, the Company has developed extensive information
databases to conduct detailed analysis of orders, sales, customer service levels
and inventory and to identify trends in these items.
The Company has a centralized distribution system in Greencastle,
Pennsylvania that enables the Company to fill, in a single consolidated
shipment, customer orders comprised of different glass product lines (e.g.,
Corning Ware-Registered Trademark- and Pyrex-Registered Trademark-) and products
sourced from third parties. Consolidated shipments significantly aid and
simplify customers' management of inventories and contribute to decreased
shipping costs. Because few houseware manufacturers possess a similar
centralized distribution system, the Company believes that the system represents
a competitive advantage over many other manufacturers of bakeware or dinnerware.
See "--Information Technology."
Pursuant to the transition services agreement entered into on the Closing
Date, Corning will continue to provide the Company with certain data processing
services, including those supporting the Company's financial systems. Prior to
the termination of the transition services agreement in April 2000, the Company
intends to establish independent data processing capability for its financial
reporting system and certain other functions. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Overview--Separation
from Corning; Transaction Related Charges."
IMPACT OF THE YEAR 2000 ISSUE
The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year, as well as hardware
that is designed with similar constraints. Any of the Company's computer
programs and hardware that have date-sensitive functions may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result in a
system failure or miscalculations causing disruptions in operations including,
among other things, a temporary inability to process transactions, send invoices
or engage in similar normal business activities.
Corrective action to address the year 2000 issue began in the second quarter
of 1996, with the establishment of a program office to manage year 2000
activities. The Company is utilizing both internal and external resources to
identify, correct and test the Company's hardware and software for year 2000
compliance. In April 1997, the Company completed a comprehensive inventory of
its computer systems. The inventory resulted in an impact assessment that was
completed in October 1997. The findings of the assessment, together with the
need to establish system independence from Corning, led the Company to embark on
a comprehensive systems replacement project.
The Company is in the process of implementing a comprehensive enterprise
resource management system. This system will replace roughly 90% of the
Company's business transaction systems. The remaining 10%, comprised of benefits
administration and payroll, will be outsourced to a year 2000 compliant service
bureau. Implementation of these new systems is expected to be completed by April
1, 1999. In addition, the Company is resolving year 2000 issues related to plant
process control systems, non-data related computer control systems and supplier
and customer year 2000 compliance. While
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<PAGE>
management cannot reasonably estimate the cost of implementation of all systems
necessary to comply with year 2000 dating, significant investments in
information systems will total in excess of $16.5 million by the year 2000. Any
remaining costs are not expected to have a material impact on the financial
position or results of operations of the Company in any year.
The Company intends its year 2000 date conversion project to be completed on
a timely basis so as to not significantly impact business operations. If the
necessary modifications and conversions are not completed as planned, the year
2000 issue may have a material impact on the Company. Also, although the
Company's systems do not rely significantly on systems of other companies, the
Company cannot provide assurance that failure of third parties to address the
year 2000 issue will not have an adverse impact on the Company.
RAW MATERIALS AND SUPPLIES
The Company purchases its raw materials on the spot market and through
long-term contracts with suppliers, including for the supply agreement between
the Company and Corning pursuant to which Corning will supply the Company with
manufacturing capacity for certain of the Company's Pyrex-Registered Trademark-
bakeware products for three years. See "Certain Relationships and Related Party
Transactions-- Between Corning and the Company--Supply Agreement." Sand, soda
ash, borax, limestone, lithia-containing spars, alumina, cullet, stainless
steel, copper and corrugated packaging materials are the principal raw materials
used by the Company. All of these materials are available from various suppliers
and the Company is not limited to any single supplier for any of these
materials. Management believes that adequate quantities of these materials are
and will continue to be available from various suppliers. However, the
replacement of certain raw material suppliers has in the past, and may in the
future, have an adverse effect on the Company's operations and financial
performance and significant increases in the cost of any of the principal raw
materials used by the Company could have a material adverse effect on its
results of operations. The Company's molded plastic products and certain
components of its kitchenware products are manufactured from plastic resin,
which is produced from petrochemical intermediates. Plastic resin prices may
fluctuate as a result of changes in natural gas and crude oil prices and the
capacity, supply and demand for resin and the petrochemical intermediates from
which it is produced. The Company sources certain products, such as non-stick
aluminum rangetop products, from third party suppliers. The Company believes
that alternative sources of supply at competitive prices are available from
other manufacturers of substantially identical products.
The melting units operated by the Company require either electric or natural
gas energy input. Back-up procedures and systems to replace the primary source
of these energy inputs are in place in each of the Company's relevant
facilities. Ongoing programs exist within each of the Company's glass melting
facilities to reduce energy consumption. Furthermore, rates for electric and
natural gas have been fixed contractually in each of the Company's plants to
avoid the negative impact of market fluctuations in prices. The Company does not
engage in any hedging activities for commodity trading relating to its supply of
raw materials.
INTELLECTUAL PROPERTY
The Company owns numerous United States and foreign trademarks and trade
names and has applications for the registration of trademarks and trade names
pending in the United States and abroad. The Company's most significant owned
trademarks and/or tradenames include Corelle-Registered Trademark-,
Revere-Registered Trademark-, Revere Ware-Registered Trademark- and
Visions-Registered Trademark-. The other two most significant trademarks used by
the Company are Corning Ware-Registered Trademark- and
Pyrex-Registered Trademark-. Upon the consummation of the Recapitalization on
April 1, 1998, Corning granted to the Company fully paid, royalty-free licenses
to use the Corning Ware-Registered Trademark- trademark, servicemark and
tradename and the Pyroceram-Registered Trademark- trademark in the field of
housewares and to use the Pyrex-Registered Trademark- trademark in the field of
durable consumer products. These licenses are exclusive, worldwide licenses,
subject to the prior exclusive licenses granted to Newell and certain of its
subsidiaries in the
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<PAGE>
Territory (see "--Distribution Channels--European, Russian, Middle Eastern and
African Consumer Products Business") and provide for renewable ten-year terms,
which the Company may renew indefinitely. The Company has also granted to Newell
and certain of its subsidiaries an exclusive license of the
Vision-Registered Trademark- and Visions-Registered Trademark- trademarks in the
Territory until November 1999. In addition, in connection with the
Recapitalization, the Company entered into an agreement with Corning under which
the Company is licensed to continue to use "Corning" in connection with the
Company's business for three years (or up to five years in the case of certain
molds used in the manufacturing process).
The Company also owns and has the exclusive right to use numerous United
States and foreign patents, and has patent applications pending in the United
States and abroad. In addition to its patent portfolio, the Company possesses a
wide array of unpatented proprietary technology and know-how. The Company also
licenses certain intellectual property rights to or from third parties.
Concurrently with the Recapitalization, Corning granted to the Company a
fully paid, royalty-free license of patents and know-how (including evolutionary
improvements) owned by Corning that pertain to or have been used in the
Company's business. Furthermore, the Company and Corning entered into a
five-year technology support agreement (renewable at the option of the Company
for an additional five years), pursuant to which Corning will provide to the
Company (at the Company's option) engineering, manufacturing technology, and
research and development services, among others, at Corning's standard internal
rates.
The Company believes that its patents, trademarks, trade names, service
marks and other proprietary rights are important to the development and conduct
of its business and the marketing of its products. As such, the Company
vigorously protects its intellectual property rights. In some cases, litigation
or other proceedings may be necessary to defend against or assert claims of
infringement, to enforce patents issued to the Company or its licensors, to
protect trade secrets, know-how or other intellectual property rights owned by
the Company, or to determine the scope and validity of the proprietary rights of
the Company or of third parties. There can be no assurance that the Company will
prevail in any such litigation.
On May 12, 1998, the Company received two letters from Rubbermaid
Incorporated alleging that Corning Ware-Registered Trademark- Pop-Ins-TM-
infringe four patents owned by Rubbermaid Incorporated. The letters request that
the Company cease and desist from making, using, offering to sell, and selling
Corning Ware-Registered Trademark- Pop-Ins-TM- and provide to Rubbermaid a full
accounting of sales of such products. The Company is in the process of
investigating the validity of this claim.
COMPETITION
The market for the Company's products is highly competitive. Competition in
the United States is affected not only by the large number of domestic
manufacturers but also by the large volume of foreign imports. In addition,
recently the Company has experienced increased competition in the United States
from low-cost Asian competitors and expects this trend to continue in the
future. The Company's major bakeware, dinnerware and cookware competitors for
domestic sales include Newell, Rubbermaid Inc., Ekco Housewares Inc.,
Pfaltzgraff Co., Lenox Inc., The Meyer Corporation, Inc. and T-Fal Corporation.
The market for housewares outside the United States and Europe is relatively
fragmented. The competitive landscape differs by country and region.
Internationally, depending on the country or region, the Company competes with
other U.S. companies operating abroad, locally manufactured private label goods
and international companies competing in the worldwide bakeware, dinnerware and
rangetop cookware categories. Major competitors abroad include Durand Verrerie
Christallerie D'Arquey, Lipper International Inc., Newell, Vitro S.A., NEG
(Nippon Electric Glass) and Schott Glaswerke.
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<PAGE>
Several of the Company's competitors are larger, may be less leveraged and
have greater financial resources than the Company following the completion of
the Transactions. In addition, there are no substantial regulatory or other
barriers to the entry of new competitors into the industry.
A number of factors affect competition in the sale of bakeware, dinnerware
and rangetop cookware manufactured and/or sold by the Company, including
quality, price competition from competitors and price point parameters
established by the Company's various distribution channels. The Company has,
from time to time, experienced price and market share pressure from certain
competitors in certain product lines, particularly in the bakeware category
where metal products of competitors have created retailer price and margin
pressures, and in the rangetop cookware category where non-stick aluminum
products have increased their share of rangetop cookware sales at the expense of
stainless steel products due to the durability and ease of cleaning of new
non-stick coatings.
Shelf space is a key factor in determining retail sales of bakeware,
dinnerware and rangetop cookware products. A competitor that is able to maintain
or increase the amount of retail space allocated to its product may gain a
competitive advantage for that product, and in recent fiscal quarters the
Company has lost shelf space in its distribution channels to certain of its
competitors. See "Risk Factors--Risks Related to Realizing Objectives of the
Business Redesign Program" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations." The allocation of retail space
is influenced by many factors, including brand name recognition, quality and
price of the product, level of service by the manufacturer and promotions.
In addition, new product introductions are an important factor in the
categories in which the Company's products compete. Other important competitive
factors are brand identification, style, design, packaging and the level of
service provided to customers. The importance of these competitive factors
varies from customer to customer and from product to product. See "Risk
Factors--Development of New Products." There can be no assurance that the
Company will be able to compete successfully against current and future sources
of competition or that the current and future competitive pressures faced by the
Company will not adversely affect its profitability or financial performance.
ENVIRONMENTAL MATTERS
The Company's facilities and operations are subject to certain federal,
state, local and foreign laws and regulations relating to environmental
protection and human health and safety, including those governing wastewater
discharges, air emissions, and the use, generation, storage, treatment,
transportation and disposal of hazardous and non-hazardous materials and wastes
and the remediation of contamination associated with such disposal. Because of
the nature of its business, the Company has incurred, and will continue to
incur, capital and operating expenditures and other costs in complying with and
resolving liabilities under such laws and regulations. The Company believes it
is in substantial compliance with applicable environmental laws and regulations,
and does not believe it has material liabilities under such laws and
regulations. However, there can be no assurance that compliance with, or
liabilities under, such laws and regulations, or the discovery of contamination,
will not have a material adverse effect on the Company in the future.
Certain of the Company's facilities have lengthy manufacturing histories
and, over such time, have used or generated and disposed of substances which are
or may be considered hazardous. In addition, certain of these facilities are
located on properties that had been used for various industrial purposes prior
to the Company's occupancy. The Company has been involved in the remediation of
historic contamination at certain of these facilities and is currently
undertaking additional subsurface investigations in order to assess certain
potential soil and groundwater contamination at other facilities. Pursuant to
the terms and conditions of the Recapitalization Agreement, Corning has agreed
to indemnify the Company for certain costs and expenses that may be incurred in
the future by the Company arising from pre-Recapitalization environmental
events, conditions or matters and as to which notice is provided
71
<PAGE>
within specified time periods. Corning has agreed to indemnify the Company for
(i) 80% of such costs and expenses up to an aggregate of $20.0 million and (ii)
100% of such costs and expenses in excess of $20.0 million. The Company believes
that, based on currently available information and the terms and conditions of
Corning's indemnification obligations under the Recapitalization Agreement, any
liability of the Company that is reasonably likely to arise out of any of these
environmental conditions and activities would not result in a material adverse
effect on the Company. However, management cannot predict with certainty whether
future events, such as changes in existing laws and regulations, the discovery
of contamination or other environmental conditions not currently known to the
Company, the occurrence of new contamination or other environmental conditions
or developments that could impair the Company's ability to obtain
indemnification from Corning, may result in the Company having to bear
environmental costs not currently planned for by the Company. Accordingly, it is
possible that such additional environmental liabilities could result in a
material adverse effect on the Company. See "Risk Factors--Environmental
Regulation."
GOVERNMENTAL REGULATION
The Company is subject to various federal, state and local laws affecting
its business, including various environmental, health, fire and safety
standards. See "--Environmental Matters." The Company is also subject to the
Fair Labor Standards Act and various state laws governing such matters as
minimum wage requirements, overtime and other working conditions and citizenship
requirements. The Company believes that its operations are in material
compliance with applicable laws and regulations.
EMPLOYEES
As of March 31, 1998, the Company had approximately 3,150 full-time
employees, approximately 1,950 of whom were covered by collective bargaining
agreements. The Company's collective bargaining agreements are as follows:
<TABLE>
<CAPTION>
PLANT UNION EXPIRATION OF CONTRACT
- ------------------------------------ ----------------------------------------- ----------------------
<S> <C> <C>
Charleroi, Pennsylvania Aluminum Brick & Glass January 1, 1999
Workers International
Union, Local 53G
Clinton, Illinois International Association of April 1, 2001
Machinists and Aerospace
Workers, District Lodge 123
Corning, New York American Flint Glass Workers January 1, 1999
Union, Local 100
Greencastle, Pennsylvania American Flint Glass Workers July 31, 1999
Union, Local 1024
United Plant Guards Workers of August 31, 1999
America, Local 12
Johor, Malaysia Kesatuan Pekeria-Pekeria June 30, 2000
Ontario, Canada Brewery, General and May 1, 1999
Professional Workers
Sydney, Australia Australian Workers Union, May 31, 1999
Glass and Containers Industry Branch
</TABLE>
The Company believes that its relationship with its employees is
satisfactory. The Company has not experienced any union activities resulting in
work slowdowns or work stoppages during the past five years.
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<PAGE>
Upon the consummation of the Recapitalization on April 1, 1998, hourly
employees of the Pressware facility in Corning, New York were offered employment
by the Company. Approximately 260, or 70% of such employees accepted employment
with the Company. Pressware personnel not accepting such offer of employment
will continue as employees of Corning and Corning will continue to make
available their services to the Company. The Company will reimburse Corning for
the corporate expenses related to such employees.
LEGAL PROCEEDINGS
The Company has been engaged in, and will continue to be engaged in, the
defense of product liability claims related to its products, particularly its
bakeware and cookware product lines. The Company maintains product liability
coverage, subject to certain deductibles and maximum coverage levels that the
Company believes is adequate and in accordance with industry standards.
In addition to product liability claims, the Company is involved from time
to time in various lawsuits or threatened litigation in the ordinary course of
business, none of which the Company believes could have a material adverse
effect on the Company if decided adversely.
On May 12, 1998, the Company received two letters from Rubbermaid
Incorporated alleging that Corning Ware-Registered Trademark- Pop-Ins-TM-
infringe four patents owned by Rubbermaid Incorporated. The letters request that
the Company cease and desist from making, using, offering to sell, and selling
Corning Ware-Registered Trademark- Pop-Ins-TM- and provide to Rubbermaid a full
accounting of sales of such products. The Company is in the process of
investigating the validity of this claim.
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information regarding the executive officers
and directors of the Company following the Recapitalization.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------ --- -------------------------------------------------
<S> <C> <C>
C. Robert Kidder.................... 53 Director and Chairman of the Board
Peter F. Campanella................. 52 Director, President and Chief Executive Officer
Edward A. Gilhuly................... 38 Director
Clifton S. Robbins.................. 40 Director
Scott M. Stuart..................... 38 Director
William H. Carter................... 44 Director
Nancy A. Reardon.................... 45 Director
William F. Stoll, Jr................ 49 Director
Anthony P. Deasey................... 49 Senior Vice President--Finance and Chief
Financial Officer
George F. Knight.................... 41 Vice President, Treasurer and Controller
Clark S. Kinlin..................... 37 Senior Vice President--Sales and Marketing
Twilver Gordon...................... 58 Vice President--Manufacturing and Engineering
Thomas C. O'Brien................... 54 Vice President, Secretary and General Counsel
</TABLE>
C. ROBERT KIDDER was elected a Director and Chairman of the Board of the
Company on April 1, 1998. He was elected a Director, Chairman of the Board and
Chief Executive Officer of Borden, Inc. on January 10, 1995, and continues in
those positions. Prior to that he was Chairman of the Board of Duracell
International, Inc. and Duracell, Inc. from August 1991 through October 1995;
Chairman of the Board and Chief Executive Officer of both companies from April
1992 through September 30, 1995; Chairman of the Board, President and Chief
Executive Officer of both companies from August 1991 until April 1992; and
President and Chief Executive Officer of both companies from June 1988 until
August 1991. He is also a director of Electronic Data Systems Corporation, AEP
Industries Inc. and Morgan Stanley, Dean Witter & Co.
PETER F. CAMPANELLA was elected a Director of the Company on April 1, 1998,
and has been its President and Chief Executive Officer since April 1996. From
1994 to 1996, he was Senior Vice President and General Manager of Corning's
Science Products Division, and from 1990 to 1994, he was Vice President and
General Manager of that division. He joined Corning in 1971 and has held various
sales, marketing and general management positions.
EDWARD A. (NED) GILHULY has been a director of the Company since April 1,
1998. He has been a member of KKR & Co., LLC, the limited liability company
which serves as the general partner of KKR, since 1996, was a General Partner of
KKR and has been a General Partner of KKR Associates, L.P. since January 1995.
He is a Director of Owens-Illinois, Inc., Union Texas Petroleum and Layne
Christensen Company.
CLIFTON S. ROBBINS has been a director of the Company since April 1, 1998.
He has been a member of KKR & Co., LLC, the limited liability company which
serves as the general partner of KKR, since 1996, was a General Partner of KKR
and has been a General Partner of KKR Associates, L.P. since January 1995. He
has been a Director of Borden, Inc. since December 1994, and is also a Director
of Act III
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Cinemas, Inc., AEP Industries Inc., Border, Inc., IDEX Corporation, Glenisla
Group, Ltd., KinderCare Learning Centers, Inc., Newsquest Media Group, PLC and
Regal Cinemas, Inc.
SCOTT M. STUART has been a director of the Company since April 1, 1998. He
has been a member of KKR & Co., LLC, the limited liability company which serves
as the general partner of KKR, since 1996, was a General Partner of KKR, and has
been a General Partner of KKR Associates, L.P. since January 1995. He has been a
Director of Borden, Inc. since December 1994, and is also a Director of AEP
Industries Inc., KSL Recreation Corporation, Newsquest Capital, PLC and World
Color Press, Inc.
WILLIAM H. CARTER has been a director of the Company since April 1, 1998. He
was elected Executive Vice President and Chief Financial Officer of Borden, Inc.
effective April 3, 1995. Prior to that, since 1987, he was a partner in Price
Waterhouse LLP. He is a Director of BCP Management, Inc. and AEP Industries,
Inc.
NANCY A. REARDON has been a director of the Company since April 1, 1998. She
was elected Senior Vice President, Human Resources and Corporate Affairs, of
Borden, Inc. effective March 3, 1997. Previously she was Senior Vice
President-Human Resources and Communications for Duracell International, Inc.
from 1991 through February 1997.
WILLIAM F. STOLL, JR. has been a director of the Company since April 1,
1998. He was elected Senior Vice President and General Counsel of Borden, Inc.
effective July 1, 1996. Prior to joining Borden at that time, he was a Vice
President of Westinghouse Electric Corporation since 1993, and served as its
Deputy General Counsel from 1988 to 1996. He is a Director of BCP Management,
Inc.
ANTHONY P. DEASEY was elected Senior Vice President--Finance and Chief
Financial Officer on June 8, 1998. Prior to joining the Company he was Senior
Vice President of Finance and Information Systems at Rollerblade Inc. from 1996
to 1998. Prior to that he was Vice President, Chief Financial Officer of Church
and Dwight Co. Inc., from 1988 to 1995.
GEORGE F. KNIGHT is Vice President, Treasurer and Controller of the Company,
while continuing as Vice President, Mergers and Acquisitions Finance, of Borden,
Inc. He was named to his Borden position effective January 1, 1998, after
joining Borden, as Director of that function in April 1997. Prior to that he was
with Duracell International, Inc., as Controller for the Asia-Pacific region
from 1994 and as Assistant Corporate Controller from 1992 to 1994.
CLARK S. KINLIN was elected Senior Vice President-Sales and Marketing of the
Company on April 1, 1998. Prior to that he was Vice President-Sales and
Marketing of the Company since September 1997, and from 1995 to 1997, he was
Vice President of Marketing. From 1993 to 1995, he was Director of Retail
Development of the Company, and from 1990 to 1993, he was Manager of Sales and
Marketing of Corning's Telecommunications Products Division. He joined Corning
in 1981.
TWILVER GORDON was elected Vice President-Manufacturing and Engineering of
the Company on April 1, 1998. Prior to that he was Director-Manufacturing and
Engineering since June 1996. From 1995 to 1996, he was Manufacturing Manager of
the Company; from 1993 to 1995, he was plant manager at the Company's Corning,
New York, Pressware facility; and from 1988 to 1993, he was Director-Customer
Services and Distribution at the Company's Greencastle, Pennsylvania, facility.
He joined Corning in 1968.
THOMAS C. O'BRIEN was elected Vice President, Secretary and General Counsel
of the Company on April 1, 1998. Prior to that he had been Assistant General
Counsel of Corning since February 1993, and Secretary and Legal Counsel of the
Company since January 1992. He joined Corning in 1977.
EXECUTIVE COMPENSATION
The following table sets forth information with respect to the compensation
paid or accrued by the Company with respect to each of its chief executive
officer and its four other most highly compensated
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executive officers (the "named executive officers") for services rendered in all
capacities during fiscal 1997. All references in the following tables to stock
and stock options relate to awards of, and options to purchase, the common stock
(with attached preferred share purchase rights) of Corning.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------------------- -------------------------- ---------------
<CAPTION>
OTHER RESTRICTED
ANNUAL STOCK SECURITIES INCENTIVE
NAME AND COMPEN- AWARDS UNDERLYING PLAN
PRINCIPAL POSITION YEAR SALARY(1) BONUS SATION(2) ($) (3) OPTIONS PAYOUTS(4)
- ---------------------------------- --------- ----------- --------- ----------- ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Peter F. Campanella............... 1997 $ 273,333 $ 358,162 $ 21,140 $ 664,313 8,000 --
President and Chief Executive
Officer
George M. Collins(5).............. 1997 210,000 179,109 4,660 359,836 4,000 --
Vice President--Worldwide Sales
Clark S. Kinlin................... 1997 158,133 115,769 2,160 166,078 4,000 --
Vice President--Marketing
Twilver Gordon.................... 1997 146,733 114,122 -- -- 2,000 --
Director--Manufacturing And
Engineering
Kim L. Frock(6)................... 1997 137,333 84,231 720 55,369 4,000 --
Vice President and Chief
Financial Officer
<CAPTION>
<S> <C>
ALL OTHER
NAME AND COMPEN-
PRINCIPAL POSITION SATION(4)
- ---------------------------------- -----------
<S> <C>
Peter F. Campanella............... $ 35,667
President and Chief Executive
Officer
George M. Collins(5).............. 20,431
Vice President--Worldwide Sales
Clark S. Kinlin................... 8,236
Vice President--Marketing
Twilver Gordon.................... 12,396
Director--Manufacturing And
Engineering
Kim L. Frock(6)................... 6,745
Vice President and Chief
Financial Officer
</TABLE>
- ------------------------
(1) Reflects salary paid or deferred.
(2) Includes dividends on CPP Shares (as defined below) paid prior to attainment
of the relevant performance vesting goals and tax gross-up payments.
(3) At the end of 1997, Messrs. Campanella, Collins, Kinlin and Gordon and Ms.
Frock held an aggregate of 55,124; 18,479; 26,958; 0; and 5,396 shares,
respectively, of restricted Corning common stock granted under Corning's
Career Share Plan (such shares, "Career Shares") and under Corning's
Corporate Performance Plans (such shares, "CPP Shares"), collectively having
an aggregate value on December 31, 1997 of $2,034,423; $681,992; $994,920;
$0; and $199,146, respectively.
Career Shares held by Messrs. Campanella, Collins and Kinlin are fully
vested as of the Closing Date, but are subject to transfer restrictions,
which in the case of Mr. Campanella will be eliminated annually on a pro
rata basis until age 60, and in the case of Mr. Kinlin will be eliminated
annually on a pro rata basis for a period of five years commencing December
15, 1999. Career Shares held by Ms. Frock are subject to restriction on
transfer until she retires at or after age 60 and are subject to forfeiture
prior to age 60, in whole, if she voluntarily terminates employment with
Corning and, in part, if her employment is terminated by Corning. CPP Shares
held by Messrs. Campanella, Collins and Kinlin are fully vested as of the
Closing Date, but are subject to transfer restrictions until February 1,
2000. CPP Shares held by Ms. Frock are not fully vested as of the Closing
Date and are subject to both forfeiture and transfer restrictions until
February 1, 2000.
Dividends are paid to each named executive officer on all shares of
restricted Corning common stock held by them.
(4) Represents amounts contributed by Corning as matching contributions to
Corning's tax-qualified Investment Plan and amounts paid in cash to the
named executive officers for benefits which would have been available to
them pursuant to the terms of the Corning Investment Plan but for certain
limitations on compensation which may be taken into account under tax-
qualified plans as imposed pursuant to the Internal Revenue Code of 1986, as
amended (the "Code").
(5) Mr. Collins' employment with the Company recently terminated and he has
retired from Corning.
(6) Ms. Frock's employment with the Company recently terminated and she has
become an employee of Corning.
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<PAGE>
The following table sets forth certain information regarding options granted
in 1997 to the named executive officers pursuant to Corning stock option plans.
OPTION/SAR GRANTS IN LAST COMPLETED FISCAL YEAR(1)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
RATES OF STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS(2) OPTION TERM(3)
------------------------------------------------------------ --------------------
<S> <C> <C> <C> <C> <C> <C>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED
OPTIONS TO EMPLOYEES EXERCISE EXPIRATION GAIN AT GAIN AT
NAME GRANTED IN FISCAL YEAR PRICE DATE 5% 10%
- ------------------------------------------------ ------------- ------------------- ----------- ----------- --------- ---------
Peter F. Campanella............................. 8,000 0.9% $ 35.32 2/4/07 $ 177,700 $ 450,328
George M. Collins............................... 4,000 0.5% 35.32 2/4/07 88,850 225,164
Clark S. Kinlin................................. 4,000 0.5% 35.32 2/4/07 88,850 225,164
Twilver Gordon.................................. 2,000 0.2% 47.00 4/23/07 59,116 149,812
Kim L. Frock.................................... 4,000 0.5% 35.52 2/4/07 88,850 225,164
</TABLE>
- ------------------------
(1) No SARs were granted in 1997 to any of the named executive officers.
(2) The stock option agreements with Messrs. Campanella, Collins, Kinlin and Ms.
Frock provide that one-half of the options will become exercisable on
February 1, 1999 and the remainder will become exercisable on February 1,
2000. The stock option agreement for Mr. Gordon provides that one-half of
the options will become exercisable on April 24, 1998 and the remainder will
become exercisable on April 24, 1999.
(3) The dollar amounts set forth under these columns are the result of
calculations at the 5% and 10% rates established by the Commission and
therefore are not intended to forecast future appreciation of the value of
Corning's common stock.
The following table sets forth the number of shares of Corning common stock
covered by both exercisable and unexercisable stock options as of December 31,
1997 held by the named executive officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTIONS/SAR VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR END(2) AT FISCAL YEAR END(3)
------------------------------ ----------------------------
SHARES
ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------- ------------- --------- ------------- --------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Peter F. Campanella.................. 26,951 $ 729,111 33,540 91,843 $ 306,166 $ 935,742
George M. Collins.................... 5,345 179,289 3,593 36,340 37,354 356,144
Clark S. Kinlin...................... 0 0 15,551 14,780 161,096 122,945
Twilver Gordon....................... 0 0 6,587 2,898 59,046 7,333
Kim L. Frock......................... 2,995 126,090 6,349 5,198 53,189 15,673
</TABLE>
- ------------------------
(1) There are no SARs outstanding.
(2) Adjusted for spin-offs at December 31, 1996.
(3) Value at December 31, 1997.
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<PAGE>
PENSION PLAN
Prior to the Closing Date, each of the named executive officers participated
in and accrued benefits under Corning's Salaried Pension Plan (the "Corning
Pension Plan"), a defined benefit plan. Benefits paid under this plan are based
upon career earnings (regular salary and cash bonuses paid under Corning's
variable compensation plans substantially as set forth in the Summary
Compensation Table) and years of credited service. The benefit formula is
reviewed and adjusted periodically for inflationary and other factors. Effective
upon commencement of employment, salaried employees may contribute to the
Corning Pension Plan two percent of their annual earnings up to the social
security wage base. Such employees will receive for each year of credited
service after December 31, 1990 an additional amount of pension benefit
reflecting the value of the increased voluntary contribution. Benefits under the
Corning Pension Plan are not subject to social security or other offsets.
Corning maintains a non-qualified Supplemental Pension Plan (the
"Supplemental Plan"), pursuant to which it will pay to certain executives,
including each of the named executive officers, amounts approximately equal to
the difference between the benefits provided for under the Corning Pension Plan
and benefits which would have been provided thereunder but for limitations on
benefits which may be provided under tax-qualified plans, as set forth in the
Code.
Effective upon the Closing Date, the Company will establish a pension plan
("CCP Pension Plan") providing pension benefits which are substantially similar
in aggregate economic value to those provided by the Corning Pension Plan. It is
anticipated that executives who participated in the Supplemental Plan will
participate, as of the Closing Date, in the Borden Inc. Executive Supplemental
Pension Plan.
Maximum annual benefits calculated under the straight life annuity option
form of pension payable to participants at age 60 are illustrated in the table
set forth below. The table below does not reflect any limitations on benefits
imposed by the Code. Assets of the Corning Pension Plan and Supplemental Plan
will not be transferred to the Company from Corning in connection with the
Recapitalization and the Company will have no obligations under these plans
following the Recapitalization.
<TABLE>
<CAPTION>
YEARS OF SERVICE
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REMUNERATION 15 20 25 30 35 40
- --------------- --------- --------- --------- --------- ---------- ----------
$ 100,000 $ 26,202 $ 35,559 $ 44,419 $ 52,784 $ 61,149 $ 69,514
200,000 56,202 75,559 94,419 112,784 131,149 149,514
300,000 86,202 115,559 144,419 172,784 201,149 229,514
400,000 116,202 155,559 194,419 232,784 271,149 309,514
500,000 146,202 195,559 244,419 292,784 341,149 389,514
600,000 176,202 235,559 294,419 352,784 411,149 469,514
700,000 206,202 275,559 344,419 412,784 481,149 549,514
800,000 236,202 315,559 394,419 472,784 551,149 629,514
900,000 266,202 355,559 444,419 532,784 621,149 709,514
1,000,000 296,202 395,559 494,419 592,784 691,149 789,514
1,100,000 326,202 435,559 544,419 652,784 761,149 869,514
1,200,000 356,202 475,559 594,419 712,784 831,149 949,514
1,300,000 386,202 515,559 644,419 772,784 901,149 1,029,514
1,400,000 416,202 555,559 694,419 832,784 971,149 1,109,514
1,500,000 446,202 595,559 744,419 892,784 1,041,149 1,189,514
</TABLE>
It is estimated that Messrs. Campanella, Collins, Kinlin, Gordon and Ms.
Frock, who currently have 25, 24, 15, 28 and 9 years of credited service,
respectively, would receive each year (if they worked to age 60) $360,639,
$98,030, $175,128, $74,868 and $148,072, respectively, under the Corning
Salaried Pension Plan, the Supplemental Plan and the CCP Pension Plan (if
applicable) in the aggregate. Messrs. Campanella's, Collins', Kinlin's and
Gordon's employment with Corning recently terminated and each became employees
of the Company.
78
<PAGE>
EMPLOYEE AGREEMENTS
The Company has in place a severance practice pursuant to which it will
provide to all salaried employees upon certain terminations of employment,
compensation in amounts ranging between eight weeks of base salary (for
employees with at least one year of service) and 52 weeks of base salary (for
employees with at least 20 years of service).
COMPENSATION OF MEMBERS OF BOARD
Members of the Board will receive no cash compensation for their service on
the Board or its committees. Members of the Board will receive reimbursement for
traveling costs and other out-of-pocket expenses incurred in attending Board and
committee meetings.
RETENTION PROGRAM
The Company has adopted a retention program (the "Retention Program") for 84
key employees (73 of its domestic employees and 11 of its international
employees). The Retention Program provides that its participants will receive
retention payments (ranging from three to six months of base salary) if they
remain employed with the Company for six months following the Closing Date. The
Recapitalization Agreement provides that Corning shall reimburse the Company for
its payments made under the Retention Program following the Closing Date.
TRANSITION ARRANGEMENTS
Corning has entered into transition agreements with eight officers of the
Company providing certain cash and stock incentives and assurances regarding the
treatment of outstanding Corning equity grants to such officers.
1998 STOCK PURCHASE AND OPTION PLAN
The Company has adopted the 1998 Plan. The 1998 Plan provides for the sale
by CCPC Acquisition of shares of outstanding Common Stock and the issuance by
the Company of options to purchase authorized but unissued shares of Common
Stock, subject to adjustment by the Company to reflect certain events such as
stock dividends, stock splits, recapitalizations, mergers or reorganizations of
the Company. The 1998 Plan is intended to assist the Company in attracting and
retaining employees of outstanding ability and to promote the identification of
their interests with those of the Company. Unless sooner terminated by the
Company's Board of Directors, the 1998 Plan will expire ten years after
adoption. Such termination will not affect the validity of any grant under the
1998 Plan ("1998 Plan Grant") outstanding on the date of the termination. Under
the 1998 Plan, CCPC Acquisition is currently in the process of selling shares of
Common Stock, and the Company is making grants of options to purchase Common
Stock, to certain members of management of the Company. In the aggregate, the
sales of shares of Common Stock by CCPC Acquisition and the option grants by the
Company will represent approximately 12.4% of the Company's fully diluted Common
Stock.
The Compensation Committee of the Board of Directors will administer the
1998 Plan, including, without limitation, the determination of the employees to
whom 1998 Plan Grants will be made, the number of shares of Common Stock subject
to each 1998 Plan Grant, and the various terms of 1998 Plan Grants. The
Compensation Committee of the Board of Directors may from time to time amend the
terms of any 1998 Plan Grant, but, except for adjustments made upon a change in
the Common Stock by reason of a stock split, spin-off, stock dividend, stock
combination or reclassification, recapitalization, reorganization,
consolidation, change of control, or similar event, such action shall not
adversely affect the rights of any participant under the 1998 Plan without such
participant's consent. The Board of Directors retain the right to amend, suspend
or terminate the 1998 Plan.
79
<PAGE>
MANAGEMENT STOCKHOLDERS' AGREEMENTS
In connection with the 1998 Plan, the Company and each such employee will
enter into a management stockholders' agreement and a stock option agreement.
The management stockholders' agreement and related sale participation agreement
will (i) place restrictions on each such employee's ability to transfer shares
of Common Stock, including a right of first refusal in favor of the Company,
(ii) provide each such employee the right to participate pro rata in certain
sales of Common Stock by CCPC Acquisition or its affiliates and (iii) provide
CCPC Acquisition and its affiliates the right to require each such employee to
participate pro rata in certain sales of Common Stock by CCPC Acquisition or its
affiliates. The management stockholders' agreements will also grant piggyback
registration rights to each such employee pursuant to the CCPC Acquisition
Registration Rights Agreement. In addition, the management stockholders'
agreement will give the Company the right to purchase shares and options held by
each such employee upon termination of employment for any reason and will permit
each such employee to sell stock and options to the Company, and the Company
will be required to purchase such stock, in the event of death, disability or
retirement after turning 65 years of age.
80
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of the Company's Common Stock as of April 1, 1998 by (i) each person
who is known by the Company to beneficially own more than 5% of the Company's
Common Stock, (ii) each of the Company's directors who own Common Stock, (iii)
each of the named executive officers who own Common Stock and (iv) all directors
and executive officers as a group. Unless otherwise indicated, the address of
each person named in the table below is Corning Consumer Products Company,
E-Building, Houghton Park, Corning, New York 14831.
<TABLE>
<CAPTION>
BENEFICIAL PERCENTAGE OF
OWNERSHIP OF COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK(1) OUTSTANDING
- ---------------------------------------------------------------------------- ------------------ -----------------
<S> <C> <C>
KKR Associates, L.P.(2) .................................................... 21,477,000 89.5%
c/o Kohlberg Kravis Roberts & Co., L.P.
9 West 57th Street
New York, New York 10019
Edward A. Gilhuly......................................................... -- --
Clifton S. Robbins........................................................ -- --
Scott M. Stuart........................................................... -- --
Corning Incorporated ....................................................... 1,920,000 8.0%
One Riverfront Plaza
Corning, NY 14831
Peter F. Campanella(3)...................................................... 180,000 *
Twilver Gordon(3)........................................................... 45,000 *
Clark S. Kinlin(3).......................................................... 80,000 *
Thomas C. O'Brien(3)........................................................ 25,000 *
All executive officers and directors as a group (13 persons, excluding
Messrs. Gilhuly, Robbins and Stuart)(4)..................................... 330,000 1.4%
</TABLE>
- --------------------------
* Less than 1%.
(1) The amounts and percentages of Common Stock beneficially owned are reported
on the basis of regulations of the Commission governing the determination of
beneficial ownership of securities. Under the rules of the Commission, a
person is deemed to be a "beneficial owner" of a security if that person has
or shares "voting power," which includes the power to vote or to direct the
voting of such security, or "investment power," which includes the power to
dispose of or to direct the disposition of such security. A person is also
deemed to be a beneficial owner of any securities of which that person has a
right to acquire beneficial ownership within 60 days. Under these rules,
more than one person may be deemed to be a beneficial owner of securities as
to which such person has an economic interest. The percentage of class
outstanding is based on 24,000,000 shares of Common Stock outstanding on the
Closing Date. It is expected that after completion of the Transactions, CCPC
Acquisition will secondarily sell shares of Common Stock, and the Company
will issue options to purchase Common Stock, to management of the Company,
which in the aggregate will represent approximately 12.4% of the fully
diluted common equity of the Company.
(2) Shares of Common Stock shown as owned by KKR Associates, L.P. ("KKR
Associates") are owned of record by CCPC Acquisition. KKR Associates is the
sole general partner of Whitehall Associates, L.P., which is the managing
member of BW Holdings, LLC. BW Holdings, LLC owns 100% of the outstanding
capital stock of CCPC Acquisition. Messrs. Gilhuly, Robbins and Stuart (who
are directors of the Company) and Messrs. Henry R. Kravis, George E.
Roberts, James H. Greene, Jr., Paul E. Raether, Michael W. Michelson,
Michael T. Tokarz, Perry Golkin and Robert I. MacDonnel, as general partners
of KKR Associates, may be deemed to share beneficial ownership of any shares
beneficially owned by KKR Associates, but disclaim any such beneficial
ownership. The address of KKR Associates is 9 West 57th Street, New York,
New York 10019.
(3) The Company has granted Messrs. Campanella, Gordon, Kinlin and O'Brien
options to purchase 540,000, 135,000, 240,000 and 75,000 shares of Common
Stock, respectively, of which 20% will vest each year beginning one year
after the date of grant.
(4) The Company currently is in the process of implementing the 1998 Plan which
will provide for ownership of up to 12.4% of the outstanding Common Stock by
members of management, including the shares acquired by Messrs. Campanella,
Gordon, Kinlin and O'Brien.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
BETWEEN CORNING AND THE COMPANY
Historically, Corning has provided the Company with certain administrative,
technical and other services, as well as providing office space and
manufacturing capacity in facilities owned or leased by Corning. Additionally,
Corning has made available to the Company certain manufacturing technology and
other intellectual property, including the Pyrex-Registered Trademark- and
Corning Ware-Registered Trademark- trademarks. In connection with the
Recapitalization, Corning and the Company entered into several agreements
relating to the provision by Corning of goods and services to the Company, the
sharing of certain facilities with the Company and the royalty-free license to
use certain trademarks, tradenames, service marks, patents and know-how of
Corning, in each case, on terms substantially as described below.
HEADQUARTERS LEASE AND TRANSITION SERVICES AGREEMENT. Corning has entered
into agreements with the Company pursuant to which Corning will continue to make
available to the Company certain office space and related facilities currently
used as the Company's headquarters until October 1, 1999 and certain
administrative services which the Company currently obtains from or through
Corning until April 1, 2000. Corning has agreed to provide this office space and
these services on substantially the same terms as offered by Corning during the
12-month period immediately prior to the Recapitalization and reflected in the
Company's historical financial statements. The Company has the right to
terminate the headquarters' lease on 30 days' notice and the right to terminate
the receipt of specific administrative services on 90 days' notice. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview--Separation from Corning; Transaction Related Charges."
SUPPLY AGREEMENT. Certain of the Company's Pyrex-Registered Trademark-
bakeware products are manufactured at a facility owned by Corning in Greenville,
Ohio. The Company and Corning entered into a supply agreement pursuant to which
Corning will supply the Company with manufacturing capacity for these products
for three years. Orders under the supply agreement will be billed at Corning's
actual cost (consisting of standard costs plus variances allocable to production
of the Company's products) determined in the same manner as during the 12-month
period immediately prior to the Recapitalization and reflected in the Company's
historical financial statements.
TECHNOLOGY SUPPORT AGREEMENT. The Company obtains certain manufacturing
technology, engineering and research and development services from Corning. The
Company and Corning entered into a technology support agreement pursuant to
which Corning will continue to make these manufacturing and technology services
available to the Company. In addition, the technology support agreement will
provide for Corning and the Company to conduct an annual technology review, for
each other's benefit, relating to patents and technical know-how in the field of
the Company's products. The manufacturing technology and engineering services to
be provided by Corning will be made available to the Company on the same basis
as has been made available to the Company during the 12-month period immediately
prior to the Recapitalization. The technology support agreement will have a term
of five years and will be renewable for an additional five-year term at the
option of the Company.
ADMINISTRATIVE SERVICES AGREEMENT. In order to enable the Company to
continue its sales operations in Australia, Brazil, Mexico, China, Hong Kong,
India, Japan, Korea, Singapore and Taiwan, Corning or its affiliates will
provide certain administrative and distribution services and sublease space to
the Company. The administrative services agreement governing these arrangements
has a term of two years expiring on April 1, 2000 and is on terms designed to
replicate substantially the economic terms of the arrangements in effect during
the 12 months immediately prior to the Recapitalization.
SHARED FACILITY AGREEMENT. The Company's Corning, New York manufacturing
facility is adjacent to, and shares certain assets and infrastructure (e.g.,
waste disposal and utility service facilities) with, Corning's Fallbrook Plant.
The Company and Corning have entered into a shared facility agreement pursuant
to which the parties have provided for the continued use and sharing of these
assets and infrastructure facilities and the allocation of the costs associated
with these items (which costs are
82
<PAGE>
generally allocated according to the parties' relative use of such shared asset)
until April 1, 2008, or until such earlier time as the Company or Corning shall
have terminated its obligation to accept or provide such assets and
infrastructure facilities in accordance with the agreement.
LICENSE AGREEMENTS. Corning and the Company entered into certain license
agreements pursuant to which Corning granted to the Company exclusive licenses
to use the Corning Ware-Registered Trademark- trademark, service mark and trade
name and Pyroceram-Registered Trademark- trademark in the field of housewares
and the Pyrex-Registered Trademark- trademark in the field of durable consumer
products (which the Company currently does not sell) for ten years (each
renewable at the option of the Company on the same terms and conditions for an
unlimited number of successive ten-year terms). In addition, Corning entered
into agreements with the Company providing for the Company's continued use of
the Corning name for up to three years (and up to five years for molds and
molded products with the Corning name embedded thereon). Corning granted to the
Company a fully paid, royalty free license of patents and know-how (including
evolutionary improvements) owned by Corning that pertain to or have been used in
the Company's business. See "Business--Intellectual Property."
CORNING GLASS CENTER AND SUPPLY ARRANGEMENTS. Pursuant to the
Recapitalization Agreement, the Company will maintain its commercial
arrangements with the Corning Glass Center (the Corning employee store) for a
period of ten years following the Closing Date on a pricing basis of the
Company's standard costs plus 15% and will continue to sell products to
Corning's manufacturing facilities for a period of five years in substantially
the same quantities and terms as during the twelve month period prior to March
2, 1998.
BETWEEN BORDEN AND THE COMPANY
In connection with the Recapitalization, the Company and Borden entered into
an agreement pursuant to which Borden will provide management, consulting and
financial services to the Company. Services will be provided in such areas as
the preparation and evaluation of strategic, operating, financial and capital
plans and the development and implementation of compensation and other incentive
programs. In consideration for such services, Borden will be entitled to an
annual fee of $1.5 million, plus reimbursement for certain expenses and
indemnification against certain liabilities. This agreement is terminable by
either party upon 30 days written notice. In connection with the
Recapitalization and in consideration of services provided by Borden in
arranging, structuring and negotiating the terms of the Recapitalization and the
related financing transactions, the Company paid Borden transaction and
financing fees and expenses of $8.0 million. The transaction and financing fees
and expenses are included in the fees and expenses incurred in connection with
the Recapitalization described under "Summary" and were funded through the
stated sources of funds disclosed thereunder. In addition, Borden and its
affiliates provided all of the interim debt financing for the Recapitalization,
a portion of which was refinanced by borrowings under the Credit Facilities and
the remainder was refinanced with the proceeds of the Old Notes.
TAX SHARING AGREEMENT
The Company and certain of its subsidiaries have entered into a tax sharing
arrangement with CCPC Acquisition pursuant to which the Company and such
subsidiaries will be required to compute their provision for income taxes on a
separate return basis and pay to, or receive from, CCPC Acquisition the separate
U.S. federal and applicable state and local income tax return liability or
credit so computed, if any.
STOCKHOLDERS' AGREEMENT; REGISTRATION RIGHTS AGREEMENT
The Company, CCPC Acquisition and Corning entered into the Stockholders'
Agreement which provides for certain restrictions and rights regarding the
transfer of Common Stock, including a right of first refusal in favor of, first,
the Company and, if the Company refuses, then CCPC Acquisition with
83
<PAGE>
respect to the Common Stock owned by Corning. After the Closing Date, Corning
will have the right to participate pro rata in certain sales of Common Stock
through the Corning Tag Along, and CCPC Acquisition will have the right to
require Corning to participate pro rata in certain sales of Common Stock by CCPC
Acquisition through the Corning Drag Along. In addition, the Stockholders'
Agreement provides Corning with unlimited "piggy back" registration rights and
one demand registration right.
CCPC Acquisition has the right, under certain circumstances and subject to
certain conditions, to require the Company to register under the Securities Act
shares of Common Stock held by it pursuant to the CCPC Acquisition Registration
Rights Agreement. Such registration rights will generally be available to CCPC
Acquisition until registration under the Securities Act is no longer required to
enable it to resell the Common Stock owned by it without restriction. The CCPC
Acquisition Registration Rights Agreement provides, among other things, that the
Company will pay all registration expenses in connection with the first six
demand registrations requested by CCPC Acquisition and in connection with any
registration commenced by the Company as a primary offering in which CCPC
Acquisition participates through "piggyback" registration rights granted under
the CCPC Acquisition Registration Rights Agreement.
84
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Certificate of Incorporation of the Company authorizes 45,000,000 shares
of Common Stock and 5,000,000 shares of preferred stock, par value $0.01 per
share (the "Preferred Stock"), of which 2,000,000 shares have been designated as
the Junior Preferred Stock. As of April 1, 1998, the outstanding capital stock
of the Company consisted of 24,000,000 shares of Common Stock and 1,200,000
shares of the Junior Preferred Stock. The following summaries of certain
provisions of the Common Stock and the Preferred Stock do not purport to be
complete and are subject to, and qualified in their entirety by, the provisions
of the Certificate of Incorporation and Bylaws of the Company.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on all matters to
be voted upon by the stockholders of the Company, and do not have cumulative
voting rights. The holders of Common Stock are entitled to receive ratably such
dividends, if any, as may be declared from time to time by the Board of
Directors out of funds legally available for that purpose, subject to
preferences that may be applicable to any outstanding Preferred Stock and any
other provisions of the Company's Certificate of Incorporation. Holders of
Common Stock have no preemptive or other rights to subscribe for additional
shares. No shares of Common Stock are subject to redemption or a sinking fund.
In the event of any liquidation, dissolution or winding up of the Company, after
payment of the debts and other liabilities of the Company, and subject to the
rights of holders of shares of Preferred Stock, holders of Common Stock are
entitled to share pro rata in any distribution to the stockholders. All of the
outstanding shares of Common Stock are fully paid and nonassessable.
PREFERRED STOCK
The Board of Directors has the authority, without action by the
stockholders, to designate and issue Preferred Stock in one or more series and
to designate the rights, preferences and privileges of each series, any or all
of which may be greater than the rights of the Common Stock. It is not possible
to state the actual effect of the issuance of any shares of Preferred Stock upon
the rights of holders of the Common Stock until the Board of Directors
determines the specific rights of the holders of such Preferred Stock. However,
the effects might include, among other things, restricting dividends on the
Common Stock, diluting the voting power of the Common Stock, impairing the
liquidation rights of the Common Stock and delaying or preventing a change in
control of the Company without further action by the stockholders.
Holders of Junior Preferred Stock are entitled to receive cumulative
dividends at the rate of $0.75 per share per calendar quarter. Such dividends
may be paid, at the option of the Company, in cash or in additional shares of
Junior Preferred Stock, or in a combination thereof. The Company may at any time
at its option redeem the Junior Preferred Stock at a redemption price per share
equal to $25.00, plus an amount equal to all unpaid accumulated dividends
thereon (the "Redemption Price"). Upon a Change of Control, the holders of the
Junior Preferred Stock have the right to require the Company to purchase the
Junior Preferred Stock at the Redemption Price, subject to the restrictions
contained in the Credit Facilities and subject to the prior payment of the
Change of Control Payment relating to the Exchange Notes and any other amounts
due pursuant to indebtedness of the Company as a result of the Change of
Control. In the event of a liquidation, dissolution or winding up of the
Company, the holders of Junior Preferred Stock shall be entitled to an amount
equal to $25.00 per share, plus an amount equal to all accumulated dividends
thereon. Holders of Junior Preferred Stock are not entitled to voting or
conversion rights.
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DESCRIPTION OF CREDIT FACILITIES
The Credit Facilities are provided by a syndicate of banks and other
financial institutions (the "Lenders") led by The Chase Manhattan Bank, as
administrative agent (the "Administrative Agent"), Salomon Brothers Holding
Company Inc, as syndication agent, and Bankers Trust Company, as documentation
agent. The Credit Facilities provide for the Term Loans of $200.0 million and
the Revolving Credit Facility of up to $275.0 million. The Revolving Credit
Facility includes borrowing capacity of up to $25.0 million for letters of
credit, and up to $25.0 million for short-term swing line loans. The final
maturity of the Term Loans is the date that is 8 1/2 years after closing of the
Credit Facilities on April 9, 1998 (the "Closing") and provides for nominal
annual amortization. The final maturity of loans under the Revolving Credit
Facility is the date that is 7 years after the Closing. Certain capitalized
terms used in this section have the meanings set forth in the Credit Facilities.
The interest rate for the Term Loans fluctuates based on leverage and
initially is Adjusted LIBOR plus 2.00%. The interest rate under the Revolving
Credit Facility fluctuates based on leverage and initially is ABR plus 1.75%.
The Company may elect interest periods of 1, 2, 3 or 6 months (or 9 or 12
months, to the extent available from all the Lenders) for Adjusted LIBOR
borrowings. Calculation of interest is on the basis of actual days elapsed in a
year of 360 days (or 365 or 366 days, as the case may be, in the case of ABR
loans based on the Prime Rate) and interest in arrears is payable at the end of
each interest period and, in any event, at least every 3 months or 90 days, as
the case may be. ABR is the Alternate Base Rate, which is the highest of Chase's
Prime Rate, the Federal Funds Effective Rate plus 0.5% and the Base CD Rate plus
1.0%. Adjusted LIBOR and the Base CD Rate will at all times include statutory
reserves to the extent actually incurred (and, in the case of the Base CD Rate,
FDIC assessment rates).
The Company will pay a commitment fee at a rate which will fluctuate based
on leverage and initially is 0.375% per annum on the undrawn portion of the
commitments in respect of the Credit Facilities, payable quarterly in arrears
after the Closing. The commitment fees will at all times be calculated based on
the actual number of days elapsed over a 365-day year.
The Company will pay a letter of credit fee equal to a rate per annum equal
to the margin for Adjusted LIBOR loans under the Revolving Credit Facility, less
0.125%, on the aggregate face amount of outstanding letters of credit under the
Revolving Credit Facility, payable in arrears at the end of each quarter and
upon the termination of the Revolving Credit Facility, in each case for the
actual number of days elapsed over a 365-day year. In addition, the Company will
pay to the fronting bank, for its own account, (a) a fronting fee of 0.125% per
annum on the aggregate face amount of outstanding letters of credit, payable in
arrears at the end of each quarter and upon the termination of the Revolving
Credit Facility, in each case for the actual number of days elapsed over a
365-day year, and (b) customary issuance, amendment and administration fees.
The Credit Facilities contain provisions under which commitment fees and
interest rates will be adjusted in increments based on the ratio (the "Leverage
Ratio") of consolidated total debt to consolidated adjusted EBITDA in effect
from time to time. Subject to certain exceptions, the margin for Adjusted LIBOR
loans for the Term Loans and the Revolving Credit Facility, and the commitment
fee rate thereunder, will be, in the case of a Leverage Ratio (i) greater than
or equal to 6.0:1.0, 2.50%, 2.25% and 0.425%, respectively, (ii) greater than or
equal to 5.5:1.0 but less than 6.0:1.0, 2.25%, 2.00% and 0.375%, respectively,
(iii) greater than or equal to 5.0:1.0 but less than 5.5:1.0, 2.00%, 1.75% and
0.375%, respectively, (iv) greater than or equal to 4.5:1.0 but less than
5.0:1.0, 1.75%, 1.50% and 0.350%, respectively, (v) greater than or equal to
4.0:1.0 but less than 4.5:1.0, 1.50%, 1.25% and 0.30%, respectively, (vi)
greater than or equal to 3.25:1.0 but less than 4.0:1.0, 1.50%, 1.00% and 0.25%,
respectively and (vii) less than 3.25:1.0, 1.50%, 0.75% and 0.225%,
respectively, with the margin for ABR loans being 1.0% less than the
corresponding margin for Adjusted LIBOR loans (but not less than 0%).
The Term Loans are subject to mandatory prepayment with (a) the net cash
proceeds of certain non-ordinary-course asset sales or other dispositions of
property by the Company and its subsidiaries,
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except to the extent that such proceeds are reinvested in the business of the
Company and its subsidiaries within a specified time period and subject to
certain other exceptions, (b) a portion of excess cash flow (as defined in the
Credit Facilities) and (c) the net proceeds of certain issuances of debt
obligations of the Company and its subsidiaries. Voluntary prepayments and
Revolving Credit Facility commitment reductions are permitted in whole or in
part at the option of the Company, in minimum principal amounts, without premium
or penalty, subject to reimbursement of certain of the Lenders' costs under
certain conditions.
The Company's obligations under the Credit Facilities are required to be
secured by a perfected first priority pledge of and security interest in (i) all
the common stock of existing and subsequently acquired direct domestic
subsidiaries of the Company (which at Closing consisted of Revere Ware
Corporation; the Company intends to transfer substantially all of its assets to
a new subsidiary after the Closing, the stock of which will also be pledged as
described above) other than common stock of unrestricted subsidiaries and
certain subsidiaries created or acquired in connection with permitted
acquisitions, (ii) evidences of indebtedness in excess of $5.0 million received
by the Company in connection with asset sales other than sales in the ordinary
course of business or in connection with permitted sale-leasebacks and (iii) 65%
of the common stock of existing and subsequently acquired material direct
foreign subsidiaries. In addition, indebtedness under the Credit Facilities is
required to be guaranteed by each existing and subsequently acquired domestic
subsidiary of the Company (which at Closing consisted of Revere Ware
Corporation), subject to certain exceptions. See "Description of the Exchange
Notes-- Subordination" and "Risk Factors--Subordination" and "--Encumbrances on
Assets to Secure Credit Facilities."
The Credit Facilities contain customary covenants and restrictions on the
Company's ability to, among other things, incur debt, grant liens, sell assets,
pay dividends, make investments, prepay or redeem the Exchange Notes, enter into
leases or make capital expenditures. In addition, the Credit Facilities provide
that the Company (i) must meet or exceed a ratio of consolidated adjusted EBITDA
to consolidated adjusted interest expense of 1.50 to 1.00 in 1998 and gradually
increasing through the maturity of the Term Loans to 2.50 to 1.00 and (ii) must
not exceed a ratio of consolidated total debt to consolidated adjusted EBITDA of
6.50 to 1.00 at the end of the last quarter of 1998 and gradually decreasing
through the maturity of the Term Loans to 4.00 to 1.00.
Events of default under the Credit Facilities include (i) nonpayment of
principal with no period of grace and nonpayment of interest, fees or other
amounts due under the Credit Facilities within 5 days after the same become due;
(ii) material breach of any representation or warranty; (iii) failure to observe
any other term, covenant or agreement contained in the Credit Facilities beyond
an applicable period of grace; (iv) the failure by the Company or its
subsidiaries (1) to make payments in respect of any indebtedness when due which
continues after the applicable period of grace or (2) to perform or observe any
condition or covenant or any other event occurring or condition existing
relating to indebtedness of the Company or its subsidiaries and the effect of
such failure, event or condition is to cause or to permit the holders of such
indebtedness to cause such indebtedness to be due prior to its stated maturity,
and, in the case of both clause (1) and (2), the aggregate amount of such
indebtedness, together with the aggregate amount of all other indebtedness in
default, equals or exceeds $20.0 million; (v) certain events of bankruptcy or
insolvency with respect to the Company or material subsidiaries; (vi) the
occurrence of certain events under the Employee Retirement Income Security Act
of 1974, as amended; (vii) any material provision of the pledge agreement
ceasing to create a valid security interest or the guaranty of the Company's
obligations ceasing to be effective; (viii) judgments against the Company or its
subsidiaries of $20.0 million or greater that remain unsatisfied, unvacated or
unstayed pending appeal for a period of 60 days after entry; or (ix) a change of
control.
A "change of control" under the Credit Facilities will occur if (a) KKR, its
affiliates and management of the Company cease to own in the aggregate, directly
or indirectly, beneficially and of record, at least 35% of the outstanding
voting stock of the Company (other than as the result of one or more widely
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distributed offerings of voting stock of the Company); (b) any person, entity or
"group" (within the meaning of Section 13(d) or 14(d) of the Exchange Act) have
acquired direct or indirect beneficial ownership of a percentage of the
outstanding voting stock of the Company that exceeds the percentage of such
voting stock then beneficially owned, in the aggregate, by KKR, its affiliates
and management of the Company, unless, in the case of (a) or (b) above, KKR, its
affiliates and management of the Company have, at such time, the right or the
ability by voting power, contract or otherwise to elect or designate for
election a majority of the Board of Directors of the Company; or (c) at any time
"continuing directors" shall not constitute a majority of the Board of Directors
of the Company. Continuing directors of the Company under the Credit Facilities
is defined in the Credit Facilities to include members of the Board of Directors
at Closing, individuals who have been members of the Board of Directors for the
preceding 12 months, individuals nominated by KKR and individuals nominated by a
majority of the then continuing directors.
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THE EXCHANGE OFFER
GENERAL
The Company hereby offers, 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), to exchange up to $200.0 million
aggregate principal amount of Exchange Notes for a like aggregate principal
amount of Old Notes properly tendered on or prior to the Expiration Date and not
withdrawn as permitted pursuant to the procedures described below. The Exchange
Offer is being made with respect to all of the Old Notes.
As of the date of this Prospectus, $200.0 million aggregate principal amount
of the Old Notes is outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about , 1998, to all holders of
Old Notes known to the Company. The Company's obligation to accept Old Notes for
exchange pursuant to the Exchange Offer is subject to certain conditions set
forth under "--Certain Conditions to the Exchange Offer" below. The Company
currently expects that each of the conditions will be satisfied and that no
waivers will be necessary.
PURPOSE OF THE EXCHANGE OFFER
The Old Notes were issued on May 5, 1998 in a transaction exempt from the
registration requirements of the Securities Act. Accordingly, the Old Notes may
not be reoffered, resold, or otherwise transferred unless so registered or
unless an applicable exemption from the registration and prospectus delivery
requirements of the Securities Act is available.
In connection with the issuance and sale of the Old Notes, the Company
entered into the Registration Rights Agreement, which requires the Company to
file with the Commission a registration statement relating to the Exchange Offer
not later than 100 days after the date of issuance of the Old Notes, and to use
its best efforts to cause the registration statement relating to the Exchange
Offer to become effective under the Securities Act not later than 200 days after
the date of issuance of the Old Notes and the Exchange Offer to be consummated
not later than 230 days after the date on which the Old Notes were issued. A
copy of the Registration Rights Agreement has been filed as an exhibit to the
Registration Statement.
The Exchange Offer is being made by the Company to satisfy its obligations
with respect to the Registration Rights Agreement. The term "holder," with
respect to the Exchange Offer, means any person in whose name Old Notes are
registered on the books of the Company or any other person who has obtained a
properly completed bond power from the registered holder, or any person whose
Old Notes are held of record by The Depository Trust Company. Other than
pursuant to the Registration Rights Agreement, the Company is not required to
file any registration statement to register any outstanding Old Notes. Holders
of Old Notes who do not tender their Old Notes or whose Old Notes are tendered
but not accepted would have to rely on exemptions to registration requirements
under the securities laws, including the Securities Act, if they wish to sell
their Old Notes.
The Company is making the Exchange Offer in reliance on the position of the
Staff of the Commission as set forth in certain interpretive letters addressed
to third parties in other transactions. However, the Company has not sought its
own interpretive letter and there can be no assurance that the staff would make
a similar determination with respect to the Exchange Offer as it has in such
interpretive letters to third parties. Based on these interpretations by the
Staff, the Company believes that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by a Holder (other than any Holder who is a broker-dealer
or an "affiliate" of the Company within the meaning of Rule 405 of the
Securities Act) without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such
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Exchange Notes are acquired in the ordinary course of such Holder's business and
that such Holder is not participating, and has no arrangement or understanding
with any person to participate, in a distribution (within the meaning of the
Securities Act) of such Exchange Notes. See "--Resale of Exchange Notes." Each
broker-dealer that receives Exchange Notes for its own account in exchange for
Old Notes, where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution."
TERMS OF THE EXCHANGE
The Company hereby offers to exchange, subject to the conditions set forth
herein and in the Letter of Transmittal accompanying this Prospectus, $1,000 in
principal amount of Exchange Notes for each $1,000 in principal amount of the
Old Notes. The terms of the Exchange Notes are identical in all material
respects to the terms of the Old Notes for which they may be exchanged pursuant
to this Exchange Offer, except that the Exchange Notes will generally be freely
transferable by holders thereof and will not be subject to any covenant
regarding registration. The Exchange Notes will evidence the same indebtedness
as the Old Notes and will be entitled to the benefits of the Indenture. See
"Description of Exchange Notes."
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered for exchange.
The Company has not requested, and does not intend to request, an
interpretation by the staff of the Commission with respect to whether the
Exchange Notes issued pursuant to the Exchange Offer in exchange for the Old
Notes may be offered for sale, resold or otherwise transferred by any holder
without compliance with the registration and prospectus delivery provisions of
the Securities Act. Instead, based on an interpretation by the staff of the
Commission set forth in a series of no-action letters issued to third parties,
the Company believes that Exchange Notes issued pursuant to the Exchange Offer
in exchange for Old Notes may be offered for sale, resold and otherwise
transferred by any holder of such Exchange Notes (other than any such holder
that is a broker-dealer or 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 holder's business and
such holder has no arrangement or understanding with any person to participate
in the distribution of such Exchange Notes and neither such holder nor any other
such person is engaging in or intends to engage in a distribution of such
Exchange Notes. Since the Commission has not considered the Exchange Offer in
the context of a no-action letter, there can be no assurance that the Staff of
the Commission would make a similar determination with respect to the Exchange
Offer. Any holder who is an affiliate of the Company or who tenders in the
Exchange Offer for the purpose of participating in a distribution of the
Exchange Notes cannot rely on such interpretation by the staff of the Commission
and must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. 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. Each broker-dealer that
receives Exchange Notes for its own account in exchange for Old Notes, where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. A broker-dealer
may not participate in the Exchange Offer with respect to Old Notes acquired
other than as a result of market-making activities or other trading activities.
See "Plan of Distribution."
Interest on the Exchange Notes will accrue from the last Interest Payment
Date on which interest was paid on the Old Notes so surrendered or, if no
interest has been paid on such Notes, from May 5, 1998.
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Tendering holders of the Old Notes shall not be required to pay brokerage
commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of the Old Notes
pursuant to the Exchange Offer.
EXPIRATION DATE; EXTENSION; TERMINATION; AMENDMENT
The Exchange Offer will expire at 5:00 p.m., New York City time, on
, 1998, unless the Company, in its sole discretion, has extended
the period of time for which the Exchange Offer is open (such date, as it may be
extended, is referred to herein as the "Expiration Date") . The Expiration Date
will be at least 20 business days after the commencement of the Exchange Offer
in accordance with Rule 14e-1(a) under the Exchange Act. 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 Old Notes, by giving oral or written notice to the Exchange
Agent and by timely public announcement no later than 9:00 a.m. New York City
time, on the next business day after the previously scheduled Expiration Date.
During any such extension, all Old Notes previously tendered will remain subject
to the Exchange Offer unless properly withdrawn. The Company does not anticipate
extending the Expiration Date.
The Company expressly reserves the right to (i) terminate or amend the
Exchange Offer and not to accept for exchange any Old Notes not theretofore
accepted for exchange upon the occurrence of any of the events specified below
under "--Certain Conditions to the Exchange Offer" which have not been waived by
the Company and (ii) amend the terms of the Exchange Offer in any manner which,
in its good faith judgment, is advantageous to the holders of the Old Notes,
whether before or after any tender of the Notes. If any such termination or
amendment occurs, the Company will notify the Exchange Agent and will either
issue a press release or give oral or written notice to the holders of the Old
Notes as promptly as practicable.
For purposes of the Exchange Offer, a "business day" means any day other
than Saturday, Sunday or a date on which banking institutions are required or
authorized by New York State law to be closed, and consists of the time period
from 12:01 a.m. through 12:00 midnight, New York City time. Unless the Company
terminates the Exchange Offer prior to 5:00 p.m., New York City time, on the
Expiration Date, the Company will exchange the Exchange Notes for the Old Notes
on the Exchange Date.
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Company of Old Notes by a holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal.
A holder of Old Notes may tender the same by (i) properly completing and
signing the Letter of Transmittal or a facsimile thereof (all references in this
Prospectus to the Letter of Transmittal shall be deemed to include a facsimile
thereof) and delivering the same, together with the certificate or certificates
representing the Old Notes being tendered and any required signature guarantees
and any other documents required by the Letter of Transmittal, to the Exchange
Agent at its address set forth below on or prior to the Expiration Date (or
complying with the procedure for book-entry transfer described below) or (ii)
complying with the guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY
IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL PROPERLY INSURED, WITH RETURN
RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
INSURE TIMELY DELIVERY. NO OLD NOTES OR LETTERS OF TRANSMITTAL SHOULD BE SENT TO
THE COMPANY.
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If tendered Old Notes are registered in the name of the signer of the Letter
of Transmittal and the Exchange Notes to be issued in exchange therefor are to
be issued (and any untendered Old Notes are to be reissued) in the name of the
registered holder (which term, for the purposes described herein, shall include
any participant in The Depository Trust Company (also referred to as a
"book-entry transfer facility") whose name appears on a security listing as the
owner of Old Notes), the signature of such signer need not be guaranteed. In any
other case, the tendered Old Notes must be endorsed or accompanied by written
instruments of transfer in form satisfactory to the Company and duly executed by
the registered holder, and the signature on the endorsement or instrument of
transfer must be guaranteed by a bank, broker, dealer, credit union, savings
association, clearing agency or other institution (each an "Eligible
Institution") that is a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Exchange Act. If the
Exchange Notes and/or Old Notes not exchanged are to be delivered to an address
other than that of the registered holder appearing on the note register for the
Old Notes, the signature in the Letter of Transmittal must be guaranteed by an
Eligible Institution.
The Exchange Agent will make a request within two business days after the
date of receipt of this Prospectus to establish accounts with respect to the Old
Notes at the book-entry transfer facility for the purpose of facilitating the
Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in the book-entry transfer facility's system
may make book-entry delivery of Old Notes by causing such book-entry transfer
facility to transfer such Old Notes into the Exchange Agent's account with
respect to the Old Notes in accordance with the book-entry transfer facility's
procedures for such transfer. Although delivery of Old Notes may be effected
through book-entry transfer into the Exchange Agent's account at the book-entry
transfer facility, an appropriate Letter of Transmittal with any required
signature guarantee and all other required documents must in each case be
transmitted to and received or confirmed by the Exchange Agent at its address
set forth below on or prior to the Expiration Date, or, if the guaranteed
delivery procedures described below are complied with, within the time period
provided under such procedures.
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Old Notes to reach the Exchange Agent before the
Expiration Date or the procedure for book-entry transfer cannot be completed on
a timely basis, a tender may be effected if the Exchange Agent has received at
its address set forth below on or prior to the Expiration Date, a letter,
telegram or facsimile transmission (receipt confirmed by telephone and an
original delivered by guaranteed overnight courier) from an Eligible Institution
setting forth the name and address of the tendering holder, the names in which
the Old Notes are registered and, if possible, the certificate numbers of the
Old Notes to be tendered, and stating that the tender is being made thereby and
guaranteeing that within three business days after the Expiration Date, the Old
Notes in proper form for transfer (or a confirmation of book-entry transfer of
such Old Notes into the Exchange Agent's account at the book-entry transfer
facility), will be delivered by such Eligible Institution together with a
properly completed and duly executed Letter of Transmittal (and any other
required documents). Unless Old Notes being tendered by the above-described
method are deposited with the Exchange Agent within the time period set forth
above (accompanied or preceded by a properly completed Letter of Transmittal and
any other required documents), the Company may, at its option, reject the
tender. Copies of the notice of guaranteed delivery ("Notice of Guaranteed
Delivery") which may be used by Eligible Institutions for the purposes described
in this paragraph are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Old Notes (or a confirmation of book-entry transfer of such
Old Notes into the Exchange Agent's account at the book-entry transfer facility)
is received by the Exchange Agent, or (ii) a Notice of Guaranteed Delivery or
letter, telegram or facsimile transmission to similar effect (as provided above)
from an Eligible Institution is received by the Exchange Agent. Issuances of
Exchange Notes in exchange for Old Notes tendered
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pursuant to a Notice of Guaranteed Delivery or letter, telegram or facsimile
transmission to similar effect (as provided above) by an Eligible Institution
will be made only against deposit of the Letter of Transmittal (and any other
required documents) and the tendered Old Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any particular Old Notes not properly tendered or not to accept any
particular Old Notes 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 Old Notes either before or after the Expiration Date (including the
right to waive the ineligibility of any holder who seeks to tender Old Notes in
the Exchange Offer). The interpretation of the terms and conditions of the
Exchange Offer (including the Letter of Transmittal and the instructions
thereto) by the Company shall be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Old Notes
for exchange must be cured within such reasonable period of time as the Company
shall determine. 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 Old 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 Old Notes, such Old Notes must be endorsed or
accompanied by appropriate powers of attorney, in either case signed exactly as
the name or names of the registered holder or holders appear on the Old Notes.
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such 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
acquired in the ordinary course of business of the person receiving such
Exchange Notes, whether or not such person is the holder, that neither the
holder nor any such other person has an arrangement or understanding with any
person to participate in the distribution of such Exchange Notes and that
neither the holder nor any such other person is an "affiliate," as defined under
Rule 405 of the Securities Act, of the Company, or if it is an affiliate it will
comply with the registration and prospectus requirements of the Securities Act
to the extent applicable.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Old Notes where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. See "Plan of Distribution."
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Notes for exchange (the "Transferor") exchanges, assigns
and transfers the Old Notes to the Company and irrevocably constitutes and
appoints the Exchange Agent as the Transferor's agent and attorney-in-fact to
cause the Old Notes to be assigned, transferred and exchanged. The Transferor
represents and warrants that it has full power and authority to tender,
exchange, assign and transfer the Old Notes and to acquire Exchange Notes
issuable upon the exchange of such tendered Notes, and that, when the same are
accepted for exchange, the Company will acquire good and unencumbered title to
the tendered Old Notes, free and clear of all liens,
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restrictions, charges and encumbrances and not subject to any adverse claim. The
Transferor also warrants that it will, upon request, execute and deliver any
additional documents deemed by the Exchange Agent or the Company to be necessary
or desirable to complete the exchange, assignment and transfer of tendered Old
Notes or transfer ownership of such Old Notes on the account books maintained by
a book-entry transfer facility. The Transferor further agrees that acceptance of
any tendered Old Notes by the Company and the issuance of Exchange Notes in
exchange therefor shall constitute performance in full by the Company of certain
of its obligations under the Registration Rights Agreement. All authority
conferred by the Transferor will survive the death or incapacity of the
Transferor and every obligation of the Transferor shall be binding upon the
heirs, legal representatives, successors, assigns, executors and administrators
of such Transferor.
The Transferor certifies that it is not an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act and that it is acquiring the
Exchange Notes offered hereby in the ordinary course of such Transferor's
business and that such Transferor has no arrangement with any person to
participate in the distribution of such Exchange Notes. 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. Each Transferor which is a
broker-dealer receiving Exchange Notes for its own account must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. 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 Old Notes where such Old Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. The Company will, for a period of 90 days after the Expiration Date,
make copies of this Prospectus available to any broker-dealer for use in
connection with any such resale.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to the Expiration
Date.
For a withdrawal to be effective, a written notice of withdrawal sent by
facsimile transmission (receipt confirmed by telephone) or letter must be
received by the Exchange Agent at the address set forth herein prior to the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having tendered the Old Notes to be withdrawn (the "Depositor"), (ii)
identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes), (iii) specify the principal
amount of Notes to be withdrawn, (iv) include a statement that such holder is
withdrawing his election to have such Old Notes exchanged, (v) be signed by the
holder in the same manner as the original signature on the Letter of Transmittal
by which such Old Notes were tendered or as otherwise described above (including
any required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee under the Indenture register the transfer of such
Old Notes into the name of the person withdrawing the tender and (vi) specify
the name in which any such Old Notes are to be registered, if different from
that of the Depositor. The Exchange Agent will return the properly withdrawn Old
Notes promptly following receipt of notice of withdrawal. If Old Notes have been
tendered pursuant to the procedure for book-entry transfer, any notice of
withdrawal must specify the name and number of the account at the book-entry
transfer facility to be credited with the withdrawn Old Notes or otherwise
comply with the book-entry transfer facility procedure. All questions as to the
validity of notices of withdrawals, including time of receipt, will be
determined by the Company and such determination will be final and binding on
all parties.
Any Old Notes so withdrawn will be deemed not to have been validly tendered
for exchange for purposes of the Exchange Offer. Any Old Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
the book-entry
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transfer facility pursuant to the book-entry transfer procedures described
above, such Old Notes will be credited to an account with such book-entry
transfer facility specified by the holder) as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Old Notes may be retendered by following one of the procedures
described under "Procedures for Tendering Old Notes" above at any time on or
prior to the Expiration Date.
ACCEPTANCE OF OLD 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 on the Exchange Date, all Old Notes properly
tendered and will issue the Exchange Notes promptly after such acceptance. See
"--Certain Conditions to the Exchange Offer" below. For purposes of the Exchange
Offer, the Company shall be deemed to have accepted properly tendered Old Notes
for exchange when, as and if the Company has given oral or written notice
thereof to the Exchange Agent.
For each Old Note accepted for exchange, the holder of such Old Note will
receive an Exchange Note having a principal amount equal to that of the
surrendered Old Note.
In all cases, issuance of Exchange Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely book-entry
confirmation of such Old Notes into the Exchange Agent's account at the
book-entry transfer facility, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Old Notes are not
accepted for any reason set forth in the terms and conditions of the Exchange
Offer or if Old Notes are submitted for a greater principal amount than the
holder desires to exchange, such unaccepted or non-exchanged Old Notes will be
returned without expense to the tendering holder thereof (or, in the case of Old
Notes tendered by book-entry transfer into the Exchange Agent's account at the
book-entry transfer facility pursuant to the book-entry transfer procedures
described above, such non-exchanged Old Notes will be credited to an account
maintained with such book-entry transfer facility) as promptly as practicable
after the expiration of the Exchange Offer.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, the Company shall not be required to accept for exchange,
or to issue Exchange Notes in exchange for, any Old Notes and may terminate or
amend the Exchange Offer (by oral or written notice to the Exchange Agent or by
a timely press release) if at any time before the acceptance of such Old Notes
for exchange or the exchange of the Exchange Notes for such Old Notes, any of
the following conditions exist:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency or regulatory authority or any
injunction, order or decree is issued with respect to the Exchange Offer
which, in the sole judgment of the Company, might materially impair the
ability of the Company to proceed with the Exchange Offer or have a material
adverse effect on the contemplated benefits of the Exchange Offer to the
Company; or
(b) 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 that is or may be adverse to the Company, or the
Company shall have become aware of facts that have or may have adverse
significance with respect to the value of the Old Notes or the Exchange
Notes or that may materially impair the contemplated benefits of the
Exchange Offer to the Company; or
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(c) any law, rule or regulation or applicable interpretations of the
Staff of the Commission is issued or promulgated which, in the good faith
determination of the Company, do not permit the Company to effect the
Exchange Offer; or
(d) any governmental approval has not been obtained, which approval the
Company, in its sole discretion, deems necessary for the consummation of the
Exchange Offer; or
(e) there shall have been proposed, adopted or enacted any law, statute,
rule or regulation (or an amendment to any existing law statute, rule or
regulation) which, in the sole judgment of the Company, might materially
impair the ability of the Company to proceed with the Exchange Offer or have
a material adverse effect on the contemplated benefits of the Exchange Offer
to the Company; or
(f) there shall occur a change in the current interpretation by the
staff of the Commission which permits the Exchange Notes issued pursuant to
the Exchange Offer in exchange for Old Notes to 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; or
(g) there shall have occurred (i) any general suspension of, shortening
of hours for, or limitation on prices for, trading in securities on any
national securities exchange or in the over-the-counter market (whether or
not mandatory), (ii) any limitation by any govermental 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 by
Federal or state authorities in the United States (whether or not
mandatory), (iv) a commencement of a war, armed hostilities or other
international or national crisis directly or indirectly involving the United
States, (v) any limitation (whether or not mandatory) by any governmental
authority on, or other event having a reasonable likelihood of affecting,
the extension of credit by banks or other leading institutions in the United
States, or (vi) 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.
The Company expressly reserves the right to terminate the Exchange Offer and
not accept for exchange any Old Notes upon the occurrence of any of the
foregoing conditions (which represent all of the material conditions to the
acceptance by the Company of properly tendered Old Notes). In addition, the
Company may amend the Exchange Offer at any time prior to the Expiration Date if
any of the conditions set forth above occur. Moreover, regardless of whether any
of such conditions has occurred, the Company may amend the Exchange Offer in any
manner which, in its good faith judgment, is advantageous to holders of the Old
Notes.
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. If the Company waives or amends the foregoing
conditions, it will, if required by law, extend the Exchange Offer for a minimum
of five business days from the date that the Company first gives notice, by
public announcement or otherwise, of such waiver or amendment, if the Exchange
Offer would otherwise expire within such five business-day period. Any
determination by the Company concerning the events described above will be final
and binding upon all parties.
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In addition, the Company will not accept for exchange any Old Notes
tendered, and no Exchange Notes will be issued in exchange for any such Old
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, as amended. In any such event the Company is required to use every
reasonable effort to obtain the withdrawal of any stop order at the earliest
possible time.
The Exchange Offer is not conditioned upon any minimum principal amount of
Old Notes being tendered for exchange.
EXCHANGE AGENT
The Bank of New York has been appointed as the Exchange Agent for the
Exchange Offer. All executed Letters of Transmittal should be directed to the
Exchange Agent at one of the addresses set forth below:
<TABLE>
<S> <C>
BY HAND/OVERNIGHT COURIER: BY MAIL:
The Bank of New York The Bank of New York
101 Barclay Street 101 Barclay Street, 7E
Corporate Trust Services Window New York, New York 10286
Ground Level Attention: Vincent Jhingoor, Reorganization
Attention: Vincent Jhingoor, Reorganization Section
Section
BY FACSIMILE:
(212) 815-6339
</TABLE>
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 at the address and
telephone number set forth in the Letter of Transmittal.
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ON THE LETTER OF TRANSMITTAL,
OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE OR TELEX NUMBER OTHER THAN THE
ONES SET FORTH ON THE LETTER OF TRANSMITTAL, WILL NOT CONSTITUTE A VALID
DELIVERY.
SOLICITATION OF TENDERS; FEES AND EXPENSES
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith. The
Company will also pay brokerage houses and other custodians, nominees and
fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding
copies of this and other related documents to the beneficial owners of the Old
Notes and in handling or forwarding tenders for their customers.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Company and are estimated in the aggregate to be
approximately $500,000, which includes fees and expenses of the Exchange Agent,
Trustee, registration fees, accounting, legal, printing and related fees and
expenses.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Company.
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Neither the delivery of this Prospectus nor any exchange made hereunder shall,
under any circumstances, create any implication that there has been no change in
the affairs of the Company since the respective dates as of which information is
given herein. The Exchange Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Old Notes in any jurisdiction in which
the making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. However, the Company may, at its
discretion, take such action as it may deem necessary to make the Exchange Offer
in any such jurisdiction and extend the Exchange Offer to holders of Old Notes
in such jurisdiction. In any jurisdiction in which the securities laws or blue
sky laws of which require the Exchange Offer to be made by a licensed broker or
dealer, the Exchange Offer is being made on behalf of the Company by one or more
registered brokers or dealers which are licensed under the laws of such
jurisdication.
TRANSFER TAXES
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered holder of the Old Notes tendered, or if
tendered Old 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 exchange of Old Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
holder or any other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the carrying value of the Old Notes
as reflected in the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized by the
Company upon the exchange of Exchange Notes for Old Notes. Expenses incurred in
connection with the issuance of the Exchange Notes will be amortized over the
term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon. Old Notes not
exchanged pursuant to the Exchange Offer will continue to remain outstanding in
accordance with their terms. In general, the Old 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 the Old Notes under the Securities Act.
Participation in the Exchange Offer is voluntary, and holders of Old Notes
should carefully consider whether to participate. Holders of Old Notes are urged
to consult their financial and tax advisors in making their own decision on what
action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Old Notes pursuant to the terms of, this Exchange Offer, the
Company will have fulfilled a covenant contained in the Registration Rights
Agreement. Holders of Old Notes who do not tender their Old Notes in the
Exchange Offer will continue to hold such Old Notes and will be entitled to all
the rights and limitations applicable thereto under the Indenture, except for
any such rights under the Registration Rights Agreement that by their terms
terminate or cease to have further effectiveness as a result of the making of
this Exchange
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Offer. All untendered Old Notes will continue to be subject to the restrictions
on transfer set forth in the Indenture. To the extent that Old Notes are
tendered and accepted in the Exchange Offer, the trading market for untendered
Old Notes could be adversely affected.
The Company may in the future seek to acquire, subject to the terms of the
Indenture, untendered Old Notes in open market or privately negotiated
transactions, through subsequent exchange offers or otherwise. The Company has
no present plan to acquire any Old Notes which are not tendered in the Exchange
Offer.
RESALE OF EXCHANGE NOTES
The Company is making the Exchange Offer in reliance on the position of the
staff of the Commission as set forth in certain interpretive letters addressed
to third parties in other transactions. However, the Company has not sought its
own interpretive letter and there can be no assurance that the Staff would make
a similar determination with respect to the Exchange Offer as it has in such
interpretive letters to third parties. Based on these interpretations by the
staff, the Company believes that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by a Holder (other than any Holder who is a broker-dealer
or an "affiliate" of the Company within the meaning of Rule 405 of the
Securities Act) without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such Exchange Notes
are acquired in the ordinary course of such Holder's business and that such
Holder is not participating, and has no arrangement or understanding with any
person to participate, in a distribution (within the meaning of the Securities
Act) of such Exchange Notes. However, any Holder who is an "affiliate" of the
Company or who has an arrangement or understanding with respect to the
distribution of the Exchange Notes to be acquired pursuant to the Exchange
Offer, or any broker-dealer who purchased Old Notes from the Company to resell
pursuant to Rule 144A or any other available exemption under the Securities Act
(i) could not rely on the applicable interpretations of the staff and (ii) must
comply with the registration and prospectus delivery requirements of the
Securities Act. A broker-dealer who holds Old Notes that were acquired for its
own account as a result of market-making or other trading activities may be
deemed to be an "underwriter" within the meaning of the Securities Act and must,
therefore, deliver a prospectus meeting the requirements of the Securities Act
in connection with any resale of Exchange Notes. Each such broker-dealer that
receives Exchange Notes for its own account in exchange for Old Notes, where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge in the Letter of
Transmittal 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 securities laws of certain jurisdictions, if
applicable, the Exchange Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with. The Company has
agreed, pursuant to the Registration Rights Agreement and subject to certain
specified limitations therein, to register or qualify the Exchange Notes for
offer or sale under the securities or blue sky laws of such jurisdictions as any
holder of the Exchange Notes reasonably requests. Such registration or
qualification may require the imposition of restrictions or conditions
(including suitability requirements for offerees or purchasers) in connection
with the offer or sale of any Exchange Notes.
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DESCRIPTION OF THE EXCHANGE NOTES
GENERAL
The Old Notes were issued and the Exchange Notes offered hereby will be
issued under the Indenture. The terms of the Exchange 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 (the "Trust Indenture Act"). The Exchange
Notes are subject to all such terms, and holders of the Exchange Notes are
referred to the Indenture and the Trust Indenture Act for a statement thereof.
The following summary of the material provisions of the Indenture describes the
material terms of the Indenture but is subject to, and qualified in its entirety
by reference to, the provisions of the Indenture, including the definitions of
certain terms contained therein and those terms made part of the Indenture by
reference to the Trust Indenture Act. For definitions of certain capitalized
terms used in the following summary, see "--Certain Definitions." The Indenture
is an exhibit to the Registration Statement of which this Prospectus is a part.
On April 30, 1998, the Company issued $200.0 million aggregate principal
amount of Old Notes under the Indenture. The terms of the Exchange Notes are
identical in all material respects to the Old Notes, except for certain transfer
restrictions and registration and other rights relating to the exchange of the
Old Notes for Exchange Notes. The Trustee will authenticate and deliver Exchange
Notes for original issue only in exchange for a like principal amount of Old
Notes. Any Old Notes that remain outstanding after the consummation of the
Exchange Offer, together with the Exchange Notes, will be treated as a single
class of securities under the Indenture. Accordingly, all references herein to
specified percentages in aggregate principal amount of the outstanding Exchange
Notes shall be deemed to mean, at any time after the Exchange Offer is
consummated, such percentage in aggregate principal amount of the Old Notes and
Exchange Notes then outstanding.
The Notes will be general unsecured obligations of the Company and will be
subordinated in right of payment to all existing and future Senior Indebtedness
of the Company. As of March 31, 1998, on a pro forma basis giving effect to
Transactions, the aggregate amount of the Company's outstanding Senior
Indebtedness would have been approximately $271.6 million, all of which would
have been secured Indebtedness and the Company would have had no Senior
Subordinated Indebtedness outstanding other than the Notes. The Indenture will
permit the incurrence of additional Senior Indebtedness in the future. See "Risk
Factors--Substantial Leverage and Debt Service."
The Company is in the process of contributing substantially all of its
assets to its Subsidiaries and will operate as a holding company conducting
substantially all of its operations through its Subsidiaries. Consequently, the
Notes will be effectively subordinated to the obligations of the Company's
Subsidiaries, including the guarantee by its Subsidiaries of obligations under
the Senior Credit Facilities. The Notes are not guaranteed by any of the
Company's Subsidiaries. In the event of an insolvency, liquidation or other
reorganization of any of the Subsidiaries of the Company, the creditors of the
Company (including the holders of the Notes), as well as stockholders of the
Company, will have no right to proceed against the assets of such Subsidiaries
or to cause the liquidation or bankruptcy of such Subsidiaries under Federal
bankruptcy laws. Creditors of such Subsidiaries, including lenders under the
Senior Credit Facilities, would be entitled to payment in full from such assets
before the Company would be entitled to receive any distribution therefrom.
Except to the extent that the Company may itself be a creditor with recognized
claims against such Subsidiaries, claims of creditors of such Subsidiaries will
have priority with respect to the assets and earnings of such Subsidiaries over
the claims of creditors of the Company, including claims under the Notes. In
addition, as a result of the Company becoming a holding company, the Company's
operating cash flow and its ability to service its indebtedness, including the
Notes, will be dependent upon the operating cash flow of its Subsidiaries and
the payment of funds by such Subsidiaries to the Company in the form of loans,
dividends or otherwise. As of March 31, 1998, after giving pro forma effect to
the Transactions, the Subsidiaries of the Company would have had total
liabilities of $117.4 million (excluding guarantees in respect of the Senior
Credit Facilities).
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As of the Issuance Date, 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 any of the
restrictive covenants set forth in the Indenture.
SUBORDINATION
The payment of the Subordinated Note Obligations will be subordinated in
right of payment, as set forth in the Indenture, to the prior payment in full in
cash or cash equivalents of all 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 marshalling of the Company's assets and liabilities, the
holders of Senior Indebtedness will be entitled to receive payment in full in
cash or cash equivalents of such Senior Indebtedness and all outstanding Letter
of Credit Obligations will be fully cash collateralized before the Holders will
be entitled to receive any payment with respect to the Subordinated Note
Obligations, and until all Senior Indebtedness is paid in full in cash
equivalents, any distribution to which the Holders would be entitled shall be
made to the holders of Senior Indebtedness (except that Holders may receive (i)
shares of stock and any debt securities that are subordinated at least to the
same extent as the Notes to (a) Senior Indebtedness and (b) any securities
issued in exchange for Senior Indebtedness and (ii) payments made from the
trusts described under "--Legal Defeasance and Covenant Defeasance").
The Company also may not make any payment upon or in respect of the
Subordinated Note Obligations (except in such subordinated securities or from
the trust described under "--Legal Defeasance and Covenant Defeasance") if (i) a
default in the payment of the principal of, premium, if any, or interest on, or
of unreimbursed amounts under drawn letters of credit or in respect of bankers'
acceptances or fees relating to letters of credit or bankers' acceptances
constituting, Designated Senior Indebtedness occurs and is continuing beyond any
applicable period of grace (a "PAYMENT DEFAULT") 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 without further notice (except such notice as
may be required to effect such acceleration) or the expiration of any applicable
grace periods (a "NON-PAYMENT DEFAULT") and the Trustee receives a notice of
such default (a "PAYMENT BLOCKAGE NOTICE") from a representative of holders of
such Designated Senior Indebtedness. Payments on the Notes, including any missed
payments, may and shall be resumed (a) in the case of a payment default, upon
the date on which such default is cured or waived or shall have ceased to exist
or such Designated Senior Indebtedness shall have been discharged or paid in
full in cash or cash equivalents and all outstanding Letter of Credit
Obligations shall have been fully cash collateralized and (b) in case of a
nonpayment default, the earlier of (x) the date on which such nonpayment default
is cured or waived, (y) 179 days after the date on which the applicable Payment
Blockage Notice is received (each such period, the "PAYMENT BLOCKAGE PERIOD") or
(z) the date such Payment Blockage Period shall be terminated by written notice
to the Trustee from the requisite holders of such Designated Senior Indebtedness
necessary to terminate such period or from their representative. No new Payment
Blockage Period may be commenced unless and until 365 days have elapsed since
the effectiveness of the immediately preceding Payment Blockage Notice. However,
if any Payment Blockage Notice within such 365-day period is given by or on
behalf of any holders of Designated Senior Indebtedness (other than the agent
under the Senior Credit Facilities), the agent under the Senior Credit
Facilities may give another Payment Blockage Notice within such period. In no
event, however, may the total number of days during which any Payment Blockage
Period or Periods is in effect exceed 179 days in the aggregate during any 365
consecutive day period. No nonpayment default that existed or was continuing on
the date of delivery of any Payment Blockage Notice to the Trustee shall be, or
be made, the basis for a subsequent Payment Blockage Notice unless such default
shall have been cured or waived for a period of not less than 90 days.
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If the Company fails to make any payment on the Notes when due or within any
applicable grace period, whether or not on account of the payment blockage
provision referred to above, such failure would constitute an Event of Default
under the Indenture and would enable the Holders to accelerate the maturity
thereof.
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
insolvency, bankruptcy, administration, reorganization, receivership or similar
proceedings relating to the Company, Holders may recover less ratably than
creditors of the Company who are holders of Senior Indebtedness. In addition,
the Notes will be structurally subordinated to the liabilities of Subsidiaries
of the Company. At March 31, 1998, on a pro forma basis after giving effect to
the Transactions, the aggregate amount of the Company's outstanding Senior
Indebtedness would have been approximately $271.6 million, all of which would
have been secured Indebtedness, the Company would have had no Senior
Subordinated Indebtedness outstanding other than the Old Notes and the Company's
subsidiaries would have had total liabilities of $117.4 million, excluding
guarantees in respect of the Senior Credit Facilities. The Indenture permits the
Company to incur additional indebtedness, including up to $278.4 million of
additional Senior Indebtedness under the Senior Credit Facilities, subject to
certain limitations. Although the Indenture contains limitations on the amount
of additional Indebtedness that the Company and its Subsidiaries may incur,
under certain circumstances the amount of such Indebtedness could be substantial
and, in any case, such Indebtedness may be Senior Indebtedness. See "--Certain
Covenants-- Limitations on Incurrence of Indebtedness and Issuance of
Disqualified Stock."
"DESIGNATED SENIOR INDEBTEDNESS" means (i) Senior Indebtedness under the
Senior Credit Facilities and (ii) any other Senior Indebtedness permitted under
the Indenture the principal amount of which is $25.0 million or more and that
has been designated by the Company as Designated Senior Indebtedness.
"SENIOR INDEBTEDNESS" means (i) the Obligations under the Senior Credit
Facilities and (ii) any other Indebtedness permitted to be incurred by the
Company 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, including, with respect to
clauses (i) and (ii), interest accruing subsequent to the filing of, or which
would have accrued but for the filing of, a petition for bankruptcy, in
accordance with and at the rate (including any rate applicable upon any default
or event of default, to the extent lawful) specified in the documents evidencing
or governing such Senior Indebtedness, whether or not such interest is an
allowable claim in such bankruptcy proceeding. Notwithstanding anything to the
contrary in the foregoing, Senior Indebtedness will not include (1) any
liability for federal, state, local or other taxes owed or owing by the Company,
(2) any obligation of the Company to any of its Subsidiaries, (3) any accounts
payable or trade liabilities arising in the ordinary course of business
(including guarantees thereof or instruments evidencing such liabilities) other
than obligations in respect of letters of credit under the Senior Credit
Facilities, (4) any Indebtedness that is incurred in violation of the Indenture,
(5) Indebtedness which, when incurred and without respect to any election under
Section 1111(b) of Title 11, United States Code, is without recourse to the
Company, (6) any Indebtedness, guarantee or obligation of the Company which is
subordinate or junior to any other Indebtedness, guarantee or obligation of the
Company, (7) Indebtedness evidenced by the Notes and (8) Capital Stock of the
Company.
"SUBORDINATED NOTE OBLIGATIONS" means any principal of, premium, if any, and
interest on the Notes payable pursuant to the terms of the Notes or upon
acceleration, together with and including any amounts received upon the exercise
of rights of rescission or other rights of action (including claims for damages)
or otherwise, to the extent relating to the purchase price of the Notes or
amounts corresponding to such principal, premium, if any, or interest on the
Notes.
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The Notes will rank senior in right of payment to all Subordinated
Indebtedness of the Company. At the Issuance Date the Company will have no
Subordinated Indebtedness.
PRINCIPAL, MATURITY AND INTEREST
The Notes will mature on May 1, 2008. Interest on the Notes will accrue at
the rate of 9 5/8% per annum and will be payable semi-annually in arrears on May
1 and November 1, commencing on November 1, 1998, to Holders of record on the
immediately preceding April 15 and October 15. 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 Issuance Date. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months. Principal of, premium, if any,
and interest 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 may be made by check mailed to the
Holders at their respective addresses set forth in the register of Holders;
PROVIDED that all payments of principal, premium, if any, and interest with
respect to Notes represented by one or more permanent global Notes registered in
the name of or held by The Depository Trust Company or its nominee will be made
by wire transfer of immediately available funds to the accounts specified by the
Holder or Holders thereof. Until otherwise designated by the Company, the
Company's office or agency in New York will be the office of the Trustee
maintained for such purpose. The Notes will be issued in denominations of $1,000
and integral multiples thereof.
MANDATORY REDEMPTION
Except as set forth below under "--Repurchase at the Option of Holders," the
Company is not required to make mandatory redemption or sinking fund payments
with respect to the Notes.
OPTIONAL REDEMPTION
Except as described below, the Notes will not be redeemable at the Company's
option prior to May 1, 2003. From and after May 1, 2003, 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 thereon, if any, to the applicable redemption date
(subject to the right of holders of record on the relevant record date to
receive interest due on the relevant interest payment date), if redeemed during
the twelve-month period beginning on May 1 of each of the years indicated below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- -------------------------------------------------------------------------- ------------------
<S> <C>
2003...................................................................... 104.813%
2004...................................................................... 103.208%
2005...................................................................... 101.604%
2006 and thereafter....................................................... 100.000%
</TABLE>
In addition, at any time or from time to time, on or prior to May 1, 2001,
the Company may, at its option, redeem up to 35% of the aggregate principal
amount of Notes originally issued under the Indenture on the Issuance Date at a
redemption price equal to 109.625% of the aggregate principal amount thereof,
plus accrued and unpaid interest thereon, if any, to the redemption date
(subject to the right of holders of record on the relevant record date to
receive interest due on the relevant interest payment date), with the net
proceeds of one or more Equity Offerings; PROVIDED that at least 65% of the
aggregate principal amount of Notes originally issued under the Indenture on the
Issuance Date remains outstanding immediately after the occurrence of each such
redemption; PROVIDED FURTHER that each such redemption occurs within 90 days of
the date of closing of each such Equity Offering. The Trustee shall select the
Notes to be purchased in the manner described under "Repurchase at the Option of
Holders--Selection and Notice."
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At any time on or prior to May 1, 2003, the Notes may also be redeemed as a
whole at the option of the Company upon the occurrence of a Change of Control,
upon not less than 30 nor more than 60 days prior notice (but in no event more
than 90 days after the occurrence of such Change of Control or transfer event)
mailed by first-class mail to each Holder's registered address, at a redemption
price equal to 100% of the principal amount thereof plus the Applicable Premium
as of, and accrued and unpaid interest, if any, to, the date of redemption (the
"Redemption Date") (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date).
"APPLICABLE PREMIUM" means, with respect to a Note at any Redemption Date,
the greater of (i) 1.0% of the principal amount of such Note and (ii) the excess
of (A) the present value at such time of (1) the redemption price of such Note
at May 1, 2003 (such redemption price being described under "--Optional
Redemption") plus (2) all required interest payments due on such Note through
May 1, 2003, computed using a discount rate equal to the Treasury Rate plus 50
basis points, over (B) the principal amount of such Note.
"TREASURY RATE" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15 (519)
which has become publicly available at least two business days prior to the
Redemption Date (or, if such Statistical Release is no longer published, any
publicly available source of similar market data)) most nearly equal to the
period from the Redemption Date to May 1, 2003; PROVIDED, HOWEVER, that if the
period from the Redemption Date to May 1, 2003 is not equal to the constant
maturity of a United States Treasury security for which a weekly average yield
is given, the Treasury Rate shall be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the weekly average yields
of United States Treasury securities for which such yields are given, except
that if the period from the Redemption Date to May 1, 2003 is less than one
year, the weekly average yield on actually traded United States Treasury
securities adjusted to a constant maturity of one year shall be used.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL. The Indenture provides that, upon the occurrence of a
Change of Control, unless the Company has elected to redeem the Notes in
connection with such Change of Control, the Company will make an offer to
purchase all of the Notes pursuant to the offer described below (the "CHANGE OF
CONTROL OFFER") at a price in cash (the "CHANGE OF CONTROL PAYMENT") equal to
101% of the aggregate principal amount thereof plus accrued and unpaid interest,
if any, to the date of purchase (subject to the right of holders of record on
the relevant record date to receive interest due on the relevant interest
payment date). The Indenture provides that within 30 days following any Change
of Control, the Company will mail a notice to each Holder, with a copy to the
Trustee, with the following information: (1) a Change of Control Offer is being
made pursuant to the covenant entitled "Change of Control," and that all Notes
properly tendered pursuant to such Change of Control Offer will be accepted for
payment; (2) the purchase price and the purchase date, which will be no earlier
than 30 days nor later than 60 days from the date such notice is mailed, except
as may be otherwise required by applicable law (the "CHANGE OF CONTROL PAYMENT
DATE"); (3) any Note not properly tendered will remain outstanding and continue
to accrue interest; (4) unless the Company defaults in the payment of the Change
of Control Payment, all Notes accepted for payment pursuant to the Change of
Control Offer will cease to accrue interest on the Change of Control Payment
Date; (5) Holders electing to have any Notes purchased pursuant to a Change of
Control Offer will be required to surrender the Notes, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes completed, to
the paying agent specified in the notice at the address specified in the notice
prior to the close of business on the third Business Day preceding the Change of
Control Payment Date; (6) Holders will be entitled to withdraw their tendered
Notes and their election to require the Company to purchase such Notes, provided
that
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the paying agent receives, not later than the close of business on the last day
of the Offer Period (as defined in the Indenture), a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of Notes tendered for purchase, and a statement that such Holder is
withdrawing his tendered Notes and his election to have such Notes purchased;
and (7) that Holders whose Notes are being purchased only in part will be issued
new Notes equal in principal amount to the unpurchased portion of the Notes
surrendered, which unpurchased portion must be equal to $1,000 in principal
amount or an integral multiple thereof.
The Indenture provides that, prior to complying with the provisions of this
covenant, but in any event within 30 days following a Change of Control, the
Company will either repay all outstanding Senior Indebtedness or obtain the
requisite consents, if any, under any outstanding Senior Indebtedness in each
case necessary to permit the repurchase of the Notes required by this covenant.
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 or regulations are applicable in connection with the repurchase
of the Notes pursuant to a Change of Control Offer. To the extent that the
provisions of any securities laws or regulations conflict with the provisions of
the Indenture, the Company will comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations described
in the Indenture by virtue thereof.
The Indenture provides that on the Change of Control Payment Date, the
Company will, to the extent permitted by law, (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 aggregate 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 for cancellation the Notes so
accepted together with an Officers' Certificate stating that such Notes or
portions thereof have been tendered to and purchased by the Company. The
Indenture will provide that the paying agent will promptly mail to each Holder
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail 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 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.
The Senior Credit Facilities will, and future credit agreements or other
agreements relating to Senior Indebtedness to which the Company becomes a party
may, prohibit the Company from purchasing any Notes as a result of a Change of
Control and/or provide that certain change of control events with respect to the
Company would constitute a default thereunder. In the event a Change of Control
occurs at a time when the Company is prohibited from purchasing the Notes, the
Company could seek the consent of its lenders to the purchase of the Notes or
could attempt to refinance the borrowings that contain such prohibition. If the
Company does not obtain such a consent or repay such borrowings, the Company
will remain prohibited from purchasing the Notes. In such case, the Company's
failure to purchase tendered Notes would constitute an Event of Default under
the Indenture. If, as a result thereof, a default occurs with respect to any
Senior Indebtedness, the subordination provisions in the Indenture would likely
restrict payments to the Holders.
The existence of a Holder's right to require the Company to repurchase such
Holder's Notes upon the occurrence of a Change of Control may deter a third
party from seeking to acquire the Company in a transaction that would constitute
a Change of Control.
ASSET SALES. The Indenture provides that the Company will not, and will not
permit any of its Restricted Subsidiaries to, cause, make or suffer to exist an
Asset Sale, unless (x) the Company, or such Restricted Subsidiary, as the case
may be, receives consideration at the time of such Asset Sale at least equal to
the fair market value (as determined in good faith by the Company) of the assets
sold or otherwise disposed of and (y) at least 75% of the consideration therefor
received by the Company, or
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such Restricted Subsidiary, as the case may be, is in the form of cash or Cash
Equivalents; PROVIDED that the amount of (a) any liabilities (as shown on the
Company's or such Restricted Subsidiary's most recent balance sheet or in the
notes thereto) of the Company or any Restricted Subsidiary (other than
liabilities that are by their terms subordinated to the Notes), that are assumed
by the transferee of any such assets, (b) any securities received by the Company
or such Restricted Subsidiary from such transferee that are converted by the
Company or such Restricted Subsidiary into cash (to the extent of the cash
received) within 180 days following the closing of such Asset Sale and (c) any
Designated Noncash Consideration received by the Company or any of its
Restricted Subsidiaries in such Asset Sale having an aggregate fair market
value, taken together with all other Designated Noncash Consideration received
pursuant to this clause (c) that is at that time outstanding, not to exceed the
greater of (x) $50.0 million or (y) 15% of Total Assets at the time of the
receipt of such Designated Noncash Consideration (with the fair market value of
each item of Designated Noncash Consideration being measured at the time
received and without giving effect to subsequent changes in value), shall be
deemed to be cash for purposes of this provision and for no other purpose.
Within 365 days after the Company's or any Restricted Subsidiary's receipt
of the Net Proceeds of any Asset Sale, the Company or such Restricted
Subsidiary, at its option, may (i) apply the Net Proceeds from such Asset Sale
to permanently reduce (x) Obligations under the Senior Credit Facilities (and to
correspondingly reduce commitments with respect thereto), (y) other Senior
Indebtedness or Senior Subordinated Indebtedness (and to correspondingly reduce
commitments with respect thereto) (PROVIDED that if the Company shall so reduce
Obligations under Senior Subordinated Indebtedness, it will equally and ratably
reduce Obligations under the Notes if the Notes are then prepayable or, if the
Notes may not then be prepaid, the Company shall make an offer (in accordance
with the procedures set forth below for an Asset Sale Offer) to all Holders to
purchase at 100% of the principal amount thereof, plus the amount of accrued but
unpaid interest, if any, on the amount of Notes that would otherwise be prepaid)
or (z) Indebtedness of a Wholly Owned Restricted Subsidiary (other than
Indebtedness owed to the Company or another Restricted Subsidiary), (ii) apply
the Net Proceeds from such Asset Sale to an investment in any one or more
businesses, capital expenditures or acquisitions of other assets in each case,
used or useful in a Similar Business and/or (iii) apply the Net Proceeds from
such Asset Sale to an investment in properties or assets that replace the
properties and assets that are the subject of such Asset Sale. The Indenture
will provide that any Net Proceeds from the Asset Sale that are not invested or
applied as provided and within the time period set forth in the first sentence
of this paragraph will be deemed to constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $15.0 million, the Company shall
make an offer to all Holders (an "Asset Sale Offer") to purchase the maximum
principal amount of Notes, that is an integral multiple of $1,000, 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,
if any, to the date fixed for the closing of such offer, in accordance with the
procedures set forth in the Indenture. The Company will commence an Asset Sale
Offer with respect to Excess Proceeds within ten Business Days after the date
that Excess Proceeds exceeds $15.0 million by mailing the notice required
pursuant to the terms of the Indenture, with a copy to the Trustee. To the
extent that the aggregate amount of Notes tendered pursuant to an Asset Sale
Offer is less than the Excess Proceeds, the Company may use any remaining Excess
Proceeds for general corporate purposes. If the aggregate principal amount of
Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased in the manner described under the
caption "Selection and Notice" below. Upon completion of any such Asset Sale
Offer, the amount of Excess Proceeds shall be reset at zero.
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 or regulations are applicable in connection with the repurchase
of the Notes pursuant to an Asset Sale Offer. To the extent that the
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provisions of any securities laws or regulations conflict with the provisions of
the Indenture, the Company will comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations described
in the Indenture by virtue thereof.
The Senior Credit Facilities will, and future credit agreements or other
agreements relating to Senior Indebtedness to which the Company becomes a party
may, prohibit the Company from purchasing any Notes pursuant to this Asset Sales
covenant. In the event the Company is prohibited from purchasing the Notes, the
Company could seek the consent of its lenders to the purchase of the Notes or
could attempt to refinance the borrowings that contain such prohibition. If the
Company does not obtain such a consent or repay such borrowings, the Company
will remain prohibited from purchasing the Notes. In such case, the Company's
failure to purchase tendered Notes would constitute an Event of Default under
the Indenture. If, as a result thereof, a default occurs with respect to any
Senior Indebtedness, the subordination provisions in the Indenture would likely
restrict payments to the Holders.
SELECTION AND NOTICE. If less than all of the Notes are to be redeemed at
any time or if more Notes are tendered pursuant to an Asset Sale Offer than the
Company is required to purchase, selection of such Notes for redemption or
purchase, as the case may be, will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which
such Notes are listed, or, if such Notes are not so listed, on a pro rata basis,
by lot or by such other method as the Trustee shall deem fair and appropriate
(and in such manner as complies with applicable legal requirements); provided
that no Notes of $1,000 or less shall be purchased or redeemed in part.
Notices of purchase or redemption shall be mailed by first class mail,
postage prepaid, at least 30 but not more than 60 days before the purchase or
redemption date to each Holder of Notes to be purchased or redeemed at such
Holder's registered address. If any Note is to be purchased or redeemed in part
only, any notice of purchase or redemption that relates to such Note shall state
the portion of the principal amount thereof that has been or is to be purchased
or redeemed.
A new Note in principal amount equal to the unpurchased or unredeemed
portion of any Note purchased or redeemed in part will be issued in the name of
the Holder thereof upon cancellation of the original Note. On and after the
purchase or redemption date unless the Company defaults in payment of the
purchase or redemption price, interest shall cease to accrue on Notes or
portions thereof purchased or called for redemption.
CERTAIN COVENANTS
LIMITATION ON 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 distribution on account
of the Company's or any of its Restricted Subsidiaries' Equity Interests,
including any dividend or distribution payable in connection with any merger or
consolidation (other than (A) dividends or distributions by the Company payable
in Equity Interests (other than Disqualified Stock) of the Company or in
options, warrants or other rights to purchase such Equity Interests or (B)
dividends or distributions by a Restricted Subsidiary so long as, in the case of
any dividend or distribution payable on or in respect of any class or series of
securities issued by a Subsidiary other than a Wholly Owned Subsidiary, the
Company or a Restricted Subsidiary receives at least its pro rata share of such
dividend or distribution in accordance with its Equity Interests in such class
or series of securities); (ii) purchase, redeem, defease or otherwise acquire or
retire for value any Equity Interests of the Company or any direct or indirect
parent of the Company; (iii) make any principal payment on, or redeem,
repurchase, defease or otherwise acquire or retire for value in each case, prior
to any scheduled repayment, or maturity, any Subordinated Indebtedness (other
than (x) Indebtedness permitted under clauses (g) and (h) of the covenant
described under "--Limitations on Incurrence of Indebtedness and Issuance of
Disqualified Stock" or (y) the purchase, repurchase or other acquisition of
Subordinated Indebtedness purchased in anticipation of satisfying a sinking fund
obligation, principal installment or
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final maturity, in each case due within one year of the date of purchase,
repurchase or acquisition); 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 such
Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof;
(b) immediately after giving effect to such transaction on a pro forma
basis, the Company could incur $1.00 of additional Indebtedness under the
provisions of the first paragraph of "--Limitations on Incurrence of
Indebtedness and Issuance of Disqualified Stock"; 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 Issuance Date (including Restricted Payments
permitted by clauses (i), (ii) (with respect to the payment of dividends on
Refunding Capital Stock pursuant to clause (b) thereof), (iv) (only to the
extent that amounts paid pursuant to such clause are greater than amounts
that could have been paid pursuant to such clause if $5.0 million and $10.0
million were substituted in such clause for $10.0 million and $20.0 million,
respectively), (vi), (ix) and (x) of the next succeeding paragraph, but
excluding all other Restricted Payments permitted by the next succeeding
paragraph), is less than the sum of (i) 50% of the Consolidated Net Income
of the Company for the period (taken as one accounting period) from the
fiscal quarter that first begins after the Issuance Date 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, in the
case such Consolidated Net Income for such period is a deficit, minus 100%
of such deficit), PLUS (ii) 100% of the aggregate net cash proceeds and the
fair market value, as determined in good faith by the Board of Directors, of
marketable securities and Qualified Proceeds received by the Company since
immediately after the closing of the Transactions from the issue or sale of
Equity Interests of the Company (including Retired Capital Stock (as defined
below), but excluding cash proceeds, marketable securities and Qualified
Proceeds received from the sale of (A) Equity Interests to members of
management, directors or consultants of the Company and its Subsidiaries
after the Issuance Date to the extent such amounts have been applied to
Restricted Payments made in accordance with clause (iv) of the next
succeeding paragraph and (B) Designated Preferred Stock) or debt securities
of the Company that have been converted into such Equity Interests of the
Company (other than Refunding Capital Stock (as defined below) or Equity
Interests or convertible debt securities of the Company sold to a Restricted
Subsidiary of the Company and other than Disqualified Stock or debt
securities that have been converted into Disqualified Stock), PLUS (iii)
100% of the aggregate amount of cash, marketable securities and Qualified
Proceeds contributed to the capital of the Company following the Issuance
Date (other than by a Restricted Subsidiary of the Company), PLUS (iv) 100%
of the aggregate amount received in cash, the fair market value of
marketable securities and Qualified Proceeds (other than Restricted
Investments) received by means of (A) the sale or other disposition (other
than to the Company or a Restricted Subsidiary) of Restricted Investments
made by the Company and its Restricted Subsidiaries and repurchases and
redemptions of such Restricted Investments from the Company and its
Restricted Subsidiaries and repayments of loans or advances which constitute
Restricted Investments by the Company and its Restricted Subsidiaries or (B)
the sale (other than to the Company or a Restricted Subsidiary) of the stock
of an Unrestricted Subsidiary or a distribution from an Unrestricted
Subsidiary (other than in each case to the extent the Investment in such
Unrestricted Subsidiary was made by the Company or a Restricted Subsidiary
pursuant to clauses (vii) or (xi) below or to the extent such Investment
constituted a Permitted Investment) or a dividend from an Unrestricted
Subsidiary plus (v) in the case of the redesignation of an Unrestricted
Subsidiary as a Restricted Subsidiary, the fair market value of the
Investment in such Unrestricted Subsidiary, as determined by the Board of
Directors in good faith or if such fair market value may exceed $25
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million, in writing by an independent investment banking firm of nationally
recognized standing, at the time of the redesignation of such Unrestricted
Subsidiary as a Restricted Subsidiary (other than an Unrestricted Subsidiary
to the extent the Investment in such Unrestricted Subsidiary was made by the
Company or a Restricted Subsidiary pursuant to clauses (vii) or (xi) below
or to the extent such Investment constituted a Permitted Investment).
The foregoing provisions will not prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at the date of declaration such payment would have
complied with the provisions of the Indenture;
(ii) (a) the redemption, repurchase, retirement or other acquisition of
any Equity Interests ("RETIRED CAPITAL STOCK") or Subordinated Indebtedness
of the Company in exchange for, or out of the proceeds of the substantially
concurrent sale (other than to a Restricted Subsidiary) of, Equity Interests
of the Company (other than any Disqualified Stock) ("REFUNDING CAPITAL
STOCK") and (b) the declaration and payment of dividends on the Refunding
Capital Stock in an aggregate amount per year no greater than the aggregate
amount of dividends per annum that was declarable and payable on such
Retired Capital Stock immediately prior to such retirement;
(iii) the redemption, repurchase or other acquisition or retirement of
Subordinated Indebtedness of the Company made by exchange for, or out of the
proceeds of the substantially concurrent sale of, new Indebtedness of the
Company which is incurred in compliance with "--Limitations on Incurrence of
Indebtedness and Issuance of Disqualified Stock" so long as (A) the
principal amount of such new Indebtedness does not exceed the principal
amount of the Subordinated Indebtedness being so redeemed, repurchased,
acquired or retired for value (PLUS the amount of any premium required to be
paid under the terms of the instrument governing the Subordinated
Indebtedness being so redeemed, repurchased, acquired or retired), (B) such
Indebtedness is subordinated to Senior Indebtedness and the Notes at least
to the same extent as such Subordinated Indebtedness so purchased,
exchanged, redeemed, repurchased, acquired or retired for value, (C) such
Indebtedness has a final scheduled maturity date equal to or later than the
final scheduled maturity date of the Subordinated Indebtedness being so
redeemed, repurchased, acquired or retired and (D) such Indebtedness has a
Weighted Average Life to Maturity equal to or greater than the remaining
Weighted Average Life to Maturity of the Subordinated Indebtedness being so
redeemed, repurchased, acquired or retired;
(iv) a Restricted Payment to pay for the repurchase, retirement or other
acquisition or retirement for value of common Equity Interests of the
Company held by any future, present or former employee, director or
consultant of the Company or any Subsidiary pursuant to any management
equity plan or stock option plan or any other management or employee benefit
plan or agreement; PROVIDED, HOWEVER, that the aggregate Restricted Payments
made under this clause (iv) does not exceed in any calendar year $10.0
million (with unused amounts in any calendar year being carried over to
succeeding calendar years subject to a maximum (without giving effect to the
following proviso) of $20.0 million in any calendar year); PROVIDED FURTHER
that such amount in any calendar year may be increased by an amount not to
exceed (A) the cash proceeds from the sale of Equity Interests of the
Company to members of management, directors or consultants of the Company
and its Subsidiaries that occurs after the Issuance Date (to the extent the
cash proceeds from the sale of such Equity Interest have not otherwise been
applied to the payment of Restricted Payments by virtue of the preceding
paragraph (c)) plus (B) the cash proceeds of key man life insurance policies
received by the Company and its Restricted Subsidiaries after the Issuance
Date less (C) the amount of any Restricted Payments previously made pursuant
to clauses (A) and (B) of this subparagraph (iv); and PROVIDED FURTHER that
cancellation of Indebtedness owing to the Company from members of management
of the Company or any of its Restricted Subsidiaries in connection
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with a repurchase of Equity Interests of the Company will not be deemed to
constitute a Restricted Payment for purposes of this covenant or any other
provision of the Indenture;
(v) the declaration and payment of dividends to holders of any class or
series of Disqualified Stock of the Company issued in accordance with the
covenant entitled "--Limitations on Incurrence of Indebtedness and Issuance
of Disqualified Stock" to the extent such dividends are included in the
definition of Fixed Charges;
(vi) (A) the declaration and payment of dividends to holders of any
class or series of Designated Preferred Stock (other than Disqualified
Stock) issued after the Issuance Date or (B) the declaration and payment of
dividends on Refunding Capital Stock in excess of the dividends declarable
and payable thereon pursuant to clause (ii); PROVIDED, HOWEVER, in either
case, that for the most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the date
of issuance of such Designated Preferred Stock or the declaration of such
dividends on Refunding Capital Stock, after giving effect to such issuance
or declaration on a pro forma basis, the Company and its Restricted
Subsidiaries would have had a Fixed Charge Coverage Ratio of at least 1.75
to 1.00;
(vii) Investments in Unrestricted Subsidiaries having an aggregate fair
market value, taken together with all other Investments made pursuant to
this clause (vii) that are at that time outstanding (without giving effect
to the sale of an Unrestricted Subsidiary to the extent the proceeds of such
sale do not consist of cash, marketable securities and/or Qualified Proceeds
or distributions made pursuant to clause (xiv) below), not to exceed $25.0
million at the time of such Investment (with the fair market value of each
Investment being measured at the time made and without giving effect to
subsequent changes in value);
(viii) repurchases of Equity Interests deemed to occur upon exercise of
stock options if such Equity Interests represent a portion of the exercise
price of such options;
(ix) the payment of dividends on the Company's Common Stock, following
the first public offering of the Company's Common Stock after the Issuance
Date, of up to 6% per annum of the net proceeds received by the Company in
such public offering, other than public offerings with respect to the
Company's Common Stock registered on Form S-8;
(x) a Restricted Payment to pay for the repurchase, retirement or other
acquisition or retirement for value of Equity Interests of the Company in
existence on the Issuance Date and which are not held by KKR or any of their
Affiliates on the Issuance Date (including any Equity Interests issued in
respect of such Equity Interests as a result of a stock split,
recapitalization, merger, combination, consolidation or otherwise, but
excluding any management equity plan or stock option plan or similar
agreement), PROVIDED that notwithstanding the foregoing proviso, the Company
and its Restricted Subsidiaries shall be permitted to make Restricted
Payments under this clause (x) only if after giving effect thereto, the
Company would be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in
the first sentence of the covenant described under "--Limitations on
Incurrence of Indebtedness and Issuance of Disqualified Stock";
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(xi) Investments that are made with Excluded Contributions;
(xii) other Restricted Payments in an aggregate amount not to exceed
$20.0 million;
(xiii) distributions or payments of Receivables Fees;
(xiv) the distribution, as a dividend or otherwise, of shares of Capital
Stock of, or Indebtedness owed to the Company or a Restricted Subsidiary of
the Company by, Unrestricted Subsidiaries (with the exception of Investments
in Unrestricted Subsidiaries acquired pursuant to clause (j) of the
definition of Permitted Investments);
(xv) cash dividends and other payments to CCPC Acquisition in amounts
equal to (A) the amounts required for CCPC Acquisition to pay any Federal,
state or local income taxes to the extent that such income taxes are
attributable to the income of the Company and its Subsidiaries and (B) the
amounts required for CCPC Acquisition to pay franchise taxes, administrative
and similar expenses related to its existence and to its ownership of the
Company; and
(xvi) cash dividends and other payments required to be made under the
Recapitalization Agreement provided however, that at the time of, and after
giving effect to, any Restricted Payment permitted under clauses (ii)(b),
(iii) through (v) and (vi) through (x) and clauses (xii) and (xiv), no
Default or Event or Default shall have occurred and be continuing or would
occur as a consequence thereof. To the extent the issuance of Equity
Interests and the receipt of capital contributions are applied to permit the
issuance of Indebtedness pursuant to clause (m) of "--Limitation on
Incurrence of Indebtedness and Issuance of Disqualified Stock," the issuance
of such Equity Interests and the receipt of such capital contributions shall
not be applied to permit payments under this covenant or Permitted
Investments (other than clauses (a) and (c) thereof).
As of the Issuance Date, all of the Company's Subsidiaries will be
Restricted Subsidiaries. The Company will not permit any Unrestricted Subsidiary
to become a Restricted Subsidiary except pursuant to the second to last sentence
of the definition of "Unrestricted Subsidiary." For purposes of designating any
Restricted Subsidiary as an Unrestricted Subsidiary, all outstanding Investments
by the Company and its Restricted Subsidiaries (except to the extent repaid) in
the Subsidiary so designated will be deemed to be Restricted Payments in an
amount determined as set forth in the last sentence of the definition of
"Investments." Such designation will be permitted only if a Restricted Payment
in such amount would be permitted at such time (whether pursuant to the first
paragraph of this covenant or under clauses (vii), (xi) and (xii)) and if such
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
Unrestricted Subsidiaries will not be subject to any of the restrictive
covenants set forth in the Indenture.
LIMITATIONS ON INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED
STOCK. The Indenture provides that the Company will not, and will not permit
any of its Restricted 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" and
collectively, an "INCURRENCE") any Indebtedness (including Acquired
Indebtedness) and that the Company will not issue any shares of Disqualified
Stock and will not permit any of its Restricted Subsidiaries to issue any shares
of preferred stock; PROVIDED, HOWEVER, that the Company may incur Indebtedness
(including Acquired Indebtedness) or issue shares of Disqualified Stock if the
Fixed Charge Coverage Ratio for the Company's and its Restricted Subsidiaries'
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 is issued would have been at
least 1.75 to 1.00, 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 had been issued, as the case may
be, and the application of proceeds therefrom had occurred at the beginning of
such four-quarter period.
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The foregoing limitations will not apply to:
(a) the existence of Indebtedness under Credit Facilities on the
Issuance Date together with the incurrence by the Company of Indebtedness
under Credit Facilities and the issuance and creation of letters of credit
and bankers' acceptances thereunder (with letters of credit and bankers'
acceptances being deemed to have a principal amount equal to the face amount
thereof) up to an aggregate principal amount of $550.0 million outstanding
at any one time;
(b) the incurrence by the Company of Indebtedness represented by the
Notes issued on the Issuance Date;
(c) Existing Indebtedness (other than Indebtedness described in clauses
(a) and (b));
(d) Indebtedness (including Capitalized Lease Obligations) incurred by
the Company or any of its Restricted Subsidiaries, to finance the purchase,
lease or improvement of property (real or personal) or equipment (whether
through the direct purchase of assets or the Capital Stock of any Person
owning such assets) in an aggregate principal amount which, when aggregated
with the principal amount of all other Indebtedness then outstanding and
incurred pursuant to this clause (d) and including all Refinancing
Indebtedness incurred to refund, refinance or replace any other Indebtedness
incurred pursuant to this clause (d), does not exceed 20% of Total Assets;
(e) Indebtedness incurred by the Company or any of its Restricted
Subsidiaries constituting reimbursement obligations with respect to letters
of credit issued in the ordinary course of business, including without
limitation letters of credit in respect of workers' compensation claims or
self-insurance, or other Indebtedness with respect to reimbursement type
obligations regarding workers' compensation claims; PROVIDED, HOWEVER, that
upon the drawing of such letters of credit or the incurrence of such
Indebtedness, such obligations are reimbursed within 30 days following such
drawing or incurrence;
(f) Indebtedness arising from agreements of the Company or a Restricted
Subsidiary providing for indemnification, adjustment of purchase price or
similar obligations, in each case, incurred or assumed in connection with
the disposition of any business, assets or a Subsidiary, other than
guarantees of Indebtedness incurred by any Person acquiring all or any
portion of such business, assets or a Subsidiary for the purpose of
financing such acquisition; PROVIDED, HOWEVER, that (i) such Indebtedness is
not reflected on the balance sheet of the Company or any Restricted
Subsidiary (contingent obligations referred to in a footnote to financial
statements and not otherwise reflected on the balance sheet will not be
deemed to be reflected on such balance sheet for purposes of this clause
(i)) and (ii) the maximum assumable liability in respect of all such
Indebtedness shall at no time exceed the gross proceeds including noncash
proceeds (the fair market value of such noncash proceeds being measured at
the time received and without giving effect to any subsequent changes in
value) actually received by the Company and its Restricted Subsidiaries in
connection with such disposition;
(g) Indebtedness of the Company to a Restricted Subsidiary; PROVIDED
that any such Indebtedness is subordinated in right of payment to the Notes;
PROVIDED FURTHER that any subsequent issuance or transfer of any Capital
Stock or any other event which results in any such Restricted Subsidiary
ceasing to be a Restricted Subsidiary or any other subsequent transfer of
any such Indebtedness (except to the Company or another Restricted
Subsidiary) shall be deemed, in each case to be an incurrence of such
Indebtedness;
(h) Indebtedness of a Restricted Subsidiary to the Company or another
Restricted Subsidiary; PROVIDED that (i) any such Indebtedness is made
pursuant to an intercompany note and (ii) if a Guarantor incurs such
Indebtedness from a Restricted Subsidiary that is not a Guarantor such
Indebtedness is subordinated in right of payment to the Guarantee of such
Guarantor; PROVIDED
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further that any subsequent transfer of any such Indebtedness (except to the
Company or another Restricted Subsidiary) shall be deemed, in each case to
be an incurrence of such Indebtedness;
(i) shares of preferred stock of a Restricted Subsidiary issued to the
Company or another Restricted Subsidiary; PROVIDED that any subsequent
issuance or transfer of any Capital Stock or any other event which results
in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or
any other subsequent transfer of any such shares of preferred stock (except
to the Company or another Restricted Subsidiary) shall be deemed in each
case to be an issuance of such shares of preferred stock;
(j) Hedging Obligations that are incurred in the ordinary course of
business (but in any event excluding Hedging Obligations entered into for
speculative purposes);
(k) obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted Subsidiary
in the ordinary course of business;
(l) Indebtedness of any Guarantor in respect of such Guarantor's
Guarantee;
(m) Indebtedness and Disqualified Stock of the Company or any of its
Restricted Subsidiaries not otherwise permitted hereunder in an aggregate
principal amount or liquidation preference, which when aggregated with the
principal amount and liquidation preference of all other Indebtedness and
Disqualified Stock then outstanding and incurred pursuant to this clause
(m), does not at any one time outstanding exceed the sum of (x) $150.0
million and (y) 100% of the net cash proceeds received by the Company since
immediately after the Transactions from the issue or sale of Equity
Interests of the Company or net cash proceeds contributed to the capital of
the Company (in each case other than Disqualified Stock) as determined in
accordance with clauses (c)(ii) and (c)(iii) of the first paragraph of
"--Limitation on Restricted Payments" to the extent such net cash proceeds
have not been applied pursuant to such clauses to make Restricted Payments
or to make other payments or exchanges pursuant to the second paragraph of
"--Limitation on Restricted Payments" or to make Permitted Investments
(other than clauses (a) and (c) thereof) (it being understood that any
Indebtedness incurred under this clause (m) shall cease to be deemed
incurred or outstanding for purposes of this clause (m) but shall be deemed
to be incurred for purposes of the first paragraph of this covenant from and
after the first date on which the Company could have incurred such
Indebtedness under the first paragraph of this covenant without reliance
upon this clause (m));
(n) (i) any guarantee by the Company of Indebtedness or other
obligations of any of its Restricted Subsidiaries so long as the incurrence
of such Indebtedness incurred by such Restricted Subsidiary is permitted
under the terms of the Indenture and (ii) any guarantee by a Restricted
Subsidiary of Indebtedness of the Company, PROVIDED that such guarantee is
incurred in accordance with the covenant described below under "--Limitation
on Guarantees of Indebtedness by Restricted Subsidiaries;"
(o) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness which serves to refund, refinance or restructure any
Indebtedness incurred as permitted under the first paragraph of this
covenant and clauses (b) and (c) above, this clause (o) and clause (p) below
or any Indebtedness issued to so refund, refinance or restructure such
Indebtedness including additional Indebtedness incurred to pay premiums and
fees in connection therewith (the "REFINANCING INDEBTEDNESS") prior to its
respective maturity; PROVIDED, HOWEVER, that such Refinancing Indebtedness
(i) has a Weighted Average Life to Maturity at the time such Refinancing
Indebtedness is incurred which is not less than the remaining Weighted
Average Life to Maturity of Indebtedness being refunded or refinanced, (ii)
to the extent such Refinancing Indebtedness refinances Indebtedness
subordinated or PARI PASSU to the Notes, such Refinancing Indebtedness is
subordinated or PARI PASSU to the Notes at least to the same extent as the
Indebtedness being refinanced or
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refunded and (iii) shall not include (x) Indebtedness of a Subsidiary that
refinances Indebtedness of the Company or (y) Indebtedness of the Company or
a Restricted Subsidiary that refinances Indebtedness of an Unrestricted
Subsidiary; and PROVIDED FURTHER that subclauses (i) and (ii) of this clause
(o) will not apply to any refunding or refinancing of any Senior
Indebtedness; and
(p) Indebtedness or Disqualified Stock of Persons that are acquired by
the Company or any of its Restricted Subsidiaries or merged into a
Restricted Subsidiary in accordance with the terms of the Indenture;
PROVIDED that such Indebtedness or Disqualified Stock is not incurred in
contemplation of such acquisition or merger; and PROVIDED FURTHER that after
giving effect to such acquisition or merger, either (i) the Company would be
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first sentence of this
covenant or (ii) the Fixed Charge Coverage Ratio is greater than immediately
prior to such acquisition or merger.
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 Indebtedness described in clauses (a) through (p) 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 and such item of Indebtedness will be treated
as having been incurred pursuant to only one of such clauses or pursuant to the
first paragraph hereof except as otherwise set forth in clause (m). Accrual of
interest, the accretion of accreted value and the payment of interest in the
form of additional Indebtedness will not be deemed to be an incurrence of
Indebtedness for purposes of this covenant.
For purposes of determining compliance with any U.S. dollar-denominated
restriction on the incurrence of Indebtedness, the U.S. dollar-equivalent
principal amount of indebtedness denominated in a foreign currency shall be
calculated based on the relevant currency exchange rate in effect on the date
such Indebtedness was incurred, in the case of term debt, or first committed, in
the case of revolving credit debt; PROVIDED that (x) the U.S. dollar-equivalent
principal amount of any such Indebtedness outstanding or committed on the
Issuance Date shall be calculated based on the relevant currency exchange rate
in effect on March 31, 1998, and (y) if such Indebtedness is incurred to
refinance other Indebtedness denominated in a foreign currency, and such
refinancing would cause the applicable U.S. dollar-denominated restriction to be
exceeded if calculated at the relevant currency exchange rate in effect on the
date of such refinancing, such U.S. dollar-denominated restriction shall be
deemed not to have been exceeded so long as the principal amount of such
refinancing Indebtedness does not exceed the principal amount of such
Indebtedness being refinanced. The principal amount of any Indebtedness incurred
to refinance other Indebtedness, if incurred in a different currency from the
Indebtedness being refinanced, shall be calculated based on the currency
exchange rate applicable to the currencies in which such respective Indebtedness
is denominated that is in effect on the date of such refinancing.
LIENS. The Indenture provides that the Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly create,
incur, assume or suffer to exist any Lien that secures obligations under any
Senior Subordinated Indebtedness or Subordinated Indebtedness on any asset or
property of the Company or such Restricted Subsidiary, or any income or profits
therefrom, or assign or convey any right to receive income therefrom, unless the
Notes are equally and ratably secured (or senior to, in the event the Lien
relates to Subordinated Indebtedness) with the obligations so secured or until
such time as such obligations are no longer secured by a Lien.
The Indenture provides that no Guarantor will directly or indirectly create,
incur, assume or suffer to exist any Lien that secures obligations under any
Senior Subordinated Indebtedness or Subordinated Indebtedness of such Guarantor
on any asset or property of such Guarantor or any income or profits therefrom,
or assign or convey any right to receive income therefrom, unless the Guarantee
of such Guarantor is equally and ratably secured (or senior to, in the event the
Lien relates to Subordinated
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Indebtedness) with the obligations so secured or until such time as such
obligations are no longer secured by a Lien.
MERGER, CONSOLIDATION, OR SALE OF ALL OR SUBSTANTIALLY ALL ASSETS. The
Indenture provides that the Company may not consolidate or merge with or into or
wind up 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 any Person
unless (i) the Company is the surviving corporation 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
will have been made is a corporation organized or existing under the laws of the
United States, any state thereof, the District of Columbia, or any territory
thereof (the Company or such Person, as the case may be, being herein called the
"SUCCESSOR COMPANY"); (ii) the Successor Company (if other than the Company)
expressly assumes all the obligations of the Company under the Indenture and the
Notes pursuant to a supplemental indenture or other documents or instruments in
form reasonably satisfactory to the Trustee; (iii) immediately after such
transaction no Default or Event of Default exists; (iv) immediately after giving
pro forma effect to such transaction, as if such transaction had occurred at the
beginning of the applicable four-quarter period, (A) the Successor Company would
be permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first sentence of the covenant
described under "--Limitations on Incurrence of Indebtedness and Issuance of
Disqualified Stock" or (B) the Fixed Charge Coverage Ratio for the Successor
Company and its Restricted Subsidiaries would be greater than such Ratio for the
Company and its Restricted Subsidiaries immediately prior to such transaction;
(v) each Guarantor, if any, unless it is the other party to the transactions
described above, in which case clause (ii) shall apply, shall have by
supplemental indenture confirmed that its Guarantee shall apply to such Person's
obligations under the Indenture and the Notes; and (vi) the Company shall have
delivered to the Trustee an Officers' Certificate and an opinion of counsel,
each stating that such consolidation, merger or transfer and such supplemental
indenture (if any) comply with the Indenture. The Successor Company will succeed
to, and be substituted for, the Company under the Indenture and the Notes.
Notwithstanding the foregoing clause (iv), (a) any Restricted Subsidiary may
consolidate with, merge into or transfer all or part of its properties and
assets to the Company and (b) the Company may merge with an Affiliate
incorporated solely for the purpose of reincorporating the Company in another
State of the United States so long as the amount of Indebtedness of the Company
and its Restricted Subsidiaries is not increased thereby.
Each Guarantor, if any, shall not, and the Company will not permit a
Guarantor to, consolidate or merge with or into or wind up into (whether or not
such Guarantor 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, any Person unless (i) such
Guarantor is the surviving corporation or the Person formed by or surviving any
such consolidation or merger (if other than such Guarantor) or to which such
sale, assignment, transfer, lease, conveyance or other disposition will have
been made is a corporation organized or existing under the laws of the United
States, any state thereof, the District of Columbia, or any territory thereof
(such Guarantor or such Person, as the case may be, being herein called the
"SUCCESSOR GUARANTOR"); (ii) the Successor Guarantor (if other than such
Guarantor) expressly assumes all the obligations of such Guarantor under the
Indenture and such Guarantor's Guarantee pursuant to a supplemental indenture or
other documents or instruments in form reasonably satisfactory to the Trustee;
(iii) immediately after such transaction no Default or Event of Default exists;
and (iv) the Company shall have delivered to the Trustee an Officers'
Certificate and an opinion of counsel, each stating that such consolidation,
merger or transfer and such supplemental indenture (if any) comply with the
Indenture. The Successor Guarantor will succeed to, and be substituted for, such
Guarantor under the Indenture and such Guarantor's Guarantee.
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
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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 of the
Company (each of the foregoing, an "AFFILIATE TRANSACTION") involving aggregate
payments or consideration in excess of $5.0 million, unless (a) such Affiliate
Transaction is on terms that are not materially 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 (b) the Company delivers to the Trustee with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $10.0 million, a resolution adopted by the
majority of the Board of Directors approving such Affiliate Transaction and set
forth in an Officers' Certificate certifying that such Affiliate Transaction
complies with clause (a) above.
The foregoing provisions will not apply to the following: (i) transactions
between or among the Company and/or any of its Restricted Subsidiaries; (ii)
Restricted Payments permitted by the provisions of the Indenture described above
under the covenant "--Limitation on Restricted Payments"; (iii) the payment of
customary annual management, consulting, monitoring and advisory fees and
related expenses to KKR and its Affiliates; (iv) the payment of reasonable and
customary fees paid to, and indemnity provided on behalf of, officers,
directors, employees or consultants of the Company or any Restricted Subsidiary;
(v) payments by the Company or any of its Restricted Subsidiaries to KKR and its
Affiliates made for any financial advisory, financing, underwriting or placement
services or in respect of other investment banking activities, including,
without limitation, in connection with acquisitions or divestitures which
payments are approved by a majority of the Board of Directors of the Company in
good faith; (vi) transactions in which the Company or any of its Restricted
Subsidiaries, as the case may be, delivers to the Trustee a letter from an
Independent Financial Advisor stating that such transaction is fair to the
Company or such Restricted Subsidiary from a financial point of view or meets
the requirements of clause (a) of the preceding paragraph; (vii) payments or
loans to employees or consultants which are approved by a majority of the Board
of Directors of the Company in good faith; (viii) any agreement as in effect as
of the Issuance Date (including, without limitation, each of the agreements
entered into in connection with the Transactions) or any amendment thereto (so
long as any such amendment is not disadvantageous to the Holders in any material
respect) or any transaction contemplated thereby; (ix) the existence of, or the
performance by the Company or any of its Restricted Subsidiaries of its
obligations under the terms of, any stockholders agreement (including any
registration rights agreement or purchase agreement related thereto) to which it
is a party as of the Issuance Date and any similar agreements which it may enter
into thereafter; PROVIDED, HOWEVER, that the existence of, or the performance by
the Company or any of its Restricted Subsidiaries of obligations under any
future amendment to any such existing agreement or under any similar agreement
entered into after the Issuance Date shall only be permitted by this clause (ix)
to the extent that the terms of any such amendment or new agreement are not
otherwise disadvantageous to the Holders in any material respect; (x) the
Transactions and the payment of all fees and expenses related to the
Transactions (including the payment of any adjustment to the Cash Dividend or
the Contingent Payment); (xi) transactions with customers, clients, suppliers,
or purchasers or sellers of goods or services, in each case in the ordinary
course of business and otherwise in compliance with the terms of the Indenture
which are fair to the Company or its Restricted Subsidiaries, in the reasonable
determination of the Board of Directors of the Company or the senior management
thereof, or are on terms at least as favorable as might reasonably have been
obtained at such time from an unaffiliated party; (xii) sales of accounts
receivable, or participations therein, in connection with any Receivables
Facility; and (xiii) the issuance of Equity Interests (other than Disqualified
Stock) of the Company to any Permitted Holder and their Related Parties.
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
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otherwise cause or suffer to exist or become effective any consensual
encumbrance or consensual restriction on the ability of any Restricted
Subsidiary to:
(a) (i) 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 (ii) pay any Indebtedness owed to the Company or any of its
Restricted Subsidiaries;
(b) make loans or advances to the Company or any of its Restricted
Subsidiaries; or
(c) sell, lease or transfer any of its properties or assets to the
Company or any of its Restricted Subsidiaries, except (in each case) for
such encumbrances or restrictions existing under or by reason of:
(1) contractual encumbrances or restrictions in effect on the
Issuance Date, including, without limitation, pursuant to Existing
Indebtedness or the Senior Credit Facilities and their related
documentation;
(2) the Indenture and the Notes;
(3) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature discussed in
clause (c) above on the property so acquired;
(4) applicable law or any applicable rule, regulation or order;
(5) any agreement or other instrument of a Person acquired by the
Company or any Restricted Subsidiary in existence at the time of such
acquisition (but not created in contemplation thereof), which encumbrance
or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of
the Person, so acquired;
(6) contracts for the sale of assets, including, without limitation
customary restrictions with respect to a Subsidiary pursuant to an
agreement that has been entered into for the sale or disposition of all
or substantially all of the Capital Stock or assets of such Subsidiary;
(7) secured Indebtedness otherwise permitted to be incurred pursuant
to the covenants described under "--Limitations on Incurrence of
Indebtedness and Issuance of Disqualified Stock" and "--Liens" that limit
the right of the debtor to dispose of the assets securing such
Indebtedness;
(8) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of
business;
(9) other Indebtedness or Disqualified Stock of Restricted
Subsidiaries permitted to be incurred subsequent to the Issuance Date
pursuant to the provisions of the covenant described under "--Limitations
on Incurrence of Indebtedness and Issuance of Disqualified Stock";
(10) customary provisions in joint venture agreements and other
similar agreements entered into in the ordinary course of business;
(11) customary provisions contained in leases and other agreements
entered into in the ordinary course of business;
(12) any encumbrances or restrictions of the type referred to in
clauses (a), (b) and (c) above imposed by any amendments, modifications,
restatements, renewals, increases,
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supplements, refundings, replacements or refinancings of the contracts,
instruments or obligations referred to in clauses (1) through (11) above,
PROVIDED that such amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings are, in
the good faith judgment of the Company's Board of Directors, no more
restrictive with respect to such dividend and other payment restrictions
than those contained in the dividend or other payment restrictions prior
to such amendment, modification, restatement, renewal, increase,
supplement, refunding, replacement or refinancing; or
(13) restrictions created in connection with any Receivables Facility
that, in the good faith determination of the Board of Directors of the
Company, are necessary or advisable to effect such Receivables Facility.
LIMITATION ON GUARANTEES OF INDEBTEDNESS BY RESTRICTED SUBSIDIARIES. (a)
The Indenture provides that the Company will not permit any Restricted
Subsidiary to guarantee the payment of any Indebtedness of the Company unless
(i) such Restricted Subsidiary simultaneously executes and delivers a
supplemental indenture to the Indenture providing for a Guarantee of payment of
the Notes by such Restricted Subsidiary except that with respect to a guarantee
of Indebtedness of the Company (A) if the Notes are subordinated in right of
payment to such Indebtedness, the Guarantee under the supplemental indenture
shall be subordinated to such Restricted Subsidiary's guarantee with respect to
such Indebtedness substantially to the same extent as the Notes are subordinated
to such Indebtedness under the Indenture and (B) if such Indebtedness is by its
express terms subordinated in right of payment to the Notes, any such guarantee
of such Restricted Subsidiary with respect to such Indebtedness shall be
subordinated in right of payment to such Restricted Subsidiary's Guarantee with
respect to the Notes substantially to the same extent as such Indebtedness is
subordinated to the Notes; (ii) such Restricted Subsidiary waives and will not
in any manner whatsoever claim or take the benefit or advantage of, any rights
of reimbursement, indemnity or subrogation or any other rights against the
Company or any other Restricted Subsidiary as a result of any payment by such
Restricted Subsidiary under its Guarantee; and (iii) such Restricted Subsidiary
shall deliver to the Trustee an opinion of counsel to the effect that (A) such
Guarantee of the Notes has been duly executed and authorized and (B) such
Guarantee of the Notes constitutes a valid, binding and enforceable obligation
of such Restricted Subsidiary, except insofar as enforcement thereof may be
limited by bankruptcy, insolvency or similar laws (including, without
limitation, all laws relating to fraudulent transfers) and except insofar as
enforcement thereof is subject to general principles of equity; PROVIDED that
this paragraph (a) shall not be applicable to any guarantee of any Restricted
Subsidiary (x) that (A) existed at the time such Person became a Restricted
Subsidiary of the Company and (B) was not incurred in connection with, or in
contemplation of, such Person becoming a Restricted Subsidiary of the Company or
(y) that guarantees the payment of Obligations of the Company or any Restricted
Subsidiary under the Senior Credit Facilities or any other Senior Indebtedness
and any refunding, refinancing or replacement thereof, in whole or in part,
PROVIDED that such refunding, refinancing or replacement thereof constitutes
Senior Indebtedness and PROVIDED FURTHER that any such Senior Indebtedness and
any refunding, refinancing or replacement thereof is not incurred pursuant to a
registered offering of securities under the Securities Act or a private
placement of securities (including under Rule 144A) pursuant to an exemption
from the registration requirements of the Securities Act, which private
placement provides for registration rights under the Securities Act.
(b) Notwithstanding the foregoing and the other provisions of the Indenture,
any Guarantee by a Restricted Subsidiary of the Notes shall provide by its terms
that it shall be automatically and unconditionally released and discharged upon
(i) any sale, exchange or transfer, to any Person not an Affiliate of the
Company, of all of the Company's Capital Stock in, or all or substantially all
the assets of, such Restricted Subsidiary (which sale, exchange or transfer is
not prohibited by the Indenture) or (ii) the release or discharge of the
guarantee which resulted in the creation of such Guarantee, except a discharge
or release by or as a result of payment under such guarantee.
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LIMITATION ON OTHER SENIOR SUBORDINATED INDEBTEDNESS. The Indenture
provides that the Company will not, and will not permit any Guarantor to,
directly or indirectly, incur any Indebtedness (including Acquired Indebtedness)
that is subordinate in right of payment to any Indebtedness of the Company or
any Indebtedness of any Guarantor, as the case may be, unless such Indebtedness
is either (a) PARI PASSU in right of payment with the Notes or such Guarantor's
Guarantee, as the case may be or (b) subordinate in right of payment to the
Notes, or such Guarantor's Guarantee, as the case may be.
REPORTS AND OTHER INFORMATION. Notwithstanding that the Company may not be
subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act
or otherwise report on an annual and quarterly basis on forms provided for such
annual and quarterly reporting pursuant to rules and regulations promulgated by
the Securities and Exchange Commission (the "COMMISSION"), the Indenture will
require the Company to file with the Commission (and make available to the
Trustee and Holders (without exhibits), without cost to each Holder, within 15
days after it files them with the Commission), (a) within 90 days after the end
of each fiscal year, annual reports on Form 10-K (or any successor or comparable
form) containing the information required to be contained therein (or required
in such successor or comparable form); (b) within 45 days after the end of each
of the first three fiscal quarters of each fiscal year, reports on Form 10-Q (or
any successor or comparable form); (c) promptly from time to time after the
occurrence of an event required to be therein reported, such other reports on
Form 8-K (or any successor or comparable form); and (d) any other information,
documents and other reports which the Company would be required to file with the
Commission if it were subject to Section 13 or 15(d) of the Exchange Act;
PROVIDED, HOWEVER, the Company shall not be so obligated to file such reports
with the Commission if the Commission does not permit such filing, in which
event the Company will make available such information to prospective purchasers
of Notes, in addition to providing such information to the Trustee and the
Holders, in each case within 15 days after the time the Company would be
required to file such information with the Commission, if it were subject to
Sections 13 or 15(d) of the Exchange Act. Notwithstanding the foregoing, such
requirements shall be deemed satisfied prior to the Exchange Offer or the
effectiveness of the Shelf Registration Statement by the filing with the
Commission of the Exchange Offer Registration Statement and/or Shelf
Registration Statement, and any amendments thereto, with such financial
information that satisfies Regulation S-X of the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The following events constitute Events of Default under the Indenture:
(i) default in payment when due and payable, upon redemption,
acceleration or otherwise, of principal of, or premium, if any, on the Notes
whether or not such payment shall be prohibited by the subordination
provisions relating to the Notes;
(ii) default for 30 days or more in the payment when due of interest on
or with respect to the Notes whether or not such payment shall be prohibited
by the subordination provisions relating to the Notes;
(iii) failure by the Company or any Guarantor for 30 days after receipt
of written notice given by the Trustee or the holders of at least 30% in
principal amount of the Notes then outstanding to comply with any of its
other agreements in the Indenture or the Notes;
(iv) default under any mortgage, indenture or instrument under which
there is issued or by which there is 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 (other than Indebtedness owed to the Company or a Restricted
Subsidiary), whether such Indebtedness or guarantee now exists or is created
after the Issuance Date, if both (A) such default either (1) results from
the failure to pay any such Indebtedness at its stated final maturity (after
giving effect to any applicable grace periods) or (2) relates to an
obligation other than the obligation to pay principal of any such
Indebtedness at its stated final maturity and results in the
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holder or holders of such Indebtedness causing such Indebtedness to become
due prior to its stated maturity and (B) the principal amount of such
Indebtedness, together with the principal amount of any other such
Indebtedness in default for failure to pay principal at stated final
maturity (after giving effect to any applicable grace periods), or the
maturity of which has been so accelerated, aggregate $20.0 million or more
at any one time outstanding;
(v) failure by the Company or any of its Significant Subsidiaries to pay
final judgments aggregating in excess of $20.0 million, which final
judgments remain unpaid, undischarged and unstayed for a period of more than
60 days after such judgment becomes final, and in the event such judgment is
covered by insurance, an enforcement proceeding has been commenced by any
creditor upon such judgment or decree which is not promptly stayed;
(vi) certain events of bankruptcy or insolvency with respect to the
Company or any of its Significant Subsidiaries; or
(vii) the Guarantee of any Significant Subsidiary shall for any reason
cease to be in full force and effect or be declared null and void or any
responsible officer of the Company or any Guarantor that is a Significant
Subsidiary denies that it has any further liability under its Guarantee or
gives notice to such effect (other than by reason of the termination of the
Indenture or the release of any such Guarantee in accordance with the
Indenture).
If any Event of Default (other than of a type specified in clause (vi)
above) occurs and is continuing under the Indenture, the Trustee or the Holders
of at least 30% in principal amount of the then outstanding Notes may declare
the principal, premium, if any, interest and any other monetary obligations on
all the then outstanding Notes to be due and payable immediately; PROVIDED,
HOWEVER, that, so long as any Indebtedness permitted to be incurred under the
Indenture as part of the Senior Credit Facilities shall be outstanding, no such
acceleration shall be effective until the earlier of (i) acceleration of any
such Indebtedness under the Senior Credit Facilities or (ii) five business days
after the giving of written notice to the Company and the administrative agent
under the Senior Credit Facilities of such acceleration. Upon the effectiveness
of such declaration, such principal and interest will be due and payable
immediately. Notwithstanding the foregoing, in the case of an Event of Default
arising under clause (vi) of the first paragraph of this section, all
outstanding Notes will become due and payable without further action or notice.
Holders 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 Indenture provides that the Trustee may withhold from
Holders notice of any continuing Default or Event of Default (except a Default
or Event of Default relating to the payment of principal, premium, if any, or
interest) if it determines that withholding notice is in their interest. In
addition, the Trustee shall have no obligation to accelerate the Notes if in the
best judgment of the Trustee acceleration is not in the best interest of the
Holders of such Notes.
The Indenture provides that the Holders of a majority in aggregate principal
amount of the then outstanding Notes issued thereunder by notice to the Trustee
may on behalf of the Holders of all of such 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, premium, if any, or
the principal of any such Note held by a non-consenting Holder. In the event of
any Event of Default specified in clause (iv) above, such Event of Default and
all consequences thereof (including without limitation any acceleration or
resulting payment default) shall be annulled, waived and rescinded,
automatically and without any action by the Trustee or the Holders, if within 20
days after such Event of Default arose (x) the Indebtedness or guarantee that is
the basis for such Event of Default has been discharged, or (y) the holders
thereof have rescinded or waived the acceleration, notice or action (as the case
may be) giving rise to such Event of Default, or (z) if the default that is the
basis for such Event of Default has been cured.
The Indenture provides that the Company is required to deliver to the
Trustee annually a statement regarding compliance with the Indenture, and the
Company is required, within five Business Days, upon
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becoming aware of any Default or Event of Default or any default under any
document, instrument or agreement representing Indebtedness of the Company or
any Guarantor, 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
or any Guarantor, shall have any liability for any obligations of the Company or
the Guarantors under the Notes, the Guarantees or the Indenture or for any claim
based on, in respect of, or by reason of such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Notes. Such
waiver may not be effective to waive liabilities under the federal securities
laws and it is the view of the Commission that such a waiver is against public
policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The obligations of the Company and the Guarantors, if any, under the
Indenture will terminate (other than certain obligations) and will be released
upon payment in full of all of the Notes. The Company may, at its option and at
any time, elect to have all of its obligations discharged with respect to the
outstanding Notes and have each Guarantor's obligation discharged with respect
to its Guarantee ("LEGAL DEFEASANCE") and cure all then existing Events of
Default except for (i) the rights of Holders of outstanding Notes to receive
payments in respect of the principal of, premium, if any, and interest on such
Notes when such payments are due solely out of the trust created pursuant to the
Indenture, (ii) the Company's obligations with respect to Notes concerning
issuing temporary Notes, registration of such 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 and each Guarantor 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 on other
indebtedness, bankruptcy, receivership, rehabilitation and insolvency events)
described under "Events of Default" will no longer constitute an Event of
Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance with
respect to the Notes:
(i) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, 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
due on the outstanding Notes on the stated maturity date or on the
applicable redemption date, as the case may be, of such principal, premium,
if any, or interest on the outstanding Notes;
(ii) in the case of Legal Defeasance, the Company shall have delivered
to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that, subject to customary assumptions
and exclusions, (A) the Company has received from, or there has been
published by, the United States Internal Revenue Service a ruling or (B)
since the Issuance Date, there has been a change in the applicable U.S.
federal income tax law, in either case to the effect that, and based thereon
such opinion of counsel in the United States shall confirm that, subject to
customary assumptions and exclusions, the Holders will not recognize income,
gain or loss for U.S. federal income tax purposes as a result of such Legal
Defeasance and will be subject to
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U.S. 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, subject to customary
assumptions and exclusions, the Holders will not recognize income, gain or
loss for U.S. federal income tax purposes as a result of such Covenant
Defeasance and will be subject to such 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 or, with respect to certain
bankruptcy or insolvency Events of Default, on the 91st day after such date
of deposit;
(v) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, the Senior Credit
Facilities or any other material agreement or instrument (other than the
Indenture) to which, the Company or any Guarantor is a party or by which the
Company or any Guarantor is bound;
(vi) the Company shall have delivered to the Trustee an opinion of
counsel to the effect that, as of the date of such opinion and subject to
customary assumptions and exclusions 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 under
any applicable U.S. federal or state law, and that the Trustee has a
perfected security interest in such trust funds for the ratable benefit of
the Holders;
(vii) 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 defeating, hindering, delaying or defrauding any creditors of the
Company or any Guarantor or others; and
(viii) the Company shall have delivered to the Trustee an Officers'
Certificate and an opinion of counsel in the United States (which opinion of
counsel may be subject to customary assumptions and exclusions) each stating
that all conditions precedent provided for or relating to the Legal
Defeasance or the Covenant Defeasance, as the case may be, have been
complied with.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect as
to all Notes issued thereunder, when either (a) all such Notes theretofore
authenticated and delivered (except lost, stolen or destroyed Notes which have
been replaced or paid and Notes for whose payment money has theretofore been
deposited in trust) have been delivered to the Trustee for cancellation; or (b)
(i) all such Notes not theretofore delivered to such Trustee for cancellation
have become due and payable by reason of the making of a notice of redemption or
otherwise or will become due and payable within one year and the Company or any
Guarantor has irrevocably deposited or caused to be deposited with such Trustee
as trust funds in trust solely for the benefit of the Holders, cash in U.S.
dollars, non-callable Government Securities, or a combination thereof, in such
amounts as will be sufficient without consideration of any reinvestment of
interest to pay and discharge the entire indebtedness on such Notes not
theretofore delivered to the Trustee for cancellation for principal, premium, if
any, and accrued interest to the date of maturity or redemption; (ii) no Default
or Event of Default with respect to the Indenture or the Notes shall have
occurred and be continuing on the date of such deposit or shall occur as a
result of such deposit and such deposit will not result in a breach or violation
of, or constitute a default under, any other instrument to which the Company or
any Guarantor is a party or by which the Company or any Guarantor is bound;
(iii) the Company or any Guarantor has paid or caused to be paid all sums
payable by it under such Indenture; and (iv) the Company has delivered
irrevocable instructions to the Trustee under such
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Indenture to apply the deposited money toward the payment of such Notes at
maturity or the redemption date, as the case may be. In addition, the Company
must deliver an Officers' Certificate and an opinion of counsel to the Trustee
stating that all conditions precedent to satisfaction and discharge have been
satisfied.
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 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, any
Guarantee and the Notes issued thereunder 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 or
the Notes may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Notes (including consents obtained in
connection with a purchase of or tender offer or exchange offer for Notes).
The Indenture provides that 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 of any such Note or alter or waive 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 such Notes and a waiver of the payment default that resulted from such
acceleration), or in respect of a covenant or provision contained in the
Indenture or any Guarantee which cannot be amended or modified without the
consent of all Holders, (v) make any Note payable in money other than that
stated in such Notes, (vi) make any change in the provisions of the Indenture
relating to waivers of past Defaults or the rights of Holders to receive
payments of principal of or premium, if any, or interest on the Notes, (vii)
make any change in the foregoing amendment and waiver provisions, (viii) impair
the right of any Holder to receive payment of principal of, or interest on such
Holder's Notes on or after the due dates therefor or to institute suit for the
enforcement of any payment on or with respect to such Holder's Notes or (ix)
make any change in the subordination provisions of the Indenture that would
adversely affect the Holders.
The Indenture provides that, notwithstanding the foregoing, without the
consent of any Holder, the Company, any Guarantor (with respect to a Guarantee
or the Indenture to which it is a party) and the Trustee may amend or supplement
the Indenture, any Guarantee or the Notes (i) to cure any ambiguity, omission,
defect or inconsistency, (ii) to provide for uncertificated Notes in addition to
or in place of certificated Notes, (iii) to comply with the covenant relating to
mergers, consolidations and sales of assets, (iv) to provide for the assumption
of the Company's or any Guarantor's obligations to Holders, (v) to make any
change that would provide any additional rights or benefits to the Holders or
that does not adversely affect the legal rights under the Indenture of any such
Holder, (vi) to add covenants for the
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benefit of the Holders or to surrender any right or power conferred upon the
Company, (vii) to comply with requirements of the Commission in order to effect
or maintain the qualification of the Indenture under the Trust Indenture Act,
(viii) to evidence and provide for the acceptance and appointment under the
Indenture of a successor Trustee pursuant to the requirements thereof, or (ix)
to add a Guarantor under the Indenture.
The consent of the Holders is not necessary under the Indenture to approve
the particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment.
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 Indenture provides that the Holders of a majority in principal amount of
the outstanding Notes issued thereunder 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 will
provide that in case an Event of Default shall occur (which shall not be cured),
the Trustee will be required, in the exercise of its power, to use the degree of
care of a prudent person in the conduct of 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 such Notes,
unless such Holder shall have offered to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense.
GOVERNING LAW
The Indenture, the Notes and the Guarantees, if any, will be, subject to
certain exceptions, governed by and construed in accordance with the internal
laws of the State of New York, without regard to the choice of law rules
thereof.
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. For
purposes of the Indenture, unless otherwise specifically indicated, the term
"consolidated" with respect to any Person refers to such Person consolidated
with its Restricted Subsidiaries, and excludes from such consolidation any
Unrestricted Subsidiary as if such Unrestricted Subsidiary were not an Affiliate
of such Person.
"ACQUIRED INDEBTEDNESS" 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 Restricted 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
Restricted 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
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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.
"ASSET SALE" means (i) the sale, conveyance, transfer or other disposition
(whether in a single transaction or a series of related transactions) of
property or assets (including by way of a sale and leaseback) of the Company or
any Restricted Subsidiary (each referred to in this definition as a
"DISPOSITION") or (ii) the issuance or sale of Equity Interests of any
Restricted Subsidiary (whether in a single transaction or a series of related
transactions), in each case, other than:
(a) a disposition of Cash Equivalents or Investment Grade Securities or
obsolete or worn out equipment in the ordinary course of business or
inventory or goods held for sale in the ordinary course of business;
(b) the disposition of all or substantially all of the assets of the
Company in a manner permitted pursuant to the provisions described above
under "--Merger, Consolidation or Sale of All or Substantially All Assets"
or any disposition that constitutes a Change of Control pursuant to the
Indenture;
(c) the making of any Restricted Payment or Permitted Investment that is
permitted to be made, and is made, under the covenant described above under
"--Limitation on Restricted Payments";
(d) any disposition of assets with an aggregate fair market value of
less than $1.0 million;
(e) any disposition of property or assets or issuance of securities by a
Restricted Subsidiary to the Company or by the Company or a Restricted
Subsidiary to a Restricted Subsidiary;
(f) any exchange of like property pursuant to Section 1031 of the
Internal Revenue Code of 1986, as amended, for use in a Similar Business;
(g) the lease, assignment or sub-lease of any real or personal property
in the ordinary course of business;
(h) any financing transaction with respect to property built or acquired
by the Company or any Restricted Subsidiary after the Issuance Date,
including, without limitation, sale-leasebacks and asset securitizations;
(i) foreclosures on assets;
(j) any sale of Equity Interests in, or Indebtedness or other
securities of, an Unrestricted Subsidiary (with the exception of Investments
in Unrestricted Subsidiaries acquired pursuant to clause (j) of the
definition of Permitted Investments); and
(k) sales of accounts receivable, or participations therein, in
connection with any Receivables Facility.
"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.
"CAPITALIZED 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 and reflected as a liability on
a balance sheet (excluding the footnotes thereto) in accordance with GAAP.
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"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, (iii) certificates of deposit, time
deposits and eurodollar time deposits with maturities of one year or less from
the date of acquisition, bankers' acceptances with maturities not exceeding one
year and overnight bank deposits, in each case with any commercial bank having
capital and surplus in excess of $500.0 million, (iv) repurchase obligations for
underlying securities of the types described in clauses (ii) and (iii) entered
into with any financial institution meeting the qualifications specified in
clause (iii) above, (v) commercial paper rated A-1 or the equivalent thereof by
Moody's or S&P and in each case maturing within one year after the date of
acquisition, (vi) investment funds investing 95% of their assets in securities
of the types described in clauses (i)-(v) above, (vii) readily marketable direct
obligations issued by any state of the United States of America or any political
subdivision thereof having one of the two highest rating categories obtainable
from either Moody's or S&P and (viii) Indebtedness or preferred stock issued by
Persons with a rating of "A" or higher from S&P or "A2" or higher from Moody's.
"CHANGE OF CONTROL" means the occurrence of any of the following:
(i) the sale, lease or transfer, in one or a series of related
transactions, of all or substantially all of the assets of the Company and
its Subsidiaries, taken as a whole, to any Person other than a Permitted
Holder and their Related Parties; or
(ii) the Company becomes aware of (by way of a report or any other
filing pursuant to Section 13(d) of the Exchange Act, proxy, vote, written
notice or otherwise) the acquisition by any Person or group (within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any
successor provision), including any group acting for the purpose of
acquiring, holding or disposing of securities (within the meaning of Rule
13d-5(b)(1) under the Exchange Act), other than the Permitted Holders and
their Related Parties, in a single transaction or in a related series of
transactions, by way of merger, consolidation or other business combination
or purchase of beneficial ownership (within the meaning of Rule 13d-3 under
the Exchange Act, or any successor provision) of 50% or more of the total
Voting Stock of the Company.
"CONSOLIDATED DEPRECIATION AND AMORTIZATION EXPENSE" means with respect to
any Person for any period, the total amount of depreciation and amortization
expense and other noncash charges (excluding any noncash item that represents an
accrual, reserve or amortization of a cash expenditure for a future period) of
such Person and its Restricted Subsidiaries for such period on a consolidated
basis and otherwise determined in accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any period, the sum,
without duplication, of: (a) consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, to the extent such expense was
deducted in computing Consolidated Net Income (including amortization of
original issue discount, non-cash interest payments, the interest component of
Capitalized Lease Obligations, and net payments (if any) pursuant to Hedging
Obligations, excluding amortization of deferred financing fees) and (b)
consolidated capitalized interest of such Person and its Restricted Subsidiaries
for such period, whether paid or accrued; PROVIDED, HOWEVER, that Receivables
Fees shall be deemed not to constitute Consolidated Interest Expense.
"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, and otherwise determined in accordance
with GAAP; PROVIDED, HOWEVER, that (i) any net after-tax extraordinary gains or
losses (less all fees and expenses relating thereto) shall be excluded, (ii) the
Net Income for such period shall not include the cumulative effect of a change
in accounting principles during such period, (iii) any net after-tax income
(loss) from discontinued operations and any net after-tax gains or losses on
disposal of discontinued operations shall be excluded, (iv) any net after-tax
gains or losses (less all fees and expenses relating thereto) attributable to
asset dispositions other than in the ordinary
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course of business (as determined in good faith by the Board of Directors of the
Company) shall be excluded, (v) the Net Income for such period of any Person
that is not a Subsidiary, or is an Unrestricted Subsidiary, or that is accounted
for by the equity method of accounting, shall be excluded; PROVIDED that
Consolidated Net Income of the Company shall be increased by the amount of
dividends or distributions or other payments actually paid in cash (or to the
extent converted into cash) to the referent Person or a Restricted Subsidiary
(subject to the limits in clause (vii) below) thereof in respect of such period,
(vi) the Net Income of any Person acquired in a pooling of interests transaction
shall not be included for any period prior to the date of such acquisition and
(vii) the Net Income for such period of any Restricted Subsidiary shall be
excluded if the declaration or payment of dividends or similar distributions by
that Restricted Subsidiary of its Net Income is not at the date of determination
wholly permitted without any prior governmental approval (which has not been
obtained) or, directly or indirectly, by the 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, unless such restriction with respect to the payment of dividends
or in similar distributions has been legally waived; PROVIDED that Consolidated
Net Income of the Company shall be increased by the amount of dividends or other
distributions or other payments actually paid in cash (or to the extent
converted into cash) to the referent Person or a Restricted Subsidiary thereof
in respect of such period. Notwithstanding the foregoing, for the purpose of the
covenant described under "Certain Covenants--Limitation on Restricted Payments"
only, there shall be excluded from Consolidated Net Income any sale or other
disposition of Restricted Investments made by the Company and its Restricted
Subsidiaries, repurchases and redemptions of Restricted Investments, repayments
of loans and advances which constitute Restricted Investments, sales of the
stock of an Unrestricted Subsidiary or distributions or dividends from an
Unrestricted Subsidiary, in each case only to the extent such amounts increase
the amount of Restricted Payments permitted under such covenant pursuant to
clause (c)(iv) thereof.
"CONTINGENT OBLIGATIONS" means, with respect to any Person, any obligation
of such Person guaranteeing any leases, dividends or other obligations that do
not constitute Indebtedness ("PRIMARY OBLIGATIONS") of any other Person (the
"PRIMARY OBLIGOR") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(i) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (ii) to advance or supply funds (A) for the
purchase or payment of any such primary obligation or (B) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, or (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation against loss in respect thereof.
"CREDIT FACILITIES" means, with respect to the Company, one or more debt
facilities (including, without limitation, the Senior Credit Facilities) or
commercial paper facilities with banks or other institutional lenders or
indentures providing for revolving credit loans, term loans, receivables
financing (including through the sale of receivables to such lenders or to
special purpose entities formed to borrow from such lenders against
receivables), letters of credit or other long-term indebtedness, in each case,
as amended, restated, modified, renewed, refunded, replaced or refinanced in
whole or in part from time to time.
"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 NONCASH CONSIDERATION" means the fair market value of noncash
consideration received by the Company or one of its Restricted Subsidiaries in
connection with an Asset Sale that is so designated as Designated Noncash
Consideration pursuant to an Officers' Certificate, setting forth the basis of
such valuation, executed by the principal executive officer and the principal
financial officer of the Company, less the amount of cash or Cash Equivalents
received in connection with a subsequent sale of such Designated Noncash
Consideration.
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"DESIGNATED PREFERRED STOCK" means preferred stock of the Company (other
than Disqualified Stock) that is issued for cash (other than to a Restricted
Subsidiary) and is so designated as Designated Preferred Stock, pursuant to an
Officers' Certificate executed by the principal executive officer and the
principal financial officer of the Company, on the issuance date thereof, the
cash proceeds of which are excluded from the calculation set forth in paragraph
(c) of the "--Limitation on Restricted Payments" covenant.
"DISQUALIFIED STOCK" means, with respect to any Person, any Capital Stock of
such Person which, by its terms (or by the terms of any security into which it
is convertible or for which it is putable or exchangeable), or upon the
happening of any event, matures or is mandatorily redeemable (other than as a
result of a change of control or asset sale), pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the holder thereof
(other than as a result of a change of control or asset sale), in whole or in
part, in each case prior to the date 91 days after the earlier of the maturity
date of the Notes or the date the Notes are no longer outstanding; PROVIDED,
HOWEVER, that if such Capital Stock is issued to any plan for the benefit of
employees of the Company or its Subsidiaries or by any such plan to such
employees, such Capital Stock shall not constitute Disqualified Stock solely
because it may be required to be repurchased by the Company or its Subsidiaries
in order to satisfy applicable statutory or regulatory obligations.
"EBITDA" means, with respect to any Person for any period, the Consolidated
Net Income of such Person for such period plus (a) provision for taxes based on
income or profits of such Person for such period deducted in computing
Consolidated Net Income, plus (b) Consolidated Interest Expense of such Person
for such period and any Receivables Fees paid by such Person or any of its
Restricted Subsidiaries during such period, in each case to the extent the same
was deducted in calculating such Consolidated Net Income, plus (c) Consolidated
Depreciation and Amortization Expense of such Person for such period to the
extent such depreciation and amortization were deducted in computing
Consolidated Net Income, plus (d) any expenses or charges related to any Equity
Offering, Permitted Investment, acquisition, recapitalization or Indebtedness
permitted to be incurred by the Indenture (whether or not successful) (including
such fees, expenses or charges related to the Transactions) and deducted in such
period in computing Consolidated Net Income, plus (e) the amount of any
restructuring charge deducted in such period in computing Consolidated Net
Income (including any one-time costs incurred in connection with acquisitions
after the Issuance Date), plus (f) without duplication, any other non-cash
charges reducing Consolidated Net Income for such period (excluding any such
charge which requires an accrual of a cash reserve for any future period) plus
(g) the amount of any minority interest expense deducted in calculating
Consolidated Net Income, less, without duplication (h) non-cash items increasing
Consolidated Net Income of such Person for such period (excluding any items
which represent the reversal of any accrual of, or cash reserve for, anticipated
cash charges in any prior period).
"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).
"EQUITY OFFERING" means any public or private sale of common stock or
preferred stock of the Company (excluding Disqualified Stock), other than (i)
public offerings with respect to the Company's Common Stock registered on Form
S-8 and (ii) any such public or private sale that constitutes an Excluded
Contribution.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"EXCLUDED CONTRIBUTION" means net cash proceeds, marketable securities or
Qualified Proceeds, in each case, received by the Company from (a) contributions
to its common equity capital and (b) the sale (other than to a Subsidiary or to
any Company or Subsidiary management equity plan or stock option plan or any
other management or employee benefit plan or agreement) of Capital Stock (other
than Disqualified Stock and Designated Preferred Stock) of the Company, in each
case designated as
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Excluded Contributions pursuant to an Officers' Certificate executed by the
principal executive officer and the principal financial officer of the Company
on the date such capital contributions are made or the date such Equity
Interests are sold, as the case may be, which are excluded from the calculation
set forth in paragraph (c) under "--Limitation on Restricted Payments."
"EXISTING INDEBTEDNESS" means Indebtedness of the Company or its Restricted
Subsidiaries in existence on the Issuance Date, plus interest accruing thereon,
after application of the net proceeds of the sale of the Old Notes as described
in this Prospectus.
"FIXED CHARGE COVERAGE RATIO" means, with respect to any Person for any
period, the ratio of EBITDA of such Person for such period to the Fixed Charges
of such Person for such period. In the event that the Company or any of its
Restricted Subsidiaries incurs, assumes, guarantees or redeems any Indebtedness
or issues or redeems Disqualified Stock or preferred stock subsequent to the
commencement of the period for which the Fixed Charge Coverage Ratio is being
calculated but prior to 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 Disqualified Stock or preferred stock, as if the same had occurred
at the beginning of the applicable four-quarter period. For purposes of making
the computation referred to above, Investments, acquisitions, dispositions,
mergers, consolidations and discontinued operations (as determined in accordance
with GAAP) that have been made by the Company or any of its Restricted
Subsidiaries during the four-quarter reference period or subsequent to such
reference period and on or prior to or simultaneously with the Calculation Date
shall be calculated on a pro forma basis assuming that all such Investments,
acquisitions, dispositions, mergers, consolidations and discontinued operations
(and the reduction of any associated fixed charge obligations and the change in
EBITDA resulting therefrom) had occurred on the first day of the four-quarter
reference period. If since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into the
Company or any Restricted Subsidiary since the beginning of such period) shall
have made any Investment, acquisition, disposition, merger, consolidation or
discontinued operation that would have required adjustment pursuant to this
definition, then the Fixed Charge Coverage Ratio shall be calculated giving pro
forma effect thereto for such period as if such Investment, acquisition,
disposition, merger, consolidation or discontinued operation had occurred at the
beginning of the applicable four-quarter period. For purposes of this
definition, whenever pro forma effect is to be given to a transaction, the pro
forma calculations shall be made in good faith by a responsible financial or
accounting officer of the Company. If any Indebtedness bears a floating rate of
interest and is being given pro forma effect, the interest on such Indebtedness
shall be calculated as if the rate in effect on the Calculation Date had been
the applicable rate for the entire period (taking into account any Hedging
Obligations applicable to such Indebtedness). Interest on a Capitalized Lease
Obligation shall be deemed to accrue at an interest rate reasonably determined
by a responsible financial or accounting officer of the Company to be the rate
of interest implicit in such Capitalized Lease Obligation in accordance with
GAAP. For purposes of making the computation referred to above, interest on any
Indebtedness under a revolving credit facility computed on a pro forma basis
shall be computed based upon the average daily balance of such Indebtedness
during the applicable period. Interest on Indebtedness that may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rate, shall be deemed to have been
based upon the rate actually chosen, or, if none, then based upon such optional
rate chosen as the Company may designate.
"FIXED CHARGES" means, with respect to any Person for any period, the sum of
(a) Consolidated Interest Expense of such Person for such period and (b) all
cash dividend payments (excluding items eliminated in consolidation) on any
series of Disqualified Stock of such Person.
"FOREIGN SUBSIDIARY" means a Restricted Subsidiary not organized or existing
under the laws of the United States, any State thereof, the District of
Columbia, or any territory thereof.
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"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 on the Issuance Date. For the purposes of the
Indenture, the term "consolidated" with respect to any Person shall mean such
Person consolidated with its Restricted Subsidiaries, and shall not include any
Unrestricted Subsidiary.
"GOVERNMENT SECURITIES" means securities that are (a) direct obligations of
the United States of America for the timely payment of which its full faith and
credit is pledged or (b) obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States of America the
timely payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act), as custodian with respect to any such Government Securities
or a specific payment of principal of or interest on any such Government
Securities held by such custodian for the account of the holder of such
depository receipt; PROVIDED that (except as required by law) such custodian is
not authorized to make any deduction from the amount payable to the holder of
such depository receipt from any amount received by the custodian in respect of
the Government Securities or the specific payment of principal of or interest on
the Government Securities evidenced by such depository receipt.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness or other obligations.
"GUARANTEE" means any guarantee of the obligations of the Company under the
Indenture and the Notes by any Person in accordance with the provisions of the
Indenture. When used as a verb, "Guarantee" shall have a corresponding meaning.
No Guarantees will be issued in connection with the initial offering and sale of
the Notes.
"GUARANTOR" means any Person that incurs a Guarantee; PROVIDED that upon the
release and discharge of such Person from its Guarantee in accordance with the
Indenture, such Person shall cease to be a Guarantor. No Guarantees will be
issued in connection with the initial offering and sale of the Notes.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under (i) currency exchange, interest rate or commodity swap
agreements, currency exchange, interest rate or commodity cap agreements and
currency exchange, interest rate or commodity collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in currency exchange, interest rates or commodity prices.
"HOLDER" means a holder of the Notes.
"INDEBTEDNESS" means, with respect to any Person, (a) any indebtedness
(including principal and premium) of such Person, whether or not contingent (i)
in respect of borrowed money, (ii) evidenced by bonds, notes, debentures or
similar instruments or letters of credit or bankers' acceptances (or, without
double counting, reimbursement agreements in respect thereof), (iii)
representing the balance deferred and unpaid of the purchase price of any
property (including Capitalized Lease Obligations), except any such balance that
constitutes a trade payable or similar obligation to a trade creditor, in each
case accrued in the ordinary course of business or (iv) representing any Hedging
Obligations, if and to the extent of any of the foregoing Indebtedness (other
than letters of credit and Hedging Obligations) that would appear as a liability
upon a balance sheet (excluding the footnotes thereto) of such Person prepared
in accordance with GAAP, (b) to the extent not otherwise included, any
obligation by such
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Person to be liable for, or to pay, as obligor, guarantor or otherwise, on the
Indebtedness of another Person (other than by endorsement of negotiable
instruments for collection in the ordinary course of business) and (c) to the
extent not otherwise included, Indebtedness of another Person secured by a Lien
on any asset owned by such Person (whether or not such Indebtedness is assumed
by such Person); PROVIDED, HOWEVER, that Contingent Obligations incurred in the
ordinary course of business shall be deemed not to constitute Indebtedness, and
obligations under or in respect of Receivables Facilities shall not be deemed to
constitute Indebtedness of a Person.
In addition, "Indebtedness" of any Person shall include Indebtedness
described in the foregoing paragraph that would not appear as a liability on the
balance sheet of such Person if (i) such Indebtedness is the obligation of a
partnership or a joint venture that is not a Restricted Subsidiary (a "Joint
Venture"), (2) such Person or a Restricted Subsidiary is a general partner of
the Joint Venture (a "General Partner") and (3) there is recourse, by contract
or operation of law, with respect to the payment of such Indebtedness to
property or assets of such Person or a Restricted Subsidiary; and such
Indebtedness shall be included in an amount not to exceed (x) the greater of (A)
the net assets of the General Partner and (B) the amount of such obligations to
the extent that there is recourse by, contract or operation of law, to the
property or assets of such Person or a Restricted Subsidiary (other than the
General Partner) or (y) if less than the amount determined pursuant to clause
(x) immediately above, the actual amount of such Indebtedness that is recourse
to such Person, if the Indebtedness is evidenced by a writing and is for a
determinable amount and the related interest expense shall be included in
Consolidated Interest Expense to the extent paid by the Company or its
Restricted Subsidiaries.
"INDEPENDENT FINANCIAL ADVISOR" means an accounting, appraisal, investment
banking firm or consultant to Persons engaged in Similar Businesses of
nationally recognized standing that is, in the good faith judgment of the
Company, qualified to perform the task for which it has been engaged.
"INVESTMENT GRADE SECURITIES" means (i) securities issued or directly and
fully guaranteed or insured by the United States government or any agency or
instrumentality thereof (other than Cash Equivalents), (ii) debt securities or
debt instruments with a rating of BBB- or higher by S&P or Baa3 or higher by
Moody's or the equivalent of such rating by such rating organization, or, if no
rating of S&P or Moody's then exists, the equivalent of such rating by any other
nationally recognized securities rating agency, but excluding any debt
securities or instruments constituting loans or advances among the Company and
its Subsidiaries, and (iii) investments in any fund that invests exclusively in
investments of the type described in clauses (i) and (ii) which fund may also
hold immaterial amounts of cash pending investment and/or distribution.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the form of loans (including
guarantees), advances or capital contributions (excluding accounts receivable,
trade credit, advances to customers, 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 issued by any other Person and investments that are required by GAAP
to be classified on the balance sheet (excluding the footnotes) of the Company
in the same manner as the other investments included in this definition to the
extent such transactions involve the transfer of cash or other property. For
purposes of the definition of "Unrestricted Subsidiary" and the covenant
described under "--Certain Covenants--Limitation on Restricted Payments," (i)
"Investments" shall include the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of a
Subsidiary of the Company at the time that such Subsidiary is designated an
Unrestricted Subsidiary; provided, however, that upon a redesignation of such
Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue
to have a permanent "Investment" in an Unrestricted Subsidiary in an amount (if
positive) equal to (x) the Company's "Investment" in such Subsidiary at the time
of such redesignation less (y) the portion (proportionate to the Company's
equity interest in such Subsidiary) of the fair market value of the net assets
of such Subsidiary at the time of such redesignation; and (ii) any property
transferred to or
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from an Unrestricted Subsidiary shall be valued at its fair market value at the
time of such transfer, in each case as determined in good faith by the Company.
"ISSUANCE DATE" means the closing date for the sale and original issuance of
the Old Notes under the Indenture.
"LETTER OF CREDIT OBLIGATIONS" means all Obligations in respect of
Indebtedness of the Company with respect to letters of credit issued pursuant to
the Senior Credit Facilities which Indebtedness shall be deemed to consist of
(a) the aggregate maximum amount available to be drawn under all such letters of
credit (the determination of such aggregate maximum amount to assume compliance
with all conditions for drawing) and (b) the aggregate amount that has been paid
by, and not reimbursed to, the issuers under such letters of credit.
"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); PROVIDED that in
no event shall an operating lease be deemed to constitute a Lien.
"MOODY'S" means Moody's Investors Service, Inc.
"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.
"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
Designated Noncash Consideration received in any Asset Sale), net of the direct
costs relating to such Asset Sale and the sale or disposition of such Designated
Noncash Consideration (including, without limitation, legal, accounting and
investment banking fees, and brokerage and sales commissions), 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
principal, premium (if any) and interest on Indebtedness required (other than
required by clause (i) of the second paragraph of "--Repurchase at the Option of
Holders--Asset Sales") to be paid as a result of such transaction and any
deduction of appropriate amounts to be provided by the Company as a reserve in
accordance with GAAP against any liabilities associated with the asset disposed
of in such transaction and retained by the Company after such sale or other
disposition thereof, including, without limitation, pension and other
post-employment benefit liabilities and liabilities related to environmental
matters or against any indemnification obligations associated with such
transaction.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements (including, without limitation, reimbursement
obligations with respect to letters of credit and banker's acceptances), damages
and other liabilities, and guarantees of payment of such principal, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities, payable under the documentation governing any Indebtedness.
"OFFICER" means the Chairman of the Board, the President, any Executive Vice
President, Senior Vice President or Vice President, the Treasurer or the
Secretary of the Company.
"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 set forth in the
Indenture.
"PERMITTED HOLDERS" means KKR and any of its Affiliates.
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"PERMITTED INVESTMENTS" means (a) any Investment in the Company or any
Restricted Subsidiary; (b) any Investment in cash and Cash Equivalents or
Investment Grade Securities; (c) any Investment by the Company or any Restricted
Subsidiary of the Company in a Person that is engaged in a Similar Business if
as a result of such Investment (i) such Person becomes a Restricted Subsidiary
or (ii) such Person, in one transaction or a series of related transactions, 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; (d) any Investment in securities or other assets not
constituting cash or Cash Equivalents and received in connection with an Asset
Sale made pursuant to the provisions of "-- Repurchase at the Option of
Holders--Asset Sales" or any other disposition of assets not constituting an
Asset Sale; (e) any Investment existing on the Issuance Date; (f) advances to
employees not in excess of $10.0 million outstanding at any one time, in the
aggregate; (g) any Investment acquired by the Company or any of its Restricted
Subsidiaries (i) in exchange for any other Investment or accounts receivable
held by the Company or any such Restricted Subsidiary in connection with or as a
result of a bankruptcy, workout, reorganization or recapitalization of the
issuer of such other Investment or accounts receivable or (ii) as a result of a
foreclosure by the Company or any of its Restricted Subsidiaries with respect to
any secured Investment or other transfer of title with respect to any secured
Investment in default; (h) Hedging Obligations permitted under clause (j) of the
"Limitation of Incurrence of Indebtedness and Issuance of Disqualified Stock"
covenant; (i) loans and advances to officers, directors and employees for
business-related travel expenses, moving expenses and other similar expenses, in
each case incurred in the ordinary course of business; (j) any Investment in a
Similar Business having an aggregate fair market value, taken together with all
other Investments made pursuant to this clause (j) that are at that time
outstanding (without giving effect to the sale of an Unrestricted Subsidiary to
the extent the proceeds of such sale do not consist of cash, marketable
securities and/or Qualified Proceeds), not to exceed the greater of (x) $100.0
million or (y) 15% of Total Assets at the time of such Investment (with the fair
market value of each Investment being measured at the time made and without
giving effect to subsequent changes in value); (k) Investments the payment for
which consists of Equity Interests of the Company (exclusive of Disqualified
Stock); PROVIDED, HOWEVER, that such Equity Interests will not increase the
amount available for Restricted Payments under clause (c) of the "Limitation on
Restricted Payments" covenant; (l) additional Investments having an aggregate
fair market value, taken together with all other Investments made pursuant to
this clause (l) that are at that time outstanding (without giving effect to the
sale of an Unrestricted Subsidiary to the extent the proceeds of such sale do
not consist of cash, marketable securities and/or Qualified Proceeds or
distributions made pursuant to clause (xiv) of the second paragraph of
"--Limitation on Restricted Payments"), not to exceed the greater of (x) $30.0
million or (y) 5% of Total Assets at the time of such Investment (with the fair
market value of each Investment being measured at the time made and without
giving effect to subsequent changes in value); (m) Investments in a Similar
Business having an aggregate fair market value, taken together with all other
Investments made pursuant to this clause (m) that are at that time outstanding
(without giving effect to the sale of an Unrestricted Subsidiary to the extent
the proceeds of such sale do not consist of cash, marketable securities and/or
Qualified Proceeds or distributions made pursuant to clause (xiv) of the second
paragraph of "--Limitation on Restricted Payments"), not to exceed $100.0
million at the time of such Investment (with the fair market value of each
Investment being measured at the time made and without giving effect to
subsequent changes in value); PROVIDED that at the time of such Investment the
Company would be permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the first sentence
of the covenant described under "--Limitation on Incurrence of Indebtedness and
Issuance of Disqualified Stock;" (n) Investments relating to any special purpose
Wholly-Owned Subsidiary of the Company organized in connection with a
Receivables Facility that, in the good faith determination of the Board of
Directors of the Company, are necessary or advisable to effect such Receivables
Facility; (o) guarantees (including Guarantees) of Indebtedness permitted under
the covenant "--Limitation on Incurrence of Indebtedness and Issuance of
Disqualified Stock;" (p) any transaction to the extent it constitutes an
investment that is permitted and made in accordance with the provisions of the
second paragraph of the covenant described under
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"Certain Covenants--Transactions with Affiliates" (except transactions described
in clauses (ii), (vi), (vii) and (xi) of such paragraph); and (q) Investments
consisting of the licensing or contribution of intellectual property pursuant to
joint marketing arrangements with other Persons.
"PERSON" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"PREFERRED STOCK" means any Equity Interest with preferential rights of
payment of dividends or upon liquidation, dissolution, or winding up.
"QUALIFIED PROCEEDS" means assets that are used or useful in, or Capital
Stock of any Person engaged in, a Similar Business; PROVIDED that the fair
market value of any such assets or Capital Stock shall be determined by the
Board of Directors in good faith, except that in the event the value of any such
assets or Capital Stock may exceed $25.0 million or more, the fair value shall
be determined in writing by an independent investment banking firm of nationally
recognized standing.
"RECEIVABLES FACILITY" means one or more receivables financing facilities,
as amended from time to time, pursuant to which the Company and/or any of its
Restricted Subsidiaries sells its accounts receivable to a Person that is not a
Restricted Subsidiary.
"RECEIVABLES FEES" means distributions or payments made directly or by means
of discounts with respect to any participation interest issued or sold in
connection with, and other fees paid to a Person that is not a Restricted
Subsidiary in connection with, any Receivables Facility.
"RELATED PARTIES" means any Person controlled by a Permitted Holder,
including any partnership or limited liability company of which a Permitted
Holder or its Affiliates is the general partner or managing member, as the case
may be.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" means, at any time, any direct or indirect
Subsidiary of the Company that is not then an Unrestricted Subsidiary; PROVIDED,
HOWEVER, that upon the occurrence of an Unrestricted Subsidiary ceasing to be an
Unrestricted Subsidiary, such Subsidiary shall be included in the definition of
"Restricted Subsidiary."
"S&P" means Standard and Poor's Ratings Group.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the rules
and regulations of the Commission promulgated thereunder.
"SENIOR CREDIT FACILITIES" means that certain Credit Agreement dated as of
April 9, 1998 among the Company, The Chase Manhattan Bank, as administrative
agent, Salomon Brothers Inc, as syndication agent, Bankers Trust Company, as
documentation agent and the several lenders from time to time parties thereto,
including any collateral documents, instruments and agreements executed in
connection therewith, and any amendments, supplements, modifications,
extensions, renewals, restatements or refundings thereof and any indentures or
credit facilities or commercial paper facilities with banks or other
institutional lenders that replace, refund or refinance any part of the loans,
notes, other credit facilities or commitments thereunder, including any such
replacement, refunding or refinancing facility or indenture that increases the
amount borrowable thereunder or alters the maturity thereof, PROVIDED, HOWEVER,
that in connection with any facilities which refund, replace or refinance such
Credit Agreement there shall not be more than one facility at any one time that
is identified as the Senior Credit Facilities and, if at any time there is more
than one facility which would constitute the Senior Credit Facilities, the
Company will designate to the Trustee which one of such facilities will be the
Senior Credit Facilities for purposes of the Indenture.
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"SENIOR SUBORDINATED INDEBTEDNESS" means (a) with respect to the Company,
Indebtedness which ranks PARI PASSU in right of payment to the Notes and (b)
with respect to any Guarantor, Indebtedness which ranks PARI PASSU in right of
payment to the Guarantee of such Guarantor.
"SIGNIFICANT 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 Securities Act, as such Regulation is in effect on the date
hereof.
"SIMILAR BUSINESS" means the housewares and appliance businesses and any
activities or businesses incidental, directly related or similar thereto, or any
line of business engaged in by the Company or its Subsidiaries on the Issuance
Date or any business activity that is a reasonable extension, development or
expansion thereof or ancillary thereto.
"SUBORDINATED INDEBTEDNESS" means (a) with respect to the Company, any
Indebtedness of the Company which is by its terms subordinated in right of
payment to the Notes and (b) with respect to any Guarantor, any Indebtedness of
such Guarantor which is by its terms subordinated in right of payment to the
Guarantee of such Guarantor.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association, or other business entity (other than a partnership, joint venture,
limited liability company or similar 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 of determination 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, joint venture, limited
liability company or similar entity of which (x) more than 50% of the capital
accounts, distribution rights, total equity and voting interests or general or
limited partnership interests, as applicable, are owned or controlled, directly
or indirectly, by such Person or one or more of the other Subsidiaries of that
Person or a combination thereof whether in the form of membership, general,
special or limited partnership or otherwise and (y) such Person or any Wholly
Owned Restricted Subsidiary of such Person is a controlling general partner or
otherwise controls such entity.
"TOTAL ASSETS" means the total consolidated assets of the Company and its
Restricted Subsidiaries, as shown on the most recent balance sheet of the
Company.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary of the Company which at
the time of determination is an Unrestricted Subsidiary (as designated by the
Board of Directors of the Company, as provided below) and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors of the Company may designate
any Subsidiary of the Company (including any existing Subsidiary and any newly
acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless
such Subsidiary or any of its Subsidiaries owns any Equity Interests or
Indebtedness of, or owns or holds any Lien on, any property of, the Company or
any Subsidiary of the Company (other than any Subsidiary of the Subsidiary to be
so designated), PROVIDED that (a) any Unrestricted Subsidiary must be an entity
of which shares of the capital stock or other equity interests (including
partnership interests) entitled to cast at least a majority of the votes that
may be cast by all shares or equity interests having ordinary voting power for
the election of directors or other governing body are owned, directly or
indirectly, by the Company, (b) such designation complies with the covenants
described under "--Certain Covenants--Limitation on Restricted Payments" and (c)
each of (I) the Subsidiary to be so designated and (II) its Subsidiaries has not
at the time of designation, and does not thereafter, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable with respect
to any Indebtedness pursuant to which the lender has recourse to any of the
assets of the Company or any of its Restricted Subsidiaries. The Board of
Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; PROVIDED that, immediately after giving effect to such designation
no Default or Event of Default shall have occurred and be continuing and either
(i) the Company could incur at least $1.00 of additional Indebtedness pursuant
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to the Fixed Charge Coverage Ratio test described under "--Certain
Covenants--Limitations on Incurrence of Indebtedness and Issuance of
Disqualified Stock" or (ii) the Fixed Charge Coverage Ratio for the Company and
its Restricted Subsidiaries would be greater than such ratio for the Company and
its Restricted Subsidiaries immediately prior to such designation, in each case
on a pro forma basis taking into account such designation. Any such designation
by the Board of Directors shall be notified by the Company to the Trustee by
promptly filing with the Trustee a copy of the board resolution giving effect to
such designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.
"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
or Disqualified Stock, as the case may be, at any date, the quotient obtained by
dividing (i) the sum of the products of the number of years from the date of
determination to the date of each successive scheduled principal payment of such
Indebtedness or redemption or similar payment with respect to such Disqualified
Stock multiplied by the amount of such payment, by (ii) the sum of all such
payments.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" is any Wholly Owned Subsidiary that is
a Restricted Subsidiary.
"WHOLLY OWNED SUBSIDIARY" of any Person means a Subsidiary of such Person,
100% 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 Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.
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EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
The Company and the Initial Purchasers entered into the Exchange and
Registration Rights Agreement concurrently with the issuance of the Old Notes.
Pursuant to the Exchange and Registration Rights Agreement, the Company agreed
to (i) file with the Commission on or prior to 100 days after the date of
issuance of the Old Notes (the "Issue Date" or the "Issuance Date") a
registration statement on an appropriate form under the Securities Act (the
"Exchange Offer Registration Statement"), with respect to the "Exchange Offer"
for the Old Notes under the Securities Act and (ii) use its reasonable best
efforts to cause the Exchange Offer Registration Statement to be declared
effective under the Securities Act within 200 days after the Issue Date. As soon
as practicable after the effectiveness of the Exchange Offer Registration
Statement, the Company will offer to the holders of Transfer Restricted
Securities who are not prohibited by any law or policy of the Commission from
participating in the Exchange Offer the opportunity to exchange their Restricted
Securities for an issue of a Exchange Notes that are identical in all material
respects to the Notes (except that the Exchange Notes will not contain terms
with respect to transfer restrictions) and that would be registered under the
Securities Act. The Company will keep the Exchange Offer open for not less than
20 business days (or longer, if required by applicable law) after the date on
which notice of the Exchange Offer is mailed to the holders of the Notes.
If (i) because of any change in law or applicable interpretations thereof by
the staff of the Commission, the Company is not permitted to effect the Exchange
Offer as contemplated hereby, (ii) any Old Notes validly tendered pursuant to
the Exchange Offer are not exchanged for Exchange Notes within 230 days after
the Issue Date, (iii) any Initial Purchaser so requests with respect to Old
Notes not eligible to be exchanged for Exchange Notes in the Exchange Offer,
(iv) any applicable law or interpretations do not permit any holder of Old Notes
to participate in the Exchange Offer or (v) any holder of Old Notes that
participates in the Exchange Offer does not receive freely transferable Exchange
Notes in exchange for tendered Old Notes, then the Company will file with the
Commission a shelf registration statement (the "Shelf Registration Statement")
to cover resales of Transfer Restricted Securities by such holders who satisfy
certain conditions relating to the provision of information in connection with
the Shelf Registration Statement. For purposes of the foregoing, "Transfer
Restricted Securities" means each Old Note until (i) the date on which such Old
Note has been exchanged for a freely transferable Exchange Note in the Exchange
Offer, (ii) the date on which such Old Notes has been effectively registered
under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (iii) the date on which such Old Note is distributed
to the public pursuant to Rule 144 under the Securities Act or is salable
pursuant to Rule 144(k) under the Securities Act.
The Company will use its reasonable best efforts to have the Exchange Offer
Registration Statement or, if applicable, the Shelf Registration Statement
(each, a "Registration Statement") declared effective by the Commission as
promptly as practicable after the filing thereof. Unless the Exchange Offer
would not be permitted by a policy of the Commission, the Company will commence
the Exchange Offer and will use its reasonable best efforts to consummate the
Exchange Offer as promptly as practicable, but in any event prior to 230 days
after the Issue Date. If applicable, the Company will use its reasonable best
efforts to keep the Shelf Registration Statement effective for a period until
two years after the Issue Date or such shorter period when all Old Notes covered
by the Shelf Registration Statement have been sold in the manner set forth and
as contemplated in the Shelf Registration Statement or when the Notes became
eligible for resale pursuant to Rule 144 under the Securities Act without volume
restrictions, if any.
If (i) the applicable Registration Statement is not fixed with the
Commission on or prior to 100 days after the Issue Date (or, in the case of a
Shelf Registration Statement required to be filed in response to a change in law
or applicable interpretations of the Staff of the Commission, if later, within
45 days after publication of the change in law or interpretations, but in no
event before 100 calendar days after the Issuance Date); (ii) the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case may be,
is not declared effective within 200 days after the Issue Date (or in the case
of a Shelf Registration Statement required to be filed in response to a change
in law or applicable interpretations of
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the Staff of the Commission, if later, within 90 days after publication of the
change in law or interpretations, but in no event before 200 days after the
Issuance Date); (iii) the Exchange Offer is not consummated on or prior to 230
days after the Issue Date (other than in the event the Company files a Shelf
Registration Statement) or (iv) the Shelf Registration Statement is filed and
declared effective within 200 days after the Issue Date but shall thereafter
cease to be effective (at any time that the Company is obligated to maintain the
effectiveness thereof) without being succeeded within 90 days by an additional
Registration Statement filed and declared effective (each such event referred to
in clauses (i) through (iv), a "Registration Default"), the Company will be
obligated to pay liquidated damages to each holder of Transfer Restricted
Securities, during the period of one or more such Registration Defaults, with
respect to the first 90-day period immediately following the occurrence of the
first Registration Default in an amount equal to one-quarter of one percent per
annum (which rate will be increased by an additional one-quarter of one percent
per annum for each subsequent 90-day period that any liquidated damages continue
to accrue; provided that the rate at which liquidated damages accrue may in no
event exceed one percent per annum) in respect of the Old Notes constituting
Transfer Restricted Securities held by such holder until the applicable
Registration Statement is filed, the Exchange Offer Registration Statement is
declared effective and the Exchange Offer is consummated or the Shelf
Registration Statement is declared effective or again becomes effective, as the
case may be. All accrued liquidated damages shall be paid to holders in the same
manner as interest payments on the Old Notes on semi-annual payment dates which
correspond to interest payment dates for the Old Notes. Following the cure of
all Registration Defaults, the accrual of liquidated damages will cease.
Notwithstanding the foregoing, the Company may issue a notice that the Shelf
Registration Statement is unusable pending the announcement of a material
corporate transaction and may issue any notice suspending use of the Shelf
Registration Statement required under applicable securities laws to be issued
and, in the event that the aggregate number of days in any consecutive
twelve-month period for which all such notices are issued and effective exceeds
30 days in the aggregate, then the Company will be obligated to pay liquidated
damages to each holder of Transfer Restricted Securities in an amount equal to
one-quarter of one percent per annum (which rate will be increased by an
additional one-quarter of one percent per annum for each subsequent 90-day
period that liquidated damages continue to accrue; provided that the rate at
which liquidated damages accrue may in no event exceed one percent per annum) in
respect of the Old Notes constituting Transfer Restricted Securities. Upon the
Company declaring that the Shelf Registration Statement is usable after the
period of time described in the preceding sentence the accrual of liquidated
damages shall cease.
The Exchange and Registration Rights Agreement also provides that the
Company (i) shall make available for a period of 90 days after the consummation
of the Exchange Offer a prospectus meeting the requirements of the Securities
Act to any broker-dealer for use in connection with any resale of any such
Exchange Notes and (ii) shall pay expenses incident to the Exchange Offer and
will indemnify certain holders of the Notes (including any broker-dealer)
against certain liabilities, including liabilities under the Securities Act. A
broker-dealer that delivers such a prospectus to purchasers in connection with
such resales will be subject to certain of the civil liability provisions under
the Securities Act and will be bound by the provisions of the Exchange and
Registration Rights Agreement (including certain indemnification rights and
obligations).
Each holder of Old Notes who wishes to exchange such Old Notes for Exchange
Notes in the Exchange Offer will be required to make certain representations,
including representations that (i) any Exchange Notes to be received by it will
be acquired in the ordinary course of its business; (ii) it has no arrangement
or understanding with any person to participate in the distribution of the
Exchange Notes and (iii) it is not an "affiliate" (as defined in Rule 405 under
the Securities Act) of the Company, or if it is an affiliate, that will comply
with the registration and prospectus delivery requirements of the Securities Act
to the extent applicable.
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If the holder is not a broker-dealer, it will be required to represent that
it is not engaged in, and does not intend to engage in, the distribution of the
Exchange Notes. If the holder is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Old Notes that were acquired as a
result of market-making activities or other trading activities (an "Exchanging
Dealer"), it will be required to acknowledge that it will deliver a prospectus
in connection with any resale of such Exchange Notes.
Holders of the Old Notes will be required to make certain representations to
the Company (as described above) in order to participate in the Exchange Offer
and will be required to deliver information to be used in connection with the
Shelf Registration Statement in order to have their Old Notes included in the
Shelf Registration statement and benefit from the provisions regarding
liquidated damages set forth in the preceding paragraphs. A holder who sells Old
Notes pursuant to the Shelf Registration Statement generally will be required to
be named as a selling securityholder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and will be
bound by the provisions of the Exchange and Registration Rights Agreement which
are applicable to such a holder (including certain indemnification obligations).
For so long as the Old Notes are outstanding, the Company will continue to
provide to holders of the Old Notes and to prospective purchasers of the Old
Notes the information required by Rule 144A(d)(4) under the Securities Act.
The foregoing description of the Exchange and Registration Rights Agreement
is a summary only, does not purport to be complete and is qualified in its
entirety by reference to all provisions of the Exchange and Registration Rights
Agreement. The Company will provide a copy of the Exchange and Registration
Rights Agreement to prospective purchasers of Old Notes identified to the
Company by any Initial Purchaser upon request.
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BOOK-ENTRY; DELIVERY AND FORM
The certificates representing the Exchange Notes will be issued in fully
registered form. The Exchange Notes initially will be represented by a single,
permanent global Exchange Note, in definitive, fully registered form without
interest coupons (the "Global Exchange Note") and will be deposited with the
Trustee as custodian for The Depository Trust Company, New York, New York
("DTC") and registered in the name of a nominee of DTC.
CERTAIN BOOK-ENTRY PROCEDURES FOR THE GLOBAL NOTES
The descriptions of the operations and procedures of DTC, Euroclear and
Cedel set forth below are provided solely as a matter of convenience. These
operations and procedures are solely within the control of the respective
settlement systems and are subject to change by them from time to time. Neither
the Company nor any of the Initial Purchasers takes any responsibility for these
operations or procedures, and investors are urged to contact the relevant system
or its participants directly to discuss these matters.
DTC has advised the Company that it is (i) a limited purpose trust company
organized under the laws of the State of New York, (ii) a "banking organization"
within the meaning of the New York Banking Law, (iii) a member of the Federal
Reserve System, (iv) a "clearing corporation" within the meaning of the Uniform
Commercial Code, as amended and (v) a "clearing agency" registered pursuant to
Section 17A of the Exchange Act. DTC was created to hold securities for its
participants (collectively, the "Participants") and facilitates the clearance
and settlement of securities transactions between Participants through
electronic book-entry changes to the accounts of its Participants, thereby
eliminating the need for physical transfer and delivery of certificates. DTC's
Participants include securities brokers and dealers (including the Initial
Purchasers), banks and trust companies, clearing corporations and certain other
organizations. Indirect access to DTC's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants") that clear through or maintain a custodial relationship
with a Participant, either directly or indirectly. Investors who are not
Participants may beneficially own securities held by or on behalf of DTC only
through Participants or Indirect Participants.
The Company expects that pursuant to procedures established by DTC upon
deposit of each Global Exchange Note, ownership of the Exchange Notes will be
shown on, and the transfer of ownership thereof will be effected only through,
records maintained by DTC (with respect to the interests of Participants) and
the records of Participants and the Indirect Participants (with respect to the
interests of persons other than Participants).
The laws of some jurisdictions may require that certain purchasers of
securities take physical delivery of such securities in definitive form.
Accordingly, the ability to transfer interests in the Exchange Notes represented
by a Global Exchange Note to such persons may be limited. In addition, because
DTC can act only on behalf of its Participants, who in turn act on behalf of
persons who hold interests through Participants, the ability of a person having
an interest in Exchange Notes represented by a Global Exchange Note to pledge or
transfer such interest to persons or entities that do not participate in DTC's
system, or to otherwise take actions in respect of such interest, may be
affected by the lack of a physical definitive security in respect of such
interest.
So long as DTC or its nominee is the registered owner of a Global Exchange
Note, DTC or such nominee, as the case may be, will be considered the sole owner
or holder of the Exchange Notes represented by the Global Exchange Note for all
purposes under the Indenture. Except as provided below, owners of beneficial
interests in a Global Exchange Note will not be entitled to have Exchange Notes
represented by such Global Exchange Note registered in their names, will not
receive or be entitled to receive physical delivery of Certificated Notes, and
will not be considered the owners or holders thereof under the Indenture for any
purpose, including with respect to the giving of any direction,
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instruction or approval to the Trustee thereunder. Accordingly, each holder
owning a beneficial interest in a Global Exchange Note must rely on the
procedures of DTC and, if such holder is not a Participant or an Indirect
Participant, on the procedures of the Participant through which such holder owns
its interest, to exercise any rights of a holder of Exchange Notes under the
Indenture or such Exchange Global Note. The Company understands that under
existing industry practice, in the event that the Company requests any action of
holders of Exchange Notes, or a holder that is an owner of a beneficial interest
in a Global Exchange Note desires to take any action that DTC, as the holder of
such Global Exchange Note, is entitled to take, DTC would authorize the
Participants to take such action and the Participants would authorize holders
owning through such Participants to take such action or would otherwise act upon
the instruction of such holders. Neither the Company nor the Trustee will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of Exchange Notes by DTC, or for maintaining,
supervising or reviewing any records of DTC relating to such Exchange Notes.
Payments with respect to the principal of, and premium, if any, Liquidated
Damages, if any, and interest on, any Exchange Notes represented by a Global
Exchange Note registered in the name of DTC or its nominee on the applicable
record date will be payable by the Trustee to or at the direction of DTC or its
nominee in its capacity as the registered holder of the Global Exchange Note
representing such Exchange Notes under the Indenture. Under the terms of the
Indenture, the Company and the Trustee may treat the persons in whose names the
Exchange Notes, including the Global Exchange Notes, are registered as the
owners thereof for the purpose of receiving payment thereon and for any and all
other purposes whatsoever. Accordingly, neither the Company nor the Trustee has
or will have any responsibility or liability for the payment of such amounts to
owners of beneficial interests in a Global Exchange Note (including principal,
premium, if any, Liquidated Damages, if any, and interest). Payments by the
Participants and the Indirect Participants to the owners of beneficial interests
in a Global Exchange Note will be governed by standing instructions and
customary industry practice and will be the responsibility of the Participants
or the Indirect Participants and DTC.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds. Transfers between
participants in Euroclear or Cedel will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the
Exchange Notes, cross-market transfers between the Participants in DTC, on the
one hand, and Euroclear or Cedel participants, on the other hand, will be
effected through DTC in accordance with DTC's rules on behalf of Euroclear or
Cedel, as the case may be, by its respective depositary; however, such
cross-market transactions will require delivery of instructions to Euroclear or
Cedel, as the case may be, by the counterparty in such system in accordance with
the rules and procedures and within the established deadlines (Brussels time) of
such system. Euroclear or Cedel, as the case may be, will, if the transaction
meets its settlement requirements, deliver instructions to its respective
depositary to take action to effect final settlement on its behalf by delivering
or receiving interests in the relevant Global Exchange Notes in DTC, and making
or receiving payment in accordance with normal procedures for same-day funds
settlement applicable to DTC. Euroclear participants and Cedel participants may
not deliver instructions directly to the depositaries for Euroclear or Cedel.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a Global Exchange Note from a
Participant in DTC will be credited, and any such crediting will be reported to
the relevant Euroclear or Cedel participant, during the securities settlement
processing day (which must be a business day for Euroclear and Cedel)
immediately following the settlement date of DTC. Cash received in Euroclear or
Cedel as a result of sales of interest in a Global Security by or through a
Euroclear or Cedel participant to a Participant in DTC will be received with
value on the settlement date of DTC but will be available in the relevant
Euroclear or Cedel cash account only as of the business day for Euroclear or
Cedel following DTC's settlement date.
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Although DTC, Euroclear and Cedel have agreed to the foregoing procedures to
facilitate transfers of interests in the Global Exchange Notes among
participants in DTC, Euroclear and Cedel, they are 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 will have any
responsibility for the performance by DTC, Euroclear or Cedel or their
respective participants or indirect participants of their respective obligations
under the rules and procedures governing their operations.
CERTIFICATED NOTES
If (i) the Company notifies the Trustee in writing that DTC is no longer
willing or able to act as a depositary or DTC ceases to be registered as a
clearing agency under the Exchange Act and a successor depositary is not
appointed within 90 days of such notice or cessation, (ii) the Company, at its
option, notifies the Trustee in writing that it elects to cause the issuance of
Exchange Notes in definitive form under the Indenture or (iii) upon the
occurrence of certain other events as provided in the Indenture, then, upon
surrender by DTC of the Global Exchange Notes, Certificated Notes will be issued
to each person that DTC identifies as the beneficial owner of the Exchange Notes
represented by the Global Exchange Notes. Upon any such issuance, the Trustee is
required to register such Certificated Notes in the name of such person or
persons (or the nominee of any thereof) and cause the same to be delivered
thereto.
Neither the Company nor the Trustee shall be liable for any delay by DTC or
any Participant or Indirect Participant in identifying the beneficial owners of
the related Exchange Notes and each such person may conclusively rely on, and
shall be protected in relying on, instructions from DTC for all purposes
(including with respect to the registration and delivery, and the respective
principal amounts, of the Exchange Notes to be issued).
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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 Old Notes
where such Old Notes were acquired as a result of market-making activities or
other trading activities. A broker-dealer may not participate in the Exchange
Offer with respect to Old Notes acquired other than as a result of market-making
activities or other trading activities. To the extent any such broker-dealer
participates in the Exchange Offer and so notifies the Company, or causes the
Company to be so notified in writing, the Company has agreed for a period of 90
days after the date of this Prospectus, it will make this Prospectus, as amended
or supplemented, available to such broker-dealer for use in connection with any
such resale, and 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. In addition, until , 1998
(90 days after the date of this Prospectus), 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. Exchange Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the Exchange Notes or a combination of such methods of
resale, at prevailing market prices at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers or any such Exchange Notes. Any broker-dealer
that resells Exchange Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such 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 commissions or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that, by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
The Company has agreed to pay all expenses incident to the Exchange Offer
(other than commissions and concessions of any broker-dealers), subject to
certain prescribed limitations, and will indemnify the holders of the Old Notes
against certain liabilities, including certain liabilities that may arise under
the Securities Act.
By its acceptance of the Exchange Offer, any broker-dealer that receives
Exchange Notes pursuant to the Exchange Offer hereby agrees to notify the
Company prior to using the Prospectus in connection with the sale or transfer of
Exchange Notes, and acknowledges and agrees that, upon receipt of notice from
the Company of the happening of any event which makes any statement in the
Prospectus untrue in any material respect or which requires the making of any
changes in the Prospectus in order to make the statements therein not misleading
or which may impose upon the Company disclosure obligations that may have a
material adverse effect on the Company (which notice the Company agrees to
deliver promptly to such broker-dealer), such broker-dealer will suspend use of
the Prospectus until the Company has notified such broker-dealer that delivery
of the Prospectus may resume and has furnished copies of any amendment or
supplement to the Prospectus to such broker-dealer.
143
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the validity of the Exchange Notes
offered hereby will be passed upon for the Company by Simpson Thacher &
Bartlett, New York, New York. A member of Simpson Thacher & Bartlett
beneficially owns shares of Common Stock which represent less than 0.1% of the
Common Stock.
EXPERTS
The consolidated financial statements of the Company as of December 31, 1997
and 1996 and for each of the three years in the period ended December 31, 1997,
included in this Prospectus, have been audited by Price Waterhouse LLP,
independent accountants, as stated in their report appearing herein and are
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
CHANGE IN ACCOUNTANTS
On April 1, 1998, the Company dismissed its independent accountants, Price
Waterhouse LLP, and replaced them with Deloitte & Touche LLP. There were no
disagreements with Price Waterhouse LLP on any matter of accounting principles,
financial statement disclosure or auditing scope or procedure.
144
<PAGE>
CORNING CONSUMER PRODUCTS COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF CORNING INCORPORATED)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
FINANCIAL STATEMENTS OF CORNING CONSUMER PRODUCTS COMPANY
Consolidated Financial Statements:
Consolidated Balance Sheets-March 31, 1998 (unaudited)
and December 31, 1997.................................................................................. F-2
Consolidated Statements of Operations-Three Months Ended
March 31, 1998 (unaudited) and 1997 (unaudited)........................................................ F-3
Consolidated Statements of Cash Flows-Three Months Ended
March 31, 1998 (unaudited) and 1997 (unaudited)........................................................ F-4
Report of Independent Accountants........................................................................ F-5
Consolidated Financial Statements:
Consolidated Balance Sheets-December 31, 1997 and 1996................................................. F-6
Consolidated Statements of Operations-Years Ended
December 31, 1997, 1996 and 1995....................................................................... F-7
Consolidated Statements of Cash Flows-Years Ended
December 31, 1997, 1996 and 1995....................................................................... F-8
Notes to Consolidated Financial Statements............................................................. F-9
</TABLE>
F-1
<PAGE>
CORNING CONSUMER PRODUCTS COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF CORNING INCORPORATED)
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
----------- --------------
<S> <C> <C>
1998 1997
----------- --------------
<CAPTION>
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents......................................................... $ 7,421 $ 4,345
Accounts receivable, net of allowances of $6,662 and $7,304 at March 31, 1998 and
December 31, 1997............................................................... 55,267 68,340
Inventories, net.................................................................. 150,430 136,138
Prepaid expenses and other current assets......................................... 5,249 8,695
Deferred taxes on income.......................................................... 7,799 8,633
----------- --------------
TOTAL CURRENT ASSETS............................................................ 226,166 226,151
Property and equipment, net......................................................... 150,510 153,332
Deferred taxes on income............................................................ 29,286 29,273
Goodwill, net of accumulated amortization of $7,090 and $6,663 at March 31, 1998 and
December 31, 1997................................................................. 59,997 60,424
Other assets........................................................................ 16,339 14,464
----------- --------------
TOTAL ASSETS.................................................................... $ 482,298 $ 483,644
----------- --------------
----------- --------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable and accrued expenses............................................. $ 69,587 $ 79,153
Due to Corning Incorporated....................................................... 96,224 87,142
----------- --------------
TOTAL CURRENT LIABILITIES....................................................... 165,811 166,295
Long-term debt...................................................................... 8,285 8,285
Accrued postretirement liability.................................................... 60,856 59,641
Other liabilities................................................................... 19,610 18,243
Minority interest in subsidiary company............................................. 1,010 1,046
----------- --------------
TOTAL LIABILITIES............................................................... 255,572 253,510
COMMITMENTS (NOTE 17)
STOCKHOLDER'S EQUITY
Common stock--$0.01 par value; shares authorized-45,000,000;
shares issued-24,000,000.......................................................... 240 240
Contributed capital................................................................. 273,830 273,830
Accumulated deficit................................................................. (45,720) (42,138)
Cumulative translation adjustment................................................... (1,624) (1,798)
----------- --------------
TOTAL STOCKHOLDER'S EQUITY...................................................... 226,726 230,134
----------- --------------
----------- --------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY...................................... $ 482,298 $ 483,644
----------- --------------
----------- --------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-2
<PAGE>
CORNING CONSUMER PRODUCTS COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF CORNING INCORPORATED)
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------
MARCH 31, MARCH 31,
1998 1997
-------------- --------------
<S> <C> <C>
(UNAUDITED) (UNAUDITED)
REVENUES
Net sales...................................................................... $ 116,538 $ 128,279
DEDUCTIONS
Cost of sales.................................................................. 77,761 83,653
Selling, general, administrative and research and development expenses......... 36,693 32,789
Other corporate administrative expenses........................................ -- 4,602
Management fees................................................................ 437 --
Goodwill amortization.......................................................... 427 427
Transactions related expenses.................................................. 1,384 --
Other, net..................................................................... 375 355
Royalty income................................................................. (226) (227)
-------------- --------------
Operating (loss) income........................................................ (313) 6,680
Interest expense............................................................... 1,574 2,102
-------------- --------------
(Loss) income before taxes on income........................................... (1,887) 4,578
Income tax expense............................................................. 1,731 2,756
-------------- --------------
(Loss) income before minority interest......................................... (3,618) 1,822
Minority interest in earnings (losses) of subsidiary........................... 36 (61)
-------------- --------------
Net (loss) income.......................................................... $ (3,582) $ 1,761
-------------- --------------
-------------- --------------
SHARE INFORMATION
Basic and diluted (loss) earnings per common share............................... $ (0.15) $ 0.07
Weighted average number of common shares outstanding during the period........... 24,000,000 24,000,000
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
CORNING CONSUMER PRODUCTS COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF CORNING INCORPORATED)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
MARCH 31, MARCH 31,
1998 1997
---------- ----------
<S> <C> <C>
(UNAUDITED) (UNAUDITED)
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net (loss) income...................................................................... $ (3,582) $ 1,761
Adjustments to reconcile net (loss) income to net cash provided by
(used in) operating activities:
Depreciation and amortization.......................................................... 8,989 10,343
Minority interest in (earnings) losses of subsidiary................................... (36) 61
Loss of disposition of plant and equipment............................................. 84 236
Deferred tax assets.................................................................... 821 374
Provision for postretirement benefits, net of cash paid................................ 1,215 1,120
Changes in operating assets and liabilities:
Accounts receivable.................................................................... 13,073 17,379
Inventories............................................................................ (14,292) (14,899)
Prepaid expenses and other current assets.............................................. 3,446 (1,282)
Accounts payable and accrued expenses.................................................. (9,566) (21,925)
Other liabilities...................................................................... 1,367 1,074
---------- ----------
Net cash provided by (used in) operating activities................................ 1,519 (5,758)
---------- ----------
CASH FLOWS USED IN INVESTING ACTIVITIES
Additions to plant and equipment, and other assets..................................... (7,858) (4,050)
Other, net............................................................................. 159 (106)
---------- ----------
Net cash used in investing activities.............................................. (7,699) (4,156)
---------- ----------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
Increase in net amounts due to Corning Incorporated.................................... 9,082 9,517
---------- ----------
Effect of exchange rates on cash......................................................... 174 (109)
Net increase (decrease) in cash.......................................................... 3,076 (506)
Cash and cash equivalents at beginning of year........................................... 4,345 8,091
---------- ----------
Cash and cash equivalents at end of period............................................... $ 7,421 $ 7,585
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
F-4
<PAGE>
[LOGO]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
Corning Consumer Products Company
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations and of cash flows present fairly, in all
material respects, the financial position of Corning Consumer Products Company
(the "Company"), a wholly-owned subsidiary of Corning Incorporated, at December
31, 1997 and 1996 and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
New York, New York
January 19, 1998
F-5
<PAGE>
CORNING CONSUMER PRODUCTS COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF CORNING INCORPORATED)
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
<S> <C> <C>
1997 1996
----------- -----------
ASSETS
Current assets
Cash and cash equivalents............................................................. $ 4,345 $ 8,091
Accounts receivable, net of allowances of $7,304 and $7,848 at December 31, 1997 and
December 31, 1996, respectively..................................................... 68,340 80,424
Inventories, net...................................................................... 136,138 134,295
Prepaid expenses and other current assets............................................. 8,695 10,854
Deferred taxes on income.............................................................. 8,633 9,021
----------- -----------
TOTAL CURRENT ASSETS................................................................ 226,151 242,685
Property and equipment, net............................................................. 153,332 160,912
Deferred taxes on income................................................................ 29,273 34,447
Goodwill, net of accumulated amortization of $6,663 and $4,957 at December 31, 1997 and
December 31, 1996, respectively....................................................... 60,424 62,130
Other assets............................................................................ 14,464 16,271
----------- -----------
TOTAL ASSETS........................................................................ $ 483,644 $ 516,445
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable and accrued expenses................................................. $ 79,153 $ 113,895
Due to Corning Incorporated........................................................... 87,142 96,650
----------- -----------
TOTAL CURRENT LIABILITIES........................................................... 166,295 210,545
Long-term debt.......................................................................... 8,285 13,474
Accrued postretirement liability........................................................ 59,641 56,367
Other liabilities....................................................................... 18,243 17,618
Minority interest in subsidiary company................................................. 1,046 751
----------- -----------
TOTAL LIABILITIES................................................................... 253,510 298,755
COMMITMENTS (NOTE 17)
STOCKHOLDER'S EQUITY
Common stock--$0.01 par value; shares authorized-45,000,000;
shares issued-24,000,000.............................................................. 240 240
Contributed capital..................................................................... 273,830 273,420
Accumulated deficit..................................................................... (42,138) (55,176)
Cumulative translation adjustment....................................................... (1,798) (794)
----------- -----------
TOTAL STOCKHOLDER'S EQUITY.......................................................... 230,134 217,690
----------- -----------
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY.......................................... $ 483,644 $ 516,445
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
CORNING CONSUMER PRODUCTS COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF CORNING INCORPORATED)
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------------------------------
1997 1996 1995
-------------- -------------- --------------
<S> <C> <C> <C>
REVENUES
Net sales..................................................... $ 572,860 $ 632,406 $ 608,720
DEDUCTIONS
Cost of sales................................................. 376,960 435,867 431,185
Selling, general, administrative and research and development
expenses.................................................... 137,315 154,159 168,174
Other corporate administrative expense........................ 18,408 20,904 19,994
Provision for restructuring costs............................. -- 2,146 --
Goodwill amortization......................................... 1,706 1,706 1,704
Other, net.................................................... 5,896 569 519
Royalty income................................................ (1,973) (1,572) (1,617)
-------------- -------------- --------------
Operating income (loss)....................................... 34,548 18,627 (11,239)
Interest expense, net......................................... 8,481 10,721 8,755
-------------- -------------- --------------
Income (loss) before taxes on income.......................... 26,067 7,906 (19,994)
Income tax expense (benefit).................................. 12,734 6,181 (1,638)
-------------- -------------- --------------
Income (loss) before minority interest........................ 13,333 1,725 (18,356)
Minority interest in earnings of subsidiary................... (295) (105) (133)
-------------- -------------- --------------
Net income (loss)......................................... $ 13,038 $ 1,620 $ (18,489)
-------------- -------------- --------------
-------------- -------------- --------------
SHARE INFORMATION
Basic and diluted earnings (loss) per common share............ $ 0.54 $ 0.07 $ (0.77)
Weighted average number of common shares outstanding during
the period.................................................. 24,000,000 24,000,000 24,000,000
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
<PAGE>
CORNING CONSUMER PRODUCTS COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF CORNING INCORPORATED)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------------------
1997 1996 1995
--------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss).......................................................... $ 13,038 $ 1,620 $ (18,489)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization.............................................. 35,706 35,771 31,994
Minority interest in earnings of subsidiary................................ 295 105 133
Loss on disposition of plant and equipment................................. 1,596 1,570 2,180
Deferred tax assets........................................................ 5,562 (1,511) (6,995)
Provision for restructuring costs.......................................... -- 2,146 --
Provision for postretirement benefits, net of cash paid.................... 3,274 3,459 3,844
Changes in operating assets and liabilities:
Accounts receivable........................................................ 12,084 16,100 5,683
Inventories................................................................ (1,843) (5,839) 2,881
Prepaid expenses and other current assets.................................. 2,159 3,938 3,912
Accounts payable and accrued expenses...................................... (4,072) (8,938) (16,133)
Payable due to Corning..................................................... (30,670) 1,012 (7,342)
Other liabilities.......................................................... 624 7,531 (666)
--------- ---------- ----------
Net cash provided by operating activities.............................. 37,753 56,964 1,002
--------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to plant and equipment, and other assets......................... (28,600) (35,827) (40,632)
Acquisition of business.................................................... -- -- (1,600)
Other, net................................................................. 2,392 198 (640)
--------- ---------- ----------
Net cash used in investing activities.................................. (26,208) (35,629) (42,872)
--------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term debt................................................ (5,189) (511) (3,906)
Increase (decrease) in net amounts due to Corning Incorporated............. (9,508) (23,001) 46,600
Capital contribution by shareholder........................................ 410 -- --
--------- ---------- ----------
Net cash provided by (used in) financing activities.................... (14,287) (23,512) 42,694
--------- ---------- ----------
Effect of accounting calendar change on cash................................. -- (205) --
Effect of exchange rates on cash............................................. (1,004) (386) 84
--------- ---------- ----------
Net change in cash........................................................... (3,746) (2,768) 908
Cash and cash equivalents at beginning of year............................... 8,091 10,859 9,951
--------- ---------- ----------
Cash and cash equivalents at end of period................................... $ 4,345 $ 8,091 $ 10,859
--------- ---------- ----------
--------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-8
<PAGE>
CORNING CONSUMER PRODUCTS COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF CORNING INCORPORATED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)
(ALL AMOUNTS AS OF AND FOR THE PERIODS ENDED MARCH 31, 1998 AND 1997 ARE
UNAUDITED)
1. BASIS OF PRESENTATION
The consolidated financial statements present the financial position, results
of operations and cash flows of Corning Consumer Products Company ("CCP"), a
wholly-owned subsidiary of Corning Incorporated ("Corning").
CCP's business includes the manufacture and sale of oven bakeware, dinnerware,
and rangetop cookware. The Company's brands include Corning Ware-Registered
Trademark-, Pyrex-Registered Trademark-, Corelle-Registered Trademark-, Revere
Ware-Registered Trademark-, and Visions-Registered Trademark-. CCP sells its
products in both wholesale and retail markets principally in the United
States, and has significant presence in certain international markets,
primarily Canada, Asia, Australia, and Latin America. CCP has four domestic
manufacturing facilities and operates a decorating facility in Malaysia and
packaging and distribution facilities in Canada, Singapore, Australia, and
Brazil.
The accompanying unaudited interim consolidated financial statements contain
all adjustments, consisting only of normal recurring adjustments, which in the
opinion of management are necessary for a fair presentation of the results for
the interim periods. Results for the interim periods are not necessarily
indicative of results for the full year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements were prepared in accordance with
generally accepted accounting principles, the most significant of which
include:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of all entities
currently controlled by CCP. All significant intercompany accounts and
transactions are eliminated. Prior to January 1, 1996, CCP operated on a
fiscal year ending on the Sunday nearest December 31. Certain subsidiaries of
CCP were consolidated at dates up to one month earlier than the consolidated
financial statements. Effective January 1, 1996, CCP prospectively adopted a
calendar year accounting calendar and began consolidating results of all
subsidiaries currently.
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.
TRANSLATION OF FOREIGN CURRENCIES
Balance sheet accounts of foreign subsidiaries are translated at current
exchange rates and income statement accounts are translated at average
exchange rates for the year. Translation gains and losses are accumulated in a
separate component of stockholder's equity. Foreign currency transaction gains
and losses are included in current earnings.
F-9
<PAGE>
CORNING CONSUMER PRODUCTS COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF CORNING INCORPORATED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)
(ALL AMOUNTS AS OF AND FOR THE PERIODS ENDED MARCH 31, 1998 AND 1997 ARE
UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH EQUIVALENTS
Cash equivalents consist of government securities with original maturities of
three months or less.
INVENTORIES
Inventories are stated at the lower of cost or market. Approximately 77%, 84%
and 84% of CCP's inventories at March 31, 1998, December 31, 1997 and 1996,
respectively, are valued using the LIFO (last-in, first-out) method of
determining cost. The FIFO (first-in, first-out) method is used to value the
remaining inventories which consist of supply inventories and inventories at
certain subsidiaries.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is calculated using
straight-line and accelerated methods based on the estimated useful lives of
the assets as follows: buildings, 8-30 years; equipment, 3-25 years; and
leasehold improvements, over the lease periods. Precious metals are recorded
at cost and consist of platinum, rhodium and palladium. They are used in CCP's
manufacturing processes and are expensed to operations based on utilization.
GOODWILL AND OTHER ASSETS
The amortization period assigned to the goodwill is 40 years. Trademarks and
other assets are amortized using the straight-line method over the estimated
economic useful life of the assets which range from 3 to 32.5 years.
IMPAIRMENT ACCOUNTING
CCP reviews the recoverability of its long-lived assets, including goodwill
and other intangible assets, when events or changes in circumstances occur
that indicate that the carrying value of the asset may not be recoverable. The
assessment of possible impairment is based on CCP's ability to recover the
asset from the expected future pre-tax cash flows (undiscounted and without
interest charges) of the related operations. If the expected undiscounted
pre-tax cash flows are less than the carrying value of such asset, an
impairment loss is recognized for the difference between estimated fair value
and carrying value. The assessment of impairment requires management to make
estimates of expected future cash flows related to long-lived assets. It is at
least reasonably possible that future events or circumstances could cause
these estimates to change.
STOCK-BASED COMPENSATION
Certain employees of CCP participate in the stock compensation plans of
Corning. CCP accounts for compensation cost under these plans using the
intrinsic value method of accounting prescribed by Accounting Principles Board
Opinion No. 25 "Accounting for Stock Issued to Employees." Compensation
expense is recorded for awards of shares over the period earned. During 1996,
the Company adopted the disclosure provisions of Statement of Financial
Accounting Standards No. 123 "Accounting for Stock-Based Compensation" ("FAS
123") which defines a fair value-based method of accounting for stock-based
compensation.
F-10
<PAGE>
CORNING CONSUMER PRODUCTS COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF CORNING INCORPORATED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)
(ALL AMOUNTS AS OF AND FOR THE PERIODS ENDED MARCH 31, 1998 AND 1997 ARE
UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVERTISING AND PROMOTION COSTS
During interim periods, CCP records charges for advertising and promotion to
operations ratably in relation to revenues. These costs are adjusted annually
at year end to reflect actual charges incurred.
INCOME TAXES
CCP uses the asset and liability approach to account for income taxes. Under
this method, deferred tax assets and liabilities are recognized for the
expected future tax consequences of differences between the carrying amounts
of assets and liabilities and their respective tax bases using enacted tax
rates in effect for the year in which the differences are expected to reverse.
The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period when the change is enacted. A valuation
allowance for deferred tax assets is provided when it is more likely than not
the deferred tax asset will not be realized.
EARNINGS PER SHARE
Basic and diluted earnings (loss) per common share is calculated by dividing
net income by the weighted average number of common shares outstanding during
the period.
3. SIGNIFICANT CUSTOMERS
Approximately 21% of CCP's net sales during the year ended December 31, 1997
were to two customers, each of which individually accounted for 15% and 6% of
net sales. In comparison, approximately 20% of net sales for the years ended
December 31, 1996 and 1995 were to these two customers, individually
accounting for 13% and 7% of net sales, respectively. The aggregate accounts
receivable balance at December 31, 1997 and 1996 related to these customers
was approximately $22.0 million at each year end.
4. INVENTORIES
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
----------- --------------------
1998 1997 1996
----------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
Finished goods.................................. $ 69,417 $ 62,434 $ 57,906
Work in process................................. 61,455 56,684 52,208
Raw materials................................... 7,024 5,030 9,363
Supplies and packing materials.................. 13,643 14,100 14,452
----------- --------- ---------
Total inventories............................... 151,539 138,248 133,929
(Decrease) increase to LIFO valuation........... (1,109) (2,110) 366
----------- --------- ---------
$ 150,430 $ 136,138 $ 134,295
----------- --------- ---------
----------- --------- ---------
</TABLE>
F-11
<PAGE>
CORNING CONSUMER PRODUCTS COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF CORNING INCORPORATED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)
(ALL AMOUNTS AS OF AND FOR THE PERIODS ENDED MARCH 31, 1998 AND 1997 ARE
UNAUDITED)
5. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
----------- --------------------
1998 1997 1996
----------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
Land............................................ $ 2,453 $ 2,453 $ 2,453
Buildings....................................... 59,921 57,941 54,810
Equipment....................................... 238,111 230,428 206,177
Leasehold improvements.......................... 11,641 11,547 13,141
Precious metals................................. 11,978 11,990 14,810
----------- --------- ---------
324,104 314,359 291,391
Accumulated depreciation and related accumulated
amortization.................................. (173,594) (161,027) (130,479)
----------- --------- ---------
----------- --------- ---------
$ 150,510 $ 153,332 $ 160,912
----------- --------- ---------
----------- --------- ---------
</TABLE>
Depreciation and related amortization expense for the years ended December 31,
1997, 1996 and 1995 was $30.4 million, $30.5 million and $27.9 million,
respectively.
6. OTHER ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
----------- --------------------
1998 1997 1996
----------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
Trademarks......................................... $ 8,600 $ 8,682 $ 9,009
Computer software.................................. 7,605 5,708 7,262
Other.............................................. 134 74 --
----------- --------- ---------
$ 16,339 $ 14,464 $ 16,271
----------- --------- ---------
----------- --------- ---------
</TABLE>
Amortization expense related to these assets for the years ended December 31,
1997, 1996 and 1995 was $3.6 million, $3.6 million and $2.4 million,
respectively.
F-12
<PAGE>
CORNING CONSUMER PRODUCTS COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF CORNING INCORPORATED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)
(ALL AMOUNTS AS OF AND FOR THE PERIODS ENDED MARCH 31, 1998 AND 1997 ARE
UNAUDITED)
7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
------------ ----------------------
<S> <C> <C> <C>
1998 1997 1996
------------ --------- -----------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C>
Trade accounts payable........................................ $ 24,566 $ 16,691 $ 16,459
Payable due to Corning........................................ 8,813 11,431 42,101
Wages and employee benefits................................... 12,288 22,652 17,293
Accrued advertising and promotion............................. 5,777 11,078 15,039
Taxes on income............................................... 1,777 3,189 3,874
Current portion of long-term debt............................. 1,894 2,022 458
Other accrued expenses........................................ 14,472 12,090 18,671
------------ --------- -----------
$ 69,587 $ 79,153 $ 113,895
------------ --------- -----------
------------ --------- -----------
</TABLE>
Payable due to Corning relates to amounts paid by Corning on CCP's behalf.
8. COMPREHENSIVE INCOME
As of January 1, 1998, CCP implemented SFAS No. 130 "Reporting Comprehensive
Income". This pronouncement, which is solely a financial statement
presentation standard, requires CCP to disclose non-owner changes included in
equity but not included in net earnings. Comprehensive income was computed as
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED
------------------------ DECEMBER 31,
1998 1997 --------------------------------
(UNAUDITED) (UNAUDITED) 1997 1996 1995
----------- ----------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Net (loss) income.............................. $ (3,582) $ 1,761 $ 13,038 $ 1,620 $ (18,489)
Foreign currency translation adjustments....... 174 (109) (1,004) 218 (84)
----------- ----------- --------- --------- ----------
Comprehensive income........................... $ (3,408) $ 1,652 $ 12,034 $ 1,838 $ (18,573)
----------- ----------- --------- --------- ----------
----------- ----------- --------- --------- ----------
</TABLE>
F-13
<PAGE>
CORNING CONSUMER PRODUCTS COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF CORNING INCORPORATED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)
(ALL AMOUNTS AS OF AND FOR THE PERIODS ENDED MARCH 31, 1998 AND 1997 ARE
UNAUDITED)
9. RELATED PARTY TRANSACTIONS
The following transactions with Corning are included in the consolidated
statements of operations for the three months ended March 31, 1998 and 1997
and the years ended December 31, 1997,1996 and 1995.
<TABLE>
<CAPTION>
MARCH 31,
--------------------------
<S> <C> <C> <C> <C> <C>
1998 1997 1997 1996 1995
------------ ------------ --------- --------- -----------
<CAPTION>
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Commission (income)/expense, net.............. $ (2) $ 226 $ 731 $ 622 $ 262
Interest income............................... 48 379 323 1,313 1,668
Interest expense.............................. 1,622 2,481 7,833 11,778 10,252
Centralized services.......................... 3,036 4,800 19,201 19,454 17,831
Other corporate administrative expense........ -- 4,602 18,408 20,904 19,994
Management fees............................... 437 -- -- -- --
</TABLE>
Sales are made by CCP to certain Corning subsidiaries which subsequently
resell the products to third parties. CCP pays these subsidiaries a sales
commission for sales made on CCP's behalf. Corning utilizes the CCP Canada
operations as a sales office and pays commissions on Corning sales generated.
Amounts due to and from Corning as a result of the above and other
transactions bear interest at a rate of 30-day LIBOR plus 3/8%. See Note 12.
Certain administrative and operating functions are centralized within Corning.
These services include finance support, information services, risk management,
purchasing and transportation, administration of benefit plans and engineering
services. These functions are charged to CCP using methods deemed appropriate
for the nature of the expenses involved and consistent with charges to other
Corning subsidiaries. The methods utilize various allocation bases such as the
number of employees and related payroll costs, and direct effort expended.
These costs are included in cost of sales and selling, general and
administrative expenses. The centralized functions provided by Corning to CCP
as well as corporate center costs are charged out under a transition service
agreement at a rate agreed upon by the management of CCP and consistent with
other Corning businesses. Management believes that the methodology used to
allocate the costs is reasonable, but may not necessarily be indicative of the
costs that would have been incurred had these functions been performed by CCP.
Other corporate administrative expense related to certain corporate center
costs such as administrative, tax, treasury, and technical support provided by
Corning to CCP charged out under a service agreement at an overall rate agreed
upon by the management of CCP. In 1998 these services are charged out under a
new transition service agreement and are included in selling, general and
administrative expenses. In addition, CCP paid Corning $437 of management fees
in the first quarter of 1998 relating to certain corporate governance
services.
Trade payables and debt obligations due to Corning are disclosed in Notes 7
and 12, respectively. CCP employees participate in Corning employee retirement
and stock compensation plans.
F-14
<PAGE>
CORNING CONSUMER PRODUCTS COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF CORNING INCORPORATED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)
(ALL AMOUNTS AS OF AND FOR THE PERIODS ENDED MARCH 31, 1998 AND 1997 ARE
UNAUDITED)
9. RELATED PARTY TRANSACTIONS (CONTINUED)
CCP participates in Corning's centralized treasury and cash management
processes. However, cash collected and disbursed for operations flow through
CCP's own bank accounts. CCP cash operations are administered by Corning. The
cash balance reported in the balance sheet is comprised primarily of cash
maintained by foreign subsidiaries of CCP.
10. EMPLOYEE RETIREMENT PLANS
PENSION BENEFITS
The majority of CCP's U.S. workforce participates in Corning's employee
benefit plans, including Corning's North American defined-benefit pension plan
(the "Plan"). At the formation of CCP, CCP assumed the liability for pensions
to be earned after January 4, 1993, by its then current workforce and began to
make contributions to the Plan. The pension liability earned prior to the
formation of CCP by both current and retired employees was retained by
Corning. Under the plan agreement, assets of the entire plan are available to
fund the CCP liability.
CCP also has defined-benefit pension plans for its employees at certain
wholly-owned subsidiaries.
CCP's funding policy is to contribute annually an amount determined jointly by
management and its consulting actuaries, which provides for the current cost
and amortization of prior service cost over a 30-year period.
The funded status of CCP's pension plans is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1997 1996
--------- ---------
Vested benefits........................................................ $ 45,304 $ 41,516
Non-vested benefits.................................................... 8,812 7,860
--------- ---------
Accumulated benefit obligation......................................... $ 54,116 $ 49,376
--------- ---------
--------- ---------
Present value of projected benefit obligation.......................... $ 56,494 $ 51,213
Current fair market value of plan assets............................... (35,711) (29,820)
Unrecognized prior service costs....................................... (9,343) (10,407)
Unrecognized net losses from changes in actuarial assumptions.......... (4,927) (4,927)
Other unrecognized net experience gains................................ 11,626 11,927
--------- ---------
Recorded pension liability............................................. $ 18,139 $ 17,986
--------- ---------
--------- ---------
</TABLE>
Plan assets are comprised principally of publicly traded debt and equity
securities. Corning common stock represented 3.1% and 7.7% of plan assets at
December 31, 1997 and 1996, respectively.
The unrecognized prior service cost, net gains and losses from changes in
actuarial assumptions and net experience gains are deferred and amortized to
pension expense over the remaining service life of plan participants, if they
exceed certain limits.
F-15
<PAGE>
CORNING CONSUMER PRODUCTS COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF CORNING INCORPORATED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)
(ALL AMOUNTS AS OF AND FOR THE PERIODS ENDED MARCH 31, 1998 AND 1997 ARE
UNAUDITED)
10. EMPLOYEE RETIREMENT PLANS (CONTINUED)
The components of pension expense for CCP's defined-benefit pension plans for
the years ended December 31, 1997, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Present value of benefits earned during the year............... $ 3,411 $ 4,780 $ 3,282
Interest cost on projected benefit obligation.................. 3,604 3,150 2,454
Actual return on plan assets................................... (2,464) (1,843) (3,424)
Net amortization and deferral.................................. 773 619 478
--------- --------- ---------
Net pension expense............................................ $ 5,324 $ 6,706 $ 2,790
--------- --------- ---------
--------- --------- ---------
</TABLE>
Measurement of pension expense is based on assumptions used to value the
pension liability at the beginning of the year.
Total consolidated pension expense, including defined contribution pension
plans for the years ended December 31, 1997, 1996 and 1995, was $8.1 million,
$9.8 million, and $5.5 million, respectively.
For CCP's defined benefit plans, the assumed discount rate and rate of
increase in future compensation levels used in determining the actuarial
present value of the projected benefit obligation were 7.5% and 4.5%,
respectively, for each of the years ended December 31, 1997 and 1996. The
expected long-term rate of return on plan assets was 9%.
POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS
At the formation of CCP, CCP assumed the liability for all postretirement
benefit costs related to its then current workforce. The postretirement
liability related to retirees at January 1, 1993 was retained by Corning
Incorporated.
The consolidated postretirement benefit obligation attributable to CCP's
workforce is determined by application of the terms of health care and life
insurance plans, together with relevant actuarial assumptions and health care
cost trend rates. The discount rate used in determining the accumulated
postretirement benefit obligation was 7.5% in 1997 and 1996. The health care
cost trend rate for CCP's principal plan is assumed to be 9% in 1997 for
covered individuals under age 65 decreasing gradually to 5% in 2010 and
thereafter. For covered individuals over age 65, the rate is assumed to be 8%
in 1997 decreasing gradually to 5% in 2010 and thereafter. The effect of a 1%
annual increase in the assumed health care cost trend rates would increase the
accumulated postretirement benefit as of December 31, 1997, by approximately
$4.2 million and the annual net periodic postretirement benefit expense by
approximately $0.4 million.
F-16
<PAGE>
CORNING CONSUMER PRODUCTS COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF CORNING INCORPORATED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)
(ALL AMOUNTS AS OF AND FOR THE PERIODS ENDED MARCH 31, 1998 AND 1997 ARE
UNAUDITED)
10. EMPLOYEE RETIREMENT PLANS (CONTINUED)
CCP's accrued postretirement liability at December 31, 1997 and 1996 was
comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1997 1996
--------- ---------
Accumulated postretirement benefit obligation:
Retirees................................................................... $ 26,883 $ 19,257
Fully eligible active plan participants.................................... 8,552 10,037
Other active plan participants............................................. 22,359 23,842
--------- ---------
57,794 53,136
Unrecognized gain from plan amendments....................................... 193 1,705
Other unrecognized net experience gains...................................... 1,654 1,526
--------- ---------
Accrued postretirement liability............................................. $ 59,641 $ 56,367
--------- ---------
--------- ---------
</TABLE>
CCP has not funded these obligations.
The components of net periodic postretirement benefit were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1997 1996 1995
--------- --------- ---------
Present value of benefits earned during the year...................... $ 2,041 $ 2,092 $ 1,973
Interest cost on the accumulated postretirement benefit obligation.... 3,464 3,343 3,163
Net amortization...................................................... (215) (214) (409)
--------- --------- ---------
Net periodic postretirement benefit expense........................... $ 5,290 $ 5,221 $ 4,727
--------- --------- ---------
--------- --------- ---------
</TABLE>
11. STOCK COMPENSATION PLANS
Certain employees of CCP participate in the stock compensation plans of
Corning. Under Corning's stock option plan, non qualified and incentive stock
options to purchase unissued Corning shares at the market price on the date
of grant generally become exercisable in installments from one to two years
from the grant date, except for a grant in December 1995 which becomes
exercisable in installments from four to five years from that grant date. The
maximum term of non qualified and incentive stock options issued by Corning
is generally 10 years from the grant date.
At December 31, 1997, CCP employees held options to acquire 351,000 shares of
Corning common stock at exercise prices ranging from $14.95 per share to
$54.81 per share. These outstanding options had a weighted-average exercise
price of $28.50 per share and weighted-average remaining contractual life of
7.1 years at December 31, 1997. Of these outstanding options, at December 31,
1997, 173,000 represented vested options with a weighted-average exercise
price of $27.00 per share.
F-17
<PAGE>
CORNING CONSUMER PRODUCTS COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF CORNING INCORPORATED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)
(ALL AMOUNTS AS OF AND FOR THE PERIODS ENDED MARCH 31, 1998 AND 1997 ARE
UNAUDITED)
11. STOCK COMPENSATION PLANS (CONTINUED)
The number and exercise price of all Corning options outstanding were
adjusted for the distributions of certain Corning subsidiaries at December
31, 1996. This adjustment increased the number of Corning options outstanding
and held by CCP employees by approximately 69,000 and decreased the exercise
price of the options by approximately 18%.
Certain employees of CCP were granted 38,000, 38,000 and 153,000 Corning
options in the years ended December 31, 1997, 1996 and 1995, respectively.
The weighted-average exercise price of option grants in the years ended
December 31, 1997, 1996 and 1995 were $42.08, $34.44 and $31.40,
respectively. CCP employees exercised 80,400, 17,100 and 3,300 Corning
options in the years ended December 31, 1997, 1996 and 1995, respectively.
The weighted-average exercise prices of these exercises in the years ended
December 31, 1997, 1996 and 1995 were $24.25, $23.00 and $12.35,
respectively.
Under Corning's incentive stock plans, stock grants are made to certain
employees of CCP, either determined by specific performance goals or issued
directly, in most instances subject to the possibility of forfeiture and
without cash consideration. In the years ended December 31, 1997, 1996 and
1995 grants of 26,500, 23,625 and 69,150 shares, respectively, were made
under these plans. The weighted-average grant date fair value of grants was
$35.32, $33.20, and $29.30 per share in 1997, 1996 and 1995, respectively. At
December 31, 1997 the unamortized cost of prior stock grants amounted to
approximately $1.7 million.
The costs related to the above plans have been allocated to CCP by Corning
within the other corporate administrative expense described in Note 8.
In addition to the stock option plan and incentive stock plans, Corning has
an employee stock purchase plan ("ESPP"), in which certain employees of CCP
participate. Under the ESPP, certain employees of CCP can elect to have up to
10% of their annual wages withheld to purchase Corning common stock. The
purchase price of the stock is 85% of the lower of the beginning-of-quarter
or end-of-quarter market price.
If CCP had accounted for compensation cost under the provisions of FAS 123,
the pro forma net income (loss) would have been $12.5 million, $1.4 million
and ($18.6 million.) in 1997, 1996 and 1995, respectively. The pro forma
effect of accounting for such costs using the fair value method of FAS 123
may not be representative of the effect in future years.
Under FAS 123, the weighted-average fair values of options granted in the
years ended December 31, 1997, 1996 and 1995 were $13.60, $10.77 and $9.17
per share, respectively. For purposes of determining fair value at the grant
date, the Black-Scholes option pricing model was used with the following
weighted-average assumptions for grants in the years ended December 31, 1997,
1996 and 1995, respectively: risk free interest rate of 6.6%, 6.6% and 5.7%;
dividend yield of 1.6%, 2.3% and 2.3%; expected volatility of 24.5%, 25% and
25%; and expected life of 6, 7 and 7 years.
F-18
<PAGE>
CORNING CONSUMER PRODUCTS COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF CORNING INCORPORATED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)
(ALL AMOUNTS AS OF AND FOR THE PERIODS ENDED MARCH 31, 1998 AND 1997 ARE
UNAUDITED)
12. BORROWINGS
At March 31, 1998 and December 31, 1997, CCP had outstanding certain
industrial development bonds bearing interest at an average rate of 3.4% per
annum and 4.0% per annum, respectively. The bonds mature on various dates
through 2005 and at March 31, 1998, December 31, 1997 and December 31, 1996
had an aggregate outstanding balance of $10.2 million, $10.3 million and
$13.9 million, respectively.
Long-term debt maturing in each of the years subsequent to December 31, 1997
is as follows:
<TABLE>
<S> <C>
1998 calendar year................................................ $ 2,022
1999 calendar year................................................ 2,029
2000 calendar year................................................ 545
2001 calendar year................................................ 563
2002 calendar year................................................ 579
2003-2005......................................................... 4,569
---------
$ 10,307
Less: current maturities.......................................... (2,022)
---------
$ 8,285
---------
---------
</TABLE>
In March 1997, CCP consolidated certain outstanding notes and debentures,
which had previously been allocated to CCP by Corning. The notes and
debentures were combined into CCP's revolving credit agreement which was
increased to provide for borrowings of up to $200 million at a rate of 30-day
LIBOR plus 3/8% due on demand. At March 31, 1998 and December 31, 1997 the
aggregate amount of intercompany debt outstanding was $96.2 million and $87.1
million, respectively.
The fair market value of CCP's borrowings is not significantly different from
its carrying value.
13. INCOME TAXES
CCP is included in the consolidated federal income tax return filed by
Corning. CCP and its subsidiaries have a tax sharing arrangement with Corning
pursuant to which they are required to compute their provision for income
taxes on a separate return (i.e., subconsolidation) basis and pay to, or
receive from, Corning the separate U.S. federal income tax return liability
or benefit so computed, if any.
F-19
<PAGE>
CORNING CONSUMER PRODUCTS COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF CORNING INCORPORATED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)
(ALL AMOUNTS AS OF AND FOR THE PERIODS ENDED MARCH 31, 1998 AND 1997 ARE
UNAUDITED)
13. INCOME TAXES (CONTINUED)
The Company's tax accounts have been prepared on a separate company basis and
do not necessarily reflect the Company's actual tax position as determined on
a consolidated basis with Corning.
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
------------------------ -------------------------------
1998 1997 1997 1996 1995
----------- ----------- --------- --------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
INCOME (LOSS) BEFORE TAXES:
U.S. companies.............. $ (1,817) 1,473 $ 14,827 $ (4,627) $ (30,794)
Non-U.S. companies.......... (70) 3,105 11,240 12,533 10,800
----------- ----------- --------- --------- ---------
Income (loss) before
taxes..................... $ (1,887) $ 4,578 $ 26,067 $ 7,906 $ (19,994)
----------- ----------- --------- --------- ---------
----------- ----------- --------- --------- ---------
</TABLE>
The income tax provision at the effective rate differs from the income tax
provision at the U.S. federal statutory tax rate in effect during the years
ended December 31, 1997, 1996 and 1995 for the following reasons:
<TABLE>
<CAPTION>
1997 1996 1995
--------- ---------- ---------
<S> <C> <C> <C>
EFFECTIVE TAX RATE RECONCILIATION:
Taxes at U.S. statutory tax rate................................ $ 9,123 $ 2,767 $ (7,034)
State taxes, net of federal benefit............................. 3,998 (172) (655)
Higher taxes on subsidiary earnings............................. 2,775 2,954 4,582
Other........................................................... (3,162) 632 1,469
--------- ---------- ---------
Income tax expense (benefit).................................... $ 12,734 $ 6,181 $ (1,638)
--------- ---------- ---------
--------- ---------- ---------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
CURRENT AND DEFERRED TAX EXPENSE (BENEFIT):.........
Current:
U.S............................................. $ 3,859 $ 222 $ 1,499
State and municipal............................. 2,996 2,909 (838)
Foreign......................................... 4,122 4,159 3,625
Deferred:
U.S............................................. 42 1,595 (4,827)
State and municipal............................. 1,574 (3,061) (983)
Foreign......................................... 141 357 (114)
--------- --------- ---------
Net tax expense (benefit)......................... $ 12,734 $ 6,181 $ (1,638)
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-20
<PAGE>
CORNING CONSUMER PRODUCTS COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF CORNING INCORPORATED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)
(ALL AMOUNTS AS OF AND FOR THE PERIODS ENDED MARCH 31, 1998 AND 1997 ARE
UNAUDITED)
13. INCOME TAXES (CONTINUED)
The tax effects of temporary differences and carryforwards that give rise to
significant portions of the deferred tax assets and liabilities at March 31,
1998, December 31, 1997 and 1996 are comprised of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
------------ --------------------
<S> <C> <C> <C>
1998 1997 1996
------------ --------- ---------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C>
Postretirement, pension and other employee benefits $ 36,725 $ 34,957 $ 34,048
Loss and tax credit carryforwards 22,705 22,871 21,549
Inventory reserves 1,747 1,881 1,460
Other 3,151 4,824 9,539
------------ --------- ---------
Gross deferred tax assets 64,328 64,533 66,596
Deferred tax assets valuation allowance (15,637) (13,432) (8,267)
------------ --------- ---------
Deferred tax assets 48,691 (51,101) 58,329
------------ --------- ---------
Fixed assets (11,606) (13,195) (14,564)
Other -- -- (297)
------------ --------- ---------
Deferred tax liabilities (11,606) (13,195) (14,861)
------------ --------- ---------
Net deferred tax assets $ 37,085 $ 37,906 $ 43,468
------------ --------- ---------
------------ --------- ---------
</TABLE>
The net change in the total valuation allowance for the three months ended
March 31, 1998 and for years ended December 31, 1997, and 1996 was an
increase of $2.2 million, $5.2 million and $3.8 million, respectively.
Management believes that the net deferred tax assets are recoverable given
the current estimates of future taxable income.
CCP currently provides income taxes on the earnings of foreign subsidiaries
and associated companies to the extent they are currently taxable or expected
to be remitted. Taxes have not been provided on $9.3 million of accumulated
foreign unremitted earnings which are expected to remain invested
indefinitely. It is not practicable to estimate the amount of additional tax
that might be payable on these foreign earnings if they were to be remitted.
CCP paid $0.7 million of income taxes to Corning for the three months ended
March 31, 1998. CCP paid $6.7 million and $4.9 million of income taxes to
Corning in 1997 and 1996, respectively. At March 31, 1998, CCP had tax
benefits attributable to tax-loss and tax-credit carryforwards aggregating
$22.7 million, which, under the tax sharing arrangement, have been utilized
by Corning but are deemed to expire at various dates through 2010.
F-21
<PAGE>
CORNING CONSUMER PRODUCTS COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF CORNING INCORPORATED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)
(ALL AMOUNTS AS OF AND FOR THE PERIODS ENDED MARCH 31, 1998 AND 1997 ARE
UNAUDITED)
14. SUPPLEMENTAL INCOME STATEMENT DATA
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------------------
1997 1996 1995
--------- -------------- ---------
<S> <C> <C> <C>
Interest income............................................. $ (493) $ (1,656) $ (2,159)
Interest expense incurred................................... 9,914 13,609 12,478
Interest capitalized........................................ (940) (1,232) (1,564)
--------- -------------- ---------
Interest expense, net....................................... $ 8,481 $ 10,721 $ 8,755
--------- -------------- ---------
--------- -------------- ---------
Interest paid............................................... $ 570 $ 609 $ 662
--------- -------------- ---------
--------- -------------- ---------
Advertising and promotion expense........................... $ 11,794 $ 13,489 $ 20,058
--------- -------------- ---------
--------- -------------- ---------
Research and development expenses........................... $ 380 $ 2,082 $ 3,490
--------- -------------- ---------
--------- -------------- ---------
</TABLE>
15. RESTRUCTURING PROVISION
In 1996, CCP recorded a charge of $4.2 million ($2.6 million after tax) for a
company-wide restructuring program to reduce overhead costs. Charges included
severance and other termination benefits related to approximately 60
employees. Also in 1996, CCP released reserves of $2.1 million related to
prior restructuring programs for which charges of $10.5 million ($6.0 million
after tax) and $25.0 million ($15.0 million after tax) were incurred in 1994
and 1993, respectively.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Balance, at beginning of year..................................... $ 4,623 $ 6,692 $ 15,359
--------- --------- ---------
--------- --------- ---------
Charges to operations:
Employee termination costs...................................... $ -- $ 3,797 $ --
Write-off fixed assets.......................................... -- 291 --
Cost of exiting leased facilities............................... -- 158 --
Other -- -- --
Reversal of excess reserve...................................... -- (2,100) --
--------- --------- ---------
TOTAL CHARGES TO OPERATIONS................................... $ -- $ 2,146 $ --
--------- --------- ---------
--------- --------- ---------
Costs incurred:
Employee termination costs...................................... $ 3,585 1,186 $ 3,680
Write-off fixed assets.......................................... 421 938 100
Cost of exiting leased facilities............................... 617 1,214 4,433
Other........................................................... -- 877 454
--------- --------- ---------
TOTAL COSTS INCURRED.......................................... $ 4,623 $ 4,215 $ 8,667
--------- --------- ---------
Balance at end of year............................................ $ -- $ 4,623 $ 6,692
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-22
<PAGE>
CORNING CONSUMER PRODUCTS COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF CORNING INCORPORATED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)
(ALL AMOUNTS AS OF AND FOR THE PERIODS ENDED MARCH 31, 1998 AND 1997 ARE
UNAUDITED)
16. STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Common Stock................................................ $ 240 $ 240 $ 240
Contributed Capital:
Balance at beginning of year................................ 273,420 271,964 271,964
Capital contribution........................................ 410 1,456 --
----------- ----------- -----------
Balance at end of year...................................... 273,830 273,420 271,964
----------- ----------- -----------
Accumulated Deficit:
Balance at beginning of year................................ (55,176) (55,987) (37,498)
Net income (loss)........................................... 13,038 1,620 (18,489)
Change in accounting calendar............................... -- (809) --
----------- ----------- -----------
Balance at end of year...................................... (42,138) (55,176) (55,987)
----------- ----------- -----------
Cumulative Translation Adjustment:
Balance at beginning of year................................ (794) (1,012) (928)
Translation adjustment...................................... (1,004) 218 (84)
----------- ----------- -----------
Balance at end of year...................................... (1,798) (794) (1,012)
----------- ----------- -----------
Stockholder's equity........................................ $ 230,134 $ 217,690 $ 215,205
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
Effective January 1, 1996, certain consolidated subsidiaries that previously
reported on fiscal years ending November 30 adopted a calendar year end. The
December 1995 net loss of these subsidiaries totaled $0.8 million and was
recorded in accumulated deficit in 1996.
On March 16, 1998 the board of directors approved a 24,000-for-1 stock split.
This increased the shares outstanding from 1,000 to 24,000,000. In addition,
the board of directors approved an increase in the number of authorized
shares from 1,000 to 45,000,000 and an increase in the par value from $0.00
to $0.01 per share. Share amounts have been restated for all periods
presented.
F-23
<PAGE>
CORNING CONSUMER PRODUCTS COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF CORNING INCORPORATED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)
(ALL AMOUNTS AS OF AND FOR THE PERIODS ENDED MARCH 31, 1998 AND 1997 ARE
UNAUDITED)
17. COMMITMENTS
CCP is a party to certain noncancellable lease agreements which expire at
various dates through 2011. Minimum rental commitments outstanding at
December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998.............................................................. $ 17,411
1999.............................................................. 13,116
2000.............................................................. 9,652
2001.............................................................. 5,932
2002.............................................................. 2,679
2003 and thereafter............................................... 3,493
---------
Net minimum lease commitments..................................... $ 52,283
---------
---------
</TABLE>
Rental expense was $24 million, $24 million and $18 million for the fiscal
years ended December 31, 1997, 1996 and 1995.
18. INTERNATIONAL ACTIVITIES
Information by geographic area is presented on a source basis, with exports
shown in their area of origin. Royalty income is included with other
unallocated amounts to allow a reconciliation to
F-24
<PAGE>
CORNING CONSUMER PRODUCTS COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF CORNING INCORPORATED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)
(ALL AMOUNTS AS OF AND FOR THE PERIODS ENDED MARCH 31, 1998 AND 1997 ARE
UNAUDITED)
18. INTERNATIONAL ACTIVITIES (CONTINUED)
amounts reported in the Consolidated Statements of Operations. Transfers
between areas are accounted for at prices approximating prices to
unaffiliated customers.
<TABLE>
<CAPTION>
LATIN-AMERICA, ELIMINATIONS
UNITED ASIA-PACIFIC & UNALLOCATED
STATES AND CANADA AMOUNTS CONSOLIDATED
----------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------------
Revenues........................................ $ 477,717 $ 95,143 $ 572,860
Transfers between areas......................... 95,073 210 $ (95,283)
----------- -------------- -------------- -------------
Total revenues.................................. 572,790 95,353 (95,283) 572,860
Income before tax............................... 14,827 11,240 26,067
Identifiable assets at year-end................. 439,595 44,049 483,644
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1996
- ------------------------------------------------------------------------------------------------------------
Revenues........................................ $ 538,500 $ 92,265 $ 1,641 $ 632,406
Transfers between areas......................... 117,932 199 (118,131)
----------- -------------- -------------- -------------
Total revenues.................................. 656,432 92,464 (116,490) 632,406
Income (loss) before tax........................ (4,627) 12,533 7,906
Identifiable assets at year-end................. 473,849 42,596 516,445
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1995
- ------------------------------------------------------------------------------------------------------------
Revenues........................................ $ 524,099 $ 82,362 $ 2,259 $ 608,720
Transfers between areas......................... 133,128 219 (133,347)
----------- -------------- -------------- -------------
Total revenues.................................. 657,227 82,581 (131,088) 608,720
Income (loss) before tax........................ (30,794) 10,800 (19,994)
Identifiable assets at year-end................. 482,884 48,699 531,583
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
19. RECAPITALIZATION (UNAUDITED)
On March 2, 1998, Corning, CCP, Borden, Inc. and CCPC Acquisition Corp.
entered into a Recapitalization Agreement, pursuant to which on April 1,
1998, CCPC Acquisition Corp. acquired 92% of the outstanding shares of common
stock of CCP from Corning for $110.4 million. Pursuant to the
Recapitalization Agreement, CCP borrowed $471.6 million and paid a cash
dividend to Corning on April 1, 1998 of $472.6 million. The dividend amount
is subject to a post-closing adjustment based on the Company's net worth and
outstanding indebtedness on the closing date. Corning retained 8% of the
outstanding shares of common stock of CCP. Certain assets, liabilities and
obligations of CCP were retained by Corning, including deferred tax assets
and liabilities, certain indebtedness, certain post-retirement medical and
life insurance liabilities, certain pension liability obligations, workers'
compensation and product liability obligations. The following reflects the
pro forma effect of the recapitalization on the March 31, 1998 balance sheet.
F-25
<PAGE>
CORNING CONSUMER PRODUCTS COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF CORNING INCORPORATED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)
(ALL AMOUNTS AS OF AND FOR THE PERIODS ENDED MARCH 31, 1998 AND 1997 ARE
UNAUDITED)
19. RECAPITALIZATION (UNAUDITED) (CONTINUED)
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
AS OF MARCH 31, 1998
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
-----------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS(A) PRO FORMA
---------- ------------------ ---------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents...................... $ 7,421 $ (3,421)(b) $ 4,000
Accounts receivable, net of allowances......... 55,267 15,681 70,948
Inventories, net............................... 150,430 -- 150,430
Prepaid expenses and other current assets...... 5,249 -- 5,249
Deferred taxes on income....................... 7,799 (7,799)(c) --
---------- ---------- ---------
Total current assets......................... 226,166 4,461 230,627
---------- ---------- ---------
Property and equipment, net.................... 150,510 -- 150,510
Deferred taxes on income....................... 29,286 18,219(c) 47,505
Goodwill, net of accumulated amortization...... 59,997 -- 59,997
Other assets................................... 16,339 15,000(d) 31,339
---------- ---------- ---------
Total assets................................. $ 482,298 $ 37,680 $ 519,978
---------- ---------- ---------
---------- ---------- ---------
LIABILITIES AND STOCKHOLDER'S EQUITY
Debt payable within one year................... $ 1,894 -- $ 1,894
Accounts payable and accrued expenses.......... 67,693 $ 8,290 75,983
Due to Corning Incorporated.................... 96,224 (96,224) --
---------- ---------- ---------
Total current liabilities.................... 165,811 (87,934) 77,877
---------- ---------- ---------
Long-term debt................................. 8,285 471,600(b) 479,885
Accrued postretirement liability............... 60,856 (32,589) 28,267
Other liabilities.............................. 20,620 (17,669) 2,951
---------- ---------- ---------
Total liabilities............................ 255,572 333,408 588,980
---------- ---------- ---------
Stockholder's equity (deficit)................. 226,726 (295,728) (69,002)
---------- ---------- ---------
Total liabilities and stockholder's
equity................................... $ 482,298 $ 37,680 $ 519,978
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
F-26
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
AS OF MARCH 31, 1998
(DOLLARS IN THOUSANDS)
The pro forma consolidated condensed balance sheet reflects pro forma
adjustments for the transactions to CCP's historical consolidated balance sheet
as of March 31, 1998. The transactions have not and will not impact the
historical basis of the Company's assets and liabilities with the exception of
deferred tax amounts.
(a)
<TABLE>
<S> <C>
Cash Dividend................................................... $(472,600)
Issuance of Preferred Stock..................................... 30,000
Cash retained by Corning........................................ (7,421)
Liabilities retained by Corning................................. 57,649
Deferred tax adjustments (See Note (c))......................... 10,420
Intercompany loan forgiveness................................... 96,224
Estimated transaction fees and expenses(5)...................... (10,000)
---------
(295,728)
---------
---------
</TABLE>
In addition, Corning will contribute $16,735 ($15,681 in cash and $1,054 in
non-cash) related to incremental incentive programs. See Note (a) to the Pro
Forma Consolidated Condensed Statement of Operations.
(b) The net sources and uses of cash reflect the following:
<TABLE>
<S> <C>
Sources:
Revolving Credit Facility............................. $ 71,600
Term Loans............................................ 200,000
Old Notes............................................. 200,000
Junior Preferred Stock................................ 30,000
Common Stock - CCPC Acquisition....................... 110,400
Common Stock - Corning................................ 9,600
-----------------
Total Sources..................................... $ 621,600
-----------------
-----------------
Uses:
Cash Dividend(1)...................................... $ 472,600
Stock Acquisition(2).................................. 110,400
Corning Retained Equity............................... 9,600
Estimated Transactions fees and expenses(3)........... 25,000
Increase to operating cash(4)......................... 4,000
-----------------
Total Uses........................................ $ 621,600
-----------------
-----------------
</TABLE>
- ------------------------
(1) The Cash Dividend of $472,600 is subject to post-closing adjustment
based on CCP's net worth and outstanding indebtedness on the Closing
Date. CCP cannot estimate at this time whether such post-closing
adjustment, if any, will require an additional payment to Corning or a
remittance from Corning.
(2) Under the 1998 Plan, CCPC Acquisition is currently in the process of
selling shares of common stock, and CCP is making grants of options to
purchase common stock, to certain members of management of CCP, which in
each case is not reflected in the Pro Forma Financial Information. In the
aggregate, the sales of shares of common stock by CCPC Acquisition and
the option grants by CCP will represent approximately 12.4% of CCP's
fully diluted common stock.
(3) Includes initial purchasers' discount and offering discount on the
Notes, fees related to the Credit Facilities and other fees and expenses
incurred in connection with the transactions.
F-27
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
AS OF MARCH 31, 1998
(DOLLARS IN THOUSANDS)
(4) Represents the $21,000 increase to CCP's cash balances at the time of
the Recapitalization, net of the application of $17,000 of such balances
to pay estimated Transactions fees and expenses in connection with the
refinancing.
(5) Represents the portion of the total $25,000 of estimated transaction
fees and expenses. Transaction fees and expenses consist of (i) legal,
accounting and investment banking fees, certain taxes and other expenses,
(ii) transaction and financing fees and expenses payable to Borden and
(iii) miscellaneous fees and expenses such as printing and filing fees.
(c) Represents net current and non-current deferred taxes of $32,903 on the
estimated increase in tax basis of fixed assets and intangibles as a result
of the Section 338(h)(10) election made in connection with the
Recapitalization, net of $22,483 related to liabilities retained by Corning.
(d) Represents the portion of the estimated transactions fees and expenses that
has been recorded as deferred financing costs and will be amortized over the
weighted average life of the related indebtedness.
F-28
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS OFFERING MEMORANDUM, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED. THIS OFFERING MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
SECURITIES TO WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS OFFERING MEMORANDUM NOR
ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO ITS DATE.
-------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary............................... 1
Summary Historical and Pro Forma
Financial and Other Data............ 13
Risk Factors.......................... 16
The Recapitalization.................. 28
Use of Proceeds....................... 30
Capitalization........................ 30
Unaudited Pro Forma Financial
Information......................... 31
Selected Historical Consolidated
Financial and Other Data............ 40
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 43
Business.............................. 56
Management............................ 74
Principal Stockholders................ 81
Certain Relationships and Related
Party Transactions.................. 82
Description of Capital Stock.......... 85
Description of Credit Facilities...... 86
The Exchange Offer.................... 89
Description of the Exchange Notes..... 100
Exchange and Registration Rights
Agreement........................... 137
Book-Entry; Delivery and Form......... 140
Plan of Distribution.................. 143
Legal Matters......................... 144
Experts............................... 144
Change in Accountants................. 144
Index to Consolidated Financial
Statements.......................... F-1
Annex A--Form of Transferee Letter of
Representation...................... A-1
</TABLE>
PROSPECTUS
$200,000,000
CORNING CONSUMER
PRODUCTS COMPANY
OFFER TO EXCHANGE $200,000,000 OF ITS 9 5/8% SENIOR SUBORDINATED NOTES DUE 2008,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT, FOR $200,000,000 OF ITS
OUTSTANDING 9 5/8% SENIOR SUBORDINATED NOTES DUE 2008.
, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") provides
that a corporation may indemnify directors and officers as well as other
employees and individuals against expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement in connection with specified
actions, suits or proceedings, whether civil, criminal, administrative, or
investigative (other than action by or in the right of the corporation a
"derivative action"), if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceedings, had no
reasonable cause to believe their conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except that indemnification only
extends to expenses (including attorneys' fees) incurred in connection with the
defense or settlement of such actions, and the statute requires court approval
before there can be any indemnification where the person seeking indemnification
has been found liable to the corporation. The statute provides that it is not
exclusive of other indemnification that may be granted by a corporation's
charter, by-laws, desinterested director vote, stockholder vote, agreement or
otherwise. Article 2.13 of the Registrant's By-laws indemnifies directors in the
performance of their duties in relying in good faith on the books of accounts or
reports made to the Company by any of its officials, or by an independent
certified public accountant, or by an appraiser selected with reasonable care by
the Board of Directors, or by a committee appointed by the Board of Directors,
or in relying on good faith upon other records of the Company. The Registrant
has also obtained officers' and directors' liability insurance which insures
against liabilities that officers and directors of the Registrant, in such
capacities, may incur.
Such 102(b)(7) of the DGCL permits a corporation to provide in its
certificate of incorporation that a director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duties as a director, except for liability (i) for any
transaction from which the director derives an improper personal benefit, (ii)
for acts or omissions not in good faith or that involve intentional misconduct
or a knowing violation of law, (iii) for improper payment of dividends or
redemptions of shares, or (iv) for any breach of a director's duty of loyalty to
the company or its stockholders. Article Eight of the Registrant's Restated
Certificate of Incorporation includes such a provision.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ---------- ------------------------------------------------------------------------------------------------------
<C> <S>
*2.1 Recapitalization Agreement dated as of March 2, 1998, among Corning Consumer Products Company (the
"Company"), Corning Incorporated, Borden, Inc. and CCPC Acquisition Corp.
*2.2 Amendment to the Recapitalization Agreement dated March 31, 1998.
*2.3 Assignment and Assumption Agreement dated as of April 1, 1998 between the Company and Corning.
*3.1 Amended and Restated Certificate of Incorporation of the Company.
*3.2 By-Laws of the Company.
*4.1 Indenture dated as of May 5, 1998 between the Company and The Bank of New York, as Trustee (the
"Indenture").
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ---------- ------------------------------------------------------------------------------------------------------
*4.2 Form of 9 5/8% Senior Subordinated Note due 2008 (included in Exhibit 4.1).
<C> <S>
*4.3 Form of 9 5/8% Series B Senior Subordinated Note due 2008 (included in Exhibit 4.1).
*4.4 Exchange and Registration Rights Agreement dated as of May 5, 1998 among the Company, Chase Securities
Inc., Salomon Brothers Inc and Citicorp Securities, Inc.
**5 Opinion of Simpson Thacher & Bartlett.
*10.1 Credit Facility, dated as of April 9, 1998, among the Company, the several lenders from time to time
parties thereto), and The Chase Manhattan Bank, as administrative agent.
*10.2 Stockholders' Agreement, dated as of April 1, 1998 among the Company, CCPC Acquisition Corp. and
Corning Incorporated.
*10.3 Form of Management Stockholder's Agreement among the Company, CCPC Acquisition Corp. and certain
officers of the Company.
*10.4 Non-Qualified Stock Option Agreement dated as of April 1, 1998 between the Company and certain
employees of the Company.
*10.5 1998 Stock Purchase and Option Plan for Key Employees of the Company and Subsidiaries.
*10.6 Registration Rights Agreement between the Company and CCPC Acquisition Corp. dated as of April 1,
1998.
*10.7 Tax Sharing Agreement among the Company, CCPC Acquisition Corp. and Revere Ware Corporation, dated as
of April 30, 1998.
*10.8 Form of Sale Participation Agreement between the Company and certain officers of the Company.
*12 Computation of Ratio of Earnings to Fixed Charges.
*16 Letter re change in Certifying Accountant.
*21 List of Subsidiaries.
**23.1 Consent of Simpson Thacher & Bartlett (included as part of its opinion filed as Exhibit 5.1 hereto).
*23.2 Consent of Price Waterhouse LLP, independent certified public accountants.
*24 Powers of Attorney. (Included on Page II-6)
*25 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New York, as
Trustee.
*27.1 Financial Data Schedule for the three months ended March 31, 1998.
*27.2 Financial Data Schedule for the year ended December 31, 1997.
*99.1 Form of Letter of Transmittal.
*99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
- ------------------------
* Filed herewith.
** To be filed by amendment.
(b) Financial Statement Schedules
Schedule II--Valuation Accounts and Reserves
II-2
<PAGE>
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereto), which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial BONA
FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed to be underwriters, in addition to the information
called for by the other Items of the applicable form.
The Registrant undertakes that every prospectus: (i) that is filed pursuant
to the immediately preceding undertaking or (ii) that purports to meet the
requirements of section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail
II-3
<PAGE>
or other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on June 17, 1998.
<TABLE>
<S> <C> <C>
CORNING CONSUMER PRODUCTS COMPANY
By: /s/ PETER F. CAMPANELLA
-----------------------------------------
Chief Executive Officer
</TABLE>
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 17th day of June, 1998 by the following persons
in the capacities indicated:
SIGNATURE TITLE
- ------------------------------ ---------------------------
Chief Executive Officer,
/s/ PETER F. CAMPANELLA President and Director
- ------------------------------ (Principal Executive
Peter F. Campanella Office)
Senior Vice
/s/ ANTHONY P. DEASEY President--Finance and
- ------------------------------ Chief Financial Officer
Anthony P. Deasey (Principal Financial
Officer)
/s/ GEORGE F. KNIGHT Vice President Controller
- ------------------------------ and Treasurer (Principal
George F. Knight Accounting Officer)
* Director
- ------------------------------
C. Robert Kidder
* Director
- ------------------------------
Edward A. Gilhuly
* Director
- ------------------------------
Clifton S. Robbins
* Director
- ------------------------------
Scott M. Stuart
* Director
- ------------------------------
William H. Carter
* Director
- ------------------------------
Nancy A. Reardon
* Director
- ------------------------------
William F. Stoll, Jr.
*By: /s/ GEORGE F. KNIGHT
-------------------------
ATTORNEY-IN-FACT
II-5
<PAGE>
POWER OF ATTORNEY
We, the undersigned directors and officers of Corning Consumer Products
Company, do hereby constitute and appoint Peter F. Campanella, George F. Knight
and William F. Stoll, Jr. or any of them, our true and lawful attorneys and
agents, to do any and all acts and things in our name and on our behalf in our
capacities as directors and officers and to execute any and all instruments for
us and in our names in the capacities indicated below, which said attorneys and
agents, or either of them, may deem necessary or advisable to enable said
Corporation to comply with the Securities Act of 1933 and any rules, regulations
and requirements of the Securities and Exchange Commission, in connection with
this Registration Statement, including specifically, but without limitation,
power and authority to sign for us or any of us in our names in the capacities
indicated below, any and all amendments (including post-effective amendments)
hereto and we do hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on the 17th day of June, 1998 by the
following persons in the capacities indicated:
SIGNATURE TITLE
- ------------------------------ ---------------------------
Chief Executive Officer,
/s/ PETER F. CAMPANELLA President and Director
- ------------------------------ (Principal Executive
Peter F. Campanella Office)
Senior Vice
/s/ ANTHONY P. DEASEY President--Finance and
- ------------------------------ Chief Financial Officer
Anthony P. Deasey (Principal Financial
Officer)
/s/ GEORGE F. KNIGHT Vice President, Controller
- ------------------------------ and Treasurer (Principal
George F. Knight Accounting Officer)
/s/ C. ROBERT KIDDER Director
- ------------------------------
C. Robert Kidder
/s/ EDWARD A. GILHULY Director
- ------------------------------
Edward A. Gilhuly
/s/ CLIFTON S.ROBBINS Director
- ------------------------------
Clifton S. Robbins
/s/ SCOTT M. STUART Director
- ------------------------------
Scott M. Stuart
/s/ WILLIAM H. CARTER Director
- ------------------------------
William H. Carter
/s/ NANCY A. REARDON Director
- ------------------------------
Nancy A. Reardon
/s/ WILLIAM F. STOLL, JR. Director
- ------------------------------
William F. Stoll, Jr.
II-6
<PAGE>
CORNING CONSUMER PRODUCTS COMPANY
(A WHOLLY OWNED SUBSIDIARY OF CORNING INCORPORATED)
FINANCIAL STATEMENT SCHEDULE
SCHEDULE II - VALUATION ACCOUNTS AND RESERVES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
YEAR ENDED DECEMBER 31, 1997 12/31/96 ADDITIONS DEDUCTIONS 12/31/97
- -------------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Doubtful accounts and allowances.............................. $ 7,848 $ 1,311 $ (1,855) $ 7,304
LIFO allowance................................................ (366) 6,747 (4,271) 2,110
Deferred tax assets valuation allowance....................... 8,267 5,805 (640) 13,432
Accumulated amortization of goodwill and other intangibles.... 6,592 2,033 -- 8,625
Accumulated amortization of software.......................... 8,338 3,244 (811) 10,771
</TABLE>
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
YEAR ENDED DECEMBER 31, 1996 12/31/95 ADDITIONS DEDUCTIONS 12/31/96
- -------------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Doubtful accounts and allowances.............................. $ 13,299 $ 1,967 $ (7,418) $ 7,848
LIFO allowance................................................ (5,087) 4,739 (18) (366)
Deferred tax assets valuation allowance....................... 4,500 10,104 (6,337) 8,267
Accumulated amortization of goodwill and other intangibles.... 4,556 2,036 -- 6,592
Accumulated amortization of software.......................... 5,440 3,289 (391) 8,338
</TABLE>
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
YEAR ENDED DECEMBER 31, 1995 12/31/94 ADDITIONS DEDUCTIONS 12/31/95
- -------------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Doubtful accounts and allowances.............................. $ 6,784 $ 8,121 $ (1,606) $ 13,299
LIFO allowance................................................ (1,830) 305 (3,562) (5,087)
Deferred tax assets valuation allowance....................... 6,329 4,508 (6,337) 4,500
Accumulated amortization of goodwill and other intangibles.... 2,525 2,031 -- 4,556
Accumulated amortization of software.......................... 3,613 1,980 (153) 5,440
</TABLE>
S-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ----------- -----------------------------------------------------------------------------------
<C> <S>
*2.1 Recapitalization Agreement dated as of March 2, 1998, among Corning Consumer
Products Company (the "Company"), Corning Incorporated, Borden, Inc. and CCPC
Acquisition Corp.
*2.2 Amendment to the Recapitalization Agreement dated March 31, 1998
*2.3 Assignment and Assumption Agreement dated as of April 1, 1998 between the Company
and Corning.
*3.1 Amended and Restated Certificate of Incorporation of the Company.
*3.2 By-Laws of the Company.
*4.1 Indenture dated as of May 5, 1998 between the Company and The Bank of New York, as
Trustee (the "Indenture").
*4.2 Form of 9 5/8% Senior Subordinated Note due 2008 (included in Exhibit 4.1).
*4.3 Form of 9 5/8% Series B Senior Subordinated Note due 2008 (included in Exhibit
4.1).
*4.4 Exchange and Registration Rights Agreement dated as of May 5, 1998 among the
Company, Chase Securities Inc., Salomon Brothers Inc and Citicorp Securities, Inc.
**5 Opinion of Simpson Thacher & Bartlett.
*10.1 Credit Facility, dated as of April 9, 1998, among the Company, the several lenders
from time to time parties thereto, and The Chase Manhattan Bank, as administrative
agent.
*10.2 Stockholders' Agreement, dated as of April 1, 1998 among the Company, CCPC
Acquisition Corp. and Corning Incorporated.
*10.3 Form of Management Stockholder's Agreement among the Company, CCPC Acquisition
Corp. and certain officers of the Company.
*10.4 Non-Qualified Stock Option Agreement dated as of April 1, 1998 between the Company
and certain employees of the Company.
*10.5 1998 Stock Purchase and Option Plan for Key Employees of the Company and
Subsidiaries.
*10.6 Registration Rights Agreement between the Company and CCPC Acquisition Corp. dated
as of April 1, 1998.
*10.7 Tax Sharing Agreement among the Company, CCPC Acquisition Corp. and Revere Ware
Corporation, dated as of April 30, 1998.
*10.8 Form of Sale Participation Agreement between the Company and certain officers of
the Company.
*12 Computation of Ratio of Earnings to Fixed Charges.
*16 Letter re change in certifying accountant.
*21 List of Subsidiaries.
**23.1 Consent of Simpson Thacher & Bartlett (included as part of its opinion filed as
Exhibit 5.1 hereto).
*23.2 Consent of Price Waterhouse LLP, independent certified public accountants.
*24 Powers of Attorney. (Included on Page II-6)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ----------- -----------------------------------------------------------------------------------
*25 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank
of New York, as Trustee.
<C> <S>
*27.1 Financial Data Schedule for the three months ended March 31, 1998.
*27.2 Financial Data Schedule for the year ended December 31, 1997.
*99.1 Form of Letter of Transmittal.
*99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
- ------------------------
* Filed herewith.
** To be filed by amendment.
FINANCIAL STATEMENT SCHEDULES
Schedule II--Valuation Accounts and Reserves
<PAGE>
Exhibit 2.1
CONFORMED COPY
================================================================================
--------------------------
RECAPITALIZATION AGREEMENT
--------------------------
Among
CORNING INCORPORATED,
CORNING CONSUMER PRODUCTS COMPANY,
CCPC ACQUISITION CORP.
and
BORDEN, INC.
Dated March 2, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
Section Page
ARTICLE I
DEFINITIONS
1.01. Certain Defined Terms.................................................1
1.02. Other Defined Terms...................................................9
ARTICLE II
PURCHASE AND SALE
2.01. Consummation of Financing; Dividend..................................11
2.02. Purchase and Sale of Acquired Shares.................................12
2.03. Closing..............................................................12
2.04. Adjustment of Cash Dividend Amount...................................13
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
3.01. Incorporation of the Seller and Authority of the Seller
and the Company......................................................16
3.02. Organization, Authority and Qualification of the Company.............16
3.03. Capital Stock of the Company.........................................16
3.04. Subsidiaries.........................................................17
3.05. No Conflict..........................................................17
3.06. Consents and Approvals...............................................18
3.07. Financial Information; Inventory; Receivables........................18
3.08. Absence of Undisclosed Liabilities...................................18
3.09. Absence of Certain Changes or Events.................................19
3.10. Absence of Litigation................................................20
3.11. Compliance with Laws.................................................20
3.12. Licenses and Permits.................................................20
3.13. Real Property; Tangible Property.....................................21
3.14. Employee Benefit and Labor Matters...................................22
3.15. Labor Matters........................................................27
3.16. Taxes................................................................27
3.17. Environmental, Health and Safety.....................................28
3.18. Intellectual Property................................................29
-i-
<PAGE>
Section Page
3.19. Material Contracts...................................................31
3.20. Brokers..............................................................32
3.21. Entire Business......................................................32
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
4.01. Incorporation and Authority of the Purchaser.........................32
4.02. No Conflict..........................................................33
4.03. Consents and Approvals...............................................33
4.04. Absence of Litigation................................................33
4.05. Investment Purpose...................................................33
4.06. Financing............................................................34
4.07. Brokers..............................................................34
ARTICLE V
ADDITIONAL AGREEMENTS
5.01. Conduct of Business Prior to the Closing.............................34
5.02. Access to Information................................................37
5.03. Confidentiality......................................................38
5.04. Regulatory and Other Authorizations; Consents........................39
5.05. Investigation........................................................39
5.06. Administrative Services Agreement....................................40
5.07. Company Headquarters.................................................40
5.08. Non-Solicitation of Employees........................................41
5.09. Intellectual Property Matters........................................41
5.10. Corning Glass Center; Corning Plant Stores; Shared Facility
Agreement............................................................44
5.11. Greenville Supply Agreement; Transfer of Molds.......................44
5.12. Technology Support Agreement.........................................44
5.13. Transition Services Agreement........................................44
5.14. Actions Affecting the Closing Balance Sheet..........................45
5.15. Foreign Sales Corporation............................................45
5.16. Payment of Intercompany Accounts Payable.............................45
5.17. Non-Competition......................................................46
5.18. Facility Financing Interests.........................................47
5.19. Stockholders Agreement...............................................48
5.20. No Negotiation.......................................................48
5.21. Financial Statements and Reports.....................................48
-ii-
<PAGE>
Section Page
5.22. Insurance............................................................49
5.23. Cumulative Gross Margin Payment......................................49
5.25. Reasonable Best Efforts..............................................51
ARTICLE VI
EMPLOYEE MATTERS
6.01. Employees............................................................51
6.02. Employee Benefits Arrangements.......................................53
6.03. Goal Sharing Plan....................................................58
6.04. Stock Options........................................................59
6.05. Supplemental Plans...................................................59
6.06. Medical Costs........................................................59
6.07. Cooperation..........................................................59
6.08. Remedies.............................................................60
6.09. Indemnification......................................................60
6.10. Survival.............................................................60
ARTICLE VII
TAX
7.01. Tax Indemnities......................................................61
7.02. Refunds and Tax Benefits.............................................63
7.03. Contests.............................................................64
7.04. Preparation of Tax Returns...........................................66
7.05. Cooperation and Exchange of Information..............................68
7.06. Conveyance Taxes.....................................................68
7.07. Section 338(h)(10) Election..........................................68
7.08. Miscellaneous........................................................70
ARTICLE VIII
CONDITIONS TO CLOSING
8.01. Conditions to Obligations of the Seller and the Company..............70
8.02. Conditions to Obligations of the Purchaser...........................71
ARTICLE IX
-iii-
<PAGE>
INDEMNIFICATION
9.01. Survival of Representations and Warranties...........................73
9.02. Indemnification for the Benefit of the Seller........................73
9.03. Indemnification by the Seller........................................75
9.04. Indemnification Procedures...........................................77
9.05. Environmental Indemnification........................................78
ARTICLE X
TERMINATION AND WAIVER
10.01. Termination.........................................................80
10.02. Effect of Termination...............................................81
10.03. Waiver..............................................................81
ARTICLE XI
GENERAL PROVISIONS
11.01. Expenses............................................................81
11.02. Notices.............................................................82
11.03. Public Announcements................................................83
11.04. Headings............................................................83
11.05. Severability........................................................83
11.06. Entire Agreement....................................................84
11.07. Assignment..........................................................84
11.08. No Third Party Beneficiaries........................................84
11.09. Amendment...........................................................84
11.10. Governing Law.......................................................84
11.11. Counterparts........................................................84
11.12. Specific Performance................................................84
11.13. Waiver of Jury Trial................................................84
11.14. Guarantee...........................................................85
11.15. Effect of Disclosure Schedules......................................85
-iv-
<PAGE>
EXHIBITS
Exhibit 1.01(a) Durable Consumer Products
Exhibit 1.01(b) Housewares Products
Exhibit 1.01(c) 1997 Balance Sheet
Exhibit 2.01 Financing
Exhibit 2.03(b) Summary of Preferred Stock Terms
Exhibit 2.03(f) Form of Stockholders Agreement
Exhibit 5.01 Corning Consumer Products Company 1998 Capital Budget
Exhibit 5.06 Form of Administrative Services Agreement
Exhibit 5.07 Form of Company Headquarters Lease Agreement
Exhibit 5.09(b)(i) Form of CORNING WARE and PYROCERAM License Agreement
Exhibit 5.09(b)(ii) Form of PYREX License Agreement
Exhibit 5.09(d) Form of Patent and Know-How License Agreement
Exhibit 5.09(e) Form of Temporary CORNING License Agreement
Exhibit 5.10 Form of Shared Facility Agreement
Exhibit 5.11 Form of Greenville Supply Agreement
Exhibit 5.12 Form of Technology Support Agreement
Exhibit 5.13 Form of Transition Services Agreement
-v-
<PAGE>
DISCLOSURE SCHEDULE
The Disclosure Schedule shall include the following Sections:
3.04 Subsidiaries
3.05 No Conflict
3.06 Consents and Approvals
3.08 Absence of Undisclosed Liabilities
3.09 Absence of Certain Changes or Events
3.10 Absence of Litigation
3.11 Compliance with Laws
3.12 Licenses and Permits
3.13 Real Property; Tangible Property
3.14 Employee Benefit Matters
3.15 Labor Matters
3.16 Taxes
3.17 Environmental, Health and Safety Compliance
3.18 Intellectual Property
3.19 Material Contracts
3.22 Insurance
5.01 Conduct of Business Prior to the Closing
5.18 Documents and Instruments Evidencing Facility Financing Interests
6.01 Termination Benefits of the Company and the Subsidiaries
6.02 Collective Bargaining Agreements
6.02(d)(i) Continued Collective Bargaining Agreements
6.02(d)(ii) Assumed Collective Bargaining Agreements
<PAGE>
RECAPITALIZATION AGREEMENT, dated March 2, 1998, among CORNING
INCORPORATED, a New York corporation (the "Seller"), CORNING CONSUMER PRODUCTS
COMPANY, a Delaware corporation (the "Company"), CCPC ACQUISITION CORP., a
Delaware corporation (the "Purchaser") and, solely for purposes of Sections
10.02 and 11.14(a) hereof, Borden, Inc., a New Jersey corporation and an
Affiliate of the Purchaser ("Borden").
WHEREAS, the Seller owns all the issued and outstanding shares (the
"Shares") of common stock, no par value per share, of the Company; and
WHEREAS, the Seller wishes to sell to the Purchaser, and the
Purchaser wishes to purchase from the Seller, certain Shares, and the Purchaser
and the Seller desire to effect a recapitalization of the Company, each on the
terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, the Purchaser, the Company and
the Seller hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Acquired Shares" means 920 Shares.
"Affiliate" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.
"Agreement" or "this Agreement" means this Recapitalization
Agreement, dated March 2, 1998, among the Seller, the Company, the Purchaser
and, for purposes of Sections 10.02 and 11.14(a) only, Borden (including the
Exhibits hereto and the Disclosure Schedule) and all amendments hereto made in
accordance with the provisions of Section 11.09.
"Books and Records" means all the books of account and other
financial records pertaining to the Company and the Subsidiaries.
<PAGE>
2
"Business" means the business of manufacturing, distributing,
exporting and/or selling the Corning Consumer Products as conducted and as
currently intended to be conducted by the Company and the Subsidiaries.
"Business Day" means any day that is not a Saturday, a Sunday or
other day on which banks are required or authorized by law to be closed in The
City of New York.
"Cash Dividend Amount" means $472,600,000 as adjusted pursuant to
Section 2.04.
"Charleroi Facility" means all real property, all improvements
thereon and all machinery and equipment used in connection therewith owned by or
leased or otherwise made available to the Company, including all easements,
licenses, rights and appurtenances thereto, comprising its manufacturing
facility located in the Borough of Charleroi, Washington County, Commonwealth of
Pennsylvania, such real property being bounded generally on the east by
Monongahela River, on the south by real property owned (on the date of this
Agreement) by West Penn Power, on the west by real property owned (on the date
of this Agreement) by Consolidated Rail Corporation and on the north by real
property owned (on the date of this Agreement) by the Borough of Charleroi.
"Closing Balance Sheet" means the audited consolidated balance sheet
(including the related notes and schedules thereto) of the Company and the
Subsidiaries, to be prepared pursuant to Section 2.04 and to be dated as of the
Closing Date, except that if the Closing Date is the first day of any month, the
Closing Balance Sheet will be dated as of the day immediately preceding the
Closing Date.
"Code" means the Internal Revenue Code of 1986, as amended through
the date hereof.
"Confidentiality Agreement" means the letter agreement dated as of
February 9, 1998, Seller and Borden.
"Consumer Copyrights" means any and all statutory or other rights in
any copyrights owned by the Seller, the Company or any Subsidiary and protecting
a work which has been used or is currently intended to be used in the Business.
"Consumer Grantee License Agreements" means each written unexpired
agreement dated prior to the Closing Date pursuant to which the Seller (and its
Affiliates), the Company or any Subsidiary, individually or in combination with
each other, has the right to use any Consumer Intellectual Property, or any
other intellectual property owned by a third party, in connection with the
Business.
<PAGE>
3
"Consumer Grantor License Agreements" means each written, unexpired
agreement dated prior to the Closing Date pursuant to which the Seller (and its
Affiliates), the Company or any Subsidiary has licensed to a third party any
Consumer Intellectual Property.
"Consumer Intellectual Property" means all intellectual property
rights owned or used by the Company and the Subsidiaries, including, without
limitation, the Consumer Trademarks, the Consumer Know-How, the Consumer
Patents, the Seller's Retained Patents, the Consumer Copyrights, and any one of
the foregoing.
"Consumer License Agreements" means the Consumer Grantor License
Agreements and the Consumer Grantee License Agreements.
"Consumer Know-How" means any and all knowledge and experience used
or currently intended to be used by the Seller, the Company or any Subsidiary
prior to the Closing Date, or that pertain or relate to the technology and
industrial techniques used, in the commercial production of Corning Consumer
Products and any evolutionary improvements therein, and not a replacement
therefor, created before the fifth anniversary of the Closing Date.
"Consumer Patents" means all patents, and all applications,
reissues, renewals, continuations and extensions relating to any patents owned
or used by, or subject to a right of assignment to, the Seller, the Company or
any Subsidiary prior to the Closing which in the case of the Seller only pertain
or relate to, or are only used in or currently intended for use in, the
Business, including, without limitation, those identified in Section 3.18 of the
Disclosure Schedule, but excluding Seller's Retained Patents.
"Consumer Trademarks" means all trademarks and all registrations,
applications, and renewals, relating to trademarks, and all logos, company names
and trade names currently owned, used and/or intended to be used by the Seller
(or its Affiliates), the Company or any Subsidiary in connection with the
Business, including, but not limited to, the trademarks listed in Section 3.18
of the Disclosure Schedule, and all goodwill associated with and all rights in
the foregoing.
"Corning Consumer Products" means Stanadyne Products, pressed glass
ceramic molds to be used for metal consumer products for retail sale, final
water filtration system products for home use (but excluding OEM Component
Products parts of such water filtration systems products) and products
manufactured, distributed and/or sold by the Company and the Subsidiaries for
use primarily in the preparation, cooking, storage, service and enjoyment of
foods and/or beverages, including, but not limited to, glass, glass-ceramic,
ceramic, plastic and metal ovenware, bakeware, cookware, dinnerware, tableware,
tableware accessories, kitchen gadgets; provided, however, that Corning Consumer
Products shall not include Steuben Products, ceramic briquettes, OEM Component
Products for consumer
<PAGE>
4
household appliances, household cooking ovens or ranges, products for lighting,
computers, laboratory science, electronics, medical applications, automobile and
building windows, mirrors, flatglass, television or display applications, liquid
filtration products (other than Stanadyne Products and final water filtration
system products for home use), OEM Component Product parts of water filtration
system products for home use, glass ceramic burner caps, glass ceramic cook
tops, flat glass ceramic stove windows and new products manufactured from flat
glass ceramic by Eurokera, S.N.C. or Keraglass, S.N.C. or their respective
licensees for sale in Europe.
"Cumulative Gross Margin" means the sum of the Gross Margins in each
of the three years ended December 31, 1998, 1999 and 2000.
"Disclosure Schedule" means the Disclosure Schedule attached hereto,
dated as of the date hereof, and forming a part of this Agreement.
"Durable Consumer Products" means Housewares and those products
identified on the attached Exhibit 1.01(a); provided that Durable Consumer
Products will not include such items as are specifically excluded from the
definition of Corning Consumer Products.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended and any regulations promulgated or proposed thereunder.
"Facility Financing Interests" means all of the rights and
obligations of the Seller and the Company with respect to the Charleroi Facility
and the Greencastle Facility, as evidenced by the documents and instruments set
forth on Section 5.18 of the Disclosure Schedule.
"Foreign Sales Corporation" means Corning Incorporated Foreign Sales
Corporation.
"Foreign Subsidiaries" means Corning Canada Inc. (a Canadian
corporation), Corning Australia Pty. Limited (an Australian corporation), CCPC
(Asia) Pte. Ltd. (a Singapore corporation), Mundial Brasil Produtos de Consumo
Ltda. (a Brazilian corporation), CCPC Korea Co. Ltd. (a Korean corporation) and
Iwaki Corning (Malaysia) SDN BHD (a Malaysian corporation).
"Governmental Authority" means any United States federal, state or
local or any foreign government, governmental, regulatory or administrative
authority, agency or commission or any court, tribunal, or judicial or arbitral
body.
"Governmental Order" means any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Authority.
<PAGE>
5
"Greencastle Facility" means all real property, all improvements
thereon and all machinery and equipment used in connection therewith, including
all easements, licenses, rights and appurtenances thereto, owned by or leased or
otherwise made available to the Company comprising its manufacturing facility
located at 1200 South Antrim Way, Greencastle, Franklin County, Commonwealth of
Pennsylvania.
"Gross Margin" means the difference (as calculated by the Company
and certified by the Company's accountants in accordance with Section 5.23)
between (a) consolidated net sales of the Company and the Subsidiaries, and (b)
cost of sales, in each case as reflected on the 1998, 1999 and 2000 Financial
Statements adjusted as follows. Net sales and cost of sales shall be adjusted to
exclude, to the extent not reflected in Management's Business Plans for 1998,
1999 and 2000 provided to the Purchaser prior to the date hereof and projecting
Cumulative Gross Margin of $710,900,000 (i) any gain or loss associated with the
sale or write-down of assets not in the ordinary course of business, (ii) any
charges or income associated with a restructuring of the Business or a decision
to close, relocate any facility or terminate or relocate any employees
(including severance or other benefits, expense accruals and moving costs
associated with the foregoing), (iii) any one-time costs (or release of reserves
for estimated costs) or income, in each case solely related to the consummation
of the transactions contemplated hereby, including any incentive payments to
employees or any payments pursuant to the Pressware Union Agreement, (iv) any
expenses or income associated with any assets acquired or divested not in the
ordinary course of business, (v) any one-time costs incurred with respect to the
implementation of independent financial systems and (vi) the impact of any
changes in accounting policies or classifications.
"Housewares" means Corning Consumer Products and (i) products used
primarily in the preparation, cooking, storage, service and enjoyment of food or
beverages such as: (A) glass, ceramic, metal, plastic or other bakeware,
cookware, dinnerware, tableware, and ovenware; (B) crystal and china dinnerware,
tableware, and decorative objects or accessories; (C) kitchen and table
utensils, cutlery and gadgets; (D) food storage containers; (E) portable
appliances; (F) table linen and oven mitts; (ii) furnishings for the home; and
(iii) the products listed on the attached Exhibit 1.01(b); provided, however,
that Housewares shall not include such items as are specifically excluded from
the definition of Corning Consumer Products.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Income Tax or Income Taxes" means any federal, state, local or
foreign tax, fee, assessment, levy, duty, tariff or other charges of any kind
imposed by a governmental taxing authority and (a) based upon, measured by, or
calculated with respect to, net income or net receipts, proceeds or profits, or
(b) based upon, measured by, or calculated with respect to multiple bases
(including, but not limited to corporate franchise or occupation taxes) if such
<PAGE>
6
tax may be based upon, measured by, or calculated with respect to one or more
bases described in clause (a) above, in each case together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto.
"Indebtedness" means (a) indebtedness for borrowed money, (b)
obligations evidenced by bonds, notes, debentures or other similar instruments
or by letters of credit, including purchase money obligations or other
obligations relating to the deferred purchase price of property (other than
trade payables incurred in the ordinary course of business), (c) obligations as
lessee under leases which have been or should have been, in accordance with U.S.
GAAP, recorded as capital leases, (d) obligations under direct or indirect
guaranties in respect of Liabilities of others, (e) obligations in respect of
outstanding or unpaid checks or drafts or overdraft obligations and (f) accrued
interest, if any, on and all other amounts owed in respect of any of the
foregoing.
"IRS" means the Internal Revenue Service of the United States.
"knowledge" means, with respect to the Seller, the actual knowledge
of Peter F. Campanella, Clark S. Kinlin, Twilver Gordon, Gary P. Vogt, Kim
Frock, Thomas C. O'Brien, Katherine A. Asbeck, James B. Flaws, John L. Cherill,
Kirk P. Gregg, Michael Donnelly, Kevyn Hennessey and Paul R. A. Burke; provided,
however, that the actual knowledge of Kirk P. Gregg, Michael Donnelly and Kevyn
Hennessey shall be attributed to the knowledge of the Seller only with respect
to employee benefits matters, the actual knowledge of John L. Cherill shall be
attributed to the knowledge of the Seller only with respect to environmental
matters and the actual knowledge of Paul R. A. Burke shall be attributed to the
knowledge of the Seller only with respect to intellectual property matters.
"Leased Real Property" means the real property leased by the Company
or any Subsidiary, as tenant, together with, to the extent leased by the Company
or any Subsidiary, all buildings and other structures, facilities or
improvements currently or hereafter located thereon, all fixtures, systems,
equipment and items of personal property of the Company or any Subsidiary
attached or appurtenant thereto, and all easements, licenses, rights and
appurtenances relating to the foregoing.
"Liabilities" means any and all debts, liabilities and obligations,
whether accrued or fixed, absolute or contingent, matured or unmatured or
determined or determinable.
"Material Adverse Effect" means any change in, or effect on, the
Company, the Subsidiaries or the Business that is or could reasonably be
expected to be materially adverse to the business, properties, results of
operations or financial condition of the Company and the Subsidiaries, taken as
a whole.
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7
"Net Worth" means Total Assets, other than, to the extent included
in Total Assets (a) cash and cash equivalents, (b) deferred Tax assets and (c)
any assets retained or transferred by the Seller pursuant to Section 5.14, minus
Total Liabilities other than, to the extent included in Total Liabilities (i)
any Indebtedness, (ii) deferred Tax liabilities and (iii) any liabilities
retained by the Seller pursuant to Section 5.14.
"Other Consumer Products" means consumer products for retail sale.
"1997 Balance Sheet" means the audited consolidated balance sheet of
the Company and the Subsidiaries as of December 31, 1997, a copy of which is
attached hereto as Exhibit 1.01(c).
"1997 Balance Sheet Date" means December 31, 1997.
"1998, 1999 and 2000 Financial Statements" means each of the audited
consolidated statements of income of the Company and the Subsidiaries for the
years ended December 31, 1998, December 31, 1999 and December 31, 2000
(including any notes thereto), each prepared in accordance with U.S. GAAP.
"OEM Component Products" means original equipment manufacturer's
component products.
"Owned Real Property" means the real property owned by the Company
or any Subsidiary, together with all buildings and other structures, facilities
or improvements currently or hereafter located thereon, all fixtures, systems,
equipment and items of personal property of the Company or any Subsidiary
attached or appurtenant thereto and all easements, licenses, rights and
appurtenances relating to the foregoing.
"Permitted Encumbrances" means: (a) liens for Taxes and assessments
not yet payable; (b) liens for Taxes, assessments and charges and other claims,
the validity of which are being contested in good faith; (c) with respect to
Section 3.09 (b) only, imperfections of title, liens, security interests and
other encumbrances the existence of which, individually or in the aggregate,
would not have a Material Adverse Effect; (d) inchoate mechanics' and
materialmen's liens for construction in progress; and (e) workmen's,
repairmen's, warehousemen's and carriers' liens arising in the ordinary course
of Business.
"Person" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity, as well as any
syndicate or group that would be deemed to be a person under Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended.
<PAGE>
8
"Purchaser's Accountants" means Deloitte & Touche LLP, independent
accountants of the Purchaser.
"Purchaser Group" means the Purchaser and any Affiliate of the
Purchaser with which the Purchaser files a consolidated, combined or unitary Tax
Return.
"Real Property" means the Leased Real Property and the Owned Real
Property.
"Revolving Credit Agreement" means the Amended and Restated
Revolving Credit Agreement between the Company and the Seller, dated as of March
28, 1997.
"Seller Group" means the Seller and any Affiliate of the Seller with
which the Seller files a consolidated, combined or unitary Tax Return.
"Seller's Accountants" means Price Waterhouse LLP, independent
accountants of the Seller.
"Seller's Future Patents" means each patent or patent application
claiming a priority date after the Closing but prior to the fifth anniversary of
the Closing and that claims an invention that is an evolutionary improvement in,
and not a replacement for, the subject matter of Seller's Retained Patents.
"Seller's Retained Patents" means all patents, and all applications,
reissues, renewals, continuations and extensions relating to any patents, owned
by the Seller prior to the Closing and that pertain or relate to the Business
but have potential applicability outside of the Business, as identified in
Section 3.18 of the Disclosure Schedule.
"Stanadyne Products" means glass housings used in fuel systems
generally of the type heretofore sold by the Company to the Stanadyne Automotive
Corporation.
"Steuben Products" means high-end crystal glassware sold under the
Steuben trademark.
"Subsidiaries" means Revere Ware Corporation, a Delaware
corporation, and the Foreign Subsidiaries.
"subsidiary" or "subsidiaries" means any Person with respect to
which a specified Person (or a subsidiary thereof) owns a majority of the common
stock (or similar voting securities) or has the power to vote or direct the
voting of sufficient securities to elect a majority of the directors or
individuals exercising similar functions.
<PAGE>
9
"Tax" or "Taxes" means any and all taxes, fees, assessments, levies,
duties, tariffs, imposts, and other charges of any kind (together with any and
all interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any governmental taxing authority including, without
limitation: taxes or other charges on or with respect to income, franchises,
windfall or other profits, gross receipts, property, assets, sales, use, capital
stock, payroll, employment, social security, workers' compensation, unemployment
compensation, severance, occupation, or net worth; taxes or other charges in the
nature of excise, withholding, ad valorem, stamp, transfer, estimated, value
added, or gains taxes; license, registration and documentation fees; and
customs' duties, tariffs, and similar charges.
"Tax Return" means any return, declaration, report, claim for refund
or information return or statement relating to Taxes filed with a taxing
authority, including any schedule or attachment thereto, and including any
amendment thereof.
"Total Assets" means the total assets reflected on the 1997 Balance
Sheet or the Closing Balance Sheet, as the case may be.
"Total Liabilities" means the total liabilities reflected on the
1997 Balance Sheet or the Closing Balance Sheet, as the case may be.
"U.S. GAAP" means United States generally accepted accounting
principles.
SECTION 1.02. Other Defined Terms. The following terms shall have
the meanings defined for such terms in the sections set forth below:
Term: Section:
----- --------
Acquired Employees 6.01(a)
Administrative Services
Agreement 5.06
Allocation 7.07(b)
Benefit Maintenance Period 6.01(c)
Benefit Plan 3.14(a)
Canadian Plan 3.14(e)
Borden Preamble
Cash Dividend 2.01
Closing 2.03
Closing Date 2.03
Code section 338(h)(10)
Election 7.07(a)
Company Preamble
Company Benefit Plan 3.14(a)
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10
Company's Accountants 5.23(a)
Compensation 6.01(b)
Continuation Period 6.01(b)
Corning 401(k) Plans 6.02(b)(i)
Corning Pension Plan 6.02(a)(i)
CORNING WARE and
PYROCERAM
License Agreement 5.09(b)(i)
Department 3.14(a)
Diversified Company 5.17
Elections 7.07(a)
Employee 3.14(a)
Employee Agreement 3.14(a)
Encumbrances 3.03
Environmental Claims 3.17
Environmental Law 3.17
Environmental Permits 3.17(a)
Environmental Report 3.17
ERISA Affiliate 3.14(a)
Existing Benefit Plans 6.02(c)(i)
Financial Statements 3.07
Financing 2.01
Goldman, Sachs 3.20
Greenville Supply
Agreement 5.11
Hazardous Materials 3.17
HMO 3.14(j)
Hourly Employees 6.02(a)(i)
Indemnified Party 9.04(a)
Indemnifying Party 9.04(a)
Independent Accounting Firm 2.04(b)(ii)
Key Employee Retention
Program 6.02(e)
Leased Employees 6.02(d)(iii)
Losses 9.02(a)
Material Contracts 3.19(a)
Multi-Employer Plan 3.14(a)
1988 Guaranty 5.18
1992 Guaranty 5.18
New Company Plan 3.14(a)
New Defined Benefit Plan 6.02(a)(ii)
New 401(k) Plans 6.02(b)(ii)
Non-Competition Period 5.17
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11
Option Exercise Period 6.04
Patent and Know-How
License Agreement 5.09(d)
PBGC 3.14(a)
PCBs 3.17
Pension Plan 3.14(a)
Post-Closing Tax Detriment 7.02(a)(ii)
Pre-Closing Tax Detriment 7.02(a)(ii)
Pre-Closing Workers and
Products Claims 5.14(c)
Pressware Union Agreement 6.02(d)(ii)
Purchaser Preamble
Purchaser Indemnified Party 9.03(a)
Purchaser Returns 7.04(a)
PYREX License Agreement 5.09(b)(ii)
Retained Names and Marks 5.09(e)
Revere Hourly Employees 6.02(a)(ii)
Revere Plan 6.02(a)(iii)
Revere Post-Retirement Plan 6.02(c)(i)
Seller Preamble
Seller Benefit Plan 3.14(a)
Seller Indemnified Party 9.02(a)
Seller Insurance Policies 5.22
Separate Return Tax Liability 7.03(b)
Seller Returns 7.04(a)
Share Purchase Price 2.02
Shared Facility Agreement 5.10(c)
Shares Recitals
Stockholders Agreement 2.03(d)
Systems Plan 5.24
Tangible Property 3.13(d)
Technology Support
Agreement 5.12
Temporary CORNING
License Agreement 5.09(e)
Termination Benefits 6.01(c)
Transition Services Agreement 5.13
Welfare Plan 3.14(a)
<PAGE>
12
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Consummation of Financing; Dividend. Upon the terms
and subject to the conditions of this Agreement, (a) prior to the Closing, the
Company may declare as a dividend payable to its stockholder of record as of the
day prior to the Closing Date, and pay to such stockholder on the Closing Date
an amount in cash equal to the Cash Dividend Amount (the "Cash Dividend"), and
(b) at the Closing, the Seller shall cause the Company to borrow, and the
Purchaser shall lend (or cause one of more of its Affiliates to lend), funds to
the Company on the terms previously described to the Seller (the "Financing") in
the amounts set forth on Exhibit 2.01 hereto, the proceeds of which (net of any
fees, expenses and other costs required to be paid by the Company in connection
with the Financing and the transactions contemplated hereby), together with the
proceeds of the preferred stock referred to in Section 2.03(b), shall be
sufficient to pay the Cash Dividend Amount.
SECTION 2.02. Purchase and Sale of Acquired Shares. Upon the terms
and subject to the conditions of this Agreement, at the Closing, the Seller
shall sell to the Purchaser, and the Purchaser shall purchase from the Seller,
the Acquired Shares for $110,400,000 in the aggregate (the "Share Purchase
Price"). The Share Purchase Price shall be payable as provided in Section
2.03(c).
SECTION 2.03. Closing. Upon the terms and subject to the conditions
of this Agreement, the consummation of the transactions contemplated by this
Agreement shall take place at a closing (the "Closing") to be held at the
offices of Shearman & Sterling, 599 Lexington Avenue, New York, New York at
10:00 A.M. New York time, on the later to occur of (i) the fifth Business Day
following the satisfaction of the conditions contained in Sections 8.01(b) and
8.02(b), or (ii) April 1, 1998, or at such other place or at such other time or
on such other date as the Seller and the Purchaser mutually agree upon in
writing (the day on which the Closing takes place being the "Closing Date"). At
the Closing, the following will take place:
(a) The Company shall consummate the Financing.
(b) The Company shall issue to the Purchaser or one of its
Affiliates shares of preferred stock having an aggregate liquidation
preference of $30,000,000 and other terms substantially as set forth in
Exhibit 2.03(b) hereto in exchange for $30,000,000.
(c) Immediately following the consummation of the Financing and the
receipt by the Company of the proceeds therefrom, the Company will pay the
Cash Dividend declared pursuant to Section 2.01(a), by wire transfer in
immediately
<PAGE>
13
available funds to an account or accounts designated by the Seller at
least two Business Days before the Closing Date in a written notice to the
Company.
(d) Immediately following the payment of the Cash Dividend by the
Company to the Seller in accordance with Section 2.03(c), the Purchaser
will pay to the Seller the Share Purchase Price, by wire transfer in
immediately available funds to an account or accounts designated by the
Seller at least two Business Days before the Closing Date in a written
notice to the Purchaser. The Seller will deliver to the Purchaser stock
certificates evidencing the Acquired Shares duly endorsed in blank or
accompanied by stock powers duly executed in blank.
(e) The Company and its Subsidiaries shall have repaid or shall
repay all third-party Indebtedness of the Company or any Subsidiaries,
other than the Facility Financing Interests, and all Indebtedness of the
Company or any Subsidiaries owing to the Seller or any of its other
Affiliates shall be repaid or otherwise discharged as described in Section
5.14(a) or otherwise in a manner that does not cause any adverse tax
consequences to the Company or any of the Subsidiaries.
(f) The Seller, the Company and the Purchaser shall enter into a
Stockholders Agreement (the "Stockholders Agreement"), substantially in
the form attached hereto as Exhibit 2.03(f).
SECTION 2.04. Adjustment of Cash Dividend Amount. The Cash Dividend
Amount shall be subject to adjustment as specified in Section 2.04(c):
(a) Closing Balance Sheet. As promptly as practicable, but in any
event within sixty calendar days following the Closing Date, the Seller
shall prepare and deliver to the Purchaser the Closing Balance Sheet,
together with a report thereon of the Seller's Accountants stating that
the Closing Balance Sheet fairly presents the consolidated financial
position of the Company at the Closing Date in conformity with U.S. GAAP
as in effect on the date hereof applied on a basis consistent with the
preparation of the 1997 Balance Sheet. For the purposes of the preparation
of the Closing Balance Sheet, the Financing, the payment of the Cash
Dividend Amount and the payments to be made to or on behalf of the
Purchaser or any of its Affiliates (in aggregate amounts previously
described to the Seller) in connection with the Closing shall be excluded
in calculating Net Worth.
(b) Disputes. (i) Subject to clause (ii) of this Section 2.04(b),
the Closing Balance Sheet delivered by the Seller to the Purchaser shall
be deemed to be and shall be final, binding and conclusive on the parties
hereto.
<PAGE>
14
(ii) The Purchaser may dispute any amounts relevant to Section
2.04(c) reflected on the Closing Balance Sheet, but only on the
basis that the amounts reflected on the Closing Balance Sheet were
not arrived at in conformity with U.S. GAAP applied on a basis
consistent with the preparation of the 1997 Balance Sheet; provided,
however, that the Purchaser shall have notified the Seller and the
Seller's Accountants in writing of each disputed item, specifying
the amount thereof in dispute and setting forth, in reasonable
detail, the basis for such dispute, within 30 Business Days of the
Seller's delivery of the Closing Balance Sheet to the Purchaser. In
the event of such a dispute, the Seller's Accountants, together with
the Seller, and the Purchaser's Accountants, together with the
Purchaser, shall attempt to reconcile their differences, and any
resolution by them as to any disputed amounts shall be final,
binding and conclusive on the parties hereto. If the Seller's
Accountants, together with the Seller, and the Purchaser's
Accountants, together with the Purchaser, are unable to resolve any
such dispute within 50 Business Days of the Seller's delivery of the
Closing Balance Sheet to the Purchaser and the items remaining in
dispute (excluding any item relating to Indebtedness or cash) are
such that the Cash Dividend Amount would be adjusted by at least
$250,000, the Seller's Accountants and the Purchaser's Accountants
shall submit the items remaining in dispute for resolution to Arthur
Andersen & Co. (or, if such firm shall decline to act or is not, at
the time of such submission, independent of the Seller, the Company
and the Purchaser, to another independent accounting firm of
international reputation mutually acceptable to the Seller and the
Purchaser) (either Arthur Andersen & Co. or such other accounting
firm being referred to herein as the "Independent Accounting Firm"),
which shall, within 40 Business Days after such submission,
determine and report to the Seller and the Purchaser upon such
remaining disputed items, and such report shall be final, binding
and conclusive on the Seller and the Purchaser. The fees and
disbursements of the Independent Accounting Firm shall be allocated
between the Seller and the Purchaser in the same proportion that the
aggregate amount of such remaining disputed items so submitted to
the Independent Accounting Firm that is unsuccessfully disputed by
each such party (as finally determined by the Independent Accounting
Firm) bears to the total amount of such remaining disputed items so
submitted. Any amounts payable pursuant to this Section 2.04 which
are not in dispute shall be paid in accordance with paragraph (c) of
this Section 2.04, notwithstanding that other amounts may remain in
dispute.
(iii) In acting under this Agreement, the Independent
Accounting Firm shall be entitled to the privileges and immunities
of arbitrators.
(c) Cash Dividend Amount Adjustment. The Closing Balance Sheet shall
be deemed final for the purposes of this Section 2.04(c) upon the earliest
of (A) the failure
<PAGE>
15
of the Purchaser to notify the Seller of a dispute within 30 Business Days
of the Seller's delivery of the Closing Balance Sheet to the Purchaser,
(B) the resolution of all disputes, pursuant to Section 2.04(b)(ii), by
the Purchaser's Accountants and the Seller's Accountants and (C) the
resolution of all disputes, pursuant to Section 2.04(b)(ii), by the
Independent Accounting Firm. Within three Business Days of the Closing
Balance Sheet being deemed final, a Cash Dividend Amount adjustment or
adjustments shall be made as follows:
(i) in the event that the amount of Net Worth calculated with
respect to the Closing Balance Sheet exceeds the amount of Net Worth
calculated with respect to the 1997 Balance Sheet, then the Cash
Dividend Amount shall be adjusted upward in an amount equal to such
excess;
(ii) in the event that the amount of Net Worth calculated with
respect to the Closing Balance Sheet is less than the amount of Net
Worth calculated with respect to the 1997 Balance Sheet, then the
Cash Dividend Amount shall be adjusted downward in an amount equal
to such deficiency;
(iii) in the event that the amount of cash and cash
equivalents reflected on the Closing Balance Sheet is greater than
zero, then the Cash Dividend Amount (as adjusted pursuant to clause
(i) or (ii) of this Section 2.04(c)) shall be adjusted upward in an
amount equal to such excess;
(iv) in the event that the amount of Indebtedness reflected on
the Closing Balance Sheet is greater than $10,300,000, then the Cash
Dividend Amount (as adjusted pursuant to clause (i), (ii) or (iii)
of this Section 2.04(c)) shall be adjusted downward in an amount
equal to such excess; and
(v) in the event that the amount of Indebtedness reflected in
the Closing Balance Sheet is less than $10,300,000, then the Cash
Dividend Amount (as adjusted pursuant to clause (i), (ii) or (iii)
of this Section (c)) shall be adjusted upward in an amount equal to
such difference.
The payments to be made by the Seller or the Company pursuant to
this Section 2.04(c) shall be made after giving effect to all the
adjustments set forth in clauses (i) or (ii) and (iii) or (iv) or (v)
above, and, in the case of payments to be made by the Seller, shall be
made, within three Business Days of the determination of any such
adjustment or adjustments, to the Company by wire transfer in immediately
available funds to an account or accounts designated by the Company, and,
in the case of payments to be made by the Company, shall be made, within
three Business Days of the determination of any such adjustment or
adjustments, to the Seller by wire transfer in immediately available funds
to an account or accounts designated by the Seller.
<PAGE>
16
(d) Interest. Any payment required to be made by the Seller or the
Company pursuant to Section 2.04(c) shall bear interest from the Closing
Date through the date of payment on the basis of the average daily rate of
interest publicly announced by Citibank, N.A. in New York, New York from
time to time as its base rate from the Closing Date to the date of such
payment.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Purchaser as follows:
SECTION 3.01. Incorporation of the Seller and Authority of the
Seller and the Company. The Seller is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of New York and has
all necessary corporate power and authority to enter into this Agreement, to
carry out its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by each of the
Seller and the Company, the performance by each of the Seller and the Company of
its obligations hereunder and the consummation by each of the Seller and the
Company of the transactions contemplated hereby have been duly authorized by all
requisite corporate action on the part of the Seller and the Company,
respectively. This Agreement has been duly executed and delivered by the Seller
and the Company, and (assuming due authorization, execution and delivery by the
Purchaser) constitutes a legal, valid and binding obligation of each of the
Seller and the Company enforceable against each of them in accordance with its
terms.
SECTION 3.02. Organization, Authority and Qualification of the
Company. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and has the corporate
power and authority to own, operate or lease the properties and assets now
owned, operated or leased by it. The Company is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction in
which the character of the properties owned or leased by it or the operation of
its business makes such qualification necessary except for such failures which,
individually or in the aggregate, would not have a Material Adverse Effect.
SECTION 3.03. Capital Stock of the Company. There are no options,
warrants, convertible securities or other rights, agreements, arrangements or
commitments relating to the capital stock of, or other equity interest in, the
Company obligating the Seller or the Company to issue, sell, transfer or
otherwise dispose of or sell any shares of capital stock of, or other equity
interest in, the Company. The Company has issued and outstanding 1,000 Shares,
which constitute all the authorized, issued and outstanding shares of capital
stock of
<PAGE>
17
the Company and are owned of record and beneficially solely by the Seller. The
Shares have been duly authorized and validly issued and are fully paid and
nonassessable and were not issued in violation of any preemptive rights. The
Seller owns the Shares free and clear of all pledges, security interests and all
other liens, encumbrances and adverse claims. (collectively, "Encumbrances").
Upon consummation of the transactions contemplated by Section 2.03(c), the
Purchaser will acquire valid title to the Acquired Shares free and clear of all
Encumbrances, other than any Encumbrances imposed in connection with the
Financing. There are no voting trusts, stockholder or registration rights
agreements, proxies or other agreements or understandings in effect with respect
to the voting or transfer of any of the Shares.
SECTION 3.04. Subsidiaries. Section 3.04 of the Disclosure Schedule
sets forth, with respect to each Subsidiary, its type of entity, the
jurisdiction of its incorporation or organization, its authorized capital stock,
partnership capital or equivalent, the number and type of its issued and
outstanding shares of capital stock, partnership interests or similar ownership
interests and the Company's current ownership of such shares, partnership
interests or similar ownership interests. Except as set forth in Section 3.04 of
the Disclosure Schedule, each of the outstanding shares of capital stock of each
of the Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable and all such shares are owned by the Company or another wholly
owned Subsidiary and are owned free and clear of all Encumbrances of any nature
whatsoever. Except as set forth in Section 3.04 of the Disclosure Schedule, the
Company and the Subsidiaries do not own any equity interest in any Person. As of
the date of this Agreement, the Company owns shares of capital stock of Foreign
Sales Corporation which, prior to the Closing Date, the Company shall transfer
to the Seller, as provided in Section 5.15. Each Subsidiary is duly organized
and validly existing under the laws of its respective jurisdiction of
incorporation and has the requisite power and authority to own, operate or lease
the properties and assets owned, operated or leased by such Subsidiary and to
carry on its business in all material respects as currently conducted by such
Subsidiary, except for such failures which, individually or in the aggregate,
would not have a Material Adverse Effect.
SECTION 3.05. No Conflict. Assuming that all consents, approvals,
authorizations and other actions described in Section 3.06 have been obtained
and all filings and notifications listed in Section 3.06 of the Disclosure
Schedule have been made, and except as may result from any facts or
circumstances relating solely to the Purchaser or as described in Section 3.05
of the Disclosure Schedule, the execution, delivery and performance of this
Agreement by the Seller and the Company do not and will not (a) violate or
conflict in any material respect with the Certificate of Incorporation or
By-laws of the Seller or the Company, (b) conflict with or violate any law,
rule, regulation order, writ, judgment, injunction, decree, determination or
award applicable to the Seller, the Company, the Business or any Subsidiary, or
(c) result in any breach of, constitute a default (or event which with the
giving of notice or lapse of time, or both, would become a default) under, or
give to others any rights of
<PAGE>
18
termination, amendment, acceleration or cancellation of, or, except for liens or
other encumbrances imposed in connection with the Financing or the Stockholders
Agreement and applicable securities laws, result in the loss of any benefit to
the Company or any Subsidiary or the creation of any lien or other encumbrance
on the Shares or on any of the assets or properties of the Company or any
Subsidiary pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument to which the
Seller, the Company or any Subsidiary is a party or by which any of such assets
or properties is bound or affected, except, in the case of clause (b) or (c), as
would not, individually or in the aggregate, have a Material Adverse Effect or
prevent or materially delay the consummation by the Seller or the Company of the
transactions contemplated hereby.
SECTION 3.06. Consents and Approvals. The execution, delivery and
performance of this Agreement by the Seller and the Company does not and will
not require any consent, approval, authorization or other order of, action by,
filing with or notification to, any Governmental Authority, except (a) as
described in Section 3.06 of the Disclosure Schedule, (b) the notification and
waiting period requirements of the HSR Act, (c) where failure to obtain such
consent, approval, authorization or action, or to make such filing or
notification, individually or in the aggregate, would not prevent or materially
delay the consummation by the Seller or the Company of the transactions
contemplated by this Agreement and would not have a Material Adverse Effect and
(d) as may be necessary as a result of any facts or circumstances relating
solely to the Purchaser.
SECTION 3.07. Financial Information; Inventory; Receivables. (a)
Financial Information. The Seller has delivered to the Purchaser true and
correct copies of the audited consolidated balance sheets of the Company and the
Subsidiaries as of December 31, 1997, 1996 and 1995 and the related audited
consolidated statements of income and cash flows (all such financial statements
being the "Financial Statements"). The Financial Statements present fairly in
all material respects the consolidated financial condition and results of
operations of the Company and the Subsidiaries as of such dates or for the
periods covered thereby and have been prepared in accordance with U.S. GAAP
applied on a basis consistent with the past practices of the Seller and the
Company.
(b) Inventory. All of the inventories of the Company and the
Subsidiaries are suitable, usable or salable in the ordinary course of business
for the purposes for which intended, except to the extent of normal
obsolescence, and except to the extent written down to realizable market value
prior to or as of the Closing Date or for which adequate reserves have been
provided in accordance with U.S. GAAP on the 1997 Balance Sheet consistent with
past practice.
(c) Receivables. All accounts and notes receivable of the Company
and the Subsidiaries reflected in the 1997 Balance Sheet or arising since the
1997 Balance Sheet Date have arisen in the ordinary course of business of the
Company and the Subsidiaries from bona
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19
fide transactions and represent valid obligations due to the operations of the
Company or the Subsidiaries in accordance with their terms, subject to the
reserve for bad debt set forth in the 1997 Balance Sheet.
SECTION 3.08. Absence of Undisclosed Liabilities. Except with
respect to the matters addressed in Section 3.16 or Article VII (which shall be
governed solely by the terms of such Section 3.16 or Article VII), there are no
Liabilities of the Company or any Subsidiary, other than Liabilities (i)
reflected or reserved against on the 1997 Balance Sheet, (ii) disclosed in
Section 3.08(a) of the Disclosure Schedule or (iii) incurred since the 1997
Balance Sheet Date in the ordinary course of business consistent with past
practice, and which do not, individually or in the aggregate, have a Material
Adverse Effect.
SECTION 3.09. Absence of Certain Changes or Events. Since the 1997
Balance Sheet Date, except as disclosed in Section 3.09 of the Disclosure
Schedule, the Business has been conducted in the ordinary course consistent with
past practice. As amplification and not limitation of the foregoing, since the
1997 Balance Sheet Date, and except as set forth in Section 3.09 of the
Disclosure Schedule or as contemplated by this Agreement, there has not been:
(a) any damage, destruction or loss to any of the assets or
properties of the Company or any Subsidiary which, individually or in the
aggregate, has had a Material Adverse Effect;
(b) any security interests, pledges, liens or other encumbrances
created on any properties or assets (whether tangible or intangible) of
the Company or any Subsidiary, other than (i) Permitted Encumbrances, (ii)
security interests, pledges, liens and other encumbrances that will be
released at or prior to the Closing and (iii) security interests, pledges,
liens or other encumbrances on assets having a value not exceeding
$500,000 in the aggregate;
(c) except for sales of inventory and obsolete fixed assets and the
transfer of cash in payment of trade payables, in each case, in the
ordinary course of business, any sale, assignment, transfer, lease or
other disposition or agreement to sell, assign, transfer, lease or
otherwise dispose of any of the fixed assets of the Company or any
Subsidiary having an aggregate value exceeding $500,000;
(d) any acquisition (by merger, consolidation or acquisition of
stock or assets) by the Company or any Subsidiary of any corporation,
partnership or other business organization or division thereof;
(e) except in the ordinary course of business, (i) any incurrence by
the Company or any Subsidiary of any indebtedness for borrowed money, (ii)
any issuance
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20
by the Company or any Subsidiary of any debt securities or (iii) any
assumption, granting, guarantee or endorsement or other accommodation or
arrangement making the Company or any Subsidiary responsible for the
Liabilities of any Person (other than the Company or another Subsidiary,
as the case may be), in the case of (i), (ii) and (iii) above, having an
aggregate value exceeding $500,000;
(f) any material change in any method of accounting or accounting
practice used by the Company or any Subsidiary, other than such changes
required by U.S.
GAAP;
(g) any event that, individually or together with all other events,
has had a Material Adverse Effect;
(h) any action which, if it had been taken after the date hereof,
would have required the consent of the Purchaser under Section 5.01(b)
hereof; or
(i) any agreement to take any actions specified in this Section
3.09.
SECTION 3.10. Absence of Litigation. Except as set forth in Section
3.10 of the Disclosure Schedule (a) there are no material claims, actions,
proceedings or investigations pending or, to the knowledge of the Seller,
threatened against or involving the Seller, the Company or any Subsidiary or any
of the assets or properties of the Company or any Subsidiary, before any
Governmental Authority and (b) the Company, the Subsidiaries and their
respective assets and properties are not subject to any Governmental Order. The
matters set forth in Section 3.10 of the Disclosure Schedule, individually or in
the aggregate, have not had a Material Adverse Effect.
SECTION 3.11. Compliance with Laws. Neither the Company nor the
Subsidiaries are in violation of any law, rule, regulation, order, judgment or
decree applicable to the Company or any Subsidiary or by which any of the
properties of the Company or any Subsidiary is bound, except (a) as set forth in
Section 3.11 of the Disclosure Schedule and (b) where such violations,
individually or in the aggregate, would not have a Material Adverse Effect.
Except as set forth in Section 3.11 of the Disclosure Schedule, the Company and
any Subsidiaries have not, in the last three years, received any written
communication from any Governmental Authority that alleges that the Company or
such Subsidiary is not in compliance in any material respect with any material
law, rule, regulation, ordinance, order, judgment or decree that has not been
resolved.
SECTION 3.12. Licenses and Permits. Except as set forth in Section
3.12 of the Disclosure Schedule, the Company and the Subsidiaries have all
governmental licenses, permits and authorizations necessary to conduct the
Business, except for such governmental licenses, permits and authorizations the
absence of which, individually or in the aggregate,
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21
would not have a Material Adverse Effect. None of the Seller, the Company or any
Subsidiary has, within the last two years, received written notice or otherwise
has knowledge that any Governmental Authority intends to cancel or terminate any
material license, permit, certificate or other authorization required to carry
on the Business as currently conducted.
SECTION 3.13. Real Property; Tangible Property. (a) Section 3.13(a)
of the Disclosure Schedule sets forth a list of all the Owned Real Property. The
Company and the Subsidiaries have good, valid, marketable and insurable title in
fee simple to the Owned Real Property, free and clear of all liens, security
interests and other encumbrances, except (i) as disclosed in Section 3.13(a) of
the Disclosure Schedule and (ii) Permitted Encumbrances.
(b) Section 3.13(b) of the Disclosure Schedule sets forth a list of
all Leased Real Property. Except as described in Section 3.13(b) of the
Disclosure Schedule, the Seller has made available to the Purchaser true and
complete copies of all leases and subleases relating to the Leased Real
Property. The Company and the Subsidiaries have good marketable and insurable
leasehold estates in the Leased Real Property, free and clear of all liens,
security interests and other encumbrances, except Permitted Encumbrances. Except
as disclosed in Section 3.13(b) of the Disclosure Schedule or as would not,
individually or in the aggregate, have a Material Adverse Effect, each such
lease or sublease is legal, valid, binding and enforceable and in full force and
effect, and will not cease to be legal, valid, binding and enforceable and in
full force and effect as a result of the consummation of the transactions
contemplated by this Agreement. To the knowledge of the Seller, no party to any
such lease or sublease is in material breach or default thereunder.
(c) Except as set forth on Section 3.13(c) of the Disclosure
Schedule, (i) none of the Seller, the Company or any Subsidiary has, within the
last two years, received written notice of any pending or threatened
condemnation or eminent domain proceedings or their local equivalent that would
materially affect the Owned Real Property or the Leased Real Property, (ii) the
Owned Real Property and Leased Real Property, the use and occupancy thereof by
the Company and the Subsidiaries, and the conduct of the Business thereon and
therein does not violate in any material respect any deed restrictions,
applicable law consisting of building codes, zoning, subdivision or other land
use or similar laws the violation of which would materially adversely affect the
use, value or occupancy of any such property or the conduct of the Business
thereon, (iii) none of the Seller, the Company or any Subsidiary has, within the
last two years, received written notice of a material violation of the
restrictions or laws described in the foregoing clause (ii), and (iv) none of
the structures or improvements on any of the Leased Real Property or Owned Real
Property encroaches upon real property of another person, and no structure or
improvement of another person encroaches upon any of the Leased Real Property or
Owned Real Property, except for any such encroachment that would not materially
adversely affect the use, value or occupancy of any such property.
<PAGE>
22
(d) Except as set forth in Section 3.13(d) of the Disclosure
Schedule, the buildings, facilities, machinery, equipment, furniture, leasehold
and their improvement, fixtures, vehicles, structures, and related capitalized
items and other tangible property relating to the Business (the "Tangible
Property") are in good operating condition and repair, free (in the case of
buildings or structures located on the Owned Real Property or Leased Real
Property) of any material structural or engineering defects, and, subject to
normal wear and tear and continued repair and replacement in accordance with
past practice, are suitable for their intended use. During the past five years
there has not been any significant interruption of the operations of the
Business due to inadequate maintenance of the Tangible Property.
SECTION 3.14. Employee Benefit and Labor Matters.
(a) Definitions. For purposes of this Agreement, the following terms
shall have the meanings set forth below:
"Benefit Plan" means each plan, program, policy payroll practice,
contract, agreement or other arrangement providing for compensation,
retirement benefits, severance, termination pay, performance awards, stock
or stock-related awards, fringe benefits or other employee benefits of any
kind, whether formal or informal, funded or unfunded, written or oral and
whether or not legally binding, including, without limitation, each
"employee benefit plan", within the meaning of Section 3(3) of ERISA and
each "multi-employer plan" within the meaning of Section 3(37) of
4001(a)(3) of ERISA.
"Company Benefit Plan" means (i) the Revere Plan and the Revere
PostRetirement Plan (as such terms are defined in Article VI), (ii) any
Benefit Plan sponsored, maintained or contributed to exclusively for the
benefit of any current or former employee of any Foreign Subsidiary, (iii)
each other Benefit Plan (other than an Employee Agreement) which is
sponsored, maintained, contributed to, or required to be sponsored,
maintained or contributed to, by the Company or any Subsidiary exclusively
for the benefit of any Employee and which, either individually or in the
aggregate, is material to the business of the Company or any Subsidiary.
"Department" means the U.S. Department of Labor.
"Employee" means each current, former or retired employee, officer,
consultant, independent contractor, agent or director of the Company or
any Subsidiary.
"Employee Agreement" means each management, employment, severance,
consulting, non-compete, confidentiality, or similar agreement or contract
between the
<PAGE>
23
Seller, the Company or any Subsidiary or ERISA Affiliate and any Employee
pursuant to which the Company or any Subsidiary has or may have any
material liability, contingent or otherwise.
"ERISA Affiliate" means each business or entity which is or was a
member of a "controlled group of corporations", under "common control" or
an "affiliated service group" with the Seller within the meaning of
Section 414(b), (c) or (m) of the Code, or required to be aggregated with
the Company under Section 414(o) of the Code or is under "common control"
with the Company, within the meaning of Section 4001(a)(14) of ERISA.
"Multi-Employer Plan" means each Company Benefit Plan which is
"multi-employer plan" within the meaning of Section 3(37) or 4001(a)(3) of
ERISA.
"New Company Plan" means the New Defined Benefit Plan, the New
401(k) Plan and any other Benefit Plan that the Purchaser is required to
establish and maintain or cause to be established and maintained pursuant
to Article VI of this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plan" means each Seller Benefit Plan or Company Benefit
Plan (other than a Multi-Employer Plan) which is an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA.
"Seller Benefit Plan" means each Benefit Plan in which Employees
participate that is sponsored, maintained or contributed to, or required
to be sponsored, maintained or contributed to, by the Seller or any ERISA
Affiliate, other than a Company Benefit Plan.
"Welfare Plan" means each Company Benefit Plan which is an "employee
welfare benefit plan" within the meaning of Section 3(1) of ERISA.
(b) Disclosure Schedule. Section 3.14(b) of the Disclosure Schedule
contains a true and complete list of each Seller Benefit Plan, Company Benefit
Plan and Employee Agreement. Except as set forth on Section 3.14(b) of the
Disclosure Schedule, neither the Company, the Seller, any Subsidiary nor any
ERISA Affiliate has any plan or commitment, whether legally binding or not, to
establish any new Seller Benefit Plan or Company Benefit Plan, to enter into any
Employee Agreement or to modify or to terminate any Seller Benefit Plan, Company
Benefit Plan or Employee Agreement (except to the extent required by law or to
conform any such Seller Benefit Plan, Company Benefit Plan or Employee Agreement
to the requirements of any applicable law, in each case as previously
<PAGE>
24
disclosed to Buyer, or as required by this Agreement), nor has any intention to
do any of the foregoing been communicated to Employees.
(c) Documents. The Seller has made available to the Purchaser, and
shall deliver to the Purchaser as soon as practicable following the date of this
Agreement: (i) current, accurate and complete copies of all documents embodying
(and all material documents relating to) each Seller Benefit Plan, Company
Benefit Plan and Employee Agreement, including all amendments thereto, and all
written interpretations thereof and trust or funding agreements with respect
thereto; (ii) the two most recent annual actuarial valuations, if any, prepared
for each Seller Benefit Plan or Company Benefit Plan; (iii) the two more recent
annual reports (Series 5500 and all schedules thereto), if any, required under
ERISA in connection with each Seller Benefit Plan or Company Benefit Plan or
related trust; (iv) a statement of alternative form of compliance pursuant to
Department of Labor Regulation ss.2520.104-23, if any, filed for each Company
Benefit Plan which is a "Pension Benefit Plan" for a select group of management
of highly compensated employees; (v) the most recent determination letter
received from the IRS, if any, for each Company Benefit Plan and related trust
which is intended to satisfy the requirements of Section 401(a) of the Code;
(vi) if the Seller Benefit Plan or Company Benefit Plan is funded, the most
recent annual and periodic accounting of Seller Benefit Plan or Company Benefit
Plan assets upon the Purchaser's request; (vii) the most recent summary plan
description together with the most recent summary of material modifications, if
any, required under ERISA with respect to each Company Benefit Plan; and (viii)
all material written communications to any Employee or Employees relating to any
Seller Benefit Plan or Company Benefit Plan.
(d) Compliance. Except as set forth in Section 3.14(d) of the
Disclosure Schedule: (i) the Company, the Seller, each Subsidiary and each ERISA
Affiliate have performed all material obligations required to be performed by
them under each Company Benefit Plan and Employee Agreement and all laws and
regulations applicable thereto; (ii) each Company Benefit Plan intended to
qualify under Section 401 of the Code (and each Corning 401(k) Plan, as defined
in Section 6.02(b)) is so qualified and a determination letter has been issued
by the IRS to the effect that each such Company Benefit Plan (and each Corning
401(k) Plan) is so qualified and no circumstances exist which could reasonably
be expected to adversely affect this qualification; (iii) no "prohibited
transaction", within the meaning of Section 4975 of the Code or Section 406 of
ERISA, has occurred with respect to any Company Benefit Plan which could result
in any material liability to the Company or any Subsidiary; (iv) there are no
actions, proceedings, arbitrations, suits or claims pending, or to the knowledge
of the Company, the Seller, any Subsidiary or any ERISA Affiliate, threatened or
anticipated (other than routine claims for benefits) against the Company, the
Seller, any Subsidiary or any ERISA Affiliate or any administrator, trustee or
other fiduciary of any Company Benefit Plan with respect to any Company Benefit
Plan or Employee Agreement, or against any Company Benefit Plan or against the
assets of any Company Benefit Plan which
<PAGE>
25
could result in any material liability to the Company or any Subsidiary; (v) no
event or transaction has occurred with respect to any Company Benefit Plan that
would result in the imposition of any material tax under Chapter 43 of Subtitle
D of the Code; (vi) each Company Benefit Plan can be amended, terminated or
otherwise discontinued without material liability to the Company, the Seller,
any Subsidiary or any ERISA Affiliate (other than liability for benefits accrued
as of the date of such amendment, termination or discontinuance), provided,
however, that such amendment, termination or discontinuance has been effected in
accordance with the procedures required under such plan; and (vii) no Company
Benefit Plan is under audit or investigation by the IRS, the Department or the
PBGC, and to the knowledge of the Company, the Seller, any Subsidiary or any
ERISA Affiliate no such audit or investigation is pending or threatened.
(e) Pension Plans. Except as set forth in Section 3.14(e) of the
Disclosure Schedule: (i) no steps have been taken to terminate any Pension Plan
now maintained or contributed to, no termination of any Pension Plan has
occurred pursuant to which all liabilities have not been satisfied in full, no
liability under Title IV of ERISA has been incurred by the Company, the Seller,
any Subsidiary or any ERISA Affiliate (whether or not related to a Pension Plan)
which has not been satisfied in full, and no event has occurred and no condition
exists that could reasonably be expected to result in the Company, the Seller,
Subsidiary or any ERISA Affiliate incurring a material liability under Title IV
of ERISA or could constitute grounds for terminating any Pension Plan; (ii) no
proceeding has been initiated by the PBGC to terminate any Pension Plan or to
appoint a trustee to administer any Pension Plan; (iii) each Pension Plan which
is subject to Part 3 of Subtitle B of Title I of ERISA or Section 412 of the
Code, has been maintained in compliance with the minimum funding standards of
ERISA and the Code and no such Pension Plan has incurred any "accumulated
funding deficiency", as defined in Section 412 of the Code and Section 302 of
ERISA, whether or not waived; (iv) neither the Company, the Seller, any
Subsidiary nor any ERISA Affiliate has sought nor received a waiver of its
funding requirements with respect to any Pension Plan and all contributions
payable with respect to each Pension Plan have been timely made; and (v) no
reportable event, within the meaning of Section 4043 of ERISA, and no event
described in Section 4062 or 4063 or ERISA, has occurred with respect to any
Pension Plan. With respect to each of the Revere Plan and the Corning Canada
Inc. Pension Plan for Hourly Employees (the "Canadian Plan"), the projected
benefit obligations (as determined in accordance with Statement of Financial
Accounting Standards No. 87 using the assumptions employed by the Seller in its
most recent audited financial statements) under such plan do not exceed the
market value of such plan's assets, and with respect to the Canadian Plan, such
plan's liabilities, determined on a "solvency" basis, do not exceed the fair
market value of such plan's assets by more than Can. $100,000.
(f) Multi-Employer Plans. None of the Seller, the Company, any
Subsidiary or any ERISA Affiliate have any liability under any Multi-Employer
Plan.
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26
(g) No Post-Employment Obligations. Except as set forth in Section
3.14(g) of the Disclosure Schedule, none of the Seller, the Company or any
Subsidiary (i) maintains or contributes to any Seller Benefit Plan or Company
Benefit Plan which provides, or has any liability to provide, life insurance,
medical, severance or other employee welfare benefits to any Employee upon his
or her retirement or termination of employment, except as may be required by
Section 4980B of the Code or (ii) to the best of the Seller's knowledge, and
except as would not result in a material liability to the Company, has ever
represented, promised or contracted (whether in oral or written form) to any
Employee (either individually or to Employees as a group) that such Employee(s)
would be provided with life insurance, medical, severance or other employee
welfare benefits upon their retirement or termination of employment, except to
the extent required by Section 4980B of the Code.
(h) Effect of Transaction. Except as set forth in Section 3.14(h) of
the Disclosure Schedule or as otherwise may be provided in Sections 6.03 and
6.04 of this Agreement, the execution of, and performance of the transactions
contemplated in, this Agreement will not (either alone or upon the occurrence of
any additional or subsequent events) (i) constitute an event under any Company
Benefit Plan, Employee Agreement, trust or loan that will or may result in any
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee or (ii) result in the triggering or
imposition of any restrictions or limitations on the right of the Company or the
Purchaser to amend or terminate any Company Benefit Plan. No payment or benefit
which will or may be made by the Company, the Seller, any Subsidiary, the
Purchaser or any of their respective affiliates with respect to any Employee
will be characterized as an "excess parachute payment", within the meaning of
Section 280G(b)(1) of the Code.
(i) 501(c)(9) Trust. Except as set forth in Section 3.14(i) of the
Disclosure Schedule, no Company Benefit Plan nor Employee Agreement is funded by
a trust described in Section 501(c)(9) of the Code.
(j) Welfare Plan Funding. With respect to each Welfare Plan, all
claims incurred (including claims incurred but not reported) by Employees
thereunder for which the Company is, or will become, liable are (i) insured
pursuant to a contract of insurance whereby the insurance company bears any risk
of loss with respect to such claims; (ii) covered under a contract with a health
maintenance organization (an "HMO") pursuant to which the HMO bears the
liability for such claims or (iii) reflected as a liability or accrued for on
the Closing Balance Sheet.
(k) Controlled Group Liability. The Company and the Subsidiaries
have no liability, contingent or otherwise, to, or with respect to any Benefit
Plan (other than the Company Benefit Plans and Employee Agreements which are
listed on Schedule 3.14(b))
<PAGE>
27
which is now, or within the preceding five calendar years has been, sponsored,
maintained, contributed to, or required to be sponsored, maintained or
contributed to, by the Seller, the Company, any Subsidiary or any ERISA
Affiliate.
SECTION 3.15. Labor Matters. Section 3.15 of the Disclosure Schedule
lists all labor, collective bargaining and other agreements to which the
Company, the Seller or any Subsidiary is a party with any labor organization,
group or association with respect to Employees, and copies of such agreements
have been made available to the Purchaser. Except as set forth in Section 3.15
of the Disclosure Schedule, the Company, the Seller and each Subsidiary is in
compliance in all material respects with all applicable material laws, rules or
regulations respecting employment practices, terms and conditions of employment
and wages and hours with respect to any Employee. Except as set forth in Section
3.15 of the Disclosure Schedule there is no, and in the past three years there
has not been any, (a) unfair labor practice charge within the meaning of the
National Labor Relations Act and the Railway Labor Act or complaint against the
Company, the Seller or any Subsidiary pending before the National Labor
Relations Board or any comparable state agency relating to labor matters
involving any Employees and (b) labor strike, labor dispute or material
disturbance, material grievance, arbitration, material administrative
proceeding, material litigation or work stoppage pending or, to the knowledge of
the Seller, threatened against the Company, the Seller or any Subsidiary
relating to labor matters.
SECTION 3.16. Taxes. Except as set forth in Section 3.16 of the
Disclosure Schedule, (a) the Company and the Subsidiaries and each affiliated,
consolidated, combined or unitary group which included or includes the Company
or any Subsidiary have timely filed, in accordance with all applicable laws and
taking into account any extensions, all Income Tax returns required to be filed
by or on behalf of the Company and the Subsidiaries with respect to material
Income Taxes and have paid all Income Taxes due and payable by them (whether or
not shown as due on such returns) and all such Tax Returns are true and correct
in all material respects, (b) the Company and the Subsidiaries have timely
filed, in accordance with all applicable laws and taking into account any
extensions, all other material Tax returns required to be filed by them for any
period ending on or before the Closing Date, taking into account any extension
of time to file, and all such Tax returns of the Company and the Subsidiaries
were true, correct and complete in all material respects and all material Taxes
shown to be payable on such Tax returns of the Company and any Subsidiary (other
than Taxes being contested in good faith and for which the Company has
adequately reserved for in accordance with U.S. GAAP, other than deferred Taxes
that reflect the difference between book and tax basis in assets and
liabilities) have been paid, (c) no material adjustments relating to Taxes of
the Company or the Subsidiaries have been raised in writing by any governmental
authority during any presently pending audit or examination, (d) the Company and
its Subsidiaries are not presently being audited by any taxing authority with
respect to a material amount of Taxes, (e) no adjustment relating to the timing
of income, deductions, losses or
<PAGE>
28
credits of the Company or any Subsidiary has been made in writing by any taxing
authority in any completed audit or examination which, by application of the
result of such adjustment, could reasonably be expected to result in a material
Tax deficiency for any subsequent period, (f) no waivers of statutes of
limitation with respect to the material Tax Returns of the Company or the
Subsidiaries have been given by or requested in writing from the Company or the
Subsidiaries, (g) there are no material liens for Taxes (other than for Taxes
not yet due and payable) on any assets of the Company or any of the
Subsidiaries, (h) neither the Company nor any of the Subsidiaries has filed a
consent pursuant to the collapsible corporation provisions of Section 341(f) of
the Code (or any corresponding provision of state or local law) or agreed to
have Section 341(f)(2) of the Code (or any corresponding provisions of state or
local law) apply to any disposition of any asset owned by the Company or any of
the Subsidiaries, as the case may be, (i) neither the Company nor any of the
Subsidiaries has agreed to make any material adjustment under Section 481(a) of
the Code by reason of a change in accounting method or otherwise, and (j) no
property owned by the Company or any of the Subsidiaries (A) is property
required to be treated as being owned by another person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as amended
and in effect immediately prior to the enactment of the Tax Reform Act of 1986;
(B) constitutes "tax exempt use property" within the meaning of Section
168(h)(1) of the Code; or (C) is tax exempt bond financed property within the
meaning of Section 168(g) of the Code.
SECTION 3.17. Environmental, Health and Safety. Except as set forth
in Section 3.17 of the Disclosure Schedule or except as would not, individually
or in the aggregate, have a Material Adverse Effect: (a) the Company and the
Subsidiaries currently hold all the permits, licenses and approvals of
Governmental Authorities and agencies necessary for the current use, occupancy
or operation of the Business and required by any Environmental Law
("Environmental Permits") and are in compliance with all such Environmental
Permits; (b) the Company and the Subsidiaries are, and for the past five years
have been, in compliance with all applicable Environmental Laws; (c) except as
permitted by and as would not result in any liability under applicable
Environmental Laws, there are no underground or aboveground storage tanks or any
surface impoundments, septic tanks, pits, sumps or lagoons in which Hazardous
Materials are being treated, stored or disposed on any of the Owned Real
Property or Leased Real Property or, with respect to the period of the Company's
or any Subsidiary's ownership, tenancy or operation of such property, on any
real property formerly owned, leased or operated by the Company or any
Subsidiary; (d) there is no asbestos or asbestos-containing material on any of
the Owned Real Property or Leased Real Property, except to the extent not
prohibited by, and as would not result in any liability under, applicable
Environmental Laws; (e) neither the Seller, the Company nor any Subsidiary, nor
any Person for whom any of them is liable by operation of law, has released,
discharged or disposed of Hazardous Materials on any of the Owned Real Property
or Leased Real Property or on any real property formerly owned, leased or
operated by the Company or any Subsidiary; (f) neither the Seller, the Company
nor any Subsidiary is undertaking any
<PAGE>
29
investigation or assessment or remedial or response action relating to any
release, discharge or disposal of or contamination with Hazardous Materials at
any site, location or operation, either voluntarily or pursuant to the order of
any Governmental Authority or the requirements of any Environmental Law; (g)
there are no past, pending or threatened in writing Environmental Claims against
the Company, any Subsidiary or any Real Property and, to the Seller's knowledge,
there are no facts that are reasonably expected to form the basis of any such
Environmental Claim; and (h) the Company has made available to the Purchaser
true and complete copies of all Environmental Reports in its possession.
As used in this Agreement, the following terms have the following
meanings:
"Environmental Claims" means any and all actions, suits, written
demands, written claims, complaints, liens, notices of noncompliance or
violation, notices of liability or potential liability, investigations, written
requests from Governmental Authorities, proceedings, consent orders or consent
agreements relating in any way to any Environmental Law, any Environmental
Permit or any Hazardous Material or arising from any actual or alleged injury or
threat of injury to health, safety or the environment.
"Environmental Law" means any foreign, federal, state or local law,
statute, ordinance, rule, regulation or common law, and any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, in each case in effect and as amended as of
the Closing Date, relating to, regulating or imposing liability or standards of
conduct concerning pollution or protection of the environment, health or safety
or the generation, use, handling, transportation, treatment, storage, disposal,
release or discharge of any Hazardous Materials.
"Environmental Report" means any written report, study, assessment,
audit or other similar document, in each case prepared during the last five
years, that addresses any issue of actual or potential noncompliance with, or
actual or potential liability under, any Environmental Law that may affect the
Company.
"Hazardous Materials" means any pollutants, contaminants, toxic or
hazardous substances, materials, wastes, constituents, compounds, chemicals,
including, without limitation, petroleum or any by-products thereof, any form of
natural gas, asbestos or asbestos-containing materials, polychlorinated
biphenyls ("PCBs") or PCB-containing equipment, radon or other radioactive
elements, carcinogenic or mutagenic agents, pesticides, explosives, flammables,
corrosives and urea formaldehyde foam insulation, in each case that form the
basis of liability, or are subject to regulation, under any Environmental Laws
as of the Closing Date.
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SECTION 3.18. Intellectual Property. Each representation and
warranty set forth in this Section 3.18 is qualified in its entirety by
reference to Section 3.18 of the Disclosure Schedule.
(a) Section 3.18 of the Disclosure Schedule contains true and
complete lists of (i) the Consumer Trademarks, (ii) the Consumer Patents, (iii)
the Seller's Retained Patents,(iv) registered Consumer Copyrights and (v) the
Consumer License Agreements.
(b) The Seller (or its Affiliates), the Company or a Subsidiary owns
or possesses adequate licenses or other valid rights to use, in each case, free
and clear of all liens, security interests, claims, or restrictions, all
material items of the Consumer Intellectual Property. There is no pending or, to
the knowledge of the Seller, threatened action, proceeding or Governmental
Order, or, to the knowledge of the Seller, assertion or claim, challenging,
limiting or canceling the validity or ownership of any Consumer Intellectual
Property. There are no pending or, to the knowledge of the Seller, threatened,
interferences, reexaminations, oppositions or other proceedings that could
threaten or diminish the scope, value, validity or enforceability of any
material Consumer Intellectual Property.
(c) There is no breach or violation of any Consumer License
Agreement by the Seller, the Company or any Subsidiary, or, to the knowledge of
the Seller, by any other party to such Consumer License Agreement. Each Consumer
License Agreement is a legal, valid, binding agreement of the Seller, the
Company or a Subsidiary, as the case may be. The consummation of the
transactions contemplated by this Agreement will not result in the termination
of, or any modification to, any Consumer License Agreement, except where the
foregoing would not, individually or in the aggregate, have a Material Adverse
Effect. The Company, the Seller or a Subsidiary, as the case may be, has taken
reasonable measures to maintain the confidentiality of the Consumer Know-How,
the value of which to the Company is dependent upon the maintenance of the
confidentiality thereof and has taken reasonable measures to police the Consumer
Intellectual Property for infringement by any third party. The Seller, the
Company and the Subsidiaries have not received notice of any, and to the
knowledge of the Seller, there are no, infringements or threatened infringements
of the Consumer Intellectual Property. None of the Seller, the Company or any
Subsidiary has licensed or otherwise permitted the use by any third party of any
Consumer Know-How on terms or in a manner that would have a Material Adverse
Effect. To the knowledge of the Seller, the conduct of the Business does not and
will not infringe upon or conflict with, in any way, any license, trademark,
trademark right, trade name, trade name right, patent, patent right, industrial
model, invention, service mark, copyright or other proprietary right of any
third party, except as would not, individually or in the aggregate, have a
Material Adverse Effect, and the Seller, the Company and the Subsidiaries have
not received any claim or notice from any third party to the contrary.
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(d) The Consumer Intellectual Property is all of the intellectual
property used in and necessary for the operation of the Business as currently
conducted.
SECTION 3.19. Material Contracts. (a) Section 3.19 of the Disclosure
Schedule lists the following contracts (the "Material Contracts") in effect as
of the date of this Agreement to which the Company or any Subsidiary is a party:
(i) any commitment, contract, agreement or purchase order that the
Seller reasonably anticipates will, in accordance with its terms, involve
aggregate payments or receipts by the Company or any Subsidiary of more
than $200,000 within any 12-month period following the date of this
Agreement and that is not cancelable by the Company or such Subsidiary
without liability within 60 days;
(ii) any lease of personal property involving any annual expense in
excess of $250,000 that is not cancelable without liability within 60
days;
(iii) any contracts or agreements containing covenants limiting the
freedom of the Company or any Subsidiary to engage in any line of business
or compete with any Person;
(iv) any license agreement, assignment or contract (whether as
licensor or licensee, assignor or assignee) relating to any Consumer
Intellectual Property other than immaterial licenses granted in the
ordinary course of business consistent with past practice;
(v) any contract that creates a joint venture or partnership;
(vi) any contract or agreement relating to clean-up, abatement or
other actions in connection with the remediation of any liabilities
relating to Hazardous Substances;
(vii) any contract with an Affiliate; and
(viii) any credit agreement, loan agreement, guarantee, note or
other evidence of Indebtedness or agreement providing for Indebtedness.
Except as set forth in Section 3.19 of the Disclosure Schedule,
correct and complete copies of all written contracts listed or required to be
listed in Section 3.19 of the Disclosure Schedule have been made available to
Purchaser before the date hereof.
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(b) Neither the Company nor any Subsidiary is (and, to the knowledge
of the Seller, no other party is) in breach or violation of, or default under,
any of the Material Contracts, where such breach or violation or default would
have a Material Adverse Effect. Each Material Contract is a valid agreement,
arrangement or commitment of the Company or Subsidiary that is a party thereto,
enforceable against the Company or such Subsidiary, as the case may be, in
accordance with its terms and, to the knowledge of the Seller, is a valid
agreement, arrangement or commitment of each other party thereto, enforceable
against such party in accordance with its terms, except in each case as would
not, individually or in the aggregate, have a Material Adverse Effect.
SECTION 3.20. Brokers. Except for Goldman, Sachs & Co. ("Goldman,
Sachs"), no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Seller. The Seller is solely responsible for the fees and expenses of
Goldman, Sachs.
SECTION 3.21. Entire Business. The assets of the Company and the
Subsidiaries (together with the rights to be licensed or made available to the
Company pursuant to agreements to be entered into pursuant to Article V) include
all of the assets, rights or properties of any kind that are material to or
necessary for the Business as it is now being and is currently proposed to be
conducted.
SECTION 3.22. Insurance. Section 3.22 of the Disclosure Schedule
lists all insurance policies of Seller, the Company and the Subsidiaries
covering the assets, products, employees and operations of the Company and the
Subsidiaries as of the date hereof. All such policies are in full force and
effect, all premiums due thereon have been paid by the Seller, the Company or
the Subsidiaries, and the Seller, the Company or the Subsidiaries have complied
in all materials respects with the provisions of such policies and have not
received notice from any of its insurance brokers or carriers that such broker
or carrier will not be willing or able to renew their existing coverage.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Seller as follows:
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SECTION 4.01. Incorporation and Authority of the Purchaser. The
Purchaser is a corporation duly incorporated, validly existing and in good
standing under the laws of Delaware and has all necessary corporate power and
authority to enter into this Agreement, to carry out its obligations hereunder
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by the Purchaser, the performance by the Purchaser of
its obligations hereunder and the consummation by the Purchaser of the
transactions contemplated hereby have been duly authorized by all requisite
corporate action on the part of the Purchaser. This Agreement has been duly
executed and delivered by the Purchaser, and (assuming due authorization,
execution and delivery by the Seller and the Company) constitutes a legal, valid
and binding obligation of the Purchaser enforceable against the Purchaser in
accordance with its terms.
SECTION 4.02. No Conflict. Assuming that all consents, approvals,
authorizations and other actions described in Section 4.03 have been obtained
and all filings and notifications described in Section 4.03 have been made, and
except as may result from any facts or circumstances relating solely to the
Seller, the execution, delivery and performance of this Agreement by the
Purchaser do not and will not: (a) violate or conflict with the Certificate of
Incorporation or By-laws of the Purchaser; (b) conflict with or violate any law,
rule, regulation, order, writ, judgment, injunction, decree, determination or
award applicable to the Purchaser; or (c) result in any breach of, or constitute
a default (or event which with the giving of notice or lapse of time, or both,
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or, except for liens or other
encumbrances imposed in connection with the Financing or by the Stockholders
Agreement and applicable securities laws, result in the creation of any lien or
other encumbrance on any of the assets or properties of the Purchaser pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument to which the Purchaser or any of its
subsidiaries is a party or by which any of such assets or properties is bound or
affected, except in the case of this clause (b) or clause (c) or as would not,
individually or in the aggregate, have a material adverse effect on the business
or financial condition of the Purchaser or prevent or materially delay the
consummation by the Purchaser of the transactions contemplated hereby.
SECTION 4.03. Consents and Approvals. The execution, delivery and
performance of this Agreement by the Purchaser does not and will not require any
material consent, approval, authorization or other order of, action by, or
filing with or notification to, any Governmental Authority, except (a) the
notification and waiting period requirements of the HSR Act, (b) where failure
to obtain such consent, approval, authorization or action, or to make such
filing or notification, would not prevent or materially delay the consummation
by the Purchaser of the transactions contemplated by this Agreement and (c) as
may be necessary as a result of any facts or circumstances relating solely to
the Seller or the Company.
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34
SECTION 4.04. Absence of Litigation. There are no claims, actions,
proceedings or investigations pending or, to the knowledge of the Purchaser,
threatened against the Purchaser before any Governmental Authority that are
reasonably likely to prevent or materially delay the consummation by the
Purchaser of the transactions contemplated hereby.
SECTION 4.05. Investment Purpose. The Purchaser is acquiring the
Acquired Shares solely for the purpose of investment and not with a view to, or
for offer or sale in connection with, any distribution thereof and agrees that
the Acquired Shares will not be transferred except in a transaction registered
or exempt from registration under the Securities Act of 1933, as amended.
SECTION 4.06. Financing. The Purchaser has available or access to
funds sufficient to fund the payment of the Cash Dividend, to purchase the
Acquired Shares and to pay the fees, expenses and other costs required to be
paid by the Company in connection with the Financing and the transactions
contemplated hereby.
SECTION 4.07. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Purchaser (other than transaction fees and
management fees payable by the Company to an Affiliate of the Purchaser as
previously disclosed to the Seller).
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35
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Conduct of Business Prior to the Closing. (a) Unless
the Purchaser otherwise agrees in writing and except as otherwise set forth in
this Agreement (including, but not limited to, Sections 5.14, 5.15 and 5.16) or
in Section 5.01 of the Disclosure Schedule, between the date of this Agreement
and the Closing Date, the Seller will cause the Company and each Subsidiary to
(i) conduct the Business only in the ordinary course consistent with past
practice and in compliance with applicable laws, (ii) use reasonable best
efforts to preserve the current relationships of the Company and the
Subsidiaries with their respective customers, suppliers, distributors, agents,
officers and employees and other persons with which the Company and the
Subsidiaries have significant business relationships, (iii) use reasonable best
efforts to maintain all of the assets owned or used by the Business in the
ordinary course of business consistent with past practice and (iv) continue
capital expenditures substantially in accordance with the forecasts for capital
expenditures for 1998 attached hereto as Exhibit 5.01; provided that in
connection with such capital expenditures, the Seller agrees that it will
approve any appropriation request made by the Company in respect of budgeted
capital expenditures during the period between the date of this Agreement and
the Closing Date.
(b) Except as expressly provided in this Agreement (including, but
not limited to, Sections 5.14, 5.15 and 5.16) or Section 5.01 of the Disclosure
Schedule, between the date of this Agreement and the Closing Date, the Seller
will cause the Company and the Subsidiaries not to do any of the following
without the prior written consent of the Purchaser (and the Purchaser shall act
in good faith in considering any such request):
(i) create any security interest, pledge, lien or other encumbrance
on any properties or assets (whether tangible or intangible) of the
Company or any Subsidiary, other than (A) Permitted Encumbrances, (B)
security interests, pledges, liens and encumbrances that will be released
at or prior to the Closing and (C) security interests, pledges, liens and
encumbrances on assets having a value not exceeding $500,000 in the
aggregate;
(ii) (A) except for sales of inventory and obsolete fixed assets and
the transfer of cash in payment of trade payables, in each case, in the
ordinary course of business, sell, assign, transfer, lease or otherwise
dispose of or agree to sell, assign, transfer, lease or otherwise dispose
of any assets of the Company or any Subsidiary or (B) cancel any
Liabilities owed to the Company or any Subsidiary, in the case of both (A)
and (B) above, having an aggregate value exceeding $500,000;
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(iii) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof;
(iv) (A) issue, repay, repurchase, redeem any debt securities (other
than issuances in the ordinary course of business of debt securities to
the Seller or any of its Affiliates on terms consistent with past practice
that will be repaid prior to the Closing Date), (B) other than with
respect to borrowings and repayments of borrowings under the Revolving
Credit Agreement in the ordinary course of business, incur, repay,
repurchase, redeem any indebtedness for borrowed money, (C) assume, grant,
guarantee or endorse, or make any other accommodation or arrangement
making the Company or any Subsidiary responsible for, the Liabilities of
any Person (other than the Company or another Subsidiary, as the case may
be) or (D) make any loans, advances or capital contributions to, or
investments in any Person (other than the Company or a Subsidiary), in the
case of (A), (B), (C) and (D), having an aggregate value exceeding
$500,000;
(v) change any method of accounting or accounting practice used by
the Company or any Subsidiary, other than such changes required by U.S.
GAAP; provided that the Seller will give the Purchaser prompt notice of
any such change;
(vi) (A) enter into or adopt, or amend any existing agreement or
arrangement relating to severance, except that the Company may pay any
severance required to be paid by any such agreement or arrangement
described in Section 3.14(b) of the Disclosure Schedule as in effect on
the date hereof, (B) enter into or adopt, or amend any existing severance
plan, (C) enter into or amend any employee benefit plan, employment or
consulting agreement or collective bargaining agreement (including,
without limitation, the plans, programs, agreements and arrangements
referred to in Section 3.14) except as set forth in Section 5.01(b)(vi) of
the Disclosure Schedule and in accordance with any collective bargaining
agreement listed in Section 3.15 of the Disclosure Schedule or (D) except
in accordance with written guidelines for merit compensation increases for
employees other than officers or directors, which have been provided to
the Purchaser, grant any increases in compensation, except compensation
increases associated with promotions and annual reviews of employees other
than officers or directors in the ordinary course of business or provided
pursuant to collective bargaining agreements;
(vii) accelerate or delay the manufacture, shipment or sale of
inventory, the collection of accounts or notes receivable or the payment
of accounts or notes payable or otherwise operate the business of the
Company or any Subsidiary, in each case in a manner that would
artificially affect the computation of the adjustments to the Cash
Dividend Amount pursuant to Section 2.04;
<PAGE>
37
(viii) engage in any transaction other than on an arms-length basis
with the Seller (or its other subsidiaries) or any officer or director of
the Seller, the Company or any Subsidiary, except, in the case of the
Seller (or such other subsidiary), in the ordinary course of business
consistent with past practice;
(ix) enter into, modify, terminate, amend or grant any waiver in
respect of any Material Contract (except in the ordinary course of
business in the case of those Material Contracts described in Section
3.19(a)(i));
(x) allow the lapse of any of the Company's or Subsidiaries' rights
of ownership or use of any material Consumer Intellectual Property;
(xi) issue or sell any shares of the capital stock of, or other
equity interests in, the Company or any Subsidiary, or securities
convertible into or exchangeable for such shares or equity interests, or
issue or grant any options, warrants, calls, subscription rights or other
rights of any kind to acquire additional shares of such capital stock,
such other equity interests or such securities;
(xii) amend the Company's or any Subsidiary's Certificate of
Incorporation or By-laws or equivalent organization documents;
(xii) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of the capital stock of the
Company or any Subsidiary;
(xiii) make any material state, local or foreign tax election or
settle or compromise any material state, local or foreign tax liability;
(xiv) declare, set aside, make or pay any dividend or other
distribution, payable in stock or property, with respect to any capital
stock or other equity or ownership interest in the Company or any
Subsidiary, provided, that cash dividends with a payment date prior to the
date of the Closing Balance Sheet may be declared and paid at any time
prior to such date;
(xv) distribute, pay or otherwise transfer any cash to the Seller or
any of its other Affiliates between the date of the Closing Balance Sheet
and the Closing;
(xvi) settle or compromise any pending or threatened suit, action or
claim for in excess of $250,000 per suit, action or claim or which relates
to the transactions contemplated hereby;
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(xvii) authorize any single expenditure or series of related capital
expenditures for any capital which are not specifically provided for in
the Company's capital budget for the year ending December 31, 1998;
(xviii) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization of the Company or any Subsidiaries; or
(xix) agree to take any of the actions specified in this Section
5.01(b).
SECTION 5.02. Access to Information. (a) From the date of this
Agreement until the Closing, upon reasonable notice, the Seller shall, and shall
cause the officers, employees, auditors, attorneys, advisors and agents of the
Seller, the Company and the Subsidiaries to, (i) afford the officers, employees,
auditors, attorneys, financing sources and authorized agents and representatives
of the Purchaser reasonable access, during normal business hours, to the
offices, properties, attorneys, auditors, consultants, advisors, books and
records and management employees, auditors, attorneys and financing sources of
the Company and the Subsidiaries and (ii) furnish to the officers, employees and
authorized agents and representatives of the Purchaser access to, and copies of,
such additional financial and operating data and other documents and information
regarding the assets, properties, goodwill and business of the Company and the
Subsidiaries as the Purchaser may from time to time reasonably request;
provided, however, that such investigation shall not unreasonably interfere with
any of the businesses or operations of the Seller, the Company, the Subsidiaries
or any Affiliate of the Seller; provided further, that the Seller shall only be
obligated to use its reasonable efforts to cause the auditors of the Seller to
make any work papers available to any Person. No investigation pursuant to this
Section 5.02(a) shall affect any representations or warranties of the parties
herein or the conditions to the obligations of the parties hereto.
(b) The Purchaser agrees that it shall preserve and keep all Books
and Records in the Purchaser's possession for a period of at least eight years
from the Closing Date. After such eight-year period, before the Purchaser shall
dispose of any of such Books and Records, at least 90 calendar days' prior
written notice to such effect shall be given by the Purchaser to the Seller, and
the Seller shall be given an opportunity, at its cost and expense, to remove and
retain all or any part of such Books and Records as the Seller may select. The
Seller acknowledges that the Purchaser shall not be liable to the Seller in the
event of any accidental destruction of such Books and Records.
(c) Each party agrees that it will cooperate with and make available
to the other party, during normal business hours, all Books and Records,
information and employees (without substantial disruption of employment)
retained and remaining in existence after the
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39
Closing Date which are necessary or useful in connection with any Tax inquiry,
audit, investigation or dispute, environmental report, filing or liability, any
litigation or investigation or any other matter requiring any such Books and
Records, information or employees for any reasonable business purpose similar to
the foregoing. The party requesting any such Books and Records, information or
employees shall bear all of the out-of-pocket costs and expenses (including,
without limitation, attorneys' fees, but excluding reimbursement for salaries
and employee benefits) reasonably incurred in connection with providing such
Books and Records, information or employees. The Seller may require certain
financial information relating to the Business for periods prior to the Closing
Date for the purpose of filing federal, state, local and foreign Tax returns and
other governmental reports, and the Purchaser agrees to furnish such information
to the Seller at the Seller's reasonable request and expense.
SECTION 5.03. Confidentiality. (a) The terms of the Confidentiality
Agreement are hereby incorporated herein by reference and shall continue in full
force and effect until the Closing, at which time such Confidentiality Agreement
and the obligations of the Purchaser under this Section 5.03 shall terminate;
provided, however, that the Confidentiality Agreement shall terminate in
accordance with its terms in respect of that portion of the Information (as
defined in the Confidentiality Agreement) that does not relate to the Business
and the transactions contemplated by this Agreement. If this Agreement is, for
any reason, terminated prior to the Closing, the Confidentiality Agreement shall
continue in full force and effect in accordance with its terms.
(b) The Seller agrees to keep confidential all nonpublic information
in its possession regarding the Business, the Company and the Subsidiaries
(including, without limitation, any information made available to the Seller
pursuant to Section 5.02(c)); provided, however, that the Seller will not be
required to maintain as confidential any information that (i) becomes generally
available to the public other than as a result of a disclosure by the Seller or
(ii) is required to be disclosed pursuant to the terms of a valid subpoena or
order by Governmental Authority or other legal requirement.
(c) At the Closing, the Seller shall assign to the Purchaser, to the
extent assignable, its rights under any confidentiality agreements between the
Seller and Persons other than the Purchaser that were entered into in connection
with or relating to a possible sale of the Business, including, without
limitation, to the extent assignable, the right to enforce all terms of such
confidentiality agreements; provided, however, that to the extent such
confidentiality agreements are not assignable, the Seller agrees to take such
action as may be reasonably necessary to enforce its rights thereunder for the
benefit of the Company, at the Company's cost and expense. At the Closing, the
Seller shall deliver to the Purchaser executed copies of all such
confidentiality agreements to the extent available and permitted under such
agreements.
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SECTION 5.04. Regulatory and Other Authorizations; Consents. (a)
Each party hereto shall use its reasonable best efforts to obtain all
authorizations, consents, orders and approvals of all Governmental Authorities
or third parties that may be or become necessary for the performance of its
obligations pursuant to this Agreement and will cooperate fully with the other
party in promptly seeking to obtain all such authorizations, consents, orders
and approvals. Each party hereto agrees to make an appropriate filing of a
Notification and Report Form pursuant to the HSR Act, and to the extent
applicable, the appropriate form under the Canada Competition Act, with respect
to the transactions contemplated hereby within five Business Days of the date
hereof, to request early termination of the waiting period under the HSR Act,
and to supply promptly any additional information and documentary material that
may be requested pursuant to the HSR Act or, if applicable, the Canada
Competition Act. The parties shall cooperate with each other in connection with
the making of all such filings or responses, including providing copies of all
such documents to the non-filing or non-responding party and its advisors prior
to filing or responding. The parties hereto shall not take any action that will
have the effect of delaying, impairing or impeding the receipt of any required
approvals.
(b) The Purchaser agrees to take any and all reasonable steps
necessary to avoid or eliminate each and every impediment under any antitrust
law that may be asserted by any governmental antitrust authority so as to enable
the parties to close the transactions contemplated hereby.
(c) Each party hereto agrees to cooperate in obtaining any other
consents and approvals which may be required in connection with the transactions
contemplated by this Agreement.
SECTION 5.05. Investigation. (a) The Purchaser acknowledges and
agrees that (i) it has made its own inquiry and investigation into, and, based
thereon, has formed an independent judgment concerning, the Company, the
Subsidiaries and the Business, (ii) it has been furnished with or given adequate
access to such information about the Company, the Subsidiaries and the Business
as it has requested and (iii) no representations and warranties are being made,
and there shall be no liability (other than for intentional breach or fraud),
with respect to information (other than, with respect to the Company, the
Subsidiaries and the Business, the representations and warranties contained in
this Agreement) furnished by the Seller or any of its directors, officers,
employees, agents, stockholders, Affiliates, consultants, counsel, accountants,
investment bankers or other representatives concerning the Seller, its
Affiliates, the Company the Subsidiaries and the Business.
(b) In connection with the Purchaser's investigation of the Company,
the Subsidiaries and the Business, the Purchaser has received from the Seller
certain estimates, projections and other forecasts for the Company, the
Subsidiaries and the Business, and certain
<PAGE>
41
plan and budget information. The Purchaser acknowledges that there are
uncertainties inherent in attempting to make such projections, forecasts, plans
and budgets, that the Purchaser is familiar with such uncertainties and that the
Seller makes no representation or warranty with respect to any such estimates,
projections, forecasts, plans or budgets.
SECTION 5.06. Administrative Services Agreement. On the Closing
Date, upon the request of the Purchaser, the Seller shall enter into an
administrative services agreement with the Company (the "Administrative Services
Agreement"), substantially in the form attached hereto as Exhibit 5.06, pursuant
to which the Seller will provide or will cause one or more of its Affiliates to
provide to the Company, among other things, certain administrative support
services in Japan, Hong Kong, India, Korea, Mexico, China, Taiwan and Brazil and
certain sales support services in Mexico. In furtherance of the foregoing, the
Seller and the Company have established or will establish in compliance with
applicable laws and regulations such appropriate (in the reasonable judgment of
the Company) local entities or organizations in foreign jurisdictions to perform
or receive the services to be provided pursuant to the Administrative Services
Agreement.
SECTION 5.07. Company Headquarters. The Purchaser shall maintain the
principal business headquarters of the Company in the State of New York within
25 miles of Corning, New York for a period of at least five years from the
Closing Date. The parties agree that the Company will move its principal
business headquarters currently located on the Seller's Houghton Park, Corning,
New York campus to a new location in the State of New York within 25 miles of
Corning, New York no later than 18 months following the Closing Date, and the
Purchaser agrees to use all reasonable efforts, and the Seller shall cooperate,
to expedite such relocation as promptly as practicable following the Closing
Date. At the Closing, the Company shall enter into a lease with the Seller with
respect to the Company's current principal business headquarters covering the
period from the Closing to the date on which the Company vacates such
headquarters premises, substantially in the form attached hereto as Exhibit
5.07.
SECTION 5.08. Non-Solicitation of Employees. For a period of two
years following the Closing Date and except as otherwise agreed to in writing by
the Seller and the Purchaser, (a) the Seller and its Affiliates shall not,
directly or indirectly, actively solicit or induce any salaried employee of the
Company or any of its Affiliates to leave such employment and become an employee
of the Seller or any of its Affiliates and (b) the Purchaser, the Company and
its Affiliates shall not, directly or indirectly, actively solicit or induce any
salaried employee of the Seller or any of its Affiliates to leave such
employment and become an employee of the Company or any of its Affiliates. The
parties agree that a remedy at law for any breach of any obligation under this
Section 5.08 will be inadequate and that in addition to any other rights and
remedies to which the Purchaser or the Seller may be entitled hereunder, at law
or in equity, the Purchaser or the Seller shall be entitled to
<PAGE>
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injunctive relief and reimbursement for all reasonable attorney's fees and other
expenses incurred in connection with the enforcement hereof. In the event this
Section 5.08 is held to be in any respect an unreasonable restriction upon the
Purchaser, the Seller or the Company or their respective Affiliates by any court
having competent jurisdiction, the court so holding may reduce the geographic
scope to which this Section 5.08 pertains and/or the period of time for which it
operates, or effect any other change to the extent necessary to render this
Section 5.08 enforceable by such court. As so modified, this Section 5.08 will
continue in full force and effect. Such decision by a court of competent
jurisdiction shall not invalidate this Agreement, but this Agreement shall be
interpreted, construed and enforced as not containing such invalidated
provision.
SECTION 5.09. Intellectual Property Matters. (a) Consumer
Intellectual Property. At or prior to the Closing, subject to any pre-existing
licenses previously disclosed to the Purchaser, the Seller shall assign to the
Company all the Consumer Intellectual Property not owned by the Company or a
Subsidiary, other than (i) rights to the trademarks or any use of the terms
CORNING, CORNING WARE, CROWN CORNING, PYREX and PYROCERAM (the use of which
shall be governed by the license agreements referred to in Sections 5.09(b),
(c), (e) and (f)) and (ii) the Consumer Know-How owned by the Seller and the
Seller's Retained Patents (each of which shall be licensed to the Company
pursuant to Section 5.09(d)). The costs associated with such a transfer,
including any associated taxes, shall be borne by the Seller.
(b) Certain Trademarks of the Seller. (i) At the Closing, subject to
any pre-existing licenses previously disclosed to the Purchaser, the Seller
shall grant to the Company a worldwide, exclusive and fully paid, royalty-free
license to use the CORNING WARE and PYROCERAM trademarks only in the field of
Housewares, for a term of ten years, continuously renewable on the same terms
and conditions for consecutive ten-year terms at the option of the Company,
pursuant to a license agreement (the "CORNING WARE and PYROCERAM License
Agreement"), substantially in the form attached hereto as Exhibit 5.09(b)(i).
(ii) At the Closing, pursuant to the CORNINGWARE and PYROCERAM
License Agreement, the Seller shall grant to the Company a worldwide, exclusive,
fully paid, and royalty-free license to use the term CORNINGWARE as part of the
corporate name of the Company and any of its subsidiaries for a term of ten
years, continually renewable on the same terms and conditions for consecutive
ten year terms at the option of the Company, subject to the following
conditions: (A) the term CORNINGWARE must be preceded by a word that (1) does
not begin with the letters COR or COS, (2) is not merely an article (e.g. "a",
"the" or "an"), (3) does not include the word "consumer" and (4) is otherwise
subject to the Seller's approval, which approval shall not be unreasonably
withheld; (B) the corporate name including the term CORNINGWARE word shall use
such word in a manner so that the
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"CORNING" portion of the word is unified with the "WARE" portion of the word,
the Seller acknowledging that use in the form "CorningWare" is acceptable; (C)
the corporate name including the term CORNINGWARE shall not be used solely as a
trademark or servicemark; and (D) the certificate of incorporation (or
equivalent document) of the Company and any of its subsidiaries using the term
CORNINGWARE as part of its corporate name shall state that such use is pursuant
to the CORNINGWARE and PYROCERAM License Agreement.
(iii) At the Closing, pursuant to the CORNINGWARE and PYROCERAM
License Agreement, the Seller shall grant to the Company a worldwide, exclusive,
fully paid and royalty-free license to use the term CORNINGWARE as a servicemark
in connection with the operation of the outlet stores primarily selling
Housewares products of the Company for a term of ten years continually renewable
on the same terms and conditions for consecutive ten year terms at the option of
the Company.
(iv) At the Closing, subject to any pre-existing licenses previously
disclosed to the Purchaser, the Seller shall grant to the Company a worldwide,
exclusive and fully paid royalty-free license to use the "PYREX" trademark in
the field of Durable Consumer Products for a term of ten years, continuously
renewable on the same terms and conditions for consecutive ten-year terms at the
option of the Company, pursuant to a license agreement (the "PYREX License
Agreement"), substantially in the form attached hereto as Exhibit 5.09(b)(ii).
(c) License Agreements. At the Closing, the Seller shall assign to
the Company the Seller's interests in the Consumer License Agreements to which
the Seller is a party as they relate to the Business; provided, however, that
with respect to any Consumer License Agreement that involves the licensing of
the CORNING WARE, PYREX or PYROCERAM trademarks or any confusingly similar
modifications or derivations and which by its terms prohibits assignment and is
disclosed to the Purchaser, (i) the Seller shall not assign such Consumer
License Agreement, but instead shall designate the Company as the recipient of
any royalties with respect to the marks CORNING WARE and PYROCERAM in the field
of Housewares and with respect to the mark PYREX in the field of Durable
Consumer Products to be received (net of any taxes imposed on the Seller with
respect to such royalties) pursuant to such license agreement for the remaining
term thereof and (ii) the Company shall have the right to compel the Seller to
enforce the terms of such Consumer License Agreements.
(d) Patents and Know-How Licenses. At the Closing, subject to any
pre-existing licenses previously disclosed to the Purchaser, the Seller shall
grant to the Company (i) a worldwide, exclusive, fully paid royalty-free license
to use the Seller's Retained Patents and Seller's Future Patents and the
Consumer Know-How owned by the Seller in and limited to the field of Corning
Consumer Products, and (ii) a non-exclusive, worldwide fully paid royalty-free
license to use the Seller's Retained Patents and Seller's Future Patents and the
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44
Consumer Know-How owned by the Seller in and limited to the field of Durable
Consumer Products and Other Consumer Products, in each case pursuant to a
license agreement (the "Patent and Know-How License Agreement"), substantially
in the form attached hereto as Exhibit 5.09(d).
(e) Corning Name. No interest in or right to use the name "CORNING"
or "PYREX" or "PYROCERAM" or any confusingly similar derivation or modification
thereof or any trademark, servicemark, trade dress, logo, domain name, URL
(universal resource locator), trade name or corporate name of the Seller,
including, without limitation, "Crown Corning" or "Corning Designs"
(collectively, the "Retained Names and Marks") is being transferred to the
Purchaser pursuant to the transactions contemplated hereby and, except as
expressly provided in the license agreements to be executed pursuant to this
Agreement, such rights of the Company and the Subsidiaries in the Retained Names
and Marks shall terminate as of the Closing. At the Closing, the Seller shall
grant to the Company a temporary trademark license: (i) to use the word
"Corning" followed by the word "Consumer" as part of the name of the Company or
any of the Subsidiaries for up to three years from the Closing Date; and (ii) to
continue using the "CORNING" trademark and tradename and the CROWN CORNING
trademark and tradename, both pursuant to a license agreement (the "Temporary
CORNING License Agreement"), substantially in the form attached hereto as
Exhibit 5.09(e). Except as expressly authorized in the Temporary CORNING License
Agreement, as soon as practicable, but not more than (i) three years following
the Closing in the case of signs, purchase orders, invoices, sales orders,
labels, letterhead, shipping documents, packaging materials, promotional
brochures and related items, and (ii) not more than five years following the
Closing in the case of molds, the Purchaser shall cause the Company and each
Subsidiary to remove or obliterate all the Retained Names and Marks from all of
the foregoing, and not to put into use after the Closing Date any additional
documents or materials bearing the Retained Names and Marks.
(f) Further to the agreements of the Seller contained in this
Section 5.09, the Seller agrees that it will not renew any licenses that it has
discretion not to renew with respect to any of the Consumer Intellectual
Property after the Closing Date.
(g) The Seller shall cooperate with the Company after the Closing to
facilitate the transfer to the Company of any and all applicable Consumer
Intellectual Property not licensed pursuant to this Section 5.09, to apply for
such renewals, divisions, continuations, or other similar protections as the
Company may reasonably request and to assign those rights to the Company and to
execute such other and further documents as may be reasonably necessary to
effectuate the transfers and licenses contemplated by this Section 5.09.
SECTION 5.10. Corning Glass Center; Corning Plant Stores; Shared
Facility Agreement. (a) The Purchaser agrees to maintain the Company's
commercial arrangements with the Corning Glass Center, Corning, New York, for a
period of ten years following the
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45
Closing Date, on a pricing basis for Corning Consumer Products of the Company's
standard costs plus 15%; provided, however, that the Company shall not be
required to sell more than $4.0 million per year of Corning Consumer Products on
this basis.
(b) The Company will continue to sell products to the Seller's
manufacturing facilities for a period of five years after the Closing Date, at
the same locations, in substantially the same quantities and on substantially
the same terms as during the twelve-month period prior to the date hereof.
(c) At the Closing, the Seller and the Company shall enter into a
shared facility agreement (the "Shared Facility Agreement"), substantially in
the form attached hereto as Exhibit 5.10.
SECTION 5.11. Greenville Supply Agreement; Transfer of Molds. At the
Closing, the Seller and the Purchaser or the Company shall enter into a supply
agreement (the "Greenville Supply Agreement"), substantially in the form
attached hereto as Exhibit 5.11. The Seller shall, on or before the Closing
Date, transfer to the Company the molds located in its Greenville facility and
used in the Business.
SECTION 5.12. Technology Support Agreement. At the Closing, upon the
request of the Purchaser, the Seller shall enter into a technology support
agreement with the Purchaser or the Company (the "Technology Support
Agreement"), substantially in the form attached hereto as Exhibit 5.12.
SECTION 5.13. Transition Services Agreement. At the Closing, upon
the request of the Purchaser, the Seller shall enter into a transition services
agreement with the Purchaser or the Company (the "Transition Services
Agreement"), substantially in the form attached hereto as Exhibit 5.13.
SECTION 5.14. Actions Affecting the Closing Balance Sheet. On or
prior to the Closing Date, the Seller shall take or cause to be taken the
following actions:
(a) The Seller shall contribute to the capital of the Company (or
otherwise capitalize the Company) in satisfaction of all amounts
outstanding under the Revolving Credit Agreement immediately prior to the
Closing Date.
(b) Pursuant to Sections 6.02(a) and (c), the Seller shall assume
(and indemnify the Company in respect of), pursuant to an assumption
agreement in form and substance reasonably acceptable to the Purchaser,
certain post-retirement medical and life insurance liability obligations
and pension liability obligations for certain Acquired Employees.
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46
(c) The Seller shall assume (and indemnify the Company in respect
of) pursuant to an assumption agreement in form and substance reasonably
acceptable to the Purchaser all liabilities of the Company and the
Subsidiaries relating to workers' compensation and product liabilities to
the extent based on or arising out of injuries, accidents or incidents the
respective dates of occurrence of which were prior to the Closing Date
(the "Pre-Closing Workers and Products Claims"). Prior to the Closing, the
Company shall transfer any reserves for the Pre-Closing Workers and
Products Claims by book-entry to the Seller.
(d) The Seller will assign to the Company pursuant to an assignment
agreement in form and substance reasonably acceptable to the Purchaser all
emissions credits relating to the Business.
(e) For purposes of calculating the amount of Indebtedness and cash
on the Closing Balance Sheet, the transactions described in this Section
5.14 shall be deemed to have occurred at the close of business on the day
next preceding the Closing.
SECTION 5.15. Foreign Sales Corporation. On or prior to the Closing
Date, the Seller shall cause the shares of capital stock of Foreign Sales
Corporation that are owned by the Company to be paid as a dividend to the Seller
or otherwise transferred from the Company to a Person other than the Company or
any Subsidiary.
SECTION 5.16. Payment of Intercompany Accounts Payable. The
Purchaser shall cause the Company and/or the Subsidiaries to pay to the Seller
all accounts payable that are accrued prior to the Closing Date by the Company
or any such Subsidiary in respect of services or goods provided by the Seller to
the Company on an arms-length basis or invoices accrued by the Seller to third
parties on behalf of the Company on an arms-length basis as they become payable
in accordance with their terms and consistent with past practice and at the
prices on which such services or goods were provided or purchased.
SECTION 5.17. Non-Competition. For a period of five years after the
Closing Date (the "Non-Competition Period"), neither the Seller nor any of its
Affiliates will manufacture, sell or distribute, or have any ownership interest
in or control any Person engaged in the manufacture, sale or distribution of,
products similar to Corning Consumer Products; provided, however, that the
foregoing shall not prohibit the Seller or any of its Affiliates from: (a)
owning, individually or collectively, directly or indirectly, securities of any
Person traded in a public market which engages in the manufacture, sale or
distribution of products similar to Corning Consumer Products, provided that the
Seller and its Affiliates do not, in the aggregate, own more than 5% of any
class of securities of such Person (other than the Company); (b) engaging in or
conducting any business contemplated by the Administrative
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47
Services Agreement, the Greenville Supply Agreement, the Technology Support
Agreement or the Transition Services Agreement; (c) acquiring a diversified
company (the "Diversified Company") having not more than 20% of its sales or
$100,000,000 of revenues (based on its latest published annual audited financial
statements) attributable to the manufacture, sale and distribution of products
similar to Corning Consumer Products, so long as (i) the Seller shall promptly
notify the Purchaser of any such acquisition and (ii) the Seller or such
Affiliate shall cause the Diversified Company to dispose of the portion thereof
which has sales attributable to the manufacture, sale and distribution of
products similar to Corning Consumer Products within 24 months after such
acquisition; (d) owning less than 20% of the Shares of the Company; and (e)
manufacturing, selling and distributing Steuben Products, ceramic briquettes,
OEM Component Products for consumer household appliances, household cooking
ovens or ranges, products for lighting, computers, laboratory science,
electronics, medical applications, automobile and building windows, mirrors,
flatglass, television or display applications, liquid filtration products (other
than Stanadyne Products and final water filtration system products for home
use), OEM Component Product parts of water filtration system products for home
use, glass ceramic burner caps, glass ceramic cook tops, flat glass ceramic
stove windows and new products manufactured from flat glass ceramic by Eurokera,
S.N.C. or Keraglass, S.N.C. or their respective licensees for sale in Europe.
The parties agree that a remedy at law for any breach of any obligation under
this Section 5.17 will be inadequate and that in addition to any other rights
and remedies to which the Purchaser may be entitled hereunder, at law or in
equity, the Purchaser shall be entitled to injunctive relief and reimbursement
for all reasonable attorney's fees and other expenses incurred in connection
with the enforcement hereof. In the event this Section 5.17 is held to be in any
respect an unreasonable restriction upon the Seller or any of its Affiliates by
any court having competent jurisdiction, the court so holding may reduce the
geographic scope to which this Section 5.17 pertains and/or the period of time
for which it operates, or effect any other change to the extent necessary to
render this Section 5.17 enforceable by such court. As so modified, this Section
5.17 will continue in full force and effect. Such decision by a court of
competent jurisdiction shall not invalidate this Agreement, but this Agreement
shall be interpreted, construed and enforced as not containing such invalidated
provision.
(b) The Seller agrees that for so long as the CORNING WARE and
PYROCERAM License Agreement has not expired or been terminated in accordance
with its terms, the Seller shall not (and will require any direct or indirect
transferee not to), without the prior consent of the Company, use and will not
license (and shall require any direct or indirect transferee not to license) the
"CORNING" trademark or any confusingly similar derivations or modifications
thereof in the Housewares field except that, for purposes of such restriction
"Housewares" shall not include Steuben Products, ceramic briquettes, OEM
Component Products for consumer household appliances, household cooking ovens or
ranges, products for lighting, computers, laboratory science, electronics,
medical applications, automobile and building windows, mirrors, flatglass,
television or display applications, liquid
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filtration products (other than Stanadyne Products and final water filtration
system products for home use), OEM Component Product parts of water filtration
system products for home use, glass ceramic burner caps, glass ceramic cook
tops, flat glass ceramic stove windows, and new products manufactured from flat
glass ceramic by Eurokera, S.N.C. or Keraglass, S.N.C. or their respective
licensees for sale in Europe. In addition, the Seller agrees that for so long as
the CORNING WARE and PYROCERAM License Agreement has not expired or been
terminated in accordance with its terms, it will not use (and will require any
direct or indirect transferee not to use) the trademarks CORNING WARE and CROWN
CORNING or any confusingly similar derivations or modifications thereof on any
products manufactured by it or any of its subsidiaries after the Closing Date,
and will not license (and will require any direct or indirect transferee not to
license) any such trademark, derivations or modifications, except that nothing
in this Section 5.17(b) (other than the first sentence hereof) shall preclude
Seller or any of its present or future Affiliates from using the CORNING
trademark. The Seller also agrees that for so long as the PYREX License
Agreement has not expired or been terminated in accordance with its terms, the
Seller shall not (and will require any direct or indirect transferee not to),
without the prior consent of the Company, use the PYREX trademark or any
confusingly similar derivations or modifications thereof in the field of Durable
Consumer Products and on or with respect to any other consumer products and will
not license (and will require any direct or indirect transferee not to license)
any such trademark, derivations or modifications.
SECTION 5.18. Facility Financing Interests. On or prior to the
Closing Date, the Seller shall assign to the Company, and the Company shall
assume the Facility Financing Interests (except the Guaranty of Seller dated
August 18, 1988 to the Pennsylvania Department of Commerce (the "1988 Guaranty")
and the Guaranty Agreement dated as of December 1, 1992 between the Seller and
Pittsburgh National Bank relating to the Greencastle Facility (the "1992
Guaranty"), each of which relate solely to the Facility Financing Interests).
Notwithstanding anything to the contrary in this Agreement, the Facility
Financing Interests (except the 1988 Guaranty and the 1992 Guaranty) shall be
reflected as Indebtedness on the Closing Balance Sheet.
SECTION 5.19. Stockholders Agreement. At the Closing, the Company,
Purchaser and the Seller shall enter into the Stockholders Agreement.
SECTION 5.20. No Negotiation. Prior to the earlier of the
termination of this Agreement or the Closing, the Seller will not, and will
cause the Company, the Subsidiaries and their respective officers, directors,
employees and agents not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making of any proposal with respect to, or
engage in any negotiations concerning, provide any confidential information or
data to, have any discussions with or enter into any agreements with, any Person
relating to any acquisition, business combination, reorganization or purchase of
all or any portion of the
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49
capital stock or assets of the Company or the Subsidiaries other than in the
ordinary course of business and in compliance with the other provisions of this
Agreement with regard to assets of the Company and the Subsidiaries. The Seller
will, and will cause the Company and the Subsidiaries to, immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any such potential transactions
involving the Company and the Subsidiaries. The Seller agrees not to release any
third party from, or waive any provisions of, any confidentiality or standstill
agreement to which Seller or the Company is a party. The Seller will, and will
cause the Company and the Subsidiaries to, immediately notify the Purchaser if
any inquiries are received in respect of the Company and the Subsidiaries and
shall provide details with respect thereto.
SECTION 5.21. Financial Statements and Reports. (a) As promptly as
practicable and in any event no later than 30 days after the end of each fiscal
month ending after the date hereof and before the Closing Date (other than the
last fiscal month) or sixty days after the end of each fiscal year ending after
the date hereof and before the Closing Date, as the case may be, the Seller will
deliver to the Purchaser true and complete copies of (in the case of any such
fiscal year) the audited and (in the case of any such fiscal month) the
unaudited consolidated balance sheets and the related audited or unaudited
consolidated statements of income and cash flows of the Company and the
Subsidiaries as of the last day of and for the fiscal year then ended or as of
the last day of and for each such fiscal month and the portion of the fiscal
year then ended, as the case may be, together with the notes, if any, relating
thereto, which financial statement shall be prepared on a basis consistent with
the Financial Statements referred to in Section 3.07.
(b) As promptly as practicable, the Seller will deliver to the
Purchaser true and complete copies of such other regularly-prepared financial
statements, reports and analyses as may be prepared by the Seller, the Company
or any Subsidiary relating to the Business or operations of the Company or any
Subsidiary.
SECTION 5.22. Insurance. From and after the Closing Date, the Seller
shall use its reasonable best efforts, subject to the terms of the Seller
Insurance Policies (as hereinafter defined), to retain the right, to the extent
the same exists and without the payment of any additional premiums or other fees
(or if additional premiums or other fees are payable, to advise the Company if
any right of recovery would exist upon the payment of such premiums or fees and,
if reimbursed by the Company therefor, to pay such premiums or fees), to make
claims and receive recoveries for the benefit of the Company, as well as for the
benefit of the Seller, under any insurance policies maintained at any time prior
to the Closing Date by the Seller and its predecessors (collectively, the
"Seller Insurance Policies"), covering any loss, liability, claim, damage or
expense relating to the assets, business, operations, conduct, products and
employees (including former employees) of the Company and its predecessors that
relates to or arises out of occurrences prior to the Closing and for which the
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50
Company remains liable, has assumed liability or retains ownership of its
affected assets (as the case may be) after the Closing Date. With respect to the
foregoing, the Seller agrees to use its reasonable best efforts so that the
Company shall have the right, power and authority, subject to any required
consent of the carriers under the Seller Insurance Policies, to make directly or
in the name of the Seller any claims under the Seller Insurance Policies and to
receive directly recoveries thereunder.
SECTION 5.23. Cumulative Gross Margin Payment. (a) As promptly as
practicable, but in any event not later than the earlier to occur of the public
availability of the 2000 Financial Statements or March 31, 2001, the Company
shall prepare and deliver to the Seller (i) the 2000 Financial Statements,
together with a report thereon of the Company's independent accountants (the
"Company's Accountants") to the effect that such financial statements fairly
present the results of operations of the Company and the Subsidiaries for the
period ended December 31, 2000, in conformity with U.S. GAAP; (ii) the
calculation of Cumulative Gross Margin and (iii) a certificate of the Company's
Accountants with respect to the calculation of Cumulative Gross Margin in
accordance with the definition of Gross Margin.
(b) The Seller may dispute the amount of Cumulative Gross Margin as
calculated by the Company and the Company's Accountants, but only on the basis,
in the case of net sales and cost of sales, that the amounts reflected on the
2000 Financial Statements were not prepared in conformity with U.S. GAAP;
provided, however, that the Seller shall have notified the Company and the
Company's Accountants in writing of each disputed item, specifying the amount
thereof in dispute and setting forth, in reasonable detail, the basis for such
dispute, within 30 Business Days of the Purchaser's delivery of the 2000
Financial Statements and the calculation of Cumulative Gross Margin to the
Seller. The Company shall make available to the Seller and its representatives
all information, records, data and auditors' working papers and access to its
personnel as shall be reasonably requested by the Seller in connection with its
evaluation of the calculation of the Cumulative Gross Margin. In the event of
such a dispute, the Company's Accountants, together with the Company, and the
Seller's Accountants, together with the Seller, shall attempt to reconcile their
differences, and any resolution by them as to any disputed items shall be final,
binding and conclusive on the parties hereto. If the Company's Accountants,
together with the Company, and the Seller's Accountants, together with the
Seller, are unable to resolve any such dispute within 50 Business Days of the
Company's delivery of the calculation of Cumulative Gross Margin to the Seller,
and the items remaining in dispute are such that the Seller would receive at
least $250,000 pursuant to such items, if such items were resolved in favor of
the Seller, the Company's Accountants and the Seller's Accountants shall
promptly submit the items remaining in dispute for resolution to the Independent
Accounting Firm, which shall, within 40 Business Days after such submission,
determine and report to the Seller and the Company upon such remaining disputed
items, and such report shall be final, binding and conclusive on
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51
the Seller and the Company. The fees and disbursements of the Independent
Accounting Firm shall be allocated between the Seller and the Company in the
same proportion that the aggregate amount of such remaining disputed items so
submitted to the Independent Accounting Firm that is unsuccessfully disputed by
each such party (as finally determined by the Independent Accounting Firm) bears
to the total amount of such remaining disputed items to submitted.
(c) The calculation of Cumulative Gross Margin shall be deemed final
for the purposes of this Section 5.23 upon the earliest of (A) the failure of
the Seller to notify the Company of a dispute within 30 Business Days of the
Company's delivery of the 2000 Financial Statements and the calculation of the
Cumulative Gross Margin to the Seller, (B) the resolution of all disputes,
pursuant to subsection (b) of this Section 5.23, by the Seller's Accountants and
the Company's Accountants and (C) the resolution of all disputes, pursuant to
subsection (b) of this Section 5.23, by the Independent Accounting Firm. Within
three Business Days of the calculation of Cumulative Gross Margin being deemed
final, the Company shall take the actions described in subsection (d) of this
Section 5.23. Any payment that the Company may be obligated to make to the
Seller pursuant to subsection (d) of this Section 5.23, shall be made by wire
transfer in immediately available funds to an account or accounts designated by
the Seller.
(d) In the event that the Cumulative Gross Margin is greater than
$710,900,000, then the Company shall pay to the Seller one dollar for each
dollar by which the Cumulative Gross Margin exceeds $710,900,000, up to a
maximum of $15,000,000. In the event that the Cumulative Gross Margin is less
than $710,900,000, the Company shall make no payment to the Seller pursuant to
this Section 5.23.
SECTION 5.24. Information Systems. (a) Prior to the Closing, the
Seller will use reasonable best efforts to cause the Company to continue to
implement, and make capital expenditures in respect of, the CCPC Year 2000 plan
(which has been provided to the Purchaser prior to the date of this Agreement)
(the "Systems Plan") in accordance with its terms.
(b) The Seller will extend information systems transitional services
under the Transition Services Agreement until the implementation of the Systems
Plan is substantially complete or the date of the first anniversary of the
expiration of the Transition Services Agreement (whichever is sooner); provided,
however, that the Seller intends to discontinue its mainframe information system
facilities on or about June 30, 1999. In connection with such discontinuance,
the Seller will provide reasonable assistance to the Company (at the Company's
expense) with respect to obtaining mainframe information services from third
party suppliers. After June 30, 1999, in the event the Company requests that the
Seller renew its lease for such mainframe facilities so as to provide mainframe
information system services to the Company until December 31, 1999, the cost of
such renewal, together with the lease payments payable under such renewal leases
shall be shared
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52
equally by the Seller and the Company (without duplication of any payments to be
made by the Company to the Seller under the Transition Services Agreement).
Notwithstanding the foregoing, there can be no assurance that such lease can be
renewed by the Seller or that the mainframe facilities provided thereunder will
not fail prior to December 31, 1999.
SECTION 5.25. Reasonable Best Efforts. Purchaser and Seller agree to
use their respective reasonable best efforts to take, or cause to be taken, all
action and to do, or cause to be done, all things necessary, proper or
advisable, to consummate and make effective the transactions contemplated by
this Agreement as promptly as practicable after the date hereof.
ARTICLE VI
EMPLOYEE MATTERS
SECTION 6.01. Employees. (a) The Purchaser agrees to cause the
Company or the Subsidiaries to continue immediately after the Closing the
employment of those persons employed by the Company or any Subsidiary
immediately prior to the Closing, including those employees on vacation, leave
of absence, short-term disability (work-related or otherwise), sick leave or
layoff, (provided that any such employee on vacation, leave of absence,
short-term disability or sick leave returns to active employment promptly
following the expiration of such period of absence and in any event within one
year following the Closing), but excluding employees receiving long-term
disability benefits at the time of the Closing and employees subject to the
Pressware Union Agreement (as defined below) (the "Acquired Employees");
provided, however, that the foregoing does not obligate the Purchaser, the
Company or any Subsidiary at any subsequent time to employ any particular person
on any particular terms, except as specifically provided in this Article VI, and
nothing herein shall restrict the Company or any Subsidiary from terminating the
employment of any employee for any reason.
(b) The Purchaser agrees to cause the Company and the Subsidiaries
to continue to provide each Acquired Employee with salary and benefits levels
(other than equity-based compensation and the Performance Improvement Plan)
("Compensation") that are substantially similar in aggregate economic value, to
those provided to the Acquired Employee immediately prior to the Closing, for
five years after the Closing Date for any Acquired Employee who is not a member
of a collective bargaining unit or until the expiration of the relevant
collective bargaining agreement in effect on the Closing Date with respect to
any Acquired Employee who is a member of a collective bargaining unit, (as
applicable, the "Continuation Period"); provided, however, (i) that if the
Seller reduces or modifies its Compensation level or any portion thereof for any
group or groups of its employees, the Purchaser may permit the Company or the
Subsidiaries to make commensurate modifications
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53
to the Compensation or any portion thereof affecting a substantially similar
group or groups of the Acquired Employees (by size or function, as the case may
be); and (ii) that, subject to compliance with the other provisions of this
Article VI and applicable law, after the Closing Date, the foregoing shall not
obligate the Purchaser to maintain a particular level of employment, which shall
be subject to the discretion of management of the Purchaser. The Seller agrees
to give the Company written notice of any proposed modification or reduction of
Compensation promptly (and in no event later than the effectiveness of such
modification or reduction). The Purchaser agrees to give the Seller prompt
written notice of the benefits it intends to provide Acquired Employees pursuant
to this Section 6.01(b) during the Continuation Period promptly following the
implementation (and any subsequent amendment) of such benefits.
(c) From and after the Closing, the Company and the Subsidiaries
shall be solely responsible for all termination, severance benefits, costs,
charges and liabilities of any nature incurred as a result of the termination of
an Acquired Employee after the Closing, including, without limitation, any
claims arising out of or relating to any plant closing, mass layoff or similar
event under applicable law occurring after the Closing (collectively,
"Termination Benefits"). For a period of one year following the Closing Date
(the "Benefit Maintenance Period"), Termination Benefits for employees of the
Company and the Subsidiaries shall be paid by the Company in the amounts and
kind which the Company and the Subsidiaries would have paid consistent with past
practice under similar circumstances of termination (including the amounts
required by law, plus any amounts required by any collective bargaining
agreement, plus any additional amounts customarily paid by the Company and the
Subsidiaries). The Termination Benefits of the Company and the Subsidiaries as
of the date of this Agreement are described in Section 6.01(c) of the Disclosure
Schedule.
SECTION 6.02. Employee Benefits Arrangements. (a) Pension Plans. (i)
Prior to the Closing Date, the Seller shall amend the Pension Plan of Corning
Incorporated (the "Corning Pension Plan") so that following the Closing Date,
(A) subject to clauses (C), (D) and (E) below, Acquired Employees currently
participating in the Corning Pension Plan shall cease to accrue benefits in such
plan, although the accrued benefits of such Acquired Employees as of the Closing
Date (as well as the accrued benefits of former employees of the Company and the
Subsidiaries and their beneficiaries) shall be retained by the Corning Pension
Plan as an exclusive obligation of the Seller, (B) Acquired Employees' service
with the Company or any Subsidiary after the Closing Date will be taken into
account for purposes of determining vesting under the Corning Pension Plan, (C)
no additional years of credited service shall be provided to and no changes in
average compensation or social security benefits shall be recognized for the
Acquired Employees for plan benefit formula purposes, (D) service with the
Company or any Subsidiary after the Closing Date will be taken into account for
purposes of determining eligibility for early retirement subsidies, optional
benefit forms and
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54
ancillary benefits with respect to the benefits accrued under the Corning
Pension Plan and (E) with respect to the benefits for employees paid on an
hourly basis ("Hourly Employees"), no increases in the monthly benefit rate
beyond that in effect at the Closing Date shall be provided, other than future
rate increases that, as of the Closing Date, are scheduled to be effective on or
subsequent to the Closing Date. Notwithstanding the foregoing clauses (A) and
(C), the Seller shall amend the Corning Pension Plan, at such time, if any,
during the Continuation Period that it implements a periodic update of average
compensation for participants in such plan then employed by Seller and its
subsidiaries, to increase the accrued benefits of Acquired Employees who have
benefits based on compensation (i.e., those on the "salaried roll") in a manner
consistent with periodic increases provided to such employees in the past based
on average compensation and credited service as of the Closing Date.
(ii) Effective as of the Closing Date, the Purchaser will cause the
Company to establish a pension plan (the "New Defined Benefit Plan") providing
pension benefits for each Acquired Employee, other than Hourly Employees of
Revere Ware Corporation ("Revere Hourly Employees") and the Foreign
Subsidiaries, which are substantially similar in aggregate economic value,
consistent with the applicable collective bargaining agreements, to those
provided by the Corning Pension Plan as of the Closing Date, and which for the
Hourly Employees covered thereunder reflect all increases in monthly benefit
rates scheduled to be effective subsequent to the Closing Date; provided,
however, that nothing in this Section 6.02(a)(ii) shall limit or relieve
Seller's obligations under Section 6.02(a)(i). The Purchaser agrees to cause the
Company and the Subsidiaries to maintain the New Defined Benefit Plan without
any amendments inconsistent with the foregoing sentence for the Benefit
Maintenance Period; provided, however, that if the Seller reduces or modifies
its benefit levels under the Corning Pension Plan for any group or groups of its
employees, the Purchaser may make commensurate modifications to the New Defined
Benefit Plan affecting a substantially similar group or groups of the Acquired
Employees (by size or function, as the case may be). The Seller agrees to give
the Company written notice of any proposed modification or reduction of benefits
under the Corning Pension Plan promptly (and in no event later than the
effectiveness of such modification or reduction). With respect to Acquired
Employees generally, the Purchaser shall cause the Company and its Subsidiaries
to provide under the New Defined Benefit Plan pension benefits which recognize
service, compensation and social security benefits with the Company and the
Subsidiaries, both before and after the Closing Date, for purposes of vesting,
participation and eligibility for early retirement subsidies, optional benefit
forms and ancillary benefits (to the extent relevant), but not for benefit
accruals, to the extent that these would have been taken into account under the
Corning Pension Plan. The New Defined Benefit Plan shall not be required to
recognize any final or career average updates of compensation and,
notwithstanding Seller's practice of periodically providing such updates, it
shall not be considered a reduction of benefits under this Article VI if the New
Defined Benefit Plan does not provide for such updates.
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55
(iii) The Purchaser shall cause the Company or its Subsidiaries to
continue to maintain the Revere Hourly Pension Plans (the "Revere Plan") for
current and former Revere Hourly Employees consistent with the applicable
collective bargaining agreements.
(iv) The Purchaser shall cause the Company and the Foreign
Subsidiaries to continue to maintain during the Benefit Maintenance Period any
pension plan of a Foreign Subsidiary in effect on the Closing Date for current
and former employees of such Foreign Subsidiary without any amendments thereto
during the Benefit Maintenance Period that would cause the benefits for an
employee under such plan not to be substantially similar in aggregate economic
value to the benefits provided as of the Closing Date, except as may be required
by applicable local law.
(b) Investment/401(k) Plans. (i) Effective as of the Closing Date,
Acquired Employees shall no longer accrue benefits under the Corning
Incorporated Investment Plan and the Corning Incorporated Investment Plan for
Unionized Employees (the "Corning 401(k) Plans") in the capacity of employees of
Seller or one of its subsidiaries. The Seller shall cause employer matching and
retirement enhancement contributions for Employees with respect to the period up
to and including the Closing Date to be made to the Corning 401(k) Plans. The
Seller will amend the Corning 401(k) Plans to provide full vesting as of the
Closing Date to all Acquired Employees covered by the Corning 401(k) Plans as of
the Closing Date.
(ii) For so long as the Seller continues to provide payroll services
to the Purchaser with respect to the Acquired Employees, the Acquired Employees
(other than Acquired Employees of the Foreign Subsidiaries) shall continue to
participate in the Corning 401(k) Plans, which shall be maintained as multiple
employer plans for this purpose. Thereafter, the Purchaser shall cause the
Company or its Subsidiaries to establish one or more "401(k)" plans for the
Acquired Employees (the "New 401(k) Plans"), other than Acquired Employees of
the Foreign Subsidiaries. For the purpose of determining vesting and employer
matching and retirement enhancement contributions, the New 401(k) Plans shall
recognize service that the Acquired Employees had with the Company or its
Subsidiaries before the Closing Date. As soon as practicable following the
establishment of the New 401(k) Plans and the Seller's and the Purchaser's
receipt of the assurances described in Section 6.02(b)(iii) below, the Seller
shall cause an amount in cash, equal to the aggregate account balances of the
Acquired Employees participating in Corning 401(k) Plans as of the close of the
business day immediately preceding the date of transfer, to be transferred to
the trust or trusts maintained with respect to the New 401(k) Plans, and the
Purchaser shall assume all liabilities with respect to such account balances.
The Purchaser and the Seller shall cooperate to establish procedures to enable
Acquired Employees to continue payroll deductions consistent with past practices
for loans outstanding on and after the date of the transfer of account balances
under the Corning 401(k) Plans.
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56
(iii) On or as soon as practicable following the adoption of the New
401(k) Plans, each of the Purchaser and the Seller shall provide the other party
with reasonably satisfactory assurances (which may include, without limitation,
a favorable determination letter issued by the IRS) as to the qualification,
respectively, of the New 401(k) Plans and the Corning 401(k) Plans under Section
401(a) of the Code.
(c) Welfare and Fringe Benefit Plans. (i) Subject to the other terms
hereof, during the Benefit Maintenance Period, the Purchaser will cause the
Company and its Subsidiaries to provide each Acquired Employee with welfare
benefits substantially similar in aggregate economic value consistent with
applicable collective bargaining agreements to those provided to such Acquired
Employee immediately prior to the Closing Date in the areas generally of
medical, vision care, hearing aid, dental assistance, flexible spending
accounts, life insurance, post-retirement medical, post-retirement life
insurance, vacation, severance, salary continuation, accidental death and
dismemberment, dependent life insurance, business travel accident insurance,
adoption assistance, short-term disability, long-term disability, workers'
compensation, tuition refunds and educational leave, compensation/bonus plans
(including "Goalsharing benefits", but not including matching gifts, service
awards or the Worldwide Employee Stock Purchase Plan, the Performance
Improvement Plan or any other equity-based plan), and non-qualified supplemental
pension and deferred compensation arrangements as such employees had with the
Company or its Subsidiaries immediately prior to the Closing Date (it being
acknowledged and agreed that the Company shall not be required to maintain all
of the following so long as the aggregate economic benefit provided to an
Acquired Employee are substantially equivalent to the aggregate benefits
provided to such employee prior to the Closing Date) (the "Existing Benefit
Plans"); provided, however, that the Purchaser will cause the Company or its
Subsidiaries to continue to maintain the Revere Post-Retirement Benefit Plan
(the "Revere Post-Retirement Plan") consistent with applicable collective
bargaining agreements for the Benefit Maintenance Period; provided further that
if the Seller reduces or modifies the benefit levels under its post-retirement
medical and/or life insurance plans for any group or groups of its employees,
the Purchaser may make commensurate modifications to the Revere Post-Retirement
Plan for a substantially similar group or groups of Revere Ware Corporation
employees (by size or function, as the case may be). Notwithstanding the above,
however, other than with regard to employees of Revere Ware Corporation and the
Foreign Subsidiaries, neither the Purchaser nor the Company nor the Subsidiaries
shall be required to provide post-retirement medical and/or life insurance
benefits for former employees of the Company or any of its Subsidiaries or
Acquired Employees who are eligible to retire as of the Closing Date, it being
hereby agreed that such post-retirement benefits shall be provided by the Seller
under the same terms and conditions as the Seller may, from time to time, apply
to similarly situated employees (or, if there are no similarly situated
employees, as provided to other employees of the Seller), or at such higher
level as the retirees may be entitled to under applicable law. For such
post-retirement medical benefits, service with the Company or its Subsidiaries
after the Closing Date will be taken into
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account only in determining the retiree's contributions with respect to their
benefits. With regard to such post-retirement life insurance, the Seller is not
obligated to provide any amounts other than those earned as of the Closing Date.
The Purchaser agrees to cause the Company and its Subsidiaries to maintain the
Existing Benefit Plans without any amendments inconsistent with the first
sentence of this paragraph (i) which would reduce benefit levels for the Benefit
Maintenance Period; provided, however, that if the Seller reduces or modifies
its benefit levels for any group or groups of its employees under any of its
benefits plans which is substantially similar to one of the Existing Benefit
Plans, the Purchaser may make commensurate modifications to the applicable,
corresponding Existing Benefit Plan for a substantially similar group or groups
of Acquired Employees (by size or function, as the case may be). The Seller
agrees to give the Company written notice of any proposed modification or
reduction of benefits under any of its benefit plans which is substantially
similar to one of the Existing Benefit Plans promptly (and in no event later
than the effectiveness of such modification or reduction).
(ii) The Purchaser shall cause the Company and the Subsidiaries to
give credit to Acquired Employees for all service with the Company, its
Subsidiaries or the Seller for the purpose of determining eligibility for any of
the Existing Benefit Plans to be provided in accordance with this Section and
for determining the amount and duration of any benefits under the Existing
Benefit Plans; provided, however, that such credit does not result in
duplication of benefits.
(d) Collective Bargaining Agreements. (i) Following the Closing
Date, the Purchaser shall cause the Company and the Subsidiaries to continue to
perform their respective obligations under the collective bargaining agreements
set forth on Section 6.02(d)(i) of the Disclosure Schedule. For the collective
bargaining agreements set forth on Section 6.02(d)(ii) of the Disclosure
Schedule, the Purchaser and the Seller shall cooperate so as to enable the
Company to recognize and assume such agreements where possible or to perform the
Seller's duties and obligations under and to otherwise abide by such agreements.
(ii) The Purchaser has received a copy of the Memorandum of
Understanding between the Seller and the Company and The American Flint Glass
Workers Union AFL-CIO, Including Local 1000, dated as of June 12, 1997 (the
"Pressware Union Agreement"). Accordingly, the Purchaser and the Seller agree as
follows with respect to the Pressware Union Agreement:
(A) the Purchaser agrees to take all actions which the Seller
undertook in the Pressware Union Agreement to require of the Purchaser;
(B) the Purchaser agrees to cause the Company to take all actions
which the Pressware Union Agreement requires or contemplates that the
Company shall take;
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(C) the Seller agrees to take all action which the Pressware Union
Agreement requires or contemplates that the Seller shall take;
(D) the Seller and the Purchaser agree to cooperate to ensure that
the Pressware Union Agreement will be implemented so as to accomplish the
intended purposes thereof;
(E) the Seller agrees to reimburse the Company and/or the Purchaser
(or, where appropriate, to pay) for the following payments (net of any tax
savings by the Company or the Purchaser realized in connection with such
payments but only at such time and to such extent as such tax savings are
actually realized) to Pressware employees under the terms of the Pressware
Union Agreement, within 10 days of the Seller's receipt of the Company's
(or the Purchaser's) invoices therefor: (1) special financial inducements
pursuant to Section 2(A) of the Pressware Union Agreement in amounts
consistent with those previously disclosed by the Seller to the Purchaser
and consistent with the Employee Incentive Retention Plan and the
Pressware Retention Incentive Plan and (2) special cash awards under
Section 2(C) of the Pressware Union Agreement; and
(F) the Seller shall take all actions necessary to ensure that there
will be no "bumping" of employees from the Seller or any of its Affiliates
to the Company or any Subsidiary after the Closing.
(iii) After the Closing Date, the Seller shall, at the Purchaser's
request, lease to the Company, on terms reasonably satisfactory to the Seller,
the Company and the Purchaser, those employees (the "Leased Employees") who are
employed at the Company's Pressware facility on the Closing Date and who choose,
in accordance with the Pressware Union Agreement, to remain employees of the
Seller. The Company shall reimburse the Seller for all costs and expenses
incurred by the Seller in connection with the lease of the Leased Employees.
Such costs and expenses shall be calculated in a manner consistent with the
Seller's customary practices prior to the Closing Date of calculating costs and
expenses related to the Company's employees for accounting purposes.
(e) Retention Program. In addition to the Pressware Union Agreement,
the Seller has caused the Company to adopt a retention program for key employees
(the "Key Employee Retention Program"). Following the Closing, the Purchaser
shall cause the Company and the Subsidiaries to implement the Key Employee
Retention Program, and the Seller shall reimburse the Company or the Purchaser,
as the case may be, for all payments made after the Closing Date to employees
under such programs (net of any tax savings by the Company or the Purchaser
realized in connection with such payments but only at such time
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59
and to such extent as such tax savings is actually realized), within 30 days
after the Seller's receipt of the invoice(s) of the Company or the Purchaser
therefor.
(f) Employee Discounts. Until the fifth anniversary of the Closing
Date, the Purchaser will cause the Company and its Subsidiaries to continue the
30% discount policy in Company stores for employees and retirees of the Seller,
the Company and the Subsidiaries.
(g) Pension Benefit Guaranty Corporation Requirements. Subject to
Section 6.09, the Purchaser agrees to cooperate reasonably, at the Seller's
expense, with the Seller to attempt to resolve any requirements imposed by the
PBGC with respect to the Corning Pension Plan and the Revere Plan during the
Continuation Period, but only to the extent that such cooperation does not
result in any liability to the Purchaser, the Company or any Subsidiary or to
any of their respective officers, directors or stockholders.
SECTION 6.03. Goal Sharing Plan and Performance Improvement Plan.
The Seller shall reimburse the Company and the Subsidiaries for a pro rata
portion of any payments required to be made by any of them under the Goal
Sharing Plan for 1998 based on the number of days before the Closing Date during
the fiscal year ending in 1998 to the extent that the obligation for any such
payments is not accrued and reflected on the Final Closing Working Capital
Statement. The Seller also shall reimburse the Company and the Subsidiaries for
all amounts payable under the Performance Improvement Plan, which amounts shall
be based on performance for fiscal year ending 1998 prorated for the period
prior to the Closing Date.
SECTION 6.04. Stock Options. All options to acquire the Seller's
common stock held by the Acquired Employees that are intended to qualify as
Incentive Stock Options (within the meaning of Code Section 422(b)) shall remain
Incentive Stock Options for a period of 90 days following the Closing Date and
shall thereafter be converted into nonqualified stock options which, together
with any stock options not intended to qualify as Incentive Stock Options, shall
remain exercisable for a period of the shorter of three years following the
Closing Date or the remaining term of such option (the "Option Exercise
Period"); provided, however, that such three-year extension period shall not
apply to stock options granted prior to December 4, 1991, which options'
exercisability following the Closing Date shall remain subject to the terms
currently applicable thereto. All stock options referred to above shall continue
to vest during the Option Exercise Period as if the holders thereof remained
employed by the Seller or one of its Subsidiaries.
SECTION 6.05. Supplemental Plans. The Seller shall cause the
Acquired Employees who participate in the Supplemental Investment Plan to become
fully vested thereunder as of the Closing, and the account balances of such
Acquired Employees shall be paid to them in cash promptly thereafter in
accordance with the terms of such plan. Acquired
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Employees who participate in the Seller's Supplemental Pension Plan shall
receive vesting credit for service with the Company for any Subsidiary following
the Closing and, notwithstanding the terms of such Plan, shall vest in
accordance with the vesting schedule contained in the Corning Pension Plan.
SECTION 6.06. Medical Costs. The Seller shall be liable for, and
indemnify and hold harmless the Purchaser, the Company and the Subsidiaries
against, any and all Losses arising out of medical, dental and similar health
related claims incurred by the Acquired Employees on or prior to the Closing
Date other than claims incurred under any Company Benefit Plan. For this
purpose, a claim is "incurred" on the date the relevant treatment is rendered.
SECTION 6.07. Cooperation. The Seller shall cooperate with the
Purchaser with respect to compliance with the covenants set forth in this
Article VI, including entering into a transition services agreement with the
Purchaser to provide for continued benefit coverage to Acquired Employees
immediately after the Closing. The Seller also shall provide the Purchaser with
any documents relating to the Seller Benefit Plans in which Employees
participate that the Purchaser may reasonably request to enable the Purchaser to
satisfy its obligations under this Article VI.
SECTION 6.08. Remedies. The Purchaser acknowledges that a breach of
its obligations under this Article VI may cause irreparable injury to the Seller
in its goodwill, its reputation, and its employee relations, in addition to
monetary damages, which may be difficult to calculate, predict or limit, and
agrees that equitable relief, including, but not limited to, specific
enforcement of its obligations hereunder, may be appropriate (in addition to
indemnification pursuant to Article IX hereof) to prevent such breach.
Accordingly, without limiting the generality of Section 11.12, the Purchaser
agrees that it will not oppose a petition by the Seller for equitable relief
with respect to a threatened or actual breach of the Purchaser's obligations
under this Article VI on the grounds that such relief is inappropriate.
SECTION 6.09. Indemnification. The Seller shall indemnify and hold
harmless the Company, any of its Subsidiaries, their respective officers,
directors, successors and permitted transferees and assigns and each New Company
Benefit Plan against any and all Losses arising out of or relating to (i) any
Seller Benefit Plan or other Benefit Plan sponsored, maintained or contributed
to by the Seller or any ERISA Affiliate (and any Benefit Plan no longer in
effect that was previously sponsored, maintained or contributed to by the Seller
or any ERISA Affiliate), whether arising out of or relating to any event or
state of facts occurring or existing before, on or after the Closing Date, and
including, without limitation, any liabilities arising under Title IV of ERISA,
Section 302 of ERISA and section 412 or 4971 of the Code, (ii) the separation,
division, allocation, unwinding or similar event involving the liabilities of
the joint venture between Vitro S.A. and the Company with respect to Benefit
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Plans, (iii) the pension plan asset transfer executed pursuant to the Agreement
of Purchase and Sale of Assets, dated April 28, 1988, and the Pension
Contribution and Asset Transfer Letter Agreement, dated June 22, 1988, (iv) any
post-retirement medical and/or life insurance benefit for Acquired Employees who
are eligible to retire as of the Closing Date and former Employees of the
Company or any of its Subsidiaries (other than Employees of Revere Ware and the
Foreign Subsidiaries), (v) any individual who is on "loan" status to the
Pressware plant pursuant to the Pressware Union Agreement, and (vi) any
obligation to make special financial payments pursuant to the Pressware Union
Agreement, including Section 2(A), 2(B) or 2(C) thereof, in excess of any
amounts reimbursed pursuant to Section 6.02(d)(ii)(E) hereof.
SECTION 6.10. Survival. The covenants and agreements of the parties
hereto contained in this Article VI shall survive the Closing and shall remain
in full force and effect until the expiration of all statutes of limitations
with respect to the respective matters set forth herein.
ARTICLE VII
TAX MATTERS
SECTION 7.01. Tax Indemnities. (a) Except to the extent reserved for
on the Closing Balance Sheet (but only to the extent such reserve is taken into
account in determining the Cash Dividend Amount adjustment under Section 2.04(c)
hereof) from and after the Closing Date, without duplication, the Seller shall
indemnify the Purchaser and the Company and their Affiliates against all Taxes
(including reasonable attorneys' and accountants' fees and other reasonable
out-of-pocket expenses incurred in connection therewith) (i) imposed on or
payable by the Company or any Subsidiary with respect to any taxable period or
portion thereof that ends on or before the Closing Date (including any taxes
allocated to such period under Section 7.01(d) hereof), (ii) imposed on or
payable by the Company or any Subsidiary under Treasury Regulation 1.1502-6 (or
any similar provision of state, local or foreign law) by reason of the Company
or any Subsidiary being included in any consolidated, affiliated, combined or
unitary group at any time on or before the Closing Date, (iii) imposed on or
payable by the Company or any Subsidiary as a result of (A) the Code section
338(h)(10) Election with respect to the Company and Revere Ware Corporation
referred to in Section 7.07 and (B) an actual election under a state or local
provision which is analogous or comparable to Code Section 338(h)(10); (iv)
relating to Foreign Sales Corporation or imposed as a result of the transactions
contemplated by Section 5.15 hereof, (v) relating to any payments required to be
made after the Closing Date under any Tax indemnity, Tax sharing, or Tax
allocation agreement between the Seller and the Company under which the Company
was obligated, or was a party, on or prior to the Closing Date, and (vi) arising
from the breach of any representation, warranty or covenant of Seller with
respect to Taxes under this
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Agreement. No indemnity shall be provided under this Agreement for any Taxes
resulting from any transaction of the Company or any Subsidiary occurring on the
Closing Date after the Closing that is not in the ordinary course of business.
(b) From and after the Closing Date, without duplication, the
Purchaser and the Company shall indemnify the Seller and its Affiliates against
all Taxes (including reasonable attorneys' and accountants' fees and other
reasonable out-of-pocket expenses incurred in connection therewith) (i) arising
from the breach of any representation, warranty or covenant of Purchaser with
respect to Taxes under this Agreement or (ii) imposed on the Company and the
Subsidiaries, which Taxes are not subject to indemnification pursuant to
paragraph (a) of this Section 7.01, including, but not limited to, Taxes (A)
resulting from any transaction of the Company and the Subsidiaries occurring
after the Closing Date or on the Closing Date after the Closing that is not in
the ordinary course of business or (B) with respect to any taxable period or
portion thereof that begins after the Closing Date and that are imposed on the
Company or any of the Subsidiaries.
(c) Payment by the indemnitor of any amount due under this Section
7.01 shall be made within ten days following written notice by the indemnitee
that payment of such amounts to the appropriate tax authority is due, provided
that the indemnitor shall not be required to make any payment earlier than two
days before it is due to the appropriate tax authority. If the Seller receives
an assessment or other notice of Taxes due with respect to the Company or any of
the Subsidiaries for any period for which the Seller is not responsible, in
whole or in part, pursuant to paragraph (a) of this Section 7.01, then the
Purchaser shall pay such Tax, or if the Seller pays such Tax, then the Purchaser
or the Company shall pay to the Seller, in accordance with the first sentence of
this Section 7.01(c), the amount of such Tax for which the Seller is not
responsible. In the case of a Tax that is contested in accordance with the
provisions of Section 7.03, payment of the Tax to the appropriate tax authority
will not be considered to be due earlier than the date a final determination to
such effect is made by the appropriate taxing authority or court. Final
determination shall have the meaning as set forth in 1313(a) of the Code.
(d) Seller and Purchaser shall, to the extent permitted by
applicable law and except as otherwise provided herein, elect with the relevant
taxing authority to close the taxable period of the Company and the Subsidiaries
at the end of the day on the Closing Date. For purposes of this Agreement, in
the case of any Tax that is imposed on a periodic basis and is payable for a
taxable period that begins before the Closing Date and ends after the Closing
Date (including without limitation any Taxes resulting from a Tax audit or
administrative court proceeding), the portion of such Taxes which is payable for
the portion of such taxable period ending on the Closing Date shall be (i) in
the case of any Tax other than a Tax based upon or measured by income or
receipts, the amount of such Tax for the entire taxable period (or, in the case
of such Taxes determined on an arrears basis, the amount of
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such Tax for the immediately preceding period) multiplied by a fraction, the
numerator of which is the number of days in the portion of such taxable period
ending on the Closing Date and the denominator of which is the number of days in
the entire taxable period and (ii) in the case of a Tax based upon or measured
by income or receipts, the amount which would be payable if the relevant taxable
period ended on the Closing Date. Any credit or refund resulting from an
overpayment of Taxes shall be prorated based upon the method employed in clause
(ii) of the immediately preceding sentence. In the case of any Tax based upon or
measured by capital (including net worth or long-term debt) or intangibles, any
amount thereof required to be allocated under this Section 7.01(d) shall be
computed by reference to the level of such items on the Closing Date. The
taxable period of any partnership or other pass-through entity in which the
Company or any Subsidiary is a partner or other beneficial interest holder shall
be deemed to terminate on the Closing Date. All determinations necessary to
effect the foregoing allocations shall be made in a manner consistent with prior
practice of the Company and the Subsidiaries.
SECTION 7.02. Refunds and Tax Benefits. (a) Subject to paragraph (b)
of this Section 7.02, the Purchaser shall promptly pay to the Seller the amount
of any refund or credit or offset (including any interest paid or credited or
any offset allowed with respect thereto but reduced by any Taxes that the
Purchaser, the Company or any Subsidiary shall be required to pay with respect
thereto) received or used, in the case of a credit or offset, by the Purchaser,
the Company or any Subsidiary of Taxes (i) relating to taxable periods or
portions thereof ending on or before the Closing Date (including any Taxes
allocated to such period under Section 7.01(d) hereof) provided Seller would be
liable for such Taxes under Section 7.01(a) hereof, and only to the extent that
any such refunds or credits or offsets are in excess of the amount of refunds
for Taxes reflected on the Closing Balance Sheet (but only to the extent such
refund is taken into account in determining the Cash Dividend Amount adjustment
under Section 2.04(c) hereof) or (ii) attributable to an amount paid by the
Seller under Section 7.01 hereof. The amount of any refunds or credits or
offsets (including any interest paid or credited with respect thereto) received
by the Purchaser, the Company or any Subsidiary shall be for the account of the
Purchaser if (i) the refund, credit or offset is of Taxes (A) relating to
taxable periods or portions thereof that begin on or after the Closing Date
(including any Taxes allocated to such period under Section 7.01(d) hereof) or
(B) relating to taxable periods or portions thereof ending on or before the
Closing Date provided such refund, credit or offset relates to Taxes for which
Seller would not be liable under Section 7.01(a) hereof, or (ii) the refund,
credit or offset relates to an adjustment to a taxable period that begins before
the Closing Date that arises from an adjustment to a taxable period beginning on
or after the Closing Date, but only, in the case of items referred to in clause
(ii), if the adjustment would not impose a material Tax cost or otherwise
materially adversely affect the Seller or any of its Affiliates. The Purchaser
shall, if the Seller so requests and at the Seller's expense, cause the relevant
entity to file for and use its reasonable best efforts to obtain and expedite
the receipt of any refund to which the Seller is entitled under this Section
7.02, provided, however, that
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the Purchaser must consent to any such refund claim, which consent may not be
unreasonably withheld (for this purpose, withholding of consent shall be
reasonable if such refund claim could reasonably be expected to have a material
tax cost or otherwise materially adversely affect Purchaser, the Company, the
Subsidiaries or any of their Affiliates). If an adjustment is made with respect
to a taxable period ending on or before the Closing Date in respect of Taxes of
the Company or the Subsidiaries that increases the Tax liability of the
Purchaser Group for any taxable period including or ending after the Closing
Date (a "Post-Closing Tax Detriment") and decreases the Tax liability of the
Seller Group, Seller shall pay to Purchaser the amount of any such Tax decrease
at the time such Post-Closing Tax Detriment is realized by the Purchaser. A
Post-Closing Tax Detriment will be considered to be realized for purposes of
this Section 7.02 at the time that it increases the aggregate Tax liability of
the Purchaser Group, provided, however, a Post-Closing Tax Detriment will be
considered realized only to the extent it increases the aggregate Tax liability
of the Purchaser Group. If an adjustment is made with respect to a taxable
period ending after the Closing Date in respect of Taxes of the Company or the
Subsidiaries that increases the Tax liability of the Seller Group for any
taxable period ending on or before the Closing Date and decreases the tax
liability of the Purchaser Group, Purchaser shall pay to Seller the amount of
any such Tax decrease (a "Pre-Closing Tax Detriment") at the time such
Pre-Closing Tax Detriment is realized by the Seller. A Pre-Closing Tax Detriment
will be considered to be realized for purposes of this Section 7.02 at the time
that it increases the aggregate Tax liability of the Seller Group, provided,
however, a Pre-Closing Tax Detriment will be considered realized only to the
extent it increases the aggregate Tax liability of the Seller Group.
(b) The Seller has applied to the IRS for a refund of certain FICA
taxes paid with respect to employees of the Company for the years January 1,
1993 through December 31, 1996. The Seller has provided copies of such
application to the Purchaser. The Seller and the Purchaser agree that the Seller
shall pay the full amount of any refund received in respect of employees'
withholdings and payments to the employees of the Company entitled to receive
the same, and that the Seller shall (i) retain all refunds received in respect
of the respective employers' withholdings and payments (but only to the extent
not taken into account in determining the Cash Dividend Amount adjustment under
Section 2.04(c) hereof) and (ii) be liable for any reductions in, or net
deficiencies associated with, such refunds. The refund claim will not be
reflected as an asset on the Closing Balance Sheet.
(c) The Purchaser and the Company shall make any and all elections
under any state, local and foreign tax provisions comparable to section
172(b)(3) of the Code in any state, locality, or foreign jurisdiction within
which the Company or any of the Subsidiaries file a combined, unitary or similar
return with the Seller or any of its Affiliates (other than the Company or any
of the Subsidiaries) to relinquish the entire carryback period with respect to
any net operating loss attributable to the Company or any of the Subsidiaries in
any taxable period beginning after the Closing Date that could be carried back
to a taxable year of the
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65
Company or any such Subsidiary ending on or before the Closing Date. Neither the
Seller nor any Affiliate thereof shall be required to pay to the Purchaser, the
Company or any Subsidiary any refund or credit of Taxes that results from the
carryback to any taxable period ending on or before the Closing Date of any net
operating loss, capital loss or tax credit attributable to the Company or any of
its Subsidiaries in any taxable period beginning after the Closing Date, except
that the Company or any of its Subsidiaries that have not filed combined,
unitary or similar returns with the Seller or any of its Affiliates (other than
the Company or any of its Subsidiaries) shall be entitled to carryback losses or
tax credits from any taxable period beginning on or after the Closing Date to
any taxable period of such Company ending on or prior to the Closing Date, but
only if such carryback would not impose a material Tax cost or otherwise
materially adversely affect the Seller or any of its Affiliates.
SECTION 7.03. Contests. (a) After the Closing Date, each of the
Seller and the Purchaser shall promptly notify the other party in writing upon
receipt of written notice of the commencement of any Tax audit or administrative
or judicial proceeding or of any demand or claim on the Seller, the Purchaser or
the Company or any Subsidiary which, if determined adversely to the taxpayer or
after the lapse of time, would be grounds for indemnification by the other party
under Section 7.01. Such notice shall contain factual information (to the extent
known to the notifying party) describing the asserted Tax liability in
reasonable detail and shall include copies of any notice or other document
received from any taxing authority in respect of any such asserted Tax
liability. If the indemnitee under Section 7.01 fails to give the indemnitor
under Section 7.01 prompt notice of an asserted Tax liability as required by
this Section 7.03, then the indemnitor shall not have any obligation to
indemnify for any loss arising out of such asserted Tax liability but only to
the extent that failure to give such notice results in a detriment to the
indemnitor.
(b) In the case of an audit or administrative or judicial proceeding
that relates to periods ending on or before the Closing Date, the Seller shall
have the sole right, at its expense, to control the conduct of such audit or
proceeding, but only to the extent that such audit or proceeding relates to a
Tax for which the Seller has a potential indemnification obligation under
Section 7.01; provided, however, that if the results of such contest could
reasonably be expected to have a material Tax cost to Purchaser, the Company, or
the Subsidiaries for any taxable period including or ending after the Closing
Date, then Seller and Purchaser shall jointly control the defense and settlement
of any such contest and each party shall cooperate with the other party at its
own expense and there shall be no settlement or closing or other agreement with
respect thereto without the consent of the other party, which consent shall not
be unreasonably withheld and, if the Seller does not assume the defense of any
such audit or proceeding, the Purchaser may defend the same in such manner as it
may deem appropriate, including, but not limited to, settling such audit or
proceeding; provided, however, that the Purchaser shall not settle any such
audit or proceeding without the consent of the Seller, which consent shall not
be unreasonably withheld. If the Seller chooses to
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control the contest, the Purchaser shall promptly empower and shall cause the
Company or Subsidiary or other party promptly to empower (by power of attorney
and such other documentation as may be appropriate) such representatives of the
Seller as it may designate to represent the Purchaser, Company or Subsidiary or
other party or its successor in the contest insofar as the contest involves an
asserted tax liability for which the Seller would be liable under Section 7.01.
Purchaser shall have sole control over the defense and settlement of any contest
relating to taxable periods or portions thereof that begin on or after the
Closing Date (including, subject to Section 7.03(c) hereof, any Taxes allocated
to such period under Section 7.01(d) hereof) or relating to taxable periods or
portions thereof ending on or before the Closing Date provided the Taxes to
which such contest relates are Taxes for which Seller is not liable under
Section 7.01(a) hereof, provided, however, that if the results of any such
contest otherwise controlled by Purchaser could reasonably be expected to have a
material Tax cost or otherwise materially adversely affect the Seller or the
Seller Group, then the Seller and Purchaser shall jointly control the defense
and settlement of any such contest and each party shall cooperate with the other
party at its own expense and there shall be no settlement or closing or other
agreement with respect thereto without the consent of the other party, which
consent shall not be unreasonably withheld.
(c) With respect to periods beginning before the Closing Date and
ending after the Closing Date, (i) each party may participate in an audit or
proceeding which relates to any such period and (ii) such audit or proceeding
shall be controlled by that party which would bear the burden of the greater
portion of the sum of the adjustment and any corresponding adjustments that may
reasonably be anticipated for future Tax periods; provided that neither party
shall settle any such audit or proceeding without the consent of the other,
which consent shall not be unreasonably withheld. The principle set forth in the
preceding sentence shall govern also for purposes of deciding any issue that
must be decided jointly (in particular, choice of judicial forum) in situations
in which separate issues are otherwise controlled hereunder by the Purchaser and
the Seller.
(d) The Purchaser and the Seller agree to cooperate, and the
Purchaser agrees to cause the Company and Subsidiaries to cooperate, in the
defense against or compromise of any claim in any audit or proceeding.
(e) Seller shall promptly notify Purchaser of the commencement of
any claim, audit, examination or other written change or adjustment received by
Seller, in each case relating to the Company or the Subsidiaries, by any taxing
authority which could reasonably be expected to affect the liability of
Purchaser, the Company or the Subsidiaries for a material amount of Taxes, and
Seller shall keep Purchaser informed of the progress thereof. The failure to
provide such notice shall not affect the indemnification obligations under this
Section unless the indemnified party is materially prejudiced as a result of
such failure.
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(f) Purchaser shall promptly notify Seller of the commencement of
any claim, audit, examination or other written change or adjustment received by
Purchaser, in each case relating to the Company or the Subsidiaries for periods
up to and including the Closing Date, by any taxing authority which could
reasonably be expected to affect the liability of Seller, the Company or the
Subsidiaries (with respect to periods up to and including the Closing Date) for
a material amount of Taxes, and Purchaser shall keep Seller informed of the
progress thereof. The failure to provide such notice shall not affect the
indemnification obligations under this Section unless the indemnified party is
materially prejudiced as a result of such failure.
SECTION 7.04. Preparation of Tax Returns. (a) The Seller shall
prepare and file any Tax Returns relating to the Company and the Subsidiaries
for any taxable periods that end on or prior to the Closing Date (the "Seller
Returns"). The Seller Returns shall be prepared in a manner consistent with the
prior practice of the Company and the Subsidiaries (except to the extent counsel
for the Seller shall determine that there is no reasonable basis therefor) and,
in case of Seller Returns relating to Income Taxes, the Seller shall deliver the
Seller Returns to the Purchaser at least 15 days before such Seller Return is
due to be filed (taking into account any extensions of time to file such return
that have been properly obtained) for Purchaser's review and comment in
accordance with Section 7.04(b) hereof. In the case of any Tax Return for a
period that includes the Closing Date that does not cover a taxable period that
ends on the Closing Date (the "Purchaser Returns"), Purchaser shall prepare or
cause the Company to prepare such Purchaser Return in a manner consistent with
the prior practice of the Company and the Subsidiaries (except to the extent
counsel for the Purchaser shall determine that there is no reasonable basis
therefor) and the Purchaser shall deliver such Purchaser Return to the Seller at
least 7 days before such return is due to be filed (taking into account any
extensions of time to file such return that have been properly obtained) for
Seller's review and comment in accordance with Section 7.04(b) hereof. Seller
shall reimburse the Purchaser for any Taxes on the Purchaser Return owed by
Seller pursuant to Sections 7.01(a) and 7.01(d) hereof to the extent such amount
exceeds the accrual for such Taxes (other than deferred Taxes that reflect the
differences between book and tax basis in assets and liabilities), if any,
established therefor in the Closing Balance Sheet and only to the extent it is
taken into account in determining the Cash Dividend Amount adjustment under
Section 2.04(c) hereof. The Purchaser shall prepare and file or cause the
Company to prepare and file any Tax return relating to the Company or any of the
Subsidiaries for any taxable periods that begin on or after the Closing Date.
(b) The Purchaser shall have the right to object to any items set
forth on the Seller Returns and the Seller shall have the right to object to any
items set forth on the Purchaser Returns within 7 days of the delivery of a
particular return but only if there is no reasonable basis for the position
taken with respect to an item or items set forth on such return
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or such return is otherwise substantially inaccurate. In the event of such an
objection, the parties along with the Seller's counsel or the Seller's
Accountants and the Purchaser's counsel or the Purchaser's Accountants shall
attempt in good faith to resolve the dispute and any resolution shall be final
and binding on them. If the parties cannot resolve any such dispute within 7
days of such delivery by Purchaser to Seller or Seller to Purchaser as the case
may be, the items remaining in dispute shall be submitted to an independent
accounting firm of international reputation selected by, and mutually acceptable
to, the Seller and the Purchaser or, if they cannot agree, the Seller's
Accountants and Purchaser's Accountants shall select such an independent firm.
The independent accounting firm so selected shall determine the proper amounts
for the items remaining in dispute and the Purchaser and the Seller shall be
bound by the determination by the independent accounting firm absent manifest
error. The independent accounting firm shall make any such determination within
7 days after submission of the remaining disputed items. If a Tax Return is due
before the date a disputed item is resolved hereunder, it shall be filed as
prepared and resolved items shall be reflected on an amended return.
SECTION 7.05. Cooperation and Exchange of Information. The Seller
and the Purchaser will provide each other with such cooperation and information
as either of them reasonably may request of the other in filing any Tax Return,
amended return or claim for refund, determining a liability for Taxes or a right
to a refund of Taxes or participating in or conducting any audit or other
proceeding in respect of Taxes. Such cooperation and information shall include
providing copies of relevant Tax returns or portions thereof, together with
accompanying schedules and related work papers and documents relating to rulings
or other determinations by taxing authorities. Each party shall make its
employees reasonably available on a mutually convenient basis to provide
explanations of any documents or information provided hereunder. Each party will
retain all returns, schedules and work papers and all material records or other
documents relating to Tax matters of the Company and the Subsidiaries for the
taxable period that includes the Closing Date and for all prior taxable periods
until the later of (i) the expiration of the statute of limitations of the
taxable periods to which such returns and other documents relate, without regard
to extensions except to the extent notified by the other party in writing of
such extensions for the respective Tax periods or (ii) eight years following the
date (without extension) for such returns; provided, however, that a party shall
not dispose of any such materials if at least 90 Business Days before the later
of the end of either of the periods described in clause (i) or (ii) the other
party has notified the disposing party of its desire to review such material in
which case such other party shall be given an opportunity, at its cost and
expense, to remove and retain all or any part of such materials. Any information
obtained under this Section 7.05 shall be kept confidential, except as may be
otherwise necessary in connection with the filing of returns or claims for
refund or in conducting an audit or other proceeding.
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SECTION 7.06. Conveyance Taxes. The Purchaser and the Seller each
shall be liable for and shall pay one-half of all sales, transfer, stamp, stock
transfer, value added, use, real property transfer or gains and similar taxes,
fees, assessments, levies, duties, tariffs, imposts and other charges incurred
as a result of the sale of the Acquired Shares and other transactions
contemplated hereby. The Purchaser and the Seller agree to cooperate in the
execution and delivery of all instruments and certificates necessary to enable
the Seller and/or the Purchaser to comply with any pre-Closing filing
requirements.
SECTION 7.07. Section 338(h)(10) Election. (a) The Seller and the
Purchaser shall jointly make a deemed asset sale election described under Code
section 338(h)(10) (the "Code section 338(h)(10) Election") and shall make all
corresponding or similar elections under applicable state or local law with
respect to the Company and Revere Ware Corporation in connection with the
qualified stock purchase of the Acquired Shares by the Purchaser hereunder and
deemed purchase of the stock of Revere Ware Corporation (collectively,
"Elections"). The Seller and the Purchaser shall file all such Elections on a
timely basis and comply with all rules and regulations applicable to such
Elections. The Seller and the Purchaser shall cooperate with each other to take
all actions necessary and appropriate (including filing such forms, returns,
elections, schedules and documents on a joint or separate basis as may be
required) to effect and preserve timely Elections in accordance with applicable
Treasury Regulations under Code section 338 and comparable state or local laws.
(b) For the purpose of making the Code section 338(h)(10) Election,
the Purchaser shall compute and allocate the "modified aggregate deemed sales
price" among the assets of the Company (including items assigned to the Company
at or prior to the Closing under Article V) and of Revere Ware Corporation in
accordance with the provisions of Code section 338 and the Treasury Regulations
thereunder (the "Allocation"), and shall deliver to the Seller the Allocation
within 45 days of the Closing for the Seller's review and comment. The Seller
may dispute amounts set forth on the Allocation within 20 Business Days of
delivery of the Allocation by the Purchaser to the Seller if the Seller
reasonably believes that any such amount or amounts are incorrect. In the event
of such a dispute, the parties along with the counsel to the Seller or the
Seller's Accountants and counsel to the Purchaser or the Purchaser's Accountants
shall attempt in good faith to resolve such dispute and any resolution shall be
final and binding on them. If the parties cannot resolve any such dispute within
20 Business Days of such delivery by the Purchaser to the Seller, the items
remaining in dispute shall be submitted to an independent accounting firm of
international reputation selected by, and mutually acceptable to, the Seller and
the Purchaser or, if they cannot agree, the Seller's Accountants and Purchaser's
Accountants shall select such an independent firm. If the independent accounting
firm so selected determines that the items remaining in dispute are not
materially incorrect, then the Purchaser and the Seller shall be bound by the
Allocation as prepared by the Purchaser. If the independent accounting firm so
selected determines that one or more of the items remaining in dispute are
materially incorrect, then the Seller and the
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Purchaser shall be bound by the allocation of such items as determined by the
independent accounting firm. The independent accounting firm shall make any such
determination within 30 Business Days after submission of the remaining disputed
items. Any subsequent adjustments to the modified aggregate deemed sales price
shall be reflected in the Allocation in a manner consistent with Code section
338 and the Treasury Regulations promulgated thereunder. The Seller shall
calculate gain or loss, if any, resulting from the Elections and the Purchaser
shall calculate tax basis in the Company's and the Subsidiaries' assets in a
manner consistent with the Allocation (as determined pursuant to the preceding
four sentences) and neither party nor the Company nor any Subsidiary shall take
any position inconsistent with the Allocation in any tax return, schedule,
estimate or otherwise; provided, however, that the Seller shall be entitled to
subtract its selling costs from the "modified aggregate deemed sales price" for
purposes of calculating gain or loss and the Purchaser shall be entitled to add
its acquisition costs to the "adjusted grossed-up basis" of the assets of the
Company and the Subsidiaries for purposes of determining the basis of the
Company's and the Subsidiaries' assets. The Purchaser will not make an election
under section 338(g) of the Code with respect to the sale of the stock of the
Company and Revere Ware Corporation hereunder except in connection with the Code
section 338(h)(10) Election that will be made by the Purchaser jointly with the
Seller.
SECTION 7.08. Miscellaneous. (a) For Tax purposes, the parties agree
to treat all payments made under this Article VII, under any other indemnity
provisions contained in this Agreement, and for any misrepresentations or
breaches of warranties or covenants, as adjustments to the purchase price.
(b) This Article VII (and not Article IX) shall be the sole
provision for indemnification against breach of representations, warranties,
covenants and agreements regarding Tax matters.
(c) For purposes of this Article VII, all references to the
Purchaser, the Seller, the Company and the Subsidiaries include successors.
(d) The covenants and agreements of the parties hereto contained in
this Article VII shall survive the Closing and shall remain in full force and
effect until 60 days after the expiration of the applicable statutes of
limitations (taking into account any extensions or waivers thereof) with respect
to any Taxes that would be indemnifiable by the Seller under Section 7.01(a) of
this Agreement or by the Purchaser under Section 7.01(b) of this Agreement.
(e) The Company and the Subsidiaries shall be entitled to make and
receive any and all payments required to be made pursuant to any Tax sharing
agreement with the Seller or its Affiliates prior to the Closing, but only to
the extent such payments are taken into account in determining the Cash Dividend
Amount adjustment under Section 2.04(c) hereof. Except to the extent provided
herein, all Tax sharing agreements or similar agreements with respect to or
involving the Company and the Subsidiaries and the Seller shall be terminated as
of the Closing Date and, after the Closing Date, the Seller, its Affiliates, the
Company, and the Subsidiaries shall not be bound thereby or have any liability
thereunder.
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ARTICLE VIII
CONDITIONS TO CLOSING
SECTION 8.01. Conditions to Obligations of the Seller and the
Company. The obligations of the Seller and the Company to consummate the
transactions contemplated by this Agreement shall be subject to the fulfillment
or waiver, at or prior to the Closing, of each of the following conditions:
(a) Representations and Warranties; Covenants. (i) The
representations and warranties of the Purchaser contained in this
Agreement shall be true and correct as of the Closing, with the same force
and effect as if made as of the Closing (or, in the case of
representations and warranties of the Purchaser which address matters only
as of a particular date, as of such date), except where the failures to be
so true and correct (without giving effect to any limitation or
qualification as to "materiality" (including the word "material") or
"material adverse effect" set forth therein) would not, individually or in
the aggregate, have a material adverse effect on the ability of the
Purchaser to consummate the transactions contemplated by this Agreement;
(ii) the covenants and agreements contained in this Agreement to be
complied with by the Purchaser at or prior to the Closing shall have been
complied with in all material respects; and (iii) the Seller shall have
received a certificate of the Purchaser as to the matters set forth in
clauses (i) and (ii) above signed by a duly authorized officer of the
Purchaser;
(b) HSR Act; Canada Competition Act. Any waiting period (and any
extension thereof) under the HSR Act and the Canada Competition Act
applicable to the purchase of the Shares contemplated hereby shall have
expired or shall have been terminated;
(c) No Order. No Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, injunction
or other Governmental Order which is in effect and has the effect of
making the transactions contemplated by this Agreement illegal or
otherwise restraining or prohibiting consummation of such transactions,
and no Governmental Authority shall have initiated any action that seeks
to impose criminal sanctions on the Seller or any of its Affiliates or
that has a reasonable likelihood of success on the merits and would impose
a material liability on the Seller, in each case, that is intended to have
the foregoing effect; and
(d) Stockholders Agreement. The Purchaser shall have executed and
delivered to the Seller the Stockholders Agreement.
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SECTION 8.02. Conditions to Obligations of the Purchaser. The
obligations of the Purchaser to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment or waiver, at or prior to the
Closing, of each of the following conditions:
(a) Representations and Warranties; Covenants. (i) The
representations and warranties of the Seller contained in this Agreement
shall be true and correct as of the Closing, with the same force and
effect as if made as of the Closing (or, in the case of representations
and warranties of the Seller which address matters only as of a particular
date, as of such date), except where the failures to be so true and
correct (without giving effect to any limitation or qualification as to
"materiality" (including the word "material") or "Material Adverse Effect"
set forth therein) would not, individually or in the aggregate, have a
Material Adverse Effect; (ii) the covenants and agreements contained in
this Agreement to be complied with by the Seller at or prior to the
Closing shall have been complied with in all material respects; and (iii)
the Purchaser shall have received a certificate of the Seller as to the
matters set forth in clauses (i) and (ii) above signed by a duly
authorized officer of the Seller;
(b) HSR Act; Canada Competition Act. Any waiting period (and any
extension thereof) under the HSR Act and the Canada Competition Act
applicable to the purchase of the Shares contemplated hereby shall have
expired or shall have been terminated;
(c) No Order. No Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, injunction
or other Governmental Order which is in effect and has the effect of
making the transactions contemplated by this Agreement illegal or
otherwise restraining or prohibiting consummation of such transactions,
and no Governmental Authority shall have initiated any action that seeks
to impose any criminal sanctions on the Purchaser or any of its Affiliates
or the Company or any Subsidiary or that has a reasonable likelihood of
success on the merits and would impose material liability on any such
Person, in each case, that is intended to have the foregoing effect;
(d) Certain Company Indebtedness. Prior to the Closing, the Company
shall have retired and paid in full (or otherwise canceled without any
adverse tax consequences to the Company) all its Indebtedness (including
the liabilities described in Section 3.09(e)(iii)), other than the
Indebtedness under the Facility Financing Interests.
(e) Ancillary Agreements. The Seller shall have duly executed and
delivered to the Purchaser, to the extent requested by the Purchaser, the
Administrative Services Agreement, the CORNING WARE and PYROCERAM License
Agreement, the PYREX License Agreement, the Patent and Know-How License
Agreement, the
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Temporary CORNING License Agreement, the Greenville Supply Agreement, the
Technology Support Agreement, the Shared Facility Agreement and the
Transition Services Agreement;
(f) Stockholders Agreement. The Seller shall have executed and
delivered to the Purchaser the Stockholders Agreement;
(g) Resignation of Directors. All directors of the Company and any
Subsidiary whose resignations shall have been requested by the Purchaser
not fewer than five Business Days prior to the Closing Date shall have
submitted their resignations or been removed from office effective as of
the Closing Date; and
(h) Termination of Certain Transactions. The Purchaser shall have
received legally binding documentation evidencing the termination without
liability (except as described in Section 5.16) to the Purchaser, the
Company or any Subsidiary of any transactions with the Seller or any of
its Affiliates (other than agreements entered into pursuant to the
provisions hereof).
(i) Certain Arrangements Regarding Management. Peter Campanella, the
President and Chief Executive Officer of the Company, shall have entered
into an agreement with the Company on substantially the terms set forth in
the attachment to the letter dated February 28, 1998, signed by Mr.
Campanella, relating to the management equity plan for members of senior
management of the Company; provided that the provisions of this Section
8.02(i) shall not be available to the Purchaser if it has changed, or
stated its intention to change, in a manner adverse to Mr. Campanella or
any other members of management of the Company who are asked by the
Purchaser to enter into such agreement, the terms of such plan from those
attached to such letter.
(j) Section 1445 Withholding. The Seller shall have delivered to the
Purchaser a certificate complying with Treasury Regulations section
1.1445-2(b)(2), in form and substance reasonably satisfactory to the
Purchaser, duly executed and acknowledged, certifying that the Seller is
not a foreign person within the meaning of such section.
ARTICLE IX
INDEMNIFICATION
SECTION 9.01. Survival of Representations and Warranties. Subject to
the limitations and other provisions of this Agreement, the representations and
warranties of the parties hereto contained in this Agreement shall survive the
Closing and shall remain in full force and effect for a period of eighteen
months after the Closing Date; provided, however,
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that the representations and warranties contained in Section 3.03 and 3.16 shall
survive until 60 days after the expiration of the statute of limitations related
thereto.
SECTION 9.02. Indemnification for the Benefit of the Seller. (a) The
Purchaser agrees to indemnify or to cause the Company, from and after the
Closing Date, to indemnify the Seller and its Affiliates, officers, directors,
employees, agents, successors and assigns (as used in this Article IX, each a
"Seller Indemnified Party") against and hold them harmless from all Liabilities,
losses, damages, claims, costs, and expenses (including reasonable attorney's
fees) (collectively, "Losses") actually incurred by them arising out of (i) the
breach of any representation or warranty of the Purchaser contained herein, it
being understood that for all purposes of this Section 9.02, such
representations and warranties shall be interpreted without giving effect to any
limitations or qualifications as to "materiality" (including the word
"material") set forth therein, (ii) the breach of any covenant or agreement of
the Purchaser contained herein (other than in Article VII, it being understood
that the sole remedy for breach thereof shall be pursuant to Article VII), (iii)
the Facility Financing Interests, the 1988 Guaranty and the 1992 Guaranty and
(iv) the conduct of the Business by the Company or the Subsidiaries following
the Closing. Anything in Section 9.01 to the contrary notwithstanding, no claim
may be asserted nor may any action be commenced against the Purchaser for breach
of any representation or warranty contained herein, unless written notice of
such claim or action is received by the Purchaser describing in reasonable
detail the facts and circumstances with respect to the subject matter of such
claim or action on or prior to the date on which the representation or warranty
on which such claim or action is based ceases to survive as set forth in Section
9.01, irrespective of whether the subject matter of such claim or action shall
have occurred before or after such date.
(b) No claim may be made against the Purchaser or the Company for
indemnification pursuant to Section 9.02(a)(i) unless the aggregate of all
Losses of the Seller Indemnified Parties with respect to this Section 9.02 shall
exceed an amount equal to $4,000,000, and the Purchaser shall then only be
liable for Losses in excess of such $4,000,000 amount. No Seller Indemnified
Party shall be indemnified pursuant to Section 9.01(a)(i) with respect to any
individual item of Loss if the aggregate of all payments made for Losses of the
Seller Indemnified Parties for which the Seller Indemnified Parties have
received indemnification pursuant to this Section 9.02(a)(i) shall have exceeded
an amount equal to 40% of the sum of the Share Purchase Price and the Cash
Dividend Amount. For the purposes of this Section 9.02(b), in computing such
individual or aggregate amounts of claims, the Person seeking indemnification
shall deduct from such amounts (i) any insurance recoveries actually received by
such Person offsetting the amount of such Loss (net of cost of recovery), (ii)
any recoveries actually received by such Person from third parties pursuant to
indemnification or otherwise with respect thereto (net of cost of recovery),
(iii) any Tax benefit to such Person attributable to amounts indemnified against
and (iv) any adjustments to the Cash Dividend Amount pursuant to Section 2.04
with respect to the subject matter in dispute. A Tax benefit will be considered
to be recognized by a Seller Indemnified Party that is a member of the Seller
Group for purposes of this Section 9.02 at the time it reduces the
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aggregate Tax liability of the Seller Group. Any indemnification payment under
this Section 9.02 shall be increased by the amount of any liability for Taxes
arising thereunder if such payment is finally determined by a taxing authority
or a court to be taxable income to the party receiving such payment.
(c) Without duplication of the amounts referred to in the last
sentence of the preceding paragraph, payments by the Purchaser or the Company
pursuant to Section 9.02(a) shall be limited to the amount of any Loss that
remains after deducting therefrom (i) any insurance recoveries actually received
by the Person seeking indemnification offsetting the amount of such Loss (net of
cost of recovery), (ii) any recoveries actually received by such Person from
third parties pursuant to indemnification or otherwise with respect thereto (net
of cost of recovery), (iii) any Tax benefit to such Person attributable to
amounts indemnified against and (iv) any adjustments to the Cash Dividend Amount
pursuant to Section 2.04 with respect to the subject matter in dispute.
(d) Subject to Section 11.12, the Seller hereby acknowledges and
agrees that its sole and exclusive remedy with respect to any and all claims
relating to the subject matter of this Agreement (other than for fraud or
intentional breach) shall be pursuant to the indemnification provisions set
forth in this Article IX and Article VII (with respect to the subject matter
thereof). In furtherance of the foregoing, the Seller hereby waives, to the
fullest extent permitted under applicable law, any and all rights, claims and
causes of action (other than for fraud or intentional breach) it may have
against the Purchaser arising under or based upon any federal, state, local or
foreign statute, law, ordinance, rule or regulation (including, without
limitation, any such rights, claims or causes of action arising under or based
upon common law or otherwise).
(e) Except as expressly set forth in this Agreement, the Purchaser
is not making any representation, warranty, covenant or agreement with respect
to the matters contained herein. Anything herein to the contrary
notwithstanding, no breach of any representation, warranty, covenant or
agreement contained herein (other than for fraud or intentional breach) shall
give rise to any right on the part of the Seller, after the consummation of the
transactions contemplated by Article II, to rescind this Agreement or any of the
transactions contemplated hereby.
SECTION 9.03. Indemnification by the Seller. (a) The Seller agrees
to indemnify the Purchaser and its Affiliates, and their officers, directors,
employees, members, agents, successors and assigns (as used in this Article IX,
each a "Purchaser Indemnified Party") against and hold them harmless from all
Losses actually incurred by them arising out of (i) the breach of any
representation or warranty of the Seller contained herein (other than Section
3.16, it being understood that the sole remedy for breach thereof shall be
pursuant to Article VII or Section 3.17, it being understood that the sole
remedy for breach thereof shall be pursuant to Section 9.05), it being
understood that for all purposes of this Section 9.03, such representations and
warranties shall be interpreted without giving effect to any
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limitations or qualifications as to "materiality" (including the word
"material") or "Material Adverse Effect" set forth therein, (ii) the breach of
any covenant or agreement of the Seller contained herein (other than Article
VII, it being understood that the sole remedy for breach thereof shall be
pursuant to Article VII), (iii) any Liabilities assumed by the Seller under
Section 5.14, and (iv) all Liabilities relating to former businesses of the
Company and the Subsidiaries that were transferred from the Company or the
Subsidiaries prior to the Closing, including, without limitation, the businesses
sold to Newell Co. and the transferred businesses of Corning Brasil. Anything in
Section 9.01 to the contrary notwithstanding, no claim may be asserted nor may
any action be commenced against the Seller for breach of any representation or
warranty contained herein, unless written notice of such claim or action is
received by the Seller describing in reasonable detail the facts and
circumstances with respect to the subject matter of such claim or action on or
prior to the date on which the representation or warranty on which such claim or
action is based ceases to survive as set forth in Section 9.01, irrespective of
whether the subject matter of such claim or action shall have occurred before or
after such date.
(b) No claim may be made against the Seller for indemnification
pursuant to Section 9.03(a)(i) unless the aggregate of all Losses of the
Purchaser Indemnified Parties with respect to this Section 9.03 shall exceed an
amount equal to $4,000,000, and the Seller shall then only be liable for Losses
in excess of such $4,000,000 amount. No Purchaser Indemnified Party shall be
indemnified pursuant to Section 9.03(a)(i) with respect to any individual item
of Loss if the aggregate of all payments made for Losses of the Purchaser
Indemnified Parties for which the Purchaser Indemnified Parties have received
indemnification pursuant to this Section 9.03(a)(i) shall have exceeded an
amount equal to 40% of the sum of the Share Purchase Price and the Cash Dividend
Amount. For the purposes of this Section 9.03(b), in computing such aggregate
amounts of claims, the Person seeking indemnification shall deduct from such
amounts (i) any insurance recoveries actually received by such Person offsetting
the amount of such Loss (net of cost of recovery), (ii) any recoveries actually
received by such Person from third parties pursuant to indemnification or
otherwise with respect thereto (net of cost of recovery), (iii) any Tax benefit
to such Person attributable to amounts indemnified against and (iv) any
adjustments to the Cash Dividend Amount pursuant to Section 2.04 with respect to
the subject matter in dispute. A Tax benefit will be considered to be recognized
by a Purchaser Indemnified Party that is a member of the Purchaser Group for
purposes of this Section 9.03 at the time it reduces the aggregate Tax liability
of the Purchaser Group. Any indemnification payment under this Section shall be
increased by the amount of any liability for Taxes arising thereunder if such
payment is finally determined by a taxing authority or a court to be taxable
income to the party receiving such payment.
(c) Without duplication of the amounts referred to in the last
sentence of the preceding paragraph, payments by the Seller pursuant to Section
9.03(a) shall be limited to the amount of any Loss that remains after deducting
therefrom (i) any insurance recoveries actually received by the Person seeking
indemnification offsetting the amount of such Loss
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(net of cost of recovery), (ii) any recoveries actually received by such Person
or any of its Affiliates from third parties pursuant to indemnification or
otherwise with respect thereto (net of cost of recovery), (iii) any Tax benefit
to such Person attributable to amounts indemnified against and (iv) any
adjustments to the Cash Dividend Amount pursuant to Section 2.04 with respect to
the subject matter in dispute.
(d) Subject to Section 11.12, the Purchaser hereby acknowledges and
agrees that its sole and exclusive remedy with respect to any and all claims
relating to the subject matter of this Agreement (other than for fraud or
intentional breach) shall be pursuant to the indemnification provisions set
forth in this Article IX, Article VI (with respect to the subject matter
thereof) and Article VII (with respect to the subject matter thereof). In
furtherance of the foregoing, the Purchaser hereby waives, to the fullest extent
permitted under applicable law, any and all rights, claims and causes of action
(other than for fraud or intentional breach) it may have against the Seller
arising under or based upon any federal, state, local or foreign statute, law,
ordinance, rule or regulation (including, without limitation, any such rights,
claims or causes of action arising under or based upon common law or otherwise).
(e) Except as expressly set forth in this Agreement, the Seller is
not making any representation, warranty, covenant or agreement with respect to
the matters contained herein. Anything herein to the contrary notwithstanding,
no breach of any representation, warranty, covenant or agreement contained
herein (other than for fraud or intentional breach) shall give rise to any right
on the part of the Purchaser, after the consummation of the transactions
contemplated by Article II, to rescind this Agreement or any of the transactions
contemplated hereby.
SECTION 9.04. Indemnification Procedures. (a) A Purchaser
Indemnified Party or a Seller Indemnified Party, as the case may be (for
purposes of this Section 9.04, an "Indemnified Party"), shall give the
indemnifying party under Section 9.02 or 9.03, as applicable (for purposes of
this Section 9.04, an "Indemnifying Party"), prompt written notice of any claim,
assertion, event or proceeding by or in respect of a third party of which such
Indemnified Party has knowledge concerning any Loss as to which such Indemnified
Party may request indemnification hereunder or any Loss as to which the
$4,000,000 amount referred to in Section 9.02(b) or 9.03(b) may be applied. The
Indemnifying Party shall have the right to direct, through counsel of its own
choosing, which counsel shall be reasonably satisfactory to the Indemnified
Party, the defense or settlement of any claim or proceeding the subject of
indemnification hereunder at its own expense. If the Indemnifying Party elects
to assume the defense of any such claim or proceeding, the Indemnified Party may
participate in such defense, but in such case the expenses of the Indemnified
Party shall be paid by the Indemnified Party. The Indemnified Party shall
provide the Indemnifying Party with access to its records and personnel relating
to any such claim, assertion, event or proceeding during normal business hours
and shall otherwise cooperate with the Indemnifying Party in the defense or
settlement thereof, and the Indemnifying Party shall reimburse the Indemnified
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Party for all its reasonable out-of-pocket expenses in connection therewith. If
the Indemnifying Party elects to direct the defense of any such claim or
proceeding, the Indemnified Party shall not pay, or permit to be paid, any part
of any claim or demand arising from such asserted liability unless the
Indemnifying Party consents in writing to such payment or unless the
Indemnifying Party withdraws from the defense of such asserted liability or
unless a final judgment from which no appeal may be taken by or on behalf of the
Indemnifying Party is entered against the Indemnified Party for such liability.
No settlement in respect of any third party claim may be effected by the
Indemnifying Party without the Indemnified Party's prior written consent unless
the settlement involves a full and unconditional release of the Indemnified
Party. If the Indemnifying Party shall fail to undertake any such defense, the
Indemnified Party shall have the right to undertake the defense or settlement
thereof, at the Indemnifying Party's expense. If the Indemnified Party assumes
the defense of any such claim or proceeding pursuant to this Section 9.04 and
proposes to settle such claim or proceeding prior to a final judgment thereon or
to forgo any appeal with respect thereto, then the Indemnified Party shall give
the Indemnifying Party prompt written notice thereof and the Indemnifying Party
shall have the right to participate in the settlement or assume or reassume the
defense of such claim or proceeding in the event the Indemnifying Party agrees
to assume liability for any Losses arising from such claim or proceeding.
SECTION 9.05. Environmental Indemnification. (a) Subject to all
other terms and conditions of this Section 9.05, the Seller shall indemnify
Purchaser Indemnified Parties against and hold them harmless from all Losses
actually incurred by them arising from (i) the release of any Hazardous Material
into the environment from or at the Real Property or any other property
currently or formerly owned or operated by the Company or any Subsidiary in
connection with the Business, (ii) the transportation or disposal of any
Hazardous Material from the Real Property, or any other property currently or
formerly owned or operated by the Company or any Subsidiary in connection with
the Business, to any offsite location, (iii) any violation of or liability under
any Environmental Law related to the Business or any Hazardous Material, in each
case occurring prior to the Closing Date, and (iv) the breach of any
representation or warranty of the Seller contained in Section 3.17 (it being
understood that for purposes of Section 9.05(a)(iv), in establishing whether
such representations and warranties have been breached, the accuracy of such
representations and warranties shall be determined by giving effect to the
limitations or qualifications as to "materiality" (including the word
"material") or "Material Adverse Effect" contained therein) (hereafter
collectively referred to as "Indemnifiable Environmental Matters") in accordance
with the following formula:
(A) The Seller shall pay for eighty percent (80%) and the
Company shall pay for twenty percent (20%) of all such Losses up to
an aggregate of twenty million dollars ($20,000,000); and
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(B) The Seller shall pay for one hundred percent (100%) of all
such Losses in excess of twenty million dollars ($20,000,000).
(b) The Purchaser agrees as follows in connection with the agreement
by the Seller set forth in Section 9.05(a); provided, however, that the Seller's
obligations pursuant to Section 9.05(a) shall not be affected by the failure of
the Purchaser to comply with any of the following except to the extent the
Seller is prejudiced thereby:
(i) In the case of any Indemnifiable Environmental Matter that
requires remedial work of any kind to be performed at the Real
Property, the Purchaser Indemnified Party requesting indemnification
pursuant to this Section 9.05 shall give the Seller (A) prompt,
written notice of such Indemnifiable Environmental Matter; and (B)
all reasonable opportunity and access to the Company's or any
Subsidiary's records, personnel and the Real Property necessary for
the Seller to plan and implement such remedial work. The Seller
shall have the right to plan and implement such remedial work, and
the failure to afford the Seller such right shall be presumed to
prejudice the Seller for purposes of this Section 9.05(b); provided,
however, that if the Seller does not undertake such remedial work
within a reasonable period after such Purchaser Indemnified Party
provides the Seller with notice as set forth in clause (A) above and
reasonable opportunity and access as set forth in clause (B) above,
such Purchaser Indemnified Party may undertake such remedial work at
the Sellers' expense in accordance with the formula set forth in
Section 9.05(a). If the Seller undertakes such remedial work, the
Seller shall (x) provide such Purchaser Indemnified Party with an
opportunity to review and comment on any work plan or similar
document related to such remedial work no later than ten (10) days
prior to the date the Seller intends to submit such work plan or
document to any Governmental Authority or other third party; (y)
provide such Purchaser Indemnified Party with a copy of all
significant correspondence received from any Governmental Authority
or other third party related to such remedial work; and (z)
undertake such remedial work in a manner so as not unreasonably to
disrupt operations and in compliance with all applicable
Environmental Laws and valid directives by Governmental Authorities
with jurisdiction.
(ii) In the case of any Indemnifiable Environmental Matter
that is the subject of a third party claim (whether or not such
Indemnifiable Environmental Matter requires remedial work to be
performed at the Real Property), the Purchaser Indemnified Party
requesting indemnification pursuant to this Section 9.05 shall
comply with the procedures set forth in Section 9.04.
(iii) Notwithstanding anything to the contrary, the Seller
shall not in any way be responsible for any Losses to the extent
they arise from any
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exacerbation of an Indemnifiable Environmental Matter caused by the
actions of a Purchaser Indemnified Party after the Closing Date.
(iv) Notwithstanding anything to the contrary, the Seller
shall not in any way be responsible for any Losses arising from an
Indemnifiable Environmental Matter of which the Seller has not
received written notice pursuant to Paragraph (b)(i) or (b)(ii) of
this Section within seven (7) years after the Closing Date.
(c) Except as provided in Section 9.03(a)(iv), but otherwise
notwithstanding anything to the contrary in this Agreement, from and after
the Closing Date, the indemnification rights provided in this Section 9.05
shall be the sole and exclusive remedy against the Seller for any Loss
incurred by any Purchaser Indemnified Party for any Indemnifiable
Environmental Matter. In furtherance of the foregoing, from and after the
Closing Date, the Purchaser hereby waives, to the fullest extent permitted
under applicable law, any claim or remedy against the Seller now or
hereafter available for any Indemnifiable Environmental Matter under any
Environmental Law, including without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act and any similar
federal or state law whether or not in existence on the date hereof. This
waiver does not apply to any claim based on fraud or the intentional
breach of any representation, warranty or covenant.
ARTICLE X
TERMINATION AND WAIVER
SECTION 10.01. Termination. This Agreement may be terminated at any
time prior to the Closing:
(a) by the mutual written consent of the Seller and the Purchaser;
or
(b) by either the Seller or the Purchaser, if any Governmental
Authority with jurisdiction over such matters shall have issued a
Governmental Order restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated hereunder and such order,
decree, ruling or other action shall have become final and unappealable;
provided, however, that the provisions of this Section 10.01(b) shall not
be available to a party unless such party shall have complied with its
obligations under Section 5.04 or otherwise used its reasonable best
efforts to oppose any such Governmental Order or to have such Governmental
Order vacated or made inapplicable to the transactions contemplated by
this Agreement; or
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(c) by either the Seller or the Purchaser, if the Closing shall not
have occurred by June 1, 1998; provided, however, that the right to
terminate this Agreement under this Section 10.01(c) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement shall have been the cause of, or shall have resulted in, the
failure of the Closing to occur prior to such date.
Time shall be of the essence in this Agreement.
SECTION 10.02. Effect of Termination. In the event of termination of
this Agreement as provided in Section 10.01, this Agreement shall forthwith
become void and there shall be no liability on the part of any party hereto
except (a) that the provisions of Section 5.03(a), this Section 10.02 and
Article XI shall survive termination of this Agreement and (b) that nothing
herein shall relieve any party from liability for any breach hereof.
SECTION 10.03. Waiver. At any time prior to the Closing, either
party hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other party hereto, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto or (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid only if
set forth in an instrument in writing signed by the party to be bound thereby.
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01. Expenses. All costs and expenses, including, without
limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses, whether or not the Closing shall have occurred; provided, however,
that, if the Closing occurs, all such expenses (other than those incurred by or
on behalf of the Seller) may be borne by the Company. The Seller agrees that it
is solely responsible for all the fees and expenses incurred in connection with
the transactions contemplated hereby (other than those incurred by the Purchaser
and other than those incurred by the Company after the Closing Date), including,
without limitation, the fees and expenses of Goldman, Sachs and Shearman &
Sterling. The Seller also acknowledges that the Company will pay to an Affiliate
of the Purchaser a transaction fee payable at the Closing and an on-going
management fee, in each case, as described to the Seller prior to the date
hereof.
SECTION 11.02. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in person, by courier service, by cable, by telecopy, by telegram, by telex or
by registered or certified mail (postage
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prepaid, return receipt requested) to the respective parties at the following
addresses (or at such other address for a party as shall be specified in a
notice given in accordance with this Section 11.02):
(a) if to the Seller:
Corning Incorporated
One Riverfront Plaza
Corning, NY 14831
Telecopy: (607) 974-8656
Attention: General Counsel
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Telecopy: (212) 848-7179
Attention: Clare O'Brien, Esq.
(b) if to the Company prior to the Closing:
Corning Consumer Products Company
E-Building
Houghton Park
Corning, NY 14831
Telecopy: (607) 974-2215
Attention: President
with copy to:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Telecopy: (212) 848-7179
Attention: Clare O'Brien, Esq.
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(c) if to the Purchaser:
c/o Borden Capital Management Partners
180 East Broad Street
Columbus, OH 43215
Telecopy: (614) 627-8374
Attention: General Counsel
with a copy to:
Simpson, Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Telecopy: (212) 455-2507
Attention: David Sorkin, Esq.
SECTION 11.03. Public Announcements. Unless otherwise required by
applicable law or any stock exchange requirements, no party to this Agreement
shall make, or cause to be made, any press release or public announcement in
respect of this Agreement or the transactions contemplated hereby or otherwise
communicate with any news media without the prior written consent of the other
party, and the parties shall cooperate as to the timing and contents of any such
press release or public announcement; provided, however, that the Seller may
make, or cause to be made, announcements in respect of this Agreement or the
transactions contemplated hereby to its employees and the Company's employees
without the consent of the Purchaser.
SECTION 11.04. Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 11.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
SECTION 11.06. Entire Agreement. This Agreement and the agreements
referred to herein constitutes the entire agreement of the parties hereto with
respect to the
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subject matter hereof and supersedes all prior agreements and undertakings, both
written and oral, between the Seller and the Purchaser with respect to the
subject matter hereof and thereof.
SECTION 11.07. Assignment. This Agreement shall not be assigned
without the express written consent of the Seller, the Company and the Purchaser
(which consent may be granted or withheld in the sole discretion of the Seller,
the Company or the Purchaser), except that no consent shall be required for
Purchaser to assign its rights and delegate its duties hereunder, in whole or in
part, to one or more of its Affiliates.
SECTION 11.08. No Third Party Beneficiaries. Except as provided in
Article IX, this Agreement shall be binding upon and inure solely to the benefit
of the parties hereto, their successors and their permitted assigns and nothing
herein, express or implied, is intended to or shall confer upon any other Person
any legal or equitable right, benefit or remedy of any nature whatsoever under
or by reason of this Agreement.
SECTION 11.09. Amendment. This Agreement may not be amended or
modified except by an instrument in writing signed by the Seller, the Company
and the Purchaser.
SECTION 11.10. Governing Law. This Agreement shall be governed by
the laws of the State of New York. All actions and proceedings arising out of or
relating to this Agreement shall be heard and determined in any New York state
or federal court sitting in The City of New York, and the parties hereto hereby
consent to the jurisdiction of such courts in any such action or proceeding.
SECTION 11.11. Counterparts. This Agreement may be executed in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
SECTION 11.12. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof.
SECTION 11.13. Waiver of Jury Trial. Each of the Seller, the Company
and the Purchaser hereby irrevocably waives all right to trial by jury in any
action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to this Agreement or the actions of the
Seller or the Purchaser in the negotiation, administration, performance and
enforcement thereof.
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SECTION 11.14. Guarantee. (a) Until such time as the Closing occurs
or this Agreement is terminated in accordance with its terms, Borden hereby
guarantees the performance by the Purchaser (or any of its assignees pursuant to
Section 11.07) of all the Purchaser's obligations hereunder. In connection with
such guarantee, Borden hereby represents and warrants to the Seller (i) that it
is a corporation duly incorporated, validly existing and in good standing under
the laws of the State of New Jersey and has all necessary corporate power and
authority to enter into this Agreement, and to carry out its obligations
hereunder, (ii) that the execution and delivery of this Agreement by Borden and
the performance of its obligations hereunder have been duly authorized by all
requisite corporate action on the part of Borden and (iii) that this Agreement
has been duly executed and delivered by Borden, and (assuming due authorization,
execution and delivery by the Seller, the Company and the Purchaser) constitutes
a legal, valid and binding obligation of Borden, enforceable against Borden in
accordance with its terms.
(b) From and after the Closing, the Company hereby guarantees the
performance by the Purchaser of all its obligations hereunder, including,
without limitation, all indemnity obligations hereunder.
SECTION 11.15. Effect of Disclosure Schedules. Certain information
set forth in the Disclosure Schedules is included solely for informational
purposes and may not be required to be disclosed pursuant to this Agreement. The
disclosure of any information in the Disclosure Schedule shall not be deemed to
constitute an acknowledgment that such information is required to be disclosed
in connection with the representations and warranties made by the Seller in this
Agreement or that it is material, nor shall such information be deemed to
establish a standard of materiality.
<PAGE>
86
IN WITNESS WHEREOF, the Seller, the Company, the Purchaser and
Borden have caused this Agreement to be executed as of the date first written
above by their respective officers thereunto duly authorized.
CORNING INCORPORATED
By:
----------------------------------
Name:
Title:
CORNING CONSUMER PRODUCTS
COMPANY
By:
----------------------------------
Name:
Title:
CCPC ACQUISITION CORP.
By:
----------------------------------
Name:
Title:
BORDEN, INC.
(for purposes of Sections 10.02 and
11.14(a) only)
By:
----------------------------------
Name:
Title:
<PAGE>
Exhibit 1.01(a)
Durable Consumer Products
Hardware & Outdoor
Barbecues, Grills & Accessories
Barometers
Fireplace Accessories
Flashlights
Home & Personal Security Products
Home Improvement & DIY
Home Safety Products
Mailboxes
Outdoor Living Products
Pest Control Products
Picnic Accessories
Recycled Products
Recycling Equipment & Accessories
Tools & Hardware
Furniture
<PAGE>
Exhibit 1.01(b)
Housewares Products
Kitchen, Dining & Electrics
Electrics (Household & Personal)
Fans
Heaters & Portable Radiators
Humidifiers & Dehumidifiers
Irons
Kitchen Electrics
Ovens (Conventional/Toaster/Microwaves)
Personal Care--Electric
Purifiers & Filters (Air/Water)
Vaporizers
Cook & Bakeware
Bakeware
Cookbooks
Cookware
Range Top Drip Pans
Tea Kettles & Brewers
Tabletop
Dinnerware
Flatware
Glassware (Drinkware/Serveware)
Serving & Buffet Accessories
Kitchen Tools & Accessories
Bar Accessories
Canisters
Canning Equipment
Cutlery & Accessories
Food Storage
Kitchen Tools & Gadgets
Magnetics
Spice Racks & Accessories
Textiles (Kitchen)
Thermoses/Vacuumware
<PAGE>
Home Organization & Cleaning
Cleaning & Stick Goods
Brushes
Cleaning Products & Supplies
Floor & Carpet Care Products
Gloves (Kitchen/Garden)
Bathroom & Personal Care
Bath & Shower
Accessories
Exercise Equipment
Home Health Care
Products
Personal Care (Non-Electric)
Scales
Textiles (Bathroom)
Space Organizers/Clothing Care
Closet & Clothes Care
Hampers
Sewing Accessories
Storage Products
<PAGE>
Exhibit 1.01(c)
1997 Balance Sheet
<PAGE>
Exhibit 2.01
Financing
Senior Term (this amount assumes that the Company will need $321.6
$4 million of operating cash and have $10.3 million of
Indebtedness as of the Closing)
Senior Subordinated 150.0
<PAGE>
Exhibit 2.03(b)
Summary of Preferred Stock Terms
Issuer: Corning Consumer Products Company.
Issue Price: $30 million
Amount: $30 million aggregate liquidation preference.
Dividend: 12% cumulative compounding, non-voting Pay-in-Kind.
Payable quarterly.
Payable in cash at option of the Issuer.
Redemption: At option of the Issuer at par plus accrued dividends.
Mandatory redemption on the tenth anniversary at par plus
accrued dividends.
Put: Upon changes of control or IPO at par plus accrued dividends.
Right to
Directors: None.
Restrictions on
Transfer: Nontransferable other than to Affiliate of the Purchaser.
<PAGE>
Exhibit 2.03(d)
Form of Stockholders Agreement
<PAGE>
Exhibit 5.6
Form of Administrative Services Agreement
<PAGE>
ADMINISTRATIVE SERVICES AGREEMENT
ADMINISTRATIVE SERVICES AGREEMENT, dated April 1, 1998 (this
"Agreement"), between CORNING INCORPORATED, a New York corporation (the
"Seller") and CORNING CONSUMER PRODUCTS COMPANY, a Delaware corporation (the
"Company").
WHEREAS, the Seller, the Company and CCPC Acquisition Corp., a
Delaware corporation (the "Purchaser") have entered into a Recapitalization
Agreement, dated March 2, 1998 (the "Recapitalization Agreement"; capitalized
terms used and not otherwise defined herein shall have the meaning ascribed to
such terms in the Recapitalization Agreement), providing for the sale by the
Seller to the Purchaser of certain shares of the Company and the
recapitalization of the Company, as a result of which the Purchaser would own
approximately 92% of the outstanding common shares of the Company and the Seller
would own approximately 8% of the outstanding common shares of the Company as of
the Closing;
WHEREAS, the Seller has heretofore conducted the Corning Business in
the Foreign Countries through the Seller's employees and/or the Seller's Local
Entities;
WHEREAS, the Company has heretofore conducted the CCPC Business in
the Foreign Countries through the Company's employees and/or the Company's Local
Entities;
WHEREAS, in certain Foreign Countries, the Seller has heretofore
provided Administrative Services to the Company's Dependent Operations therein;
WHEREAS, in certain Foreign Countries, the Company has heretofore
provided Administrative Services to the Seller's Dependent Operations therein;
and
WHEREAS, the Seller and the Company wish to arrange for their
respective Dependent Operations in the Foreign Countries to continue to receive
on the terms and conditions contained herein Administrative Services from the
respective Service Providers at the same level, and on substantially the same
terms, as prior to the Closing;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, the Seller and the Company
hereby agree as follows:
<PAGE>
2
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Administrative Services" means services provided to a Dependent
Operation of the Seller or the Company, as the case may be, in support of
the business thereof, including, but not limited to, the services listed
in Exhibit A hereto.
"CCPC Business" means the Business as conducted by the Company or an
Affiliate thereof in a particular Foreign Country prior to the Closing
including the employment of any persons involved therein.
"Corning Business" means the business, other than the CCPC Business,
of the Seller or an Affiliate thereof, including the employment of any
persons involved therein, conducted in a particular Foreign Country prior
to the Closing Date.
"Customary Level of Services" means with respect to Administrative
Services, services of substantially the same nature, quantity and quality
as were provided to the particular Dependent Operation prior to the
Closing Date.
"Cutoff Date" means the two-year anniversary of the Closing Date.
"Dependent Assets" means any fixed assets, including, but not
limited to, computer equipment, desks, chairs and other office
furnishings, provided by the Service Provider in connection with the
Administrative Services and used by the Dependent Operation.
"Dependent Operation" means, as applicable, any Corning Business
that received Administrative Services from a Service Provider of the
Company or any CCPC Business that received Administrative Services from a
Service Provider of the Seller, prior to the Closing Date in a Foreign
Country, including any Local Entity that conducts such Corning Business or
CCPC Business, as applicable, whether formed prior to or after the Closing
Date.
"Foreign Countries" means Australia, Brazil, China, Hong Kong,
India, Japan, Korea, Mexico, Singapore and Taiwan.
<PAGE>
3
"Local Entity" means a subsidiary, branch office or representative
office of the Seller or the Company (or an Affiliate of the Seller or the
Company) in a Foreign Country.
"Service Provider" means a Local Entity that provided Administrative
Services to the Dependent Operations of the Seller or the Company, as
applicable, in a Foreign Country prior to the Closing Date. The Service
Providers of the Seller and the Service Providers of the Company are
listed in Exhibit B hereto.
ARTICLE II
PAYMENTS
SECTION 2.01. Payments. The Seller and the Company shall cause their
respective Service Providers to charge or their respective Dependent Operations
to pay, as the case may be, the costs incurred by such Service Providers in
providing Administrative Services hereunder, plus a 5% markup thereon calculated
in the same manner and on the same terms as such costs and markup were
calculated for such services during the 12 months immediately prior to the
Closing Date.
SECTION 2.02. Additional Payments. In the event a Service Provider
agrees to provide additional Administrative Services above the Customary Level
of Services, such Service Provider shall charge and the Seller or the Company,
as applicable, shall cause its Dependent Operation to pay an amount equal to the
cost of acquiring similar services on the open market from a third party in an
arm's-length transaction.
SECTION 2.03. Form of Payments; Invoicing. All payments to be made
pursuant to this Article II shall be made in the currency of the Foreign Country
where the Dependent Operation is receiving Administrative Services. The Service
Provider shall provide the Dependent Operation with a monthly invoice, and the
Dependent Operation shall make payment on such invoice within 30 days of the
date thereof.
ARTICLE III
TERM AND TERMINATION
SECTION 3.01. Term. The term of this Agreement shall be two years
from the Closing Date.
<PAGE>
4
SECTION 3.02. Termination. (a) Any Dependent Operation may terminate
any particular Administrative Services provided by the respective Service
Provider to such Dependent Operation, and, upon such termination and upon giving
90-days' advance written notice to the respective Service Provider, such
Dependent Operation shall have no further obligation to pay for such
Administrative Services.
(b) If any Dependent Operation shall fail to perform or shall
default in the performance of any material provision of this Agreement, and if
such failure or default shall continue thirty (30) Business Days after receipt
by the respective Service Provider of written notice of such failure or default,
and such failure or default is not cured within such 30-day period, then the
Service Provider may terminate this Agreement with immediate effect.
ARTICLE IV
OFFICE SHARING AND SUBLEASES
SECTION 4.01. Sublease or Sharing of Office Space. To the extent
necessary and consistent with the Customary Level of Services, the Service
Provider shall license or sublease office space to the Dependent Operation on
the same terms and conditions as such office space was provided, and in
consideration of payment of the same amounts as were charged for such office
space, during the 12-month period immediately prior to the Closing Date.
ARTICLE V
DEPENDENT ASSETS
SECTION 5.01. Use of Dependent Assets. Prior to the Cutoff Date, or
such earlier time as may be determined by mutual agreement of the parties
hereto, the Service Provider in each Foreign Country shall permit the respective
Dependent Operation to use the Dependent Assets. In exchange for such use of the
Dependent Assets, the Dependent Operation shall pay, on an annual basis, to the
Service Provider an amount equal to the depreciation amount for such Dependent
Assets reflected on the balance sheet of the respective Service Provider for the
applicable fiscal year.
SECTION 5.02. Transfer of Dependent Assets. On the Cutoff Date, or
at such earlier time as may be determined by mutual agreement of the parties
hereto, the Service Provider in each Foreign Country shall sell, assign,
transfer, convey and deliver all of the Dependent Assets to the respective
Dependent Operation. In exchange for such sale,
<PAGE>
5
assignment, transfer, conveyance and delivery, the Dependent Operation shall pay
to the respective Service Provider the value of such Dependent Assets reflected
on the balance sheet of the respective Service Provider at the time of such
sale, assignment, transfer, conveyance and delivery or an amount otherwise
agreed by the parties.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. Undertakings. The Seller and the Company shall cause
their respective Service Providers in each of the Foreign Countries to provide
Administrative Services to the Dependent Operations of the other party hereto in
such Foreign Countries at the Customary Level of Services. If a Dependent
Operation shall request an increase in Administrative Services above the
Customary Level of Services provided by the respective Service Provider prior to
the Closing Date, such Service Provider may, but shall not be obligated to,
provide such increased level of services.
SECTION 6.02. Force Majeure Event. Either party hereto shall not be
held responsible for the failure or delay in performance hereunder if such
failure or delay is due to any act of God or the public enemy, war, compliance
with laws, governmental acts or regulations, fire, flood, epidemic, strikes and
labor interruption, accident, unusually severe weather or other similar causes,
which are beyond its reasonable control (a "Force Majeure Event"). Upon the
occurrence of a Force Majeure Event, the party affected thereby shall promptly
give notice to the other party of the occurrence or circumstance upon which it
intends to rely to excuse its performance. Duties and obligations of both
parties shall be suspended for the duration of the Force Majeure Event. During
the duration of a Force Majeure Event, the party affected by the Force Majeure
Event shall use commercially reasonable efforts to avoid or remove such Force
Majeure Event and shall also take reasonable steps to resume its performance
under this Agreement with the least possible delay.
SECTION 6.03. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in person, by courier service, by cable, by telecopy, by telegram, by telex or
by registered or certified mail (postage prepaid, return receipt requested) to
the respective parties at the following addresses (or at such other address for
a party as shall be specified in a notice given in accordance with this Section
6.03):
<PAGE>
6
(a) if to the Seller:
Corning Incorporated
One Riverfront Plaza
Corning, NY 14831
Telecopy: (607) 974-8656
Attention: General Counsel
(b) if to the Company:
Corning Consumer Products Company
E-Building, Houghton Park
Corning, NY 14831
Telecopy: (607) 974-2215
Attention: President
SECTION 6.04. Nondisclosure. Neither the Seller nor the Company
shall disclose, imply the existence of or include in any promotional materials
any reference to this Agreement or its terms without the written consent of the
other party.
SECTION 6.05. Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 6.06. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
SECTION 6.07. Entire Agreement. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and undertakings, both written and oral,
between the parties hereto with respect to the subject matter hereof.
<PAGE>
7
SECTION 6.08. Assignment. This Agreement shall not be assigned by
either party without the express written consent of the other party (which
consent may be granted or withheld in the sole discretion of such other party),
except that no consent shall be required for the Company to assign its rights
and delegate its duties hereunder, in whole or in part, to one or more of its
subsidiaries or pledge and assign all of its rights hereunder to the financial
institutions providing the Financing (or refinancings thereof).
SECTION 6.09. No Third Party Beneficiaries. This Agreement shall be
binding upon and inure solely to the benefit of the parties hereto and their
successors and permitted assigns, and nothing herein, express or implied, is
intended to or shall confer upon any other Person any legal or equitable right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 6.10. Amendment; Waiver. (a) This Agreement may not be
amended or modified except by an instrument in writing signed by the Seller and
the Company.
(b) No failure or delay on the part of a party hereto in exercising
any right, power or remedy hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy hereunder. The remedies provided for herein are cumulative and are not
exclusive of any remedies provided by law or available at equity.
SECTION 6.11. Governing Law. This Agreement shall be governed by the
laws of the State of New York.
SECTION 6.12. Dispute Resolution. Any controversies arising out of
the interpretation, implementation or compliance with the provisions of this
Agreement or arising out of a dispute as to the proper computation of all
charges and costs to be paid under the terms of this Agreement shall be finally
settled by arbitration held in The City of New York under the Rules of
Conciliation and Arbitration of the American Arbitration Association before a
single arbitrator appointed in accordance with such rules, and judgment upon the
award rendered may be entered by any court having jurisdiction. The costs and
expenses of the arbitration shall be paid by the parties in inverse proportion
to the allocation by the arbitrator of the amounts disputed, or if no amounts
are in dispute, by the party against whom the dispute is finally settled.
SECTION 6.13. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original, but all of which
taken together shall constitute one and the same agreement.
<PAGE>
8
SECTION 6.14. Independent Contractors; No Guarantee of Results. No
agency, partnership or joint venture is established by this Agreement. Neither
party shall enter into, incur liabilities or hold itself out to third parties as
having the authority to enter into and incur any contractual obligations,
expenses or liabilities on behalf of the other party. Neither Seller nor Company
makes any representation or promise concerning the earnings or other results to
be achieved by any Local Entity of a Dependent Operation as a result of
Administrative Services of a Service Provider; and neither Seller nor Company
shall have any liability to the other based thereon.
SECTION 6.15. Confidentiality. Each of the Seller and the Company
hereby agrees that it will not, and will cause each of its Affiliates not to, at
any time reveal to any Person or use in any way detrimental to the other Person
any non-public, confidential or proprietary information relating to the other or
the business or affairs of such other Person that is acquired or otherwise
received by such Person in connection with the performance of its obligations
under this Agreement, other than such information that (a) is generally
available to the public (other than as a result of a disclosure by such Person),
(b) is available to such Person on a nonconfidential basis from a source that is
not prohibited from disclosing such information to such Person or (c) after
notice and an opportunity to contest, such Person is required to disclose under
any applicable law or under subpoena or other process of laws.
<PAGE>
9
IN WITNESS WHEREOF, the Seller and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
CORNING INCORPORATED
By:
-----------------------------------
Name:
Title:
CORNING CONSUMER PRODUCTS
COMPANY
By:
-----------------------------------
Name:
Title:
<PAGE>
Exhibit 5.07
Form of Company Headquarters Lease Agreement
<PAGE>
================================================================================
LEASE
CORNING INCORPORATED
a New York corporation,
as Landlord,
and
CORNING CONSUMER PRODUCTS COMPANY
a Delaware corporation,
as Tenant
Dated April 1, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Paragraph Page
- --------- ----
<S> <C>
1. LEASE OF PREMISES; TERM..................................................1
2. RENT.....................................................................1
3. REPAIRS..................................................................1
4. IMPROVEMENTS AND ALTERATIONS.............................................2
5. LIENS....................................................................3
6. USE OF PREMISES..........................................................3
7. LANDLORD SERVICES........................................................4
8. RULES AND REGULATIONS....................................................5
9. TAXES ON TENANT'S PROPERTY...............................................5
10. FIRE OR CASUALTY........................................................6
11. EMINENT DOMAIN..........................................................6
12. ASSIGNMENT AND SUBLETTING...............................................7
13. ACCESS..................................................................8
14. SUBORDINATION, ATTORNMENT; ESTOPPEL CERTIFICATES........................8
15. SALE BY LANDLORD........................................................9
16. NON-LIABILITY AND INDEMNIFICATION OF LANDLORD; INSURANCE...............10
17. WAIVER OF SUBROGATION..................................................12
18. ATTORNEYS' FEES........................................................13
19. WAIVER.................................................................13
20. NOTICES................................................................14
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
21. INSOLVENCY OR BANKRUPTCY...............................................14
22. DEFAULT................................................................15
23. HOLDING OVER...........................................................17
24. CONDITION OF PREMISES..................................................18
25. QUIET POSSESSION.......................................................18
26. NOTICE OF DAMAGE.......................................................18
27. GOVERNING LAW..........................................................18
28. COMMON FACILITIES; PARKING.............................................18
29. SUCCESSORS AND ASSIGNS.................................................19
30. BROKERS................................................................19
31. NAME...................................................................19
32. EXAMINATION OF LEASE...................................................20
33. INTEREST ON TENANT'S OBLIGATIONS; LATE CHARGE..........................20
34. TIME...................................................................20
35. DEFINED TERMS AND MARGINAL HEADINGS....................................20
36. PRIOR AGREEMENTS; SEVERABILITY.........................................21
37. CORPORATE AUTHORITY....................................................21
38. NO LIGHT, AIR OR VIEW EASEMENTS........................................21
39. LANDLORD'S APPROVALS...................................................21
40. MISCELLANEOUS..........................................................21
41. SIGNAGE................................................................22
</TABLE>
EXHIBIT A FLOOR PLANS
<PAGE>
EXHIBIT B RULES AND REGULATIONS
EXHIBIT C FORM OF LEASE CERTIFICATE
<PAGE>
THIS LEASE (this "Lease") is made April 1, 1998, by and between
CORNING INCORPORATED, a New York corporation ("Landlord"), and CORNING CONSUMER
PRODUCTS COMPANY, a Delaware corporation ("Tenant").
WHEREAS, Landlord, Tenant and CCPC Acquisition Corp. (the "Purchaser") are
parties to the Recapitalization Agreement, dated March 2, 1998 (the
"Recapitalization Agreement"; capitalized terms used and not otherwise defined
herein shall have the meaning ascribed to such terms in the Recapitalization
Agreement), providing for the acquisition by Purchaser of approximately 92% of
the issued and outstanding shares of common stock, no par value, of Tenant; and
WHEREAS, pursuant to the Recapitalization Agreement, Landlord and Tenant
agreed to enter into this Lease;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants hereinafter set forth and other good and valuable consideration,
Landlord and Tenant hereby agree as follows:
BASIC LEASE PROVISIONS
1. The "Premises" shall be that space, as listed in this Item 1, located in
facilities owned by Landlord (the "Facilities") in Corning, New York, and
the rent therefor (the "Rent") under this Lease shall be:
<TABLE>
<CAPTION>
PREMISES PREMISES PREMISES MONTHLY
NAME: LOCATION: AREA (s.f.): RENT:
- ----- --------- ------------ -----
<S> <C> <C> <C>
E-Building HP-EB-01 36,347 $114,977
A-Building Houghton Park 6,367 $22,971
B-Building Houghton Park 6,493 $24,740.06
CORGAS Bldgs. (3) West William Street 596 $ 871
D-Building Houghton Park 0 $ 0
--------- -----------
TOTAL 49,803 $166,559.06
</TABLE>
Each of the foregoing five separate spaces referred to as a "Unit".
2. TERM OF LEASE: Eighteen (18) months, terminable in whole or as to any Unit
or Units by Tenant on thirty (30) days' notice to Landlord.
<PAGE>
3. COMMENCEMENT DATE: The date hereof.
EXPIRATION DATE: October 1, 1999.
4. PERMITTED USE: The leased premises may be used for the same purposes
(i.e., executive, general and administrative office) and only for such
purposes, for which they were used by Tenant prior to the date hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as
of the date first above written. The foregoing Basic Lease Provisions are an
integral part of this Lease. In the event of any conflict between any Basic
Lease Provision and the balance of this Lease, however, the latter shall
control.
CORNING INCORPORATED, CORNING CONSUMER PRODUCTS
Landlord COMPANY, Tenant
BY: BY:
-------------------------- ------------------------------
Name: Name:
Title: Title:
<PAGE>
PARAGRAPH 1. LEASE OF PREMISES; TERM
(a) Lease of Premises. Landlord hereby leases to Tenant and Tenant hereby
hires from Landlord, subject to all the terms and conditions hereinafter set
forth, those certain Premises described in Item 1 of the Basic Lease Provisions
above and substantially as shown in the floorplans on Exhibit A attached hereto,
in their existing condition.
(b) Term. The term of this Lease (the "Term") shall be as shown in Item 2
of the Basic Lease Provisions and shall commence on the date hereof (the
"Commencement Date"), and shall end on October 1, 1999 (the "Expiration Date").
Tenant may terminate this Lease as to the entire Premises, or any Unit or Units,
upon thirty (30) days' written notice to Landlord.
(c) Renewal. Tenant may extend the term of this Lease, on a month-to-month
basis for up to six (6) additional months, by written notice to Landlord
delivered not less than thirty (30) days prior to the Expiration Date.
PARAGRAPH 2. RENT
(a) Tenant agrees to pay as monthly Rent for the Premises the sum shown in
Item 1 of the Basic Lease Provisions as the total amount due for the Premises;
provided, however, that should Tenant terminate this Lease with respect to any
portion of the Premises described in Item 1 of the Basic Lease Provisions, the
Rent payable pursuant to this Lease shall be proportionately reduced, based on
the total square footage of the Premises and the time of month of the
termination date. The Rent shall be payable in advance without notice, without
deduction or offset. If the Term commences or ends on a day other than the first
or last day, respectively, of a calendar month, then the rent for each such
partial month shall be prorated in the proportion that the number of days this
Lease is in effect during such partial month bears to the total number of days
in such calendar month, and such rent shall be payable at the commencement of
such partial month.
(b) A payment for the first month or partial month of Rent shall be paid
to Landlord on the date of this Lease and, subsequently, monthly payments shall
be paid to Landlord on the first day of the first calendar month commencing
after the Commencement Date and continuing on the first day of each calendar
month commencing during the Term thereafter.
PARAGRAPH 3. REPAIRS
(a) Landlord's Repairs. Subject to Paragraph 3(b), Landlord, at its
expense, shall make all necessary repairs to the exterior walls, exterior doors,
windows, corridors and other common areas of the Facilities, shall keep such
areas in a safe, clean and neat condition, and shall use reasonable efforts to
keep all of the Facilities' equipment and systems used in
1
<PAGE>
common with other tenants (such as elevators, plumbing, heating, air
conditioning and similar equipment) in good working order, condition and repair.
Landlord shall use commercially reasonable efforts where practicable to: (1)
initiate all necessary repairs promptly; (2) carry out the same in a workmanlike
manner so as to reasonably minimize interference with Tenant's ability to
conduct its business at the Premises; (3) install pipes, conduits and ducts
above hung ceilings, behind drywall and in service rooms; and (4) restore all
materially affected areas of the Premises substantially to its condition prior
to such repairs. Except as provided in Paragraphs 10 and 11 hereof, there shall
be no abatement of Rent, no allowance to Tenant for diminution of rental value
and no liability of Landlord by reason of inconvenience, annoyance or any injury
to or interference with Tenant's business arising from the making of or the
failure to make any repairs, alterations or improvements described in this
Paragraph.
(b) Tenant's Repairs. Tenant agrees that it will make all repairs to the
Premises and fixtures therein which Landlord is not required to make pursuant to
Paragraph 3(a) above and shall do all decorating, remodeling, alteration and
painting of the Premises required by Tenant during the Term. Tenant shall take
good care of all floor and window coverings installed at any time in any portion
of the Premises and Tenant shall, as and when needed, shampoo, clean and repair
any of said coverings as necessary to preserve them in good order, condition and
appearance, reasonable wear and tear excepted. Tenant will pay for any repairs
to the Premises, or the Facilities that are caused by any negligence or
carelessness of Tenant or its assignees, subtenants or employees, or of the
respective agents or invitees of any of the foregoing persons. Tenant will
maintain the Premises, and will leave the Premises upon termination of this
Lease, in a safe, clean, neat and sanitary condition, reasonable wear and tear
excepted.
PARAGRAPH 4. IMPROVEMENTS AND ALTERATIONS
(a) Landlord's Work. Landlord shall have the right at any time to change
the arrangement and location of all entrances, passageways, doors, doorways,
corridors, stairs, toilets and other public parts of the Facilities and, upon
giving Tenant reasonable notice thereof, to change any name, number or
designation by which the Premises or the Facilities are commonly known.
(b) Alterations. Tenant shall not make any alterations, additions or
improvements to the Premises without the prior written consent of Landlord,
which consent shall not be unreasonably withheld or delayed. All such
alterations, additions and improvements shall be made in conformity with plans
therefor approved by Landlord in writing prior to the commencement of such work.
All such alterations, additions or improvements (except movable furniture,
furnishings and trade fixtures) shall become the property of Landlord and shall
be surrendered with the Premises, as a part thereof, at the expiration or
earlier termination of the Term. Upon any termination of this Lease, Tenant
shall, upon demand by Landlord and at Tenant's sole expense, immediately remove
any alterations, additions or improvements (except those made initially at the
commencement of Tenant's possession of the
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Premises as approved by Landlord) made under this Paragraph and Tenant shall
repair and restore the Premises to their original condition, reasonable wear and
tear excepted. Any personal property left on the Premises at the expiration or
other termination of this Lease may, at the option of Landlord, either be deemed
abandoned or be placed in storage at a public warehouse in the name of and for
the account of and at the expense and risk of Tenant or otherwise disposed of by
Landlord in the manner provided by law. Tenant expressly releases Landlord of
and from any and all claims and liability for damage to or destruction or loss
of property left by Tenant upon the Premises at the expiration or other
termination of this Lease and, to the extent permitted by then applicable law,
Tenant shall protect, indemnify, defend and hold Landlord harmless from and
against any and all claims and liability with respect thereto.
PARAGRAPH 5. LIENS
Tenant shall keep the Premises free from any liens arising out of any work
performed, materials furnished or obligations incurred by or for Tenant. In the
event that Tenant shall not, within ten (10) days following the imposition of
any such lien, cause such lien to be released of record by payment or posting of
a proper bond, Landlord shall have, in addition to all other remedies provided
herein and by law, the right, but not the obligation, to cause such lien to be
released by such means as Landlord shall deem proper, including payment of or
defense against the claim giving rise to such lien. All sums paid by Landlord
and all expenses incurred by it in connection therewith shall create
automatically an obligation of Tenant to pay an equivalent amount to Landlord as
rent on Landlord's demand therefor, together with interest at the maximum rate
per annum then permitted by law until paid to Landlord. Nothing herein shall
imply any consent by Landlord to subject Landlord's estate to liability under
any mechanics' or other lien law. Tenant shall give Landlord adequate
opportunity, and Landlord shall have the right at all times, to post such
notices of nonresponsibility as are provided for in the mechanics' lien laws of
New York.
PARAGRAPH 6. USE OF PREMISES
Tenant shall use the Premises only as set forth in Item 4 of the Basic
Lease Provisions and shall not use or permit the Premises to be used for any
other purpose without the prior written consent of Landlord. Tenant shall not
use or occupy the Premises in violation of law or of any certificate of
occupancy issued for the Facilities and shall, upon five (5) days' written
notice from Landlord, discontinue any use of the Premises which is declared by
any governmental authority having jurisdiction to be a violation of law or of
such certificate of occupancy. Tenant shall comply with any direction of any
governmental authority having jurisdiction that shall, by reason of the nature
of Tenant's use or occupancy of the Premises, impose any duty upon Tenant or
Landlord with respect to the Premises or with respect to the use or occupancy
thereof. Tenant shall not do or permit to be done anything that will invalidate
or increase the cost of any fire, extended coverage or other insurance policy
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covering any part of the Facilities or any property located thereon. Tenant
shall promptly upon demand reimburse Landlord for the full amount of any
additional premium charged for any such policy by reason of Tenant's failure to
comply with the provisions of this Paragraph 6, it being understood that such
demand for reimbursement shall not be Landlord's exclusive remedy. Tenant shall
not in any way obstruct or interfere with the rights of other tenants or
occupants of the Facilities, or injure or annoy them, or use or allow the
Premises to be used for any improper, immoral, unlawful or objectionable
purpose; nor shall Tenant cause, maintain or permit any nuisance in, on or about
the Premises or commit or suffer to be committed any waste in or upon the
Premises.
PARAGRAPH 7. LANDLORD SERVICES
(a) Services Furnished by Landlord. Landlord will provide to Tenant, to
substantially the same extent and in a manner consistent with its prior
provision of services, the following services: (1) automatic elevator services;
(2) heat, ventilation and air conditioning services; (3) electrical services,
provided that Tenant does not consume electricity at a rate materially above its
rate of use prior to the date hereof; (4) water for drinking, cleaning and
lavatory purposes; (5) janitorial services; and (6) such other services as were
provided by Landlord to Tenant during the 12 months prior to the date hereof.
(b) Lighting Fixtures. Tenant shall replace, as necessary, all bulbs and
fluorescent tubes in lighting fixtures installed in the Premises. If Tenant
shall fail to make any such replacement within five (5) days after written
notice from Landlord, Landlord may make such replacement and charge the cost of
labor and materials involved therein to Tenant, as additional rent.
(c) Tenant Cooperation. Tenant agrees to cooperate fully with Landlord and
to abide by all regulations and requirements which Landlord may prescribe for
the use of the above-described utilities and services to be provided by
Landlord. Any failure to pay any excess costs as described above shall
constitute a breach of the obligation to pay rent under this Lease and shall
entitle Landlord to the rights granted herein, at law or in equity as a result
of such a breach.
(d) No Abatement of Rent. Landlord shall not be liable for, and Tenant
shall not be entitled to, any abatement or reduction of rent by reason of
Landlord's failure to furnish any of the above-described utilities and services
to be provided by Landlord when such failure is caused by: (1) accident,
breakage or repairs due to the active or wilful misconduct of Tenant, Tenant's
agents or Tenant's employees; (2) strikes, lockouts, or other labor disturbances
or disputes of any character; (3) governmental regulation, moratorium or other
governmental action or inaction; (4) any inability notwithstanding the exercise
of reasonable diligence to obtain electricity, water or fuel; or (5) by any
other cause beyond Landlord's reasonable control. No such failure, stoppage or
interruption of any such utility or service shall constitute an eviction of
Tenant or relieve Tenant of the obligation to perform any covenant or agreement
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of this Lease to be performed by Tenant. In the event of any such failure,
stoppage or interruption of the utilities or services to be supplied by
Landlord, Landlord shall use commercially reasonable efforts to have service
promptly resumed.
(e) Service Modification. Notwithstanding anything to the contrary above,
Landlord reserves the right from time to time to make reasonable modifications
to the above standards for utilities and services, after reasonable notice to
Tenant.
(f) Telephone. Tenant shall pay for all telephone service to the Premises
and shall contract directly with the providing companies for such service.
PARAGRAPH 8. RULES AND REGULATIONS
Tenant agrees to abide by all rules and regulations for use of the
Premises imposed by Landlord as set forth in Exhibit B attached hereto, as the
same may be amended from time to time and upon Landlord's giving reasonable
notice of such amendments to Tenant. Such rules and regulations are and shall be
imposed for the cleanliness, good appearance, proper maintenance, good order and
reasonable use of the Premises, and the Facilities and as may be necessary for
the enjoyment of the Facilities by all tenants and their clients, customers, and
employees. Landlord shall not be liable for the failure of any tenant or of the
agents or employees of any tenant to conform to such rules and regulations.
PARAGRAPH 9. TAXES ON TENANT'S PROPERTY
(a) Personal Property. Tenant shall be liable for, and shall pay no later
than ten (10) days before delinquency, all taxes, levies and assessments levied
against any personal property or trade fixtures placed by Tenant in or about the
Premises. If any such tax, levy or assessment on Tenant's personal property or
trade fixtures is levied against Landlord or Landlord's property, or if the
assessed value of the Facilities is increased by the inclusion therein of a
value placed upon such personal property or trade fixtures of Tenant and if
Landlord pays such taxes, levies or assessment based upon such increased
assessment (which Landlord shall have the right to do regardless of the validity
thereof, but only under proper protest if requested by Tenant), Tenant shall
repay upon demand to Landlord the amount of such taxes, levies or assessments so
levied against Landlord, or the proportion of any taxes, levies or assessments
resulting from such increase in assessment. Tenant shall also be liable for and
shall repay upon demand to Landlord the amount of any rental, excise, sales,
transaction privilege or other tax or levy, however denominated, imposed upon or
measured by the rent reserved hereunder or on Landlord's business of leasing the
Premises, excepting only net income taxes, franchise taxes and estate,
inheritance or gift taxes. In the event Tenant is required to repay Landlord
pursuant to this Paragraph for any taxes, levies or assessments paid by
Landlord, Tenant shall have the right, in the name of Tenant and with Landlord's
full cooperation, but without any cost to Landlord, to bring suit in any court
of competent
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jurisdiction to recover the amount of any such taxes, levies, or assessments so
paid under protest, with any amount so recovered to belong to Tenant; provided,
however, that if applicable governmental regulations prevent Tenant from
bringing such an action in its own name, and if Tenant reasonably and in good
faith determines that a protest is appropriate, then Landlord shall, without any
cost to Landlord, bring suit as aforesaid in reasonable cooperation with Tenant.
PARAGRAPH 10. FIRE OR CASUALTY
In the event that any portion of the Premises or any Unit or access
thereto is wholly or partially damaged or destroyed by fire or other casualty
covered by the form of fire and extended coverage insurance maintained by
Landlord, Landlord shall rebuild, repair or restore the Premises or Unit or
access thereto to substantially the same condition as when the same were
furnished to Tenant, excluding any improvements installed by Tenant, and this
Lease shall continue in full force and effect; provided, however, that if, in
Landlord's sole determination, any portion of the Premises or Unit or access
thereto is materially damaged or destroyed by such fire or other casualty,
Landlord shall not be required to restore the Premises or Unit or access
thereto. In the event that the Premises is materially damaged or destroyed by
such fire or other casualty, either party may elect, by written notice to the
other party given within sixty (60) days after the occurrence of the fire or
other casualty, to terminate this Lease, in which event this Lease shall
terminate as of the date of the occurrence of the casualty. Upon the occurrence
of a fire or other casualty as to which neither Landlord nor Tenant elects to
terminate this Lease, Landlord shall within sixty (60) days after the date of
the occurrence notify Tenant in writing of the time estimated by Landlord to
repair or restore the damage caused by such casualty. Rent shall be equitably
abated, to the extent that the Premises or any Unit shall be rendered
untenantable on account of fire or other casualty, from the date that the
Premises or Unit is rendered untenantable until the date that the Premises or
Unit no longer is untenantable, unless such damage or destruction was caused by
the negligence or willful misconduct of Tenant or Tenant's agent.
PARAGRAPH 11. EMINENT DOMAIN
(a) Termination of Lease. In case the whole of the Premises or any Unit,
or any portion thereof, shall be taken by any lawful power or authority by
exercise of the right of eminent domain, or shall be sold to prevent such
taking, Landlord may terminate this Lease effective as of the date possession is
required to be surrendered to such authority. Landlord may, without any
obligation to Tenant, agree to sell or convey to the taking authority the
Premises, any Unit, the Facilities or any portion thereof sought by the taking
authority, free from this Lease and the right of Tenant hereunder, without first
requiring that any action or proceeding be instituted or, if instituted, pursued
to a judgment.
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(b) No Restoration. In no event shall Landlord be required to restore the
Premises or any Unit on account of any taking described in Paragraph 11(a)
hereof. In the event that Landlord does not restore the Premises or any Unit
affected by any taking, Tenant may terminate the lease effective as of the date
possession is required to be surrendered to the taking authority. If the Tenant
does not elect to terminate this Lease, rent shall be equitably abated, to the
extent that the Premises or any Unit shall be rendered untenantable on account
of such taking, from the date that the Premises or Unit is rendered untenantable
until the date that the Premises or Unit no longer is untenantable.
(c) Awards. Except as expressly provided herein, Tenant shall not assert
any claim against Landlord or the taking authority for any compensation because
of any taking of all or any portion of the Premises or any Unit, and Landlord
shall be entitled to receive the entire amount of any award therefor without
deduction for any estate or interest of Tenant. Nothing contained in this
Paragraph 11(c), however, shall be deemed to give Landlord any interest in, or
prevent Tenant from seeking any award against the taking authority for, the
taking of personal property and fixtures belonging to Tenant or for relocation
or business interruption expenses recoverable from the taking authority.
PARAGRAPH 12. ASSIGNMENT AND SUBLETTING
(a) No Assignment or Subletting. Except as provided in Paragraph 12(b)
hereof, Tenant shall not voluntarily or involuntarily assign, sublet, mortgage
or otherwise encumber all or any portion of its interest in this Lease or in the
Premises, except that no consent shall be required for the Tenant to assign its
rights and delegate its duties hereunder, in whole or in part, to one or more of
its subsidiaries or pledge and assign all of its rights hereunder to the
financial institutions providing the Financing (or refinancings thereof).
(b) Permitted Transfers. Tenant shall have the right to sublet all or any
portion of the Premises, without the consent of Landlord, to any entity which is
a majority-owned subsidiary of Tenant ("Related Entity"), for as long as such
entity continues to be a Related Entity, provided that Tenant gives Landlord
notice as provided in clause (1) below. The following conditions shall apply to
any sublease made pursuant to this paragraph: (1) Tenant shall be required to
provide Landlord with not less than thirty (30) days' prior written notice
setting forth the name of such subtenant; (2) Tenant shall not at the time of
such sublease be in default in the payment of Rent or otherwise in default under
any of the material terms, covenants or conditions in this Lease beyond the
applicable notice and grace periods; (3) Tenant shall not be released or
discharged from any of its obligations under this Lease in connection with or as
a result of any such sublease; (4) any such subtenant shall use the Premises or
such portion thereof as may be subleased only for the uses permitted pursuant to
the terms of this Lease; (5) such sublease is made for valid intracorporate
business purpose and is not made to circumvent the provisions of Paragraph 12(a)
hereof; and (6) the sublease shall specifically provide that the subtenant will
be bound by all of the terms and conditions of this
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Lease and the sublease will be subject and subordinate to this Lease and to all
matters to which this Lease is subject and subordinate.
(c) No Merger. The voluntary or other surrender of this Lease by Tenant or
a mutual cancellation hereof shall not work a merger but shall, at the option of
Landlord, either terminate all or any existing subleases or subtenancies or
operate as an assignment to Landlord of such subleases or subtenancies.
PARAGRAPH 13. ACCESS
Landlord reserves and shall at all times have the right to enter the
Premises, without notice to Tenant, to inspect the same, to supply janitorial
service and any other service to be provided by Landlord to Tenant hereunder, to
submit the Premises to prospective purchasers or tenants, to post notices of
nonresponsibility, to use and maintain pipes and conduits in and through the
Premises and to alter, improve or repair the Premises or any other portion of
the Facilities, all without being deemed guilty of an eviction of Tenant and
without abatement of Rent. Landlord may, for the purpose of altering, improving
or repairing the Premises or any other portion of the Facilities, erect
scaffolding and other necessary structures where reasonably required by the
character of the work to be performed. Landlord shall use commercially
reasonable efforts where practicable to conduct such entries and activities in a
workmanlike manner so as to reasonably minimize interference with Tenant's
ability to conduct its business at the Premises and Tenant hereby waives any
claim for damages for any injury or inconvenience to or interference with
Tenant's business, any loss of occupancy or quiet enjoyment of the Premises and
any other loss occasioned thereby or arising therefrom. Landlord shall at all
times have and retain a key with which to unlock all of the doors in, upon and
about the Premises, excluding Tenant's vaults and safes, if any. Landlord shall
have the right to use any and all means that Landlord may deem proper to open
such doors in an emergency in order to obtain entry to the Premises and any such
entry shall not under any circumstances be construed or deemed to be a forcible
or unlawful entry into, or a detainer of, the Premises or an eviction of Tenant
from the Premises or any portion thereof. No provision of this Paragraph 13
shall be construed as obligating Landlord to perform any repairs, alterations or
decoration not otherwise expressly required of Landlord under this Lease.
PARAGRAPH 14. SUBORDINATION, ATTORNMENT; ESTOPPEL CERTIFICATES
(a) Subordination. This Lease is junior, subject and subordinate to all
declarations of restrictions and all mortgages, deeds of trust and other
security instruments of any kind now or hereafter covering the Premises, the
Facilities or any portion of any thereof; provided, however, that the owner or
beneficiary of such encumbrances shall agree to the non-disturbance of the
Lease, so long as Tenant is in compliance with the terms hereof. This Lease, at
the option of Landlord, shall be subject and subordinate to any such liens or
encumbrances now or hereafter imposed by Landlord without the necessity of the
execution
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and delivery of any further instruments on the part of Tenant to effectuate such
subordination; provided, however, that the owner or beneficiary of such
encumbrances shall agree to the non-disturbance of the Lease, so long as Tenant
is in compliance with the terms hereof. Notwithstanding the foregoing, Tenant
covenants and agrees to execute and deliver within ten (10) business days upon
demand therefor such further instruments evidencing any such subordination of
this Lease as may be reasonably requested by Landlord. In the event of the
foreclosure of any such lien or encumbrance, Tenant shall attorn to the then
owner who owns or acquires title to the Premises or the Facilities, and will
recognize such owner as Landlord under this Lease. Tenant hereby waives any
right to terminate this Lease (except as may be permitted under other sections
of this Lease) solely because of any such foreclosure. This waiver shall in no
way constitute a waiver of any of Tenant's rights to terminate this lease under
any other provision hereof.
(b) Estoppel Certificates. Tenant shall at any time and from time to time,
upon not less than twenty (20) days' prior notice from Landlord, execute,
acknowledge and deliver to Landlord a statement in writing certifying that this
Lease is unmodified and in full force and effect (or if there have been
modifications, that this Lease is in full force and effect as modified and
describing the same), the dates through which the Rent and all other charges
have been paid in advance, if any, and stating whether or not, to the best
knowledge of Tenant, Landlord is in default in the performance of any covenant,
agreement or condition contained in this Lease and, if so, specifying each such
default. Any such statement delivered pursuant to this Paragraph 14(b) may be
relied upon by any prospective purchaser or encumbrancer (and all successors
thereof) of any interest of Landlord in or to the Facilities. Tenant's failure
to timely deliver any such statement shall be conclusive upon Tenant that: (1)
this Lease is in full force and effect, without modification except as may be
represented by Landlord; (2) there are no uncured defaults in Landlord's
performance; and (3) not more than one month's Rent has been paid more than one
month in advance.
(c) Lease Certificate. In addition, and not in lieu of the foregoing,
Tenant shall execute and deliver, within ten (10) days after demand therefor by
Landlord, a certificate substantially in the form of Exhibit C attached hereto,
indicating thereon any exceptions thereto which Tenant may claim to exist at
that time.
PARAGRAPH 15. SALE BY LANDLORD
In the event of a sale or conveyance by Landlord of the Premises, such
transfer shall operate to release Landlord from any and all liability under this
Lease. Subject to the provisions of Paragraph 14 hereof, Tenant's right to quiet
possession of the Premises shall not, however, be disturbed on account of such
transfer, so long as Tenant shall pay all rent and observe and perform all
provisions of this Lease to be observed and performed by Tenant, unless this
Lease is terminated pursuant to specific provisions relating to termination
contained in this Lease. If any security deposit has been made by Tenant,
Landlord may transfer the then balance of such deposit to Landlord's transferee
in connection with the sale or conveyance of
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the Premises, and thereupon Landlord shall be discharged from any further
liability in connection with such deposit.
PARAGRAPH 16. NON-LIABILITY AND INDEMNIFICATION OF LANDLORD; INSURANCE
(a) Landlord's Non-liability. Except to the extent caused solely by the
active negligence or intentional misconduct of Landlord or its servants,
employees or agents or by a default under this Lease on the part of Landlord,
Landlord shall not be liable for any injury or damage which may be sustained by
the person, goods, wares, merchandise or other property of Tenant, of Tenant's
employees, invitees or customers or of any other person in or about the Premises
resulting from any cause whatsoever (including, without limitation, fire, steam,
electricity, gas, water, rain or dampness which may occur, leak or flow from or
into any part of the Premises or any other place, any breakage, leakage,
obstruction or other defect in the pipes, sprinklers, wires, appliances,
plumbing, air conditioning or lighting fixtures of the Premises, theft,
explosion or falling plaster). In no event shall Landlord be liable for any
damage arising from any act or neglect of any other tenant of the Facilities or
any of their officers, employees, agents, representatives, customers, visitors
or invitees, for any damage to Tenant's property entrusted to employees of
Landlord or its agents, for any interference with light or other incorporeal
hereditaments or for any damage arising from any latent defect in the Premises
or the Facilities.
(b) Indemnification. To the fullest extent permitted by then applicable
law, Tenant shall protect and indemnify Landlord, hold Landlord harmless from,
and defend Landlord against any and all claims, losses, costs, damages, expenses
or liabilities, including, without limitation, reasonable attorneys' fees and
costs of defense, for any injury or damage to any person or property whatsoever
occurring in or on the Premises caused in part or in whole by the act, neglect,
fault or omission of Tenant or its assignees, subtenants or agents, of the
respective servants, employees or invitees of any of the foregoing persons or of
any other persons permitted in the Facilities by Tenant or any of such persons;
excluding, however, such damage to the extent caused solely by the active
negligence or intentional misconduct of Landlord or its servants, employees or
agents. This indemnity shall not require payment by Landlord as a condition
precedent to recovery from Tenant. In addition, if any person not a party to
this Lease shall institute any other type of action against Tenant in which
Landlord, involuntarily and without cause, shall be made a party defendant,
Tenant shall indemnify Landlord, hold Landlord harmless from and defend Landlord
against all liabilities by reason thereof consistent with the provisions of this
Paragraph 16(b).
(c) Tenant's Insurance. Tenant hereby agrees to maintain in full force and
effect at all times during the Term and any other period of its occupancy or
possession of the Premises, at its own expense, for the protection of Tenant and
Landlord, as their interests may appear, policies of insurance which afford the
following coverages: (1) Worker's Compensation and Employee's Liability
Insurance to the extent required by then applicable law; (2) Commercial
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General Liability Insurance with a Broad Form Liability Endorsement (including
protective liability coverage on operations of independent contractors engaged
in construction, coverage of Tenant's indemnity obligations under this Lease and
blanket contractual liability insurance) on an "occurrence" basis against claims
for "personal injury" liability, including, without limitation, bodily injury,
death and property damage liability, with a limit of not less than Five Million
Dollars ($5,000,000) in the event of "personal injury" to any number of persons
or of damages to property arising out of any single "occurrence"; (3) insurance
against loss or damage by fire and such other risks and hazards as are insurable
under then applicable standard forms of "all risk" fire and extended coverage
insurance policies to the personal property, furniture, furnishings and fixtures
belonging to Tenant used or located in the Premises for not less than one
hundred percent (100%) of the actual replacement value thereof (the proceeds of
which insurance, so long as this Lease remains in effect, shall be used to
repair or replace such personal property, furnishings and fixtures in the
Premises; provided, however, that upon any termination of this Lease pursuant to
Paragraph 10 hereof, all proceeds applicable to damages to the Premises shall be
the property of Landlord); and (4) business interruption or loss of income
insurance in an amount equal to the total Rent for a period of at least twelve
(12) months commencing with the date of loss (the proceeds of which insurance
shall be paid to Landlord to the extent of any abatement of Rent under the
Lease).
(d) Deductibles. Tenant may, with the written consent of Landlord, elect
to have reasonable deductibles in connection with the policies of insurance
required to be maintained by Tenant under Paragraph 16(c) hereof.
(e) Certificates of Insurance. At the request of the Landlord and upon the
commencement of this Lease, Tenant shall deliver to Landlord certificates of
insurance evidencing the above coverages with limits not less than those
specified above. Such certificates, with the exception of worker's compensation,
shall add Landlord, each of its partners, subsidiaries, affiliates, directors,
agents and employees, as additional insureds and shall expressly provide that
the interest of such persons therein shall not be affected by any breach by
Tenant of any policy provision for which such certificates evidence coverage.
Further, each such certificate shall expressly provide that no less than thirty
(30) days' prior written notice shall be given to Landlord in the event of a
material alteration to or cancellation of the coverages evidenced by such
certificate. The insurance that Tenant is required to maintain in force and
effect under this Paragraph 16 shall be primary insurance as respects Landlord
(and any other additional insureds designated by Landlord) and not excess over
or contributory with any other available insurance. Certificates of insurance
evidencing the liability insurance coverage required under Paragraph 17(c)(2)
hereof shall contain an endorsement providing, in substance, that such insurance
as is afforded thereby for the benefit of Landlord (and any other additional
insureds designated by Landlord) shall be primary and any insurance carried by
Landlord (and any other such additional insureds) shall be excess and not
contributory.
(f) No Co-Insurance. If, on account of the failure of Tenant to comply
with the provisions of this Paragraph 16, Landlord or any other person is
adjudged a co-insurer by its
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insurance carrier, then any loss or damage which Landlord or such other person
shall sustain by reason thereof shall be borne by Tenant and shall be
immediately paid by Tenant upon receipt of a bill therefor and evidence of such
loss.
(g) Insurance Limits. Landlord makes no representation that the limits of
liability specified to be carried by Tenant under this Lease are adequate to
protect Tenant against Tenant's undertaking under this Lease. In the event
Tenant believes that any such required coverage is insufficient, Tenant shall
provide, at its own expense, such additional insurance as Tenant deems adequate.
In no event shall the limits of any coverage maintained by Tenant pursuant to
this Paragraph 16 be considered as limiting Tenant's liability under this Lease.
(h) Force Majeure. Any covenants, conditions, provisions or agreements on
the part of Landlord to perform any act or thing for the benefit of Tenant shall
not be deemed breached if Landlord is unable to furnish or perform the same by
virtue of laws, rules, orders, ordinances, directions, regulations or
requirements of any governmental authority, by a strike, lockout or other labor
trouble or by any other cause whatsoever beyond Landlord's control, nor shall
Tenant's rent be abated by reason of such inability on the part of Landlord
except as otherwise specifically required under this Lease. In each instance of
Landlord's inability referred to in this paragraph, Landlord shall exercise
reasonable diligence to eliminate the cause of such inability or delay and to
effect the restoration of any services to Tenant supported thereby.
(i) Consequential Damages. In no event shall Landlord be liable to Tenant
for any damage by reason of loss of profits or business interruption or any
other consequential damages.
(j) General Requirements. All insurance required to be carried by Tenant
hereunder shall be with companies reasonably acceptable to Landlord. All
policies and certificates delivered by Tenant pursuant to this Paragraph shall
contain liability limits not less than those set forth herein, shall list all
additional insureds and shall specify all endorsements and special coverages
required by this Paragraph. Any insurance required to be maintained by Tenant
may be maintained pursuant to so-called "blanket" policies of insurance so long
as the Premises are specifically identified therein (by endorsement or
otherwise) as included in the coverage provided and such policies otherwise
comply with the provisions of this Lease.
PARAGRAPH 17. WAIVER OF SUBROGATION
(a) Without affecting any other rights or remedies hereunder, at law or in
equity, Landlord and Tenant each hereby waives all rights of recovery against
the other, any other tenant or occupant in the Premises and all officers,
employees, agents, representatives, customers and business visitors of such
persons for loss of or damage to property at the Premises arising from any cause
insured against under any policy of all-risk insurance either required to be
carried by such waiving party pursuant to the provisions of this Lease or
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actually carried by such waiving party to the extent of any insurance recovery
thereunder with respect to such loss or damage. The foregoing waiver shall be
effective whether or not such waiving party shall actually obtain and maintain
the "all risk" insurance required pursuant to this Lease. Tenant shall, upon
obtaining the policies of insurance which it is required to maintain under this
Lease, give notice to its insurance carriers that the foregoing waiver of
subrogation is contained in this Lease.
(b) In the event either Landlord or Tenant notifies the other that an
insurer under any policy described in Paragraph 17(a) hereof has refused to
consent to or permit the waiver of subrogation thereunder in any fashion or has
conditioned the same upon the payment of an additional premium, then such waiver
shall be of no force or effect with respect to loss or damage covered by such
policy during the period commencing five (5) business days after such other
party's receipt of such notice and continuing until such insurer reinstates such
consent; provided, however, that if such other party elects to reimburse the
notifying party for any required additional premium, the notifying party shall
obtain such insurer's consent.
PARAGRAPH 18. ATTORNEYS' FEES
In the event of any legal action or proceeding brought by either party
against the other arising out of this Lease, the prevailing party shall be
entitled to recover reasonable attorneys' fees, expenses and costs incurred in
such action, and such amount shall be included in any such judgment rendered in
such action or proceeding.
PARAGRAPH 19. WAIVER
No waiver by Landlord of any provision of this Lease or of any breach by
Tenant hereunder shall be deemed to be a waiver of any other provision hereof or
of any subsequent breach by Tenant of the same or any other provision.
Landlord's consent to or approval of any act by Tenant requiring Landlord's
consent or approval shall not be deemed to render unnecessary the obtaining of
Landlord's consent to or approval of any subsequent act of Tenant. No act or
thing done by Landlord or Landlord's agents during the term of this Lease,
including, without limitation, Tenant's delivery of the keys to the Premises to
any employee or agent of Landlord, shall operate as or be deemed to be a
termination of this Lease, a surrender of the Premises or an acceptance of a
surrender of the Premises unless expressly stated in a writing signed by
Landlord. The acceptance of any rent by Landlord following a breach of this
Lease by Tenant shall not constitute a waiver by Landlord of such breach or any
other breach unless such waiver is expressly stated in a writing signed by
Landlord. The acceptance of any payment from a debtor-in-possession, a trustee,
a receiver or any other person acting on behalf of Tenant or Tenant's estate
shall not constitute a waiver of or cure a default under Paragraph 15 or 23
hereof.
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PARAGRAPH 20. NOTICES
All notices, requests, claims, demands and other communications hereunder
shall be in writing and shall be given or made (and shall be deemed to have been
duly given or made upon receipt) by delivery in person, by courier service, by
cable, by telecopy, by telegram, by telex, or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Paragraph 20):
(a) if to Landlord:
Corning Incorporated
One Riverfront Plaza
Corning, New York 14831
Telecopy: (607) 974-8656
Attention: Secretary
with a copy to:
Corning Incorporated
One Riverfront Plaza
Corning, New York 14831
Telecopy: (607) 974-8656
Attention:Business Services Division
Real Estate Department
(b) if to Tenant:
Corning Consumer Products Company
E-Building
Houghton Park
Corning, New York 14831
Telecopy: (607) 974-2215
Attention: President
PARAGRAPH 21. INSOLVENCY OR BANKRUPTCY
(a) Prior to Term. If at any time prior to the Commencement Date (1)
Tenant shall make any general assignment for the benefit of creditors, (2) a
petition shall be filed by or against Tenant to have Tenant adjudged a bankrupt
or for a reorganization or arrangement under any law relating to bankruptcy, (3)
a trustee or receiver shall be appointed to take possession of substantially all
of Tenant's assets or of Tenant's interest in this Lease, (4) substantially all
of Tenant's assets or Tenant's interest in this Lease shall be seized by
14
<PAGE>
attachment, execution or other judicial process, or (5) Tenant shall convene a
meeting of its creditors or any class thereof for the purpose of effecting a
moratorium upon or composition of its debts (each an "Insolvency Event"), then
this Lease shall automatically be cancelled and terminated and neither Tenant
nor any person claiming through or under Tenant or by virtue of any statute or
by an order of any court shall be entitled to possession of the Premises. In
such event Landlord, in addition to the other rights and remedies available to
it under this Lease, at law or in equity, may retain as damages all rent,
security, deposit and other amounts previously received by it from Tenant or
others on behalf of Tenant.
(b) No Assignment. In no event shall this Lease be assigned or assignable
by operation of law and in no event shall this Lease be an asset of Tenant in
any receivership, bankruptcy, insolvency or reorganization proceeding.
PARAGRAPH 22. DEFAULT
(a) Default by Tenant. The occurrence of any of the following shall
constitute an "Event of Default" by Tenant:
(1) Any failure by Tenant to pay Rent or to make any other payment
required to be made by Tenant hereunder at the time specified for payment
and the continuance of such failure for a period of five (5) business days
after Landlord has delivered to Tenant a written notice with respect to
such failure.
(2) Any abandonment or vacation of the Premises by Tenant.
(3) Any material warranty, representation or statement made or
furnished by Tenant to Landlord at any time in connection with this Lease
is determined to have been false or misleading in any material respect
when made or furnished.
(4) Tenant makes or attempts any assignment, sublease, mortgage or
encumbrance in violation of Paragraph 12 hereof.
(5) The occurrence of any Insolvency Event filed against Tenant by a
third party other than Landlord that is not dismissed within sixty (60)
days after such occurrence or the occurrence of any other Insolvency
Event.
(6) Any failure by Tenant to observe and perform any other provision
of this Lease to be observed or performed by Tenant, where such failure
continues for thirty (30) days (except where a different period is
specified in this Lease) after written notice thereof by Landlord to
Tenant; provided, however, that, if such failure cannot be cured within
such thirty (30) day period and Tenant commences to cure such failure
within that initial thirty (30) day period, and thereafter diligently
pursues such cure to completion, then such failure shall not constitute an
Event of Default so long as it is
15
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fully cured within ninety (90) days after the above-described written
notice by Landlord to Tenant.
(b) Remedies. Upon the occurrence of an Event of Default, then in addition
to all other remedies available to Landlord at law or in equity:
(1) Landlord shall have the immediate option to terminate this Lease
and all rights of Tenant hereunder by giving Tenant written notice of such
intention to terminate, in which event Landlord may recover from Tenant all of
the following: (A) the worth at the time of award of any unpaid Rent that had
been earned at the time of such termination; plus (B) the worth at the time of
award of the amount by which the unpaid rent that would have been earned after
termination until the time of award exceeds the amount of such rental loss
Tenant proves reasonably could have been avoided; plus (C) the worth at the time
of award of the amount by which the unpaid rent for the balance of the term
after the time of award exceeds the amount of such rental loss that Tenant
proves reasonably could be avoided; plus (D) any other amount necessary to
compensate Landlord for all the detriments proximately caused by Tenant's
failure to perform its obligations under this Lease or tht in the ordinary
course of things would be likely to result therefrom; plus (E) at Landlord's
election, such other amounts in addition to or in lieu of the foregoing as may
be permitted from time to time by applicable New York law. As used in (A) and
(B) above, the "worth at the time of award" shall be computed by allowing
interest at the rate specified in Paragraph 33(a) below and as used in (C)
above, the "worth at the time of award" shall be computed by discounting such
amount at the discount rate of the Federal Reserve Bank of New York at the time
of award plus one percent (1%).
(2) Landlord shall also have the right, with or without terminating
this Lease, to re-enter the Premises and remove all persons and property from
the Premises. Such property may be removed and stored in a public warehouse or
elsewhere at the cost of and for the account of Tenant.
(3) In the event Landlord elects to re-enter the Premises under
Paragraph 22(b)(2) above or takes possession of the Premises pursuant to any
proceeding or notice provided by law or Tenant vacates or abandons the Premises,
but Landlord does not elect to terminate this Lease as provided in this
Paragraph 22, Landlord may from time to time without terminating this Lease
either recover from Tenant all Rent as it becomes due or relet the Premises or
any part thereof upon such terms and conditions as Landlord in its sole
discretion may deem advisable, with the right of Landlord to make alterations
and repairs to the Premises. In the event of any such reletting, rental and
other charges received by Landlord therefrom shall be applied in the following
order: (A) to the payment of any indebtedness other than rent due hereunder from
Tenant to Landlord; (B) to the payment of all costs of such reletting; (C) to
the payment of the cost of any reasonable alterations and repairs to the
Premises; and (D) to the payment of Rent and other charges due and unpaid
hereunder. The residue, if any, shall be held by Landlord and applied in payment
of future rent and other charges due hereunder, as the same may become due. In
the event the rental and other charges
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received by Landlord from all such reletting are at any time less than the then
aggregate of (A) through (D) above, Tenant shall pay such deficiency to Landlord
immediately upon demand therefor, but not more often than monthly.
(4) No re-entry or taking possession of the Premises by Landlord
pursuant to this Paragraph 22 shall be construed as an election to terminate
this Lease unless a written notice of such intention shall be given to Tenant or
unless such termination shall be decreed by a court of competent jurisdiction.
Notwithstanding any reletting without termination by Landlord because of any
default by Tenant, Landlord may, at any time after such reletting, elect to
terminate this Lease for any such default.
(5) In any action for unlawful detainer commenced by Landlord
against Tenant by reason of any default hereunder, the reasonable rental value
of the Premises for the period of the unlawful detainer shall be the amount of
Rent reserved in this Lease for such period, unless Landlord or Tenant shall
prove to the contrary by competent evidence. The rights and remedies reserved to
Landlord herein, including those not specifically described, shall be cumulative
and, except as otherwise provided by then applicable New York law, Landlord may
pursue any or all of such rights and remedies at the same time or otherwise.
(c) Default by Landlord. Landlord shall not be in default or breach of
this Lease unless Landlord fails to observe or perform an obligation required
under this Lease to be observed or performed by Landlord and such failure
continues for fifteen (15) days (except where a different period is specified in
this Lease) after written notice thereof by Tenant to Landlord; provided,
however, that if the nature of such default is such that the same cannot
reasonably be cured within such fifteen (15) day period, Landlord shall not be
deemed to be in default if Landlord shall, within such period, commence such
cure and thereafter diligently prosecute the same to completion, but in no event
shall any such cure period exceed one hundred twenty (120) days in the
aggregate.
PARAGRAPH 23. HOLDING OVER
If Tenant holds over after the expiration or earlier termination of the
Term without the express written consent of Landlord, Tenant shall become a
tenant at sufferance only at either the then prevailing market rate, as
determined by Landlord in its sole and absolute discretion, for the Premises or,
at Landlord's option, one hundred fifty percent (150%) of the Rent, in each case
in effect upon the date of such expiration or earlier termination (subject to
such adjustments as may be provided for in Paragraph 2 hereof and prorated on a
daily basis) and otherwise upon the terms, covenants and conditions herein
specified, so far as applicable. Acceptance by Landlord of Rent after such
expiration or earlier termination shall not constitute a consent to a holdover
hereunder or result in a renewal of this Lease. The foregoing provisions of this
Paragraph 23 are in addition to and do not affect Landlord's right of re-entry
or any other rights of Landlord hereunder or as otherwise provided by law.
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PARAGRAPH 24. CONDITION OF PREMISES
Tenant acknowledges that neither Landlord nor any agent of Landlord has
made any representation or warranty with respect to the Premises or the
Facilities with respect to the suitability of any part of the same for the
conduct of Tenant's business. Tenant accepts possession of the Premises in its
"as is" condition. The taking of possession of the Premises by Tenant shall
conclusively establish that the Premises and the Facilities were at such time in
a good and sanitary order, condition and repair acceptable to Tenant.
PARAGRAPH 25. QUIET POSSESSION
Upon Tenant's paying the rent reserved hereunder, and observing and
performing all of the covenants, conditions and provisions on Tenant's part to
be observed and performed hereunder, Tenant shall have quiet possession of the
Premises for the entire Term, subject to all the provisions of this Lease.
Landlord shall have the right, upon reasonable oral notification to Tenant and
at reasonable times, so as not to interrupt the conduct of Tenant's business, to
show the interior of Tenant's suite to prospective tenants, buyers, planners and
others as required.
PARAGRAPH 26. NOTICE OF DAMAGE
Tenant shall give prompt notice to Landlord in case of fire or accidents
in the Premises or at the Facilities or of any defects discovered therein or in
their fixtures or equipment.
PARAGRAPH 27. GOVERNING LAW
This Lease shall be governed by, and construed in accordance with, the
laws of the State of New York.
PARAGRAPH 28. COMMON FACILITIES; PARKING
(a) Right to Use Common Facilities. Tenant shall have the non-exclusive
right, in common with others, to the use of any common entrances, lobbies,
elevators, stairs, ramps, drives and similar access and serviceways and other
similar common areas of the Facilities. The rights of Tenant hereunder in and to
the common facilities shall at all times be subject to the rights of Landlord
and other tenants in the Facilities who use the same in common with Tenant, and
it shall be the duty of Tenant to keep all the common areas free and clear of
any obstructions created or permitted by Tenant or resulting from Tenant's
operations. Nothing herein shall affect the right of Landlord at any time to
remove any persons not authorized to
18
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use the common areas from such areas or to prevent the use of such areas by
unauthorized persons.
(b) Changes in Common Areas. Landlord reserves the right, at any time and
from time to time to: (1) make alterations in or additions to the common areas
of the Facilities, including, without limitation, constructing new buildings or
changing the location, size, shape or number of the driveways, entrances,
parking spaces, parking areas, loading and unloading areas, landscape areas, and
walkways; (2) designate property to be included in or eliminate property from
the common areas of the Facilities; (3) close temporarily any of the common
areas of the Facilities for maintenance purposes; and (4) use the common areas
of the Facilities while engaged in making alterations in or additions and
repairs to the Facilities; provided, however, that reasonable access to the
Premises and parking at the Facilities remain available.
(c) Parking. Tenant shall be entitled to parking spaces and privileges
that are substantially the same as it enjoyed prior to the date hereof.
PARAGRAPH 29. SUCCESSORS AND ASSIGNS
Except as otherwise provided in this Lease, all of the covenants,
conditions, and provisions of this Lease shall be binding upon and shall inure
to the benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns.
PARAGRAPH 30. BROKERS
Tenant warrants that it has had no dealings with any real estate broker or
agent in connection with the negotiation of this Lease, and that it knows of no
real estate broker or agent who is or might be entitled to a commission or
finder's or similar fee in connection with this Lease. Tenant agrees to
indemnify, protect, defend and hold Landlord harmless from and against any and
all costs, expenses and liabilities for any compensation claimed by any broker
(if any) set forth in this Lease or claimed by any other broker, finder or agent
in connection with the negotiation of this Lease.
PARAGRAPH 31. NAME
In no event shall Tenant acquire any rights in or to any names pursuant to
this Lease.
19
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PARAGRAPH 32. EXAMINATION OF LEASE
Submission of this Lease for examination or signature by Tenant does not
constitute a reservation of or option for lease, and it is not effective as a
lease or otherwise until execution by and delivery to both Landlord and Tenant.
PARAGRAPH 33. INTEREST ON TENANT'S OBLIGATIONS; LATE CHARGE
(a) Any amount due from Tenant to Landlord that is not paid when due shall
bear interest at the lesser of eighteen percent (18%) per annum and the maximum
rate then permitted by law in this context from the date such payment is due
until paid. The rate so determined shall continue in effect following any
default by Tenant pursuant to this Lease. Payment of such interest shall not
excuse or cure any default by Tenant under this Lease.
(b) In the event Tenant is more than ten (10) business days late in paying
any installment of Rent due under this Lease, Tenant shall pay Landlord a late
charge equal to five percent (5%) of the delinquent installment of Rent. The
parties agree that the amount of such late charge represents a reasonable
estimate of the cost and expense that will be incurred by Landlord in processing
each delinquent payment of rent by Tenant. The parties further agree that the
payment of late charges and the payment of interest provided for in Paragraph
33(a) hereof are distinct and separate from one another, in that the payment of
interest is to compensate Landlord for its inability to use the money improperly
withheld by Tenant, while the payment of late charges is to compensate Landlord
for its additional administrative expenses in handling and processing delinquent
payments.
PARAGRAPH 34. TIME
Time is and shall be of the essence of this Lease and each and all of its
provisions.
PARAGRAPH 35. DEFINED TERMS AND MARGINAL HEADINGS
The words "Landlord" and "Tenant" as used herein shall include the plural
as well as the singular. If more than one person is named as Tenant under this
Lease, the obligations of such persons shall be joint and several. Whenever
under the provisions of this Lease Landlord is required or agrees to take
certain action, Landlord's obligation to do so shall be deemed fulfilled if
Landlord causes such action to be taken by any other person. The marginal
headings and titles to the Paragraphs and other divisions of this Lease are not
a part of this Lease and shall have no effect upon the construction or
interpretation of any part hereof.
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PARAGRAPH 36. PRIOR AGREEMENTS; SEVERABILITY
This Lease, including any and all Exhibits attached hereto, contains all
of the agreements of the parties hereto with respect to any matter covered or
mentioned in this Lease, and no prior agreement, understanding or representation
pertaining to any such matter shall be effective for any purpose. No provision
of this Lease may be amended or added to except by an agreement in writing
signed by the parties hereto or their respective successors in interest. If any
term or provision of this Lease the deletion of which would not adversely affect
the receipt of any material benefit by either party hereunder shall be held
invalid or unenforceable to any extent, the remainder of this Lease shall not be
affected thereby and each term and provision of this Lease shall be valid and
enforceable to the fullest extent permitted by law.
PARAGRAPH 37. CORPORATE AUTHORITY
Each individual executing this Lease on behalf of Landlord and Tenant
represents and warrants that: (a) such individual has full power and authority
to execute this Lease on behalf of its party; and (b) the execution and delivery
of this Lease have been duly authorized by such party.
PARAGRAPH 38. NO LIGHT, AIR OR VIEW EASEMENTS
Any diminution or shutting off of light, air or view by any structure tht
may be erected on lands adjacent to the Premises shall in no way affect this
Lease or impose any liability on Landlord.
PARAGRAPH 39. LANDLORD'S APPROVALS
In no event shall the review, approval, inspection or examination by
Landlord of any item to be reviewed, approved, inspected or examined by Landlord
under the Terms of this Lease be deemed to be an approval of or representation
or warranty as to the adequacy, accuracy, sufficiency or soundness of any such
item or the quality or suitability of such item for its intended use. Any such
review, approval, inspection or examination by Landlord shall be for the sole
purpose of protecting Landlord's interests in the Facilities and under this
Lease, and no third parties shall have any rights pursuant thereto.
PARAGRAPH 40. MISCELLANEOUS
(a) Tenant acknowledges that the liability of Landlord with respect to its
obligations pursuant to this Lease is limited to Landlord's equity interest in
the Facilities. Tenant shall look solely to Landlord's equity interest in the
Facilities to satisfy any claim or judgment against or any liability or
obligation of Landlord to Tenant. No recourse shall be had by
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Tenant against Landlord or the assets of Landlord (other than the equity
interest of Landlord in the Facilities) to satisfy any claim or judgment of
Tenant against Landlord or any obligation or liability of Landlord to Tenant.
(b) Tenant may not record this Lease.
PARAGRAPH 41. SIGNAGE
Landlord shall have no obligation to provide any signage to Tenant.
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IN WITNESS WHEREOF, the parties hereto have executed this Lease as
of the day and year first above written.
LANDLORD:
CORNING INCORPORATED, a New York
corporation
By:
-------------------------------------
Name:
Title:
TENANT:
CORNING CONSUMER PRODUCTS
COMPANY, a Delaware corporation
By:
-------------------------------------
Name:
Title:
23
<PAGE>
Exhibit 5.09(b)(i)
Form of CORNING WARE and PYROCERAM License Agreement
<PAGE>
================================================================================
--------------------------------------
CORNINGWARE AND PYROCERAM LICENSE AGREEMENT
--------------------------------------
Between
CORNING INCORPORATED
and
CORNING CONSUMER PRODUCTS COMPANY
April 1, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Page
----
SECTION 1.01. Certain Defined Terms.................................. 2
ARTICLE II
GRANT OF LICENSES
SECTION 2.01. Grant of Licenses...................................... 5
SECTION 2.02. Licensor Restrictions.................................. 5
SECTION 2.03. Ownership.............................................. 6
SECTION 2.04. Assignment of Rights................................... 6
SECTION 2.05. Registration of Marks.................................. 7
SECTION 2.06. Reservation of Licensor Rights......................... 7
ARTICLE III
QUALITY CONTROL, ADVERTISING
SECTION 3.01. Quality Standard....................................... 9
SECTION 3.02. Quality Assurance...................................... 9
SECTION 3.03. Samples, Quality....................................... 9
SECTION 3.04. Advertising/Packaging.................................. 10
SECTION 3.05. Compliance............................................. 10
SECTION 3.06. Notice................................................. 11
ARTICLE IV
INDEMNIFICATION, INSURANCE
SECTION 4.01. Indemnification........................................ 11
SECTION 4.02. Insurance.............................................. 12
ARTICLE V
TERM AND TERMINATION
SECTION 5.01. Term................................................... 12
SECTION 5.02. Licensee's Option to Terminate......................... 13
SECTION 5.03. Material Breach........................................ 13
SECTION 5.04. Termination for Other Events........................... 13
SECTION 5.05. Survival............................................... 14
ARTICLE VI
FEES AND CHARGES
SECTION 6.01. Fees and Charges....................................... 14
SECTION 6.02. Registered User........................................ 15
ARTICLE VII
FORCE MAJEURE EVENT
SECTION 7.01. Force Majeure Event.................................... 15
SECTION 7.02. Effect of a Force Majeure Event........................ 15
<PAGE>
SECTION 7.03. Length of a Force Majeure Event........................ 15
ARTICLE VIII
SUBLICENSING, ADDITIONAL LICENSING
SECTION 8.01. SubLicensing........................................... 15
SECTION 8.02. Additional Licensing................................... 16
ARTICLE IX
INFRINGEMENT
SECTION 9.01. Infringement........................................... 16
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Notices............................................... 17
SECTION 10.02. Headings.............................................. 18
SECTION 10.03. Severability.......................................... 18
SECTION 10.04. Entire Agreement...................................... 18
SECTION 10.05. Assignment............................................ 18
SECTION 10.06. No Third-Party Beneficiaries.......................... 19
SECTION 10.07. Amendment; Waiver..................................... 19
SECTION 10.08. Governing Law......................................... 19
SECTION 10.09. Counterparts.......................................... 19
SECTION 10.10. Independent Contractors............................... 19
SECTION 10.11. Personnel............................................. 20
SECTION 10.12. Disclaimer............................................ 20
EXHIBIT 1 CORNING WARE TRADEMARK Registrations
EXHIBIT 2 PYROCERAM TRADEMARK Registrations
EXHIBIT 3 Pre-Existing License Agreements
EXHIBIT 4 Arbitration Procedures
EXHIBIT 5 Definition of Franchising
<PAGE>
CORNINGWARE AND PYROCERAM LICENSE AGREEMENT, dated April 1, 1998 (this
"Agreement"), between CORNING INCORPORATED, a corporation organized under the
laws of New York (the "Licensor"), and CORNING CONSUMER PRODUCTS COMPANY, a
corporation organized under the laws of Delaware (the "Licensee").
WHEREAS, the Licensor, the Licensee, CCPC Acquisition Corp., a corporation
organized under the laws of Delaware (the "Purchaser"), and, for certain limited
purposes only, Borden, Inc. have entered into a Recapitalization Agreement dated
March 2, 1998 (the "Recapitalization Agreement"), providing for the sale by the
Licensor to the Purchaser of approximately 92% of the issued and outstanding
shares of common stock, no par value per share, of the Licensee;
WHEREAS, the execution and delivery of this Agreement by the Licensor is a
condition precedent to the obligations of the Purchaser under the
Recapitalization Agreement;
WHEREAS, on the terms and conditions set forth herein, the Licensor is
willing to grant a fully paid, royalty-free and exclusive license to the
Licensee to use the CORNING WARE TRADEMARK and the PYROCERAM TRADEMARK only in
connection with the manufacture and sale of products within the field of
Housewares;
WHEREAS, the Licensor desires to continue to use the trademark and trade
name "CORNING" and the trademark "PYROCERAM" outside of the field of Housewares
but, other than through the Licensee, so long as this Agreement remains in
effect, will discontinue the Licensor's use of the CORNING WARE trademark;
WHEREAS, the Licensor is the owner of the CORNING WARE TRADEMARK and the
PYROCERAM TRADEMARK;
WHEREAS, the Licensor had previously licensed to the Licensee and the
Subsidiaries the right to utilize the CORNING WARE and PYROCERAM trademarks
while the Licensee was a wholly owned subsidiary of Licensor and desires to
replace such authorization and license with the license granted under this
Agreement; and
WHEREAS, the Licensor is willing to license to the Licensee and its
Affiliates the right to use the term CORNINGWARE as part of its corporate name,
pursuant to the terms and conditions contained herein; and
WHEREAS, the Licensor is willing to license to the Licensee and its
Affiliates the right to use the term CORNINGWARE as part of the service mark
used in the operation of the Licensee factory outlet store operations, pursuant
to the terms and conditions contained herein.
<PAGE>
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants hereinafter set forth, and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, it is hereby agreed
as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. Capitalized words or phrases used and
not otherwise defined herein shall have the respective meanings ascribed thereto
in the Recapitalization Agreement. The following terms shall have the following
meanings:
"CORNINGWARE SERVICEMARK" means the CORNINGWARE servicemark and any
and all common law and/or statutory trademark rights therein and any confusingly
similar modifications, derivations or stylizations thereof (including
translations thereof into any language other than English), the goodwill related
thereto, and all registrations, applications, renewals, continuations and
extensions for the CORNINGWARE servicemark and owned by the Licensor; provided,
however, that the CORNINGWARE SERVICEMARK shall only include the right to use
the term CORNING immediately followed by the term WARE, in only the same word,
the Licensor acknowledging use in the form "CorningWare" is in the same word in
connection with the Licensed Services; provided, further, the CORNINGWARE
SERVICEMARK shall not include any usage of the term CORNINGWARE or any
confusingly similar derivation or modification thereof as part of a corporate
name, or vanity phone number, except as provided herein; provided, further
however that the CORNINGWARE SERVICEMARK shall not include the right to use the
term "CORNING" alone.
"CORNINGWARE TRADE NAME" means the CORNINGWARE term when used as
part of the corporate name of the Licensee and any of its subsidiaries;
provided, however, (i) the CORNINGWARE term must be preceded by a word that (a)
does not begin with the letters COR or COS, (b) is not merely an article, e.g.
"a", "the", "an", (c) does not include the word "consumer" and (d) is otherwise
subject to the Licensor's approval, which approval shall not be unreasonably
withheld; and (ii) the corporate name including the term CORNINGWARE shall use
such word in a manner so that the "CORNING" portion of the word is unified with
the "WARE" portion of the word, the Licensor acknowledging that use in the form
"CorningWare" is acceptable; (iii) the corporate name including the term
CORNINGWARE shall not be used solely as a trademark or servicemark; and (iv) the
certificate of incorporation (or equivalent document) of the Licensee and any of
its subsidiaries using the term CORNINGWARE as part of its corporate name shall
state that such use is pursuant to the terms and conditions of this Agreement.
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"CORNING WARE TRADEMARK" means the CORNING WARE trademark and any
and all common law and/or statutory trademark rights therein and any confusingly
similar modifications, derivations or stylizations thereof (including
translations thereof into any language other than English), the goodwill related
thereto, and all registrations, applications, renewals, continuations and
extensions for the CORNING WARE trademark and owned by the Licensor including,
but not limited to, those identified on Exhibit 1 attached hereto; provided,
however, that the CORNING WARE TRADEMARK shall only include the right to use the
term CORNING immediately followed by the term WARE, in the same word or as a
separate word; provided, further, the CORNING WARE TRADEMARK shall not include
any usage of the term CORNING WARE or any confusingly similar derivation or
modification thereof as part of a corporate name, vanity phone number or used
primarily as a trade name, except as provided herein, nor shall it include the
right to use the term "CORNING" alone or followed by any term other than "WARE".
Notwithstanding the foregoing, in jurisdictions (a) in which the CORNING WARE
TRADEMARK would be viewed as legally indistinguishable from the CORNING
trademark and (b) in which, pursuant to the laws thereof, the licensing of the
CORNING WARE TRADEMARK would constitute a de facto license of the CORNING
trademark, then the CORNING trademark shall be included in the CORNING WARE
TRADEMARK only to the extent required by the laws of each such jurisdiction, and
Licensee agrees, nevertheless, to use the CORNING WARE TRADEMARK only in the
manner provided above.
"Force Majeure Event" means, with respect to a Person, any act of
God or the public enemy, war, compliance with laws, governmental acts or
regulations, fire, flood, epidemic, strikes and labor interruptions, accident,
unusually severe weather or similar causes which are beyond the reasonable
control of such Person.
"Housewares" shall have the same meaning as in the Recapitalization
Agreement and repeated here only for the sake of convenience. In the event of
any inconsistency between the following definition and the one in the
Recapitalization Agreement, the Recapitalization Agreement definition shall
control:
Housewares means Corning Consumer Products and: (i) products
used primarily in the preparation, cooking, storage, service and
enjoyment of food or beverages such as: (A) glass, ceramic, metal,
plastic or other bakeware, cookware, dinnerware, tableware, and
ovenware; (B) crystal and china dinnerware, tableware, and
decorative objects or accessories; (C) kitchen and table utensils,
cutlery and gadgets; (D) food storage containers; (E) portable
appliances; (F) table linen and oven mitts; (ii) furnishings for the
home; and (iii) the products listed on Exhibit 1.01(b) to the
Recapitalization Agreement; provided, however, that Housewares shall
not include such items as are specifically excluded from the
definition of Corning Consumer Products.
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"Licensee" to the extent applicable shall include both Corning
Consumer Products Company and any of its subsidiaries.
"Licensed Products" means Housewares bearing or otherwise using one
of the Trademarks, and manufactured, distributed, sublicensed or sold by the
Licensee after the Closing.
"Licensed Services" means the operation of outlet stores primarily
selling Housewares products of the Company, whether or not other housewares
products are sold there.
"PYROCERAM TRADEMARK" means the PYROCERAM trademark and any and all
common law and/or statutory trademark rights therein and derivations or
stylizations thereof (including translations thereof into any language other
than English), the goodwill related thereto, and all registrations,
applications, renewals, continuations and extensions for the PYROCERAM trademark
and owned by the Licensor including, but not limited to, those identified on
Exhibit 2 attached hereto; provided, however, that the PYROCERAM TRADEMARK shall
not include the use of the term PYROCERAM or any confusingly similar derivation
or modification thereof as part of a corporate name, vanity phone number, or
used primarily as a trade name.
"Related Marks" means any other name or mark that is confusingly
similar, deceptive or misleading with respect to either of the Trademarks.
"Steuben Products" means high-end crystal glassware sold under the
Steuben trademark.
"subsidiary" or "subsidiaries" means any Person with respect to
which a specified Person (or a subsidiary thereof) owns a majority of the common
stock (or similar voting securities) or has the power to vote or direct the
voting of sufficient securities to elect a majority of the directors or
individuals exercising similar functions.
"Trademarks" means the CORNING WARE TRADEMARK and the PYROCERAM
TRADEMARK.
"Term" shall mean the term of this Agreement as provided for in
Article V hereof.
"Territory" shall mean, worldwide subject to any rights of a third
party as set forth in a pre-existing license as identified on Exhibit 3 hereto.
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ARTICLE II
GRANT OF LICENSES
SECTION 2.01. Grant of Licenses. (a) Subject to the terms and
conditions contained herein, and to any pre-existing agreements as identified
and described in Exhibit 3 hereto, the Licensor hereby grants to the Licensee a
fully paid, exclusive and royalty-free license to use the Trademarks only on or
in connection with the manufacture, distribution and/or sale of Licensed
Products in the Territory for the Term. The license shall be exclusive in and
limited to the field of Housewares, and the Licensee shall not use the
Trademarks outside of the field of Housewares. Pursuant to the license granted
herein, Licensee may directly or through a third party manufacture the Licensed
Products, but only the Licensee may initially distribute or sell the Licensed
Products manufactured by a third party unless such third party is authorized to
distribute or sell the Licensed Products under Article VIII hereof. Any use of
the Trademarks by the Licensee shall inure to the benefit of the Licensor, and
Licensee shall be treated as a related company of Licensor for the purpose of 15
U.S.C. ss. 1055 only. The Licensee undertakes to use the Trademarks strictly in
accordance with the terms and conditions set forth herein. Licensee shall not
use any of the Trademarks together with or accompanied by another word,
trademark or trade name in any manner or fashion that could give the impression
that the two marks form a single unit or a composite mark, unless such
combination has been previously approved by Licensor, which approval shall not
be unreasonably withheld.
(b) Subject to the terms and conditions contained herein, and to any
pre-existing agreements as identified and described in Exhibit 3 hereto, the
Licensor hereby grants to the Licensee a fully paid, exclusive and royalty-free
license to use the CORNINGWARE SERVICEMARK (either by itself or in combination
with other words or logos, e.g. CORNINGWARE REVERE FACTORY OUTLET STORES) only
on or in connection with the Licensed Services in the Territory for the Term.
(c) Subject to the terms and conditions contained herein, and to any
pre-existing agreements with Persons not a party hereto as identified and
described in Exhibit 3 hereto, the Licensor hereby grants to the Licensee a
fully-paid, exclusive and royalty-free license to use the CORNINGWARE TRADE NAME
as part of the corporate name of the Licensee and any of its subsidiaries in the
Territory for the Term. Other than as expressly permitted by Section 2.01
hereof, the Licensee shall not use the CORNINGWARE TRADE NAME as a trademark or
servicemark.
SECTION 2.02. Licensor Restrictions. (a) The Licensor shall not make
or permit any further use by Persons other than Licensee within the Territory
with respect to the field of Housewares of (i) the mark CORNING, either alone or
in combination with other words, or (ii) either of the Trademarks except that,
for purposes of such restriction, "Housewares" shall not include Steuben
Products, ceramic briquettes, OEM Components for consumer household appliances,
household cooking ovens or ranges, products for lighting,
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computers, laboratory science, electronics, medical applications, automobile and
building windows, mirrors, flatglass, television or display application, liquid
filtration products (other than Stanadyne Products and final water filtration
system products for home use), OEM Component Product parts of water filtration
system products for home use, glass ceramic burner caps, glass ceramic cook
tops, and flat glass ceramic stove windows and burner caps and new products
manufactured from flat glass ceramic by Eurokera, S.N.C. or Keraglass, S.N.C. or
their respective licensees for sale in Europe.
(b) Additionally, Licensor agrees it will not use, will not permit
any third party to use, and will require any direct or indirect transferee not
to use, the CORNING WARE TRADEMARK, CORNINGWARE SERVICEMARK, CORNINGWARE TRADE
NAME or the trademark CROWN CORNING or any confusingly similar modifications,
derivations or stylizations thereof, and will not license, permit any third
party to license, and will require any direct or indirect transferee not to
license, any such trademark, service mark or trade name or any such
modifications, derivations or stylizations.
SECTION 2.03. Ownership. The Licensor warrants to the Licensee that
the Licensor is the owner of each of the Trademarks and the Licensee
acknowledges that Licensor is the owner of the Trademarks. The Licensee shall
not in any manner represent that it has any ownership in any of the Trademarks,
the CORNINGWARE SERVICEMARK or CORNINGWARE TRADE NAME or any registration(s)
thereof, and the Licensee acknowledges that use of any of the Trademarks, the
CORNINGWARE SERVICEMARK or the CORNINGWARE TRADE NAME shall not create in the
Licensee's favor any ownership right, title, or interest in or to any of the
Trademarks, the CORNINGWARE SERVICEMARK or the CORNINGWARE TRADE NAME. The
Licensee hereby waives and disclaims any ownership right or interest in or to
each of the Trademarks, the CORNINGWARE SERVICEMARK or the CORNINGWARE TRADE
NAME that may arise under the law of any country by virtue of the use hereunder
of any of the Trademarks, the CORNINGWARE SERVICEMARK or the CORNINGWARE TRADE
NAME.
SECTION 2.04. Assignment of Rights. (a) In order to carry out the
intent of Section 2.02, the Licensee agrees, upon the reasonable request of the
Licensor during the continuance or after the termination of this Agreement, to
assign without charge to the Licensor any and all ownership rights to each of
the Trademarks, the CORNINGWARE SERVICEMARK or the CORNINGWARE TRADE NAME that
the Licensee may have, or purport to have, in any country, together with an
assignment of any goodwill associated with each of the Trademarks, the
CORNINGWARE SERVICEMARK or the CORNINGWARE TRADE NAME provided that the Licensor
shall be responsible for all reasonable professional costs incurred by the
Licensee in complying with this obligation.
(b) The Licensor agrees not to assign any of the Trademarks, the
CORNINGWARE SERVICEMARK, CORNINGWARE TRADE NAME or any Related Mark(s) without
the consent of the Licensee (which consent shall not be unreasonably
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withheld) except that no such consent shall be required with respect to an
assignment (i) to an Affiliate of the Licensor or (ii) to the purchaser of all
or substantially all of the business of the Licensor. In the case of an
assignment pursuant to either (i) or (ii) immediately above, such assignee shall
be bound by all the terms and conditions of this Agreement.
(c) In the event that the Licensor (including a successor in
interest or purchaser of all or substantially all of its business) shall decide
to abandon the Trademarks, the CORNINGWARE SERVICEMARK, or the Related Marks
through the earlier of (i) three (3) consecutive years of nonuse or (ii) such a
period of nonuse as under applicable law in the applicable jurisdiction in the
Territory would constitute abandonment of a trademark, the Licensor shall
promptly assign such mark(s) to the Licensee, notwithstanding Section 2.02
hereof. In the event of such assignment, the Licensee shall bear all the tax
consequence and administrative costs of such assignment.
SECTION 2.05. Registration of Marks. The Licensee agrees not to
register in any country any name or mark which, in the reasonable opinion of the
Licensor is confusingly similar, deceptive or misleading with respect to either
of the Trademarks or the CORNINGWARE SERVICEMARK. If any application for
registration is, or has been, filed by the Licensee in any country that relates
to any name or mark which, in the reasonable opinion of the Licensor, is
confusingly similar, deceptive or misleading with respect to any of the
Trademarks or the CORNINGWARE SERVICEMARK, the Licensee shall immediately
abandon any such application or registration or, at the Licensor's reasonable
discretion, assign it to the Licensor. Only in accordance with a determination
of the arbitration panel as provided for by Article V hereof, or when the
Licensor must act in response to the Licensee's failure to act, the Licensee
shall reimburse the Licensor for all reasonable costs and expenses of any
opposition, cancellation or related legal proceedings, including attorney's
fees, initiated by the Licensor or its authorized representative, in connection
with any such registration or application. The Licensor shall file and prosecute
in the name of the Licensor, at the request of the Licensee, such trademark
registration(s) and application(s) for any of the Trademarks or the CORNINGWARE
SERVICE MARK as may be reasonably necessary to appropriately protect any
authorized use of any of the Trademarks, the CORNINGWARE SERVICEMARK or the
Related Marks by the Licensee.
SECTION 2.06. Reservation of Licensor Rights. (a) Notwithstanding
anything in Section 2.02, the Licensor reserves to itself, its Affiliates and
its licensees and assigns (excluding the Licensee) the right to continue to use
or sublicense the terms and trademarks "CORNING" and "PYROCERAM" outside the
field of Housewares. Further, nothing in this Agreement shall be construed to
restrict the Licensor or any of its Affiliates from using the term "CORNING" as
part of its or any of its Affiliates corporate name(s) or as a trade name.
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(b) Nothing in this Agreement affects or limits the rights of the
Licensor and its Affiliates to use any trademark owned by the Licensor or its
Affiliates and not licensed hereunder.
(c) Nothing in this Agreement shall mean, or shall be construed to
mean, that, in the event that any pre-existing license agreement that licensed
one or more of the Trademarks terminates or expires during the Term of this
Agreement, the rights of the pre-existing licensee shall automatically be
subsumed by the Licensee under this Agreement; provided, however, in the event
of the termination or expiration of any such pre-existing license agreement(s),
the Licensor shall (i) offer all of such rights to the Licensee on virtually
identical terms to such expired or terminated pre-existing license, except with
respect to terms relating to royalties or related payments in respect of such
licensed rights, and (ii) with respect to the terms of any royalty or related
payments (which the Licensor agrees will be reasonable), or to the extent the
Licensee desires terms other than virtually identical terms, the Licensor agrees
to first bargain in good faith with the Licensee to grant such rights to the
Licensee prior to bargaining with any third party for such rights. In the event
the Licensor and the Licensee fail to reach agreement with respect to such
royalty, related payment or differing terms, the Licensor agrees that it will
not license such rights to any Person other than the Licensee on terms that are
less favorable to the Licensor than those last discussed with the Licensee
without first offering to the Licensee the opportunity to license such rights on
such less favorable terms.
(d) The Licensor and the Licensee agree that the use of the
Trademarks as part of a Universal Resource Locator (URL) or as a domain name,
e.g. corningware.com, by only one party could result in confusion in the
marketplace. Consequently, the parties agree to cooperate with each other
regarding the potential use of either of the Trademarks as part of such a URL or
the operation of any Internet site(s) under such URLs, in order to make optimal
use of such site(s) to promote the Licensor's and the Licensee's respective
businesses and enhance the goodwill related thereto. The Licensor shall, upon
reasonable request of the Licensee, register any such URL containing a Trademark
in the name of the Licensor with any applicable government authority. The
Licensee shall operate and have discretion over the content of any Internet site
using the URL "corningware" or "pyroceram" (or any confusingly similar URL) and
provided that all the Licensees sites shall be linked, at no cost to the
Licensee, to a main site operated by the Licensor under the corning.com URL.
Further, the first page of the Licensor's corning.com site shall indicate
clearly and respectfully the link to the Licensee's sites. All other terms and
conditions regarding the parties' Internet sites shall be negotiated in good
faith by the parties at a future point prior to the establishment of such sites
on the Internet.
ARTICLE III
QUALITY CONTROL, ADVERTISING
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SECTION 3.01. Quality Standard. The Licensee agrees that all current
and future Licensed Products shall maintain, with respect to all cosmetic and
functional attributes, such quality standards so as to maintain the reputation
and goodwill of the Trademarks. Further, in the course of conducting the
Business through the Licensee prior to the Closing, the Licensor has established
standards for quality in the operations of the Licensed Services. The Licensee
agrees to maintain such quality standards so as to maintain the reputation and
goodwill of the CORNINGWARE SERVICEMARK.
SECTION 3.02. Quality Assurance. Within thirty (30) days after the
end of each calendar year during the Term after a written request from the
Licensor, the officer of the Licensee responsible for all quality control and
quality assurance functions shall submit to the Licensor a written statement
verified by affidavit that, during the preceding calendar year and with respect
to all Licensed Products sold during said calendar year and all operations of
the Licensed Services within the preceding calendar year, all quality control
procedures followed by the Licensee immediately prior to the date of this
Agreement, or any modifications thereof approved by the Licensor, were followed.
SECTION 3.03. Samples, Quality. (a) Upon the Licensor's written
request, and at no charge to the Licensor, the Licensee shall annually make
available to the Licensor a reasonable number of representative samples of (i)
the Licensed Products and (ii) any and all new products sold under one of the
Trademarks introduced by the Licensee in the preceding calendar year, together
with any applicable sales or promotional materials (including but not limited to
packaging, advertising and sell sheets), for inspection and testing by the
Licensor to facilitate proper quality control. The Licensor reserves the right
to have such inspection and testing conducted by third parties under contract
with the Licensor. Further, the Licensor, upon reasonable notice to the Licensee
(or sublicensee) and no more than once in any calendar year and subject to
appropriate confidentiality obligations, shall have the right to inspect any
facility of the Licensee (or sublicensee) at which the Licensed Products are
manufactured, distributed or sold, solely for the purpose of ensuring that the
Licensee is complying with the appropriate quality standards and quality control
procedures. The Licensee shall permit duly authorized representatives of the
Licensor to conduct any such inspections.
(b) Upon the written request of the Licensor, the Licensee shall
annually (or more often if reasonably justified) make available to the Licensor
a reasonable number of representative samples of any materials utilizing the
CORNINGWARE SERVICEMARK or the CORNINGWARE TRADE NAME (including but not limited
to packaging, advertising and sell sheets), for inspection and review by the
Licensor. The Licensor reserves the right to have such inspection and testing
conducted by third parties under contract with the Licensor. Further, the
Licensor, upon reasonable notice to the Licensee shall have the right to inspect
any facility where the Licensed Services are being performed for the purpose of
ensuring that the Licensee is complying with the appropriate quality standards.
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SECTION 3.04. Advertising/Packaging. (a) The Licensee shall have the
right to create and use its own advertising, packaging, Internet content and
other promotional materials utilizing either of the Trademarks in connection
with the manufacture, distribution or sale of Licensed Products; provided,
however, that the Licensee shall not commit or omit any act or pursue any course
of conduct that might tend to bring either of the Trademarks into disrepute or
use any of the Trademarks in any way likely to damage the goodwill and
reputation attaching thereto, or in a manner likely to dilute the value or
strength of either of the Trademarks or registrations thereof. Upon any request
from the Licensor, and at no charge to the Licensor, the Licensee shall make
available to the Licensor once in any calendar year a reasonable number of
representative samples of any advertising or promotional materials utilizing
either of the Trademarks to ensure proper use of the Trademarks.
(b) Licensee shall have the right to create and use its own
advertising, packaging, stationary, signage, business cards, letterhead,
promotional brochures, Internet content and related items utilizing either the
CORNINGWARE SERVICEMARK or CORNINGWARE TRADE NAME in connection with the
operation of the Business and the Licensed Services; provided, however, that the
Licensee shall not commit or omit any act or pursue any course of conduct that
might tend to bring either the CORNINGWARE SERVICEMARK or CORNINGWARE TRADE NAME
into disrepute or use either of the CORNINGWARE SERVICEMARK or CORNINGWARE TRADE
NAME in any way likely to damage the goodwill and reputation attaching thereto,
or in a manner likely to dilute the value or strength of either of the
CORNINGWARE SERVICEMARK or CORNINGWARE TRADE NAME or registrations thereof. The
Licensee agrees to use the CORNINGWARE SERVICEMARK or CORNINGWARE TRADE NAME so
as to maintain the quality standards embodied in the Licensor's current use of
the CORNING name as a trademark, servicemark and trade name. All advertising,
packaging, stationary, signage, business cards, letterhead, promotional
brochures and related items, using either the CORNINGWARE SERVICEMARK or the
CORNINGWARE TRADE NAME shall be subject to the Licensor's approval, which shall
not be unreasonably withheld. The Licensee shall discontinue or modify in
accordance with the Licensor's reasonable instructions all use of any such
materials that, in accordance with the reasonable opinion of the Licensor,
violates the terms of this Section 3.04(b).
SECTION 3.05. Compliance. The Licensee agrees to take such actions
as are necessary and appropriate to avoid any material in the production of
Licensed Products that would contaminate or otherwise degrade foods or beverages
used with Licensed Products, and to otherwise comply with all laws and
regulations applicable to the packaging, handling, manufacture, distribution or
sale of the Licensed Products. The Licensee, at its sole expense, shall be
responsible for obtaining and maintaining all material licenses, permits and
approvals which are required by all appropriate governmental authorities, with
respect to the manufacture, distribution or sale of the Licensed Products. Upon
reasonable request, the Licensee shall furnish to Licensor written evidence from
such governmental authorities of any such governmental license, permit,
clearance authorization, approval, or recording.
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SECTION 3.06. Notice. The Licensee acknowledges the value of, the
popularity of, and the goodwill associated with, each of the Trademarks, the
CORNINGWARE SERVICEMARK and CORNINGWARE TRADE NAME and acknowledges that such
value, popularity and goodwill are property rights belonging to the Licensor.
The Licensee shall affix to each Licensed Product or item on which the
CORNINGWARE SERVICEMARK or CORNINGWARE TRADE NAME is used any notice which the
Licensor may reasonably request for the purpose of preserving its rights
according to law. If the Licensee uses any of the Trademarks or the CORNINGWARE
SERVICEMARK in advertising, packaging or in any other promotional materials in
connection with the Licensed Products or the Licensed Services, the Licensee
shall in a manner reasonable for the materials, clearly indicate the Licensor's
ownership of the Trademarks. The style, form and manner in which the Trademarks
are used by the Licensee on the date hereof shall be deemed approved by the
Licensor. When using the Trademarks, the Licensee shall comply with all laws
pertaining to the use thereof, including all applicable marking requirements.
The Licensee will at no time accept or use, without the Licensor's prior written
consent, any word or mark which is likely to be similar to or confused with the
Trademarks, the CORNINGWARE SERVICEMARK or the CORNINGWARE TRADE NAME.
ARTICLE IV
INDEMNIFICATION, INSURANCE
SECTION 4.01. Indemnification. (a) The Licensee agrees to defend,
indemnify, and hold the Licensor and Licensor's related companies and their
respective officers, directors, employees and agents harmless against all
liabilities, losses, damages, claims, costs, interests, judgments, fines,
amounts paid in settlement and expenses (including reasonable attorneys' fees
and litigation expenses) actually incurred by the Licensor or its related
companies or such officers, directors, employees and agents resulting from or
arising out of claims by third parties, whether for personal injury or otherwise
(excluding infringement, dilution and related claims related to the Trademarks,
CORNINGWARE SERVICEMARK or CORNINGWARE TRADE NAME), as a result of (i) the
manufacture, distribution, sale or use of the Licensed Products or (ii) the
Licensee's use of the CORNINGWARE SERVICEMARK or CORNINGWARE TRADE NAME, which
claims are based on the Licensor's ownership of the Trademarks or the rights of
the Licensor under this Agreement ("Licensor Claims"), regardless of whether the
Licensor may be found, or alleged to be liable therefor, on the basis of
negligence, strict liability, breach of warranty, products liability, or any
other theory; provided, however, that this sentence shall not apply to Licensor
Claims based on or arising out of accidents, injuries or product failures
occurring prior to the date hereof.
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(b) The Licensor agrees to defend, indemnify, and hold the Licensee
and Licensee's related companies and their respective officers, directors,
employees and agents harmless against all liabilities, losses, damages, claims,
costs, interests, judgments, fines, amounts paid in settlement and expenses
(including reasonable attorneys' fees and litigation expenses) actually incurred
by the Licensee or its related companies or such officers, directors, employees
and agents resulting from or arising out of claims by third parties, whether for
personal injury, unfair competition claims (including trademark infringement or
dilution), or otherwise, as a result (i) of the manufacture, distribution, sale
or use of products sold by the Licensor under the CORNING trademark or (ii) the
Licensee's use of the Trademarks, the CORNINGWARE SERVICEMARK or the CORNINGWARE
TRADE NAME pursuant to this Agreement ("Licensee Claims"), regardless of whether
the Licensee may be found, or alleged to be liable therefor, on the basis of
negligence, strict liability, breach of warranty, products liability or any
other theory; provided, however, that this sentence shall not apply to Licensee
Claims based on or arising out of accidents, injuries or product failures
occurring prior to the date hereof.
SECTION 4.02. Insurance. The Licensee shall name the Licensor as a
beneficiary under its existing insurance policies, which shall protect the
Licensor from any claims arising out of Licensee's use of the Trademarks,
CORNINGWARE SERVICEMARK or the CORNINGWARE TRADE NAME, in an amount no less than
$ 10,000,000 general aggregate/$ 10,000,000 each occurrence. The Licensee shall
continuously maintain such insurance in full force and effect during the term of
this Agreement (including any extensions or renewals thereof) and for a period
of two (2) years after the termination or expiration of this Agreement for any
reason. The Licensee shall ensure that the Licensor receives within two months
after the effective date of this Agreement (and within two months after any
extensions or renewals of the policy) a true and complete copy of any such
policy or policies of insurance and any riders thereto. If the Licensee fails to
maintain such policy in accordance with this Section 4.02, it shall be
considered a material breach by the Licensee of this Agreement.
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ARTICLE V
TERM AND TERMINATION
SECTION 5.01. Term. Unless previously terminated in accordance with
Section 5.02, 5.03 or 5.04, the term of this Agreement, subject to extension or
termination as provided in this Agreement, shall begin as of the date hereof and
shall continue for a period of ten (10) years. Unless previously terminated in
accordance with Section 5.02, 5.03 or 5.04, this Agreement shall be extended in
the discretion of the Licensee for additional successive ten (10) year term(s)
through the Licensee's providing the Licensor with notification of its desire to
extend the term of this Agreement. In the event that the Licensee fails to
provide the Licensor with such notification, this Agreement shall automatically
extend, unless in response to an inquiry from the Licensor, the Licensee
notifies the Licensor of its desire not to extend this Agreement. Upon the
termination or expiration of this Agreement, the Licensee shall cease all use of
the Trademarks, the CORNINGWARE SERVICEMARK and the CORNINGWARE TRADE NAME.
SECTION 5.02. Licensee's Option to Terminate. At any time on ninety
(90) days' prior written notice, the Licensee may, at its sole election,
terminate this Agreement.
SECTION 5.03. Material Breach. In the event that the Licensee is in
material breach of any provision of this Agreement such that the Trademarks are
in imminent danger of a material diminution in value, or of losing their
validity, the Licensor shall give the Licensee a first notice specifying all
pertinent information known by the Licensor concerning the nature of the breach
and at least enough information so as to provide the Licensee with the ability
to attempt a cure, and the Licensee shall have a period specified by the
Licensor, but not less than ninety (90) days from the receipt of such first
notice to remedy the alleged breach. If the breach is not remedied within such
specified period, the Licensor shall give the Licensee a second notice and
within sixty (60) days after the Licensee's receipt of such notice, the parties
will arrange within thirty (30) days for a first meeting of at least one
corporate officer of each party to discuss the alleged breach. If the ensuing
meeting(s) of corporate officers do not resolve the dispute or Licensee refuses
to participate, the Licensor shall seek arbitration in accordance with the
procedures set forth in Exhibit 4 to resolve the dispute. Thereafter, if the
Licensee refuses to participate in such arbitration or it is finally determined
by such arbitration that the Licensee committed a material breach, then the
Licensor shall be entitled to any equitable remedy a court shall order in
accordance with such arbitration decision, including, without limitation,
specific performance, injunctive relief or an accounting, in addition to any
legal remedy in accordance with such arbitration decision, such as monetary
damages; provided, however, that nothing contained herein shall prevent either
party from seeking immediate and temporary equitable remedies in a court to
preserve the status quo until such arbitration proceeding can be completed.
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SECTION 5.04. Termination for Other Events. Upon the occurrence of
any of the following events, the Licensor shall have the right, by sending
written notice to the Licensee, to terminate this Agreement with immediate
effect:
(a) the liquidation (except for the purposes of an amalgamation or
reconstruction) or insolvency of the Licensee, or the appointment of an
administrator, receiver, administrative receiver, trustee or other custodian
acting to protect the interests of any creditor or class of creditors over all
or a substantial part of the assets of the Licensee; or
(b) with respect only to the subject jurisdiction in the Territory,
the nationalization or sequestration by governmental authority of a controlling
interest in the Licensee; or
(c) with respect only to the license granted to use the CORNINGWARE
SERVICEMARK in Section 2.01(b) hereof, the transfer of the operation of the
Licensed Services in violation of Section 10.05 hereof.
SECTION 5.05. Survival. The obligations of the parties under
Sections 2.02, 2.03, 2.04 and 4.01 and Article VI shall continue during any
court ordered enforcement of any obligation under this Agreement.
ARTICLE VI
FEES AND CHARGES
SECTION 6.01. Fees and Charges. The Licensor shall exercise
reasonable diligence to maintain the portfolio of Trademark registrations and
pay all fees and charges that may be incurred in connection with applications,
registrations and renewals of the Trademarks; provided, however, the Licensee
shall reimburse the Licensor for all fees and charges incurred in connection
with any application or registration of the Trademarks, the CORNINGWARE
SERVICEMARK or the CORNINGWARE TRADE NAME requested by the Licensee after the
Closing. At the request of and without charge to the Licensor, the Licensee
shall assist, to the extent reasonably necessary, in the registration of any of
the Trademarks, the CORNINGWARE SERVICEMARK or the CORNINGWARE TRADE NAME in
each jurisdiction in which this Agreement is applicable and in preparing,
executing and filing any document necessary to be executed or filed in
connection with the Licensee's use of any of the Trademarks, the CORNINGWARE
SERVICEMARK or the CORNINGWARE TRADE NAME. Should the filing or approval of an
application for registration or other documents be required prior to the
Licensee's use of any of the Trademarks, the CORNINGWARE SERVICEMARK or the
CORNINGWARE TRADE NAME, the Licensee shall not use such in such place or places
unless and until such required filings are made and approvals secured.
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SECTION 6.02. Registered User. If and to the extent the applicable
law permits or requires, the Licensor shall apply to register the Licensee as a
permitted user or registered user of the Trademarks, the CORNINGWARE SERVICEMARK
or the CORNINGWARE TRADE NAME in such countries in which the Licensor or the
Licensee believe such registration is desirable or required. The Licensee shall
join in any or all of such applications and shall execute and deliver any such
documents as may be necessary to implement such applications. The costs and
expenses of such permitted user or registered user applications shall be borne
by the Licensee in such jurisdictions of the Territory where such recordation is
not required by law yet is desired by the Licensee and the Licensor, and by the
Licensor in such jurisdictions where such recordation is required by law.
ARTICLE VII
FORCE MAJEURE EVENT
SECTION 7.01. Force Majeure Event. Neither party shall be held
responsible for the failure or delay in performance hereunder if such failure or
delay is due to any Force Majeure Event.
SECTION 7.02. Effect of a Force Majeure Event. Upon the occurrence
of a Force Majeure Event, the party whose performance is so affected shall
promptly give notice to the other party of the occurrence or circumstance upon
which it intends to rely to excuse its performance. Duties and obligations of
both parties shall be suspended for the duration of the Force Majeure Event.
SECTION 7.03. Length of a Force Majeure Event. During the duration
of the Force Majeure Event, the party so affected shall use its reasonable best
efforts to avoid or remove such Force Majeure Event, and shall also take
reasonable steps to resume its performance under this Agreement with the least
possible delay.
ARTICLE VIII
SUBLICENSING, ADDITIONAL LICENSING
SECTION 8.01. SubLicensing. (a) Subject to the Licensor's
appropriate quality control limitations, the Licensee may sublicense either of
the Trademarks only within the field of Housewares and only within those
jurisdiction(s) of the Territory where current law or practice do permit
sublicensing of trademarks. The right to sublicense set forth in this Section
8.01(a) shall immediately terminate in any jurisdiction within the Territory
where the sublicensing of trademarks becomes prohibited by law or judicial
determination. Each sublicense pursuant to which the Licensee purports to grant
to a third party any rights licensed herein by the Licensor to the Licensee
shall be in writing and a copy delivered to the Licensor by the Licensee. Each
such sublicense agreement shall include provisions which insure that
15
<PAGE>
the sublicensee conveys rights and undertakes obligations to sublicensor (the
Licensee hereunder) of the same character, and to the same extent as herein
conveyed or undertaken by the Licensee and therefore, the Licensee agrees that
language substantially similar to Sections 2.02, 2.05, 3.01 through 3.06 and
9.01 shall be incorporated in such sublicense agreements. Each such sublicense
agreement shall provide that the Licensor shall have the right to terminate any
such sublicense agreement in the event of the expiration or termination of this
Agreement. Any purported sublicense agreement that does not in all respects
comply with the provisions of this paragraph shall be of no force or effect.
(b) The Licensee shall not be entitled to sublicense the CORNINGWARE
SERVICEMARK or the CORNINGWARE TRADE NAME, without the Licensor's previous
written consent, which shall not be unreasonably withheld.
SECTION 8.02. Additional Licensing. In the event that the Licensee
desires to sublicense one of the Trademarks within the field of Housewares in a
jurisdiction which prohibits sublicensing, the Licensee shall notify the
Licensor of such desire and, with respect to any such products to be licensed to
such a third party, waive the Licensee's exclusivity under this Agreement. The
Licensor shall then grant a license to such third party on terms and conditions
similar to this Agreement, including the applicable quality control standards,
and such other terms as the Licensee requests, but provided that any royalties
to be received from such licensee shall be paid to the Licensee; provided,
however, that if there are any tax consequences to the Licensor created by the
delegation of the royalties to the Licensee, then the Licensee shall reimburse
the Licensor for any such taxes that the Licensor shall be required to pay.
ARTICLE IX
INFRINGEMENT
SECTION 9.01. Infringement. (a) To the extent that such items come
to the attention of the Licensee or any sublicensee or their respective
employees, agents and Affiliates, the Licensee shall notify the Licensor
promptly of (i) any claim of or action for infringement or passing-off
threatened, made, or brought against the Licensee by reason of the Licensee's
use of any of the Trademarks, CORNINGWARE SERVICEMARK or the CORNINGWARE TRADE
NAME and (ii) any infringement by a third party of the Trademarks, CORNINGWARE
SERVICEMARK or the CORNINGWARE TRADE NAME. The Licensor shall have a duty to
defend the Trademarks, CORNINGWARE SERVICEMARK or the CORNINGWARE TRADE NAME
from any infringement of the Trademarks, CORNINGWARE SERVICEMARK or the
CORNINGWARE TRADE NAME by third parties. The Licensor shall have the duty to (y)
defend any claim or action brought against the Licensee for trademark
infringement, dilution or related claims concerning the Trademarks, the
CORNINGWARE SERVICEMARK or CORNINGWARE TRADE NAME, and (z) take
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such action as the Licensor deems reasonable, including litigating, to prevent
infringements of the Trademarks, the CORNINGWARE SERVICEMARK or the CORNINGWARE
TRADE NAME, in each case through attorneys selected and paid for by the
Licensor, that meet with the Licensee's reasonable satisfaction. In the case of
infringements within the field of Housewares, including the operation of
Housewares store services, the parties shall equally share all costs and
proceeds of, and control and supervision over, such action.
(b) In the case of infringements by third parties, the Licensor
shall not be required, and may elect not, to prosecute such third parties in
situations in which the Licensor is advised by trademark counsel that such an
action could risk a finding of invalidity or cancellation of the applicable
registration(s) of the Trademarks, the CORNINGWARE SERVICEMARK or the
CORNINGWARE TRADE NAME. The Licensee shall join as a party to any action if
necessary to establish standing to sue (locus standi), shall make available to
the Licensor all relevant records, papers, information, samples, specimens,
formulae and the like, shall cooperate with the Licensor in all respects, and
shall make all reasonable efforts to have the Licensee's employees testify when
requested by the Licensor, all in support of the defense or prosecution of any
infringement, passing-off or related actions undertaken by the Licensor
hereunder, provided, however, the Licensor shall reimburse the Licensee for
reasonable out of pocket costs incurred in connection with the foregoing. If the
Licensor informs the Licensee that the Licensor has been advised by trademark
counsel that an action to prevent alleged infringement or passing off or related
action could risk a finding of invalidity or cancellation of the applicable
registration(s) of the Trademarks, the Licensee shall not be permitted to
prosecute such an action.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in person, by courier service, by cable, by telecopy, by telegram, by telex or
by registered or certified mail (postage prepaid, return receipt requested) to
the respective parties at the following addresses (or at such other address for
a party as shall be specified in a notice given in accordance with this Section
10.01):
(a) if to the Licensor:
Corning Incorporated
One Riverfront Plaza
Corning, NY 14831
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Telecopy: (607) 974-8656
Attention: General Counsel
(b) if to the Licensee:
Corning Consumer Products Company
E-Building, Houghton Park
Corning, NY 14831
Telecopy: (607) 974-2215
Attention: President
SECTION 10.02. Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 10.03. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
SECTION 10.04. Entire Agreement. This Agreement (including the
Exhibits hereto) constitutes the entire agreement of the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements and
undertakings, both written and oral, between the Licensor and the Licensee with
respect to the subject matter hereof, provided, further, to the extent the
Licensee and/or the Subsidiaries have been heretofore authorized or licensed to
use the Trademarks in connection with the Business by virtue of agreements
(whether oral or written) or authorized conduct between the Licensor and the
Licensee and the Subsidiaries, such agreements or authorizations of such conduct
by the Licensee or the Subsidiaries are hereby terminated and replaced by this
Agreement, including all limitations and other provisions contained herein.
SECTION 10.05. Assignment. This Agreement may not be assigned by the
Licensee without the prior written consent of the Licensor, which shall not be
unreasonably withheld; provided, however, that the Agreement may be assigned by
the Licensee to any successor to all or substantially all of the Business
pertaining to each Trademark without the consent of the Licensor; provided,
further, that Licensee may not assign or otherwise transfer its rights under
this Agreement to use the CORNINGWARE SERVICEMARK apart from the
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<PAGE>
transferee succeeding to all or substantially all of the Business of the
Licensee. The Licensor also agrees that Licensee may transfer any part of its
Business to a subsidiary without the consent of the Licensor and not affect the
right to use the CORNINGWARE SERVICEMARK. The Licensor agrees that a substantial
change in ownership of the Licensee through a public offering of shares in the
Licensee or any other change of control of the Licensee shall not constitute an
assignment requiring consent. The Licensee agrees that the franchising, as
defined in 16 C.F.R. 436 and attached hereto as Exhibit 5, of any portion of its
Business shall be considered an assignment requiring the Licensor's consent.
SECTION 10.06. No Third-Party Beneficiaries. This Agreement shall be
binding upon and inure solely to the benefit of the parties hereto and their
permitted assigns and nothing herein, express or implied, is intended to or
shall confer upon any other Person any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 10.07. Amendment; Waiver. (a) This Agreement may not be
amended or modified except by an instrument in writing signed by the Licensor
and the Licensee.
(b) Any failure or delay on the part of a party hereto in exercising
any right, power or remedy hereunder shall not operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy hereunder. The remedies provided for herein are cumulative and are not
exclusive of any remedies provided by law or available at equity.
SECTION 10.08. Governing Law. This Agreement shall be governed by
the laws of the State of New York applicable to contracts entered into and fully
performed within said State, without regard to any applicable principles of
conflict of laws, and, to the extent applicable, the laws of the United States
of America. All actions and proceedings arising out of or relating to this
Agreement that are not covered by arbitration, if any, shall be heard and
determined in a New York state court or a federal court sitting in the State of
New York having jurisdiction thereover.
SECTION 10.09. Counterparts. This Agreement may be executed in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
SECTION 10.10. Independent Contractors. No agency, partnership or
joint venture is established by this Agreement. Neither party shall enter into,
incur liabilities, or hold itself out to third parties as having the authority
to enter into and incur any contractual obligations, expenses or liabilities on
behalf of the other party.
19
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SECTION 10.11. Personnel. The personnel of any party, while present
at the facilities of another party, shall be subject to all rules, regulations
and security requirements generally in effect at the respective facility. Each
party shall be responsible for the costs of their respective employees and
agents while present at the facilities of the other party. Each party shall be
responsible for insuring its respective personnel against all risks of injury to
person or property, caused to or by such personnel, while present at the
facilities of another party, or the Affiliates of any of them.
SECTION 10.12. Disclaimer. Nothing in this Agreement shall be
construed as (a) an assumption by the Licensor of any obligation to increase the
sales or profits of the Licensee; (b) an assumption by the Licensor of any
financial obligation to the Licensee; (c) the creation of any relationship of
employment between employees of the Licensees and its Affiliates and employees
of the Licensor and its Affiliates; (d) the creation of any fiduciary
relationship between the Licensor and the Licensee; (e) the creation of a joint
venture or franchise relationship between the Licensor and the Licensee; or (f)
the delegation of any function of authority of the Licensee to the Licensor.
20
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IN WITNESS WHEREOF, the Licensor and the Licensee have executed this
Agreement by their respective duly authorized representatives as of the date
first above written.
CORNING INCORPORATED
By:
----------------------------------
Name:
Title:
CORNING CONSUMER PRODUCTS
COMPANY
By:
----------------------------------
Name:
Title:
21
<PAGE>
Exhibit 5.09(b)(ii)
Form of PYREX License Agreement
<PAGE>
================================================================================
------------------------------------------------
PYREX LICENSE AGREEMENT
------------------------------------------------
Between
CORNING INCORPORATED,
CORNING LIMITED
and
CORNING CONSUMER PRODUCTS COMPANY
April 1, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms................................... 1
ARTICLE II
GRANT OF TRADEMARK LICENSE
SECTION 2.01. Grant of License........................................ 3
SECTION 2.02. Ownership of PYREX TRADEMARK............................ 3
SECTION 2.03. Assignment of Trademark Rights.......................... 4
SECTION 2.04. Registration of Marks................................... 4
SECTION 2.05. Reservation of Licensor Rights.......................... 4
ARTICLE III
QUALITY CONTROL, ADVERTISING
SECTION 3.01. Quality Standard........................................ 6
SECTION 3.02. Quality Assurance....................................... 6
SECTION 3.03. Samples, Quality........................................ 6
SECTION 3.04. Advertising/Packaging................................... 7
SECTION 3.05. Compliance.............................................. 7
SECTION 3.06. Notice.................................................. 7
ARTICLE IV
INDEMNIFICATION, INSURANCE
SECTION 4.01. Indemnification......................................... 8
SECTION 4.02. Insurance............................................... 9
ARTICLE V
TERM AND TERMINATION
SECTION 5.01. Term.................................................... 9
SECTION 5.02. The Licensee's Option to Terminate...................... 9
SECTION 5.03. Material Breach......................................... 9
SECTION 5.04. Termination for Other Events........................... 10
SECTION 5.05. Survival............................................... 10
ARTICLE VI
FEES AND CHARGES
SECTION 6.01. Fees and Charges....................................... 10
SECTION 6.02. Registered User........................................ 11
ARTICLE VII
FORCE MAJEURE EVENT
SECTION 7.01. Force Majeure Event.................................... 11
SECTION 7.02. Effect of a Force Majeure Event........................ 11
SECTION 7.03. Length of a Force Majeure Event........................ 11
<PAGE>
ARTICLE VIII
SUBLICENSING, ADDITIONAL LICENSING
SECTION 8.01. Sublicensing........................................... 11
SECTION 8.02. Additional Licensing................................... 12
ARTICLE IX
INFRINGEMENT
SECTION 9.01. Infringement........................................... 12
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Notices............................................... 13
SECTION 10.02. Headings.............................................. 14
SECTION 10.03. Severability.......................................... 14
SECTION 10.04. Entire Agreement...................................... 14
SECTION 10.05. Assignment............................................ 14
SECTION 10.06. No Third Party Beneficiaries.......................... 14
SECTION 10.07. Amendment; Waiver..................................... 14
SECTION 10.08. Governing Law......................................... 15
SECTION 10.09. Counterparts.......................................... 15
SECTION 10.10. Independent Contractors............................... 15
SECTION 10.11. Personnel............................................. 15
SECTION 10.12. Disclaimer............................................ 15
ii
<PAGE>
Page
----
EXHIBIT 1 Durable Consumer Products
EXHIBIT 2 Registrations and Applications
EXHIBIT 3 Pre-Existing License Agreements
EXHIBIT 4 Arbitration Procedures
EXHIBIT 5 Definition of Franchising
iii
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PYREX LICENSE AGREEMENT, dated April 1, 1998 (this "Agreement"),
between CORNING INCORPORATED, a corporation organized under the laws of New York
("Corning"), CORNING LIMITED, a private limited corporation organized under the
laws of England ("Corning Limited" and , together with Corning, the "Licensor"),
and CORNING CONSUMER PRODUCTS COMPANY, a corporation organized under the laws of
Delaware (the "Licensee").
WHEREAS, the Licensor, the Licensee, CCPC Acquisition Corp., a
corporation organized under the laws of Delaware (the "Purchaser"), and, for
certain limited purposes only, Borden, Inc. have entered into a Recapitalization
Agreement dated March 2, 1998 (the "Recapitalization Agreement"), providing for
the sale by the Licensor to the Purchaser of approximately 92% of the issued and
outstanding shares of common stock, no par value per share, of the Licensee;
WHEREAS, the execution and delivery of this Agreement by the
Licensor is a condition precedent to the obligations of the Purchaser under the
Recapitalization Agreement;
WHEREAS, on the terms and conditions set forth herein, the Licensor
is willing to grant a fully paid, royalty-free and exclusive license to the
Licensee to use the PYREX TRADEMARK only in connection with the manufacture and
sale of products within the field of Durable Consumer Products;
WHEREAS, the Licensor desires to continue to use the trademark
"PYREX" outside of the field of Durable Consumer Products;
WHEREAS, the Licensor is the owner of the PYREX TRADEMARK; and
WHEREAS, the Licensor had previously licensed the Licensee and the
Subsidiaries to utilize the PYREX TRADEMARK while the Licensee was a wholly
owned subsidiary of Licensor and desires to replace such authorization and
license with the license granted under this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual
covenants and agreements hereinafter set forth, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, it
is hereby agreed as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. Capitalized words or phrases
used and not otherwise defined herein shall have the respective meanings
ascribed thereto in the Recapitalization Agreement. The following terms shall
have the following meanings:
<PAGE>
"Durable Consumer Products" shall have the same meaning as set forth
in the Recapitalization Agreement and repeated here for purposes of convenience
only:
Durable Consumer Products means Housewares and those products
identified on the attached Exhibit 1.01(a) (Exhibit 1 to this
Agreement).
"Force Majeure Event" means, with respect to a Person, any act of
God or the public enemy, war, compliance with laws, governmental acts or
regulations, fire, flood, epidemic, strikes and labor interruptions, accident,
unusually severe weather or similar causes that are beyond the reasonable
control of such Person.
"Licensee" to the extent applicable shall include both Corning
Consumer Products Company and its subsidiaries.
"Licensor" to the extent applicable shall include both Corning and
Corning Limited. Corning Limited is the holder of record title to certain of the
registrations for the PYREX TRADEMARK in certain of the jurisdictions included
in the Territory.
"Licensed Products" means Durable Consumer Products bearing or
otherwise using the PYREX TRADEMARK and manufactured, distributed, sublicensed
or sold by the Licensee after the Closing.
"PYREX TRADEMARK" means the PYREX trademark and any and all common
law and/or statutory trademark rights therein and any confusingly similar
modifications, derivations or stylizations thereof (including translations
thereof into any language other than English), the goodwill related thereto, and
all registrations, applications, renewals, continuations and extensions for the
PYREX trademark and owned by the Licensor, including, but not limited to, those
registrations and publications identified in Exhibit 2; provided, however, that
the PYREX TRADEMARK shall not include the use of the term PYREX or any
confusingly similar derivation or modification thereof as part of a corporate
name, vanity phone number or used primarily as a trade name.
"Related Marks" means any other name or mark that is confusingly
similar, deceptive or misleading with respect to the PYREX TRADEMARK.
"subsidiary" or "subsidiaries" means any Person with respect to
which a specified Person (or a subsidiary thereof) owns a majority of the common
stock (or similar voting securities) or has the power to vote or direct the
voting of sufficient securities to elect a majority of the directors or
individuals exercising similar functions.
"Term" shall mean the term of this Agreement as provided for in
Article V hereof.
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"Territory" shall mean worldwide, subject to any rights of a third
party as set forth in a pre-existing license identified on Exhibit 3 hereto.
ARTICLE II
GRANT OF TRADEMARK LICENSE
SECTION 2.01. Grant of License. (a) Subject to the terms and
conditions contained herein, and to any pre-existing agreements with Persons not
a party hereto, as identified and described in Exhibit 3 hereto, the Licensor
hereby grants to the Licensee an exclusive and fully paid royalty-free license
to use the PYREX TRADEMARK only on or in connection with the manufacture,
distribution and/or sale of Licensed Products in the Territory for the Term. The
license shall be exclusive in and limited to the field of Durable Consumer
Products, and the Licensee shall not use the PYREX TRADEMARK outside of the
field of Durable Consumer Products. Pursuant to the license granted herein, the
Licensee may directly, or through a third party, manufacture the Licensed
Products, but only the Licensee may initially distribute or sell the Licensed
Products manufactured by a third party unless such third party is authorized to
distribute or sell the Licensed Products under Article VIII hereof. Any use of
the PYREX TRADEMARK by the Licensee shall inure to the benefit of the Licensor,
and the Licensee shall be treated as a related company of Licensor for the
purposes of 15 U.S.C. ss. 1055 only. The Licensee undertakes to use the PYREX
TRADEMARK strictly in accordance with the terms and conditions set forth herein.
The Licensee shall not use the PYREX TRADEMARK together with or another word,
trademark or trade name in any manner or fashion that would give the impression
that the two marks form a single unit or a composite mark, unless such
combination has been previously approved by the Licensor, which approval shall
not be unreasonably withheld.
(b) Licensor shall not make or permit any further use by persons
other than the Licensee within the Territory with respect to the field of
Durable Consumer Goods of the PYREX TRADEMARK or any Related Mark.
SECTION 2.02. Ownership of PYREX TRADEMARK. The Licensor warrants to
the Licensee that the Licensor is the owner of the PYREX TRADEMARK and the
Licensee acknowledges that Licensor is the owner of the PYREX TRADEMARK. The
Licensee shall not in any manner represent that it has any ownership in the
PYREX TRADEMARK or any registration thereof, and the Licensee acknowledges that
use of the PYREX TRADEMARK shall not create in the Licensee's favor any right,
title or interest in or to ownership of the PYREX TRADEMARK. The Licensee hereby
waives and disclaims any ownership right or interest in or to the PYREX
TRADEMARK that may arise under the law of any country out of the use hereunder
of the PYREX TRADEMARK.
SECTION 2.03. Assignment of Trademark Rights. (a) In order to carry
out the intent of Section 2.02, the Licensee agrees, upon the request of the
Licensor during the
3
<PAGE>
continuance or after the termination of this Agreement, to assign without charge
to the Licensor any and all ownership rights to the PYREX TRADEMARK that the
Licensee may have, or purport to have, in any country, together with an
assignment of any goodwill associated with the PYREX TRADEMARK, provided that
the Licensor shall be responsible for all reasonable professional costs incurred
by the Licensee in complying with this obligation.
(b) Licensor agrees not to assign the PYREX TRADEMARK or any Related
Mark(s) without the consent of the Licensee (which consent shall not be
unreasonably withheld) except no such consent shall be required with respect to
an assignment (i) to an Affiliate of the Licensor or (ii) to the purchaser of
all or substantially all of the business of the Licensor. In the case of an
assignment pursuant to either (i) or (ii) immediately above, such assignee shall
be bound by all terms and conditions of this Agreement.
(c) In the event that Licensor (including a successor in interest or
purchaser of all or substantially all of its business) shall decide to abandon
the PYREX TRADEMARK through the earlier of (i) three (3) consecutive years of
nonuse or (ii) such a period of nonuse as under applicable law in the applicable
jurisdiction would constitute abandonment of a trademark, Licensor shall
promptly assign the PYREX TRADEMARK to the Licensee, notwithstanding Section
2.02 hereof. In the event of such assignment, the Licensee shall bear all tax
consequences and administrative costs of such assignment.
SECTION 2.04. Registration of Marks. The Licensee agrees not to
register in any country any name or mark that, in the reasonable opinion of the
Licensor is confusingly similar, deceptive or misleading with respect to the
PYREX TRADEMARK. If any application for registration is, or has been filed by
the Licensee in any country which relates to any name or mark which, in the sole
opinion of the Licensor, is confusingly similar, deceptive or misleading with
respect to the PYREX TRADEMARK, the Licensee shall immediately abandon any such
application or registration or, at the Licensor's reasonable discretion, assign
it to the Licensor. Only in accordance with a determination of the arbitration
panel as provided for by Article V hereof, or when the Licensor must act in
response to the Licensee's failure to act, the Licensee shall reimburse Licensor
for all reasonable costs and expenses of any opposition, cancellation or related
legal proceedings, including attorney's fees, initiated by the Licensor or its
authorized representative, in connection with any such registration or
application. The Licensor shall file and prosecute in the name of the Licensor,
at the request of the Licensee, such registrations and applications for the
PYREX TRADEMARK as may be reasonably necessary to appropriately protect any
authorized use of the PYREX TRADEMARK by the Licensee.
SECTION 2.05. Reservation of Licensor Rights. (a) The Licensor shall
not use, will not permit any third party to use, and will require any direct or
indirect transferee not to use, the PYREX TRADEMARK or any confusingly similar
modifications, stylizations or derivations thereof in the field of Durable
Consumer Products or on or with respect to any
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other consumer products, and will not license or permit any third party to
license, and will require any direct or indirect transferee not to license, any
such trademark, modifications, stylizations or derivations (except to the extent
required by any pre-existing license agreement as disclosed on Exhibit 3, which,
to the extent within the control of the Licensor, shall not be modified or
renewed). Notwithstanding the foregoing, the Licensor reserves to itself, its
Affiliates and its licensees and assigns (excluding the Licensee hereunder) the
right to continue to use or sublicense the term and trademark PYREX outside of
the field of Durable Consumer Products or any other consumer products,
including, but not limited to, OEM components for lighting, laboratory
glassware, glass tubing, and OEM components for consumer household appliances.
(b) Nothing in this Agreement affects or limits the rights of the
Licensor and its Affiliates to use any trademark owned by the Licensor or its
Affiliates and not licensed hereunder, including, but not limited to, the
PYROCERAM trademark.
(c) Nothing in this Agreement shall mean, or shall be construed to
mean that, in the event that any pre-existing license agreement that licensed
the PYREX TRADEMARK terminates or expires during the Term of this Agreement, the
rights of the pre-existing licensee shall automatically be subsumed by the
Licensee under this Agreement; provided, however, in the event of the
termination or expiration of any such pre-existing license agreement(s), the
Licensor shall (i) offer all of such rights to the Licensee on terms virtually
identical to such expired or terminated pre-existing license, except with
respect to terms relating to royalties or related payments in respect of such
rights, and (ii) with respect to the terms of any royalty or related payment
(which Licensor agrees will be reasonable) or to the extent the Licensee desires
terms other than virtually identical terms, the Licensor agrees to bargain in
good faith with the Licensee to grant such rights to Licensee prior to
bargaining with any third party for such rights. In the event Licensor and
Licensee fail to reach agreement with respect to such royalty, related payment
or differing terms, Licensor agrees that it will not license such rights to any
person other than Licensee on terms that are less favorable to Licensor than
those last discussed with Licensee without first offering to Licensee the
opportunity to license such rights on such less favorable terms.
(d) The Licensor and the Licensee agree that the use of the PYREX
TRADEMARK as part of a Universal Resource Locator (URL) or as a domain name,
e.g., pyrex.com, by only one party could result in confusion in the marketplace.
Consequently, the parties agree to cooperate with each other regarding the
potential use of the PYREX TRADEMARK as part of such a URL or the operation of
any Internet site(s) under such URLs, in order to make optimal use of such
site(s) to promote the Licensor's and the Licensee's respective businesses and
enhance the goodwill related thereto. The Licensor shall, upon reasonable
request of the Licensee, register any such URL containing a PYREX TRADEMARK in
the name of the Licensor with any applicable governmental authority. The
Licensee shall operate and have discretion over the content of any Internet site
containing the PYREX TRADEMARK in its URL provided that such URL contains an
additional word or
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words so as to indicate the nature of the Business (e.g., pyrexconsumer.com,
pyrexkitchen.com) and, provided that a reasonable number of Licensee's sites
shall be linked, at no cost to the Licensee, to a main site operated by the
Licensor under the pyrex.com URL. Further, the first page of the Licensor's
pyrex.com site shall indicate clearly and respectfully the link to the
Licensee's sites. The Licensor and Licensee acknowledge that the URL pyrex.com
is presently placed on hold by the InterNIC, and at the request of Licensee or
of its own volition, Licensor shall exercise reasonable efforts to remove
pyrex.com from the hold status and obtain rights to the domain name. All other
terms and conditions regarding the parties' Internet sites shall be negotiated
in good faith by the parties at a future point prior to the establishment of
such sites on the Internet.
ARTICLE III
QUALITY CONTROL, ADVERTISING
SECTION 3.01. Quality Standard. The Licensee agrees that all current
and future Licensed Products shall maintain, with respect to all cosmetic and
functional attributes, such quality standards so as to maintain the reputation
and goodwill of the PYREX TRADEMARK.
SECTION 3.02. Quality Assurance. Within thirty (30) days after the
end of each calendar year during the Term, upon written request from the
Licensor, the officer of the Licensee responsible for all quality control and
quality assurance functions shall submit to the Licensor a written statement
verified by affidavit that, during the preceding calendar year and with respect
to all Licensed Products sold during that calendar year and all operations of
the Licensed Services within the preceding calendar year, all quality control
procedures followed by the Licensee immediately prior to the date of this
Agreement, or any modifications thereof approved by the Licensor, were followed
during the applicable period.
SECTION 3.03. Samples, Quality. (a) Upon Licensor's written request,
and at no charge to the Licensor, the Licensee shall annually make available to
the Licensor a reasonable number of representative samples of (i) the Licensed
Products and (ii) any and all new products sold under the PYREX TRADEMARK
introduced by the Licensee in the preceding calendar year, together with any
applicable sales or promotional materials (including but not limited to
packaging, advertising and sell sheets), for inspection and testing by the
Licensor to facilitate proper quality control. The Licensor reserves the right
to have such inspection and testing conducted by third parties under contract
with the Licensor. Further, the Licensor, upon reasonable notice to the Licensee
(or, sublicensee), not more than once in any calendar year and subject to
appropriate confidentiality obligations, shall have the right to inspect any
facility of the Licensee (or, sublicensee) at which Licensed Products are
manufactured, distributed or sold, solely for the purpose of ensuring that the
Licensee is complying with the appropriate quality standards and quality control
procedures. The
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Licensee shall permit duly authorized representatives of the Licensor to conduct
any such inspections.
(b) Upon the written request of the Licensor, the Licensee shall
annually (or more often if reasonably justified) make available to the Licensor
a reasonable number of representative samples of any materials utilizing the
PYREX TRADEMARK (including but not limited to packaging, advertising and sell
sheets) for inspection and review by the Licensor. Licensor reserves the right
to have such inspection and testing conducted by third parties under contract
with the Licensor.
SECTION 3.04. Advertising/Packaging. (a) Licensee shall have the
right to create and use its own advertising, packaging, Internet content and
other promotional materials utilizing the PYREX TRADEMARK in connection with the
manufacture, distribution or sale of Licensed Products; provided, however, the
Licensee shall not commit or omit any act or pursue any course of conduct that
might tend to bring the PYREX TRADEMARK into disrepute or use the PYREX
TRADEMARK in any way likely to damage the goodwill and reputation attaching
thereto, or in a manner likely to dilute the value or strength of the PYREX
TRADEMARK or registrations thereof. Upon any request from the Licensor, and at
no charge to the Licensor, the Licensee shall make available to the Licensor
once in any calendar year a reasonable number of representative samples of any
advertising or promotional materials utilizing the PYREX TRADEMARK to ensure
proper use thereof.
(b) The Licensee shall adhere at least to the following standards in
its use of the PYREX TRADEMARK: (i) the mark PYREX can be (x) capitalized
completely ("PYREX"), (y) used with an initial capital letter or (z) used in
quotes followed by the word "brand", (ii) the mark PYREX shall be followed by
the word "brand" or a generic term for the product, and (iii) the mark PYREX
shall not be used in the plural or possessive form.
SECTION 3.05. Compliance. Licensee agrees to take such actions as
are necessary and appropriate to avoid any material in the production of
Licensed Products that would contaminate or otherwise degrade foods or beverages
used with Licensed Products, and to otherwise comply with all laws and
regulations applicable to the packaging, handling, manufacture, distribution or
sale of the Licensed Products. Licensee, at its sole expense, shall be
responsible for obtaining and maintaining all material licenses, permits and
approvals which are required by all appropriate governmental authorities, with
respect to the manufacture, distribution or sale of the Licensed Products. Upon
reasonable request, the Licensee shall furnish to Licensor written evidence from
such governmental authorities of any such governmental license, permit,
clearance authorization, approval or recording.
SECTION 3.06. Notice. The Licensee acknowledges the value of, the
popularity of, and the goodwill associated with the PYREX TRADEMARK and
acknowledges that such value, popularity and goodwill are property rights
belonging to the Licensor. The Licensee shall affix to each Licensed Product or
item on which the PYREX TRADEMARK is used any notice which the Licensor may
reasonably request for the purpose of preserving its
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rights according to law. If the Licensee uses the PYREX TRADEMARK in
advertising, packaging or in any other promotional materials in connection with
Licensed Products, Licensee shall in a manner reasonable for the materials,
clearly indicate the Licensor's ownership of the PYREX TRADEMARK. The style,
form and manner in which the PYREX TRADEMARK is used by the Licensee on the date
hereof shall be deemed approved by the Licensor. When using the PYREX TRADEMARK,
the Licensee shall comply with all laws pertaining to the use thereof, including
all applicable marking requirements. The Licensee will at no time accept or use,
without the Licensor's prior written consent, any word or mark which is likely
to be similar to or confusing with the PYREX TRADEMARK.
ARTICLE IV
INDEMNIFICATION, INSURANCE
SECTION 4.01. Indemnification. (a) The Licensee agrees to defend,
indemnify, and hold the Licensor and the Licensor's related companies and their
respective officers, directors, employees and agents harmless against all
liabilities, losses, damages, claims, costs, interests, judgments, fines,
amounts paid in settlement and expenses (including reasonable attorneys' fees
and litigation expenses) actually incurred by the Licensor or its related
companies or such officers, directors, employees and agents resulting from or
arising out of claims by third parties, whether for personal injury or otherwise
(excluding infringement, dilution and related claims related to the PYREX
TRADEMARK), as a result of (i) the manufacture, distribution, sale or use of the
Licensed Products or (ii) the Licensee's use of the PYREX TRADEMARK, which
claims are based on the Licensor's ownership of the PYREX TRADEMARK or the
rights of the Licensor under this Agreement ("Licensor Claims"), regardless of
whether the Licensor may be found, or alleged to be liable therefor, on the
basis of negligence, strict liability, breach of warranty, products liability or
any other theory; provided, however, that this sentence shall not apply to
Licensor Claims based on or arising out of accidents, injuries or product
failures occurring prior to the date hereof.
(b) The Licensor agrees to defend, indemnify, and hold the Licensee
and the Licensee's related companies and their respective officers, directors,
employees and agents harmless against all liabilities, losses, damages, claims,
costs, interests, judgments, fines, amounts paid in settlement and expenses
(including reasonable attorneys' fees and litigation expenses) actually incurred
by the Licensee or its related companies or such officers, directors, employees
and agents resulting from or arising out of claims by third parties, whether for
personal injury, unfair competition claims (including trademark infringement or
dilution related to the PYREX TRADEMARK), or otherwise, as a result of (i) the
manufacture, distribution, sale or use of products sold by the Licensor under
the PYREX TRADEMARK or (ii) the Licensee's use of the PYREX TRADEMARK pursuant
to this Agreement ("Licensee Claims"), regardless of whether the Licensee may be
found, or alleged to be liable therefor, on the basis of negligence, strict
liability, breach of warranty, products liability or any other theory; provided,
however, that this sentence shall not apply to the
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Licensee Claims based on or arising out of accidents, injuries or product
failures occurring prior to the date hereof.
SECTION 4.02. Insurance. The Licensee shall purchase and maintain,
in its own name and at its own expense, during the Term (and any extensions or
renewals thereof) adequate insurance protecting the Licensee from any personal
injury claims based on the manufacture, distribution, sale or use of the
Licensed Products, in an amount and with a company or companies and on terms and
conditions reasonably expected to cover the expected liability of Licensee and
Licensee's indemnification obligation to the Licensor.
ARTICLE V
TERM AND TERMINATION
SECTION 5.01. Term. Unless previously terminated in accordance with
this Article V, the term of this Agreement, subject to extension or termination
as provided in this Agreement, shall begin as of the date hereof and shall
continue for a period of ten years. Unless previously terminated in accordance
with this Article V, this Agreement shall be extended in the discretion of the
Licensee for additional successive ten (10) year term(s) through the Licensee's
providing the Licensor with notification of its desire to extend the term of
this Agreement. In the event the Licensee fails to provide the Licensor with
such notification, this Agreement shall automatically extend, unless in response
to an inquiry from the Licensor, the Licensee notifies Licensor of its desire
not to extend this Agreement. Upon the termination or expiration of this
Agreement, the Licensee shall cease all use of the PYREX TRADEMARK.
SECTION 5.02. The Licensee's Option to Terminate. At any time on
ninety (90) days prior written notice, the Licensee may, at its sole election,
terminate this Agreement.
SECTION 5.03. Material Breach. In the event that the Licensee is in
material breach of any provision of this Agreement such that the PYREX TRADEMARK
is in imminent danger of a material diminution in value, or of losing its
validity, the Licensor shall give the Licensee a first notice specifying all
pertinent information known by Licensor concerning the nature of the breach and
at least enough information so as to provide the Licensee with the ability to
attempt a cure, and the Licensee shall have a period specified by the Licensor,
but not less than ninety (90) days from the receipt of such first notice, to
remedy the alleged breach. If the breach is not remedied within such specified
period, the Licensor shall give the Licensee a second notice and within sixty
(60) days after the Licensee's receipt of such notice, the parties will arrange
for a first meeting within thirty (30) days of at least one corporate officer of
each party to discuss the alleged breach. If the ensuing meeting(s) of corporate
officers does not resolve the dispute or the Licensee refuses to participate,
the Licensor shall seek arbitration in accordance with the procedures set forth
in Exhibit 4 to resolve the dispute. Thereafter, if the Licensee refuses to
participate in such arbitration or it is
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finally determined by such arbitration that the Licensee committed a material
breach then the Licensor shall be entitled to any equitable remedy a court shall
order in accordance with such arbitration decision, including, without
limitation, specific performance, injunctive relief or an accounting, in
addition to any legal remedy in accordance with such arbitration decision, such
as monetary damages; provided, however, nothing contained herein shall prevent
either party from seeking immediate and temporary equitable remedies in a court
to preserve the status quo until such arbitration proceeding can be completed.
SECTION 5.04. Termination for Other Events. Upon the occurrence of
any of the following events, the Licensor shall have the right, by sending
written notice to the Licensee, to terminate this Agreement with immediate
effect:
(a) the liquidation (except for the purposes of an amalgamation or
reconstruction) or insolvency of the Licensee, or the appointment of an
administrator, receiver, administrative receiver, trustee or other
custodian acting to protect the interests of any creditor or class of
creditors over all or a substantial part of the assets of the Licensee; or
(b) with respect only to the subject jurisdiction in the Territory,
the nationalization or sequestration by governmental authority of a
controlling interest in the Licensee.
SECTION 5.05. Survival. The obligations of the parties under
Sections 2.02, 2.03, 2.04 and 4.01 and Article VI shall continue during any
court ordered enforcement of any obligation under this Agreement.
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ARTICLE VI
FEES AND CHARGES
SECTION 6.01. Fees and Charges. The Licensor shall exercise
reasonable diligence to maintain the portfolio of PYREX TRADEMARK registrations
and pay all fees and charges that may be incurred in connection with
applications, registrations and renewals of the PYREX TRADEMARK; provided,
however, the Licensee shall reimburse Licensor for all fees and charges incurred
in connection with any application or registration of the PYREX TRADEMARK
requested by the Licensee after the Closing. At the request of and without
charge to the Licensor, the Licensee shall assist, to the extent reasonably
necessary, in the registration of the PYREX TRADEMARK in each jurisdiction in
which this Agreement is applicable and in preparing, executing and filing any
document necessary to be executed or filed in connection with the Licensee's use
of any of the PYREX TRADEMARK. Should the filing or approval of an application
for registration or other documents be required prior to the Licensee's use of
the PYREX TRADEMARK, the Licensee shall not use the PYREX TRADEMARK in such
place or places unless and until such required filings are made and approvals
secured.
SECTION 6.02. Registered User. If and to the extent the applicable
law permits or requires, the Licensor shall apply to register the Licensee as a
permitted user or registered user of the PYREX TRADEMARK in such countries in
which the Licensor or the Licensee believe such registration is desirable or
required. The Licensee shall join in any or all of such applications and shall
execute and deliver any such documents as may be necessary to implement such
applications. The costs and expenses of such permitted user or registered user
applications shall be borne by the Licensee in such jurisdictions of the
Territory where such recordation is not required by law yet is desired by the
Licensee and the Licensor, and by the Licensor in such jurisdictions where such
recordation is required by law.
ARTICLE VII
FORCE MAJEURE EVENT
SECTION 7.01. Force Majeure Event. Neither party shall be held
responsible for the failure or delay in performance hereunder if such failure or
delay is due to any Force Majeure Event.
SECTION 7.02. Effect of a Force Majeure Event. Upon the occurrence
of a Force Majeure Event, the party whose performance is so affected shall
promptly give notice to the other party of the occurrence or circumstance upon
which it intends to rely to excuse its performance. Duties and obligations of
both parties shall be suspended for the duration of the Force Majeure Event.
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SECTION 7.03. Length of a Force Majeure Event. During the duration
of the Force Majeure Event, the party so affected shall use its reasonable best
efforts to avoid or remove such Force Majeure Event and shall take reasonable
steps to resume its performance under this Agreement with the least possible
delay.
ARTICLE VIII
SUBLICENSING, ADDITIONAL LICENSING
SECTION 8.01. Sublicensing. (a) Subject to the Licensor's
appropriate quality control limitations, the Licensee may sublicense the PYREX
TRADEMARK only within the field of Durable Consumer Products and only within
those jurisdiction(s) of the Territory where current law or practice does permit
sublicensing of trademarks. The right to sublicense set forth in this Section
8.01(a) shall immediately terminate in any jurisdiction within the Territory
where the sublicensing of trademarks becomes prohibited by law or judicial
determination. Each sublicense pursuant to which the Licensee purports to grant
to a third party any rights licensed herein by the Licensor to the Licensee
shall be in writing and a copy delivered to the Licensor by the Licensee. Each
such sublicense agreement shall include provisions which insure that the
sublicensee conveys rights and undertakes obligations to sublicensor (the
Licensee hereunder) of the same character, and to the same extent as herein
conveyed or undertaken by the Licensee and therefore, the Licensee agrees that
language substantially similar to Sections 2.02, 2.05, 3.01 through 3.06 and
9.01 shall be incorporated in such sublicense agreements. Each such sublicense
agreement shall provide that the Licensor shall have the right to terminate any
such sublicense agreement in the event of the expiration or termination of this
Agreement. Any purported sublicense agreement that does not in all respect
comply with the provisions of this paragraph shall be of no force or effect.
SECTION 8.02. Additional Licensing. In the event that the Licensee
desires to sublicense the PYREX TRADEMARK within the field of Durable Consumer
Products in a jurisdiction which prohibits sublicensing, the Licensee shall
notify the Licensor of such desire and, with respect to any such products to be
licensed to such a third party, waive the Licensee's exclusivity under this
Agreement. The Licensor shall then grant a license to such third party on terms
and conditions similar to this Agreement, including the applicable quality
control standards, and such other terms as the Licensee requests, but provide
that any royalties to be received from such licensee shall be paid to the
Licensee, provided, however, that if there are any tax consequences to the
Licensor created by the delegation of the royalties to the Licensee, then the
Licensee shall reimburse the Licensor for any such taxes that the Licensor shall
be required to pay.
ARTICLE IX
INFRINGEMENT
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SECTION 9.01. Infringement. (a) To the extent that such items come
to the attention of the Licensee or any sublicensee or their respective
employees, agents and Affiliates, the Licensee shall notify the Licensor
promptly of (i) any claim of or action for infringement or dilution, or related
claims threatened, made, or brought against the Licensee by reason of the
Licensee's use of the PYREX TRADEMARK and (ii) any infringement by a third party
of the PYREX TRADEMARK. The Licensor shall have a duty to defend the PYREX
TRADEMARK from any infringement of the PYREX TRADEMARK by third parties. The
Licensor shall have the duty to (y) defend any claim or action brought against
the Licensee for trademark infringement, dilution, or related claims concerning
the PYREX TRADEMARK, and (z) take such action as the Licensor deems reasonable,
including litigating, to prevent infringements of the PYREX TRADEMARK, in each
case through attorneys selected and paid for by the Licensor, that meet with the
Licensee's reasonable satisfaction. In the case of infringements within the
field of Durable Consumer Products the parties shall equally share all costs and
proceeds of, and control and supervision over, such action.
(b) In the case of infringements by third parties, the Licensor
shall not be required, and may elect not, to prosecute such third parties in
situations in which the Licensor is advised by trademark counsel that such an
action could risk a finding of invalidity or cancellation of the applicable
registration(s) of the PYREX TRADEMARK. The Licensee shall join as a party to
any action if necessary to establish standing to sue (locus standi), shall make
available to the Licensor all relevant records, papers, information, samples,
specimens, formulae and the like, shall cooperate with the Licensor in all
respects, and shall make all reasonable efforts to have the Licensee's employees
testify when requested by the Licensor, all in support of the defense or
prosecution of any infringement, passing-off or related actions undertaken by
the Licensor hereunder, provided, however, the Licensor shall reimburse the
Licensee for reasonable out of pocket costs incurred in connection with the
foregoing. If the Licensor informs the Licensee that the Licensor has been
advised by trademark counsel that an action to prevent alleged infringement or
passing off or related action could risk a finding of invalidity or cancellation
of the applicable registrations(s) of the PYREX TRADEMARK, the Licensee shall
not be permitted to prosecute such an action.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in person, by courier service, by cable, by telecopy, by telegram, by telex or
by registered or certified mail (postage prepaid, return receipt requested) to
the respective parties at the following addresses (or at such other address for
a party as shall be specified in a notice given in accordance with this Section
10.01):
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(a) if to the Licensor:
Corning Incorporated
One Riverfront Plaza
Corning, NY 14831
Telecopy: (607) 974-8656
Attention: General Counsel
(b) if to the Licensee:
Corning Consumer Products Company
E-Building, Houghton Park
Corning, New York 14831
Telecopy: (607) 974-2215
Attention: President
SECTION 10.02. Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 10.03. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
SECTION 10.04. Entire Agreement. This Agreement (including the
Exhibits hereto) constitutes the entire agreement of the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements and
undertakings, both written and oral, between the Licensor and the Licensee with
respect to the subject matter hereof, provided, further, to the extent the
Licensee and/or the Subsidiaries have been heretofore authorized or licensed to
use PYREX TRADEMARK in connection with the Business by virtue of agreements
(whether oral or written) or authorized conduct between the Licensor and the
Licensee and the Subsidiaries, such agreements or authorizations of such conduct
by the Licensee or the Subsidiaries are hereby terminated and replaced by this
Agreement, including all limitations and other provisions contained herein.
SECTION 10.05. Assignment. This Agreement may not be assigned by the
Licensee without the prior written consent of the Licensor, which shall not be
unreasonably withheld; provided, however, that the Agreement may be assigned by
the Licensee to any
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successor to all or substantially all of the Business pertaining to each
Trademark without the consent of the Licensor. Licensor agrees that a
substantial change in ownership of the Licensee through a public offering of
shares in the Licensee or any other change of control of Licensee shall not
constitute an assignment requiring consent. The Licensee agrees that the
franchising, as defined in 16 C.F.R. 436 and attached hereto as Exhibit 5, of
any portion of its Business shall be considered an assignment requiring the
Licensor's consent.
SECTION 10.06. No Third Party Beneficiaries. This Agreement shall be
binding upon and inure solely to the benefit of the parties hereto and their
permitted assigns and nothing herein, express or implied, is intended to or
shall confer upon any other Person any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 10.07. Amendment; Waiver. (a) This Agreement may not be
amended or modified except by an instrument in writing signed by the Licensor
and the Licensee.
(b) Any failure or delay on the part of a party hereto in exercising
any right, power or remedy hereunder shall not operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy hereunder. The remedies provided for herein are cumulative and are not
exclusive of any remedies provided by law or available at equity.
SECTION 10.08. Governing Law. This Agreement shall be governed by
the laws of the State of New York applicable to contracts entered into and fully
performed within said State, without regard to any applicable principles of
conflict of laws, and, to the extent applicable, the laws of the United States
of America. All actions and proceedings arising out of or relating to this
Agreement shall be heard and determined in a New York state court or a federal
court sitting in the State of New York having jurisdiction thereover.
SECTION 10.09. Counterparts. This Agreement may be executed in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
SECTION 10.10. Independent Contractors. No agency, partnership or
joint venture is established by this Agreement. Neither party shall enter into,
incur liabilities or hold itself out to third parties as having the authority to
enter into and incur any contractual obligations, expenses or liabilities on
behalf of the other party.
SECTION 10.11. Personnel. The personnel of any party, while present
at the facilities of another party, shall be subject to all rules, regulations
and security requirements generally in effect at the respective facility. Each
party shall be responsible for the costs of their respective employees and
agents while present at the facilities of the other party. Each party shall be
responsible for insuring its respective personnel against all risks of injury to
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person or property, caused to or by such personnel, while present at the
facilities of another party, or the Affiliates of any of them.
SECTION 10.12. Disclaimer. Nothing in this Agreement shall be
construed as (a) an assumption by the Licensor of any obligation to increase the
sales or profits of the Licensee; (b) an assumption by the Licensor of any
financial obligation to the Licensee; (c) the creation of any relationship of
employment between employees of the Licensees and its Affiliates and employees
of the Licensor and its Affiliates; (d) the creation of any fiduciary
relationship between the Licensor and the Licensee; (e) the creation of a joint
venture or franchise relationship between the Licensor and the Licensee; or (f)
the delegation of any function of authority of the Licensee to the Licensor.
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IN WITNESS WHEREOF, the Licensor and the Licensee have executed this
Agreement by their respective duly authorized representatives as of the date
first above written.
CORNING INCORPORATED
By:
---------------------------------
Name:
Title:
CORNING LIMITED
By:
---------------------------------
Name:
Title:
CORNING CONSUMER PRODUCTS
COMPANY
By:
---------------------------------
Name:
Title:
17
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Exhibit 5.09(d)
Form of Patent and Know-How License Agreement
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PATENT AND KNOW-HOW LICENSE AGREEMENT
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Between
CORNING INCORPORATED
and
CORNING CONSUMER PRODUCTS COMPANY
Dated as of April 1, 1998
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms...........................................2
ARTICLE II
DISCLOSURE AND TRANSFER OF SELLER'S RETAINED KNOW-HOW
SECTION 2.01. Know-How Transfer...............................................3
SECTION 2.02. Form of Know-How................................................3
SECTION 2.03. Revisions to Form of Technical Data.............................3
SECTION 2.04. Technical Assistance............................................3
SECTION 2.05. Licensee's Use of Consumer Know-How.............................3
ARTICLE III
LICENSES
SECTION 3.01. Grant of Know-How License.......................................4
SECTION 3.02. Grant of Patent Licenses........................................4
SECTION 3.03. Terms of Licenses...............................................5
SECTION 3.04. Termination of Prior Licenses Between the Parties...............5
SECTION 3.05. Reservation of Licensor's Rights................................5
SECTION 3.06. Sublicensing....................................................5
ARTICLE IV
INFRINGEMENT
SECTION 4.01. Third-Party Use.................................................6
SECTION 4.02. Third-Party Claims of Invalidity................................6
ARTICLE V
CONFIDENTIALITY
SECTION 5.01. Confidentiality.................................................7
ARTICLE VI
PATENT FEES AND EXPENSES
SECTION 6.01. Patent Fees and Expenses........................................7
ARTICLE VII
DEFAULT, TERMINATION AND TERM
SECTION 7.01. Term............................................................7
SECTION 7.02. Licensee's Option to Terminate..................................8
SECTION 7.03. Material Breach.................................................8
SECTION 7.04. Termination for Other Events....................................8
SECTION 7.05. Effect of Termination...........................................9
SECTION 7.06. Bankruptcy......................................................9
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ARTICLE VIII
FORCE MAJEURE EVENT
SECTION 8.01. Force Majeure Event.............................................9
SECTION 8.02. Effect of a Force Majeure Event.................................9
SECTION 8.03. Length of a Force Majeure Event.................................9
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Notices........................................................10
SECTION 9.02. Headings.......................................................10
SECTION 9.03. Severability...................................................10
SECTION 9.04. Entire Agreement...............................................11
SECTION 9.05. Assignment.....................................................11
SECTION 9.06. No Third Party Beneficiaries...................................11
SECTION 9.07. Amendment; Waiver..............................................11
SECTION 9.08. Governing Law..................................................11
SECTION 9.09. Counterparts...................................................11
SECTION 9.10. Independent Contractors........................................12
SECTION 9.11. Waiver of Jury Trial...........................................12
SECTION 9.12. Disclaimer.....................................................12
SECTION 9.13. Personnel......................................................13
SECTION 9.14. Indemnification................................................13
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Page
EXHIBIT 1 Seller's Retained Patents
EXHIBIT 2 Map of Territory
EXHIBIT 3 List of Countries
EXHIBIT 4 Pre-Existing License Agreements
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PATENT AND KNOW-HOW LICENSE AGREEMENT, dated April 1, 1998 (this
"Agreement"), between CORNING INCORPORATED, a corporation organized under the
laws of New York (the "Licensor"), and CORNING CONSUMER PRODUCTS COMPANY, a
corporation organized under the laws of Delaware (the "Licensee").
WHEREAS, the Licensor, the Licensee and CCPC Acquisition Corp., a
corporation organized under the laws of Delaware (the "Purchaser"), and, for
certain limited purposes only, Borden, Inc. have entered into a Recapitalization
Agreement, dated March 2, 1998 (the "Recapitalization Agreement"), providing for
the sale by the Licensor to the Purchaser of approximately 92% of the issued and
outstanding shares of common stock, no par value per share, of the Licensee;
WHEREAS, the execution and delivery of this Agreement by the
Licensor is a condition precedent to the obligations of the Purchaser under the
Recapitalization Agreement;
WHEREAS, contemporaneously with this Agreement, the Licensor has
assigned the Consumer Patents (as defined in the Recapitalization Agreement)
owned by the Licensor to the Licensee;
WHEREAS, the Licensor desires to retain the right to practice the
Seller's Retained Patents (listed on Exhibit 1 hereto), Seller's Future Patents
and Consumer Know-How outside of the Business (as all are defined in the
Recapitalization Agreement), but to grant to the Licensee an exclusive license
to practice the Seller's Retained Patents, Seller's Future Patents and Consumer
Know-How in the field of Corning Consumer Products and a nonexclusive license to
practice the Seller's Retained Patents, Seller's Future Patents and Consumer
Know-How in the field of Durable Consumer Products and Other Consumer Products;
WHEREAS, the Licensor had previously granted a license to the
Licensee to utilize the Seller's Retained Patents and Consumer Know-How while
Licensee was a wholly owned subsidiary of Licensor and desires to replace such
authorization and license with the license granted herein, without eliminating
any preclusive effect of such previous license, and subject to the terms and
conditions of this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual
agreements and covenants hereinafter set forth, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, it
is hereby agreed as follows:
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ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. Capitalized words or phrases
used and not otherwise defined herein shall have the respective meanings
ascribed thereto in the Recapitalization Agreement. The following terms shall
have the following meanings:
"Commercial Production" means the manufacture of Licensed Products
for the purpose of sale to bona fide customers in transactions negotiated and
consummated at arm's length and in accordance with regular commercial practices.
"Confidential Information" means information, in whatever form
(including, but not limited to, the Consumer Know-How, processes, data, methods,
specifications, designs, and formulas) that has commercial value and is not
known or disclosed to the general public and relates to the Field; provided,
however, that Confidential Information shall not include any such information:
(i) that, through no fault of the Licensee or its Affiliates, is or becomes
public information or otherwise available to the public; (ii) that the Licensee
or its Affiliates rightfully possessed prior to the receipt from the Licensor;
or (iii) that the Licensee or its Affiliates develops independently, and such
independent development can be demonstrated by competent evidence.
"Force Majeure Event" means, with respect to a Person, any act of
God or the public enemy, war, compliance with laws, governmental acts or
regulations, fire, flood, epidemic, strikes and labor interruptions, accident,
unusually severe weather or similar causes that are beyond the reasonable
control of such Person.
"Licensee", to the extent applicable, shall include both Corning
Consumer Products Company and any of its subsidiaries.
"Licensed Products" shall mean Corning Consumer Products, Durable
Consumer Products and Other Consumer Products.
"subsidiary" or "subsidiaries" means any Person with respect to
which a specified Person (or a subsidiary thereof) owns a majority of the common
stock (or similar voting securities) or has the power to vote or direct the
voting of sufficient securities to elect a majority of the directors or
individuals exercising similar functions.
"Term" means, subject to earlier termination in accordance herewith,
(i) with respect to the Seller's Retained Patents or Seller's Future Patents,
the period of time from the Closing until the expiration of the last to expire
of Seller's Retained Patents or Seller's Future Patents (including any
extension, reissue or prolongation thereof) licensed hereunder and (ii)
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with respect to the Consumer Know-How, ten (10) years after the expiration of
the last of the Seller's Retained Patents or Seller's Future Patents (including
any extension, reissue or prolongation thereof) expires.
"Territory" shall mean worldwide subject to any rights of a third
party as set forth in a pre-existing license as identified on Exhibit 3.
ARTICLE II
DISCLOSURE AND TRANSFER OF SELLER'S RETAINED KNOW-HOW
SECTION 2.01. Know-How Transfer. During the Term of this Agreement
and subject to the provisions of Article V hereof, the Licensor, upon request by
the Licensee, shall identify, disclose and transfer in writing or by other means
convertible to written form, to the Licensee the Consumer Know-How possessed by
the Licensor relating to the Commercial Production of Licensed Products.
SECTION 2.02. Form of Know-How. Consumer Know-How transferred by the
Licensor pursuant to the provisions of Section 2.01 hereof shall be in such form
(e.g., drawings, blueprints, written memoranda, electronic media, or personal
consultation) as the Licensee decides will satisfactorily and expeditiously
accomplish the transfer of such Consumer Know-How. The transfer of such Consumer
Know-How through personal consultation shall be performed only (i) upon specific
request by the Licensee, in cases where the transfer of such Consumer Know-How
is not reasonably practicable in the form of drawings, blueprints, written
memoranda or any other written form, or (ii) as may be provided by the
Technology Support Agreement, dated as of the date hereof, between the Licensor
and the Licensee. Nothing herein shall require the Licensor to teach the
Licensee how to utilize any of the Consumer Know-How.
SECTION 2.03. Revisions to Form of Technical Data. In the event that
the Licensee requests any part of the Consumer Know-How in a form that differs
from the form in which the Licensor has supplied or offered to supply it, the
Licensee shall pay the costs incurred by the Licensor to prepare the Consumer
Know-How in the requested form; provided, however, that the Licensee shall not
be required to pay the costs of obtaining any such information if it is already
available to the Licensor in the form requested by the Licensee.
SECTION 2.04. Technical Assistance. Representatives of the Licensor
shall provide certain services regarding the Consumer Know-How and Seller's
Retained Patents licensed pursuant to the Technology Support Agreement entered
into by the Licensee and the Licensor as of the date hereof.
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SECTION 2.05. Licensee's Use of Consumer Know-How. Consumer Know-How
licensed hereunder shall be used by the Licensee only at facilities of the
Licensee (or any sublicensee) and solely for the Commercial Production of
Licensed Products. The Licensee shall implement policies and procedures to
ensure that, to the extent possible, Consumer Know-How licensed hereunder is not
publicly disclosed.
ARTICLE III
LICENSES
SECTION 3.01. Grant of Know-How License. (a) The Licensor hereby
grants to the Licensee a fully paid, exclusive, royalty-free license in the
field of Corning Consumer Products, and limited to such field, to utilize the
Consumer Know-How provided by the Licensor hereunder to make, have made, use and
sell the Licensed Products within the Territory, to the extent that the Licensor
has the right to do so without making payments to or infringing the rights of
any third party, only as subject to any pre-existing license, only as identified
and described on Exhibit 2 hereto. (b) The Licensor hereby grants to the
Licensee a fully paid, nonexclusive, royalty-free license in the field of
Durable Consumer Products and Other Consumer Products and limited to such field,
to utilize the Consumer Know-How provided by the Licensor hereunder to make,
have made, use and sell the Licensed Products within the Territory to the extent
that the Licensor has the right to do so without making payments to or
infringing the rights of any third party, only as subject to any pre-existing
license only as identified and described on Exhibit 2 hereto. (c) If the use by
the Licensee of any future Consumer Know-How licensed hereunder requires the
Licensor to make a payment to a third party, Licensee shall be so notified, and,
if it elects to use or continue to use such Consumer Know-How, it shall
reimburse the Licensor the pro rata amount of such third party payment that
pertains to Licensee's use thereof. The Licensee agrees not to exploit the
Consumer Know-How outside the respective fields or outside the scope of the
licenses granted herein. The licenses granted herein shall include the right to
sublicense within the respective fields without the payment of compensation to
Licensor.
SECTION 3.02. Grant of Patent Licenses. (a) The Licensor hereby
grants to the Licensee a fully paid, exclusive, royalty-free license to make,
have made, import, use, offer to sell and sell Corning Consumer Products under
the Seller's Retained Patents and the Seller's Future Patents within the
Territory to the extent that the Licensor has the right to do so without making
payments to or infringing the rights of any third party, only as subject to any
pre-existing licenses only as identified and described on Exhibit 2 hereto. (b)
The Licensor hereby grants to the Licensee a fully paid, nonexclusive,
royalty-free license to make, have made, import, use, offer to sell and sell
Durable Consumer Products and Other Consumer Products under the Seller's
Retained Patents and the Seller's Future Patents within the Territory to the
extent that the Licensor has the right to do so without making payments to
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or infringing the rights of any third party, only as subject to any pre-existing
licenses only as identified and described on Exhibit 2 hereto. (c) Such licenses
shall be limited to the respective fields, and shall include the right to
sublicense within the fields without payment of compensation to the Licensor.
The licenses granted herein shall not include any future improvements made by
the Licensor to the Seller's Retained Patents other than the Seller's Future
Patents.
SECTION 3.03. Terms of Licenses. Subject to Section 7.04 below: (i)
the licenses granted in Section 3.02 shall extend for the lifetime of each of
the licensed Seller's Retained Patents or the Seller's Future Patents; and (ii)
the licenses granted in Section 3.01 shall extend for ten (10) years after the
last of the Seller's Retained Patents or Seller's Future Patents expire.
SECTION 3.04. Termination of Prior Licenses Between the Parties. To
the extent Licensee and/or the Subsidiaries have heretofore been authorized or
licensed to use or practice the Consumer Know-How or the Seller's Retained
Patents in connection with the Business by virtue of agreements (whether written
or oral) or authorized conduct between the Licensor and the Licensee and the
Subsidiaries ("Prior Agreements"), such Prior Agreements are hereby terminated,
replaced and superseded by the terms and conditions of this Agreement; provided,
however, to the extent any of the Prior Agreements preserved rights of the
Licensee vis-a-vis any subsequent agreements to which Licensor was a party, the
Licensor and Licensee agree that the terms of such Prior Agreement are carried
forward so as to preserve such rights, subject to the terms and conditions of
this Agreement.
SECTION 3.05. Reservation of Licensor's Rights. Notwithstanding any
other provision of this Agreement, nothing contained herein shall prohibit the
Licensor from utilizing the Consumer Know-How or practicing the Seller's
Retained Patents or Seller's Future Patents outside of the field of Corning
Consumer Products.
SECTION 3.06. Sublicensing. Each sublicense pursuant to which
Licensee purports to grant to a third party any rights licensed herein by the
Licensor to the Licensee shall be in writing and a copy delivered to the
Licensor by the Licensee. Each such sublicense agreement shall include
provisions that ensure that the sublicensee receives rights and undertakes
obligations to the Licensor of the same character, and to the same extent as
herein received or undertaken by the Licensee. Each such sublicense agreement
shall provide that the Licensor shall have the right to terminate any such
sublicense agreement (i) in the event of a breach thereof by the sublicensee, if
the Licensor has given notice of such breach to the Licensee and the Licensee
has not been able to cure such breach to the Licensor's reasonable satisfaction
within thirty (30) days of such notice or (ii) upon the expiration or
termination of this Agreement. The Licensor shall be named as a third party
beneficiary in any such sublicense agreement with respect thereto. Any purported
sublicense agreement that does not
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in all respects comply with the provisions of this Section 3.06 shall be of no
force or effect. In no event will the provisions of this Article III be used to
undermine the Licensee's obligations pursuant to Section 9.06 hereof to obtain
the Licensor's consent to the assignment of all or part of the Licensee's
obligations under this Agreement.
ARTICLE IV
INFRINGEMENT
SECTION 4.01. Third-Party Use. (a) In the event that the Licensee
learns that there is, or may be, an infringement of Seller's Retained Patents or
Seller's Future Patents or any unauthorized use of any of the Consumer Know-How
licensed hereunder, the Licensee shall inform the Licensor of any such
infringement or unauthorized use as soon as practicable. The Licensor shall have
the duty to (y) defend any claim or action brought against the Licensee for
claims that use of the Consumer Know-How, Seller's Retained Patents or Seller's
Future Patents infringe the rights of others and (z) take such action as the
Licensor deems reasonable, including litigating, to protect or defend the
validity or use, or to prevent the unauthorized use of the Seller's Retained
Patents or Seller's Future Patents or the Consumer Know-How in connection with
the Business, in each case through attorneys selected and paid for by the
Licensor. The Licensee shall have the right to participate in the prosecution of
any such action affecting the Business, and in no event shall such an action be
settled or compromised so as to have any material effect on the value of the
Company's license to and use of Seller's Retained Patents, Seller's Future
Patents or Consumer Know-How without the Licensee's consent. If the Licensor
elects not to prosecute such claims, the Licensee may do so, unless the Licensor
provides written opinion of counsel that proceeding would subject Seller's
Retained Patents, Seller's Future Patents, Consumer Know-How to a finding of
invalidity, unenforcibility or, in the case of the Consumer Know-How, public
disclosure.
(b) At the Licensee's request, the Licensor shall join in and
cooperate with any legal action that the Licensee in its sole discretion may
deem necessary or appropriate to protect or defend the validity or use of, or to
prevent the unauthorized use of Seller's Retained Patents, Seller's Future
Patents or Consumer Know-How in connection with the Business; provided, however,
that the Licensee shall not proceed if the Licensor provides written opinion of
counsel that proceeding would subject Seller's Retained Patents, Seller's Future
Patents or Consumer Know-How to a finding of invalidity, unenforcibility or, in
the case of the Consumer Know-How, public disclosure.
SECTION 4.02. Third-Party Claims of Invalidity. In the event of any
claim asserted by a third party to invalidate one or more of the Seller's
Retained Patents or the Seller's Future Patents licensed hereunder, the Licensee
shall cooperate fully in any defense that the Licensor decides to undertake;
provided, however, that the Licensor shall reimburse
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the Licensee for all reasonable out-of-pocket costs or expenses incurred by the
Licensee as a result of such cooperation.
ARTICLE V
CONFIDENTIALITY
SECTION 5.01. Confidentiality. (a) All Confidential Information that
the Licensee receives from the Licensor under the provisions of this Agreement,
whether contained in blueprints, drawings, written reports, letters or
memoranda, or notes made by employees, or acquired by employees from observation
or any other activities of a party related directly or solely to this Agreement,
shall be held in confidence and accorded the same protection and confidential
treatment used by the Licensee with respect to its own confidential information
and trade secrets, and shall not be used by the Licensee for any purpose other
than in accordance with the terms of this Agreement.
(b) Licensor shall exercise the same degree of care as it has
exercised in the past to ensure that all Confidential Information in its
possession that is also Consumer Know-How is not publicly disclosed.
ARTICLE VI
PATENT FEES AND EXPENSES
SECTION 6.01. Patent Fees and Expenses. The Licensee shall reimburse
the Licensor for all patent fees and reasonable expenses associated with
prosecuting, issuing or maintaining each of the Seller's Retained Patents and
Seller's Future Patents to the extent the same are maintained on the date
hereof, unless prior to the Licensor incurring such costs, the Licensee notifies
the Licensor of its desire that such actions not be taken, provided that, to the
extent any of the Seller's Retained Patents have potential applicability outside
the Business by the Licensor or by other licensees outside the Field, such costs
shall be equitably apportioned. Otherwise, the Licensor shall have no obligation
to pay any such fees; provided, however, if Licensor refuses to pay any share of
any such fee, it shall be required to assign the subject patent to the Licensee.
All such fees or expenses shall be invoiced by the Licensor to the Licensee in
accordance with the Licensor's billing practices and all such invoices shall be
promptly paid by the Licensee.
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ARTICLE VII
DEFAULT, TERMINATION AND TERM
SECTION 7.01. Term. Unless earlier terminated in accordance with
Section 7.02 or 7.03, this Agreement shall be effective for the Term.
SECTION 7.02. Licensee's Option to Terminate. At any time on ninety
(90) days' prior written notice, the Licensee may, at its sole election,
terminate this Agreement. The Licensee shall have the right to terminate any
license granted under any one or more of the Seller's Retained Patents or
Seller's Future Patents upon thirty (30) days' written notice.
SECTION 7.03. Material Breach. In the event that the Licensee is in
material breach of any provision of this Agreement such that the Seller's
Retained Patents, Seller's Future Patents, or Consumer Know-How are in imminent
danger of a material diminution in value or of losing their validity, the
Licensor shall give Licensee a first notice specifying all pertinent information
known by the Licensor concerning the nature of the breach and at least enough
information so as to provide the Licensee with the ability to attempt a cure,
and the Licensee shall have a period specified by the Licensor, but not less
than ninety (90) days from the receipt of such first notice to remedy the
alleged breach. If the breach is not remedied within such specified period, the
Licensor shall give the Licensee a second notice and within sixty (60) days
after the Licensee's receipt of such notice, the parties will arrange for a
first meeting within thirty (30) days of at least one corporate officer of each
party to discuss the alleged breach. If the ensuing meeting(s) of corporate
officers do not resolve the dispute or the Licensee refuses to participate,
Licensor shall seek arbitration in accordance with the procedures set forth in
Exhibit 3 to resolve the dispute. Thereafter, if the Licensee refuses to
participate in such arbitration or it is finally determined by such arbitration
that the Licensee committed a material breach then the Licensor shall be
entitled to any equitable remedy a court shall order in accordance with such
arbitration decision, including, without limitation, specific performance,
injunctive relief or an accounting, in addition to any legal remedy in
accordance with such arbitration decision, such as monetary damages; provided,
however, nothing contained herein shall prevent either party from seeking
immediate and temporary equitable remedies in a court to preserve the status quo
until such arbitration proceeding can be completed.
SECTION 7.04. Termination for Other Events. Upon the occurrence of
any of the following events, the Licensor shall have the right, by sending
written notice to the Licensee, to terminate this Agreement with immediate
effect:
(a) the liquidation (except for the purposes of an amalgamation or
reconstruction) or insolvency of the Licensee, or the appointment (subject
to the provisions of paragraph (b) of this Section 7.04) of an
administrator, receiver,
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administrative receiver, trustee or other custodian acting to protect the
interests of any creditor or class of creditors over all or a substantial
part of the assets of the Licensee; or
(b) the adjudication of the Licensee as bankrupt and the appointment
of a trustee in bankruptcy who does not expressly affirm this Agreement in
its entirety within thirty (30) days after its appointment.
SECTION 7.05. Effect of Termination. The termination of this
Agreement by the Licensor pursuant to this Article VII shall immediately
terminate all licenses granted herein as of the effective date of the
termination.
SECTION 7.06. Bankruptcy. (a) The licenses to the Seller's Retained
Patents, Seller's Future Patents and the Consumer Know-How granted under Article
III hereof shall be deemed to be, for purposes of Section 365(n) of the U.S.
Bankruptcy Code, licenses to "intellectual property" as defined in Section 101
of the Bankruptcy Code. The parties agree that the Licensee shall retain and may
fully exercise all of its rights and elections under the Bankruptcy Code.
(b) In the event that a bankruptcy proceeding under the Bankruptcy
Code is commenced by or against the Licensor, the Licensee shall be entitled to
a complete duplicate of, or complete access to, all Seller's Retained Patents,
Seller's Future Patents and the Consumer Know-How constituting "intellectual
property" under Section 101 of the Bankruptcy Code and all embodiments thereof.
If such Seller's Retained Patents, Seller's Future Patents and the Consumer
Know-How are not already in the Licensee's possession, it shall be promptly
delivered to the Licensee upon the Licensee's written request (i) upon any such
commencement of a bankruptcy proceeding, unless the Licensor elects to continue
to perform all of its obligations under this Agreement; or (ii) upon the
rejection of this Agreement by or on behalf of the Licensor. The Licensee shall
have the sublicensable right to modify, adapt and prepare derivative works based
upon Seller's Retained Patents, Seller's Future Patents and the Consumer
Know-How.
ARTICLE VIII
FORCE MAJEURE EVENT
SECTION 8.01. Force Majeure Event. Neither party shall be held
responsible for the failure or delay in performance hereunder if such failure or
delay is due to any Force Majeure Event.
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SECTION 8.02. Effect of a Force Majeure Event. Upon the occurrence
of a Force Majeure Event, the party whose performance is so affected shall
promptly give notice to the other party of the occurrence or circumstance upon
which it intends to rely to excuse its performance. Duties and obligations of
both parties shall be suspended for the duration of the Force Majeure Event.
SECTION 8.03. Length of a Force Majeure Event. During the duration
of the Force Majeure Event, the party so affected shall use its reasonable best
efforts to avoid or remove such Force Majeure Event, and shall also take
reasonable steps to resume its performance under this Agreement with the least
possible delay.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in person, by courier service, by cable, by telecopy, by telegram, by telex or
by registered or certified mail (postage prepaid, return receipt requested) to
the respective parties at the following addresses (or at such other address for
a party as shall be specified in a notice given in accordance with this Section
9.01):
(a) if to the Licensor:
Corning Incorporated
Sullivan Park, FR-02-12
Corning, NY 14831
Telecopy: (607) 974-3848
Attention: General Patent Counsel
(b) if to the Licensee:
Corning Consumer Products Company
E-Building, Houghton Park
Corning, New York 14831
Telecopy: (607) 974-2215
Attention: President
SECTION 9.02. Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
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SECTION 9.03. Severability. If any term or other provision of this
Agreement is held to be invalid, illegal or unenforceable by any rule of law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or unenforceable, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
SECTION 9.04. Entire Agreement. This Agreement (including the
Exhibits hereto) constitutes the entire agreement of the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements and
undertakings, both written and oral, between the Licensor and the Licensee with
respect to the subject matter hereof.
SECTION 9.05. Assignment. This Agreement may not be assigned by the
Licensee without the prior written consent of the Licensor, which shall not
unreasonably be withheld; provided, however, that this Agreement may be assigned
by the Licensee to any successor to all or substantially all of the Business
without the consent of the Licensor; provided further that the Licensor agrees
that a substantial change in ownership of the Licensee through a public offering
of shares in the Licensee or any other change of control of the Licensee, shall
not constitute an assignment requiring consent. The Licensor may assign this
Agreement or Seller's Retained Patents, Seller's Future Patents or the Consumer
Know-How to a third party without Licensee's consent; provided, however, such
assignee shall be bound by all the terms and conditions of this Agreement.
SECTION 9.06. No Third Party Beneficiaries. This Agreement shall be
binding upon and inure solely to the benefit of the parties hereto and their
permitted assigns and nothing herein, express or implied, is intended to or
shall confer upon any other Person, any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 9.07. Amendment; Waiver. (a) This Agreement may not be
amended or modified except by an instrument in writing signed by the Licensor
and the Licensee.
(b) No failure or delay on the part of a party hereto in exercising
any right, power or remedy hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy hereunder. The remedies provided for herein are cumulative and are not
exclusive of any remedies provided by law or available at equity.
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SECTION 9.08. Governing Law. This Agreement shall be governed by the
laws of the State of New York, excluding any principles of conflict of laws. All
actions and proceedings arising out of or relating to this Agreement shall be
heard and determined in any New York state or federal court sitting in the State
of New York, and the parties hereto hereby consent to the jurisdiction of such
courts in any such action or proceeding.
SECTION 9.09. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed, shall be deemed to be an original but all of which,
taken together, shall constitute one and the same agreement.
SECTION 9.10. Independent Contractors. No agency, partnership or
joint venture is established by this Agreement. Neither party shall enter into,
incur liabilities, or hold itself out to third parties as having the authority
to enter into and incur any contractual obligations, expenses or liabilities on
behalf of the other party.
SECTION 9.11. Waiver of Jury Trial. Each of the Licensor and the
Licensee hereby irrevocably waives all right to trial by jury in any action,
proceeding or counterclaim (whether based on contract, tort or otherwise)
arising out of or relating to this Agreement or the actions of the Licensor or
the Licensee in the negotiation, administration, performance and enforcement
thereof.
SECTION 9.12. Disclaimer. (a) Nothing in this Agreement shall be
construed as:
(i) any warranty or representation that any Seller's Retained Patent
or Seller's Future Patent licensed hereunder is or shall be valid;
(ii) any warranty or representation as to the results to be attained
by the utilization of Seller's Retained Patents, Seller's Future Patents,
or Consumer Know-How licensed herein;
(iii) a promise that any of Seller's Retained Patent or Seller's
Future Patents licensed hereunder will be enforced or is enforceable;
(iv) any warranty or representation as to the quality, utility,
merchantability or any other characteristic of any product manufactured,
used or sold under any right, license or immunity granted or conferred by
this Agreement;
(v) the delegation of any function or authority by one party to
another;
<PAGE>
13
(vi) an assumption by the Licensor of any financial obligation to
the Licensee;
(vii) the creation of any relationship of employment between the
Licensee and employees of the Licensor or any of its subsidiaries,
Affiliates or associated companies; or
(viii) the creation of any fiduciary relationship between the
Licensor and the Licensee.
(b) Notwithstanding anything in clause (a) hereto, the parties
declare that, to the best of each of their respective knowledge, as of the date
hereof, there are no laws or regulations in effect that materially limit or
restrict their ability to fully perform their obligations under this Agreement.
SECTION 9.13. Personnel. The personnel of any party, while present
at the facilities of another party, shall be subject to all rules, regulations
and security requirements generally in effect at the respective facilities. Each
party shall be responsible for insuring its respective personnel against all
risks of injury to person or property, caused to or by such personnel while
present at the facilities of another party, or the Affiliates of any of them.
SECTION 9.14. Indemnification. (a) The Licensee agrees to defend,
indemnify, and hold the Licensor and Licensor's related companies and their
respective officers, directors, employees and agents harmless against all
liabilities, losses, damages, claims, costs, interests, judgments, fines,
amounts paid in settlement and expenses (including reasonable attorneys' fees
and litigation expenses) actually incurred by the Licensor or its related
companies or such officers, directors, employees and agents resulting from or
arising out of claims by third parties, whether for personal injury or otherwise
(excluding patent infringement and related claims related to the Seller's
Retained Patents, Seller's Future Patents and the Consumer Know-How), as a
result of the manufacture, distribution, sale or use of the Licensed Products,
which claims are based on the Licensor's ownership of the Seller's Retained
Patents, Seller's Future Patents and the Consumer Know-How or the rights of the
Licensor under this Agreement ("Licensor Claims"), regardless of whether the
Licensor may be found, or alleged to be liable therefor, on the basis of
negligence, strict liability, breach of warranty, products liability or any
other theory; provided, however, that this sentence shall not apply to Licensor
Claims based on or arising out of accidents, injuries or product failures
occurring prior to the date hereof.
(b) The Licensor agrees to defend, indemnify and hold the Licensee
and the Licensee's related companies and their respective officers, directors,
employees and agents harmless against all liabilities, losses, damages, claims,
costs, interests, judgments, fines,
<PAGE>
14
amounts paid in settlement and expenses (including reasonable attorneys' fees
and litigation expenses) actually incurred by the Licensee or its related
companies or such officers, directors, employees and agents resulting from or
arising out of claims by third parties, whether for personal injury, unfair
competition claims, patent infringement or otherwise, as a result of the
manufacture, distribution, sale or use of products sold by Licensor and
utilizing the Seller's Retained Patents, Seller's Future Patents, or Consumer
Know-How, pursuant to this Agreement ("Licensee Claims"), regardless of whether
Licensee may be found, or alleged to be liable therefor, on the basis of
negligence, strict liability, breach of warranty, products liability or any
other theory; provided, however, that this sentence shall not apply to Licensee
Claims based on or arising out of accidents, injuries or product failures
occurring prior to the date hereof.
<PAGE>
15
IN WITNESS WHEREOF, the Licensor and the Licensee have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
CORNING INCORPORATED
By:
-----------------------------------
Name:
Title:
CORNING CONSUMER PRODUCTS
COMPANY
By:
-----------------------------------
Name:
Title:
<PAGE>
Exhibit 5.09(e)
Form of Temporary CORNING License Agreement
<PAGE>
================================================================================
TEMPORARY CORNING LICENSE AGREEMENT
Between
CORNING INCORPORATED
and
CORNING CONSUMER PRODUCTS COMPANY
April 1, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms...........................................1
ARTICLE II
GRANT OF TRADEMARK LICENSE
SECTION 2.01. Grant of License................................................3
SECTION 2.02. Ownership of Trademarks.........................................4
SECTION 2.03. Notice..........................................................4
SECTION 2.04. Exclusions from License and Reservation of Rights...............4
SECTION 2.05. Termination of Pre-existing Licenses Between the Parties........5
ARTICLE III
QUALITY CONTROL, ADVERTISING
SECTION 3.01. Quality Standards...............................................5
SECTION 3.02. Quality Assurance...............................................5
SECTION 3.03. Samples, Quality................................................5
SECTION 3.04. Advertising/Packaging...........................................6
SECTION 3.05. Compliance......................................................6
SECTION 3.06. Further Use.....................................................6
SECTION 3.07. Additional Materials............................................6
ARTICLE IV
INDEMNIFICATION
SECTION 4.01. Indemnification.................................................7
ARTICLE V
TERMINATION
SECTION 5.01. Licensee's Option to Terminate..................................7
SECTION 5.02. Material Breach.................................................7
SECTION 5.03. Termination for Other Events....................................8
ARTICLE VI
FORCE MAJEURE EVENT
SECTION 6.01. Force Majeure Event.............................................8
SECTION 6.02. Effect of a Force Majeure Event.................................8
SECTION 6.03. Length of a Force Majeure Event.................................9
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.01. Notices.........................................................9
SECTION 7.02. Headings........................................................9
<PAGE>
Page
SECTION 7.03. Severability....................................................9
SECTION 7.04. Entire Agreement...............................................10
SECTION 7.05. Assignment and Sublicensing....................................10
SECTION 7.06. No Third Party Beneficiaries...................................10
SECTION 7.07. Amendment; Waiver..............................................10
SECTION 7.08. Governing Law..................................................10
SECTION 7.09. Counterparts...................................................11
SECTION 7.10. Independent Contractors........................................11
SECTION 7.11. Personnel......................................................11
SECTION 7.12. Disclaimer.....................................................11
EXHIBIT 1 CORNING TRADEMARK Registrations
EXHIBIT 2 Pre-existing License Agreements
EXHIBIT 3 Arbitration Procedures
EXHIBIT 4 Definition of Franchising
<PAGE>
TEMPORARY CORNING LICENSE AGREEMENT, dated as of April 1, 1998 (this
"Agreement"), between CORNING INCORPORATED, a corporation organized under the
laws of New York (the "Licensor"), and CORNING CONSUMER PRODUCTS COMPANY, a
corporation organized under the laws of Delaware (the "Licensee").
WHEREAS, the Licensor, the Licensee and CCPC Acquisition Corp., a
corporation organized under the laws of Delaware (the "Purchaser"), and, for
certain limited purposes only, Borden, Inc. have entered into a Recapitalization
Agreement dated March 2, 1998 (the "Recapitalization Agreement"), providing for
the sale by the Licensor to the Purchaser approximately 92% of the issued and
outstanding shares of common stock, no par value per share, of the Licensee;
WHEREAS, the execution and delivery of this Agreement by the
Licensor is a condition precedent to the obligations of the Purchaser under the
Recapitalization Agreement;
WHEREAS, the Licensor heretofore owned all of the outstanding shares
of the Licensee;
WHEREAS, the Licensor previously conducted the Business associated
with the CORNING trademark through the Licensee and the Subsidiaries and had
licensed or otherwise authorized the Licensee and the Subsidiaries to use the
CORNING trademark in the Business;
WHEREAS, the Licensor has separately licensed the Licensee to use
the CORNING WARE trademark in the Business in the future;
WHEREAS, the Licensor desires that the CORNING trademark no longer
be associated with the Business, but recognizes that in order for the Licensee
to discontinue such use it needs to continue using the CORNING trademark for a
transitional period.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, it
is hereby agreed as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. Capitalized words or phrases
used and not otherwise defined herein shall have the respective meanings
ascribed thereto in the Recapitalization Agreement. The following terms shall
have the following meanings:
<PAGE>
2
"Associated Equipment" means internal and external signage (other
than the signage for the CORNING REVERE Factory Stores), automobiles, trucks,
trailers and other vehicles and other forms and types of equipment, other than
molds used in the production of Licensed Products, owned or used by the
Licensee.
"Associated Materials" means advertising, business cards, catalogs,
checks, contracts (including purchase orders and customer agreements), invoices,
labels, letterhead, packaging, shipping documents, stationery, promotional
brochures and related items, and other like or similar materials owned or used
by the Licensee.
"CORNING NAME" means the term "CORNING" (i) followed by the term
"Consumer" as part of the corporate name of the Licensee or any of the
Subsidiaries or (ii) as part of trade names "CORNING REVERE Factory Stores" and
"CORNING REVERE Factory Outlet Stores".
"CORNING TRADEMARK" means the CORNING trademark and any and all
common law and/or statutory trademark rights therein and any confusingly similar
modifications, derivations or stylizations thereof, e.g., CROWN CORNING,
(including translations thereof into any language other than English), the
goodwill related thereto, and all related registrations, applications, renewals,
continuations and extensions owned by the Licensor; provided, however, that the
CORNING TRADEMARK shall not include the term CORNING or any confusingly similar
modifications, derivation or stylizations thereof used as part of a trade name,
corporate name, vanity phone number, Universal Resource Locator (URL), domain
name, or used principally as a trade name; provided further that the trademarks
CORELLE, COMCOR, CORNERSTONE and CORNING WARE shall not be included in the
CORNING TRADEMARK, as they are the subject of separate agreements between the
Licensor and the Licensee.
"Field" means Corning Consumer Products.
"Force Majeure Event" means, with respect to a Person, any act of
God or the public enemy, war, compliance with laws, governmental acts or
regulations, fire, flood, epidemic, strikes and labor interruptions, accident,
unusually severe weather or similar causes which are beyond the reasonable
control of such Person.
"Licensee", to the extent applicable, shall include both Corning
Consumer Products Company and any of its subsidiaries.
"Licensed Products" means Corning Consumer Products bearing or
otherwise using one of the Trademarks manufactured, distributed or sold by
Licensee after the Closing.
<PAGE>
3
"subsidiary" or "subsidiaries" means any Person with respect to
which a specified Person (or a subsidiary thereof) owns a majority of the common
stock (or similar voting securities) or has the power to vote or direct the
voting of sufficient securities to elect a majority of the directors or
individuals exercising similar functions.
"Term" means five (5) years after the Closing, unless this Agreement
is terminated earlier in accordance with its terms.
"Territory" shall mean worldwide, subject to any rights of a third
party as set forth in a pre-existing license as identified on Exhibit 2.
"Trademarks" means the CORNING TRADEMARK and the CORNING NAME.
ARTICLE II
GRANT OF TRADEMARK LICENSE
SECTION 2.01. Grant of License. (a) Subject to the terms and
conditions contained herein and to any pre-existing agreements as identified and
described on Exhibit 2 hereto, the Licensor hereby grants to the Licensee a
fully-paid, royalty-free and nonexclusive license to use the CORNING NAME in
connection with and as part of the Licensee's respective corporate name(s),
trade name(s) and fictitious name(s) in the Territory for a period of three (3)
years from the Closing Date. The Licensee is authorized to use the CORNING NAME
as part of its fictitious name in connection with its use of both the Associated
Equipment and the Associated Materials. The Licensee shall not use the CORNING
NAME outside of the Field. The Licensee undertakes to use the CORNING NAME
strictly in accordance with the terms and conditions set forth herein. At the
expiration of such three (3) year period, all such use of the CORNING NAME by
the Licensee shall cease.
(b) Subject to the terms and conditions contained herein and to any
pre-existing agreements as identified and described on Exhibit 2 hereto, the
Licensor hereby grants to the Licensee a fully-paid, royalty-free and
nonexclusive license in the Territory to use the CORNING TRADEMARK solely on or
in connection with the manufacture, distribution and/or sale of Licensed
Products and on or in the Associated Materials and Associated Equipment in the
Territory all for a period of three (3) years from the Closing. The Licensee
shall not use the CORNING TRADEMARK outside of the Field. All use of the CORNING
TRADEMARK by the Licensee shall inure to the benefit of the Licensor. The
Licensee undertakes to use the CORNING TRADEMARK strictly in accordance with the
terms and conditions set forth herein. Except as authorized by Section 2.01(c)
hereof, at the expiration
<PAGE>
4
of such three (3) year period all such use of the CORNING TRADEMARK by the
Licensee shall cease.
(c) Subject to the terms and conditions contained herein and to any
pre-existing agreements as identified and described in Exhibit 2 hereto, the
Licensor hereby grants to the Licensee a fully-paid, royalty-free, worldwide and
nonexclusive license in the Territory to use the CORNING TRADEMARK for molds
with the CORNING TRADEMARK embedded therein and Licensed Products made therefrom
in the Territory for the Term hereof. The Licensee shall not use the CORNING
TRADEMARK outside of the Field. All use of the CORNING TRADEMARK by the Licensee
shall inure to the benefit of the Licensor. The Licensee undertakes to use the
CORNING TRADEMARK strictly in accordance with the terms and conditions set forth
herein. At the expiration of the Term, all such use of the CORNING TRADEMARK by
the Licensee shall cease.
SECTION 2.02. Ownership of Trademarks. The Licensor warrants to the
Licensee that the Licensor is the owner of each of the Trademarks and the
Licensee acknowledges the exclusive right and title in and to each of the
Trademarks is owned by the Licensor. The Licensee shall not in any manner
represent that it has any ownership in either of the Trademarks or any
registration thereof, and the Licensee acknowledges that use of either of the
Trademarks shall not create in the Licensee's favor any ownership right, title
or interest in or to either of the Trademarks. The Licensee hereby waives and
disclaims any ownership right or interest in each of the Trademarks that may
arise under the law of any country out of the use hereunder of either of the
Trademarks by the Licensee.
SECTION 2.03. Notice. The Licensee acknowledges the value and the
popularity of, and the goodwill associated with, each of the Trademarks and
acknowledges that such value, popularity and goodwill are property rights
belonging to the Licensor. The Licensee agrees to cooperate with the Licensor to
preserve such rights of the Licensor, and, as a condition of the continuance of
this license, the Licensee shall affix to each Licensed Product or package
therefor such notice as the Licensor may reasonably request for the purpose of
preserving its rights according to law.
SECTION 2.04. Exclusions from License and Reservation of Rights.
(a) Notwithstanding the foregoing, the Licensor reserves to itself,
its Affiliates and its licensees and assignees the right to continue to use the
CORNING NAME and the CORNING TRADEMARK.
(b) Nothing in this Agreement affects or limits the rights of the
Licensor and its Affiliates to use any trademark owned by the Licensor or its
Affiliates whether or not licensed hereunder.
SECTION 2.05. Termination of Pre-existing Licenses Between the
Parties. To the extent the Licensee and/or the Subsidiaries have heretofore been
authorized or licensed to use the Trademarks in connection with the Business by
virtue of agreements (whether oral or
<PAGE>
5
written) or authorized conduct between the Licensor and the Licensee and the
Subsidiaries, such agreements or authorizations of such conduct by the Licensee
or the Subsidiaries are hereby terminated and replaced by this Agreement,
including all limitations and other provisions contained herein.
ARTICLE III
QUALITY CONTROL, ADVERTISING
SECTION 3.01. Quality Standards. Licensor has, in the course of
conducting the Business through the Licensee prior to the Closing, established
and maintained standards of quality for the Licensed Products. The Licensee
knows and is familiar with such quality standards. The Licensee accepts said
quality standards as the standard required to maintain the reputation and
goodwill of the Trademarks.
SECTION 3.02. Quality Assurance. Within thirty (30) days after the
end of each calendar year during the Term after a written request from the
Licensor, the officer of the Licensee responsible for all quality control and
quality assurance functions shall submit to the Licensor a written statement
verified by affidavit that, during the preceding calendar year and with respect
to all Licensed Products sold during said calendar year and all operations of
the Licensed Services within the preceding calendar year, all quality control
procedures followed by the Licensee immediately prior to the date of this
Agreement, or any modifications thereof approved by the Licensor, were followed.
SECTION 3.03. Samples, Quality. Upon Licensor's written request, and
at no charge to the Licensor, the Licensee shall annually make available to the
Licensor a reasonable number of representative samples of (i) the Licensed
Products and (ii) any and all new products sold under one of the Trademarks
introduced by Licensee in the preceding calendar year, together with any
applicable sales or promotional materials (including but not limited to
packaging, advertising and sell sheets), for inspection and testing by the
Licensor to facilitate proper quality control. Licensor reserves the right to
have such inspection and testing conducted by third parties under contract with
the Licensor. Further, the Licensor, upon reasonable notice to the Licensee (or
sublicensee) and no more than once in any calendar year and subject to
appropriate confidentiality obligations, shall have the right to inspect any
facility of the Licensee (or sublicensee) at which Licensed Products are
manufactured, distributed or sold, solely for the purpose of ensuring that the
Licensee is complying with the appropriate quality standards and quality control
procedures. Licensee shall permit duly authorized representatives of the
Licensor to conduct any such inspections.
SECTION 3.04. Advertising/Packaging. The Licensee shall have the
right to create and use its own advertising, packaging Internet content and
other promotional materials utilizing either of the Trademarks in connection
with the manufacture, distribution or sale of
<PAGE>
6
Licensed Products; provided, however, the Licensee shall not commit or omit any
act or pursue any course of conduct that might tend to bring either of the
Trademarks into disrepute or use any of the Trademarks in any way likely to
damage the goodwill and reputation attaching thereto, or in a manner likely to
dilute the value or strength of either of the Trademarks or registrations
thereof. Upon any reasonable request from the Licensor, and at no charge to the
Licensor, the Licensee shall make available to the Licensor a reasonable number
of representative samples of any advertising or promotional materials utilizing
either of the Trademarks to ensure proper use of the Trademarks. All
advertising, packaging or other promotional materials using any of the
Trademarks shall be subject to the Licensor's approval. The Licensee shall
discontinue all use of any advertising, packaging or other promotional material
that in the reasonable opinion of the Licensor violates the terms of this
Section 3.04.
SECTION 3.05. Compliance. Licensee agrees to take such actions as
are necessary and appropriate to avoid any material in the production of
Licensed Products that would contaminate or otherwise degrade foods or beverages
used with Licensed Products, and to otherwise comply with all laws and
regulations applicable to the packaging, handling, manufacture, distribution or
sale of the Licensed Products. The Licensee, at its sole expense, shall be
responsible for obtaining and maintaining all licenses, permits and approvals
that are required by all appropriate governmental authorities with respect to
the manufacture, distribution or sale of the Licensed Products. Upon request,
the Licensee shall furnish to the Licensor written evidence from such
governmental authorities of any such governmental license, permit, clearance,
authorization, approval or recording.
SECTION 3.06. Further Use. The Licensee agrees to communicate to the
Licensor any intended use by the Licensee of the Trademarks on Associated
Equipment and Associated Materials that are different from those in inventory or
in existence on the date hereof and to comply with the Licensor's reasonable
requests and instructions regarding such use. Any approval by the Licensor of a
particular use of the Trademarks under this Section 3.06 shall not require
subsequent approvals by the Licensor for the same use during the Term (or any
portion thereof), after which time Licensee shall discontinue all such uses and
remove the Trademarks in all instances, except as expressly authorized
hereunder.
SECTION 3.07. Additional Materials. Until new Associated Materials
and Associated Equipment are prepared by the Licensee, the Licensee shall have
the right to create additional copies of existing Associated Materials bearing
the Trademarks for the limited purpose of continuing sales of Licensed Products
until such new Associated Materials and Associated Equipment can be prepared.
<PAGE>
7
ARTICLE IV
INDEMNIFICATION
SECTION 4.01. Indemnification. (a) Licensee agrees to defend,
indemnify, and hold the Licensor and Licensor's related companies and their
respective officers, directors, employees and agents harmless against all
liabilities, losses, damages, claims, costs, interests, judgments, fines,
amounts paid in settlement and expenses (including reasonable attorneys' fees
and litigation expenses) actually incurred by the Licensor or its related
companies or such officers, directors, employees and agents resulting from or
arising out of claims by third parties, whether for personal injury or otherwise
(excluding infringement, dilution and related claims related to the Trademarks),
as a result of the manufacture, distribution, sale or use of the Licensed
Products, which claims are based on Licensor's ownership of the Trademarks or
the rights of the Licensor under this Agreement ("Licensor Claims"), regardless
of whether Licensor may be found, or alleged to be liable therefor, on the basis
of negligence, strict liability, breach of warranty, products liability or any
other theory; provided, however, that this sentence shall not apply to Licensor
Claims based on or arising out of accidents, injuries or product failures
occurring prior to the date hereof.
(b) Licensor agrees to defend, indemnify, and hold the Licensee and
Licensee's related companies and their respective officers, directors, employees
and agents harmless against all liabilities, losses, damages, claims, costs,
interests, judgments, fines, amounts paid in settlement and expenses (including
reasonable attorneys' fees and litigation expenses) actually incurred by the
Licensee or its related companies or such officers, directors, employees and
agents resulting from or arising out of claims by third parties, whether for
personal injury, unfair competition claims (including trademark infringement or
dilution), or otherwise, as a result (i) of the manufacture, distribution, sale
or use of products sold by Licensor under the CORNING trademark or (ii)
Licensee's use of the Trademarks pursuant to this Agreement ("Licensee Claims"),
regardless of whether Licensee may be found, or alleged to be liable therefor,
on the basis of negligence, strict liability, breach of warranty, products
liability or any other theory; provided, however, that this sentence shall not
apply to Licensee Claims based on or arising out of accidents, injuries or
product failures occurring prior to the date hereof.
ARTICLE V
TERMINATION
SECTION 5.01. Licensee's Option to Terminate. At any time on ninety
(90) days' prior written notice, the Licensee may, at its sole election,
terminate this Agreement.
SECTION 5.02. Material Breach. In the event that Licensee is in
material breach of any provision of this Agreement such that the Trademarks are
in imminent danger of
<PAGE>
8
a material diminution in value, or of losing their validity, the Licensor shall
give the Licensee a first notice specifying all pertinent information known by
Licensor concerning the nature of the breach and at least enough information so
as to provide Licensee with the ability to attempt a cure, and Licensee shall
have a period specified by Licensor, but not less than ninety (90) days from the
receipt of such first notice to remedy the alleged breach. If the breach is not
remedied within such specified period, Licensor shall give Licensee a second
notice and, within sixty (60) days after Licensee's receipt of such notice, the
parties will arrange for a first meeting within thirty (30) days of at least one
corporate officer of each party to discuss the alleged breach. If the ensuing
meeting(s) of corporate officers do not resolve the dispute or Licensee refuses
to participate, Licensor shall seek arbitration in accordance with the
procedures set forth in Exhibit 3 to resolve the dispute. Thereafter, if
Licensee refuses to participate in such arbitration or it is finally determined
by such arbitration that Licensee committed a material breach, then the Licensor
shall be entitled to any equitable remedy a court shall order in accordance with
such arbitration decision, including, without limitation, specific performance,
injunctive relief or an accounting, in addition to any legal remedy in
accordance with such arbitration decision, such as monetary damages; provided,
however, nothing contained herein shall prevent either party from seeking
immediate and temporary equitable remedies in a court to preserve the status quo
until such arbitration proceeding can be completed.
SECTION 5.03. Termination for Other Events. Upon the occurrence of
(i) the liquidation (except for the purposes of an amalgamation or
reorganization) or (ii) insolvency of the Licensee or (iii) the appointment of
an administrator, receiver, administrative receiver, trustee or other custodian
acting to protect the interests of any creditor or class of creditors over all
or a substantial part of the assets of the Licensee, the Licensor shall have the
right, by sending written notice to the Licensee, to terminate this Agreement
with immediate effect.
ARTICLE VI
FORCE MAJEURE EVENT
SECTION 6.01. Force Majeure Event. Neither party shall be held
responsible for the failure or delay in performance hereunder if such failure or
delay is due to any Force Majeure Event.
SECTION 6.02. Effect of a Force Majeure Event. Upon the occurrence
of a Force Majeure Event, the party whose performance is so affected shall
promptly give notice to the other party of the occurrence of a Force Majeure
Event or circumstance upon which it intends to rely to excuse its performance.
Duties and obligations of both parties shall be suspended for the duration of
the Force Majeure Event.
<PAGE>
9
SECTION 6.03. Length of a Force Majeure Event. During the duration
of the Force Majeure Event, the party so affected shall use its reasonable best
efforts to avoid or remove such Force Majeure Event, and shall also take
reasonable steps to resume its performance under this Agreement with the least
possible delay.
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.01. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in person, by courier service, by cable, by telecopy, by telegram, by telex or
by registered or certified mail (postage prepaid, return receipt requested) to
the respective parties at the following addresses (or at such other address for
a party as shall be specified in a notice given in accordance with this Section
7.01):
(a) if to the Licensor:
Corning Incorporated
One Riverfront Plaza
Corning, NY 14831
Telecopy: (607) 974-8656
Attention: General Counsel
(b) if to the Licensee:
Corning Consumer Products Company
E-Building, Houghton Park
Corning, NY 14831
Telecopy: (607) 974-2215
Attention: President
SECTION 7.02. Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 7.03. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall
<PAGE>
10
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner in order
that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
SECTION 7.04. Entire Agreement. This Agreement (including the
Exhibits hereto) constitutes the entire agreement of the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements and
undertakings, both written and oral, between the Licensor and the Licensee with
respect to the subject matter hereof.
SECTION 7.05. Assignment and Sublicensing. This Agreement may not be
assigned by the Licensee without the prior written consent of the Licensor,
which shall not be unreasonably withheld; provided, however, that the Agreement
may be assigned by the Licensee to any successor to all or substantially all of
the Business pertaining to each Trademark without the consent of the Licensor.
Licensor agrees that a substantial change in ownership of Licensee through a
public offering of shares in Licensee or any other change of control of Licensee
shall not constitute an assignment requiring consent. Licensee agrees that the
franchising, as defined in 16 C.F.R. 436 and attached hereto as Exhibit 4, of
any portion of its Business shall be considered an assignment requiring
Licensor's consent.
SECTION 7.06. No Third Party Beneficiaries. This Agreement shall be
binding upon and inure solely to the benefit of the parties hereto and their
permitted assigns and nothing herein, express or implied, is intended to or
shall confer upon any other Person any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 7.07. Amendment; Waiver. (a) This Agreement may not be
amended or modified except by an instrument in writing signed by the Licensor
and the Licensee.
(b) Any failure or delay on the part of a party hereto in exercising
any right, power or remedy hereunder shall not operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy hereunder. The remedies provided for herein are cumulative and are not
exclusive of any remedies provided by law or available at equity.
SECTION 7.08. Governing Law. This Agreement shall be governed by the
laws of the State of New York applicable to contracts entered into and fully
performed within said State, without regard to any applicable principles of
conflict of laws, and to the extent applicable, the laws of the United States of
America. All actions and proceedings arising out
<PAGE>
11
of or relating to this Agreement shall be heard and determined in a New York
state or federal court sitting in the State of New York having jurisdiction
thereover.
SECTION 7.09. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
SECTION 7.10. Independent Contractors. No agency, partnership or
joint venture is established by this Agreement. Neither party shall enter into,
incur liabilities, or hold itself out to third parties as having the authority
to enter into and incur any contractual obligations, expenses or liabilities on
behalf of the other party.
SECTION 7.11. Personnel. The personnel of any party, while present
at the facilities of another party, shall be subject to all rules, regulations
and security requirements generally in effect at the respective facility. Each
party shall be responsible for the costs of their respective employees and
agents while present at the facilities of the other party. Each party shall be
responsible for insuring its respective personnel against all risks of injury to
person or property, caused to or by such personnel, while present at the
facilities of another party, or the Affiliates of any of them.
SECTION 7.12. Disclaimer. Nothing in this Agreement shall be
construed as (a) an assumption by the Licensor of any obligation to increase the
sales or profits of the Licensee; (b) an assumption by the Licensor of any
financial obligation to the Licensee; (c) the creation of any relationship of
employment between employees of the Licensee and its Affiliates and employees of
the Licensor and its Affiliates; (d) the creation of any fiduciary relationship
between the Licensor and the Licensee; (e) the creation of a joint venture or
franchise relationship between licensor and Licensee; or (f) the delegation of
any function of authority of the Licensee to the Licensor.
<PAGE>
12
IN WITNESS WHEREOF, the Licensor and the Licensee have executed this
Agreement by their respective duly authorized representatives as of the date
first above written.
CORNING INCORPORATED
By: __________________________________
Name:
Title:
CORNING CONSUMER PRODUCTS
COMPANY
By: __________________________________
Name:
Title:
<PAGE>
Exhibit 5.10
Form of Shared Facility Agreement
<PAGE>
================================================================================
SHARED FACILITIES AGREEMENT
Between
CORNING INCORPORATED
and
CORNING CONSUMER PRODUCTS COMPANY
Dated as of April 1, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
CERTAIN DEFINITIONS
ARTICLE II
PROVISION OF SHARED SERVICES
SECTION 2.01. Undertaking to Provide and to Accept Shared Services....5
SECTION 2.02. Shared Service Standards................................6
SECTION 2.03. Persons to Provide Shared Services......................6
SECTION 2.04. Review of Shared Services and Mixed Facilities..........6
ARTICLE III
TERM AND TERMINATION
SECTION 3.01. Effective Date..........................................7
SECTION 3.02. Duration of Shared Services.............................7
SECTION 3.03. Termination of Shared Services..........................7
ARTICLE IV
FORCE MAJEURE AND TEMPORARY SUSPENSION OF SHARED SERVICES
SECTION 4.01. Occurrence of Event of Force Majeure....................9
SECTION 4.02. Modification and Temporary Suspension
of Shared Services for Repairs......................10
ARTICLE V
PAYMENT FOR SERVICES; MAINTENANCE
SECTION 5.01. Payment for Shared Services; Maintenance...............10
SECTION 5.02. Terms of Payment.......................................11
SECTION 5.03. Adjustments for Errors.................................11
SECTION 5.04. Default Interest.......................................11
SECTION 5.05. Sales and Use Taxes....................................11
i
<PAGE>
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
ARTICLE VII
COVENANTS
SECTION 7.01. Covenants of Corning...................................12
SECTION 7.02. Covenants of CCPC......................................15
ARTICLE VIII
LIMITATION ON LIABILITY
SECTION 8.01. Limitation on Liability................................18
SECTION 8.02. Dispute Resolution.....................................18
SECTION 8.03. Liability Generally....................................19
SECTION 8.04. Indemnification........................................19
SECTION 8.05. Waiver of Subrogation..................................20
SECTION 8.06. Scope of Article VIII..................................20
ARTICLE IX
EASEMENTS
SECTION 9.01. Declaration............................................21
SECTION 9.02. Granting of Easements..................................21
SECTION 9.03. Exculpation............................................22
SECTION 9.04. Warranty...............................................22
SECTION 9.05. Environmental Laws.....................................23
SECTION 9.06. Relocation of Easements................................23
SECTION 9.07. Miscellaneous..........................................24
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Amendment.............................................25
SECTION 10.02. Notices...............................................25
SECTION 10.03. Headings..............................................27
SECTION 10.04. Severability..........................................27
SECTION 10.05. Entire Agreement......................................27
SECTION 10.06. Assignment............................................27
SECTION 10.07. Governing Law.........................................28
SECTION 10.08. Counterparts..........................................28
SECTION 10.09. Specific Performance..................................28
SECTION 10.10. Waiver of Jury Trial..................................28
SECTION 10.11. Relationship of Parties...............................28
SECTION 10.12. Survival..............................................28
SECTION 10.13. Ownership of Property.................................28
SECTION 10.14. Estoppel Certificate..................................29
ii
<PAGE>
EXHIBIT A - [PROPERTY DESCRIPTION - CORNING PROPERTY]
EXHIBIT B - [PROPERTY DESCRIPTION - CCPC PROPERTY]
EXHIBIT C - [LOCATION OF MIXED FACILITIES]
EXHIBIT D - ACCOUNTING POLICIES AND PROCEDURES
EXHIBIT E - SHARED SERVICES
EXHIBIT F - [OWNERSHIP OF PERSONAL PROPERTY]
iii
<PAGE>
THIS SHARED FACILITIES AGREEMENT (this "Agreement"), is made this
1st day of April, 1998 between CORNING INCORPORATED, a New York corporation
("Corning"), and CORNING CONSUMER PRODUCTS COMPANY, a Delaware corporation
("CCPC").
WITNESSETH:
WHEREAS, Corning and CCPC (each a "Party") together with CCPC
Acquisition Corp., a Delaware corporation ("Purchaser"), have entered into that
certain Recapitalization Agreement, dated March 2, 1998 (the "Recapitalization
Agreement"; all terms used but not otherwise defined herein shall have the
meaning ascribed to such terms in the Recapitalization Agreement), providing for
the acquisition by Purchaser of approximately 92% of the issued and outstanding
shares of common stock, no par value, of CCPC;
WHEREAS, the Parties own adjacent parcels of land together with
improvements thereon, as more precisely described on Exhibit A (describing the
parcel owned by Corning) and Exhibit B (describing the parcel owned by CCPC)
attached hereto;
WHEREAS, after the date hereof (the "Closing Date") CCPC will
continue to operate on its owned parcel in substantially the same manner as it
did prior to the Closing Date;
WHEREAS, the Parties desire to provide for the continued use and
sharing of specified properties and facilities after the Closing Date as
provided herein; and
WHEREAS, the Parties recognize that in order for them to operate
their respective businesses, and, in particular, provide and receive the Shared
Services described in this Agreement, compatibly and without undue interference
by either Party with the operations of the other, it is necessary to establish
certain easements and covenants on and over certain portions of the Properties.
NOW, THEREFORE, in consideration of the premises and mutual
agreements and covenants hereinafter set forth, the Parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
As used in this Agreement, the following terms have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
<PAGE>
2
"Accounting Policies and Procedures" means the standard accounting
policies and procedures set forth in Exhibit D hereto, and as such
policies and procedures may change from time to time to the extent
permitted by Paragraph 4 of Exhibit D hereto.
"Affiliate" means, as to any Person, any other Person that, directly
or indirectly, controls, is controlled by or is under common control with
such Person or is a director or officer of such Person. For purposes of
this definition, the term "control" (including the terms "controlling",
"controlled by" and "under common control with") of a Person means the
possession, direct or indirect, of the power to vote 50% or more of the
Voting Stock of such Person or to direct or cause the direction of the
management and policies of such Person, whether through the ownership of
Voting Stock, by contract or otherwise.
"Alteration" means, with respect to any Mixed Facility, any repair,
replacement, substitution therefor or additions there.
"Business Day" means any day other than Saturday, Sunday or a legal
holiday in the State of New York.
"Environmental Claims" means any and all actions, suits, demands,
demand letters, claims, liens, notices of noncompliance or violation,
notices of liability or potential liability, investigations, proceedings,
consent orders or consent agreements relating in any way to any
Environmental Law, any Environmental Permit or any Hazardous Material,
including, without limitation: (a) any and all claims by any Person for
investigation, enforcement, cleanup, removal, response, remedial or other
actions or damages pursuant to any applicable Environmental Law or
Environmental Permit; and (b) any and all claims by any Person seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief to the extent resulting from the presence of or exposure
to Hazardous Materials or arising from any actual or alleged injury or
threat of injury to health, safety or the environment.
"Environmental Law" means any foreign, federal, state or local Law,
statute, ordinance, rule, regulation or common law, and any judicial or
administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, or any indemnity
agreements or other contractual obligations, in each case in effect and as
amended as of the Closing Date or at any time while this Agreement remains
in effect, relating to, regulating or imposing liability or standards of
conduct concerning pollution or protection of the environment, health or
safety or the generation, use, handling, transportation, treatment,
storage, disposal, release or discharge of any Hazardous Materials.
<PAGE>
3
"Environmental Losses" means, without limitation, any actual cleanup
costs, remediation, removal or other response costs (including, without
limitation, costs to cause either Party or its Subsidiaries or any of a
Party's or its subsidiaries' properties or assets to come into compliance
with Environmental Laws), investigation costs (including, without
limitation, reasonable fees of consultants, counsel and other experts in
connection with any environmental investigation, testing, audits or
studies), losses, liabilities or obligations (including, without
limitation, liabilities or obligations under any lease or other contract),
payments, damages (including, without limitation, any actual or punitive
damages and any damages (i) of third parties for personal injury or
property damage or (ii) to natural resources), civil or criminal fines or
penalties, judgments, amounts paid in settlement and reasonable fees
(including, without limitation, reasonable fees of consultants, counsel
and other experts in connection with any action or proceeding or in
connection with the enforcement of this Agreement), arising out of,
relating to or resulting from any Environmental Claims or any other
environmental or health and safety matter or Environmental Laws.
"Environmental Permits" means all permits, approvals, regulations
and other governmental consents of any Governmental Authority necessary
for the current use, occupancy or operation of the Business and required
by any applicable Environmental Law.
"Event of Force Majeure" means, for any Person, any event,
circumstance or condition that is beyond the control of such Person and
that prevents such Person from performing, in whole or in part, its
obligations under this Agreement. Without limiting the generality of the
foregoing, the following occurrences shall be deemed to be Events of Force
Majeure: (a) Acts of God, fire, explosion, accident, flood, storm or other
natural phenomenon; (b) war (whether declared or undeclared), riot,
blockade, sabotage or acts of public enemies; (c) national defense
requirements; (d) compliance with any law, rule, regulation or
Governmental Order that (i) becomes effective after the date hereof and
(ii) is binding on the Person seeking to rely on such law, rule,
regulation or Governmental Order to excuse performance and such Person's
compliance therewith is not voluntary or optional; (e) strikes, lockouts
or injunctions (it being understood that nothing herein shall require a
Person to settle such or any other kind of labor dispute except on such
terms as shall be satisfactory to such Person); (f) unavailability (for
reasons other than the cost thereof) of adequate fuel, power, raw
materials, labor, containers or transportation facilities; and (g)
breakage or failure of machinery or equipment.
"FB" means the Fallbrook Plant, a manufacturing facility owned and
operated by Corning as of the Date of Closing, located on the property
described in Exhibit A attached hereto.
<PAGE>
4
"Governmental Authority" means any United States federal, state or
local or any foreign government, governmental, regulatory or
administrative authority, agency or commission or any court, tribunal or
judicial or arbitral body.
"Governmental Order" means any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any
Governmental Authority.
"Hazardous Materials" means any pollutants, contaminants, toxic or
hazardous substances, materials, wastes, constituents, compounds,
chemicals, including, without limitation, petroleum or any by-products
thereof, any form of natural gas, asbestos or asbestos-containing
materials, polychlorinated biphenyls ("PCBs") or PCB-containing equipment,
radon or other radioactive elements, carcinogenic or mutagenic agents,
pesticides, explosives, flammables, corrosives and urea formaldehyde foam
insulation, in each case that form the basis of liability, or are subject
to regulation, under any applicable Environmental Laws.
"Hours of Operation" means, for any Shared Service, the days and
times during which Provider is required to provide such Shared Service to
Recipient and during which Recipient is required to accept such Shared
Service, and which shall be substantially those hours that the Shared
Service operated prior to the Closing Date unless otherwise specified in
Exhibit E hereto.
"Liabilities" means any and all debts, liabilities and obligations,
whether accrued or fixed, absolute or contingent, matured or unmatured, or
determined or determinable.
"Losses" means any and all Liabilities, Environmental Losses,
losses, damages, claims, costs, interests, judgments, fines, amounts paid
in settlement and expenses actually incurred by a Party.
"Mixed Facility" means any asset, property or facility located at or
on PW or FB, as the case may be, that is: (a) owned by one Party but
utilized by or for the benefit of the other Party; (b) owned by one Party,
but located on the property of the other; and/or (c) utilized by or for
the benefit of both Parties in their respective manufacturing operations.
The Mixed Facilities together with their associated Shared Services are
more precisely described on Exhibits C and E attached hereto.
"Person" means any individual, sole proprietorship, general partner
of a general or limited partnership, partnership, joint venture, trust,
incorporated organization, association, corporation, institution, party,
entity or Governmental Authority, including any instrumentality, division,
body, agency or department thereof.
<PAGE>
5
"Property" means, as applicable, either FB or PW.
"Pro Rata Portion" means on any date of determination a fraction:
(a) the numerator of which is the level or quantity of a Shared Service
consumed or used by Recipient during the twelve (12) months most recently
ended prior to such date; and (b) the denominator of which is the sum of
the level or quantity of such Shared Service consumed or used by Provider
plus the level or quantity of such Shared Service consumed or used by
Recipient during such twelve (12) months.
"Provider" means the Party that owns a Mixed Facility and provides
to Recipient a Shared Service associated with that Mixed Facility.
"PW" means the Pressware Plant, a manufacturing facility owned and
operated by CCPC as of the Closing Date, located on the property described
in Exhibit B attached hereto.
"Recapitalization Agreement" means the Recapitalization Agreement
dated March 2, 1998, among Corning, CCPL, CCPC Acquisition Corp. and
Borden, Inc.
"Recipient" means the Party that benefits from Shared Services
provided by Provider.
"Shared Services" means activities, operations, services, functions,
processes, facilities and/or resources, that are used in the operations of
FB and/or PW, as the case may be, or that utilize Mixed Facilities, all of
which are described in Exhibit E, and that shall be provided by Provider
to Recipient pursuant to the terms of this Agreement.
"Voting Stock" means capital stock issued by a corporation, or the
equivalent interests in any other Person, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the
election of directors (or persons performing similar functions) of such
Person, even though the right to vote has been suspended by the happening
of such a contingency.
ARTICLE II
PROVISION OF SHARED SERVICES
SECTION 2.01. Undertaking to Provide and to Accept Shared Services.
The Parties hereto shall provide (or, subject to the provisions of Section 2.03,
shall arrange for one or more third parties to provide) and accept, as
applicable, each of the Shared Services described in Exhibit E hereto, in each
case on the terms and subject to the conditions set forth
<PAGE>
6
in this Agreement, the provision of such Shared Services to be in accordance
with the service standards set forth in Section 2.02. Nothing in this Agreement
shall prevent either Party from developing within its organization the ability
to provide such Shared Services or from contracting with one or more third
parties to provide such Shared Services.
SECTION 2.02. Shared Service Standards. (a) Provider shall provide
each Shared Service to Recipient, and Recipient shall accept each Shared Service
from Provider, of the same quality and character as each Shared Service was
provided prior to the Closing Date and in a manner so as not to discriminate
against either Party.
(b) Provider shall provide each Shared Service to Recipient at the
level and/or the quantity requested by Recipient, but Provider shall have no
obligation to provide a level or quantity in excess of Recipient's Pro Rata
Portion as of the Closing Date of the total capacity of such Shared Services.
(c) Measurement of the levels and quantities of Shared Services to
be provided shall be undertaken in accordance with practices in effect prior to
the Closing Date and the terms and conditions set forth in Exhibits D and E
hereto; provided, however, that the Parties shall cooperate to modify such
practices if such modifications: (i) would improve the accuracy or would reduce
the costs associated with the measurement of the levels and quantities of Shared
Services provided under this Agreement; and (ii) would not result in an increase
in the costs to be borne by Provider or the burden (including any administrative
burden) to Provider.
SECTION 2.03. Persons to Provide Shared Services. All Shared
Services shall be provided by employees of Provider or, at Provider's election,
by third parties with whom Provider has contracted to provide such Shared
Services. All references in this Agreement to Provider's "providing" Shared
Services shall include direct provision of Shared Services by Provider and
indirect provision of Shared Services by third parties on behalf of Provider.
SECTION 2.04. Review of Shared Services and Mixed Facilities. (a)
Once each calendar year at a mutually agreeable time and place, the Parties
shall review, in good faith, the Shared Services, the costs thereof and the
allocation of costs of maintenance thereof (as such allocations currently are
set forth on Exhibit E hereto) for the purpose of adjusting such allocations of
costs consistent with the Parties' respective utilizations thereof and need
therefor. If the allocations of costs are altered as a result of such annual
review, the Parties will amend Exhibit E hereto accordingly.
(b) Twice each year (once in January and once in June), the owner of
each Mixed Facility shall certify in writing to the other Party that the Mixed
Facility is operating and is free from significant threats to its continued
operations.
<PAGE>
7
ARTICLE III
TERM AND TERMINATION
SECTION 3.01. Effective Date. This Agreement shall become effective
on the Closing Date.
SECTION 3.02. Duration of Shared Services. (a) Provider shall be
required to provide and Recipient shall be required to accept each Shared
Service until the tenth (10th) anniversary of the Closing Date, or until such
earlier time as Recipient or Provider, as applicable, shall have terminated the
obligation to accept or provide a Shared Service in the manner set forth in
Section 3.03 hereof.
(b) Either Party may renew this Agreement, with respect to any
Shared Service that has not been cancelled pursuant to Section 3.03, by
delivering written notice to the other Party not later than twelve (12) months
prior to the expiration of the term or the then current renewal period, as
applicable, for up to seventeen (17) successive renewal terms of five (5) years
each.
SECTION 3.03. Termination of Shared Services. Except as provided in
this Section 3.03, no Party may cause the termination or discontinuation of any
Shared Service or Mixed Facility that is used or provided for the benefit of the
other Party without the written consent of such other Party.
(a) Recipient may, at any time, terminate this Agreement as to any
Shared Service on not less than six (6) months' prior written notice to
Provider, unless Provider also is a Recipient of such Shared Service and such
cancellation would have the effect of depriving Provider of the use or benefit
of such Shared Services; provided, however, for purposes of this Section
3.03(a), the loss or reduction of financial support alone shall not be deemed to
deprive the Provider of the use or benefit of Shared Services.
(b) Either Party may terminate its use of and access to a Mixed
Facility that it owns and that is located on the Property of the other Party on
not less than ninety (90) days' written notice, wherein the termination date of
such use and access will be specified. In such event: (i) the Party on whose
Property the Mixed Facility is located may require the other Party to remove
such Mixed Facility and to repair any damage and to clean up any environmental
damage to the extent caused by such other Party's use of such Mixed Facility by
notice delivered within sixty (60) days after delivery of the termination notice
(provided, however, that the timing of such repair and clean up responsibility
shall be determined based on reasonable business or legal requirements of both
Parties); and (ii) after the conditions set forth in the previous clause hereof
are met and after the effective termination date, the owner of the Mixed
Facility shall no longer be responsible for maintenance costs thereof. In the
<PAGE>
8
event the owner of the Property on which such Mixed Facility is located requests
the other Party to remove the Mixed Facility and such other Party fails to
commence and diligently pursue the removal of such Mixed Facility within thirty
(30) days after the termination date, then the Mixed Facility shall be deemed
abandoned by the terminating Party and the nonterminating Party may either
scrap, destroy or remove the Mixed Facility at the terminating Party's expense
(to the extent such scrapping, destruction or removal is performed in a
reasonably cost-effective manner) or retain the Mixed Facility, at its own
expense, as its own property.
(c) Either Party may terminate this Agreement as to any Shared
Service or any Mixed Facility owned by the other Party that is located on the
terminating Party's Property on not less than six (6) months' prior written
notice if the nonterminating Party has not used such Shared Service or Mixed
Facility during the twelve (12) months immediately prior to the date of such
notice. If the termination involves a Mixed Facility: (i) the terminating Party
shall tender such Mixed Facility located on its Property to the other Party, and
if such tender is rejected, such Mixed Facility shall be deemed abandoned and
may be scrapped, destroyed or removed at the terminating Party's expense or
retained as the terminating Party's own property; and (ii) the nonterminating
Party shall remain responsible for and shall repair any damages and shall clean
up any environmental damage to the extent caused by the nonterminating Party's
use of such Mixed Facility (provided, however, that the timing of such clean up
responsibility shall be determined based on reasonable business or legal
requirements of the terminating Party).
(d) This Agreement may be terminated with respect to any Shared
Service or Mixed Facility, at the option of:
(i) Recipient, if Provider fails to supply the Shared Service
in question or to perform in accordance with the terms of this Agreement any
other material term, covenant or agreement contained in this Agreement on its
part to be performed or observed with respect to such Shared Service, if such
failure shall remain unremedied for sixty (60) days after notice thereof shall
have been given by Provider or, if the failure is of a type that cannot
reasonably be cured within sixty (60) days, failure to initiate within such
sixty (60) day period such action as reasonably can be taken toward curing the
same and/or failure to prosecute such action as promptly as is reasonably
possible after such action is initiated; or
(ii) Provider, if Recipient shall fail to pay to Provider any
amount due to Provider hereunder with respect to the Shared Service in question,
when the same becomes due and payable under this Agreement and any such failure
shall remain unremedied for a period of thirty (30) days after notice thereof
shall have been given by Provider to Recipient. The foregoing termination rights
shall be in addition to all other rights and
<PAGE>
9
remedies that the nonbreaching Party may have against the breaching Party under
Article VIII hereof.
(e) Both Parties agree to cooperate to minimize costs to the other
associated with termination of this Agreement with respect to any Mixed
Facilities or Shared Services.
ARTICLE IV
FORCE MAJEURE AND TEMPORARY SUSPENSION OF SHARED SERVICES
SECTION 4.01. Occurrence of Event of Force Majeure. (a) Upon the
occurrence and during the continuance of an Event of Force Majeure, the
obligation of Provider to provide one or more Shared Services or the obligation
of Recipient to accept one or more Shared Services, as the case may be, shall be
temporarily suspended; provided, however, that: (i) such suspension shall relate
solely to that portion of the Shared Service or Shared Services that the Party
seeking to rely on such Event of Force Majeure is unable to perform or accept,
as the case may be; and (ii) such suspension shall be in effect only for such
period during which such Event of Force Majeure shall be continuing. If such
Event of Force Majeure results in a partial rather than a total inability on the
part of Provider to perform, Recipient shall be entitled to receive its Pro Rata
Portion of any available quantity or level of such Shared Service.
(b) If an Event of Force Majeure prevents a Party from fully
performing its obligations under this Agreement, such Party shall diligently
attempt to remove the cause of its inability to perform fully and shall keep the
other Party advised on a regular basis of its progress in removing the cause of
its inability to perform fully its obligations hereunder.
(c) Upon the occurrence and during the continuance of an Event of
Force Majeure, Recipient shall be entitled to obtain substitute Shared Services
on a temporary or permanent basis; provided, however, that if Provider also is a
Recipient of the Shared Service in question and such cancellation would have the
effect of depriving Provider of the use or benefit of such Shared Services, then
Recipient shall only be entitled to obtain substitute Shared Services on a
permanent basis after receiving the prior written consent of Provider. In the
event that Recipient elects to obtain any substitute Shared Service on a
permanent basis (and such election may not be made unless the Event of Force
Majeure continues for not less than sixty (60) days), then on the later of: (i)
the thirtieth (30th) day after the date on which Recipient notifies Provider
that it intends to exercise its right to obtain permanent substitute Shared
Services, and (ii) any date of termination specified in such notice, Provider
will have no further obligation to provide and Recipient shall have no further
obligation to accept such Shared Service or Shared Services and all costs
associated with such Shared Service or Shared Services shall cease to accrue.
<PAGE>
10
SECTION 4.02. Modification and Temporary Suspension of Shared
Services for Repairs. (a) To allow the Party that owns a Mixed Facility to
maintain and/or make necessary repairs or improvements to the Mixed Facility,
such Party may elect to reduce, interrupt, allocate, alter or change (each
activity a "Change") the Mixed Facility or Shared Services that it is required
to provide under this Agreement; provided that:
(i) The Party desiring to make the Change in the Shared
Services or Mixed Facility shall give notice of such action to the other Party,
pursuant to Section 7.01(i)(i) and Section 7.02(i)(i), as applicable; and
(ii) The Party that does not own the Mixed Facility or Shared
Services in question provides prior written consent for the Change.
(b) Except as the Parties may otherwise agree in writing, a Party
that desires to undertake a Change in a Shared Services or Mixed Facilities as
described in Section 4.02(a) hereof, shall be responsible for any costs
associated therewith; provided, however, that this Section 4.02(b) shall not
apply to activities that are part of a standard periodic maintenance program.
(c) The Party undertaking any Change described in Section 4.02(a)
hereof shall use all reasonable efforts to allocate the effects of such Change
in a manner so that each Party receives its Pro Rata Portion of any available
quantity or level of any effected Mixed Facility or Shared Service.
(d) Upon the occurrence and during the continuance of any Change
referred to in this Section 4.02, the Parties shall cooperate to attempt to
arrange for Shared Services to be furnished in an alternate manner, to minimize
or reduce the effect on its operations of such reduction, interruption,
allocation, alteration or change of a Shared Service, and to otherwise engage in
a course of conduct intended to enable Provider to provide and Recipient to
receive the suspended Shared Service, in each case, without imposing any
obligations on either party in addition to those otherwise imposed by this
Agreement including, without limitation, obligations that would increase the
costs that are to be borne by either Party.
ARTICLE V
PAYMENT FOR SERVICES; MAINTENANCE
SECTION 5.01. Payment for Shared Services; Maintenance. Except as
otherwise provided in Exhibits D and E: (a) the Party which owns a Mixed
Facility shall be responsible for the upkeep, Maintenance (as defined in Exhibit
E hereto) and replacement thereof, and the other Party will cooperate to
facilitate the same; (b) each Party shall be
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11
responsible for its own costs in the use and operation for its own benefit of
any Mixed Facilities; and (c) the costs of upkeep, repair and replacement of
Mixed Facilities shall be shared proportionately on the basis of the relative
amount of use by the respective Parties of the particular Shared Services
related to the Mixed Facilities, as such proportion is specified for each Shared
Service in Exhibit E hereto.
SECTION 5.02. Terms of Payment. On or before the seventh (7th)
Business Day of each month that occurs during the term of this Agreement and on
or before the seventh (7th) Business Day after the termination date of any
Shared Service in the case of any termination of a Shared Service, Provider
shall deliver to Recipient an invoice setting forth, in detail sufficient so as
to permit the calculation of the amounts payable with respect to each Shared
Service, the amounts payable by Recipient under Section 5.01(c) hereof with
respect to the immediately preceding month or, in the case of any termination of
a Shared Service, with respect to the portion of the month prior to the
applicable termination date. Recipient shall pay Provider the invoiced amount
within thirty (30) days after delivery of the invoice. Payments due on a day
other than a Business Day shall be made on the next succeeding Business Day.
SECTION 5.03. Adjustments for Errors. If at any time during the term
of this Agreement an error is made in the calculation of any amount payable by
Recipient under this Agreement, the invoice for the month immediately succeeding
the month in which such error was finally determined shall be increased or
decreased, as the case may be, by an amount equal to the amount of such
overpayment or underpayment, as the case may be, by Recipient. Corrections of
errors shall be made in accordance with the provisions of Paragraph 3 of Exhibit
D hereto.
SECTION 5.04. Default Interest. Notwithstanding any other provision
of this Agreement, interest shall accrue on any overdue amount payable under
this Agreement at a rate equal to one and one-half percent (1 1/2%) per month,
prorated for the number of days such overdue amounts are outstanding.
SECTION 5.05. Sales and Use Taxes. Recipient shall pay to Provider
for each Shared Service that is the subject of any sales or use tax imposed by
any Governmental Authority, thirty (30) days after demand therefor, an amount
equal to Recipient's Pro Rata Portion of the aggregate amount of such sales and
use taxes. Notwithstanding the foregoing, Recipient shall use reasonable efforts
to provide exemption certificates where available and to calculate any
applicable sales and use taxes and to make payment thereof directly to the
appropriate taxing authority.
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12
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Each Party represents and warrants that except as otherwise
permitted by this Agreement, and except for a gas services agreement, an
electricity services agreement and certain raw material supply agreements all of
which have been entered into between Corning and various third parties, it has
not entered into any agreements or undertakings (whether or not in writing) that
relate to the Shared Services to be provided pursuant to this Agreement with a
third party or with one of its Affiliates, nor has it adopted any policies or
procedures that would entitle such third party or Affiliate to receive such
Shared Services in a manner that, solely as a result of the rights afforded to
such third party or Affiliate, would impair the rights or increase the
obligations of Recipient of such Shared Services.
ARTICLE VII
COVENANTS
SECTION 7.01. Covenants of Corning. So long as this Agreement
remains in effect, Corning agrees to do the following:
(a) Compliance with Law. Corning shall provide Shared Services in a
manner consistent with applicable laws, rules, regulations and orders including,
without limitation, all applicable Environmental Laws and Environmental Permits.
(b) Inspection, Access and Testing. At scheduled times and intervals
to be agreed upon by the Parties, Corning shall:
(i) permit either CCPC or, at Corning's option, independent
public accountants mutually acceptable to the Parties, to inspect and to audit
the books, records and accounts of Corning relating to the Shared Services
furnished to CCPC pursuant to this Agreement; provided that: (A) such inspection
and audit shall be conducted for the sole purpose of determining whether the
costs charged to CCPC have been assessed in accordance with the terms of this
Agreement; and (B) the cost of such audit or inspection shall be borne by CCPC;
and
(ii) permit CCPC or any of CCPC's agents or representatives to
visit FB in order to: (A) consult with those agents of Corning designated by
Corning regarding Shared Services to be provided hereunder; and (B) require that
meter calibration and/or other tests be conducted to verify the accuracy of
equipment used to determine the quantity or quality of Shared Services (and any
Mixed Facilities) provided by or on behalf of Corning to CCPC; provided that:
(Y) CCPC shall not be entitled to require meter calibration and/or other tests
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13
permitted by clause (B) above any more frequently than every thirty (30) days;
and (Z) CCPC shall cause its employees, agents and representatives to comply
with all of Corning's rules and regulations pertaining to security, safety and
property protection and follow the route or routes designated by Corning.
(c) Books and Records. Corning shall keep proper books of record and
account, in which full and correct entries shall be made of all financial
transactions related to the performance of its obligations under this Agreement,
including, without limitation, recording the levels or quantities of Shared
Services provided by or on behalf of Corning to CCPC under this Agreement, the
costs and expenses associated therewith and amounts paid by or on behalf of
CCPC.
(d) Authorizations and Permits. (i) Except as otherwise specified
herein, Corning shall maintain in full force and effect all authorizations,
waivers, consents, permits (including all Environmental Permits), orders and
approvals and make or cause to be made all registrations, filings, permit
transfers (including any Environmental Permit transfers) and notices with or to
all third parties and Governmental Authorities necessary or appropriate for
Corning to provide the Shared Services with respect to which Corning is the
Provider and to maintain all Mixed Facilities owned by Corning; and (ii) with
respect to such authorizations, waivers, consents, permits, orders and approvals
that will materially affect the manner in which CCPC operates PW, Corning shall
consult with and allow CCPC to participate in discussions with any Governmental
Authority or third party regarding compliance with any such authorizations,
waivers, consents, permits, orders or approvals and in the making of any such
registration, filing, permit transfer or notice now or hereafter in effect or to
obtain, modify or renew any such authorizations, waivers, consents, permits,
orders or approvals.
(e) Alteration of Facilities. Corning shall not make any Alteration
to FB, if such Alteration would materially adversely affect Corning's ability to
provide Shared Services to CCPC on the terms and conditions of this Agreement
(except as otherwise permitted by Section 4.02 hereof) or that would materially
increase the amounts that are payable by CCPC in connection with Shared Services
provided to CCPC under this Agreement; provided that this Section 7.01(e) shall
not apply to any Alteration: (A) that is required by any law, rule, regulation
or Governmental Order; (B) that, in Corning's reasonable opinion, is required to
preserve safety or environmental standards at FB or is required by any of
Corning's other contractual undertakings in existence on the Closing Date; or
(C) if the amounts that are payable by CCPC in connection with Shared Services
provided to CCPC under this Agreement would not be materially increased as a
result of such Alteration.
(f) Increases in Levels of Shared Services. Corning shall discuss
and reasonably consider requests by CCPC to increase the quantities of any
Shared Service or to
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14
provide additional Shared Services; provided that nothing in this Section
7.01(f) shall obligate Corning to agree to changes in the nature, level or types
of Shared Services provided.
(g) Accounting Changes. Corning shall not make any change in the
Accounting Policies and Procedures except to the extent permitted in Schedule D
hereto.
(h) Provision of Shared Services to Other Entities. Except as
otherwise permitted by this Agreement, Corning shall not enter into any
agreements or undertakings that relate to the Shared Services to be provided by
Corning to CCPC pursuant to this Agreement with any third parties or any of
Corning's Affiliates, or adopt any policies or practices within FB that would
entitle such third parties or any of Corning's Affiliates to receive Shared
Services in a manner that, solely as a result of the rights afforded to such
third party or Affiliate, would materially impair the rights or increase the
obligations of CCPC with respect to such Shared Services.
(i) Reporting. Corning shall furnish to CCPC:
(i) promptly, and in any event (except for emergency
situations) not later than thirty (30) days prior to the commencement of a
suspension or a reduction of a Shared Service or Shared Services of the type
described in Section 4.02, a statement made by Corning describing the nature,
extent, effect and the anticipated duration of such suspension of Shared
Service;
(ii) promptly, and in any event within three days after the
occurrence of an Event of Force Majeure, a statement made by Corning describing
the nature, extent, effect and anticipated duration of such Event of Force
Majeure;
(iii) promptly upon receipt thereof, copies of any statement
or report to or notice from any Governmental Authority or third party that
relates to any authorization, waiver, consent, permit (including any
Environmental Permit), order or approval that relates to any Shared Service to
be provided by or on behalf of Corning and that will materially affect the
manner in which CCPC operates PW;
(iv) promptly upon becoming aware, notice of any event or
occurrence that results in any noncompliance by Corning with any applicable law,
rule, regulation, permit or authorization including, without limitation, any
Environmental Law or Environmental Permit insofar as such noncompliance will
adversely affect any Shared Service to be provided by or on behalf of Corning to
CCPC or the performance of any of Corning's other obligations under this
Agreement;
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15
(v) within a reasonable period after becoming aware, notice of
any event or contingency that may significantly increase CCPC's share of costs
under this Agreement and any proposals that Corning may have to avoid or reduce
such cost increase; and
(vi) promptly, and in any event not later than three (3) days
prior thereto, notice of the date and time of all meter calibrations or other
tests conducted to verify the accuracy of the equipment used to determine the
quality, quantity or level of Shared Services or Mixed Facilities.
SECTION 7.02. Covenants of CCPC. So long as this Agreement remains
in effect, CCPC agrees to do the following:
(a) Compliance with Law. CCPC shall provide Shared Services in a
manner consistent with applicable laws, rules, regulations and orders including,
without limitation, all applicable Environmental Laws and Environmental Permits.
(b) Inspection, Access and Testing. At scheduled times and intervals
to be agreed upon by the Parties, CCPC shall:
(i) permit Corning or, at CCPC's option, independent public
accountants mutually acceptable to the Parties, to inspect and to audit the
books, records and accounts of CCPC relating to the Shared Services furnished to
Corning pursuant to this Agreement; provided that: (A) such inspection and audit
shall be conducted for the sole purpose of determining whether the costs charged
to Corning have been assessed in accordance with the terms of this Agreement;
and (B) the cost of such audit or inspection shall be borne by Corning; and
(ii) permit Corning or any of Corning's agents or
representatives to visit PW in order to: (A) consult with those agents of CCPC
designated by CCPC regarding Shared Services to be provided hereunder; and (B)
require that meter calibration and/or other tests be conducted to verify the
accuracy of equipment used to determine the quantity and quality of Shared
Services (and any Mixed Facilities) provided by or on behalf of CCPC to Corning;
provided that: (Y) Corning shall not be entitled to require meter calibration
and/or other tests permitted by clause (B) above any more frequently than every
thirty (30) days; and (Z) Corning shall cause its employees, agents and
representatives to comply with all of CCPC's rules and regulations pertaining to
security, safety and property protection and follow the route or routes
designated by CCPC.
(c) Books and Records. CCPC shall keep proper books of record and
account, in which full and correct entries shall be made of all financial
transactions related to
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16
the performance of its obligations under this Agreement, including, without
limitation, recording the levels or quantities of Shared Services provided by or
on behalf of CCPC to Corning under this Agreement, the costs and expenses
associated therewith and amounts paid by or on behalf of Corning.
(d) Authorizations and Permits. (i) Except as otherwise specified
herein, CCPC shall maintain in full force and effect all authorizations,
waivers, consents, permits (including all Environmental Permits), orders and
approvals and make or cause to be made all registrations, filings, permit
transfers (including any Environmental Permit transfers) and notices with or to
all third parties and Governmental Authorities necessary or appropriate for CCPC
to provide the Shared Services with respect to which CCPC is the Provider and to
maintain all Mixed Facilities owned by CCPC; and (ii) with respect to such
authorizations, waivers, consents, permits, orders and approvals that will
materially affect the manner in which Corning operates FB, CCPC shall consult
with and allow Corning to participate in discussions with any Governmental
Authority or third party regarding compliance with any such authorizations,
waivers, consents, permits, orders or approvals and in the making of any such
registration, filing, permit transfer or notice now or hereafter in effect or to
obtain, modify or renew any such authorizations, waivers, consents, permits,
orders or approvals.
(e) Alteration of Facilities. CCPC shall not make any Alteration to
PW if such Alteration would materially adversely affect CCPC's ability to
provide Shared Services to Corning on the terms and conditions of this Agreement
(except as otherwise permitted by Section 4.02 hereof) or that would materially
increase the amounts that are payable by Corning in connection with Shared
Services provided to Corning under this Agreement; provided that this Section
7.02(e) shall not apply to any Alteration: (A) that is required by any law,
rule, regulation or Governmental Order; (B) that, in CCPC's reasonable opinion,
is required to preserve safety or environmental standards at FB or is required
by any of CCPC's other contractual undertakings in existence on the Closing
Date; or (C) if the amounts that are payable by Corning in connection with
Shared Services provided to Corning under this Agreement would not be materially
increased as a result of such Alteration.
(f) Increases in Levels of Shared Services. CCPC shall discuss and
reasonably consider requests by Corning to increase the quantities of any Shared
Service or to provide additional Shared Services; provided that nothing in this
Section 7.02(f) shall obligate CCPC to agree to changes in the nature, level or
types of Shared Services provided.
(g) Accounting Changes. CCPC shall not make any change in the
Accounting Policies and Procedures except to the extent permitted in Schedule D
hereto.
(h) Provision of Shared Services to Other Entities. Except as
otherwise permitted by this Agreement, CCPC shall not enter into any agreements
or undertakings that
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17
relate to the Shared Services to be provided by Corning to Corning pursuant to
this Agreement with any third parties or any of CCPC's Affiliates, or adopt any
policies or practices within FB that would entitle such third parties or any of
CCPC's Affiliates to receive Shared Services in a manner that, solely as a
result of the rights afforded to such third party or Affiliate, would materially
impair the rights or increase the obligations of Corning with respect to such
Shared Services.
(i) Reporting. CCPC shall furnish to Corning:
(i) promptly, and in any event (except for emergency
situations) not later than thirty (30) days prior to the commencement of a
suspension or a reduction of a Shared Service or Shared Services of the type
described in Section 4.02, a statement of CCPC describing the nature, extent,
effect and the anticipated duration of such suspension of Shared Service;
(ii) promptly, and in any event within three days after the
occurrence of an Event of Force Majeure, a statement of CCPC describing the
nature, extent, effect and anticipated duration of such Event of Force Majeure;
(iii) promptly upon receipt thereof, copies of any statement
or report to or notice from any Governmental Authority or third party that
relates to any authorization, waiver, consent, permit (including any
Environmental Permit), order or approval that relates to any Shared Service to
be provided by or on behalf of CCPC and that will materially affect the manner
in which Corning operates PW;
(iv) promptly upon becoming aware, notice of any event or
occurrence that results in any noncompliance by CCPC with any applicable law,
rule, regulation, permit or authorization including, without limitation, any
Environmental Law or Environmental Permit insofar as such noncompliance will
adversely affect any Shared Service to be provided by or on behalf of CCPC to
Corning or the performance of any of CCPC's other obligations under this
Agreement;
(v) within a reasonable period after becoming aware, notice of
any event or contingency that may significantly increase Corning's share of
costs under this Agreement and any proposals that Corning may have to avoid or
reduce such cost increase; and
(vi) promptly, and in any event not later than three (3) days
prior thereto, notice of the date and time of all meter calibrations or other
tests conducted to verify the accuracy of the equipment used to determine the
quality, quantity or level of Shared Services or Mixed Facilities.
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18
ARTICLE VIII
LIMITATION ON LIABILITY
SECTION 8.01. Limitation on Liability. Subject to the provisions of
Sections 8.02, 8.03, 8.04, 8.05 and 8.06 hereof, the Parties hereto agree as
follows:
(a) Neither Corning, its Affiliates nor any of their respective
officers, directors, employees or agents (other than third parties providing
Shared Services in accordance with Section 2.04 hereof) (each, a "Corning
Entity") shall be liable to CCPC or its Affiliates for, and CCPC and its
Affiliates release and discharge each Corning Entity from any Losses that may be
incurred by or asserted or awarded against CCPC arising out of or in connection
with any act or omission, by any Corning Entity in connection with the
performance of (or the failure to perform) any of Corning's obligations under
this Agreement, other than: (i) any Losses that are caused by or arise from the
negligence, recklessness or wilful misconduct of a Corning Entity in connection
with the performance of (or the failure to perform) any of Corning's obligations
under this Agreement; and (ii) any physical damage caused by a Corning Entity to
a Mixed Facility. This paragraph 8.01(a) shall in no way limit any rights to
indemnification that CCPC or any of its Affiliates may have under the
Recapitalization Agreement.
(b) Neither CCPC, its Affiliates nor any of their respective
officers, directors, employees or agents (other than third parties providing
Shared Services in accordance with Section 2.04 hereof) (each, a "CCPC Entity")
shall be liable to Corning or its Affiliates for, and Corning and its Affiliates
release and discharge each CCPC Entity from any Losses that may be incurred by
or asserted or awarded against Corning arising out of or in connection with any
act or omission, by any CCPC Entity in connection with the performance of (or
the failure to perform) any of CCPC's obligations under this Agreement, other
than: (i) any Losses that are caused by or arise from the negligence,
recklessness or wilful misconduct of a CCPC Entity in connection with the
performance of (or the failure to perform) any of CCPC's obligations under this
Agreement; or (ii) any physical damage caused by a CCPC Entity to a Mixed
Facility.
SECTION 8.02. Dispute Resolution. (a) In the event that any claim or
controversy shall arise as to whether either Party hereto shall have fulfilled
its respective obligations under this Agreement, the Parties agree that within
five (5) days after notification thereof authorized representatives of the
Parties shall meet to resolve such claim or controversy. If, within ten (10)
days after the authorized representatives first began such meetings the Parties
have not agreed to a resolution, a CCPC representative and a Corning
representative (other than, in the case of each Party, the aforementioned
authorized representative) shall meet within five (5) days to resolve such claim
or controversy. If, within ten (10) days after the designated representatives
first began such meetings, the Parties have
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19
not reached agreement, the issue shall be determined in the manner set forth in
Section 8.02(b) hereof.
(b) If, within five (5) Business Days after the date referred to in
the last sentence of Section 8.02(a) hereof the issue in question remains
unresolved, each Party shall select a third party to act as such Party's
arbitration representative, and the two arbitration representatives so
designated shall have five (5) Business Days in which to agree upon and to
select an independent third party (the "Arbitrator") with knowledge of and
expertise in the matter being submitted for arbitration. If at the end of such
five (5) Business Days (unless such period is extended by agreement of the
arbitration representatives) the Arbitrator has not been agreed upon and
selected, the arbitration representatives shall petition the most senior
available judge on active service of the United States District Court for the
Western District of New York to select the Arbitrator. The Arbitrator will have
the sole authority to determine the issue in accordance with the terms of this
Section 8.02. On the next Business Day following the selection of the
Arbitrator, each party shall submit in writing to the Arbitrator and to the
other party its evidence as to the matter in question. The Arbitrator shall have
fifteen (15) days in which to evaluate the two proposals and to determine the
matter in question. The Arbitrator shall be entitled to make any determination
or award any relief or remedy. The decision of the Arbitrator shall be binding
on the parties. The costs of the Arbitrator and, if any, the costs of the
proceedings described in this Section 8.02 shall be borne by the parties
equally. Each party shall bear all costs associated with its arbitration
representative and its legal and other expenses, if any.
SECTION 8.03. Liability Generally. Neither Party shall be
responsible for special or consequential damages (including lost profits) of the
other Party unless its failure to minimize damages shall amount to gross
negligence. Each Party shall use all reasonable efforts to minimize its damages
caused by the other Party.
SECTION 8.04. Indemnification. (a) Subject to the limitations set
forth in clause (c) below, Corning hereby agrees to indemnify, hold harmless and
defend CCPC and CCPC's Affiliates, against and in respect of any and all Losses
(including reasonable attorneys' fees and litigation expenses) incurred by CCPC
and CCPC's Affiliates caused by or arising from (i) acts of a Corning Entity in
connection with the performance of (or failure to perform) any of Corning's
obligations under this Agreement that would constitute negligence, recklessness
or wilful misconduct of a Corning Entity and (ii) any damages (including,
without limitation, Environmental Losses) caused by a Corning Entity to a Mixed
Facility. This paragraph 8.04(a) shall in no way limit any rights to
indemnification that CCPC or any of its Affiliates may have under the
Recapitalization Agreement.
(b) Subject to the limitations set forth in clause (c) below, CCPC
hereby agrees to indemnify, hold harmless and defend Corning and Corning's
Affiliates, against and
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20
in respect of any and all Losses (including reasonable attorneys' fees and
litigation expenses) incurred by Corning and Corning's Affiliates caused by or
arising from (i) acts of a CCPC Entity in connection with the performance of (or
failure to perform) any of CCPC's obligations under this Agreement that would
constitute negligence, recklessness or wilful misconduct of a CCPC Entity and
(ii) any damages (including, without limitation, Environmental Losses) caused by
a CCPC Entity to a Mixed Facility.
(c) A party seeking indemnification pursuant to this Section 8.05
(the "Indemnified Party") shall give prompt notice to the party from whom such
indemnification is sought (the "Indemnifying Party") of the assertion of any
claim, or the commencement of any action, suit or proceedings, in respect of
which indemnity may be sought hereunder, and will give the Indemnifying Party
such information with respect thereto as the Indemnifying Party may reasonably
request, but no failure to give such notice shall relieve the Indemnifying Party
of any liability hereunder, except to the extent that the Indemnifying Party has
suffered actual prejudice thereby. The Indemnifying Party shall have the right
to undertake the defense of any such claim asserted by a third party and the
Indemnified Party shall cooperate in such defense and make available all records
and materials requested by the Indemnifying Party in connection therewith at the
Indemnifying Party's expense. The Indemnified Party shall by entitled to
participate in such defense, but shall not be entitled to indemnification with
respect to the costs and expenses of such defense if the Indemnifying Party
shall have assumed the defense of the claim with counsel reasonably satisfactory
to the Indemnified Party. The Indemnifying Party shall not be liable for any
claim settled without its consent, which consent may be withheld at the sole
discretion of the Indemnifying Party. The Indemnifying Party may settle and
claim without the consent of the Indemnified Party, but only if the settlement
involved solely monetary damages.
SECTION 8.05. Waiver of Subrogation. Each Party hereby waives any
causes of action that it might have against the other Party on account of any
loss or damage arising from activities the Party undertakes in accordance with
this Agreement that is insured against under any insurance policy (to the extent
that such loss or damage is recoverable under such insurance policy) that covers
any property that is the subject of this Agreement, and the fixtures, personal
property, improvements, business or activities thereon. Each Party agrees that
it will request its insurance carrier to endorse all applicable policies waiving
the carrier's rights of recovery under subrogation or otherwise against the
other Party.
SECTION 8.06. Scope of Article VIII. This Article VIII shall provide
the sole and exclusive remedies available to the parties for any breach or
alleged breach of, or failure to perform under, this Agreement and the Exhibits
hereto.
ARTICLE IX
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21
EASEMENTS
SECTION 9.01. Declaration. The Parties hereby declare that the
Properties shall hereafter be conveyed, hypothecated, encumbered, leased,
occupied, built upon and otherwise used, improved or transferred in whole or in
part subject to the easements and covenants set forth in this Article IX. All of
the easements and covenants set forth in this Article IX are declared to be in
furtherance of a general plan for the Properties and are established for the
purpose of enhancing and protecting the value, desirability and attractiveness
of the Properties.
SECTION 9.02. Granting of Easements. To the extent a Mixed Facility
owned by one Party (the owner of each such Mixed Facility in each instance the
"Mixed Facility Owner") is located on the Property owned by the other Party (the
owner of each such Property in each instance the "Property Owner"), and the
Mixed Facility Owner requires access thereto to use, maintain or replace such
Mixed Facility in accordance with this Agreement, or to otherwise meet its
obligations under this Agreement, the Property Owner hereby grants and conveys
unto the Mixed Facility Owner, for the benefit of the Mixed Facility Owner,
nonexclusive easements, rights and privileges over, under, upon, across and
through the Property Owner's Property, for the purpose of accessing, operating,
maintaining, repairing, replacing, inspecting, constructing, monitoring,
investigating, providing stormwater drainage or in any other way using the
Property Owner's Property for the purposes contemplated by this Agreement and
specifically as described in Exhibit E hereto, by the Mixed Facility Owner and
its tenants, employees, agents, contractors, vendors and invitees with respect
to the Mixed Facility in question (each such easement, right and privilege an
"Easement"). The general location of each Mixed Facility subject to the
easements, rights and privileges set forth in this Article IX (each an "Easement
Area") shall be as identified in Exhibits C and E hereto with respect to each
Shared Facility identified. The Easements set forth in this Section 9.02 shall
terminate on the date that this Agreement terminates with respect to the Mixed
Facility or Shared Service associated with that Easement, as set forth in
Article III hereof. In connection with its use and enjoyment of the Easements
set forth in this Section 9.02, the Mixed Facility Owner shall comply with the
following provisions:
(a) The Mixed Facility Owner shall comply with such reasonable
Property security procedures and regulations as the Property Owner shall adopt
and impose from time to time.
(b) The Property Owner shall have the right to designate from time
to time specific access roads and gates for use by outside contractors, vendors
and agents, including, without limitation, designation of separate access roads
and gates for use by union contractors or nonunion contractors, provided each
such designation or restriction is then being imposed by the Property Owner on
its own outside contractors, vendors and agents.
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(c) The Property Owner shall have the right to restrict access by
employees of the Mixed Facility Owner to designated access gate or gates. The
Property Owner shall not modify or alter any parking facilities adjacent to such
designated gates, or the staffing or security procedures with respect to such
gates in any manner that: (i) materially adversely affects the access of
employees of the Mixed Facility Owner to the Mixed Facility Owner's Property; or
(ii) discriminates between the employees of the Mixed Facility Owner and the
employees of the Property Owner in terms of ease of access to the Mixed Facility
Owner's Property or the Property Owner's Property, as the case may be.
(d) The Mixed Facility Owner shall not undertake construction or any
other action in connection with its use of the Easements that results in an
adverse impact to the financial, property or other interests of the Property
Owner, except as otherwise provided for in this Agreement.
(e) Any dispute arising under Sections 9.02(a), 9.02(b), 9.02(c) and
9.02(d) hereof shall be resolved by the arbitration provisions set forth at
Section 8.02(b) hereof.
SECTION 9.03. Exculpation. Neither the Property Owner, its
Affiliates nor any of their respective officers, directors, employees or agents
(other than third parties providing Shared Services in accordance with Section
2.04 hereof) (each a "Property Owner Entity") shall have any liability or
obligation with respect to any Losses arising out of or in connection with any
act or omission by any such party with respect to (a) any improvements,
equipment or facilities constructed, maintained or placed by the Mixed Facility
Owner on, under, over or across any of the Easement Areas granted pursuant to
this Article IX, (b) repair and maintenance of such improvements, equipment or
facilities, or (c) any release or spill of any Hazardous Material from any Mixed
Facility constructed or maintained by the Mixed Facility Owner in such Easement
Areas, unless such Losses resulted from the negligence, recklessness or wilful
misconduct of a Property Owner Entity in connection with the performance of (or
the failure to perform) any of Property Owner's obligations under this
Agreement.
SECTION 9.04. Warranty. Property Owner has granted and conveyed the
Easements set forth under Section 9.02 hereof to the Mixed Facility Owner TO
HAVE AND TO HOLD same, together with all and singular the rights and
appurtenances thereto in anywise belonged, unto the Mixed Facility Owner, and
its successors and assigns and the Property Owner does hereby bind itself and
its successors and assigns to WARRANT AND FOREVER DEFEND such Easements and
other matters unto the Mixed Facility Owner and its successors and assigns
against every person whomsoever lawfully claiming, or to claim the same, on any
part thereof, during the existence of such Easement.
<PAGE>
23
SECTION 9.05. Environmental Laws. In connection with its use and
enjoyment of the Easements granted hereunder, each Mixed Facility Owner shall
comply with the following provisions:
(a) Except as set forth in Section 9.05(c) hereof, each Mixed
Facility Owner shall comply, at its sole cost and expense, with all applicable
Environmental Laws relating to the activities conducted by such Mixed Facility
Owner at, on or under the applicable Easement Area and shall obtain any and all
necessary Environmental Permits for all activities so conducted. The costs of
complying with Environmental Laws pursuant to this Section 9.05(a), shall be
deemed Maintenance Costs (as defined in Exhibit E attached hereto), and shall be
allocated pursuant to Section 5.01(c) hereof.
(b) The Mixed Facility Owner shall engage in its activities in the
Easement Area in all respects in compliance with Environmental Law and shall
cooperate with the Property Owner, when appropriate, to ensure compliance with
same, including compliance with any requirement to adopt and amend from time to
time comprehensive plans with respect to: (i) emergency response (including,
without limitation, with respect to releases or threatened releases of Hazardous
Materials); (ii) emergency evacuation; and (iii) other matters relating to
safety and environmental issues for which a comprehensive approach or plan
applicable to the Mixed Facilities in question is required by applicable laws or
is agreed upon by the parties.
(c) Subject to Section 9.05 of the Recapitalization Agreement, the
Property Owner shall not be responsible for any Losses arising with respect to
any violation of Environmental Law relating to the Easement Area or any presence
or release of Hazardous Materials, relating to the Easement Area, arising out of
or in connection with any act or omission, negligent or otherwise, by the Mixed
Facility Owner, except to the extent such violation, presence or release results
from any negligent actions or omission of the Property Owner.
SECTION 9.06. Relocation of Easements. (a) Subject to the terms and
conditions of this Article IX, the Property Owner, at its sole cost and expense,
shall have the right to relocate any of the Easements granted pursuant to
Section 9.02 hereof.
(b) Any relocation of Easements by the Property Owner pursuant to
Section 9.06(a) hereof shall be subject to the following terms and conditions:
(i) The Property Owner shall not relocate any Easement without
the prior written consent of the Mixed Facility Owner if such relocation would
materially adversely affect the operation, Property or business of the Mixed
Facility Owner.
<PAGE>
24
(ii) Anything to the contrary provided in this Section 9.06
notwithstanding, the Property Owner shall have the right, without the prior
consent of the Mixed Facility Owner, to relocate any Easement with respect to
the Property Owner Property, if such relocation is required: (A) by applicable
Laws; or (B) by the terms of any Permitted Encumbrance (as defined in the
Recapitalization Agreement) in effect as of the date hereof.
(iii) Upon written request by the Property Owner to relocate
any Easement in accordance with this Section 9.06, each of the Property Owner
and the Mixed Facility Owner shall promptly execute, acknowledge and deliver an
amendment to this Agreement effecting such relocation.
(iv) Any dispute arising with respect to the relocation of any
Easement pursuant to this Section 9.06 shall be resolved by the arbitration
provisions set forth in Section 8.02 hereof.
SECTION 9.07. Miscellaneous. (a) Mixed Facility Owner shall engage
in all activities in the Easement Area in a manner pursuant to Section 2.02
hereof.
(b) Mixed Facility Owner shall keep the Easement Area free from
liens arising in any manner out of the activities of Mixed Facility Owner and
shall promptly discharge any such liens.
(c) Each Party shall exercise its rights and privileges in
connection with the Easements granted hereunder and shall conduct all activities
in such Easement Areas in substantial compliance with all applicable laws.
(d) Each of the Easements established by this Declaration shall
constitute a servitude on the property of the Property Owner, shall be an
appurtenance to the property of the Mixed Facility Owner, shall survive the
total or partial destruction of the subject matter of the Easement and/or the
servient tenement of such grant, and shall run with the land.
(e) It is intended that each and all of the covenants and agreements
in this Article IX, to be performed by or on the part of the Property Owner or
the Mixed Facility Owner, or on or in any portion of the Properties, and whether
affirmative or negative in nature, shall be construed as covenants and not as
conditions. To the fullest extent legally possible all such covenants shall run
with the land to the end that the covenants of each of the Property Owner and
the Mixed Facility Owner shall be appurtenant to each other's parcel and shall
constitute covenants running with the land as between such owner's parcel as the
dominant tenement and the other owner's parcel as the servient tenement. In
furtherance thereof, upon the sale or conveyance of all or any portion of the
Property Owner's Property,
<PAGE>
25
the Property Owner shall cause the purchaser or transferee to expressly assume
the obligations of the Property Owner hereunder to locate the Easements granted
hereby.
(f) In the event that all or a portion of the Property Owner
Property shall be the subject of a Taking (as hereinafter defined), the award
with respect to such parcel (whether awarded as compensation for the portion of
such parcel taken or as severance damages with respect to the remainder of such
parcel and whether made with respect to the Easement over and across such parcel
created pursuant to this Article IX) shall belong solely to the owner of such
parcel. Unless it is otherwise expressly agreed between the Parties, the Mixed
Facility Owner shall not be entitled to any award made with respect to the
portion of the parcel so taken if the effect thereof would be to diminish the
amount of the award made to the Property Owner. The foregoing shall not,
however, prevent the Mixed Facility Owner from asserting a collateral claim for
damages concerning the Mixed Facility Owner Property (even though no portion
thereof is taken) by reason of the Taking of the whole or any portion of the
other parcel, to the extent that such damages suffered may be awarded or paid by
the taking authority in recognition of reduced access, loss of business or
similar consequences. For the purposes of this Section, the term "Taking" shall
mean an acquisition of a parcel or portion thereof for public or quasi-public
use by condemnation or power of eminent domain or by voluntary conveyance under
threat or in anticipation thereof.
(g) Nothing contained herein shall ever constitute or be construed
as a dedication of any interest described herein to the public, and there shall
be no merger of the Easement created hereby with the fee or leasehold estate
therein by reason of the fact that the fee or leasehold title to the Easement
Areas may be held, directly or indirectly, by or for the benefit of any Person
which shall be have any interest in such Easements.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Amendment. This Agreement may not be amended or
modified except by an instrument in writing signed by Corning and CCPC.
SECTION 10.02. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in person, by courier service, by cable, by telecopy, by telegram, by telex or
by registered or certified mail (postage prepaid, return receipt requested) to
the respective parties at the following addresses (or at such other
address for a party as shall be specified in a notice given in accordance with
this Section 10.02:
<PAGE>
26
(a) if to the Seller:
Corning Incorporated
One Riverfront Plaza
Corning, NY 14831
Telecopy: (607) 974-8656
Attention: General Counsel
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Telecopy: (212) 848-7179
Attention: Clare O'Brien, Esq.
(b) if to the Company prior to the Closing:
Corning Consumer Products Company
E-Building
Houghton Park
Corning, NY 14831
Telecopy: (607) 974-2215
Attention: President
with copy to:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Telecopy: (212) 848-7179
Attention: Clare O'Brien, Esq.
(c) if to Purchaser:
c/o Borden Capital Management Partners
180 East Broad Street
Columbus, OH 43215
Telecopy: (614) 627-8374
Attention: General Counsel
<PAGE>
27
with a copy to:
Simpson, Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Telecopy: (212) 455-2507
Attention: David Sorkin, Esq.
SECTION 10.03. Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 10.04. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
SECTION 10.05. Entire Agreement. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and undertakings, both written and oral,
between Corning and CCPC with respect to the subject matter hereof.
SECTION 10.06. Assignment. This Agreement shall not be assigned
without the express written consent of Corning and CCPC (which consent may be
granted or withheld in the sole discretion of Corning or CCPC), except that no
consent shall be required for CCPC to assign its rights and delegate its duties
hereunder, in whole or in part, to one or more of its subsidiaries or pledge and
assign all of its rights hereunder to the financial institutions providing the
Financing (or refinancings thereof).
SECTION 10.07. Governing Law. This Agreement shall be governed by
the laws of the State of New York. All actions and proceedings arising out of or
relating to this Agreement shall be heard and determined in any New York state
or federal court sitting in the City of New York or the Western District of New
York, Steuben County, and the parties hereto hereby consent to the jurisdiction
of such courts in any such action or proceeding.
<PAGE>
28
SECTION 10.08. Counterparts. This Agreement may be executed in one
or more counterparts, and by the Parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 10.09. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof.
SECTION 10.10. Waiver of Jury Trial. Each of Corning and CCPC hereby
irrevocably waives all right to trial by jury in any action, proceeding or
counterclaim (whether based on contract, tort or otherwise) arising out of or
relating to this Agreement or the actions of Corning and CCPC in the
negotiation, administration, performance and enforcement thereof.
SECTION 10.11. Relationship of Parties. In all matters relating to
this Agreement, both Parties will be acting solely as independent contractors
and will be solely responsible for the acts of their employees, officers,
directors and agents including any third parties providing Shared Services on a
Party's behalf. Employees, agents or contractors of a Party shall not be
considered employees, agents or contractors of the other Party. Neither Party
shall have the right, power or authority to create any obligation, express or
implied, on behalf of the other Party.
SECTION 10.12. Survival. Without prejudice to the survival of the
other agreements of the Parties hereunder, the agreements of the Parties
pursuant to Articles V and VIII hereof shall survive the termination of this
Agreement.
SECTION 10.13. Ownership of Property. Unless otherwise indicated on
Exhibit E hereto, on the date hereof the ownership of personal property relating
to the operations of Corning and CCPC are as indicated on Exhibit F hereto.
SECTION 10.14. Estoppel Certificate. Each Party agrees to furnish to
the other Party within ten (10) days of the request therefor, at the request of
the other Party, an executed certificate signed by such Party containing a list
of the Shared Services under this Agreement, provided by such Party, that are
then in effect and confirming the accuracy of such list.
<PAGE>
29
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
date first above written.
CORNING INCORPORATED
By_______________________________________
Name:
Title:
CORNING CONSUMER PRODUCTS
COMPANY
By_______________________________________
Name:
Title:
<PAGE>
ACKNOWLEDGEMENTS
State of New York )
) ss.:
County of _____________ )
On the _____ day of ___________ in the year 1998 before me, the
undersigned, a Notary Public in and for said State, personally appeared
______________________, personally known to me or proved to me on the basis of
satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed
to the within instrument and acknowledged to me that he/she/they executed the
same in his/her/their capacity(ies), and that by his/her/their signature(s) on
the instrument, the individual(s), or the person upon behalf of which the
individual(s) acted, executed the instrument.
___________________________________[Seal]
Signature of Notary Public
State of New York )
) ss.:
County of _____________ )
On the _____ day of ___________ in the year 1998 before me, the
undersigned, a Notary Public in and for said State, personally appeared
______________________, personally known to me or proved to me on the basis of
satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed
to the within instrument and acknowledged to me that he/she/they executed the
same in his/her/their capacity(ies), and that by his/her/their signature(s) on
the instrument, the individual(s), or the person upon behalf of which the
individual(s) acted, executed the instrument.
___________________________________[Seal]
Signature of Notary Public
<PAGE>
Exhibit 5.11
Form of Greenville Supply Agreement
<PAGE>
GREENVILLE SUPPLY AGREEMENT
SUPPLY AGREEMENT, dated April 1, 1998 (this "Agreement"), between
CORNING INCORPORATED, a New York corporation (the "Seller"), and CORNING
CONSUMER PRODUCTS COMPANY, a Delaware corporation ("CCPC").
WHEREAS, the Seller, CCPC and CCPC Acquisition Corp. (the
"Purchaser") are parties to the Recapitalization Agreement, dated March 2, 1998
(the "Recapitalization Agreement"; capitalized terms used but not otherwise
defined herein have the meanings ascribed to such terms in the Recapitalization
Agreement), providing for the acquisition by the Purchaser of approximately 92%
of the issued and outstanding shares of common stock, no par value, of CCPC; and
WHEREAS, pursuant to the Recapitalization Agreement, the Seller and
CCPC agreed to enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth and other good and valuable
consideration, CCPC and the Seller hereby agree as follows:
1. Definitions.
"Full Line" means the total number of Products that can be
manufactured on one manufacturing line of the Greenville Plant currently devoted
to the manufacturing of Products during normal working hours and based on the
customary product mix.
"Greenville Plant" means the Seller's manufacturing facilities
located in Greenville, Ohio.
"Products" means clear borosilicate glass consumer houseware
products manufactured at the Greenville Plant for sale to CCPC.
2. Term and Termination.
(a) The term (the "Term") of this Agreement shall be three years.
(b) CCPC shall have the right to terminate this Agreement at any
time upon delivery to the Seller of a written notice at least 12 months prior to
the intended termination date. The Seller shall have the right to terminate this
Agreement, upon delivery to CCPC of a written notice at least 12 months prior to
the intended termination date, if the volume of
<PAGE>
2
CCPC's average purchases over any calendar year is less than the Minimum Order
Level specified below.
(c) Obligations contained in Sections 4, 7, 8, 11 and 22 below shall
survive the termination or expiration of this Agreement.
3. Quantities.
CCPC shall have the right to order, and the Seller shall be
obligated to deliver to CCPC, not more than three Full Lines of Products and not
less than one Full Line of Products (the "Minimum Order Level") in each calendar
year of the Term.
4. Purchase Price; Payment Terms.
(a) The purchase price for each of the Products (the "Purchase
Price") shall be the average per unit standard cost determined based on the
fully absorbed cost of production, including plant overhead cost adjusted pro
rata for CCPC's share of standard plant capacity (the "Cost"). The Cost shall be
determined in the same manner as it was determined during the 12 months
immediately preceding the date hereof. The Purchase Price will be determined at
the beginning of each contract year based on CCPC's forecasted purchases and the
Seller's forecasted Cost for such contract year and shall be adjusted upwards or
downwards on a quarterly basis based on CCPC's actual purchase volume and the
Seller's actual Cost. The Purchase Price shall be determined F.O.B. Greenville
Plant.
(b) The Seller shall invoice CCPC on a monthly basis, and payment
shall be made in U.S. Dollars within 30 days after the date of the Seller's
invoice. The Seller reserves the right to suspend further deliveries of Products
upon failure of CCPC to make any payment pursuant to this Agreement.
(c) Seller shall charge or credit CCPC for variances from standard
cost resulting from upward or downward changes in CCPC's actual purchase order
volumes. Seller will determine variances from standard cost in the same manner
as variances were determined during the 12 months prior to the date hereof. Such
changes or credits (which shall be set forth in a statement prepared on a
reasonably detailed basis and delivered to CCPC) will be netted and charged or
credited to CCPC on a quarterly basis.
5. Forecasts.
CCPC shall submit on a quarterly basis a 12-month rolling forecast
of the volume of purchases of Products. Firm purchase orders shall be issued
three months in advance of the intended date of delivery and shall identify the
Product ordered, the quantity of
<PAGE>
3
such Product, the shipping instructions and the date on which delivery is
required. CCPC shall use reasonable good faith efforts to schedule orders so as
to provide for a level manufacturing load for Seller.
6. Specifications/Quality.
Products delivered pursuant to this Agreement shall meet Product and
quality specifications existing as of the date hereof. CCPC shall have the right
to request a change in such Product or quality specifications, and the Seller
shall use commercially reasonable efforts to accommodate any such requests;
provided, however, that CCPC shall be responsible for all costs and expenses
incurred by the Seller in connection with any such change in specifications. In
the event that such change in specifications has been approved by the Seller,
CCPC shall continue to be obligated to purchase the inventory of Products
manufactured by the Seller based on CCPC's orders prior to the effective time of
any such change in the specifications. In the event the Seller is unable to
accommodate any such request for a change in specifications, the parties hereto
shall continue to perform their respective obligations pursuant to this
Agreement until this Agreement is terminated in accordance with Section 2
hereof.
7. Warranties and Remedies.
(a) The Seller hereby warrants that each of the Products delivered
to CCPC hereunder will meet the specifications for such Product. In the event
that the Seller delivers any Product not in conformance with the Seller's
warranty contained herein, then CCPC shall have the right to return such Product
to the Seller, and the Seller shall replace such Product with a conforming
Product and pay for the freight costs of returning such Products and shipping
conforming Products. Except with respect to Losses subject to indemnification
under Section 8, such replacement shall be the exclusive remedy available to
CCPC for a breach of any warranties hereunder.
(b) EXCEPT FOR THE EXPRESS WARRANTY SET FORTH IN SECTION 7(a), THE
SELLER DOES NOT MAKE AND DISCLAIMS ALL WARRANTIES WITH RESPECT TO PRODUCTS,
WHETHER EXPRESS, IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, ANY
IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
(c) Except with respect to Losses subject to indemnification under
Section 8 (to the extent that such damages are suffered by a third party),
neither party shall be liable to the other for any indirect, consequential,
special, exemplary or incidental damages arising in connection with this
agreement, including, without limitation, damages for harm to business, lost
profits or lost savings, regardless of how caused and whether or not either
party had been advised of the possibility of such damages. These limitations of
liability shall apply regardless
<PAGE>
4
of the form of action, whether such action is in contract or based on warranty,
strict liability, statute or tort.
8. Indemnification.
(a) Subject to the limitations set forth in clause (c) below, the
Seller hereby agrees to indemnify, hold harmless and defend CCPC and CCPC's
Affiliates, against and in respect of any and all liabilities, losses, costs and
expenses (including reasonable attorneys' fees and litigation expenses)
("Losses") incurred by CCPC and CCPC's Affiliates resulting from third party
claims or demands to the extent arising out of, based upon, relating or
pertaining to (i) the sale by the Seller to CCPC of any Product that does not
conform to the warranty contained in Section 7(a), (ii) the breach by the Seller
of any agreement, warranty, representation or covenant contained in this
Agreement or (iii) acts of the Seller of the Seller's Affiliates that constitute
gross negligence or willful misconduct.
(b) Subject to the limitations set forth in clause (c) below, CCPC
hereby agrees to indemnify, hold harmless and defend the Seller and the Seller's
Affiliates, against and in respect of any and all liabilities, losses, costs and
expenses (including reasonable attorneys' fees and litigation expenses) incurred
by the Seller and the Seller's Affiliates resulting from third party claims or
demands to the extent arising out of, based upon, relating or pertaining to (i)
the sale of any Products, unless such claims are based on breach of the warranty
set forth in Section 7(a), (ii) the breach by CCPC of any agreement, warranty,
representation or covenant contained in this Agreement or (iii) acts of CCPC or
CCPC's Affiliates that constitute gross negligence or willful misconduct.
(c) A party seeking indemnification pursuant to this Section 8 (the
"Indemnified Party") shall give prompt notice to the party from which such
indemnification is sought (the "Indemnifying Party") of the assertion of any
claim, or the commencement of any action, suit or proceedings, in respect of
which indemnity may be sought hereunder, and will give the Indemnifying Party
such information with respect thereto as the Indemnifying Party may reasonably
request, but no failure to give such notice shall relieve the Indemnifying Party
of any liability hereunder, except to the extent that the Indemnifying Party has
suffered actual prejudice thereby. The Indemnifying Party shall have the right
to undertake the defense of any such claim asserted by a third party and the
Indemnified Party shall cooperate in such defense and make available all records
and materials requested by the Indemnifying Party in connection therewith at the
Indemnifying Party's expense. The Indemnified Party shall be entitled to
participate in such defense, but shall not be entitled to indemnification with
respect to the costs and expenses of such defense if the Indemnifying Party
shall have assumed the defense of the claim with counsel reasonably satisfactory
to the Indemnified Party. The Indemnifying Party shall not be liable for any
claim settled without its consent, which consent may be withheld at the sole
discretion of the Indemnifying Party. The Indemnifying Party may settle any
claim
<PAGE>
5
without the consent of the Indemnified Party, but only if the settlement
involves solely payment of monetary damages and includes an unconditional
release of the Indemnified Party.
9. Sale or Shutdown of Greenville Plant.
The Seller shall have the right to sell the Greenville Plant,
provided, however, that the purchaser thereof shall assume the Seller's
obligations hereunder. Notwithstanding anything to the contrary contained in
this Agreement, the Seller shall have the right at any time, upon giving to CCPC
12-months' written notice, to shut down the Greenville Plant and shall
thereafter have no further obligations pursuant to this Agreement.
10. Force Majeure Event.
The Seller shall not be held responsible for the failure or delay in
performance hereunder if such failure or delay is due to any act of God or the
public enemy, war, compliance with laws, governmental acts or regulations, fire,
flood, epidemic, strikes and labor interruption, accident, unusually severe
weather or other similar causes, which are beyond its reasonable control (a
"Force Majeure Event"). Upon the occurrence of a Force Majeure Event, the Seller
shall promptly give notice to CCPC of the occurrence or circumstance upon which
it intends to rely to excuse its performance. Duties and obligations of both
parties shall be suspended for the duration of the Force Majeure Event. During
the duration of a Force Majeure Event, the Seller shall use commercially
reasonable efforts to avoid or remove such Force Majeure Event and shall also
take reasonable steps to resume its performance under this Agreement with the
least possible delay.
11. Notices.
All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given or made (and shall be deemed to
have been duly given or made upon receipt) by delivery in person, by courier
service, by cable, by telecopy, by telegram, by telex or by registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 11):
<PAGE>
6
(a) if to the Seller:
Corning Incorporated
One Riverfront Plaza
Corning, NY 14831
Telecopy: (607) 974-8656
Attention: General Counsel
(b) if to CCPC:
Corning Consumer Products Company
E-Building, Houghton Park
Corning, NY 14831
Telecopy: (607) 974-2215
Attention: President
12. Nondisclosure.
Neither the Seller nor CCPC shall disclose, imply the existence of
or include in any promotional materials any reference to this Agreement or its
terms without the written consent of the other party.
13. Headings.
The descriptive headings contained in this Agreement are for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
14. Severability.
If any term or other provision of this Agreement is invalid, illegal
or incapable of being enforced by any rule of law or public policy, all other
terms and provisions of this Agreement shall nevertheless remain in full force
and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible.
<PAGE>
7
15. Entire Agreement.
This Agreement constitutes the entire agreement of the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements and undertakings, both written and oral, between the Seller and CCPC
with respect to the subject matter hereof.
16. Assignment.
This Agreement shall not be assigned by either party without the
express written consent of the other party (which consent may be granted or
withheld in the sole discretion of such other party); provided, however, that
either party may assign its rights and obligations hereunder to one or more of
its Affiliates (except that no such assignment shall relieve such party of its
obligations hereunder and such party shall remain liable for the performance of
its obligations hereunder). Notwithstanding anything contained herein to the
contrary, (i) the Seller shall have the right to assign this Agreement to a
purchaser of the Greenville Plant without CCPC's consent, provided, however,
that such purchaser assumes the Seller's obligations under this Agreement, and
(ii) CCPC may pledge and assign all of its rights hereunder to the financial
institutions providing the financing (or refinancings thereof).
17. No Third Party Beneficiaries.
This Agreement shall be binding upon and inure solely to the benefit
of the parties hereto and their permitted assigns, and nothing herein, express
or implied, is intended to or shall confer upon any other Person any legal or
equitable right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
18. Amendment; Waiver.
(a) This Agreement may not be amended or modified except by an
instrument in writing signed by the Seller and CCPC.
(b) No failure or delay on the part of a party hereto in exercising
any right, power or remedy hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy hereunder. The remedies provided for herein are cumulative and are not
exclusive of any remedies provided by law or available at equity.
19. Governing Law.
This Agreement shall be governed by the laws of the State of New
York.
<PAGE>
8
20. Counterparts.
This Agreement may be executed in one or more counterparts, and by
the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
21. Independent Contractors.
No agency, partnership or joint venture is established by this
Agreement. Neither party shall enter into, incur liabilities or hold itself out
to third parties as having the authority to enter into and incur any contractual
obligations, expenses or liabilities on behalf of the other party.
22. Confidentiality.
Each of the Seller and CCPC hereby agrees that it will not, and will
cause each of its Affiliates not to, at any time reveal to any Person or use in
any way detrimental to the other Person any non-public, confidential or
proprietary information relating to the other or the business or affairs of such
other Person that is acquired or otherwise received by such Person in connection
with the performance of its obligations under this Agreement, other than such
information that (a) is generally available to the public (other than as a
result of a disclosure by such Person), (b) is available to such Person on a
nonconfidential basis from a source that is not prohibited from disclosing such
information to such Person or (c) after notice and an opportunity to contest,
such Person is required to disclose under any applicable law or under subpoena
or other process of laws.
<PAGE>
9
IN WITNESS WHEREOF, the Seller and CCPC have caused this Agreement
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
CORNING INCORPORATED
By:
-----------------------------
Name:
Title:
CORNING CONSUMER PRODUCTS
COMPANY
By:
-----------------------------
Name:
Title:
<PAGE>
Exhibit 5.12
Form of Technology Support Agreement
<PAGE>
- --------------------------------------------------------------------------------
------------------------------------------------
TECHNOLOGY SUPPORT AGREEMENT
------------------------------------------------
Between
CORNING INCORPORATED
and
CORNING CONSUMER PRODUCTS COMPANY
Dated as of April 1, 1998
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I SERVICES
SECTION 1.01. Provision of Services...........................................1
SECTION 1.02. Covered Services................................................1
SECTION 1.03. Term and Termination............................................1
SECTION 1.04. Service Periods.................................................2
SECTION 1.05. Payment and Billing.............................................2
SECTION 1.06. Performance of Services; Limitation of Liability; Indemnity.....3
SECTION 1.07. Additional Services.............................................4
SECTION 1.08. Limitations on Corning's Obligations............................5
SECTION 1.09. Limitations on Company's Obligations............................5
SECTION 1.10. Sales and Use Taxes.............................................5
ARTICLE II CONFIDENTIALITY AND INVENTIONS
SECTION 2.01. Confidentiality.................................................5
SECTION 2.02. Inventions......................................................6
ARTICLE III RESPONSIBILITY
SECTION 3.01. Responsibility..................................................6
ARTICLE IV MAINTENANCE OF BOOKS AND RECORDS
SECTION 4.01. Maintenance of Books and Records................................6
ARTICLE V CONTROVERSIES
SECTION 5.01. Controversies...................................................7
<PAGE>
ARTICLE VI FORCE MAJEURE EVENT
SECTION 6.01. Force Majeure Event.............................................7
SECTION 6.02. Effect of a Force Majeure Event.................................7
SECTION 6.03. Length of a Force Majeure Event.................................7
ARTICLE VII GENERAL PROVISIONS
SECTION 7.01. Notices.........................................................8
SECTION 7.02. Headings........................................................8
SECTION 7.03. Severability....................................................8
SECTION 7.04. Entire Agreement................................................9
SECTION 7.05. Assignment......................................................9
SECTION 7.06. No Third-Party Beneficiaries....................................9
SECTION 7.07. Amendment; Waiver...............................................9
SECTION 7.08. Governing Law...................................................9
SECTION 7.09. Counterparts....................................................9
SECTION 7.10. Independent Contractors.........................................9
SECTION 7.11. No Guarantee of Results........................................10
<PAGE>
Attachment A Services and Charges
<PAGE>
Technology Support Agreement
TECHNOLOGY SUPPORT AGREEMENT, dated as of April 1, 1998, by and
between CORNING INCORPORATED, a corporation organized under the laws of New York
("Corning"), and CORNING CONSUMER PRODUCTS COMPANY, a corporation organized
under the laws of Delaware ("Company").
WHEREAS, Corning is engaged in a variety of businesses and employs
personnel to support such businesses in the areas of manufacturing technology
and engineering services, and research and development services; and
WHEREAS, Corning, Company and CCPC Acquisition Corp., a company
organized under the laws of Delaware ("Purchaser"), have entered into a
Recapitalization Agreement, dated March 2, 1998 (the "Recapitalization
Agreement"; terms defined therein being used herein as defined therein),
providing for the acquisition by Purchaser of approximately 92% of the issued
and outstanding shares of common stock, no par value, of Company; and
WHEREAS, pursuant to the Recapitalization Agreement, Corning has
agreed to make available to Company certain technology support services.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, it
is hereby agreed as follows:
ARTICLE I
SERVICES
SECTION 1.01. Provision of Services. Corning agrees to make
available certain services to Company in connection with the operation of
Company on the terms and conditions contained herein. Such services are
described herein and in Attachment A hereto, which sets forth: (a) a description
of the services to be rendered by Corning to Company; and (b) the costs or
charges for providing such services.
SECTION 1.02. Covered Services. Corning shall be obligated to make
available the services described in Attachment A and any services subsequently
made a part of this Agreement in accordance with Section 1.07. Services to be
provided by Corning to Company pursuant to this Agreement are hereinafter
referred to as the "Services".
SECTION 1.03. Term and Termination. (a) Term. Unless earlier
terminated in accordance with paragraph (b) or (c) of this Section 1.03, or
unless otherwise agreed to in
<PAGE>
2
writing by the parties hereto, the term of this Agreement ("Term") shall be five
(5) years from the date hereof, renewable at the option of Company, subject to
Section 1.08, for an additional five-year period.
(b) Termination for Breach. If Company shall fail to perform or
shall default in the performance of any material provision of this Agreement,
and if such failure or default shall continue for thirty (30) Business Days
after receipt by Company of written notice of such failure or default, and such
failure or default is not cured within such 30-day period, then Corning may
terminate this Agreement with immediate effect.
(c) Termination for Other Events. Upon the occurrence of any of the
following events, Corning shall have the right, by sending written notice to
Company, to terminate this Agreement with immediate effect:
(i) the liquidation (except for the purposes of an amalgamation or
reconstruction) or insolvency of Company, or the appointment (subject to
the provisions of clause (ii) of this paragraph (c)) of an administrator,
receiver, administrative receiver, trustee or other custodian acting to
protect the interests of any creditor or class of creditors over all or a
substantial part of the assets of Company; or
(ii) the adjudication of Company as bankrupt and the appointment of
a trustee in bankruptcy who does not expressly affirm this Agreement in
its entirety within thirty (30) Business Days after its appointment.
(d) Survival. The obligations of the parties under Section 1.06
shall survive the expiration or termination of this Agreement.
SECTION 1.04. Service Periods. The period during which Corning shall
provide each of the Services described in Attachment A shall commence on the
date hereof and continue until the end of the Term. The period during which
Corning shall provide any Services subsequently made a part of this Agreement in
accordance with Section 1.07 below shall be as agreed upon by the parties.
Notwithstanding anything herein to the contrary, except as otherwise provided in
Attachment A, Company may discontinue any Service (and its obligations to
continue paying for the same) on ninety (90) days' advance written notice
provided in accordance with Section 6.01. Upon such discontinuance of any
Service, Company may renew such service for the remainder of the Term only with
the express written consent of Corning.
SECTION 1.05. Payment and Billing. (a) In full compensation for the
Services, Company shall pay Corning for the Services at the same rates charged
by Corning for similar services performed by it for its own businesses or wholly
owned subsidiaries (the
<PAGE>
3
"Standard Internal Rates") except as otherwise provided in Attachment A. Except
as otherwise agreed upon by Corning and Company, such Standard Internal Rates
will not increase by more than 5% from year to year. The Standard Internal Rates
shall not include travel, parts, materials and expense charges, which shall be
billed at cost (and may increase accordingly). To the extent that program or
system changes or other changes to the Services are requested by Company, the
applicable charges, to the extent Standard Internal Rates are not applicable,
will be as agreed by the parties. Payments will be made quarterly within thirty
(30) days after Company's receipt of Corning's statement therefor together with
applicable supporting documentation, unless payment is required more often
pursuant to this Agreement or Attachment A.
(b) All payments will be made in U.S. dollars. Each statement shall
set forth in reasonable detail the calculation of the charges and costs upon
which the amount to be reimbursed is based, broken down by the Services rendered
during the month to which such statement relates. If Company has any objection
to the amount of any statement, it shall nevertheless pay such amount in full,
but may thereafter cause Corning's records with respect thereto to be inspected
in accordance with Article III hereof, and thereafter Company will be entitled
to a prompt refund of any amounts paid in excess of the amounts required
hereunder and Corning shall promptly pay any deficiency amounts found to be due
as a result of such inspection. Following such inspection, the parties shall
endeavor in good faith to resolve any disagreement with respect to charges and
costs hereunder, but any disagreement that cannot be so resolved shall be
submitted to binding arbitration in accordance with Article IV.
SECTION 1.06. Performance of Services; Limitation of Liability;
Indemnity. (a) The Services shall be performed in a reasonably prompt and
professional manner by Corning's internal staff group that generally performs
comparable services for Corning's businesses in the United States; provided,
however, that if Corning is not able to provide requested Services or if such
Services can be provided in a satisfactory manner by a third party contractor or
Corning's retiree, Corning may provide such Services through such third party
contractors or Corning's retiree at such rate as the third party charges for
such services. Each of Corning and Company hereby agrees and acknowledges that,
subject to paragraph (b) of this Section 1.06, Company's sole and exclusive
remedy and Corning's sole and exclusive liability for any defect or error in the
Services will be re-performance of such Services. CORNING MAKES NO WARRANTY AND
HEREBY EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES, INCLUDING WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
(b) Notwithstanding the provisions of paragraph (a) of this Section
1.06, (i) subject to Section 1.08 below, in the event Corning fails to perform
its obligations hereunder (other than such failure as is excused by Article V),
it will be liable for any out-of-pocket costs (including those resulting from
hiring employees on a temporary basis) actually
<PAGE>
4
incurred by Company, in excess of amounts that would have been paid to Corning
under this Agreement if Corning had performed its obligations hereunder, in
arranging for the performance of Services not performed by Corning as a result
of the breach of Corning's obligations hereunder and (ii) Corning will be liable
to Company for, and will indemnify, hold harmless and defend Company against,
any and all liabilities, losses, costs and expenses (including reasonable
attorneys' fees and litigation expenses) (collectively, "Damages") incurred by
Company or its Affiliates as a result of the bad faith or gross negligence of
Corning.
(c) Subject to the limitations set forth in paragraph (d) of this
Section 1.06, Company agrees to indemnify, hold harmless and defend Corning
against all liabilities, losses, costs and expenses (including reasonable
attorneys' fees and litigation expenses) incurred by Corning or its Affiliates
as a result of the performance by Corning of Services under this Agreement,
other than those costs and Damages for which Corning is liable pursuant to
Section 1.06(b).
(d) A party seeking indemnification pursuant to this Section 1.06
(the "Indemnified Party") shall give prompt notice to the party from whom such
indemnification is sought (the "Indemnifying Party") of the assertion of any
claim, or the commencement of any action, suit or proceeding, in respect of
which indemnity may be sought hereunder, and will give the Indemnifying Party
such information with respect thereto as the Indemnifying Party may reasonably
request, but no failure to give such notice shall relieve the Indemnifying Party
of any liability hereunder, except to the extent that the Indemnifying Party has
suffered actual prejudice thereby. The Indemnifying Party shall have the right
to undertake the defense of any such claim asserted by a third party, and the
Indemnified Party shall cooperate in such defense and make available all records
and materials reasonably requested by the Indemnifying Party in connection
therewith at the Indemnifying Party's expense. The Indemnified Party shall be
entitled to participate in such defense, but shall not be entitled to
indemnification with respect to the costs and expenses of such defense if the
Indemnifying Party shall have assumed the defense of the claim with counsel
reasonably satisfactory to the Indemnified Party. The Indemnifying Party shall
not be liable for any claim settled without its consent, which consent may not
be unreasonably withheld. The Indemnifying Party may settle any claim without
the consent of the Indemnified Party, but only if the settlement involves solely
the payment of monetary damages.
SECTION 1.07. Additional Services. Additional reasonable requests
for services not previously described in Attachment A shall be negotiated by
Corning and Company at rates equal to Corning's Standard Internal Rates. Any
Services to be so provided shall be agreed upon in writing by Corning and
Company.
<PAGE>
5
SECTION 1.08. Limitations on Corning's Obligations. (a) Subject to
subparagraph (c) below, Corning will not be obligated to (i) hire additional or
different personnel, replace retiring or otherwise disassociated personnel or
acquire additional resources in order to provide any Services to Company
pursuant to this Agreement, (ii) take any actions other than in the ordinary
course of its business to retain personnel currently employed by it in order to
provide any Services to Company pursuant to this Agreement, or (iii) provide any
services to Company beyond the initial five (5) year period where such services
are provided solely for the benefit of Company and are not used by Corning in
the ordinary course of business.
(b) The obligation of Corning to provide Services is conditioned
upon and subject to any contractual and legal obligations, prohibitions and
restrictions applicable to Corning regarding such Services, and this Agreement
will not obligate Corning to violate, modify or eliminate any such obligation,
prohibition or restriction. Corning hereby agrees not to enter voluntarily into
any arrangement containing any such obligations, prohibitions or restrictions
during the term of this Agreement.
(c) To the extent Company is using Services provided for herein,
Corning will use commercially reasonable efforts (but shall not otherwise be
obligated) to retain personnel necessary to perform such Services.
SECTION 1.09. Limitations on Company's Obligations. Nothing
contained in this Agreement shall obligate Company to purchase any particular
Service from Corning nor, subject to Company's obligations of confidentiality,
shall Company be prohibited by this Agreement from obtaining such Services from
third parties.
SECTION 1.10. Sales and Use Taxes. Company shall pay to Corning for
each of the Services that is the subject of any sales or use tax imposed by any
governmental authority, thirty (30) days after demand therefor, an amount equal
to Company's pro rata share with respect to the Services of the aggregate amount
of such sales and use taxes. Notwithstanding the foregoing, Company shall use
reasonable efforts to provide exemption certificates when available and to
calculate any applicable sales and use taxes and to make payment thereof
directly to the appropriate taxing authority.
ARTICLE II
CONFIDENTIALITY AND INVENTIONS
SECTION 2.01. Confidentiality. All confidential information that is
disclosed by a party under the provisions of this Agreement, whether contained
in blueprints, drawings, written reports, letters or memoranda, or notes made by
employees, or acquired by employees
<PAGE>
6
from observation or any other activities of a party related directly or solely
to this Agreement, shall be held in confidence and accorded the same protection
and confidential treatment used by the party receiving such information (the
"Receiving Party") with respect to its own confidential information and trade
secrets, and shall not be used by the Receiving Party for any purpose other than
in accordance with the terms of this Agreement.
Upon expiration or termination of this Agreement, the
confidentiality obligations in this Agreement shall continue for three (3)
years.
SECTION 2.02. Inventions. Unless otherwise agreed by the Parties in
writing, Corning will own any invention made solely by an employee of Corning
while involved in, or as a result of, Services provided to Company under this
Agreement, and such invention shall be deemed licensed to Company pursuant to
the Patent and Know-How License Agreement dated as of the same date as this
Agreement between Corning and Company. If an invention is made jointly by
employees of Company and Corning pursuant to the Services provided under this
Agreement, both Company and Corning shall jointly own the invention; and, unless
otherwise agreed in writing, the party which requested that the patent
application be filed shall pay any application and maintenance expenses. Unless
otherwise agreed by the parties, Company shall own any invention made solely by
an employee of Company.
ARTICLE III
RESPONSIBILITY
SECTION 3.01. Responsibility. Nothing in this Agreement shall be
construed as: (a) an assumption by Corning of any obligation to increase the
sales or profits of Company or otherwise to assume responsibility for the
operations of Company; (b) an assumption by Corning of any financial obligation
of Company; (c) the creation of any relationship of employment between Company
and employees or consultants of Corning, its subsidiaries or Affiliates; (d) an
assumption by Corning of any responsibility for the work performed by outside
suppliers employed directly by Company or any of its Affiliates at the
suggestion or recommendation of Corning; or (e) the delegation of any function
or authority of Company.
ARTICLE IV
MAINTENANCE OF BOOKS AND RECORDS
SECTION 4.01. Maintenance of Books and Records. Corning shall
maintain true and complete books of account containing an accurate record of all
data necessary for the proper computation of all charges to be paid and costs to
be reimbursed by Company under the terms of this Agreement.
<PAGE>
7
ARTICLE V
CONTROVERSIES
SECTION 5.01. Controversies. Any conflict or disagreement arising
out of the interpretation, implementation, or compliance with the provisions of
this Agreement, or arising out of a dispute as to the proper computation of all
charges and costs to be reimbursed by Company under the terms of this Agreement,
shall be finally settled by arbitration held in New York, New York under the
Rules of Conciliation and Arbitration then obtaining of the American Arbitration
Association before a single arbitrator appointed in accordance with such Rules,
and judgment upon the award rendered may be entered by any court having
jurisdiction. The costs and expenses of the arbitration shall be paid by the
parties in inverse proportion to the allocation by the arbitrator of the amounts
disputed, or, if no amounts are in dispute, by the party against whom the
dispute is finally settled.
ARTICLE VI
FORCE MAJEURE EVENT
SECTION 6.01. Force Majeure Event. Corning shall not be held
responsible for the failure or delay in performance hereunder if such failure or
delay is due to any act of God or the public enemy, war, compliance with laws,
governmental acts or regulations, fire, flood, epidemic, strikes and labor
interruption, accident, unusually severe weather or other similar causes that
are beyond its reasonable control (a "Force Majeure Event").
SECTION 6.02. Effect of a Force Majeure Event. Upon the occurrence
of a Force Majeure Event, Corning shall promptly give notice to Company of the
occurrence or circumstance upon which it intends to rely to excuse its
performance. Duties and obligations of both parties shall be suspended for the
duration of the Force Majeure Event. In the event of, and only during the
occurrence of, a Force Majeure Event, Company may take such reasonable measures
as are necessary to meet its needs, including the provision of services from
alternative sources.
SECTION 6.03. Length of a Force Majeure Event. During the duration
of a Force Majeure Event, Corning shall use its reasonable best efforts to avoid
or remove such Force Majeure Event, and shall also take reasonable steps to
resume its performance under this Agreement with the least possible delay.
<PAGE>
8
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.01. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in person, by courier service, by cable, by telecopy, by telegram, by telex or
by registered or certified mail (postage prepaid, return receipt requested) to
the respective parties at the following addresses (or at such other address for
a party as shall be specified in a notice given in accordance with this Section
7.01):
(a) if to Corning:
Corning Incorporated
One Riverfront Plaza
Corning, NY 14831
Telecopy: (607) 974-8656
Attention: General Counsel
(b) if to Company:
Corning Consumer Products Company
E-Building, Houghton Park
Corning, NY 14831
Telecopy: (607) 974-2215
Attention: President
SECTION 7.02. Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 7.03. Severability. If any term or other provision of this
Agreement is determined to be invalid, illegal or incapable of being enforced by
any rule of law or public policy, all other terms and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the greatest extent
possible.
<PAGE>
9
SECTION 7.04. Entire Agreement. This Agreement (including the
Attachment hereto) constitutes the entire agreement of the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements and
undertakings, both written and oral, between Corning and Company with respect to
the subject matter hereof.
SECTION 7.05. Assignment. This Agreement shall not be assigned by
either party without the express written consent of the other party (which
consent may be granted or withheld in the sole discretion of such other party);
provided, however, that either party may assign its rights and obligations
hereunder to one or more of its Affiliates (except that no such assignment shall
relieve such party of its obligations hereunder and such party shall remain
liable for the performance of its obligations hereunder). Notwithstanding
anything contained herein to the contrary, the Company may pledge and assign all
of its rights hereunder to the financial institutions providing the Financing
(or refinancings thereof).
SECTION 7.06. No Third-Party Beneficiaries. This Agreement shall be
binding upon and inure solely to the benefit of the parties hereto and their
permitted assigns and nothing herein, express or implied, is intended to or
shall confer upon any other Person any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 7.07. Amendment; Waiver. (a) This Agreement may not be
amended or modified except by an instrument in writing signed by Corning and
Company.
(b) No failure or delay on the part of a party hereto in exercising
any right, power or remedy hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy hereunder. The remedies provided for herein are cumulative and are not
exclusive of any remedies provided by law or available at equity.
SECTION 7.08. Governing Law. This Agreement shall be governed by the
laws of the State of New York.
SECTION 7.09. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original, but all of which
taken together shall constitute one and the same agreement.
SECTION 7.10. Independent Contractors. No agency, partnership,
fiduciary relationship or joint venture is established by this Agreement.
Neither party shall enter into, incur liabilities, or hold itself out to third
parties as having the authority to enter into and incur any contractual
obligations, expenses or liabilities on behalf of the other party.
<PAGE>
10
SECTION 7.11. No Guarantee of Results. Neither Seller nor Company
makes any representation or promise concerning the earnings or other results to
be achieved by any party or an Affiliate of any party in connection with the
performance of this Agreement, and neither Seller nor Company shall have any
liability to the other based thereon.
<PAGE>
11
IN WITNESS WHEREOF, Company and Corning have executed this Agreement
by their respective duly authorized representatives as of the date first above
written.
CORNING INCORPORATED
By:
-----------------------------------
Name:
Title:
CORNING CONSUMER PRODUCTS
COMPANY
By:
-----------------------------------
Name:
Title:
<PAGE>
Exhibit 5.13
Form of Transition Services Agreement
<PAGE>
================================================================================
---------------------------------------------------
TRANSITION SERVICES AGREEMENT
---------------------------------------------------
Between
CORNING INCORPORATED
and
CORNING CONSUMER PRODUCTS COMPANY
Dated as of April 1, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I SERVICES
SECTION 1.01. Provision of Services...........................................1
SECTION 1.02. Covered Services................................................1
SECTION 1.03. Term and Termination............................................2
SECTION 1.04. Service Periods.................................................2
SECTION 1.05. Payments for Services...........................................3
SECTION 1.06. Performance of Services; Limitation of Liability; Indemnity.....3
SECTION 1.07. Additional Services.............................................4
SECTION 1.08. Limitations on Corning's Obligations............................5
ARTICLE II RESPONSIBILITY
SECTION 2.01. Responsibility..................................................5
ARTICLE III MAINTENANCE OF BOOKS
AND RECORDS
SECTION 3.01. Maintenance of Books and Records................................5
ARTICLE IV CONTROVERSIES
SECTION 4.01. Controversies...................................................6
ARTICLE V FORCE MAJEURE EVENT
SECTION 5.01. Force Majeure Event.............................................6
SECTION 5.02. Effect of a Force Majeure Event.................................6
SECTION 5.03. Length of a Force Majeure Event.................................6
i
<PAGE>
Page
ARTICLE VI GENERAL PROVISIONS
SECTION 6.01. Notices.........................................................7
SECTION 6.02. Nondisclosure...................................................7
SECTION 6.03. Headings........................................................7
SECTION 6.04. Severability....................................................7
SECTION 6.05. Entire Agreement................................................8
SECTION 6.06. Assignment......................................................8
SECTION 6.07. No Third Party Beneficiaries....................................8
SECTION 6.08. Amendment; Waiver...............................................8
SECTION 6.09. Governing Law...................................................8
SECTION 6.10. Counterparts....................................................8
SECTION 6.11. Independent Contractors.........................................9
SECTION 6.12. Confidentiality.................................................9
ANNEX 1 Services and Charges
ANNEX 2 1998 Services and Charges
ii
<PAGE>
Transition Services Agreement
TRANSITION SERVICES AGREEMENT, dated April 1, 1998, by and between
CORNING INCORPORATED, a corporation organized under the laws of New York
("Corning"), and CORNING CONSUMER PRODUCTS COMPANY, a corporation organized
under the laws of Delaware ("Company").
WHEREAS, Corning is engaged in a variety of businesses and employs
personnel and maintains staff departments to provide management, operating and
administrative services to such businesses;
WHEREAS, Corning, Company and CCPC Acquisition Corp., a Delaware
corporation ("Purchaser"), have entered into a Recapitalization Agreement, dated
March 2, 1998 (the "Recapitalization Agreement"; terms defined therein being
used herein as defined therein), providing for the acquisition by Purchaser of
approximately 92% of all the issued and outstanding shares of common stock, no
par value, of Company; and
WHEREAS, pursuant to the Recapitalization Agreement, Corning has
agreed to make available to Company certain transition services.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, it
is hereby agreed as follows:
ARTICLE I
SERVICES
SECTION 1.01. Provision of Services. Corning agrees to make
available on the terms and conditions contained herein certain services to
Company in connection with the operation of Company. Such services are described
herein and in Annex 1 hereto, which sets forth: (a) a description of the
services to be rendered by Corning to Company; and (b) the costs or charges for
providing such services.
SECTION 1.02. Covered Services. Corning shall be obligated to make
available the services described in Annex 1 and any services subsequently made a
part of this Agreement in accordance with Section 1.07. Services to be provided
by Corning to Company pursuant to this Agreement are hereinafter referred to as
the "Services". For purposes of clarification and not limitation, Annex 2 hereto
describes certain terms and conditions upon which the Services specified therein
will be made available by Corning to Company from the date hereof until December
31, 1998. Thereafter, the terms and conditions for such Services will be
negotiated by the parties in accordance with Annex 1 hereto.
<PAGE>
2
SECTION 1.03. Term and Termination. (a) Term. Unless earlier
terminated in accordance with paragraph (b) or (c) of this Section 1.03, or
unless otherwise agreed to in writing by the parties hereto, the term of this
Agreement ("Term") shall be two years from the date hereof.
(b) Termination for Breach. If Company shall fail to perform or
shall default in the performance of any material provision of this Agreement,
and if such failure or default shall continue for 30 days after receipt by
Company of written notice of such failure or default, and such failure or
default is not cured within such 30-day period, then Corning may terminate this
Agreement with immediate effect.
(c) Termination for Other Events. Upon the occurrence of any of the
following events, Corning shall have the right, by sending written notice to
Company, to terminate this Agreement with immediate effect:
(i) the liquidation (except for the purposes of an amalgamation or
reconstruction) or insolvency of Company, or the appointment (subject to
the provisions of clause (ii) of this paragraph (c)) of an administrator,
receiver, administrative receiver, trustee or other custodian acting to
protect the interests of any creditor or class of creditors over all or a
substantial part of the assets of Company; or
(ii) the adjudication of Company as bankrupt and the appointment of
a trustee in bankruptcy who does not expressly affirm this Agreement in
its entirety within 30 days after its appointment.
(d) Survival. The obligations of the parties under Section 1.06
shall survive the expiration or termination of this Agreement.
SECTION 1.04. Service Periods. The period during which Corning shall
provide each of the Services described in Annex 1 shall commence on the date
hereof and continue until the end of the Term. The period during which Corning
shall provide any Services subsequently made a part of the Agreement in
accordance with Section 1.07 below, shall be as agreed by the parties.
Notwithstanding anything herein to the contrary, except as otherwise provided in
Annex 1, (i) Company is not required to purchase Services from Corning and may,
at its option, obtain Services from third parties and (ii) Company may
discontinue any Service (and its obligations to continue paying for the same) on
90 days' advance written notice provided in accordance with Section 6.01. Upon
such discontinuance of any Service, Company may renew such Service for the
remainder of the Term only with the express written consent of Corning.
<PAGE>
3
SECTION 1.05. Payments for Services. In full compensation for the
Services, Company shall pay Corning for the Services at the same rates charged
by Corning for similar services performed by it for its own businesses or wholly
owned subsidiaries (the "Standard Internal Rates") except as otherwise provided
in Annex 1 or Annex 2. To the extent that program or system changes or other
changes to the Services are requested by Company, the applicable charges, to the
extent Standard Internal Rates are not applicable, will be as agreed by the
parties. Payments will be made monthly within 30 days after Company's receipt of
Corning's statement therefor together with applicable supporting documentation,
unless payment is required more often pursuant to this Agreement, Annex 1 or
Annex 2. All payments will be made in U.S. dollars. Each statement shall set
forth in reasonable detail the calculation of the charges and costs upon which
the amount to be reimbursed is based, broken down by the Services rendered
during the month to which such statement relates. If Company has any objection
to the amount of any statement, it shall nevertheless pay such amount in full,
but may thereafter cause Corning's records with respect thereto to be inspected
in accordance with Article III hereof, and thereafter Company will be entitled
to a prompt refund of any amounts paid in excess of the amounts required
hereunder and Corning shall promptly pay any deficiency amounts found to be due
as a result of such inspection. Following such inspection, the parties shall
endeavor in good faith to resolve any disagreement with respect to charges and
costs hereunder, but any disagreement which cannot be so resolved shall be
submitted to binding arbitration in accordance with Article IV.
SECTION 1.06. Performance of Services; Limitation of Liability;
Indemnity. (a) The Services shall be performed in a reasonably prompt and
professional manner by Corning's internal staff group that generally performs
comparable services for Corning's businesses in the United States; provided,
however, that if Corning is not able to provide requested Services or if such
Services can be provided in a satisfactory manner by a third party contractor at
a commercially reasonable rate, Corning may provide such Services through such
third party contractors at the rate charged by the third party contractor for
such Services. Each of Corning and Company hereby agrees and acknowledges that,
subject to paragraph (b) of this Section 1.06, Company's sole and exclusive
remedy and Corning's sole and exclusive liability for any defect or error in the
Services will be re-performance of such Services. CORNING MAKES NO WARRANTY AND
HEREBY EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES, INCLUDING WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
(b) Notwithstanding the provisions of paragraph (a) of this Section
1.06, (i) subject to Section 1.08 below, in the event Corning fails to perform
its obligations hereunder (other than such failure as is excused by Article V),
it will be liable for any out-of-pocket costs (including those resulting from
hiring employees on a temporary basis) actually incurred by Company, in excess
of amounts that would have been paid to Corning under this Agreement if Corning
had performed its obligations hereunder, in arranging for the
<PAGE>
4
performance of Services not performed by Corning as a result of the breach of
Corning's obligations hereunder and (ii) Corning will be liable to Company for,
and will indemnify, hold harmless and defend Company against, any and all
liabilities, losses, costs and expenses (including reasonable attorneys' fees
and litigation expenses) (collectively, "Damages") incurred by Company or its
Affiliates as a result of the bad faith or gross negligence of Corning.
(c) Subject to the limitations set forth in paragraph (d) of this
Section 1.06, Company agrees to indemnify, hold harmless and defend Corning
against all Damages incurred by Corning or its Affiliates as a result of the
performance by Corning of Services under this Agreement, other than those costs
and Damages for which Corning is liable pursuant to Section 1.06(b).
(d) A party seeking indemnification pursuant to this Section 1.06
(the "Indemnified Party") shall give prompt notice to the party from whom such
indemnification is sought (the "Indemnifying Party") of the assertion of any
claim, or the commencement of any action, suit or proceeding, in respect of
which indemnity may be sought hereunder, and will give the Indemnifying Party
such information with respect thereto as the Indemnifying Party may reasonably
request, but no failure to give such notice shall relieve the Indemnifying Party
of any liability hereunder, except to the extent that the Indemnifying Party has
suffered actual prejudice thereby. The Indemnifying Party shall have the right
to undertake the defense of any such claim asserted by a third person, and the
Indemnified Party shall cooperate in such defense and make available all records
and materials requested by the Indemnifying Party in connection therewith at the
Indemnifying Party's expense. The Indemnified Party shall be entitled to
participate in such defense, but shall not be entitled to indemnification with
respect to the costs and expenses of such defense if the Indemnifying Party
shall have assumed the defense of the claim with counsel reasonably satisfactory
to the Indemnified Party. The Indemnifying Party shall not be liable for any
claim settled without its consent, which consent may not be unreasonably
withheld. The Indemnifying Party may settle any claim without the consent of the
Indemnified Party, but only if the settlement involves solely payment of
monetary damages.
(e) To the extent that Company receives Services from Corning
involving the exercise of managerial judgment or discretion (including, but not
limited to, the selection of service or raw material providers, the investment
and management of funds and the selection of depositories), Company will have no
claim against and will indemnify Corning for losses resulting from the
performance of such Services.
SECTION 1.07. Additional Services. Additional reasonable requests
for services not previously described in Annex 1 or Annex 2 shall be negotiated
by Corning and
<PAGE>
5
Company at rates equal to Corning's Standard Internal Rates. Any Services to be
so provided shall be agreed in writing by Corning and Company.
SECTION 1.08. Limitations on Corning's Obligations. (a) Subject to
subparagraph (c) below, Corning will not be obligated to (i) hire additional or
different personnel or acquire additional resources or (ii) take any actions
other than in the ordinary course of its business to retain personnel currently
employed by it, in each case in order to provide any Services to Company
pursuant to this Agreement.
(b) The obligation of Corning to provide Services is conditioned
upon and subject to any contractual and legal obligations, prohibitions and
restrictions applicable to Corning regarding such Services, and this Agreement
will not obligate Corning to violate, modify or eliminate any such obligation,
prohibition or restriction. Corning hereby agrees not to enter voluntarily into
any arrangement containing any such obligations, prohibitions or restrictions
during the term of this Agreement.
(c) To the extent Company is using Services provided for herein,
Corning will use commercially reasonable efforts (but shall not otherwise be
obligated) to retain personnel necessary to perform such Services.
ARTICLE II
RESPONSIBILITY
SECTION 2.01. Responsibility. Nothing in this Agreement shall be
construed as: (a) an assumption by Corning of any obligation to increase the
sales or profits of Company or otherwise to assume responsibility for the
operations of Company; (b) an assumption by Corning of any financial obligation
of Company; (c) the creation of any relationship of employment between Company
and employees or consultants of Corning, its subsidiaries or Affiliates; (d) an
assumption by Corning of any responsibility for the work performed by outside
suppliers employed directly by Company or any of its Affiliates at the
suggestion or recommendation of Corning; or (e) the delegation of any function
or authority of Company.
ARTICLE III
MAINTENANCE OF BOOKS AND RECORDS
SECTION 3.01. Maintenance of Books and Records. Corning shall
maintain true and complete books of account containing an accurate record of all
data necessary for the proper computation of all charges and costs to be
reimbursed by Company under the terms of this Agreement.
<PAGE>
6
ARTICLE IV
CONTROVERSIES
SECTION 4.01. Controversies. Any conflict or disagreement arising
out of the interpretation, implementation, or compliance with the provisions of
this Agreement, or arising out of a dispute as to the proper computation of all
charges and costs to be reimbursed by Company under the terms of this Agreement,
shall be finally settled by arbitration held in New York, New York under the
Rules of Conciliation and Arbitration of the American Arbitration Association
before a single arbitrator appointed in accordance with such Rules, and judgment
upon the award rendered may be entered by any court having jurisdiction. The
costs and expenses of the arbitration shall be paid by the parties in inverse
proportion to the allocation by the arbitrator of the amounts disputed, or, if
no amounts are in dispute, by the party against whom the dispute is finally
settled.
ARTICLE V
FORCE MAJEURE EVENT
SECTION 5.01. Force Majeure Event. Corning shall not be held
responsible for the failure or delay in performance hereunder if such failure or
delay is due to any act of God or the public enemy, war, compliance with laws,
governmental acts or regulations, fire, flood, epidemic, strikes and labor
interruption, accident, unusually severe weather or other similar causes, which
are beyond its reasonable control (a "Force Majeure Event").
SECTION 5.02. Effect of a Force Majeure Event. Upon the occurrence
of a Force Majeure Event, Corning shall promptly give notice to Company of the
occurrence or circumstance upon which it intends to rely to excuse its
performance. Duties and obligations of both parties shall be suspended for the
duration of the Force Majeure Event. In the event of, and only during the
occurrence of, a Force Majeure Event, Company may take such reasonable measures
as are necessary to meet its needs, including the provision of services from
alternative sources.
SECTION 5.03. Length of a Force Majeure Event. During the duration
of a Force Majeure Event, Corning shall use its best efforts to avoid or remove
such Force Majeure Event and shall also take reasonable steps to resume its
performance under this Agreement with the least possible delay.
<PAGE>
7
ARTICLE VI
GENERAL PROVISIONS
SECTION 6.01. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in person, by courier service, by cable, by telecopy, by telegram, by telex or
by registered or certified mail (postage prepaid, return receipt requested) to
the respective parties at the following addresses (or at such other address for
a party as shall be specified in a notice given in accordance with this Section
6.01):
(a) if to Corning:
Corning Incorporated
One Riverfront Plaza
Corning, NY 14831
Telecopy: (607) 974-8656
Attention: General Counsel
(b) if to Company:
Corning Consumer Products Company
E-Building, Houghton Park
Corning, NY 14831
Telecopy: (607) 974-2215
Attention: President
SECTION 6.02. Nondisclosure. Neither Corning nor Company shall
disclose, imply the existence of, or include in any promotional materials any
reference to this Agreement or its terms without the written consent of the
other party.
SECTION 6.03. Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 6.04. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the
<PAGE>
8
parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible.
SECTION 6.05. Entire Agreement. This Agreement (including the
Annexes hereto) constitutes the entire agreement of the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements and
undertakings, both written and oral, between Corning and Company with respect to
the subject matter hereof, provided, however, this Agreement shall be
implemented and interpreted in a manner consistent with the Recapitalization
Agreement.
SECTION 6.06. Assignment. This Agreement shall not be assigned by
either party without the express written consent of the other party (which
consent may be granted or withheld in the sole discretion of such other party);
provided, however, that either party may assign its rights and obligations
hereunder to one or more of its Affiliates (except that no such assignment shall
relieve such party of its obligations hereunder and such party shall remain
liable for the performance of its obligations hereunder). Notwithstanding
anything contained herein to the contrary, the Company may pledge and assign all
of its rights hereunder to the financial institutions providing the Financing
(or refinancings thereof).
SECTION 6.07. No Third Party Beneficiaries. This Agreement shall be
binding upon and inure solely to the benefit of the parties hereto and their
permitted assigns and nothing herein, express or implied, is intended to or
shall confer upon any other Person any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 6.08. Amendment; Waiver. (a) This Agreement may not be
amended or modified except by an instrument in writing signed by Corning and
Company.
(b) No failure or delay on the part of a party hereto in exercising
any right, power or remedy hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy hereunder. The remedies provided for herein are cumulative and are not
exclusive of any remedies provided by law or available at equity.
SECTION 6.09. Governing Law. This Agreement shall be governed by the
laws of the State of New York.
SECTION 6.10. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which
<PAGE>
9
when executed shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement.
SECTION 6.11. Independent Contractors. No agency, partnership or
joint venture is established by this Agreement. Neither party shall enter into,
incur liabilities or hold itself out to third parties as having the authority to
enter into and incur any contractual obligations, expenses or liabilities on
behalf of the other party.
SECTION 6.12. Confidentiality. Each of Corning and Company hereby
agrees that it will not, and will cause each of its Affiliates not to, at any
time reveal to any Person or use in any way detrimental to the other Person any
non-public, confidential or proprietary information relating to the other or the
business or affairs of such other Person that is acquired or otherwise received
by such Person in connection with the performance of its obligations under this
Agreement, other than such information that (a) is generally available to the
public (other than as a result of a disclosure by such Person), (b) is available
to such Person on a nonconfidential basis from a source that is not prohibited
from disclosing such information to such Person or (c) after notice and an
opportunity to contest, such Person is required to disclose under any applicable
law or under subpoena or other process of laws.
<PAGE>
10
IN WITNESS WHEREOF, Company and Corning have executed this Agreement
by their respective duly authorized representatives as of the date first above
written.
CORNING INCORPORATED
By: __________________________________
Name:
Title:
CORNING CONSUMER PRODUCTS
COMPANY
By: __________________________________
Name:
Title:
<PAGE>
March 31, 1998
CCPC Acquisition Corp.
c/o Borden, Inc.
180 East Broad Street
Columbus, OH 43215-3799
Attention: William F. Stoll, Jr.,
General Counsel
Corning Consumer Products Company
E-Building
Houghton Park
Corning, NY 14831
Attention: Peter F. Campanula,
President & Chief Executive Officer
Ladies and Gentlemen:
Reference is made to the Recapitalization Agreement, dated March 2,
1998 (the "RECAPITALIZATION AGREEMENT"), among Corning Incorporated, a New York
corporation (the "SELLER"), Corning Consumer Products Company, a Delaware
corporation (the "COMPANY", CCPC Acquisition Corp., a Delaware corporation (the
"PURCHASER") and, solely for the purposes of Sections 10.02 and 11.14(a) of the
Recapitalization Agreement, Borden, Inc., a New Jersey corporation and an
Affiliate of the Purchaser. All capitalized terms used but not otherwise
defined herein shall have the meanings ascribed to such terms in the
Recapitalization Agreement.
The Purchaser hereby acknowledges that, in connection with the
transactions contemplated by the Recapitalization Agreement, the Company will
effect an amendment to the Certificate of Incorporation of the Company (the
"CHARTER AMENDMENT", a copy of which has been provided to the Purchaser) by
which, among other things, (i) the total number of shares of all classes of
stock will be increased so that the Company will have authority to issue
50,000,000 shares, of which 45,000,000 shares will be common stock, par value
$.01 per share (the "COMMON STOCK"), and 5,000,000 will be preferred stock, par
value $.01 per share, and (ii) the Company will effect a stock split whereby
each share of Common Stock then issued and outstanding will be automatically
subdivided, changed and converted into 24,000 fully paid and nonassessable
shares of Common Stock. Furthermore, the Purchaser hereby consents, pursuant to
Section 5.01(b) and for purposes of Section 3.09 of the Recapitalization
Agreement, to the Charter Amendment.
In light of the transactions effected by Charter Amendment, the
parties hereto agree that the Recapitalization Agreement be, and hereby is,
amended as follows:
<PAGE>
2
1. The definition of "ACQUIRED SHARES" in Section 1.01 shall be
deleted in its entirety and replaced by the following:
"ACQUIRED SHARES" shall mean 22,080,000 Shares.
2. The phrase "shares (the "SHARES") of common stock, no par value
per share, of the Company" shall be deleted from the first recital of the
Recapitalization Agreement and the phrase "Shares (as defined herein)" shall be
inserted in lieu thereof.
3. The following new definitions shall be inserted in the correct
alphabetical order in Section 1.01:
"CHARTER AMENDMENT" means the amendment to the Certificate of
Incorporation of the Company, filed on the date immediately preceding
the Closing, by which, among other things, (i) the total number of
shares of all classes of stock will be increased so that the Company
will have authority to issue 50,000,000 shares, of which 45,000,000
shares will be common stock, par value $.01 per share, and 5,000,000
will be preferred stock, par value $.01 per share, and (ii) the
Company will effect a stock split whereby each share of common stock
then issued and outstanding will be automatically subdivided, changed
and converted into 24,000 fully paid and nonassessable shares of
common stock.
"SHARES" shall mean, as of the date of this Agreement, the issued and
outstanding shares of common stock no par value of the Company, and,
as of the effective date of the Charter Amendment, the issued and
outstanding shares of common stock, par value $.01 per share, of the
Company.
4. The second sentence of Section 3.03 shall be amended to read:
The Company has authorized (i) as of the date of this Agreement, 1,000
Shares, all of which are issued and outstanding, and (ii) as of the
effective date of the Charter Amendment and as of the Closing Date,
45,000,000 Shares, of which 24,000,000 Shares are issued and
outstanding, and 5,000,000 shares of preferred stock, par value $.01
per share, of which no shares are issued and outstanding; such Shares,
as of the date of this Agreement, and such Shares and preferred stock,
as of the effective date of the Charter Amendment and as of the
Closing Date, constitute all the authorized, issued and outstanding
shares of capital stock of the Company and the Shares are owned of
record and beneficially solely by the Seller.
<PAGE>
3
Please indicate your agreement with the foregoing by signing in the
space provided below, and returning an executed copy of this letter to me.
Very truly yours,
CORNING INCORPORATED
By:
--------------------------
Name:
Title:
Agreed and accepted as of
the date first written above:
CCPC ACQUISITION CORP.
By:
--------------------------
Name:
Title:
Agreed and accepted as of
the date first written above:
CORNING CONSUMER PRODUCTS COMPANY
By:
--------------------------
Name:
Title:
Agreed and accepted as of
the date first written above:
BORDEN, INC.
By:
--------------------------
Name:
Title:
<PAGE>
Exhibit 2.3
ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of April 1, 1998 (this
"Agreement"), among CORNING INCORPORATED, a New York corporation (the "Seller"),
and CORNING CONSUMER PRODUCTS COMPANY, a Delaware corporation (the "Company").
WHEREAS, the Seller, the Company, the Purchaser, and, for certain
limited purposes, Borden, Inc. have entered into a Recapitalization Agreement,
dated March 2, 1998 (the "Recapitalization Agreement"; capitalized terms used
and not defined herein are used herein as defined in the Recapitalization
Agreement), providing for the sale by the Seller to the Purchaser of certain
shares of the Company and the recapitalization of the Company, as a result of
which the Purchaser will own 92% of the outstanding common shares of the Company
and the Seller will own 8% of the outstanding common shares of the Company as of
the Closing; and
WHEREAS, the execution and delivery of this Agreement by the Seller
and the Company is a condition to the obligations of the Purchaser to consummate
the transactions contemplated by the Recapitalization Agreement;
WHEREAS, the Company has transferred any reserves for the
Pre-Closing Workers and Products Claims (as defined below) by book-entry to the
Seller;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, the Seller and the Company
hereby agree as follows:
1. The Seller hereby assumes and agrees to pay, perform and
discharge when due, and to indemnify the Company and each of its Affiliates
(including, but not limited to, Purchaser and the Subsidiaries) against and hold
each of them harmless from, all of the following debts, liabilities and
obligations of the Company and the Subsidiaries:
(i) those certain post-retirement medical and life insurance
liability obligations and pension liability obligations for certain
Acquired Employees (the "Post Retirement Medical and Pension Obligations")
described in Sections 6.02(a) and 6.02(c) of the Recapitalization
Agreement;
(ii) all liabilities of the Company and the Subsidiaries relating to
workers' compensation and product liabilities to the extent based on or
arising out of injuries, accidents or incidents the respective dates of
occurrence of which were prior to the date hereof (the "Pre-Closing
Workers and Products Claims").
<PAGE>
2
2. The Seller hereby assigns, transfers, conveys and delivers to the
Company, its successors and assigns free and clear of any claim, lien or
encumbrance, the entire right, title and interest of the Seller in and to:
(i) all emissions credits relating to the Business; and
(ii) the confidentiality agreements listed on Exhibit A hereto (the
"Confidentiality Agreements") between the Seller and Persons other than
the Purchaser that were entered into in connection with or relating to a
possible sale of the Business, including, without limitation, the right to
enforce all terms of such confidentiality agreements. Original copies of
the Confidentiality Agreements have been delivered to the Purchaser
simultaneously with the execution of this Agreement.
3. The Seller hereby assigns, transfers conveys and delivers to the
Company, its successors and assigns free and clear of any claim, lien or
encumbrance, the entire right, title and interest of the Seller in and to, and
the Company hereby assumes, agrees to pay, perform and discharge when due, and
to indemnify the Seller against and hold the Seller harmless in respect of, the
Facility Financing Interests, except for the 1988 Guaranty and the 1992
Guaranty.
4. Any notice, request or other document to be given hereunder to
either party hereto shall be given in accordance with Section 11.02 of the
Recapitalization Agreement.
5. This Agreement shall not be assigned by either party without the
express written consent of the other party; provided, however, that the Company
may assign this Agreement to an Affiliate of the Company without the consent of
the Seller.
6. This Agreement shall be governed by the laws of the State of New
York. All actions and proceedings arising out of or relating to the Agreement
shall be heard and determined in any New York state or federal court sitting in
The City of New York, and the parties hereto hereby consent to the jurisdiction
of such courts in any such action or proceeding.
7. This Agreement may not be amended, waived or otherwise modified
except by a written instrument signed by the Seller and the Company.
8. This Agreement may be executed in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which shall be
deemed to be an original but all of which taken together shall constitute one
and the same agreement.
<PAGE>
3
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written by their respective officers
thereunto duly authorized.
CORNING INCORPORATED
By
-----------------------------------
Name:
Title:
CORNING CONSUMER PRODUCTS
COMPANY
By
-----------------------------------
Name:
Title:
<PAGE>
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CORNING CONSUMER PRODUCTS COMPANY
Corning Consumer Products Company, a corporation organized and
existing under the laws of the State of Delaware (the "Corporation"), hereby
certifies as follows:
I. The name of the Corporation is "Corning Consumer Products
Company," which was amended from "Corning Vitro Corporation" pursuant to a
Certificate of Amendment of Certificate of Incorporation filed with the
Secretary of the State of Delaware on March 2, 1994. The original Certificate of
Incorporation of the Corporation was filed with the Secretary of State of the
State of Delaware on September 19, 1991.
II. The text of the Certificate of Incorporation as amended
heretofore is hereby further amended and restated to read as herein set forth in
full:
FIRST: The name of the Corporation is:
CORNING CONSUMER PRODUCTS COMPANY
SECOND: The address of the Corporation's registered office in
the State of Delaware is 1209 Orange Street, in the City of Wilmington, County
of New Castle, Delaware 19801. The name of its registered agent at such address
is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to design,
manufacture, construct, use, buy, sell, lease, hire and deal in and with glass,
glass ceramic, metal, plastic and other consumer housewares, cookware, beverage
ware and service ware products and other articles and property of all kinds, to
render service of all kinds and generally to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH: (A) The total number of shares of all classes of stock
which the Corporation shall have authority to issue is 50,000,000 shares, of
which 45,000,000 shares shall be Common Stock, par value one cent ($.01) per
share, and 5,000,000 shares shall be Preferred Stock, par value one cent ($.01)
per share.
(B) At the close of business on March 31, 1998, and without
any further action on the part of the Corporation or its stockholders, each
share of the Corporation's Common Stock then issued shall automatically be
subdivided, changed and converted into 24,000 fully paid and nonassessable
shares of Common Stock.
(C) The Preferred Stock may be issued from time to time in one
or more series. The Board of Directors of the Corporation is authorized to fix
by resolution or resolutions the designation of each series of Preferred Stock
and the powers, designations, preferences and relative participating, optional
or other rights, if any, or the qualifications, limitations or restrictions
thereof, including, without limiting the generality of the foregoing, such
provisions as may be desired concerning voting, redemption, dividends,
dissolution or the distribution of assets, conversion or exchange, and such
other subjects or matters as may be fixed by resolution or resolutions of the
Board of Directors under the General Corporation
<PAGE>
Law of the State of Delaware. Unless otherwise provided in such resolution or
resolutions, shares of Preferred Stock of any series which shall be issued and
thereafter acquired by the Corporation through purchase, redemption, exchange,
conversion or otherwise shall return to the status of authorized but unissued
Preferred Stock.
(D) 1. Designation of Junior Cumulative Pay-In-Kind Preferred
Stock. The designation of a series of preferred stock shall be "Junior
Cumulative Pay-In-Kind Preferred Stock (the "Junior Preferred Stock") consisting
of 2,000,000 shares. The par value of the Junior Preferred Stock shall be $0.01
per share. The original liquidation preference of the Junior Preferred Stock
shall be $25 per share ("Original Liquidation Preference"), which value does not
represent a determination by the Board of Directors for the purposes of the
Corporation's capital accounts.
2. Rank. The Junior Preferred Stock shall, with respect to
dividend rights and rights on liquidation, winding up and dissolution, rank
senior to the Common Stock of the Corporation. (All equity securities of the
Corporation to which the Junior Preferred Stock ranks senior, including the
Common Stock, are collectively referred to herein as the "Junior Securities",
all equity securities of the Corporation with which the Junior Preferred Stock
ranks on a parity are collectively referred to herein as the "Parity Securities"
and all equity securities of the Corporation (other than convertible debt
securities) to which the Junior Preferred Stock ranks junior, whether with
respect to dividends or upon liquidation, dissolution, winding up or otherwise,
are collectively referred to herein as the "Senior Securities".) The Junior
Preferred Stock shall be subject to the creation of Junior Securities, Parity
Securities and Senior Securities.
3. Dividends.
(i) The holders of the shares of Junior Preferred
Stock shall be entitled to receive, when, as and if declared
by the Board of Directors, out of funds legally available for
the payment of dividends, cumulative dividends at the rate of
$0.75 per share per calendar quarter. Such dividends shall be
payable in quarterly payments on March 31, June 30, September
30 and December 31 of each year commencing with June 30, 1998
(each of such dates being a "Dividend Payment Date"), in
preference to dividends on the Junior Securities. Such
dividends shall be paid to the holders of record at the close
of business on the March 15, June 15, September 15 or December
15, as the case may be, immediately preceding the relevant
dividend payment date (each of such dates being a "Dividend
Payment Record Date"). Each dividend shall accrue (whether or
not declared) from the previous dividend payment date (or,
with respect to the first dividend, from the date of initial
issuance of the Junior Preferred Stock). Dividends payable for
any partial dividend period shall be pro rated on the basis of
a 360-day year consisting of twelve 30-day months (four 90-day
quarters) and the actual number of days elapsed in the period
for which payable.
Dividend payments made with respect to the Junior
Preferred Stock may be made (a) by issuing fully paid and
nonassessable shares (or fractional shares as hereinafter
described) of Junior Preferred Stock with an aggregate
Original Liquidation Preference equal to the aggregate amount
of dividends being made, (b) in cash or (c) in any combination
thereof.
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<PAGE>
Dividends on the Junior Preferred Stock shall be
fully cumulative, and from and after any Dividend Payment Date
on which any dividend that has been accrued through such date
has not been paid in full or any payment date set for a
redemption on which such redemption has not been paid in full,
the amount of such unpaid dividends or unpaid redemption
payment (the "Arrearage") shall accrue dividends at a rate of
12% per annum. Such dividends in respect of any Arrearage
shall accrue on a daily basis, whether or not declared, until
the Arrearage is paid, shall be calculated as of such
successive Dividend Payment Date and shall constitute
additional Arrearage from and after any Dividend Payment Date
to the extent not paid on such Dividend Payment Date.
References herein to dividends that have accrued with respect
to the Junior Preferred Stock shall include the amount of any
Arrearage together with dividends accrued on such Arrearage
pursuant to the immediately preceding two sentences.
"Liquidation Preference" means the Original
Liquidation Preference, plus an amount in cash equal to all
accrued and unpaid dividends, whether or not declared
(including an amount equal to a prorated dividend from the
last Dividend Payment Date or the date of initial issuance,
whichever is later, to the date such Liquidation Preference is
being determined). The Liquidation Preference of a share of
Junior Preferred Stock will increase on a daily basis as
dividends accrue on such share, whether or not declared, and
will decrease only to the extent such dividends are actually
paid in cash or additional shares of Junior Preferred Stock
are actually issued, all as provided in this paragraph 3. The
issuance of such shares of Junior Preferred Stock (plus the
amount of cash dividends, if any, paid together therewith)
shall constitute full payment of such dividend. In no event
shall an election by the Board of Directors to pay dividends,
in full or in part, in cash on any Dividend Payment Date
preclude the Board of Directors from electing either such
alternative in respect of all or any portion of any subsequent
dividend.
(ii) All dividends and distributions paid with
respect to shares of the Junior Preferred Stock pursuant to
paragraph 3(i) shall be paid pro rata to the holders entitled
thereto. If the Board of Directors elects on any Dividend
Payment Date to pay any dividend partially in shares of Junior
Preferred Stock, the proportion of such cash and shares of
Junior Preferred Stock shall be the same for each outstanding
share of Junior Preferred Stock.
(iii) Each fractional share of Junior Preferred Stock
outstanding shall be entitled to a ratably proportionate
amount of dividends accruing with respect to each outstanding
share of Junior Preferred Stock pursuant to paragraph (i)
hereof, and all such dividends with respect to such
outstanding fractional shares shall be fully cumulative and
shall accrue (whether or not declared), and shall be payable
in the same manner and at such times as provided for in
paragraph 3(i) hereof, with respect to dividends on each
outstanding share of Junior Preferred Stock.
(iv) No full dividends shall be declared by the Board
of Directors or paid or set apart for payment by the
Corporation on any Parity Securities, nor shall the
Corporation make any distribution in respect of any Parity
Securities,
3
<PAGE>
either directly or indirectly, and whether in cash,
obligations or shares of the Corporation or other property,
for any period unless full cumulative dividends have been or
contemporaneously are declared and paid or declared and a sum
set apart sufficient for such payment on the Junior Preferred
Stock for all dividend payment periods terminating on or prior
to the date of payment, or setting apart for payment, of such
full dividends on such Parity Securities. If any dividends are
not paid in full, as aforesaid, upon the shares of the Junior
Preferred Stock and any other Parity Securities, all dividends
or distributions declared upon shares of the Junior Preferred
Stock and any other Parity Securities shall be declared pro
rata so that the amount of dividends or distributions declared
per share of the Junior Preferred Stock and such Parity
Securities shall in all cases bear to each other the same
ratio that accrued dividends per share on the Junior Preferred
Stock and such Parity Securities bear to each other. Any
dividend not paid pursuant to paragraph 3(i) hereof or this
paragraph 3(iv) shall be fully cumulative and shall accrue
(whether or not declared) as set forth in paragraph 3(i)
hereof.
(v) (a) Holders of shares of the Junior Preferred
Stock shall be entitled to receive the dividends provided for
in paragraph 3(i) hereof in preference to and in priority over
any dividends upon any of the Junior Securities.
(b) So long as any shares of the Junior Preferred
Stock are outstanding, the Board of Directors shall not
declare, and the Corporation shall not pay or set apart for
payment any dividend on any of the Junior Securities or make
any payment on account of, or set apart for payment money for
a sinking or other similar fund for, the repurchase,
redemption or other retirement of, any of the Junior
Securities or Parity Securities or any warrants, rights or
options exercisable for or convertible into any of the Junior
Securities or Parity Securities (other than the repurchase,
redemption or other retirement of debentures or other debt
securities that are convertible or exchangeable into any of
the Junior Securities or Parity Securities), or make any
distribution in respect of the Junior Securities, either
directly or indirectly, and whether in cash, obligations or
shares of the Corporation or other property (other than
distributions or dividends in Junior Securities to the holders
of Junior Securities), and shall not permit any corporation or
other entity directly or indirectly controlled by the
Corporation to purchase or redeem any of the Junior Securities
or Parity Securities or any warrants, rights, calls or options
exercisable for or convertible into any of the Junior
Securities or Parity Securities (other than the repurchase,
redemption or other retirement of debentures or other debt
securities that are convertible or exchangeable into any of
the Junior Securities or Parity Securities) unless prior to or
concurrently with such declaration, payment, setting apart for
payment, repurchase, redemption or other retirement or
distribution, as the case may be, all accrued and unpaid
dividends on shares of the Junior Preferred Stock not paid on
the dates provided for in paragraph 3(i) hereof (including
accrued dividends not paid by reason of the terms and
conditions of paragraph 3(i) or paragraph 3(iv) hereof) shall
have been or are paid in full and fully in cash or in fully
paid and nonassessable shares (or fractional shares) of Junior
Preferred Stock; provided that, this paragraph shall not
prohibit the Corporation from
4
<PAGE>
repurchasing any Junior Securities or any warrants, rights or
options exercisable for or convertible into Junior Securities
from any employee of the Corporation or its subsidiaries
pursuant to the terms of any agreements with such employee.
(c) Subject to the foregoing provisions of this
paragraph 3, the Board of Directors may declare and the
Corporation may pay or set apart for payment dividends and
other distributions on any of the Junior Securities or Parity
Securities, and may repurchase, redeem or otherwise retire any
of the Junior Securities or Parity Securities or any warrants,
rights or options exercisable for or convertible into any of
the Junior Securities or Parity Securities, and the holders of
the shares of the Junior Preferred Stock shall not be entitled
to share therein.
4. Payment on Liquidation.
(i) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
Corporation, the holders of shares of Junior Preferred Stock
then outstanding shall be entitled to be paid out of the
assets of the Corporation available for distribution to its
stockholders an amount in cash equal to the Liquidation
Preference for each share outstanding, before any payment
shall be made or any assets distributed to the holders of any
of the Junior Securities. If the assets of the Corporation are
not sufficient to pay in full the liquidation payments payable
to the holders of outstanding shares of the Junior Preferred
Stock and any Parity Securities, then the holders of all such
shares shall share ratably in such distribution of assets in
accordance with the amount which would be payable on such
distribution if the amounts to which the holders of
outstanding shares of Junior Preferred Stock and the holders
of outstanding shares of such Parity Securities are entitled
were paid in full. Except as provided in this paragraph 4(i),
holders of Junior Preferred Stock shall not be entitled to any
distribution in the event of liquidation, dissolution or
winding up of the affairs of the Corporation.
(ii) For the purposes of this paragraph 4, neither
the voluntary sale, conveyance, lease, exchange or transfer
(for cash, shares of stock, securities or other consideration)
of all or substantially all of the property or assets of the
Corporation nor the consolidation or merger of the Corporation
with or into one or more other corporations nor the
consolidation or merger of one or more corporations with or
into the Corporation shall be deemed to be a voluntary or
involuntary liquidation, dissolution or winding up.
5. Redemption.
(i) Optional Redemption. At any time and from time to
time, the Corporation shall have the right, at its sole option
and election, to redeem any or all of the outstanding shares
of Junior Preferred Stock, in whole or in part. The redemption
price shall be paid in cash out of funds legally available
therefor and will be in an amount per share (the "Redemption
Price") equal to the Liquidation Preference.
5
<PAGE>
(ii) Notice and Redemption Procedures. Notice of the
redemption of shares of Junior Preferred Stock pursuant to
paragraph 5(i) hereof shall be sent to the holders of record
of the shares of Junior Preferred Stock to be redeemed by
first class mail, postage prepaid, at such holder's address as
it appears on the transfer books of the Corporation not more
than 60 nor fewer than 30 days prior to the redemption date;
provided that any failure to give such notice to any holder,
or any defect in such notice, shall not affect the validity of
the proceedings for the redemption of any shares of Junior
Preferred Stock held by any other holder. On or after the date
fixed for redemption stated in such notice, each holder of the
shares called for redemption shall surrender the certificate
evidencing such shares to the Corporation at the place
designated in such notice and shall thereupon be entitled to
receive payment of the Redemption Price. From and after the
date of any redemption of any shares effected by the
Corporation pursuant to this paragraph 5, all dividends on
such shares shall cease to accrue and all rights of the
holders thereof as holders of such shares shall cease and
terminate.
(iii) Put Event. Any holder of record of shares of
Junior Preferred Stock, in accordance with the procedures set
forth in paragraph 5(iv) hereof and subject to the provisions
set forth in paragraph 5(v) hereof, may require the
Corporation to redeem any or all of the shares of Junior
Preferred Stock held by such holder at the Redemption Price
therefor, upon the occurrence of any of the following events
(each a "Put Event"):
(a) The Corporation becomes aware of (by way of a
report or any other filing pursuant to Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), proxy, vote, written notice or otherwise) the
acquisition by any "Person" or "Group" (as such terms are used
in Sections 13(d) and 14(d) of the Exchange Act), other than
the permitted holders of the Junior Preferred Stock as
described in paragraph 7, in a single transaction or in a
related series of transactions, by way of merger,
consolidation or other business combination or purchase of
"beneficial ownership" (as defined in Rule 13(d)-3 under the
Exchange Act) of 50% or more of the total voting power
entitled to vote in the election of directors of the
Corporation; or
(b) the sale, lease, transfer or other disposition of
all or substantially all of the consolidated assets of the
Corporation and its subsidiaries to any Person or Group, other
than the permitted holders of the Junior Preferred Stock as
described in paragraph 7.
(iv) Put Event Notice and Redemption Procedures.
Notice of any Put Event shall be sent to the holders of record
of the outstanding shares of Junior Preferred Stock not more
than 30 days following such Put Event, which notice shall
describe the transaction or transactions constituting such Put
Event and set forth each holder's right to require the
Corporation to redeem any or all shares of Junior Preferred
Stock held by such holder out of funds legally available
therefor, the redemption date (which date shall be not more
than 60, nor less than 30, days from the date of such notice)
and the reasonable procedures to be followed by such holders
in exercising such redemption right. Any failure by the
Corporation to give the notice prescribed by the preceding
6
<PAGE>
sentence, or any defects in such notice, shall not prejudice
the rights of any holder of shares of Junior Preferred Stock
to cause the Corporation to redeem any such shares held by
such holder. In the event a holder of shares of Junior
Preferred Stock shall elect to require the Corporation to
redeem any or all such shares of Junior Preferred Stock
pursuant to paragraph 5(iii) hereof, such holder shall deliver
within 20 days of the mailing of the Corporation's notice
described in this paragraph 5(iv), or, if no notice is given,
at any time following the last day the Corporation was
required to give notice of the Put Event in accordance with
this paragraph 5(iv) (in which case the date of redemption
shall be the date which is the later of (x) 60 days following
the last day the Corporation was required to give notice in
accordance with this paragraph 5(iv) and (y) ten days
following the delivery of such election by such holder), a
written notice, in the form specified by the Corporation (if
the Corporation did in fact give the notice required by this
paragraph 5(iv)), to the Corporation so stating, and
specifying the number of shares to be redeemed pursuant to
paragraph 5(iii) hereof; provided, however, that such holders
may deliver a notice of an election to redeem at any time
within 80 days following the occurrence of a Put Event (and
such holders shall not be required to wait for the
Corporation's notice provided for in this paragraph 5(iv) or
for the expiration of the time allowed for the Corporation's
notice hereunder), in which case the redemption date shall be
90 days after the date of the Put Event. The Corporation shall
redeem the number of shares so specified on the date fixed for
redemption.
(v) Limitation on Payment of Redemption Price.
Notwithstanding anything to the contrary in paragraph 5, the
Corporation shall not be required to pay the Redemption Price
for any shares of Junior Preferred Stock which are required to
be redeemed pursuant to paragraphs 5(iii) and (iv) in respect
of a Put Event (i) to the extent and so long as such payment
would constitute a default or event of default under the
Corporation's senior credit facilities and (ii) until the
prior payment of all amounts due pursuant to any actually
exercised right to require the redemption or repurchase by the
Corporation of, or the prior payment of all amounts due
pursuant to or the waiver of any right to accelerate the
payments under, any Senior Securities, debt securities or
indebtedness for borrowed money of the Corporation arising as
a result of such Put Event.
6. Voting Rights. The holders of record of shares of Junior
Preferred Stock shall not be entitled to any voting rights, except as otherwise
provided by law.
7. Transferability. The shares of the Junior Preferred Stock
may not be sold, transferred, assigned, pledged or otherwise disposed of to any
Person or Group other than (i) BW Holdings L.L.C., (ii) any Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, BW Holdings L.L.C. and (iii) any
partner, member or stockholder of any Person described in the preceding clauses
(i) and (ii).
7
<PAGE>
8. Reacquired Shares. Shares of Junior Preferred Stock that
have been issued and reacquired in any manner, including shares reacquired by
purchase or redemption, shall (upon compliance with any applicable provisions of
the laws of the State of Delaware) have the status of authorized and unissued
shares of preferred stock undesignated as to class and series and may be
redesignated and reissued as part of any series of any class of preferred stock
other than the Junior Preferred Stock.
9. Mutilated or Missing Certificates. If any of the Junior
Preferred Stock certificates shall be mutilated, lost, stolen or destroyed, the
Corporation shall issue, in exchange and substitution for and upon cancellation
of the mutilated certificate, or in lieu of and substitution for the certificate
lost, stolen or destroyed, a new certificate of like tenor and representing an
equivalent amount of shares of Junior Preferred Stock, but only upon receipt of
evidence of such loss, theft or destruction of such certificate and indemnity,
if requested.
10. Severability of Provisions. If any right, preference or
limitation of the Junior Preferred Stock set forth in this Amended and Restated
Certificate of Incorporation (as amended from time to time) is invalid, unlawful
or incapable of being enforced by reason of any rule or law or public policy,
all other rights, preferences and limitations set forth in such Amended and
Restated Certificate of Incorporation, as amended, which can be given effect
without the invalid, unlawful or unenforceable right, preference or limitation
shall, nevertheless remain in full force and effect, and no right, preference or
limitation herein set forth shall be deemed dependent upon any other such right,
preference or limitation unless so expressed herein.
11. Notices. All notices and other communications required or
permitted to be given to the Corporation under this section (D) of ARTICLE
FOURTH shall be made by courier to the Corporation at its principal executive
offices at the following address:
Corning Consumer Products Company
E-Building
Houghton Park
Corning, New York 14831
Telecopy: (607) 974-2215
Attention: Secretary
Minor imperfections in any such notice shall not affect the validity thereof.
12. Limitations. Except as may otherwise be required by law,
the shares of Junior Preferred Stock shall not have any powers, preferences or
relative, participating, optional or other special rights other than those
specifically set forth in this Amended and Restated Certificate of Incorporation
of the Corporation.
FIFTH: The name and mailing address of the incorporator is as
follows:
<TABLE>
<CAPTION>
Name Mailing Address
---- ---------------
<S> <C>
M. Ann Gosnell Houghton Park
Corning, New York 14831
</TABLE>
8
<PAGE>
SIXTH: Elections of directors need not be by written ballot
except and to the extent provided in the By-Laws of the Corporation.
SEVENTH: If (A) any two or more stockholders or subscribers to
stock of the Corporation shall enter into any agreement abridging, limiting or
restricting the rights of any one or more of them to sell, assign, transfer,
mortgage, pledge or hypothecate any or all of the stock of the Corporation held
by any one or more of them and if a copy of said agreement shall be filed with
the Corporation, or if (B) the incorporator or the stockholders entitled to vote
shall adopt any by-law provision abridging, limiting or restricting the
aforesaid rights of any stockholders, then and in either of such events, all
certificates for shares of stock subject to such abridgements, limitations or
restrictions shall have a reference thereto endorsed thereon by an officer of
the Corporation and such stock shall not thereafter be transferred on the books
of the Corporation except in accordance with the terms and provisions of such
agreement or bylaw, as the case may be.
EIGHTH: (A) A director of the Corporation shall not be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director except for liability (1) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(2) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (3) under Section 174 of the Delaware
General Corporation Law, or (4) for any transaction from which the director
derived any improper personal benefit.
(B) The Corporation may indemnify, to the full extent
permitted by applicable law, any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he is or was a director or officer of the Corporation, or is or
was serving at the request of the Corporation, as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise.
(C) Any indemnification under Section (B) of this ARTICLE
EIGHTH (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
director or officer is proper in the circumstances because he has met any
applicable standard of conduct. Such determination may be made (1) by resolution
of the Board of Directors adopted in the manner provided in the By-Laws of the
Corporation, or (2) if a quorum consisting of directors who were not parties to
such action, suit or proceeding is not obtainable, or, even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (3) by the stockholders.
NINTH: Any action required or permitted to be taken at any
annual or special meeting of stockholders of the Corporation may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted.
9
<PAGE>
IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation which restates, integrates and amends the provisions of the
Certificate of Incorporation of the Corporation, having been duly adopted in
accordance with the provisions of Sections 228, 242 and 245 of the General
Corporation Law of the State of Delaware, has been executed by its duly
authorized officer and has been affixed hereunto with the corporate seal this
___ day of April 1998.
CORNING CONSUMER PRODUCTS COMPANY
By: -------------------------
Name:
Title:
10
<PAGE>
Exhibit 3.2
CORNING VITRO CORPORATION
A Delaware Corporation
BY-LAWS
Adopted October 18, 1991
<PAGE>
CORNING VITRO CORPORATION
A Delaware Corporation
BY-LAWS
TABLE OF CONTENTS
ARTICLE I
STOCKHOLDERS
Section 1.01 Annual Meetings. . . . . . . . . . . . . . . . . . . . . 1
Section 1.02 Special Meetings . . . . . . . . . . . . . . . . . . . . 1
Section 1.03 Notice of Meetings . . . . . . . . . . . . . . . . . . . 1
Section 1.04 Business Transacted at Special Meetings of
Stockholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.05 Quorum . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.06 Consent of Stockholders in Lieu of Meeting . . . . . . . 2
ARTICLE II
BOARD OF DIRECTORS
Section 2.01 General Powers . . . . . . . . . . . . . . . . . . . . . 2
Section 2.02 Number and Term of Office. . . . . . . . . . . . . . . . 2
Section 2.03 Election of Directors. . . . . . . . . . . . . . . . . . 2
Section 2.04 Annual and Regular Meetings. . . . . . . . . . . . . . . 2
Section 2.05 Special Meetings; Notice . . . . . . . . . . . . . . . . 3
Section 2.06 Telephonic Meetings. . . . . . . . . . . . . . . . . . . 3
Section 2.07 Quorum and Vote. . . . . . . . . . . . . . . . . . . . . 3
Section 2.08 Action Without a Meeting . . . . . . . . . . . . . . . . 3
Section 2.09 Manner of Acting . . . . . . . . . . . . . . . . . . . . 3
Section 2.10 Resignations . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.11 Removal of Directors . . . . . . . . . . . . . . . . . . 3
Section 2.12 Vacancies and Newly Created Directorships. . . . . . . . 4
Section 2.13. Reliance on Accounts and Reports, etc.. . . . . . . . . 4
Section 2.14 Committees . . . . . . . . . . . . . . . . . . . . . . . 4
(i)
<PAGE>
Page
----
ARTICLE III
OFFICERS
Section 3.01 Number and Designation . . . . . . . . . . . . . . . . . 4
Section 3.02 Additional Officers. . . . . . . . . . . . . . . . . . . 5
Section 3.03 Election . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.04 Removal and Vacancies. . . . . . . . . . . . . . . . . . 5
Section 3.05 Duties of the Chairman of the Board of Directors . . . . 5
Section 3.06 Duties of the President. . . . . . . . . . . . . . . . . 5
Section 3.07 Duties of the Vice President . . . . . . . . . . . . . . 5
Section 3.08 Duties of the Secretary. . . . . . . . . . . . . . . . . 5
Section 3.09 Duties of the Treasurer. . . . . . . . . . . . . . . . . 6
Section 3.10 Duties of the Controller . . . . . . . . . . . . . . . . 6
ARTICLE IV
EXECUTION OF INSTRUMENTS;
DEPOSITS; FINANCES
Section 4.01 General. . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 4.02 Corporate Indebtedness . . . . . . . . . . . . . . . . . 6
Section 4.03 Checks, Drafts, etc. . . . . . . . . . . . . . . . . . . 7
Section 4.04 Deposits . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.05 Dividends. . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.06 Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE V
CAPITAL STOCK
Section 5.01 Certificates of Stock. . . . . . . . . . . . . . . . . . 7
ARTICLE VI
SEAL; OFFICES
Section 6.01 Seal . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 6.02 Offices. . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE VII
AMENDMENTS
Section 7.01 Amendments . . . . . . . . . . . . . . . . . . . . . . . 8
(ii)
<PAGE>
-1-
BY-LAWS
OF
CORNING VITRO CORPORATION
ARTICLE I
STOCKHOLDERS
Section 1.01 ANNUAL MEETINGS. The annual meeting of the stockholders of the
Corporation for the election of directors and for the transaction of such other
business as properly may come before such meeting shall be held at such place
either within or outside the State of Delaware and at 11:00 A.M. local time on
the first Thursday in February (or, if such is a legal holiday, then on the next
succeeding business day), or at such other time and date as shall be fixed from
time to time by resolution of the Board of Directors and as set forth in the
notice of the meeting.
Section 1.02 SPECIAL MEETINGS. Special meetings of the stockholders may be
called at any time by the Chairman of the Board of Directors, if any, or by the
President (or, in the absence or disability of the Chairman of the Board and the
President, by any Vice President), or by the Board of Directors. Such special
meetings of the stockholders shall be held at such places, within or outside the
State of Delaware, as shall be specified in the respective notices or waivers of
notice thereof.
Section 1.03 NOTICE OF MEETINGS. The Secretary or any Assistant Secretary
shall cause written notice of the time and place of each meeting of the
stockholders to be mailed, telexed or cabled, at least ten but not more than
fifty days prior to the meeting, to each stockholder of record entitled to vote
at his post-office, telex or cable address, as the case may be, as such address
appears on the books of the Corporation at the time such notice is dispatched.
Such further notice shall be given as may be required by law. Notice of any
meeting of stockholders need not be given to any stockholder who shall sign a
waiver of such notice in writing, whether before or after the time of such
meeting. Notice of any adjourned meeting of the stockholders of the Corporation
need not be given.
Section 1.04 BUSINESS TRANSACTED AT SPECIAL MEETINGS OF
STOCKHOLDERS. Business transacted at any special meeting of stockholders shall
not be limited to the purposes stated in the notice thereof.
Section 1.05 QUORUM. Except as at the time otherwise required by statue or
by the Certificate of Incorporation, the presence at any stockholders' meeting,
in person or by proxy, of the holders of record of shares of stock (of any
class) entitled to vote at the meeting, aggregating a majority of the total
number of shares of stock of all classes then issued and
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outstanding and entitled to vote at the meeting, shall be necessary and
sufficient to constitute a quorum for the transaction of business.
Section 1.06 CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. To the extent
provided by any statute at the time in force, whenever the vote of stockholders
at a meeting thereof is required or permitted to be taken for or in connection
with any corporate action, by any statute, by the Certificate of Incorporation
or by these By-Laws, the meeting and vote of stockholder may be dispenses with
if the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitle to vote thereon were present and voted shall consent in
writing to such corporate action being taken.
ARTICLE II
BOARD OF DIRECTORS
Section 2.01 GENERAL POWERS. The property, affairs and business of the
Corporation shall be managed by the Board of Directors. The Board of Directors
may exercise all the powers of the Corporation, whether derived from law or the
Certificate of Incorporation, except such powers as are, by statute, by the
Certificate of Incorporation or by these By-Laws, vested solely in the
stockholders of the Corporation. No director need be a stockholder of the
Corporation.
Section 2.02 NUMBER AND TERM OF OFFICE. The number of Directors may be fixed
from time to time by resolution of the Board of Directors. Each Director
(whenever elected) shall hold office until his successor shall have been elected
and shall qualify, or until his death, or until he shall have resigned in the
manner provided in Section 2.10 hereof or shall have been removed in the manner
provided in Section 2.11 hereof.
Section 2.03 ELECTION OF DIRECTORS. Except as otherwise provided in Sections
2.11 and 2.12 hereof, the Directors shall be elected annually at the annual
meeting of the stockholders. In the event of the failure to elect Directors at
an annual meeting of the stockholders, then Directors may be elected at any
regular or special meeting of stockholders entitled to vote for election of
Directors, provided that notice of such meeting shall contain mention of such
purpose.
Section 2.04 ANNUAL AND REGULAR MEETINGS. The annual meeting of the Board of
Directors, for the choosing of officers and for the transaction of such other
business as may come before the meeting, shall be held in each year as soon as
possible after the annual meeting of the stockholders at the place of such
annual meeting of the stockholders, and notice of such annual meeting of the
Board of Directors shall not be required to be given. The Board of Directors
from time to time may provide by resolution for the holding of regular meetings
and fix the time and place (which may be within or outside the State of
Delaware) thereof. Notice of such regular meetings need not be given; provided,
however, that in case the Board of Directors shall fix or change the time or
place of regular meetings, notice of such action
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shall be mailed, telexed or cabled promptly to each Director who shall not have
been present at the meeting at which such action was taken.
Section 2.05 SPECIAL MEETINGS; NOTICE. Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board, if any, or
by the President (or, in the absence or disability of the Chairman of the Board
and the President, by any Vice President), or by any two Directors, at such time
and place (which may be within or outside of the State of Delaware) as may be
specified in the respective notices or waivers of notice thereof. Special
meetings of the Board of Directors may be called on three days' notice to each
director, personally or by telephone, facsimile, telex, or cable, or on seven
days' notice by mail. Notice of any special meeting need not be given to any
Director who shall be present at such meeting, or to any Director who shall
waive notice of such meeting in writing, whether before or after the time of
such meeting, and any business may be transacted thereat. No notice need be
given of any adjourned meeting.
Section 2.06 TELEPHONIC MEETINGS. Directors may participate in a meeting of
the Board of Directors, or a meeting of any committee designated by the Board,
by means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this By-Law shall constitute presence in
person at such meeting.
Section 2.07 QUORUM AND VOTE. At all meetings of the Board of Directors, the
presence of a majority of the total authorized number of Directors under Section
2.02 hereof shall be necessary and sufficient to constitute a quorum for the
transaction of business. Except when otherwise required by statute, the vote of
a majority of the total number of Directors present and acting at a meeting at
which a quorum is present shall be the act of the Board of Directors. In the
absence of a quorum, a majority of the Directors present may adjourn the meeting
from time to time, until a quorum shall be present.
Section 2.08 ACTION WITHOUT A MEETING. Any action required or permitted to
be taken at any meeting of the Board of Directors or any meeting of a Committee
of the Board of Directors may be taken without a meeting, if written consents
thereto are signed by all members of the Board or Committee and such written
consents are filed with the minutes of proceedings of the Board.
Section 2.09 MANNER OF ACTING. The Directors shall act only as a Board, and
the individual Directors shall have no power as such.
Section 2.10 RESIGNATIONS. Any Director may resign at any time by delivering
a written resignation to the Chairman of the Board, if any, the President, a
Vice President, the Secretary or any Assistant Secretary. Unless otherwise
specified therein, such resignation shall take effect upon delivery.
Section 2.11 REMOVAL OF DIRECTORS. Any Director may be removed at any time,
either for or without cause, upon the affirmative vote of the holders of a
majority of the outstanding shares of stock of the Corporation entitled to vote
for the election of such Director, given at a
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special meeting of such stockholders called for the purpose; provided, however,
that if less than the entire Board is to be removed, no Director may be removed
without cause if the votes cast against his removal would be sufficient to elect
him if then cumulatively voted at an election of the entire Board of Directors.
Any vacancy in the Board of Directors caused by any such removal may be filled
at such meeting by a vote of the stockholders entitled to vote for the election
of the Directors so removed. If such stockholders do not fill such vacancy at
such meeting, such vacancy may be filled in the manner provided in Section 2.12
hereof.
Section 2.12 VACANCIES AND NEWLY CREATED DIRECTORSHIPS. If any vacancies
shall occur in the Board of Directors, by reason of death, resignation, removal
or otherwise, or if the authorized number of Directors shall be increased, the
Directors then in office shall continue to act, and such vacancies may be filled
by a majority of the Directors then in office, though less than a quorum, and
the Directors so chosen shall hold office until the next annual election and
until their successors are duly elected and qualified, unless sooner displaced.
Any such vacancies or newly created Directorships may also be filled by a vote
of the stockholders entitled to vote for the election of Directors.
Section 2.13. RELIANCE ON ACCOUNTS AND REPORTS, ETC. A Director, or a member
of any committee designated by the Board of Directors, in the performance of his
duties, shall be fully protected in relying in good faith on the books of
accounts or reports made to the Corporation by any of its officials, or by an
independent certified public accountant, or by an appraiser selected with
reasonable care by the Board of Directors, or by any such committee, or in
relying in good faith upon other records of the Corporation.
Section 2.14 COMMITTEES. The Board of Directors shall designate at least two
of its members to each of the following standing Committees of the Board, and
shall by resolution delegate such matters to such committees as it shall in its
discretion determine: Management & Compensation, Finance & Audit, and
Government Affairs. The Board may establish such other committees having such
responsibilities and composition as it shall from time to time by resolution
determine.
ARTICLE III
OFFICERS
Section 3.01 NUMBER AND DESIGNATION. The officers of the Corporation shall
be chosen by the Board of Directors and shall include Chairman of the Board, a
President, a Vice President, a Secretary, a Controller and a Treasurer who shall
hold office until their successors are chosen and qualify. The Board of
Directors may also choose additional Vice Presidents, and one or more Assistant
Secretaries and Assistant Treasurers. Any one or more of such Vice Presidents
may be designated as Executive or Senior Vice President. Any number of offices
may be held by the same person, except that no person shall simultaneously hold
the offices of Chairman or President and Secretary, Treasurer or Controller.
The Chairman shall be
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member of the Board of Directors. The Board may also designate any Vice
Presidents as Chief Financial Officer and as General Counsel.
Section 3.02 ADDITIONAL OFFICERS. The Board of Directors may appoint such
other officers and agents as it shall deem necessary who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board of Directors.
Section 3.03 ELECTION. The Board of Directors at its first meeting or such
subsequent meetings as shall be held prior to its first annual meeting, and
thereafter annually at its annual meeting, shall choose the officers of the
Corporation. If any officers are not chosen at an annual meeting, such officers
may be chosen at any subsequent regular or special meeting.
Section 3.04 REMOVAL AND VACANCIES. 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 Board of Directors, either with or without cause. Any vacancy
occurring in any office or the Corporation shall be filled by the Board of
Directors.
Section 3.05 DUTIES OF THE CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman
of the Board of Directors, if present, shall preside at all stockholders'
meetings and all meetings of the Board at which he is present and shall have
such other duties as shall be assigned to him or her by the Board of Directors.
The Chairman shall be the Chief Executive Officer of the Corporation.
Section 3.06 DUTIES OF THE PRESIDENT. The President shall have direct charge
of the business of the Corporation, subject to the general control of the Board
of Directors, and shall be the Chief Operating Officer of the Corporation and
member of the Board of Directors. In the absence of the Chairman of the Board
or if no Chairman of the Board has been chosen, the President shall also have
the duties of the Chairman of the Board.
Section 3.07 DUTIES OF THE VICE PRESIDENT. In the event of the absence or
disability of the Chairman of the Board and the President, the Executive or
Senior Vice President, or if absent, any Vice President designated by the Board
of Directors, shall perform all the duties of the President, and when so acting,
shall have all the powers of, and be subject to all the restrictions upon, the
President. Except where by law the signature of the President is required, each
of the Vice Presidents shall possess the same power as the President to sign all
certificates, contracts, obligations and other instruments of the Corporation.
Any Vice President shall perform such other duties and may exercise such other
powers as from time to time may be assigned to him or her by these By-Laws or by
the Board of Directors or by the President.
Section 3.08 DUTIES OF THE SECRETARY. The Secretary shall, if present, act
as Secretary of, and keep the minutes of, all the proceedings of the meetings of
the stockholders and of the Board of Directors and of any committee of the Board
of Directors in one or more books to be kept for that purpose; shall perform
such other duties as shall be assigned to him or her by
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the President or the Board of Directors; and, in general, shall perform all
duties incident to the office of Secretary.
Section 3.09 DUTIES OF THE TREASURER. The Treasurer shall keep or cause to
be kept full and accurate records of all receipts and disbursements in the books
of the Corporation and shall have the care and custody of all funds and
securities of the Corporation. He or she shall disburse and funds of the
Corporation as may be ordered by the Board of Directors, shall render to the
President and Directors, whenever they request it, an account of all of his or
her transactions as Treasurer and shall perform such other duties as may be
assigned to him or her by the President of the Board of Directors; and, in
general, shall perform all duties incident to the office of Treasurer.
Section 3.10 DUTIES OF THE CONTROLLER. The Controller shall be the chief
accounting officer of the Corporation. He or she shall keep or cause to be kept
all books of account and accounting records of the Corporation and shall keep
and maintain, or cause to be kept and maintained, adequate and correct accounts
of the properties and business transactions of the Corporation. He or she shall
prepare or cause to be prepared appropriate financial statements for the
Corporation and shall perform such other duties as may be assigned to him or her
by the President or the Board of Directors; and, in general, shall perform all
duties incident to the office of Controller.
ARTICLE IV
EXECUTION OF INSTRUMENTS; DEPOSITS;
FINANCES
Section 4.01 GENERAL. Subject to the provisions of Sections 4.02 and 4.03
hereof, all deeds, documents, transfers, contracts, and agreements and other
instruments requiring execution by the Corporation shall be signed by the
Chairman of the Board, the President or a Vice President and by the Treasurer or
Secretary, or an Assistant Treasurer an Assistant Secretary, or as the Board of
Directors may otherwise from time to time authorize by resolution. Any such
authorization may be general or confined to specific instances.
Section 4.02 CORPORATE INDEBTEDNESS. No loan shall be contracted on behalf
of the Corporation, and no evidences of indebtedness shall be issued in its
name, unless authorized by the Board of Directors. Such authorizations of the
Board may be general or confined to specific instances. Loans authorized by the
Board of Directors may be effected at any time for the Corporation from any
bank, trust company or other institution, or from any firm, corporation or
individual. All bonds, debentures, notes and other obligations or evidences of
indebtedness of the Corporation issued for such loans as the Board shall
authorize shall be made, executed and delivered as the Board of Directors shall
authorize. All notes and other obligations or evidences of indebtedness
permitted hereunder without authorization of the Board of Directors shall be
signed by both the President and either the Secretary or the Treasurer. When so
authorized by the Board of Directors, any part of or all the properties,
including contract rights, assets, business or goodwill of the Corporation,
whether then owned
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or thereafter acquired, may be mortgaged, pledged, hypothecated or conveyed or
assigned in trust as security for the payment of such bonds, debentures, notes
and other obligations or evidences of indebtedness to the Corporation, and of
the interest thereon, by instruments executed and delivered in the name of the
Corporation.
Section 4.03 CHECKS, DRAFTS, ETC. All checks, drafts, bills of exchange or
orders for the payment of money, issued in the name of the Corporation, shall be
signed only by the Treasurer or such other person or persons and in such manner
as may from time to time be designated by the Board of Directors, which
designation may be general or confined to specific instances; and unless so
designated, no person shall have any power or authority thereby to bind the
Corporation or to pledge its credit or to render it liable.
Section 4.04 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 depositories as the Board of Directors may
select. The Board of Directors may make such special rules and regulations with
respect to such bank accounts, not inconsistent with the provisions of these
By-Laws, as it may deem expedient. For the purpose of deposit and for the
purpose of collection for the account of the Corporation, checks, drafts and
other orders for the payment of money which are payable to the order of the
Corporation shall be endorsed, assigned and delivered by the Treasurer or such
other person or persons and in such manner as may from time to time be
designated by the Board of Directors.
Section 4.05 DIVIDENDS. Dividends upon the stock of the Corporation, subject
to the provisions of the Certificate of Incorporation, if any, may be declared
by the Board of Directors at any regular or special meeting, pursuant to law.
Such declaration may be continuing or limited to a specific payment or
distribution. Dividends may be paid in cash, in property, or in shares of
stock, subject to the provisions of the Certificate of Incorporation.
Section 4.06 FISCAL YEAR. The fiscal year of the Corporation shall be the
calendar year, unless otherwise fixed by resolution of the Board of Directors.
ARTICLE V
CAPITAL STOCK
Section 5.01 CERTIFICATES OF STOCK. Every holder of stock in the Corporation
shall be entitled to have a certificate signed by, or in the name of the
Corporation by, the Chairman of the Board of Directors, or the President or a
Vice President, and by the Treasurer or an Assistant Treasurer, or by the
Secretary or an Assistant Secretary of the Corporation, certifying the number of
shares owned by him in the Corporation.
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ARTICLE VI
SEAL; OFFICES
Section 6.01 SEAL. The corporate seal shall have inscribed thereon the name
of the Corporation, the year of its incorporation and the words "Corporate Seal,
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
Section 6.02 OFFICES. The registered office of the Corporation shall be in
the City of Wilmington, County of New Castle, State of Delaware. The
Corporation may also have offices at such other places both within or outside
the State of Delaware as the Board of Directors may from time to time determine
or as the business of the Corporation may require.
ARTICLE VII
AMENDMENTS
Section 7.01 AMENDMENTS. These By-Laws may only be altered or repealed and
new By-Laws adopted by resolution of the Board of Directors and the vote or
written consent of holders of not less than two-thirds of the outstanding Common
Stock.
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CORNING CONSUMER PRODUCTS COMPANY
9 5/8% Senior Subordinated Notes due 2008
-----------------------
INDENTURE
Dated as of May 5, 1998
-----------------------
THE BANK OF NEW YORK,
Trustee
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ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01. Definitions
SECTION 1.02. Other Definitions ................................................ 2
SECTION 1.03. Incorporation by Reference of Trust Indenture Act ................ 2
SECTION 1.04. Rules of Construction ............................................ 2
ARTICLE 2
The Securities
SECTION 2.01 Amount of Securities; Issuable in Series ......................... 2
SECTION 2.02. Form and Dating .................................................. 2
SECTION 2.03. Execution and Authentication ..................................... 2
SECTION 2.04. Registrar and Paying Agent ....................................... 2
SECTION 2.05. Paying Agent to Hold Money in Trust .............................. 2
SECTION 2.06. Securityholder Lists ............................................. 2
SECTION 2.07. Transfer and Exchange ............................................ 2
SECTION 2.08. Replacement Securities ........................................... 2
SECTION 2.09. Outstanding Securities ........................................... 2
SECTION 2.10. Temporary Securities ............................................. 2
SECTION 2.11. Cancelation ...................................................... 2
SECTION 2.12. Defaulted Interest ............................................... 3
SECTION 2.13. CUSIP Numbers .................................................... 3
ARTICLE 3
Redemption
SECTION 3.01. Notices to Trustee ............................................... 3
SECTION 3.02. Selection of Securities To Be Redeemed ........................... 3
SECTION 3.03. Notice of Redemption ............................................. 3
SECTION 3.04. Effect of Notice of Redemption ................................... 3
SECTION 3.05. Deposit of Redemption Price ...................................... 3
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SECTION 3.06. Securities Redeemed in Part ...................................... 3
ARTICLE 4
Covenants
SECTION 4.01. Payment of Securities ............................................ 3
SECTION 4.02. SEC Reports ...................................................... 3
SECTION 4.03. Limitation on Incurrence of Indebtedness and Issuance
of Disqualified Stock ........................................... 3
SECTION 4.04. Limitation on Restricted Payments ................................ 3
SECTION 4.05. Dividend and Other Payment Restrictions Affecting
Subsidiaries .................................................... 4
SECTION 4.06. Asset Sales ...................................................... 4
SECTION 4.07. Transactions with Affiliates ..................................... 4
SECTION 4.08. Change of Control ................................................ 5
SECTION 4.09. Compliance Certificate ........................................... 5
SECTION 4.10. Further Instruments and Acts ..................................... 5
SECTION 4.11. Limitation on Guarantees of Indebtedness by Restricted
Subsidiaries .................................................... 5
SECTION 4.12. Liens ............................................................ 5
SECTION 4.13. Limitation on Other Senior Subordinated Indebtedness ............. 5
ARTICLE 5
Successor Company
SECTION 5.01. Merger, Consolidation, or Sale of All or Substantially
All Assets ...................................................... 5
ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default ................................................ 5
SECTION 6.02. Acceleration ..................................................... 5
SECTION 6.03. Other Remedies ................................................... 5
SECTION 6.04. Waiver of Past Defaults .......................................... 5
SECTION 6.05. Control by Majority .............................................. 5
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SECTION 6.06. Limitation on Suits .............................................. 6
SECTION 6.07. Rights of Holders to Receive Payment.............................. 6
SECTION 6.08. Collection Suit by Trustee........................................ 6
SECTION 6.09. Trustee May File Proofs of Claim ................................. 6
SECTION 6.10. Priorities ....................................................... 6
SECTION 6.11. Undertaking for Costs ............................................ 6
SECTION 6.12. Waiver of Stay or Extension Laws ................................. 6
ARTICLE 7
Trustee
SECTION 7.01. Duties of Trustee ................................................ 6
SECTION 7.02. Rights of Trustee ................................................ 6
SECTION 7.03. Individual Rights of Trustee ..................................... 6
SECTION 7.04. Trustee's Disclaimer ............................................. 6
SECTION 7.05. Notice of Defaults ............................................... 6
SECTION 7.06. Reports by Trustee to Holders .................................... 6
SECTION 7.07. Compensation and Indemnity ....................................... 6
SECTION 7.08. Replacement of Trustee ........................................... 6
SECTION 7.09. Successor Trustee by Merger ...................................... 6
SECTION 7.10. Eligibility; Disqualification .................................... 6
SECTION 7.11. Preferential Collection of Claims Against Company ................ 6
ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities; Defeasance.................. 6
SECTION 8.02. Conditions to Defeasance ......................................... 6
SECTION 8.03. Application of Trust Money ....................................... 7
SECTION 8.04. Repayment to Company ............................................. 7
SECTION 8.05. Indemnity for Government Obligations ............................. 7
SECTION 8.06. Reinstatement .................................................... 7
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ARTICLE 9
Amendments
SECTION 9.01. Without Consent of Holders ....................................... 7
SECTION 9.02. With Consent of Holders .......................................... 7
SECTION 9.03. Compliance with Trust Indenture Act .............................. 7
SECTION 9.04. Revocation and Effect of Consents and Waivers .................... 7
SECTION 9.05. Notation on or Exchange of Securities ............................ 7
SECTION 9.06. Trustee to Sign Amendments ....................................... 7
SECTION 9.07. Payment for Consent .............................................. 7
ARTICLE 10
Subordination
SECTION 10.01. Agreement To Subordinate ........................................ 7
SECTION 10.02. Liquidation, Dissolution, Bankruptcy ............................ 7
SECTION 10.03. Default on Senior Indebtedness .................................. 7
SECTION 10.04. Acceleration of Payment of Securities ........................... 7
SECTION 10.05. When Distribution Must Be Paid Over ............................. 7
SECTION 10.06. Subrogation ..................................................... 7
SECTION 10.07. Relative Rights ................................................. 7
SECTION 10.08. Subordination May Not Be Impaired by Company .................... 7
SECTION 10.09. Rights of Trustee and Paying Agent .............................. 7
SECTION 10.10. Distribution or Notice to Representative ........................ 7
SECTION 10.11. Article 10 Not To Prevent
Events of Default or Limit Right To Accelerate ................. 7
SECTION 10.12. Trust Moneys Not Subordinated ................................... 7
SECTION 10.13. Trustee Entitled To Rely ........................................ 7
SECTION 10.14. Trustee to Effectuate Subordination ............................. 8
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Indebtedness......... 8
SECTION 10.16. Reliance by Holders of Senior Indebtedness on
Subordination Provisions........................................ 8
SECTION 10.17. Trustee's Compensation Not Prejudiced............................ 8
SECTION 10.18. Defeasance ...................................................... 8
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ARTICLE 11
Miscellaneous
SECTION 11.01. Trust Indenture Act Controls .................................... 8
SECTION 11.02. Notices ......................................................... 8
SECTION 11.03. Communication by Holders with Other Holders ..................... 8
SECTION 11.04. Certificate and Opinion as to Conditions Precedent .............. 8
SECTION 11.05. Statements Required in Certificate or Opinion ................... 8
SECTION 11.06. When Securities Disregarded ..................................... 8
SECTION 11.07. Rules by Trustee, Paying Agent and Registrar .................... 8
SECTION 11.08. Legal Holidays .................................................. 8
SECTION 11.09. GOVERNING LAW ................................................... 8
SECTION 11.10. No Recourse Against Others ...................................... 8
SECTION 11.11. Successors ...................................................... 8
SECTION 11.12. Multiple Originals .............................................. 8
SECTION 11.13. Table of Contents; Headings ..................................... 8
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Appendix A - Provisions Relating to Original Securities, Additional Securities,
Private Exchange Securities and Exchange Securities
Exhibit A - Form of Initial Security
Exhibit B - Form of Exchange Security
Exhibit C - Form of Certificate to be Delivered in Connection with Transfers of
Regulation S Global Security
Exhibit D - Form of Transferee Letter of Representation
<PAGE>
INDENTURE dated as of May 5, 1998, between CORNING CONSUMER
PRODUCTS COMPANY, a Delaware corporation (the "Company"), and THE BANK
OF NEW YORK, a New York banking corporation, as trustee (the
"Trustee").
Each party agrees as follows for the benefit of the other party and for the
equal and ratable benefit of the Holders of (i) the Company's 9 5/8% Senior
Subordinated Notes due 2008 issued on the date hereof (the "Original
Securities"), (ii) any Additional Securities (as defined herein) that may be
issued on any Issuance Date (all such Securities in clauses (i) and (ii) being
referred to collectively as the "Initial Securities"), (iii) if and when issued
as provided in the Registration Agreement (as defined in Appendix A hereto (the
"Appendix")), the Company's 9 5/8% Senior Subordinated Notes due 2008 issued in
the Registered Exchange Offer (as defined in the Appendix) in exchange for any
Initial Securities (the "Exchange Securities") and (iv) if and when issued as
provided in the Registration Agreement, the Private Exchange Securities (as
defined in the Appendix, and together with the Initial Securities and any
Exchange Securities issued hereunder, the "Securities") issued in the Private
Exchange (as defined in the Appendix). Except as otherwise provided herein, the
Securities will be limited to $300,000,000 in aggregate principal amount
outstanding, of which $200,000,000 in aggregate principal amount will be
initially issued on the date hereof. Subject to the conditions set forth herein,
the Company may issue up to $100,000,000 aggregate principal amount of
Additional Securities.
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.
"Acquired Indebtedness" 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 Restricted 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
Restricted Subsidiary of such specified Person, and (ii) Indebtedness secured by
a Lien encumbering any asset acquired by such specified Person.
<PAGE>
"Additional Securities" means up to $100,000,000 aggregate principal amount
of 9 5/8% Senior Subordinated Notes due 2008 issued under the terms of this
Indenture subsequent to the Closing Date, other than Exchange Securities issued
in exchange for Original Securities.
"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.
"Applicable Premium" means, with respect to a Security at any Redemption
Date, the greater of (i) 1.0% of the principal amount of such Security and (ii)
the excess of (A) the present value at such time of (1) the redemption price of
such Security at May 1, 2003 (such redemption price being described under
paragraph 5 of the Securities) plus (2) all required interest payments due on
such Security through May 1, 2003, computed using a discount rate equal to the
Treasury Rate plus 50 basis points, over (B) the principal amount of such
Security.
"Asset Sale" means (i) the sale, conveyance, transfer or other disposition
(whether in a single transaction or a series of related transactions) of
property or assets (including by way of a sale and leaseback) of the Company or
any Restricted Subsidiary (each referred to in this definition as a
"disposition") or (ii) the issuance or sale of Equity Interests of any
Restricted Subsidiary (whether in a single transaction or a series of related
transactions), in each case, other than:
(a) a disposition of Cash Equivalents or Investment Grade Securities or
obsolete or worn out equipment in the ordinary course of business or
inventory or goods held for sale in the ordinary course of business;
(b) the disposition of all or substantially all of the assets of the
Company in a manner permitted pursuant to Section 5.01 or any disposition
that constitutes a Change of Control pursuant to this Indenture;
(c) the making of any Restricted Payment or Permitted Investment that
is permitted to be made, and is made, pursuant to Section 4.04;
(d) any disposition of assets with an aggregate fair market value of
less than $1.0 million;
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(e) any disposition of property or assets or issuance of securities by
a Restricted Subsidiary to the Company or by the Company or a Restricted
Subsidiary to a Restricted Subsidiary;
(f) any exchange of like property pursuant to Section 1031 of the Code
for use in a Similar Business;
(g) the lease, assignment or sub-lease of any real or personal property
in the ordinary course of business;
(h) any financing transaction with respect to property built or
acquired by the Company or any Restricted Subsidiary after the Closing Date,
including, without limitation, sale-leasebacks and asset securitizations;
(i) foreclosures on assets;
(j) any sale of Equity Interests in, or Indebtedness or other
securities of, an Unrestricted Subsidiary (with the exception of Investments
in Unrestricted 3 Subsidiaries acquired pursuant to clause (j) of the
definition of Permitted Investments); and
(k) sales of accounts receivable, or participations therein, in
connection with any Receivables Facility.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"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.
"Capitalized 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 and reflected as a liability on
a balance sheet (excluding the footnotes thereto) in accordance with GAAP.
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"Cash Dividend" shall have the meaning given to it in the Offering
Memorandum.
"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, (iii) certificates of deposit, time
deposits and eurodollar time deposits with maturities of one year or less from
the date of acquisition, bankers' acceptances with maturities not exceeding one
year and overnight bank deposits, in each case with any commercial bank having
capital and surplus in excess of $500.0 million, (iv) repurchase obligations for
underlying securities of the types described in clauses (ii) and (iii) of this
definition entered into with any financial institution meeting the
qualifications specified in clause (iii) above, (v) commercial paper rated A-1
or the equivalent thereof by Moody's or S&P and in each case maturing within one
year after the date of acquisition, (vi) investment funds investing 95% of their
assets in securities of the types described in clauses (i)-(v) above, (vii)
readily marketable direct obligations issued by any state of the United States
of America or any political subdivision thereof having one of the two highest
rating categories obtainable from either Moody's or S&P and (viii) Indebtedness
or preferred stock issued by Persons with a rating of "A" or higher from S&P or
"A2" or higher from Moody's.
"CCPC Acquisition" means CCPC Acquisition Corp.
"Change of Control" means the occurrence of any of the following:
(i) the sale, lease or transfer, in one or a series of related
transactions, of all or substantially all of the assets of the Company
and its Subsidiaries, taken as a whole, to any Person other than a
Permitted Holder and their Related Parties; or
(ii) the Company becomes aware of (by way of a report or any other
filing pursuant to Section 13(d) of the Exchange Act, proxy, vote,
written notice or otherwise) the acquisition by any Person or group
(within the meaning of Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act, or any successor provision), including any group acting
for the purpose of acquiring, holding or disposing of securities
(within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other
than the Permitted Holders and their Related Parties, in a single
transaction or in a related series of transactions, by way of merger,
consolidation or other business combination or purchase of beneficial
ownership (within the meaning of Rule 13d-3 under the Exchange Act, or
any successor provision) of 50% or more of the total Voting Stock of
the Company.
"Closing Date" means the date of this Indenture.
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"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the Company's shares of common stock, par value $0.01
per share.
"consolidated" with respect to any Person refers to such Person consolidated
with its Restricted Subsidiaries, and excludes from such consolidation any
Unrestricted Subsidiary as if such Unrestricted Subsidiary were not an Affiliate
of such Person.
"Consolidated Depreciation and Amortization Expense" means with respect to
any Person for any period, the total amount of depreciation and amortization
expense and other noncash charges (excluding any noncash item that represents an
accrual, reserve or amortization of a cash expenditure for a future period) of
such Person and its Restricted Subsidiaries for such period on a consolidated
basis and otherwise determined in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any period, the sum,
without duplication, of: (a) consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, to the extent such expense was
deducted in computing Consolidated Net Income (including amortization of
original issue discount, non-cash interest payments, the interest component of
Capitalized Lease Obligations, and net payments (if any) pursuant to Hedging
Obligations, excluding amortization of deferred financing fees) and (b)
consolidated capitalized interest of such Person and its Restricted Subsidiaries
for such period, whether paid or accrued; provided, however, that Receivables
Fees shall be deemed not to constitute Consolidated Interest Expense.
"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, and otherwise determined in accordance
with GAAP; provided, however, that (i) any net after-tax extraordinary gains or
losses (less all fees and expenses relating thereto) shall be excluded, (ii) the
Net Income for such period shall not include the cumulative effect of a change
in accounting principles during such period, (iii) any net after-tax income
(loss) from discontinued operations and any net after-tax gains or losses on
disposal of discontinued operations shall be excluded, (iv) any net after-tax
gains or losses (less all fees and expenses relating thereto) attributable to
asset dispositions other than in the ordinary course of business (as determined
in good faith by the Board of Directors of the Company) shall be excluded, (v)
the Net Income for such period of any Person that is not a Subsidiary, or is an
Unrestricted Subsidiary, or that is accounted for by the equity method of
accounting, shall be excluded; provided that Consolidated Net Income of the
Company shall be increased by the amount of dividends or distributions or other
payments actually paid in cash (or to the extent converted into cash) to the
referent Person or a Restricted Subsidiary (subject to the limits in clause
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(vii) below) thereof in respect of such period, (vi) the Net Income of any
Person acquired in a pooling of interests transaction shall not be included for
any period prior to the date of such acquisition and (vii) the Net Income for
such period of any Restricted Subsidiary shall be excluded if the declaration or
payment of dividends or similar distributions by that Restricted Subsidiary of
its Net Income is not at the date of determination wholly permitted without any
prior governmental approval (which has not been obtained) or, directly or
indirectly, by the 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, unless such
restriction with respect to the payment of dividends or in similar distributions
has been legally waived; provided that Consolidated Net Income of the Company
shall be increased by the amount of dividends or other distributions or other
payments actually paid in cash (or to the extent converted into cash) to the
referent Person or a Restricted Subsidiary thereof in respect of such period.
Notwithstanding the foregoing, for the purpose of Section 4.04 only, there shall
be excluded from Consolidated Net Income any sale or other disposition of
Restricted Investments made by the Company and its Restricted Subsidiaries,
repurchases and redemptions of Restricted Investments, repayments of loans and
advances which constitute Restricted Investments, sales of the stock of an
Unrestricted Subsidiary or distributions or dividends from an Unrestricted
Subsidiary, in each case only to the extent such amounts increase the amount of
Restricted Payments permitted under Section 4.04(a)(3)(iv).
"Contingent Obligations" means, with respect to any Person, any obligation
of such Person guaranteeing any leases, dividends or other obligations that do
not constitute Indebtedness ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(i) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (ii) to advance or supply funds (A) for the
purchase or payment of any such primary obligation or (B) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, or (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation against loss in respect thereof.
"Contingent Payment" shall have the meaning given to it in the Offering
Memorandum.
"Credit Facilities" means, with respect to the Company, one or more debt
facilities (including, without limitation, the Senior Credit Facilities) or
commercial paper facilities with banks or other institutional lenders or
indentures providing for revolving credit loans, term loans, receivables
financing (including through the sale of receivables
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to such lenders or to special purpose entities formed to borrow from such
lenders against receivables), letters of credit or other long-term indebtedness,
in each case, as amended, restated, modified, renewed, refunded, replaced or
refinanced in whole or in part from time to time.
"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 Noncash Consideration" means the fair market value of noncash
consideration received by the Company or one of its Restricted Subsidiaries in
connection with an Asset Sale that is so designated as Designated Noncash
Consideration pursuant to an Officers' Certificate, setting forth the basis of
such valuation, executed by the principal executive officer and the principal
financial officer of the Company, less the amount of cash or Cash Equivalents
received in connection with a subsequent sale of such Designated Noncash
Consideration.
"Designated Preferred Stock" means preferred stock of the Company (other
than Disqualified Stock) that is issued for cash (other than to a Restricted
Subsidiary) and is so designated as Designated Preferred Stock, pursuant to an
Officers' Certificate executed by the principal executive officer and the
principal financial officer of the Company, on the issuance date thereof, the
cash proceeds of which are excluded from the calculation set forth in Section
4.04(a)(3).
"Designated Senior Indebtedness" means (i) Senior Indebtedness under the
Senior Credit Facilities and (ii) any other Senior Indebtedness permitted under
this Indenture the principal amount of which is $25.0 million or more and that
has been designated by the Company as Designated Senior Indebtedness in an
Officers' Certificate executed by the principal executive officer and principal
financial officer of the Company.
"Disqualified Stock" means, with respect to any Person, any Capital Stock of
such Person which, by its terms (or by the terms of any security into which it
is convertible or for which it is putable or exchangeable), or upon the
happening of any event, matures or is mandatorily redeemable (other than as a
result of a change of control or asset sale), pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the holder thereof
(other than as a result of a change of control or asset sale), in whole or in
part, in each case prior to the date 91 days after the earlier of the maturity
date of the Securities or the date the Securities are no longer outstanding;
provided, however, that if such Capital Stock is issued to any plan for the
benefit of employees of the Company or its Subsidiaries or by any such plan to
such employees, such Capital Stock shall not constitute Disqualified Stock
solely because it may be required to be repurchased by the Company or its
Subsidiaries in order to satisfy applicable statutory or regulatory obligations.
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"EBITDA" means, with respect to any Person for any period, the Consolidated
Net Income of such Person for such period plus (a) provision for taxes based on
income or profits of such Person for such period deducted in computing
Consolidated Net Income, plus (b) Consolidated Interest Expense of such Person
for such period and any Receivables Fees paid by such Person or any of its
Restricted Subsidiaries during such period, in each case to the extent the same
was deducted in calculating such Consolidated Net Income, plus (c) Consolidated
Depreciation and Amortization Expense of such Person for such period to the
extent such depreciation and amortization were deducted in computing
Consolidated Net Income, plus (d) any expenses or charges related to any Equity
Offering, Permitted Investment, acquisition, recapitalization or Indebtedness
permitted to be Incurred by this Indenture (whether or not successful)
(including such fees, expenses or charges related to the Transactions) and
deducted in such period in computing Consolidated Net Income, plus (e) the
amount of any restructuring charge deducted in such period in computing
Consolidated Net Income (including any one-time costs incurred in connection
with acquisitions after the Closing Date), plus (f) without duplication, any
other non-cash charges reducing Consolidated Net Income for such period
(excluding any such charge which requires an accrual of a cash reserve for any
future period) plus (g) the amount of any minority interest expense deducted in
calculating Consolidated Net Income, less, without duplication (h) non-cash
items increasing Consolidated Net Income of such Person for such period
(excluding any items which represent the reversal of any accrual of, or cash
reserve for, anticipated cash charges in any prior period).
"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).
"Equity Offering" means any public or private sale of common stock or
preferred stock of the Company (excluding Disqualified Stock), other than (i)
public offerings with respect to the Company's Common Stock registered on Form
S-8 and (ii) any such public or private sale that constitutes an Excluded
Contribution.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"Excluded Contribution" means net cash proceeds, marketable securities or
Qualified Proceeds, in each case, received by the Company from (a) contributions
to its common equity capital and (b) the sale (other than to a Subsidiary or to
any Company or Subsidiary management equity plan or stock option plan or any
other management or employee benefit plan or agreement) of Capital Stock (other
than Disqualified Stock and Designated Preferred Stock) of the Company, in each
case designated as Excluded
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Contributions pursuant to an Officers' Certificate executed by the principal
executive officer and the principal financial officer of the Company on the date
such capital contributions are made or the date such Equity Interests are sold,
as the case may be, which are excluded from the calculation set forth in Section
4.04(a)(3).
"Existing Indebtedness" means Indebtedness of the Company or its Restricted
Subsidiaries in existence on the Closing Date, plus interest accruing thereon,
after application of the net proceeds of the sale of the Securities as described
the Offering Memorandum.
"Fixed Charge Coverage Ratio" means, with respect to any Person for any
period, the ratio of EBITDA of such Person for such period to the Fixed Charges
of such Person for such period. In the event that the Company or any of its
Restricted Subsidiaries Incurs or redeems any Indebtedness or issues or redeems
Disqualified Stock or preferred stock subsequent to the commencement of the
period for which the Fixed Charge Coverage Ratio is being calculated but prior
to 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 or redemption of
Indebtedness, or such issuance or redemption of Disqualified Stock or preferred
stock, as if the same had occurred at the beginning of the applicable
four-quarter period. For purposes of making the computation referred to above,
Investments, acquisitions, dispositions, mergers, consolidations and
discontinued operations (as determined in accordance with GAAP) that have been
made by the Company or any of its Restricted Subsidiaries during the
four-quarter reference period or subsequent to such reference period and on or
prior to or simultaneously with the Calculation Date shall be calculated on a
pro forma basis assuming that all such Investments, acquisitions, dispositions,
mergers, consolidations and discontinued operations (and the reduction of any
associated fixed charge obligations and the change in EBITDA resulting
therefrom) had occurred on the first day of the four-quarter reference period.
If since the beginning of such period any Person (that subsequently became a
Restricted Subsidiary or was merged with or into the Company or any Restricted
Subsidiary since the beginning of such period) shall have made any Investment,
acquisition, disposition, merger, consolidation or discontinued operation that
would have required adjustment pursuant to this definition, then the Fixed
Charge Coverage Ratio shall be calculated giving pro forma effect thereto for
such period as if such Investment, acquisition, disposition, merger,
consolidation or discontinued operation had occurred at the beginning of the
applicable four-quarter period. For purposes of this definition, whenever pro
forma effect is to be given to a transaction, the pro forma calculations shall
be made in good faith by a responsible financial or accounting officer of the
Company. If any Indebtedness bears a floating rate of interest and is being
given pro forma effect, the interest on such Indebtedness shall be calculated as
if the rate in effect on the Calculation Date had been the applicable rate for
the entire period (taking into account any Hedging
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Obligations applicable to such Indebtedness). Interest on a Capitalized Lease
Obligation shall be deemed to accrue at an interest rate reasonably determined
by a responsible financial or accounting officer of the Company to be the rate
of interest implicit in such Capitalized Lease Obligation in accordance with
GAAP. For purposes of making the computation referred to above, interest on any
Indebtedness under a revolving credit facility computed on a pro forma basis
shall be computed based upon the average daily balance of such Indebtedness
during the applicable period. Interest on Indebtedness that may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rate, shall be deemed to have been
based upon the rate actually chosen, or, if none, then based upon such optional
rate chosen as the Company may designate.
"Fixed Charges" means, with respect to any Person for any period, the sum of
(a) Consolidated Interest Expense of such Person for such period and (b) all
cash dividend payments (excluding items eliminated in consolidation) on any
series of Disqualified Stock of such Person.
"Foreign Subsidiary" means a Restricted Subsidiary not organized or existing
under the laws of the United States, any State thereof, the District of
Columbia, or any territory thereof.
"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 on the Closing Date.
"Government Securities" means securities that are (a) direct obligations of
the United States of America for the timely payment of which its full faith and
credit is pledged or (b) obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States of America the
timely payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act), as custodian with respect to any such Government Securities
or a specific payment of principal of or interest on any such Government
Securities held by such custodian for the account of the holder of such
depository receipt; provided that (except as required by law) such custodian is
not authorized to make any deduction from the amount payable to the holder of
such depository receipt from any amount received by the custodian in respect of
the Government Securities or the specific payment of principal of or interest on
the Government Securities evidenced by such depository receipt.
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"guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness or other obligations.
"Guarantee" means any guarantee of the obligations of the Company under this
Indenture and the Securities by any Person in accordance with the provisions of
this Indenture and any supplemental indenture. When used as a verb, "Guarantee"
shall have a corresponding meaning.
"Guarantor" means any Person that Incurs a Guarantee; provided that upon the
release and discharge of such Person from its Guarantee in accordance with this
Indenture and any supplemental indenture, such Person shall cease to be a
Guarantor.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) currency exchange, interest rate or commodity swap
agreements, currency exchange, interest rate or commodity cap agreements and
currency exchange, interest rate or commodity collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in currency exchange, interest rates or commodity prices.
"Holder" or "Securityholder" means a holder of the Securities.
"Incur" means to directly or indirectly create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used
as a noun shall have a correlative meaning.
"Indebtedness" means, with respect to any Person, (a) any indebtedness
(including principal and premium) of such Person, whether or not contingent (i)
in respect of borrowed money, (ii) evidenced by bonds, notes, debentures or
similar instruments or letters of credit or bankers' acceptances (or, without
double counting, reimbursement agreements in respect thereof), (iii)
representing the balance deferred and unpaid of the purchase price of any
property (including Capitalized Lease Obligations), except any such balance that
constitutes a trade payable or similar obligation to a trade creditor, in each
case accrued in the ordinary course of business or (iv) representing any Hedging
Obligations, if and to the extent that any of the foregoing Indebtedness (other
than letters of credit and Hedging Obligations) would appear as a liability upon
a balance sheet (excluding the footnotes thereto) of such Person prepared in
accordance with GAAP,
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(b) to the extent not otherwise included, any obligation by such Person to be
liable for, or to pay, as obligor, guarantor or otherwise, on the Indebtedness
of another Person (other than by endorsement of negotiable instruments for
collection in the ordinary course of business) and (c) to the extent not
otherwise included, Indebtedness of another Person secured by a Lien on any
asset owned by such Person (whether or not such Indebtedness is assumed by such
Person); provided, however, that Contingent Obligations Incurred in the ordinary
course of business shall be deemed not to constitute Indebtedness, and
obligations under or in respect of Receivables Facilities shall not be deemed to
constitute Indebtedness of a Person.
In addition, "Indebtedness" of any Person shall include Indebtedness
described in the foregoing paragraph that would not appear as a liability on the
balance sheet of such Person if (i) such Indebtedness is the obligation of a
partnership or a joint venture that is not a Restricted Subsidiary (a "Joint
Venture"), (2) such Person or a Restricted Subsidiary is a general partner of
the Joint Venture (a "General Partner") and (3) there is recourse, by contract
or operation of law, with respect to the payment of such Indebtedness to
property or assets of such Person or a Restricted Subsidiary; and such
Indebtedness shall be included in an amount not to exceed (x) the greater of (A)
the net assets of the General Partner and (B) the amount of such obligations to
the extent that there is recourse by, contract or operation of law, to the
property or assets of such Person or a Restricted Subsidiary (other than the
General Partner) or (y) if less than the amount determined pursuant to clause
(x) immediately above, the actual amount of such Indebtedness that is recourse
to such Person, if the Indebtedness is evidenced by a writing and is for a
determinable amount and the related interest expense shall be included in
Consolidated Interest Expense to the extent paid by the Company or its
Restricted Subsidiaries.
"Indenture" means this Indenture as amended or supplemented from time to
time.
"Independent Financial Advisor" means an accounting, appraisal, investment
banking firm or consultant to Persons engaged in Similar Businesses of
nationally recognized standing that is, in the good faith judgment of the
Company, qualified to perform the task for which it has been engaged.
"Investment Grade Securities" means (i) securities issued or directly and
fully guaranteed or insured by the United States government or any agency or
instrumentality thereof (other than Cash Equivalents), (ii) debt securities or
debt instruments with a rating of BBB- or higher by S&P or Baa3 or higher by
Moody's or the equivalent of such rating by such rating organization, or, if no
rating of S&P or Moody's then exists, the equivalent of such rating by any other
nationally recognized securities rating agency, but excluding any debt
securities or instruments constituting loans or advances among the Company and
its Subsidiaries, and (iii) investments in any fund that invests exclusively in
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investments of the type described in clauses (i) and (ii) which fund may also
hold immaterial amounts of cash pending investment and/or distribution.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the form of loans (including
guarantees), advances or capital contributions (excluding accounts receivable,
trade credit, advances to customers, 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 issued by any other Person and investments that are required by GAAP
to be classified on the balance sheet (excluding the footnotes) of the Company
in the same manner as the other investments included in this definition to the
extent such transactions involve the transfer of cash or other property. For
purposes of the definition of "Unrestricted Subsidiary" and Section 4.04, (i)
"Investments" shall include the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of a
Subsidiary of the Company at the time that such Subsidiary is designated an
Unrestricted Subsidiary; provided, however, that upon a redesignation of such
Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue
to have a permanent "Investment" in an Unrestricted Subsidiary in an amount (if
positive) equal to (x) the Company's "Investment" in such Subsidiary at the time
of such redesignation less (y) the portion (proportionate to the Company's
equity interest in such Subsidiary) of the fair market value of the net assets
of such Subsidiary at the time of such redesignation; and (ii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its fair
market value at the time of such transfer, in each case as determined in good
faith by the Company.
"Issuance Date" with respect to any Initial Securities, means the date on
which such Initial Securities are originally issued.
"KKR" means Kohlberg Kravis Roberts & Co., L.P.
"Letter of Credit Obligations" means all Obligations in respect of
Indebtedness of the Company with respect to letters of credit issued pursuant to
the Senior Credit Facilities which Indebtedness shall be deemed to consist of
(a) the aggregate maximum amount available to be drawn under all such letters of
credit (the determination of such aggregate maximum amount to assume compliance
with all conditions for drawing) and (b) the aggregate amount that has been paid
by, and not reimbursed to, the issuers under such letters of credit.
"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
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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); provided that in no event shall an operating
lease be deemed to constitute a Lien.
"Moody's" means Moody's Investors Service, Inc.
"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.
"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
Designated Noncash Consideration received in any Asset Sale), net of the direct
costs relating to such Asset Sale and the sale or disposition of such Designated
Noncash Consideration (including, without limitation, legal, accounting and
investment banking fees, and brokerage and sales commissions), 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
principal, premium (if any) and interest on Indebtedness required (other than
required by Section 4.06(b)(i)) to be paid as a result of such transaction and
any deduction of appropriate amounts to be provided by the Company as a reserve
in accordance with GAAP against any liabilities associated with the asset
disposed of in such transaction and retained by the Company after such sale or
other disposition thereof, including, without limitation, pension and other
post-employment benefit liabilities and liabilities related to environmental
matters or against any indemnification obligations associated with such
transaction.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements (including, without limitation, reimbursement
obligations with respect to letters of credit and banker's acceptances), damages
and other liabilities, and guarantees of payment of such principal, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities, payable under the documentation governing any Indebtedness.
"Offer Period" means the period from the date of a Change of Control until
and including the Change of Control Payment Date.
"Offering Memorandum" means the Offering Memorandum dated April 30, 1998,
relating to the Company's 9 5/8% Senior Subordinated Notes due 2008.
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"Officer" means the Chairman of the Board, the President, any Executive Vice
President, Senior Vice President or Vice President, the Treasurer or the
Secretary of the Company or any Guarantor.
"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 set forth in this
Indenture.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
"Permitted Holders" means KKR and any of its Affiliates.
"Permitted Investments" means (a) any Investment in the Company or any
Restricted Subsidiary; (b) any Investment in cash and Cash Equivalents or
Investment Grade Securities; (c) any Investment by the Company or any Restricted
Subsidiary of the Company in a Person that is engaged in a Similar Business if
as a result of such Investment (i) such Person becomes a Restricted Subsidiary
or (ii) such Person, in one transaction or a series of related transactions, 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; (d) any Investment in securities or other assets not
constituting cash or Cash Equivalents and received in connection with an Asset
Sale made pursuant to Section 4.06 or any other disposition of assets not
constituting an Asset Sale; (e) any Investment existing on the Closing Date; (f)
advances to employees not in excess of $10.0 million outstanding at any one
time, in the aggregate; (g) any Investment acquired by the Company or any of its
Restricted Subsidiaries (i) in exchange for any other Investment or accounts
receivable held by the Company or any such Restricted Subsidiary in connection
with or as a result of a bankruptcy, workout, reorganization or recapitalization
of the issuer of such other Investment or accounts receivable or (ii) as a
result of a foreclosure by the Company or any of its Restricted Subsidiaries
with respect to any secured Investment or other transfer of title with respect
to any secured Investment in default; (h) Hedging Obligations permitted under
Section 4.03(b)(x); (i) loans and advances to officers, directors and employees
for business-related travel expenses, moving expenses and other similar
expenses, in each case Incurred in the ordinary course of business; (j) any
Investment in a Similar Business having an aggregate fair market value, taken
together with all other Investments made pursuant to this clause (j) that are at
that time outstanding (without giving effect to the sale of an Unrestricted
Subsidiary to the extent the proceeds of such sale do not consist of cash,
marketable securities and/or Qualified Proceeds), not to exceed the greater of
(x) $100.0 million or (y) 15% of Total
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Assets at the time of such Investment (with the fair market value of each
Investment being measured at the time made and without giving effect to
subsequent changes in value); (k) Investments the payment for which consists of
Equity Interests of the Company (exclusive of Disqualified Stock); provided,
however, that such Equity Interests shall not increase the amount available for
Restricted Payments under Section 4.04(a)(3); (l) additional Investments having
an aggregate fair market value, taken together with all other Investments made
pursuant to this clause (l) that are at that time outstanding (without giving
effect to the sale of an Unrestricted Subsidiary to the extent the proceeds of
such sale do not consist of cash, marketable securities and/or Qualified
Proceeds or distributions made pursuant to Section 4.04(b)(xiv)), not to exceed
the greater of (x) $30.0 million or (y) 5% of Total Assets at the time of such
Investment (with the fair market value of each Investment being measured at the
time made and without giving effect to subsequent changes in value); (m)
Investments in a Similar Business having an aggregate fair market value, taken
together with all other Investments made pursuant to this clause (m) that are at
that time outstanding (without giving effect to the sale of an Unrestricted
Subsidiary to the extent the proceeds of such sale do not consist of cash,
marketable securities and/or Qualified Proceeds or distributions made pursuant
to Section 4.04(b)(xiv)), not to exceed $100.0 million at the time of such
Investment (with the fair market value of each Investment being measured at the
time made and without giving effect to subsequent changes in value); provided
that at the time of such Investment the Company would be permitted to Incur at
least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in Section 4.03(a); (n) Investments relating to any special
purpose Wholly-Owned Subsidiary of the Company organized in connection with a
Receivables Facility that, in the good faith determination of the Board of
Directors of the Company, are necessary or advisable to effect such Receivables
Facility; (o) guarantees (including Guarantees) of Indebtedness permitted under
Section 4.03; (p) any transaction to the extent it constitutes an investment
that is permitted and made in accordance with the provisions of Section 4.07(b)
(except transactions described in clauses (ii), (vi), (vii) and (xi) of Section
4.07(b)); and (q) Investments consisting of the licensing or contribution of
intellectual property pursuant to joint marketing arrangements with other
Persons.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"preferred stock" means any Equity Interest with preferential rights of
payment of dividends or upon liquidation, dissolution, or winding up.
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"principal" of a Security means the principal of the Security plus the
premium, if any, payable on the Security that is due or overdue or is to become
due at the relevant time.
"Qualified Proceeds" means assets that are used or useful in, or Capital
Stock of any Person engaged in, a Similar Business; provided that the fair
market value of any such assets or Capital Stock shall be determined by the
Board of Directors in good faith, except that in the event the value of any such
assets or Capital Stock may exceed $25.0 million or more, the fair value shall
be determined in writing by an independent investment banking firm of nationally
recognized standing.
"Recapitalization Agreement" means the Recapitalization Agreement, dated
March 2, 1998, among the Company, Corning Incorporated, Borden, Inc. and CCPC
Acquisition.
"Receivables Facility" means one or more receivables financing facilities,
as amended from time to time, pursuant to which the Company and/or any of its
Restricted Subsidiaries sells its accounts receivable to a Person that is not a
Restricted Subsidiary.
"Receivables Fees" means distributions or payments made directly or by means
of discounts with respect to any participation interest issued or sold in
connection with, and other fees paid to a Person that is not a Restricted
Subsidiary in connection with, any Receivables Facility.
"Redemption Date" shall mean, with respect to any redemption of Securities,
the date of redemption with respect thereto.
"Related Parties" means any Person controlled by a Permitted Holder,
including any partnership or limited liability company of which a Permitted
Holder or its Affiliates is the general partner or managing member, as the case
may be.
"Representative" means the trustee, agent or representative (if any) for an
issue of Senior Indebtedness of the Company.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" means, at any time, any direct or indirect
Subsidiary of the Company that is not then an Unrestricted Subsidiary; provided,
however, that upon the occurrence of an Unrestricted Subsidiary ceasing to be an
Unrestricted Subsidiary, such Subsidiary shall be included in the definition of
"Restricted Subsidiary."
"S&P" means Standard and Poor's Ratings Group.
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"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the rules
and regulations of the Commission promulgated thereunder.
"Senior Credit Facilities" means that certain Credit Agreement dated as of
April 9, 1998 among the Company, The Chase Manhattan Bank, as administrative
agent, Salomon Brothers Inc, as syndication agent, Bankers Trust Company, as
documentation agent and the several lenders from time to time parties thereto,
including any collateral documents, instruments and agreements executed in
connection therewith, and any amendments, supplements, modifications,
extensions, renewals, restatements or refundings thereof and any indentures or
credit facilities or commercial paper facilities with banks or other
institutional lenders that replace, refund or refinance any part of the loans,
notes, other credit facilities or commitments thereunder, including any such
replacement, refunding or refinancing facility or indenture that increases the
amount borrowable thereunder or alters the maturity thereof; provided, however,
that in connection with any facilities which refund, replace or refinance such
Credit Agreement there shall not be more than one facility at any one time that
is identified as the Senior Credit Facilities and, if at any time there is more
than one facility which would constitute the Senior Credit Facilities, the
Company shall designate to the Trustee pursuant to an Officers' Certificate
executed by the principal executive officer and principal financial officer of
the Company which one of such facilities shall be the Senior Credit Facilities
for purposes of this Indenture.
"Senior Indebtedness" means (i) the Obligations under the Senior Credit
Facilities and (ii) any other Indebtedness permitted to be Incurred by the
Company 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 Securities, including, with respect to
clauses (i) and (ii), interest accruing subsequent to the filing of, or which
would have accrued but for the filing of, a petition for bankruptcy, in
accordance with and at the rate (including any rate applicable upon any default
or event of default, to the extent lawful) specified in the documents evidencing
or governing such Senior Indebtedness, whether or not such interest is an
allowable claim in such bankruptcy proceeding. Notwithstanding anything to the
contrary in the foregoing, Senior Indebtedness shall not include (1) any
liability for federal, state, local or other taxes owed or owing by the Company,
(2) any obligation of the Company to any of its Subsidiaries, (3) any accounts
payable or trade liabilities arising in the ordinary course of business
(including guarantees thereof or instruments evidencing such liabilities) other
than obligations in respect of letters of credit under the Senior Credit
Facilities, (4) any Indebtedness that is Incurred in violation of this
Indenture, (5) Indebtedness which, when Incurred and without respect to any
election under Section 1111(b) of Title 11, United States Code, is without
recourse to the Company, (6) any Indebtedness, guarantee or
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obligation of the Company which is subordinate or junior to any other
Indebtedness, guarantee or obligation of the Company, (7) Indebtedness evidenced
by the Securities and (8) Capital Stock of the Company.
"Senior Subordinated Indebtedness" means (a) with respect to the Company,
Indebtedness which ranks pari passu in right of payment to the Securities and
(b) with respect to any Guarantor, Indebtedness which ranks pari passu in right
of payment to the Guarantee of such Guarantor.
"Significant 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 Securities Act, as such Regulation is in effect on the date
hereof.
"Similar Business" means the housewares and appliance businesses and any
activities or businesses incidental, directly related or similar thereto, or any
line of business engaged in by the Company or its Subsidiaries on the Closing
Date or any business activity that is a reasonable extension, development or
expansion thereof or ancillary thereto.
"Subordinated Indebtedness" means (a) with respect to the Company, any
Indebtedness of the Company which is by its terms subordinated in right of
payment to the Securities and (b) with respect to any Guarantor, any
Indebtedness of such Guarantor which is by its terms subordinated in right of
payment to the Guarantee of such Guarantor.
"Subordinated Note Obligations" means any principal of, premium, if any, and
interest on the Securities payable pursuant to the terms of the Securities or
upon acceleration, together with and including any amounts received upon the
exercise of rights of rescission or other rights of action (including claims for
damages) or otherwise, to the extent relating to the purchase price of the
Securities or amounts corresponding to such principal, premium, if any, or
interest on the Securities.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association, or other business entity (other than a partnership, joint venture,
limited liability company or similar 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 of determination 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, joint venture, limited
liability company or similar entity of which (x) more than 50% of the capital
accounts, distribution rights, total equity and voting interests or general or
limited partnership interests, as applicable, are owned or controlled, directly
or indirectly, by
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such Person or one or more of the other Subsidiaries of that Person or a
combination thereof whether in the form of membership, general, special or
limited partnership or otherwise and (y) such Person or any Wholly Owned
Restricted Subsidiary of such Person is a controlling general partner or
otherwise controls such entity.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb)
as in effect on the date of this Indenture.
"Total Assets" means the total consolidated assets of the Company and its
Restricted Subsidiaries, as shown on the most recent balance sheet of the
Company.
"Transactions" has the meaning given to it in the Offering Memorandum.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15 (519)
which has become publicly available at least two Business Days prior to the
Redemption Date (or, if such Statistical Release is no longer published, any
publicly available source of similar market data)) most nearly equal to the
period from the Redemption Date to May 1, 2003; provided, however, that if the
period from the Redemption Date to May 1, 2003 is not equal to the constant
maturity of a United States Treasury security for which a weekly average yield
is given, the Treasury Rate shall be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the weekly average yields
of United States Treasury securities for which such yields are given, except
that if the period from the Redemption Date to May 1, 2003 is less than one
year, the weekly average yield on actually traded United States Treasury
securities adjusted to a constant maturity of one year shall be used.
"Trustee" means the party named as such in this Indenture until a successor
replaces it and, thereafter, means the successor.
"Trust Officer" means the Chairman of the Board, the President or any other
officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"Uniform Commercial Code" means the New York Uniform Commercial Code as in
effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company which at
the time of determination is an Unrestricted Subsidiary (as designated by the
Board of Directors of the Company, as provided below) and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors of the Company may designate
any Subsidiary of the
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Company (including any existing Subsidiary and any newly acquired or newly
formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or
any of its Subsidiaries owns any Equity Interests or Indebtedness of, or owns or
holds any Lien on, any property of, the Company or any Subsidiary of the Company
(other than any Subsidiary of the Subsidiary to be so designated), provided that
(a) any Unrestricted Subsidiary must be an entity of which shares of the capital
stock or other equity interests (including partnership interests) entitled to
cast at least a majority of the votes that may be cast by all shares or equity
interests having ordinary voting power for the election of directors or other
governing body are owned, directly or indirectly, by the Company, (b) such
designation complies with Section 4.04 and (c) each of (I) the Subsidiary to be
so designated and (II) its Subsidiaries has not at the time of designation, and
does not thereafter, create, Incur any Indebtedness pursuant to which the lender
has recourse to any of the assets of the Company or any of its Restricted
Subsidiaries. The Board of Directors may designate any Unrestricted Subsidiary
to be a Restricted Subsidiary; provided that, immediately after giving effect to
such designation no Default or Event of Default shall have occurred and be
continuing and either (i) the Company could Incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test described in
Section 4.03(a) or (ii) the Fixed Charge Coverage Ratio for the Company and its
Restricted Subsidiaries would be greater than such ratio for the Company and its
Restricted Subsidiaries immediately prior to such designation, in each case on a
pro forma basis taking into account such designation. Any such designation by
the Board of Directors shall be notified by the Company to the Trustee by
promptly filing with the Trustee a copy of the board resolution giving effect to
such designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.
"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
or Disqualified Stock, as the case may be, at any date, the quotient obtained by
dividing (i) the sum of the products of the number of years from the date of
determination to the date of each successive scheduled principal payment of such
Indebtedness or redemption or similar payment with respect to such Disqualified
Stock multiplied by the amount of such payment, by (ii) the sum of all such
payments.
"Wholly Owned Restricted Subsidiary" is any Wholly Owned Subsidiary that is
a Restricted Subsidiary.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person,
100% 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 Subsidiaries of such Person and one or
more
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Wholly Owned Subsidiaries of such Person.
SECTION 1.02. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
---- ----------
<S> <C>
"Affiliate Transaction" ........ 4.07
"Asset Sale Offer" ............. 4.06(b)
"Asset Sale Purchase Date" ..... 4.06(b)
"Bankruptcy Law" ............... 6.01
"Change of Control Offer" ...... 4.08(a)
"Change of Control Payment" ... 4.08(a)
"Change of Control Payment Date" 4.08(b)
"covenant defeasance option" ... 8.01(b)
"CUSIP" ........................ 2.13
"Custodian" .................... 6.01
"Event of Default" ............. 6.01
"Excess Proceeds" .............. 4.06(b)
"legal defeasance option" ...... 8.01(b)
"Legal Holiday" ................ 11.08
"non-payment default" .......... 10.03
"Offered Price" ................ 4.06(b)
"Paying Agent" ................. 2.04
"Payment Blockage Notice" ...... 10.03
"Payment Blockage Period" ...... 10.03
"payment default" .............. 10.03
"protected purchaser" .......... 2.08
"Refinancing Indebtedness" ..... 4.03(b)(xv)
"Refunding Capital Stock" ...... 4.04(b)
"Registrar" .................... 2.04
"Restricted Payments" .......... 4.04(a)
"Retired Capital Stock" ........ 4.04(b)
"Successor Company" ............ 5.01(a)(i)
"Successor Guarantor"........... 5.01(b)(i)
</TABLE>
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SECTION 1.03. Incorporation by Reference of Trust Indenture Act. This
Indenture is subject to the mandatory provisions of the TIA, which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Holder or Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company, any Guarantor
and any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
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) "including" means including without limitation;
(5) words in the singular include the plural and words in the
plural include the singular;
(6) unsecured Indebtedness shall not be deemed to be subordinate
or junior to Secured Indebtedness merely by virtue of its nature as
unsecured Indebtedness;
(7) the principal amount of any noninterest bearing or other
discount security at any date shall be the principal amount thereof
that would be shown
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on a balance sheet of the issuer dated such date prepared in
accordance with GAAP; and
(8) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation value of such Preferred Stock or (ii) the maximum
mandatory redemption or mandatory repurchase price with respect to such
Preferred Stock, whichever is greater.
ARTICLE 2
The Securities
SECTION 2.01. Amount of Securities; Issuable in Series. The aggregate
principal amount of Securities which may be authenticated and delivered under
this Indenture is $300,000,000. The Securities may be issued in one or more
series. All Securities of any one series shall be substantially identical except
as to denomination.
With respect to any Additional Securities issued after the Closing Date
(except for Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities pursuant to Section
2.07, 2.08, 2.10 or 3.06 or the Appendix and, except for Securities which,
pursuant to Section 2.03 are deemed never to have been authenticated and
delivered hereunder), there shall be (i) established in or pursuant to a
resolution of the Board of Directors and (ii) (A) set forth or determined in the
manner provided in an Officer's Certificate or (B) established in one or more
indentures supplemental hereto, prior to the issuance of such Additional
Securities:
(1) whether such Additional Securities shall be issued as part of
a new or existing series of Securities and the title of such Additional
Securities (which shall distinguish the Additional Securities of the
series from Securities of any other series);
(2) the aggregate principal amount of such Additional Securities
which may be authenticated and delivered under this Indenture shall be
in an aggregate principal amount not to exceed $100,000,000 (except for
Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities of the same
series pursuant to Section 2.07, 2.08, 2.10 or 3.06 or the Appendix and
except for Securities which, pursuant to Section 2.03, are deemed never
to have been authenticated and delivered hereunder);
(3) the issue price and Issuance Date of such Additional
Securities, including the date from which interest on such Additional
Securities shall accrue;
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(4) if applicable, that such Additional Securities shall be
issuable in whole or in part in the form of one or more Global
Securities (as defined in the Appendix) and, in such case, the
respective depositaries for such Global Securities, the form of any
legend or legends which shall be borne by such Global Securities in
addition to or in lieu of those set forth in Exhibit A hereto and any
circumstances in addition to or in lieu of those set forth in Section
2.3 of the Appendix in which any such Global Security may be exchanged
in whole or in part for Additional Securities registered, or any
transfer of such Global Security in whole or in part may be registered,
in the name or names of Persons other than the depositary for such
Global Security or a nominee thereof; and
(5) if applicable, that such Additional Securities shall not be
issued in the form of Initial Securities as set forth in Exhibit A, but
shall be issued in the form of Exchange Securities as set forth in
Exhibit B.
If any of the terms of any Additional Securities are established by action
taken pursuant to a resolution of the Board of Directors, a copy of an
appropriate record of such action shall be certified by the Secretary or any
Assistant Secretary of the Company and delivered to the Trustee at or prior to
the delivery of the Officers' Certificate or any indenture supplemental hereto
setting forth the terms of the Additional Securities.
SECTION 2.02. Form and Dating. Provisions relating to the Original
Securities, the Additional Securities, the Private Exchange Securities and the
Exchange Securities are set forth in the Appendix, which is hereby incorporated
in and expressly made a part of this Indenture. The (i) Original Securities and
the Trustee's certificate of authentication, (ii) Private Exchange Securities
and the Trustee's certificate of authentication and (iii) any Additional
Securities (if issued as Transfer Restricted Securities (as defined in the
Appendix)) and the Trustee's certificate of authentication shall each be
substantially in the form of Exhibit A hereto, which is hereby incorporated in
and expressly made a part of this Indenture. The Exchange Securities and any
Additional Securities issued other than as Transfer Restricted Securities and
the Trustee's certificate of authentication shall each be substantially in the
form of Exhibit B hereto, which is hereby incorporated in and expressly made a
part of this Indenture. The Securities may have notations, legends or
endorsements required by law, stock exchange rule, agreements to which the
Company is subject, if any, or usage (provided that any such notation, legend or
endorsement is in a form acceptable to the Company). Each Security shall be
dated the date of its authentication.
SECTION 2.03. Execution and Authentication. One or more Officers shall sign
the Securities for the Company by manual or facsimile signature.
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If an Officer whose signature is on a Security no longer holds that office
at the time the Trustee authenticates the Security, the Security shall be valid
nevertheless.
A Security shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Security. The signature
shall be conclusive evidence that the Security has been authenticated under this
Indenture.
The Trustee shall authenticate and make available for delivery Securities as
set forth in the Appendix.
The Trustee may appoint an authenticating agent reasonably acceptable to the
Company to authenticate the Securities. Any such appointment shall be evidenced
by an instrument signed by a Trust Officer, a copy of which shall be furnished
to the Company. Unless limited by the terms of such appointment, an
authenticating agent may authenticate Securities 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 any
Registrar, Paying Agent or agent for service of notices and demands.
SECTION 2.04. Registrar and Paying Agent. The Company shall maintain an
office or agency where Securities may be presented for registration of transfer
or for exchange (the "Registrar") and an office or agency where Securities may
be presented for payment (the "Paying Agent"). The Registrar shall keep a
register of the Securities and of their transfer and exchange. The Company may
have one or more co- registrars and one or more additional paying agents. The
term "Paying Agent" includes any additional paying agent, and the term
"Registrar" includes any co-registrars. The Company initially appoints the
Trustee as (i) Registrar and Paying Agent in connection with the Securities and
(ii) the Securities Custodian (as defined in the Appendix) with respect to the
Global Securities.
The Company shall enter into an appropriate agency agreement with any
Registrar or Paying Agent not a party to this Indenture, which shall incorporate
the terms of the TIA. The agreement shall implement the provisions of this
Indenture that relate to such agent. The Company shall notify the Trustee of the
name and address of any such agent. If the Company fails to maintain a Registrar
or Paying Agent, the Trustee shall act as such and shall be entitled to
appropriate compensation therefor pursuant to Section 7.07. The Company or any
of its domestically organized Wholly Owned Subsidiaries may act as Paying Agent
or Registrar.
The Company may remove any Registrar or Paying Agent upon written notice to
such Registrar or Paying Agent and to the Trustee; provided, however, that no
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such removal shall become effective until (1) acceptance of an appointment by a
successor as evidenced by an appropriate agreement entered into by the Company
and such successor Registrar or Paying Agent, as the case may be, and delivered
to the Trustee or (2) notification to the Trustee that the Trustee shall serve
as Registrar or Paying Agent until the appointment of a successor in accordance
with clause (1) above. The Registrar or Paying Agent may resign at any time upon
written notice; provided, however, that the Trustee may resign as Paying Agent
or Registrar only if the Trustee also resigns as Trustee in accordance with
Section 7.08.
SECTION 2.05. Paying Agent To Hold Money in Trust. Prior to each due date of
the principal and interest on any Security, the Company shall deposit with the
Paying Agent (or if the Company or a Subsidiary is acting as Paying Agent,
segregate and hold in trust for the benefit of the Persons entitled thereto) a
sum sufficient to pay such principal and interest when so becoming due. The
Company shall require each Paying Agent (other than the Trustee) to agree in
writing that the Paying Agent shall hold in trust for the benefit of
Securityholders or the Trustee all money held by the Paying Agent for the
payment of principal of or interest on the Securities and shall notify the
Trustee of any default by the Company in making any such payment. If the Company
or a Subsidiary of the Company acts as Paying Agent, it shall segregate the
money held by it as Paying Agent and hold it as a separate trust fund. The
Company at any time may require a Paying Agent to pay all money held by it to
the Trustee and to account for any funds disbursed by the Paying Agent. Upon
complying with this Section, the Paying Agent shall have no further liability
for the money delivered to the Trustee.
SECTION 2.06. Securityholder 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 Securityholders. If the Trustee is not the Registrar, the
Company shall furnish, or cause the Registrar to furnish, to the Trustee, in
writing at least five Business Days before each interest payment date and at
such other times as the Trustee may request in writing, a list in such form and
as of such date as the Trustee may reasonably require of the names and addresses
of Securityholders.
SECTION 2.07. Transfer and Exchange. The Securities shall be issued in
registered form and shall be transferable only upon the surrender of a Security
for registration of transfer. When a Security is presented to the Registrar with
a request to register a transfer, the Registrar shall register the transfer as
requested if the requirements of Section 8-401(a)(l) of the Uniform Commercial
Code are met. When Securities are presented to the Registrar with a request to
exchange them for an equal principal amount of Securities of other
denominations, the Registrar shall make the exchange as requested if the same
requirements are met. To permit registration of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Securities at the
Registrar's request. The Company may require payment of a sum sufficient to pay
all taxes,
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assessments or other governmental charges in connection with any transfer or
exchange pursuant to this Section. The Company shall not be required to make and
the Registrar need not register transfers or exchanges of Securities selected
for redemption (except, in the case of Securities to be redeemed in part, the
portion thereof not to be redeemed) or any Securities for a period of 15 days
before a selection of Securities to be redeemed.
Prior to the due presentation for registration of transfer of any Security,
the Company, the Trustee, the Paying Agent and the Registrar may deem and treat
the Person in whose name a Security is registered as the absolute owner of such
Security for the purpose of receiving payment of principal of and interest, if
any, on such Security and for all other purposes whatsoever, whether or not such
Security is overdue, and none of the Company, the Trustee, the Paying Agent or
the Registrar shall be affected by notice to the contrary.
Any Holder of a Global Security shall, by acceptance of such Global
Security, agree that transfers of beneficial interest in such Global Security
may be effected only through a book-entry system maintained by (i) the Holder of
such Global Security (or its agent) or (ii) any Holder of a beneficial interest
in such Global Security, and that ownership of a beneficial interest in such
Global Security shall be required to be reflected in a book entry.
All Securities issued upon any transfer or exchange pursuant to the terms of
this Indenture will evidence the same debt and will be entitled to the same
benefits under this Indenture as the Securities surrendered upon such transfer
or exchange.
SECTION 2.08. Replacement Securities. If a mutilated Security is surrendered
to the Registrar or if the Holder of a Security claims that the Security has
been lost, destroyed or wrongfully taken, the Company shall issue and the
Trustee shall authenticate a replacement Security if the requirements of Section
8-405 of the Uniform Commercial Code are met, such that the Holder (i) satisfies
the Company or the Trustee within a reasonable time after he has notice of such
loss, destruction or wrongful taking and the Registrar does not register a
transfer prior to receiving such notification, (ii) makes such request to the
Company or the Trustee prior to the Security being acquired by a protected
purchaser as defined in Section 8-303 of the Uniform Commercial Code (a
"protected purchaser") and (iii) satisfies any other reasonable requirements of
the Trustee. If required by the Trustee or the Company, such Holder shall
furnish an indemnity bond sufficient in the judgment of the Trustee to protect
the Company, the Trustee, the Paying Agent and the Registrar from any loss that
any of them may suffer if a Security is replaced. The Company and the Trustee
may charge the Holder for their expenses in replacing a Security. In the event
any such mutilated, lost, destroyed or wrongfully taken Security has become or
is about to become due and
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payable, the Company in its discretion may pay such Security instead of issuing
a new Security in replacement thereof.
Every replacement Security is an additional obligation of the Company.
The provisions of this Section 2.08 are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, lost, destroyed or wrongfully taken Securities.
SECTION 2.09. Outstanding Securities. Securities outstanding at any time are
all Securities authenticated by the Trustee except for those canceled by it,
those delivered to it for cancelation and those described in this Section as not
outstanding. A Security does not cease to be outstanding because the Company or
an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.08, it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Security is held by a protected purchaser.
If the Paying Agent segregates and holds in trust, in accordance with this
Indenture, on a Redemption Date or maturity date money sufficient to pay all
principal and interest payable on that date with respect to the Securities (or
portions thereof) to be redeemed or maturing, as the case may be, and the Paying
Agent is not prohibited from paying such money to the Securityholders on that
date pursuant to the terms of this Indenture, then on and after that date such
Securities (or portions thereof) cease to be outstanding and interest on them
ceases to accrue.
SECTION 2.10. Temporary Securities. In the event that Definitive Securities
(as defined in the Appendix) are to be issued under the terms of this Indenture,
until such Definitive Securities are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Securities. Temporary Securities
shall be substan tially in the form of Definitive Securities but may have
variations that the Company considers appropriate for temporary Securities.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate Definitive Securities and deliver them in exchange for temporary
Securities upon surrender of such temporary Securities at the office or agency
of the Company, without charge to the Holder. In addition, the Temporary
Regulation S Global Security (as defined in the Appendix) may also be issued in
temporary form.
SECTION 2.11. Cancelation. The Company at any time may deliver Securities to
the Trustee for cancelation. The Registrar and the Paying Agent shall forward to
the Trustee any Securities surrendered to them for registration of transfer,
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exchange or payment. The Trustee and no one else shall cancel all Securities
surrendered for registration of transfer, exchange, payment or cancelation and
deliver canceled Securities to the Company pursuant to written direction by an
Officer. The Company may not issue new Securities to replace Securities it has
redeemed, paid or delivered to the Trustee for cancelation. The Trustee shall
not authenticate Securities in place of canceled Securities other than pursuant
to the terms of this Indenture.
SECTION 2.12. Defaulted Interest. If the Company defaults in a payment of
interest on the Securities, the Company shall pay the defaulted interest (plus
interest on such defaulted interest to the extent lawful) in any lawful manner.
The Company may pay the defaulted interest to the Persons who are
Securityholders on a subsequent special record date. The Company shall fix or
cause to be fixed any such special record date and payment date to the
reasonable satisfaction of the Trustee and shall promptly mail or cause to be
mailed to each Securityholder a notice that states the special record date, the
payment date and the amount of defaulted interest to be paid.
SECTION 2.13. CUSIP Numbers. The Company in issuing the Securities may use
"CUSIP" numbers (if then generally in use) and, if so, the Trustee shall use
"CUSIP" numbers in notices of redemption as a convenience to Holders; provided,
however, that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Securities or as contained
in any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers. The Company shall
promptly notify the Trustee after the Company becomes aware, through written
notice, of a change in the "CUSIP" numbers.
ARTICLE 3
Redemption
SECTION 3.01. Notices to Trustee. If the Company elects to redeem Securities
pursuant to paragraph 5 of the Securities, it shall notify the Trustee in
writing of the Redemption Date and the principal amount of Securities to be
redeemed.
The Company shall give each notice to the Trustee provided for in this
Section at least 60 days before the Redemption Date unless the Trustee consents
to a shorter period. Such notice shall be accompanied by an Officers'
Certificate from the Company to the effect that such redemption will comply with
the conditions herein. If fewer than all the Securities are to be redeemed, the
record date relating to such redemption shall be selected by the Company and
given to the Trustee, which record date
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shall be not fewer than 15 days after the date of notice to the Trustee. Any
such notice may be canceled at any time prior to notice of such redemption being
mailed to any Holder and shall thereby be void and of no effect.
SECTION 3.02. Selection of Securities To Be Redeemed. If fewer than all the
Securities are to be redeemed, the Trustee shall select the Securities to be
redeemed in compliance with the requirements of the principal national
securities exchange, if any, on which such Securities are listed, or, if such
Securities are not so listed, on a pro rata basis, by lot or by such other
method as the Trustee shall deem fair and appropriate (and in such manner as
complies with applicable legal requirements); provided that no Securities of
$1,000 or less shall be purchased or redeemed in part. Provisions of this
Indenture that apply to Securities called for redemption also apply to portions
of Securities called for redemption. The Trustee shall notify the Company
promptly of the Securities or portions of Securities to be redeemed.
SECTION 3.03. Notice of Redemption. At least 30 days but not more than 60
days before a date for redemption of Securities, the Company, or the Trustee at
the Company's direction, shall mail a notice of redemption by first-class mail,
postage prepaid, to each Holder of Securities to be redeemed at such Holder's
registered address; provided that in the event the Trustee is to mail such
notice, the Company shall deliver to the Trustee, at least 45 days prior to the
Redemption Date, an Officer's Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the following items.
The notice shall identify the Securities to be redeemed and shall state:
(1) the Redemption Date;
(2) the redemption price and the amount of accrued interest to the
Redemption Date;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to
the Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Securities are to be
redeemed, the certificate numbers and principal amounts of the
particular Securities to be redeemed (or the portion thereof);
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(6) that, unless the Company defaults in making such redemption
payment, interest on Securities (or portion thereof) called for
redemption ceases to accrue on and after the Redemption Date;
(7) the CUSIP number, if any, printed on the Securities being
redeemed; and
(8) 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 Securities.
At the Company's request, the Trustee shall give the notice of redemption in
the Company's name and at the Company's expense. In such event, the Company
shall provide the Trustee with the information required by this Section.
SECTION 3.04. Effect of Notice of Redemption. Once notice of redemption is
mailed, Securities called for redemption become due and payable on the
Redemption Date and at the redemption price stated in the notice. Upon surrender
to the Paying Agent, such Securities shall be paid at the redemption price
stated in the notice, plus accrued interest, if any, to the Redemption Date;
provided, however, that if the Redemption Date is after a regular record date or
a special record date and on or prior to the interest payment date, the accrued
interest shall be payable to the Securityholder of the redeemed Securities
registered on the relevant record date. Failure to give notice or any defect in
the notice to any Holder shall not affect the validity of the notice to any
other Holder.
SECTION 3.05. Deposit of Redemption Price. Prior to 10:00 a.m. on the
Redemption Date, the Company shall deposit with the Paying Agent (or, if the
Company or a Subsidiary is the Paying Agent, shall segregate and hold in trust)
money sufficient to pay the redemption price of and accrued interest on all
Securities to be redeemed on that date other than Securities or portions of
Securities called for redemption that have been delivered by the Company to the
Trustee for cancelation.
SECTION 3.06. Securities Redeemed in Part. A new Security in principal
amount equal to the unredeemed portion of any Security redeemed in part will be
issued in the name of the Holder thereof upon cancelation of the original
Security. On and after the Redemption Date unless the Company defaults in
payment of the redemption price, interest shall cease to accrue on Securities or
portions thereof called for redemption.
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ARTICLE 4
Covenants
SECTION 4.01. Payment of Securities. The Company shall promptly pay the
principal of and interest on the Securities on the dates and in the manner
provided in the Securities and in this Indenture. Principal and interest shall
be considered paid on the date due if on such date the Trustee or the Paying
Agent holds in accordance with this Indenture money sufficient to pay all
principal and interest then due and the Trustee or the Paying Agent, as the case
may be, is not prohibited from paying such money to the Securityholders on that
date pursuant to the terms of this Indenture.
The Company shall pay interest on overdue principal at the rate specified
therefor in the Securities, and it shall pay interest on overdue installments of
interest at the same rate to the extent lawful.
SECTION 4.02. SEC Reports. Notwithstanding that the Company may not be
subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act
or otherwise report on an annual and quarterly basis on forms provided for such
annual and quarterly reporting pursuant to rules and regulations promulgated by
the Commission, the Company shall file with the Commission (and make available
to the Trustee and Holders (without exhibits), without cost to each Holder,
within 15 days after it files them with the Commission), (a) within 90 days
after the end of each fiscal year, annual reports on Form 10-K (or any successor
or comparable form) containing the information required to be contained therein
(or required in such successor or comparable form); (b) within 45 days after the
end of each of the first three fiscal quarters of each fiscal year, reports on
Form 10-Q (or any successor or comparable form); (c) promptly from time to time
after the occurrence of an event required to be therein reported, such other
reports on Form 8-K (or any successor or comparable form); and (d) any other
information, documents and other reports which the Company would be required to
file with the Commission if it were subject to Section 13 or 15(d) of the
Exchange Act; provided, however, the Company shall not be so obligated to file
such reports with the Commission if the Commission does not permit such filing,
in which event the Company will make available such information to prospective
purchasers of Securities, in addition to providing such information to the
Trustee and the Holders, in each case within 15 days after the time the Company
would be required to file such information with the Commission, if it were
subject to Sections 13 or 15(d) of the Exchange Act. Notwithstanding the
foregoing, such requirements shall be deemed satisfied prior to the Exchange
Offer or the effectiveness of the Shelf Registration Statement by the filing
with the Commission of an exchange offer registration statement and/or a shelf
registration statement as required by the Registration Agreement (as defined in
the Appendix), and any amendments thereto, with such financial information that
satisfies Regulation S-X of the Securities Act.
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Delivery of such reports, information and documents to the Trustee is for
informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
SECTION 4.03. Limitation on Incurrence of Indebtedness and Issuance of
Disqualified Stock. (a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to Incur any Indebtedness (including Acquired
Indebtedness) and the Company shall not issue any shares of Disqualified Stock
and shall not permit any of its Restricted Subsidiaries to issue any shares of
preferred stock; provided, however, that the Company may Incur Indebtedness
(including Acquired Indebtedness) or issue shares of Disqualified Stock if the
Fixed Charge Coverage Ratio for the Company's and its Restricted Subsidiaries'
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 is issued would have been at
least 1.75 to 1.00, 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 had been issued, as the case may
be, and the application of proceeds therefrom had occurred at the beginning of
such four-quarter period.
(b) The foregoing limitations shall not apply to:
(i) the existence of Indebtedness under Credit Facilities on the
Closing Date together with the Incurrence by the Company of
Indebtedness under Credit Facilities and the issuance and creation of
letters of credit and bankers' acceptances thereunder (with letters of
credit and bankers' acceptances being deemed to have a principal amount
equal to the face amount thereof) up to an aggregate principal amount
of $550.0 million outstanding at any one time;
(ii) the Incurrence by the Company of Indebtedness represented by
the Securities issued on the Closing Date;
(iii) Existing Indebtedness (other than Indebtedness described in
clauses (i) and (ii));
(iv) Indebtedness (including Capitalized Lease Obligations)
Incurred by the Company or any of its Restricted Subsidiaries, to
finance the purchase, lease or improvement of property (real or
personal) or equipment (whether through the direct purchase of assets
or the Capital Stock of any Person owning
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such assets) in an aggregate principal amount which, when
aggregated with the principal amount of all other Indebtedness then
outstanding and Incurred pursuant to this clause (iv) and including all
Refinancing indebtedness Incurred to refund, refinance or replace any
other Indebtedness Incurred pursuant to this Section 4.03(b)(iv), does
not exceed 20% of Total Assets;
(v) Indebtedness Incurred by the Company or any of its Restricted
Subsidiaries constituting reimbursement obligations with respect to
letters of credit issued in the ordinary course of business, including
without limitation letters of credit in respect of workers'
compensation claims or self-insurance, or other Indebtedness with
respect to reimbursement type obligations regarding workers'
compensation claims; provided, however, that upon the drawing of such
letters of credit or the Incurrence of such Indebtedness, such
obligations are reimbursed within 30 days following such drawing or
Incurrence;
(vi) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary providing for indemnification, adjustment of
purchase price or similar obligations, in each case, Incurred or
assumed in connection with the disposition of any business, assets or a
Subsidiary, other than guarantees of Indebtedness Incurred by any
Person acquiring all or any portion of such business, assets or a
Subsidiary for the purpose of financing such acquisition; provided,
however, that (a) such Indebtedness is not reflected on the balance
sheet of the Company or any Restricted Subsidiary (contingent
obligations referred to in a footnote to financial statements and not
otherwise reflected on the balance sheet shall not be deemed to be
reflected on such balance sheet for purposes of this clause (a)) and
(b) the maximum assumable liability in respect of all such Indebtedness
shall at no time exceed the gross proceeds including noncash proceeds
(the fair market value of such noncash proceeds being measured at the
time received and without giving effect to any subsequent changes in
value) actually received by the Company and its Restricted Subsidiaries
in connection with such disposition;
(vii) Indebtedness of the Company to a Restricted Subsidiary;
provided that any such Indebtedness is subordinated in right of payment
to the Securities; provided further that any subsequent issuance or
transfer of any Capital Stock or any other event which results in any
such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any
other subsequent transfer of any such Indebtedness (except to the
Company or another Restricted Subsidiary) shall be deemed, in each case
to be an Incurrence of such Indebtedness;
(viii) Indebtedness of a Restricted Subsidiary to the Company or
another Restricted Subsidiary; provided that (a) any such Indebtedness
is made pursuant
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to an intercompany note and (b) if a Guarantor Incurs such
Indebtedness from a Restricted Subsidiary that is not a Guarantor such
Indebtedness is subordinated in right of payment to the Guarantee of
such Guarantor; provided further that any subsequent transfer of any
such Indebtedness (except to the Company or another Restricted
Subsidiary) shall be deemed, in each case to be an Incurrence of such
Indebtedness;
(ix) shares of preferred stock of a Restricted Subsidiary issued
to the Company or another Restricted Subsidiary; provided that any
subsequent issuance or transfer of any Capital Stock or any other event
which results in any such Restricted Subsidiary ceasing to be a
Restricted Subsidiary or any other subsequent transfer of any such
shares of preferred stock (except to the Company or another Restricted
Subsidiary) shall be deemed in each case to be an issuance of such
shares of preferred stock;
(x) Hedging Obligations that are Incurred in the ordinary course
of business (but in any event excluding Hedging Obligations entered
into for speculative purposes);
(xi) obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted
Subsidiary in the ordinary course of business;
(xii) Indebtedness of any Guarantor in respect of such Guarantor's
Guarantee;
(xiii) Indebtedness and Disqualified Stock of the Company or any
of its Restricted Subsidiaries not otherwise permitted under this
Section 4.03 in an aggregate principal amount or liquidation
preference, which when aggregated with the principal amount and
liquidation preference of all other Indebtedness and Disqualified Stock
then outstanding and Incurred pursuant to this Section 4.03(b)(xiii),
does not at any one time outstanding exceed the sum of (a) $150.0
million and (b) 100% of the net cash proceeds received by the Company
since immediately after the Transactions from the issue or sale of
Equity Interests of the Company or net cash proceeds contributed to the
capital of the Company (in each case other than Disqualified Stock) as
determined in accordance with clauses (a)(3)(ii) and (a)(3)(iii) of
Section 4.04 to the extent such net cash proceeds have not been applied
pursuant to such clauses to make Restricted Payments or to make other
payments or exchanges pursuant to 4.04(b) or to make Permitted
Investments (other than clauses (a) and (c) of such definition) (it
being understood that any Indebtedness Incurred under this Section
4.03(b)(xiii) shall cease to be deemed Incurred or outstanding for
purposes of this Section 4.03(b)(xiii) but shall
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be deemed to be Incurred for purposes of Section 4.03(a) from and
after the first date on which the Company could have Incurred such
Indebtedness under Section 4.03(a) without reliance upon this Section
4.03(b)(xiii));
(xiv) (a) any guarantee by the Company of Indebtedness or other
obligations of any of its Restricted Subsidiaries so long as the
Incurrence of such Indebtedness Incurred by such Restricted Subsidiary
is permitted under the terms of this Indenture and (b) any guarantee by
a Restricted Subsidiary of Indebtedness of the Company, provided that
such guarantee is Incurred in accordance with Section 4.11;
(xv) the Incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness which serves to refund, refinance or
restructure any Indebtedness Incurred as permitted under Section
4.03(a) and clauses (ii) and (iii) of this Section 4.03(b), this clause
(xv) and clause (xvi) below or any Indebtedness issued to so refund,
refinance or restructure such Indebtedness including additional
Indebtedness Incurred to pay premiums and fees in connection therewith
(the "Refinancing Indebtedness") prior to its respective maturity;
provided, however, that such Refinancing Indebtedness (a) has a
Weighted Average Life to Maturity at the time such Refinancing
Indebtedness is Incurred which is not less than the remaining Weighted
Average Life to Maturity of Indebtedness being refunded or refinanced,
(b) to the extent such Refinancing Indebtedness refinances Indebtedness
subordinated or pari passu to the Securities, such Refinancing
Indebtedness is subordinated or pari passu to the Securities at least
to the same extent as the Indebtedness being refinanced or refunded and
(c) shall not include (1) Indebtedness of a Subsidiary that refinances
Indebtedness of the Company or (2) Indebtedness of the Company or a
Restricted Subsidiary that refinances Indebtedness of an Unrestricted
Subsidiary; and provided further that clauses (a) and (b) of this
Section 4.03(xv) shall not apply to any refunding or refinancing of any
Senior Indebtedness; and
(xvi) Indebtedness or Disqualified Stock of Persons that are
acquired by the Company or any of its Restricted Subsidiaries or merged
into a Restricted Subsidiary in accordance with the terms of this
Indenture; provided that such Indebtedness or Disqualified Stock is not
Incurred in contemplation of such acquisition or merger; and provided
further that after giving effect to such acquisition or merger, either
(a) the Company would be permitted to Incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in Section 4.03(a) or (b) the Fixed Charge Coverage
Ratio is greater than immediately prior to such acquisition or merger.
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(c) For purposes of determining compliance with this Section 4.03, in
the event that an item of Indebtedness meets the criteria of more than one
of the categories of permitted Indebtedness described in clauses (i) through
(xvi) of Section 4.03(b) or is entitled to be Incurred pursuant to Section
4.03(a), the Company shall, in its sole discretion, classify such item of
Indebtedness in any manner that complies with this Section 4.03 and such
item of Indebtedness shall be treated as having been Incurred pursuant to
only one of such clauses or pursuant to Section 4.03(a) except as otherwise
set forth in Section 4.03(b)(xiii). Accrual of interest, the accretion of
accreted value and the payment of interest in the form of additional
Indebtedness shall not be deemed to be an Incurrence of Indebtedness for
purposes of this Section 4.03.
(d) For purposes of determining compliance with any U.S.
dollar-denominated restriction on the Incurrence of Indebtedness, the U.S.
dollar-equivalent principal amount of Indebtedness denominated in a foreign
currency shall be calculated based on the relevant currency exchange rate in
effect on the date such Indebtedness was Incurred, in the case of term debt,
or first committed, in the case of revolving credit debt; provided that (1)
the U.S. dollar-equivalent principal amount of any such Indebtedness
outstanding or committed on the Closing Date shall be calculated based on
the relevant currency exchange rate in effect on March 31, 1998, and (2) if
such Indebtedness is Incurred to refinance other Indebtedness denominated in
a foreign currency, and such refinancing would cause the applicable U.S.
dollar-denominated restriction to be exceeded if calculated at the relevant
currency exchange rate in effect on the date of such refinancing, such U.S.
dollar-denominated restriction shall be deemed not to have been exceeded so
long as the principal amount of such refinancing Indebtedness does not
exceed the principal amount of such Indebtedness being refinanced. The
principal amount of any Indebtedness Incurred to refinance other
Indebtedness, if Incurred in a different currency from the Indebtedness
being refinanced, shall be calculated based on the currency exchange rate
applicable to the currencies in which such respective Indebtedness is
denominated that is in effect on the date of such refinancing.
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SECTION 4.04. Limitation on Restricted Payments. (a) 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 distribution on account
of the Company's or any of its Restricted Subsidiaries' Equity Interests,
including any dividend or distribution payable in connection with any merger or
consolidation (other than (A) dividends or distributions by the Company payable
in Equity Interests (other than Disqualified Stock) of the Company or in
options, warrants or other rights to purchase such Equity Interests or (B)
dividends or distributions by a Restricted Subsidiary so long as, in the case of
any dividend or distribution payable on or in respect of any class or series of
securities issued by a Subsidiary other than a Wholly Owned Subsidiary, the
Company or a Restricted Subsidiary receives at least its pro rata share of such
dividend or distribution in accordance with its Equity Interests in such class
or series of securities); (ii) purchase, redeem, defease or otherwise acquire or
retire for value any Equity Interests of the Company or any direct or indirect
parent of the Company; (iii) make any principal payment on, or redeem,
repurchase, defease or otherwise acquire or retire for value in each case, prior
to any scheduled repayment, or maturity, any Subordinated Indebtedness (other
than (x) Indebtedness permitted under clauses (vii) and (viii) of Section
4.03(b) or (y) the purchase, repurchase or other acquisition of Subordinated
Indebtedness purchased in anticipation of satisfying a sinking fund obligation,
principal installment or final maturity, in each case due within one year of the
date of purchase, repurchase or acquisition); 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 such Restricted Payment:
(1) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(2) immediately after giving effect to such transaction on a pro
forma basis, the Company could Incur $1.00 of additional Indebtedness
pursuant to Section 4.03(a); and
(3) such Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by the Company and its Restricted
Subsidiaries after the Closing Date (including Restricted Payments
permitted by clauses (i), (ii) (with respect to the payment of
dividends on Refunding Capital Stock pursuant to clause (b) thereof),
(iv) (only to the extent that amounts paid pursuant to such clause are
greater than amounts that could have been paid pursuant to such clause
if $5.0 million and $10.0 million were substituted in such clause for
$10.0 million and $20.0 million, respectively), (vi), (ix) and (x) of
Section 4.04(b), but excluding all other Restricted Payments permitted
by Section 4.04(b)), is less than the sum of (i) 50% of the
Consolidated Net Income of the Company for the period (taken as one
accounting period) from the fiscal quarter that first begins after the
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Closing Date 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, in the case such Consolidated
Net Income for such period is a deficit, minus 100% of such deficit),
plus (ii) 100% of the aggregate net cash proceeds and the fair market
value, as determined in good faith by the Board of Directors, of
marketable securities and Qualified Proceeds 33 received by the Company
since immediately after the closing of the Transactions from the issue
or sale of Equity Interests of the Company (including Retired Capital
Stock (as defined below), but excluding cash proceeds, marketable
securities and Qualified Proceeds received from the sale of (A) Equity
Interests to members of management, directors or consultants of the
Company and its Subsidiaries after the Closing Date to the extent such
amounts have been applied to Restricted Payments made in accordance
with Section 4.04(b)(iv) and (B) Designated Preferred Stock) or debt
securities of the Company that have been converted into such Equity
Interests of the Company (other than Refunding Capital Stock (as
defined below) or Equity Interests or convertible debt securities of
the Company sold to a Restricted Subsidiary of the Company and other
than Disqualified Stock or debt securities that have been converted
into Disqualified Stock), plus (iii) 100% of the aggregate amount of
cash, marketable securities and Qualified Proceeds contributed to the
capital of the Company following the Closing Date (other than by a
Restricted Subsidiary of the Company), plus (iv) 100% of the aggregate
amount received in cash, the fair market value of marketable securities
and Qualified Proceeds (other than Restricted Investments) received by
means of (A) the sale or other disposition (other than to the Company
or a Restricted Subsidiary) of Restricted Investments made by the
Company and its Restricted Subsidiaries and repurchases and redemptions
of such Restricted Investments from the Company and its Restricted
Subsidiaries and repayments of loans or advances which constitute
Restricted Investments by the Company and its Restricted Subsidiaries
or (B) the sale (other than to the Company or a Restricted Subsidiary)
of the stock of an Unrestricted Subsidiary or a distribution from an
Unrestricted Subsidiary (other than in each case to the extent the
Investment in such Unrestricted Subsidiary was made by the Company or a
Restricted Subsidiary pursuant to clauses (vii) or (xi) of Section
4.04(b) or to the extent such Investment constituted a Permitted
Investment) or a dividend from an Unrestricted Subsidiary plus (v) in
the case of the redesignation of an Unrestricted Subsidiary as a
Restricted Subsidiary, the fair market value of the Investment in such
Unrestricted Subsidiary, as determined by the Board of Directors in
good faith or if such fair market value may exceed $25 million, in
writing by an independent investment banking firm of nationally
recognized standing, at the time of the redesignation of such
Unrestricted Subsidiary as a Restricted Subsidiary (other than an
Unrestricted Subsidiary to the extent the Investment in such
Unrestricted Subsidiary was made by the Company or a Restricted
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Subsidiary pursuant to clauses (vii) or (xi) of Section 4.04(b) or
to the extent such Investment constituted a Permitted Investment).
(b) The foregoing provisions shall not prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at the date of declaration such payment would
have complied with the provisions of this Indenture;
(ii) (a) the redemption, repurchase, retirement or other
acquisition of any Equity Interests ("Retired Capital Stock") or
Subordinated Indebtedness of the Company in exchange for, or out of the
proceeds of the substantially concurrent sale (other than to a
Restricted Subsidiary) of, Equity Interests of the Company (other than
any Disqualified Stock) ("Refunding Capital Stock") and (b) the
declaration and payment of dividends on the Refunding Capital Stock in
an aggregate amount per year no greater than the aggregate amount of
dividends per annum that was declarable and payable on such Retired
Capital Stock immediately prior to such retirement;
(iii) the redemption, repurchase or other acquisition or
retirement of Subordinated Indebtedness of the Company made by exchange
for, or out of the proceeds of the substantially concurrent sale of,
new Indebtedness of the Company which is Incurred in compliance with
Section 4.03 so long as (A) the principal amount of such new
Indebtedness does not exceed the principal amount of the Subordinated
Indebtedness being so redeemed, repurchased, acquired or retired for
value (plus the amount of any premium required to be paid under the
terms of the instrument governing the Subordinated Indebtedness being
so redeemed, repurchased, acquired or retired), (B) such Indebtedness
is subordinated to Senior Indebtedness and the Securities at least to
the same extent as such Subordinated Indebtedness so purchased,
exchanged, redeemed, repurchased, acquired or retired for value, (C)
such Indebtedness has a final scheduled maturity date equal to or later
than the final scheduled maturity date of the Subordinated Indebtedness
being so redeemed, repurchased, acquired or retired and (D) such
Indebtedness has a Weighted Average Life to Maturity equal to or
greater than the remaining Weighted Average Life to Maturity of the
Subordinated Indebtedness being so redeemed, repurchased, acquired or
retired;
(iv) a Restricted Payment to pay for the repurchase, retirement or
other acquisition or retirement for value of common Equity Interests of
the Company held by any future, present or former employee, director or
consultant of the Company or any Subsidiary pursuant to any management
equity plan or stock option plan or any other management or employee
benefit plan or agreement;
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provided, however, that the aggregate Restricted Payments made
under this Section 4.04(b)(iv) does not exceed in any calendar year
$10.0 million (with unused amounts in any calendar year being carried
over to succeeding calendar years subject to a maximum (without giving
effect to the following proviso) of $20.0 million in any calendar
year); provided further that such amount in any calendar year may be
increased by an amount not to exceed (A) the cash proceeds from the
sale of Equity Interests of the Company to members of management,
directors or consultants of the Company and its Subsidiaries that
occurs after the Closing Date (to the extent the cash proceeds from the
sale of such Equity Interest have not otherwise been applied to the
payment of Restricted Payments by virtue of Section 4.04(a)(3)) plus
(B) the cash proceeds of key man life insurance policies received by
the Company and its Restricted Subsidiaries after the Closing Date less
(C) the amount of any Restricted Payments previously made pursuant to
clauses (A) and (B) of this Section 4.04(b)(iv); and provided further
that cancelation of Indebtedness owing to the Company from members of
management of the Company or any of its Restricted Subsidiaries in
connection with a repurchase of Equity Interests of the Company shall
not be deemed to constitute a Restricted Payment for purposes of this
Section 4.04 or any other provision of this Indenture;
(v) the declaration and payment of dividends to holders of any
class or series of Disqualified Stock of the Company issued in
accordance with Section 4.03 to the extent such dividends are included
in the definition of Fixed Charges;
(vi) (A) the declaration and payment of dividends to holders of
any class or series of Designated Preferred Stock (other than
Disqualified Stock) issued after the Closing Date or (B) the
declaration and payment of dividends on Refunding Capital Stock in
excess of the dividends declarable and payable thereon pursuant to
Section 4.04(b)(ii); provided, however, in either case, that for the
most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date of
issuance of such Designated Preferred Stock or the declaration of such
dividends on Refunding Capital Stock, after giving effect to such
issuance or declaration on a pro forma basis, the Company and its
Restricted Subsidiaries would have had a Fixed Charge Coverage Ratio of
at least 1.75 to 1.00;
(vii) Investments in Unrestricted Subsidiaries having an aggregate
fair market value, taken together with all other Investments made
pursuant to this Section 4.04(b)(vii) that are at that time outstanding
(without giving effect to the sale of an Unrestricted Subsidiary to the
extent the proceeds of such sale do not consist of cash, marketable
securities and/or Qualified Proceeds or distributions made pursuant to
Section 4.04(b)(xiv)), not to exceed $25.0 million at the time of
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such Investment (with the fair market value of each Investment
being measured at the time made and without giving effect to subsequent
changes in value);
(viii) repurchases of Equity Interests deemed to occur upon
exercise of stock options if such Equity Interests represent a portion
of the exercise price of such options;
(ix) the payment of dividends on the Company's Common Stock,
following the first public offering of the Company's Common Stock after
the Closing Date, of up to 6% per annum of the net proceeds received by
the Company in such public offering, other than public offerings with
respect to the Company's Common Stock registered on Form S-8;
(x) a Restricted Payment to pay for the repurchase, retirement or
other acquisition or retirement for value of Equity Interests of the
Company in existence on the Closing Date and which are not held by KKR
or any of their Affiliates on the Closing Date (including any Equity
Interests issued in respect of such Equity Interests as a result of a
stock split, recapitalization, merger, combination, consolidation or
otherwise, but excluding any management equity plan or stock option
plan or similar agreement), provided that notwithstanding the foregoing
proviso, the Company and its Restricted Subsidiaries shall be permitted
to make Restricted Payments under this Section 4.04(b)(x) only if after
giving effect thereto, the Company would be permitted to Incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in Section 4.03(a);
(xi) Investments that are made with Excluded Contributions;
(xii) other Restricted Payments in an aggregate amount not to
exceed $20.0 million;
(xiii) distributions or payments of Receivables Fees;
(xiv) the distribution, as a dividend or otherwise, of shares of
Capital Stock of, or Indebtedness owed to the Company or a Restricted
Subsidiary of the Company by, Unrestricted Subsidiaries (with the
exception of Investments in Unrestricted Subsidiaries acquired pursuant
to clause (j) of the definition of Permitted Investments);
(xv) cash dividends and other payments to CCPC Acquisition in
amounts equal to (A) the amounts required for CCPC Acquisition to pay
any Federal, state or local income taxes to the extent that such income
taxes are
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attributable to the income of the Company and its Subsidiaries and
(B) the amounts required for CCPC Acquisition to pay franchise taxes,
administrative and similar expenses related to its existence and to its
ownership of the Company; and
(xvi) cash dividends and other payments required to be made under
the Recapitalization Agreement;
provided however, that at the time of, and after giving effect to, any
Restricted Payment permitted under clauses (ii)(b), (iii) through (v), (vi)
through (x), (xii) and (xiv) of this Section 4.04(b), no Default or Event or
Default shall have occurred and be continuing or would occur as a consequence
thereof. To the extent the issuance of Equity Interests and the receipt of
capital contributions are applied to permit the issuance of Indebtedness
pursuant to Section 4.03(b)(xiii), the issuance of such Equity Interests and the
receipt of such capital contributions shall not be applied to permit payments
under this Section 4.04 or Permitted Investments (other than clauses (a) and (c)
of the definition thereof).
As of the Closing Date, all of the Company's Subsidiaries shall be
Restricted Subsidiaries. The Company shall not permit any Unrestricted
Subsidiary to become a Restricted Subsidiary except pursuant to the second to
last sentence of the definition of "Unrestricted Subsidiary." For purposes of
designating any Restricted Subsidiary as an Unrestricted Subsidiary, all
outstanding Investments by the Company and its Restricted Subsidiaries (except
to the extent repaid) in the Subsidiary so designated shall be deemed to be
Restricted Payments in an amount determined as set forth in the last sentence of
the definition of "Investments." Such designation shall be permitted only if a
Restricted Payment in such amount would be permitted at such time (whether
pursuant to Section 4.04(a) or under clauses (vii), (xi) and (xii) of Section
4.04(b)) and if such Subsidiary otherwise meets the definition of an
Unrestricted Subsidiary. Unrestricted Subsidiaries shall not be subject to any
of the restrictive covenants set forth in this Indenture.
SECTION 4.05. 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 consensual encumbrance or consensual restriction
on the ability of any Restricted Subsidiary to:
(a) (i) 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 (ii) pay any Indebtedness owed to the Company or any of its
Restricted Subsidiaries; 37
(b) make loans or advances to the Company or any of its Restricted
Subsidiaries; or
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(c) sell, lease or transfer any of its properties or assets to the
Company or any of its Restricted Subsidiaries, except (in each case) for
such encumbrances or restrictions existing under or by reason of:
(1) contractual encumbrances or restrictions in effect on the
Closing Date, including, without limitation, pursuant to Existing
Indebtedness or the Senior Credit Facilities and their related
documentation;
(2) this Indenture and the Securities;
(3) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions of the nature
discussed in clause (c) above on the property so acquired;
(4) applicable law or any applicable rule, regulation or order;
(5) any agreement or other instrument of a Person acquired by the
Company or any Restricted Subsidiary in existence at the time of such
acquisition (but not created in contemplation thereof), which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired;
(6) contracts for the sale of assets, including, without
limitation customary restrictions with respect to a Subsidiary pursuant
to an agreement that has been entered into for the sale or disposition
of all or substantially all of the Capital Stock or assets of such
Subsidiary;
(7) secured Indebtedness otherwise permitted to be Incurred
pursuant to Sections 4.03 and 4.12 that limit the right of the debtor
to dispose of the assets securing such Indebtedness;
(8) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of
business;
(9) other Indebtedness or Disqualified Stock of Restricted
Subsidiaries permitted to be Incurred subsequent to the Closing Date
pursuant to Section 4.03;
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(10) customary provisions in joint venture agreements and other
similar agreements entered into in the ordinary course of business;
(11) customary provisions contained in leases and other agreements
entered into in the ordinary course of business;
(12) any encumbrances or restrictions of the type referred to in
clauses (a), (b) and (c) of this Section 4.05 imposed by any
amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings of the contracts,
instruments or obligations referred to in clauses (1) through (11),
provided that such amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings are,
in the good faith judgment of the Company's Board of Directors, no more
restrictive with respect to such dividend and other payment
restrictions than those contained in the dividend or other payment
restrictions prior to such amendment, modification, restatement,
renewal, increase, supplement, refunding, replacement or refinancing;
or
(13) restrictions created in connection with any Receivables
Facility that, in the good faith determination of the Board of
Directors of the Company, are necessary or advisable to effect such
Receivables Facility.
SECTION 4.06. Asset Sales. (a) The Company shall not, and shall not permit
any of its Restricted Subsidiaries to, cause, make or suffer to exist an Asset
Sale, unless (x) the Company, or such Restricted Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least equal to the fair
market value (as determined in good faith by the Company) of the assets sold or
otherwise disposed of and (y) at least 75% of the consideration therefor
received by the Company, or such Restricted Subsidiary, as the case may be, is
in the form of cash or Cash Equivalents; provided that the amount of (i) any
liabilities (as shown on the Company's or such Restricted Subsidiary's most
recent balance sheet or in the notes thereto) of the Company or any Restricted
Subsidiary (other than liabilities that are by their terms subordinated to the
Securities), that are assumed by the transferee of any such assets, (ii) any
securities received by the Company or such Restricted Subsidiary from such
transferee that are converted by the Company or such Restricted Subsidiary into
cash (to the extent of the cash received) within 180 days following the closing
of such Asset Sale and (iii) any Designated Noncash Consideration received by
the Company or any of its Restricted Subsidiaries in such Asset Sale having an
aggregate fair market value, taken together with all other Designated Noncash
Consideration received pursuant to this clause (iii) that is at that time
outstanding, not to exceed the greater of (x) $50.0 million or (y) 15% of Total
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Assets at the time of the receipt of such Designated Noncash Consideration (with
the fair market value of each item of Designated Noncash Consideration being
measured at the time received and without giving effect to subsequent changes in
value), shall be deemed to be cash for purposes of this provision and for no
other purpose.
(b) Within 365 days after the Company's or any Restricted Subsidiary's
receipt of the Net Proceeds of any Asset Sale, the Company or such
Restricted Subsidiary, at its option, may (i) apply the Net Proceeds from
such Asset Sale to permanently reduce (x) Obligations under the Senior
Credit Facilities (and to correspondingly reduce commitments with respect
thereto), (y) other Senior Indebtedness or Senior Subordinated Indebtedness
(and to correspondingly reduce commitments with respect thereto) (provided
that if the Company shall so reduce Obligations under Senior Subordinated
Indebtedness, it shall equally and ratably reduce Obligations under the
Securities if the Securities are then prepayable or, if the Securities may
not then be prepaid, the Company shall make an offer (in accordance with the
procedures set forth below for an Asset Sale Offer) to all Holders to
purchase at 100% of the principal amount thereof, plus the amount of accrued
but unpaid interest, if any, on the amount of Securities that would
otherwise be prepaid) or (z) Indebtedness of a Wholly Owned Restricted
Subsidiary (other than Indebtedness owed to the Company or another
Restricted Subsidiary), (ii) apply the Net Proceeds from such Asset Sale to
an investment in any one or more businesses, capital expenditures or
acquisitions of other assets in each case, used or useful in a Similar
Business and/or (iii) apply the Net Proceeds from such Asset Sale to an
investment in properties or assets that replace the properties and assets
that are the subject of such Asset Sale. Any Net Proceeds from the Asset
Sale that are not invested or applied as provided and within the time period
set forth in the first sentence of this Section 4.06(b) shall be deemed to
constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds
exceeds $15.0 million, the Company shall make an offer to all Holders (an
"Asset Sale Offer") to purchase the maximum principal amount of Securities,
that is an integral multiple of $1,000, 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, if any, to the
date fixed for the closing of such offer (the "Offered Price"). Within 10
Business Days after the date on which the aggregate amount of Excess
Proceeds exceeds $15.0 million, the Company shall give to each Holder, with
a copy to the Trustee, a notice stating:
(i) that the Holder has the right to require the Company to
repurchase such Holder's Securities at the Offered Price, subject to
proration in the event the Excess Proceeds are less than the aggregate
Offered Price of all Securities tendered;
(ii) the date of purchase of Securities pursuant to the Asset Sale
Offer (the "Asset Sale Purchase Date"), which shall be no earlier than
30 days nor later than 60 days from the date such notice is mailed;
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(iii) that the Offered Price will be paid to Holders electing to
have Securities purchased on the Asset Sale Purchase Date, provided
that a Holder must surrender its Security to the Paying Agent at the
address specified in the notice prior to the close of business at least
five Business Days prior to the Asset Sale Purchase Date;
(iv) any Security not tendered will continue to accrue interest
pursuant to its terms;
(v) that unless the Company defaults in the payment of the Offered
Price, any Security accepted for payment pursuant to the Asset Sale
Offer shall cease to accrue interest on and after the Asset Sale
Purchase Date;
(vi) that Holders will be entitled to withdraw their tendered
Securities and their election to require the Company to purchase such
Securities, provided that the Company receives, not later than the
close of business on the third Business Day preceding the Asset Sale
Purchase Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the
Securities tendered for purchase, and a statement that such Holder is
withdrawing its election to have such Securities purchased;
(vii) that the Holders whose Securities are being purchased only
in part will be issued new Securities equal in principal amount to the
unpurchased portion of the Securities surrendered; which unpurchased
portion must be equal to $1,000 in principal amount or an integral
multiple thereof; and
(viii) the instructions a Holder must follow in order to have his
Securities purchased in accordance with this Section 4.06.
(c) To the extent that the aggregate amount of Securities tendered
pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company may use any remaining Excess Proceeds for general corporate
purposes. If the aggregate principal amount of Securities surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall
select the Securities to be purchased in the manner described in Section
4.06(d). Upon completion of any such Asset Sale Offer, the amount of Excess
Proceeds shall be reset at zero.
(d) If more Securities are tendered pursuant to an Asset Sale Offer
than the Company is required to purchase, selection of such Securities for
purchase shall be made by the Trustee in compliance with the requirements of
the principal national securities exchange, if any, on which such Securities
are listed, or, if such Securities are not so listed, on a pro rata basis,
by lot or by such other method as the Trustee shall deem fair
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<PAGE>
and appropriate (and in such manner as complies with applicable legal
requirements); provided that no Securities of $1,000 or less shall be
purchased in part.
(e) Notices of purchase shall be mailed by first class mail, postage
prepaid, at least 30 but not more than 60 days before the Asset Sale
Purchase Date to each Holder of Securities to be purchased at such Holder's
registered address. If any Security is to be purchased in part only, any
notice of purchase that relates to such Security shall state the portion of
the principal amount thereof that has been or is to be purchased. A new
Security in principal amount equal to the unpurchased portion of any
Security purchased in part shall be issued in the name of the Holder thereof
upon cancelation of the original Security. On and after the Asset Sale
Purchase Date unless the Company defaults in payment of the Offered Price,
interest shall cease to accrue on Securities or portions thereof purchased.
(f) The Company shall 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 or regulations are applicable in connection with the
repurchase of the Securities pursuant to an Asset Sale Offer. To the extent
that the provisions of any securities laws or regulations conflict with the
provisions of this Indenture, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations described in this Indenture by virtue thereof.
SECTION 4.07. Transactions with Affiliates. (a) 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 of the Company (each of the
foregoing, an "Affiliate Transaction") involving aggregate payments or
consideration in excess of $5.0 million, unless (i) such Affiliate Transaction
is on terms that are not materially 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 with respect to
any Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $10.0 million, a resolution adopted by the
majority of the Board of Directors approving such Affiliate Transaction and set
forth in an Officers' Certificate certifying that such Affiliate Transaction
complies with Section 4.07(a)(i).
(b) The foregoing provisions shall not apply to the following: (i)
transactions between or among the Company and/or any of its Restricted
Subsidiaries; (ii) Restricted Payments permitted by Section 4.04; (iii) the
payment of customary annual management, consulting, monitoring and advisory
fees and related expenses to KKR and its Affiliates;
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(iv) the payment of reasonable and customary fees paid to, and indemnity
provided on behalf of, officers, directors, employees or consultants of the
Company or any Restricted Subsidiary; (v) payments by the Company or any of
its Restricted Subsidiaries to KKR and its Affiliates made for any financial
advisory, financing, underwriting or placement services or in respect of
other investment banking activities, including, without limitation, in
connection with acquisitions or divestitures which payments are approved by
a majority of the Board of Directors of the Company in good faith; (vi)
transactions in which the Company or any of its Restricted Subsidiaries, as
the case may be, delivers to the Trustee a letter from an Independent
Financial Advisor stating that such transaction is fair to the Company or
such Restricted Subsidiary from a financial point of view or meets the
requirements of Section 4.07(a)(i); (vii) payments or loans to employees or
consultants which are approved by a majority of the Board of Directors of
the Company in good faith; (viii) any agreement as in effect as of the
Closing Date (including, without limitation, each of the agreements entered
into in connection with the Transactions) or any amendment thereto (so long
as any such amendment is not disadvantageous to the Holders in any material
respect) or any transaction contemplated thereby; (ix) the existence of, or
the performance by the Company or any of its Restricted Subsidiaries of its
obligations under the terms of, any stockholders agreement (including any
registration rights agreement or purchase agreement related thereto) to
which it is a party as of the Closing Date and any similar agreements which
it may enter into thereafter; provided, however, that the existence of, or
the performance by the Company or any of its Restricted Subsidiaries of
obligations under any future amendment to any such existing agreement or
under any similar agreement entered into after the Closing Date shall only
be permitted by this clause (ix) to the extent that the terms of any such
amendment or new agreement are not otherwise disadvantageous to the Holders
in any material respect; (x) the Transactions and the payment of all fees
and expenses related to the Transactions (including the payment of any
adjustment to the Cash Dividend or the Contingent Payment); (xi)
transactions with customers, clients, suppliers, or purchasers or sellers of
goods or services, in each case in the ordinary course of business and
otherwise in compliance with the terms of this Indenture which are fair to
the Company or its Restricted Subsidiaries, in the reasonable determination
of the Board of Directors of the Company or the senior management thereof,
or are on terms at least as favorable as might reasonably have been obtained
at such time from an unaffiliated party; (xii) sales of accounts receivable,
or participations therein, in connection with any Receivables Facility; and
(xiii) the issuance of Equity Interests (other than Disqualified Stock) of
the Company to any Permitted Holder and their Related Parties.
SECTION 4.08. Change of Control. (a) Upon the occurrence of a Change of
Control, unless the Company has elected to redeem the Securities in connection
with such Change of Control pursuant to paragraph 5 of the Securities, the
Company shall make an offer to purchase all of the Securities pursuant to the
offer described below (the "Change of
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Control Offer") at a price in cash (the "Change of Control Payment") equal to
101% of the aggregate principal amount thereof plus accrued and unpaid interest,
if any, to the date of purchase (subject to the right of holders of record on
the relevant record date to receive interest due on the relevant interest
payment date).
(b) Within 30 days following any Change of Control, the Company shall
mail a notice to each Holder, with a copy to the Trustee, with the following
information: (1) a Change of Control Offer is being made pursuant to this
Section 4.08 and that all Securities properly tendered pursuant to such
Change of Control Offer will be accepted for payment; (2) the purchase price
and the purchase date, which shall be no earlier than 30 days nor later than
60 days from the date such notice is mailed, except as may be otherwise
required by applicable law (the "Change of Control Payment Date"); (3) any
Security not properly tendered will remain outstanding and continue to
accrue interest; (4) unless the Company defaults in the payment of the
Change of Control Payment, all Securities accepted for payment pursuant to
the Change of Control Offer will cease to accrue interest on the Change of
Control Payment Date; (5) Holders electing to have any Securities purchased
pursuant to a Change of Control Offer will be required to surrender the
Securities, with the form entitled "Option of Holder to Elect Purchase" on
the reverse of the Securities completed, to the Paying Agent specified in
the notice at the address specified in the notice prior to the close of
business on the third Business Day preceding the Change of Control Payment
Date; (6) Holders will be entitled to withdraw their tendered Securities and
their election to require the Company to purchase such Securities, provided
that the Paying Agent receives, not later than the close of business on the
last day of the Offer Period, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of
Securities tendered for purchase, and a statement that such Holder is
withdrawing his tendered Securities and his election to have such Securities
purchased; and (7) that Holders whose Securities are being purchased only in
part will be issued new Securities equal in principal amount to the
unpurchased portion of the Securities surrendered, which unpurchased portion
must be equal to $1,000 in principal amount or an integral multiple thereof.
(c) On the Change of Control Payment Date, the Company shall, to the
extent permitted by law, (1) accept for payment all Securities or portions
thereof properly tendered pursuant to the Change of Control Offer, (2)
deposit with the Paying Agent an amount equal to the aggregate Change of
Control Payment in respect of all Securities or portions thereof so tendered
and (3) deliver, or cause to be delivered, to the Trustee for cancelation
the Securities so accepted together with an Officers' Certificate stating
that such Securities or portions thereof have been tendered to and purchased
by the Company. The Paying Agent shall promptly mail to each Holder the
Change of Control Payment for such Securities, and the Trustee shall
promptly authenticate and mail to each Holder a new Security equal in
principal amount to any unpurchased portion of the Securities surrendered,
if any, provided, that each such new Security shall be in a principal amount
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of $1,000 or an integral multiple thereof. 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.
(d) Prior to complying with the provisions of this Section 4.08, but in
any event within 30 days following a Change of Control, the Company shall
either repay all outstanding Senior Indebtedness or obtain the requisite
consents, if any, under any outstanding Senior Indebtedness in each case
necessary to permit the repurchase of the Securities required by this
Section 4.08.
(e) The Company shall 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 or regulations are applicable in connection with the
repurchase of the Securities pursuant to a Change of Control Offer. To the
extent that the provisions of any securities laws or regulations conflict
with the provisions of this Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations described in this Indenture by virtue thereof.
SECTION 4.09. Compliance Certificate. The Company shall (i) deliver to the
Trustee within 120 days after the end of each fiscal year of the Company,
commencing with the fiscal year ending on December 31, 1998, an Officers'
Certificate stating that in the course of the performance by the signers of
their duties as Officers of the Company they would normally have knowledge of
any Default and whether or not the signers know of any Default that occurred
during such period and (ii) within five Business Days, upon becoming aware of
any Default or Event of Default or any default under any document, instrument or
agreement representing Indebtedness of the Company or any Guarantor, deliver to
the Trustee a statement specifying such Default or Event of Default. The
certificate or statement shall describe the Default, if any, its status and what
action the Company is taking or proposes to take with respect thereto. The
Company also shall comply with Section 314(a)(4) of the TIA.
SECTION 4.10. Further Instruments and Acts. Upon request of the Trustee, the
Company shall execute and deliver such further instruments and do such further
acts as may be reasonably necessary or proper to carry out more effectively the
purpose of this Indenture.
SECTION 4.11. Limitation on Guarantees of Indebtedness by Restricted
Subsidiaries. (a) The Company shall not permit any Restricted Subsidiary to
guarantee the payment of any Indebtedness of the Company unless (i) such
Restricted Subsidiary simultaneously executes and delivers a supplemental
indenture providing for a Guarantee of payment of the Securities by such
Restricted Subsidiary except that with respect to a guarantee of Indebtedness of
the Company (A) if the Securities are subordinated in right
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of payment to such Indebtedness, the Guarantee under the supplemental
indenture shall be subordinated to such Restricted Subsidiary's guarantee
with respect to such Indebtedness substantially to the same extent as the
Securities are subordinated to such Indebtedness under this Indenture and (B)
if such Indebtedness is by its express terms subordinated in right of payment
to the Securities, any such guarantee of such Restricted Subsidiary with
respect to such Indebtedness shall be subordinated in right of payment to
such Restricted Subsidiary's Guarantee with respect to the Securities
substantially to the same extent as such Indebtedness is subordinated to the
Securities; (ii) such Restricted Subsidiary waives and shall not in any
manner whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the
Company or any other Restricted Subsidiary as a result of any payment by such
Restricted Subsidiary under its Guarantee; and (iii) such Restricted
Subsidiary shall deliver to the Trustee an Opinion of Counsel to the effect
that (A) such Guarantee of the Securities has been duly executed and
authorized and (B) such Guarantee of the Securities constitutes a valid,
binding and enforceable obligation of such Restricted Subsidiary, except
insofar as enforcement thereof may be limited by bankruptcy, insolvency or
similar laws (including, without limitation, all laws relating to fraudulent
transfers) and except insofar as enforcement thereof is subject to general
principles of equity; provided that this Section 4.11(a) shall not be
applicable to any guarantee of any Restricted Subsidiary (x) that (A) existed
at the time such Person became a Restricted Subsidiary of the Company and (B)
was not incurred in connection with, or in contemplation of, such Person
becoming a Restricted Subsidiary of the Company or (y) that guarantees the
payment of Obligations of the Company or any Restricted Subsidiary under the
Senior Credit Facilities or any other Senior Indebtedness and any refunding,
refinancing or replacement thereof, in whole or in part, provided that such
refunding, refinancing or replacement thereof constitutes Senior Indebtedness
and provided further that any such Senior Indebtedness and any refunding,
refinancing or replacement thereof is not Incurred pursuant to a registered
offering of securities under the Securities Act or a private placement of
securities (including under Rule 144A) pursuant to an exemption from the
registration requirements of the Securities Act, which private placement
provides for registration rights under the Securities Act.
(b) Notwithstanding the provisions of Section 4.11(a) and the other
provisions of this Indenture, any Guarantee by a Restricted Subsidiary of
the Securities shall provide by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or
transfer, to any Person not an Affiliate of the Company, of all of the
Company's Capital Stock in, or all or substantially all the assets of, such
Restricted Subsidiary (which sale, exchange or transfer is not prohibited by
this Indenture) or (ii) the release or discharge of the guarantee which
resulted in the creation of such Guarantee, except a discharge or release by
or as a result of payment under such guarantee.
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SECTION 4.12. Liens. (a) The Company shall not, and shall not permit any of
its Restricted Subsidiaries to, directly or indirectly Incur or suffer to exist
any Lien that secures obligations under any Senior Subordinated Indebtedness or
Subordinated Indebtedness on any asset or property of the Company or such
Restricted Subsidiary, or any income or profits therefrom, or assign or convey
any right to receive income therefrom, unless the Securities are equally and
ratably secured (or senior to, in the event the Lien relates to Subordinated
Indebtedness) with the obligations so secured or until such time as such
obligations are no longer secured by a Lien.
(b) No Guarantor shall directly or indirectly Incur or suffer to exist
any Lien that secures obligations under any Senior Subordinated Indebtedness
or Subordinated Indebtedness of such Guarantor on any asset or property of
such Guarantor or any income or profits therefrom, or assign or convey any
right to receive income therefrom, unless the Guarantee of such Guarantor is
equally and ratably secured (or senior to, in the event the Lien relates to
Subordinated Indebtedness) with the obligations so secured or until such
time as such obligations are no longer secured by a Lien.
SECTION 4.13. Limitation on Other Senior Subordinated Indebtedness. The
Company shall not, and shall not permit any Guarantor to, directly or
indirectly, Incur any Indebtedness (including Acquired Indebtedness) that is
subordinate in right of payment to any Indebtedness of the Company or any
Indebtedness of any Guarantor, as the case may be, unless such Indebtedness is
either (a) pari passu in right of payment with the Securities or such
Guarantor's Guarantee, as the case may be or (b) subordinate in right of payment
to the Securities, or such Guarantor's Guarantee, as the case may be.
ARTICLE 5
Successor Company
SECTION 5.01. Merger, Consolidation, or Sale of All or Substantially All
Assets. (a) The Company shall not consolidate or merge with or into or wind up
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 any Person unless:
(i) the Company is the surviving corporation 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 will have been made is a corporation organized or
existing under the laws of the United States, any state thereof, the
District of Columbia, or any territory thereof (the Company or such
Person, as the case may be, being herein called the "Successor
Company");
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(ii) the Successor Company (if other than the Company) expressly
assumes all the obligations of the Company under this Indenture and the
Securities pursuant to a supplemental indenture or other documents or
instruments in form reasonably satisfactory to the Trustee;
(iii) immediately after such transaction no Default or Event of
Default exists;
(iv) immediately after giving pro forma effect to such
transaction, as if such transaction had occurred at the beginning of
the applicable four-quarter period, (A) the Successor Company would be
permitted to Incur at least $1.00 of additional Indebtedness pursuant
to the Fixed Charge Coverage Ratio test set forth in Section 4.03(a) or
(B) the Fixed Charge Coverage Ratio for the Successor Company and its
Restricted Subsidiaries would be greater than such Ratio for the
Company and its Restricted Subsidiaries immediately prior to such
transaction;
(v) each Guarantor, if any, unless it is the other party to the
transactions described above, in which case Section 5.01(b) shall
apply, shall have by supplemental indenture confirmed that its
Guarantee shall apply to such Person's obligations under this Indenture
and the Securities; and
(vi) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if
any) comply with this Indenture.
The Successor Company shall succeed to, and be substituted for, the Company
under this Indenture and the Securities. Notwithstanding the foregoing Section
5.01(a)(iv), (a) any Restricted Subsidiary may consolidate with, merge into or
transfer all or part of its properties and assets to the Company and (b) the
Company may merge with an Affiliate incorporated solely for the purpose of
reincorporating the Company in another State of the United States so long as the
amount of Indebtedness of the Company and its Restricted Subsidiaries is not
increased thereby.
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(b) Each Guarantor, if any, shall not, and the Company shall not permit
a Guarantor to, consolidate or merge with or into or wind up into (whether
or not such Guarantor 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, any Person
unless:
(i) such Guarantor is the surviving corporation or the Person
formed by or surviving any such consolidation or merger (if other than
such Guarantor) or to which such sale, assignment, transfer, lease,
conveyance or other disposition will have been made is a corporation
organized or existing under the laws of the United States, any state
thereof, the District of Columbia, or any territory thereof (such
Guarantor or such Person, as the case may be, being herein called the
"Successor Guarantor");
(ii) the Successor Guarantor (if other than such Guarantor)
expressly assumes all the obligations of such Guarantor under this
Indenture and such Guarantor's Guarantee pursuant to a supplemental
indenture or other documents or instruments in form reasonably
satisfactory to the Trustee;
(iii) immediately after such transaction no Default or Event of
Default exists; and
(iv) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if
any) comply with this Indenture.
The Successor Guarantor shall succeed to, and be substituted for, such
Guarantor under this Indenture and such Guarantor's Guarantee.
ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default. An "Event of Default" occurs if:
(1) the Company defaults in payment when due and payable, upon
redemption, acceleration or otherwise, of principal of, or premium, if
any, on the Securities whether or not such payment shall be prohibited
by Article 10;
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(2) the Company defaults in the payment when due of interest on or
with respect to the Securities whether or not such payment shall be
prohibited by Article 10 and such default continues for a period of 30
days;
(3) the Company or any Guarantor defaults in the performance, or
breaches any covenant, warranty or other agreement contained in this
Indenture or any Guarantee (other than a default in the performance, or
breach of a covenant, warranty or agreement which is specifically dealt
with in clauses (1) or (2) of this Section 6.01) and such default or
breach continues for a period of 30 days after the notice specified
below;
(4) default under any mortgage, indenture or instrument under
which there is issued or by which there is 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 (other than Indebtedness owed to the
Company or a Restricted Subsidiary), whether such Indebtedness or
guarantee now exists or is created after the Closing Date, if both (A)
such default either (1) results from the failure to pay any such
Indebtedness at its stated final maturity (after giving effect to any
applicable grace periods) or (2) relates to an obligation other than
the obligation to pay principal of any such Indebtedness at its stated
final maturity and results in the holder or holders of such
Indebtedness causing such Indebtedness to become due prior to its
stated maturity and (B) the principal amount of such Indebtedness,
together with the principal amount of any other such Indebtedness in
default for failure to pay principal at stated final maturity (after
giving effect to any applicable grace periods), or the maturity of
which has been so accelerated, aggregate $20.0 million or more at any
one time outstanding;
(5) the Company or any of its Significant Subsidiaries pursuant to
or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it
in an involuntary case;
(C) consents to the appointment of a Custodian of it or for
all or substantially all of its property; or
(D) makes a general assignment for the benefit of its
creditors;
or takes any comparable action under any foreign laws relating to insolvency;
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(6) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that remains unstayed and in effect for 60
days and:
(A) is for relief against the Company or any of its
Significant Subsidiaries in an involuntary case;
(B) appoints a Custodian of the Company or any of its
Significant Subsidiaries or for all or substantially all of the
property of the Company or any of its Significant Subsidiaries; or
(C) orders the winding up or liquidation of the Company or
any of its Significant Subsidiaries,
provided that clauses (A), (B) and (C) shall not apply to an
Unrestricted Subsidiary, unless such action or proceeding has a
material adverse effect on the interests of the Company or any of its
Significant Subsidiaries;
(7) The failure by the Company or any of its Significant
Subsidiaries to pay final judgments aggregating in excess of $20.0
million, which final judgments remain unpaid, undischarged and unstayed
for a period of more than 60 days after such judgment becomes final,
and in the event such judgment is covered by insurance, an enforcement
proceeding has been commenced by any creditor upon such judgment or
decree which is not promptly stayed; or
(8) The Guarantee of any Significant Subsidiary shall for any
reason cease to be in full force and effect or be declared null and
void or any Officer of the Company or any Guarantor that is a
Significant Subsidiary denies that it has any further liability under
its Guarantee or gives notice to such effect (other than by reason of
the termination of this Indenture or the release of any such Guarantee
in accordance with this Indenture).
The foregoing shall constitute Events of Default whatever the reason for any
such Event of Default and whether it is voluntary or involuntary or is effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body.
The term "Bankruptcy Law" means Title 11, United States Code, or any similar
Federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator, custodian or similar official under any
Bankruptcy Law.
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A Default under clause (3) above is not an Event of Default until the
Trustee or the Holders of at least 30% in principal amount of the outstanding
Securities notify the Company of the Default and the Company does not cure such
Default within the time specified in clause (3) after receipt of such notice.
Such notice must specify the Default, demand that it be remedied and state that
such notice is a "Notice of Default"
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default under clause (4) or (8) and any event which with the giving
of notice or the lapse of time would become an Event of Default under clause (3)
or (7), its status and what action the Company is taking or proposes to take
with respect thereto.
SECTION 6.02. Acceleration. If any Event of Default (other than of a type
specified in clause Section 6.01(5) or (6)) occurs and is continuing under this
Indenture, the Trustee or the Holders of at least 30% in principal amount of the
then outstanding Securities may declare the principal, premium, if any, interest
and any other monetary obligations on all the then outstanding Securities to be
due and payable immediately; provided, however, that, so long as any
Indebtedness permitted to be incurred under this Indenture as part of the Senior
Credit Facilities shall be outstanding, no such acceleration shall be effective
until the earlier of (i) acceleration of any such Indebtedness under the Senior
Credit Facilities or (ii) five Business Days after the giving of written notice
to the Company and the administrative agent under the Senior Credit Facilities
of such acceleration. Upon the effectiveness of such declaration, such principal
and interest shall be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising under Section 6.01(5) or
(6), all outstanding Securities shall ipso facto become due and payable without
further action or notice.
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 of or interest on the Securities or to enforce the performance of
any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of the
Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder 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 acquies cence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in
aggregate principal amount of the then outstanding Securities issued thereunder
by notice to the Trustee may on behalf of the Holders of all of such Securities
waive any existing
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Default or Event of Default and its consequences except (i) a continuing Default
or Event of Default in the payment of interest on, premium, if any, or the
principal of any such Security held by a non-consenting Holder, (ii) a Default
arising from the failure to redeem or purchase any Security when required
pursuant to the terms of this Indenture or (iii) a Default in respect of a
provision that under Section 9.02 cannot be amended without the consent of each
Securityholder affected. In the event of any Event of Default specified in
Section 6.01(4), such Event of Default and all consequences thereof (including
without limitation any acceleration or resulting payment default) shall be
annulled, waived and rescinded, automatically and without any action by the
Trustee or the Holders, if within 20 days after such Event of Default arose (x)
the Indebtedness or guarantee that is the basis for such Event of Default has
been discharged, or (y) the holders thereof have rescinded or waived the
acceleration, notice or action (as the case may be) giving rise to such Event of
Default, or (z) if the default that is the basis for such Event of Default has
been cured. When a Default is waived, it is deemed cured, but no such waiver
shall extend to any subsequent or other Default.
SECTION 6.05. Control by Majority. The Holders of a majority in principal
amount of the Securities may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or of exercising any trust or
power conferred on the Trustee. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture or, subject to Section 7.01,
that the Trustee determines is unduly prejudicial to the rights of other
Securityholders or would involve the Trustee in personal liability; provided,
however, that the Trustee may take any other action deemed proper by the Trustee
that is not inconsistent with such direction. Prior to taking any action
hereunder, the Trustee shall be entitled to indemni fication satisfactory to it
in its sole discretion against all losses and expenses caused by taking or not
taking such action.
SECTION 6.06. Limitation on Suits. Except to enforce the right to receive
payment of principal, premium (if any) or interest when due, no Securityholder
may pursue any remedy with respect to this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 30% in principal amount of the
Securities make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable
security or indemnity against any loss, liability or expense;
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(4) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of security or indemnity;
and
(5) the Holders of a majority in principal amount of the
Securities do not give the Trustee a direction inconsistent with the
request during such 60-day period.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding any
other provision of this Indenture, the right of any Holder to receive payment of
principal of and liquidated damages and interest on the Securities held by such
Holder, on or after the respective due dates expressed in the Securities, 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 speci fied
in Section 6.01(1) or (2) occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the Company
for the whole amount then due and owing (together with interest on any unpaid
interest to the extent lawful) and the amounts provided for in Section 7.07.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file such
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee and the Securityholders allowed in
any judicial proceedings relative to the Company, any Subsidiary or any
Guarantor, their creditors or their property and, unless prohibited by law or
applicable regulations, may vote on behalf of the Holders in any election of a
trustee in bankruptcy or other Person performing similar functions and may
participate as a member, voting or otherwise, of any official committee of
creditors appointed in such matter, and any Custodian in any such judicial
proceeding is hereby authorized by each Holder to make 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 it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and its counsel, and any other amounts due the Trustee under Section
7.07.
SECTION 6.10. Priorities. If the Trustee collects any money or property
pursuant to this Article 6, it shall pay out the money or property in the
following order:
FIRST: to the Trustee for amounts due under Section 7.07;
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SECOND: to Securityholders for amounts due and unpaid on the Securities for
principal and interest, ratably, and any liquidated damages without preference
or priority of any kind, according to the amounts due and payable on the
Securities for principal, any liquidated damages and interest, respectively,
except that payment shall first be made to the holders of Senior Indebtedness to
the extent required by Article 10; and
THIRD: to the Company or any other obligor on the Securities.
The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section 6.10. At least 15 days before such
record date, the Trustee shall mail to each Securityholder and the Company a
notice that states the record date, the payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any
right or remedy under this Indenture or in any suit against the Trustee for any
action taken or omitted by it as Trustee, a court in its discretion may require
the filing by any party litigant in the suit of an undertaking to pay the costs
of the suit, and the court in its discretion may assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in the suit,
having due regard to the merits and good faith of the claims or defenses made by
the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a
suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10%
in principal amount of the Securities.
SECTION 6.12. Waiver of Stay or Extension Laws. Neither the Company nor any
Guarantor (to the extent it may lawfully do so) shall at any time insist upon,
or plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, which may affect the covenants or the performance of this Indenture; and
the Company and each Guarantor (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and shall not 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
had been enacted.
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ARTICLE 7
Trustee
SECTION 7.01. Duties of Trustee. (a) If an Event of Default has occurred and
is continuing, the Trustee shall exercise the rights and powers vested in it by
this Indenture and use the same degree of care and skill in their exercise as a
prudent Person would exercise or use under the circumstances in the conduct of
such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements
of this Indenture, but shall not be obligated to recalculate or verify
the contents thereof.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful
misconduct, except that:
(1) this paragraph does not limit the effect of Section 7.01(b);
(2) the Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) 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) 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.
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(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that
repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section 7.01 and to the provisions of the
TIA.
SECTION 7.02. Rights of Trustee. (a) The Trustee may rely on 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. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
the Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through 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 which it believes to be authorized or within its rights
or powers; provided, however, that the Trustee's conduct does not constitute
wilful misconduct or negligence.
(e) The Trustee may consult with counsel, and the advice or Opinion of
Counsel with respect to legal matters relating to this Indenture and the
Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it
hereunder in good faith and in accordance with the advice or opinion of such
counsel.
(f) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
bond, debenture, note or other paper or document unless requested in writing
to do so by the Holders of not less than a majority in principal amount of
the Securities at the time outstanding, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters as
it may see fit, and, if the Trustee shall determine to make such further
inquiry or
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investigation, it shall be entitled to examine the books, records
and premises of the Company, personally or by agent or attorney.
(g) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might reasonably be incurred by it in
compliance with such request or direction.
SECTION 7.03. Individual Rights of Trustee. The Trustee in its individual or
any other capacity may become the owner or pledgee of Securities and may
otherwise deal with the Company or its Affiliates with the same rights it would
have if it were not Trustee. Any Paying Agent, Registrar or co-paying agent may
do the same with like rights. However, the Trustee must comply with Sections
7.10 and 7.11.
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 Securities, it shall not be accountable for the Company's use of the
proceeds from the Securities, and it shall not be responsible for any statement
of the Company in this Indenture or in any document issued in connection with
the sale of the Securities or in the Securities other than the Trustee's
certificate of authentication.
SECTION 7.05. Notice of Defaults. If a Default occurs and is continuing and
if it is known to the Trustee, the Trustee shall mail to each Securityholder
notice of the Default within the earlier of 90 days after it occurs or 30 days
after it is known to a Trust Officer. Except in the case of a Default in payment
of principal of or interest on any Security (including payments pursuant to the
mandatory redemption provisions of such Security, if any), the Trustee may
withhold the notice if and so long as a committee of its Trust Officers in good
faith determines that withholding the notice is in the interests of
Securityholders.
SECTION 7.06. Reports by Trustee to Holders. As promptly as practicable
after each June 30 beginning with the June 30 following the first anniversary of
this Indenture, and in any event prior to August 31 in each subsequent year, the
Trustee shall mail to each Securityholder a brief report dated as of June 30
that complies with Section 313(a) of the TIA. The Trustee shall also comply with
Section 313(b) of the TIA.
A copy of each report at the time of its mailing to Securityholders shall be
filed with the SEC and each stock exchange (if any) on which the Securities are
listed. The Company agrees to notify promptly the Trustee whenever the
Securities become listed on any stock exchange and of any delisting thereof.
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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 services. 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 upon
request for all reasonable out-of-pocket expenses incurred or made by it,
including costs of collection, in addition to the compensation for its services.
Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Trustee's agents, counsel, accountants and
experts. The Company and each Guarantor, if any, jointly and severally shall
indemnify the Trustee against any and all loss, liability or expense (including
reasonable attorneys' fees) incurred by or in connection with the administration
of this trust and the performance of its duties hereunder. The Trustee shall
notify the Company of any claim for which it may seek indemnity promptly upon
obtaining actual knowledge thereof; provided, however, that any failure so to
notify the Company shall not relieve the Company or any Guarantor of its
indemnity obligations hereunder. The Company shall defend the claim and the
indemnified party shall provide reasonable cooperation at the Company's expense
in the defense of such claim. Such indemnified parties together may have one
separate counsel and the Company and any Guarantor, as applicable, shall pay the
fees and expenses of such counsel; provided, however, that the Company shall not
be required to pay such fees and expenses if it assumes such indemnified
parties' defense and, in such indemnified parties' reasonable judgment, there is
no conflict of interest between the Company and any Guarantor, as applicable,
and such parties in connection with such defense. The Company need not reimburse
any expense or indemnify against any loss, liability or expense incurred by an
indemnified party through such party's own wilful misconduct, negligence or bad
faith.
The Trustee's right to receive payment of any amounts due under this Section
7.07 shall not be subordinated to any other liability or indebtedness of the
Company (even though the Securities may be so subordinated).
To secure the Company's payment obligations in this Section, the Trustee
shall have a lien prior to the Securities on all money or property held or
collected by the Trustee other than money or property held in trust to pay
principal of and interest and any liquidated damages on particular Securities.
The Company's payment obligations pursuant to this Section 7.07 shall
survive the satisfaction or discharge of this Indenture, any rejection or
termination of this Indenture under any bankruptcy law or the resignation or
removal of the Trustee. When the Trustee incurs expenses after the occurrence of
a Default specified in Section 6.01(5) or (6) with respect to the Company, the
expenses are intended to constitute expenses of administration under the
Bankruptcy Law.
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SECTION 7.08. Replacement of Trustee. The Trustee may resign at any time by
so notifying the Company. The Holders of a majority in principal amount of the
Securities may remove the Trustee by so notifying the Trustee and may appoint a
successor Trustee. The Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee
or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Company or by the Holders of a
majority in principal amount of the Securities and such Holders do not
reasonably promptly appoint a successor Trustee, or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Company shall promptly appoint 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 Securityholders. The
retiring Trustee shall promptly transfer all property held by it as Trustee to
the successor Trustee, subject to the lien provided for in Section 7.07.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Holders of
10% in principal amount of the Securities may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this Section, the
Company's obligations under Section 7.07 shall continue for the benefit of the
retiring Trustee.
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SECTION 7.09. Successor Trustee by Merger. If the Trustee consolidates with,
merges or converts into, or transfers all or substantially all its corporate
trust business or assets to, another corporation or banking association, the
resulting, surviving or transferee corporation without any further act shall be
the successor Trustee.
In case at the time such successor or successors by merger, conversion or
consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Securities shall have been authenticated but not delivered,
any such successor to the Trustee may adopt the certificate of authentication of
any predecessor trustee, and deliver such Securities so authenticated; and in
case at that time any of the Securities shall not have been authenticated, any
successor to the Trustee may authenticate such Securities either in the name of
any predecessor hereunder or in the name of the successor to the Trustee; and in
all such cases such certificates shall have the full force which it is anywhere
in the Securities or in this Indenture provided that the certificate of the
Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall at all
times satisfy the requirements of TIA Section 310(a). The Trustee shall have
a combined capital and surplus of at least $100,000,000 as set forth in its
most recent published annual report of condition. The Trustee shall comply
with TIA Section 310(b); provided, however, that there shall be excluded from
the operation of TIA Section 310(b)(1) any indenture or indentures under
which other securities or certificates of interest or participation in other
securities of the Company are outstanding if the requirements for such
exclusion set forth in TIA Section 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company. The
Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated.
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ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities; Defeasance. (a) Subject
to Section 8.01(c), this Indenture shall be discharged and shall cease to be of
further effect as to all Securities issued hereunder, when either (a) all such
Securities theretofore authenticated and delivered (except lost, stolen or
destroyed Securities which have been replaced or paid and Securities for whose
payment money has theretofore been deposited in trust) have been delivered to
the Trustee for cancelation; or (b) (i) all such Securities not theretofore
delivered to such Trustee for cancelation have become due and payable by reason
of the making of a notice of redemption or otherwise or will become due and
payable within one year or are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of redemption
by the Trustee in the name and at the expense of the Company and the Company or
any Guarantor has irrevocably deposited or caused to be deposited with such
Trustee as trust funds in trust solely for the benefit of the Holders, cash in
U.S. dollars, non-callable Government Securities, or a combination thereof, in
such amounts as will be sufficient without consideration of any reinvestment of
interest to pay and discharge the entire indebtedness on such Securities not
theretofore delivered to the Trustee for cancelation for principal, premium, if
any, and accrued interest to the date of maturity or redemption; (ii) no Default
or Event of Default shall have occurred and be continuing on the date of such
deposit or shall occur as a result of such deposit and such deposit will not
result in a breach or violation of, or constitute a default under, any other
instrument to which the Company or any Guarantor is a party or by which the
Company or any Guarantor is bound; (iii) the Company or any Guarantor has paid
or caused to be paid all sums payable by it under this Indenture and the
Securities; and (iv) the Company has delivered irrevocable instructions to the
Trustee under this Indenture to apply the deposited money toward the payment of
such Securities at maturity or the Redemption Date, as the case may be. In
addition, the Company must deliver an Officers' Certificate and an Opinion of
Counsel to the Trustee stating that all conditions precedent to satisfaction and
discharge have been satisfied. The Trustee, at the expense of the Company, shall
execute proper instruments acknowledging satisfaction and discharge of the
Indenture upon the occurrence of the foregoing.
(b) Subject to Sections 8.01(c) and 8.02, the Company at any time may
terminate (i) all of its obligations under the Securities and this Indenture
("legal defeasance option") or (ii) its obligations under Sections 4.02,
4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12 and 4.13 and the
operation of Sections 5.01, 6.01(3), 6.01(4), 6.01(5) (with respect to
Significant Subsidiaries of the Company only), 6.01(6) (with respect to
Significant Subsidiaries of the Company only), 6.01(7) and 6.01(8)
("covenant defeasance option"). The Company may exercise its legal
defeasance option
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notwithstanding its prior exercise of its covenant defeasance option. In the
event that the Company terminates all of its obligations under the
Securities and this Indenture by exercising either its legal defeasance
option or its covenant defeasance option, the obligations under any
Guarantee shall each be terminated simultaneously with the termination of
such obligations.
If the Company exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default. If the Company
exer cises its covenant defeasance option, payment of the Securities may not be
accelerated because of an Event of Default specified in Section 6.01(3) (as such
Section relates to Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09,
4.10, 4.11, 4.12 and 4.13), 6.01(4), 6.01(5) (with respect to Significant
Subsidiaries of the Company only), 6.01(6) (with respect to Significant
Subsidiaries of the Company only), 6.01(7) and 6.01(8) or because of the failure
of the Company to comply with Section 5.01.
Upon satisfaction of the conditions set forth herein and upon request of the
Company, the Trustee shall acknowledge in writing the discharge of those
obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.04, 2.05, 2.06, 2.07, 2.08, 2.09, 2.10, 6.07,
7.07, 7.08 and in this Article 8 shall survive until the Securities have
been paid in full. Thereafter, the Company's obligations in Sections 7.07,
8.04 and 8.05 shall survive.
SECTION 8.02. Conditions to Defeasance. In order to exercise either Legal
Defeasance or Covenant Defeasance with respect to the Securities:
(i) the Company must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders, 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 due on the outstanding Securities on
the stated maturity date or on the applicable Redemption Date, as the
case may be, of such principal, premium, if any, or interest on the
outstanding Securities;
(ii) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel in the United States
confirming that, subject to customary assumptions and exclusions, (A)
the Company has received from, or there has been published by, the
United States Internal Revenue Service a ruling or (B) since the
Closing Date, there has been a change in the applicable U.S. federal
income tax law, in either case to the effect that, and based thereon
such Opinion of Counsel in the United States shall confirm that,
subject to customary
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assumptions and exclusions, the Holders will not recognize income,
gain or loss for U.S. federal income tax purposes as a result of such
Legal Defeasance and will be subject to U.S. 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
confirming that, subject to customary assumptions and exclusions, the
Holders will not recognize income, gain or loss for U.S. federal income
tax purposes as a result of such Covenant Defeasance and will be
subject to such 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 or, with respect to certain
bankruptcy or insolvency Events of Default, on the 91st day after such
date of deposit;
(v) such Legal Defeasance or Covenant Defeasance shall not result
in a breach or violation of, or constitute a default under, the Senior
Credit Facilities or any other material agreement or instrument (other
than this Indenture) to which, the Company or any Guarantor is a party
or by which the Company or any Guarantor is bound;
(vi) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that, as of the date of such opinion and subject
to customary assumptions and exclusions 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 under any applicable U.S. federal or state
law, and that the Trustee has a perfected security interest in such
trust funds for the ratable benefit of the Holders;
(vii) 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 defeating, hindering, delaying or defrauding any
creditors of the Company or any Guarantor or others; and
(viii) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel in the United States
(which Opinion of Counsel may be subject to customary assumptions and
exclusions) each stating that all conditions precedent provided for or
relating to the Legal Defeasance or the Covenant Defeasance, as the
case may be, have been complied with.
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Before or after a deposit, the Company may make arrangements satisfactory to
the Trustee for the redemption of Securities at a future date in accordance with
Article 3.
SECTION 8.03. Application of Trust Money. The Trustee shall hold in trust
money or Government Securities deposited with it pursuant to this Article 8. It
shall apply the deposited money and the money from Government Securities through
the Paying Agent and in accordance with this Indenture to the payment of
principal of and interest on the Securities. Money and securities so held in
trust are not subject to Article 10.
SECTION 8.04. Repayment to Company. The Trustee and the Paying Agent shall
promptly turn over to the Company upon request any excess money or securities
held by them at any time.
Subject to any applicable abandoned property law, the Trustee and the Paying
Agent shall pay to the Company upon written request any money held by them for
the payment of principal or interest that remains unclaimed for two years, and,
thereafter, Securityholders entitled to the money must look to the Company for
payment as general creditors.
SECTION 8.05. Indemnity for Government Obligations. The Company shall pay
and shall indemnify the Trustee against any tax, fee or other charge imposed on
or assessed against deposited Government Securities or the principal and
interest received on such Government Securities.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is unable to
apply any money or Government Securities in accordance with this Article 8 by
reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Company's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to this Article 8 until such time as the Trustee or Paying Agent is
permitted to apply all such money or Government Securities in accordance with
this Article 8; provided, however, that, if the Company has made any payment of
interest on or principal of any Securities because of the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the money or Government Securities
held by the Trustee or Paying Agent.
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ARTICLE 9
Amendments
SECTION 9.01. Without Consent of Holders. The Company, any Guarantor (with
respect to a Guarantee or the supplemental indenture to which it is a party) and
the Trustee may amend this Indenture, the Securities or the Guarantees without
notice to or consent of any Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article 5;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(4) to provide for the assumption of the Company's or any
Guarantor's obligations to Holders;
(5) to add Guarantees with respect to the Securities or to secure
the Securities;
(6) to make any change that would provide any additional rights or
benefits to the Holders or that does not adversely affect the legal
rights under this Indenture of any such Holder;
(7) to add to the covenants for the benefit of the Holders or to
surrender any right or power herein conferred upon the Company;
(8) to comply with any requirements of the SEC in connection with
qualifying, or maintaining the qualification of, this Indenture under
the TIA;
(9) to evidence and provide for the acceptance and appointment
under this Indenture of a successor Trustee pursuant to Article 7; or
(10) to provide for the issuance of the Exchange Securities,
Private Exchange Securities or Additional Securities, which shall have
terms substantially identical in all material respects to the Original
Securities (except that the transfer restrictions contained in the
Original Securities shall be modified or eliminated, as appropriate),
and which shall be treated, together with any outstanding Original
Securities, as a
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single issue of securities.
After an amendment under this Section becomes effective, the Company shall
mail to Securityholders a notice briefly describing such amendment. The failure
to give such notice to all Securityholders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section.
SECTION 9.02. With Consent of Holders. The Company, any Guarantor and the
Trustee may amend this Indenture, the Securities or the Guarantees without
notice to any Securityholder but with the written consent of the Holders of at
least a majority in principal amount of the Securities then outstanding
(including consents obtained in connection with a tender offer or exchange for
the Securities) and, subject to Article 6, any existing default or compliance
with any provision of this Indenture or the Securities may be waived with the
consent of the Holders of a majority in principal amount of the then outstanding
Securities (including consents obtained in connection with a purchase of or
tender offer or exchange offer for Securities). However, without the consent of
each Securityholder affected, an amendment may not (with respect to any
Securities held by a non-consenting Holder):
(i) reduce the principal amount of Securities whose Holders must
consent to an amendment, supplement or waiver;
(ii) reduce the principal of or change the fixed maturity of any
Security or alter or waive the provisions with respect to the
redemption of the Securities (other than provisions relating to
Sections 4.06 or 4.08);
(iii) reduce the rate of or change the time for payment of
interest on any Security;
(iv) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Securities (except
a rescission of acceleration of the Securities by the Holders of at
least a majority in aggregate principal amount of such Securities and a
waiver of the payment default that resulted from such acceleration), or
in respect of a covenant or provision contained in this Indenture, any
Guarantee or the Securities which cannot be amended or modified without
the consent of all Holders;
(v) make any Security payable in money other than that stated in
such Securities;
(vi) make any change to Section 6.04 or 6.07;
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(vii) make any change to the second sentence of this Section 9.02;
(viii) impair the right of any Holder to receive payment of
principal of, or interest on such Holder's Securities on or after the
due dates therefor or to institute suit for the enforcement of any
payment on or with respect to such Holder's Securities; or
(ix) make any change to Article 10 that would adversely affect the
Holders.
It shall not be necessary for the consent of the Holders under this Section
to approve the particular form of any proposed amendment, but it shall be
sufficient if such consent approves the substance thereof.
After an amendment under this Section 9.02 becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section 9.02.
SECTION 9.03. Compliance with Trust Indenture Act. Every amendment to this
Indenture or the Securities shall comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents and Waivers. A consent to an
amendment or a waiver by a Holder of a Security shall bind the Holder and every
subsequent Holder of that Security or portion of the Security that evidences the
same debt as the consenting Holder's Security, even if notation of the consent
or waiver is not made on the Security. However, any such Holder or subsequent
Holder may revoke the consent or waiver as to such Holder's Security or portion
of the Security if the Trustee receives the notice of revocation before the date
the amendment or waiver becomes effective. After an amendment or waiver becomes
effective, it shall bind every Securityholder. An amendment or waiver becomes
effective once both (i) the requisite number of consents have been received by
the Company or the Trustee and (ii) such amendment or waiver has been executed
by the Company and the Trustee.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Securityholders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Securityholders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall be valid or effective for more than 120
days after such record date.
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SECTION 9.05. Notation on or Exchange of Securities. If an amendment changes
the terms of a Security, the Trustee may require the Holder of the Security to
deliver it to the Trustee. The Trustee may place an appropriate notation on the
Security regarding the changed terms and return it to the Holder. Alternatively,
if the Company or the Trustee so determines, the Company in exchange for the
Security shall issue and the Trustee shall authenticate a new Security that
reflects the changed terms. Failure to make the appropriate notation or to issue
a new Security shall not affect the validity of such amendment.
SECTION 9.06. Trustee To Sign Amendments. The Trustee shall sign any
amendment authorized pursuant to this Article 9 if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it and
to receive, and (subject to Section 7.01) shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel stating that such
amendment is authorized or permitted by this Indenture and that such amendment
is the legal, valid and binding obligation of the Company and any Guarantors
enforceable against them in accordance with its terms, subject to customary
exceptions, and complies with the provisions hereof (including Section 9.03).
SECTION 9.07. Payment for Consent. Neither the Company nor any Affiliate of
the Company shall, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder for
or as an inducement to any consent, waiver or amendment of any of the terms or
provisions of this Indenture or the Securities unless such consideration is
offered to be paid to all Holders that so consent, waive or agree to amend in
the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.
ARTICLE 10
Subordination
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SECTION 10.01. Agreement To Subordinate. The Company agrees, and each
Securityholder by accepting a Security agrees, that the Indebtedness evidenced
by the Securities is subordinated in right of payment, to the extent and in the
manner provided in this Article 10, to the prior payment in full in cash or Cash
Equivalents of all Senior Indebtedness of the Company and that the subordination
is for the benefit of and enforceable by the holders of such Senior
Indebtedness. The Securities shall in all respects rank pari passu with all
other Senior Subordinated Indebtedness of the Company and shall rank senior to
all existing and future Subordinated Indebtedness of the Company; and only
Indebtedness of the Company that is Senior Indebtedness of the Company shall
rank senior to the Securities in accordance with the provisions set forth
herein. For purposes of this Article 10, the Indebtedness evidenced by the
Securities shall be deemed to include the liquidated damages payable pursuant to
the provisions set forth in the Securities and the Registration Agreement. All
provisions of this Article 10 shall be subject to Section 10.12.
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, an assignment for the benefit of
creditors or any marshaling of the Company's assets and liabilities, the holders
of Senior Indebtedness shall be entitled to receive payment in full in cash or
Cash Equivalents of such Senior Indebtedness and all outstanding Letter of
Credit Obligations shall be fully cash collateralized before the Holders will be
entitled to receive any payment with respect to the Subordinated Note
Obligations, and until all Senior Indebtedness is paid in full in cash or Cash
Equivalents, any distribution to which the Holders would be entitled shall be
made to the holders of Senior Indebtedness (except that Holders may receive (i)
shares of stock and any debt securities that are subordinated at least to the
same extent as the Securities to (a) Senior Indebtedness and (b) any securities
issued in exchange for Senior Indebtedness and (ii) payments and other
distributions made from the trusts described in Section 8.01).
SECTION 10.03. Default on Senior Indebtedness. The Company shall not make
any payment upon or in respect of the Subordinated Note Obligations (except that
Holders may receive (i) shares of stock and any debt securities that are
subordinated at least to the same extent as the Securities to (a) Senior
Indebtedness and (b) any securities issued in exchange for Senior Indebtedness
and (ii) payments and other distributions made from the trusts described in
Section 8.01) until all Senior Indebtedness has been paid in full in cash or
Cash Equivalents if (i) a default in the payment of the principal of, premium,
if any, or interest on, or of unreimbursed amounts under drawn letters of credit
or in respect of bankers' acceptances or fees relating to letters of credit or
bankers' acceptances constituting, Designated Senior Indebtedness occurs and is
continuing beyond any applicable period of grace in the indenture, agreement or
other
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document governing such Designated Senior Indebtedness (a "payment default")
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
without further notice (except such notice as may be required to effect such
acceleration) or the expiration of any applicable grace periods (a
"non-payment default") and the Trustee receives a notice of such default (a
"Payment Blockage Notice") from a representative of holders of such
Designated Senior Indebtedness. Payments on the Securities, including any
missed payments, may and shall be resumed (a) in the case of a payment
default, upon the date on which such default is cured or waived or shall have
ceased to exist or such Designated Senior Indebtedness shall have been
discharged or paid in full in cash or Cash Equivalents and all outstanding
Letter of Credit Obligations shall have been fully cash collateralized and
(b) in case of a nonpayment default, the earlier of (x) the date on which
such nonpayment default is cured or waived, (y) 179 days after the date on
which the applicable Payment Blockage Notice is received (each such period,
the "Payment Blockage Period") or (z) the date such Payment Blockage Period
shall be terminated by written notice to the Trustee from the requisite
holders of such Designated Senior Indebtedness necessary to terminate such
period or from their representative. No new Payment Blockage Period may be
commenced unless and until 365 days have elapsed since the effectiveness of
the immediately preceding Payment Blockage Notice. However, if any Payment
Blockage Notice within such 365-day period is given by or on behalf of any
holders of Designated Senior Indebtedness (other than the agent under the
Senior Credit Facilities), the agent under the Senior Credit Facilities may
give another Payment Blockage Notice within such period. In no event,
however, shall the total number of days during which any Payment Blockage
Period or Periods is in effect exceed 179 days in the aggregate during any
365 consecutive day period. No nonpayment default that existed or was
continuing on the date of delivery of any Payment Blockage Notice to the
Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice unless such default shall have been cured or waived for a period of
not less than 90 days.
SECTION 10.04. Acceleration of Payment of Securities. If payment of the
Securities is accelerated because of an Event of Default, the Company or the
Trustee shall promptly notify the holders of the Designated Senior Indebtedness
(or their Representative) of the acceleration. If any Designated Senior
Indebtedness is outstanding, the Company shall not pay the Securities until five
Business Days after such holders or the Representative of the Designated Senior
Indebtedness receive notice of such acceleration and, thereafter, shall pay the
Securities only if this Article 10 otherwise permits payment at that time.
SECTION 10.05. When Distribution Must Be Paid Over. If a distribution is
made to Securityholders that because of this Article 10 should not have been
made to them, the Securityholders who receive the distribution shall hold it in
trust for holders of
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Senior Indebtedness of the Company and pay it over to them as their interests
may appear.
SECTION 10.06. Subrogation. After all Senior Indebtedness of the Company
is paid in full and until the Securities are paid in full, Securityholders
shall be subrogated to the rights of holders of such Senior Indebtedness to
receive distributions applicable to Senior Indebtedness. A distribution made
under this Article 10 to holders of such Senior Indebtedness which otherwise
would have been made to Securityholders is not, as between the Company and
Securityholders, a payment by the Company on such Senior Indebtedness.
SECTION 10.07. Relative Rights. This Article 10 defines the relative rights
of Securityholders and holders of Senior Indebtedness of the Company. Nothing in
this Indenture shall:
(1) impair, as between the Company and Securityholders, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on and liquidated damages in respect of, the
Securities in accordance with their terms; or
(2) prevent the Trustee or any Securityholder from exercising its
available remedies upon a Default, subject to the rights of holders of
Senior Indebtedness of the Company to receive distributions otherwise
payable to Securityholders.
SECTION 10.08. Subordination May Not Be Impaired by Company. No right of any
holder of Senior Indebtedness of the Company to enforce the subordination of the
Indebtedness evidenced by the Securities shall be impaired by any act or failure
to act by the Company or by its failure to comply with this Indenture.
SECTION 10.09. Rights of Trustee and Paying Agent. Notwithstanding Section
10.03, the Trustee or Paying Agent may continue to make payments on the
Securities and shall not be charged with knowledge of the existence of facts
that would prohibit the making of any such payments unless, not less than two
Business Days prior to the date of such payment, a Trust Officer of the Trustee
receives notice satisfactory to it that payments may not be made under this
Article 10. The Company, the Registrar, the Paying Agent, a Representative or a
holder of Senior Indebtedness of the Company may give the notice; provided,
however, that, if an issue of Senior Indebtedness of the Company has a
Representative, only the Representative may give the notice.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness of the Company with the same rights it would have if it were not
Trustee. The Registrar and the Paying Agent may do the same with like rights.
The Trustee shall
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be entitled to all the rights set forth in this Article 10 with respect to
any Senior Indebtedness of the Company which may at any time be held by it,
to the same extent as any other holder of such Senior Indebtedness; and
nothing in Article 7 shall deprive the Trustee of any of its rights as such
holder. Nothing in this Article 10 shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 7.07.
SECTION 10.10. Distribution or Notice to Representative. Whenever a
distribution is to be made or a notice given to holders of Senior Indebtedness
of the Company, the distribution may be made and the notice given to their
Representative (if any).
SECTION 10.11. Article 10 Not To Prevent Events of Default or Limit Right To
Accelerate. The failure to make a payment pursuant to the Securities by reason
of any provision in this Article 10 shall not be construed as preventing the
occurrence of a Default. Nothing in this Article 10 shall have any effect on the
right of the Secu rityholders or the Trustee to accelerate the maturity of the
Securities.
SECTION 10.12. Trust Moneys Not Subordinated. Notwithstanding anything
contained herein to the contrary, payments from money or the proceeds of
Government Securities held in trust under Article 8 by the Trustee for the
payment of principal of and interest on the Securities shall not be subordinated
to the prior payment of any Senior Indebtedness of the Company or subject to the
restrictions set forth in this Article 10, and none of the Securityholders shall
be obligated to pay over any such amount to the Company or any holder of Senior
Indebtedness of the Company or any other creditor of the Company.
SECTION 10.13. Trustee Entitled To Rely. Upon any payment or distribution
pursuant to this Article 10, the Trustee and the Securityholders shall be
entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section
10.02 are pending, (ii) upon a certificate of the liquidating trustee or
agent or other Person making such payment or distribution to the Trustee or
to the Securityholders or (iii) upon the Representatives for the holders of
Senior Indebtedness of the Company for the purpose of ascertaining the
Persons entitled to participate in such payment or distribution, the holders
of such 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. In the event
that the Trustee determines, in good faith, that evidence is required with
respect to the right of any Person as a holder of Senior Indebtedness of the
Company to participate in any payment or distribution pursuant to this
Article 10, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of such Senior
Indebtedness held by such Person, the extent to which such Person is entitled
to participate in such payment
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or distribution and other facts pertinent to the rights of such Person under
this Article 10, and, if such evidence is not furnished, the Trustee may
defer any payment to such Person pending judicial determination as to the
right of such Person to receive such payment. The provisions of Sections 7.01
and 7.02 shall be applicable to all actions or omissions of actions by the
Trustee pursuant to this Article 10.
SECTION 10.14. Trustee To Effectuate Subordination. Each Securityholder by
accepting a Security authorizes and directs the Trustee on his behalf to take
such action as may be necessary or appropriate to acknowledge or effectuate the
subordination between the Securityholders and the holders of Senior Indebtedness
of the Company as provided in this Article 10 and appoints the Trustee as
attorney-in-fact for any and all such purposes.
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Indebtedness. The
Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior
Indebtedness of the Company and shall not be liable to any such holders if it
shall mistakenly pay over or distribute to Securityholders or the Company or any
other Person, money or assets to which any holders of Senior Indebtedness of the
Company shall be entitled by virtue of this Article 10 or otherwise.
SECTION 10.16. Reliance by Holders of Senior Indebtedness on Subordination
Provisions. Each Securityholder by accepting a Security acknowledges and agrees
that the foregoing subordination provisions are, and are intended to be, an
inducement and a consideration to each holder of any Senior Indebtedness of the
Company, whether such Senior Indebtedness was created or acquired before or
after the issuance of the Securities, to acquire and continue to hold, or to
continue to hold, such Senior Indebtedness and such holder of such Senior
Indebtedness shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, or in continuing to hold, such
Senior Indebtedness.
SECTION 10.17. Trustee's Compensation Not Prejudiced. Nothing in this
Article 10 shall apply to amounts due to the Trustee pursuant to other sections
of this Indenture.
SECTION 10.18. Defeasance. The terms of this Article 10 shall not apply to
payments from money or the proceeds of Government Securities held in trust by
the Trustee for the payment of principal of and interest on the Securities
pursuant to the provisions described in Section 8.03.
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ARTICLE 11
Miscellaneous
SECTION 11.01. Trust Indenture Act Controls. If any provision of this
Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION 11.02. Notices. Any notice or communication shall be in writing and
delivered in person or mailed by first-class mail addressed as follows:
if to the Company:
Corning Consumer Products Company
E-Building, Houghton Park
Corning, New York 14831
Attention of: Thomas O'Brien, Esq.
if to the Trustee:
The Bank of New York
101 Barclay Street--Floor 21W
New York, New York 10286
Attention of: Corporate Trust Trustee
Administration
The Company or the Trustee by notice to the other may designate additional
or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Securityholder shall be mailed to
the Securityholder at the Securityholder's address as it appears on the
registration books of the Registrar and shall be sufficiently given if so mailed
within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any defect
in it shall not affect its sufficiency with respect to other Securityholders. If
a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
Notices to the Trustee shall be deemed effective only upon actual receipt.
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SECTION 11.03. Communication by Holders with Other Holders. Securityholders
may communicate pursuant to TIA Section 312(b) with other Securityholders with
respect to their rights under this Indenture or the Securities. The Company, the
Trustee, the Registrar and anyone else shall have the protection of TIA ss.
312(c).
SECTION 11.04. Certificate and Opinion as to Conditions Precedent. Upon any
request or application by the Company to the Trustee to take or refrain from
taking any action under this Indenture, the Company shall furnish to the
Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 11.05. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 11.06. When Securities Disregarded. In determining whether the
Holders of the required principal amount of Securities have concurred in any
direc tion, waiver or consent, Securities owned by the Company, any Guarantor or
by any Person directly or indirectly controlling or controlled by or under
direct or indirect
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common control with the Company or any Guarantor shall be disregarded and deemed
not to be outstanding, except that, for the purpose of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Securities which the Trustee knows are so owned shall be so disregarded.
Subject to the foregoing, only Securities outstanding at the time shall be
considered in any such determination.
SECTION 11.07. Rules by Trustee, Paying Agent and Registrar. The Trustee may
make reasonable rules for action by or a meeting of Securityholders. The
Registrar and the Paying Agent may make reasonable rules for their functions.
SECTION 11.08. Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday or
a day on which banking institutions are not required to be open in the State of
New York. If a payment date is a Legal Holiday, payment shall be made on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period. If a regular record date is a Legal Holiday, the
record date shall not be affected.
SECTION 11.09. GOVERNING LAW. THIS INDENTURE AND THE SECURITIES SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE
EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.
SECTION 11.10. No Recourse Against Others. No director, officer, employee,
incorporator or stockholder of the Company or any Guarantor, shall have any
liability for any obligations of the Company or the Guarantors under the
Securities, the Guarantees or this Indenture or for any claim based on, in
respect of, or by reason of such obligations or their creation. Each Holder by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Securities. 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.
SECTION 11.11. Successors. All agreements of the Company and each Guarantor
in this Indenture and the Securities shall bind its successors. All agreements
of the Trustee in this Indenture shall bind its successors.
SECTION 11.12. Multiple 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. One signed copy is enough to prove this
Indenture.
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SECTION 11.13. Table of Contents; Headings. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
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IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
CORNING CONSUMER PRODUCTS COMPANY,
by
---------------------------------
Name:
Title:
THE BANK OF NEW YORK, as Trustee,
by
---------------------------------
Name:
Title:
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APPENDIX A
PROVISIONS RELATING TO ORIGINAL SECURITIES,
ADDITIONAL SECURITIES, PRIVATE EXCHANGE SECURITIES
AND EXCHANGE SECURITIES
1. Definitions
1.1 Definitions
For the purposes of this Appendix A the following terms shall have the
meanings indicated below:
"Applicable Procedures" means, with respect to any transfer or transaction
involving a Temporary or Permanent Regulation S Global Security or beneficial
interest therein, the rules and procedures of the Depositary for such Global
Security, Euroclear and Cedel, in each case to the extent applicable to such
transaction and as in effect from time to time.
"Cedel" means Cedel Bank, S.A., or any successor securities clearing agency.
"Definitive Security" means a certificated Initial Security or Exchange
Security (bearing the Restricted Securities Legend if the transfer of such
Security is restricted by applicable law) that does not include the Global
Securities Legend.
"Depositary" means The Depository Trust Company, its nominees and their
respective successors.
"Euroclear" means the Euroclear Clearance System or any successor securities
clearing agency.
"Global Securities Legend" means the legend set forth under that caption in
Exhibit A to this Indenture.
"IAI" means an institutional "accredited investor" as described in Rule
501(a)(1), (2), (3) or (7) under the Securities Act.
"Initial Purchasers" means Chase Securities Inc., Salomon Brothers Inc and
Citicorp Securities, Inc.
"Private Exchange" means an offer by the Company, pursuant to the
Registration Agreement, to issue and deliver to certain purchasers, in exchange
for the
<PAGE>
Initial Securities held by such purchasers as part of their initial
distribution, a like aggregate principal amount of Private Exchange Securities.
"Private Exchange Securities" means the Securities of the Company issued in
exchange for Initial Securities pursuant to this Indenture in connection with
the Private Exchange pursuant to the Registration Agreement.
"Purchase Agreement" means (i) the Purchase Agreement dated April 30, 1998,
among the Company and the Initial Purchasers and (ii) any other similar Purchase
Agreement relating to Additional Securities.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Registered Exchange Offer" means the offer by the Company, pursuant to the
Registration Agreement, to certain Holders of Initial Securities, to issue and
deliver to such Holders, in exchange for their Initial Securities, a like
aggregate principal amount of Exchange Securities registered under the
Securities Act.
"Registration Agreement" means (i) the Exchange and Registration Rights
Agreement dated May 5, 1998, among the Company and the Initial Purchasers and
(ii) any other similar Exchange and Registration Rights Agreement relating to
Additional Securities.
"Regulation S" means Regulation S under the Securities Act, as amended.
"Regulation S Securities" means all Initial Securities offered and sold
outside the United States in reliance on Regulation S.
"Restricted Period", with respect to any Securities, means the period of 40
consecutive days beginning on and including the later of (i) the day on which
such Securities are first offered to persons other than distributors (as defined
in Regulation S under the Securities Act) in reliance on Regulation S and (ii)
the Issuance Date with respect to such Securities.
"Restricted Securities Legend" means the legend set forth in Section
2.3(e)(i) herein.
"Rule 501" means Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Rule 144A" means Rule 144A under the Securities Act, as amended.
"Rule 144A Securities" means all Initial Securities offered and sold to QIBs
in reliance on Rule 144A.
"Securities Act" means the Securities Act of 1933, as amended.
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"Securities Custodian" means the custodian with respect to a Global Security
(as appointed by the Depositary) or any successor person thereto, who shall
initially be the Trustee.
"Shelf Registration Statement" means a registration statement filed by the
Company in connection with the offer and sale of Initial Securities pursuant to
the Registration Agreement.
"Transfer Restricted Securities" means Definitive Securities and any other
Securities that bear or are required to bear the Restricted Securities Legend.
1.2 Other Definitions
<TABLE>
<CAPTION>
Term: Defined in Section:
----- -------------------
<S> <C>
"Agent Members".................................................................................. 2.1(b)
"IAI Global Security"............................................................................ 2.1(a)
"Global Securities".............................................................................. 2.1(a)
"Permanent Regulation S Global Security"......................................................... 2.3(d)
"Regulation S Global Securities"................................................................. 2.1(a)
"Rule 144A Global Security"...................................................................... 2.1(a)
"Temporary Regulation S Global Security"......................................................... 2.1(a)
</TABLE>
2. The Securities
2.1 Form and Dating
The Initial Securities issued on the date hereof will be (i) offered and
sold by the Company pursuant to the Purchase Agreement and (ii) resold,
initially only to (A) QIBs in reliance on Rule 144A and (B) Persons other than
U.S. Persons (as defined in Regulation S) in reliance on Regulation S. Such
Initial Securities may thereafter be transferred to, among others, QIBs,
purchasers in reliance on Regulation S and, except as set forth below, IAIs in
accordance with Rule 501. Additional Securities offered after the date hereof
may be offered and sold by the Company from time to time pursuant to one or more
Purchase Agreements in accordance with applicable law.
(a) Global Securities. Rule 144A Securities shall be issued initially
in the form of one or more permanent global Securities in definitive, fully
registered form (collectively, the "Rule 144A Global Security") and
Regulation S Securities shall be issued initially in the form of one or more
temporary global Securities (collectively, the "Temporary Regulation S
Global Security"), in each case without interest coupons and bearing the
Global
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Securities Legend and Restricted Securities Legend, which shall be
deposited on behalf of the purchasers of the Securities represented thereby
with the Securities Custodian, and regis tered in the name of the Depositary
or a nominee of the Depositary, duly executed by the Company and
authenticated by the Trustee as provided in this Indenture. One or more
global securities in definitive, fully registered form without interest
coupons and bearing the Global Securities Legend and the Restricted
Securities Legend (collectively, the "IAI Global Security") shall also be
issued on the Closing Date, deposited with the Securities Custodian, and
registered in the name of the Depositary or a nominee of the Depositary,
duly executed by the Company and authenticated by the Trustee as provided in
this Indenture to accommodate transfers of beneficial interests in the
Securities to IAIs subsequent to the initial distribution. Except as set
forth in Section 2.3, beneficial ownership interests in the Temporary
Regulation S Global Security will not be exchangeable for interests in the
Rule 144A Global Security, the IAI Global Security, a Permanent Regulation S
Global Security (as defined below) or any other Security without a
Restricted Securities Legend until the expiration of the Restricted Period.
Upon the expiration of the Restricted Period, beneficial interests in the
Securities represented by the Temporary Regulation S Global Security may be
exchanged for interests in the Permanent Regulation S Global Security as
described below in Section 2.3(d). The Rule 144A Global Security, the IAI
Global Security, the Temporary Regulation S Global Security and the
Permanent Regulation S Global Security are each referred to herein as a
Global Security and are collectively referred to herein as "Global
Securities." The Temporary Regulation S Global Security and the Permanent
Regulation S Global Security are referred to herein as "Regulation S Global
Securities." The aggregate principal amount of the Global Securities 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 hereinafter
provided.
(b) Book-Entry Provisions. This Section 2.1(b) shall apply only to a
Global Security deposited with or on behalf of the Depositary.
The Company shall execute and the Trustee shall, in accordance with Section
2.2 and pursuant to an order of the Company, authenticate and deliver initially
one or more Global Securities that (a) shall be registered in the name of the
Depositary for such Global Security or Global Securities or the nominee of such
Depositary and (b) shall be delivered by the Trustee to such Depositary or
pursuant to such Depositary's instructions or held by the Trustee as Securities
Custodian.
Members of, or participants in, the Depositary ("Agent Members") shall have
no rights under this Indenture with respect to any Global Security held on their
behalf by the Depositary or by the Trustee as Securities Custodian or under such
Global Security, and the Depositary may be treated by the Company, the Trustee
and any agent of the Company or the Trustee as the absolute owner of such Global
Security for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
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authorization furnished by the Depositary or impair, as between the Depositary
and its Agent Members, the operation of customary practices of such Depositary
governing the exercise of the rights of a holder of a beneficial interest in any
Global Security.
(c) Definitive Securities. Except as provided in Section 2.3 or 2.4,
owners of beneficial interests in Global Securities will not be entitled to
receive physical delivery of certificated Securities.
2.2 Authentication. The Trustee shall authenticate and make available for
delivery upon a written order of the Company signed by two Officers (1) Original
Securities for original issue on the date hereof in an aggregate principal
amount of $200,000,000, (2) subject to the terms of this Indenture, Additional
Securities in an aggregate principal amount of up to $100,000,000 and (3) the
(A) Exchange Securities for issue only in a Registered Exchange Offer and (B)
Private Exchange Securities for issue only in the Private Exchange, in the case
of each of (A) and (B) pursuant to the Registration Agreement and for a like
principal amount of Initial Securities exchanged pursuant thereto. Such order
shall specify the amount of the Securities to be authenticated, the date on
which the original issue of Securities is to be authenticated and whether the
Securities are to be Initial Securities, Exchange Securities or Private Exchange
Securities. The aggregate principal amount of Securities outstanding at any time
may not exceed $300,000,000 except as provided in Section 2.08 of this
Indenture.
2.3 Transfer and Exchange. (a) Transfer and Exchange of Definitive
Securities. When Definitive Securities are presented to the Registrar with a
request:
(x) to register the transfer of such Definitive Securities; or
(y) to exchange such Definitive Securities for an equal principal
amount of Definitive Securities of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
its reasonable requirements for such transaction are met; provided, however,
that the Definitive Securities surrendered for transfer or exchange:
(i) shall be duly endorsed or accompanied by a written instrument
of transfer in form reasonably satisfactory to the Company and the
Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing; and
5
<PAGE>
(ii) are accompanied by the following additional information and
documents, as applicable:
(A) if such Definitive Securities are being delivered to the
Registrar by a Holder for registration in the name of such Holder,
without transfer, a certification from such Holder to that effect
(in the form set forth on the reverse side of the Initial
Security); or
(B) if such Definitive Securities are being transferred to
the Company, a certification to that effect (in the form set forth
on the reverse side of the Initial Security); or
(C) if such Definitive Securities are being transferred
pursuant to an exemption from registration in accordance with Rule
144 under the Securities Act or in reliance upon another exemption
from the registration requirements of the Securities Act, (i) a
certification to that effect (in the form set forth on the reverse
side of the Initial Security) and (ii) if the Company so requests,
an Opinion of Counsel or other evidence reasonably satisfactory to
it as to the compliance with the restrictions set forth in the
legend set forth in Section 2.3(e)(i).
(b) Restrictions on Transfer of a Definitive Security for a
Beneficial Interest in a Global Security. A Definitive Security may not
be exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the
Trustee of a Definitive Security, duly endorsed or accompanied by a
written instrument of transfer in form reasonably satisfactory to the
Company and the Registrar, together with:
(i) certification (in the form set forth on the reverse side
of the Initial Security) that such Definitive Security is being
transferred (A) to a QIB in accordance with Rule 144A, (B) to an
IAI that has furnished to the Trustee a signed letter
substantially in the form of Exhibit D or (C) outside the United
States in an offshore transaction within the meaning of Regulation
S and in compliance with Rule 904 under the Securities Act
together with a letter substantially in the form of Exhibit C; and
(ii) written instructions directing the Trustee to make, or
to direct the Securities Custodian to make, an adjustment on its
books and records with respect to such Global Security to reflect
an increase in the aggregate principal amount of the Securities
represented by the Global Security, such instructions to contain
information regarding the Depositary account to be credited with
such increase,
6
<PAGE>
then the Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Securities Custodian, the
aggregate principal amount of Securities represented by the Global Security to
be increased by the aggregate principal amount of the Definitive Security to be
exchanged and shall credit or cause to be credited to the account of the Person
specified in such instructions a beneficial interest in the Global Security
equal to the principal amount of the Definitive Security so canceled. If no
Global Securities are then outstanding and the Global Security has not been
previously exchanged for certificated securities pursuant to Section 2.4, the
Company shall issue and the Trustee shall authenticate, upon written order of
the Company in the form of an Officers' Certificate, a new Global Security in
the appropriate principal amount.
7
<PAGE>
(c) Transfer and Exchange of Global Securities. (i) The transfer
and exchange of Global Securities or beneficial interests therein shall
be effected through the Depositary, in accordance with this Indenture
(including applicable restrictions on transfer set forth herein, if
any) and the procedures of the Depositary therefor. A transferor of a
beneficial interest in a Global Security shall deliver a written order
given in accordance with the Depositary's procedures containing
information regarding the participant account of the Depositary to be
credited with a beneficial interest in such Global Security or another
Global Security and such account shall be credited in accordance with
such order with a beneficial interest in the applicable Global Security
and the account of the Person making the transfer shall be debited by
an amount equal to the beneficial interest in the Global Security being
transferred. Transfers by an owner of a beneficial interest in the Rule
144A Global Security or the IAI Global Security to a transferee who
takes delivery of such interest through the Regulation S Global
Security, whether before or after the expiration of the Restricted
Period, will be made only upon receipt by the Trustee of a
certification from the transferor to the effect that such transfer is
being made in accordance with Regulation S or (if available) Rule 144
under the Securities Act and that, if such transfer is being made prior
to the expiration of the Restricted Period, the interest transferred
will be held immediately thereafter through Euroclear or Cedel. In the
case of a transfer of a beneficial interest in either the Temporary
Regulation S Global Security or the Rule 144A Global Security for an
interest in the IAI Global Security, the transferee must furnish a
signed letter substantially in the form of Exhibit D to the Trustee. In
the case of a transfer of an interest in either the Temporary
Regulation S Global Security or the Permanent Regulation S Global
Security to an interest in a Rule 144A Global Security or IAI Global
Security, the transferor must furnish a letter substantially in the
form of Exhibit C to the Trustee.
(ii) If the proposed transfer is a transfer of a beneficial
interest in one Global Security to a beneficial interest in
another Global Security, the Registrar shall reflect on its books
and records the date and an increase in the principal amount of
the Global Security to which such interest is being transferred in
an amount equal to the principal amount of the interest to be so
transferred, and the Registrar shall reflect on its books and
records the date and a corresponding decrease in the principal
amount of Global Security from which such interest is being
transferred.
(iii) Notwithstanding any other provisions of this Appendix
(other than the provisions set forth in Section 2.4), a Global
Security may not be transferred as a whole except by the
Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary
or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary.
(iv) In the event that a Global Security is exchanged for
Definitive Securities pursuant to Section 2.4 prior to the
consummation of the Registered Exchange Offer
8
<PAGE>
or the effectiveness of the Shelf Registration Statement with
respect to such Securities, such Securities may be exchanged only
in accordance with such procedures as are substantially consistent
with the provisions of this Section 2.3 (including the
certification requirements set forth on the reverse of the Initial
Securities intended to ensure that such transfers comply with Rule
144A, Regulation S or such other applicable exemption from
registration under the Securities Act, as the case may be) and
such other procedures as may from time to time be adopted by the
Company.
(d) Restrictions on Transfer of Temporary Regulation S Global Security.
(i) Prior to the expiration of the Restricted Period, interests in the
Temporary Regulation S Global Security may only be held through Euroclear or
Cedel. During the Restricted Period, beneficial ownership interests in the
Temporary Regulation S Global Security may only be sold, pledged or
transferred through Euroclear or Cedel in accordance with the Applicable
Procedures and only (A) to the Company, (B) so long as such security is
eligible for resale pursuant to Rule 144A, to a person whom the selling
holder reasonably believes is a QIB that purchases for its own account or
for the account of a QIB to whom notice is given that the resale, pledge or
transfer is being made in reliance on Rule 144A, (C) in an offshore
transaction in accordance with Regulation S, (D) pursuant to an exemption
from registration under the Securities Act provided by Rule 144 (if
applicable) under the Securities Act, (E) to an IAI purchasing for its own
account, or for the account of such an IAI, in a minimum principal amount of
Securities of $250,000 or (F) pursuant to an effective registration
statement under the Securities Act, in each case in accordance with any
applicable securities laws of any state of the United States. Prior to the
expiration of the Restricted Period, transfers by an owner of a beneficial
interest in the Temporary Regulation S Global Security to a transferee who
takes delivery of such interest through the Rule 144A Global Security or the
IAI Global Security will be made only in accordance with Applicable
Procedures and upon receipt by the Trustee of a written certification from
the transferor of the beneficial interest in the form provided on the
reverse of the Initial Security to the effect that such transfer is being
made to (i) a person whom the transferor reasonably believes is a QIB within
the meaning of Rule 144A in a transaction meeting the requirements of Rule
144A or (ii) an IAI purchasing for its own account, or for the account of
such an IAI, in a minimum principal amount of the Securities of $250,000.
Such written certification will no longer be required after the expiration
of the Restricted Period. In the case of a transfer of a beneficial interest
in the Regulation S Global Security for an interest in the IAI Global
Security, the transferee must furnish a signed letter substantially in the
form of Exhibit D to the Trustee.
(ii) Upon the expiration of the Restricted Period, beneficial
ownership interests in the Temporary Regulation S Global Security may
be exchanged for interests in a permanent global security in
definitive, fully registered form without the Restricted Security
Legend (the "Permanent Regulation S Global Security") upon
certification to the Trustee that such interests are owned either by
non-U.S. persons or
9
<PAGE>
U.S. persons who purchased such interests pursuant to an exemption
from, or transfer not subject to, the registration requirements of the
Securities Act. Upon the expiration of the Restricted Period, the
Company shall prepare and execute the Permanent Regulation S Global
Security in accordance with the terms of this Indenture and deliver it
to the Trustee for authentication. The Trustee shall retain the
Permanent Regulation S Global Security as Securities Custodian. Any
transfers of beneficial ownership interests in the Temporary Regulation
S Global Security made in reliance on Regulation S shall thenceforth be
recorded by the Trustee by making an appropriate increase in the
principal amount of the Permanent Regulation S Global Security and a
corresponding decrease in the principal amount of the Temporary
Regulation S Global Security. At such time as the principal amount of
the Temporary Regulation S Global Security has been reduced to zero,
the Trustee shall cancel the Temporary Regulation S Global Security and
deliver it to the Company.
(e) Legend.
(i) Except as permitted by the following paragraphs (ii), (iii) or
(iv), each Security certificate evidencing the Global Securities and
the Definitive Securities (and all Securities issued in exchange
therefor or in substitution thereof) shall bear a legend in
substantially the following form (each defined term in the legend being
defined as such for purposes of the legend only):
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL
OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR
OF SUCH SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE
10
<PAGE>
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE
IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL
ACCREDITED INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A
MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANY OTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH
OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST
OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
Each Definitive Security will also bear the following additional legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR
AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER
AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE
FOREGOING RESTRICTIONS."
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<PAGE>
(ii) Upon any sale or transfer of a Transfer Restricted Security
that is a Definitive Security, the Registrar shall permit the Holder
thereof to exchange such Transfer Restricted Security for a Definitive
Security that does not bear the legends set forth above and rescind any
restriction on the transfer of such Transfer Restricted Security if the
Holder certifies in writing to the Registrar that its request for such
exchange was made in reliance on Rule 144 (such certification to be in
the form set forth on the reverse of the Initial Security).
(iii) After a transfer of any Initial Securities or Private
Exchange Securities during the period of the effectiveness of a Shelf
Registration Statement with respect to such Initial Securities or
Private Exchange Securities, as the case may be, all require ments
pertaining to the Restricted Securities Legend on such Initial
Securities or such Private Exchange Securities will cease to apply and
any requirements that any such Initial Securities or such Private
Exchange Securities be issued in global form will continue to apply.
(iv) Upon the consummation of a Registered Exchange Offer with
respect to the Initial Securities pursuant to which Holders of such
Initial Securities are offered Exchange Securities in exchange for
their Initial Securities, all requirements pertaining to Initial
Securities that Initial Securities be issued in global form will
continue to apply, and Exchange Securities in global form without the
Restricted Securities Legend will be available to Holders that exchange
such Initial Securities in such Registered Exchange Offer.
(v) Upon the consummation of a Private Exchange with respect to
the Original or Additional Securities pursuant to which Holders of such
Original or Additional Securities are offered Private Exchange
Securities in exchange for their Original or Additional Securities, all
requirements pertaining to such Original or Additional Securities that
Original or Additional Securities be issued in global form will
continue to apply, and Private Exchange Securities in global form with
the Restricted Securities Legend will be available to Holders that
exchange such Original or Additional Securities in such Private
Exchange.
(vi) Upon a sale or transfer after the expiration of the
Restricted Period of any Initial Security acquired pursuant to
Regulation S, all requirements that such Initial Security bear the
Restricted Securities Legend will cease to apply and the requirements
requiring any such Initial Security be issued in global form will
continue to apply.
(vii) Any Additional Securities sold in a registered offering
shall not be required to bear the Restricted Securities Legend.
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<PAGE>
(f) Cancelation or Adjustment of Global Security. At such time as all
beneficial interests in a Global Security have either been exchanged for
Definitive Securities, transferred, redeemed, repurchased or canceled, such
Global Security shall be returned by the Depositary to the Trustee for
cancelation or retained and canceled by the Trustee. At any time prior to
such cancelation, if any beneficial interest in a Global Security is
exchanged for Definitive Securities, transferred in exchange for an interest
in another Global Security, redeemed, repurchased or canceled, the principal
amount of Securities represented by such Global Security shall be reduced
and an adjustment shall be made on the books and records of the Trustee (if
it is then the Securities Custodian for such Global Security) with respect
to such Global Security, by the Trustee or the Securities Custodian, to
reflect such reduction.
(g) Obligations with Respect to Transfers and Exchanges of Securities.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate, Definitive
Securities and Global Securities at the Registrar's request.
(ii) No service charge shall be made for any registration of
transfer or exchange, but the Company may require payment of a sum
sufficient to cover any transfer tax, assessments, or similar
governmental charge payable in connection therewith (other than any
such transfer taxes, assessments or similar governmental charge payable
upon exchange or transfer pursuant to Section 3.06, 4.06, 4.08 and
9.05).
(iii) Prior to the due presentation for registration of transfer
of any Security, the Company, the Trustee, the Paying Agent or the
Registrar may deem and treat the person in whose name a Security is
registered as the absolute owner of such Security for the purpose of
receiving payment of principal of and interest on such Security and for
all other purposes whatsoever, whether or not such Security is overdue,
and none of the Company, the Trustee, the Paying Agent or the Registrar
shall be affected by notice to the contrary.
(iv) All Securities issued upon any transfer or exchange pursuant
to the terms of this Indenture shall evidence the same debt and shall
be entitled to the same benefits under this Indenture as the Securities
surrendered upon such transfer or exchange.
(h) No Obligation of the Trustee.
13
<PAGE>
(i) The Trustee shall have no responsibility or obligation to any
beneficial owner of a Global Security, a member of, or a participant in
the Depositary or any other Person with respect to the accuracy of the
records of the Depositary or its nominee or of any participant or
member thereof, with respect to any ownership interest in the
Securities or with respect to the delivery to any participant, member,
beneficial owner or other Person (other than the Depositary) of any
notice (including any notice of redemption or repurchase) or the
payment of any amount, under or with respect to such Securities. All
notices and communications to be given to the Holders and all payments
to be made to Holders under the Securities shall be given or made only
to the registered Holders (which shall be the Depositary or its nominee
in the case of a Global Security). The rights of beneficial owners in
any Global Security shall be exercised only through the Depositary
subject to the applicable rules and procedures of the Depositary. The
Trustee may rely and shall be fully protected in relying upon
information furnished by the Depositary with respect to its members,
participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to
any transfer of any interest in any Security (including any transfers
between or among Depositary participants, members or beneficial owners
in any Global Security) other than to require delivery of such
certificates and other documentation or evidence as are expressly
required by, and to do so if and when expressly required by, the terms
of this Indenture, and to examine the same to determine substantial
compliance as to form with the express requirements hereof.
2.4 Definitive Securities
(a) A Global Security deposited with the Depositary or with the Trustee
as Securities Custodian pursuant to Section 2.1 shall be transferred to the
beneficial owners thereof in the form of Definitive Securities in an
aggregate principal amount equal to the principal amount of such Global
Security, in exchange for such Global Security, only if such transfer
complies with Section 2.3 and (i) the Depositary notifies the Company that
it is unwilling or unable to continue as a Depositary for such Global
Security or if at any time the Depositary ceases to be a "clearing agency"
registered under the Exchange Act, and a successor depositary is not
appointed by the Company within 90 days of such notice, or (ii) an Event of
Default has occurred and is continuing or (iii) the Company, in its sole
discretion, notifies the Trustee in writing that it elects to cause the
issuance of certificated Securities under this Indenture.
(b) Any Global Security that is transferable to the beneficial owners
thereof pursuant to this Section 2.4 shall be surrendered by the Depositary
to the Trustee, to be so transferred, in whole or from time to time in part,
without charge, and the Trustee shall authenticate and deliver, upon such
transfer of each portion of such Global Security, an equal aggregate
principal amount of Definitive Securities of authorized denominations. Any
portion
14
<PAGE>
of a Global Security transferred pursuant to this Section shall be
executed, authenticated and delivered only in denominations of $1,000 and
any integral multiple thereof and registered in such names as the Depositary
shall direct. Any certificated Initial Security in the form of a Definitive
Security delivered in exchange for an interest in the Global Security shall,
except as otherwise provided by Section 2.3(e), bear the Restricted
Securities Legend.
(c) Subject to the provisions of Section 2.4(b), the registered Holder
of a Global Security may grant proxies and otherwise authorize any Person,
including Agent Members and Persons that may hold interests through Agent
Members, to take any action which a Holder is entitled to take under this
Indenture or the Securities.
(d) In the event of the occurrence of any of the events specified in
Section 2.4(a)(i), (ii) or (iii), the Company will promptly make available
to the Trustee a reasonable supply of Definitive Securities in fully
registered form without interest coupons.
15
<PAGE>
EXHIBIT A
[FORM OF FACE OF INITIAL SECURITY]
[Global Securities Legend]
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 SECURITY 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 SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend]
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY
BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR
OF SUCH SECURITY), ONLY
<PAGE>
(A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES
WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
"ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7)
UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL ACCREDITED INVESTOR
ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL
AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT
TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO
EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER
AFTER THE RESALE RESTRICTION TERMINATION DATE.
Each Definitive Security will also bear the following additional legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR
AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER
AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE
FOREGOING RESTRICTIONS."
2
<PAGE>
No. $__________
9 5/8% Senior Subordinated Note due 2008
CUSIP No. ______
CORNING CONSUMER PRODUCTS COMPANY, a Delaware corporation, promises to pay
to Cede & Co., or registered assigns, the principal sum [of Dollars] [listed on
the Schedule of Increases or Decreases in Global Security attached hereto](1) on
May 1, 2008.
Interest Payment Dates: May 1 and November 1.
Record Dates: April 15 and October 15.
- --------
(1) Use the Schedule of Increases and Decreases language if Note is in Global
Form.
3
<PAGE>
Additional provisions of this Security are set forth on the other side of
this Security.
IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed.
CORNING CONSUMER PRODUCTS COMPANY,
by
--------------------------------------
Name:
Title:
Dated:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
THE BANK OF NEW YORK,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
By:
----------------------------
Authorized Signatory
4
<PAGE>
[FORM OF REVERSE SIDE OF SECURITY]
9 5/8% Senior Subordinated Note due 2008
1. Interest
(a) CORNING CONSUMER PRODUCTS COMPANY, a Delaware corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on the
principal amount of this Security at the rate per annum shown above. The Company
will pay interest semiannually on May 1 and November 1 of each year, commencing
November 1, 1998. Interest on the Securities will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from May
5, 1998. Interest will be computed on the basis of a 360-day year of twelve
30-day months. The Company shall pay interest on overdue principal at the rate
borne by the Securities, and it shall pay interest on overdue installments of
interest at the same rate to the extent lawful.
(b) Liquidated Damages. The holder of this Security is entitled to the
benefits of an Exchange and Registration Rights Agreement, dated as of May 5,
1998, among the Company and the Initial Purchasers named therein (the
"Registration Agreement"). Capitalized terms used in this paragraph (b) but not
defined herein have the meanings assigned to them in the Registration Agreement.
If (i) the applicable Registration Statement is not filed with the Commission on
or prior to 100 days after the Issuance Date (or, in the case of a Shelf
Registration Statement required to be filed in response to a change in law or
applicable interpretations of the Commission's staff, if later, within 45 days
after publication of the change in law or interpretations, but in no event
before 100 calender days after the Issuance Date), (ii) the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case may be,
is not declared effective within 200 days after the Issuance Date (or, in the
case of a Shelf Registration Statement required to be filed in response to a
change in law or applicable interpretations of the Commission's staff, if later,
within 90 days after publication of the change in law or interpretations, but in
no event before 200 days after the Issuance Date), (iii) the Registered Exchange
Offer is not consummated on or prior to 230 days after the Issuance Date (other
than in the event the Company files a Shelf Registration Statement), or (iv) the
Shelf Registration Statement is filed and declared effective within 200 days
after the Issuance Date but shall thereafter cease to be effective (at any time
that the Company is obligated to maintain the effectiveness thereof) without
being succeeded within 90 days by an additional Registration Statement filed and
declared effective (each such event referred to in clauses (i) through (iv), a
"Registration Default"), the Company will be obligated to pay liquidated damages
to each Holder of Transfer Restricted Securities, during the period of one or
more such Registration Defaults, with respect to the first 90-day period
immediately following the occurrence of the first Registration Default in an
amount equal to
5
<PAGE>
.25% per annum (which rate shall be increased by an additional .25% per annum
for each subsequent 90-day period that any liquidated damages continue to
accrue; provided that the rate at which liquidated damages accrue may in no
event exceed 1.00% per annum) in respect of the Securities constituting Transfer
Restricted Securities held by such Holder until (i) the applicable Registration
Statement is filed, (ii) the Exchange Offer Registration Statement is declared
effective and the Registered Exchange Offer is consummated, (iii) the Shelf
Registration Statement is declared effective or (iv) the Shelf Registration
Statement again becomes effective, as the case may be. Following the cure of all
Registration Defaults, the accrual of liquidated damages shall cease.
Notwithstanding the foregoing provisions, the Company may issue a notice that
the Shelf Registration Statement is unusable pending the announcement of a
material corporate transaction and may issue any notice suspending use of the
Shelf Registration Statement required under applicable securities laws to be
issued and, in the event that the aggregate number of days in any consecutive
twelve-month period for which all such notices are issued and effective exceeds
30 days in the aggregate, then the Company shall be obligated to pay liquidated
damages to each Holder of Transfer Restricted Securities in an amount equal to
0.25% per annum (which rate shall be increased by an additional 0.25% per annum
for each subsequent 90-day period that liquidated damages continue to accrue;
provided that the rate at which liquidated damages accrue may in no event exceed
1.00% per annum) in respect of the Securities constituting Transfer Restricted
Securities. Upon the Company declaring that the Shelf Registration Statement is
usable after the period of time described in the preceding sentence the accrual
of liquidated damages shall cease; provided, however, that if after any such
cessation of the accrual of liquidated damages the Shelf Registration Statement
again ceases to be usable beyond the period permitted above, liquidated damages
shall again accrue pursuant to the foregoing provisions. The Trustee shall have
no responsibility with respect to the determination of the amount of any such
liquidated damages. For purposes of the foregoing, "Transfer Restricted
Securities" means (i) each Initial Security until the date on which such Initial
Security has been exchanged for a freely transferable Exchange Security in the
Registered Exchange Offer, (ii) each Initial Security or Private Exchange
Security until the date on which such Initial Security or Private Exchange
Security has been effectively registered under the Securities Act and disposed
of in accordance with a Shelf Registration Statement or (iii) each Initial
Security or Private Exchange Security until the date on which such Initial
Security or Private Exchange Security is distributed to the public pursuant to
Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under
the Securities Act. The liquidated damages due shall be payable on each interest
payment date to the record holder entitled to receive the interest payment to be
made on such date.
6
<PAGE>
2. Method of Payment
The Company will pay interest on the Securities (except defaulted interest)
to the Persons who are registered holders of Securities at the close of business
on the April 15 or October 15 next preceding the interest payment date even if
Securities are canceled after the record date and on or before the interest
payment date. Holders must surrender Securities to a Paying Agent to collect
principal payments. The Company will pay principal and interest in money of the
United States of America that at the time of payment is legal tender for payment
of public and private debts. Payments in respect of the Securities represented
by a Global Security (including principal, premium and interest) will be made by
wire transfer of immediately available funds to the accounts specified by The
Depository Trust Company. The Company will make all payments in respect of a
certificated Security (including principal, premium and interest), by mailing a
check to the registered address of each Holder thereof; provided, however, that
payments on the Securities may also be made, in the case of a Holder of at least
$1,000,000 aggregate principal amount of Securities, by wire transfer to a U.S.
dollar account maintained by the payee with a bank in the United States if such
Holder elects payment by wire transfer by giving written notice to the Trustee
or the Paying Agent to such effect designating such account no later than 15
days immediately preceding the relevant due date for payment (or such other date
as the Trustee may accept in its discretion).
3. Paying Agent and Registrar
Initially, THE BANK OF NEW YORK, a New York banking association (the
"Trustee"), will act as Paying Agent and Registrar. The Company may appoint and
change any Paying Agent, Registrar or co-registrar without notice. The Company
or any of its domestically incorporated Wholly Owned Subsidiaries may act as
Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as of May 5, 1998
(the "Indenture"), between the Company and the Trustee. The terms of the
Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date of the Indenture (the "TIA"). Terms
defined in the Indenture and not defined herein have the meanings ascribed
thereto in the Indenture. The Securities are subject to all such terms, and
Securityholders are referred to the Indenture and the TIA for a statement of
those terms.
The Securities are senior subordinated unsecured obligations of the Company
limited to $300,000,000 aggregate principal amount at any one time outstanding
(subject to Sections 2.01 and 2.08 of the Indenture). This Security is one of
the Original Securities referred to in the Indenture issued in an aggregate
principal amount of $200,000,000. The
7
<PAGE>
Securities include the Initial Securities and any Exchange Securities issued in
exchange for Initial Securities. The Initial Securities and the Exchange
Securities are treated as a single class of securities under the Indenture. The
Indenture imposes certain limitations on the ability of the Company and its
Restricted Subsidiaries to, among other things, make certain Investments and
other Restricted Payments, incur Indebtedness and issue Disqualified Stock,
enter into consensual restrictions upon the payment of certain dividends and
distributions by such Restricted Subsidiaries, enter into or permit certain
transactions with Affiliates, create or incur Liens, make asset sales, guarantee
Indebtedness, or incur Indebtedness that is senior to Senior Subordinated
Indebtedness but junior to Senior Indebtedness. The Indenture also imposes
limitations on the ability of the Company to consolidate or merge with or into
any other Person or convey, transfer or lease all or substantially all of the
property of the Company.
5. Optional Redemption
Except as described below, the Securities will not be redeemable at the
Company's option prior to May 1, 2003. From and after May 1, 2003, the
Securities shall 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 thereon, if any, to the
applicable Redemption Date (subject to the right of holders of record on the
relevant record date to receive interest due on the relevant interest payment
date), if redeemed during the twelve-month period beginning on May 1 of each of
the years indicated below:
<TABLE>
<CAPTION>
Year Redemption Price
- ---- ----------------
<S> <C>
2003................................................ 104.813%
2004................................................ 103.208%
2005................................................ 101.604%
2006 and thereafter................................. 100.000%
</TABLE>
In addition, at any time or from time to time, on or prior to May 1, 2001,
the Company may, at its option, redeem up to 35% of the aggregate principal
amount of Securities originally issued under the Indenture on the Closing Date
at a redemption price equal to 109.625% of the aggregate principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the Redemption
Date (subject to the right of holders of record on the relevant record date to
receive interest due on the relevant interest payment date), with the
8
<PAGE>
net proceeds of one or more Equity Offerings; provided that at least 65% of the
aggregate principal amount of Securities originally issued under the Indenture
on the Closing Date remains outstanding immediately after the occurrence of each
such redemption; provided further that each such redemption occurs within 90
days of the date of closing of each such Equity Offering.
At any time on or prior to May 1, 2003, the Securities may also be redeemed
as a whole at the option of the Company upon the occurrence of a Change of
Control, upon not less than 30 nor more than 60 days prior notice (but in no
event more than 90 days after the occurrence of such Change of Control or
transfer event) mailed by first-class mail to each Holder's registered address,
at a redemption price equal to 100% of the principal amount thereof plus the
Applicable Premium as of, and accrued and unpaid interest, if any, to, the
Redemption Date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date).
6. Sinking Fund
The Securities are not subject to any sinking fund.
7. Notice of Redemption
Notice of redemption shall be mailed by first-class mail at least 30 days
but not more than 60 days before the Redemption Date to each Holder of
Securities to be redeemed at his or her registered address. Securities in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued interest on all Securities (or portions thereof) to be redeemed on the
Redemption Date is deposited with the Paying Agent on or before the Redemption
Date and certain other conditions are satisfied, on and after such date interest
ceases to accrue on such Securities (or such portions thereof) called for
redemption.
8. Change of Control
Upon a Change of Control, unless the Company has elected to redeem the
Securities in connection with such Change of Control, the Company shall, subject
to certain conditions specified in the Indenture, make an offer to repurchase
all of the Securities then outstanding at a purchase price in cash equal to 101%
of the aggregate principal amount thereof plus accrued and unpaid interest, if
any, to the date of purchase (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date that is on or prior to the date of purchase) as provided in, and subject to
the terms of, the Indenture.
9
<PAGE>
9. Subordination
The Securities are subordinated to Senior Indebtedness, as defined in the
Indenture. To the extent provided in the Indenture, Senior Indebtedness must be
paid before the Securities may be paid. The Company and each Guarantor, if any,
agree, and each Securityholder by accepting a Security agrees, to the
subordination provisions contained in the Indenture and any supplemental
indenture and authorizes the Trustee to give it effect and appoints the Trustee
as attorney-in-fact for such purpose.
10. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in denominations of
$1,000 and whole multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. Upon any transfer or exchange, the
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements or transfer documents and to pay any taxes required by
law or permitted by the Indenture. The Regis trar need not register the transfer
of or exchange any Securities selected for redemption (except, in the case of a
Security to be redeemed in part, the portion of the Security not to be redeemed)
or to transfer or exchange any Securities for a period of 15 days prior to a
selection of Securities to be redeemed.
11. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner of it for
all purposes.
12. Unclaimed Money
If money for the payment of principal or interest remains unclaimed for two
years, the Trustee or Paying Agent shall pay the money back to the Company at
its written request unless an abandoned property law designates another Person.
After any such payment, Holders entitled to the money must look only to the
Company and not to the Trustee for payment.
10
<PAGE>
13. Discharge and Defeasance
Subject to certain conditions, the Company at any time may terminate some of
or all its obligations under the Securities and the Indenture if the Company
deposits with the Trustee money or Government Securities for the payment of
principal and interest on the Securities to redemption or maturity, as the case
may be.
14. Amendment, Waiver
11
<PAGE>
Subject to certain exceptions, the Company, any Guarantor and the Trustee
may amend the Indenture, the Securities or the Guarantees with the written
consent of the Holders of at least a majority in principal amount of the
Securities then outstanding (including consents obtained in connection with a
tender offer or exchange for the Securities) and, subject to Article 6, any
existing default or compliance with any provision of this Indenture or the
Securities may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Securities (including consents
obtained in connection with a purchase of or tender offer or exchange offer
for Securities). Subject to certain exceptions set forth in the Indenture,
without the consent of any Holder of Securities, the Company and the Trustee
may amend the Indenture or the Securities to cure any ambiguity, omission,
defect or inconsistency; to comply with Article 5 of the Indenture; to
provide for uncertificated Securities in addition to or in place of
certificated Securities; provided, however, that the uncertificated
Securities are issued in registered form for purposes of Section 163(f) of
the Code or in a manner such that the uncertificated Securities are described
in Section 163(f)(2)(B) of the Code; to provide for the assumption of the
Company's or any Guarantor's obligations to Holders; to add Guarantees with
respect to the Securities or to secure the Securities; to make any change
that would provide any additional rights or benefits to the Holders or that
does not adversely affect the legal rights under the Indenture of any such
Holder; to add to the covenants for the benefit of the Holders or to
surrender any right or power herein conferred upon the Company; to comply
with any requirements of the SEC in connection with qualifying, or
maintaining the qualification of, the Indenture under the TIA; to evidence
and provide for the acceptance and appointment under the Indenture of a
successor Trustee pursuant to Article 7 of the Indenture; or to provide for
the issuance of the Exchange Securities, Private Exchange Securities or
Additional Securities, which shall have terms substantially identical in all
material respects to the Original Securities (except that the transfer
restrictions contained in the Original Securities shall be modified or
eliminated, as appropriate), and which shall be treated, together with any
outstanding Original Securities, as a single issue of securities.
12
<PAGE>
15. Defaults and Remedies
If an Event of Default occurs (other than an Event of Default relating to
certain events of bankruptcy, insolvency or reorganization of the Company) and
is continuing, the Trustee or the Holders of at least 30% in principal amount of
the outstanding Securities may declare the principal of and accrued but unpaid
interest on all the Securities to be due and payable provided, however, that, so
long as any Indebtedness permitted to be incurred under the Indenture as part of
the Senior Credit Facilities shall be outstanding, no such acceleration shall be
effective until the earlier of (i) acceleration of any such Indebtedness under
the Senior Credit Facilities or (ii) five Business Days after the giving of
written notice to the Company and the administrative agent under the Senior
Credit Facilities of such acceleration. If an Event of Default relating to
certain events of bankruptcy, insolvency or reorganization of the Company
occurs, the principal of and interest on all the Securities shall become
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holders. Under certain circumstances, the Holders of a
majority in principal amount of the outstanding Securities may rescind any such
acceleration with respect to the Securities and its consequences.
If an Event of Default occurs and is continuing, the Trustee will be under
no obligation to exercise any of the rights or powers under the Indenture at the
request or direction of any of the Holders unless such Holders have offered to
the Trustee reasonable indemnity or security against any loss, liability or
expense. Except to enforce the right to receive payment of principal, premium
(if any) or interest when due, no Holder may pursue any remedy with respect to
the Indenture or the Securities unless (i) such Holder has previously given the
Trustee notice that an Event of Default is continuing, (ii) Holders of at least
30% in principal amount of the outstanding Securities have requested the Trustee
in writing to pursue the remedy, (iii) such Holders have offered the Trustee
reasonable security or indemnity against any loss, liability or expense, (iv)
the Trustee has not complied with such request within 60 days after the receipt
of the request and the offer of security or indemnity and (v) the Holders of a
majority in principal amount of the outstanding Securities have not given the
Trustee a direction inconsistent with such request within such 60-day period.
Subject to certain restrictions, the Holders of a majority in principal amount
of the outstanding Securities are given the right to direct the time, method and
place of conducting any proceeding for any remedy available to the
13
<PAGE>
Trustee or of exercising any trust or power conferred on the Trustee. The
Trustee, however, may refuse to follow any direction that conflicts with law or
the Indenture or that the Trustee determines is unduly prejudicial to the rights
of any other Holder or that would involve the Trustee in personal liability.
Prior to taking any action under the Indenture, the Trustee will be entitled to
indemnification satisfactory to it in its sole discretion against all losses and
expenses caused by taking or not taking such action.
16. Trustee Dealings with the Company
Subject to certain limitations imposed by the TIA, the Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.
17. No Recourse Against Others
No director, officer, employee, incorporator or stockholder of the Company
or of any Guarantor, shall have any liability for any obligations of the Company
or the Guarantors under the Securities, the Guarantees 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 Security waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Securities. 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.
18. Authentication
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
14
<PAGE>
19. Abbreviations
Customary abbreviations may be used in the name of a Securityholder or an
assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
20. Governing Law
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES
OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION WOULD BE REQUIRED THEREBY.
21. 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 Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities 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 of Securities upon written request
and without charge to the Holder a copy of the Indenture which has in it the
text of this Security.
15
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Security 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 other side of this Security.
16
<PAGE>
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF
TRANSFER RESTRICTED SECURITIES
This certificate relates to $_________ principal amount of Securities held in
(check applicable space) ____ book-entry or _____ definitive form by the
undersigned.
The undersigned (check one box below):
/ / has requested the Trustee by written order to deliver in exchange for its
beneficial interest in the Global Security held by the Depositary a Security
or Securities in definitive, registered form of authorized denominations and
an aggregate principal amount equal to its beneficial interest in such
Global Security (or the portion thereof indicated above);
/ / has requested the Trustee by written order to exchange or register the
transfer of a Security or Securities.
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act, the undersigned confirms that such Securities
are being transferred in accordance with its terms:
CHECK ONE BOX BELOW
(1) / / to the Company; or
(2) / / pursuant to an effective registration statement under the Securities
Act of 1933; or
(3) / / inside the United States to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act of 1933) that
purchases for its own account or for the account of a qualified
institutional buyer to whom notice is given that such transfer is
being made in reliance on Rule 144A, in each case pursuant to and
in compliance with Rule 144A under the Securities Act of 1933; or
(4) / / outside the United States in an offshore transaction within the
meaning of Regulation S under the Securities Act in compliance with
Rule 904 under the Securities Act of 1933; or
17
<PAGE>
(5) / / to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933) that
has furnished to the Trustee a signed letter containing certain
representations and agreements; or
(6) / / pursuant to another available exemption from registration provided
by Rule 144 under the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register any
of the Securities evidenced by this certificate in the name of any Person
other than the registered holder thereof; provided, however, that if box
(4), (5) or (6) is checked, the Trustee may require, prior to registering
any such transfer of the Securities, such legal opinions, certifications and
other information as the Company has reasonably requested to confirm that
such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities
Act of 1933.
------------------------
Your Signature
Signature Guarantee:
Date:
------------------------- -----------------------------
Signature must be guaranteed Signature of Signature
by a participant in a Guarantee
recognized signature guaranty
medallion program or other
signature guarantor acceptable
to the Trustee
- ------------------------------------------------------------
18
<PAGE>
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Security
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Company as
the undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the exemption
from registration provided by Rule 144A.
Dated:
-------------------- ---------------------------
NOTICE: To be executed by
an executive officer
19
<PAGE>
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The initial principal amount of this Global Security is $[ ]. The following
increases or decreases in this Global Security have been made:
<TABLE>
<CAPTION>
Date of Amount of decrease in Amount of increase in Principal amount of this Signature of authorized
Exchange Principal Amount of this Principal Amount of this Global Security following signatory of Trustee or
Global Security Global Security such decrease or increase Securities Custodian
<S> <C> <C> <C> <C>
</TABLE>
20
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company pursuant
to Section 4.06 (Asset Sale) or 4.08 (Change of Control) of the Indenture, check
the box:
Asset Saleo / / Change of Control / /
If you want to elect to have only part of this Security purchased by the
Company pursuant to Section 4.06 or 4.08 of the Indenture, state the amount:
$
Date: Your Signature:
--------------------- --------------------------------
(Sign exactly as your name appears on the other side of the Security)
Signature Guarantee:
------------------------------------------------------------
Signature must be guaranteed by a participant in a recognized
signature guaranty medallion program or other signature
guarantor acceptable to the Trustee
21
<PAGE>
EXHIBIT B
[FORM OF FACE OF EXCHANGE SECURITY]
No. $__________
9 5/8% Senior Subordinated Note due 2008
CUSIP No. ______
CORNING CONSUMER PRODUCTS COMPANY, a Delaware corporation, promises to
pay to Cede & Co., or registered assigns, the principal sum [of Dollars]
[listed on the Schedule of Increases or Decreases in Global Security attached
hereto](2) on May 1, 2008.
Interest Payment Dates: May 1 and November 1.
Record Dates: April 15 and October 15.
- --------
(2) Use the Schedule of Increases and Decreases language if Note is in Global
Form.
<PAGE>
Additional provisions of this Security are set forth on the other side of
this Security.
IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed.
CORNING CONSUMER PRODUCTS COMPANY,
by
--------------------------------------------------
Name:
Title:
Dated:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
THE BANK OF NEW YORK,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
By:
---------------------------
Authorized Signatory
- ----------
*/ If the Security is to be issued in global form, add the Global Securities
Legend and the attachment from Exhibit A captioned "TO BE ATTACHED TO GLOBAL
SECURITIES SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY".
2
<PAGE>
[FORM OF REVERSE SIDE OF EXCHANGE SECURITY]
9 5/8% Senior Subordinated Note due 2008
1. Interest
CORNING CONSUMER PRODUCTS COMPANY, a Delaware corporation (such corporation,
and its successors and assigns under the Indenture hereinafter referred to,
being herein called the "Company"), promises to pay interest on the principal
amount of this Security at the rate per annum shown above. The Company will pay
interest semiannually on May 1 and November 1 of each year, commencing November
1, 1998. Interest on the Securities will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from May 5, 1998.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. The Company shall pay interest on overdue principal at the rate borne by
the Securities, and it shall pay interest on overdue installments of interest at
the same rate to the extent lawful.
3
<PAGE>
2. Method of Payment
The Company will pay interest on the Securities (except defaulted interest)
to the Persons who are registered holders of Securities at the close of business
on the April 15 or October 15 next preceding the interest payment date even if
Securities are canceled after the record date and on or before the interest
payment date. Holders must surrender Securities to a Paying Agent to collect
principal payments. The Company will pay principal and interest in money of the
United States of America that at the time of payment is legal tender for payment
of public and private debts. Payments in respect of the Securities represented
by a Global Security (including principal, premium and interest) will be made by
wire transfer of immediately available funds to the accounts specified by The
Depository Trust Company. The Company will make all payments in respect of a
certificated Security (including principal, premium and interest), by mailing a
check to the registered address of each Holder thereof; provided, however, that
payments on the Securities may also be made, in the case of a Holder of at least
$1,000,000 aggregate principal amount of Securities, by wire transfer to a U.S.
dollar account maintained by the payee with a bank in the United States if such
Holder elects payment by wire transfer by giving written notice to the Trustee
or the Paying Agent to such effect designating such account no later than 15
days immediately preceding the relevant due date for payment (or such other date
as the Trustee may accept in its discretion).
3. Paying Agent and Registrar
Initially, THE BANK OF NEW YORK, a New York banking association (the
"Trustee"), will act as Paying Agent and Registrar. The Company may appoint and
change any Paying Agent, Registrar or co-registrar without notice. The Company
or any of its domestically incorporated Wholly Owned Subsidiaries may act as
Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as of May 5, 1998
(the "Indenture"), between the Company and the Trustee. The terms of the
Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date of the Indenture (the "TIA"). Terms
defined in the Indenture and not defined herein have the meanings ascribed
thereto in the Indenture. The Securities are subject to all such terms, and
Securityholders are referred to the Indenture and the TIA for a statement of
those terms.
The Securities are senior unsecured obligations of the Company limited to
$300,000,000 million aggregate principal amount at any one time outstanding, of
which $200,000,000 in aggregate principal amount will be initially issued on the
Closing Date. Subject to the conditions set forth in the Indenture, the Company
may issue up to an
4
<PAGE>
additional $100,000,000 million aggregate principal amount of Additional
Securities. This Security is one of the Initial Securities referred to in the
Indenture. The Securities include the Original Securities, the Additional
Securities and any Exchange Securities and Private Exchange Securities issued in
exchange for the Initial Securities pursuant to the Indenture. The Original
Securities, the Additional Securities, the Exchange Securities and the Private
Exchange Securities are treated as a single class of securities under the
Indenture. The Indenture imposes certain limitations on the ability of the
Company and its Restricted Subsidiaries to, among other things, make certain
Investments and other Restricted Payments, incur Indebtedness and issue
Disqualified Stock, enter into consensual restrictions upon the payment of
certain dividends and distributions by such Restricted Subsidiaries, enter into
or permit certain transactions with Affiliates, create or incur Liens, make
asset sales, guarantee Indebtedness, or incur Indebtedness that is senior to
Senior Subordinated Indebtedness but junior to Senior Indebtedness. The
Indenture also imposes limitations on the ability of the Company to consolidate
or merge with or into any other Person or convey, transfer or lease all or
substantially all of the property of the Company.
5. Optional Redemption
Except as described below, the Securities will not be redeemable at the
Company's option prior to May 1, 2003. From and after May 1, 2003, the
Securities shall 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 thereon, if any, to the
applicable Redemption Date (subject to the right of holders of record on the
relevant record date to receive interest due on the relevant interest payment
date), if redeemed during the twelve-month period beginning on May 1 of each of
the years indicated below:
<TABLE>
<CAPTION>
Year Redemption Price
- ---- ----------------
<S> <C>
2003.................................................. 104.813%
2004.................................................. 103.208%
2005.................................................. 101.604%
2006 and thereafter................................... 100.000%
</TABLE>
In addition, at any time or from time to time, on or prior to May 1, 2001,
the Company may, at its option, redeem up to 35% of the aggregate principal
amount of Securities originally issued under the Indenture on the Closing Date
at a redemption price equal to 109.625% of the aggregate principal amount
thereof, plus accrued and unpaid
5
<PAGE>
interest thereon, if any, to the Redemption Date (subject to the right of
holders of record on the relevant record date to receive interest due on the
relevant interest payment date), with the net proceeds of one or more Equity
Offerings; provided that at least 65% of the aggregate principal amount of
Securities originally issued under the Indenture on the Closing Date remains
outstanding immediately after the occurrence of each such redemption; provided
further that each such redemption occurs within 90 days of the date of closing
of each such Equity Offering.
At any time on or prior to May 1, 2003, the Securities may also be redeemed
as a whole at the option of the Company upon the occurrence of a Change of
Control, upon not less than 30 nor more than 60 days prior notice (but in no
event more than 90 days after the occurrence of such Change of Control or
transfer event) mailed by first-class mail to each Holder's registered address,
at a redemption price equal to 100% of the principal amount thereof plus the
Applicable Premium as of, and accrued and unpaid interest, if any, to, the
Redemption Date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date).
6. Sinking Fund
The Securities are not subject to any sinking fund.
7. Notice of Redemption
Notice of redemption shall be mailed by first-class mail at least 30 days
but not more than 60 days before the Redemption Date to each Holder of
Securities to be redeemed at his or her registered address. Securities in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued interest on all Securities (or portions thereof) to be redeemed on the
Redemption Date is deposited with the Paying Agent on or before the Redemption
Date and certain other conditions are satisfied, on and after such date interest
ceases to accrue on such Securities (or such portions thereof) called for
redemption.
8. Change of Control
Upon a Change of Control, unless the Company has elected to redeem the
Securities in connection with such Change of Control, the Company shall, subject
to certain conditions specified in the Indenture, make an offer to repurchase
all of the Securities then outstanding at a purchase price in cash equal to 101%
of the aggregate principal amount thereof plus accrued and unpaid interest, if
any, to the date of purchase (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date that is on or prior to the date of purchase) as provided in, and subject to
the terms of, the Indenture.
6
<PAGE>
9. Subordination
The Securities are subordinated to Senior Indebtedness, as defined in the
Indenture. To the extent provided in the Indenture, Senior Indebtedness must be
paid before the Securities may be paid. The Company and each Guarantor, if any,
agree, and each Securityholder by accepting a Security agrees, to the
subordination provisions contained in the Indenture and any supplemental
indenture and authorizes the Trustee to give it effect and appoints the Trustee
as attorney-in-fact for such purpose.
10. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in denominations of
$1,000 and whole multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. Upon any transfer or exchange, the
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements or transfer documents and to pay any taxes required by
law or permitted by the Indenture. The Regis trar need not register the transfer
of or exchange any Securities selected for redemption (except, in the case of a
Security to be redeemed in part, the portion of the Security not to be redeemed)
or to transfer or exchange any Securities for a period of 15 days prior to a
selection of Securities to be redeemed.
11. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner of it for
all purposes.
12. Unclaimed Money
If money for the payment of principal or interest remains unclaimed for two
years, the Trustee or Paying Agent shall pay the money back to the Company at
its written request unless an abandoned property law designates another Person.
After any such payment, Holders entitled to the money must look only to the
Company and not to the Trustee for payment.
13. Discharge and Defeasance
Subject to certain conditions, the Company at any time may terminate some of
or all its obligations under the Securities and the Indenture if the Company
deposits with the Trustee money or Government Securities for the payment of
principal and interest on the Securities to redemption or maturity, as the case
may be.
7
<PAGE>
14. Amendment, Waiver
Subject to certain exceptions, the Company, any Guarantor and the Trustee
may amend the Indenture, the Securities or the Guarantees with the written
consent of the Holders of at least a majority in principal amount of the
Securities then outstanding (including consents obtained in connection with a
tender offer or exchange for the Securities) and, subject to Article 6, any
existing default or compliance with any provision of this Indenture or the
Securities may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Securities (including consents obtained
in connection with a purchase of or tender offer or exchange offer for
Securities). Subject to certain exceptions set forth in the Indenture, without
the consent of any Holder of Securities, the Company and the Trustee may amend
the Indenture or the Securities to cure any ambiguity, omission, defect or
inconsistency; to comply with Article 5 of the Indenture; to provide for
uncertificated Securities in addition to or in place of certificated Securities;
provided, however, that the uncertificated Securities are issued in registered
form for purposes of Section 163(f) of the Code or in a manner such that the
uncertificated Securities are described in Section 163(f)(2)(B) of the Code; to
provide for the assumption of the Company's or any Guarantor's obligations to
Holders; to add Guarantees with respect to the Securities or to secure the
Securities; to make any change that would provide any additional rights or
benefits to the Holders or that does not adversely affect the legal rights under
the Indenture of any such Holder; to add to the covenants for the benefit of the
Holders or to surrender any right or power herein conferred upon the Company; to
comply with any requirements of the SEC in connection with qualifying, or
maintaining the qualification of, the Indenture under the TIA; to evidence and
provide for the acceptance and appointment under the Indenture of a successor
Trustee pursuant to Article 7 of the Indenture; or to provide for the issuance
of the Exchange Securities, Private Exchange Securities or Additional
Securities, which shall have terms substantially identical in all material
respects to the Original Securities (except that the transfer restrictions
contained in the Original Securities shall be modified or eliminated, as
appropriate), and which shall be treated, together with any outstanding Original
Securities, as a single issue of securities.
8
<PAGE>
15. Defaults and Remedies
If an Event of Default occurs (other than an Event of Default relating to
certain events of bankruptcy, insolvency or reorganization of the Company) and
is continuing, the Trustee or the Holders of at least 30% in principal amount of
the outstanding Securities may declare the principal of and accrued but unpaid
interest on all the Securities to be due and payable provided, however, that, so
long as any Indebtedness permitted to be incurred under the Indenture as part of
the Senior Credit Facilities shall be outstanding, no such acceleration shall be
effective until the earlier of (i) acceleration of any such Indebtedness under
the Senior Credit Facilities or (ii) five Business Days after the giving of
written notice to the Company and the administrative agent under the Senior
Credit Facilities of such acceleration. If an Event of Default relating to
certain events of bankruptcy, insolvency or reorganization of the Company
occurs, the principal of and interest on all the Securities shall become
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holders. Under certain circumstances, the Holders of a
majority in principal amount of the outstanding Securities may rescind any such
acceleration with respect to the Securities and its consequences.
If an Event of Default occurs and is continuing, the Trustee will be under
no obligation to exercise any of the rights or powers under the Indenture at the
request or direction of any of the Holders unless such Holders have offered to
the Trustee reasonable indemnity or security against any loss, liability or
expense. Except to enforce the right to receive payment of principal, premium
(if any) or interest when due, no Holder may pursue any remedy with respect to
the Indenture or the Securities unless (i) such Holder has previously given the
Trustee notice that an Event of Default is continuing, (ii) Holders of at least
30% in principal amount of the outstanding Securities have requested the Trustee
in writing to pursue the remedy, (iii) such Holders have offered the Trustee
reasonable security or indemnity against any loss, liability or expense, (iv)
the Trustee has not complied with such request within 60 days after the receipt
of the request and the offer of security or indemnity and (v) the Holders of a
majority in principal amount of the outstanding Securities have not given the
Trustee a direction inconsistent with such request within such 60-day period.
Subject to certain restrictions, the Holders of a majority in principal amount
of the outstanding Securities are given the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. The Trustee, however,
may refuse to follow any direction that conflicts with law or the Indenture or
that the Trustee determines is unduly prejudicial to the rights of any other
Holder or that would involve the Trustee in personal liability. Prior to taking
any action under the Indenture, the Trustee will be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
9
<PAGE>
16. Trustee Dealings with the Company
Subject to certain limitations imposed by the TIA, the Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.
17. No Recourse Against Others
No director, officer, employee, incorporator or stockholder of the Company
or of any Guarantor, shall have any liability for any obligations of the Company
or the Guarantors under the Securities, the Guarantees 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 Security waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Securities. 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.
18. Authentication
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
19. Abbreviations
Customary abbreviations may be used in the name of a Securityholder or an
assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
20. Governing Law
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES
OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION WOULD BE REQUIRED THEREBY.
21. CUSIP Numbers
10
<PAGE>
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities 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 of Securities upon written request
and without charge to the Holder a copy of the Indenture which has in it the
text of this Security.
11
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Security 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 other side of this Security. Signature
must be guaranteed by a participant in a recognized signature guaranty medallion
program or other signature guarantor acceptable to the Trustee.
12
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company pursuant
to Section 4.06 (Asset Sale) or 4.08 (Change of Control) of the Indenture, check
the box:
Asset Sale / / Change of Control / /
If you want to elect to have only part of this Security purchased by the
Company pursuant to Section 4.06 or 4.08 of the Indenture, state the amount:
$
Date: Your Signature:
----------------- ---------------------------------
(Sign exactly as your name appears
on the other side of the Security)
Signature Guarantee:
---------------------------------------------
Signature must be guaranteed by a participant in a
recognized signature guaranty medallion program or other
signature guarantor acceptable to the Trustee.
13
<PAGE>
EXHIBIT 4.4
EXECUTION COPY
CORNING CONSUMER PRODUCTS COMPANY
$200,000,000
9 5/8% Senior Subordinated Notes due 2008
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
May 5, 1998
CHASE SECURITIES INC.
SALOMON BROTHERS INC
CITICORP SECURITIES, INC.
c/o Chase Securities Inc.
270 Park Avenue, 4th floor
New York, New York 10017
Ladies and Gentlemen:
Corning Consumer Products Company, a Delaware corporation (the "Company"),
proposes to issue and sell to Chase Securities Inc. ("CSI"), Salomon Brothers
Inc ("Salomon") and Citicorp Securities, Inc. (together with CSI and Salomon,
the "Initial Purchasers"), upon the terms and subject to the conditions set
forth in a purchase agreement dated April 30, 1998 (the "Purchase Agreement"),
$200,000,000 aggregate principal amount of its 9 5/8% Senior Subordinated Notes
due 2008 (the "Securities"). Capitalized terms used but not defined herein shall
have the meanings given to such terms in the Purchase Agreement.
As an inducement to the Initial Purchasers to enter into the Purchase
Agreement and in satisfaction of a condition to the obligations of the Initial
Purchasers thereunder, the Company agrees with the Initial Purchasers, for the
benefit of the holders (including the Initial Purchasers) of the Securities, the
Exchange Securities (as defined herein) and the Private Exchange Securities (as
defined herein) (collectively, the "Holders"), as follows:
1. Registered Exchange Offer. The Company shall (i) prepare and, not later
than 100 days following the date of original issuance of the Securities (the
"Issue Date"), file with the Commission a registration statement (the "Exchange
Offer Registration Statement") on an appropriate form under the Securities Act
with respect to a proposed offer to the Holders of the Securities (the
"Registered Exchange Offer") to issue and deliver to such Holders, in exchange
for the Securities, a like aggregate principal amount of debt securities of the
Company (the "Exchange Securities") that are identical in all material respects
to the Securities, except for the transfer restrictions relating to the
Securities, (ii) use its reasonable best efforts to
<PAGE>
cause the Exchange Offer Registration Statement to become effective under the
Securities Act no later than 200 days after the Issue Date and the Registered
Exchange Offer to be consummated no later than 230 days after the Issue Date and
(iii) keep the Exchange Offer Registration Statement effective for not less than
20 business days (or longer, if required by applicable law) after the date on
which notice of the Registered Exchange Offer is mailed to the Holders (such
period being called the "Exchange Offer Registration Period"). The Exchange
Securities will be issued under the Indenture or an indenture (the "Exchange
Securities Indenture") between the Company and the Trustee or such other bank or
trust company that is reasonably satisfactory to the Initial Purchasers, as
trustee (the "Exchange Securities Trustee"), such indenture to be identical in
all material respects to the Indenture, except for the transfer restrictions
relating to the Securities.
Upon the effectiveness of the Exchange Offer Registration Statement, the
Company shall promptly commence the Registered Exchange Offer, it being the
objective of such Registered Exchange Offer to enable each Holder electing to
exchange Securities for Exchange Securities (assuming that such Holder (a) is
not an affiliate (as defined in Rule 405 under the Securities Act) of the
Company or an Exchanging Dealer (as defined herein) not complying with the
requirements of the next sentence, (b) is not an Initial Purchaser holding
Securities that have, or that are reasonably likely to have, the status of an
unsold allotment in an initial distribution, (c) acquires the Exchange
Securities in the ordinary course of such Holder's business and (d) has no
arrangements or understandings with any person to participate in the
distribution of the Exchange Securities) and to trade such Exchange Securities
from and after their receipt without any limitations or restrictions under the
Securities Act and without material restrictions under the securities laws of
the several states of the United States. The Company, the Initial Purchasers and
each Exchanging Dealer acknowledge that, pursuant to current interpretations by
the Commission's staff of Section 5 of the Securities Act, each Holder that is a
broker-dealer electing to exchange Securities, acquired for its own account as a
result of market-making activities or other trading activities, for Exchange
Securities (an "Exchanging Dealer"), is required to deliver a prospectus
containing substantially the information set forth in Annex A hereto on the
cover, in Annex B hereto in the "Exchange Offer Procedures" section and the
"Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of
Distribution" section of such prospectus (or any comparable section thereof) in
connection with a sale of any such Exchange Securities received by such
Exchanging Dealer pursuant to the Registered Exchange Offer.
If, prior to the consummation of the Registered Exchange Offer, any Holder
holds any Securities acquired by it that have, or that are reasonably likely to
be determined to have, the status of an unsold allotment in an initial
distribution, or any Holder is not entitled to participate in the Registered
Exchange Offer, the Company shall, upon the request of any such Holder,
simultaneously with the delivery of the Exchange Securities in the Registered
Exchange Offer, issue and deliver to any such Holder, in exchange for the
Securities held by such Holder (the "Private Exchange"), a like aggregate
principal amount of debt securities of the Company (the "Private Exchange
Securities") that are identical in all material respects to the Exchange
Securities, except for the transfer restrictions relating to such Private
Exchange Securities. The Private Exchange Securities will be issued under the
same indenture as the Exchange Securities, and the Company shall use its
reasonable best efforts to cause the Private Exchange Securities to bear the
same CUSIP number as the Exchange Securities.
In connection with the Registered Exchange Offer, the Company shall:
<PAGE>
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 20
business days (or longer, if required by applicable law) after the date on
which notice of the Registered Exchange Offer is mailed to the Holders;
(c) utilize the services of a depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York;
(d) permit Holders to withdraw tendered Securities at any time prior to
the close of business, New York City time, on the last business day on which
the Registered Exchange Offer shall remain open; and
(e) otherwise comply in all respects with all laws that are applicable
to the Registered Exchange Offer.
As soon as practicable after the close of the Registered Exchange Offer
and any Private Exchange, as the case may be, the Company shall:
(a) accept for exchange all Securities tendered and not validly
withdrawn pursuant to the Registered Exchange Offer and the Private
Exchange;
(b) deliver to the Trustee for cancelation all Securities so accepted
for exchange; and
(c) cause the Trustee or the Exchange Securities Trustee, as the case
may be, promptly to authenticate and deliver to each Holder, Exchange
Securities or Private Exchange Securities, as the case may be, equal in
principal amount to the Securities of such Holder so accepted for exchange.
The Company shall use its reasonable best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the prospectus
contained therein in order to permit such prospectus to be used by all persons
subject to the prospectus delivery requirements of the Securities Act for such
period of time as such persons must comply with such requirements in order to
resell the Exchange Securities; provided that (i) in the case where such
prospectus and any amendment or supplement thereto must be delivered by an
Exchanging Dealer, such period shall be the lesser of 90 days and the date on
which all Exchanging Dealers have sold all Exchange Securities held by them and
(ii) the Company shall make such prospectus and any amendment or supplement
thereto available to any broker-dealer for use in connection with any resale of
any Exchange Securities for a period of not less than 90 days after the
consummation of the Registered Exchange Offer.
<PAGE>
The Indenture or the Exchange Securities Indenture, as the case may be,
shall provide that the Securities, the Exchange Securities and the Private
Exchange Securities shall vote and consent together on all matters as one class
and that none of the Securities, the Exchange Securities or the Private Exchange
Securities will have the right to vote or consent as a separate class on any
matter.
Interest on each Exchange Security and Private Exchange Security issued
pursuant to the Registered Exchange Offer and in the Private Exchange will
accrue from the last interest payment date on which interest was paid on the
Securities surrendered in exchange therefor or, if no interest has been paid on
the Securities, from the Issue Date.
Each Holder participating in the Registered Exchange Offer shall be required
to represent to the Company that at the time of the consummation of the
Registered Exchange Offer (i) any Exchange Securities received by such Holder
will be acquired in the ordinary course of business, (ii) such Holder has no
arrangements or understanding with any person to participate in the distribution
of the Securities or the Exchange Securities within the meaning of the
Securities Act and (iii) such Holder is not an affiliate of the Company or, if
it is such an affiliate, such Holder will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable.
Notwithstanding any other provisions hereof, the Company will ensure that
(i) any Exchange Offer Registration Statement and any amendment thereto and any
prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations of the
Commission thereunder, (ii) any Exchange Offer Registration Statement and any
amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(iii) any prospectus forming part of any Exchange Offer Registration Statement,
and any supplement to such prospectus, does not, as of the consummation of the
Registered Exchange Offer, include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
2. Shelf Registration. If (i) because of any change in law or applicable
interpretations thereof by the Commission's staff the Company is not permitted
to effect the Registered Exchange Offer as contemplated by Section 1 hereof, or
(ii) any Securities validly tendered pursuant to the Registered Exchange Offer
are not exchanged for Exchange Securities within 230 days after the Issue Date,
or (iii) any Initial Purchaser so requests with respect to Securities or Private
Exchange Securities not eligible to be exchanged for Exchange Securities in the
Registered Exchange Offer and held by it following the consummation of the
Registered Exchange Offer, or (iv) any applicable law or interpretations do not
permit any Holder to participate in the Registered Exchange Offer, or (v) any
Holder that participates in the Registered Exchange Offer does not receive
freely transferable Exchange Securities in exchange for tendered Securities,
then the following provisions shall apply:
<PAGE>
(a) The Company shall use its reasonable best efforts to file as
promptly as practicable with the Commission, and thereafter shall use its
reasonable best efforts to cause to be declared effective, a shelf
registration statement on an appropriate form under the Securities Act
relating to the offer and sale of the Transfer Restricted Securities (as
defined below) by the Holders thereof from time to time in accordance with
the methods of distribution set forth in such registration statement
(hereafter, a "Shelf Registration Statement" and, together with any Exchange
Offer Registration Statement, a "Registration Statement").
(b) The Company shall use its reasonable best efforts to keep the Shelf
Registration Statement continuously effective in order to permit the
prospectus forming part thereof to be used by Holders of Transfer Restricted
Securities for a period ending on the earlier of (i) two years from the
Issue Date or such shorter period that will terminate when all the Transfer
Restricted Securities covered by the Shelf Registration Statement have been
sold pursuant thereto and (ii) the date on which the Securities become
eligible for resale without volume restrictions pursuant to Rule 144 under
the Securities Act (in any such case, such period being called the "Shelf
Registration Period"). The Company shall be deemed not to have used its
reasonable best efforts to keep the Shelf Registration Statement effective
during the requisite period if it voluntarily takes any action that would
result in Holders of Transfer Restricted Securities covered thereby not
being able to offer and sell such Transfer Restricted Securities during that
period, unless (A) such action is required by applicable law or (B) such
action was permitted by Section 2(c).
(c) Notwithstanding the provisions of Section 2(b) (but subject to the
provisions of Section 3(b)), the Company may issue a notice that the Shelf
Registration Statement is unusable pending the announcement of a material
corporate transaction and may issue any notice suspending use of the Shelf
Registration Statement required under applicable securities laws to be
issued.
(d) Notwithstanding any other provisions hereof, the Company will
ensure that (i) any Shelf Registration Statement and any amendment thereto
and any prospectus forming part thereof and any supplement thereto complies
in all material respects with the Securities Act and the rules and
regulations of the Commission thereunder, (ii) any Shelf Registration
Statement and any amendment thereto (in either case, other than with respect
to information included therein in reliance upon or in conformity with
written information furnished to the Company by or on behalf of any Holder
specifically for use therein (the "Holders' Information")) does not contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading and (iii) any prospectus forming part of any Shelf
Registration Statement, and any supplement to such prospectus (in either
case, other than with respect to Holders' Information), does not include an
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
<PAGE>
3. Liquidated Damages.
(a) The parties hereto agree that the Holders of Transfer Restricted
Securities will suffer damages if the Company fails to fulfill its
obligations under Section 1 or Section 2, as applicable, and that it would
not be feasible to ascertain the extent of such damages. Accordingly, if (i)
the applicable Registration Statement is not filed with the Commission on or
prior to 100 days after the Issue Date (or, in the case of a Shelf
Registration Statement required to be filed in response to a change in law
or applicable interpretations of the Commission's staff, if later, within 45
days after publication of the change in law or interpretations, but in no
event before 100 calender days after the Issue Date), (ii) the Exchange
Offer Registration Statement or the Shelf Registration Statement, as the
case may be, is not declared effective within 200 days after the Issue Date
(or, in the case of a Shelf Registration Statement required to be filed in
response to a change in law or applicable interpretations of the
Commission's staff, if later, within 90 days after publication of the change
in law or interpretations, but in no event before 200 days after the Issue
Date), (iii) the Registered Exchange Offer is not consummated on or prior to
230 days after the Issue Date (other than in the event the Company files a
Shelf Registration Statement), or (iv) the Shelf Registration Statement is
filed and declared effective within 200 days after the Issue Date but shall
thereafter cease to be effective (at any time that the Company is obligated
to maintain the effectiveness thereof) without being succeeded within 90
days by an additional Registration Statement filed and declared effective
(each such event referred to in clauses (i) through (iv), a "Registration
Default"), the Company will be obligated to pay liquidated damages to each
Holder of Transfer Restricted Securities, during the period of one or more
such Registration Defaults, with respect to the first 90-day period
immediately following the occurrence of the first Registration Default in an
amount equal to .25% per annum (which rate will be increased by an
additional .25% per annum for each subsequent 90- day period that any
liquidated damages continue to accrue; provided that the rate at which
liquidated damages accrue may in no event exceed 1.00% per annum) in respect
of the Securities constituting Transfer Restricted Securities held by such
Holder until (i) the applicable Registration Statement is filed, (ii) the
Exchange Offer Registration Statement is declared effective and the
Registered Exchange Offer is consummated, (iii) the Shelf Registration
Statement is declared effective or (iv) the Shelf Registration Statement
again becomes effective, as the case may be. Following the cure of all
Registration Defaults, the accrual of liquidated damages will cease.
(b) Notwithstanding the foregoing provisions of Section 3(a), the
Company may issue a notice that the Shelf Registration Statement is unusable
pending the announcement of a material corporate transaction and may issue
any notice suspending use of the Shelf Registration Statement required under
applicable securities laws to be issued and, in the event that the aggregate
number of days in any consecutive twelve-month period for which all such
notices are issued and effective exceeds 30 days in the aggregate, then the
Company will be obligated to pay liquidated damages to each Holder of
Transfer Restricted Securities in an amount equal to 0.25% per annum (which
rate will be increased by an additional 0.25% per annum for each subsequent
90-day period that liquidated damages continue to accrue; provided that the
rate at which liquidated damages accrue may in no event exceed 1.00% per
annum) in respect of the Securities constituting Transfer Restricted
Securities. Upon the Company declaring that the Shelf Registration Statement
is usable after the period of time described in the preceding sentence the
accrual of liquidated damages shall cease; provided, however, that if
<PAGE>
after any such cessation of the accrual of liquidated damages the Shelf
Registration Statement again ceases to be usable beyond the period permitted
above, liquidated damages will again accrue pursuant to the foregoing
provisions.
(c) The Company shall notify the Trustee and the Paying Agent under the
Indenture immediately upon the happening of each and every Registration
Default or any event described in Section 3(b). The Company shall pay the
liquidated damages due on the Transfer Restricted Securities by depositing
with the Paying Agent (which may not be the Company for these purposes), in
trust, for the benefit of the Holders thereof, prior to 10:00 a.m., New York
City time, on the next interest payment date specified by the Indenture and
the Securities, sums sufficient to pay the liquidated damages then due. The
liquidated damages due shall be payable on each interest payment date
specified by the Indenture and the Securities to the record holder entitled
to receive the interest payment to be made on such date. Each obligation to
pay liquidated damages shall be deemed to accrue from and including the date
of the applicable Registration Default.
(d) The parties hereto agree that the liquidated damages provided for
in this Section 3 constitute a reasonable estimate of and are intended to
constitute the sole damages that will be suffered by Holders of Transfer
Restricted Securities by reason of the failure of (i) the Shelf Registration
Statement or the Exchange Offer Registration Statement to be filed, (ii) the
Shelf Registration Statement to remain effective or (iii) the Exchange Offer
Registration Statement to be declared effective and the Registered Exchange
Offer to be consummated, in each case to the extent required by this
Agreement.
(e) As used herein, the term "Transfer Restricted Securities" means (i)
each Security until the date on which such Security has been exchanged for a
freely transferable Exchange Security in the Registered Exchange Offer, (ii)
each Security or Private Exchange Security until the date on which it has
been effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement or (iii) each Security or
Private Exchange Security until the date on which it is distributed to the
public pursuant to Rule 144 under the Securities Act or is saleable pursuant
to Rule 144(k) under the Securities Act. Notwithstanding anything to the
contrary in Sections 3(a) and 3(b), the Company shall not be required to pay
liqui dated damages to a Holder of Transfer Restricted Securities if such
Holder failed to comply with its obligations to make the representations set
forth in the second to last paragraph of Section 1 or failed to provide the
information required to be provided by it, if any, pursuant to Section 4(n).
<PAGE>
4. Registration Procedures. In connection with any Registration Statement,
the following provisions shall apply:
(a) The Company shall (i) furnish to each Initial Purchaser, prior to
the filing thereof with the Commission, a copy of the Registration Statement
and each amendment thereof and each supplement, if any, to the prospectus
included therein; (ii) include substantially the information set forth in
Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer
Procedures" section and the "Purpose of the Exchange Offer" section and in
Annex C hereto in the "Plan of Distribution" section (or in similarly titled
sections) of the prospectus forming a part of the Exchange Offer
Registration Statement, and include the information set forth in Annex D
hereto in the Letter of Transmittal delivered pursuant to the Registered
Exchange Offer; and (iii) if requested by any Initial Purchaser, include the
information required by Items 507 or 508 of Regulation S-K, as applicable,
in the prospectus forming a part of the Exchange Offer Registration
Statement.
(b) The Company shall advise each Initial Purchaser, each Exchanging
Dealer and the Holders (if applicable) and, if requested by any such person,
confirm such advice in writing (which advice pursuant to clauses (ii)-(v)
hereof shall be accompanied by an instruction to suspend the use of the
prospectus until the requisite changes have been made):
(i) when any Registration Statement and any amendment thereto has
been filed with the Commission and when such Registration Statement or
any post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or
supplements to any Registration Statement or the prospectus included
therein or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of any Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Securities, the
Exchange Securities or the Private Exchange Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose; and
(v) of the happening of any event that requires the making of any
changes in any Registration Statement or the prospectus included
therein in order that the statements therein are not misleading and do
not omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
<PAGE>
(c) The Company will make every reasonable effort to obtain the
withdrawal at the earliest possible time of any order suspending the
effectiveness of any Registration Statement.
(d) The Company will furnish to each Holder of Transfer Restricted
Securities included within the coverage of any Shelf Registration Statement,
without charge, at least one conformed copy of such Shelf Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules and, if any such Holder so requests in writing, all
exhibits thereto (including those, if any, incorporated by reference).
(e) The Company will, during the Shelf Registration Period, promptly
deliver to each Holder of Transfer Restricted Securities included within the
coverage of any Shelf Registration Statement, without charge, as many copies
of the prospectus (including each preliminary prospectus) included in such
Shelf Registration Statement and any amendment or supplement thereto as such
Holder may reasonably request; and the Company consents to the use of such
prospectus or any amendment or supplement thereto by each of the selling
Holders of Transfer Restricted Securities in connection with the offer and
sale of the Transfer Restricted Securities covered by such prospectus or any
amendment or supplement thereto.
(f) The Company will furnish to each Initial Purchaser and each
Exchanging Dealer, and to any other Holder who so requests, without charge,
at least one conformed copy of the Exchange Offer Registration Statement and
any post-effective amendment thereto, including financial statements and
schedules and, if any Initial Purchaser or Exchanging Dealer or any such
Holder so requests in writing, all exhibits thereto (including those, if
any, incorporated by reference).
(g) The Company will, during the Exchange Offer Registration Period or
the Shelf Registration Period, as applicable, promptly deliver to each
Initial Purchaser, each Exchanging Dealer and such other persons that are
required to deliver a prospectus following the Registered Exchange Offer,
without charge, as many copies of the final prospectus included in the
Exchange Offer Registration Statement or the Shelf Registration Statement
and any amendment or supplement thereto as such Initial Purchaser,
Exchanging Dealer or other persons may reasonably request; and the Company
consents to the use of such prospectus or any amendment or supplement
thereto by any such Initial Purchaser, Exchanging Dealer or other persons,
as applicable, as aforesaid.
(h) Prior to the effective date of any Registration Statement, the
Company will use its reasonable best efforts to register or qualify, or
cooperate with the Holders of Securities, Exchange Securities or Private
Exchange Securities included therein and their respective counsel in
connection with the registration or qualification of, such Securities,
Exchange Securities or Private Exchange Securities for offer and sale under
the securities or blue sky laws of such jurisdictions as any such Holder
reasonably requests in writing and do any and all other acts or things
necessary or advisable to
<PAGE>
enable the offer and sale in such jurisdictions of the Securities, Exchange
Securities or Private Exchange Securities covered by such Registration
Statement; provided that the Company will not be required to qualify
generally to do business in any jurisdiction where it is not then so
qualified or to take any action which would subject it to general service
of process or to taxation in any such jurisdiction where it is not then so
subject.
(i) The Company will cooperate with the Holders of Securities, Exchange
Securities or Private Exchange Securities to facilitate the timely
preparation and delivery of certificates representing Securities, Exchange
Securities or Private Exchange Securities to be sold pursuant to any
Registration Statement free of any restrictive legends and in such
denominations and registered in such names as the Holders thereof may
request in writing at least three business days prior to the closing date of
any sale of Securities, Exchange Securities or Private Exchange Securities
pursuant to such Registration Statement.
(j) If any event contemplated by Section 4(b)(ii) through (v) occurs
during the period for which the Company is required to maintain an effective
Registration Statement, the Company will promptly prepare and file with the
Commission a post-effective amendment to the Registration Statement or a
supplement to the related prospectus or file any other required document so
that, as thereafter delivered to purchasers of the Securities, Exchange
Securities or Private Exchange Securities from a Holder, the prospectus 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, in the
light of the circumstances under which they were made, not misleading.
(k) Not later than the effective date of the applicable Registration
Statement, the Company will provide a CUSIP number for the Securities, the
Exchange Securities and the Private Exchange Securities, as the case may be,
and provide the applicable trustee with printed certificates for the
Securities, the Exchange Securities or the Private Exchange Securities, as
the case may be, in a form eligible for deposit with The Depository Trust
Company.
(l) The Company will comply with all applicable rules and regulations
of the Commission and will make generally available to its security holders
as soon as reasonably practicable after the effective date of the applicable
Registration Statement an earning statement covering at least 12 months
which shall satisfy the provisions of Section 11(a) of the Securities Act.
(m) The Company will cause the Indenture or the Exchange Securities
Indenture, as the case may be, to be qualified under the Trust Indenture Act
as required by applicable law in a timely manner.
(n) The Company may require each Holder of Transfer Restricted
Securities to be registered pursuant to any Shelf Registration Statement to
furnish to the Company such information concerning the Holder and the
distribution of such Transfer Restricted
<PAGE>
Securities as the Company may from time to time reasonably require for
inclusion in such Shelf Registration Statement, and the Company may exclude
from such registration the Transfer Restricted Securities of any Holder that
fails to furnish such information within a reasonable time after receiving
such request.
(o) In the case of a Shelf Registration Statement, each Holder of
Transfer Restricted Securities to be registered pursuant thereto agrees by
acquisition of such Transfer Restricted Securities that, upon receipt of any
notice from the Company pursuant to Section 4(b)(ii) through (v), such
Holder will discontinue disposition of such Transfer Restricted Securities
until such Holder's receipt of copies of the supplemental or amended
prospectus contemplated by Section 4(j) or until advised in writing (the
"Advice") by the Company that the use of the applicable prospectus may be
resumed. If the Company shall give any notice under Section 4(b)(ii) through
(v) during the period that the Company is required to maintain an effective
Registration Statement (the "Effectiveness Period"), such Effectiveness
Period shall be extended by the number of days during such period from and
including the date of the giving of such notice to and including the date
when each seller of Transfer Restricted Securities covered by such
Registration Statement shall have received (x) the copies of the
supplemental or amended prospectus contemplated by Section 4(j) (if an
amended or supplemental prospectus is required) or (y) the Advice (if no
amended or supplemental prospectus is required).
(p) In the case of a Shelf Registration Statement, the Company shall
enter into such customary agreements (including, if requested, an
underwriting agreement in customary form) and take all such other action, if
any, as Holders of a majority in aggregate principal amount of the
Securities, Exchange Securities and Private Exchange Securities being sold
or the managing underwriters (if any) shall reasonably request in order to
facilitate any disposition of Securities, Exchange Securities or Private
Exchange Securities pursuant to such Shelf Registration Statement.
(q) In the case of a Shelf Registration Statement, the Company shall
(i) make reasonably available for inspection by a representative of, and
Special Counsel (as defined below) acting for, Holders of a majority in
aggregate principal amount of the Securities, Exchange Securities and
Private Exchange Securities being sold and any underwriter participating in
any disposition of Securities, Exchange Securities or Private Exchange
Securities pursuant to such Shelf Registration Statement, all relevant
financial and other records, pertinent corporate documents and properties of
the Company and its subsidiaries and (ii) use its reasonable best efforts to
have its officers, directors, employees, accountants and counsel supply all
relevant information reasonably requested by such representative, Special
Counsel or any such underwriter (an "Inspector") in connection with such
Shelf Registration Statement provided, however, that such Inspector shall
first agree in writing with the Company that any information that is
reasonably and in good faith designated by the Company in writing as
confidential at the time of delivery of such information shall be kept
confidential by such Inspector, unless (i) disclosure of such information is
required by court or
<PAGE>
administrative order or is necessary to respond to inquiries of regulatory
authorities, (ii) disclosure of such information is required by law
(including any disclosure requirements pursuant to Federal securities laws
in connection with the filing of such Registration Statement or the use of
any prospectus), (iii) such information becomes generally available to the
public other than as a result of a disclosure or failure to safeguard such
information by such Inspector or (iv) such information becomes available to
such Inspector from a source other than the Company and its subsidiaries and
such source is not known, after due inquiry, by the relevant Holder to be
bound by a confidentiality agreement; provided further, that the foregoing
investigation shall be coordinated on behalf of the Holders by one
representative designated by and on behalf of such Holders and any such
confidential information shall be available from such representative to such
Holders so long as any Holder agrees to be bound by such confidentiality
agreement.
(r) In the case of a Shelf Registration Statement, the Company shall,
if requested by Holders of a majority in aggregate principal amount of the
Securities, Exchange Securities and Private Exchange Securities being sold,
their Special Counsel or the managing underwriters (if any) in connection
with such Shelf Registration Statement, use its reasonable best efforts to
cause (i) its counsel to deliver an opinion relating to the Shelf
Registration Statement and the Securities, Exchange Securities or Private
Exchange Securities, as applicable, in customary form, (ii) its officers to
execute and deliver all customary documents and certificates requested by
Holders of a majority in aggregate principal amount of the Securities,
Exchange Securities and Private Exchange Securities being sold, their
Special Counsel or the managing underwriters (if any) and (iii) its
independent public accountants to provide a comfort letter or letters in
customary form, subject to receipt of appropriate documentation as
contemplated, and only if permitted, by Statement of Auditing Standards No.
72.
5. Registration Expenses. The Company will bear all expenses incurred in
connection with the performance of its obligations under Sections 1, 2, 3 and 4
and, other than in connection with the Exchange Offer Registration Statement,
the Company will reimburse the Initial Purchasers and the Holders for the
reasonable fees and disbursements of one firm of attorneys (in addition to any
local counsel) chosen by the Holders of a majority in aggregate principal amount
of the Securities, the Exchange Securities and the Private Exchange Securities
to be sold pursuant to each Registration Statement (the "Special Counsel")
acting for the Initial Purchasers or Holders in connection therewith, which
counsel shall be approved by the Company (such approval to not be unreasonably
withheld). Each Initial Purchaser and Holder shall pay all expenses of its
counsel other than as set forth in the preceding sentence, underwriting
discounts and commissions (prior to the reduction thereof with respect to
selling concessions, if any) and transfer taxes, if any, relating to the sale or
disposition of such Initial Purchaser's or Holder's Securities pursuant to the
Shelf Registration Statement.
6. Indemnification.
(a) In the event of a Shelf Registration Statement or in connection
with any prospectus delivery pursuant to an Exchange Offer Registration
Statement by an Initial Purchaser or Exchanging Dealer, as applicable, the
Company shall indemnify and
<PAGE>
hold harmless each Holder (including, without limitation, any such Initial
Purchaser or Exchanging Dealer), its affiliates, their respective officers,
directors, employees, representatives and agents, and each person, if any,
who controls such Holder within the meaning of the Securities Act or the
Exchange Act (collectively referred to for purposes of this Section 6 and
Section 7 as a Holder) from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof (including,
without limitation, any loss, claim, damage, liability or action relating to
purchases and sales of Securities, Exchange Securities or Private Exchange
Securities), to which that Holder may become subject, whether commenced or
threatened, under the Securities Act, the Exchange Act, any other federal or
state statutory law or regulation, at common law or otherwise, insofar as
such loss, claim, damage, liability or action arises out of, or is based
upon, (i) any untrue statement or alleged untrue statement of a material
fact contained in any such Registration Statement or any prospectus forming
part thereof or in any amendment or supplement thereto or (ii) the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading, and shall
reimburse each Holder promptly upon demand for any legal or other expenses
reasonably incurred by that Holder in connection with investigating or
defending or preparing to defend against or appearing as a third party
witness in connection with any such loss, claim, damage, liability or action
as such expenses are incurred; provided, however, that the Company shall not
be liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of, or is based upon, an untrue statement or
alleged untrue statement in or omission or alleged omission from any of such
documents in reliance upon and in conformity with any Holders' Information;
and provided, further, that with respect to any such untrue statement in or
omission from any related preliminary prospectus, the indemnity agreement
contained in this Section 6(a) shall not inure to the benefit of any Holder
from whom the person asserting any such loss, claim, damage, liability or
action received Securities, Exchange Securities or Private Exchange
Securities to the extent that such loss, claim, damage, liability or action
of or with respect to such Holder results from the fact that both (A) a copy
of the final prospectus was not sent or given to such person at or prior to
the written confirmation of the sale of such Securities, Exchange Securities
or Private Exchange Securities to such person and (B) the untrue statement
in or omission from the related preliminary prospectus was corrected in the
final prospectus unless, in either case, such failure to deliver the final
prospectus was a result of non-compliance by the Company with Section 4(d),
4(e), 4(f) or 4(g).
(b) In the event of a Shelf Registration Statement, each Holder shall
indemnify and hold harmless the Company, its affiliates, their respective
officers, directors, employees, representatives and agents, and each person,
if any, who controls the Company within the meaning of the Securities Act or
the Exchange Act (collectively referred to for purposes of this Section 6(b)
and Section 7 as the Company), from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof, to which the
Company may become subject, whether commenced or threatened, under the
Securities Act, the Exchange Act, any other federal or state statutory law
or regulation, at common law or otherwise, insofar as such loss, claim,
damage, liability or action arises out of, or is based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained in any
such Registration Statement or
<PAGE>
any prospectus forming part thereof or in any amendment or supplement
thereto or (ii) the omission or alleged omission to state therein a material
fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with any Holders' Information
furnished to the Company by such Holder, and shall reimburse the Company for
any legal or other expenses reasonably incurred by the Company in connection
with investigating or defending or preparing to defend against or appearing
as a third party witness in connection with any such loss, claim, damage,
liability or action as such expenses are incurred; provided, however, that
no such Holder shall be liable for any indemnity claims hereunder in excess
of the amount of net proceeds received by such Holder from the sale of
Securities, Exchange Securities or Private Exchange Securities pursuant to
such Shelf Registration Statement.
(c) Promptly after receipt by an indemnified party under this Section 6
of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 6(a) or 6(b), notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
however, that the failure to notify the indemnifying party shall not relieve
it from any liability which it may have under this Section 6 except to the
extent that it has been materially prejudiced (through the forfeiture of
substantive rights or defenses) by such failure; and provided, further, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have to an indemnified party otherwise than under
this Section 6. If any such claim or action shall be brought against an
indemnified party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein and, to the
extent that it wishes, jointly with any other similarly notified
indemnifying party, to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party. After notice from the indemnifying
party to the indemnified party of its election to assume the defense of such
claim or action, the indemnifying party shall not be liable to the
indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the
defense thereof other than the reasonable costs of investigation; provided,
however, that an indemnified party shall have the right to employ its own
counsel in any such action, but the fees, expenses and other charges of such
counsel for the indemnified party will be at the expense of such indemnified
party unless (1) the employment of counsel by the indemnified party has been
authorized in writing by the indemnifying party, (2) the indemnified party
has reasonably concluded (based upon advice of counsel to the indemnified
party) that there may be legal defenses available to it or other indemnified
parties that are different from or in addition to those available to the
indemnifying party, (3) a conflict or potential conflict exists (based upon
advice of counsel to the indemnified party) between the indemnified party
and the indemnifying party (in which case the indemnifying party will not
have the right to direct the defense of such action on behalf of the
indemnified party) or (4) the indemnifying party has not in fact employed
counsel reasonably satisfactory to the indemnified party to assume the
defense of such action within a reasonable time after receiving notice of
the commencement of the action, in each of which cases the reasonable fees,
disbursements and other charges of counsel will be at the expense of the
<PAGE>
indemnifying party or parties. It is understood that the indemnifying party
or parties shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm of attorneys
(in addition to any local counsel) at any one time for all such indemnified
party or parties. Each indemnified party, as a condition of the indemnity
agreements contained in Sections 6(a) and 6(b), shall use all reasonable
efforts to cooperate with the indemnifying party in the defense of any such
action or claim. No indemnifying party shall be liable for any settlement of
any such action effected without its written consent (which consent shall
not be unreasonably withheld), but if settled with its written consent or if
there be a final judgment for the plaintiff in any such action, the
indemnifying party agrees to indemnify and hold harmless any indemnified
party from and against any loss or liability by reason of such settlement or
judgment. No indemnifying party shall, without the prior written consent of
the indemnified party (which consent shall not be unreasonably withheld),
effect any settlement of any pending or threatened proceeding in respect of
which any indemnified party is or could have been a party and indemnity
could have been sought hereunder by such indemni fied party, unless such
settlement includes an unconditional release of such indemnified party from
all liability on claims that are the subject matter of such proceeding.
7. Contribution. If the indemnification provided for in Section 6 is
unavailable or insufficient to hold harmless an indemnified party under Section
6(a) or 6(b), then each indem nifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Company from the offering and sale of the Securities,
on the one hand, and a Holder with respect to the sale by such Holder of
Securities, Exchange Securities or Private Exchange Securities, on the other, or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company, on the one hand, and such Holder, on the other, with respect to the
statements or omissions that resulted in such loss, claim, damage or liability,
or action in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by the Company, on the one hand,
and a Holder, on the other, with respect to such offering and such sale shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Securities (before deducting expenses) received by or on behalf of the
Company as set forth in the table on the cover of the Offering Memo randum, on
the one hand, bear to the total proceeds received by such Holder with respect to
its sale of Securities, Exchange Securities or Private Exchange Securities, on
the other. The relative fault 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 the Company or
information supplied by the Company, on the one hand, or to any Holders'
Information supplied by such Holder, on the other, the intent of the parties and
their relative knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The parties hereto agree that it
would not be just and equitable if contributions pursuant to this Section 7 were
to be determined by pro rata allocation or by any other method of allocation
that does not take into account the equitable considerations referred to herein.
The amount paid
<PAGE>
or payable by an indemnified party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to above in this Section 7
shall be deemed to include, for purposes of this Section 7, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending or preparing to defend any such action or claim.
Notwithstanding the provisions of this Section 7, an indemnifying party that is
a Holder of Securities, Exchange Securities or Private Exchange Securities shall
not be required to contribute any amount in excess of the amount by which the
total price at which the Securities, Exchange Securities or Private Exchange
Securities sold by such indemnifying party to any purchaser exceeds the amount
of any damages which such indemnifying party has otherwise paid or become liable
to pay by reason of any untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
8. Rules 144 and 144A. The Company covenants that it will take such further
action as any Holder of Transfer Restricted Securities may reasonably request,
all to the extent required from time to time to enable such Holder to sell
Transfer Restricted Securities without registration under the Securities Act
within the limitation of the exemptions provided by Rules 144 and 144A
(including, without limitation, the requirements of Rule 144A(d)(4)). Upon the
written request of any Holder of Transfer Restricted Securities, the Company
shall deliver to such Holder a written statement as to whether it has complied
with such requirements. Notwithstanding the foregoing, nothing in this Section 8
shall be deemed to require the Company to register any of its securities
pursuant to the Exchange Act.
9. Underwritten Registrations. If any of the Transfer Restricted Securities
covered by any Shelf Registration Statement are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering will be selected by the Holders of a majority
in aggregate principal amount of such Transfer Restricted Securities included in
such offering, subject to the consent of the Company (which shall not be
unreasonably withheld or delayed), and such Holders shall be responsible for all
underwriting commissions and discounts in connection therewith.
No person may participate in any underwritten registration hereunder unless
such person (i) agrees to sell such person's Transfer Restricted Securities on
the basis reasonably provided in any underwriting arrangements approved by the
persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements.
10. Miscellaneous.
(a) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given, unless the Company has obtained
the written consent of Holders of a majority in aggregate principal amount
of the Securities, the Exchange Securities and the Private Exchange
Securities, taken as a single class. Notwithstanding the foregoing, a waiver
or consent to depart from the provisions hereof with
<PAGE>
respect to a matter that relates exclusively to the rights of Holders whose
Securities, Exchange Securities or Private Exchange Securities are being
sold pursuant to a Registration Statement and that does not directly or
indirectly affect the rights of other Holders may be given by Holders of a
majority in aggregate principal amount of the Securities, the Exchange
Securities and the Private Exchange Securities being sold by such Holders
pursuant to such Registration Statement.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class
mail, telecopier or air courier guaranteeing next-day delivery:
(1) if to a Holder, at the most current address given by such
Holder to the Company in accordance with the provisions of this Section
10(b), which address initially is, with respect to each Holder, the
address of such Holder maintained by the Registrar under the Indenture,
with a copy in like manner to Chase Securities Inc., Salomon Brothers
Inc and Citicorp Securities, Inc.;
(2) if to an Initial Purchaser, initially at its address set forth
in the Purchase Agreement; and
(3) if to the Company, initially at the address of the Company set
forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; one business day after being
delivered to a next-day air courier; five business days after being deposited in
the mail; and when receipt is acknowledged by the recipient's telecopier
machine, if sent by telecopier.
(c) Successors And Assigns. This Agreement shall be binding upon the
Company and its successors and assigns.
(d) Counterparts. This Agreement may be executed in any number of
counterparts (which may be delivered in original form or by telecopier) 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.
(e) Definition of Terms. For purposes of this Agreement, (a) the term
"business day" means any day on which the New York Stock Exchange, Inc. is
open for trading, (b) the term "subsidiary" has the meaning set forth in
Rule 405 under the Securities Act and (c) except where otherwise expressly
provided, the term "affiliate" has the meaning set forth in Rule 405 under
the Securities Act.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
<PAGE>
(g) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
(h) No Inconsistent Agreements. The Company represents, warrants and
agrees that (i) it has not entered into, shall not, on or after the date of
this Agreement, enter into any agreement that is inconsistent with the
rights granted to the Holders in this Agreement or otherwise conflicts with
the provisions hereof, (ii) it has not previously entered into any agreement
which remains in effect granting any registration rights with respect to any
of its debt securities to any person and (iii) without limiting the
generality of the foregoing, without the written consent of the Holders of a
majority in aggregate principal amount of the then outstanding Transfer
Restricted Securities, it shall not grant to any person the right to request
the Company to register any debt securities of the Company under the
Securities Act unless the rights so granted are not in conflict or
inconsistent with the provisions of this Agreement.
(i) No Piggyback on Registrations. Neither the Company nor any of its
security holders (other than the Holders of Transfer Restricted Securities
in such capacity) shall have the right to include any securities of the
Company in any Shelf Registration or Registered Exchange Offer other than
Transfer Restricted Securities.
(j) Severability. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law. If any term, provision, covenant
or restriction of this Agree ment is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions set forth herein shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated, and the parties hereto shall use their reasonable best efforts
to find and employ an alternative means to achieve the same or substantially
the same result as that contemplated by such term, provision, covenant or
restric tion. It is hereby stipulated and declared to be the intention of
the parties that they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement among
the Company and the Initial Purchasers.
Very truly yours,
CORNING CONSUMER PRODUCTS COMPANY,
by
---------------------------------
Name:
Title:
<PAGE>
Accepted:
CHASE SECURITIES INC.,
by
------------------------------
Authorized Signatory
SALOMON BROTHERS INC,
by
------------------------------
Authorized Signatory
CITICORP SECURITIES, INC.,
by
------------------------------
Authorized Signatory
<PAGE>
Exhibit 10.1
================================================================================
CREDIT AGREEMENT
AMONG
CORNING CONSUMER PRODUCTS COMPANY
THE SEVERAL LENDERS
FROM TIME TO TIME PARTIES HERETO
THE CHASE MANHATTAN BANK,
AS ADMINISTRATIVE AGENT
SALOMON BROTHERS HOLDING COMPANY INC,
AS SYNDICATION AGENT
AND
BANKERS TRUST COMPANY,
AS DOCUMENTATION AGENT
DATED AS OF APRIL 9, 1998
================================================================================
CHASE SECURITIES INC.,
AS ARRANGER
<PAGE>
Table of Contents
Page
SECTION 1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. Amount and Terms of Credit . . . . . . . . . . . . . . . . 29
2.1 Commitments . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.2 Minimum Amount of Each Borrowing;
Maximum Number of Borrowings. . . . . . . . . . . . . . . . . 30
2.3 Notice of Borrowing . . . . . . . . . . . . . . . . . . . . . 30
2.4 Disbursement of Funds . . . . . . . . . . . . . . . . . . . . 31
2.5 Repayment of Loans; Evidence of Debt. . . . . . . . . . . . . 32
2.6 Conversions and Continuations . . . . . . . . . . . . . . . . 33
2.7 Pro Rata Borrowings . . . . . . . . . . . . . . . . . . . . . 34
2.8 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.9 Interest Periods. . . . . . . . . . . . . . . . . . . . . . . 35
2.10 Increased Costs, Illegality, etc. . . . . . . . . . . . . . . 36
2.11 Compensation. . . . . . . . . . . . . . . . . . . . . . . . . 37
2.12 Change of Lending Office. . . . . . . . . . . . . . . . . . . 38
2.13 Notice of Certain Costs . . . . . . . . . . . . . . . . . . . 38
SECTION 3. Letters of Credit. . . . . . . . . . . . . . . . . . . . . 38
3.1 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . 38
3.2 Letter of Credit Requests . . . . . . . . . . . . . . . . . . 39
3.3 Letter of Credit Participations . . . . . . . . . . . . . . . 39
3.4 Agreement to Repay Letter of Credit Drawings. . . . . . . . . 41
3.5 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . 42
3.6 Successor Letter of Credit Issuer . . . . . . . . . . . . . . 43
SECTION 4. Fees; Commitments. . . . . . . . . . . . . . . . . . . . . 43
4.1 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
4.2 Voluntary Reduction of Revolving Credit Commitments . . . . . 44
4.3 Mandatory Termination of Commitments. . . . . . . . . . . . . 44
SECTION 5. Payments . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.1 Voluntary Prepayments . . . . . . . . . . . . . . . . . . . . 44
5.2 Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . 45
5.3 Method and Place of Payment . . . . . . . . . . . . . . . . . 47
5.4 Net Payments. . . . . . . . . . . . . . . . . . . . . . . . . 48
5.5 Computations of Interest and Fees . . . . . . . . . . . . . . 50
SECTION 6. Conditions Precedent to Initial Borrowing. . . . . . . . . 50
6.1 Credit Documents. . . . . . . . . . . . . . . . . . . . . . . 50
6.2 Closing Certificate . . . . . . . . . . . . . . . . . . . . . 50
6.3 Corporate Proceedings of Each Credit Party. . . . . . . . . . 50
6.4 Corporate Documents . . . . . . . . . . . . . . . . . . . . . 51
6.5 No Material Adverse Change. . . . . . . . . . . . . . . . . . 51
6.6 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
<PAGE>
ii
6.7 Recapitalization. . . . . . . . . . . . . . . . . . . . . . . 51
6.8 Closing Date Balance Sheet. . . . . . . . . . . . . . . . . . 51
6.9 Solvency Opinion. . . . . . . . . . . . . . . . . . . . . . . 51
6.10 Required Approvals. . . . . . . . . . . . . . . . . . . . . . 51
6.11 Legal Opinions. . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 7. Conditions Precedent to All Credit Events. . . . . . . . . 51
7.1 No Default; Representations and Warranties. . . . . . . . . . 52
7.2 Notice of Borrowing; Letter of Credit Request . . . . . . . . 52
SECTION 8. Representations, Warranties and Agreements . . . . . . . . 52
8.1 Corporate Status. . . . . . . . . . . . . . . . . . . . . . . 52
8.2 Corporate Power and Authority . . . . . . . . . . . . . . . . 52
8.3 No Violation. . . . . . . . . . . . . . . . . . . . . . . . . 53
8.4 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.5 Margin Regulations. . . . . . . . . . . . . . . . . . . . . . 53
8.6 Governmental Approvals. . . . . . . . . . . . . . . . . . . . 53
8.7 Investment Company Act. . . . . . . . . . . . . . . . . . . . 53
8.8 True and Complete Disclosure. . . . . . . . . . . . . . . . . 53
8.9 Financial Condition; Financial Statements . . . . . . . . . . 54
8.10 Tax Returns and Payments. . . . . . . . . . . . . . . . . . . 54
8.11 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . 54
8.12 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . 55
8.13 Patents, etc. . . . . . . . . . . . . . . . . . . . . . . . . 55
8.14 Environmental Laws. . . . . . . . . . . . . . . . . . . . . . 55
8.15 Properties. . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 9. Affirmative Covenants. . . . . . . . . . . . . . . . . . . 55
9.1 Information Covenants . . . . . . . . . . . . . . . . . . . . 55
9.2 Books, Records and Inspections. . . . . . . . . . . . . . . . 57
9.3 Maintenance of Insurance. . . . . . . . . . . . . . . . . . . 58
9.4 Payment of Taxes. . . . . . . . . . . . . . . . . . . . . . . 58
9.5 Consolidated Corporate Franchises . . . . . . . . . . . . . . 58
9.6 Compliance with Statutes, Obligations, etc. . . . . . . . . . 58
9.7 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
9.8 Good Repair . . . . . . . . . . . . . . . . . . . . . . . . . 59
9.9 Transactions with Affiliates. . . . . . . . . . . . . . . . . 59
9.10 End of Fiscal Years; Fiscal Quarters. . . . . . . . . . . . . 59
9.11 Additional Guarantors . . . . . . . . . . . . . . . . . . . . 60
9.12 Pledges of Additional Stock and Evidence of Indebtedness. . . 60
9.13 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 60
9.14 Changes in Business . . . . . . . . . . . . . . . . . . . . . 60
9.15 Ownership of Assets . . . . . . . . . . . . . . . . . . . . . 60
9.16 Issuance of Subordinated Notes. . . . . . . . . . . . . . . . 61
SECTION 10. Negative Covenants. . . . . . . . . . . . . . . . . . . . 61
10.1 Limitation on Indebtedness. . . . . . . . . . . . . . . . . . 61
10.2 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . 63
10.3 Limitation on Fundamental Changes . . . . . . . . . . . . . . 64
<PAGE>
iii
10.4 Limitation on Sale of Assets. . . . . . . . . . . . . . . . 65
10.5 Limitation on Investments . . . . . . . . . . . . . . . . . 66
10.6 Limitation on Investments . . . . . . . . . . . . . . . . . 67
10.7 Limitations on Debt Payments and Amendments . . . . . . . . 68
10.8 Limitations on Sale Leasebacks. . . . . . . . . . . . . . . 69
10.9 Consolidated Lease Expense. . . . . . . . . . . . . . . . . 69
10.10 Consolidated Total Debt to Consolidated EBITDA Ratio. . . . 69
10.11 Consolidated EBITDA to Consolidated Interest Expense Ratio. 70
10.12 Capital Expenditures. . . . . . . . . . . . . . . . . . . . 70
SECTION 11. Events of Default. . . . . . . . . . . . . . . . . . . . . 71
11.1 Payments. . . . . . . . . . . . . . . . . . . . . . . . . . 71
11.2 Representations, etc. . . . . . . . . . . . . . . . . . . . 71
11.3 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . 71
11.4 Default Under Other Agreements. . . . . . . . . . . . . . . 72
11.5 Bankruptcy, etc.. . . . . . . . . . . . . . . . . . . . . . 72
11.6 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
11.7 Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . 73
11.8 Pledge Agreement. . . . . . . . . . . . . . . . . . . . . . 73
11.9 Judgments . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 12. The Administrative Agent. . . . . . . . . . . . . . . . . 74
12.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . . 74
12.2 Delegation of Duties. . . . . . . . . . . . . . . . . . . . 74
12.3 Exculpatory Provisions. . . . . . . . . . . . . . . . . . . 74
12.4 Reliance by Administrative Agent. . . . . . . . . . . . . . 74
12.5 Notice of Default . . . . . . . . . . . . . . . . . . . . . 75
12.6 Non-Reliance on Administrative Agent and Other Lenders. . . 75
12.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . 75
12.8 Administrative Agent in Its Individual Capacity . . . . . . 76
12.9 Successor Agent . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 13. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 76
13.1 Amendments and Waivers. . . . . . . . . . . . . . . . . . . 76
13.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 77
13.3 No Waiver; Cumulative Remedies. . . . . . . . . . . . . . . 78
13.4 Survival of Representations and Warranties. . . . . . . . . 78
13.5 Payment of Expenses and Taxes . . . . . . . . . . . . . . . 79
13.6 Successors and Assigns; Participations and Assignments. . . 79
13.7 Replacements of Lenders under Certain Circumstances . . . . 81
13.8 Adjustments; Set-off. . . . . . . . . . . . . . . . . . . . 82
13.9 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . 82
13.10 Severability. . . . . . . . . . . . . . . . . . . . . . . . 82
13.11 Integration . . . . . . . . . . . . . . . . . . . . . . . . 83
13.12 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . 83
13.13 Submission to Jurisdiction; Waivers . . . . . . . . . . . . 83
13.14 Acknowledgments . . . . . . . . . . . . . . . . . . . . . . 83
13.15 WAIVERS OF JURY TRIAL . . . . . . . . . . . . . . . . . . . 84
13.16 Confidentiality . . . . . . . . . . . . . . . . . . . . . . 84
<PAGE>
iv
SCHEDULES
Schedule 1.1 Commitments and Addresses of Lenders
Schedule 8.12 Subsidiaries
Schedule 10.1 Other Indebtedness
EXHIBITS
Exhibit A Form of Guarantee
Exhibit B Form of Pledge Agreement
Exhibit C-1 Form of Promissory Note (Term Loans)
Exhibit C-2 Form of Promissory Note (Revolving Credit and Swingline Loans)
Exhibit D Form of Letter of Credit Request
Exhibit E-1 Form of Legal Opinion of Simpson Thacher & Bartlett
Exhibit E-2 Form of Legal Opinion of Thomas O'Brien
Exhibit F Form of Assignment and Acceptance
Exhibit G Form of Closing Certificate
Exhibit H Form of Confidentiality Agreement
<PAGE>
CREDIT AGREEMENT dated as of April 9, 1998, among CORNING CONSUMER
PRODUCTS COMPANY, a Delaware corporation (the "BORROWER"), the lending
institutions from time to time parties hereto (each a "LENDER" and,
collectively, the "LENDERS"), THE CHASE MANHATTAN BANK, as Administrative Agent
(such term and each other capitalized term used but not defined in this
introductory statement having the meaning provided in Section 1), Salomon
Brothers Holding Company Inc, as Syndication Agent, and Bankers Trust Company,
as Documentation Agent.
The Borrower has requested the Lenders to extend credit in the form
of (a) Term Loans, in an aggregate principal amount not in excess of
$200,000,000, and (b) Revolving Credit Loans at any time and from time to time
prior to the Revolving Credit Maturity Date, in an aggregate principal amount at
any time outstanding not in excess of $275,000,000 less the sum of (i) the
aggregate Letter of Credit Outstanding at such time and (ii) the aggregate
principal amount of all Swingline Loans then outstanding. The Borrower has
requested the Letter of Credit Issuer to issue Letters of Credit at any time and
from time to time prior to the L/C Maturity Date, in an aggregate face amount at
any time outstanding not in excess of $25,000,000. The Borrower has requested
Chase to extend credit in the form of Swingline Loans at any time and from time
to time prior to the Swingline Maturity Date, in an aggregate principal amount
at any time outstanding not in excess of $25,000,000.
The proceeds of the Term Loans will be used by the Borrower,
together with up to $125,000,000 in proceeds of Revolving Credit Loans on the
Closing Date, solely (a) to pay a portion of the principal of, and accrued
interest on, the Subordinated Loans, PROVIDED that after giving effect to such
repayment there is at least $150,000,000 aggregate principal amount of
Subordinated Loans outstanding, and (b) to pay related fees and expenses
incurred in connection with the Recapitalization, the financing therefor and the
other transactions contemplated hereby and thereby. Proceeds of additional
Revolving Credit Loans and Swingline Loans may be used by the Borrower for
general corporate purposes (including Permitted Acquisitions and the uses
specified in clause (b) of the immediately preceding sentence and, to the extent
that the aggregate amount of Revolving Credit Loans drawn on the Closing Date
was less than $125,000,000, for the purposes set forth in clause (a) of the
immediately preceding sentence), and Letters of Credit will be used by the
Borrower for general corporate purposes.
The parties hereto hereby agree as follows:
DEFINITIONS. As used herein, the following terms shall have the meanings
specified in this Section 1 unless the context otherwise requires (it being
understood that defined terms in this Agreement shall include in the singular
number the plural and in the plural the singular):
"ABR" shall mean, for any day, a rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the
Prime Rate in effect on such day, (b) the Base CD Rate in effect on such
day plus 1% and (c) the Federal Funds Effective Rate in effect on such day
plus 1/2 of 1%. Any change in the ABR due to a change in the Prime Rate,
the Three-Month Secondary CD Rate or the Federal Funds Effective Rate shall
be effective as of the opening of business on the effective day of such
change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal
Funds Effective Rate, respectively.
"ABR LOAN" shall mean each Loan bearing interest at the rate
provided in Section 2.8(a) and, in any event, shall include all Swingline
Loans.
<PAGE>
2
"ABR REVOLVING CREDIT LOAN" shall mean any Revolving Credit Loan
bearing interest at a rate determined by reference to the ABR.
"ACQUIRED EBITDA" shall mean, with respect to any Acquired Entity
or Business, any Converted Restricted Subsidiary, any Sold Entity or
Business or any Converted Unrestricted Subsidiary (any of the foregoing, a
"PRO FORMA ENTITY") for any period, the sum of the amounts for such period
of (a) income from continuing operations before income taxes and
extraordinary items, (b) interest expense, (c) depreciation expense,
(d) amortization expense, including amortization of deferred financing
fees, (e) non-recurring charges, (f) non-cash charges, (g) losses on asset
sales and (h) restructuring charges or reserves LESS the sum of the amounts
for such period of (i) non-recurring gains, (j) non-cash gains and
(k) gains on asset sales, all as determined on a consolidated basis for
such Pro Forma Entity in accordance with GAAP.
"ACQUIRED ENTITY OR BUSINESS" shall have the meaning provided in
the definition of the term "Consolidated EBITDA".
"ACQUISITION SUBSIDIARY" shall mean (a) any Subsidiary of the
Borrower that is formed or acquired after the Closing Date in connection
with Permitted Acquisitions, PROVIDED that at such time (or promptly
thereafter) the Borrower designates such Subsidiary an Acquisition
Subsidiary in a written notice to the Administrative Agent, (b) any
Restricted Subsidiary on the Closing Date subsequently re-designated as an
Acquisition Subsidiary by the Borrower in a written notice to the
Administrative Agent, PROVIDED that such re-designation shall be deemed to
be an investment on the date of such re-designation in an Acquisition
Subsidiary in an amount equal to the sum of (i) the net worth of such
re-designated Restricted Subsidiary immediately prior to such
re-designation (such net worth to be calculated without regard to any
Guarantee provided by such re-designated Restricted Subsidiary) and
(ii) the aggregate principal amount of any Indebtedness owed by such
re-designated Restricted Subsidiary to the Borrower or any other Restricted
Subsidiary immediately prior to such re-designation (to the extent not
repaid on the date of such re-designation), all calculated, except as set
forth in the parenthetical to clause (i), on a consolidated basis in
accordance with GAAP, and (c) each Subsidiary of an Acquisition Subsidiary;
PROVIDED, HOWEVER, that (i) at the time of any written re-designation by
the Borrower to the Administrative Agent of any Acquisition Subsidiary as a
Restricted Subsidiary, the Acquisition Subsidiary so re-designated shall no
longer constitute an Acquisition Subsidiary, (ii) no Acquisition Subsidiary
may be re-designated as a Restricted Subsidiary if a Default or Event of
Default would result from such re-designation and (iii) no Restricted
Subsidiary may be re-designated as an Acquisition Subsidiary if a Default
or Event of Default would result from such re-designation. On or promptly
after the date of its formation, acquisition or re-designation, as
applicable, each Acquisition Subsidiary (other than an Acquisition
Subsidiary that is a Foreign Subsidiary) shall have entered into a tax
sharing agreement containing terms that, in the reasonable judgment of the
Administrative Agent, provide for an appropriate allocation of tax
liabilities and benefits.
"ADJUSTED TOTAL REVOLVING CREDIT COMMITMENT" shall mean at any time
the Total Revolving Credit Commitment less the aggregate Revolving Credit
Commitments of all Defaulting Lenders.
"ADJUSTED TOTAL TERM LOAN COMMITMENT" shall mean at any time the
Total Term Loan Commitment less the Term Loan Commitments of all Defaulting
Lenders.
<PAGE>
3
"ADMINISTRATIVE AGENT" shall mean Chase, together with its
affiliates, as the arranger of the Commitments and as the administrative
agent for the Lenders under this Agreement and the other Credit Documents.
"ADMINISTRATIVE AGENT'S OFFICE" shall mean the office of the
Administrative Agent located at 270 Park Avenue, New York, New York 10017,
or such other office in New York City as the Administrative Agent may
hereafter designate in writing as such to the other parties hereto.
"AFFILIATE" shall mean, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under direct
or indirect common control with such Person. A Person shall be deemed to
control a corporation if such Person possesses, directly or indirectly, the
power (a) to vote 10% or more of the securities having ordinary voting
power for the election of directors of such corporation or (b) to direct or
cause the direction of the management and policies of such corporation,
whether through the ownership of voting securities, by contract or
otherwise.
"AGGREGATE REVOLVING CREDIT OUTSTANDING" shall have the meaning
provided in Section 5.2(b).
"AGREEMENT" shall mean this Credit Agreement, as the same may be
amended, supplemented or otherwise modified from time to time.
"APPLICABLE ABR MARGIN" shall mean, with respect to each ABR Loan
at any date, the applicable percentage per annum set forth below based upon
(a) whether such loan is a Revolving Credit Loan, a Swingline Loan or a
Term Loan and (b) the Status in effect on such date:
Applicable ABR
Loan Status Margin
---- ------ ------
Revolving Credit Loans and Level I Status 1.250%
Swingline Loans Level II Status 1.000%
Level III Status 0.750%
Level IV Status 0.500%
Level V Status 0.250%
Level VI Status 0.000%
Level VII Status 0.000%
Term Loans Level I Status 1.500%
Level II Status 1.250%
Level III Status 1.000%
Level IV Status 0.750%
Level V Status 0.500%
Level VI Status 0.500%
Level VII Status 0.500%
<PAGE>
"APPLICABLE EURODOLLAR MARGIN" shall mean, with respect to each
Eurodollar Term Loan and Eurodollar Revolving Credit Loan at any date, the
applicable percentage per annum set forth below based upon (a) whether such
loan is a Revolving Credit Loan or a Term Loan and (b) the Status in effect
on such date:
Applicable Eurodollar
Loan Status Margin
---- ------ ------
Revolving Credit Loans Level I Status 2.250%
Level II Status 2.000%
Level III Status 1.750%
Level IV Status 1.500%
Level V Status 1.250%
Level VI Status 1.000%
Level VII Status 0.750%
Term Loans Level I Status 2.500%
Level II Status 2.250%
Level III Status 2.000%
Level IV Status 1.750%
Level V Status 1.500%
Level VI Status 1.500%
Level VII Status 1.500%
"ASSET SALE PREPAYMENT EVENT" shall mean any sale, transfer or
other disposition of any business units, assets or other properties of the
Borrower or any of the Restricted Subsidiaries not in the ordinary course
of business. Notwithstanding the foregoing, the term "Asset Sale
Prepayment Event" shall not include any transaction permitted by Section
10.3, 10.4 (other than Section 10.4(b)) or 10.5.
"AUTHORIZED OFFICER" shall mean the Chairman of the Board, the
President, the Chief Financial Officer, the Treasurer or any other senior
officer of the Borrower designated as such in writing to the Administrative
Agent by the Borrower.
"AVAILABLE AMOUNT" shall mean, on any date (the "REFERENCE DATE"),
an amount equal to (a) the sum of (i) for the purposes of Sections 10.5(l)
and 10.5(n), $50,000,000, (ii) the aggregate amount of Net Cash Proceeds
from Prepayment Events refused by Term Loan Lenders and retained by the
Borrower in accordance with Section 5.2(c)(iv) on or prior to the Reference
Date, (iii) an amount equal to (x) the cumulative amount of Excess Cash
Flow for all fiscal years completed prior to the Reference Date MINUS
(y) the portion of such Excess Cash Flow that has been on or prior to the
Reference Date (or will be) applied to the prepayment of Loans in
accordance with Section 5.2(a)(ii), (iv) the amount of any capital
contributions (other than any equity contribution made on or prior to the
Closing Date or made in accordance with Section 10.5(c)(i)) made in cash to
the Borrower from and including the Business Day immediately following the
Closing Date through and including the Reference Date, (v) an amount equal
to the Net Cash Proceeds received by the Borrower on or prior to the
Reference Date from any issuance of equity securities by the Borrower,
(vi) the aggregate amount of all cash dividends and other cash
distributions received by the Borrower or any Guarantor from any
Acquisition Subsidiaries, Minority Investments or Unrestricted Subsidiaries
on or prior to the
<PAGE>
5
Reference Date (other than the portion of any such dividends and other
distributions that is used by the Borrower or any Guarantor to pay taxes),
(vii) the aggregate amount of all cash repayments of principal received by
the Borrower or any Guarantor from any Acquisition Subsidiaries, Minority
Investments or Unrestricted Subsidiaries on or prior to the Reference Date
in respect of loans made by the Borrower or any Guarantor to such
Acquisition Subsidiaries, Minority Investments or Unrestricted Subsidiaries
and (viii) the aggregate amount of all net cash proceeds received by the
Borrower or any Guarantor in connection with the sale, transfer or other
disposition of its ownership interest in any Acquisition Subsidiary,
Minority Investment or Unrestricted Subsidiary on or prior to the Reference
Date MINUS (b) the sum of (i) the aggregate amount of any investments
(including loans) made by the Borrower or any Restricted Subsidiary (other
than any Acquisition Subsidiary) in or to Acquisition Subsidiaries pursuant
to Section 10.5(j) on or prior to the Reference Date, (ii) the aggregate
amount of any investments (including loans) made by the Borrower or any
Restricted Subsidiary (other than any Acquisition Subsidiary) pursuant to
Section 10.5(n) on or prior to the Reference Date, (iii) the aggregate
amount of any investments made by the Borrower or any Restricted Subsidiary
to acquire the Remaining Equity pursuant to Section 10.5(l) on or prior to
the Reference Date and (iv) the aggregate price paid by the Borrower in
connection with (x) any prepayment of the Subordinated Loans (other than
with the Net Cash Proceeds of the Loans or the Subordinated Notes) or (y)
any prepayment, repurchase or redemption of Subordinated Notes, in each
case pursuant to Section 10.7(a) on or prior to the Reference Date.
"AVAILABLE COMMITMENT" shall mean an amount equal to the excess, if
any, of (a) the sum of (i) the amount of the Total Revolving Credit
Commitment and (ii) the amount of the Total Term Loan Commitment over
(b) the sum of (i) the aggregate principal amount of all Revolving Credit
Loans (but not Swingline Loans) then outstanding and (ii) the aggregate
Letter of Credit Outstanding at such time.
"AVAILABLE FOREIGN INVESTMENT AMOUNT" shall mean, on any date (the
"INVESTMENT DATE"), an amount equal to (a) the sum of (i) $50,000,000,
(ii) the aggregate amount of all cash dividends and other cash
distributions received by the Borrower or any Guarantor from any Restricted
Foreign Subsidiaries on or prior to the Investment Date (other than the
portion of any such dividends and other distributions that is used by the
Borrower or any Guarantor to pay taxes), (iii) the aggregate amount of all
cash repayments of principal received by the Borrower or any Guarantor from
any Restricted Foreign Subsidiaries on or prior to the Investment Date in
respect of loans made by the Borrower or any Guarantor to such Restricted
Foreign Subsidiaries and (iv) the aggregate amount of all net cash proceeds
received by the Borrower or any Guarantor in connection with the sale,
transfer or other disposition of its ownership interest in any Restricted
Foreign Subsidiary on or prior to the Investment Date MINUS (b) the
aggregate amount of any investments (including loans) made by the Borrower
or any Restricted Subsidiary (other than any Restricted Foreign Subsidiary)
in or to Restricted Foreign Subsidiaries pursuant to Section 10.5(j) or
10.5(k) on or prior to the Investment Date.
"BANKRUPTCY CODE" shall have the meaning provided in Section 11.5.
"BASE CD RATE" shall mean the sum of (a) the product of (i) the
Three-Month Secondary CD Rate and (ii) a fraction, the numerator of which
is one and the denominator of which is one minus the C/D Reserve Percentage
and (b) the C/D Assessment Rate.
<PAGE>
6
"BOARD" shall mean the Board of Governors of the Federal Reserve
System of the United States (or any successor).
"BORDEN" shall mean Borden, Inc., a New Jersey corporation.
"BORROWER" shall have the meaning provided in the preamble to this
Agreement.
"BORROWER COMMON STOCK" shall mean any class of outstanding common
stock of the Borrower after the Recapitalization.
"BORROWING" shall mean and include (a) the incurrence of Swingline
Loans from Chase on a given date, (b) the incurrence of one Type of Term
Loan on the Closing Date (or resulting from conversions on a given date
after the Closing Date) having, in the case of Eurodollar Term Loans, the
same Interest Period (PROVIDED that ABR Loans incurred pursuant to
Section 2.10(b) shall be considered part of any related Borrowing of
Eurodollar Term Loans) and (c) the incurrence of one Type of Revolving
Credit Loan on a given date (or resulting from conversions on a given date)
having, in the case of Eurodollar Revolving Credit Loans, the same Interest
Period (PROVIDED that ABR Loans incurred pursuant to Section 2.10(b) shall
be considered part of any related Borrowing of Eurodollar Revolving Credit
Loans).
"BUSINESS DAY" shall mean (a) for all purposes other than as covered
by clause (b) below, any day excluding Saturday, Sunday and any day that
shall be in The City of New York a legal holiday or a day on which banking
institutions are authorized by law or other governmental actions to close
and (b) with respect to all notices and determinations in connection with,
and payments of principal and interest on, Eurodollar Loans, any day that
is a Business Day described in clause (a) and which is also a day for
trading by and between banks in Dollar deposits in the relevant interbank
Eurodollar market.
"CAPITAL EXPENDITURES" shall mean, for any period, the aggregate of
all expenditures (whether paid in cash or accrued as liabilities and
including in all events all amounts expended or capitalized under Capital
Leases, but excluding any amount representing capitalized interest) by the
Borrower and the Restricted Subsidiaries during such period that, in
conformity with GAAP, are or are required to be included as additions
during such period to property, plant or equipment reflected in the
consolidated balance sheet of the Borrower and its Subsidiaries, PROVIDED
that the term "Capital Expenditures" shall not include (a) expenditures
made in connection with the replacement, substitution or restoration of
assets (i) to the extent financed from insurance proceeds paid on account
of the loss of or damage to the assets being replaced or restored or
(ii) with awards of compensation arising from the taking by eminent domain
or condemnation of the assets being replaced, (b) the purchase price of
equipment that is purchased simultaneously with the trade-in of existing
equipment to the extent that the gross amount of such purchase price is
reduced by the credit granted by the seller of such equipment for the
equipment being traded in at such time, (c) the purchase of plant, property
or equipment made within one year of the sale of any asset to the extent
purchased with the proceeds of such sale or (d) expenditures that
constitute any part of Consolidated Lease Expense.
"CAPITALIZED LEASE OBLIGATIONS" shall mean, as applied to any Person,
all obligations under Capital Leases of such Person or any of its
Subsidiaries, in each case taken at the amount thereof accounted for as
liabilities in accordance with GAAP.
<PAGE>
7
"CAPITAL LEASE", as applied to any Person, shall mean any lease of any
property (whether real, personal or mixed) by that Person as lessee that,
in conformity with GAAP, is, or is required to be, accounted for as a
capital lease on the balance sheet of that Person.
"CCPC" shall mean CCPC Acquisition Corp., a Delaware corporation.
"C/D ASSESSMENT RATE" shall mean for any day as applied to any ABR
Loan, the annual assessment rate in effect on such day that is payable by a
member of the Bank Insurance Fund maintained by the Federal Deposit
Insurance Corporation or any successor thereto (the "FDIC") classified as
well-capitalized and within supervisory subgroup "B" (or a comparable
successor assessment risk classification) within the meaning of 12 C.F.R.
Section 327.4(a) (or any successor provision) to the FDIC for the FDIC's
insuring time deposits at offices of such institution in the United States.
"C/D RESERVE PERCENTAGE" shall mean for any day as applied to any ABR
Loan, the percentage (expressed as a decimal) that is in effect on such
day, as prescribed by the Board, for determining the reserve requirement
for a Depositary Institution (as defined in Regulation D of the Board) in
respect of new non-personal time deposits in Dollars having a maturity that
is 30 days or more.
"CHANGE OF CONTROL" shall mean and be deemed to have occurred if
(a) (i) KKR, its Affiliates and the Management Group shall at any time not
own, in the aggregate, directly or indirectly, beneficially and of record,
at least 35% of the outstanding Voting Stock of the Borrower (other than as
the result of one or more widely distributed offerings of Borrower Common
Stock, in each case whether by the Borrower or by KKR, its Affiliates or
the Management Group) and/or (ii) any person, entity or "group" (within the
meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934,
as amended) shall at any time have acquired direct or indirect beneficial
ownership of a percentage of the outstanding Voting Stock of the Borrower
that exceeds the percentage of such Voting Stock then beneficially owned,
in the aggregate, by KKR, its Affiliates and the Management Group, unless,
in the case of either clause (i) or (ii) above, KKR, its Affiliates and
the Management Group have, at such time, the right or the ability by voting
power, contract or otherwise to elect or designate for election a majority
of the Board of Directors of the Borrower; and/or (b) at any time
Continuing Directors shall not constitute a majority of the Board of
Directors of the Borrower.
"CHASE" shall mean The Chase Manhattan Bank, a New York banking
corporation, and any successor thereto by merger, consolidation or
otherwise.
"CLOSING DATE" shall mean the date of the initial Borrowing hereunder.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated and rulings issued
thereunder. Section references to the Code are to the Code, as in effect
at the date of this Agreement, and any subsequent provisions of the Code,
amendatory thereof, supplemental thereto or substituted therefor.
"COLLATERAL" shall have the meaning provided in the Pledge Agreement.
<PAGE>
8
"COMMITMENT FEE RATE" shall mean, with respect to the Available
Commitment on any day, the rate per annum set forth below opposite the
Status in effect on such day:
Commitment
Status Fee Rate
------ --------
Level I Status 0.425%
Level II Status 0.375%
Level III Status 0.375%
Level IV Status 0.350%
Level V Status 0.300%
Level VI Status 0.250%
Level VII Status 0.225%
"COMMITMENTS" shall mean, with respect to each Lender, such Lender's
Term Loan Commitment and Revolving Credit Commitment.
"CONFIDENTIAL INFORMATION" shall have the meaning provided in Section
13.16.
"CONFIDENTIAL INFORMATION MEMORANDUM" shall mean the Confidential
Information Memorandum of the Borrower dated March 1998 delivered to the
Lenders in connection with this Agreement.
"CONSOLIDATED EARNINGS" shall mean, for any period, "income (loss)
before taxes on income" of the Borrower and the Restricted Subsidiaries,
excluding extraordinary items, for such period, determined in a manner
consistent with the manner in which such amount was determined in
accordance with the audited financial statements referred to in
Section 9.1(a).
"CONSOLIDATED EBITDA" shall mean, for any period, the sum, without
duplication, of the amounts for such period of (a) Consolidated Earnings,
(b) Consolidated Interest Expense, (c) depreciation expense,
(d) amortization expense, including amortization of deferred financing
fees, (e) extraordinary losses and non-recurring charges, (f) non-cash
charges, (g) losses on asset sales, (h) restructuring charges or reserves,
(i) in the case of any period that includes a period ending during the
fiscal year ending December 31, 1998, Transaction Expenses, (j) any
expenses or charges incurred in connection with any issuance of debt or
equity securities, (k) any fees and expenses related to Permitted
Acquisitions and (l) any deduction for minority interest expense and (m)
the amount of Inventory Reduction Impact for such period LESS the sum of
the amounts for such period of (n) extraordinary gains and non-recurring
gains, (o) non-cash gains and (p) gains on asset sales, all as determined
on a consolidated basis for the Borrower and the Restricted Subsidiaries in
accordance with GAAP, PROVIDED that (i) except as provided in clause (ii)
below, there shall be excluded from Consolidated Earnings for any period
the income from continuing operations before income taxes and extraordinary
items of all Unrestricted Subsidiaries for such period to the extent
otherwise included in Consolidated Earnings, except to the extent actually
received in cash by the Borrower or its Restricted Subsidiaries during such
period through dividends or other distributions, and (ii)(x) there shall be
included in determining Consolidated EBITDA for any period (A) the Acquired
EBITDA of any Person, property, business or asset (other than an
Unrestricted Subsidiary) acquired to the extent not subsequently sold,
transferred or otherwise
<PAGE>
9
disposed of (but not including the Acquired EBITDA of any related Person,
property, business or assets to the extent not so acquired) by the Borrower
or any Restricted Subsidiary during such period (each such Person,
property, business or asset acquired and not subsequently so disposed of,
an "ACQUIRED ENTITY OR BUSINESS"), and the Acquired EBITDA of any
Unrestricted Subsidiary that is converted into a Restricted Subsidiary
during such period (each, a "CONVERTED RESTRICTED SUBSIDIARY"), in each
case based on the actual Acquired EBITDA of such Acquired Entity or
Business or Converted Restricted Subsidiary for such period (including the
portion thereof occurring prior to such acquisition or conversion) and
(B) for purposes of the definition of the term "Permitted Acquisition" and
Sections 10.3, 10.10 and 10.11, an adjustment in respect of each Acquired
Entity or Business equal to the amount of the Pro Forma Adjustment with
respect to such Acquired Entity or Business for such period (including the
portion thereof occurring prior to such acquisition or conversion) as
specified in the Pro Forma Adjustment Certificate delivered to the Lenders
and the Administrative Agent and (y) for purposes of determining the
Consolidated Total Debt to Consolidated EBITDA Ratio only, there shall be
excluded in determining Consolidated EBITDA for any period the Acquired
EBITDA of any Person, property, business or asset (other than an
Unrestricted Subsidiary) sold, transferred or otherwise disposed of by the
Borrower or any Restricted Subsidiary during such period (each such Person,
property, business or asset so sold or disposed of, a "SOLD ENTITY OR
BUSINESS"), and the Acquired EBITDA of any Restricted Subsidiary that is
converted into an Unrestricted Subsidiary during such period (each, a
"CONVERTED UNRESTRICTED SUBSIDIARY"), in each case based on the actual
Acquired EBITDA of such Sold Entity or Business or Converted Unrestricted
Subsidiary for such period (including the portion thereof occurring prior
to such sale, transfer, disposition or conversion).
"CONSOLIDATED EBITDA TO CONSOLIDATED INTEREST EXPENSE RATIO" shall
mean, as of any date of determination, the ratio of (a) Consolidated EBITDA
for the relevant Test Period to (b) Consolidated Interest Expense for such
Test Period.
"CONSOLIDATED INTEREST EXPENSE" shall mean, for any period, cash
interest expense (including that attributable to Capital Leases in
accordance with GAAP), net of cash interest income, of the Borrower and the
Restricted Subsidiaries on a consolidated basis with respect to all
outstanding Indebtedness of the Borrower and the Restricted Subsidiaries,
including, without limitation, all commissions, discounts and other fees
and charges owed with respect to letters of credit and bankers' acceptance
financing and net costs under Hedge Agreements (other than currency swap
agreements, currency future or option contracts and other similar
agreements), but excluding, however, amortization of deferred financing
costs and any other amounts of non-cash interest, all as calculated on a
consolidated basis in accordance with GAAP, PROVIDED that (a) except as
provided in clause (b) below, there shall be excluded from Consolidated
Interest Expense for any period the cash interest expense (or income) of
all Unrestricted Subsidiaries for such period to the extent otherwise
included in Consolidated Interest Expense and (b) for purposes of the
definition of the term "Permitted Acquisition" and Sections 10.3, 10.10 and
10.11, there shall be included in determining Consolidated Interest Expense
for any period the cash interest expense (or income) of any Acquired Entity
or Business acquired during such period and of any Converted Restricted
Subsidiary converted during such period, in each case based on the cash
interest expense (or income) of such Acquired Entity or Business or
Converted Restricted Subsidiary for such period (including the portion
thereof occurring prior to such acquisition or conversion) assuming any
Indebtedness incurred or repaid in connection with any such acquisition or
conversion
<PAGE>
10
had been incurred or prepaid on the first day of such period; PROVIDED
FURTHER, HOWEVER, that Consolidated Interest Expense for the Test Periods
ending on June 30, 1998, September 30, 1998, and December 31, 1998, shall
be determined by (i) in the case of the Test Period ending on June 30,
1998, multiplying Consolidated Interest Expense for the period commencing
on April 1, 1998, and ending on June 30, 1998, by 4, (ii) in the case of
the Test Period ending on September 30, 1998, multiplying Consolidated
Interest Expense for the period commencing on April 1, 1998, and ending on
September 30, 1998, by 2, and (iii) in the case of the Test Period ending
on December 31, 1998, multiplying Consolidated Interest Expense for the
period commencing on April 1, 1998, and ending on December 31, 1998, by
4/3.
"CONSOLIDATED NET SALES" shall mean, for any fiscal year of the
Borrower, "net sales" of the Borrower and the Restricted Subsidiaries as
set forth in the audited financial statements referred to in Section 9.1(a)
with respect to the immediately preceding fiscal year.
"CONSOLIDATED LEASE EXPENSE" shall mean, for any period, all rental
expenses of the Borrower and the Restricted Subsidiaries during such period
under operating leases for real or personal property (including in
connection with Permitted Sale Leasebacks), excluding real estate taxes,
insurance costs and common area maintenance charges and net of sublease
income, other than (a) obligations under vehicle leases entered into in the
ordinary course of business, (b) all such rental expenses associated with
assets acquired pursuant to a Permitted Acquisition to the extent that such
rental expenses relate to operating leases in effect at the time of (and
immediately prior to) such acquisition and (c) Capitalized Lease
Obligations, all as determined on a consolidated basis in accordance with
GAAP, PROVIDED that there shall be excluded from Consolidated Lease Expense
for any period the rental expenses of all Unrestricted Subsidiaries for
such period to the extent otherwise included in Consolidated Lease Expense.
"CONSOLIDATED NET INCOME" shall mean, for any period, the consolidated
net income (or loss) of the Borrower and the Restricted Subsidiaries,
determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED TOTAL DEBT" shall mean, as of any date of determination,
(a) the sum of (i) all Indebtedness of the Borrower and the Restricted
Subsidiaries for borrowed money outstanding on such date and (ii) all
Capitalized Lease Obligations of the Borrower and the Restricted
Subsidiaries outstanding on such date, all calculated on a consolidated
basis in accordance with GAAP MINUS (b) the aggregate amount of cash
included in the cash accounts listed on the consolidated balance sheet of
the Borrower and the Restricted Subsidiaries and deposited with the
Administrative Agent or Lenders domiciled in the United States as at such
date to the extent the use thereof for application to payment of
Indebtedness is not prohibited by law or any contract to which the Borrower
or any of the Restricted Subsidiaries is a party.
"CONSOLIDATED TOTAL DEBT TO CONSOLIDATED EBITDA RATIO" shall mean, as
of any date of determination, the ratio of (a) Consolidated Total Debt as
of the last day of the relevant Test Period to (b) Consolidated EBITDA for
such Test Period.
"CONSOLIDATED WORKING CAPITAL" shall mean, at any date, the excess of
(a) the sum of all amounts (other than cash, cash equivalents and bank
overdrafts) that would, in conformity with GAAP, be set forth opposite the
caption "total current assets" (or any
<PAGE>
11
like caption) on a consolidated balance sheet of the Borrower and the
Restricted Subsidiaries at such date over (b) the sum of all amounts that
would, in conformity with GAAP, be set forth opposite the caption "total
current liabilities" (or any like caption) on a consolidated balance sheet
of the Borrower and the Restricted Subsidiaries on such date, but excluding
(i) the current portion of any Funded Debt, (ii) without duplication of
clause (i) above, all Indebtedness consisting of Loans and Letter of Credit
Exposure to the extent otherwise included therein and (iii) the current
portion of deferred income taxes.
"CONTINUING DIRECTOR" shall mean, at any date, an individual (a) who
is a member of the Board of Directors of the Borrower on the date hereof,
(b) who, as at such date, has been a member of such Board of Directors for
at least the 12 preceding months, (c) who has been nominated to be a member
of such Board of Directors, directly or indirectly, by KKR or one of its
Affiliates or Persons nominated by KKR or one of its Affiliates or (d) who
has been nominated to be a member of such Board of Directors by a majority
of the other Continuing Directors then in office.
"CONVERTED RESTRICTED SUBSIDIARY" shall have the meaning provided in
the definition of the term "Consolidated EBITDA".
"CONVERTED UNRESTRICTED SUBSIDIARY" shall have the meaning provided in
the definition of the term "Consolidated EBITDA".
"CREDIT DOCUMENTS" shall mean this Agreement, the Guarantee, the
Pledge Agreement and any promissory notes issued by the Borrower hereunder.
"CREDIT EVENT" shall mean and include the making (but not the
conversion or continuation) of a Loan and the issuance of a Letter of
Credit.
"CREDIT PARTY" shall mean each of the Borrower and the Guarantors.
"CUMULATIVE CONSOLIDATED NET INCOME AVAILABLE TO STOCKHOLDERS" means,
as of any date of determination, Consolidated Net Income less cash
dividends paid with respect to capital stock for the period (taken as one
accounting period) commencing on the Closing Date and ending on the last
day of the most recent fiscal quarter for which Section 9.1 Financials have
been delivered to the Lenders under Section 9.1.
"DEBT INCURRENCE PREPAYMENT EVENT" shall mean any issuance or
incurrence by the Borrower or any of the Restricted Subsidiaries of any
Indebtedness (excluding (a) the Subordinated Notes to the extent that the
Net Cash Proceeds therefrom are applied to repay the principal of, and
accrued interest on, the Subordinated Loans and (b) any other Indebtedness
permitted to be issued or incurred under Section 10.1).
"DEFAULT" shall mean any event, act or condition that with notice or
lapse of time, or both, would constitute an Event of Default.
"DEFAULTING LENDER" shall mean any Lender with respect to which a
Lender Default is in effect.
"DIVIDENDS" shall have the meaning provided in Section 10.6.
<PAGE>
12
"DOCUMENTATION AGENT" shall mean Bankers Trust Company, together with
its affiliates, as the documentation agent for the Lenders under this
Agreement and the other Credit Documents.
"DOLLARS" and "$" shall mean dollars in lawful currency of the United
States of America.
"DOMESTIC SUBSIDIARY" shall mean each Subsidiary of the Borrower that
is organized under the laws of the United States, any state or territory
thereof, or the District of Columbia.
"DRAWING" shall have the meaning provided in Section 3.4(b).
"ENVIRONMENTAL CLAIMS" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims,
liens, notices of noncompliance or violation, investigations (other than
internal reports prepared by the Borrower or any of its Subsidiaries (a) in
the ordinary course of such Person's business or (b) as required in
connection with a financing transaction or an acquisition or disposition of
real estate) or proceedings relating in any way to any Environmental Law or
any permit issued, or any approval given, under any such Environmental Law
(hereinafter, "CLAIMS"), including, without limitation, (i) any and all
Claims by governmental or regulatory authorities for enforcement, cleanup,
removal, response, remedial or other actions or damages pursuant to any
applicable Environmental Law and (ii) any and all Claims by any third party
seeking damages, contribution, indemnification, cost recovery, compensation
or injunctive relief resulting from Hazardous Materials or arising from
alleged injury or threat of injury to health, safety or the environment.
"ENVIRONMENTAL LAW" shall mean any applicable Federal, state, foreign
or local statute, law, rule, regulation, ordinance, code and rule of common
law now or hereafter in effect and in each case as amended, and any binding
judicial or administrative interpretation thereof, including any binding
judicial or administrative order, consent decree or judgment, relating to
the environment, human health or safety or Hazardous Materials.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time. Section references to ERISA are to
ERISA as in effect at the date of this Agreement and any subsequent
provisions of ERISA amendatory thereof, supplemental thereto or substituted
therefor.
"ERISA AFFILIATE" shall mean each person (as defined in Section 3(9)
of ERISA) that together with the Borrower or a Subsidiary would be deemed
to be a "single employer" within the meaning of Section 414(b) or (c) of
the Code or, solely for purposes of Section 302 of ERISA and Section 412 of
the Code, is treated as a single employer under Section 414 of the Code.
"EURODOLLAR LOAN" shall mean any Eurodollar Term Loan or Eurodollar
Revolving Credit Loan.
"EURODOLLAR RATE" shall mean, in the case of any Eurodollar Term Loan
or Eurodollar Revolving Credit Loan, with respect to each day during each
Interest Period pertaining to such Eurodollar Loan, the rate of interest
determined on the basis of the rate
<PAGE>
13
for deposits in Dollars for a period equal to such Interest Period
commencing on the first day of such Interest Period appearing on Page 3750
of the Telerate screen as of 11:00 A.M., London time, two Business Days
prior to the beginning of such Interest Period. In the event that such
rate does not appear on Page 3750 of the Telerate Service (or otherwise on
such service), the "Eurodollar Rate" for the purposes of this paragraph
shall be determined by reference to such other publicly available service
for displaying eurodollar rates as may be agreed upon by the Administrative
Agent and the Borrower or, in the absence of such agreement, the
"Eurodollar Rate" for the purposes of this paragraph shall instead be the
rate per annum notified to the Administrative Agent by the Reference Lender
as the rate at which the Reference Lender is offered Dollar deposits at or
about 10:00 A.M., New York time, two Business Days prior to the beginning
of such Interest Period, in the interbank eurodollar market where the
eurodollar and foreign currency and exchange operations in respect of its
Eurodollar Loans are then being conducted for delivery on the first day of
such Interest Period for the number of days comprised therein and in an
amount comparable to the amount of its Eurodollar Term Loan or Eurodollar
Revolving Credit Loan, as the case may be, to be outstanding during such
Interest Period.
"EURODOLLAR REVOLVING CREDIT LOAN" shall mean any Revolving Credit
Loan bearing interest at a rate determined by reference to the Eurodollar
Rate.
"EURODOLLAR TERM LOAN" shall mean any Term Loan bearing interest at a
rate determined by reference to the Eurodollar Rate.
"EVENT OF DEFAULT" shall have the meaning provided in Section 11.
"EXCESS CASH FLOW" shall mean, for any period, an amount equal to the
excess of (a) the sum, without duplication, of (i) Consolidated Net Income
for such period, (ii) an amount equal to the amount of all non-cash charges
to the extent deducted in arriving at such Consolidated Net Income, (iii)
decreases in Consolidated Working Capital for such period and (iv) an
amount equal to the aggregate net non-cash loss on the sale, lease,
transfer or other disposition of assets by the Borrower and the Restricted
Subsidiaries during such period (other than sales in the ordinary course of
business) to the extent deducted in arriving at such Consolidated Net
Income OVER (b) the sum, without duplication, of (i) an amount equal to the
amount of all non-cash credits included in arriving at such Consolidated
Net Income, (ii) the aggregate amount actually paid by the Borrower and the
Restricted Subsidiaries in cash during such period on account of Capital
Expenditures (excluding the principal amount of Indebtedness incurred in
connection with such Capital Expenditures, whether incurred in such period
or in a subsequent period), (iii) the aggregate amount of all prepayments
of Revolving Credit Loans and Swingline Loans made during such period to
the extent accompanying reductions of the Total Revolving Credit
Commitments, (iv) the aggregate amount of all principal payments of
Indebtedness of the Borrower or the Restricted Subsidiaries (including,
without limitation, any Term Loans and the principal component of payments
in respect of Capitalized Lease Obligations but excluding Revolving Credit
Loans and Swingline Loans) made during such period (other than in respect
of any revolving credit facility to the extent there is not an equivalent
permanent reduction in commitments thereunder), (v) an amount equal to the
aggregate net non-cash gain on the sale, lease, transfer or other
disposition of assets by the Borrower and the Restricted Subsidiaries
during such period (other than sales in the ordinary course of business) to
the extent included in arriving at such Consolidated Net Income,
(vi) increases in Consolidated
<PAGE>
14
Working Capital for such period, (vii) payments by the Borrower and the
Restricted Subsidiaries during such period in respect of long-term
liabilities of the Borrower and the Restricted Subsidiaries other than
Indebtedness, (viii) the amount of investments made during such period
pursuant to Section 10.5 to the extent that such investments were financed
with internally generated cash flow of the Borrower and the Restricted
Subsidiaries, (ix) the amount of dividends paid during such period pursuant
to clause (b), (c), (d) or (e) of the proviso to Section 10.6, (x) the
aggregate amount of expenditures actually made by the Borrower and the
Restricted Subsidiaries in cash during such period (including, without
limitation, expenditures for the payment of financing fees) to the extent
that such expenditures are not expensed during such period and (xi) the
aggregate amount of any premium, make-whole or penalty payments actually
paid in cash by the Borrower and the Restricted Subsidiaries during such
period that are required to be made in connection with any prepayment of
Indebtedness and that are accounted for as extraordinary items.
"FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any day, the weighted
average of the per annum rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day that is a
Business Day, the average of the quotations for the day of such
transactions received by the Administrative Agent from three federal funds
brokers of recognized standing selected by it.
"FEES" shall mean all amounts payable pursuant to, or referred to in,
Section 4.1.
"FINAL DATE" shall mean the date on which the Revolving Credit
Commitments shall have terminated, no Revolving Credit Loans shall be
outstanding and the Letter of Credit Outstandings shall have been reduced
to zero.
"FOREIGN SUBSIDIARY" shall mean each Subsidiary of the Borrower that
is not a Domestic Subsidiary.
"FRONTING FEE" shall have the meaning provided in Section 4.1(c).
"FUNDED DEBT" shall mean all Indebtedness of the Borrower and the
Restricted Subsidiaries for borrowed money that matures more than one year
from the date of its creation or matures within one year from such date
that is renewable or extendable, at the option of the Borrower or one of
the Restricted Subsidiaries, to a date more than one year from such date or
arises under a revolving credit or similar agreement that obligates the
lender or lenders to extend credit during a period of more than one year
from such date, including, without limitation, all amounts of Funded Debt
required to be paid or prepaid within one year from the date of its
creation and, in the case of the Borrower, Indebtedness in respect of the
Loans.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time; PROVIDED, HOWEVER,
that if there occurs after the date hereof any change in GAAP that affects
in any respect the calculation of any covenant contained in Section 10, the
Lenders and the Borrower shall negotiate in good faith amendments to the
provisions of this Agreement that relate to the calculation of such
covenant with the intent of having the respective positions of the Lenders
and the Borrower after such change in GAAP conform as nearly as possible to
their respective
<PAGE>
15
positions as of the date of this Agreement and, until any such amendments
have been agreed upon, the covenants in Section 10 shall be calculated as
if no such change in GAAP has occurred.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any
state or other political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government.
"GUARANTEE" shall mean and include the Guarantee, made by each
Guarantor in favor of the Administrative Agent for the benefit of the
Lenders, substantially in the form of Exhibit A, as the same may be
amended, supplemented or otherwise modified from time to time.
"GUARANTEE OBLIGATIONS" shall mean, as to any Person, any obligation
of such Person guaranteeing or intended to guarantee any Indebtedness of
any other Person (the "PRIMARY OBLIGOR") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (a) to purchase any such Indebtedness or any
property constituting direct or indirect security therefor, (b) to advance
or supply funds (i) for the purchase or payment of any such Indebtedness or
(ii) to maintain working capital or equity capital of the primary obligor
or otherwise to maintain the net worth or solvency of the primary obligor,
(c) to purchase property, securities or services primarily for the purpose
of assuring the owner of any such Indebtedness of the ability of the
primary obligor to make payment of such Indebtedness or (d) otherwise to
assure or hold harmless the owner of such Indebtedness against loss in
respect thereof; PROVIDED, HOWEVER, that the term "Guarantee Obligations"
shall not include endorsements of instruments for deposit or collection in
the ordinary course of business. The amount of any Guarantee Obligation
shall be deemed to be an amount equal to the stated or determinable amount
of the Indebtedness in respect of which such Guarantee Obligation is made
or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof (assuming such Person is required to perform
thereunder) as determined by such Person in good faith.
"GUARANTOR" shall mean each Domestic Subsidiary of the Borrower that
is a Restricted Subsidiary and is or becomes a party to the Guarantee.
"HAZARDOUS MATERIALS" shall mean (a) any petroleum or petroleum
products, radioactive materials, friable asbestos, urea formaldehyde foam
insulation, transformers or other equipment that contain dielectric fluid
containing regulated levels of polychlorinated biphenyls, and radon gas;
(b) any chemicals, materials or substances defined as or included in the
definition of "hazardous substances", "hazardous waste", "hazardous
materials", "extremely hazardous waste", "restricted hazardous waste",
"toxic substances", "toxic pollutants", "contaminants", or "pollutants", or
words of similar import, under any applicable Environmental Law; and (c)
any other chemical, material or substance, exposure to which is prohibited,
limited or regulated by any Governmental Authority.
"HEDGE AGREEMENTS" shall mean interest rate swap, cap or collar
agreements, interest rate future or option contracts, currency swap
agreements, currency future or option contracts and other similar
agreements entered into by the Borrower in order to protect the Borrower or
any of the Restricted Subsidiaries against fluctuations in interest rates
or currency exchange rates.
<PAGE>
16
"INDEBTEDNESS" of any Person shall mean (a) all indebtedness of such
Person for borrowed money, (b) the deferred purchase price of assets or
services that in accordance with GAAP would be shown on the liability side
of the balance sheet of such Person, (c) the face amount of all letters of
credit issued for the account of such Person and, without duplication, all
drafts drawn thereunder, (d) all Indebtedness of a second Person secured by
any Lien on any property owned by such first Person, whether or not such
Indebtedness has been assumed, (e) all Capitalized Lease Obligations of
such Person, (f) all obligations of such Person under interest rate swap,
cap or collar agreements, interest rate future or option contracts,
currency swap agreements, currency future or option contracts and other
similar agreements and (g) without duplication, all Guarantee Obligations
of such Person, PROVIDED that Indebtedness shall not include trade payables
and accrued expenses, in each case arising in the ordinary course of
business.
"INTEREST PERIOD" shall mean, with respect to any Term Loan or
Revolving Credit Loan, the interest period applicable thereto, as
determined pursuant to Section 2.9.
"INVENTORY REDUCTION IMPACT" shall mean, for any period, the aggregate
amount of increase in cost of goods sold resulting from a planned reduction
in inventory during such period, relative to the aggregate cost of goods
sold that would have been in effect but for the effect of such planned
reduction, PROVIDED that the aggregate amount of Inventory Reduction Impact
shall not exceed (a) $20,000,000 during the term of this Agreement and (b)
$10,000,000 in any one fiscal year.
"JUNIOR PREFERRED STOCK" shall mean the Borrower's Junior Cumulative
Pay-in-Kind Preferred Stock, par value $0.01 per share.
"KKR" shall mean each of Kohlberg Kravis Roberts & Co., L.P. and KKR
Associates, L.P.
"L/C MATURITY DATE" shall mean the date that is five Business Days
prior to the Revolving Credit Maturity Date.
"L/C PARTICIPANT" shall have the meaning provided in Section 3.3(a).
"L/C PARTICIPATION" shall have the meaning provided in Section 3.3(a).
"LENDER" shall have the meaning provided in the preamble to this
Agreement.
"LENDER DEFAULT" shall mean (a) the failure (which has not been cured)
of a Lender to make available its portion of any Borrowing or to fund its
portion of any unreimbursed payment under Section 3.3 or (b) a Lender
having notified the Administrative Agent and/or the Borrower that it does
not intend to comply with the obligations under Section 2.1(b), 2.1(d) or
3.3, in the case of either clause (a) or clause (b) above, as a result of
the appointment of a receiver or conservator with respect to such Lender at
the direction or request of any regulatory agency or authority.
"LETTER OF CREDIT" shall mean each standby letter of credit issued
pursuant to Section 3.1.
<PAGE>
17
"LETTER OF CREDIT COMMITMENT" shall mean $25,000,000, as the same may
be reduced from time to time pursuant to Section 3.1.
"LETTER OF CREDIT EXPOSURE" shall mean, with respect to any Lender,
such Lender's Revolving Credit Commitment Percentage of the Letter of
Credit Outstanding.
"LETTER OF CREDIT FEE" shall have the meaning provided in Section
4.1(b).
"LETTER OF CREDIT ISSUER" shall mean Chase, any of its Affiliates or
any successor pursuant to Section 3.6.
"LETTER OF CREDIT OUTSTANDING" shall mean, at any time, the sum of,
without duplication, (a) the aggregate Stated Amount of all outstanding
Letters of Credit and (b) the aggregate amount of all Unpaid Drawings in
respect of all Letters of Credit.
"LETTER OF CREDIT REQUEST" shall have the meaning provided in Section
3.2.
"LEVEL I STATUS" shall mean, on any date, the Consolidated Total Debt
to Consolidated EBITDA Ratio is greater than or equal to 6.00:1.00 as of
such date.
"LEVEL II STATUS" shall mean, on any date, the circumstance that
Level I Status does not exist and the Consolidated Total Debt to
Consolidated EBITDA Ratio is greater than or equal to 5.50:1.00 as of such
date.
"LEVEL III STATUS" shall mean, on any date, the circumstance that
neither Level I Status nor Level II Status exists and the Consolidated
Total Debt to Consolidated EBITDA Ratio is greater than or equal to
5.00:1.00 as of such date.
"LEVEL IV STATUS" shall mean, on any date, the circumstance that none
of Level I Status, Level II Status or Level III Status exists and the
Consolidated Total Debt to Consolidated EBITDA Ratio is greater than or
equal to 4.50:1.00 as of such date.
"LEVEL V STATUS" shall mean, on any date, the circumstance that none
of Level I Status, Level II Status, Level III Status or Level IV Status
exists and the Consolidated Total Debt to Consolidated EBITDA Ratio is
greater than or equal to 4.00:1.00 as of such date.
"LEVEL VI STATUS" shall mean, on any date, the circumstance that none
of Level I Status, Level II Status, Level III Status, Level IV Status or
Level V Status exists and the Consolidated Total Debt to Consolidated
EBITDA Ratio is greater than or equal to 3.25:1.00 as of such date.
"LEVEL VII STATUS" shall mean, on any date, the circumstance that the
Consolidated Total Debt to Consolidated EBITDA Ratio is less than 3.25:1.00
as of such date.
"LIEN" shall mean any mortgage, pledge, security interest,
hypothecation, assignment, lien (statutory or other) or similar encumbrance
(including any agreement to give any of the foregoing, any conditional sale
or other title retention agreement or any lease in the nature thereof).
"LOAN" shall mean any Revolving Credit Loan, Swingline Loan or Term
Loan made by any Lender hereunder.
<PAGE>
18
"MANAGEMENT GROUP" shall mean, at any time, the Chairman of the Board,
the President, any Executive Vice President or Vice President, the
Treasurer and the Secretary of the Borrower at such time.
"MANDATORY BORROWING" shall have the meaning provided in Section
2.1(d).
"MARGIN STOCK" shall have the meaning provided in Regulation U.
"MATERIAL ADVERSE CHANGE" shall mean any change in the business,
assets, operations, properties or financial condition of the Borrower and
its Subsidiaries taken as a whole that would materially adversely affect
the ability of the Borrower and the other Credit Parties taken as a whole
to perform their obligations under this Agreement and the other Credit
Documents taken as a whole.
"MATERIAL ADVERSE EFFECT" shall mean a circumstance or condition
affecting the business, assets, operations, properties or financial
condition of the Borrower and its Subsidiaries taken as a whole that would
materially adversely affect (a) the ability of the Borrower and the other
Credit Parties taken as a whole to perform their obligations under this
Agreement and the other Credit Documents taken as a whole or (b) the rights
and remedies of the Administrative Agent and the Lenders under this
Agreement and the other Credit Documents taken as a whole.
"MATERIAL SUBSIDIARY" shall mean, at any date of determination, any
Restricted Subsidiary of the Borrower (a) whose total assets at the last
day of the Test Period ending on the last day of the most recent fiscal
period for which Section 9.1 Financials have been delivered were equal to
or greater than 5% of the consolidated total assets of the Borrower and the
Restricted Subsidiaries at such date or (b) whose gross revenues for such
Test Period were equal to or greater than 5% of the consolidated gross
revenues of the Borrower and the Restricted Subsidiaries for such period,
in each case determined in accordance with GAAP.
"MATURITY DATE" shall mean the Term Loan Maturity Date or the
Revolving Credit Maturity Date.
"MINIMUM BORROWING AMOUNT" shall mean (a) with respect to a Borrowing
of Term Loans or Revolving Credit Loans, $1,000,000 and (b) with respect to
a Borrowing of Swingline Loans, $100,000.
"MINORITY INVESTMENT" shall mean any Person (other than a Subsidiary)
in which the Borrower or any Restricted Subsidiary owns capital stock or
other equity interests.
"MOODY'S" shall mean Moody's Investors Service, Inc. or any successor
by merger or consolidation to its business.
"NET CASH PROCEEDS" shall mean, with respect to any Prepayment Event
or any issuance by the Borrower of equity securities, (a) the gross cash
proceeds (including payments from time to time in respect of installment
obligations, if applicable) received
<PAGE>
19
by or on behalf of the Borrower or any of the Restricted Subsidiaries in
respect of such Prepayment Event or issuance, as the case may be, less
(b) the sum of:
(i) in the case of any Prepayment Event, the amount, if any, of
all taxes paid or estimated to be payable by the Borrower or any of
the Restricted Subsidiaries in connection with such Prepayment Event,
(ii) in the case of any Prepayment Event, the amount of any
reasonable reserve established in accordance with GAAP against any
liabilities (other than any taxes deducted pursuant to clause
(i) above) (A) associated with the assets that are the subject of such
Prepayment Event and (B) retained by the Borrower or any of the
Restricted Subsidiaries, PROVIDED that the amount of any subsequent
reduction of such reserve (other than in connection with a payment in
respect of any such liability) shall be deemed to be Net Cash Proceeds
of such a Prepayment Event occurring on the date of such reduction,
(iii) in the case of any Prepayment Event, the amount of any
Indebtedness secured by a Lien on the assets that are the subject of
such Prepayment Event to the extent that the instrument creating or
evidencing such Indebtedness requires that such Indebtedness be repaid
upon consummation of such Prepayment Event,
(iv) in the case of any Asset Sale Prepayment Event, the amount
of any proceeds of such Asset Sale Prepayment Event that the Borrower
has reinvested (or intends to reinvest within one year of the date of
such Asset Sale Prepayment Event) in the business of the Borrower or
any of the Restricted Subsidiaries (subject to Section 9.14), PROVIDED
that any portion of such proceeds that has not been so reinvested
within such one-year period shall (x) be deemed to be Net Cash
Proceeds of an Asset Sale Prepayment Event occurring on the last day
of such one-year period and (y) be applied to the repayment of Term
Loans in accordance with Section 5.2(a)(i), PROVIDED FURTHER that, for
purposes of the preceding proviso, such one-year period shall be
extended by up to twelve months from the last day of such one-year
period so long as (A) such proceeds are to be reinvested within such
additional twelve-month period under the Borrower's business plan as
most recently adopted in good faith by its Board of Directors and
(B) the Borrower believes in good faith that such proceeds will be so
reinvested within such additional twelve-month period, and
(v) in the case of any Prepayment Event or any issuance by the
Borrower of equity securities, reasonable and customary fees,
commissions, expenses, issuance costs, discounts and other costs paid
by the Borrower or any of the Restricted Subsidiaries in connection
with such Prepayment Event or issuance, as the case may be (other than
those payable to the Borrower or any Subsidiary of the Borrower), in
each case only to the extent not already deducted in arriving at the
amount referred to in clause (a) above.
"NON-DEFAULTING LENDER" shall mean and include each Lender other than
a Defaulting Lender.
"NON-EXCLUDED TAXES" shall have the meaning provided in Section
5.4(a).
"NOTICE OF BORROWING" shall have the meaning provided in Section 2.3.
<PAGE>
20
"NOTICE OF CONVERSION OR CONTINUATION" shall have the meaning provided
in Section 2.6.
"OBLIGATIONS" shall mean all monetary amounts of every type or
description at any time owing to the Administrative Agent, any Lender or,
in the case of Hedge Agreements, any affiliate of a Lender pursuant to the
terms of this Agreement, any other Credit Document or any Hedge Agreement.
"PARTICIPANT" shall have the meaning provided in Section 13.6(a)(ii).
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor thereto.
"PERMITTED ACQUISITION" shall mean the acquisition, by merger or
otherwise, by the Borrower or any of the Restricted Subsidiaries of assets
or capital stock or other equity interests, so long as (a) such acquisition
and all transactions related thereto shall be consummated in accordance
with applicable law; (b) such acquisition shall, in the case of the
acquisition of capital stock or other equity interests by the Borrower or
any Restricted Domestic Subsidiary, result in the issuer of such capital
stock or other equity interests becoming a Restricted Domestic Subsidiary
and a direct Restricted Domestic Subsidiary in the case of such an
acquisition by the Borrower; (c) after giving effect to such acquisition,
no Default or Event of Default shall have occurred and be continuing; and
(d) the Borrower shall be in compliance, on a pro forma basis after giving
effect to such acquisition (including any Indebtedness assumed or permitted
to exist or incurred pursuant to Sections 10.1(j) and 10.1(k),
respectively, and any related Pro Forma Adjustment), with the covenants set
forth in Sections 10.9, 10.10 and 10.11, as such covenants are recomputed
as at the last day of the most recently ended Test Period under such
Sections as if such acquisition had occurred on the first day of such Test
Period.
"PERMITTED INVESTMENTS" shall mean (a) securities issued or
unconditionally guaranteed by the United States government or any agency or
instrumentality thereof, in each case having maturities of not more than 24
months from the date of acquisition thereof; (b) securities issued by any
state of the United States of America or any political subdivision of any
such state or any public instrumentality thereof or any political
subdivision of any such state or any public instrumentality thereof having
maturities of not more than 24 months from the date of acquisition thereof
and, at the time of acquisition, having an investment grade rating
generally obtainable from either S&P or Moody's (or, if at any time neither
S&P nor Moody's shall be rating such obligations, then from another
nationally recognized rating service); (c) commercial paper issued by any
Lender or any bank holding company owning any Lender; (d) commercial paper
maturing no more than 12 months after the date of creation thereof and, at
the time of acquisition, having a rating of at least A-2 or P-2 from either
S&P or Moody's (or, if at any time neither S&P nor Moody's shall be rating
such obligations, an equivalent rating from another nationally recognized
rating service); (e) domestic and eurodollar certificates of deposit or
bankers' acceptances maturing no more than two years after the date of
acquisition thereof issued by any Lender or any other bank having combined
capital and surplus of not less than $250,000,000 in the case of domestic
banks and $100,000,000 (or the dollar equivalent thereof) in the case of
foreign banks; (f) repurchase agreements with a term of not more than
30 days for underlying securities of the type described in clauses (a), (b)
and (e) above entered into with any bank meeting the qualifications
specified in clause (e) above or securities dealers of recognized national
<PAGE>
21
standing; (g) shares of investment companies that are registered under the
Investment Company Act of 1940 and invest solely in one or more of the
types of securities described in clauses (a) through (f) above; and (h) in
the case of investments by any Restricted Foreign Subsidiary, other
customarily utilized high-quality investments in the country where such
Restricted Foreign Subsidiary is located.
"PERMITTED LIENS" shall mean (a) Liens for taxes, assessments or
governmental charges or claims not yet due or which are being contested in
good faith and by appropriate proceedings for which appropriate reserves
have been established in accordance with GAAP; (b) Liens in respect of
property or assets of the Borrower or any of its Subsidiaries imposed by
law, such as carriers', warehousemen's and mechanics' Liens and other
similar Liens arising in the ordinary course of business, in each case so
long as such Liens arise in the ordinary course of business and do not
individually or in the aggregate have a Material Adverse Effect; (c) Liens
arising from judgments or decrees in circumstances not constituting an
Event of Default under Section 11.9; (d) Liens incurred or deposits made in
connection with workers' compensation, unemployment insurance and other
types of social security, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations incurred in the ordinary course of business; (e) ground leases
in respect of real property on which facilities owned or leased by the
Borrower or any of its Subsidiaries are located; (f) easements,
rights-of-way, restrictions, minor defects or irregularities in title and
other similar charges or encumbrances not interfering in any material
respect with the business of the Borrower and its Subsidiaries taken as a
whole; (g) any interest or title of a lessor or secured by a lessor's
interest under any lease permitted by this Agreement; (h) Liens in favor of
customs and revenue authorities arising as a matter of law to secure
payment of customs duties in connection with the importation of goods;
(i) Liens on goods the purchase price of which is financed by a documentary
letter of credit issued for the account of the Borrower or any of its
Subsidiaries, PROVIDED that such Lien secures only the obligations of the
Borrower or such Subsidiaries in respect of such letter of credit to the
extent permitted under Section 10.1; and (j) leases or subleases granted to
others not interfering in any material respect with the business of the
Borrower and its Subsidiaries, taken as a whole.
"PERMITTED SALE LEASEBACK" shall mean any Sale Leaseback consummated
by the Borrower or any of the Restricted Subsidiaries after the Closing
Date, PROVIDED that such Sale Leaseback is consummated for fair value as
determined at the time of consummation in good faith by the Borrower and,
in the case of any Permitted Sale Leaseback (or series of related Permitted
Sales Leasebacks) the aggregate proceeds of which exceed $20,000,000, the
Board of Directors of the Borrower (which such determination may take into
account any retained interest or other investment of the Borrower or such
Restricted Subsidiary in connection with, and any other material economic
terms of, such Sale Leaseback).
"PERSON" shall mean any individual, partnership, joint venture, firm,
corporation, limited liability company, association, trust or other
enterprise or any Governmental Authority.
"PLAN" shall mean any multiemployer or single-employer plan, as
defined in Section 4001 of ERISA and subject to Title IV of ERISA, that is
or was within any of the preceding five plan years maintained or
contributed to by (or to which there is or was an
<PAGE>
22
obligation to contribute or to make payments of) the Borrower, a Subsidiary
or an ERISA Affiliate.
"PLEDGE AGREEMENT" shall mean and include the Pledge Agreement entered
into by the Borrower, the other pledgors party thereto and the
Administrative Agent for the benefit of the Lenders, substantially in the
form of Exhibit B, as the same may be amended, supplemented or otherwise
modified from time to time.
"PLEDGED SUBSIDIARY" shall mean, at any date of determination, any
Domestic Subsidiary of the Borrower all the capital stock of which has been
pledged to the Administrative Agent, for the benefit of the Lenders, on
such date in accordance with Section 9.12.
"PREPAYMENT EVENT" shall mean any Asset Sale Prepayment Event, Debt
Incurrence Prepayment Event or any Permitted Sale Leaseback.
"PRIME RATE" shall mean the rate of interest per annum publicly
announced from time to time by the Administrative Agent as its reference
rate in effect at its principal office in New York City (the Prime Rate not
being intended to be the lowest rate of interest charged by Chase in
connection with extensions of credit to debtors).
"PRO FORMA ADJUSTMENT" shall mean, for any test period that includes
any of the six fiscal quarters first following any Permitted Acquisition,
with respect to the Acquired EBITDA of the applicable Acquired Entity or
Business, the pro forma increase or decrease in such Acquired EBITDA
projected by the Borrower in good faith as a result of reasonably
identifiable and supportable net cost savings or additional net costs, as
the case may be, realizable during such period by combining the operations
of such Acquired Entity or Business with the operations of the Borrower and
its Subsidiaries, PROVIDED that so long as such net cost savings or
additional net costs will be realizable at any time during such period, it
may be assumed, for purposes of projecting such pro forma increase or
decrease to such Acquired EBITDA, that such net cost savings or additional
net costs will be realizable during the entire such period, PROVIDED
FURTHER that any such pro forma increase or decrease to such Acquired
EBITDA shall be without duplication for net cost savings or additional net
costs actually realized during such period and already included in such
Acquired EBITDA.
"PRO FORMA ADJUSTMENT CERTIFICATE" shall mean any certificate of an
Authorized Officer of the Borrower delivered pursuant to Section 9.1(h) or
setting forth the information described in clause (iv) to Section 9.1(d).
"RECAPITALIZATION" shall mean the recapitalization of the Borrower
pursuant to the Recapitalization Agreement.
"RECAPITALIZATION AGREEMENT" shall mean the Recapitalization Agreement
dated March 2, 1998, among Corning Incorporated, the Borrower, CCPC and
Borden, as the same may be amended, supplemented or otherwise modified from
time to time.
"REFERENCE LENDER" shall mean Chase.
"REGISTER" shall have the meaning provided in Section 13.6(c).
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23
"REGULATION D" shall mean Regulation D of the Board as from time to
time in effect and any successor to all or a portion thereof establishing
reserve requirements.
"REGULATION T" shall mean Regulation T of the Board as from time to
time in effect and any successor to all or a portion thereof establishing
margin requirements.
"REGULATION U" shall mean Regulation U of the Board as from time to
time in effect and any successor to all or a portion thereof establishing
margin requirements.
"REGULATION X" shall mean Regulation X of the Board as from time to
time in effect and any successor to all or a portion thereof establishing
margin requirements.
"REMAINING EQUITY" shall mean all the Borrower Common Stock that
(a) is in existence on the Closing Date after giving effect to the
Recapitalization and (b) is not beneficially owned, directly or indirectly,
by Borden, KKR, KKR's Affiliates or the Management Group on the Closing
Date pursuant to the 1998 management equity plan, including any additional
Borrower Common Stock or other capital stock or equity interests in the
Borrower issued in respect of such Borrower Common Stock in existence on
the Closing Date as a result of a stock split, recapitalization, merger,
combination, consolidation or otherwise, but excluding any management
equity plan or stock option plan or similar agreement.
"REPAYMENT AMOUNT" shall have the meaning provided in Section 2.5(b).
"REPAYMENT DATE" shall have the meaning provided in Section 2.5(b).
"REPLACEMENT PREFERRED STOCK" shall mean preferred stock of the
Borrower that (a) is issued in exchange for, or to replace or refinance,
all or a portion of the Junior Preferred Stock and (b) may include, at the
election of the Borrower, (i) provisions for required cash dividends (at a
rate per annum not in excess of 12%), (ii) provisions for transferability,
(iii) provisions for voting rights and/or board representation upon the
occurrence of non-payment of dividends and (iv) such other terms as the
Administrative Agent shall be reasonably satisfied are at least as
advantageous to the Lenders in all respects material to their interests as
the terms of the Junior Preferred Stock.
"REPORTABLE EVENT" shall mean an event described in Section 4043 of
ERISA and the regulations thereunder.
"REQUIRED LENDERS" shall mean, at any date, (a) Non-Defaulting Lenders
having or holding a majority of the sum of (i) the Adjusted Total Revolving
Credit Commitment at such date, (ii) the Adjusted Total Term Loan
Commitment at such date and (iii) the outstanding principal amount of the
Term Loans (excluding the Term Loans held by Defaulting Lenders) at such
date or (b) if the Total Revolving Credit Commitment and the Total Term
Loan Commitment have been terminated or for the purposes of acceleration
pursuant to Section 11, the holders (excluding Defaulting Lenders) of a
majority of the outstanding principal amount of the Loans and Letter of
Credit Exposures (excluding the Loans and Letter of Credit Exposures of
Defaulting Lenders) in the aggregate at such date.
"REQUIRED REVOLVING CREDIT LENDERS" shall mean, at any date,
(a) Non-Defaulting Lenders having or holding a majority of the Adjusted
Total Revolving Credit
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24
Commitment at such date or (b) if the Total Revolving Credit Commitment has
been terminated, the holders (excluding Defaulting Lenders) of a majority
of the outstanding principal amount of the Revolving Credit Loans and
Letter of Credit Exposures (excluding the Loans and Letter of Credit
Exposures of Defaulting Lenders) in the aggregate at such date.
"REQUIRED TERM LOAN LENDERS" shall mean, at any date,
(a) Non-Defaulting Lenders having or holding a majority of the sum of
(i) the Adjusted Total Term Loan Commitment at such date and (ii) the
outstanding principal amount of the Term Loans (excluding the Term Loans
held by Defaulting Lenders) in the aggregate at such date or (b) if the
Total Term Loan Commitment has been terminated or for the purposes of
acceleration pursuant to Section 11 , the holders (excluding Defaulting
Lenders) of a majority of the outstanding principal amount of the Term
Loans (excluding the Term Loans of Defaulting Lenders) in the aggregate at
such date.
"REQUIREMENT OF LAW" shall mean, as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or assets
or to which such Person or any of its property or assets is subject.
"RESTRICTED DOMESTIC SUBSIDIARY" shall mean each Restricted Subsidiary
that is also a Domestic Subsidiary.
"RESTRICTED FOREIGN SUBSIDIARY" shall mean any Foreign Subsidiary that
is also a Restricted Subsidiary.
"RESTRICTED SUBSIDIARY" shall mean any Subsidiary of the Borrower
other than an Unrestricted Subsidiary.
"REVOLVING CREDIT COMMITMENT" shall mean, (a) with respect to each
Lender that is a Lender on the date hereof, the amount set forth opposite
such Lender's name on Schedule 1.1 as such Lender's "Revolving Credit
Commitment" and (b) in the case of any Lender that becomes a Lender after
the date hereof, the amount specified as such Lender's "Revolving Credit
Commitment" in the Assignment and Acceptance pursuant to which such Lender
assumed a portion of the Total Revolving Credit Commitment, in each case as
the same may be changed from time to time pursuant to the terms hereof.
"REVOLVING CREDIT COMMITMENT PERCENTAGE" shall mean at any time, for
each Lender, the percentage obtained by dividing such Lender's Revolving
Credit Commitment by the Total Revolving Credit Commitment, PROVIDED that
at any time when the Total Revolving Credit Commitment shall have been
terminated, each Lender's Revolving Credit Commitment Percentage shall be
its Revolving Credit Commitment Percentage as in effect immediately prior
to such termination.
"REVOLVING CREDIT LOAN" shall have the meaning provided in
Section 2.1.
"REVOLVING CREDIT MATURITY DATE" shall mean the date that is seven
years after the Closing Date, or, if such date is not a Business Day, the
next preceding Business Day.
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25
"SALE LEASEBACK" shall mean any transaction or series of related
transactions pursuant to which the Borrower or any of the Restricted
Subsidiaries (a) sells, transfers or otherwise disposes of any property,
real or personal, whether now owned or hereafter acquired, and (b) as part
of such transaction, thereafter rents or leases such property or other
property that it intends to use for substantially the same purpose or
purposes as the property being sold, transferred or disposed.
"S&P" shall mean Standard & Poor's Ratings Service or any successor by
merger or consolidation to its business.
"SEC" shall mean the Securities and Exchange Commission or any
successor thereto.
"SECTION 9.1 FINANCIALS" shall mean the financial statements
delivered, or required to be delivered, pursuant to Section 9.1(a) or (b)
together with the accompanying officer's certificate delivered, or required
to be delivered, pursuant to Section 9.1(e).
"SOLD ENTITY OR BUSINESS" shall have the meaning provided in the
definition of the term "Consolidated EBITDA".
"SPECIFIED SUBSIDIARY" shall mean, at any date of determination,
(a) any Material Subsidiary or (b) any Unrestricted Subsidiary (i) whose
total assets at the last day of the Test Period ending on the last day of
the most recent fiscal period for which Section 9.1 Financials have been
delivered were equal to or greater than 15% of the consolidated total
assets of the Borrower and its Subsidiaries at such date or (ii) whose
gross revenues for such Test Period were equal to or greater than 15% of
the consolidated gross revenues of the Borrower and its Subsidiaries for
such period, in each case determined in accordance with GAAP.
"STATED AMOUNT" of any Letter of Credit shall mean the maximum amount
from time to time available to be drawn thereunder, determined without
regard to whether any conditions to drawing could then be met.
"STATUS" shall mean, as to the Borrower as of any date, the existence
of Level I Status, Level II Status, Level III Status, Level IV Status,
Level V Status, Level VI Status or Level VII Status, as the case may be, on
such date. Changes in Status resulting from changes in the Consolidated
Total Debt to Consolidated EBITDA Ratio shall become effective (the date of
such effectiveness, the "EFFECTIVE DATE") as of the first day following the
last day of the most recent fiscal year or period for which (a) Section 9.1
Financials are delivered to the Lenders under Section 9.1 and (b) an
officer's certificate is delivered by the Borrower to the Lenders setting
forth, with respect to such Section 9.1 Financials, the then-applicable
Status, and shall remain in effect until the next change to be effected
pursuant to this definition, PROVIDED that (i) if the Borrower shall have
made any payments in respect of interest or commitment fees during the
period (the "INTERIM PERIOD") from and including the Effective Date to but
excluding the day any change in Status is determined as provided above,
then the amount of the next such payment due on or after such day shall be
increased or decreased by an amount equal to any underpayment or
overpayment so made by the Borrower during such Interim Period,
(ii) notwithstanding the foregoing, for the period from and including the
Closing Date to but excluding the date that the Borrower shall deliver the
Section 9.1 Financials for the fiscal year ended December 31, 1998, the
Status of the Borrower for purposes of this
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26
Agreement shall be Level III Status, provided that in the event that (A)
the aggregate principal amount of the Subordinated Loans is less than
$200,000,000 after giving effect to the repayment thereof with the proceeds
of the Loans or (B) the Borrower issues less than $200,000,000 in aggregate
principal amount of Subordinated Notes, the Status of the Borrower during
such period shall be Level II Status, and (iii) each determination of the
Consolidated Total Debt to Consolidated EBITDA Ratio pursuant to this
definition shall be made with respect to the Test Period ending at the end
of the fiscal period covered by the relevant financial statements.
"SUBORDINATED LOANS" shall mean the $471,600,000 aggregate principal
amount of subordinated loans made by Borden and an Affiliate of Borden to
the Borrower on April 1, 1998, pursuant to the Subordinated Promissory
Notes.
"SUBORDINATED NOTE INDENTURE" shall mean the Indenture between the
Borrower and a trustee to be determined, pursuant to which the Subordinated
Notes will be issued, as the same may be amended, supplemented or otherwise
modified from time to time.
"SUBORDINATED NOTES" shall mean not less than $150,000,000 aggregate
principal amount of Senior Subordinated Notes due 2008 of the Borrower
(a) issued pursuant to the Subordinated Note Indenture, (b) bearing a rate
of interest determined by the Board of Directors of the Borrower to be a
market rate of issuance at the date of issuance thereof and (c) having
other terms customary for similar issuances under similar market conditions
or otherwise on terms reasonably acceptable to the Agents.
"SUBORDINATED PROMISSORY NOTES" shall mean the collective reference to
(a) the Subordinated Promissory Note dated April 1, 1998, between the
Borrower, as Maker, and Borden, as Lender, and (b) the Subordinated
Promissory Note dated April 1, 1998, between the Borrower, as Maker, and BW
Holdings, LLC, as Lender.
"SUBSIDIARY" of any Person shall mean and include (a) any corporation
more than 50% of whose stock of any class or classes having by the terms
thereof ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time stock of any class
or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time owned by such
Person directly or indirectly through Subsidiaries and (b) any partnership,
association, joint venture or other entity in which such Person directly or
indirectly through Subsidiaries has more than a 50% equity interest at the
time. Unless otherwise expressly provided, all references herein to a
"Subsidiary" shall mean a Subsidiary of the Borrower.
"SWINGLINE COMMITMENT" shall mean $25,000,000.
"SWINGLINE LOANS" shall have the meaning provided in Section 2.1(c).
"SWINGLINE MATURITY DATE" shall mean, with respect to any Swingline
Loan, the date that is five Business Days prior to the Revolving Credit
Maturity Date.
"SYNDICATION AGENT" shall mean Salomon Brothers Holding Company Inc,
together with its affiliates, as the syndication agent for the Lenders
under this Agreement and the other Credit Documents.
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27
"TERM LOAN" shall have the meaning provided in Section 2.1.
"TERM LOAN COMMITMENT" shall mean, (a) in the case of each Lender that
is a Lender on the date hereof, the amount set forth opposite such Lender's
name on Schedule 1.1 as such Lender's "Term Loan Commitment" and (b) in the
case of any Lender that becomes a Lender after the date hereof, the amount
specified as such Lender's "Term Loan Commitment" in the Assignment and
Acceptance pursuant to which such Lender assumed a portion of the Total
Term Loan Commitment, in each case as the same may be changed from time to
time pursuant to the terms hereof.
"TERM LOAN MATURITY DATE" shall mean the date that is eight years and
six months after the Closing Date, or, if such Date is not a Business Day,
the next preceding Business Day.
"TEST PERIOD" shall mean, for any determination under this Agreement,
the four consecutive fiscal quarters of the Borrower then last ended.
"THREE-MONTH SECONDARY CD RATE" shall mean, for any day, the secondary
market rate, expressed as a per annum rate, for three-month certificates of
deposit reported as being in effect on such day (or, if such day shall not
be a Business Day, the next preceding Business Day) by the Board through
the public information telephone line of the Federal Reserve Bank of New
York (which rate will, under the current practices of the Board, be
published in Federal Reserve Statistical Release H.15(519) during the week
following such day), or, if such rate shall not be so reported on such day
or such next preceding Business Day, the average of the secondary market
quotations for three-month certificates of deposit of major money center
banks in New York City received at approximately 10:00 A.M., New York time,
on such day (or, if such day shall not be a Business Day, on the next
preceding Business Day) by the Administrative Agent from three New York
City negotiable certificate of deposit dealers of recognized standing
selected by it.
"TOTAL COMMITMENT" shall mean the sum of the Total Term Loan
Commitment and the Total Revolving Credit Commitment.
"TOTAL CREDIT EXPOSURE" shall mean, at any date, the sum of (a) the
Total Revolving Credit Commitment at such date, (b) the Total Term Loan
Commitment at such date and (c) the outstanding principal amount of all
Term Loans at such date.
"TOTAL REVOLVING CREDIT COMMITMENT" shall mean the sum of the
Revolving Credit Commitments of all the Lenders.
"TOTAL TERM LOAN COMMITMENT" shall mean the sum of the Term Loan
Commitments of all the Lenders.
"TRANSACTION EXPENSES" shall mean any fees or expenses incurred or
paid by the Borrower or any of its Subsidiaries in connection with the
Recapitalization, the financing therefor and the other transactions
contemplated hereby and thereby.
"TRANSFEREE" shall have the meaning provided in Section 13.6(e).
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28
"TYPE" shall mean (a) as to any Term Loan, its nature as an ABR Loan
or a Eurodollar Term Loan and (b) as to any Revolving Credit Loan, its
nature as an ABR Loan or a Eurodollar Revolving Credit Loan.
"UNFUNDED CURRENT LIABILITY" of any Plan shall mean the amount, if
any, by which the present value of the accrued benefits under the Plan as
of the close of its most recent plan year, determined in accordance with
Statement of Financial Accounting Standards No. 87 as in effect on the date
hereof, based upon the actuarial assumptions that would be used by the
Plan's actuary in a termination of the Plan, exceeds the fair market value
of the assets allocable thereto.
"UNPAID DRAWING" shall have the meaning provided in Section 3.4(a).
"UNRESTRICTED SUBSIDIARY" shall mean (a) any Subsidiary of the
Borrower that is formed or acquired after the Closing Date, PROVIDED that
at such time (or promptly thereafter) the Borrower designates such
Subsidiary an Unrestricted Subsidiary in a written notice to the
Administrative Agent, (b) any Restricted Subsidiary on the Closing Date
subsequently re-designated as an Unrestricted Subsidiary by the Borrower in
a written notice to the Administrative Agent, PROVIDED that such
re-designation shall be deemed to be an investment on the date of such
re-designation in an Unrestricted Subsidiary in an amount equal to the sum
of (i) the net worth of such re-designated Restricted Subsidiary
immediately prior to such re-designation (such net worth to be calculated
without regard to any Guarantee provided by such re-designated Restricted
Subsidiary) and (ii) the aggregate principal amount of any Indebtedness
owed by such re-designated Restricted Subsidiary to the Borrower or any
other Restricted Subsidiary immediately prior to such re-designation, all
calculated, except as set forth in the parenthetical to clause (i), on a
consolidated basis in accordance with GAAP, and (c) each Subsidiary of an
Unrestricted Subsidiary; PROVIDED, HOWEVER, that (i) at the time of any
written re-designation by the Borrower to the Administrative Agent of any
Unrestricted Subsidiary as a Restricted Subsidiary, the Unrestricted
Subsidiary so re-designated shall no longer constitute an Unrestricted
Subsidiary, (ii) no Unrestricted Subsidiary may be re-designated as a
Restricted Subsidiary if a Default or Event of Default would result from
such re-designation and (iii) no Restricted Subsidiary may be re-designated
as an Unrestricted Subsidiary if a Default or Event of Default would result
from such re-designation. On or promptly after the date of its formation,
acquisition or re-designation, as applicable, each Unrestricted Subsidiary
(other than an Unrestricted Subsidiary that is a Foreign Subsidiary) shall
have entered into a tax sharing agreement containing terms that, in the
reasonable judgment of the Administrative Agent, provide for an appropriate
allocation of tax liabilities and benefits.
"VOTING STOCK" shall mean, with respect to any Person, shares of such
Person's capital stock having the right to vote for the election of
directors of such Person under ordinary circumstances.
SECTION 2. AMOUNT AND TERMS OF CREDIT.
2.1 COMMITMENTS. (a) Subject to and upon the terms and conditions
herein set forth, each Lender having a Term Loan Commitment severally agrees to
make a loan or loans (each a "TERM LOAN" and, collectively, the "TERM LOANS") to
the Borrower, which Term Loans (i) shall be made on the Closing Date, (ii) may,
at the option of the Borrower, be incurred and maintained as, and/or converted
into, ABR Loans or Eurodollar Term Loans, PROVIDED that all
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29
Term Loans made by each of the Lenders pursuant to the same Borrowing shall,
unless otherwise specifically provided herein, consist entirely of Term Loans of
the same Type, (iii) may be repaid in accordance with the provisions hereof, but
once repaid, may not be reborrowed, (iv) shall not exceed for any such Lender
the Term Loan Commitment of such Lender and (v) shall not exceed in the
aggregate the Total Term Loan Commitment. On the Term Loan Maturity Date, all
Term Loans shall be repaid in full.
(b) Subject to and upon the terms and conditions herein set forth,
each Lender having a Revolving Credit Commitment severally agrees to make a loan
or loans (each a "REVOLVING CREDIT LOAN" and, collectively, the "REVOLVING
CREDIT LOANS") to the Borrower, which Revolving Credit Loans (i) shall be made
at any time and from time to time on and after the Closing Date and prior to the
Revolving Credit Maturity Date, (ii) may, at the option of the Borrower, be
incurred and maintained as, and/or converted into, ABR Loans or Eurodollar
Revolving Credit Loans, PROVIDED that all Revolving Credit Loans made by each of
the Lenders pursuant to the same Borrowing shall, unless otherwise specifically
provided herein, consist entirely of Revolving Credit Loans of the same Type,
(iii) may be repaid and reborrowed in accordance with the provisions hereof,
(iv) shall not exceed for any such Lender at any time outstanding that aggregate
principal amount which, when added to the product of (x) such Lender's Revolving
Credit Commitment Percentage and (y) the sum of (I) the aggregate Letter of
Credit Outstanding at such time AND (II) the aggregate principal amount of all
Swingline Loans then outstanding, equals the Revolving Credit Commitment of such
Lender at such time and (v) shall not, after giving effect thereto and to the
application of the proceeds thereof, exceed for all Lenders at any time
outstanding the aggregate principal amount that, when added to the sum of (x)
the Letter of Credit Outstanding at such time and (y) the aggregate principal
amount of all Swingline Loans then outstanding, equals the Total Revolving
Credit Commitment then in effect. On the Revolving Credit Maturity Date, all
Revolving Credit Loans shall be repaid in full.
(c) Subject to and upon the terms and conditions herein set forth,
Chase in its individual capacity agrees, at any time and from time to time on
and after the Closing Date and prior to the Swingline Maturity Date, to make a
loan or loans (each a "SWINGLINE LOAN" and, collectively, the "SWINGLINE LOANS")
to the Borrower, which Swingline Loans (i) shall be ABR Loans, (ii) shall have
the benefit of the provisions of Section 2.1(d), (iii) shall not exceed at any
time outstanding the Swingline Commitment, (iv) shall not, after giving effect
thereto and to the application of the proceeds thereof, exceed in the aggregate
at any time outstanding the principal amount that, when added to the aggregate
principal amount of all Revolving Credit Loans then outstanding and all Letter
of Credit Outstanding at such time, equals the Total Revolving Credit Commitment
then in effect and (v) may be repaid and reborrowed in accordance with the
provisions hereof. On the Swingline Maturity Date, each outstanding Swingline
Loan shall be repaid in full. Chase shall not make any Swingline Loan after
receiving a written notice from the Borrower or any Lender stating that a
Default or Event of Default exists and is continuing until such time as Chase
shall have received written notice of (i) rescission of all such notices from
the party or parties originally delivering such notice or (ii) the waiver of
such Default or Event of Default in accordance with the provisions of Section
13.1.
(d) On any Business Day, Chase may, in its sole discretion, give
notice to the Lenders that all then-outstanding Swingline Loans shall be funded
with a Borrowing of Revolving Credit Loans, in which case a Borrowing of
Revolving Credit Loans constituting ABR Loans (each such Borrowing, a "MANDATORY
BORROWING") shall be made on the immediately succeeding Business Day by all
Lenders PRO RATA based on each Lender's Revolving Credit Commitment Percentage,
and the proceeds thereof shall be applied directly to Chase to repay Chase for
such outstanding Swingline Loans. Each Lender hereby irrevocably agrees to make
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30
such Revolving Credit Loans upon one Business Day's notice pursuant to each
Mandatory Borrowing in the amount and in the manner specified in the preceding
sentence and on the date specified to it in writing by Chase notwithstanding (i)
that the amount of the Mandatory Borrowing may not comply with the minimum
amount for each Borrowing specified in Section 2.2, (ii) whether any conditions
specified in Section 7 are then satisfied, (iii) whether a Default or an Event
of Default has occurred and is continuing, (iv) the date of such Mandatory
Borrowing or (v) any reduction in the Total Commitment after any such Swingline
Loans were made. In the event that, in the sole judgment of Chase, any
Mandatory Borrowing cannot for any reason be made on the date otherwise required
above (including, without limitation, as a result of the commencement of a
proceeding under the Bankruptcy Code in respect of the Borrower), each Lender
hereby agrees that it shall forthwith purchase from Chase (without recourse or
warranty) such participation of the outstanding Swingline Loans as shall be
necessary to cause the Lenders to share in such Swingline Loans ratably based
upon their respective Revolving Credit Commitment Percentages, PROVIDED that all
principal and interest payable on such Swingline Loans shall be for the account
of Chase until the date the respective participation is purchased and, to the
extent attributable to the purchased participation, shall be payable to the
Lender purchasing same from and after such date of purchase.
2.2 MINIMUM AMOUNT OF EACH BORROWING; MAXIMUM NUMBER OF BORROWINGS.
The aggregate principal amount of each Borrowing of Term Loans, Revolving Credit
Loans or Swingline Loans shall be in a multiple of $100,000 and shall not be
less than the Minimum Borrowing Amount with respect thereto (except that
Mandatory Borrowings shall be made in the amounts required by Section 2.1(d)).
More than one Borrowing may be incurred on any date, PROVIDED that at no time
shall there be outstanding more than 20 Borrowings of Eurodollar Loans under
this Agreement.
2.3 NOTICE OF BORROWING. (a) The Borrower shall give the
Administrative Agent at the Administrative Agent's Office (i) prior to 12:00
Noon (New York time) at least three Business Days' prior written notice (or
telephonic notice promptly confirmed in writing) of the Borrowing of Term Loans
if all or any of such Term Loans are to be initially Eurodollar Loans and
(ii) prior written notice (or telephonic notice promptly confirmed in writing)
prior to 10:00 A.M. (New York time) on the date of the Borrowing of Term Loans
if all such Term Loans are to be ABR Loans. Such notice (together with each
notice of a Borrowing of Revolving Credit Loans pursuant to Section 2.3(b) and
each notice of a Borrowing of Swingline Loans pursuant to Section 2.3(c), a
"NOTICE OF BORROWING") shall be irrevocable and shall specify (i) the aggregate
principal amount of the Term Loans to be made, (ii) the date of the borrowing
(which shall be a Business Day and, in the case of the initial borrowing, shall
be the Closing Date) and (iii) whether the Term Loans shall consist of ABR Loans
and/or Eurodollar Term Loans and, if the Term Loans are to include Eurodollar
Term Loans, the Interest Period to be initially applicable thereto. The
Administrative Agent shall promptly give each Lender written notice (or
telephonic notice promptly confirmed in writing) of each proposed Borrowing of
Term Loans, of such Lender's proportionate share thereof and of the other
matters covered by the related Notice of Borrowing.
(b) Whenever the Borrower desires to incur Revolving Credit Loans
hereunder (other than Mandatory Borrowings or borrowings to repay Unpaid
Drawings), it shall give the Administrative Agent at the Administrative Agent's
Office, c/o The Loan and Agency Services Group, (i) prior to 12:00 Noon (New
York time) at least three Business Days' prior written notice (or telephonic
notice promptly confirmed in writing) of each Borrowing of Eurodollar Revolving
Credit Loans and (ii) prior to 12:00 Noon (New York time) at least one Business
Day's prior written notice (or telephonic notice promptly confirmed in writing)
of each Borrowing of ABR
<PAGE>
31
Loans. Each such Notice of Borrowing, except as otherwise expressly provided in
Section 2.10, shall be irrevocable and shall specify (i) the aggregate principal
amount of the Revolving Credit Loans to be made pursuant to such Borrowing, (ii)
the date of Borrowing (which shall be a Business Day) and (iii) whether the
respective Borrowing shall consist of ABR Loans or Eurodollar Revolving Credit
Loans and, if Eurodollar Revolving Credit Loans, the Interest Period to be
initially applicable thereto. The Administrative Agent shall promptly give each
Lender written notice (or telephonic notice promptly confirmed in writing) of
each proposed Borrowing of Revolving Credit Loans, of such Lender's
proportionate share thereof and of the other matters covered by the related
Notice of Borrowing.
(c) Whenever the Borrower desires to incur Swingline Loans hereunder,
it shall give the Administrative Agent written notice (or telephonic notice
promptly confirmed in writing) of each Borrowing of Swingline Loans prior to
1:00 P.M. (New York time) on the date of such Borrowing. Each such notice shall
be irrevocable and shall specify (i) the aggregate principal amount of the
Swingline Loans to be made pursuant to such Borrowing and (ii) the date of
Borrowing (which shall be a Business Day). The Administrative Agent shall
promptly give Chase written notice (or telephonic notice promptly confirmed in
writing) of each proposed Borrowing of Swingline Loans and of the other matters
covered by the related Notice of Borrowing.
(d) Mandatory Borrowings shall be made upon the notice specified in
Section 2.1(d), with the Borrower irrevocably agreeing, by its incurrence of any
Swingline Loan, to the making of Mandatory Borrowings as set forth in such
Section.
(e) Borrowings to reimburse Unpaid Drawings shall be made upon the
notice specified in Section 3.4(c).
(f) Without in any way limiting the obligation of the Borrower to
confirm in writing any notice it may give hereunder by telephone, the
Administrative Agent may act prior to receipt of written confirmation without
liability upon the basis of such telephonic notice believed by the
Administrative Agent in good faith to be from an Authorized Officer of the
Borrower. In each such case the Borrower hereby waives the right to dispute the
Administrative Agent's record of the terms of any such telephonic notice.
2.2 DISBURSEMENT OF FUNDS. (a) No later than 12:00 Noon (New York
time) on the date specified in each Notice of Borrowing (including Mandatory
Borrowings), each Lender will make available its PRO RATA portion, if any, of
each Borrowing requested to be made on such date in the manner provided below,
PROVIDED that all Swingline Loans shall be made available in the full amount
thereof by Chase no later than 2:00 P.M. (New York time) on the date requested.
(b) Each Lender shall make available all amounts it is to fund under
any Borrowing in Dollars and immediately available funds to the Administrative
Agent at the Administrative Agent's Office and the Administrative Agent will
(except in the case of Mandatory Borrowings and Borrowings to repay Unpaid
Drawings) make available to the Borrower by depositing to the Borrower's account
at the Administrative Agent's Office the aggregate of the amounts so made
available in Dollars and the type of funds received. Unless the Administrative
Agent shall have been notified by any Lender prior to the date of any such
Borrowing that such Lender does not intend to make available to the
Administrative Agent its portion of the Borrowing or Borrowings to be made on
such date, the Administrative Agent may assume that such Lender has made such
amount available to the Administrative Agent on such date of Borrowing, and the
Administrative Agent, in reliance upon such assumption, may (in its
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32
sole discretion and without any obligation to do so) make available to the
Borrower a corresponding amount. If such corresponding amount is not in fact
made available to the Administrative Agent by such Lender and the Administrative
Agent has made available same to the Borrower, the Administrative Agent shall be
entitled to recover such corresponding amount from such Lender. If such Lender
does not pay such corresponding amount forthwith upon the Administrative Agent's
demand therefor, the Administrative Agent shall promptly notify the Borrower,
and the Borrower shall immediately pay such corresponding amount to the
Administrative Agent. The Administrative Agent shall also be entitled to
recover from such Lender or the Borrower, as the case may be, interest on such
corresponding amount in respect of each day from the date such corresponding
amount was made available by the Administrative Agent to the Borrower to the
date such corresponding amount is recovered by the Administrative Agent, at a
rate per annum equal to (i) if paid by such Lender, the Federal Funds Effective
Rate or (ii) if paid by the Borrower, the then-applicable rate of interest,
calculated in accordance with Section 2.8, for the respective Loans.
(c) Nothing in this Section 2.4 shall be deemed to relieve any Lender
from its obligation to fulfill its commitments hereunder or to prejudice any
rights that the Borrower may have against any Lender as a result of any default
by such Lender hereunder (it being understood, however, that no Lender shall be
responsible for the failure of any other Lender to fulfill its commitments
hereunder).
2.5 REPAYMENT OF LOANS; EVIDENCE OF DEBT. (a) The Borrower shall
repay to the Administrative Agent, for the benefit of the Lenders, (i) on the
Term Loan Maturity Date, the then-unpaid Term Loans, and (ii) on the Revolving
Credit Maturity Date, the then-unpaid Revolving Credit Loans. The Borrower
shall repay to the Administrative Agent, for the account of Chase, on the
Swingline Maturity Date, the then-unpaid Swingline Loans.
(b) The Borrower shall repay to the Administrative Agent, for the
benefit of the Lenders of Term Loans, on each date set forth below (each a
"REPAYMENT DATE"), the principal amount of the Term Loans set forth below
opposite such Repayment Date (each a "REPAYMENT AMOUNT"):
Number of Months From Closing Date Repayment Amount
---------------------------------- ----------------
12 $ 2,000,000
24 2,000,000
36 2,000,000
48 2,000,000
60 2,000,000
72 2,000,000
84 2,000,000
96 2,000,000
102 184,000,000
To the extent that the aggregate principal amount of Term Loans outstanding at
5:00 P.M. (New York time) on the Closing Date is less than $200,000,000, the
Repayment Amounts shall automatically be decreased, in the inverse order of
maturity, by the amount of such difference.
(c) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing the indebtedness of the Borrower to the
appropriate lending office of such Lender resulting from each Loan made by such
lending office of such Lender from time to time,
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33
including the amounts of principal and interest payable and paid to such lending
office of such Lender from time to time under this Agreement.
(d) The Administrative Agent shall maintain the Register pursuant to
Section 13.6, and a subaccount for each Lender, in which Register and
subaccounts (taken together) shall be recorded (i) the amount of each Loan made
hereunder, whether such Loan is a Term Loan, a Revolving Credit Loan or a
Swingline Loan, the Type of each Loan made and the Interest Period applicable
thereto, (ii) the amount of any principal or interest due and payable or to
become due and payable from the Borrower to each Lender or Chase hereunder and
(iii) the amount of any sum received by the Agent hereunder from the Borrower
and each Lender's share thereof.
(e) The entries made in the Register and accounts and subaccounts
maintained pursuant to paragraphs (c) and (d) of this Section 2.5 shall, to the
extent permitted by applicable law, be prima facie evidence of the existence and
amounts of the obligations of the Borrower therein recorded; PROVIDED, HOWEVER,
that the failure of any Lender or the Administrative Agent to maintain such
account, such Register or such subaccount, as applicable, or any error therein,
shall not in any manner affect the obligation of the Borrower to repay (with
applicable interest) the Loans made to the Borrower by such Lender in accordance
with the terms of this Agreement.
2.6 CONVERSIONS AND CONTINUATIONS. (a) The Borrower shall have the
option on any Business Day to convert all or a portion equal to at least the
Minimum Borrowing Amount of the outstanding principal amount of Term Loans or
Revolving Credit Loans of one Type into a Borrowing or Borrowings of another
Type or to continue the outstanding principal amount of any Eurodollar Term
Loans or Eurodollar Revolving Credit Loans as Eurodollar Term Loans or
Eurodollar Revolving Credit Loans, as the case may be, for an additional
Interest Period, PROVIDED that (i) no partial conversion of Eurodollar Term
Loans or Eurodollar Revolving Credit Loans shall reduce the outstanding
principal amount of Eurodollar Term Loans or Eurodollar Revolving Credit Loans
made pursuant to a single Borrowing to less than the Minimum Borrowing Amount,
(ii) ABR Loans may not be converted into Eurodollar Term Loans or Eurodollar
Revolving Credit Loans if a Default or Event of Default is in existence on the
date of the conversion and the Administrative Agent has or the Required Lenders
have determined in its or their sole discretion not to permit such conversion,
(iii) Eurodollar Loans may not be continued as Eurodollar Term Loans or
Eurodollar Revolving Credit Loans for an additional Interest Period if a Default
or Event of Default is in existence on the date of the proposed continuation and
the Administrative Agent has or the Required Lenders have determined in its or
their sole discretion not to permit such continuation and (iv) Borrowings
resulting from conversions pursuant to this Section 2.6 shall be limited in
number as provided in Section 2.2. Each such conversion or continuation shall
be effected by the Borrower by giving the Administrative Agent at the
Administrative Agent's Office prior to 12:00 Noon (New York time) at least three
Business Days' (or one Business Day's notice in the case of a conversion into
ABR Loans) prior written notice (or telephonic notice promptly confirmed in
writing) (each a "NOTICE OF CONVERSION OR CONTINUATION") specifying the Term
Loans or Revolving Credit Loans to be so converted or continued, the Type of
Term Loans or Revolving Credit Loans to be converted or continued into and, if
such Term Loans or Revolving Credit Loans are to be converted into or continued
as Eurodollar Term Loans or Eurodollar Revolving Credit Loans, the Interest
Period to be initially applicable thereto. The Administrative Agent shall give
each Lender notice as promptly as practicable of any such proposed conversion or
continuation affecting any of its Term Loans or Revolving Credit Loans.
(b) If any Default or Event of Default is in existence at the time of
any proposed continuation of any Eurodollar Term Loans or Eurodollar Revolving
Credit Loans and the
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34
Administrative Agent has or the Required Lenders have determined in its or their
sole discretion not to permit such continuation, such Eurodollar Term Loans or
Eurodollar Revolving Credit Loans shall be automatically converted on the last
day of the current Interest Period into ABR Loans. If upon the expiration of
any Interest Period in respect of Eurodollar Term Loans or Eurodollar Revolving
Credit Loans, the Borrower has failed to elect a new Interest Period to be
applicable thereto as provided in paragraph (a) above, the Borrower shall be
deemed to have elected to convert such Borrowing of Eurodollar Term Loans or
Eurodollar Revolving Credit Loans, as the case may be, into a Borrowing of ABR
Loans effective as of the expiration date of such current Interest Period.
2.7 PRO RATA BORROWINGS. Each Borrowing of Term Loans or Revolving
Credit Loans under this Agreement shall be granted by the Lenders PRO RATA on
the basis of their then-applicable Commitments. It is understood that no Lender
shall be responsible for any default by any other Lender in its obligation to
make Loans hereunder and that each Lender shall be obligated to make the Loans
provided to be made by it hereunder, regardless of the failure of any other
Lender to fulfill its commitments hereunder.
2.8 INTEREST. (a) The unpaid principal amount of each ABR Loan shall
bear interest from the date of the Borrowing thereof until maturity (whether by
acceleration or otherwise) at a rate per annum that shall at all times be the
Applicable ABR Margin plus the ABR in effect from time to time.
(b) The unpaid principal amount of each Eurodollar Term Loan or
Eurodollar Revolving Credit Loan shall bear interest from the date of the
Borrowing thereof until maturity thereof (whether by acceleration or otherwise)
at a rate per annum that shall at all times be the Applicable Eurodollar Margin
in effect from time to time plus the relevant Eurodollar Rate.
(c) If all or a portion of (i) the principal amount of any Loan or
(ii) any interest payable thereon shall not be paid when due (whether at the
stated maturity, by acceleration or otherwise), such overdue amount shall bear
interest at a rate per annum that is (x) in the case of overdue principal, the
rate that would otherwise be applicable thereto PLUS 2% or (y) in the case of
any overdue interest, to the extent permitted by applicable law, the rate
described in Section 2.8(a) PLUS 2% from and including the date of such
non-payment to but excluding the date on which such amount is paid in full
(after as well as before judgment).
(d) Interest on each Loan shall accrue from and including the date of
any Borrowing to but excluding the date of any repayment thereof and shall be
payable (i) in respect of each ABR Loan, quarterly in arrears on the last day of
each March, June, September and December, (ii) in respect of each Eurodollar
Term Loan or Eurodollar Revolving Credit Loan, on the last day of each Interest
Period applicable thereto and, in the case of an Interest Period in excess of
three months, on each date occurring at three-month intervals after the first
day of such Interest Period, (iii) in respect of each Loan (except, in the case
of prepayments, any ABR Loan), on any prepayment (on the amount prepaid), at
maturity (whether by acceleration or otherwise) and, after such maturity, on
demand.
(e) All computations of interest hereunder shall be made in accordance
with Section 5.5.
(f) The Administrative Agent, upon determining the interest rate for
any Borrowing of Eurodollar Loans, shall promptly notify the Borrower and the
relevant Lenders thereof. Each such determination shall, absent clearly
demonstrable error, be final and conclusive and binding on all parties hereto.
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35
2.9 INTEREST PERIODS. At the time the Borrower gives a Notice of
Borrowing or Notice of Conversion or Continuation in respect of the making of,
or conversion into or continuation as, a Borrowing of Eurodollar Term Loans or
Eurodollar Revolving Credit Loans (in the case of the initial Interest Period
applicable thereto) or prior to 10:00 A.M. (New York time) on the third Business
Day prior to the expiration of an Interest Period applicable to a Borrowing of
Eurodollar Term Loans or Eurodollar Revolving Credit Loans, the Borrower shall
have the right to elect by giving the Administrative Agent written notice (or
telephonic notice promptly confirmed in writing) the Interest Period applicable
to such Borrowing, which Interest Period shall, at the option of the Borrower,
be a one, two, three, six or (in the case of Revolving Credit Loans, if
available to all the Lenders making such loans as determined by such Lenders in
good faith based on prevailing market conditions) a nine or twelve month period,
PROVIDED that the initial Interest Period may be for a period less than one
month if agreed upon by the Borrower and the Agents. Notwithstanding anything
to the contrary contained above:
(a) the initial Interest Period for any Borrowing of Eurodollar
Term Loans or Eurodollar Revolving Credit Loans shall commence on the date
of such Borrowing (including the date of any conversion from a Borrowing of
ABR Loans) and each Interest Period occurring thereafter in respect of such
Borrowing shall commence on the day on which the next preceding Interest
Period expires;
(b) if any Interest Period relating to a Borrowing of Eurodollar
Term Loans or Eurodollar Revolving Credit Loans begins on the last Business
Day of a calendar month or begins on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period, such Interest Period shall end on the last Business Day of
the calendar month at the end of such Interest Period;
(c) if any Interest Period would otherwise expire on a day that
is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day, PROVIDED that if any Interest Period in respect of
a Eurodollar Term Loan or Eurodollar Revolving Credit Loan would otherwise
expire on a day that is not a Business Day but is a day of the month after
which no further Business Day occurs in such month, such Interest Period
shall expire on the next preceding Business Day; and
(d) the Borrower shall not be entitled to elect any Interest
Period in respect of any Eurodollar Term Loan or Eurodollar Revolving
Credit Loan if such Interest Period would extend beyond the applicable
Maturity Date of such Loan.
2.10 INCREASED COSTS, ILLEGALITY, ETC. (a) In the event that (x) in
the case of clause (i) below, the Administrative Agent or (y) in the case of
clauses (ii) and (iii) below, any Lender shall have reasonably determined (which
determination shall, absent clearly demonstrable error, be final and conclusive
and binding upon all parties hereto):
(i)on any date for determining the Eurodollar Rate for any Interest
Period that, by reason of any changes arising on or after the Closing Date
affecting the interbank Eurodollar market, adequate and fair means do not
exist for ascertaining the applicable interest rate on the basis provided
for in the definition of Eurodollar Rate; or
(ii)at any time, that such Lender shall incur increased costs or
reductions in the amounts received or receivable hereunder with respect to
any Eurodollar Loans (other than any such increase or reduction
attributable to taxes) because of (x) any change since the date hereof in
any applicable law, governmental rule, regulation, guideline or order (or
in the interpretation or
<PAGE>
36
administration thereof and including the introduction of any new law or
governmental rule, regulation, guideline or order), such as, for example,
but not limited to, a change in official reserve requirements, and/or (y)
other circumstances affecting the interbank Eurodollar market or the
position of such Lender in such market; or
(iii)at any time, that the making or continuance of any Eurodollar
Loan has become unlawful by compliance by such Lender in good faith with
any law, governmental rule, regulation, guideline or order (or would
conflict with any such governmental rule, regulation, guideline or order
not having the force of law even though the failure to comply therewith
would not be unlawful), or has become impracticable as a result of a
contingency occurring after the date hereof that materially and adversely
affects the interbank Eurodollar market;
then, and in any such event, such Lender (or the Administrative Agent, in the
case of clause (i) above) shall within a reasonable time thereafter give notice
(if by telephone confirmed in writing) to the Borrower and to the Administrative
Agent of such determination (which notice the Administrative Agent shall
promptly transmit to each of the other Lenders). Thereafter (x) in the case of
clause (i) above, Eurodollar Term Loans and Eurodollar Revolving Credit Loans
shall no longer be available until such time as the Administrative Agent
notifies the Borrower and the Lenders that the circumstances giving rise to such
notice by the Administrative Agent no longer exist (which notice the
Administrative Agent agrees to give at such time when such circumstances no
longer exist), and any Notice of Borrowing or Notice of Conversion given by the
Borrower with respect to Eurodollar Term Loans or Eurodollar Revolving Credit
Loans that have not yet been incurred shall be deemed rescinded by the Borrower,
(y) in the case of clause (ii) above, the Borrower shall pay to such Lender,
promptly after receipt of written demand therefor, such additional amounts (in
the form of an increased rate of, or a different method of calculating, interest
or otherwise as such Lender in its reasonable discretion shall determine) as
shall be required to compensate such Lender for such increased costs or
reductions in amounts receivable hereunder (it being agreed that a written
notice as to the additional amounts owed to such Lender, showing in reasonable
detail the basis for the calculation thereof, submitted to the Borrower by such
Lender shall, absent clearly demonstrable error, be final and conclusive and
binding upon all parties hereto) and (z) in the case of clause (iii) above, the
Borrower shall take one of the actions specified in Section 2.10(b) as promptly
as possible and, in any event, within the time period required by law.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 2.10(a)(ii) or (iii), the Borrower may (and
in the case of a Eurodollar Loan affected pursuant to Section 2.10(a)(iii)
shall) either (i) if the affected Eurodollar Loan is then being made pursuant to
a Borrowing, cancel said Borrowing by giving the Administrative Agent telephonic
notice (confirmed promptly in writing) thereof on the same date that the
Borrower was notified by a Lender pursuant to Section 2.10(a)(ii) or (iii) or
(ii) if the affected Eurodollar Loan is then outstanding, upon at least three
Business Days' notice to the Administrative Agent, require the affected Lender
to convert each such Eurodollar Revolving Credit Loan and Eurodollar Term Loan
into an ABR Loan, PROVIDED that if more than one Lender is affected at any time,
then all affected Lenders must be treated in the same manner pursuant to this
Section 2.10(b).
(c) If, after the date hereof, the adoption of any applicable law,
rule or regulation regarding capital adequacy, or any change therein, or any
change in the interpretation or administration thereof by any governmental
authority, the National Association of Insurance Commissioners, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by a Lender or its parent with any request or directive made or
adopted after the date hereof regarding capital adequacy (whether or not having
the
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37
force of law) of any such authority, association, central bank or comparable
agency, has or would have the effect of reducing the rate of return on such
Lender's or its parent's capital or assets as a consequence of such Lender's
commitments or obligations hereunder to a level below that which such Lender or
its parent could have achieved but for such adoption, effectiveness, change or
compliance (taking into consideration such Lender's or its parent's policies
with respect to capital adequacy), then from time to time, promptly after demand
by such Lender (with a copy to the Administrative Agent), the Borrower shall pay
to such Lender such additional amount or amounts as will compensate such Lender
or its parent for such reduction, it being understood and agreed, however, that
a Lender shall not be entitled to such compensation as a result of such Lender's
compliance with, or pursuant to any request or directive to comply with, any
such law, rule or regulation as in effect on the date hereof. Each Lender, upon
determining in good faith that any additional amounts will be payable pursuant
to this Section 2.10(c), will give prompt written notice thereof to the
Borrower, which notice shall set forth in reasonable detail the basis of the
calculation of such additional amounts, although the failure to give any such
notice shall not, subject to Section 2.13, release or diminish any of the
Borrower's obligations to pay additional amounts pursuant to this Section
2.10(c) upon receipt of such notice.
2.11 COMPENSATION. If (a) any payment of principal of any Eurodollar
Term Loan or Eurodollar Revolving Credit Loan is made by the Borrower to or for
the account of a Lender other than on the last day of the Interest Period for
such Eurodollar Loan as a result of a payment or conversion pursuant to Section
2.5, 2.6, 2.10, 5.1, 5.2 or 13.7, as a result of acceleration of the maturity of
the Loans pursuant to Section 11 or for any other reason, (b) any Borrowing of
Eurodollar Term Loans or Eurodollar Revolving Credit Loans is not made as a
result of a withdrawn Notice of Borrowing, (c) any ABR Loan is not converted
into a Eurodollar Term Loan or Eurodollar Revolving Credit Loan as a result of a
withdrawn Notice of Conversion or Continuation, (d) any Eurodollar Loan is not
continued as a Eurodollar Term Loan or Eurodollar Revolving Credit Loan as a
result of a withdrawn Notice of Conversion or Continuation or (e) any prepayment
of principal of any Eurodollar Term Loan or Eurodollar Revolving Credit Loan is
not made as a result of a withdrawn notice of prepayment pursuant to Section 5.1
or 5.2, the Borrower shall, after receipt of a written request by such Lender
(which request shall set forth in reasonable detail the basis for requesting
such amount), pay to the Administrative Agent for the account of such Lender any
amounts required to compensate such Lender for any additional losses, costs or
expenses that such Lender may reasonably incur as a result of such payment,
failure to convert, failure to continue or failure to prepay, including, without
limitation, any loss, cost or expense (excluding loss of anticipated profits)
actually incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by any Lender to fund or maintain such Eurodollar Loan.
2.12 CHANGE OF LENDING OFFICE. Each Lender agrees that, upon the
occurrence of any event giving rise to the operation of Section 2.10(a)(ii),
2.10(a)(iii), 2.10(b), 3.5 or 5.4 with respect to such Lender, it will, if
requested by the Borrower, use reasonable efforts (subject to overall policy
considerations of such Lender) to designate another lending office for any Loans
affected by such event, PROVIDED that such designation is made on such terms
that such Lender and its lending office suffer no economic, legal or regulatory
disadvantage, with the object of avoiding the consequence of the event giving
rise to the operation of any such Section. Nothing in this Section 2.12 shall
affect or postpone any of the obligations of the Borrower or the right of any
Lender provided in Section 2.10, 3.5 or 5.4.
2.13 NOTICE OF CERTAIN COSTS. Notwithstanding anything in this
Agreement to the contrary, to the extent any notice required by Section 2.10,
2.11, 3.5 or 5.4 is given by any Lender more than 180 days after such Lender has
knowledge (or should have had knowledge) of
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38
the occurrence of the event giving rise to the additional cost, reduction in
amounts, loss, tax or other additional amounts described in such Sections, such
Lender shall not be entitled to compensation under Section 2.10, 2.11, 3.5 or
5.4, as the case may be, for any such amounts incurred or accruing prior to the
giving of such notice to the Borrower.
SECTION 3. LETTERS OF CREDIT.
3.1 LETTERS OF CREDIT. (a) Subject to and upon the terms and
conditions herein set forth, the Borrower, at any time and from time to time on
or after the Closing Date and prior to the L/C Maturity Date, may request that
the Letter of Credit Issuer issue, for the account of the Borrower, a standby
letter of credit or letters of credit in such form as may be approved by the
Letter of Credit Issuer in its reasonable discretion.
(b) Notwithstanding the foregoing, (i) no Letter of Credit shall be issued
the Stated Amount of which, when added to the Letter of Credit Outstanding at
such time, would exceed the Letter of Credit Commitment then in effect; (ii) no
Letter of Credit shall be issued the Stated Amount of which, when added to the
sum of (x) the Letter of Credit Outstanding at such time and (y) the aggregate
principal of all Revolving Credit Loans and Swingline Loans then outstanding,
would exceed the Total Revolving Credit Commitment then in effect; (iii) each
Letter of Credit shall have an expiry date occurring no later than one year
after the date of issuance thereof, unless otherwise agreed upon by the
Administrative Agent and the Letter of Credit Issuer, PROVIDED that in no event
shall such expiry date occur later than the L/C Maturity Date; (iv) each Letter
of Credit shall be denominated in Dollars; and (v) no Letter of Credit shall be
issued by the Letter of Credit Issuer after it has received a written notice
from the Borrower or any Lender stating that a Default or Event of Default has
occurred and is continuing until such time as the Letter of Credit Issuer shall
have received a written notice of (x) rescission of such notice from the party
or parties originally delivering such notice or (y) the waiver of such Default
or Event of Default in accordance with the provisions of Section 13.1.
(c) Upon at least one Business Day's prior written notice (or telephonic
notice promptly confirmed in writing) to the Administrative Agent and the Letter
of Credit Issuer (which notice the Administrative Agent shall promptly transmit
to each of the Lenders), the Borrower shall have the right, on any day,
permanently to terminate or reduce the Letter of Credit Commitment in whole or
in part, PROVIDED that, after giving effect to such termination or reduction,
the Letter of Credit Outstanding shall not exceed the Letter of Credit
Commitment.
3.2 LETTER OF CREDIT REQUESTS. (a) Whenever the Borrower desires
that a Letter of Credit be issued for its account, it shall give the
Administrative Agent and the Letter of Credit Issuer at least five (or such
lesser number as may be agreed upon by the Administrative Agent and the Letter
of Credit Issuer) Business Days' written notice thereof. Each notice shall be
executed by the Borrower and shall be in the form of Exhibit D (each a "LETTER
OF CREDIT REQUEST"). The Administrative Agent shall promptly transmit copies of
each Letter of Credit Request to each Lender.
(b) The making of each Letter of Credit Request shall be deemed to be a
representation and warranty by the Borrower that the Letter of Credit may be
issued in accordance with, and will not violate the requirements of, Section
3.1(b).
3.3 LETTER OF CREDIT PARTICIPATIONS. (a) Immediately upon the
issuance by the Letter of Credit Issuer of any Letter of Credit, the Letter of
Credit Issuer shall be deemed to have
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39
sold and transferred to each other Lender that has a Revolving Credit Commitment
(each such other Lender, in its capacity under this Section 3.3, an "L/C
PARTICIPANT"), and each such L/C Participant shall be deemed irrevocably and
unconditionally to have purchased and received from the Letter of Credit Issuer,
without recourse or warranty, an undivided interest and participation (each an
"L/C PARTICIPATION"), to the extent of such L/C Participant's Revolving Credit
Commitment Percentage, in such Letter of Credit, each substitute letter of
credit, each drawing made thereunder and the obligations of the Borrower under
this Agreement with respect thereto, and any security therefor or guaranty
pertaining thereto (although Letter of Credit Fees will be paid directly to the
Administrative Agent for the ratable account of the L/C Participants as provided
in Section 4.1(b) and the L/C Participants shall have no right to receive any
portion of any Fronting Fees).
(b) In determining whether to pay under any Letter of Credit, the
Letter of Credit Issuer shall have no obligation relative to the L/C
Participants other than to confirm that any documents required to be delivered
under such Letter of Credit have been delivered and that they appear to comply
on their face with the requirements of such Letter of Credit. Any action taken
or omitted to be taken by the Letter of Credit Issuer under or in connection
with any Letter of Credit issued by it, if taken or omitted in the absence of
gross negligence or willful misconduct, shall not create for the Letter of
Credit Issuer any resulting liability.
(c) In the event that the Letter of Credit Issuer makes any payment
under any Letter of Credit issued by it and the Borrower shall not have repaid
such amount in full to the Letter of Credit Issuer pursuant to Section 3.4(a),
the Letter of Credit Issuer shall promptly notify the Administrative Agent and
each L/C Participant of such failure, and each L/C Participant shall promptly
and unconditionally pay to the Administrative Agent, for the account of the
Letter of Credit Issuer, the amount of such L/C Participant's Revolving Credit
Commitment Percentage of such unreimbursed payment in Dollars and in same day
funds; PROVIDED, HOWEVER, that no L/C Participant shall be obligated to pay to
the Administrative Agent for the account of the Letter of Credit Issuer its
Revolving Credit Commitment Percentage of such unreimbursed amount arising from
any wrongful payment made by the Letter of Credit Issuer under a Letter of
Credit as a result of acts or omissions constituting willful misconduct or gross
negligence on the part of the Letter of Credit Issuer. If the Letter of Credit
Issuer so notifies, prior to 11:00 A.M. (New York time) on any Business Day, any
L/C Participant required to fund a payment under a Letter of Credit, such L/C
Participant shall make available to the Administrative Agent for the account of
the Letter of Credit Issuer such L/C Participant's Revolving Credit Commitment
Percentage of the amount of such payment on such Business Day in same day funds.
If and to the extent such L/C Participant shall not have so made its Revolving
Credit Commitment Percentage of the amount of such payment available to the
Administrative Agent for the account of the Letter of Credit Issuer, such L/C
Participant agrees to pay to the Administrative Agent for the account of the
Letter of Credit Issuer, forthwith on demand, such amount, together with
interest thereon for each day from such date until the date such amount is paid
to the Administrative Agent for the account of the Letter of Credit Issuer at
the Federal Funds Effective Rate. The failure of any L/C Participant to make
available to the Administrative Agent for the account of the Letter of Credit
Issuer its Revolving Credit Commitment Percentage of any payment under any
Letter of Credit shall not relieve any other L/C Participant of its obligation
hereunder to make available to the Administrative Agent for the account of the
Letter of Credit Issuer its Revolving Credit Commitment Percentage of any
payment under such Letter of Credit on the date required, as specified above,
but no L/C Participant shall be responsible for the failure of any other L/C
Participant to make available to the Administrative Agent such other L/C
Participant's Revolving Credit Commitment Percentage of any such payment.
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40
(d) Whenever the Letter of Credit Issuer receives a payment in respect
of an unpaid reimbursement obligation as to which the Administrative Agent has
received for the account of the Letter of Credit Issuer any payments from the
L/C Participants pursuant to paragraph (c) above, the Letter of Credit Issuer
shall pay to the Administrative Agent and the Administrative Agent shall
promptly pay to each L/C Participant that has paid its Revolving Credit
Commitment Percentage of such reimbursement obligation, in Dollars and in same
day funds, an amount equal to such L/C Participant's share (based upon the
proportionate aggregate amount originally funded by such L/C Participant to the
aggregate amount funded by all L/C Participants) of the principal amount of such
reimbursement obligation and interest thereon accruing after the purchase of the
respective L/C Participations.
(e) The obligations of the L/C Participants to make payments to the
Administrative Agent for the account of the Letter of Credit Issuer with respect
to Letters of Credit shall be irrevocable and not subject to counterclaim,
set-off or other defense or any other qualification or exception whatsoever and
shall be made in accordance with the terms and conditions of this Agreement
under all circumstances, including, without limitation, any of the following
circumstances:
(i any lack of validity or enforceability of this Agreement
or any of the other Credit Documents;
(ii the existence of any claim, set-off, defense or other
right that the Borrower may have at any time against a beneficiary named in
a Letter of Credit, any transferee of any Letter of Credit (or any Person
for whom any such transferee may be acting), the Administrative Agent, the
Letter of Credit Issuer, any Lender or other Person, whether in connection
with this Agreement, any Letter of Credit, the transactions contemplated
herein or any unrelated transactions (including any underlying transaction
between the Borrower and the beneficiary named in any such Letter of
Credit);
(iii any draft, certificate or any other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Credit
Documents; or
(v the occurrence of any Default or Event of Default;
PROVIDED, HOWEVER, that no L/C Participant shall be obligated to pay to the
Administrative Agent for the account of the Letter of Credit Issuer its
Revolving Credit Commitment Percentage of any unreimbursed amount arising from
any wrongful payment made by the Letter of Credit Issuer under a Letter of
Credit as a result of acts or omissions constituting willful misconduct or gross
negligence on the part of the Letter of Credit Issuer.
3.4 AGREEMENT TO REPAY LETTER OF CREDIT DRAWINGS. (a) The Borrower
hereby agrees to reimburse the Letter of Credit Issuer, by making payment to the
Administrative Agent in Dollars in immediately available funds at the
Administrative Agent's Office, for any payment or disbursement made by the
Letter of Credit Issuer under any Letter of Credit (each such amount so paid
until reimbursed, an "UNPAID DRAWING") immediately after, and in any event on
the date of, such payment, with interest on the amount so paid or disbursed by
the Letter of Credit Issuer, to the extent not reimbursed prior to 5:00 P.M.
(New York time) on the date of
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41
such payment or disbursement, from and including the date paid or disbursed to
but excluding the date the Letter of Credit Issuer is reimbursed therefor, at a
rate per annum that shall at all times be the Applicable ABR Margin plus the ABR
as in effect from time to time, PROVIDED that, notwithstanding anything
contained in this Agreement to the contrary, (i) unless the Borrower shall have
notified the Administrative Agent and the Letter of Credit Issuer prior to
10:00 A.M. on the date of such drawing that the Borrower intends to reimburse
the Letter of Credit Issuer for the amount of such drawing with funds other than
the proceeds of Loans, the Borrower shall be deemed to have given a Notice of
Borrowing to the Administrative Agent requesting that the Lenders make Revolving
Credit Loans (which shall initially be ABR Loans) on the date on which such
drawing is honored in an amount equal to the amount of such drawing and
(ii) each Lender shall, on such date, make Revolving Credit Loans in an amount
equal to such Lender's pro rata portion of such Borrowing in accordance with the
provisions of Section 2.4.
(b) The Borrower's obligations under this Section 3.4 to reimburse the
Letter of Credit Issuer with respect to Unpaid Drawings (including, in each
case, interest thereon) shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to payment
that the Borrower or any other Person may have or have had against the Letter of
Credit Issuer, the Administrative Agent or any Lender (including in its capacity
as an L/C Participant), including, without limitation, any defense based upon
the failure of any drawing under a Letter of Credit (each a "DRAWING") to
conform to the terms of the Letter of Credit or any non-application or
misapplication by the beneficiary of the proceeds of such Drawing, PROVIDED that
the Borrower shall not be obligated to reimburse the Letter of Credit Issuer for
any wrongful payment made by the Letter of Credit Issuer under the Letter of
Credit issued by it as a result of acts or omissions constituting willful
misconduct or gross negligence on the part of the Letter of Credit Issuer.
(c) Each payment by the Letter of Credit Issuer under any Letter of
Credit shall constitute a request by the Borrower for an ABR Revolving Credit
Loan in the amount of the Unpaid Drawing in respect of such Letter of Credit.
The Letter of Credit Issuer shall notify the Borrower and the Administrative
Agent, by 10:00 A.M. (New York time) on any Business Day on which the Letter of
Credit Issuer intends to honor a drawing under a Letter of Credit, of (i) the
Letter of Credit Issuer's intention to honor such drawing and (ii) the amount
of such drawing. Unless otherwise instructed by the Borrower by 10:30 A.M. (New
York time) on such Business Day, the Administrative Agent shall promptly notify
each Lender of such drawing and the amount of its Revolving Credit Loan to be
made in respect thereof, and each Lender shall be irrevocably obligated to make
an ABR Revolving Credit Loan to the Borrower in the amount of its Revolving
Credit Commitment Percentage of the applicable Unpaid Drawing by 12:00 noon (New
York time) on such Business Day by making the amount of such Revolving Credit
Loan available to the Administrative Agent at the Administrative Agent's Office.
Such Revolving Credit Loans shall be made without regard to the Minimum
Borrowing Amount. The Administrative Agent shall use the proceeds of such
Revolving Credit Loans solely for purpose of reimbursing the Letter of Credit
Issuer for the related Unpaid Drawing.
3.5 INCREASED COSTS. If after the date hereof, the adoption of any
applicable law, rule or regulation, or any change therein, or any change in the
interpretation or administration thereof by any Governmental Authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or actual compliance by the Letter of Credit Issuer or any L/C
Participant with any request or directive made or adopted after the date hereof
(whether or not having the force of law), by any such authority, central bank or
comparable agency shall either (a) impose, modify or make applicable any
reserve, deposit, capital adequacy or similar requirement against letters of
credit issued by the Letter of Credit Issuer, or any L/C Participant's
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42
L/C Participation therein, or (b) impose on the Letter of Credit Issuer or any
L/C Participant any other conditions affecting its obligations under this
Agreement in respect of Letters of Credit or L/C Participations therein or any
Letter of Credit or such L/C Participant's L/C Participation therein; and the
result of any of the foregoing is to increase the cost to the Letter of Credit
Issuer or such L/C Participant of issuing, maintaining or participating in any
Letter of Credit, or to reduce the amount of any sum received or receivable by
the Letter of Credit Issuer or such L/C Participant hereunder (other than any
such increase or reduction attributable to taxes) in respect of Letters of
Credit or L/C Participations therein, then, promptly after receipt of written
demand to the Borrower by the Letter of Credit Issuer or such L/C Participant,
as the case may be (a copy of which notice shall be sent by the Letter of Credit
Issuer or such L/C Participant to the Administrative Agent), the Borrower shall
pay to the Letter of Credit Issuer or such L/C Participant such additional
amount or amounts as will compensate the Letter of Credit Issuer or such L/C
Participant for such increased cost or reduction, it being understood and
agreed, however, that the Letter of Credit Issuer or a L/C Participant shall not
be entitled to such compensation as a result of such Person's compliance with,
or pursuant to any request or directive to comply with, any such law, rule or
regulation as in effect on the date hereof. A certificate submitted to the
Borrower by the Letter of Credit Issuer or a L/C Participant, as the case may be
(a copy of which certificate shall be sent by the Letter of Credit Issuer or
such L/C Participant to the Administrative Agent), setting forth in reasonable
detail the basis for the determination of such additional amount or amounts
necessary to compensate the Letter of Credit Issuer or such L/C Participant as
aforesaid shall be conclusive and binding on the Borrower absent clearly
demonstrable error.
3.6 SUCCESSOR LETTER OF CREDIT ISSUER. The Letter of Credit Issuer
may resign as Letter of Credit Issuer upon 60 days' prior written notice to the
Administrative Agent, the Lenders and the Borrower. If the Letter of Credit
Issuer shall resign as Letter of Credit Issuer under this Agreement, then the
Borrower shall appoint from among the Lenders with Revolving Credit Commitments
a successor issuer of Letters of Credit, whereupon such successor issuer shall
succeed to the rights, powers and duties of the Letter of Credit Issuer, and the
term "Letter of Credit Issuer" shall mean such successor issuer effective upon
such appointment. At the time such resignation shall become effective, the
Borrower shall pay to the resigning Letter of Credit Issuer all accrued and
unpaid fees pursuant to Sections 4.1(c) and (d). The acceptance of any
appointment as the Letter of Credit Issuer hereunder by a successor Lender shall
be evidenced by an agreement entered into by such successor, in a form
satisfactory to the Borrower and the Administrative Agent and, from and after
the effective date of such agreement, such successor Lender shall have all the
rights and obligations of the previous Letter of Credit Issuer under this
Agreement and the other Credit Documents. After the resignation of the Letter
of Credit Issuer hereunder, the resigning Letter of Credit Issuer shall remain a
party hereto and shall continue to have all the rights and obligations of a
Letter of Credit Issuer under this Agreement and the other Loan Documents with
respect to Letters of Credit issued by it prior to such resignation, but shall
not be required to issue additional Letters of Credit. After any retiring
Letter of Credit Issuer's resignation as Letter of Credit Issuer, the provisions
of this Agreement relating to the Letter of Credit Issuer shall inure to its
benefit as to any actions taken or omitted to be taken by it (a) while it was
Letter of Credit Issuer under this Agreement or (b) at any time with respect to
Letters of Credit issued by such Letter of Credit Issuer.
SECTION 4. FEES; COMMITMENTS.
4.1 FEES. (a) The Borrower agrees to pay to the Administrative
Agent, for the account of each Lender having a Revolving Credit Commitment (in
each case pro rata according
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43
to the respective Commitments of all such Lenders), a commitment fee for each
day from and including the Closing Date to but excluding the Final Date. Such
commitment fee shall be payable in arrears (i) June 30, 1998 (for the period
ended on such day), (ii) on the last day of each March, June, September and
December (for the three-month period (or portion thereof) ended on the such day
for which no payment has been received pursuant to clause (i) above) and
(iii) on the Final Date (for the period ended on such date for which no payment
has been received pursuant to clause (ii) above), and shall be computed for each
day during such period at a rate per annum equal to the Commitment Fee Rate in
effect on such day on the Available Commitments in effect on such day.
Notwithstanding the foregoing, the Borrower shall not be obligated to pay any
amounts to any Defaulting Lender pursuant to this Section 4.1.
(b) The Borrower agrees to pay to the Administrative Agent for the
account of the Lenders PRO RATA on the basis of their respective Letter of
Credit Exposure, a fee in respect of each Letter of Credit (the "LETTER OF
CREDIT FEE"), for the period from and including the date of issuance of such
Letter of Credit to but not including the termination date of such Letter of
Credit computed at the per annum rate for each day equal to the Applicable
Eurodollar Margin for Revolving Credit Loans minus 0.125% per annum on the
average daily Stated Amount of such Letter of Credit. Such Letter of Credit
Fees shall be due and payable quarterly in arrears on the last day of each
March, June, September and December and on the date upon which the Total
Revolving Credit Commitment terminates and the Letter of Credit Outstandings
shall have been reduced to zero.
(c) The Borrower agrees to pay to the Administrative Agent for the
account of the Letter of Credit Issuer a fee in respect of each Letter of Credit
issued by it (the "FRONTING FEE"), for the period from and including the date of
issuance of such Letter of Credit to but not including the termination date of
such Letter of Credit, computed at the rate for each day equal to 0.125% per
annum on the average daily Stated Amount of such Letter of Credit. Such
Fronting Fees shall be due and payable quarterly in arrears on the last day of
each March, June, September and December and on the date upon which the Total
Revolving Credit Commitment terminates and the Letter of Credit Outstandings
shall have been reduced to zero.
(d) The Borrower agrees to pay directly to the Letter of Credit Issuer
upon each issuance of, drawing under, and/or amendment of, a Letter of Credit
issued by it such amount as the Letter of Credit Issuer and the Borrower shall
have agreed upon for issuances of, drawings under or amendments of, letters of
credit issued by it.
(e) The Borrower agrees to pay to the Administrative Agent, for the
benefit of the Agents, on the Closing Date, the fees in the amounts and on the
dates previously agreed to in writing by the Borrower and the Agents. The
Administrative Agent agrees to pay to each Lender, on behalf of the Agents, for
each Lender's own account on the Closing Date, the fees in the amounts and on
the dates previously agreed to in writing by the Agents and such Lender.
4.2 VOLUNTARY REDUCTION OF REVOLVING CREDIT COMMITMENTS. Upon at
least one Business Day's prior written notice (or telephonic notice promptly
confirmed in writing) to the Administrative Agent at the Administrative Agent's
Office (which notice the Administrative Agent shall promptly transmit to each of
the Lenders), the Borrower shall have the right, without premium or penalty, on
any day, permanently to terminate or reduce the Revolving Credit Commitments in
whole or in part, PROVIDED that (a) any such reduction shall apply
proportionately and permanently to reduce the Revolving Credit Commitment of
each of the Lenders, (b) any partial reduction pursuant to this Section 4.2
shall be in the amount of at least $1,000,000 and (c) after giving effect to
such termination or reduction and to any prepayments of
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the Loans made on the date thereof in accordance with this Agreement, the sum of
(i) the aggregate outstanding principal amount of the Revolving Credit Loans and
the Swingline Loans and (ii) the Letter of Credit Outstandings shall not exceed
the Total Revolving Credit Commitment.
4.3 MANDATORY TERMINATION OF COMMITMENTS. (a) The Total Term Loan
Commitment shall terminate at 5:00 P.M. (New York time) on the Closing Date.
(b) The Total Revolving Credit Commitment shall terminate at 5:00 P.M.
(New York time) on the Revolving Credit Maturity Date.
(c) The Swingline Commitment shall terminate at 5:00 P.M. (New York time)
on the Swingline Maturity Date.
SECTION 5. PAYMENTS.
5.1 VOLUNTARY PREPAYMENTS. The Borrower shall have the right to
prepay Term Loans, Revolving Credit Loans and Swingline Loans, without premium
or penalty, in whole or in part from time to time on the following terms and
conditions: (a) the Borrower shall give the Administrative Agent at the
Administrative Agent's Office written notice (or telephonic notice promptly
confirmed in writing) of its intent to make such prepayment, the amount of such
prepayment and (in the case of Eurodollar Term Loans and Eurodollar Revolving
Credit Loans) the specific Borrowing(s) pursuant to which made, which notice
shall be given by the Borrower no later than (i) in the case of Term Loans or
Revolving Credit Loans, 10:00 A.M. (New York time) one Business Day prior to, or
(ii) in the case of Swingline Loans, 10:00 A.M. (New York time) on, the date of
such prepayment and shall promptly be transmitted by the Administrative Agent to
each of the Lenders or Chase, as the case may be; (b) each partial prepayment of
any Borrowing of Term Loans or Revolving Credit Loans shall be in a multiple of
$100,000 and in an aggregate principal amount of at least $1,000,000 and each
partial prepayment of Swingline Loans shall be in a multiple of $100,000 and in
an aggregate principal amount of at least $100,000, PROVIDED that no partial
prepayment of Eurodollar Term Loans or Eurodollar Revolving Credit Loans made
pursuant to a single Borrowing shall reduce the outstanding Eurodollar Term
Loans or Eurodollar Revolving Credit Loans made pursuant to such Borrowing to an
amount less than the Minimum Borrowing Amount for Eurodollar Term Loans or
Eurodollar Revolving Credit Loans; and (c) any prepayment of Eurodollar Term
Loans or Eurodollar Revolving Credit Loans pursuant to this Section 5.1 on any
day other than the last day of an Interest Period applicable thereto shall be
subject to compliance by the Borrower with the applicable provisions of Section
2.11. Each prepayment of Term Loans pursuant to this Section 5.1 shall be
applied to reduce the Repayment Amounts in such order as the Borrower may
determine. At the Borrower's election in connection with any prepayment
pursuant to this Section 5.1, such prepayment shall not be applied to any Term
Loan or Revolving Credit Loan of a Defaulting Lender.
5.2 MANDATORY PREPAYMENTS. (a) TERM LOAN PREPAYMENTS. (i) On each
occasion that a Prepayment Event occurs, the Borrower shall, within five
Business Days after the occurrence of such Prepayment Event, offer to prepay, in
accordance with paragraph (c) below, the principal amount of Term Loans in an
amount equal to 100% of the Net Cash Proceeds from such Prepayment Event.
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45
(ii) Not later than the date that is six months after the last day of
any fiscal year (commencing with the fiscal year ending December 31, 1998), the
Borrower shall offer to prepay, in accordance with paragraph (c) below, the
principal of Term Loans in an amount equal to (x) 50% of Excess Cash Flow for
such fiscal year (or, in the case of the fiscal year ending December 31, 1998,
for the period from and including the Closing Date to and including December 31,
1998), MINUS (y) the amount of any such Excess Cash Flow that the Borrower has,
prior to such date, reinvested in the business of the Borrower or any of its
Subsidiaries (subject to Section 9.14).
(b) AGGREGATE REVOLVING CREDIT OUTSTANDINGS. If on any date the sum
of the outstanding principal amount of the Revolving Credit Loans and Swingline
Loans and the aggregate amount of Letter of Credit Outstandings (all the
foregoing, collectively, the "AGGREGATE REVOLVING CREDIT OUTSTANDINGS") exceeds
the Total Revolving Credit Commitment as then in effect, the Borrower shall
forthwith repay on such date the principal amount of Swingline Loans and, after
all Swingline Loans have been paid in full, Revolving Credit Loans, in an amount
equal to such excess. If, after giving effect to the prepayment of all
outstanding Swingline Loans and Revolving Credit Loans, the Aggregate Revolving
Credit Outstandings exceed the Total Revolving Credit Commitment then in effect,
the Borrower shall pay to the Administrative Agent an amount in cash equal to
such excess and the Administrative Agent shall hold such payment for the benefit
of the Lenders as security for the obligations of the Borrower hereunder
(including, without limitation, obligations in respect of Letter of Credit
Outstandings) pursuant to a cash collateral agreement to be entered into in form
and substance satisfactory to the Administrative Agent (which shall permit
certain investments in Permitted Investments satisfactory to the Administrative
Agent, until the proceeds are applied to the secured obligations).
(c) APPLICATION TO REPAYMENT AMOUNTS. Each prepayment of Term Loans
required by Section 5.2(a) shall be applied to reduce the Repayment Amounts in
such order as the Borrower may determine. With respect to each such prepayment,
(i) the Borrower will, not later than the date specified in Section 5.2(a) for
offering to make such prepayment, give the Administrative Agent telephonic
notice (promptly confirmed in writing) requesting that the Administrative Agent
provide notice of such prepayment to each Term Loan Lender, (ii) each Term Loan
Lender will have the right to refuse any such prepayment by giving written
notice of such refusal to the Borrower within fifteen Business Days after such
Lender's receipt of notice from the Administrative Agent of such prepayment (and
the Borrower shall not prepay any such Term Loans until the date that is
specified in the immediately following clause), (iii) the Borrower will make all
such prepayments not so refused upon the earlier of (x) such fifteenth Business
Day and (y) such time as the Borrower has received notice from each Lender that
it consents to or refuses such prepayment and (iv) any prepayment so refused may
be retained by the Borrower.
(d) APPLICATION TO TERM LOANS. With respect to each prepayment of
Term Loans required by Section 5.2(a), the Borrower may designate the Types of
Loans that are to be prepaid and the specific Borrowing(s) pursuant to which
made, PROVIDED that (i) Eurodollar Term Loans may be designated for prepayment
pursuant to this Section 5.2 only on the last day of an Interest Period
applicable thereto unless all Eurodollar Term Loans with Interest Periods ending
on such date of required prepayment and all ABR Term Loans have been paid in
full; and (ii) if any prepayment of Eurodollar Term Loans made pursuant to a
single Borrowing shall reduce the outstanding Term Loans made pursuant to such
Borrowing to an amount less than the Minimum Borrowing Amount for Eurodollar
Term Loans, such Borrowing shall immediately be converted into ABR Loans. In
the absence of a designation by the Borrower as described in the preceding
sentence, the Administrative Agent shall, subject to the above, make such
designation in its
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46
reasonable discretion with a view, but no obligation, to minimize breakage costs
owing under Section 2.11.
(e) APPLICATION TO REVOLVING CREDIT LOANS. With respect to each
prepayment of Revolving Credit Loans required by Section 5.2(b), the Borrower
may designate the Types of Loans that are to be prepaid and the specific
Borrowing(s) pursuant to which made, PROVIDED that (i) Eurodollar Revolving
Credit Loans may be designated for prepayment pursuant to this Section 5.2 only
on the last day of an Interest Period applicable thereto unless all Eurodollar
Revolving Credit Loans with Interest Periods ending on such date of required
prepayment and all ABR Loans have been paid in full; (ii) if any prepayment of
Eurodollar Revolving Credit Loans made pursuant to a single Borrowing shall
reduce the outstanding Revolving Credit Loans made pursuant to such Borrowing to
an amount less than the Minimum Borrowing Amount for Eurodollar Revolving Credit
Loans, such Borrowing shall immediately be converted into ABR Loans; (iii) each
prepayment of any Loans made pursuant to a Borrowing shall be applied PRO RATA
among such Loans; and (iv) notwithstanding the provisions of the preceding
clause (iii), no prepayment made pursuant to Section 5.2(b) of Revolving Credit
Loans shall be applied to the Revolving Credit Loans of any Defaulting Lender.
In the absence of a designation by the Borrower as described in the preceding
sentence, the Administrative Agent shall, subject to the above, make such
designation in its reasonable discretion with a view, but no obligation, to
minimize breakage costs owing under Section 2.11.
(f) EURODOLLAR INTEREST PERIODS. In lieu of making any payment
pursuant to this Section 5.2 in respect of any Eurodollar Loan other than on the
last day of the Interest Period therefor, so long as no Default or Event of
Default shall have occurred and be continuing, the Borrower at its option may
deposit with the Administrative Agent an amount equal to the amount of the
Eurodollar Loan to be prepaid and such Eurodollar Loan shall be repaid on the
last day of the Interest Period therefor in the required amount. Such deposit
shall be held by the Administrative Agent in a corporate time deposit account
established on terms reasonably satisfactory to the Administrative Agent,
earning interest at the then-customary rate for accounts of such type. Such
deposit shall constitute cash collateral for the Obligations, PROVIDED that the
Borrower may at any time direct that such deposit be applied to make the
applicable payment required pursuant to this Section 5.2.
(g) MINIMUM AMOUNT. No prepayment shall be required pursuant to
Section 5.2(a)(i) unless and until the amount at any time of Net Cash Proceeds
from Prepayment Events required to be applied at or prior to such time pursuant
to such Section and not yet applied at or prior to such time to prepay Term
Loans pursuant to such Section exceeds $15,000,000 in the aggregate.
(h) FOREIGN ASSET SALES. Notwithstanding any other provisions of
this Section 5.2, (i) to the extent that any of or all the Net Cash Proceeds of
any asset sale by a Restricted Foreign Subsidiary giving rise to an Asset Sale
Prepayment Event (a "FOREIGN ASSET SALE") are prohibited or delayed by
applicable local law from being repatriated to the United States, the portion of
such Net Cash Proceeds so affected will not be required to be applied to repay
Term Loans at the times provided in this Section 5.2 but may be retained by the
applicable Restricted Foreign Subsidiary so long, but only so long, as the
applicable local law will not permit repatriation to the United States (the
Borrower hereby agreeing to cause the applicable Restricted Foreign Subsidiary
to promptly take all actions required by the applicable local law to permit such
repatriation), and once such repatriation of any of such affected Net Cash
Proceeds is permitted under the applicable local law, such repatriation will be
immediately effected and such repatriated Net Cash Proceeds will be promptly
(and in any event not later than two Business Days after such repatriation)
applied (net of additional taxes payable or reserved against as a
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47
result thereof) to the repayment of the Term Loans pursuant to this Section 5.2
and (ii) to the extent that the Borrower has determined in good faith that
repatriation of any of or all the Net Cash Proceeds of any Foreign Asset Sale
would have a material adverse tax cost consequence with respect to such Net Cash
Proceeds, the Net Cash Proceeds so affected may be retained by the applicable
Restricted Foreign Subsidiary, PROVIDED that, in the case of this clause (ii),
on or before the date on which any Net Cash Proceeds so retained would otherwise
have been required to be applied to reinvestments or prepayments pursuant to
Section 5.2(a), (x) the Borrower applies an amount equal to such Net Cash
Proceeds to such reinvestments or prepayments as if such Net Cash Proceeds had
been received by the Borrower rather than such Restricted Foreign Subsidiary,
less the amount of additional taxes that would have been payable or reserved
against if such Net Cash Proceeds had been repatriated (or, if less, the Net
Cash Proceeds that would be calculated if received by such Foreign Subsidiary)
or (y) such Net Cash Proceeds are applied to the repayment of Indebtedness of a
Restricted Foreign Subsidiary.
5.3 METHOD AND PLACE OF PAYMENT. (a) Except as otherwise
specifically provided herein, all payments under this Agreement shall be made,
without set-off, counterclaim or deduction of any kind, to the Administrative
Agent for the ratable account of the Lenders entitled thereto, the Letter of
Credit Issuer or Chase, as the case may be, not later than 12:00 Noon (New York
time) on the date when due and shall be made in immediately available funds and
in lawful money of the United States of America at the Administrative Agent's
Office, it being understood that written or facsimile notice by the Borrower to
the Administrative Agent to make a payment from the funds in the Borrower's
account at the Administrative Agent's Office shall constitute the making of such
payment to the extent of such funds held in such account. The Administrative
Agent will thereafter cause to be distributed on the same day (if payment was
actually received by the Administrative Agent prior to 2:00 P.M. (New York time)
on such day) like funds relating to the payment of principal or interest or Fees
ratably to the Lenders entitled thereto.
(b) Any payments under this Agreement that are made later than
2:00 P.M. (New York time) shall be deemed to have been made on the next
succeeding Business Day. Whenever any payment to be made hereunder shall be
stated to be due on a day that is not a Business Day, the due date thereof shall
be extended to the next succeeding Business Day and, with respect to payments of
principal, interest shall be payable during such extension at the applicable
rate in effect immediately prior to such extension.
5.4 NET PAYMENTS. (a) All payments made by the Borrower under this
Agreement shall be made free and clear of, and without deduction or withholding
for or on account of, any current or future income, stamp or other taxes,
levies, imposts, duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any Governmental
Authority, excluding (i) net income taxes and franchise taxes (imposed in lieu
of net income taxes) imposed on the Administrative Agent or any Lender and
(ii) any taxes imposed on the Administrative Agent or any Lender as a result of
a current or former connection between the Administrative Agent or such Lender
and the jurisdiction of the Governmental Authority imposing such tax or any
political subdivision or taxing authority thereof or therein (other than any
such connection arising solely from the Administrative Agent or such Lender
having executed, delivered or performed its obligations or received a payment
under, or enforced, this Agreement). If any such non-excluded taxes, levies,
imposts, duties, charges, fees, deductions or withholdings ("NON-EXCLUDED
TAXES") are required to be withheld from any amounts payable to the
Administrative Agent or any Lender hereunder, the amounts so payable to the
Administrative Agent or such Lender shall be increased to the extent necessary
to yield to the Administrative Agent or such Lender (after payment of all
Non-Excluded Taxes) interest or any such other amounts payable hereunder at the
rates or in the amounts specified in
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48
this Agreement; PROVIDED, HOWEVER, that the Borrower shall not be required to
increase any such amounts payable to any Lender that is not organized under the
laws of the United States of America or a state thereof if such Lender fails to
comply with the requirements of paragraph (b) of this Section 5.4. Whenever any
Non-Excluded Taxes are payable by the Borrower, as promptly as possible
thereafter the Borrower shall send to the Administrative Agent for its own
account or for the account of such Lender, as the case may be, a certified copy
of an original official receipt received by the Borrower showing payment
thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the
appropriate taxing authority or fails to remit to the Administrative Agent the
required receipts or other required documentary evidence, the Borrower shall
indemnify the Administrative Agent and the Lenders for any incremental taxes,
interest, costs or penalties that may become payable by the Administrative Agent
or any Lender as a result of any such failure. The agreements in this Section
5.4(a) shall survive the termination of this Agreement and the payment of the
Loans and all other amounts payable hereunder.
(b) Each Lender that is not incorporated or organized under the laws
of the United States of America or a state thereof shall:
(i) deliver to the Borrower and the Administrative Agent two copies
of either United States Internal Revenue Service Form 1001 or Form 4224 or,
in the case of Non-U.S. Lender claiming exemption from U.S. Federal
withholding tax under Section 871(h) or 881(c) of the Code with respect to
payments of "portfolio interest", a Form W-8, or any subsequent versions
thereof or successors thereto (and, if such Non-U.S. Lender delivers a
Form W-8, a certificate representing that such Non-U.S. Lender is not a
bank for purposes of Section 881(c) of the Code, is not a 10-percent
shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of the
Borrower and is not a controlled foreign corporation related to the
Borrower (within the meaning of Section 864(d)(4) of the Code)), properly
completed and duly executed by such Non-U.S. Lender claiming complete
exemption from, or reduced rate of, U.S. Federal withholding tax on
payments by the Borrower under this Agreement;
(ii) deliver to the Borrower and the Administrative Agent two
further copies of any such form or certification on or before the date that
any such form or certification expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recent form
previously delivered by it to the Borrower; and
(iii) obtain such extensions of time for filing and complete such
forms or certifications as may reasonably be requested by the Borrower or
the Administrative Agent;
unless in any such case any change in treaty, law or regulation has occurred
prior to the date on which any such delivery would otherwise be required that
renders any such form inapplicable or would prevent such Lender from duly
completing and delivering any such form with respect to it and such Lender so
advises the Borrower and the Administrative Agent. Each Person that shall
become a Participant pursuant to Section 13.6 or a Lender pursuant to Section
13.6 shall, upon the effectiveness of the related transfer, be required to
provide all the forms and statements required pursuant to this Section 5.4(b),
provided that in the case of a Participant such Participant shall furnish all
such required forms and statements to the Lender from which the related
participation shall have been purchased.
(c) The Borrower shall not be required to indemnify any Non-U.S.
Lender, or to pay any additional amounts to any Non-U.S. Lender, in respect of
U.S. Federal withholding tax pursuant to paragraph (a) above to the extent that
(i) the obligation to withhold amounts with respect to
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49
U.S. Federal withholding tax existed on the date such Non-U.S. Lender became a
party to this Agreement (or, in the case of a Non-U.S. Participant, on the date
such Participant became a Participant hereunder); PROVIDED, HOWEVER, that this
clause (i) shall not apply to the extent that (x) the indemnity payments or
additional amounts any Lender (or Participant) would be entitled to receive
(without regard to this clause (i)) do not exceed the indemnity payment or
additional amounts that the person making the assignment, participation or
transfer to such Lender (or Participant) would have been entitled to receive in
the absence of such assignment, participation or transfer, or (y) such
assignment, participation or transfer had been requested by the Borrower,
(ii) the obligation to pay such additional amounts would not have arisen but for
a failure by such Non-U.S. Lender or Non-U.S. Participant to comply with the
provisions of paragraph (b) above or (iii) any of the representations or
certifications made by a Non-U.S. Lender or Non-U.S. Participant pursuant to
paragraph (b) above are incorrect at the time a payment hereunder is made, other
than by reason of any change in treaty, law or regulation having effect after
the date such representations or certifications were made.
(d) If the Borrower determines in good faith that a reasonable basis
exists for contesting any taxes for which indemnification has been demanded
hereunder, the relevant Lender or the Administrative Agent, as applicable, shall
cooperate with the Borrower in challenging such taxes at the Borrower's expense
if so requested by the Borrower. If any Lender or the Administrative Agent, as
applicable, receives a refund of a tax for which a payment has been made by the
Borrower pursuant to this Agreement, which refund in the good faith judgment of
such Lender or Administrative Agent, as the case may be, is attributable to such
payment made by the Borrower, then the Lender or the Administrative Agent, as
the case may be, shall reimburse the Borrower for such amount as the Lender or
Administrative Agent, as the case may be, determines to be the proportion of the
refund as will leave it, after such reimbursement, in no better or worse
position than it would have been in if the payment had not been required. A
Lender or Administrative Agent shall claim any refund that it determines is
available to it, unless it concludes in its reasonable discretion that it would
be adversely affected by making such a claim. Neither the Lender nor the
Administrative Agent shall be obliged to disclose any information regarding its
tax affairs or computations to the Borrower in connection with this
paragraph (d) or any other provision of this Section 5.4.
(e) Each Lender represents and agrees that, on the date hereof and at
all times during the term of this Agreement, it is not and will not be a conduit
entity participating in a conduit financing arrangement (as defined in Section
7701(1) of the Code and the regulations thereunder) with respect to the
Borrowings hereunder unless the Borrower has consented to such arrangement prior
thereto.
5.5 COMPUTATIONS OF INTEREST AND FEES. (a) Interest on Eurodollar
Loans and, except as provided in the next succeeding sentence, ABR Loans shall
be calculated on the basis of a 360-day year for the actual days elapsed.
Interest on ABR Loans in respect of which the rate of interest is calculated on
the basis of the Prime Rate and interest on overdue interest shall be calculated
on the basis of a 365- (or 366-, as the case may be) day year for the actual
days elapsed.
(b) Fees and Letter of Credit Outstanding shall be calculated on the
basis of a 365- (or 366-, as the case may be) day year for the actual days
elapsed.
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50
SECTION 6. CONDITIONS PRECEDENT TO INITIAL BORROWING.
The initial Borrowing under this Agreement is subject to the
satisfaction of the following conditions precedent:
6.1 CREDIT DOCUMENTS. The Administrative Agent shall have received
(a) this Agreement, executed and delivered by a duly authorized officer of the
Borrower and each Lender, (b) the Guarantee, executed and delivered by a duly
authorized officer of each Guarantor, (c) the Pledge Agreement, executed and
delivered by each pledgor party thereto and (d) all certificates representing
securities pledged under the Pledge Agreement, accompanied by instruments of
transfer and undated stock powers endorsed in blank (provided that such delivery
of, and perfection of the security interest under the Pledge Agreement in,
capital stock of direct Material Subsidiaries that are Foreign Subsidiaries
shall be satisfied within 60 days after the Closing Date).
6.2 CLOSING CERTIFICATE. The Administrative Agent shall have
received a certificate of each Credit Party, dated the Closing Date,
substantially in the form of Exhibit G, with appropriate insertions, executed by
the President or any Vice President and the Secretary or any Assistant Secretary
of such Credit Party, and attaching the documents referred to in Sections 6.3
and 6.4.
6.3 CORPORATE PROCEEDINGS OF EACH CREDIT PARTY. The Administrative
Agent shall have received a copy of the resolutions, in form and substance
satisfactory to the Administrative Agent, of the Board of Directors of each
Credit Party (or a duly authorized committee thereof) authorizing (a) the
execution, delivery and performance of the Credit Documents and the
Recapitalization Agreement (and any agreements relating thereto) to which it is
a party and (b) in the case of the Borrower, the extensions of credit
contemplated hereunder.
6.4 CORPORATE DOCUMENTS. The Administrative Agent shall
have received true and complete copies of the certificate of incorporation and
by-laws of each Credit Party.
6.5 NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in the business, assets, operations, properties, financial
condition or prospects of the Borrower and its Subsidiaries taken as a whole
since December 31, 1997.
6.6 FEES. The Administrative Agent shall have received the fees
referred to in Section 4.1(e) to be received on the Closing Date.
6.7 RECAPITALIZATION. (a) The Recapitalization shall have been
consummated in accordance with applicable law and the Recapitalization Agreement
and (b) CCPC and other Affiliates of KKR shall own, beneficially and of record,
shares representing at least 88% of the shares of Borrower Common Stock. The
Recapitalization Agreement shall not have been amended since April 1, 1998, in
any material respect that is, in the reasonable judgment of the Administrative
Agent, adverse to the interests of the Lenders.
6.8 CLOSING DATE BALANCE SHEET. The Lenders shall have received a
PRO FORMA consolidated closing balance sheet of the Borrower giving effect to
the Recapitalization, the financing therefor and the other transactions
contemplated hereby and thereby, dated the date of the corresponding PRO FORMA
balance sheet included in the draft Offering Memorandum dated April 9, 1998, for
the Subordinated Notes.
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51
6.9 SOLVENCY OPINION. The Lenders shall have received an opinion
from Houlihan, Lokey, Howard & Zukin Financial Advisors, Inc., in form and
substance reasonably satisfactory to the Agents, as to the solvency of the
Borrower and its Subsidiaries on a consolidated basis after giving effect to the
Recapitalization, the making of the initial Loans and the consummation of the
other transactions contemplated hereby.
6.10 REQUIRED APPROVALS. All requisite material Governmental
Authorities and third parties shall have approved or consented to the
Recapitalization and the other transactions contemplated hereby to the extent
required, all applicable appeal periods shall have expired and there shall be no
governmental or judicial action, actual or threatened, that has or could have a
reasonable likelihood of restraining, preventing or imposing materially
burdensome conditions on the Recapitalization, the financing therefor or the
other transactions contemplated hereby or thereby.
6.11 LEGAL OPINIONS. The Administrative Agent shall have received,
with a counterpart for each Lender, the executed legal opinions of (a) Simpson
Thacher & Bartlett, special New York counsel to the Borrower, substantially in
the form of Exhibit E-1, (b) Thomas O'Brien, general counsel to the Borrower,
substantially in the form of Exhibit E-2, and the Borrower hereby instructs such
counsel to deliver such legal opinions.
SECTION 7. CONDITIONS PRECEDENT TO ALL CREDIT EVENTS. The
agreement of each Lender to make any Loan requested to be made by it on any date
(including, without limitation, its initial Loan, but excluding Mandatory
Borrowings) and the obligation of the Letter of Credit Issuer to issue Letters
of Credit on any date is subject to the satisfaction of the following conditions
precedent:
7.1 NO DEFAULT; REPRESENTATIONS AND WARRANTIES. At the time of each
Credit Event and also after giving effect thereto (a) there shall exist no
Default or Event of Default and (b) all representations and warranties made by
any Credit Party contained herein or in the other Credit Documents shall be true
and correct in all material respects with the same effect as though such
representations and warranties had been made on and as of the date of such
Credit Event (except where such representations and warranties expressly relate
to an earlier date, in which case such representations and warranties shall have
been true and correct in all material respects as of such earlier date).
7.2 NOTICE OF BORROWING; LETTER OF CREDIT REQUEST. (a) Prior to the
making of each Term Loan, each Revolving Credit Loan (other than any Revolving
Credit Loan made pursuant to Section 3.4(a)) and each Swingline Loan, the
Administrative Agent shall have received a Notice of Borrowing (whether in
writing or by telephone) meeting the requirements of Section 2.3.
(b) Prior to the issuance of each Letter of Credit, the
Administrative Agent and the Letter of Credit Issuer shall have received a
Letter of Credit Request meeting the requirements of Section 3.2(a).
The acceptance of the benefits of each Credit Event shall constitute a
representation and warranty by each Credit Party to each of the Lenders that all
the applicable conditions specified above exist as of that time.
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52
SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. In order to
induce the Lenders to enter into this Agreement, to make the Loans and issue or
participate in Letters of Credit as provided for herein, the Borrower makes the
following representations and warranties to, and agreements with, the Lenders,
all of which shall survive the execution and delivery of this Agreement and the
making of the Loans and the issuance of the Letters of Credit:
8.1 CORPORATE STATUS. The Borrower and each Material Subsidiary (a)
is a duly organized and validly existing corporation or other entity in good
standing under the laws of the jurisdiction of its organization and has the
corporate or other organizational power and authority to own its property and
assets and to transact the business in which it is engaged and (b) has duly
qualified and is authorized to do business and is in good standing in all
jurisdictions where it is required to be so qualified, except where the failure
to be so qualified could not reasonably be expected to result in a Material
Adverse Effect.
8.2 CORPORATE POWER AND AUTHORITY. Each Credit Party has the
corporate power and authority to execute, deliver and carry out the terms and
provisions of the Credit Documents to which it is a party and has taken all
necessary corporate action to authorize the execution, delivery and performance
of the Credit Documents to which it is a party. Each Credit Party has duly
executed and delivered each Credit Document to which it is a party and each such
Credit Document constitutes the legal, valid and binding obligation of such
Credit Party enforceable in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and subject to general principles of
equity.
8.3 NO VIOLATION. Neither the execution, delivery and performance by
any Credit Party of the Credit Documents to which it is a party nor compliance
with the terms and provisions thereof nor the consummation of the
Recapitalization and the other transactions contemplated therein will
(a) contravene any applicable provision of any material law, statute, rule,
regulation, order, writ, injunction or decree of any court or governmental
instrumentality, (b) result in any breach of any of the terms, covenants,
conditions or provisions of, or constitute a default under, or result in the
creation or imposition of (or the obligation to create or impose) any Lien upon
any of the property or assets of the Borrower or any of the Restricted
Subsidiaries pursuant to, the terms of any material indenture (including the
Subordinated Note Indenture), loan agreement, lease agreement, mortgage, deed of
trust, agreement or other material instrument to which the Borrower or any of
the Restricted Subsidiaries is a party or by which it or any of its property or
assets is bound or (c) violate any provision of the certificate of incorporation
or By-Laws of the Borrower or any of the Restricted Subsidiaries.
8.4 LITIGATION. Except as set forth in the Borrower's audited
financial statements for the fiscal year ended December 31, 1997, there are no
actions, suits or proceedings (including, without limitation, Environmental
Claims) pending or, to the knowledge of the Borrower, threatened with respect to
the Borrower or any of its Subsidiaries that could reasonably be expected to
result in a Material Adverse Effect.
8.5 MARGIN REGULATIONS. Neither the making of any Loan hereunder nor
the use of the proceeds thereof will violate the provisions of Regulation T, U
or X of the Board.
8.6 GOVERNMENTAL APPROVALS. No order, consent, approval, license,
authorization, or validation of, or filing, recording or registration with, or
exemption by, any Governmental Authority is required to authorize or is required
in connection with (a) the execution, delivery and performance of any Credit
Document or (b) the legality, validity, binding
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53
effect or enforceability of any Credit Document, except any of the foregoing the
failure to obtain or make could not reasonably be expected to have a Material
Adverse Effect.
8.7 INVESTMENT COMPANY ACT. The Borrower is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
8.8 TRUE AND COMPLETE DISCLOSURE. (a) All factual information and
data (taken as a whole) heretofore or contemporaneously furnished by the
Borrower, any of its Subsidiaries or any of their respective authorized
representatives in writing to the Administrative Agent and/or any Lender on or
before the Closing Date (including, without limitation, (i) the Confidential
Information Memorandum and (ii) all information contained in the Credit
Documents) for purposes of or in connection with this Agreement or any
transaction contemplated herein was true and complete in all material respects
on the date as of which such information or data is dated or certified and was
not incomplete by omitting to state any material fact necessary to make such
information and data (taken as a whole) not misleading at such time in light of
the circumstances under which such information or data was furnished, it being
understood and agreed that for purposes of this Section 8.8(a), such factual
information and data shall not include projections and pro forma financial
information.
(b) The projections and pro forma financial information contained in
the information and data referred to in paragraph (a) above were based on good
faith estimates and assumptions believed by such Persons to be reasonable at the
time made, it being recognized by the Lenders that such projections as to future
events are not to be viewed as facts and that actual results during the period
or periods covered by any such projections may differ from the projected
results.
8.9 FINANCIAL CONDITION; FINANCIAL STATEMENTS. The consolidated
balance sheet of the Borrower and its Subsidiaries at December 31, 1997, and the
related consolidated statements of operations and cash flows for the fiscal year
ended as of such date, which statements have been audited by Price Waterhouse
LLP, independent certified public accountants, who delivered an unqualified
opinion with respect thereto, in each case present fairly in all material
respects the consolidated financial position of the Borrower and its
Subsidiaries at the respective dates of said statements and the results of
operations for the respective periods covered thereby. All such financial
statements have been prepared in accordance with GAAP consistently applied
except to the extent provided in the notes to said financial statements. There
has been no Material Adverse Change since December 31, 1997, other than solely
as a result of changes in general economic conditions.
8.10 TAX RETURNS AND PAYMENTS. Each of the Borrower and its
Subsidiaries has filed all federal income tax returns and all other material tax
returns, domestic and foreign, required to be filed by it and has paid all
material taxes and assessments payable by it that have become due, other than
those not yet delinquent or contested in good faith. The Borrower and each of
its Subsidiaries have paid, or have provided adequate reserves (in the good
faith judgment of the management of the Borrower) in accordance with GAAP for
the payment of, all material federal, state and foreign income taxes applicable
for all prior fiscal years and for the current fiscal year to the Closing Date.
8.11 COMPLIANCE WITH ERISA. Each Plan is in compliance with ERISA,
the Code and any applicable Requirement of Law; no Reportable Event has occurred
(or is reasonably likely to occur) with respect to any Plan; no Plan is
insolvent or in reorganization (or
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54
is reasonably likely to be insolvent or in reorganization), and no written
notice of any such insolvency or reorganization has been given to the Borrower,
any Subsidiary or any ERISA Affiliate; no Plan (other than a multiemployer plan)
has an accumulated or waived funding deficiency (or is reasonably likely to have
such a deficiency); neither the Borrower nor any Subsidiary nor any ERISA
Affiliate has incurred (or is reasonably likely expected to incur) any liability
to or on account of a Plan pursuant to Section 409, 502(i), 502(l), 515, 4062,
4063, 4064, 4069, 4201 or 4204 of ERISA or Section 4971 or 4975 of the Code or
has been notified in writing that it will incur any liability under any of the
foregoing Sections with respect to any Plan; no proceedings have been instituted
(or are reasonably likely to be instituted) to terminate or to reorganize any
Plan or to appoint a trustee to administer any Plan, and no written notice of
any such proceedings has been given to the Borrower, any Subsidiary or any ERISA
Affiliate; and no lien imposed under the Code or ERISA on the assets of the
Borrower or any Subsidiary or any ERISA Affiliate exists (or is reasonably
likely to exist) nor has the Borrower, any Subsidiary or any ERISA Affiliate
been notified in writing that such a lien will be imposed on the assets of the
Borrower, any Subsidiary or any ERISA Affiliate on account of any Plan, EXCEPT
to the extent that a breach of any of the foregoing representations, warranties
or agreements in this Section 8.11 would not result, individually or in the
aggregate, in an amount of liability that would be reasonably likely to have a
Material Adverse Effect or relates to any matter disclosed in the financial
statements of the Borrower contained in the Confidential Information Memorandum.
No Plan (other than a multiemployer plan) has an Unfunded Current Liability that
would, individually or when taken together with any other liabilities referenced
in this Section 8.11, be reasonably likely to have a Material Adverse Effect.
With respect to Plans that are multiemployer plans (as defined in Section 3(37)
of ERISA), the representations and warranties in this Section 8.11, other than
any made with respect to (a) liability under Section 4201 or 4204 of ERISA or
(b) liability for termination or reorganization of such Plans under ERISA, are
made to the best knowledge of the Borrower.
8.12 SUBSIDIARIES. Schedule 8.12 lists each Subsidiary of the
Borrower (and the direct and indirect ownership interest of the Borrower
therein), in each case existing on the Closing Date. To the knowledge of the
Borrower, each Material Subsidiary as of the Closing Date has been so designated
on Schedule 8.12.
8.13 PATENTS, ETC. The Borrower and each of the Restricted
Subsidiaries have obtained all patents, trademarks, servicemarks, trade names,
copyrights, licenses and other rights, free from burdensome restrictions, that
are necessary for the operation of their respective businesses as currently
conducted and as proposed to be conducted, except where the failure to obtain
any such rights could not reasonably be expected to have a Material Adverse
Effect.
8.14 ENVIRONMENTAL LAWS. (a) Other than instances of noncompliance
that could not reasonably be expected to have a Material Adverse Effect: (i) the
Borrower and each of its Subsidiaries are in compliance with all Environmental
Laws in all jurisdictions in which the Borrower and each of its Subsidiaries are
currently doing business (including, without limitation, having obtained all
material permits required under Environmental Laws) and (ii) the Borrower will
comply and cause each of its Subsidiaries to comply with all such Environmental
Laws (including, without limitation, all permits required under Environmental
Laws).
(b) Neither the Borrower nor any of its Subsidiaries has treated, stored,
transported or disposed of Hazardous Materials at or from any currently or
formerly owned Real Estate (as defined in Section 9.1(f)) or facility relating
to its business in a manner that could reasonably be expected to have a Material
Adverse Effect.
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55
8.15 PROPERTIES. The Borrower and each of the Restricted Subsidiaries
have good title to or leasehold interest in all properties that are necessary
for the operation of their respective businesses as currently conducted and as
proposed to be conducted, free and clear of all Liens (other than any Liens
permitted by this Agreement) and except where the failure to have such good
title could not reasonably be expected to have a Material Adverse Effect.
SECTION 9. AFFIRMATIVE COVENANTS. The Borrower hereby covenants and
agrees that on the Closing Date and thereafter, for so long as this Agreement is
in effect and until the Commitments, the Swingline Commitment and each Letter of
Credit have terminated and the Loans and Unpaid Drawings, together with
interest, Fees and all other Obligations incurred hereunder, are paid in full:
9.1 INFORMATION COVENANTS. The Borrower will furnish to each Lender
and the Administrative Agent:
(a) ANNUAL FINANCIAL STATEMENTS. As soon as available and in any
event on or before the date on which such financial statements are required
to be filed with the SEC, the consolidated balance sheet of (i) the
Borrower and the Restricted Subsidiaries and (ii) the Borrower and its
Subsidiaries, in each case as at the end of such fiscal year and the
related consolidated statement of operations and cash flows for such fiscal
year, setting forth comparative consolidated figures for the preceding
fiscal year, and certified by independent certified public accountants of
recognized national standing whose opinion shall not be qualified as to the
scope of audit or as to the status of the Borrower or any of the Material
Subsidiaries as a going concern, together in any event with a certificate
of such accounting firm stating that in the course of its regular audit of
the business of the Borrower and the Material Subsidiaries, which audit was
conducted in accordance with generally accepted auditing standards, such
accounting firm has obtained no knowledge of any Default or Event of
Default relating to Section 10.9, 10.10 and 10.11 that has occurred and is
continuing or, if in the opinion of such accounting firm such a Default or
Event of Default has occurred and is continuing, a statement as to the
nature thereof.
(b) QUARTERLY FINANCIAL STATEMENTS. As soon as available and in any
event on or before the date on which such financial statements are required
to be filed with the SEC with respect to each of the first three quarterly
accounting periods in each fiscal year of the Borrower, the consolidated
balance sheet of (i) the Borrower and the Restricted Subsidiaries and
(ii) the Borrower and its Subsidiaries, in each case as at the end of such
quarterly period and the related consolidated statement of operations for
such quarterly accounting period and for the elapsed portion of the fiscal
year ended with the last day of such quarterly period, and the related
consolidated statement of cash flows for the elapsed portion of the fiscal
year ended with the last day of such quarterly period, and setting forth
comparative consolidated figures for the related periods in the prior
fiscal year or, in the case of such consolidated balance sheet, for the
last day of the prior fiscal year, all of which shall be certified by an
Authorized Officer of the Borrower, subject to changes resulting from audit
and normal year-end audit adjustments.
(c) BUDGETS. Within 60 days after the commencement of each fiscal
year of the Borrower, budgets of the Borrower in reasonable detail for the
fiscal year as customarily prepared by management of the Borrower for its
internal use, setting forth the principal assumptions upon which such
budgets are based.
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56
(d) OFFICER'S CERTIFICATES. At the time of the delivery of the
financial statements provided for in Sections 9.1(a) and (b), a certificate
of an Authorized Officer of the Borrower to the effect that no Default or
Event of Default exists or, if any Default or Event of Default does exist,
specifying the nature and extent thereof, which certificate shall set forth
(i) the calculations required to establish whether the Borrower and its
Subsidiaries were in compliance with the provisions of Sections 10.9, 10.10
and 10.11 as at the end of such fiscal year or period, as the case may be,
(ii) a specification of any change in the identity of the Restricted
Subsidiaries, Unrestricted Subsidiaries, Acquisition Subsidiaries and
Foreign Subsidiaries as at the end of such fiscal year or period, as the
case may be, from the Restricted Subsidiaries, Unrestricted Subsidiaries,
Acquisition Subsidiaries, and Foreign Subsidiaries, respectively, provided
to the Lenders on the Closing Date or the most recent fiscal year or
period, as the case may be, (iii) the then applicable Status and (iv) the
amount of any Pro Forma Adjustment not previously set forth in a Pro Forma
Adjustment Certificate or any change in the amount of a Pro Forma
Adjustment set forth in any Pro Forma Adjustment Certificate previously
provided and, in either case, in reasonable detail, the calculations and
basis therefor; and at the time of the delivery of the financial statements
provided for in Section 9.1(a), a certificate of an Authorized Officer of
the Borrower setting forth in reasonable detail the Available Amount as at
the end of the fiscal year to which such financial statements relate.
(e) NOTICE OF DEFAULT OR LITIGATION. Promptly after an Authorized
Officer of the Borrower or any of its Subsidiaries obtains knowledge
thereof, notice of (i) the occurrence of any event that constitutes a
Default or Event of Default, which notice shall specify the nature thereof,
the period of existence thereof and what action the Borrower proposes to
take with respect thereto, and (ii) any litigation or governmental
proceeding pending against the Borrower or any of its Subsidiaries that
could reasonably be expected to result in a Material Adverse Effect.
(f) ENVIRONMENTAL MATTERS. The Borrower will promptly advise the
Lenders in writing after obtaining knowledge of any one or more of the
following environmental matters, unless such environmental matters would
not, individually or when aggregated with all other such matters, be
reasonably expected to result in a Material Adverse Effect:
(i Any pending or threatened Environmental Claim against
the Borrower or any of its Subsidiaries or any Real Estate (as defined
below);
(ii Any condition or occurrence on any Real Estate that
(x) results in noncompliance by the Borrower or any of its
Subsidiaries with any applicable Environmental Law or (y) could
reasonably be anticipated to form the basis of an Environmental Claim
against the Borrower or any of its Subsidiaries or any Real Estate;
(iii Any condition or occurrence on any Real Estate that
could reasonably be anticipated to cause such Real Estate to be
subject to any restrictions on the ownership, occupancy, use or
transferability of such Real Estate under any Environmental Law; and
(iv The taking of any removal or remedial action in
response to the actual or alleged presence of any Hazardous Material
on any Real Estate.
All such notices shall describe in reasonable detail the nature of the
claim, investigation, condition, occurrence or removal or remedial action
and the Borrower's response thereto. The term "REAL ESTATE" shall mean
land, buildings and improvements owned or leased by the
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57
Borrower or any of its Subsidiaries, but excluding all operating fixtures
and equipment, whether or not incorporated into improvements.
(g) OTHER INFORMATION. Promptly upon filing thereof, copies of any
filings on Form 10-K, 10-Q or 8-K or registration statements with, and
reports to, the SEC by the Borrower or any of its Subsidiaries (other than
amendments to any registration statement (to the extent such registration
statement, in the form it becomes effective, is delivered to the Lenders),
exhibits to any registration statement and any registration statements on
Form S-8) and copies of all financial statements, proxy statements, notices
and reports that the Borrower or any of its Subsidiaries shall send to the
holders of any publicly issued debt of the Borrower and/or any of its
Subsidiaries (including the Subordinated Notes) in their capacity as such
holders (in each case to the extent not theretofore delivered to the
Lenders pursuant to this Agreement) and, with reasonable promptness, such
other information (financial or otherwise) as the Administrative Agent on
its own behalf or on behalf of any Lender may reasonably request in writing
from time to time.
(h) PRO FORMA ADJUSTMENT CERTIFICATE. Not later than the consummation
of the acquisition of any Acquired Entity or Business by the Borrower or
any Restricted Subsidiary for which there shall be a Pro Forma Adjustment,
a certificate of an Authorized Officer of the Borrower setting forth the
amount of such Pro Forma Adjustment and, in reasonable detail, the
calculations and basis therefor.
9.2 BOOKS, RECORDS AND INSPECTIONS. The Borrower will, and will
cause each of the Specified Subsidiaries to, permit officers and designated
representatives of the Administrative Agent or the Required Lenders to visit and
inspect any of the properties or assets of the Borrower and any such Specified
Subsidiary in whomsoever's possession to the extent that it is within the
Borrower's or such Specified Subsidiary's control to permit such inspection, and
to examine the books of account of the Borrower and any such Specified
Subsidiary and discuss the affairs, finances and accounts of the Borrower and of
any such Specified Subsidiary with, and be advised as to the same by, its and
their officers and independent accountants, all at such reasonable times and
intervals and to such reasonable extent as the Administrative Agent or the
Required Lenders may desire.
9.3 MAINTENANCE OF INSURANCE. The Borrower will, and will cause each
of the Material Subsidiaries to, at all times maintain in full force and effect,
with insurance companies that the Borrower believes (in the good faith judgment
of the management of the Borrower) are financially sound and responsible at the
time the relevant coverage is placed or renewed, insurance in at least such
amounts and against at least such risks (and with such risk retentions) as are
usually insured against in the same general area by companies engaged in the
same or a similar business; and will furnish to the Lenders, upon written
request from the Administrative Agent, information presented in reasonable
detail as to the insurance so carried.
9.4 PAYMENT OF TAXES. The Borrower will pay and discharge, and will
cause each of its Subsidiaries to pay and discharge, all material taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any properties belonging to it, prior to the date on
which material penalties attach thereto, and all lawful material claims that, if
unpaid, could reasonably be expected to become a material Lien upon any
properties of the Borrower or any of the Restricted Subsidiaries, PROVIDED that
neither the Borrower nor any of its Subsidiaries shall be required to pay any
such tax, assessment, charge, levy or claim that is being contested in good
faith and by proper proceedings if it has maintained adequate reserves
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58
(in the good faith judgment of the management of the Borrower) with respect
thereto in accordance with GAAP.
9.5 CONSOLIDATED CORPORATE FRANCHISES. The Borrower will do, and
will cause each Material Subsidiary to do, or cause to be done, all things
necessary to preserve and keep in full force and effect its existence, corporate
rights and authority, except to the extent that the failure to do so could not
reasonably be expected to have a Material Adverse Effect; PROVIDED, HOWEVER,
that the Borrower and its Subsidiaries may consummate any transaction permitted
under Section 10.3, 10.4 or 10.5.
9.6 COMPLIANCE WITH STATUTES, OBLIGATIONS, ETC. The Borrower will,
and will cause each Subsidiary to, comply with all applicable laws, rules,
regulations and orders, except to the extent the failure to do so could not
reasonably be expected to have a Material Adverse Effect.
9.7 ERISA. Promptly after the Borrower or any Subsidiary or any
ERISA Affiliate knows or has reason to know of the occurrence of any of the
following events that, individually or in the aggregate (including in the
aggregate such events previously disclosed or exempt from disclosure hereunder,
to the extent the liability therefor remains outstanding), would be reasonably
likely to have a Material Adverse Effect, the Borrower will deliver to each of
the Lenders a certificate of an Authorized Officer or any other senior officer
of the Borrower setting forth details as to such occurrence and the action, if
any, that the Borrower, such Subsidiary or such ERISA Affiliate is required or
proposes to take, together with any notices (required, proposed or otherwise)
given to or filed with or by the Borrower, such Subsidiary, such ERISA
Affiliate, the PBGC, a Plan participant (other than notices relating to an
individual participant's benefits) or the Plan administrator with respect
thereto: that a Reportable Event has occurred; that an accumulated funding
deficiency has been incurred or an application is to be made to the Secretary of
the Treasury for a waiver or modification of the minimum funding standard
(including any required installment payments) or an extension of any
amortization period under Section 412 of the Code with respect to a Plan; that a
Plan having an Unfunded Current Liability has been or is to be terminated,
reorganized, partitioned or declared insolvent under Title IV of ERISA
(including the giving of written notice thereof); that a Plan has an Unfunded
Current Liability that has or will result in a lien under ERISA or the Code;
that proceedings will be or have been instituted to terminate a Plan having an
Unfunded Current Liability (including the giving of written notice thereof);
that a proceeding has been instituted against the Borrower, a Subsidiary or an
ERISA Affiliate pursuant to Section 515 of ERISA to collect a delinquent
contribution to a Plan; that the PBGC has notified the Borrower, any Subsidiary
or any ERISA Affiliate of its intention to appoint a trustee to administer any
Plan; that the Borrower, any Subsidiary or any ERISA Affiliate has failed to
make a required installment or other payment pursuant to Section 412 of the Code
with respect to a Plan; or that the Borrower, any Subsidiary or any ERISA
Affiliate has incurred or will incur (or has been notified in writing that it
will incur) any liability (including any contingent or secondary liability) to
or on account of a Plan pursuant to Section 409, 502(i), 502(l), 515, 4062,
4063, 4064, 4069, 4201 or 4204 of ERISA or Section 4971 or 4975 of the Code.
9.8 GOOD REPAIR. The Borrower will, and will cause each of the
Restricted Subsidiaries to, ensure that its properties and equipment used or
useful in its business in whomsoever's possession they may be to the extent that
it is within the Borrower's or such Restricted Subsidiary's control to cause
same, are kept in good repair, working order and condition, normal wear and tear
excepted, and that from time to time there are made in such properties and
equipment all needful and proper repairs, renewals, replacements, extensions,
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59
additions, betterments and improvements thereto, to the extent and in the manner
customary for companies in similar businesses and consistent with third party
leases, except in each case to the extent the failure to do so could not be
reasonably expected to have a Material Adverse Effect.
9.9 TRANSACTIONS WITH AFFILIATES. The Borrower will conduct, and
cause each of the Restricted Subsidiaries to conduct, all transactions with any
of its Affiliates on terms that are substantially as favorable to the Borrower
or such Restricted Subsidiary as it would obtain in a comparable arm's-length
transaction with a Person that is not an Affiliate, PROVIDED that the foregoing
restrictions shall not apply to (a) the payment of customary annual fees to KKR
and/or its Affiliates for management, consulting and financial services rendered
to the Borrower and its Subsidiaries and investment banking fees paid to KKR and
its Affiliates for services rendered to the Borrower and its Subsidiaries in
connection with divestitures, acquisitions, financings and other transactions,
(b) customary fees paid to members of the Board of Directors of the Borrower and
its Subsidiaries and (c) transactions permitted by Section 10.6.
9.10 END OF FISCAL YEARS; FISCAL QUARTERS. The Borrower will, for
financial reporting purposes, cause (a) each of its, and each of its
Subsidiaries', fiscal years to end on December 31 of each year and (b) each of
its, and each of its Subsidiaries', fiscal quarters to end on dates consistent
with such fiscal year-end and the Borrower's past practice; PROVIDED, HOWEVER,
that the Borrower may, upon written notice to the Administrative Agent, change
the financial reporting convention specified above to any other financial
reporting convention reasonably acceptable to the Administrative Agent, in which
case the Borrower and the Administrative Agent will, and are hereby authorized
by the Lenders to, make any adjustments to this Agreement that are necessary in
order to reflect such change in financial reporting.
9.11 ADDITIONAL GUARANTORS. Except as provided in Section 10.1(j) or
(k), the Borrower will cause (a) any direct or indirect Domestic Subsidiary
(other than any Unrestricted Subsidiary or Acquisition Subsidiary) formed or
otherwise purchased or acquired after the date hereof and (b) any Subsidiary
(other than any Unrestricted Subsidiary or Acquisition Subsidiary) that is not a
Domestic Subsidiary on the date hereof but subsequently becomes a Domestic
Subsidiary (other than any Unrestricted Subsidiary or Acquisition Subsidiary),
in each case to execute a supplement to the Guarantee, in form and substance
reasonably satisfactory to the Administrative Agent, in order to become a
Guarantor.
9.12 PLEDGES OF ADDITIONAL STOCK AND EVIDENCE OF INDEBTEDNESS. Except
as provided in Section 10.1(j) or (k), the Borrower will pledge, and, in the
case of clause (c), will cause each direct Domestic Subsidiary to pledge, to the
Administrative Agent, for the benefit of the Lenders, (a) all the capital stock
of each direct Domestic Subsidiary (other than any Unrestricted Subsidiary,
Acquisition Subsidiary or any Domestic Subsidiary the assets of which consist
primarily of capital stock of Foreign Subsidiaries) and 65% of all the capital
stock of each direct Material Subsidiary that is a Foreign Subsidiary (other
than any Unrestricted Subsidiary or Acquisition Subsidiary), in each case,
formed or otherwise purchased or acquired after the date hereof, in each case
pursuant to a supplement to the Pledge Agreement in form and substance
reasonably satisfactory to the Administrative Agent, (b) all the capital stock
of any direct Domestic Subsidiary (other than any Unrestricted Subsidiary or
Acquisition Subsidiary) and 65% of all the capital stock of each direct Material
Subsidiary that is a Foreign Subsidiary (other than any Unrestricted Subsidiary
or Acquisition Subsidiary), in each case that is not a direct Subsidiary on the
date hereof but subsequently becomes a direct Subsidiary (other than an
Unrestricted Subsidiary or Acquisition Subsidiary), in each case pursuant to a
supplement to the Pledge Agreement in form and substance reasonably satisfactory
to the Administrative Agent, and (c) all evidences of Indebtedness in excess of
$5,000,000 received by the Borrower or any of
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60
the direct Domestic Subsidiaries (other than any Unrestricted Subsidiary or
Acquisition Subsidiary) in connection with any disposition of assets pursuant to
Section 10.4(b), in each case pursuant to a supplement to the Pledge Agreement
in form and substance reasonably satisfactory to the Administrative Agent.
9.13 USE OF PROCEEDS. The Borrower will use the Letters of Credit and
the proceeds of all Loans for the purposes set forth in the introductory
statement to this Agreement.
9.14 CHANGES IN BUSINESS. The Borrower and its Subsidiaries taken as
a whole will not fundamentally and substantively alter the character of their
business taken as a whole from the business conducted by the Borrower and its
Subsidiaries taken as a whole on the date hereof and other business activities
incidental or related to any of the foregoing.
9.15 OWNERSHIP OF ASSETS. (a) The Borrower will, as soon as
reasonably practicable and in any event by the date that is 120 days after the
Closing Date, engage in transactions involving the Borrower and its
Subsidiaries so that, after giving effect to such transactions, the Pledged
Subsidiaries hold assets representing not less than a substantial majority of
the aggregate fair value of the assets of the Borrower and its Subsidiaries
(determined by the Borrower in good faith on a consolidated basis) at such date,
PROVIDED that the foregoing shall not be deemed to require the Borrower or its
Subsidiaries to obtain (i) consent by any lessor or landlord under any leases,
(ii) transfer of supply and similar trade arrangements entered into in the
ordinary course of business or (iii) any consent from any other third party in
connection therewith if the Borrower determines that seeking such consent would
be materially detrimental to the Borrower's business or if the Borrower has used
commercially reasonably efforts to obtain such consent and has been usable to do
so, so long as, to the extent that the contract, license, arrangement or asset
as to which such consent is not obtained is necessary for the normal conduct of
the business of the Borrower and its Subsidiaries, such Pledged Subsidiaries (or
their Subsidiaries) shall have the ability to realize the practical benefits of
such contract, license, arrangement or asset notwithstanding the failure to
obtain such consent to respect thereof.
(b) The Borrower will, from and after the date that is 120 days after
the Closing Date, refrain from engaging in or permitting to occur any
transaction or other event that results, after giving effect to such transaction
or event, in the Pledged Subsidiaries (and their Restricted Subsidiaries)
holding assets representing less than the lesser of (i) a substantial majority
of the aggregate fair value of the assets of the Borrower and its Subsidiaries
(determined by the Borrower in good faith on a consolidated basis) at such time
and (ii) an aggregate fair value at such time substantially equal to the fair
value (determined by the Borrower in good faith on a consolidated basis) at such
time of the assets initially transferred to Pledged Subsidiaries (and their
Restricted Subsidiaries) pursuant to Section 9.15(a).
9.16 ISSUANCE OF SUBORDINATED NOTES. The Borrower will use
commercially reasonable efforts to issue the Subordinated Notes as soon as
reasonably practicable following the Closing Date.
SECTION 10. NEGATIVE COVENANTS. The Borrower hereby covenants and
agrees that on the Closing Date and thereafter, for so long as this Agreement is
in effect and until the Commitments, the Swingline Commitment and each Letter of
Credit have terminated and the
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61
Loans and Unpaid Drawings, together with interest, Fees and all other
Obligations incurred hereunder, are paid in full:
10.1 LIMITATION ON INDEBTEDNESS. The Borrower will not, and will not
permit any of the Restricted Subsidiaries to, create, incur, assume or suffer to
exist any Indebtedness, except:
(a) Indebtedness arising under the Credit Documents;
(b) Indebtedness of (i) the Borrower to any Subsidiary of the Borrower
and (ii) any Restricted Subsidiary to the Borrower or any other Subsidiary
of the Borrower;
(c) Indebtedness in respect of any bankers' acceptance, letter of
credit, warehouse receipt or similar facilities entered into in the
ordinary course of business;
(d) except as provided in clauses (j) and (k) below, Guarantee
Obligations incurred by (i) Restricted Subsidiaries in respect of
Indebtedness of the Borrower or other Restricted Subsidiaries that is
permitted to be incurred under this Agreement and (ii) the Borrower in
respect of Indebtedness of the Restricted Subsidiaries that is permitted to
be incurred under this Agreement;
(e) Guarantee Obligations incurred in the ordinary course of business
in respect of obligations of suppliers, customers, franchisees, lessors and
licensees;
(f) (i) Indebtedness (including Indebtedness arising under Capital
Leases) incurred within 270 days of the acquisition, construction or
improvement of fixed or capital assets to finance the acquisition,
construction or improvement of such fixed or capital assets or otherwise
incurred in respect of Capital Expenditures permitted by Section 10.12,
(ii) Indebtedness arising under Capital Leases entered into in connection
with Permitted Sale Leasebacks and (iii) Indebtedness arising under Capital
Leases, other than Capital Leases in effect on the date hereof and Capital
Leases entered into pursuant to subclauses (i) and (ii) above, PROVIDED
that the aggregate amount of Indebtedness incurred pursuant to this
subclause (iii) shall not exceed $25,000,000 at any time outstanding, and
(iv) any refinancing, refunding, renewal or extension of any Indebtedness
specified in subclause (i), (ii) or (iii) above, PROVIDED that the
principal amount thereof is not increased above the principal amount
thereof outstanding immediately prior to such refinancing, refunding,
renewal or extension;
(g) Indebtedness outstanding on the date hereof and listed on
Schedule 10.1 and any refinancing, refunding, renewal or extension thereof,
PROVIDED that (i) the principal amount thereof is not increased above the
principal amount thereof outstanding immediately prior to such refinancing,
refunding, renewal or extension, except to the extent otherwise permitted
hereunder, and (ii) the direct and contingent obligors with respect to such
Indebtedness are not changed;
(h) Indebtedness in respect of Hedge Agreements;
(i) Indebtedness in respect of (i) the Subordinated Loans and (ii) the
Subordinated Notes;
(j) (i) Indebtedness of a Person or Indebtedness attaching to assets
of a Person that, in either case, becomes a Restricted Subsidiary
(including a Restricted Subsidiary that is also an Acquisition Subsidiary)
or Indebtedness attaching to assets that are acquired by the Borrower
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62
or any Restricted Subsidiary (including any Acquisition Subsidiary), in
each case after the Closing Date as the result of a Permitted Acquisition,
PROVIDED that (w) such Indebtedness existed at the time such Person became
a Restricted Subsidiary or at the time such assets were acquired and, in
each case, was not created in anticipation thereof, (x) such Indebtedness
is not guaranteed in any respect by the Borrower or any Restricted
Subsidiary (other than any such person that so becomes a Restricted
Subsidiary), (y)(A) the Borrower pledges the capital stock of such Person
to the Administrative Agent to the extent required under Section 9.12, (B)
such Person executes a supplement to the Guarantee to the extent required
under Section 9.11 and (C) if any such Indebtedness is secured, (1) the
Guarantee referred to in the preceding subclause (B) is equally and ratably
secured or (2) in the case of assets acquired by the Borrower or any
Restricted Subsidiary (other than any Acquisition Subsidiary), the
Borrower's obligations hereunder or such Restricted Subsidiary's Guarantee,
as the case may be, are equally and ratably secured, PROVIDED that the
requirements of this subclause (y) shall not apply to an aggregate amount
at any time outstanding of up to (and including) $75,000,000 of the
aggregate of (1) such Indebtedness and (2) all Indebtedness as to which the
proviso to clause (k)(i)(y) below then applies, and (z) the aggregate
amount of such Indebtedness and all Indebtedness incurred under clause (k)
below, when taken together, does not exceed $150,000,000 in the aggregate
at any time outstanding, PROVIDED that, when calculating the outstanding
amount of Indebtedness for purposes of this subclause (z), Indebtedness of
any Acquisition Subsidiary, Indebtedness attaching to assets of any
Acquisition Subsidiary and Indebtedness attaching to assets acquired by any
Acquisition Subsidiary shall be excluded, and (ii) any refinancing,
refunding, renewal or extension of any Indebtedness specified in
subclause (i) above, PROVIDED that, except to the extent otherwise
permitted hereunder, (x) the principal amount of any such Indebtedness is
not increased above the principal amount thereof outstanding immediately
prior to such refinancing, refunding, renewal or extension and (y) the
direct and contingent obligors with respect to such Indebtedness are not
changed;
(k) (i) Indebtedness of the Borrower or any Restricted Subsidiary
(including any Acquisition Subsidiary) incurred to finance a Permitted
Acquisition, PROVIDED that (x) such Indebtedness is not guaranteed in any
respect by any Restricted Subsidiary (other than any Person acquired (the
"ACQUIRED PERSON") as a result of such Permitted Acquisition or the
Restricted Subsidiary so incurring such Indebtedness) or, in the case of
Indebtedness of any Restricted Subsidiary, by the Borrower, (y)(A) the
Borrower pledges the capital stock of such acquired Person to the
Administrative Agent to the extent required under Section 9.12, (B) such
acquired Person executes a supplement to the Guarantee to the extent
required under Section 9.11 and (C) if a guarantee by such acquired Person
of any such Indebtedness is secured by assets of such acquired Person, the
Guarantee referred to in the preceding subclause (B) is equally and ratably
secured, PROVIDED that the requirements of this subclause (y) shall not
apply to an aggregate amount at any time outstanding of up to (and
including) $75,000,000 of the aggregate of (1) such Indebtedness and
(2) all Indebtedness as to which the proviso to clause (j)(i)(y) above then
applies, and (z) the aggregate amount of such Indebtedness and all
Indebtedness assumed or permitted to exist under clause (j) above, when
taken together, does not exceed $150,000,000 in the aggregate at any time
outstanding, PROVIDED that, when calculating the outstanding amount of
Indebtedness for purposes of this subclause (z), Indebtedness of any
Acquisition Subsidiary shall be excluded, and (ii) any refinancing,
refunding, renewal or extension of any Indebtedness specified in
subclause (i) above, PROVIDED that (x) the principal amount of any such
Indebtedness is not increased above the principal amount thereof
outstanding immediately prior to such refinancing, refunding, renewal or
extension and (y) the direct and contingent obligors with respect to such
Indebtedness are not changed, except to the extent otherwise permitted
hereunder;
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63
(l) Indebtedness of Restricted Foreign Subsidiaries in an aggregate
amount at any time outstanding not to exceed (i) $50,000,000 MINUS (ii) the
amount, if any, by which the aggregate amount of Indebtedness incurred and
outstanding at such time pursuant to clause (n) below exceeds $100,000,000;
(m) (i) Indebtedness incurred in connection with any Permitted Sale
Leaseback and (ii) any refinancing, refunding, renewal or extension of any
Indebtedness specified in subclause (i) above, PROVIDED that, except to the
extent otherwise permitted hereunder, (x) the principal amount of any such
Indebtedness is not increased above the principal amount thereof
outstanding immediately prior to such refinancing, refunding, renewal or
extension and (y) the direct and contingent obligors with respect to such
Indebtedness are not changed; and
(n) (i) additional Indebtedness, PROVIDED that the aggregate amount of
Indebtedness incurred and remaining outstanding pursuant to this clause (n)
shall not at any time exceed the sum of (x) $100,000,000 and (y) the
amount, if any, by which $50,000,000 exceeds the aggregate amount of
Indebtedness then outstanding under clause (l) above, and (ii) any
refinancing, refunding, renewal or extension of any Indebtedness specified
in subclause (i) above.
10.2 LIMITATION ON LIENS. The Borrower will not, and will not permit
any of the Restricted Subsidiaries to, create, incur, assume or suffer to exist
any Lien upon any property or assets of any kind (real or personal, tangible or
intangible) of the Borrower or any Restricted Subsidiary, whether now owned or
hereafter acquired, except:
(a) Liens arising under the Credit Documents;
(b) Permitted Liens;
(c) Liens securing Indebtedness permitted pursuant to Section 10.1(f),
PROVIDED that such Liens attach at all times only to the assets so
financed;
(d) Liens existing on the date hereof;
(e) Liens existing on the assets of any Person that becomes a
Restricted Subsidiary, or existing on assets acquired, pursuant to a
Permitted Acquisition to the extent the Liens on such assets secure
Indebtedness permitted by Section 10.1(j), PROVIDED that such Liens attach
at all times only to the same assets that such Liens attached to, and
secure only the same Indebtedness that such Liens secured, immediately
prior to such Permitted Acquisition;
(f) (i) Liens placed upon the capital stock of any Restricted
Subsidiary acquired pursuant to a Permitted Acquisition to secure
Indebtedness of the Borrower or any other Restricted Subsidiary incurred
pursuant to Section 10.1(k) in connection with such Permitted Acquisition,
(ii) Liens placed upon the assets of such Restricted Subsidiary to secure a
guarantee by such Restricted Subsidiary of any such Indebtedness of the
Borrower or any other Restricted Subsidiary and (iii) Liens placed upon the
capital stock or assets of any Acquisition Subsidiary to secure
Indebtedness of such Acquisition Subsidiary incurred pursuant to Section
10.1(k) in connection with any Permitted Acquisition;
(g) the replacement, extension or renewal of any Lien permitted by
clauses (a) through (f) above upon or in the same assets theretofore
subject to such Lien or the replacement, extension
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64
or renewal (without increase in the amount or change in any direct or
contingent obligor except to the extent otherwise permitted hereunder) of
the Indebtedness secured thereby; and
(h) additional Liens so long as the aggregate principal amount of the
obligations so secured does not exceed $25,000,000 at any time outstanding.
LIMITATION ON FUNDAMENTAL CHANGES. Except as expressly permitted by
Section 10.4 or 10.5, the Borrower will not, and will not permit any of the
Restricted Subsidiaries to, enter into any merger, consolidation or
amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease, assign, transfer or
otherwise dispose of, all or substantially all its business units, assets or
other properties, except that:
(i) any Subsidiary of the Borrower or any other Person may be
merged or consolidated with or into the Borrower, PROVIDED that
(i) the Borrower shall be the continuing or surviving corporation or
the Person formed by or surviving any such merger or consolidation (if
other than the Borrower) shall be a corporation organized or existing
under the laws of the United States, any state thereof, the District
of Columbia or any territory thereof (the Borrower or such Person, as
the case may be, being herein referred to as the "SUCCESSOR
BORROWER"), (ii) the Successor Borrower (if other than the Borrower)
shall expressly assume all the obligations of the Borrower under this
Agreement and the other Credit Documents pursuant to a supplement
hereto or thereto in form reasonably satisfactory to the
Administrative Agent, (iii) no Default or Event of Default would
result from the consummation of such merger or consolidation, (iv) the
Successor Borrower shall be in compliance, on a pro forma basis after
giving effect to such merger or consolidation, with the covenants set
forth in Sections 10.9, 10.10 and 10.11, as such covenants are
recomputed as at the last day of the most recently ended Test Period
under such Section as if such merger or consolidation had occurred on
the first day of such Test Period, (v) each Guarantor, unless it is
the other party to such merger or consolidation, shall have by a
supplement to the Guarantee confirmed that its Guarantee shall apply
to the Successor Borrower's obligations under this Agreement and (vi)
the Borrower shall have delivered to the Administrative Agent an
officer's certificate and an opinion of counsel, each stating that
such merger or consolidation and such supplement to this Agreement or
any Guarantee comply with this Agreement, PROVIDED FURTHER that if the
foregoing are satisfied, the Successor Borrower (if other than the
Borrower) will succeed to, and be substituted for, the Borrower under
this Agreement;
(ii) any Subsidiary of the Borrower or any other Person may be
merged or consolidated with or into any one or more Subsidiaries of
the Borrower, PROVIDED that (i) in the case of any merger or
consolidation involving one or more Restricted Subsidiaries, (A) a
Restricted Subsidiary shall be the continuing or surviving corporation
or (B) the Borrower shall take all steps necessary to cause the Person
formed by or surviving any such merger or consolidation (if other than
a Restricted Subsidiary) to become a Restricted Subsidiary, (ii) in
the case of any merger or consolidation involving one or more
Guarantors, a Guarantor shall be the continuing or surviving
corporation or the Person formed by or surviving any such merger or
consolidation (if other than a Guarantor) shall execute a supplement
to the Guarantee in form and substance reasonably satisfactory to the
Administrative Agent in order to become a Guarantor, (iii) no Default
or Event of Default would result from the consummation of such merger
or consolidation, (iv) the Borrower shall be in compliance, on a pro
forma basis after giving effect to such merger or consolidation, with
the covenants set forth in Sections 10.9, 10.10 and 10.11,
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65
as such covenants are recomputed as at the last day of the most
recently ended Test Period under such Section as if such merger or
consolidation had occurred on the first day of such Test Period, and
(v) the Borrower shall have delivered to the Administrative Agent an
Officers' Certificate stating that such merger or consolidation and
such supplement to any Guarantee comply with this Agreement;
(iii) any Restricted Subsidiary that is not a Guarantor may sell,
lease, transfer or otherwise dispose of any or all of its assets (upon
voluntary liquidation or otherwise) to the Borrower, a Guarantor or
any other Restricted Subsidiary of the Borrower; and
(iv) any Guarantor may sell, lease, transfer or otherwise dispose
of any or all of its assets (upon voluntary liquidation or otherwise)
to the Borrower or any other Guarantor.
10.4 LIMITATION ON SALE OF ASSETS. The Borrower will not, and will
not permit any of the Restricted Subsidiaries to, (i) convey, sell, lease,
assign, transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, receivables and leasehold interests), whether
now owned or hereafter acquired (other than any such sale, transfer, assignment
or other disposition resulting from any casualty or condemnation, of any assets
of the Borrower or the Restricted Subsidiaries) or (ii) sell any shares owned by
it of any Restricted Subsidiary's capital stock to any Person other than the
Borrower, a Guarantor or a Restricted Foreign Subsidiary, except that:
(a) the Borrower and the Restricted Subsidiaries may sell, transfer or
otherwise dispose of used or surplus equipment, vehicles, inventory and
other assets in the ordinary course of business;
(b) the Borrower and the Restricted Subsidiaries may sell, transfer or
otherwise dispose of other assets for fair value, PROVIDED that (i) the
aggregate amount of such sales, transfers and disposals by the Borrower and
the Restricted Subsidiaries taken as a whole pursuant to this clause (b)
shall not exceed in the aggregate $125,000,000 during the term of this
Agreement, (ii) any consideration in excess of $5,000,000 received by the
Borrower or any Guarantor in connection with such sales, transfers and
other dispositions of assets pursuant to this clause (b) that is in the
form of Indebtedness shall be pledged to the Administrative Agent pursuant
to Section 9.12, (iii) with respect to any such sale, transfer or
disposition (or series of related sales, transfers or dispositions) in an
aggregate amount in excess of $10,000,000, the Borrower shall be in
compliance, on a pro forma basis after giving effect to such sale, transfer
or disposition, with the covenants set forth in Sections 10.9, 10.10 and
10.11, as such covenants are recomputed as at the last day of the most
recently ended Test Period under such Sections as if such sale, transfer or
disposition had occurred on the first day of such Test Period, and
(iv) after giving effect to any such sale, transfer or disposition, no
Default or Event of Default shall have occurred and be continuing;
(c) the Borrower and the Restricted Subsidiaries may make sales of
assets to the Borrower or to any Restricted Subsidiary, PROVIDED that any
such sales to Restricted Foreign Subsidiaries shall be for fair value;
(d) any Restricted Subsidiary may effect any transaction permitted by
Section 10.3;
(e) in addition to selling or transferring accounts receivable
pursuant to the other provisions hereof, the Borrower and the Restricted
Subsidiaries may sell or discount without
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66
recourse accounts receivable arising in the ordinary course of business in
connection with the compromise or collection thereof; and
(f) the Borrower and the Restricted Subsidiaries may sell, transfer or
otherwise dispose of Stores in connection with Permitted Sale Leasebacks.
10.5 LIMITATION ON INVESTMENTS. The Borrower will not, and will not
permit any of the Restricted Subsidiaries to, make any advance, loan, extensions
of credit or capital contribution to, or purchase any stock, bonds, notes,
debentures or other securities of or any assets of, or make any other investment
in, any Person, except:
(a) extensions of trade credit and asset purchases in the ordinary
course of business;
(b) Permitted Investments;
(c) loans and advances to officers, directors and employees of the
Borrower or any of its Subsidiaries (i) to finance the purchase of capital
stock of the Borrower and (ii) for additional purposes not contemplated by
subclause (i) above in an aggregate principal amount at any time
outstanding with respect to this clause (ii) not exceeding $10,000,000;
(d) investments existing on the date hereof and any extensions,
renewals or reinvestments thereof, so long as the aggregate amount of all
investments pursuant to this clause (d) is not increased at any time above
the amount of such investments existing on the date hereof;
(e) investments in Hedge Agreements permitted by Section 10.1(h);
(f) investments received in connection with the bankruptcy or
reorganization of suppliers or customers and in settlement of delinquent
obligations of, and other disputes with, customers arising in the ordinary
course of business;
(g) investments to the extent that payment for such investments is
made solely with capital stock of the Borrower;
(h) investments constituting non-cash proceeds of sales, transfers and
other dispositions of assets to the extent permitted by Section 10.4;
(i) investments in any Guarantor;
(j) investments constituting Permitted Acquisitions, PROVIDED that the
aggregate amount of any such investment made by the Borrower or any
Restricted Subsidiary (other than any Acquisition Subsidiary) in any
Acquisition Subsidiary shall not exceed the Available Amount at the time of
such investment, and PROVIDED FURTHER that the aggregate amount of any such
investment made by the Borrower or any Restricted Subsidiary (other than
any Restricted Foreign Subsidiary) in any Restricted Foreign Subsidiary
shall not exceed (i) the Available Foreign Investment Amount at the time of
such investment MINUS (ii) the portion of the Available Foreign Investment
Amount being used at such time for investments made pursuant to clause (n)
below;
(k) investments in any Restricted Foreign Subsidiary, PROVIDED that
the aggregate amount of any such investment made by the Borrower or any
Restricted Subsidiary (other than any Restricted Foreign Subsidiary) shall
not exceed (i) the Available Foreign Investment Amount
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67
at the time of such investment MINUS (ii) the portion of the Available
Foreign Investment Amount being used at such time for investments made
pursuant to clause (n) below;
(l) investments made to pay for the repurchase, retirement or other
acquisition of the Remaining Equity in an aggregate amount at the time of
such investment not in excess of the lesser of (i) the Available Amount at
such time and (ii) the aggregate amount of such investments then permitted
to be made under the Subordinated Note Indenture;
(m) investments made to repurchase or retire common stock of the
Borrower owned by the Borrower's employee stock ownership plan or key
employee stock ownership plan;
(n) additional investments (including investments in Minority
Investments, Unrestricted Subsidiaries and Acquisition Subsidiaries) in an
aggregate amount at the time of such investment not in excess of the sum of
(i) the Available Amount at such time and (ii) the amount equal to one-half
of the Available Foreign Investment Amount at such time; and
(o) investments permitted under Section 10.6.
10.6 LIMITATION ON DIVIDENDS. The Borrower will not declare or pay
any dividends (other than dividends payable solely in its capital stock or
rights, warrants or options to purchase its capital stock) or return any capital
to its stockholders or make any other distribution, payment or delivery of
property or cash to its stockholders as such, or redeem, retire, purchase or
otherwise acquire, directly or indirectly, for consideration, any shares of any
class of its capital stock or the capital stock of any direct or indirect parent
of the Borrower now or hereafter outstanding (or any warrants for or options or
stock appreciation rights in respect of any of such shares), or set aside any
funds for any of the foregoing purposes, or permit any of the Restricted
Subsidiaries to purchase or otherwise acquire for consideration (other than in
connection with an investment permitted by Section 10.5) any shares of any class
of the capital stock of the Borrower, now or hereafter outstanding (or any
options or warrants or stock appreciation rights issued by such Person with
respect to its capital stock) (all of the foregoing "DIVIDENDS"), PROVIDED that,
so long as no Default or Event of Default exists or would exist after giving
effect thereto, (a) the Borrower may redeem in whole or in part any capital
stock of the Borrower (i) for the Replacement Preferred Stock, (ii) for another
class of capital stock or rights to acquire capital stock of the Borrower or
(iii) with proceeds from substantially concurrent equity contributions or
issuances of new shares of capital stock, PROVIDED that such other class of
capital stock (other than any Replacement Preferred Stock) contains terms and
provisions at least as advantageous to the Lenders in all respects material to
their interests as those contained in the capital stock redeemed thereby,
(b) the Borrower may repurchase shares of its capital stock (and/or options or
warrants in respect thereof) held by its officers, directors and employees so
long as such repurchase is pursuant to, and in accordance with the terms of,
management and/or employee stock plans, stock subscription agreements or
shareholder agreements, (c) the Borrower may make investments permitted by
Section 10.5, (d) the Borrower may declare and pay dividends on its capital
stock, PROVIDED that (i) the aggregate amount of dividends paid pursuant to this
clause (d) shall not at any time exceed 50% of Cumulative Consolidated Net
Income Available to Stockholders at such time less the amount of dividends
previously paid pursuant to this clause (d) following the last day of the most
recent fiscal quarter for which Section 9.1 Financials have been delivered to
the Lenders under Section 9.1 and (ii) at the time of the payment of any such
dividends and after giving effect thereto, the Consolidated Total Debt to
Consolidated EBITDA Ratio on the date of such payment of such dividends shall be
less than 4.00:1.00 and (e) the Borrower may declare and pay dividends and/or
make distributions on its capital stock, the proceeds of which will be used by
CCPC solely to pay taxes of CCPC, the Borrower and its
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68
Subsidiaries as part of a consolidated tax filing group, along with franchise
taxes, administrative and similar expenses related to its existence and
ownership of the Borrower, PROVIDED that the amount of such dividends does not
exceed in any fiscal year the amount of such taxes and expenses payable for such
fiscal year.
10.7 LIMITATIONS ON DEBT PAYMENTS AND AMENDMENTS. (a) The Borrower
will not (i) prepay, repurchase or redeem or otherwise defease any portion of
the Subordinated Loans or (ii) prepay, repurchase or redeem or otherwise defease
any Subordinated Notes; PROVIDED, HOWEVER, that (A) the Borrower may prepay the
principal of, and accrued interest on, the Subordinated Loans with Revolving
Credit Loans as contemplated by this Agreement and may prepay the remainder of
the principal of, and accrued interest on, the Subordinated Loans with the Net
Cash Proceeds of the Subordinated Notes and (B) so long as no Default or Event
of Default has occurred and is continuing, the Borrower may prepay, repurchase
or redeem Subordinated Notes (x) for an aggregate price not in excess of the
Available Amount at the time of such prepayment, repurchase or redemption or
(y) with the proceeds of subordinated Indebtedness that (1) is permitted by
Section 10.1 and (2) has terms material to the interests of the Lenders not
materially less advantageous to the Lenders than those of the Subordinated
Notes.
(b) The Borrower will not waive, amend, modify, terminate or release
the Subordinated Loan Agreement or the Subordinated Note Indenture to the
extent that any such waiver, amendment, modification, termination or release
would be adverse to the Lenders in any material respect.
(c) The Borrower will not waive, amend, modify, terminate or release
the Certificate of Designations relating to the Junior Preferred Stock to the
extent that any such waiver, amendment, modification, termination or release
would be adverse to the Lenders in any material respect, PROVIDED that the
Borrower shall be entitled to make appropriate modifications to the Certificate
of Designations consistent with clause (b) of the definition of the term
Replacement Preferred Stock or in connection with the issuance of the
Replacement Preferred Stock as contemplated by Section 10.6(a).
10.8 LIMITATIONS ON SALE LEASEBACKS. The Borrower will not, and will
not permit any of the Restricted Subsidiaries to, enter into or effect any Sale
Leasebacks, other than Permitted Sale Leasebacks.
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69
10.9 CONSOLIDATED LEASE EXPENSE. The Borrower will not permit
Consolidated Lease Expense for any fiscal year of the Borrower set forth below
to exceed the amount set forth below opposite such fiscal year:
Fiscal Year Amount
----------- ------
1998 $32,000,000
1999 35,000,000
2000 38,000,000
2001 42,000,000
2002 46,000,000
2003 50,600,000
2004 55,700,000
2005 61,200,000
2006 67,300,000
10.10 CONSOLIDATED TOTAL DEBT TO CONSOLIDATED EBITDA RATIO. The
Borrower will not permit the Consolidated Total Debt to Consolidated EBITDA
Ratio for any Test Period ending during any period set forth below to be greater
than the ratio set forth below opposite such period:
Period Ratio
------ -----
12/31/98 - 3/30/99 6.50:1.00
3/31/99 - 12/30/99 6.35:1.00
12/31/99 - 12/30/00 6.00:1.00
12/31/00 - 12/30/01 5.50:1.00
12/31/01 - 12/30/02 5.00:1.00
12/31/02 - 12/30/03 4.50:1.00
12/31/03 - 12/30/04 4.25:1.00
12/31/04 and thereafter 4.00:1.00
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10.11 CONSOLIDATED EBITDA TO CONSOLIDATED INTEREST EXPENSE RATIO.
The Borrower will not permit the Consolidated EBITDA to Consolidated Interest
Expense Ratio for any Test Period ending during any period set forth below to be
less than the ratio set forth below opposite such period:
Period Ratio
------ -----
6/30/98 - 12/30/98 1.50:1.00
12/31/98 - 12/30/99 1.60:1.00
12/31/99 - 12/30/00 1.80:1.00
12/31/00 - 12/30/01 2.00:1.00
12/31/01 - 12/30/02 2.00:1.00
12/31/02 - 12/30/03 2.25:1.00
12/31/03 and thereafter 2.50:1.00
10.12 CAPITAL EXPENDITURES. The Borrower will not, and will not
permit any of the Restricted Subsidiaries to, make any Capital Expenditures
(other than Permitted Acquisitions that constitute Capital Expenditures), that
would cause the aggregate amount of such Capital Expenditures made by the
Borrower and the Restricted Subsidiaries in any fiscal year of the Borrower set
forth below to exceed the greater of (a) the amount set forth below under column
A and (b) the amount equal to the Consolidated Net Sales for such fiscal year
multiplied by the number set forth below under column B opposite such fiscal
year:
Fiscal Year A B
----------- --- ---
1998 $35,000,000 0.06
1999 45,000,000 0.07
2000 45,000,000 0.07
2001 45,000,000 0.07
2002 45,000,000 0.07
2003 45,000,000 0.07
2004 45,000,000 0.07
2005 45,000,000 0.07
2006 45,000,000 0.07
To the extent that Capital Expenditures (other than Permitted Acquisitions that
constitute Capital Expenditures) made by the Borrower and the Restricted
Subsidiaries during any fiscal year are less than the maximum amount permitted
to be made for such fiscal year, 75% of such unused amount (each such amount, a
"CARRY-FORWARD AMOUNT") may be carried forward to the immediately succeeding
fiscal year and utilized to make such Capital Expenditures in such succeeding
fiscal year in the event the amount set forth above for such succeeding fiscal
year has been used (it being understood and agreed that (a) no carry-forward
amount may be carried forward beyond the first two fiscal years immediately
succeeding the fiscal year in which it arose, (b) no portion of the
carry-forward amount available for any fiscal year may be used until the entire
amount of such Capital Expenditures permitted to be made in such fiscal year
(without giving effect to such carry-forward amount) shall be made and (c) if
the carry-forward amount
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available for any fiscal year is the sum of amounts carried forward from each of
the two immediately preceding fiscal years, no portion of such carry-forward
amount from the earlier of the two immediately preceding fiscal years may be
used until the entire portion of such carry-forward amount from the more recent
immediately preceding fiscal year shall have been used for such Capital
Expenditures made in such fiscal year).
SECTION 11 EVENTS OF DEFAULT. Upon the occurrence of any of the
following specified events (each an "EVENT OF DEFAULT"):
11.1 PAYMENTS. The Borrower shall (a) default in the payment when due
of any principal of the Loans or (b) default, and such default shall continue
for five or more days, in the payment when due of any interest on the Loans or
any Fees or any Unpaid Drawings or of any other amounts owing hereunder or under
any other Credit Document; or
11.2 REPRESENTATIONS, ETC.. Any representation, warranty or statement
made or deemed made by any Credit Party herein or in the Guarantee, the Pledge
Agreement or any certificate delivered or required to be delivered pursuant
hereto or thereto shall prove to be untrue in any material respect on the date
as of which made or deemed made; or
11.3 COVENANTS. Any Credit Party shall (a) default in the due
performance or observance by it of any term, covenant or agreement contained in
Section 9.1(e), 9.15 or Section 10 or (b) default in the due performance or
observance by it of any term, covenant or agreement (other than those referred
to in Section 11.1 or 11.2 or clause (a) of this Section 11.3) contained in this
Agreement, the Guarantee or the Pledge Agreement and such default shall continue
unremedied for a period of at least 30 days after receipt of written notice by
the Borrower from the Administrative Agent or the Required Lenders; or
11.4 DEFAULT UNDER OTHER AGREEMENTS. (a) The Borrower or any of the
Restricted Subsidiaries shall (i) default in any payment with respect to any
Indebtedness (other than the Obligations) in excess of $20,000,000 in the
aggregate, for the Borrower and such Subsidiaries, beyond the period of grace,
if any, provided in the instrument or agreement under which such Indebtedness
was created or (ii) default in the observance or performance of any agreement or
condition relating to any such Indebtedness or contained in any instrument or
agreement evidencing, securing or relating thereto, or (except in the case of
Indebtedness consisting of any Hedge Agreement) any other event shall occur or
condition exist, the effect of which default or other event or condition is to
cause, or to permit the holder or holders of such Indebtedness (or a trustee or
agent on behalf of such holder or holders) to cause, any such Indebtedness to
become due prior to its stated maturity; or (b) without limiting the provisions
of clause (a) above, any such Indebtedness (other than Indebtedness consisting
of any Hedge Agreement) shall be declared to be due and payable, or required to
be prepaid other than by a regularly scheduled required prepayment or as a
mandatory prepayment, prior to the stated maturity thereof; or
11.5 BANKRUPTCY, ETC.. The Borrower or any Specified Subsidiary shall
commence a voluntary case concerning itself under Title 11 of the United States
Code entitled "Bankruptcy," as now or hereafter in effect, or any successor
thereto (the "BANKRUPTCY CODE"); or an involuntary case is commenced against the
Borrower or any Specified Subsidiary and the petition is not controverted within
10 days after commencement of the case; or an involuntary case is commenced
against the Borrower or any Specified Subsidiary and the petition is not
dismissed within 60 days after commencement of the case; or a custodian (as
defined in the Bankruptcy Code) is appointed for, or takes charge of, all or
substantially all of the property of
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72
the Borrower or any Specified Subsidiary; or the Borrower or any Specified
Subsidiary commences any other proceeding under any reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or
similar law of any jurisdiction whether now or hereafter in effect relating to
the Borrower or any Specified Subsidiary; or there is commenced against the
Borrower or any Specified Subsidiary any such proceeding that remains
undismissed for a period of 60 days; or the Borrower or any Specified Subsidiary
is adjudicated insolvent or bankrupt; or any order of relief or other order
approving any such case or proceeding is entered; or the Borrower or any
Specified Subsidiary suffers any appointment of any custodian or the like for it
or any substantial part of its property to continue undischarged or unstayed for
a period of 60 days; or the Borrower or any Specified Subsidiary makes a general
assignment for the benefit of creditors; or any corporate action is taken by the
Borrower or any Specified Subsidiary for the purpose of effecting any of the
foregoing; or
11.6 ERISA. (a) Any Plan shall fail to satisfy the minimum funding
standard required for any plan year or part thereof or a waiver of such standard
or extension of any amortization period is sought or granted under Section 412
of the Code; any Plan is or shall have been terminated or is the subject of
termination proceedings under ERISA (including the giving of written notice
thereof); an event shall have occurred or a condition shall exist in either case
entitling the PBGC to terminate any Plan or to appoint a trustee to administer
any Plan (including the giving of written notice thereof); any Plan shall have
an accumulated funding deficiency (whether or not waived); the Borrower or any
Subsidiary or any ERISA Affiliate has incurred or is likely to incur a liability
to or on account of a Plan under Section 409, 502(i), 502(l), 515, 4062, 4063,
4064, 4069, 4201 or 4204 of ERISA or Section 4971 or 4975 of the Code (including
the giving of written notice thereof); (b) there could result from any event or
events set forth in clause (a) of this Section 11.6 the imposition of a lien,
the granting of a security interest, or a liability, or the reasonable
likelihood of incurring a lien, security interest or liability; and (c) such
lien, security interest or liability will or would be reasonably likely to have
a Material Adverse Effect; or
11.7 GUARANTEE. The Guarantee or any material provision thereof shall
cease to be in full force or effect or any Guarantor thereunder or any Credit
Party shall deny or disaffirm in writing such Guarantor's obligations under the
Guarantee; or
11.8 PLEDGE AGREEMENT. The Pledge Agreement or any material provision
thereof shall cease to be in full force or effect (other than pursuant to the
terms hereof or thereof or as a result of acts or omissions of the
Administrative Agent or any Lender) or any Pledgor thereunder or any Credit
Party shall deny or disaffirm in writing such Pledgor's obligations under the
Pledge Agreement; or
11.9 JUDGMENTS. One or more judgments or decrees shall be entered
against the Borrower or any of the Restricted Subsidiaries involving a liability
of $20,000,000 or more in the aggregate for all such judgments and decrees for
the Borrower and the Restricted Subsidiaries (to the extent not paid or fully
covered by insurance provided by a carrier not disputing coverage) and any such
judgments or decrees shall not have been satisfied, vacated, discharged or
stayed or bonded pending appeal within 60 days from the entry thereof; or
11.10 CHANGE OF CONTROL. A Change of Control shall occur;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Administrative Agent shall, upon the written
request of the Required Lenders, by written notice to the Borrower, take any or
all of the following actions, without prejudice to the
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73
rights of the Administrative Agent or any Lender to enforce its claims against
the Borrower, except as otherwise specifically provided for in this Agreement
(PROVIDED that, if an Event of Default specified in Section 11.5 shall occur
with respect to the Borrower or any Specified Subsidiary, the result that would
occur upon the giving of written notice by the Administrative Agent as specified
in clauses (i), (ii) and (iv) below shall occur automatically without the giving
of any such notice): (i) declare the Total Term Loan Commitment and the Total
Revolving Commitment terminated, whereupon the Commitments and Swingline
Commitment, if any, of each Lender or Chase, as the case may be, shall forthwith
terminate immediately and any Fees theretofore accrued shall forthwith become
due and payable without any other notice of any kind; (ii) declare the principal
of and any accrued interest in respect of all Loans and all Obligations owing
hereunder and thereunder to be, whereupon the same shall become, forthwith due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower; (iii) terminate any Letter of
Credit that may be terminated in accordance with its terms; and/or (iv) direct
the Borrower to pay (and the Borrower agrees that upon receipt of such notice,
or upon the occurrence of an Event of Default specified in Section 11.5 with
respect to the Borrower or any Specified Subsidiary, it will pay) to the
Administrative Agent at the Administrative Agent's Office such additional
amounts of cash, to be held as security for the Borrower's reimbursement
obligations for Drawings that may subsequently occur thereunder, equal to the
aggregate Stated Amount of all Letters of Credit issued and then outstanding.
SECTION 12 THE ADMINISTRATIVE AGENT.
12.1 APPOINTMENT. Each Lender hereby irrevocably designates and
appoints the Administrative Agent as the agent of such Lender under this
Agreement and the other Credit Documents, and each such Lender irrevocably
authorizes the Administrative Agent, in such capacity, to take such action on
its behalf under the provisions of this Agreement and the other Credit Documents
and to exercise such powers and perform such duties as are expressly delegated
to the Administrative Agent by the terms of this Agreement and the other Credit
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any Lender, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Credit Document or
otherwise exist against the Administrative Agent. Neither the Syndication Agent
nor the Documentation Agent, in their respective capacities as such, shall have
any obligations, duties or responsibilities under this Agreement.
12.2 DELEGATION OF DUTIES. The Administrative Agent may execute any
of its duties under this Agreement and the other Credit Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys in-fact selected by it with reasonable care.
12.3 EXCULPATORY PROVISIONS. Neither the Administrative Agent nor any
of its officers, directors, employees, agents, attorneys-in-fact or Affiliates
shall be (a) liable for any action lawfully taken or omitted to be taken by it
or such Person under or in connection with this Agreement or any other Credit
Document (except for its or such Person's own gross negligence or willful
misconduct) or (b) responsible in any manner to any of the Lenders for any
recitals, statements, representations or warranties made by the Borrower or any
Guarantor or any officer
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thereof contained in this Agreement or any other Credit Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Administrative Agent under or in connection with, this
Agreement or any other Credit Document or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Credit Document or for any failure of the Borrower or any Guarantor to
perform its obligations hereunder or thereunder. The Administrative Agent shall
not be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Credit Document, or to inspect the properties,
books or records of the Borrower.
12.4 RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent shall
be entitled to rely, and shall be fully protected in relying, upon any writing,
resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or
teletype message, statement, order or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to the Borrower), independent accountants and other
experts selected by the Administrative Agent. The Administrative Agent may deem
and treat the Lender specified in the Register with respect to any amount owing
hereunder as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Administrative Agent. The Administrative Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Credit
Document unless it shall first receive such advice or concurrence of the
Required Lenders as it deems appropriate or it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense that may
be incurred by it by reason of taking or continuing to take any such action.
The Administrative Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement and the other Credit Documents in
accordance with a request of the Required Lenders, and such request and any
action taken or failure to act pursuant thereto shall be binding upon all the
Lenders and all future holders of the Loans.
12.5 NOTICE OF DEFAULT. The Administrative Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Administrative Agent has received notice from a Lender or
the Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". In the event
that the Administrative Agent receives such a notice, the Administrative Agent
shall give notice thereof to the Lenders. The Administrative Agent shall take
such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders, PROVIDED that unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Lenders (except to the extent that
this Agreement requires that such action be taken only with the approval of the
Required Lenders or each of the Lenders, as applicable).
12.6 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS. Each
Lender expressly acknowledges that neither the Administrative Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates has
made any representations or warranties to it and that no act by the
Administrative Agent hereinafter taken, including any review of the affairs of
the Borrower or any Guarantor, shall be deemed to constitute any representation
or warranty by the Administrative Agent to any Lender. Each Lender represents
to the Administrative Agent that it has, independently and without reliance upon
the Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its
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own appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Borrower and any
Guarantor and made its own decision to make its Loans hereunder and enter into
this Agreement. Each Lender also represents that it will, independently and
without reliance upon the Administrative Agent or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Credit Documents, and to
make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of the Borrower and any Guarantor. Except for notices, reports
and other documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, the Administrative Agent shall not have any duty
or responsibility to provide any Lender with any credit or other information
concerning the business, assets, operations, properties, financial condition,
prospects or creditworthiness of the Borrower or any Guarantor that may come
into the possession of the Administrative Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates.
12.7 INDEMNIFICATION. The Lenders agree to indemnify the
Administrative Agent in its capacity as such (to the extent not reimbursed by
the Borrower and without limiting the obligation of the Borrower to do so),
ratably according to their respective portions of the Total Credit Exposure in
effect on the date on which indemnification is sought (or, if indemnification is
sought after the date upon which the Commitments shall have terminated and the
Loans shall have been paid in full, ratably in accordance with their respective
portions of the Total Credit Exposure in effect immediately prior to such date),
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever that may at any time (including, without limitation, at any time
following the payment of the Loans) be imposed on, incurred by or asserted
against the Administrative Agent in any way relating to or arising out of, the
Commitments, this Agreement, any of the other Credit Documents or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the
Administrative Agent under or in connection with any of the foregoing, PROVIDED
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the Administrative Agent's gross
negligence or willful misconduct. The agreements in this Section 12.7 shall
survive the payment of the Loans and all other amounts payable hereunder.
12.8 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. The
Administrative Agent and its Affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrower and any Guarantor
as though the Administrative Agent were not the Administrative Agent hereunder
and under the other Credit Documents. With respect to the Loans made by it, the
Administrative Agent shall have the same rights and powers under this Agreement
and the other Credit Documents as any Lender and may exercise the same as though
it were not the Administrative Agent, and the terms "Lender" and "Lenders" shall
include the Administrative Agent in its individual capacity.
12.9 SUCCESSOR AGENT. The Administrative Agent may resign as
Administrative Agent upon 20 days' prior written notice to the Lenders and the
Borrower. If the Administrative Agent shall resign as Administrative Agent
under this Agreement and the other Credit Documents, then the Required Lenders
shall appoint from among the Lenders a successor agent for the Lenders, which
successor agent shall be approved by the Borrower (which approval shall not be
unreasonably withheld), whereupon such successor agent shall succeed to the
rights, powers and duties of the Administrative Agent, and the term
"Administrative Agent" shall mean
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such successor agent effective upon such appointment and approval, and the
former Administrative Agent's rights, powers and duties as Administrative Agent
shall be terminated, without any other or further act or deed on the part of
such former Administrative Agent or any of the parties to this Agreement or any
holders of the Loans. After any retiring Administrative Agent's resignation as
Administrative Agent, the provisions of this Section 12 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement and the other Credit Documents.
SECTION 13. MISCELLANEOUS.
13.1 AMENDMENTS AND WAIVERS. Neither this Agreement nor any other
Credit Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this Section 13.1. The
Required Lenders may, or, with the written consent of the Required Lenders, the
Administrative Agent may, from time to time, (a) enter into with the relevant
Credit Party or Credit Parties written amendments, supplements or modifications
hereto and to the other Credit Documents for the purpose of adding any
provisions to this Agreement or the other Credit Documents or changing in any
manner the rights of the Lenders or of the Borrower hereunder or thereunder or
(b) waive, on such terms and conditions as the Required Lenders or the
Administrative Agent, as the case may be, may specify in such instrument, any of
the requirements of this Agreement or the other Credit Documents or any Default
or Event of Default and its consequences; PROVIDED, HOWEVER, that no such waiver
and no such amendment, supplement or modification shall directly (i) forgive any
portion of any Loan or extend the final scheduled maturity date of any Loan or
reduce the stated rate, or forgive any portion, or extend the date for the
payment, of any interest or fee payable hereunder (other than as a result of
waiving the applicability of any post-default increase in interest rates) or
extend the final expiration date of any Lender's Commitment or extend the final
expiration date of any Letter of Credit beyond the L/C Maturity Date or increase
the aggregate amount of the Commitments of any Lender, in each case without the
written consent of each Lender directly and adversely affected thereby, or
(ii) amend, modify or waive any provision of this Section 13.1 or reduce the
percentages specified in the definitions of the terms "Required Lenders",
"Required Revolving Credit Lenders" and "Required Term Loan Lenders", or consent
to the assignment or transfer by the Borrower of its rights and obligations
under any Credit Document to which it is a party (except as permitted pursuant
to Section 10.3), in each case without the written consent of each Lender
directly and adversely affected thereby, or (iii) amend, modify or waive any
provision of Section 12 without the written consent of the then-current Agents,
or (iv) amend, modify or waive any provision of Section 3 without the written
consent of the Letter of Credit Issuer, or (v) amend, modify or waive any
provisions hereof relating to Swingline Loans without the written consent of
Chase, or (vi) change any Revolving Credit Commitment to a Term Loan Commitment,
or change any Term Loan Commitment to a Revolving Credit Commitment, in each
case without the prior written consent of each Lender directly and adversely
affected thereby, or (vii) decrease any Repayment Amount or extend any scheduled
Repayment Date, in each case without the written consent of the Required Term
Loan Lenders, or (viii) except to the extent permitted under the applicable
Credit Document, release all or substantially all the Collateral under the
Pledge Agreement or release all or substantially all the Guarantors under the
Guarantee, in each case without the written consent of (x) the Required
Revolving Credit Lenders and (y) the Required Term Loan Lenders, and PROVIDED
FURTHER, that at any time that no Default or Event of Default has occurred and
is continuing, the Revolving Credit Commitment of any Lender may be increased to
finance a Permitted Acquisition, with the consent of such Lender, the Borrower
and the Administrative Agent (which consent, in the case of the Administrative
Agent, shall not be unreasonably withheld) and without the consent of the
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77
Required Lenders, so long as (i) the Increased Commitment Amount (as defined
below) at such time, when added to the amount of Indebtedness incurred pursuant
to Section 10.1(k) and outstanding at such time, does not exceed the limits set
forth therein, (ii) the Borrower shall pledge the Capital Stock of any person
acquired pursuant thereto to the Administrative Agent for the benefit of the
Lenders to the extent required under Section 9.12 and (iii) to the extent
determined by the Administrative Agent to be necessary to ensure pro rata
borrowings commencing with the initial borrowing after giving effect to such
increase, the Borrower shall prepay any Eurodollar Loans outstanding immediately
prior to such initial borrowing; as used herein, the "Increased Commitment
Amount" means, at any time, aggregate amount of all increases pursuant to this
proviso made at or prior to such time less the aggregate amount of all voluntary
reductions of the Revolving Credit Commitments made prior to such time. Any
such waiver and any such amendment, supplement or modification shall apply
equally to each of the affected Lenders and shall be binding upon the Borrower,
such Lenders, the Administrative Agent and all future holders of the affected
Loans. In the case of any waiver, the Borrower, the Lenders and the
Administrative Agent shall be restored to their former positions and rights
hereunder and under the other Credit Documents, and any Default or Event of
Default waived shall be deemed to be cured and not continuing, it being
understood that no such waiver shall extend to any subsequent or other Default
or Event of Default or impair any right consequent thereon.
13.2 NOTICES. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission), and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made when delivered, or three days after
being deposited in the mail, postage prepaid, or, in the case of telecopy
notice, when received, addressed as follows in the case of the Borrower and the
Administrative Agent, and as set forth on Schedule 1.1 in the case of the other
parties hereto, or to such other address as may be hereafter notified by the
respective parties hereto:
The Borrower: Corning Consumer Products Company
E Building
Houghton Park
Corning, New York 14831
Attention: Thomas O'Brien
Fax: (607) 974-6135
with a copy to:
Borden, Inc.
180 East Broad Street
Columbus, Ohio 43215
Attention: Ronald Starkman
Fax: (614) 225-4421
The Administrative Agent: The Chase Manhattan Bank
c/o The Loan and Agency Services Group
One Chase Manhattan Plaza, Eighth Floor
New York, NY 10081
Attention: Janet Belden
Fax: (212) 552-5658
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with a copy to:
The Chase Manhattan Bank
270 Park Avenue
New York, NY 10017
Attention: Clifford Rooke
Fax: (212) 972-0009
PROVIDED that any notice, request or demand to or upon the Administrative Agent
or the Lenders pursuant to Sections 2.3, 2.6, 2.9, 4.2 and 5.1 shall not be
effective until received.
13.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent or any Lender, any
right, remedy, power or privilege hereunder or under the other Credit Documents
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exclusive of any rights, remedies, powers and privileges provided by law.
13.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made hereunder, in the other Credit Documents and in any
document, certificate or statement delivered pursuant hereto or in connection
herewith shall survive the execution and delivery of this Agreement and the
making of the Loans hereunder.
13.5 PAYMENT OF EXPENSES AND TAXES. The Borrower agrees (a) to pay or
reimburse the Agents for all their reasonable out-of-pocket costs and expenses
incurred in connection with the development, preparation and execution of, and
any amendment, supplement or modification to, this Agreement and the other
Credit Documents and any other documents prepared in connection herewith or
therewith, and the consummation and administration of the transactions
contemplated hereby and thereby, including, without limitation, the reasonable
fees, disbursements and other charges of counsel to the Agents, (b) to pay or
reimburse each Lender and the Administrative Agent for all its reasonable and
documented costs and expenses incurred in connection with the enforcement or
preservation of any rights under this Agreement, the other Credit Documents and
any such other documents, including, without limitation, the reasonable fees,
disbursements and other charges of counsel to each Lender and of counsel to the
Administrative Agent, (c) to pay, indemnify, and hold harmless each Lender and
the Administrative Agent from, any and all recording and filing fees and any and
all liabilities with respect to, or resulting from any delay in paying, stamp,
excise and other similar taxes, if any, that may be payable or determined to be
payable in connection with the execution and delivery of, or consummation or
administration of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of,
this Agreement, the other Credit Documents and any such other documents, and (d)
to pay, indemnify, and hold harmless each Lender and the Administrative Agent
and their respective directors, officers, employees, trustees and agents from
and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever, including, without limitation, reasonable and
documented fees, disbursements and other charges of counsel, with respect to the
execution, delivery, enforcement, performance and administration of this
Agreement, the other Credit Documents and any such other documents, including,
without limitation, any of the foregoing relating to the violation of,
noncompliance with or liability under, any Environmental Law applicable to the
operations of the Borrower, any of its Subsidiaries or any of the Properties
(all
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the foregoing in this clause (d), collectively, the "INDEMNIFIED LIABILITIES"),
PROVIDED that the Borrower shall have no obligation hereunder to the
Administrative Agent or any Lender nor any of their respective directors,
officers, employees and agents with respect to indemnified liabilities arising
from (i) the gross negligence or willful misconduct of the party to be
indemnified or (ii) disputes among the Administrative Agent, the Lenders and/or
their transferees. The agreements in this Section 13.5 shall survive repayment
of the Loans and all other amounts payable hereunder.
13.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS AND ASSIGNMENTS. (a)
(i) This Agreement shall be binding upon and inure to the benefit of the
Borrower, the Lenders, the Administrative Agent and their respective successors
and assigns, except that the Borrower may not assign or transfer any of its
rights or obligations under this Agreement without the prior written consent of
each Lender.
(ii) Any Lender may, in the ordinary course of its business and in
accordance with applicable law, at any time sell to one or more banks or other
entities ("PARTICIPANTS") participating interests in any Loan owing to such
Lender, any Commitment of such Lender or any other interest of such Lender
hereunder and under the other Credit Documents (including to loan derivative
counterparties in respect of swaps or similar arrangements having the practical
or economic effect thereof). In the event of any such sale by a Lender of a
participating interest to a Participant, such Lender's obligations under this
Agreement to the other parties to this Agreement shall remain unchanged, such
Lender shall remain solely responsible for the performance thereof, such Lender
shall remain the holder of any such Loan for all purposes under this Agreement
and the other Credit Documents, and the Borrower and the Administrative Agent
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement and the other Credit
Documents. In no event shall any Participant under any such participation have
any right to approve any amendment or waiver of any provision of any Credit
Document, or any consent to any departure by any Credit Party therefrom, except
to the extent that such amendment, waiver or consent would directly forgive any
principal of any Loan or reduce the stated rate, or forgive any portion, or
postpone the date for the payment, of any interest or fee payable hereunder
(other than as a result of waiving the applicability of any post-default
increase in interest rates), or increase the aggregate amount of the Commitments
of any Lender or postpone the date of the final scheduled maturity of any Loan,
in each case to the extent subject to such participation. The Borrower agrees
that if amounts outstanding under this Agreement are due or unpaid, or shall
have been declared or shall have become due and payable upon the occurrence of
an Event of Default, each Participant shall, to the maximum extent permitted by
applicable law, be deemed to have the right of setoff in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as a
Lender under this Agreement, PROVIDED that, in purchasing such participating
interest, such Participant shall be deemed to have agreed to share with the
Lenders the proceeds thereof as provided in Section 13.7 as fully as if it were
a Lender hereunder. The Borrower also agrees that each Participant shall be
entitled to the benefits of Sections 2.10 and 2.11 with respect to its
participation in the Commitments and the Loans outstanding from time to time as
if it were a Lender, PROVIDED that no Participant shall be entitled to receive
any greater amount pursuant to any such Section than the transferor Lender would
have been entitled to receive in respect of the amount of the participation
transferred by such transferor Lender to such Participant had no such transfer
occurred.
(iii) Any Lender may, in the ordinary course of its business and in
accordance with applicable law, at any time and from time to time assign to any
Lender or any Affiliate
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(with the consent of the Borrower if any increased costs would result therefrom)
thereof or, with the consent of the Borrower and the Administrative Agent (which
in each case shall not be unreasonably withheld, it being understood that,
without limitation, the Borrower shall have the right to withhold its consent to
any assignment if, in order for such assignment to comply with applicable law,
the Borrower would be required to obtain the consent of, or make any filing or
registration with, any Governmental Authority), to an additional bank or fund
that is regularly engaged in making, purchasing or investing in loans or
securities or financial institution (an "ASSIGNEE") all or any part of its
rights and obligations under this Agreement and the other Credit Documents
pursuant to an Assignment and Acceptance, substantially in the form of Exhibit
F, executed by such Assignee, such assigning Lender (and, in the case of an
Assignee that is not then a Lender or an Affiliate thereof, by the Borrower and
the Administrative Agent) and delivered to the Administrative Agent for its
acceptance and recording in the Register, PROVIDED that, except in the case of
an assignment of all of a Lender's interests under this Agreement, unless
otherwise agreed to by the Borrower and the Administrative Agent, no such
assignment to an Assignee (other than any Lender or any Affiliate thereof) shall
be in an aggregate principal amount of less than $5,000,000. Upon such
execution, delivery, acceptance and recording, from and after the effective date
determined pursuant to such Assignment and Acceptance, (x) the Assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender hereunder
with a Commitment as set forth therein and (y) the assigning Lender thereunder
shall, to the extent provided in such Assignment and Acceptance, be released
from its obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such assigning Lender shall cease to be a
party hereto). Notwithstanding any provision of this Agreement to the contrary,
the consent of the Borrower shall not be required for any assignment that occurs
at any time when any of the events described in Section 11.5 shall have occurred
and be continuing with respect to the Borrower.
(b) Nothing herein shall prohibit any Lender from pledging or
assigning all or any portion of its Loans to any Federal Reserve Bank in
accordance with applicable law. In order to facilitate such pledge or
assignment, the Borrower hereby agrees that, upon request of any Lender at any
time and from time to time after the Borrower has made its initial borrowing
hereunder, the Borrower shall provide to such Lender, at the Borrower's own
expense, a promissory note, substantially in the form of Exhibit C-1 or C-2, as
the case may be, evidencing the Term Loans and Revolving Credit Loans,
respectively, owing to such Lender.
(c) The Administrative Agent, on behalf of the Borrower, shall
maintain at the address of the Administrative Agent referred to in Section 13.2
a copy of each Assignment and Acceptance delivered to it and a register (the
"REGISTER") for the recordation of the names and addresses of the Lenders and
the Commitment of, and principal amount of the Loans owing to, each Lender from
time to time. The entries in the Register shall be conclusive, in the absence
of manifest error, and the Borrower, the Administrative Agent and the Lenders
shall treat each Person whose name is recorded in the Register as the owner of a
Loan or other obligation hereunder as the owner thereof for all purposes of this
Agreement and the other Credit Documents, notwithstanding any notice to the
contrary. Any assignment of any Loan or other obligation hereunder shall be
effective only upon appropriate entries with respect thereto being made in the
Register. The Register shall be available for inspection by the Borrower or any
Lender at any reasonable time and from time to time upon reasonable prior
notice.
(d)(i) Upon its receipt of an Assignment and Acceptance executed by
an assigning Lender and an Assignee (and, in the case of an Assignee that is not
then a Lender or an Affiliate
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thereof, by the Borrower and the Administrative Agent) together with payment to
the Administrative Agent of a registration and processing fee of $3,500, the
Administrative Agent shall (i) promptly accept such Assignment and Acceptance
and (ii) on the effective date determined pursuant thereto record the
information contained therein in the Register and give notice of such acceptance
and recordation to the Lenders and the Borrower.
(e) Subject to Section 13.16, the Borrower authorizes each Lender to
disclose to any Participant or Assignee (each, a "TRANSFEREE") and any
prospective Transferee any and all financial information in such Lender's
possession concerning the Borrower and its Affiliates that has been delivered to
such Lender by or on behalf of the Borrower pursuant to this Agreement or which
has been delivered to such Lender by or on behalf of the Borrower in connection
with such Lender's credit evaluation of the Borrower and its Affiliates prior to
becoming a party to this Agreement, PROVIDED that neither the Administrative
Agent nor any Lender shall provide to any Transferee or prospective Transferee
any of the Confidential Information unless such person shall have previously
executed a Confidentiality Agreement in the form of Exhibit H.
13.7 REPLACEMENTS OF LENDERS UNDER CERTAIN CIRCUMSTANCES. The
Borrower shall be permitted to replace any Lender that (a) requests
reimbursement for amounts owing pursuant to Section 2.10, 2.12, 3.5 or 5.4, (b)
is affected in the manner described in Section 2.10(a)(iii) and as a result
thereof any of the actions described in such Section is required to be taken or
(c) becomes a Defaulting Lender, with a replacement bank or other financial
institution, PROVIDED that (i) such replacement does not conflict with any
Requirement of Law, (ii) no Event of Default shall have occurred and be
continuing at the time of such replacement, (iii) the Borrower shall repay (or
the replacement bank or institution shall purchase, at par) all Loans and other
amounts (other than any disputed amounts), pursuant to Section 2.10, 2.11, 2.12,
3.5 or 5.4, as the case may be) owing to such replaced Lender prior to the date
of replacement, (iv) the replacement bank or institution, if not already a
Lender, and the terms and conditions of such replacement, shall be reasonably
satisfactory to the Administrative Agent, (v) the replaced Lender shall be
obligated to make such replacement in accordance with the provisions of Section
13.6 (provided that the Borrower shall be obligated to pay the registration and
processing fee referred to therein) and (vi) any such replacement shall not be
deemed to be a waiver of any rights that the Borrower, the Administrative Agent
or any other Lender shall have against the replaced Lender.
13.8 ADJUSTMENTS; SET-OFF. (a) If any Lender (a "BENEFITTED LENDER")
shall at any time receive any payment of all or part of its Loans, or interest
thereon, or receive any collateral in respect thereof (whether voluntarily or
involuntarily, by set-off, pursuant to events or proceedings of the nature
referred to in Section 11.5, or otherwise), in a greater proportion than any
such payment to or collateral received by any other Lender, if any, in respect
of such other Lender's Loans, or interest thereon, such benefitted Lender shall
purchase for cash from the other Lenders a participating interest in such
portion of each such other Lender's Loan, or shall provide such other Lenders
with the benefits of any such collateral, or the proceeds thereof, as shall be
necessary to cause such benefitted Lender to share the excess payment or
benefits of such collateral or proceeds ratably with each of the Lenders;
PROVIDED, HOWEVER, that if all or any portion of such excess payment or benefits
is thereafter recovered from such benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest.
(b) After the occurrence and during the continuance of an Event of
Default, in addition to any rights and remedies of the Lenders provided by law,
each Lender shall have the right, without prior notice to the Borrower, any such
notice being expressly waived by the
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Borrower to the extent permitted by applicable law, upon any amount becoming due
and payable by the Borrower hereunder (whether at the stated maturity, by
acceleration or otherwise) to set-off and appropriate and apply against such
amount any and all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or claims, in any
currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by such Lender or any branch or
agency thereof to or for the credit or the account of the Borrower. Each Lender
agrees promptly to notify the Borrower and the Administrative Agent after any
such set-off and application made by such Lender, PROVIDED that the failure to
give such notice shall not affect the validity of such set-off and application.
13.9 COUNTERPARTS. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts (including
by facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of this
Agreement signed by all the parties shall be lodged with the Borrower and the
Administrative Agent.
13.10 SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
13.11 INTEGRATION. This Agreement and the other Credit Documents
represent the agreement of the Borrower, the Administrative Agent and the
Lenders with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Administrative Agent or any
Lender relative to subject matter hereof not expressly set forth or referred to
herein or in the other Credit Documents.
13.12 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
13.13 SUBMISSION TO JURISDICTION; WAIVERS. The Borrower hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Credit Documents to
which it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the courts of
the State of New York, the courts of the United States of America for the
Southern District of New York and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of
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mail), postage prepaid, to the Borrower at its address set forth in Section
13.2 or at such other address of which the Administrative Agent shall have
been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this Section 13.13 any special, exemplary, punitive or consequential
damages.
13.14 ACKNOWLEDGMENTS. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Credit Documents;
(b) neither the Administrative Agent nor any Lender has any fiduciary
relationship with or duty to the Borrower arising out of or in connection
with this Agreement or any of the other Credit Documents, and the
relationship between Administrative Agent and Lenders, on one hand, and the
Borrower, on the other hand, in connection herewith or therewith is solely
that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Credit
Documents or otherwise exists by virtue of the transactions contemplated
hereby among the Lenders or among the Borrower and the Lenders.
13.15 WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT
AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN
ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
13.16 CONFIDENTIALITY. The Administrative Agent and each Lender
shall hold all non-public information furnished by or on behalf of the Borrower
in connection with such Lender's evaluation of whether to become a Lender
hereunder or obtained by such Lender or the Administrative Agent pursuant to the
requirements of this Agreement ("CONFIDENTIAL INFORMATION"), in accordance with
its customary procedure for handling confidential information of this nature and
(in the case of a Lender that is a bank) in accordance with safe and sound
banking practices and in any event may make disclosure as required or requested
by any governmental agency or representative thereof or pursuant to legal
process or to such Lender's or the Administrative Agent's attorneys,
professional advisors or independent auditors or Affiliates, PROVIDED that
unless specifically prohibited by applicable law or court order, each Lender and
the Administrative Agent shall notify the Borrower of any request by any
governmental agency or representative thereof (other than any such request in
connection with an examination of the financial condition of such Lender by such
governmental agency) for disclosure of any such non-public information prior to
disclosure of such information, and PROVIDED FURTHER that in no event shall any
Lender or the Administrative Agent be obligated or required to return any
materials furnished by the Borrower or any Subsidiary of the Borrower. Each
Lender and the Administrative Agent agrees that it will not provide to
prospective Transferees or to prospective direct or indirect contractual
counterparties in swap agreements to be entered into in connection
<PAGE>
84
with Loans made hereunder any of the Confidential Information unless such Person
shall have previously executed a Confidentiality Agreement in the form of
Exhibit H.
<PAGE>
85
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Agreement to be duly executed and delivered as of the date
first above written.
CORNING CONSUMER PRODUCTS COMPANY,
by
/s/ Ronald P. Starkman
---------------------------------
Name: Ronald P. Starkman
Title: Assistant Treasurer
THE CHASE MANHATTAN BANK, as
Administrative Agent and as a Lender,
by
/s/ Lawrence Palumbo, Jr.
-------------------------------
Name: Lawrence Palumbo, Jr.
Title: Vice President
SALOMON BROTHERS HOLDING COMPANY INC,
Syndication Agent and as a Lender,
by
/s/ Chad A. Leat
-------------------------------
Name: Chad A. Leat
Title: Managing Director
BANKERS TRUST COMPANY,
as Documentation Agent and as a Lender,
by
/s/ Robert R. Telesca
-------------------------------
Name: Robert R. Telesca
Title: Assistant Vice President
<PAGE>
EXHIBIT A
TO THE CREDIT AGREEMENT
-----------------------
FORM OF GUARANTEE
GUARANTEE dated as of April 9, 1998, made by each of the corporations
listed on Annex A hereto (the "GUARANTORS") in favor of THE CHASE MANHATTAN
BANK, as administrative agent (in such capacity, the "ADMINISTRATIVE AGENT") for
the lenders (the "LENDERS") from time to time parties to the Credit Agreement
dated as of April 9, 1998 (as the same may be amended, supplemented or otherwise
modified from time to time, the "CREDIT AGREEMENT"), among CORNING CONSUMER
PRODUCTS COMPANY, a Delaware corporation (the "BORROWER"), the Lenders, the
Administrative Agent, SALOMON BROTHERS HOLDING COMPANY INC, as syndication agent
(in such capacity, the "SYNDICATION AGENT") for the Lenders, and BANKERS TRUST
COMPANY, as documentation agent (in such capacity, the "DOCUMENTATION AGENT")
for the Lenders.
W I T N E S S E T H:
WHEREAS, (a) pursuant to the Credit Agreement, the Lenders have
severally agreed to make Loans and other extensions of credit (collectively, the
"EXTENSIONS OF CREDIT") to the Borrower upon the terms and subject to the
conditions set forth therein and (b) one or more Lenders or affiliates of
Lenders may from time to time enter into Hedge Agreements (as defined in the
Credit Agreement) with the Borrower;
WHEREAS, each Guarantor is a Domestic Subsidiary of the Borrower;
WHEREAS, the proceeds of the Extensions of Credit will be used in part
to enable the Borrower to make valuable transfers to the Guarantors in
connection with the operation of their respective businesses;
WHEREAS, the Borrower and the Guarantors are engaged in related
businesses, and each Guarantor will derive substantial direct and indirect
benefit from the making of the Extensions of Credit; and
WHEREAS, it is a condition precedent to the obligation of the Lenders
to make their respective Extensions of Credit to the Borrower under the Credit
Agreement that the Guarantors shall have executed and delivered this Guarantee
to the Administrative Agent for the ratable benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent, the Syndication Agent, the Documentation Agent and the
Lenders to enter into the Credit Agreement and to induce the Lenders to make
their respective Extensions of Credit to the Borrower under the Credit Agreement
and to induce one or more Lenders or affiliates of Lenders to enter into Hedge
Agreements with the Borrower, the Guarantors hereby agree with the
Administrative Agent, for the ratable benefit of the Lenders, as follows:
<PAGE>
2
1. DEFINED TERMS. (a) Unless otherwise defined herein, terms
defined in the Credit Agreement and used herein shall have the meanings given to
them in the Credit Agreement.
(b) As used herein, the term "OBLIGATIONS" means the collective
reference to (i) the unpaid principal of and interest on the Loans and all other
obligations and liabilities of the Borrower to the Administrative Agent or any
Lender (including, without limitation, interest accruing at the then applicable
rate provided in the Credit Agreement after the maturity of the Loans and
interest accruing at the then applicable rate provided in the Credit Agreement
after the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to the Borrower, whether
or not a claim for post-filing or post-petition interest is allowed in such
proceeding), whether direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter incurred, that may arise under, out of, or
in connection with, the Credit Agreement, the other Credit Documents, the
Letters of Credit or any other documents made, delivered or given in connection
therewith, whether on account of principal, interest, reimbursement obligations,
fees, indemnities, costs, expenses or otherwise (including, without limitation,
all fees and disbursements of counsel to the Administrative Agent or to the
Lenders that are required to be paid by the Borrower or any Guarantor pursuant
to the terms of the Credit Agreement or any other Credit Document) and (ii) all
obligations and liabilities of the Borrower to any Lender or any affiliate of a
Lender, whether direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter incurred, that may arise under, out of, or in
connection with, any Hedge Agreement or any other document made, delivered or
given in connection therewith.
(c) References to "Lenders" in this Guarantee shall be deemed to
include affiliates of Lenders that may from time to time enter into Hedge
Agreements with the Borrower.
(d) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Guarantee shall refer to this Guarantee as a whole and
not to any particular provision of this Guarantee, and Section references are to
Sections of this Guarantee unless otherwise specified.
The meanings given to terms defined herein shall be equally applicable to both
the singular and plural forms of such terms.
2. GUARANTEE. (a) Subject to the provisions of Section 2(b), each of
the Guarantors hereby, jointly and severally, unconditionally and irrevocably,
guarantees to the Administrative Agent, for the ratable benefit of the Lenders
and their respective successors, indorsees, transferees and assigns, the prompt
and complete payment and performance by the Borrower when due (whether at the
stated maturity, by acceleration or otherwise) of the Obligations.
(b) Anything herein or in any other Credit Document to the contrary
notwithstanding, the maximum liability of each Guarantor hereunder and under the
other
<PAGE>
3
Credit Documents shall in no event exceed the amount that can be guaranteed by
such Guarantor under applicable federal and state laws relating to the
insolvency of debtors.
(d) Each Guarantor further agrees to pay any and all expenses
(including, without limitation, all fees and disbursements of counsel) that may
be paid or incurred by the Administrative Agent or any Lender in enforcing, or
obtaining advice of counsel in respect of, any rights with respect to, or
collecting, any or all of the Obligations and/or enforcing any rights with
respect to, or collecting against, such Guarantor under this Guarantee. This
Guarantee shall remain in full force and effect until the Obligations are paid
in full, the Commitments are terminated and no Letters of Credit shall be
outstanding, notwithstanding that from time to time prior thereto the Borrower
may be free from any Obligations.
(e) Each Guarantor agrees that the Obligations may at any time and
from time to time exceed the amount of the liability of such Guarantor hereunder
without impairing this Guarantee or affecting the rights and remedies of the
Administrative Agent or any Lender hereunder.
(f) No payment or payments made by the Borrower, any of the
Guarantors, any other guarantor or any other Person or received or collected by
the Administrative Agent or any Lender from the Borrower, any of the Guarantors,
any other guarantor or any other Person by virtue of any action or proceeding or
any set-off or appropriation or application at any time or from time to time in
reduction of or in payment of the Obligations shall be deemed to modify, reduce,
release or otherwise affect the liability of any Guarantor hereunder, which
shall, notwithstanding any such payment or payments other than payments made by
such Guarantor in respect of the Obligations or payments received or collected
from such Guarantor in respect of the Obligations, remain liable for the
Obligations up to the maximum liability of such Guarantor hereunder until the
Obligations are paid in full, the Commitments are terminated and no Letters of
Credit shall be outstanding.
(g) Each Guarantor agrees that whenever, at any time, or from time to
time, it shall make any payment to the Administrative Agent or any Lender on
account of its liability hereunder, it will notify the Administrative Agent in
writing that such payment is made under this Guarantee for such purpose.
3. RIGHT OF CONTRIBUTION. Each Guarantor hereby agrees that to the
extent that a Guarantor shall have paid more than its proportionate share of any
payment made hereunder, such Guarantor shall be entitled to seek and receive
contribution from and against any other Guarantor hereunder who has not paid its
proportionate share of such payment. Each Guarantor's right of contribution
shall be subject to the terms and conditions of Section 5 hereof. The
provisions of this Section 3 shall in no respect limit the obligations and
liabilities of any Guarantor to the Administrative Agent and the Lenders, and
each Guarantor shall remain liable to the Administrative Agent and the Lenders
for the full amount guaranteed by such Guarantor hereunder.
4. RIGHT OF SET-OFF. Each Guarantor hereby irrevocably authorizes
the Administrative Agent and each Lender at any time and from time to time
following the
<PAGE>
4
occurrence and during the continuance of an Event of Default without notice to
such Guarantor or any other Guarantor, any such notice being expressly waived by
each Guarantor, upon any amount becoming due and payable by such Guarantor
hereunder (whether at stated maturity, by acceleration or otherwise) to set-off
and appropriate and apply any and all deposits (general or special, time or
demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, due or to become due, at any time held or
owing by the Administrative Agent or such Lender to or for the credit or the
account of such Guarantor. The Administrative Agent and each Lender shall
notify such Guarantor promptly of any such set-off and the appropriation and
application made by the Administrative Agent or such Lender, PROVIDED that the
failure to give such notice shall not affect the validity of such set-off and
application.
5. NO SUBROGATION. Notwithstanding any payment or payments made by
any of the Guarantors hereunder or any set-off or appropriation and application
of funds of any of the Guarantors by the Administrative Agent or any Lender, no
Guarantor shall be entitled to be subrogated to any of the rights of the
Administrative Agent or any Lender against the Borrower or any other Guarantor
or any collateral security or guarantee or right of offset held by the
Administrative Agent or any Lender for the payment of the Obligations, nor shall
any Guarantor seek or be entitled to seek any contribution or reimbursement from
the Borrower or any other Guarantor in respect of payments made by such
Guarantor hereunder, until all amounts owing to the Administrative Agent and the
Lenders by the Borrower on account of the Obligations are paid in full, the
Commitments are terminated and no Letters of Credit shall be outstanding. If
any amount shall be paid to any Guarantor on account of such subrogation rights
at any time when all the Obligations shall not have been paid in full, such
amount shall be held by such Guarantor in trust for the Administrative Agent and
the Lenders, segregated from other funds of such Guarantor, and shall, forthwith
upon receipt by such Guarantor, be turned over to the Administrative Agent in
the exact form received by such Guarantor (duly indorsed by such Guarantor to
the Administrative Agent, if required), to be applied against the Obligations,
whether due or to become due, in such order as the Administrative Agent may
determine.
6. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS; WAIVER OF
RIGHTS. Each Guarantor shall remain obligated hereunder notwithstanding that,
without any reservation of rights against any Guarantor and without notice to or
further assent by any Guarantor, any demand for payment of any of the
Obligations made by the Administrative Agent or any Lender may be rescinded by
such party and any of the Obligations continued, and the Obligations, or the
liability of any other party upon or for any part thereof, or any collateral
security or guarantee therefor or right of offset with respect thereto, may,
from time to time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered or released by the Administrative
Agent or any Lender, and the Credit Agreement, the other Credit Documents, the
Letters of Credit and any other documents executed and delivered in connection
therewith and the Hedge Agreements and any other documents executed and
delivered in connection therewith may be amended, modified, supplemented or
terminated, in whole or in part, as the Administrative Agent (or the Required
Lenders, as the case may be, or, in the case of any Hedge Agreement, the Lender
party thereto) may
<PAGE>
5
deem advisable from time to time, and any collateral security, guarantee or
right of offset at any time held by the Administrative Agent or any Lender for
the payment of the Obligations may be sold, exchanged, waived, surrendered or
released. Neither the Administrative Agent nor any Lender shall have any
obligation to protect, secure, perfect or insure any Lien at any time held by it
as security for the Obligations or for this Guarantee or any property subject
thereto. When making any demand hereunder against any of the Guarantors, the
Administrative Agent or any Lender may, but shall be under no obligation to,
make a similar demand on the Borrower or any other Guarantor or guarantor, and
any failure by the Administrative Agent or any Lender to make any such demand or
to collect any payments from the Borrower or any such other Guarantor or
guarantor or any release of the Borrower or such other Guarantor or guarantor
shall not relieve any of the Guarantors in respect of which a demand or
collection is not made or any of the Guarantors not so released of their several
obligations or liabilities hereunder, and shall not impair or affect the rights
and remedies, express or implied, or as a matter of law, of the Administrative
Agent or any Lender against any of the Guarantors. For the purposes hereof,
"demand" shall include the commencement and continuance of any legal
proceedings.
7. GUARANTEE ABSOLUTE AND UNCONDITIONAL. Each Guarantor waives any
and all notice of the creation, contraction, incurrence, renewal, extension,
amendment, waiver or accrual of any of the Obligations, and notice of or proof
of reliance by the Administrative Agent or any Lender upon this Guarantee or
acceptance of this Guarantee, the Obligations or any of them, shall conclusively
be deemed to have been created, contracted or incurred, or renewed, extended,
amended, waived or accrued, in reliance upon this Guarantee; and all dealings
between the Borrower and any of the Guarantors, on the one hand, and the
Administrative Agent and the Lenders, on the other hand, likewise shall be
conclusively presumed to have been had or consummated in reliance upon this
Guarantee. Each Guarantor waives diligence, presentment, protest, demand for
payment and notice of default or nonpayment to or upon the Borrower or any of
the Guarantors with respect to the Obligations. Each Guarantor understands and
agrees that this Guarantee shall be construed as a continuing, absolute and
unconditional guarantee of payment without regard to (a) the validity,
regularity or enforceability of the Credit Agreement, any other Credit Document,
any Letter of Credit or any Hedge Agreement, any of the Obligations or any other
collateral security therefor or guarantee or right of offset with respect
thereto at any time or from time to time held by the Administrative Agent or any
Lender, (b) any defense, set-off or counterclaim (other than a defense of
payment or performance) that may at any time be available to or be asserted by
the Borrower against the Administrative Agent or any Lender or (c) any other
circumstance whatsoever (with or without notice to or knowledge of the Borrower
or such Guarantor) that constitutes, or might be construed to constitute, an
equitable or legal discharge of the Borrower for the Obligations, or of such
Guarantor under this Guarantee, in bankruptcy or in any other instance. When
pursuing its rights and remedies hereunder against any Guarantor, the
Administrative Agent and any Lender may, but shall be under no obligation to,
pursue such rights and remedies as it may have against the Borrower or any other
Person or against any collateral security or guarantee for the Obligations or
any right of offset with respect thereto, and any failure by the Administrative
Agent or any Lender to pursue such other rights or remedies or to collect any
payments from the Borrower or any such other Person or to realize upon any such
collateral security or
<PAGE>
6
guarantee or to exercise any such right of offset, or any release of the
Borrower or any such other Person or any such collateral security, guarantee or
right of offset, shall not relieve such Guarantor of any liability hereunder,
and shall not impair or affect the rights and remedies, whether express, implied
or available as a matter of law, of the Administrative Agent and the Lenders
against such Guarantor. This Guarantee shall remain in full force and effect
and be binding in accordance with and to the extent of its terms upon each
Guarantor and the successors and assigns thereof, and shall inure to the benefit
of the Administrative Agent and the Lenders, and their respective successors,
indorsees, transferees and assigns, until all the Obligations and the
obligations of each Guarantor under this Guarantee shall have been satisfied by
payment in full, the Commitments shall be terminated and no Letters of Credit
shall be outstanding, notwithstanding that from time to time during the term of
the Credit Agreement and any Hedge Agreement the Borrower may be free from any
Obligations.
8. REINSTATEMENT. This Guarantee shall continue to be effective, or
be reinstated, as the case may be, if at any time payment, or any part thereof,
of any of the Obligations is rescinded or must otherwise be restored or returned
by the Administrative Agent or any Lender upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Borrower or any Guarantor, or
upon or as a result of the appointment of a receiver, intervenor or conservator
of, or trustee or similar officer for, the Borrower or any Guarantor or any
substantial part of its property, or otherwise, all as though such payments had
not been made.
9. PAYMENTS. Each Guarantor hereby guarantees that payments
hereunder will be paid to the Administrative Agent without set-off or
counterclaim in Dollars at the office of the Administrative Agent located at 270
Park Avenue, New York, New York 10017.
10. REPRESENTATIONS AND WARRANTIES; COVENANTS. Each Guarantor
hereby represents and warrants that the representations and warranties set forth
in Section 8 of the Credit Agreement as they relate to such Guarantor or the
Credit Documents to which such Guarantor is a party, each of which is hereby
incorporated herein by reference, are true and correct, and the Administrative
Agent and each Lender shall be entitled to rely on each of them as if they were
fully set forth herein.
(b) Each Guarantor hereby covenants and agrees with the
Administrative Agent and each Lender that, from and after the date of this
Guarantee until the Obligations are paid in full, the Commitments are terminated
and no Letter of Credit remains outstanding, such Guarantor shall take, or shall
refrain from taking, as the case may be, all actions that are necessary to be
taken or not taken so that no violation of any provision, covenant or agreement
contained in Section 9 or 10 of the Credit Agreement, and so that no Default or
Event of Default, is caused by any act or failure to act of such Guarantor or
any of its Subsidiaries.
11. AUTHORITY OF AGENT. Each Guarantor acknowledges that the rights
and responsibilities of the Administrative Agent under this Guarantee with
respect to any action taken by the Administrative Agent or the exercise or
non-exercise by the Administrative Agent of any option, right, request, judgment
or other right or remedy
<PAGE>
7
provided for herein or resulting or arising out of this Guarantee shall, as
between the Administrative Agent and the Lenders, be governed by the Credit
Agreement and by such other agreements with respect thereto as may exist from
time to time among them, but, as between the Administrative Agent and such
Guarantor, the Administrative Agent shall be conclusively presumed to be acting
as agent for the Lenders with full and valid authority so to act or refrain from
acting, and no Guarantor shall be under any obligation, or entitlement, to make
any inquiry respecting such authority.
12. NOTICES. All notices, requests and demands pursuant hereto shall
be made in accordance with Section 13.2 of the Credit Agreement, PROVIDED that
any such notice, request or demand to or upon any Guarantor shall be addressed
to such Guarantor at the notice address set forth under its signature below.
13. COUNTERPARTS. This Guarantee may be executed by one or more of
the Guarantors on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the counterparts of this Guarantee signed by all the
Guarantors shall be lodged with the Administrative Agent.
14. SEVERABILITY. Any provision of this Guarantee that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
15. INTEGRATION. This Guarantee represents the agreement of each
Guarantor with respect to the subject matter hereof and there are no promises or
representations by the Administrative Agent or any Lender relative to the
subject matter hereof not reflected herein.
16. (a) AMENDMENTS IN WRITING; NO WAIVER; CUMULATIVE REMEDIES.
None of the terms or provisions of this Agreement may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
the affected Guarantor(s) and the Administrative Agent in accordance with
Section 13.1 of the Credit Agreement.
(b) Neither the Administrative Agent nor any Lender shall by any act
(except by a written instrument pursuant to Section 16(a)), delay, indulgence,
omission or otherwise be deemed to have waived any right or remedy hereunder or
to have acquiesced in any Default or Event of Default or in any breach of any of
the terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Administrative Agent or any Lender, any right,
power or privilege hereunder shall operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Administrative Agent or any Lender of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy that the Administrative Agent or such Lender would otherwise
have on any future occasion.
<PAGE>
8
(c) The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
17. SECTION HEADINGS. The Section headings used in this Guarantee
are for convenience of reference only and are not to affect the construction
hereof or be taken into consideration in the interpretation hereof.
18. SUCCESSORS AND ASSIGNS. This Guarantee shall be binding upon the
successors and assigns of each Guarantor and shall inure to the benefit of the
Administrative Agent and the Lenders and their successors and assigns, except
that no Guarantor may assign, transfer or delegate any of its rights or
obligations under this Agreement without the prior written consent of the
Administrative Agent; PROVIDED, HOWEVER, that at the time any Guarantor ceases
to be a Domestic Subsidiary of the Borrower, such Guarantor shall be released
from its obligations under this Guarantee without further action.
19. WAIVER OF JURY TRIAL. EACH GUARANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS GUARANTEE, ANY OTHER CREDIT DOCUMENT OR ANY LETTER OF CREDIT AND FOR ANY
COUNTERCLAIM THEREIN.
20. SUBMISSION TO JURISDICTION; WAIVERS. Each Guarantor hereby
irrevocably and unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this Guarantee, any other Credit Document or any
Letter of Credit, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the Courts of
the State of New York, the courts of the United States of America for the
Southern District of New York and appellate courts from any thereof;
(ii) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(iii) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to such
Guarantor at its address referred to in Section 12 or at such other address
of which the Administrative Agent shall have been notified pursuant
thereto;
(iv) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
<PAGE>
9
(v) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this Section 20 any special, exemplary, punitive or consequential
damages.
21. GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
<PAGE>
10
IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee
to be duly executed and delivered by its duly authorized officer as of the day
and year first above written.
EACH SUBSIDIARY GUARANTOR LISTED ON
ANNEX A HERETO,
By:
-----------------------------
Name:
Title:
Address for Notices for each Guarantor:
Corning Consumer Products Company
E Building
Houghton Park
Corning, New York 14831
Attention: Thomas O'Brien
Fax: (607) 974-6135
With a copy to:
Borden, Inc.
180 East Broad Street
Columbus, Ohio 43215-3799
Attention: Ronald Starkman
Fax: (614) 225-4421
<PAGE>
ANNEX A
TO THE GUARANTEE AGREEMENT
SUBSIDIARY GUARANTORS
<PAGE>
EXHIBIT B
TO THE CREDIT AGREEMENT
-----------------------
FORM OF PLEDGE AGREEMENT
PLEDGE AGREEMENT dated as of April 9, 1998, among CORNING CONSUMER
PRODUCTS COMPANY, a Delaware corporation (the "BORROWER PLEDGOR"), the
undersigned Subsidiaries of the Borrower Pledgor listed on Annex A hereto (each
a "SUBSIDIARY PLEDGOR" and, collectively, the "SUBSIDIARY PLEDGORS"; the
Borrower Pledgor and the Subsidiary Pledgors, collectively, the "PLEDGORS") and
THE CHASE MANHATTAN BANK, as administrative agent (in such capacity, the
"ADMINISTRATIVE AGENT") for the lenders (the "LENDERS") from time to time
parties to the Credit Agreement dated as of April 9, 1998 (as the same may be
amended, supplemented or otherwise modified from time to time, the "CREDIT
AGREEMENT"), among the Borrower Pledgor, the Lenders, the Administrative Agent,
SALOMON BROTHERS HOLDING COMPANY INC, as syndication agent (in such capacity,
the "SYNDICATION AGENT") for the Lenders, and BANKERS TRUST COMPANY, as
documentation agent (in such capacity, the "DOCUMENTATION AGENT") for the
Lenders.
W I T N E S S E T H:
WHEREAS, (a) pursuant to the Credit Agreement, the Lenders have
severally agreed to make Loans and other extensions of credit (collectively, the
"EXTENSIONS OF CREDIT") to the Borrower Pledgor upon the terms and subject to
the conditions set forth therein and (b) one or more Lenders or affiliates of
Lenders may from time to time enter into Hedge Agreements (as defined in the
Credit Agreement) with the Borrower Pledgor;
WHEREAS, (a) each Subsidiary Pledgor is a direct Domestic Subsidiary
(as defined in the Credit Agreement) of the Borrower Pledgor and (b) each
Subsidiary Pledgor has, pursuant to the Guarantee dated as of the date hereof,
guaranteed to the Administrative Agent, for the ratable benefit of the Lenders
and their respective successors, indorsees, transferees and assigns, the prompt
and complete payment and performance by the Borrower Pledgor when due (whether
at the stated maturity, by acceleration or otherwise) of the Obligations (as
defined in the Credit Agreement);
WHEREAS, the proceeds of the Extensions of Credit will be used in part
to enable the Borrower Pledgor to make valuable transfers to the Subsidiary
Pledgors in connection with the operation of their respective businesses;
WHEREAS, the Borrower Pledgor and the Subsidiary Pledgors are engaged
in related businesses, and each Pledgor will derive substantial direct and
indirect benefit from the making of the Extensions of Credit;
WHEREAS, it is a condition precedent to the obligation of the Lenders
to make their respective Extensions of Credit to the Borrower Pledgor under the
Credit Agreement that the Borrower Pledgor and the Subsidiary Pledgors shall
have executed and delivered this Pledge Agreement to the Administrative Agent
for the ratable benefit of the Lenders; and
WHEREAS, (a) the Borrower Pledgor is the legal and beneficial owner of
the shares of stock (the "PLEDGED SHARES") described on Schedule I hereto and
issued by the corporations named therein, which Pledged Shares constitute the
percentage of all the issued and outstanding shares of capital stock of such
companies identified on such Schedule I, and
<PAGE>
2
(b) each of the Pledgors is the legal and beneficial owner of the indebtedness
(the "PLEDGED DEBT") described from time to time on a schedule hereafter
delivered to the Administrative Agent in accordance with the terms of the Credit
Agreement at the time of receipt by any such Pledgor of non-cash proceeds in
excess of $5,000,000 from sales of assets permitted by the Credit Agreement;
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent, the Syndication Agent, the Documentation Agent and the
Lenders to enter into the Credit Agreement, the Pledgors hereby agree with the
Administrative Agent, for the ratable benefit of the Lenders, as follows:
1.DEFINED TERMS. (a) Unless otherwise defined herein, terms defined
in the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement.
(b) As used herein, the term "OBLIGATIONS" means the collective
reference to (i) the unpaid principal of and interest on the Loans and all other
obligations and liabilities of the Borrower Pledgor to the Administrative Agent
or any Lender (including, without limitation, interest accruing at the
then-applicable rate provided in the Credit Agreement after the maturity of the
Loans and interest accruing at the then-applicable rate provided in the Credit
Agreement after the filing of any petition in bankruptcy, or the commencement of
any insolvency, reorganization or like proceeding, relating to the Borrower
Pledgor, whether or not a claim for post-filing or post-petition interest is
allowed in such proceeding), whether direct or indirect, absolute or contingent,
due or to become due, now existing or hereafter incurred, that may arise under,
out of, or in connection with, the Credit Agreement, the other Credit Documents,
the Letters of Credit or any other documents made, delivered or given in
connection therewith, whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise (including, without
limitation, all fees and disbursements of counsel to the Administrative Agent or
to the Lenders that are required to be paid by the Borrower Pledgor or any
Subsidiary Pledgor pursuant to the terms of the Credit Agreement or any other
Credit Document) and (ii) all obligations and liabilities of the Borrower
Pledgor to any Lender or any affiliate of a Lender, whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter
incurred, that may arise under, out of, or in connection with, any Hedge
Agreement or any other document made, delivered or given in connection
therewith.
(c) References to "Lenders" in this Pledge Agreement shall be deemed
to include affiliates of Lenders that may from time to time enter into Hedge
Agreements with the Borrower Pledgor.
(d) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Pledge Agreement shall refer to this Pledge Agreement
as a whole and not to any particular provision of this Pledge Agreement, and
Section references are to Sections of this Pledge Agreement unless otherwise
specified.
(e) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
2. GRANT OF SECURITY. The Pledgors hereby transfer, assign and
pledge to the Administrative Agent for the ratable benefit of the Lenders, and
hereby grant to the
<PAGE>
3
Administrative Agent for the ratable benefit of the Lenders, a security interest
in, the following, whether now owned or existing or hereafter acquired or
existing (collectively, the "COLLATERAL"):
(a) in the case of the Borrower Pledgor, the Pledged Shares and the
certificates representing the Pledged Shares and any interest of the Borrower
Pledgor in the entries on the books of any financial intermediary pertaining to
the Pledged Shares, and all dividends, cash, warrants, rights, instruments and
other property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Pledged Shares;
and
(b) in the case of each Pledgor, the Pledged Debt and the instruments
evidencing the Pledged Debt, and all interest, cash, instruments and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Pledged Debt; and
(c) in the case of the Borrower Pledgor and each Pledgor, to the
extent not covered by clauses (a) and (b) above, respectively, all proceeds of
any or all of the foregoing Collateral. For purposes of this Pledge Agreement,
the term "proceeds" includes whatever is receivable or received when Collateral
or proceeds are sold, exchanged, collected or otherwise disposed of, whether
such disposition is voluntary or involuntary, and includes, without limitation,
proceeds of any indemnity or guaranty payable to any Pledgor or the
Administrative Agent from time to time with respect to any of the Collateral.
3. SECURITY FOR OBLIGATIONS. This Pledge Agreement secures the
payment of all Obligations of each Pledgor. Without limiting the generality of
the foregoing, this Pledge Agreement secures the payment of all amounts that
constitute part of the Obligations and would be owed by any of the Pledgors to
the Administrative Agent or the Lenders under the Credit Documents but for the
fact that they are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving any Pledgor.
4. DELIVERY OF THE COLLATERAL. All certificates or instruments, if
any, representing or evidencing the Collateral shall be promptly delivered to
and held by or on behalf of the Administrative Agent pursuant hereto and shall
be in suitable form for transfer by delivery, or shall be accompanied by duly
executed instruments of transfer or assignment in blank, all in form and
substance reasonably satisfactory to the Administrative Agent. The
Administrative Agent shall have the right, at any time after the occurrence and
during the continuance of an Event of Default and without notice to any Pledgor,
to transfer to or to register in the name of the Administrative Agent or any of
its nominees any or all of the Pledged Shares.
5. REPRESENTATIONS AND WARRANTIES. Each Pledgor represents and
warrants as follows:
(a) In the case of the Borrower Pledgor, the Pledged Shares set forth
on Schedule I hereto represent on the date hereof the percentage of all the
issued and outstanding capital stock of each Restricted Subsidiary of the
Borrower Pledgor as identified on such Schedule I.
(b) In the case of each Pledgor, such Pledgor is the legal and
beneficial owner of the Collateral, as indicated on Schedule I, pledged or
assigned by such Pledgor hereunder
<PAGE>
4
free and clear of any Lien, except for the Lien created by this Pledge Agreement
or Liens permitted under Section 8 hereof.
(c) As of the date of this Pledge Agreement, the Pledged Shares
pledged by the Borrower Pledgor hereunder have been duly authorized and validly
issued and are fully paid and non-assessable.
(d) The execution and delivery by such Pledgor of this Pledge
Agreement and the pledge of the Collateral pledged by such Pledgor hereunder
pursuant hereto create a valid and perfected first priority security interest in
the Collateral, securing the payment of the Obligations.
(e) Such Pledgor has full power, authority and legal right to pledge
all the Collateral pledged by such Pledgor pursuant to this Pledge Agreement and
will defend its and the Administrative Agent's title or interest thereto or
therein (and in the proceeds thereof) against any and all Liens (other than the
Lien of this Pledge Agreement), however arising, or any and all persons
whomsoever.
6. FURTHER ASSURANCES. Each Pledgor agrees that at any time and from
time to time, at the expense of such Pledgor, it will promptly execute and
deliver all further instruments and documents, and take all further action, that
may be necessary, or that the Administrative Agent may reasonably request, in
order to perfect and protect any pledge, assignment or security interest granted
or purported to be granted hereby or to enable the Administrative Agent to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral.
7. VOTING RIGHTS; DIVIDENDS AND DISTRIBUTIONS; ETC. (a) So long as
no Event of Default shall have occurred and be continuing:
(i) Each Pledgor shall be entitled to exercise any and all
voting and other consensual rights pertaining to the Collateral or any
part thereof for any purpose not prohibited by the terms of this
Pledge Agreement or the other Credit Documents.
(ii) The Administrative Agent shall execute and deliver (or
cause to be executed and delivered) to each Pledgor all such proxies
and other instruments as such Pledgor may reasonably request for the
purpose of enabling such Pledgor to exercise the voting and other
rights that it is entitled to exercise pursuant to paragraph (i)
above.
(b) Subject to paragraph (c) below, each Pledgor shall be entitled to
receive and retain and use, free and clear of the Lien of this Pledge Agreement,
any and all dividends, distributions, principal and interest made or paid in
respect of the Collateral; PROVIDED, HOWEVER, that any and all dividends and
other distributions in equity securities included in the Collateral shall be,
and shall be forthwith delivered to the Administrative Agent to hold as,
Collateral and shall, if received by such Pledgor, be received in trust for the
benefit of the Administrative Agent, be segregated from the other property or
funds of such Pledgor and be forthwith delivered to the Administrative Agent as
Collateral in the same form as so received (with any necessary indorsement).
<PAGE>
5
(c) Upon written notice to each Pledgor by the Administrative Agent
following the occurrence and during the continuance of an Event of Default,
(i) all rights of such Pledgor to exercise or refrain from
exercising the voting and other consensual rights that it would
otherwise be entitled to exercise pursuant to Section 7(a)(i) shall
cease, and all such rights shall thereupon become vested in the
Administrative Agent, which shall thereupon have the sole right to
exercise or refrain from exercising such voting and other consensual
rights during the continuance of such Event of Default;
(ii) all rights of such Pledgor to receive the dividends,
distributions and principal and interest payments that such Pledgor
would otherwise be authorized to receive and retain pursuant to
Section 7(b) shall cease, and all such rights shall thereupon become
vested in the Administrative Agent, which shall thereupon have the
sole right to receive and hold as Collateral such dividends,
distributions and principal and interest payments during the
continuance of such Event of Default;
(iii) all dividends, distributions and principal and interest
payments that are received by such Pledgor contrary to the provisions
of Section 7(b) shall be received in trust for the benefit of the
Administrative Agent, shall be segregated from other funds of such
Pledgor and shall forthwith be paid over to the Administrative Agent
as Collateral in the same form as so received (with any necessary
indorsements); and
(iv) in order to permit the Administrative Agent to receive all
dividends, distributions and principal and interest payments to which
it may be entitled under Section 7(b) above, to exercise the voting
and other consensual rights that it may be entitled to exercise
pursuant to Section 7(c)(i) above, and to receive all dividends,
distributions and principal and interest payments that it may be
entitled to under Section 7(c)(ii) above, such Pledgor shall, if
necessary, upon written notice from the Administrative Agent, from
time to time execute and deliver to the Administrative Agent,
appropriate proxies, dividend payment orders and other instruments as
the Administrative Agent may reasonably request.
8. TRANSFERS AND OTHER LIENS; ADDITIONAL COLLATERAL; ETC. Each
Pledgor shall:
(a) not, except as permitted by the Credit Agreement, (i) sell or
otherwise dispose of, or grant any option or warrant with respect to, any of the
Collateral or (ii) create or suffer to exist any consensual Lien upon or with
respect to any of the Collateral, except for the Lien under this Pledge
Agreement, PROVIDED that in the event such Pledgor sells assets or any other
Collateral permitted by the Credit Agreement and such assets are or include
Collateral, the Administrative Agent shall release such Collateral to such
Pledgor free and clear of the Lien under this Pledge Agreement concurrently with
the consummation of such sale; and
(b) (i) in the case of the Borrower Pledgor, except as permitted by
the Credit Agreement, cause each issuer of Pledged Shares not to issue any stock
or other securities in addition to or in substitution for the Pledged Shares
issued by such issuer, except to such Pledgor, and (ii) pledge hereunder,
immediately upon its acquisition (directly or indirectly)
<PAGE>
6
thereof, any and all additional shares of stock or other securities of each such
issuer (other than those issuers organized outside of the United States (with
respect to which the Pledgor shall pledge 65 percent of such shares within
60 Business Days of such acquisition)) of Pledged Shares.
9. ADMINISTRATIVE AGENT APPOINTED ATTORNEY-IN-FACT. Each Pledgor
hereby irrevocably appoints the Administrative Agent as such Pledgor's
attorney-in-fact, with full authority in the place and stead of such Pledgor and
in the name of such Pledgor or otherwise to take any action and to execute any
instrument, in each case after the occurrence and during the continuance of an
Event of Default, that the Administrative Agent may deem reasonably necessary or
advisable to accomplish the purposes of this Pledge Agreement, including,
without limitation, to receive, indorse and collect all instruments made payable
to such Pledgor representing any dividend, distribution or principal or interest
payment in respect of the Collateral or any part thereof and to give full
discharge for the same.
10. THE ADMINISTRATIVE AGENT'S DUTIES. The powers conferred on the
Administrative Agent hereunder are solely to protect its interest in the
Collateral and shall not impose any duty upon it to exercise any such powers.
Except for the safe custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the Administrative
Agent shall have no duty as to any Collateral, as to ascertaining or taking
action with respect to calls, conversions, exchanges, maturities, tenders or
other matters relative to any Pledged Shares, whether or not the Administrative
Agent or any Lender has or is deemed to have knowledge of such matters, or as to
the taking of any necessary steps to preserve rights against any parties or any
other rights pertaining to any Collateral. The Administrative Agent shall be
deemed to have exercised reasonable care in the custody and preservation of any
Collateral in its possession if such Collateral is accorded treatment
substantially equal to that which the Administrative Agent accords its own
property.
11. REMEDIES. If any Event of Default shall have occurred and be
continuing:
(a) The Administrative Agent may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party upon
default under the Uniform Commercial Code in effect in the State of New York at
such time (the "N.Y. UNIFORM COMMERCIAL CODE") (whether or not the N.Y. Uniform
Commercial Code applies to the affected Collateral) and also may without notice
except as specified below, sell the Collateral or any part thereof in one or
more parcels at public or private sale, at any exchange broker's board or at any
of the Administrative Agent's offices or elsewhere, for cash, on credit or for
future delivery, at such price or prices and upon such other terms as are
commercially reasonable irrespective of the impact of any such sales on the
market price of the Collateral. Each purchaser at any such sale shall hold the
property sold absolutely free from any claim or right on the part of any
Pledgor, and each Pledgor hereby waives (to the extent permitted by law) all
rights of redemption, stay and/or appraisal which it now has or may at any time
in the future have under any rule of law or statute now existing or hereafter
enacted. Each Pledgor agrees that, to the extent notice of sale shall be
required by law, at least ten days' notice to such Pledgor of the time and place
of any public sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Administrative Agent shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given. The Administrative Agent may adjourn any public or private sale
from time to time by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to which it was
so adjourned. To the extent permitted by law, each Pledgor hereby
<PAGE>
7
waives any claim against the Administrative Agent arising by reason of the fact
that the price at which any Collateral may have been sold at such a private sale
was less than the price that might have been obtained at a public sale, even if
the Administrative Agent accepts the first offer received and does not offer
such Collateral to more than one offeree.
(b) All cash and cash proceeds received by the Administrative Agent
in respect of any sale of, collection from, or other realization upon, all or
any part of the Collateral may, in the discretion of the Administrative Agent,
be held by the Administrative Agent as collateral for, and/or then or at any
time thereafter applied (after payment of any amounts payable to the
Administrative Agent pursuant to Section 13.5 of the Credit Agreement) in whole
or in part by the Administrative Agent for the ratable benefit of the Lenders
against, all or any part of the Obligations in such order as the Administrative
Agent shall elect. Any surplus of such cash or cash proceeds held by the
Administrative Agent and remaining after payment in full of all the Obligations
shall be paid over to applicable Pledgor or to any other Person that may be
lawfully entitled to receive such surplus.
(c) The Administrative Agent may exercise any and all rights and
remedies of each Pledgor in respect of the Collateral.
(d) All payments received by any Pledgor after the occurrence and
during the continuance of an Event of Default in respect of the Collateral shall
be received in trust for the benefit of the Administrative Agent, shall be
segregated from other funds of such Pledgor and shall be forthwith paid over to
the Administrative Agent in the same form as so received (with any necessary
indorsement).
12. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS; WAIVER OF
RIGHTS. Each Pledgor shall remain obligated hereunder notwithstanding that,
without any reservation of rights against such Pledgor and without notice to or
further assent by such Pledgor, any demand for payment of any of the Obligations
made by the Administrative Agent or any Lender may be rescinded by such party
and any of the Obligations continued, and the Obligations, or the liability of
any other party upon or for any part thereof, or any collateral security or
guarantee therefor or right of offset with respect thereto, may, from time to
time, in whole or in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered or released by the Administrative Agent or any
Lender, and the Credit Agreement, the other Credit Documents, the Letters of
Credit and any other documents executed and delivered in connection therewith
and the Hedge Agreements and any other documents executed and delivered in
connection therewith may be amended, modified, supplemented or terminated, in
whole or in part, as the Administrative Agent (or the Required Lenders, as the
case may be, or, in the case of any Hedge Agreement, the Lender party thereto)
may deem advisable from time to time, and any collateral security, guarantee or
right of offset at any time held by the Administrative Agent or any Lender for
the payment of the Obligations may be sold, exchanged, waived, surrendered or
released. Neither the Administrative Agent nor any Lender shall have any
obligation to protect, secure, perfect or insure any Lien at any time held by it
as security for the Obligations or for this Pledge Agreement or any property
subject thereto. When making any demand hereunder against any Pledgor, the
Administrative Agent or any Lender may, but shall be under no obligation to,
make a similar demand on the Borrower Pledgor, any other Pledgor or pledgor, and
any failure by the Administrative Agent or any Lender to make any such demand or
to collect any payments from the Borrower Pledgor or any other Pledgor or
pledgor or any release of the Borrower Pledgor or any other Pledgor or pledgor
shall not relieve any Pledgor in respect of which a demand is made or collection
is not made or any Pledgor not so released of its several
<PAGE>
8
obligations or liabilities hereunder, and shall not impair or affect the rights
and remedies, express or implied, or as a matter of law, of the Administrative
Agent or any Lender against any Pledgor. For the purposes hereof "demand" shall
include the commencement and continuance of any legal proceedings.
13. CONTINUING SECURITY INTEREST; ASSIGNMENTS UNDER THE CREDIT
AGREEMENT. This Pledge Agreement shall create a continuing security interest in
the Collateral and shall (a) remain in full force and effect until the payment
in full in cash of the Obligations, (b) be binding upon each Pledgor, its
successors and assigns and (c) inure, together with the rights and remedies of
the Administrative Agent hereunder, to the benefit of the Administrative Agent,
the Lenders and their respective successors, transferees and assigns.
14. REINSTATEMENT. This Pledge Agreement shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any of the Obligations is rescinded or must otherwise be
restored or returned by the Administrative Agent or any Lender upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of any
Pledgor, or upon or as a result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, the Borrower Pledgor or any
other Pledgor or any substantial part of its property, or otherwise, all as
though such payments had not been made.
15. NOTICES. All notices, requests and demands pursuant hereto shall
be made in accordance with Section 13.2 of the Credit Agreement, PROVIDED that
any such notice, request or demand to or upon any Subsidiary Pledgor shall be
addressed to such Subsidiary Pledgor at the notice address set forth under its
signature below.
16. COUNTERPARTS. This Pledge Agreement may be executed by one or
more of the Pledgors on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the counterparts of this Pledge Agreement signed by all
the Pledgors shall be lodged with the Administrative Agent and the Borrower
Pledgor.
17. SEVERABILITY. Any provision of this Pledge Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
18. INTEGRATION. This Pledge Agreement represents the agreement of
each of the Pledgors with respect to the subject matter hereof and there are no
promises or representations by the Administrative Agent or any Lender relative
to the subject matter hereof not reflected herein or in the other Credit
Documents.
19. AMENDMENTS IN WRITING; NO WAIVER; CUMULATIVE REMEDIES. (a) None
of the terms or provisions of this Pledge Agreement may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
the affected Pledgor and the Administrative Agent in accordance with Section
13.1 of the Credit Agreement.
(b) Neither the Administrative Agent nor any Lender shall by any act
(except by a written instrument pursuant to Section 19(a)), delay, indulgence,
omission or otherwise be deemed to have waived any right or remedy hereunder or
to have acquiesced in any Default
<PAGE>
9
or Event of Default or in any breach of any of the terms and conditions hereof.
No failure to exercise, nor any delay in exercising, on the part of the
Administrative Agent or any Lender, any right, power or privilege hereunder
shall operate as a waiver thereof. No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. A waiver by the
Administrative Agent or any Lender of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy that the
Administrative Agent or such Lender would otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
20. SECTION HEADINGS. The Section headings used in this Pledge
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
21. SUCCESSORS AND ASSIGNS. This Pledge Agreement shall be binding
upon the successors and assigns of each of the Pledgors and shall inure to the
benefit of the Administrative Agent and the Lenders and their successors and
assigns, except that none of the Pledgors may assign, transfer or delegate any
of its rights or obligations under this Pledge Agreement without the prior
written consent of the Administrative Agent.
22. WAIVER OF JURY TRIAL. EACH OF THE PLEDGORS HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS PLEDGE AGREEMENT, ANY OTHER CREDIT DOCUMENT OR ANY LETTER OF CREDIT AND
FOR ANY COUNTERCLAIM THEREIN.
23. SUBMISSION TO JURISDICTION; WAIVERS. Each of the Pledgors hereby
irrevocably and unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this Pledge Agreement, any other Credit Document or
any Letter of Credit, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the Courts of
the State of New York, the courts of the United States of America for the
Southern District of New York and appellate courts from any thereof;
(ii) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(iii) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to such
Pledgor at its address referred to in Section 15 or at such other address
of which the Administrative Agent shall have been notified pursuant
thereto;
(iv) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
<PAGE>
10
(v) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this Section 23 any special, exemplary, punitive or consequential
damages.
45. GOVERNING LAW. THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
<PAGE>
11
IN WITNESS WHEREOF, each of the undersigned has caused this Pledge
Agreement to be duly executed and delivered by its duly authorized officer as of
the day and year first above written.
CORNING CONSUMER PRODUCTS COMPANY,
By:
-------------------------------
Name:
Title:
EACH SUBSIDIARY PLEDGOR LISTED ON
ANNEX A HERETO,
By:
-------------------------------
Name:
Title:
Address for Notices for each Pledgor:
Corning Consumer Products Company
E Building
Houghton Park
Corning, New York 14831
Attention: Thomas O'Brien
Fax: (607) 974-6135
With a copy to:
Borden, Inc.
180 East Broad Street
Columbus, Ohio 43215-3799
Attention: Ronald Starkman
Fax: (614) 225-4421
THE CHASE MANHATTAN BANK, as Administrative
Agent,
By:
-------------------------------
Name:
Title:
<PAGE>
ANNEX A
TO THE PLEDGE AGREEMENT
SUBSIDIARY PLEDGORS
<PAGE>
SCHEDULE 1
TO THE PLEDGE AGREEMENT
-----------------------
PLEDGED SHARES
Stock Percentage of
Class of Stock/ Certificate Number of Outstanding
Pledgor Issuer Par Value No(s) Shares Shares
- ------- ------ --------- ---- ------ ------
<PAGE>
EXHIBIT C-1
TO THE CREDIT AGREEMENT
-----------------------
TERM LOAN PROMISSORY NOTE
$[ ] New York, New York
April [ ], 1998
FOR VALUE RECEIVED, the undersigned, CORNING CONSUMER PRODUCTS COMPANY, a
Delaware corporation (the "BORROWER"), hereby unconditionally promises to pay to
the order of [LENDER] (the "LENDER") at the office of The Chase Manhattan Bank
(together with its successors in such capacity, the "ADMINISTRATIVE AGENT"),
located at 270 Park Avenue, New York, New York 10017, in lawful money of the
United States of America and in immediately available funds, in accordance with
Section 2.5 of the Credit Agreement (as hereinafter defined), the principal
amount of (a) [DOLLARS] ($[ ]), or, if less, (b) the aggregate unpaid
principal amount of all Term Loans made by the Lender to the Borrower pursuant
to Section 2.1 of the Credit Agreement. The Borrower further agrees to pay
interest in like money at such office on the unpaid principal amount hereof from
time to time outstanding at the rates and on the dates specified in Section 2.8
of the Credit Agreement.
The holder of this promissory note is authorized to endorse on the
schedules annexed hereto and made a part hereof or on a continuation thereof
that shall be attached hereto and made a part hereof the date, Type and amount
of each Term Loan made pursuant to the Credit Agreement and the date and amount
of each payment or prepayment of principal thereof, each continuation thereof,
each conversion of all or a portion thereof to another Type and, in the case of
Eurodollar Term Loans, the length of each Interest Period with respect thereto.
Each such endorsement shall constitute PRIMA FACIE evidence of the accuracy of
the information endorsed, PROVIDED that the failure to make any such endorsement
or any error in such endorsement shall not affect the obligations of the
Borrower in respect of any Term Loan.
This promissory note (a) has been issued pursuant to Section 13.6(b) of the
Credit Agreement dated as of April 9, 1998 (as the same may be amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"),
among the Borrower, the Lenders from time to time parties thereto, the
Administrative Agent, Salomon Brothers Holding Company Inc, as Syndication
Agent, and Bankers Trust Company, as Documentation Agent, (b) is subject to the
provisions of the Credit Agreement and (c) is subject to prepayment in whole or
in part as provided in the Credit Agreement.
Upon the occurrence of any one or more of the Events of Default specified
in the Credit Agreement, all amounts then remaining unpaid on this promissory
note shall become, or may be declared to be, immediately due and payable, all as
provided in the Credit Agreement.
All parties now and hereafter liable with respect to this promissory note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement and
used herein shall have the meanings given to them in the Credit Agreement.
<PAGE>
THIS PROMISSORY NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
CORNING CONSUMER PRODUCTS COMPANY,
By:
-------------------------------
Name:
Title:
<PAGE>
Schedule A
To term note
LOANS, CONVERSIONS AND REPAYMENTS OF ABR LOANS
<TABLE>
<CAPTION>
- ------------ ---------------------- ------------- ----------------------- ----------------------- ------------------ -----------
Amount Amount of ABR Loans Unpaid Principal
Converted to Amount of Principal of Converted to Balance of Notation
Date Amount of ABR Loans ABR Loans ABR Loans Repaid Eurodollar Term Loans ABR Loans Made By
- ------------ ---------------------- ------------- ----------------------- ----------------------- ------------------ -----------
<S> <C> <C> <C> <C> <C> <C>
- ------------ ---------------------- ------------- ----------------------- ----------------------- ------------------ -----------
- ------------ ---------------------- ------------- ----------------------- ----------------------- ------------------ -----------
- ------------ ---------------------- ------------- ----------------------- ----------------------- ------------------ -----------
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</TABLE>
<PAGE>
Schedule B
To Term Note
------------
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR TERM LOANS
<TABLE>
<CAPTION>
Amount Amount of Unpaid Principal
Amount of Converted Interest Period and Amount of Principal Eurodollar Term Balance of
Eurodollar to Eurodollar Eurodollar Rate with of Eurodollar Term Loans Converted Eurodollar Notation
Date Term Loans Term Loans Respect Thereto Loans Repaid to ABR Loans Term Loans Made By
- -------------- ---------- ------------- -------------------- ------------------- ---------------- ---------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------- ---------- ------------- -------------------- ------------------- ---------------- ---------------- --------
- -------------- ---------- ------------- -------------------- ------------------- ---------------- ---------------- --------
- -------------- ---------- ------------- -------------------- ------------------- ---------------- ---------------- --------
- -------------- ---------- ------------- -------------------- ------------------- ---------------- ---------------- --------
- -------------- ---------- ------------- -------------------- ------------------- ---------------- ---------------- --------
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- -------------- ---------- ------------- -------------------- ------------------- ---------------- ---------------- --------
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- -------------- ---------- ------------- -------------------- ------------------- ---------------- ---------------- --------
</TABLE>
<PAGE>
EXHIBIT C-2
TO THE CREDIT AGREEMENT
-----------------------
REVOLVING CREDIT LOAN PROMISSORY NOTE
$[ ] New York, New York
April [ ], 1998
FOR VALUE RECEIVED, the undersigned, CORNING CONSUMER PRODUCTS COMPANY, a
Delaware corporation (the "BORROWER"), hereby unconditionally promises to pay to
the order of [LENDER] (the "LENDER") at the office of The Chase Manhattan Bank
(together with its successors in such capacity, the "ADMINISTRATIVE AGENT"),
located at 270 Park Avenue, New York, New York 10017, in lawful money of the
United States of America and in immediately available funds, in accordance with
Section 2.5 of the Credit Agreement (as hereinafter defined), the principal
amount of (a) [DOLLARS] ($[ ]), or, if less, (b) the aggregate unpaid
principal amount of all Revolving Credit Loans made by the Lender to the
Borrower pursuant to Section 2.1 of the Credit Agreement. The Borrower further
agrees to pay interest in like money at such office on the unpaid principal
amount hereof from time to time outstanding at the rates and on the dates
specified in Section 2.8 of the Credit Agreement.
The holder of this promissory note is authorized to endorse on the
schedules annexed hereto and made a part hereof or on a continuation thereof
that shall be attached hereto and made a part hereof the date, Type and amount
of each Revolving Credit Loan made pursuant to the Credit Agreement and the date
and amount of each payment or prepayment of principal thereof, each continuation
thereof, each conversion of all or a portion thereof to another Type and, in the
case of Eurodollar Revolving Credit Loans, the length of each Interest Period
with respect thereto. Each such endorsement shall constitute PRIMA FACIE
evidence of the accuracy of the information endorsed, PROVIDED that the failure
to make any such endorsement or any error in such endorsement shall not affect
the obligations of the Borrower in respect of any Revolving Credit Loan.
This promissory note (a) has been issued pursuant to Section 13.6(b) of the
Credit Agreement dated as of April 9, 1998 (as the same may be amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"),
among the Borrower, the Lenders from time to time parties thereto, the
Administrative Agent, Salomon Brothers Holding Company Inc, as Syndication
Agent, and Bankers Trust Company, as Documentation Agent, (b) is subject to the
provisions of the Credit Agreement and (c) is subject to prepayment in whole or
in part as provided in the Credit Agreement.
Upon the occurrence of any one or more of the Events of Default specified
in the Credit Agreement, all amounts then remaining unpaid on this promissory
note shall become, or may be declared to be, immediately due and payable, all as
provided in the Credit Agreement.
All parties now and hereafter liable with respect to this promissory note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement and
used herein shall have the meanings given to them in the Credit Agreement.
<PAGE>
2
THIS PROMISSORY NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
CORNING CONSUMER PRODUCTS COMPANY,
By:
-------------------------------
Name:
Title:
<PAGE>
SCEDULE A
TO REVOLVING CREDIT NOTE
LOANS, CONVERSIONS AND REPAYMENTS OF ABR LOANS
<TABLE>
<CAPTION>
- ------------ ---------------------- ------------- ----------------------- ----------------------- ------------------ -----------
Amount of ABR Loans
Amount Converted to Unpaid Principal
Converted to Amount of Principal of Eurodollar Revolving Balance of Notation
Date Amount of ABR Loans ABR Loans ABR Loans Repaid Credit Loans ABR Loans Made By
- ------------ ---------------------- ------------- ----------------------- ----------------------- ------------------ -----------
<S> <C> <C> <C> <C> <C> <C>
- ------------ ---------------------- ------------- ----------------------- ----------------------- ------------------ -----------
- ------------ ---------------------- ------------- ----------------------- ----------------------- ------------------ -----------
- ------------ ---------------------- ------------- ----------------------- ----------------------- ------------------ -----------
- ------------ ---------------------- ------------- ----------------------- ----------------------- ------------------ -----------
- ------------ ---------------------- ------------- ----------------------- ----------------------- ------------------ -----------
- ------------ ---------------------- ------------- ----------------------- ----------------------- ------------------ -----------
- ------------ ---------------------- ------------- ----------------------- ----------------------- ------------------ -----------
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- ------------ ---------------------- ------------- ----------------------- ----------------------- ------------------ -----------
- ------------ ---------------------- ------------- ----------------------- ----------------------- ------------------ -----------
</TABLE>
<PAGE>
Schedule B
To Term Note
------------
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR TERM LOANS
<TABLE>
<CAPTION>
- -------------- ------------ ------------- -------------------- ------------------- ---------------- ---------------- --------
Amount of Unpaid Principal
Amount Eurodollar Balance of
Amount of Converted to Amount of Principal Revolving Eurodollar
Eurodollar Eurodollar Interest Period and of Eurodollar Credit Loans Revolving
Revolving Revolving Eurodollar Rate with Revolving Credit Converted to Credit Notation
Date Credit Loans Credit Loans Respect Thereto Loans Repaid ABR Loans Loans Made By
- -------------- ------------ ------------- -------------------- ------------------- ---------------- ---------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------- ---------- ------------- -------------------- ------------------- ---------------- ---------------- --------
- -------------- ---------- ------------- -------------------- ------------------- ---------------- ---------------- --------
- -------------- ---------- ------------- -------------------- ------------------- ---------------- ---------------- --------
- -------------- ---------- ------------- -------------------- ------------------- ---------------- ---------------- --------
- -------------- ---------- ------------- -------------------- ------------------- ---------------- ---------------- --------
- -------------- ---------- ------------- -------------------- ------------------- ---------------- ---------------- --------
- -------------- ---------- ------------- -------------------- ------------------- ---------------- ---------------- --------
- -------------- ---------- ------------- -------------------- ------------------- ---------------- ---------------- --------
- -------------- ---------- ------------- -------------------- ------------------- ---------------- ---------------- --------
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- -------------- ---------- ------------- -------------------- ------------------- ---------------- ---------------- --------
- -------------- ---------- ------------- -------------------- ------------------- ---------------- ---------------- --------
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- -------------- ---------- ------------- -------------------- ------------------- ---------------- ---------------- --------
- -------------- ---------- ------------- -------------------- ------------------- ---------------- ---------------- --------
</TABLE>
<PAGE>
Exhibit 10.2
STOCKHOLDERS' AGREEMENT
among
CORNING CONSUMER PRODUCTS COMPANY,
CCPC ACQUISITION CORP.
and
CORNING INCORPORATED
dated as of
April 1, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
I. INTRODUCTORY MATTERS........................................................................................ 1
1.1. Defined Terms............................................................................. 1
1.2. Construction.............................................................................. 3
II. TRANSFERS.................................................................................................. 3
2.1. Limitations on Transfer................................................................... 3
2.2. Right of First Refusal.................................................................... 4
2.3. Transfers to Affiliates................................................................... 5
2.4. Tag-Along Rights.......................................................................... 5
2.5. Drag-Along Rights......................................................................... 6
III. REGISTRATION RIGHTS....................................................................................... 7
3.1. Piggyback Rights.......................................................................... 7
3.2. Demand Registration....................................................................... 8
3.3. Other Registration-Related Matters........................................................ 8
3.4. Indemnification........................................................................... 11
IV. MISCELLANEOUS.............................................................................................. 13
4.1. Additional Securities Subject to Agreement................................................ 13
4.2. Termination............................................................................... 13
4.3. Notices................................................................................... 13
4.4. Further Assurances........................................................................ 13
4.5. Non-Assignability......................................................................... 13
4.6. Amendment; Waiver......................................................................... 14
4.7. Third Parties............................................................................. 14
4.8. Governing Law............................................................................. 14
4.9. Specific Performance...................................................................... 14
4.10. Entire Agreement.......................................................................... 14
4.11. Titles and Headings....................................................................... 14
4.12. Severability.............................................................................. 14
4.13. Counterparts.............................................................................. 14
4.14. Reporting Requirements.................................................................... 14
4.15. Representations........................................................................... 15
</TABLE>
i
<PAGE>
STOCKHOLDERS' AGREEMENT
STOCKHOLDERS' AGREEMENT, dated as of April 1, 1998 (this
"Agreement"), among Corning Consumer Products Company, a Delaware corporation
(the "Company"), CCPC Acquisition Corp. ("Borden"), and Corning Incorporated
("Corning").
RECITALS:
A. The Company, Borden, Borden, Inc., a New Jersey
corporation, and Corning are parties to a Recapitalization Agreement, dated as
of March 2, 1998 (the "Recapitalization Agreement"), pursuant to which, among
other things, the Company was recapitalized (the "Recapitalization");
B. Immediately following the Recapitalization, Borden held
22,080,000 shares of Common Stock and Corning held 1,920,000 shares of Common
Stock; and
C. The parties hereto wish to provide for certain matters
relating to their respective holdings of Common Stock.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:
I. INTRODUCTORY MATTERS
1.1. Defined Terms. In addition to the terms defined elsewhere
herein, the following terms have the following meanings when used herein with
initial capital letters:
"Affiliate" means, with respect to any specified Person, any
other Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control
with, such specified Person; provided, that (i) officers, directors or
employees of the Company will not be deemed to be Affiliates of a
stockholder of the Company for purposes hereof solely by reason of
being officers, directors or employees of the Company, and (ii) the
Corning Glass Museum and the Corning Foundation will be deemed to be
Affiliates of Corning.
"Agreement" means this Agreement, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with
the terms hereof.
"Assumption Agreement" means a writing reasonably satisfactory
in form and substance to Borden whereby a Transferee of shares of
Common Stock becomes a party to, and agrees to be bound by, to the same
extent as its transferor by the terms of, this Agreement.
"Board" means the Board of Directors of the Company.
<PAGE>
"Business Day" means a day other than a Saturday, Sunday,
federal or New York State holiday or other day on which commercial
banks in New York City are authorized or required by law to close.
"Common Stock" means the shares of common stock, no par
value per share, of the Company.
"IPO" means the completion of an initial Public Offering and
the sale to the public of Common Stock by the Company.
"Permitted Transferees" means any Person to whom shares of
Common Stock are Transferred in a Transfer in accordance with Sections
2.2 or 2.3 or otherwise not in violation of this Agreement and who is
required to, and does, enter into an Assumption Agreement, and includes
any Person to whom a Permitted Transferee of Corning (or a Permitted
Transferee of a Permitted Transferee) so further Transfers shares of
Common Stock and who is required to, and does, become bound by the
terms of this Agreement.
"Person" means any individual, corporation, limited liability
company, partnership, trust, joint stock company, business trust,
unincorporated association, joint venture, governmental authority or
other legal entity of any nature whatsoever.
"Public Offering" means the sale of shares of any class of the
Common Stock to the public pursuant to an effective registration
statement (other than a registration statement on Form S-4 or S-8 or
any similar or successor form) filed under the Securities Act.
"Registrable Securities" means (i) any Common Stock held by
Corning immediately following the Recapitalization, (ii) any Common
Stock issued as (or issuable upon the conversion or exercise of any
warrant, right, option or other convertible security which is issued
as) a dividend or other distribution with respect to, or in exchange
for, or in replacement of, such Common Stock, and (iii) any Common
Stock issued by way of a stock split of the Common Stock referred to in
clauses (i) or (ii) or this clause (iii). For purposes of this
Agreement, any Registrable Securities will cease to be Registrable
Securities when (A) a registration statement covering such Registrable
Securities has been declared effective and such Registrable Securities
have been disposed of pursuant to such effective registration
statement, (B) all Registrable Securities may be offered and sold
pursuant to Rule 144 (or any similar provision then in effect) under
the Securities Act in a single transaction or series of transactions
over a 90-day period, (C) such Registrable Securities are sold by a
person in a transaction in which rights under the provisions of this
Agreement are not assigned in accordance with this Agreement, or (D)
such Registrable Securities cease to be outstanding.
"Registration Expenses" means any and all expenses incident to
the performance by the Company of its obligations under Sections 3.1 or
3.2, including without limitation (i) all SEC, stock exchange, National
Association of Securities Dealers, Inc. and other comparable regulatory
agencies, registration and filing fees, (ii) all fees and expenses of
the Company in complying with securities or blue sky laws (including
fees and disbursements of counsel for the underwriters in connection
with blue sky
2
<PAGE>
qualifications), (iii) all printing, messenger and delivery expenses of
the Company, (iv) the fees and disbursements of counsel for the Company
and of its independent accountants, including without limitation the
expenses of any "cold comfort" letters required by or incident to such
performance and compliance, and (v) fees and disbursements customarily
paid by issuers of securities (but not underwriters' or sales agents'
discounts or similar compensation).
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder, as the same may
be amended from time to time.
"Stockholders" means each of the holders of Common
Stock.
"Transfer" means a transfer, sale, assignment, pledge,
hypothecation or other disposition, whether directly or indirectly
pursuant to the creation of a derivative security, the grant of an
option or other right, the imposition of a restriction on disposition
or voting or transfer by operation of law.
1.2. Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rule of strict construction will be applied against any party. Unless the
context otherwise requires: (a) "or" is disjunctive but not exclusive, (b) words
in the singular include the plural, and in the plural include the singular, and
(c) the words "hereof", "herein", and "hereunder" and words of similar import
when used in this Agreement refer to this Agreement as a whole and not to any
particular provision of this Agreement, and Section references are to this
Agreement unless otherwise specified.
II. TRANSFERS
2.1. Limitations on Transfer. (a) Prior to the IPO, Corning
and its Permitted Transferees may not Transfer any shares of Common Stock other
than (i) in connection with a Public Offering effected in accordance with
Section 3.1(a), (ii) in accordance with Sections 2.3, 2.4, or 2.5 or (iii) in
accordance with Section 2.2.
(b) In the event of any purported Transfer by Corning or any
of its Permitted Transferees of any shares of Common Stock in violation of the
provisions of this Agreement, such purported Transfer will be void and of no
effect and the Company will not give effect to such Transfer.
(c) Each certificate representing shares of Common Stock
issued to Corning or any of its Permitted Transferees will bear a legend on the
face thereof substantially to the following effect (with such additions thereto
or changes therein as the Company may be advised by counsel are required by law
or necessary to give full effect to this Agreement, the "Legend"):
"THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO A STOCKHOLDERS' AGREEMENT AMONG THE COMPANY, CCPC
3
<PAGE>
ACQUISITION CORP. AND CORNING INCORPORATED, A COPY OF WHICH IS ON FILE
WITH THE SECRETARY OF THE COMPANY. NO TRANSFER, SALE, ASSIGNMENT,
PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT IN ACCORDANCE WITH
THE PROVISIONS OF SUCH STOCKHOLDERS' AGREEMENT. THE HOLDER OF THIS
CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY
ALL OF THE PROVISIONS OF SUCH STOCKHOLDERS' AGREEMENT.
"THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN REGISTERED
UNDER THAT ACT OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE."
The Legend will be removed by the Company by the delivery of substitute
certificates without such Legend in the event of (i) a Transfer permitted by
this Agreement and in which the Transferee is not required to enter into an
Assumption Agreement or (ii) the termination of Article II pursuant to the terms
hereof, provided however, that the second paragraph of Legend will only be
removed if at such time it is no longer required for purposes of applicable
securities laws.
2.2. Right of First Refusal. (a) Each of Corning and its
Permitted Transferees agrees that, if such Stockholder (the "Offeree") receives
a bona fide offer (a "Transfer Offer") to purchase all or any portion of the
Common Stock (the "Transfer Stock") then owned by such Offeree from any Person
(the "Offeror") other than an affiliate of such Offeree which such Offeree
wishes to accept, such Offeree shall cause the Transfer Offer to be reduced to
writing and shall provide a written notice (the "Transfer Notice") of such
Transfer Offer to the Company and Borden; provided that, there shall not be more
than four Permitted Transferees pursuant to this Section 2.2. The Transfer
Notice shall also contain an irrevocable offer to sell the Transfer Stock to the
Company and, if the Company shall decline to accept such offer, Borden (in the
manner set forth below) at a price equal to the price contained in, and upon
substantially the same terms and conditions as the terms and conditions
contained in, the Transfer Offer and shall be accompanied by a true and complete
copy of the Transfer Offer (which shall identify the Offeror, the Transfer
Stock, the price contained in the Transfer Offer and the other material terms
and conditions of the Transfer Offer). At any time within 30 days after the date
of the receipt by the Company and Borden of the Transfer Notice, the Company
shall have the option to exercise its right to purchase (or assign its right to
one of its subsidiaries) or, if the Company and its subsidiaries shall decline
to exercise such option, Borden shall have the right to exercise such option to
purchase (or assign its right to any party) all of the Common Stock covered by
the Transfer Offer at the same price and on such substantially the same terms
and conditions as the Transfer Offer. If such election is made, within 60 days
after the date of the receipt by the Company and Borden of the Transfer Notice,
the Company or Borden or one of their aforementioned assignees shall deliver a
certified bank check or checks in the appropriate amount to such Offeree against
delivery of certificates or other instruments representing the Common Stock so
purchased, appropriately endorsed by such Offeree. If the Company or Borden or
one of their aforementioned assignees has not given notice of its intention to
exercise such right to purchase within such 30 day period or has not tendered
the purchase price for such Common Stock in the manner set forth above within
such 60 day period, such Offeree shall
4
<PAGE>
be free for a period of 90 days from the end of such 30 day or 60 day period, as
the case may be, to transfer the Transfer Stock to the Offeror on terms which
are no more favorable in any material respect to the transferee than the terms
and conditions set forth in the Transfer Notice. If for any reason such Offeree
does not transfer the Transfer Stock to the Offeror on such terms and conditions
or if such Offeree wishes to sell the Transfer Stock on terms which are more
favorable in any material respect to the transferee than those set forth in the
Transfer Notice, the provisions of this Section 2.2 shall again be applicable to
the Transfer Stock.
(b) The closing of the purchase of the Transfer Stock upon
exercise of the option pursuant to Section 2.2(a) shall take place at the
principal office of the Company on a date specified by the buyer no later than
the last day of the 60 day period after the giving of the Transfer Notice.
2.3. Transfers to Affiliates. Corning and its Permitted
Transferees may Transfer any or all of the shares of Common Stock held by any of
them to any of their respective Affiliates who duly executes and delivers an
Assumption Agreement, provided that in connection therewith the Company has been
furnished with an opinion in form and substance reasonably satisfactory to the
Company of counsel reasonably satisfactory to the Company that such Transfer is
exempt from or not subject to the provisions of Section 5 of the Securities Act
and any other applicable securities laws.
2.4. Tag-Along Rights. (a) So long as this Agreement remains
in effect, with respect to any proposed Transfer by Borden of shares of Common
Stock to any Person not an Affiliate of Borden, other than in a Public Offering,
whether pursuant to a stock sale, a tender or exchange offer or a similar
transaction (any such transaction, a "Borden Sale"), Borden will have the
obligation, and each of Corning and its Permitted Transferees will have the
right, to require the proposed Transferee or acquiring Person to purchase from
each of Corning and its Permitted Transferees who exercises its rights under
Section 2.4(b) (a "Tagging Stockholder") a number of shares of Common Stock up
to the product (rounded up to the nearest whole number) of (i) the quotient
determined by dividing (A) the aggregate number of shares of Common Stock owned
by such Tagging Stockholder by (B) the aggregate number of shares of Common
Stock owned by Borden, the Tagging Stockholder and any other Stockholder
entitled to participate in such transaction, and (ii) the total number of shares
of Common Stock proposed to be directly or indirectly Transferred to the
Transferee or acquiring Person in the contemplated Borden Sale (a "Proposed
Transferee"), at the same price per share of Common Stock and upon the same
terms and conditions (including, without limitation, time of payment and form of
consideration) as to be paid and given to Borden; provided, that in order to be
entitled to exercise its right to sell shares of Common Stock to the Proposed
Transferee pursuant to this Section 2.4, each Tagging Stockholder must agree to
make to the Proposed Transferee the same representations, warranties, covenants,
indemnities and agreements as Borden agrees to make in connection with the
proposed Borden Sale; and provided, further, that no Tagging Stockholder shall
be required to make representations, warranties or covenants or provide
indemnification with respect to any matter other than its ownership of the
shares of Common Stock to be transferred, its ability to transfer such shares
free and clear of all encumbrances and its authority and due authorization to
transfer such shares. Each Tagging Stockholder will be responsible for its
proportionate share of the costs incurred in connection with the Borden Sale to
the extent not paid or reimbursed by the Company or the Proposed Transferee.
5
<PAGE>
(b) Borden will give notice to each Tagging Stockholder of
each proposed Borden Sale at least twenty Business Days prior to the proposed
consummation of such Borden Sale, setting forth the number of shares of Common
Stock proposed to be so Transferred, the name and address of the Proposed
Transferee, the proposed amount and form of consideration (and if such
consideration consists in part or in whole of property other than cash, Borden
will provide such information, to the extent reasonably available to Borden,
relating to such consideration as the Tagging Stockholder may reasonably request
in order to evaluate such non-cash consideration) and other terms and conditions
of payment offered by the Proposed Transferee, and a representation that the
Proposed Transferee has been informed of the tag-along rights provided for in
this Section 2.4. Borden will deliver or cause to be delivered to each Tagging
Stockholder copies of all transaction documents relating to the proposed Borden
Sale as the same become available. The tag-along rights provided by this Section
2.4 must be exercised by each Tagging Stockholder within five Business Days
following receipt of the notice required by the preceding sentence by delivery
of a written notice to Borden indicating the desire of such Tagging Stockholder
to exercise its, her or his rights and specifying the number of shares of Common
Stock it, she or he desires to sell. The Tagging Stockholder will be entitled
under this Section 2.4 to Transfer to the Proposed Transferee the number of
shares of Common Stock calculated in accordance with Section 2.4(a).
(c) If any Tagging Stockholder exercises his, her or its
rights under Section 2.4(a), the closing of the purchase of the Common Stock
with respect to which such rights have been exercised will take place
concurrently with the closing of the sale of Borden's Common Stock to the
Proposed Transferee.
2.5. Drag-Along Rights. (a) So long as this Agreement remains
in effect, if Borden receives an offer from a Person other than an Affiliate of
Borden (a "Third Party") to purchase (other than in a Public Offering) at least
a majority of the shares of Common Stock then outstanding and such offer is
accepted by Borden, then each of Corning and its Permitted Transferees hereby
agrees that, if requested by Borden, it will Transfer to such Third Party on the
same terms and conditions (including, without limitation, time of payment and
form of consideration) as to be paid and given to Borden, the number of shares
of Common Stock equal to the number of shares of Common Stock owned by it
multiplied by the percentage of the then outstanding shares of Common Stock to
which the Third Party offer is applicable.
(b) Borden will give notice (the "Drag-Along Notice") to each
of Corning and its Permitted Transferees of any proposed Transfer giving rise to
the rights of Borden set forth in Section 2.5(a) as soon as practicable
following Borden's acceptance of the offer referred to in Section 2.5(a). The
Drag-Along Notice will set forth the number of shares of Common Stock proposed
to be so Transferred, the name of the proposed Transferee or acquiring Person,
the proposed amount and form of consideration (and if such consideration
consists in part or in whole of property other than cash, Borden will provide
such information, to the extent reasonably available to Borden, relating to such
consideration as Corning and its Permitted Transferees may reasonably request in
order to evaluate such non-cash consideration), the number of shares of Common
Stock sought and the other terms and conditions of the offer; provided that none
of Corning or any Permitted Transferee shall be obligated to accept pursuant to
this Section 2.5 any consideration other than cash, cash equivalents, marketable
securities, securities with registration rights similar to those contemplated in
Section 3.1 or securities which may be Transferred pursuant to Rules 144 or
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145 (or any successor rules) under the Securities Act. Borden will notify
Corning and its Permitted Transferees at least ten Business Days in advance of
entering into a definitive agreement in connection with such offer. In any such
agreement, Corning and its Permitted Transferees will be required (i) to make or
agree to the same representations, warranties and indemnities as Borden so long
as they are made severally and not jointly (provided that Corning and its
Permitted Transferees will not be required to make representations, warranties
or covenants or provide indemnification with respect to any matter other than
their respective ownership of the shares of Common Stock to be transferred,
their respective ability to transfer such shares free and clear of all
encumbrances and their respective authority and due authorization to transfer
such shares), and (ii) to pay their proportionate share of the costs incurred in
connection with such Borden Sale to the extent not paid or reimbursed by the
Company or the Transferee or acquiring Person. If the Transfer referred to in
the Drag-Along Notice is not consummated within 90 days from the date of the
Drag-Along Notice, Borden must deliver another Drag-Along Notice in order to
exercise its rights under this Section 2.5 with respect to such Transfer or any
other Transfer.
III. REGISTRATION RIGHTS
3.1. Piggyback Rights. (a) Each time the Company is planning
to file a registration statement under the Securities Act in connection with the
sale of Common Stock by (i) the Company (other than in connection with an IPO or
a registration statement on Forms S-4 or S-8 or any similar or successor form)
or (ii) Borden (the Company or Borden in such case, the "Initiating Party"), the
Company will give prompt written notice thereof to Corning and its Permitted
Transferees at least 15 Business Days prior to the anticipated filing date of
such registration statement. Upon the written request of Corning and any
Permitted Transferee made within 10 Business Days after the receipt of any such
notice from the Company, which request will specify the Registrable Securities
(such securities, together with any other shares of Common Stock requested to be
included in such registration statement by any other Person pursuant to similar
registration rights, the "Piggy-Back Shares") intended to be disposed of by
Corning or such Permitted Transferee in such offering, the Company will use
reasonable efforts to effect the registration under the Securities Act of all
Piggy-Back Shares which the Company has been so requested to register by Corning
or such Permitted Transferee to the extent required to permit the disposition of
the Piggy-Back Shares to be registered; provided, that (x) if, at any time after
giving written notice of its intention to register any securities and prior to
the effective date of the registration statement filed in connection with such
registration, any Initiating Party determines for any reason not to proceed with
the proposed registration, the Company may at its election give written notice
of such determination to each holder of Piggy-Back Shares and thereupon will be
relieved of its obligation to register any Piggy-Back Shares in connection with
such registration, and (y) if such registration involves an underwritten
offering, each such holder must sell its shares to the underwriters on the same
terms and conditions as apply to the Initiating Parties.
(b) If a registration pursuant to this Section 3.1 involves an
underwritten offering and the managing underwriter or underwriters advise the
Company in writing that, in their opinion, (i) the number of securities which
the Initiating Party intends to include in such registration, together with the
Piggy-Back Shares, exceeds the largest number of such securities which can be
sold in such offering without having an adverse effect on such offering
(including, but not limited to, the price at which such securities can be sold)
or (ii) the inclusion of the Piggy-Back Shares in such registration would have
an adverse effect on
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such offering, then the Company will include in such registration (A) first,
100% of the securities proposed to be sold by the Company and (B) second, to the
extent that the number of securities requested to be included in such
registration can, in the opinion of such managing underwriter, be sold without
having the adverse effect referred to above, the number of securities which
Borden and the holders of Piggy-Back Shares have requested to be included in
such registration, such amount to be allocated pro rata among Borden and all
such holders on the basis of the relative number of securities then held by
Borden and each such holder (provided that any securities thereby allocated to
Borden or any such holder that exceed the request of Borden or such holder will
be reallocated among Borden and the remaining requesting holders in like
manner).
3.2. Demand Registration. From and after 180 days following
the completion of the IPO, Corning and/or any Permitted Transferee (the
"Requesting Holders") may request in a written notice (the "Request") that the
Company effect the registration under the Securities Act of all or any part of
the Registrable Securities owned by the Requesting Holders if at such time such
Registrable Securities represent more than 5% of the outstanding Common Stock;
provided that if such shares represent less than 5% of the outstanding Common
Stock solely because of issuances of additional shares of Common Stock following
the date hereof, the Company shall be required to register all the Registrable
Securities then owned by the Requesting Holders if at such time such Registrable
Securities represent more than 3% of the outstanding Common Stock. Following the
receipt of the Request, the Company will, as expeditiously as practicable, use
reasonable efforts to effect the registration under the Securities Act of any or
all Registrable Securities of the Requesting Holders as are specified in the
Request and will cause such registration statement to remain effective for a
period of not less than 180 days; provided, however, that the Company will not
be required to effect more than one registration pursuant to this Section 3.2.
The Company will select the managing underwriter of any underwritten offering
effected under this Section 3.2, which will be reasonably acceptable to the
Requesting Holders.
3.3. Other Registration-Related Matters. (a) If the Board
determines that the registration and distribution of Registrable Securities (A)
could impede, delay or interfere with any pending material financing,
acquisition, corporate reorganization or other significant transaction involving
the Company or (B) could require disclosure of non-public material information,
the disclosure of which could adversely affect the Company, the Company will
promptly give the Requesting Holders written notice of such determination and
will be entitled to postpone the filing or effectiveness of a registration
statement for a reasonable period of time not to exceed 180 calendar days in any
calendar year (a "Section 3.3(a) Period"); provided, however, that in connection
therewith the Company will be required to deliver to the Requesting Holders a
general statement, signed by the chief financial officer of the Company,
describing in reasonable detail the reasons for such postponement or restriction
on use and an estimate of the anticipated delay. The Company will promptly
notify the Requesting Holders of the expiration or earlier termination of a
Section 3.3(a) Period.
(b) The Company may require any Person that is selling shares
of Common Stock in a Public Offering pursuant to Sections 3.1 or 3.2 (each a
"Holder") to furnish to the Company in writing such information regarding such
Person and the distribution of the shares of Common Stock which are included in
a Public Offering as may from time to time reasonably be requested in writing in
order to comply with the Securities Act.
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(c) The Company will pay all Registration Expenses in
connection with each registration or proposed registration of Registrable
Securities pursuant to Sections 3.1 or 3.2. Notwithstanding the foregoing, (y)
the fees or expenses of counsel to the Holders or of any other expert hired
directly by the Holders will be the sole responsibility of the Holders and (z)
the Holders will be responsible for their respective pro rata shares (determined
by reference to the number of shares included in the applicable registration) of
all underwriting discounts and commissions and transfer taxes.
(d) No later than ten days before the first filing of a
registration statement pursuant to Section 3.2 and before filing any other
registration statement or prospectus, or any amendments or supplements thereto,
in connection with any registration or proposed registration of Registrable
Securities pursuant to Sections 3.1 or 3.2, the Company will furnish to counsel
of the Holders copies of all documents proposed to be filed.
(e) The Company will furnish to each Holder such number of
copies of the applicable registration statement and of each amendment or
supplement thereto (in each case including all exhibits), such number of copies
of the prospectus included in such registration statement (including each
preliminary prospectus and summary prospectus), in conformity with the
requirements of the Securities Act, and such other documents as such Holder may
reasonably request in order to facilitate the disposition of Registrable
Securities by such Holder.
(f) The Company will use reasonable efforts to register or
qualify Registrable Securities covered by a registration statement under such
other securities or blue sky laws of such jurisdictions as each Holder
reasonably requests, and do any and all other acts and things which may be
reasonably necessary or advisable to enable such Holder to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
Holder, except that the Company will not for any such purpose be required to
qualify generally to do business as a foreign corporation in any jurisdiction
where, but for the requirements of this Section 3.3(f), it would not be
obligated to be so qualified, to subject itself to taxation in any such
jurisdiction, or to consent to general service of process in any such
jurisdiction.
(g) The Company will use reasonable efforts to cause the
Registrable Securities covered by a registration statement to be registered with
or approved by such other governmental agencies or authorities as may be
necessary to enable the Holder thereof to consummate the disposition thereof.
(h) The Company will notify each Holder of Registrable
Securities covered by a registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act promptly
after the Company becomes aware that the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing, and at the request of any such Holder, prepare and
furnish to such Holder a reasonable number of copies of an amended or
supplemental prospectus as may be necessary so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus will not include
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
in the light of the circumstances than existing.
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(i) The Company will enter into such customary agreements
(including an underwriting agreement in customary form) and take such other
actions as sellers of a majority of securities covered by a registration
statement or the underwriters, if any, reasonably request in order to expedite
or facilitate the disposition of such Registrable Securities.
(j) The Company will make available for inspection by any
Holder of Registrable Securities covered by a registration statement, by any
underwriter participating in any disposition to be effected pursuant to such
registration statement and by any attorney, accountant or other agent retained
by any such Holder or any such underwriter, all pertinent financial and other
records, pertinent corporate documents and properties of the Company, and cause
all of the Company's officers, directors and employees to supply all information
reasonably requested by any such Holder, underwriter, attorney, accountant or
agent in connection with such registration statement.
(k) The Company will obtain a "cold comfort" letter or letters
from the Company's independent public accountants in customary form and covering
matters of the type customarily covered by "cold comfort" letters as the sellers
of a majority of the securities covered by the registration statement reasonably
requests.
(l) Each Holder agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section
3.3(h), such Holder will forthwith discontinue disposition of securities
pursuant to the registration statement covering such Registrable Securities
until such Holder's receipt of the copies of the amended or supplemented
prospectus contemplated by Section 3.3(h) and, if so directed by the Company,
such Holder will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies then in such Holder's possession, of the
prospectus covering such Registrable Securities current at the time of receipt
of such notice. In the event the Company gives any such notice, the period for
which the Company will be required to keep the registration statement effective
will be extended by the number of days during the period from and including the
date of the giving of such notice pursuant to Section 3.3(h) to and including
the date when each Holder has received the copies of the supplemented or amended
prospectus contemplated by Section 3.3(h).
(m) Each Holder will, in connection with an offering of the
Company's securities, upon the request of the Company or of the underwriters
managing any underwritten offering of the Company's securities, agree in writing
not to effect any sale, disposition or distribution of Registrable Securities
(other than those included in the registration or in a private sale to a third
party that is otherwise in accordance with the terms of this Agreement if such
third party agrees to be bound by this Agreement, including this clause (m))
without the prior written consent of the managing underwriter for such period of
time (not to exceed 180 days) from the effective date of such registration as
the Company or the underwriters may specify.
3.4. Indemnification. (a) Indemnification by the Company. In
the event of any registration of any securities of the Company under the
Securities Act pursuant to Sections 3.1 or 3.2, the Company hereby indemnifies
and agrees to hold harmless, to the extent permitted by law, each Holder of
Registrable Securities covered by such registration statement, each Affiliate of
such Holder and their respective directors and officers or general and limited
partners (and the directors, officers, affiliates and controlling Persons
thereof),
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each other Person who participates as an underwriter in the offering or sale of
such securities and each other Person, if any, who controls such Holder or any
such underwriter within the meaning of the Securities Act (collectively, the
"Indemnified Parties"), against any and all losses, claims, damages or
liabilities, joint or several, and expenses to which such Indemnified Party may
become subject under the Securities Act, common law or otherwise, insofar as
such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof, whether or not such Indemnified Party is a party thereto) arise
out of or are based upon (i) any untrue statement or alleged untrue statement of
any material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary, final or
summary prospectus contained therein, or any amendment or supplement thereto, or
(ii) any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading
in the light of the circumstances then existing, and the Company will reimburse
such Indemnified Party for any legal or other expenses reasonably incurred by it
in connection with investigating or defending any such loss, claim, liability,
action or proceeding; provided, that the Company will not be liable to any
Indemnified Party in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of or is based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, in any such
preliminary, final or summary prospectus, or any amendment or supplement thereto
in reliance upon and in conformity with written information with respect to such
Indemnified Party furnished to the Company by such Indemnified Party for use in
the preparation thereof; and provided, further, that the Company will not be
liable to any Person who participates as an underwriter in the offering or sale
of Registrable Securities or any other Person, if any, who controls such
underwriter within the meaning of the Securities Act, under the indemnity
agreement in this Section 3.4 with respect to any preliminary prospectus or the
final prospectus or the final prospectus as amended or supplemented, as the case
may be, to the extent that any such loss, claim, damage or liability of such
underwriter or controlling Person results from the fact that such underwriter
sold Registrable Securities to a Person to whom there was not sent or given, at
or prior to the written confirmation of such sale, a copy of the final
prospectus or of the final prospectus as then amended or supplemented, whichever
is most recent, if the Company has previously furnished copies thereof to such
underwriter. Such indemnity will remain in full force and effect regardless of
any investigation made by or on behalf of such Holder or any Indemnified Party
and will survive the Transfer of such securities by such Holder.
(b) Indemnification by the Holders and Underwriters. The
Company may require, as a condition to including any Registrable Securities in
any registration statement filed in accordance with Sections 3.1 or 3.2, that
the Company shall have received an undertaking reasonably satisfactory to it
from the Holder of such Registrable Securities or any prospective underwriter to
indemnify and hold harmless (in the same manner and to the same extent as set
forth in Section 3.4(a)) the Company, all other Holders or any prospective
underwriter, as the case may be, and any of their respective Affiliates,
directors, officers and controlling Persons, with respect to any statement or
alleged statement in or omission or alleged omission from such registration
statement, any preliminary, final or summary prospectus contained therein, or
any amendment or supplement, if such statement or alleged statement or omission
or alleged omission was made in reliance upon and in conformity with written
information with respect to such Holder or underwriter furnished to the Company
by such Holder or underwriter expressly for use in the preparation of such
registration statement, preliminary, final or summary prospectus or amendment or
supplement, or a
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document incorporated by reference into any of the foregoing. Such indemnity
will remain in full force and effect regardless of any investigation made by or
on behalf of the Company or any of the Holders, or any of their respective
affiliates, directors, officers or controlling Persons and will survive the
Transfer of such securities by such Holder.
(c) Notices of Claims. Etc. Promptly after receipt by an
indemnified party hereunder of written notice of the commencement of any action
or proceeding with respect to which a claim for indemnification may be made
pursuant to this Section 3.4, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action; provided, that the failure of the
indemnified party to give notice as provided herein will not relieve the
indemnifying party of its obligations under Section 3.4(a) or 3.4(b), except to
the extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against an indemnified party,
unless in such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties may exist in respect of such
claim, the indemnifying party will be entitled to participate in and to assume
the defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party for any legal or
other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. If, in such
indemnified party's reasonable judgment, having common counsel would result in a
conflict of interest between the interests of such indemnified and indemnifying
parties, then such indemnified party may employ separate counsel reasonably
acceptable to the indemnifying party to represent or defend such indemnified
party in such action, it being understood, however, that the indemnifying party
will not be liable for the reasonable fees and expenses of more than one
separate firm of attorneys at any time for all such indemnified parties (and not
more than one separate firm of local counsel at any time for all such
indemnified parties) in such action. No indemnifying party will consent to entry
of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim or
litigation.
(d) Other Indemnification. Indemnification similar to that
specified in this Section 3.4 (with appropriate modifications) will be given by
the Company and each Holder of Registrable Securities with respect to any
required registration or other qualification of securities under any federal or
state law or regulation or governmental authority other than the Securities Act.
(e) Contribution. If recovery is not available under the
foregoing indemnification provisions of this Section 3.4 for any reason other
than as expressly specified therein, the parties required to provide to
indemnification by the terms thereof will contribute to liabilities and expenses
of the indemnified party except to the extent that contribution is not permitted
under Section 11(f) of the Securities Act. In determining the amount of
contribution to which the respective parties are entitled, consideration will be
given to the relative benefits received by each party from the offering of the
Registrable Securities (taking into account the portion of the proceeds realized
by each), the parties' relative knowledge and access to information concerning
the matter with respect to which the
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claim was asserted, the opportunity to correct and prevent any misstatement or
omission and any other equitable considerations appropriate under the
circumstances.
(f) Non-Exclusivity. The obligations of the parties under this
Section 3.4 will be in addition to any liability which any party may otherwise
have to any other party.
IV. MISCELLANEOUS
4.1. Additional Securities Subject to Agreement. Each of
Corning and its Permitted Transferees agrees that any other equity securities of
the Company which it hereafter acquires by means of a stock split, stock
dividend, or distribution will be subject to the provisions of this Agreement to
the same extent as if held on the date hereof.
4.2. Termination. The provisions of this Agreement specified
below will terminate and be of no further force and effect (other than with
respect to prior breaches) as follows: (i) with respect to Sections 2.1, 2.2,
2.3, 2.4, 2.5, and 4.14 upon completion of an IPO; (ii) with respect to Sections
3.1, 3.2 and 3.3, at such time as Corning owns no Registrable Securities; (iii)
with respect to Section 3.4, upon the expiration of the applicable statutes of
limitations; and (iv) with respect to all other Sections of this Agreement, at
such time as all Sections of this Agreement other than such other Sections have
terminated.
4.3. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by courier service, by cable, by telecopy, by telegram, by telex or
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the addresses set forth in Section 11.02 of the
Recapitalization Agreement (or at such other address for a party as shall be
specified in a notice given in accordance with this Section 4.3).
4.4. Further Assurances. The parties hereto will sign such
further documents, cause such meetings to be held, resolutions passed, exercise
their votes and do and perform and cause to be done such further acts and things
as may be necessary in order to give full effect to this Agreement and every
provision hereof.
4.5. Non-Assignability. This Agreement will inure to the
benefit of and be binding on the parties hereto and their respective successors
and permitted assigns. This Agreement may not be assigned by any party hereto
without the express prior written consent of the other parties, and any
attempted assignment, without such consents, will be null and void; provided,
however, that Borden may assign or delegate its rights hereunder to any
Affiliate of Borden so long as such Affiliate executes and delivers to the
Company an Assumption Agreement satisfactory to the Company.
4.6. Amendment; Waiver. This Agreement may be amended,
supplemented or otherwise modified only by a written instrument executed by the
parties hereto. No waiver by any party of any of the provisions hereof will be
effective unless explicitly set forth in writing and executed by the party so
waiving. Except as provided in the preceding sentence, no action taken pursuant
to this Agreement, including without limitation, any investigation by or on
behalf of any party, will be deemed to constitute a waiver by the party taking
such action of compliance with any covenants or agreements contained herein. The
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waiver by any party hereto of a breach of any provision of this Agreement will
not operate or be construed as a waiver of any subsequent breach.
4.7. Third Parties. This Agreement does not create any rights,
claims or benefits inuring to any person that is not a party hereto nor create
or establish any third party beneficiary hereto.
4.8. Governing Law. This Agreement will be governed by, and
construed in accordance with, the laws of the State of New York, without giving
effect to the principles of conflict of laws thereof.
4.9. Specific Performance. Without limiting or waiving in any
respect any rights or remedies of the parties hereto under this Agreement now or
hereinafter existing at law or in equity or by statute, each of the parties
hereto will be entitled to seek specific performance of the obligations to be
performed by the other in accordance with the provisions of this Agreement.
4.10. Entire Agreement. This Agreement sets forth the entire
understanding of the parties hereto with respect to the subject matter hereof.
4.11. Titles and Headings. The section headings contained in
this Agreement are for reference purposes only and will not affect the meaning
or interpretation of this Agreement.
4.12. Severability. If any provision of this Agreement is
declared by any court of competent jurisdiction to be illegal, void or
unenforceable, all other provisions of this Agreement will not be affected and
will remain in full force and effect.
4.13. Counterparts. This Agreement may be executed in any
number of counterparts, each of which will be deemed to be an original and all
of which together will be deemed to be one and the same instrument.
4.14. Reporting Requirements. (a) So long as the Company is
not subject to the reporting requirements under Section 12 or 15 of the
Securities Exchange Act of 1934, as amended, as promptly as practicable, but in
no event later than 90 days after the end of each fiscal year ending after the
date hereof or 30 days after the end of each fiscal quarter ending after the
date hereof, as the case may be, the Company shall furnish to Corning true and
correct copies of (i) in the case of any such fiscal year, the audited
consolidated balance sheets and the related audited consolidated statements of
income and cash flows of the Company and its subsidiaries as of the last day of
and for the fiscal year then ended, together with the accompanying report of the
Company's auditors thereon, and (ii) to the extent available, in the case of
each fiscal quarter, the unaudited consolidated balance sheets and related
unaudited consolidated statements of income and cash flows of the Company and
its subsidiaries for the fiscal quarter then ended, which financial statements
shall be prepared in accordance with United States generally accepted accounting
principles (in each case, together with any notes relating thereto).
(b) In the event that the Company is not preparing financial
statements described in clause (ii) of paragraph (a) above, then as promptly as
practicable, the Company will deliver to Corning true and complete copies of
such other regularly-prepared financial
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statements, reports and analyses as may be prepared by the Company or any
subsidiary thereof relating to the business or operations of the Company or any
subsidiary thereof.
(c) Corning agrees to keep confidential all nonpublic
information made available to Corning pursuant to this Section 4.14; provided,
however, that Corning will not be required to maintain as confidential any such
information that (a) becomes generally available to the public other than as a
result of a disclosure by Corning or (b) is required to be disclosed pursuant to
the terms of a valid subpoena or order by governmental authority or other legal
requirement.
4.15. Representations. Each of the parties hereto represents
that this Agreement has been duly executed and delivered by such party and
constitutes a legal, valid and binding obligation of such party enforceable
against it in accordance with the terms of this Agreement.
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IN WITNESS WHEREOF, each of the undersigned has executed this
Agreement or caused this Agreement to be executed on its behalf as of the date
first written above.
CORNING CONSUMER PRODUCTS COMPANY
By:
-----------------------------
Name:
Title:
CCPC ACQUISITION CORP.
By:
-----------------------------
Name:
Title:
CORNING INCORPORATED
By:
-----------------------------
Name:
Title:
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Exhibit 10.3
MANAGEMENT STOCKHOLDER'S AGREEMENT
This Management Stockholder's Agreement (this "Agreement") is
entered into as of the date set forth on the signature page hereof among CORNING
CONSUMER PRODUCTS COMPANY, a Delaware corporation (the "Company"), CCPC
Acquisition Corp., a Delaware corporation (the "Parent"), and the individual
whose name and address appears on the signature page hereof (the "Purchaser"
and, together with the Company, the "Parties").
RECITALS
This Agreement is one of several agreements ("Other
Purchasers' Agreements") which have been, or which in the future will be,
entered into among the Company, the Parent and other individuals who are or will
be key employees of the Company or one of its subsidiaries (collectively, the
"Other Purchasers").
Prior to April 1, 1998, each of the 1,000 outstanding shares
of common stock (the "Common Stock") of the Company was subdivided, changed and
converted into 24,000 shares of Common Stock (or 24,000,000 in the aggregate).
The Parent has agreed to sell to the Purchaser the number of
shares of Common Stock set forth on the signature page hereof (the "Purchase
Stock") at a purchase price of $5.00 per share (the "Purchase Price"). In
addition, the Company will grant to the Purchaser an option or options to
purchase Common Stock ("Options") at an exercise price of $5.00 per share of
Common Stock pursuant to the terms of the 1998 Stock Purchase and Option Plan
for Key Employees of Corning Consumer Products Company and Subsidiaries (the
"Option Plan") and the Non-Qualified Stock Option Agreement attached hereto as
Exhibit A.
AGREEMENT
To implement the foregoing and in consideration of the mutual
agreements contained herein, the Parties agree as follows:
1. Purchase of Stock; Issuance of Options. (a) On or prior to
the purchase date identified on the signature page hereof (or such later date to
which the Company and the Purchaser agree in writing), (i) the Parent will
deliver the Purchase Stock and the Purchaser shall pay the Parent the Purchase
Price for each share delivered and (ii) the Company will grant the Options
described above to the Purchaser in accordance with, and subject to the terms
and conditions contained in, the Option Plan and the Non-Qualified Stock Option
Agreement.
(b) The Parties shall execute and deliver to each other copies
of the NonQualified Stock Option Agreement concurrently with the issuance of the
Options.
2. Purchaser's Representations, Warranties and Agreements. (a)
The Purchaser hereby represents and warrants that he is acquiring the Purchase
Stock and, at the time of exercise or other acquisition, all other Stock (as
defined in Section 8) for investment for his own account and not with a view to,
or for resale in connection with, the distribution
<PAGE>
or other disposition thereof. The Purchaser agrees and acknowledges that he will
not, directly or indirectly, offer, transfer, sell, assign, pledge, hypothecate
or otherwise dispose of any shares of the Stock unless such transfer, sale,
assignment, pledge, hypothecation or other disposition complies with Section 3
of this Agreement and (i) the transfer, sale, assignment, pledge, hypothecation
or other disposition is pursuant to an effective registration statement under
the Securities Act of 1933, as amended, or the rules and regulations in effect
thereunder (the "Act"), and any applicable state securities law or (ii) counsel
for the Purchaser (which counsel shall be acceptable to the Company) shall have
furnished the Company with an opinion, satisfactory in form and substance to the
Company, that no such registration is required because of the availability of an
exemption from registration under the Act and any applicable state securities
law. Notwithstanding the foregoing, the Company acknowledges and agrees that any
of the following transfers are deemed to be in compliance with the Act,
applicable state securities law and this Agreement and no opinion of counsel is
required in connection therewith: (x) a transfer made pursuant to Section 4, 5
or 6 hereof, (y) a transfer upon the death of the Purchaser to his executors,
administrators, testamentary trustees, legatees or beneficiaries (the
"Purchaser's Estate") or a transfer to the executors, administrators,
testamentary trustees, legatees or beneficiaries of a person who has become a
holder of Stock in accordance with the terms of this Agreement, provided that it
is expressly understood that any such transferee shall be bound by the
provisions of this Agreement and (z) a transfer made after the Vesting Reference
Date (as defined below) in compliance with the federal and state securities laws
to a trust, custodianship or limited partnership the beneficiaries or limited
partners of which may include only the Purchaser, his spouse or his lineal
descendants (a "Purchaser's Trust") or a transfer made after the third
anniversary of the Vesting Reference Date to such a trust by a person who has
become a holder of Stock in accordance with the terms of this Agreement,
provided that such transfer is made expressly subject to this Agreement and that
the transferee agrees in writing to be bound by the terms and conditions hereof.
For purposes of this Agreement, the term "Valuation Reference
Date" shall mean April 1, 1998 and the term "Vesting Reference Date" shall mean
the date set forth on the signature page hereof as the Vesting Reference Date.
(b) The certificate (or certificates) representing the Stock
shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED,
SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS
SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION COMPLIES WITH THE PROVISIONS OF THE MANAGEMENT
STOCKHOLDER'S AGREEMENT AMONG CORNING CONSUMER PRODUCTS COMPANY ("THE
COMPANY"), CCPC ACQUISITION CORP. AND THE PURCHASER NAMED ON THE FACE
HEREOF (A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY).
EXCEPT AS OTHERWISE PROVIDED IN SUCH AGREEMENT, NO TRANSFER, SALE,
ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT (A) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND ANY APPLICABLE STATE SECURITIES LAW OR (B) IF
(I) THE COMPANY HAS BEEN FURNISHED
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WITH A SATISFACTORY OPINION OF COUNSEL FOR THE HOLDER THAT SUCH
TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION
IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF THE ACT OR THE RULES AND
REGULATIONS IN EFFECT THEREUNDER, AND IN COMPLIANCE WITH APPLICABLE
PROVISIONS OF STATE SECURITIES LAWS, AND (II) IF THE HOLDER IS A
CITIZEN OR RESIDENT OF ANY COUNTRY OTHER THAN THE UNITED STATES, OR THE
HOLDER DESIRES TO EFFECT ANY SUCH TRANSACTION IN ANY SUCH COUNTRY, THE
COMPANY HAS BEEN FURNISHED WITH A SATISFACTORY OPINION OR OTHER ADVICE
OF COUNSEL FOR THE HOLDER THAT SUCH TRANSACTION WILL NOT VIOLATE THE
LAWS OF SUCH COUNTRY."
(c) The Purchaser acknowledges that he has been advised that
(i) the Stock has not been registered under the Act or any state securities law,
(ii) the Stock must be held indefinitely and the Purchaser must continue to bear
the economic risk of the investment in the Stock unless it is subsequently
registered under the Act and any applicable state securities law, or an
exemption from such registration is available, (iii) it is not anticipated that
there will be any public market for the Stock, (iv) Rule 144 promulgated under
the Act is not currently available with respect to sales of any securities of
the Company, and the Company has made no covenant to make such Rule available
(except as provided in Section 9(b)), (v) when and if shares of the Stock may be
disposed of without registration in reliance on Rule 144, such disposition can
be made only in limited amounts in accordance with the terms and conditions of
such Rule, (vi) if the Rule 144 exemption is not available, public sale without
registration will require compliance with Regulation A or some other exemption
under the Act and applicable state securities law, (vii) a restrictive legend in
the form heretofore set forth shall be placed on the certificates representing
the Stock and (viii) a notation shall be made in the appropriate records of the
Company indicating that the Stock is subject to restriction on transfer and, if
the Company should at some time in the future engage the services of a stock
transfer agent, appropriate stop transfer restrictions will be issued to such
transfer agent with respect to the Stock.
(d) If any shares of the Stock are to be disposed of in
accordance with Rule 144 under the Act or otherwise, the Purchaser shall
promptly notify the Company of such intended disposition and shall deliver to
the Company at or prior to the time of such disposition such documentation as
the Company may reasonably request in connection with such sale and, in the case
of a disposition pursuant to Rule 144, shall deliver to the Company an executed
copy of any notice on Form 144 required to be filed with the Securities and
Exchange Commission.
(e) The Purchaser agrees that, if any shares of the capital
stock of the Company are offered to the public pursuant to an effective
registration statement under the Act and applicable state securities law (other
than registration of securities issued under an employee plan), the Purchaser
will not effect any public sale or distribution of any shares of the Stock not
covered by such registration statement within 7 days prior to, or within 180
days after, the effective date of such registration statement (or, if later, the
date of the public offering pursuant to such registration statement), unless
otherwise agreed to in writing by the Company; provided that, if any such
offering of shares of the capital stock of the Company is pursuant to a public
offering through an underwriter or underwriters, then the period of 180 days
referred to above shall be such longer or shorter period as the underwriters
shall
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<PAGE>
require in the underwriting agreement for such offering with respect to public
sales or distributions of shares of the Stock by the Company.
(f) The Purchaser represents and warrants that (i) he has
received and reviewed a Private Placement Memorandum (the "Private Placement
Memorandum") relating to the Stock and the documents referred to therein and
(ii) he has been given the opportunity to obtain any additional information or
documents and to ask questions and receive answers about such documents, the
Company and the business and prospects of the Company which he deems necessary
to evaluate the merits and risks related to his investment in the Stock and to
verify the information contained in the Private Placement Memorandum and the
information received as indicated in this Section 2(f)(ii), and he has relied
solely on such information.
(g) The Purchaser further represents and warrants that (i) his
financial condition is such that he can afford to bear the economic risk of
holding the Stock for an indefinite period of time and has adequate means for
providing for his current needs and personal contingencies, (ii) he can afford
to suffer a complete loss of his investment in the Stock, (iii) all information
which he has provided to the Company concerning himself and his financial
position is correct and complete as of the date of this Agreement, (iv) he
understands and has taken cognizance of all risk factors related to the purchase
of the Stock, including those set forth in the Private Placement Memorandum
referred to above, and (v) his knowledge and experience in financial and
business matters are such that he is capable of evaluating the merits and risks
of his purchase of the Stock as contemplated by this Agreement.
3. Restriction on Transfer. Except for transfers permitted by
clauses (x), (y) and (z) of Section 2(a) or a sale of shares of Stock pursuant
to an effective registration statement under the Act and applicable state
securities law filed by the Company or pursuant to the Sale Participation
Agreement, the Purchaser agrees that he will not transfer, sell, assign, pledge,
hypothecate or otherwise dispose of any shares of the Stock at any time prior to
the fifth anniversary of the Vesting Reference Date. No transfer of any such
shares in violation hereof shall be made or recorded on the books of the Company
and any such transfer shall be void and of no effect.
4. Right of First Refusal. At any time after the fifth
anniversary of the Vesting Reference Date, if the Purchaser receives an Offer
(as defined below) which the Purchaser wishes to accept, then the Purchaser
shall cause the Offer to be reduced to writing and shall notify the Company in
writing of his wish to accept the Offer. The Purchaser's notice shall contain an
irrevocable offer to sell such shares of Stock to the Company (in the manner set
forth below) at a purchase price equal to the price contained in, and on the
same terms and conditions of, the Offer, and shall be accompanied by a true copy
of the Offer (which shall identify the third party who has made the Offer (the
"Offeror") or other proposed method of disposition). At any time within 30 days
after the date of the receipt by the Company of the Purchaser's notice, the
Company shall have the right and option to purchase, or to arrange for a third
party to purchase, all of the shares of Stock covered by the Offer either (i) at
the same price and on the same terms and conditions as the Offer or (ii) if the
Offer includes any consideration other than cash, then at the sole option of the
Company, at the equivalent all cash price, determined in good faith by a duly
authorized compensation committee of, or representing, the Company's Board of
Directors (the "Compensation Committee"), by
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<PAGE>
delivering a certified bank check or checks in the appropriate amount to the
Purchaser at the principal office of the Company against delivery of
certificates or other instruments representing the shares of the Stock so
purchased, appropriately endorsed by the Purchaser. If at the end of such 30 day
period, the Company has not tendered the purchase price for such shares in the
manner set forth above, the Purchaser may during the succeeding 60 day period
sell not less than all of the shares of Stock covered by the Offer to the
Offeror or in the manner of disposition identified at the time the Offer is
delivered to the Company, as the case may be, at a price and on terms no less
favorable to the Purchaser than those contained in the Offer. Promptly after
such sale, the Purchaser shall notify the Company of the consummation thereof
and shall furnish such evidence of the completion and time of completion of such
sale and of the terms thereof as may reasonably be requested by the Company. If,
at the end of 60 days following the expiration of the 30 day period for the
Company to purchase the Stock, the Purchaser has not completed the sale of such
shares of the Stock as aforesaid, all the restrictions on sale, transfer or
assignment contained in this Agreement shall again be in effect with respect to
such shares of the Stock.
For purposes of this Agreement, "Offer" shall mean a bona fide
offer to purchase any or all of the Purchaser's shares of Stock received by the
Purchaser from an Offeror, and shall include, without limitation, any proposed
sale of shares of Stock by the Purchaser pursuant to a registration statement
under the Act and any applicable state securities law or under an available
exemption from registration under the Act, including Rule 144 under the Act if
it is then available, and any applicable state securities law; provided, that
the term Offer shall not include any proposed sale of shares pursuant to said
Rule 144 (subject to such rule being available) after a Public Offering has
occurred.
5. Purchaser's Resale of Stock and Options to the Company Upon
a Special Treatment Event. (a) Except as otherwise provided herein, if, on or
prior to the fifth anniversary of the Vesting Reference Date, (i) (A) the
Purchaser is still in the employ of the Company or any subsidiary of the Company
and (B) the Purchaser either dies or becomes permanently disabled or (ii) the
Purchaser retires from the Company or any of its subsidiaries at age 65 or over
(or such other age as may be approved by the Compensation Committee) after
having been employed by the Company or any of its subsidiaries for at least
three years after the Vesting Reference Date (any event referred to in clause
(i) or clause (ii) being referred to herein as a "Special Treatment Event"),
then the Purchaser, the Purchaser's Estate or a Purchaser's Trust, as the case
may be, shall have the right, for six months following the date of the
occurrence of such Special Treatment Event, to (x) sell to the Company, and the
Company shall be required to purchase, on one occasion, all or any portion of
the shares of Stock then held by the Purchaser, the Purchaser's Estate and/or
the Purchaser's Trust, as the case may be, at the Special Treatment Repurchase
Price, as determined in accordance with Section 7, and (y) require the Company
to pay to the Purchaser, the Purchaser's Estate or the Purchaser's Trust, as the
case may be, an additional amount equal to the Option Excess Price, determined
on the basis of the Special Treatment Repurchase Price as provided in Section 8,
with respect to the termination of outstanding Options held by the Purchaser. No
fewer than 10 business days prior to the last day of the six month period
following the occurrence of a Special Treatment Event, the Purchaser, the
Purchaser's Estate and/or the Purchaser's Trust, as the case may be, shall send
written notice to the Company of its intention to sell shares of Stock and to
terminate such Options in exchange for the payment referred to in the preceding
sentence (the "Redemption Notice").
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For purposes of this Agreement, the Purchaser shall be deemed
to have a "permanent disability" if the Purchaser is unable to engage in the
activities required by the Purchaser's job by reason of any medically determined
physical or mental impairment which can be expected to result in death or which
has lasted or can be expected to last for a continuous period of not less than
12 months.
(b) The completion of the purchase provided for in Section
5(a) shall take place at the principal office of the Company on the tenth
business day after the giving of the Redemption Notice. The Special Treatment
Repurchase Price and any payment with respect to the Options as described above
shall be paid by delivery to the Purchaser, the Purchaser's Estate or the
Purchaser's Trust, as the case may be, of a certified bank check or checks in
the appropriate amount payable to the order of the Purchaser, the Purchaser's
Estate or the Purchaser's Trust, as the case may be, against delivery of
certificates or other instruments representing the Stock so purchased and
appropriate documents cancelling the Options so terminated appropriately
endorsed or executed by the Purchaser, the Purchaser's Estate or the Purchaser's
Trust, or his or its duly authorized representative.
(c) Notwithstanding anything in Section 5(a) or 5(b) to the
contrary and subject to Section 11, (i) if there exists and is continuing a
default or an event of default on the part of the Company or any subsidiary of
the Company under any loan, guarantee or other agreement under which the Company
or any subsidiary of the Company has borrowed money or such repurchase would
result in a default or an event of default on the part of the Company or any
subsidiary of the Company under any such agreement or (ii) if a repurchase would
not be permitted under Section 170 of the General Corporation Law of the State
of Delaware or would otherwise violate the General Corporation Law of the State
of Delaware (each such occurrence referred to in clause (i) or (ii) above being
an "Event"), then the Company shall not be obligated to repurchase any of the
Stock or the Options from the Purchaser, the Purchaser's Estate or the
Purchaser's Trust, as the case may be, until the first business day which is 10
calendar days after all of the foregoing Events have ceased to exist (the
"Repurchase Eligibility Date"); provided, however, that (A) the number of shares
of Stock subject to repurchase under this Section 5(c) shall be that number of
shares of Stock, and (B) the number of Exercisable Option Shares (as defined in
Section 8) for purposes of calculating the Option Excess Price payable under
this Section 5(c) shall be that number of Exercisable Option Shares, held by the
Purchaser, the Purchaser's Estate or a Purchaser's Trust, as the case may be, at
the time of delivery of a Redemption Notice in accordance with Section 5(a)
hereof; provided, further, that the Repurchase Calculation Date shall be
determined in accordance with Section 7 as of the Repurchase Eligibility Date
(unless the Special Treatment Repurchase Price would be greater if the
Repurchase Calculation Date had been determined as if no Event had occurred, in
which case, solely for purposes of this proviso, the Repurchase Calculation Date
shall be determined as if no Event had occurred). All Options exercisable as of
the date of a Redemption Notice shall continue to be exercisable until the
repurchase pursuant to such Redemption Notice.
(d) Notwithstanding any other provision of this Section 5 to
the contrary and subject to Section 11, the Purchaser, the Purchaser's Estate or
the Purchaser's Trust, as the case may be, shall have the right to withdraw any
Redemption Notice which has been pending for 60 or more days and which has
remained unsatisfied because of the provisions of Section 5(c).
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6. The Company's Option to Repurchase Stock and Options of
Purchaser. (a) If, on or prior to the fifth anniversary of the Vesting Reference
Date, (i) the Purchaser's active employment with the Company (and/or, if
applicable, its subsidiaries) is voluntarily or involuntarily terminated for any
reason whatsoever, with or without cause, (ii) the beneficiaries of a
Purchaser's Trust shall include any person or entity other than the Purchaser,
his spouse or his lineal descendants, or (iii) the Purchaser shall effect a
transfer of any of the Stock other than as permitted in this Agreement (any of
the foregoing, a "Call Event"), then the Company shall have the right to
purchase all, but not less than all, of the shares of the Stock then held by the
Purchaser or a Purchaser's Trust at the Ordinary Repurchase Price, as determined
in accordance with Section 7; provided, however, that if the termination of
employment results from a Special Treatment Event, then, notwithstanding the
foregoing, the Company shall have the right to purchase all, but not less than
all, of the shares of the Stock then held by the Purchaser or a Purchaser's
Trust but the Repurchase Price (as defined in Section 7) shall be the Special
Treatment Repurchase Price. The Company shall have a period of 75 days from the
date of a Call Event in which to give notice in writing to the Purchaser of the
exercise of such election ("Call Notice"). In the event that the Company
exercises its right to repurchase shares of the Stock pursuant to this Section 6
and the Purchaser's employment has not been terminated by the Company for Cause
(as defined in the Non-Qualified Stock Option Agreement) or by the Purchaser
without Good Reason (as defined in the Non-Qualified Stock Option Agreement),
then the Company shall also pay the Purchaser an amount equal to the Option
Excess Price determined on the basis of the Ordinary Repurchase Price or the
Special Treatment Repurchase Price, as the case may be, as provided in Section
8, with respect to the termination of outstanding Options held by the Purchaser.
(b) The completion of any purchase pursuant to Section 6(a)
shall take place at the principal office of the Company on the tenth business
day after the giving of the Call Notice. The Ordinary Repurchase Price or the
Special Treatment Repurchase Price, as the case may be, and any payment with
respect to the Options as described above shall be paid by delivery to the
Purchaser of a certified bank check or checks in the appropriate amount payable
to the order of the Purchaser against delivery of certificates or other
instruments representing the Stock so purchased and appropriate documents
cancelling the Options so terminated, appropriately endorsed or executed by the
Purchaser or the Purchaser's Trust, or his or its authorized representative.
(c) Notwithstanding any other provision of this Section 6 to
the contrary and subject to Section 11, if there exists and is continuing any
Event, then the Company shall delay the repurchase of any of the Stock or the
Options (pursuant to a Call Notice timely given in accordance with Section 6(a)
hereof) from the Purchaser, the Purchaser's Estate or the Purchaser's Trust, as
the case may be, until the Repurchase Eligibility Date; provided, however, that
(i) the number of shares of Stock subject to repurchase under this Section 6(c)
shall be that number of shares of Stock, and (ii) the number of Exercisable
Option Shares for purposes of calculating the Option Excess Price payable under
this Section 6(c) shall be that number of Exercisable Option Shares, held by the
Purchaser, the Purchaser's Estate or a Purchaser's Trust, as the case may be, at
the time of delivery of a Call Notice in accordance with Section 6(a) hereof;
provided, further, that the Repurchase Calculation Date shall be determined in
accordance with Section 7 based on the Repurchase Eligibility Date (unless the
applicable Repurchase Price would be greater if the Repurchase Calculation Date
had been determined as if no Event had occurred, in which case, solely for
purposes of this proviso,
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the Repurchase Calculation Date shall be determined as if no Event had
occurred); and provided, further that if the Repurchase Eligibility Date has not
occurred within 18 months of the date of the Call Notice, then the Call Notice
shall expire. All Options exercisable as of the date of a Call Notice shall
continue to be exercisable until the repurchase pursuant to such Call Notice.
7. Determination of Repurchase Price. (a) The Special
Treatment Repurchase Price and the Ordinary Repurchase Price are hereinafter
collectively referred to as the "Repurchase Price." The Repurchase Price shall
be calculated on the basis of the unaudited financial statements of the Company
or the Market Price Per Share (as defined in Section 7(f)) as of the last day of
the month preceding the later of (i) the month in which the event giving rise to
the repurchase occurs and (ii) the month in which the Repurchase Eligibility
Date occurs (hereinafter called the "Repurchase Calculation Date"). The event
giving rise to the repurchase shall be the death, permanent disability,
retirement or termination of employment, as the case may be, of the Purchaser,
and not the giving of any notice required pursuant to Section 5 or 6.
(b) (i) Prior to a Public Offering (as defined in Section
7(e)), the Special Treatment Repurchase Price shall be a per share Repurchase
Price equal to $5.00 (the "Original Per Share Price") plus the amount, if any,
by which the Modified Book Value Per Share (as defined in Section 7(d)) as of
the Repurchase Calculation Date exceeds the Original Per Share Price.
(ii) After a Public Offering, the Special Treatment
Repurchase Price shall be a per share Repurchase Price equal to the Original Per
Share Price plus the amount, if any, by which the Market Price Per Share as of
the Repurchase Calculation Date exceeds the Original Per Share Price.
(c) (i) Prior to a Public Offering, the Ordinary Repurchase
Price shall be a per share Repurchase Price equal to the lesser of:
(A) the Modified Book Value Per Share; and
(B) the Original Per Share Price plus (x) the Percentage (as
defined below) multiplied by (y) the amount, if any, by which the
Modified Book Value Per Share as of the Repurchase Calculation Date
exceeds the Original Per Share Price.
(ii) After a Public Offering, the Ordinary Repurchase
Price shall be a per share Repurchase Price equal to the lesser of:
(A) the Market Price Per Share; and
(B) the Original Per Share Price plus (x) the Percentage
multiplied by (y) the amount, if any, by which the Market Price Per
Share as of the Repurchase Calculation Date exceeds the Original Per
Share Price.
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The "Percentage" shall be determined as follows:
<TABLE>
<CAPTION>
Repurchase Calculation Date Percentage
- --------------------------- ----------
<S> <C>
Vesting Reference Date through and including the first 0%
anniversary of the Vesting Reference Date
After the first anniversary of the Vesting Reference Date through 20%
and including the second anniversary of the Vesting
Reference Date
After the second anniversary of the Vesting Reference Date 40%
through and including the third anniversary of the Vesting
Reference Date
After the third anniversary of the Vesting Reference Date 60%
through and including the fourth anniversary of the Vesting
Reference Date
After the fourth anniversary of the Vesting Reference Date 80%
through and including the fifth anniversary of the Vesting
Reference Date
After the fifth anniversary of the Vesting Reference Date 100%
</TABLE>
(d) For purposes of this Agreement, "Modified Book Value Per
Share" shall be the quotient of:
(i) an amount equal to (A) $120 million plus (B) the
aggregate net income of the Company attributable to the Common Stock
from and after the Valuation Reference Date (as decreased by any net
losses from and after the Valuation Reference Date) plus (C) the
aggregate dollar amount contributed to the Company after the Valuation
Reference Date as common equity by the shareholders of the Company
minus (D) the aggregate dollar amount of any dividends paid or stock
repurchases made by the Company on the Common Stock after the Valuation
Reference Date,
divided by
(ii) the sum of the number of shares of Common Stock then
outstanding;
provided that, if any outstanding stock options, other rights to acquire Common
Stock, or securities convertible into shares of Common Stock have a per share
exercise price less than such quotient (collectively, the "In-the-Money
Options"), then, sequentially beginning with the In- the-Money Options with the
lowest per share exercise price and until either (A) all In-the-Money Options
have been included in such adjustment of such quotient or (B) there are no
In-the- Money Options with a per share exercise price less than the quotient as
adjusted that have not been included in such adjustment of such quotient, the
numerator of such quotient shall be increased by the aggregate exercise prices
of such In-the-Money Options and the denominator of such quotient shall be
increased by the number of shares of Common Stock issuable upon the exercise of
such In-the-Money Options.
The calculations set forth in clauses (i)(B), (i)(C) and (i)(D) of the
immediately preceding sentence shall be determined in accordance with generally
accepted accounting principles
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applied on a basis consistent with any prior periods as reflected in the
consolidated financial statements of the Company, without giving effect to any
adjustments required or permitted by Accounting Principles Board Opinion Nos. 16
and 17 with respect to assets acquired or liabilities assumed in the
recapitalization of the Company by the Parent (except that the determination of
gains or losses on sales of assets and on foreign currency translations
occurring subsequent to the recapitalization of the Company by the Parent shall
be computed as if purchase accounting had been required for the recapitalization
of the Company).
(e) For purposes of this Agreement, "Public Offering" shall
mean the sale of shares of Common Stock to the public subsequent to the date
hereof pursuant to a registration statement under the Act which has been
declared effective by the Securities and Exchange Commission (other than a
registration statement on Form S-8 or any other similar form) which results in
an active trading market in the Common Stock. A "Qualified Public Offering"
shall be deemed to have occurred if there has been a Public Offering and there
exists an active trading market in 19% or more of the Common Stock; provided,
that, for purposes of determining whether a Qualified Public Offering shall have
occurred, shares of Common Stock originally held by Corning Incorporated on
April 2, 1998 (including any shares which have been subsequently transferred by
Corning Incorporated) shall not be taken into account for the purposes of such
determination.
(f) For purposes of this Agreement, "Market Price Per Share"
shall mean the price per share equal to the average of the last sale price of
the Common Stock on the Repurchase Calculation Date on each exchange on which
the Common Stock may at the time be listed or, if there shall have been no sales
on any of such exchanges on the Repurchase Calculation Date, the average of the
closing bid and asked prices on each such exchange at the end of the Repurchase
Calculation Date or if there is no such bid and asked price on the Repurchase
Calculation Date on the next preceding date when such bid and asked price
occurred or, if the Common Stock shall not be so listed, the average of the
closing sales prices as reported by Nasdaq at the end of the Repurchase
Calculation Date in the over-the-counter market. If the Common Stock is not so
listed or reported by Nasdaq, then the Market Price Per Share shall be the
Modified Book Value Per Share.
(g) In determining the Repurchase Price, appropriate
adjustments shall be made for any future issuances of rights to acquire and
securities convertible into Common Stock and any stock dividends, splits,
combinations, recapitalizations or any other adjustment in the number of
outstanding shares of Common Stock.
8. Stock Issued to Purchaser Upon Exercise of Stock Options;
Termination of Options. (a) The Company may from time to time grant to the
Purchaser, in addition to the Options, options under the Option Plan to purchase
shares of Common Stock at the Original Per Share Price or at a different option
exercise price. For purposes of this Agreement, "Stock" shall mean and include
all Purchase Stock, all shares of Common Stock issued to the Purchaser by the
Company upon exercise of the Options, all shares of Common Stock issued to the
Purchaser by the Company upon exercise of any other stock options held by the
Purchaser and any other Common Stock otherwise acquired by the Purchaser at any
time when this Agreement is in effect.
(b) All outstanding Options and other options granted to the
Purchaser under the Option Plan or otherwise, whether or not then exercisable,
shall terminate automatically
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(i) upon the payment by the Company to the Purchaser, pursuant to the provisions
of Section 5 or 6 of this Agreement, of an amount equal to the Option Excess
Price, (ii) upon the repurchase of Stock as provided in Section 5 or 6 of this
Agreement if the Option Excess Price is zero or a negative number, or (iii)
without payment in the event of a termination of the Purchaser's employment by
the Company for Cause or by the Purchaser without Good Reason.
For purposes of this Agreement, "Option Excess Price" shall
mean the excess, if any, of the Special Treatment Repurchase Price or the
Ordinary Repurchase Price, depending on which Repurchase Price is being used to
repurchase the remainder of the Stock, over the Option Price (as defined in the
Option Plan) multiplied by the number of Exercisable Option Shares.
For purposes of this Agreement, "Exercisable Option Shares"
shall mean the shares of Common Stock which, at the time of determination of the
Option Excess Price, could be purchased by the Purchaser upon exercise of his
outstanding Options or other options.
9. Representations, Warranties and Agreements of the Company
and the Parent. (a) The Company represents and warrants to the Purchaser that
(i) this Agreement has been duly authorized, executed and delivered by the
Company and (ii) the Purchase Stock is duly and validly issued, fully paid and
nonassessable. The Parent represents and warrants to the Purchaser that (i) this
Agreement has been duly authorized, executed and delivered by the Parent and
(ii) the Parent has valid title to the Purchase Stock.
(b) If the Company shall have engaged in a Public Offering,
(i) the Company shall use reasonable efforts to register the Options and the
Stock to be acquired on exercise thereof on a Form S-8 Registration Statement or
any successor to Form S-8 to the extent that such registration is then available
with respect to such Options and Stock, (ii) the Company shall use its best
efforts to comply with all state securities or "blue sky" laws which might be
applicable to the sale of the Stock and the issuance of the Options to the
Purchaser and (iii) the Company will file the reports required to be filed by it
under the Act and the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations adopted by the Securities and Exchange
Commission ("SEC") thereunder, to the extent required from time to time to
enable the Purchaser to sell shares of Stock without registration under the Act
within the limitations of the exemptions provided by (A) Rule 144 under the Act,
as such Rule may be amended from time to time, or (B) any similar rule or
regulation hereafter adopted by the SEC. Notwithstanding anything contained in
this Section 9(b), the Company may deregister under Section 12 of the Exchange
Act if it is then permitted to do so pursuant to the Exchange Act and the rules
and regulations thereunder. Nothing in this Section 9(b) shall be deemed to
limit in any manner the restrictions on sales of Stock contained in this
Agreement.
10. "Piggyback" Registration Rights. (a) Until the later of
(i) the first occurrence of a Qualified Public Offering and (ii) the fifth
anniversary of the Vesting Reference Date, the Purchaser hereby agrees to be
bound by all of the terms, conditions and obligations of a Registration Rights
Agreement (the "Registration Rights Agreement"), between the Company and
entities controlled by Kohlberg Kravis Roberts & Co., L.P. (the "Parent"), and,
in the case of a Qualified Public Offering and subject to the limitations set
11
<PAGE>
forth in this Section 10, shall have all of the rights and privileges of the
Registration Rights Agreement, in each case as if the Purchaser were an original
party (other than the Company) thereto; provided, however, that the Purchaser
shall not have any rights to request registration under Section 3 of the
Registration Rights Agreement; and provided, further, that the Purchaser shall
not be bound by any amendments to the Registration Rights Agreement unless the
Purchaser consents thereto. Notwithstanding anything to the contrary contained
in the Registration Rights Agreement, the Purchaser's rights and obligations
under the Registration Rights Agreement shall be subject to the limitations and
additional obligations set forth in this Section 10. All shares of Stock
purchased by the Purchaser pursuant to this Agreement and held by the Purchaser,
the Purchaser's Estate or a Purchaser's Trust, including shares purchased upon
the exercise of Options, shall be deemed to be Registrable Securities (as
defined in the Registration Rights Agreement).
(b) The Company will promptly notify the Purchaser in writing
(a "Notice") of any proposed registration (a "Proposed Registration") in
connection with a Qualified Public Offering. If within 15 days of the receipt by
the Purchaser of such Notice, the Company receives from the Purchaser, the
Purchaser's Estate or the Purchaser's Trust a written request (a "Request") to
register shares of Stock held by the Purchaser, the Purchaser's Estate or the
Purchaser's Trust (which Request will be irrevocable unless otherwise mutually
agreed to in writing by the Purchaser and the Company), shares of Stock will be
so registered as provided in this Section 10; provided, however, that for each
such registration statement only one Request, which shall be executed by the
Purchaser, the Purchaser's Estate or the Purchaser's Trust, as the case may be,
may be submitted for all Registrable Securities held by the Purchaser, the
Purchaser's Estate and the Purchaser's Trust.
(c) The maximum number of shares of Stock which will be
registered pursuant to a Request will be the lowest of (i) the number of shares
of Stock equal to the sum of (x) the product of (A) the number of shares of
Common Stock then held by the Purchaser multiplied by (B) the Percentage, plus
(y) all shares of Common Stock which the purchaser is then entitled to acquire
under an unexercised Option to the extent then exercisable, (ii) the product of
(A) the number of shares of Common Stock calculated under clause (i) above,
multiplied by (B) the quotient of (x) the number of shares of Stock then
proposed to be registered in such Proposed Registration by the Parent, if any,
divided by (y) the number of shares of Stock then held by the Parent, including
all shares of Stock which the Parent is then entitled to acquire upon
conversion, exercise or exchange of a security that is convertible into, or
exercisable or exchangeable for, Stock, (iii) the maximum number of shares of
Stock which the Company can register in the Proposed Registration without
adverse effect on the offering in the view of the managing underwriters (reduced
pro rata with all Other Purchasers as more fully described in Section 10(d)) and
(iv) the maximum number of shares which the Purchaser (pro rata based upon the
aggregate number of shares of Common Stock the Purchaser and all Other
Purchasers have requested be registered) and all Other Purchasers are permitted
to register under the Registration Rights Agreement.
(d) If a Proposed Registration involves an underwritten
offering and the managing underwriter advises the Company in writing that, in
its opinion, the number of shares of Common Stock requested to be included in
the Proposed Registration exceeds the number which can be sold in such offering,
so as to be likely to have an adverse effect on the price, timing or
distribution of the shares offered in such Qualified Public Offering as
contemplated by the Company, then the Company will include in the Proposed
Registration
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<PAGE>
(i) first, 100% of the shares proposed to be sold by the Company and, if such
registration was initiated pursuant to a "demand" registration right granted
pursuant to the Stockholders' Agreement dated April 1, 1998 among the Company,
the Parent and Corning Incorporated, the parties exercising such right and (ii)
second, to the extent of the number of shares requested to be included in such
registration which, in the opinion of such managing underwriter, can be sold
without having the adverse effect referred to above, the number of shares which
the Holders (as defined in the Registration Rights Agreement), including,
without limitation, the Purchaser and Other Purchasers, have requested to be
included in the Proposed Registration, such amount to be allocated pro rata
among all requesting Holders on the basis of the relative number of shares then
held by each such Holder (provided that any shares thereby allocated to any such
Holder that exceed such Holder's request will be reallocated among the remaining
requesting Holders in like manner).
(e) Upon delivering a Request the Purchaser will, if requested
by the Company, execute and deliver a custody agreement and power of attorney in
form and substance satisfactory to the Company with respect to the shares of
Stock to be registered pursuant to this Section 10 (a "Custody Agreement and
Power of Attorney"). The Custody Agreement and Power of Attorney will provide,
among other things, that the Purchaser will deliver to and deposit in custody
with the custodian and attorney-in-fact named therein a certificate or
certificates representing such shares of Stock (duly endorsed in blank by the
registered owner or owners thereof or accompanied by duly executed stock powers
in blank) and irrevocably appoint said custodian and attorney-in-fact as the
Purchaser's agent and attorney-in-fact with full power and authority to act
under the Custody Agreement and Power of Attorney on the Purchaser's behalf with
respect to the matters specified therein.
(f) If a Proposed Registration involves an underwritten
offering and the Parent enters into lockup agreements pursuant to the terms of
the underwriting agreement, then the Purchaser, if such Purchaser exercises
registration rights pursuant to this Section 10, shall enter into a lockup
agreement on substantially similar terms and conditions.
(g) The Purchaser agrees that he will execute such other
agreements as the Company may reasonably request to further evidence the
provisions of this Section 10.
11. Pro Rata Repurchases. Notwithstanding anything to the
contrary contained in Section 5, 6 or 7, if at any time consummation of all
purchases and payments to be made by the Company pursuant to this Agreement and
the Other Purchasers' Agreements would result in an Event, then the Company
shall make purchases from, and payments to, the Purchaser and Other Purchasers
pro rata (on the basis of the proportion of the number of shares of Stock and
the number of Options each such Purchaser and all Other Purchasers have elected
or are required to sell to the Company) for the maximum number of shares of
Stock and shall pay the Option Excess Price for the maximum number of Options
permitted without resulting in an Event (the "Maximum Repurchase Amount"). The
provisions of Section 5(c) and 6(c) shall apply in their entirety to payments
and repurchases with respect to Options and shares of Stock which may not be
made due to the limits imposed by the Maximum Repurchase Amount under this
Section 11. Until all of such Stock and Options are purchased and paid for by
the Company, the Purchaser and the Other Purchasers whose Stock and Options are
not purchased in accordance with this Section 11 shall have priority, on a pro
rata basis, over other purchases of Common Stock and Options by the Company
pursuant to this Agreement and Other Purchasers' Agreements.
13
<PAGE>
12. Rights to Negotiate Repurchase Price. Nothing in this
Agreement shall be deemed to restrict or prohibit the Company from purchasing
shares of Stock or Options from the Purchaser, at any time, upon such terms and
conditions, and for such price, as may be mutually agreed upon between the
Parties, whether or not at the time of such purchase circumstances exist which
specifically grant the Company the right to purchase, or the Purchaser the right
to sell, shares of Stock or the Company has the right to pay, or the Purchaser
has the right to receive, the Option Excess Price under the terms of this
Agreement.
13. Covenant Regarding 83(b) Election. Except as the Company
may otherwise agree in writing, the Purchaser hereby covenants and agrees that
he will make an election provided pursuant to Treasury Regulation 1.83-2 with
respect to the Stock, including without limitation, the Stock to be acquired
pursuant to Section 1 and the Stock to be acquired upon each exercise of the
Purchaser's Options; and Purchaser further covenants and agrees that he will
furnish the Company with copies of the forms of election the Purchaser files
within 30 days after the date hereof, and within 30 days after each exercise of
Purchaser's Options and with evidence that each such election has been filed in
a timely manner.
14. Notice of Change of Beneficiary. Immediately prior to any
transfer of Stock to a Purchaser's Trust, the Purchaser shall provide the
Company with a copy of the instruments creating the Purchaser's Trust and with
the identity of the beneficiaries of the Purchaser's Trust. The Purchaser shall
notify the Company immediately prior to any change in the identity of any
beneficiary of the Purchaser's Trust.
15. Expiration of Certain Provisions. The provisions contained
in Sections 4, 5 and 6 of this Agreement and the portion of any other provision
of this Agreement which incorporates the provisions of Sections 4, 5 and 6,
shall terminate and be of no further force or effect with respect to any shares
of Stock sold by the Purchaser (i) pursuant to an effective registration
statement filed by the Company pursuant to Section 10 hereof or (ii) pursuant to
the terms of the Sale Participation Agreement of even date herewith, between the
Purchaser and the Parent.
The provisions contained in Section 2(e), 3, 4, 5, 6 and 13 of
this Agreement, and the portion of any other provisions of this Agreement which
incorporate the provisions of such Sections, shall terminate and be of no
further force or effect upon the consummation of a merger, reorganization,
business combination or liquidation of the Company, a sale of Common Stock owned
by the Parent or other transaction, but only if such merger, reorganization,
business combination, liquidation, sale of Common Stock or other transaction
results in KKR Associates, a New York limited partnership, Parent or any
affiliate of either of them, no longer having the power (i) to elect a majority
of the Board of Directors of the Company or such other corporation which
succeeds to the Company's rights and obligations pursuant to such merger,
reorganization, business combination, liquidation or stock sale, or (ii) if the
resulting entity of such merger, reorganization, business combination,
liquidation or stock sale is not a corporation, to select the general partner(s)
or other persons or entities controlling the operations and business of the
resulting entity (a "Change of Control").
16. Recapitalizations, etc. The provisions of this Agreement
shall apply, to the full extent set forth herein with respect to the Stock or
the Options, to any and all shares of
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<PAGE>
capital stock of the Company or any capital stock, partnership units or any
other security evidencing ownership interests in any successor or assign of the
Company (whether by merger, consolidation, sale of assets or otherwise) which
may be issued in respect of, in exchange for, or substitution of, the Stock or
the Options, by reason of any stock dividend, split, reverse split, combination,
recapitalization, liquidation, reclassification, merger, consolidation or
otherwise.
17. Purchaser's Employment by the Company. Nothing contained
in this Agreement or in any other agreement entered into by the Company and the
Purchaser contemporaneously with the execution of this Agreement (i) obligates
the Company or any subsidiary of the Company to employ the Purchaser in any
capacity whatsoever or (ii) prohibits or restricts the Company (or any such
subsidiary) from terminating the employment, if any, of the Purchaser at any
time or for any reason whatsoever, with or without cause, and the Purchaser
hereby acknowledges and agrees that, except as may otherwise be specifically set
forth in a written agreement or written arrangement with Purchaser, neither the
Company nor any other person has made any representations or promises whatsoever
to the Purchaser concerning the Purchaser's employment or continued employment
by the Company.
18. Binding Effect. The provisions of this Agreement shall be
binding upon and accrue to the benefit of the Parties and their respective
heirs, legal representatives, successors and assigns. In the case of a
transferee permitted under Section 2(a) hereof, such transferee shall be deemed
the Purchaser hereunder; provided, however, that no transferee (including
without limitation, transferees referred to in Section 2(a) hereof) shall derive
any rights under this Agreement unless and until such transferee has delivered
to the Company a valid undertaking and becomes bound by the terms of this
Agreement.
19. Amendment. This Agreement may be amended only by a written
instrument signed by the Parties hereto.
20. Closing. Except as otherwise provided herein, the closing
of each purchase and sale of shares of Stock and the payment of the Option
Excess Price, if any, pursuant to this Agreement shall take place at the
principal office of the Company on the tenth business day following delivery of
the notice by either Party to the other of its exercise of the right to purchase
or sell such Stock hereunder or to cause the payment of the Option Excess Price,
if any.
21. Applicable Law; Consent to Jurisdiction; Waivers. The laws
of the state of Delaware shall govern the interpretation, validity and
performance of the terms of this Agreement, regardless of the law that might be
applied under principles of conflicts of law. Any suit, action or proceeding
against the Purchaser with respect to this Agreement, or any judgment entered by
any court in respect of any thereof, may be brought in any court of competent
jurisdiction in the State of Delaware or New York, as the Company may elect in
its sole discretion, and the Purchaser hereby submits to the non-exclusive
jurisdiction of such courts for the purpose of any such suit, action, proceeding
or judgment. By the execution and delivery of this Agreement, the Purchaser
appoints Corporation Services Company, at its office in Wilmington, Delaware or
New York, New York, as the case may be, as his agent upon which process may be
served in any such suit, action or proceeding. Service of process upon such
agent, together with notice of such
15
<PAGE>
service given to the Purchaser in the manner provided in Section 24, shall be
deemed in every respect effective service of process upon him in any suit,
action or proceeding. Nothing herein shall in any way be deemed to limit the
ability of the Company to serve any such writs, process or summonses in any
other manner permitted by applicable law or to obtain jurisdiction over the
Purchaser, in such other jurisdictions and in such manner, as may be permitted
by applicable law. The Purchaser hereby irrevocably waives any objections which
he may now or hereafter have to the laying of the venue of any suit, action or
proceeding arising out of or relating to this Agreement brought in any court of
competent jurisdiction in the State of Delaware or New York, and hereby further
irrevocably waives any claim that any such suit, action or proceeding brought in
any such court has been brought in any inconvenient forum. No suit, action or
proceeding against the Company with respect to this Agreement may be brought in
any court, domestic or foreign, or before any similar domestic or foreign
authority other than in a court of competent jurisdiction in the State of
Delaware or New York, and the Purchaser hereby irrevocably waives any right
which he may otherwise have had to bring such an action in any other court,
domestic or foreign, or before any similar domestic or foreign authority. The
Company hereby submits to the jurisdiction of such courts for the purpose of any
such suit, action or proceeding.
22. Assignability of Certain Rights by the Company. The
Company shall have the right to assign any or all of its rights or obligations
to purchase shares of Stock pursuant to Sections 4, 5 and 6; provided, however,
that the Company shall remain obligated to perform its obligations
notwithstanding such assignment in the event that such assignee fails to perform
the obligations so assigned to it.
23. Miscellaneous. In this Agreement (i) all references to
"dollars" or "$" are to United States dollars and (ii) the word "or" is not
exclusive. If any provision of this Agreement shall be declared illegal, void or
unenforceable by any court of competent jurisdiction, the other provisions shall
not be affected, but shall remain in full force and effect.
24. Notices. All notices and other communications provided for
herein shall be in writing and shall be deemed to have been duly given if
delivered by hand (whether by overnight courier or otherwise) or sent by
registered or certified mail, return receipt requested, postage prepaid, to the
Party to whom it is directed:
(a) If to the Company, to it at the following address:
Corning Consumer Products Company
E-Building
Houghton Park
Corning, New York 14831
Attn: President
with copies to:
Kohlberg Kravis Roberts & Co.
9 West 57th Street
New York, New York 10019
16
<PAGE>
Attn: Clifton Robbins and Scott Stuart
-and-
c/o Borden Capital Management Partners
180 East Broad Street
Columbus, Ohio 43215
Attention: Chief Executive Officer
-and-
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attn: David J. Sorkin, Esq.
(b) If to the Purchaser, to him at the address set forth below
under his signature;
or at such other address as either party shall have specified by notice
in writing to the other.
25. Covenant Not to Compete; Confidential Information. (a) In
consideration of the Company entering into this Agreement with the Purchaser,
the Purchaser hereby agrees effective as of the Vesting Reference Date, for so
long as the Purchaser is employed by the Company or one of its subsidiaries and
for a period of one year thereafter (the "Noncompete Period"), that the
Purchaser shall not, directly or indirectly, engage in the production, sale or
distribution of any product produced, sold or distributed by the Company or its
subsidiaries on the date hereof or during the Noncompete Period anywhere in the
world in which the Company or its subsidiaries is doing business other than
through the Purchaser's employment with the Company or any of its subsidiaries.
At the Company's option, the Noncompete Period may be extended for an additional
one year period if (i) within nine months of the termination of the Purchaser's
employment, the Company gives the Purchaser notice of such extension and (ii)
beginning with the first anniversary of such termination, the Company pays the
Purchaser an amount equal to the Purchaser's base salary on the date of the
termination of his employment. Such amount shall be paid in installments in a
manner consistent with the then current salary payment policies of the Company.
For purposes of this Agreement, the phrase "directly or indirectly engage in"
shall include any direct or indirect ownership or profit participation interest
in such enterprise, whether as an owner, stockholder, partner, joint venturer of
otherwise, and shall include any direct or indirect participation in such
enterprise as a consultant, licensor of technology or otherwise.
(b) The Purchaser will not disclose or use at any time during
the Noncompete Period (as such period may be extended pursuant to Section
25(a)), any Confidential Information (as defined below) of which the Purchaser
is or becomes aware, whether or not such information is developed by him, except
to the extent that such disclosure or use is directly related to and required by
the Purchaser's performance of duties, if any, assigned to the Purchaser by the
Company. As used in this Agreement, the term "Confidential Information" means
information that is not generally known to the public and that is used,
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<PAGE>
developed or obtained by the Company or its subsidiaries in connection with its
business, including but not limited to (i) products or services, (ii) fees,
costs and pricing structures, (iii) designs, (iv) computer software, including
operating systems, applications and program listings, (v) flow charts, manuals
and documentation, (vi) data bases, (vii) accounting and business methods,
(viii) inventions, devices, new developments, methods and processes, whether
patentable or unpatentable and whether or not reduced to practice, (ix)
customers and clients and customer or client lists, (x) other copyrightable
works, (xi) all technology and trade secrets, and (xii) all similar and related
information in whatever form. Confidential Information will not include any
information that has been published in a form generally available to the public
prior to the date the Purchaser proposes to disclose or use such information.
The Purchaser acknowledges and agrees that all copyrights, works, inventions,
innovations, improvements, developments, patents, trademarks and all similar or
related information which relate to the actual or anticipated business of the
Company and its subsidiaries (including its predecessors) and conceived,
developed or made by the Purchaser while employed by the Company or its
subsidiaries belong to the Company. The Purchaser will perform all actions
reasonably requested by the Company (whether during or after the Noncompete
Period) to establish and confirm such ownership at the Company's expense
(including, without limitation, assignments, consents, powers of attorney and
other instruments).
(c) Notwithstanding Sections 25(a) and (b) above, if at any
time a court holds that the restrictions stated in such Sections are
unreasonable or otherwise unenforceable under circumstances then existing, the
Parties agree that the maximum period, scope or geographic area determined to be
reasonable under such circumstances by such court will be substituted for the
stated period, scope or area. Because the Purchaser's services are unique and
because the Purchaser has had access to Confidential Information, the Parties
agree that money damages will be an inadequate remedy for any breach of this
Agreement. In the event a breach or threatened breach of this Agreement, the
Company or its successors or assigns may, in addition to other rights and
remedies existing in their favor, apply to any court of competent jurisdiction
for specific performance and/or injunctive relief in order to enforce, or
prevent any violations of, the provisions hereof (without the posting of a bond
or other security).
(d) Notwithstanding the foregoing Sections 25(a), (b) and (c),
the provisions of any employment agreement in effect on the date hereof between
the Company and Purchaser which contains covenants relating to confidentiality
and competition shall supersede and replace the provisions of Sections 25(a),
(b) and (c) and shall be deemed incorporated by reference in this Agreement in
their entirety.
[Continued on next page.]
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<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement
as of April 30, 1998.
CORNING CONSUMER PRODUCTS COMPANY
By:
-----------------------------
Name:
Title:
CCPC ACQUISITION CORP.
By:
-----------------------------
Name:
Title:
------------------------------
(Print Name of Purchaser)
---------------------------------
(Signature of Purchaser)
---------------------------------
---------------------------------
---------------------------------
(Address of Purchaser)
Number of Shares of
Purchase Stock: ---------------------------------
Purchase Date: April 30, 1998
---------------------------------
Vesting Reference Date: April 1, 1998
---------------------------------
Management Stockholder's Agreement
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<PAGE>
Exhibit 10.4
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, dated as of ___________, 1998, is made by and
between CORNING CONSUMER PRODUCTS COMPANY, a Delaware corporation (the
"Company"), and the undersigned, an employee of the Company or a Subsidiary (as
defined below) or Affiliate (as defined below) of the Company (hereinafter
referred to as "Optionee").
WHEREAS, the Company wishes to afford the Optionee the
opportunity to purchase shares of common stock of the Company (the "Common
Stock");
WHEREAS, the Company wishes to carry out the Plan (as
hereinafter defined), the terms of which are hereby incorporated by reference
and made a part of this Agreement; and
WHEREAS, the Committee (as hereinafter defined), appointed to
administer the Plan, has determined that it would be to the advantage and best
interest of the Company and its stockholders to grant the Non-Qualified Options
provided for herein to the Optionee as an incentive for increased efforts during
his term of office with the Company or its Subsidiaries or Affiliates, and has
advised the Company thereof and instructed the undersigned officers to issue
said Options;
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and other good and valuable consideration, receipt of which is
hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Agreement, they
shall have the meaning specified in the Plan or below unless the context clearly
indicates to the contrary.
Section 1.1 - Affiliate
"Affiliate" shall mean, with respect to the Company, any
corporation directly or indirectly controlling, controlled by, or under common
control with, the Company or any other entity designated by the Board of
Directors of the Company in which the Company or an Affiliate has an interest.
Section 1.2 - Cause
"Cause" shall mean (i) the Optionee's willful and continued
failure to perform the Optionee's duties with respect to the Company and its
subsidiaries which continues beyond ten days after a written demand for
substantial performance is delivered to the Optionee by the Company or (ii)
misconduct by the Optionee involving (x) dishonesty or breach of trust in
connection with the Optionee's employment or (y) conduct which would be a
reasonable basis for an indictment of the Optionee for a felony or for a
misdemeanor involving moral turpitude.
<PAGE>
Section 1.3 - Code
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
Section 1.4 - Committee
"Committee" shall mean the Compensation Committee of the
Company, or any other committee duly authorized by the Board of Directors of the
Company to administer the Plan and this Agreement.
Section 1.5 - Good Reason
"Good Reason" shall mean (i) a reduction in the Optionee's
base salary, other than a reduction which is part of a general salary reduction
program affecting senior executives of the Company, or (ii) a material reduction
by the Company of any provision of the Optionee's employment agreement with the
Company, if any, including any material reduction in the Optionee's duties and
responsibilities.
Section 1.6 - Management Stockholder's Agreement
"Management Stockholder's Agreement" shall mean that certain
Management Stockholder's Agreement dated as of April 1, 1998 between the
Optionee and the Company.
Section 1.7 - Options
"Options" shall mean the non-qualified options to purchase
Common Stock granted under this Agreement.
Section 1.8 - Permanent Disability
The Optionee shall be deemed to have a "Permanent Disability"
if the Optionee is unable to engage in the activities required by the Optionee's
job by reason of any medically determined physical or mental impairment which
can be expected to result in death or which has lasted or can be expected to
last for a continuous period of not less than 12 months.
Section 1.9 - Plan
"Plan" shall mean the 1998 Stock Purchase and Option Plan for
Key Employees of the Company and its Subsidiaries.
Section 1.10 - Pronouns
The masculine pronoun shall include the feminine and neuter,
and the singular the plural, where the context so indicates.
Section 1.11 - Purchase Date
"Purchase Date" shall mean the date hereof.
2
<PAGE>
Section 1.12 - Retirement
"Retirement" shall mean retirement at age 65 or over (or such
other age as may be approved by the Board of Directors of the Company) after
having been employed by the Company or a Subsidiary for at least three years
after the Vesting Reference Date.
Section 1.13 - Secretary
"Secretary" shall mean the Secretary of the Company.
Section 1.14 - Subsidiary
"Subsidiary" shall mean any corporation in an unbroken chain
of corporations beginning with the Company if each of the corporations, or group
of commonly controlled corporations, other than the last corporation in the
unbroken chain then owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
Section 1.15 - Vesting Reference Date
"Vesting Reference Date" shall mean the date set forth on the
signature page hereof as the Vesting Reference Date.
ARTICLE II
GRANT OF OPTIONS
Section 2.1 - Grant of Options
For good and valuable consideration, on and as of the date
hereof the Company irrevocably grants to the Optionee an Option to purchase any
part or all of an aggregate of the number of shares of Common Stock set forth
with respect to each such Option on the signature page hereof upon the terms and
conditions set forth in this Agreement.
Section 2.2 - Exercise Price
The exercise price of the shares of stock covered by the
Options shall be $5.00 per share without commission or other charge.
Section 2.3 - Consideration to the Company
In consideration of the granting of these Options by the
Company, the Optionee agrees to render faithful and efficient services to the
Company or a Subsidiary or Affiliate, with such duties and responsibilities as
the Company shall from time to time prescribe. Nothing in this Agreement or in
the Plan shall confer upon the Optionee any right to continue in the employ of
the Company or any Subsidiary or Affiliate or shall interfere with or restrict
in any way the rights of the Company and its Subsidiaries or Affiliates, which
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are hereby expressly reserved, to terminate the employment of the Optionee at
any time for any reason whatsoever, with or without Cause.
Section 2.4 - Adjustments in Options
Subject to Section 9 of the Plan, in the event that the
outstanding shares of the stock subject to an Option are, from time to time,
changed into or exchanged for a different number or kind of shares of the
Company or other securities of the Company by reason of a merger, consolidation,
recapitalization, reclassification, stock split, stock dividend, combination of
shares, or otherwise, the Committee shall make an appropriate and equitable
adjustment in the number and kind of shares or other consideration as to which
such Option, or portions thereof then unexercised, shall be exercisable. Any
such adjustment made by the Committee shall be final and binding upon the
Optionee, the Company and all other interested persons.
ARTICLE III
PERIOD OF EXERCISABILITY
Section 3.1 - Commencement of Exercisability
(a) Options shall become exercisable as follows:
<TABLE>
<CAPTION>
Percentage of Option
Date Option Shares Granted As to Which
Becomes Exercisable Option Is Exercisable
- ------------------- ------------------------
<S> <C>
After the first anniversary
of the Vesting Reference Date 20%
After the second anniversary
of the Vesting Reference Date 40%
After the third anniversary
of the Vesting Reference Date 60%
After the fourth anniversary
of the Vesting Reference Date 80%
After the fifth anniversary
of the Vesting Reference Date 100%
</TABLE>
Notwithstanding the foregoing, each Option shall become
immediately exercisable as to 100% of the shares of Common Stock subject to such
Option immediately prior to a Change of Control (but only to the extent such
Option has not otherwise terminated or become exercisable). A "Change of
Control" means (i) a sale of all or
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substantially all of the assets of the Company to a Person who is not an
Affiliate of Kohlberg Kravis Roberts & Co., L.P. ("KKR"), (ii) a sale by KKR or
any of its Affiliates resulting in more than 50% of the voting stock of the
Company being held by a Person or Group that does not include KKR or any of its
Affiliates or (iii) a merger or consolidation of the Company into another Person
which is not an Affiliate of KKR.
"Person" means an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association, joint
venture, governmental authority or other entity of whatever nature.
"Group" means two or more Persons acting together as a
partnership, limited partnership, syndicate or other group for the purpose of
acquiring, holding or disposing of securities of the Company.
(c) Notwithstanding the foregoing, no Option shall become
exercisable as to any additional shares of Common Stock following the
termination of employment of the Optionee for any reason other than a
termination of employment because of death, Permanent Disability or Retirement
of the Optionee and any Option (other than as provided in the succeeding
sentence) which is non-exercisable as of the Optionee's termination of
employment shall immediately be cancelled. In the event of a termination of
employment because of death, Permanent Disability or Retirement of the Optionee,
the Options shall immediately become exercisable as to all shares of Common
Stock subject thereto.
Section 3.2 - Expiration of Options
Except as otherwise provided in Section 5 or 6 of the
Management Stockholder's Agreement, the Options may not be exercised to any
extent by the Optionee after the first to occur of the following events:
(a) The tenth anniversary of the Vesting Reference Date; or
(b) The first anniversary of the date of the Optionee's
termination of employment by reason of death, Permanent Disability or
Retirement; or
(c) The first business day which is fifteen calendar days
after the earlier of (i) 75 days after termination of employment of the
Optionee for any reason other than for Cause or without Good Reason or
(ii) the delivery of notice by the Company that it does not intend to
exercise its call right under Section 6 of the Management Stockholder's
Agreement; provided, however, that in any event the Options shall
remain exercisable under this subsection 3.2(c) until at least 45 days
after termination of employment of the Optionee for any reason other
than for death, Permanent Disability or Retirement; or
(d) The date the Option is terminated pursuant to Section 5, 6
or 8(b) of the Management Stockholder's Agreement;
(e) The date of an Optionee's termination of employment by the
Company for Cause or by the Optionee without Good Reason; or
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(f) If the Committee so determines pursuant to Section 9 of
the Plan, the effective date of either the merger or consolidation of
the Company into another Person, or the exchange or acquisition by
another Person of all or substantially all of the Company's assets or
80% or more of its then outstanding voting stock, or the
recapitalization, reclassification, liquidation or dissolution of the
Company. At least ten (10) days prior to the effective date of such
merger, consolidation, exchange, acquisition, recapitalization,
reclassification, liquidation or dissolution, the Committee shall give
the Optionee notice of such event if the Option has then neither been
fully exercised nor become unexercisable under this Section 3.2.
ARTICLE IV
EXERCISE OF OPTION
Section 4.1 - Person Eligible to Exercise
During the lifetime of the Optionee, only he may exercise an
Option or any portion thereof. After the death of the Optionee, any exercisable
portion of an Option may, prior to the time when an Option becomes unexercisable
under Section 3.2, be exercised by his personal representative or by any person
empowered to do so under the Optionee's will or under the then applicable laws
of descent and distribution.
Section 4.2 - Partial Exercise
Any exercisable portion of an Option or the entire Option, if
then wholly exercisable, may be exercised in whole or in part at any time prior
to the time when the Option or portion thereof becomes unexercisable under
Section 3.2; provided, however, that any partial exercise shall be for whole
shares of Common Stock only.
Section 4.3 - Manner of Exercise
An Option, or any exercisable portion thereof, may be
exercised solely by delivering to the Secretary or his office all of the
following prior to the time when the Option or such portion becomes
unexercisable under Section 3.2:
(a) Notice in writing signed by the Optionee or the other
person then entitled to exercise the Option or portion thereof, stating
that the Option or portion thereof is thereby exercised, such notice
complying with all applicable rules established by the Committee;
(b) Full payment (in cash, by check or by a combination
thereof) for the shares with respect to which such Option or portion
thereof is exercised;
(c) A bona fide written representation and agreement, in a
form satisfactory to the Committee, signed by the Optionee or other
person then entitled to exercise such Option or portion thereof,
stating that the shares of stock are being acquired for his own
account, for investment and without any present intention of
distributing or reselling said shares or any of them except as may be
permitted under the Securities
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<PAGE>
Act of 1933, as amended (the "Act"), and then applicable rules and
regulations thereunder, and that the Optionee or other person then
entitled to exercise such Option or portion thereof will indemnify the
Company against and hold it free and harmless from any loss, damage,
expense or liability resulting to the Company if any sale or
distribution of the shares by such person is contrary to the
representation and agreement referred to above; provided, however, that
the Committee may, in its absolute discretion, take whatever additional
actions it deems appropriate to ensure the observance and performance
of such representation and agreement and to effect compliance with the
Act and any other federal or state securities laws or regulations;
(d) Full payment to the Company of all amounts which, under
federal, state or local law, it is required to withhold upon exercise
of the Option; and
(e) In the event the Option or portion thereof shall be
exercised pursuant to Section 4.1 by any person or persons other than
the Optionee, appropriate proof of the right of such person or persons
to exercise the option.
Without limiting the generality of the foregoing, the Committee may require an
opinion of counsel acceptable to it to the effect that any subsequent transfer
of shares acquired on exercise of an Option does not violate the Act, and may
issue stop-transfer orders covering such shares. Share certificates evidencing
stock issued on exercise of this Option shall bear an appropriate legend
referring to the provisions of subsection (c) above and the agreements herein.
The written representation and agreement referred to in subsection (c) above
shall, however, not be required if the shares to be issued pursuant to such
exercise have been registered under the Act, and such registration is then
effective in respect of such shares.
Section 4.4 - Conditions to Issuance of Stock Certificates
The shares of stock deliverable upon the exercise of an
Option, or any portion thereof, may be either previously authorized but unissued
shares or issued shares which have then been reacquired by the Company. Such
shares shall be fully paid and nonassessable. The Company shall not be required
to issue or deliver any certificate or certificates for shares of stock
purchased upon the exercise of an Option or portion thereof prior to fulfillment
of all of the following conditions:
(a) The obtaining of approval or other clearance from any
state or federal governmental agency which the Committee shall, in its
absolute discretion, determine to be necessary or advisable; and
(b) The lapse of such reasonable period of time following the
exercise of the Option as the Committee may from time to time establish
for reasons of administrative convenience.
Section 4.5 - Rights as Stockholder
The holder of an Option shall not be, nor have any of the
rights or privileges of, a stockholder of the Company in respect of any shares
purchasable upon the exercise of the Option or any portion thereof unless and
until certificates representing such shares shall have been issued by the
Company to such holder.
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<PAGE>
ARTICLE V
MISCELLANEOUS
Section 5.1 - Administration
The Committee shall have the power to interpret the Plan and
this Agreement and to adopt such rules for the administration, interpretation
and application of the Plan as are consistent therewith and to interpret or
revoke any such rules. All actions taken and all interpretations and
determinations made by the Committee shall be final and binding upon the
Optionee, the Company and all other interested persons. No member of the
Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or the Options. In
its absolute discretion, the Board of Directors may at any time and from time to
time exercise any and all rights and duties of the Committee under the Plan and
this Agreement.
Section 5.2 - Options Not Transferable
Except as provided in the Management Stockholder's Agreement,
neither the Options nor any interest or right therein or part thereof shall be
liable for the debts, contracts or engagements of the Optionee or his successors
in interest or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means whether such
disposition be voluntary or involuntary or by operation of law by judgment,
levy, attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy), and any attempted disposition thereof shall be null and
void and of no effect; provided, however, that this Section 5.2 shall not
prevent transfers by will or by the applicable laws of descent and distribution.
Section 5.3 - Shares to Be Reserved
The Company shall at all times during the term of the Options
reserve and keep available such number of shares of stock as will be sufficient
to satisfy the requirements of this Agreement.
Section 5.4 - Notices
Any notice to be given under the terms of this Agreement to
the Company shall be addressed to the Company in care of its Secretary, and any
notice to be given to the Optionee shall be addressed to him at the address
given beneath his signature hereto. By a notice given pursuant to this Section
5.4, either party may hereafter designate a different address for notices to be
given to him. Any notice which is required to be given to the Optionee shall, if
the Optionee is then deceased, be given to the Optionee's personal
representative if such representative has previously informed the Company of his
status and address by written notice under this Section 5.4. Any notice shall
have been deemed duly given when enclosed in a properly sealed envelope or
wrapper addressed as aforesaid, deposited (with postage prepaid) in a post
office or branch post office regularly maintained by the United States Postal
Service.
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<PAGE>
Section 5.5 - Titles
Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of this Agreement.
Section 5.6 - Applicability of Plan and Management Stockholder's Agreement
The Options and the shares of Common Stock issued to the
Optionee upon exercise of the Options shall be subject to all of the terms and
provisions of the Plan and the Management Stockholder's Agreement, to the extent
applicable to the Options and such shares. In the event of any conflict between
this Agreement and the Plan, the terms of the Plan shall control. In the event
of any conflict between this Agreement or the Plan and the Management
Stockholder's Agreement, the terms of the Management Stockholder's Agreement
shall control.
Section 5.7 - Amendment
This Agreement may be amended only by a writing executed by
the parties hereto which specifically states that it is amending this Agreement.
Section 5.8 - Governing Law
The laws of the State of Delaware shall govern the
interpretation, validity and performance of the terms of this Agreement
regardless of the law that might be applied under principles of conflicts of
laws.
Section 5.9 - Consent to Jurisdiction; Waivers
The laws of the state of Delaware shall govern the
interpretation, validity and performance of the terms of this Agreement,
regardless of the law that might be applied under principles of conflicts of
law. Any suit, action or proceeding against the Optionee with respect to this
Agreement, or any judgment entered by any court in respect of any thereof, may
be brought in any court of competent jurisdiction in the State of Delaware or
New York, as the Company may elect in its sole discretion, and the Optionee
hereby submits to the non-exclusive jurisdiction of such courts for the purpose
of any such suit, action, proceeding or judgment. The Optionee hereby
irrevocably waives any objections which he may now or hereafter have to the
laying of the venue of any suit, action or proceeding arising out of or relating
to this Agreement brought in any court of competent jurisdiction in the State of
Delaware or New York, and hereby further irrevocably waives any claim that any
such suit, action or proceeding brought in any such court has been brought in
any inconvenient forum. No suit, action or proceeding against the Company with
respect to this Agreement may be brought in any court, domestic or foreign, or
before any similar domestic or foreign authority other than in a court of
competent jurisdiction in the State of Delaware or New York, and the Optionee
hereby irrevocably waives any right which he may otherwise have had to bring
such an action in any other court, domestic or foreign, or before any similar
domestic or foreign authority. The Company hereby submits to the jurisdiction of
such courts for the purpose of any such suit, action or proceeding.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed and
delivered by the parties hereto.
CORNING CONSUMER PRODUCTS
COMPANY
By
-----------------------------
Title:
- --------------------------- Aggregate number of shares
Optionee of Common Stock for which
the Option granted hereunder
is exercisable:
- ---------------------------
- ---------------------------
Address
Optionee's Taxpayer
Identification Number:
- ---------------------------
Vesting Reference Date:
April 1, 1998
- ---------------------------
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<PAGE>
Exhibit 10.5
FORM OF
1998 STOCK PURCHASE AND OPTION PLAN
FOR KEY EMPLOYEES OF
CORNING CONSUMER PRODUCTS COMPANY AND SUBSIDIARIES
1. Purpose of Plan
The 1998 Stock Purchase and Option Plan for Key Employees of
Corning Consumer Products Company and Subsidiaries (the "Plan") is designed:
(a) to promote the long term financial interests and growth of
Corning Consumer Products Company (the "Corporation") and its
subsidiaries by attracting and retaining management personnel with the
training, experience and ability to enable them to make a substantial
contribution to the success of the Corporation's business;
(b) to motivate management personnel by means of
growth-related incentives to achieve long range goals; and
(c) to further the identity of interests of participants with
those of the stockholders of the Corporation through opportunities for
increased stock, or stock-based, ownership in the Corporation.
2. Definitions
As used in the Plan, the following words shall have the
following meanings:
(a) "Grant" means an award made to a Participant pursuant to
the Plan and described in Paragraph 5, including, without limitation, an award
of an Incentive Stock Option, Stock Option, Stock Appreciation Right, Dividend
Equivalent Right, Restricted Stock, Purchase Stock, Performance Units,
Performance Shares or Other Stock Based Grant, or any combination of the
foregoing.
(b) "Grant Agreement" means an agreement between the
Corporation and a Participant that sets forth the terms, conditions and
limitations applicable to a Grant.
(c) "Board of Directors" means the Board of Directors of the
Corporation.
(d) "Committee" means the Compensation Committee of the Board
of Directors.
(e) "Common Stock" or "Share" means common stock of the
Corporation which may be authorized but unissued, or issued and reacquired.
(f) "Employee" means a person, including an officer, in the
regular full-time employment of the Corporation or one of its Subsidiaries who,
in the opinion of the Committee, is, or is expected, to be primarily responsible
for the management, growth or protection of some part or all of the business of
the Corporation.
<PAGE>
(g) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(h) "Fair Market Value" means such value of a Share as
reported for stock exchange transactions and/or determined in accordance with
any applicable resolutions or regulations of the Committee in effect at the
relevant time.
(i) "Participant" means an Employee, or other person having a
unique relationship with the Corporation or one of its Subsidiaries, to whom one
or more Grants have been made and such Grants have not all been forfeited or
terminated under the Plan; provided, however, a non-employee director of the
Corporation or one of its Subsidiaries may not be a Participant.
(j) "Stock-Based Grants" means the collective reference to the
grant of Stock Appreciation Rights, Dividend Equivalent Rights, Restricted
Stocks, Performance Units, Performance Shares and Other Stock Based Grants.
(k) "Stock Options" means the collective reference to
"Incentive Stock Options" and "Other Stock Options".
(l) "Subsidiary" means any corporation other than the
Corporation in an unbroken chain of corporations beginning with the Corporation
if each of the corporations other than the last corporation in the unbroken
chain owns 50% or more of the voting stock in one of the other corporations in
such chain.
3. Administration of Plan
(a) The Plan shall be administered by the Committee. None of
the members of the Committee shall be eligible to be selected for Grants under
the Plan, or have been so eligible for selection within one year prior thereto;
provided, however, that the members of the Committee shall qualify to administer
the Plan for purposes of Rule 16b-3 (and any other applicable rule) promulgated
under Section 16(b) of the Exchange Act to the extent that the Corporation is
subject to such rule. The Committee may adopt its own rules of procedure, and
the action of a majority of the Committee, taken at a meeting or taken without a
meeting by a writing signed by such majority, shall constitute action by the
Committee. The Committee shall have the power and authority to administer,
construe and interpret the Plan, to make rules for carrying it out and to make
changes in such rules. Any such interpretations, rules, and administration shall
be consistent with the basic purposes of the Plan.
(b) The Committee may delegate to the Chief Executive Officer
and to other senior officers of the Corporation its duties under the Plan
subject to such conditions and limitations as the Committee shall prescribe
except that only the Committee may designate and make Grants to Participants who
are subject to Section 16 of the Exchange Act.
(c) The Committee may employ attorneys, consultants,
accountants, appraisers, brokers or other persons. The Committee, the
Corporation, and the officers and directors of the Corporation shall be entitled
to rely upon the advice, opinions or valuations of any such persons. All actions
taken and all interpretations and determinations made by the Committee in good
faith shall be final and binding upon all Participants, the Corporation
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<PAGE>
and all other interested persons. No member of the Committee shall be personally
liable for any action, determination or interpretation made in good faith with
respect to the Plan or the Grants, and all members of the Committee shall be
fully protected by the Corporation with respect to any such action,
determination or interpretation.
4. Eligibility
The Committee may from time to time make Grants under the Plan
to such Employees, or other persons having a unique relationship with
Corporation or any of its Subsidiaries, and in such form and having such terms,
conditions and limitations as the Committee may determine. No Grants may be made
under this Plan to non-employee directors of Corporation or any of its
Subsidiaries. Grants may be granted singly, in combination or in tandem. The
terms, conditions and limitations of each Grant under the Plan shall be set
forth in a Grant Agreement, in a form approved by the Committee, consistent,
however, with the terms of the Plan; provided, however, such Grant Agreement
shall contain provisions dealing with the treatment of Grants in the event of
the termination, death or disability of a Participant, and may also include
provisions concerning the treatment of Grants in the event of a change of
control of Corporation.
5. Grants
From time to time, the Committee will determine the forms and
amounts of Grants for Participants. Such Grants may take the following forms in
the Committee's sole discretion:
(a) Incentive Stock Options - These are stock options within
the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended ("Code"), to purchase Common Stock. In addition to other
restrictions contained in the Plan, an option granted under this
Paragraph 5(a), (i) may not be exercised more than 10 years after the
date it is granted, (ii) may not have an option price less than the
Fair Market Value of Common Stock on the date the option is granted,
(iii) must otherwise comply with Code Section 422, and (iv) must be
designated as an "Incentive Stock Option" by the Committee. The maximum
aggregate Fair Market Value of Common Stock (determined at the time of
each Grant) with respect to which any Participant may first exercise
Incentive Stock Options under this Plan and any Incentive Stock Options
granted to the Participant for such year under any plans of the
Corporation or any Subsidiary in any calendar year is $100,000. Payment
of the option price shall be made in cash or in shares of Common Stock,
or a combination thereof, in accordance with the terms of the Plan, the
Grant Agreement, and of any applicable guidelines of the Committee in
effect at the time.
(b) Other Stock Options - These are options to purchase Common
Stock which are not designated by the Committee as "Incentive Stock
Options". At the time of the Grant the Committee shall determine, and
shall have contained in the Grant Agreement or other Plan rules, the
option exercise period, the option price, and such other conditions or
restrictions on the grant or exercise of the option as the Committee
deems appropriate, which may include the requirement that the grant of
options is predicated on the acquisition of Purchase Shares under
Paragraph 5(e) by the Optionee. In addition to other restrictions
contained in the Plan, an option granted
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<PAGE>
under this Paragraph 5(b), (i) may not be exercised more than 10 years
after the date it is granted and (ii) may not have an option exercise
price less than 50% of the Fair Market Value of Common Stock on the
date the option is granted. Payment of the option price shall be made
in cash or in shares of Common Stock, or a combination thereof, in
accordance with the terms of the Plan and of any applicable guidelines
of the Committee in effect at the time.
(c) Stock Appreciation Rights - These are rights that on
exercise entitle the holder to receive the excess of (i) the Fair
Market Value of a share of Common Stock on the date of exercise over
(ii) the Fair Market Value on the date of Grant (the "base value")
multiplied by (iii) the number of rights exercised as determined by the
Committee. Stock Appreciation Rights granted under the Plan may, but
need not be, granted in conjunction with an Option under Paragraph 5(a)
or 5(b). The Committee, in the Grant Agreement or by other Plan rules,
may impose such conditions or restrictions on the exercise of Stock
Appreciation Rights as it deems appropriate, and may terminate, amend,
or suspend such Stock Appreciation Rights at any time. No Stock
Appreciation Right granted under this Plan may be exercised less than 6
months after the date it is granted except in the event of death or
disability of a Participant, or more than 10 years after the date it is
granted. To the extent that any Stock Appreciation Right that shall
have become exercisable, but shall not have been exercised or cancelled
or, by reason of any termination of employment, shall have become
non-exercisable, it shall be deemed to have been exercised
automatically, without any notice of exercise, on the last day of which
it is exercisable, provided that any conditions or limitations on its
exercise are satisfied (other than (i) notice of exercise and (ii)
exercise or election to exercise during the period prescribed) and the
Stock Appreciation Right shall then have value. Such exercise shall be
deemed to specify that the holder elects to receive cash and that such
exercise of a Stock Appreciation Right shall be effective as of the
time of automatic exercise.
(d) Restricted Stock - Restricted Stock is Common Stock
delivered to a Participant with or without payment of consideration
with restrictions or conditions on the Participant's right to transfer
or sell such stock; provided that the price of any Restricted Stock
delivered for consideration and not as bonus stock may not be less than
50% of the Fair Market Value of Common Stock on the date such
Restricted Stock is granted or the price of such Restricted Stock may
be the par value. If a Participant irrevocably elects in writing in the
calendar year preceding a Grant of Restricted Stock, dividends paid on
the Restricted Stock granted may be paid in shares of Restricted Stock
equal to the cash dividend paid on Common Stock. The number of shares
of Restricted Stock and the restrictions or conditions on such shares
shall be as the Committee determines, in the Grant Agreement or by
other Plan rules, and the certificate for the Restricted Stock shall
bear evidence of the restrictions or conditions. No Restricted Stock
may have a restriction period of less than 6 months, other than in the
case of death or disability.
(e) Purchase Stock - Purchase Stock are shares of Common Stock
offered to a Participant at such price as determined by the Committee,
the acquisition of which will make him eligible to receive under the
Plan, including, but not limited to, Other Stock Options; provided,
however, that the price of such Purchase Shares may not be
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<PAGE>
less than 50% of the Fair Market Value of the Common Stock on the date
such shares of Purchase Stock are offered.
(f) Dividend Equivalent Rights - These are rights to receive
cash payments from the Corporation at the same time and in the same
amount as any cash dividends paid on an equal number of shares of
Common Stock to shareholders of record during the period such rights
are effective. The Committee, in the Grant Agreement or by other Plan
rules, may impose such restrictions and conditions on the Dividend
Equivalent Rights, including the date such rights will terminate, as it
deems appropriate, and may terminate, amend, or suspend such Dividend
Equivalent Rights at any time.
(g) Performance Units - These are rights to receive at a
specified future date, payment in cash of an amount equal to all or a
portion of the value of a unit granted by the Committee. At the time of
the Grant, in the Grant Agreement or by other Plan rules, the Committee
must determine the base value of the unit, the performance factors
applicable to the determination of the ultimate payment value of the
unit and the period over which Corporation performance will be
measured. These factors must include a minimum performance standard for
the Corporation below which no payment will be made and a maximum
performance level above which no increased payment will be made. The
term over which Corporation performance will be measured shall be not
less than six months.
(h) Performance Shares - These are rights to receive at a
specified future date, payment in cash or Common Stock, as determined
by the Committee, of an amount equal to all or a portion of the Fair
Market Value for all days that the Common Stock is traded during the
last forty-five (45) days of the specified period of performance of a
specified number of shares of Common Stock at the end of a specified
period based on Corporation performance during the period. At the time
of the Grant, the Committee, in the Grant Agreement or by Plan rules,
will determine the factors which will govern the portion of the rights
so payable and the period over which Corporation performance will be
measured. The factors will be based on Corporation performance and must
include a minimum performance standard for the Corporation below which
no payment will be made and a maximum performance level above which no
increased payment will be made. The term over which Corporation
performance will be measured shall be not less than six months.
Performance Shares will be granted for no consideration.
(i) Other Stock-Based Grants - The Committee may make other
Grants under the Plan pursuant to which shares of Common Stock (which
may, but need not, be shares of Restricted Stock pursuant to Paragraph
5(d)), are or may in the future be acquired, or Grants denominated in
stock units, including ones valued using measures other than market
value. Other Stock-Based Grants may be granted with or without
consideration; provided, however, that the price of any such Grant made
for consideration that provides for the acquisition of shares of Common
Stock or other equity securities of the Corporation may not be less
than 50% of the Fair Market Value of the Common Stock or such other
equity securities on the date of grant of such Grant. Such Other
Stock-Based Grants may be made alone, in addition to or in
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<PAGE>
tandem with any Grant of any type made under the Plan and must be
consistent with the purposes of the Plan.
6. Limitations and Conditions
(a) The number of Shares available for Grants under this Plan
shall be 2,820,000 shares of the authorized Common Stock as of the effective
date of the Plan. The number of Shares subject to Grants under this Plan to any
one Participant shall not be more than 600,000 shares. Unless restricted by
applicable law, Shares related to Grants that are forfeited, terminated,
cancelled or expire unexercised, shall immediately become available for Grants.
(b) No Grants shall be made under the Plan beyond ten years
after the effective date of the Plan, but the terms of Grants made on or before
the expiration thereof may extend beyond such expiration. At the time a Grant is
made or amended or the terms or conditions of a Grant are changed, the Committee
may provide for limitations or conditions on such Grant.
(c) Nothing contained herein shall affect the right of the
Corporation to terminate any Participant's employment at any time or for any
reason.
(d) Deferrals of Grant payouts may be provided for, at the
sole discretion of the Committee, in the Grant Agreements.
(e) Except as otherwise prescribed by the Committee, the
amounts of the Grants for any employee of a Subsidiary, along with interest,
dividend, and other expenses accrued on deferred Grants shall be charged to the
Participant's employer during the period for which the Grant is made. If the
Participant is employed by more than one Subsidiary or by both the Corporation
and a Subsidiary during the period for which the Grant is made, the
Participant's Grant and related expenses will be allocated between the companies
employing the Participant in a manner prescribed by the Committee.
(f) Other than as specifically provided with regard to the
death of a Participant, no benefit under the Plan shall be subject in any manner
to anticipation, alienation, sale, pledge, encumbrance, or charge, and any
attempt to do so shall be void. No such benefit shall, prior to receipt thereof
by the Participant, be in any manner liable for or subject to the debts,
contracts, liabilities, engagements, or torts of the Participant.
Notwithstanding the foregoing, the Committee may, in its discretion, authorize
all or a portion of the Stock Options to be granted to an optionee to be on
terms which permit transfer by such optionee to (1) the spouse, children or
grandchildren of the optionee ("Immediate Family Members"), (ii) a trust or
trusts for the exclusive benefit of such Immediate Members, or (iii) a
partnership or other entity in which such Immediate Family Members are the only
partners, members or beneficiaries, provided that, (x) the stock option
agreement pursuant to which such options are granted must be approved by the
Committee, and must expressly provide for transferability in a manner consistent
with this Paragraph, (y) subsequent transfers of transferred options shall be
prohibited except transfers by will or by the applicable laws of descent and
distribution, and (z) the transferees shall agree to be bound by the provisions
of the Plan. Following transfer, any such options shall continue to be subject
to the same terms and conditions as were applicable immediately prior to
transfer.
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(g) Participants shall not be, and shall not have any of the
rights or privileges of, stockholders of the Corporation in respect of any
Shares purchasable in connection with any Grant unless and until certificates
representing any such Shares have been issued by the Corporation to such
Participants.
(h) No election as to benefits or exercise of Stock Options,
Stock Appreciation Rights, or other rights may be made during a Participant's
lifetime by anyone other than the Participant except by a legal representative
appointed for or by the Participant.
(i) Absent express provisions to the contrary, any grant under
this Plan shall not be deemed compensation for purposes of computing benefits or
contributions under any retirement plan of the Corporation or its Subsidiaries
and shall not affect any benefits under any other benefit plan of any kind or
subsequently in effect under which the availability or amount of benefits is
related to level of compensation. This Plan is not a "Retirement Plan" or
"Welfare Plan" under the Employee Retirement Income Security Act of 1974, as
amended.
(j) Unless the Committee determines otherwise, no benefit or
promise under the Plan shall be secured by any specific assets of the
Corporation or any of its Subsidiaries, nor shall any assets of the Corporation
or any of its Subsidiaries be designated as attributable or allocated to the
satisfaction of the Corporation's obligations under the Plan.
7. Transfers and Leaves of Absence
For purposes of the Plan, unless the Committee determines
otherwise: (a) a transfer of a Participant's employment without an intervening
period of separation among the Corporation and any Subsidiary shall not be
deemed a termination of employment, and (b) a Participant who is granted in
writing a leave of absence shall be deemed to have remained in the employ of the
Corporation during such leave of absence.
8. Adjustments
In the event of any change in the outstanding Common Stock by
reason of a stock split, spin-off, stock dividend, stock combination or
reclassification, recapitalization or merger, change of control, or similar
event, the Committee may adjust appropriately the number of Shares subject to
the Plan and available for or covered by Grants and Share prices related to
outstanding Grants and make such other revisions to outstanding Grants as it
deems are equitably required.
9. Merger, Consolidation, Exchange,
Acquisition, Liquidation or Dissolution
In its absolute discretion, and on such terms and conditions
as it deems appropriate, coincident with or after the grant of any Stock Option
or any Stock-Based Grant, the Committee may provide that such Stock Option or
Stock-Based Grant cannot be exercised after the merger or consolidation of the
Corporation into another corporation, the exchange of all or substantially all
of the assets of the Corporation for the securities of another corporation, the
acquisition by another corporation of 80% or more of the Corporation's then
outstanding shares of voting stock or the recapitalization, reclassification,
liquidation or dissolution of the Corporation, and if the Committee so provides,
it shall, on such terms and
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conditions as it deems appropriate in its absolute discretion, also provide,
either by the terms of such Stock Option or Stock-Based Grant or by a resolution
adopted prior to the occurrence of such merger, consolidation, exchange,
acquisition, recapitalization, reclassification, liquidation or dissolution,
that, for some period of time prior to such event, such Stock Option or
Stock-Based Grant shall be exercisable as to all shares subject thereto,
notwithstanding anything to the contrary herein (but subject to the provisions
of Paragraph 6(b)) and that, upon the occurrence of such event, such Stock
Option or Stock-Based Grant shall terminate and be of no further force or
effect; provided, however, that the Committee may also provide, in its absolute
discretion, that even if the Stock Option or Stock-Based Grant shall remain
exercisable after any such event, from and after such event, any such Stock
Option or Stock-Based Grant shall be exercisable only for the kind and amount of
securities and/or other property, or the cash equivalent thereof, receivable as
a result of such event by the holder of a number of shares of stock for which
such Stock Option or Stock- Based Grant could have been exercised immediately
prior to such event.
10. Amendment and Termination
The Committee shall have the authority to make such amendments
to any terms and conditions applicable to outstanding Grants as are consistent
with this Plan provided that, except for adjustments under Paragraph 8 or 9
hereof, no such action shall modify such Grant in a manner adverse to the
Participant without the Participant's consent except as such modification is
provided for or contemplated in the terms of the Grant.
The Board of Directors may amend, suspend or terminate the
Plan except that no such action, other than an action under Paragraph 8 or 9
hereof, may be taken which would, without shareholder approval, increase the
aggregate number of Shares available for Grants under the Plan, decrease the
price of outstanding Options or Stock Appreciation Rights, change the
requirements relating to the Committee or extend the term of the Plan.
11. Foreign Options and Rights
The Committee may make Grants to Employees who are subject to
the laws of nations other than the United States, which Grants may have terms
and conditions that differ from the terms thereof as provided elsewhere in the
Plan for the purpose of complying with foreign laws.
12. Withholding Taxes
The Corporation shall have the right to deduct from any cash
payment made under the Plan any federal, state or local income or other taxes
required by law to be withheld with respect to such payment. It shall be a
condition to the obligation of the Corporation to deliver shares upon the
exercise of an Option or Stock Appreciation Right, upon payment of Performance
units or shares, upon delivery of Restricted Stock or upon exercise, settlement
or payment of any Other Stock-Based Grant that the Participant pay to the
Corporation such amount as may be requested by the Corporation for the purpose
of satisfying any liability for such withholding taxes. Any Grant Agreement may
provide that the Participant may elect, in accordance with any conditions set
forth in such Grant Agreement, to pay a portion or all of such withholding taxes
in shares of Common Stock.
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13. Effective Date and Termination Dates
The Plan shall be effective on and as of the date of its
approval by the stockholders of the Corporation and shall terminate ten years
later, subject to earlier termination by the Board of Directors pursuant to
Paragraph 10.
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Exhibit 10.6
REGISTRATION RIGHTS AGREEMENT
-----------------------------
REGISTRATION RIGHTS AGREEMENT, dated as of April 1, 1998, between
CORNING CONSUMER PRODUCTS COMPANY, a Delaware corporation (the "COMPANY"), and
CCPC ACQUISITION CORP. (the "PARENT").
RECITALS
As of the date hereof, the Parent is the holder of 22,080,000 shares
of common stock (the "COMMON STOCK") of the Company. The Company desires to
provide to the Parent and to each other Holder (as defined below) rights to
registration under the Securities Act (as defined below) of Registrable
Securities (as defined below), on the terms and subject to the conditions set
forth herein.
AGREEMENT
1. DEFINITIONS. As used in this Agreement, the following capitalized
terms shall have the following respective meanings:
"COMMON OR COMMON EQUIVALENT REGISTRABLE SECURITIES": Registrable
Securities which are (i) Common Stock or (ii) Preferred Stock or Warrants
that are convertible into or exchangeable or exercisable for Common Stock.
"DEMAND PARTY": (a) the Parent or (b) any other Holder or Holders,
including, without limitation, any Person that may become an assignee of
the Parent's rights hereunder; PROVIDED that to be a Demand Party under
this clause (b), a Holder or Holders must either individually or in
aggregate with all other Holders with whom it is acting together to demand
registration own at least 1% of the total number of Registrable Securities.
"EXCHANGE ACT": The Securities Exchange Act of 1934, as amended, or
any similar federal statute then in effect, and a reference to a particular
section thereof shall be deemed to include a reference to the comparable
section, if any, of any such similar federal statute.
"HOLDER": The Parent and any other holder of Registrable Securities
(including any direct or indirect transferees of the Parent who agrees in
writing to be bound by the provisions of this Agreement).
"PERSON": Any individual, partnership, joint venture, corporation,
trust, unincorporated organization or government or any department or
agency thereof.
"REGISTRABLE SECURITIES": Any Common Stock, Preferred Stock or
Warrants acquired by the Parent from the Company or any affiliate of the
Company, Common Stock issued upon the conversion of any Preferred Stock or
upon the exercise of Warrants or otherwise, and any Common Stock, Preferred
Stock or Warrants which
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may be issued or distributed in respect thereof by way of stock dividend or
stock split or other distribution, recapitalization or reclassification.
Any particular Registrable Securities that are issued shall cease to be
Registrable Securities when (i) a registration statement with respect to
the sale by the Holder of such securities shall have become effective under
the Securities Act and such securities shall have been disposed of in
accordance with such registration statement, (ii) such securities shall
have been distributed to the public pursuant to Rule 144 (or any successor
provision) under the Securities Act, (iii) such securities shall have been
otherwise transferred, new certificates for such securities not bearing a
legend restricting further transfer shall have been delivered by the
Company and subsequent disposition of such securities shall not require
registration or qualification of such securities under the Securities Act
or any state securities or blue sky law then in force, or (iv) such
securities shall have ceased to be outstanding.
"REGISTRATION EXPENSES": Any and all expenses incident to performance
of or compliance with this Agreement, including, without limitation, (i)
all SEC and stock exchange or National Association of Securities Dealers,
Inc. (the "NASD") registration and filing fees (including, if applicable,
the fees and expenses of any "qualified independent underwriter," as such
term is defined in Schedule E to the By-laws of the NASD, and of its
counsel), (ii) all fees and expenses of complying with securities or blue
sky laws (including fees and disbursements of counsel for the underwriters
in connection with blue sky qualifications of the Registrable Securities),
(iii) all printing, messenger and delivery expenses, (iv) all fees and
expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange pursuant to clause (viii) of Section
4 and all rating agency fees, (v) the fees and disbursements of counsel for
the Company and of its independent public accountants, including the
expenses of any special audits and/or "cold comfort" letters required by or
incident to such performance and compliance, (vi) the reasonable fees and
disbursements of counsel selected pursuant to Section 7 hereof by the
Holders of the Registrable Securities being registered to represent such
Holders in connection with each such registration, (vii) any fees and
disbursements of underwriters customarily paid by the issuers or sellers of
securities, including liability insurance if the Company so desires or if
the underwriters so require, and the reasonable fees and expenses of any
special experts retained in connection with the requested registration, but
excluding underwriting discounts and commissions and transfer taxes, if
any, and (viii) other reasonable out-of-pocket expenses of Holders
(PROVIDED that such expenses shall not include expenses of counsel other
than those provided for in clause (vi) above).
"SECURITIES ACT": The Securities Act of 1933, as amended, or any
similar federal statute then in effect, and a reference to a particular
section thereof shall be deemed to include a reference to the comparable
section, if any, of any such similar federal statute.
"SEC": The Securities and Exchange Commission or any other federal
agency at the time administering the Securities Act or the Exchange Act.
2. INCIDENTAL REGISTRATIONS. (a) RIGHT TO INCLUDE COMMON OR COMMON
EQUIVALENT REGISTRABLE SECURITIES. If the Company at any time after the date
hereof proposes to register its Common Stock (or any security, including,
without limitation, Preferred Stock
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or Warrants, which is convertible into or exchangeable or exercisable for Common
Stock) under the Securities Act (other than a registration on Form S-4 or S-8,
or any successor or other forms promulgated for similar purposes), whether or
not for sale for its own account, in a manner which would permit registration of
Common or Common Equivalent Registrable Securities for sale to the public under
the Securities Act, it will, at each such time, give prompt written notice to
all Holders of Common or Common Equivalent Registrable Securities of its
intention to do so and of such Holders' rights under this Section 2. Upon the
written request of any such Holder made within 15 days after the receipt of any
such notice (which request shall specify the Common or Common Equivalent
Registrable Securities intended to be disposed of by such Holder), the Company
will use its best efforts to effect the registration under the Securities Act of
all Common or Common Equivalent Registrable Securities which the Company has
been so requested to register by the Holders thereof, to the extent requisite to
permit the disposition of the Common or Common Equivalent Registrable Securities
so to be registered; PROVIDED that (i) if, at any time after giving written
notice of its intention to register any securities and prior to the effective
date of the registration statement filed in connection with such registration,
the Company shall determine for any reason not to proceed with the proposed
registration of the securities to be sold by it, the Company may, at its
election, give written notice of such determination to each Holder of Common or
Common Equivalent Registrable Securities and, thereupon, shall be relieved of
its obligation to register any Common or Common Equivalent Registrable
Securities in connection with such registration (but not from its obligation to
pay the Registration Expenses in connection therewith), and (ii) if such
registration involves an underwritten offering, all Holders of Common or Common
Equivalent Registrable Securities requesting to be included in the Company's
registration must sell their Common or Common Equivalent Registrable Securities
to the underwriters selected by the Company on the same terms and conditions as
apply to the Company, with such differences, including any with respect to
indemnification and liability insurance, as may be customary or appropriate in
combined primary and secondary offerings. If a registration requested pursuant
to this Section 2(a) involves an underwritten public offering, any Holder of
Common or Common Equivalent Registrable Securities requesting to be included in
such registration may elect, in writing prior to the effective date of the
registration statement filed in connection with such registration, not to
register such securities in connection with such registration. Nothing in this
Section 2(a) shall operate to limit the right of a Holder to (i) request the
registration of Common Stock issuable upon conversion or exercise of convertible
securities held by such Holder notwithstanding the fact that, at the time of
request, such Holder holds only convertible securities or (ii) request the
registration at one time of both Common Stock and Common Equivalent Registrable
Securities.
(b) EXPENSES. The Company will pay all Registration Expenses in
connection with each registration of Common or Common Equivalent Registrable
Securities requested pursuant to this Section 2.
(c) PRIORITY IN INCIDENTAL REGISTRATIONS. If a registration pursuant
to this Section 2 involves an underwritten offering and the managing underwriter
advises the Company in writing that, in its opinion, the number of securities
requested to be included in such registration exceeds the number which can be
sold in such offering, so as to be likely to have an adverse effect on the
price, timing or distribution of the securities offered in such offering as
contemplated by the Company, then the Company will include in such registration
(i) first, 100% of the securities proposed to be sold by the Company and, if
such
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registration was initiated pursuant to a "demand" registration right granted
pursuant to the Stockholders' Agreement dated April 1, 1998 among the Company,
the Parent and Corning Incorporated (the "CORNING STOCKHOLDERS' AGREEMENT"), the
parties exercising such right and (ii) second, to the extent of the number of
securities requested to be included in such registration which, in the opinion
of such managing underwriter, can be sold without having the adverse effect
referred to above, the number of securities which the Holders (which term, for
the purposes of this paragraph, shall include other holders of Common Stock
having similar "incidental" or "piggyback" registration rights under the Corning
Stockholders' Agreement) have requested to be included in such registration,
such amount to be allocated pro rata among all requesting Holders on the basis
of the relative number of securities then held by each such Holder (provided
that any securities thereby allocated to any such Holder that exceed such
Holder's request will be reallocated among the remaining requesting Holders in
like manner).
3. REGISTRATION ON REQUEST. (a) REQUEST BY THE DEMAND PARTY. At any
time upon the written request of the Demand Party requesting that the Company
effect the registration under the Securities Act of all or part of such Demand
Party's Registrable Securities and specifying the amount and intended method of
disposition thereof, the Company will promptly give written notice of such
requested registration to all other Holders of such Registrable Securities, and
thereupon will, as expeditiously as possible, use its best efforts to effect the
registration under the Securities Act of:
(i) such Registrable Securities (including, if such request
relates to Preferred Stock or Warrants which are convertible into or
exchangeable or exercisable for shares of Common Stock, the shares of
Common Stock issuable upon such conversion, exchange or exercise) which the
Company has been so requested to register by the Demand Party; and
(ii) all other Registrable Securities of the same class or series
as are to be registered at the request of a Demand Party and which the
Company has been requested to register by any other Holder thereof by
written request given to the Company within 15 days after the giving of
such written notice by the Company (which request shall specify the amount
and intended method of disposition of such Registrable Securities),
all to the extent necessary to permit the disposition (in accordance with the
intended method thereof as aforesaid) of the Registrable Securities so to be
registered; PROVIDED that, with respect to any Demand Party other than the
Parent, the Company shall not be obligated to effect any registration of
Registrable Securities under this Section 3(a) unless such Demand Party requests
that the Company register at least 1% of the total number of Registrable
Securities; and PROVIDED, FURTHER, that, unless Holders of a majority of the
shares of Registrable Securities held by Holders consent thereto in writing, the
Company shall not be obligated to file a registration statement relating to any
registration request under this Section 3(a) (x) within a period of nine months
after the effective date of any other registration statement relating to any
registration request under this Section 3(a) which was not effected on Form S-3
(or any successor or similar short-form registration statement) or relating to
any registration effected under Section 2, or (y) if with respect thereto the
managing underwriter, the SEC, the Securities Act or the rules and regulations
thereunder, or the form on which the registration statement is to be filed,
would require the conduct of an audit other than the regular audit conducted by
the Company at the end of its fiscal year, in which case the filing may be
delayed until the completion of such regular audit (unless the Holders of the
Registrable Securities to be registered agree to pay the expenses of the Company
in connection with such an audit other than the
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<PAGE>
regular audit). Nothing in this Section 3(a) shall operate to limit the right
of a Holder to (i) request the registration of Common Stock issuable upon
conversion or exercise of convertible securities held by such Holder
notwithstanding the fact that, at the time of request, such Holder holds only
convertible securities or (ii) request the registration at one time of both
Common Stock and Common Equivalent Registrable Securities.
(b) REGISTRATION STATEMENT FORM. If any registration
requested pursuant to this Section 3 which is proposed by the Company to be
effected by the filing of a registration statement on Form S-3 (or any successor
or similar short-form registration statement) shall be in connection with an
underwritten public offering, and if the managing underwriter shall advise the
Company in writing that, in its opinion, the use of another form of registration
statement is of material importance to the success of such proposed offering,
then such registration shall be effected on such other form.
(c) EXPENSES. The Company will pay all Registration Expenses in
connection with the first six (6) registrations of each class or series of
Registrable Securities pursuant to this Section 3 upon the written request of
any of the Holders, PROVIDED that, for purposes hereof, a request to register
Common Stock into which Preferred Stock or Warrants are convertible,
exchangeable or exercisable in conjunction with a registration of such Preferred
Stock or Warrants shall be deemed to be one request for registration of a class
or series of Registrable Securities. All expenses for any subsequent
registrations of Registrable Securities pursuant to this Section 3 shall be paid
pro rata by the Company and all other Persons (including the Holders)
participating in such registration on the basis of the relative number of shares
of Common Stock or relative aggregate liquidation preference of the shares of
Preferred Stock, or the relative number of Warrants, as the case may be, of each
such person whose Registrable Securities are included in such registration.
(d) EFFECTIVE REGISTRATION STATEMENT. A registration requested
pursuant to this Section 3 will not be deemed to have been effected unless it
has become effective; PROVIDED that if, within 180 days after it has become
effective, the offering of Registrable Securities pursuant to such registration
is interfered with by any stop order, injunction or other order or requirement
of the SEC or other governmental agency or court, such registration will be
deemed not to have been effected.
(e) SELECTION OF UNDERWRITERS. If a requested registration pursuant
to this Section 3 involves an underwritten offering, the Holders of a majority
of the shares of Registrable Securities which are held by Holders and which the
Company has been requested to register shall have the right to select the
investment banker or bankers and managers to administer the offering; PROVIDED,
HOWEVER, that such investment banker or bankers and managers shall be reasonably
satisfactory to the Company.
(f) PRIORITY IN REQUESTED REGISTRATIONS. If a requested registration
pursuant to this Section 3 involves an underwritten offering and the managing
underwriter advises the Company in writing that, in its opinion, the number of
securities requested to be included in such registration (including securities
of the Company which are not Registrable Securities)
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<PAGE>
exceeds the number which can be sold in such offering, the Company will include
in such registration only the Registrable Securities requested to be included in
such registration. In the event that the number of Registrable Securities
requested to be included in such registration exceeds the number which, in the
opinion of such managing underwriter, can be sold, the number of such
Registrable Securities to be included in such registration shall be allocated
pro rata among all requesting Holders on the basis of the relative number of
shares of Registrable Securities then held by each such Holder (provided that
any shares thereby allocated to any such Holder that exceed such Holder's
request shall be reallocated among the remaining requesting Holders in like
manner). In the event that the number of Registrable Securities requested to be
included in such registration is less than the number which, in the opinion of
the managing underwriter, can be sold, the Company may include in such
registration the securities the Company proposes to sell up to the number of
securities that, in the opinion of the underwriter, can be sold.
(g) ADDITIONAL RIGHTS. If the Company at any time grants to any other
holders of Common Stock, Preferred Stock or Warrants any rights to request the
Company to effect the registration under the Securities Act of any such shares
of Common Stock, Preferred Stock or Warrants on terms more favorable to such
holders than the terms set forth in this Section 3, the terms of this Section 3
shall be deemed amended or supplemented to the extent necessary to provide the
Holders such more favorable rights and benefits.
4. REGISTRATION PROCEDURES. If and whenever the Company is required
to use its best efforts to effect or cause the registration of any Registrable
Securities under the Securities Act as provided in this Agreement, the Company
will, as expeditiously as possible:
(i) prepare and, in any event within 120 days after the end of
the period within which a request for registration may be given to the
Company, file with the SEC a registration statement with respect to such
Registrable Securities and use its best efforts to cause such registration
statement to become effective, PROVIDED, HOWEVER, that the Company may
discontinue any registration of its securities which is being effected
pursuant to Section 2 at any time prior to the effective date of the
registration statement relating thereto;
(ii) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period not in excess of 270 days and to comply
with the provisions of the Securities Act, the Exchange Act and the rules
and regulations of the SEC thereunder with respect to the disposition of
all securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such registration statement; PROVIDED that
before filing a registration statement or prospectus, or any amendments or
supplements thereto, the Company will furnish to counsel selected pursuant
to Section 7 hereof by the Holders of the Registrable Securities covered by
such registration statement to represent such Holders, copies of all
documents proposed to be filed, which documents will be subject to the
review of such counsel;
(iii) furnish to each seller of such Registrable Securities such
number of copies of such registration statement and of each amendment and
supplement thereto
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(in each case including all exhibits filed therewith, including any
documents incorporated by reference), such number of copies of the
prospectus included in such registration statement (including each
preliminary prospectus and summary prospectus), in conformity with the
requirements of the Securities Act, and such other documents as such seller
may reasonably request in order to facilitate the disposition of the
Registrable Securities by such seller;
(iv) use its best efforts to register or qualify such Registrable
Securities covered by such registration in such jurisdictions as each
seller shall reasonably request, and do any and all other acts and things
which may be reasonably necessary or advisable to enable such seller to
consummate the disposition in such jurisdictions of the Registrable
Securities owned by such Seller, except that the Company shall not for any
such purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction where, but for the requirements of this
clause (iv), it would not be obligated to be so qualified, to subject
itself to taxation in any such jurisdiction or to consent to general
service of process in any such jurisdiction;
(v) use its best efforts to cause such Registrable Securities
covered by such 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
Registrable Securities;
(vi) notify each seller of any such Registrable Securities
covered by such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act
within the appropriate period mentioned in clause (ii) of this Section 4,
of the Company's becoming aware that the prospectus included in such
registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing, and at the request of any such
seller, prepare and furnish to such seller a reasonable number of copies of
an amended or supplemental prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
then existing;
(vii) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make available to its security
holders, as soon as reasonably practicable (but not more than eighteen
months) after the effective date of the registration statement, an earnings
statement which shall satisfy the provisions of Section 11(a) of the
Securities Act and the rules and regulations promulgated thereunder;
(viii) (A) if such Registrable Securities are Common Stock
(including Common Stock issuable upon conversion of a convertible
security), use its best efforts to list such Registrable Securities on any
securities exchange on which the Common Stock is then listed if such
Registrable Securities are not already so listed and if such listing is
then permitted under the rules of such exchange; (B) if such Registrable
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Securities are convertible securities, upon the reasonable request of
sellers of a majority of shares of such Registrable Securities, use its
best efforts to list the convertible securities and, if requested, the
Common Stock underlying the convertible securities, notwithstanding that at
the time of request such sellers hold only convertible securities, on any
securities exchange so requested, if such Registrable Securities are not
already so listed and if such listing is then permitted under the rules of
such exchange; and (C) and use its best efforts to provide a transfer agent
and registrar for such Registrable Securities covered by such registration
statement not later than the effective date of such registration statement;
(ix) enter into such customary agreements (including an
underwriting agreement in customary form), which may include
indemnification provisions in favor of underwriters and other persons in
addition to, or in substitution for the provisions of Section 5 hereof, and
take such other actions as sellers of a majority of shares of such
Registrable Securities or the underwriters, if any, reasonably request in
order to expedite or facilitate the disposition of such Registrable
Securities;
(x) obtain a "cold comfort" letter or letters from the Company's
independent public accounts in customary form and covering matters of the
type customarily covered by "cold comfort" letters as the seller or sellers
of a majority of shares of such Registrable Securities shall reasonably
request (provided that Registrable Securities constitute at least 25% of
the securities covered by such registration statement);
(xi) make available for inspection by any seller of such
Registrable Securities covered by such registration statement, by any
underwriter participating in any disposition to be effected pursuant to
such registration statement and by any attorney, accountant or other agent
retained by any such seller or any such underwriter, all pertinent
financial and other records, pertinent corporate documents and properties
of the Company, and cause all of the Company's officers, directors and
employees to supply all information reasonably requested by any such
seller, underwriter, attorney, accountant or agent in connection with such
registration statement;
(xii) notify counsel (selected pursuant to Section 7 hereof) for
the Holders of Registrable Securities included in such registration
statement and the managing underwriter or agent, immediately, and confirm
the notice in writing (i) when the registration statement, or any
post-effective amendment to the registration statement, shall have become
effective, or any supplement to the prospectus or any amendment prospectus
shall have been filed, (ii) of the receipt of any comments from the SEC,
(iii) of any request of the SEC to amend the registration statement or
amend or supplement the prospectus or for additional information, and (iv)
of the issuance by the SEC of any stop order suspending the effectiveness
of the registration statement or of any order preventing or suspending the
use of any preliminary prospectus, or of the suspension of the
qualification of the registration statement for offering or sale in any
jurisdiction, or of the institution or threatening of any proceedings for
any of such purposes;
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<PAGE>
(xiii) make every reasonable effort to prevent the issuance of any
stop order suspending the effectiveness of the registration statement or of
any order preventing or suspending the use of any preliminary prospectus
and, if any such order is issued, to obtain the withdrawal of any such
order at the earliest possible moment;
(xiv) if requested by the managing underwriter or agent or any
Holder of Registrable Securities covered by the registration statement,
promptly incorporate in a prospectus supplement or post-effective amendment
such information as the managing underwriter or agent or such Holder
reasonably requests to be included therein, including, without limitation,
with respect to the number of Registrable Securities being sold by such
Holder to such underwriter or agent, the purchase price being paid therefor
by such underwriter or agent and with respect to any other terms of the
underwritten offering of the Registrable Securities to be sold in such
offering; and make all required filings of such prospectus supplement or
post-effective amendment as soon as practicable after being notified of the
matters incorporated in such prospectus supplement or post-effective
amendment;
(xv) cooperate with the Holders of Registrable Securities covered
by the registration statement and the managing underwriter or agent, if
any, to facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legends) representing securities to be sold under
the registration statement, and enable such securities to be in such
denominations and registered in such names as the managing underwriter or
agent, if any, or such Holders may request;
(xvi) obtain for delivery to the Holders of Registrable Securities
being registered and to the underwriter or agent an opinion or opinions
from counsel for the Company in customary form and in form, substance and
scope reasonably satisfactory to such Holders, underwriters or agents and
their counsel; and
(xvii) cooperate with each seller of Registrable Securities and
each underwriter or agent participating in the disposition of such
Registrable Securities and their respective counsel in connection with any
filings required to be made with the NASD.
The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish the Company with such
information regarding such seller and pertinent to the disclosure requirements
relating to the registration and the distribution of such securities as the
Company may from time to time reasonably request in writing.
Each Holder of Registrable Securities agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
clause (vi) of this Section 4, such Holder will forthwith discontinue
disposition of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until such Holder's receipt of the copies
of the supplemented or amended prospectus contemplated by clause (vi) of this
Section 4, and, if so directed by the Company, such Holder will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies
then in such Holder's possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice. In the event the
Company shall give any such notice, the
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period mentioned in clause (ii) of this Section 4 shall be extended by the
number of days during the period from and including the date of the giving of
such notice pursuant to clause (vi) of this Section 4 and including the date
when each seller of Registrable Securities covered by such registration
statement shall have received the copies of the supplemented or amended
prospectus contemplated by clause (vi) of this Section 4.
5. INDEMNIFICATION. (a) INDEMNIFICATION BY THE COMPANY. In the event
of any registration of any securities of the Company under the Securities Act
pursuant to Section 2 or 3, the Company will, and it hereby does, indemnify and
hold harmless, to the extent permitted by law, the seller of any Registrable
Securities covered by such registration statement, each affiliate of such seller
and their respective directors and officers or general and limited partners
(including any director, officer, affiliate, employee, agent and controlling
Person of any of the foregoing), each other Person who participates as an
underwriter in the offering or sale of such securities and each other Person, if
any, who controls such seller or any such underwriter within the meaning of the
Securities Act (collectively, the "INDEMNIFIED PARTIES"), against any and all
losses, claims, damages or liabilities, joint or several, and expenses
(including reasonable attorney's fees and reasonable expenses of investigation)
to which such Indemnified Party may become subject under the Securities Act,
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions or proceedings in respect thereof, whether or not such Indemnified
Party is a party thereto) arise out of or are based upon (a) any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered under the
Securities Act, any preliminary, final or summary prospectus contained therein,
or any amendment or supplement thereto, or (b) any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein (in the case of a prospectus, in light of the
circumstances under which they were made) not misleading, and the Company will
reimburse such Indemnified Party for any legal or any other expenses reasonably
incurred by it in connection with investigating or defending against any such
loss, claim, liability, action or proceeding; PROVIDED that the Company shall
not be liable to any Indemnified Party in any such case to the extent that any
such loss, claim, damage, liability (or action or proceeding in respect thereof)
or expense arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement or
amendment or supplement thereto or in any such preliminary, final or summary
prospectus in reliance upon and in conformity with written information furnished
to the Company with respect to such seller through an instrument duly executed
by such seller specifically stating that it is for use in the preparation
thereof; and PROVIDED, FURTHER, that the Company will not be liable to any
Person who participates as an underwriter in the offering or sale of Registrable
Securities or any other Person, if any, who controls such underwriter within the
meaning of the Securities Act, under the indemnity agreement in this Section
5(a) with respect to any preliminary prospectus or the final prospectus or the
final prospectus as amended or supplemented, as the case may be, to the extent
that any such loss, claim, damage or liability of such underwriter or
controlling Person results from the fact that such underwriter sold Registrable
Securities to a person to whom there was not sent or given, at or prior to the
written confirmation of such sale, a copy of the final prospectus or of the
final prospectus as then amended or supplemented, whichever is most recent, if
the Company has previously furnished copies thereof to such underwriter. For
purposes of the last proviso to the immediately preceding sentence, the term
"prospectus" shall not be deemed to include the documents incorporated therein
by reference, and no Person who participates as an
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underwriter in the offering or sale of Registrable Securities or any other
Person, if any, who controls such underwriter within the meaning of the
Securities Act, shall be obligated to send or give any supplement or amendment
to any document incorporated by reference in any preliminary prospectus or the
final prospectus to any person other than a person to whom such underwriter had
delivered such incorporated document or documents in response to a written
request therefor. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such seller or any
Indemnified Party and shall survive the transfer of such securities by such
seller.
In addition, the Company will, and it hereby does, indemnify and hold
harmless, to the extent permitted by law, the Parent, each affiliate of the
Parent and their respective directors and officers or general and limited
partners (including any director, officer, affiliate, employee, agent and
controlling Person of any of the foregoing), against any and all losses, claims,
damages or liabilities, joint or several, and expenses (including reasonable
attorney's fees and reasonable expenses of investigation) in any manner arising
out of or relating to (x) the purchase or ownership of capital stock or other
securities of the Company by the Parent or any such other Person or (y) any
litigation to which the Parent or any such other Person is made a party in its
capacity as a stockholder or owner of securities (or a partner, director,
officer, affiliate, employee, agent or controlling Person of a stockholder or
owner of securities) of the Company.
(b) INDEMNIFICATION BY THE SELLER. The Company may require, as a
condition to including any Registrable Securities in any registration statement
filed in accordance with Section 4 herein, that the Company shall have received
an undertaking reasonably satisfactory to it from the prospective seller of such
Registrable Securities or any underwriter to indemnify and hold harmless (in the
same manner and to the same extent as set forth in subdivision (a) of this
Section 5) the Company and all other prospective sellers with respect to any
untrue statement or alleged untrue statement in or omission or alleged omission
from such registration statement, any preliminary, final or summary prospectus
contained therein, or any amendment or supplement, if such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company with
respect to such seller through an instrument duly executed by such seller or
underwriter specifically stating that it is for use in the preparation of such
registration statement, preliminary, final or summary prospectus or amendment or
supplement, or a document incorporated by reference into any of the foregoing.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any of the prospective
sellers, or any of their respective affiliates, directors, officers or
controlling Persons and shall survive the transfer of such securities by such
seller. In no event shall the liability of any selling Holder of Registrable
Securities hereunder be greater in amount than the dollar amount of the proceeds
received by such Holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an Indemnified
Party hereunder of written notice of the commencement of any action or
proceeding with respect to which a claim for indemnification may be made
pursuant to this Section 5, such Indemnified Party will, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action; PROVIDED that the failure of the
Indemnified Party to give notice as provided herein shall not relieve the
indemnifying
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<PAGE>
party of its obligations under the preceding subdivisions of this Section 5,
except to the extent that the indemnifying party is actually prejudiced by such
failure to give notice. In case any such action is brought against an
Indemnified Party, unless in such Indemnified Party's reasonable judgment a
conflict of interest between such Indemnified Party and indemnifying parties may
exist in respect of such claim, the indemnifying party will be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such Indemnified Party, and after notice from
the indemnifying party to such Indemnified Party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
Indemnified Party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party will consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof, the giving by the claimant or plaintiff to such Indemnified Party of a
release from all liability in respect to such claim or litigation.
(d) CONTRIBUTION. If the indemnification provided for in this Section
5 from the indemnifying party is unavailable to an Indemnified Party hereunder
in respect of any losses, claims, damages, liabilities or expenses referred to
herein, then the 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 expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and Indemnified Parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying
party and Indemnified Parties shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact, has been made by, or relates to information supplied by, such indemnifying
party or Indemnified Parties, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such action. The
amount paid or payable by a party under this Section 5(d) as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include any legal or other fees or expenses reasonably incurred by
such party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
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.
(e) OTHER INDEMNIFICATION. Indemnification similar to that specified
in the preceding subdivisions of this Section 5 (with appropriate modifications)
shall be given by the Company and each seller of Registrable Securities with
respect to any required registration or other qualification of securities under
any federal or state law or regulation or governmental authority other than the
Securities Act.
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<PAGE>
(f) NON-EXCLUSIVITY. The obligations of the parties under this
Section 5 shall be in addition to any liability which any party may otherwise
have to any other party.
6. RULE 144. The Company covenants that it will file the reports
required to be filed by it under the Securities Act and the Exchange Act and the
rules and regulations adopted by the SEC thereunder (or, if the Company is not
required to file such reports, it will, upon the request of any Holder of
Registrable Securities, make publicly available such information), and it will
take such further action as any Holder of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such Holder to
sell shares of Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by (i) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (ii) any
similar rule or regulation hereafter adopted by the SEC. Upon the request of
any Holder of Registrable Securities, the Company will deliver to such Holder a
written statement as to whether it has complied with such requirements.
Notwithstanding anything contained in this Section 6, the Company may deregister
under Section 12 of the Exchange Act if it then is permitted to do so pursuant
to the Exchange Act and the rules and regulations thereunder.
7. SELECTION OF COUNSEL. In connection with any registration of
Registrable Securities pursuant to Sections 2 and 3 hereof, the Holders of a
majority of the Registrable Securities covered by any such registration may
select one counsel to represent all Holders of Registrable Securities covered by
such registration; PROVIDED, HOWEVER, that in the event that the counsel
selected as provided above is also acting as counsel to the Company in
connection with such registration, the remaining Holders shall be entitled to
select one additional counsel to represent all such remaining Holders.
8. MISCELLANEOUS. (a) OTHER INVESTORS. The Company may enter into
agreements with other purchasers of Common Stock who are then employees of the
Company or any of its subsidiaries, making them parties hereto (and thereby
giving them all, or a portion, of the rights, preferences and privileges of an
original party hereto) with respect to additional shares of Common Stock (the
"SUPPLEMENTAL AGREEMENTS"); PROVIDED, HOWEVER, that pursuant to any such
Supplemental Agreement, such purchaser expressly agrees to be bound by all of
the terms, conditions and obligations of this Agreement as if such purchaser
were an original party hereto. All shares of Common Stock issued or issuable
pursuant to such Supplemental Agreements shall be deemed to be Registrable
Securities.
(b) HOLDBACK AGREEMENT. If any such registration shall be in
connection with an underwritten public offering, each Holder of Registrable
Securities agrees not to effect any public sale or distribution, including any
sale pursuant to Rule 144 under the Securities Act, of any equity securities of
the Company, or of any security convertible into or exchangeable or exercisable
for any equity security of the Company (in each case, other than as part of such
underwritten public offering), within 7 days before or such period not to exceed
180 days as the underwriting agreement may require (or such lesser period as the
managing underwriters may permit) after the effective date of such registration
(except as part of such registration), and the Company hereby also so agrees and
agrees to cause each other holder of any equity security, or of any security
convertible into or exchangeable or exercisable for any equity security, of the
Company purchased from the Company (at any time other than in a public offering)
to so agree.
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<PAGE>
(c) AMENDMENTS AND WAIVERS. This Agreement may be amended and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the Holders of
a majority of the Registrable Securities then outstanding; PROVIDED, HOWEVER,
that no amendment, waiver or consent to the departure from the terms and
provisions of this Agreement that is adverse to the Parent or any of its
successors and assigns shall be effective as against any such Person for so long
as such Person holds any Registrable Securities unless consented to in writing
by such Person. Each Holder of any Registrable Securities at the time or
thereafter outstanding shall be bound by any consent authorized by this Section
8(b), whether or not such Registrable Securities shall have been marked to
indicate such consent.
(d) SUCCESSORS, ASSIGNS AND TRANSFEREES. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns. Upon any merger or consolidation of Parent
with the Company or any liquidation of Parent, the stockholder or stockholders
of Parent shall succeed to all of Parent's rights and obligations hereunder. In
addition, and whether or not any express assignment shall have been made, the
provisions of this Agreement which are for the benefit of the parties hereto
other than the Company shall also be for the benefit of and enforceable by any
subsequent Holder of any Registrable Securities, subject to the provisions
contained herein. Without limitation to the foregoing, in the event that the
Parent or any of its successors or assigns or any other subsequent Holder of any
Registrable Securities distributes or otherwise transfers any shares of the
Registrable Securities to any of its present or future shareholders, members,
general or limited partners, the Company hereby acknowledges that the
registration rights granted pursuant to this Agreement shall be transferred to
such shareholders, members or partners on a pro rata basis, and that at or after
the time of any such distribution or transfer, any such shareholder, member,
partner or group of shareholders, members or partners may designate a Person to
act on its behalf in delivering any notices or making any requests hereunder.
(e) NOTICES. All notices and other communications provided for
hereunder shall be in writing and shall be sent by first class mail, telex,
telecopier or hand delivery:
(i) if to the Company, to:
Corning Consumer Products Company
E-Building
Houghton Park
Corning, New York 14831
Attn: President
(ii) if to the Parent, to:
c/o Borden Capital Management Partners
180 East Broad Street
Columbus, Ohio 43215
Attention: Chief Executive Officer
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<PAGE>
with copies to:
KKR Associates
9 West 57th Street
New York, New York 10019
Attention: Clifton S. Robbins and Scott M. Stuart
-and-
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: David J. Sorkin, Esq
(iii) if to any other holder of Registrable Securities, to the
address of such
other holder as shown in the stock record book of the Company, or
to such other address as any of the above shall have designated
in writing to all of the other above.
All such notices and communications shall be deemed to have been given
or made (A) when delivered by hand, (B) five business days after being deposited
in the mail, postage prepaid, (C) when telexed answer-back received or (D) when
telecopied, receipt acknowledged.
(f) DESCRIPTIVE HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein.
(g) SEVERABILITY. In the event that any one or more of the
provisions, paragraphs, words, clauses, phrases or sentences contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision, paragraph, word, clause, phrase or
sentence in every other respect and of the remaining provisions, paragraphs,
words, clauses, phrases or sentences hereof shall not be in any way impaired, it
being intended that all rights, powers and privileges of the parties hereto
shall be enforceable to the fullest extent permitted by law.
(h) COUNTERPARTS. This Agreement may be executed in counterparts, and
by different parties on separate counterparts, each of which shall be deemed an
original, but all such counterparts shall together constitute one and the same
instrument.
(i) GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement shall
be governed by and construed and enforced in accordance with the laws of the
State of New York applicable to contracts made and to be performed therein. The
parties to this Agreement hereby agree to submit to the jurisdiction of the
courts of the State of New York, the courts of the United States of America for
the Southern District of New York, and appellate courts from any thereof in any
action or proceeding arising out of or relating to this Agreement.
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<PAGE>
(j) SPECIFIC PERFORMANCE. The parties hereto acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. Accordingly, it is agreed that they shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of competent jurisdiction in the United States or any state thereof, in
addition to any other remedy to which they may be entitled at law or in equity.
[Continued on next page.]
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<PAGE>
IN WITNESS WHEREOF, each of the undersigned has executed this
Agreement or caused this Agreement to be duly executed on its behalf as of the
date first written above.
CORNING CONSUMER PRODUCTS COMPANY
By
----------------------------
Name:
Title:
CCPC ACQUISITION CORP.
By
----------------------------
Name:
Title:
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<PAGE>
Exhibit 10.7
TAX SHARING AGREEMENT
AGREEMENT entered into as of April 30, 1998 between CCPC
Acquisition Corp. ("Parent"), and Corning Consumer Products Company and Revere
Ware Corporation, which are includible corporations in the affiliated group of
corporations of which Parent is the common parent (within the meaning attributed
to such terms in section 1504 of the Internal Revenue Code of 1986, as amended
(the "Code")) and, collectively, are hereinafter referred to as the "Group."
WHEREAS, each member of the Group desires, to the extent
permitted by the Code or the regulations promulgated thereunder, to be included
in the filing of consolidated Federal income tax returns on behalf of the Group;
and
WHEREAS, each member of the Group desires to participate, to
the extent permitted by applicable state or local law, in combined or
consolidated state and local income tax returns if so requested by Parent and to
allocate and settle in an equitable manner the state or local income tax
liability shown on such returns; and
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, the parties agree as follows:
1. Definition. For purposes of this Agreement, the
following terms shall be defined as follows:
(a) Subsidiary shall mean Corning Consumer Products
Company, Revere Ware Corporation and any corporation that becomes a member of
the Group under paragraph 15 hereof (including any Pledged Subsidiary, as
defined in the Credit Agreement dated April 9, 1998, that will acquire assets
from Corning Consumer Products Company) provided, however, that each of the
provisions of this Agreement shall apply separately to each as if each were the
only Subsidiary.
<PAGE>
2
(b) Subsidiary Group shall mean each Subsidiary
which would be included in the affiliated group of corporations (as defined in
Section 1504(a) of the code) of which Corning Consumer Products Company would be
the common Parent but for the inclusion of the Subsidiary in the Group.
(c) Taxable Period shall mean any taxable year
or portion thereof with respect to which a consolidated Federal, or combined or
consolidated state or local, income tax return is filed on behalf of the Group.
(d) Subsidiary Group Federal Tax for a Taxable
Period shall mean the Federal income tax liability and the Federal alternative
minimum tax liability for that Taxable Period that the Subsidiary Group would
have incurred if the Subsidiary Group had not been included in a consolidated
Federal income tax return filed for the Group for such Taxable Period and each
prior Taxable Period for which this Agreement is in effect but instead had filed
its own consolidated federal income tax return for such Taxable Period and each
prior Taxable Period for which this Agreement is in effect, provided that any
net operating loss or net capital loss of the Subsidiary Group shall only be
carried forward and taken into account in computing the Subsidiary Group Federal
Tax for subsequent Taxable Periods (subject to applicable limitations under the
Code).
(e) Subsidiary Group State or Local Tax for a
Taxable Period shall mean the state or local income tax liability for that
Taxable Period that the Subsidiary Group or subgroup thereof would have incurred
if the Subsidiary Group or a subgroup thereof had not been included in a
combined or consolidated state or local income tax return with the Group or a
subgroup that includes Parent for such Taxable Period and each prior Taxable
Period for which this Agreement is in effect but instead had filed its own
combined or consolidated state or local income tax return for such Taxable
Period and each prior Taxable Period for which this Agreement is in effect,
provided that any net operating loss or net
<PAGE>
3
capital loss of the Subsidiary Group or the subgroup thereof shall only be
carried forward and taken into account in computing the Subsidiary Group or the
subgroup thereof State or Local Tax for subsequent Taxable Periods (subject to
applicable limitations under state or local law).
(f) Estimated Tax Payments shall mean for a
Taxable Period the aggregate payments for such Taxable Period provided in
Paragraph 3 hereof.
(g) Final Determination shall mean a closing
agreement with the Internal Revenue Service or the relevant state or local
taxing authorities, a claim for refund that has been allowed, a deficiency
notice with respect to which the period for filing a petition with the Tax Court
or the relevant state or local tribunal has expired, or a decision of any court
of competent jurisdiction that is not subject to appeal or as to which the time
for appeal has expired.
2. Payments by Subsidiary or Parent.
(a) For each Taxable Period, Corning Consumer
Products Company shall pay to Parent an amount equal to the excess, if any, of
(x) the sum of Subsidiary Group Federal Tax for such Taxable Period over (y)
Subsidiary Group Estimated Tax Payments with respect to Federal income taxes. If
the Subsidiary Group Estimated Tax Payments with respect to Federal income taxes
for such Taxable Period exceed the sum of the Subsidiary Group Federal Tax for
such Taxable Period, Parent shall pay to CCPC an amount equal to such excess.
(b) For each Taxable Period with respect to
which the Subsidiary Group or a subgroup thereof participates in the filing of a
combined or consolidated state or local income tax return with Parent, Corning
Consumer Products Company or the highest tier member (other than Parent)
included in the tax return shall pay to Parent an amount equal to the excess, if
any, of the Subsidiary Group or the subgroup thereof State or Local
<PAGE>
4
Tax for such period over the Subsidiary Group or a subgroup thereof Estimated
Tax Payments with respect to such state or local income tax for such period. If
the Subsidiary Group or a subgroup thereof Estimated Tax Payments with respect
to state or local income tax for such period exceed the Subsidiary Group or the
subgroup thereof State or Local Tax for such period, Parent shall pay to Corning
Consumer Products Company or the highest tier member (other than Parent)
included in the tax return an amount equal to such excess.
3. Estimated Tax Payments.
(a) For every Taxable Period, Corning Consumer
Products Company shall pay to Parent, by the tenth day of the fourth, sixth,
ninth and twelfth months of such Taxable Period, the amount of estimated Federal
income taxes that the Subsidiary Group would be required to pay on or before the
fifteenth day of each such month if the Subsidiary Group were filing a separate
consolidated Federal income tax return for such Taxable Period. Such estimated
Federal income tax liability shall be determined in a manner consistent with
Paragraphs 1(c) hereof and shall reflect estimated taxable income and/or
estimated alternative minimum taxable income projected for three, six, nine and
twelve months, respectively, under a method that is used or would be used by
Parent in paying its actual estimated tax payments, if any.
(b) For every period with respect to which the
Subsidiary Group or a subgroup thereof participates in the filing of a combined
or consolidated state or local income tax return with Parent, Corning Consumer
Products Company or the highest tier member (other than Parent) included in the
tax return shall pay to Parent, by the fifth day prior to the date an estimated
state or local payment is due, the amount of estimated taxes that the Subsidiary
Group or subgroup thereof would have been required to pay, determined in a
manner consistent with Paragraph 1(d) hereof.
<PAGE>
5
4. Time and Form of Payment.
Payments pursuant to Paragraph 2 hereof shall be made no later
than the fifth day prior to the due date of the Group's consolidated Federal
income tax return (or the Group's combined or consolidated state or local income
tax return) for the period in question. If the due date for any such return is
extended, any payments to be made at the time of filing a request for extension
of time to file shall be made on an estimated basis. No later than five (5) days
prior to the extended due date for such return, a Subsidiary's payment shall be
recalculated and any difference between the tax liability of the Subsidiary
Group or subgroup thereof with respect to such return, determined in accordance
with the terms of this Agreement, and all of the Subsidiary Group or subgroup
thereof prior estimated payments with respect to the relevant Taxable Period
shall be paid by such fifth day to the party entitled thereto, with interest
from the original due date at the relevant statutory rate.
5. Redetermination of Tax Liability. In the event of any
redetermination of the consolidated Federal income tax liability of the Group
for any Taxable Period (or of the combined or consolidated state or local income
tax liability for any period with respect to which a combined or consolidated
return is filed) as a result of audit by the Internal Revenue Service (or the
relevant state or local authorities), a claim for refund, or otherwise, the
Subsidiary Group Federal Tax (or State or Local Tax) shall be recomputed for
such Taxable Period and any subsequent Taxable Periods to take into account such
redetermination and the payments pursuant to Paragraph 2 hereof shall be
appropriately adjusted. Any payment between Parent and a Subsidiary required by
such adjustment shall be paid within seven (7) days after the date of a Final
Determination with respect to such redetermination, or as soon as such
adjustment can practicably be calculated, if later, together with interest for
the period at the relevant statutory rate.
<PAGE>
6
6. Filing of Returns, Payment of Tax, Etc.
(a) Agent. Subsidiary hereby appoints Parent as
its agent, as long as Subsidiary, as the case may be, is a member of the Group,
for the purpose of participating in the filing of consolidated Federal income
tax returns and making any election or application or taking any action in
connection therewith on behalf of Subsidiary. Subsidiary hereby appoints Parent
as its agent, as long as Subsidiary, as the case may be, is a member of the
Group, for the purpose of filing or participating in such combined or
consolidated state or local income tax returns as Parent may elect to file or
participate in filing and making any election or application or taking any
action in connection therewith on behalf of Subsidiary. Subsidiary hereby
consents to the filing of such returns and the making of such elections and
applications. Nothing herein shall be construed as requiring Parent to file or
participate in the filing of combined or consolidated state or local income tax
returns for the Group for any period.
(b) Cooperation. Subsidiary shall cooperate
with Parent in the filing, to the extent permitted by law, of a consolidated
Federal income tax return and such combined or consolidated state or local
income tax returns for the Group as Parent elects to file or participate in by
maintaining such books and records and providing such information as may be
necessary or useful in the filing of such returns and executing any documents
and taking any actions that Parent may reasonably request in connection
therewith. Parent will provide Subsidiary, upon request, with copies of any such
returns promptly after such returns are filed. Parent and Subsidiary shall
provide one another with such information concerning such returns and the
application of payments made under this Agreement as Parent or Subsidiary may
reasonably request of one another.
(c) Payment of Tax. For each Taxable Period,
Parent shall timely pay or discharge, or cause to be timely paid or discharged,
the consolidated Federal income
<PAGE>
7
tax liability of the Group for such Taxable Period and the combined or
consolidated state or local income tax liability shown on any combined return
Parent elects to or is required to file.
7. Resolution of Disputes. Any dispute concerning the
calculation or basis of determination of any payment provided for hereunder
shall be resolved by the independent certified public accountants for Parent
whose judgement shall be conclusive and binding upon the parties, in the absence
of manifest error.
8. Adjudications. In any audit, conference, or other
proceeding with the Internal Revenue Service (or the relevant state or local
authorities), or in any judicial proceedings concerning the determination of the
Federal income tax liability of the Group or Subsidiary or the state or local
income tax liability of any combined or consolidated group including Parent,
Parent and Subsidiary shall be represented by persons selected by Parent. The
settlement and terms of settlement of any issues relating to such proceeding
shall be in the sole discretion of Parent, and Subsidiary hereby appoints Parent
as its agent for the purpose or proposing and concluding any such settlement.
9. Successors. This Agreement shall inure to the benefit of
and be binding upon any successors or assigns of the parties hereto.
10. Interpretation. This Agreement is intended to allocate the
Federal and certain state or local income tax liabilities of the Group, and any
situation or circumstances concerning such allocation that are not specifically
contemplated hereby or provided for herein shall be dealt with in a manner
consistent with the underlying principles of allocation in this Agreement.
11. Legal and Accounting Fees. Any fees or expenses for legal,
accounting or other professional services rendered in connection with (i) the
preparation of a consolidated Federal or combined or consolidated state or local
income tax return for the Group (to the extent that such services reasonably
pertain to the tax liability of Subsidiary
<PAGE>
8
rather than any other members of the Group), (ii) the application of the
provisions of this Agreement, or (iii) the conduct of any audit, conference or
proceeding of the Internal Revenue Service or relevant state or local
authorities or judicial proceedings relevant to any determination required to be
made shall be allocated between Parent and Subsidiary in the manner resulting in
a reasonable approximation of the actual amount of such fees or expenses
hereunder reasonably related to, and for the benefit of, Subsidiary, rather than
to or for other members of the Group.
12. Effect of the Agreement. This Agreement shall determine
the liability of Parent and Subsidiary to each other as to the matters provided
for herein, whether or not such determination is effective for purposes of the
Code or the regulations promulgated thereunder or state or local revenue laws
and regulations, financial reporting purposes or other purposes.
13. Entire Agreement. This Agreement embodies the entire
understanding between the parties relating to its subject matter and supersedes
and terminates all prior agreements and understandings among the parties with
respect to such subject matter. This Agreement, including this provision against
oral modification, shall not be modified or terminated except by a writing duly
signed by each of the parties hereto, and no waiver of any provisions of this
agreement shall be effective unless in a writing duly signed by each of the
parties hereto provided. however, all parties agree that upon execution and
acceptance of a Supplemental Signature Page, in the form attached as Exhibit A
hereto, this Agreement shall be amended and any Pledged Subsidiary, as referred
to in Section 1 (a) above, shall have the rights and obligations of a Subsidiary
under the Agreement.
14. Code References. Any references to sections of the Code
shall be deemed to refer to any successor provisions of the Code and shall refer
to such sections or provisions as in effect from time to time.
<PAGE>
9
15. New Members. Each of the parties agree that each
corporation that becomes a member of the Group after the date hereof and that is
permitted to file a consolidated Federal or combined or consolidated state or
local income tax return with other members of the Group, shall be added to this
Agreement without the express written consent of the other members.
<PAGE>
10
IN WITNESS WHEREOF, each of the parties has caused
this Agreement to be executed by its respective duly authorized officer as of
the date first set forth above.
CCPC ACQUISITION CORP.
By:
---------------------------------
CORNING CONSUMER PRODUCTS COMPANY
By:
---------------------------------
REVERE WARE CORPORATION
By:
---------------------------------
<PAGE>
Exhibit 10.8
SALE PARTICIPATION AGREEMENT
----------------------------
__________, 1998
To: The Person whose name
and address are set forth
on the signature page hereof
Dear Sir or Madam:
You have entered into a Management Stockholder's Agreement, dated as
of April 1, 1998 (the "STOCKHOLDER'S AGREEMENT"), with Corning Consumer Products
Company, a Delaware corporation (the "COMPANY"), relating to the purchase by you
from CCPC Acquisition Corp. (the "PARENT") of shares of common stock (the
"COMMON STOCK") of the Company. Parent hereby agrees with you as follows,
effective upon your purchase of Common Stock:
1. In the event that at any time the Parent proposes to sell for cash
or any other consideration any shares of Common Stock of the Company owned by
it, in any transaction other than a Public Offering (as defined in the
Stockholder's Agreement) or a sale to an affiliate of KKR Associates, the Parent
will notify you or your Purchaser's Estate or Purchaser's Trust (as such terms
are defined in Section 2 of the Stockholder's Agreement), as the case may be, in
writing (a "NOTICE") of such proposed sale (a "PROPOSED SALE") and the material
terms of the Proposed Sale as of the date of the Notice (the "MATERIAL TERMS")
promptly, and in any event not less than 15 days prior to the consummation of
the Proposed Sale and not more than 5 days after the execution of the definitive
agreement relating to the Proposed Sale, if any (the "SALE AGREEMENT"). If
within 10 days of your or your Purchaser's Estate's or Purchaser's Trust's, as
the case may be, receipt of such Notice the Parent receives from you or your
Purchaser's Estate or Purchaser's Trust, as the case may be, a written request
(a "PURCHASER REQUEST") to include Common Stock held by you or your Purchaser's
Estate or Purchaser's Trust, as the case may be, in the Proposed Sale (which
Purchaser Request shall be irrevocable unless (a) there shall be a material
adverse change in the Material Terms or (b) otherwise mutually agreed to in
writing by you or your Purchaser's Estate or Purchaser's Trust, as the case may
be, and the Parent), the Common Stock held by you will be so included as
provided herein; PROVIDED that only one Purchaser Request, which shall be
executed by you or your Purchaser's Estate or Purchaser's Trust, as the case may
be, may be delivered with respect to any Proposed Sale for all Common Stock held
by you or your Purchaser's Estate or Purchaser's Trust. Promptly after the
consummation of the transactions contemplated thereby, the Parent will furnish
you, your Purchaser's Trust or your Purchaser's Estate, as the case may be, with
a copy of the Sale Agreement, if any.
2. The number of shares of Common Stock which you or your Purchaser's
Estate or Purchaser's Trust, as the case may be, will be permitted to include in
a Proposed Sale pursuant to a Purchaser Request will be the lesser of (a) the
sum of the number of shares of Common Stock then owned by you or your
Purchaser's Estate or Purchaser's Trust, as the case may be, plus all shares of
Common Stock which you are then entitled to acquire under an unexercised option
to purchase shares of Common Stock, to the extent such option
<PAGE>
is then vested or would become vested as a result of the consummation of the
Proposed Sale and (b) the sum of the shares of Common Stock then owned by you or
your Purchaser's Estate or Purchaser's Trust, as the case may be, plus all
shares of Common Stock which you are entitled to acquire under an unexercised
option to purchase shares of Common Stock, whether or not fully vested,
multiplied by a percentage calculated by dividing the aggregate number of shares
of Common Stock which the Parent proposes to sell in the Proposed Sale by the
total number of shares of Common Stock owned by the Parent. If one or more
holders of shares of Common Stock who have been granted the same rights granted
to you or your Purchaser's Estate or Purchaser's Trust, as the case may be,
hereunder elect not to include the maximum number of shares of Common Stock
which such holders would have been permitted to include in a Proposed Sale (the
"ELIGIBLE SHARES"), the Parent or such remaining holders of shares of Common
Stock, or any of them, may sell in the Proposed Sale a number of additional
shares of Common Stock owned by any of them equal to their pro rata portion of
the number of Eligible Shares not included in the Proposed Sale, based on the
relative number of shares of Common Stock then held by each such holder, and
such additional shares of Common Stock which any such holder or holders propose
to sell shall not be included in any calculation made pursuant to this Paragraph
2 for the purpose of determining the number of shares of Common Stock which you
or your Purchaser's Estate or Purchaser's Trust, as the case may be, will be
permitted to include in a Proposed Sale. The Parent may sell in the Proposed
Sale additional shares of Common Stock owned by it equal to any remaining
Eligible Shares which will not be included in the Proposed Sale pursuant to the
foregoing.
3. If Parent receives an offer from a person to purchase in a Proposed
Sale (a) at least a majority of the shares of Common Stock then outstanding or
(b) all or substantially all of the shares of Common Stock owned by Parent, and
such offer is accepted by Parent, then each of you, your Purchaser's Estate and
your Purchaser's Trust hereby agrees that, if requested by Parent ("PARENT
REQUEST"), you, your Purchaser's Estate and your Purchaser's Trust will sell in
such Proposed Sale on the same terms and conditions (including, without
limitation, time of payment and form of consideration) as to be paid and given
to Parent, the number of shares of Common Stock equal to the number of shares of
Common Stock owned by you, your Purchaser's Estate and your Purchaser's Trust
(plus all shares of Common Stock which you are then entitled to acquire under an
unexercised option to purchase shares of Common Stock, to the extent such option
is then vested or would become vested as a result of the consummation of the
Proposed Sale) multiplied by (x) in the case of a Proposed Sale described in
clause (a) above, the percentage of the then outstanding shares of Common Stock
to which the Proposed Sale is applicable or (y) in the case of a Proposed Sale
described in clause (b) above, the percentage of the shares of Common Stock
owned by Parent to which the Proposed Sale is applicable.
4. (a) Except as may otherwise be provided herein, shares of Common
Stock subject to a Purchaser Request or a Parent Request will be included in a
Proposed Sale pursuant hereto and in any agreements with purchasers relating
thereto on the same terms and subject to the same conditions applicable to the
shares of Common Stock which the Parent proposes to sell in the Proposed Sale.
Such terms and conditions shall include, without limitation: the sales price;
the payment of fees, commissions, adjustments to purchase price and expenses;
the provision of, and representation and warranty as to,
-2-
<PAGE>
information requested by the Parent; and the provision of requisite
indemnifications; PROVIDED that any fees, commissions, adjustments to purchase
price, expenses or indemnification provided by you, your Purchaser's Estate or
your Purchaser's Trust shall be on a pro rata basis.
(b) In the event of a transaction (such as a merger or consolidation)
involving the Company which results in a Change of Control (as defined in
Section 15 of the Stockholder's Agreement) but is not a Proposed Sale (a
"PROPOSED TRANSACTION"), you agree on behalf of yourself, your Purchaser's
Estate and your Purchaser's Trust to bear your pro rata share of any fees,
commissions, adjustments to purchase price, expenses or indemnities borne by the
Parent.
(c) Your pro rata share of any amount pursuant to Paragraphs 4(a) or
(b) shall be based upon the number of shares of Common Stock owned by you, your
Purchaser's Estate and your Purchaser's Trust plus the number of shares of
Common Stock you would have the right to acquire under unexercised options which
are then vested or would become vested as a result of the Proposed Sale or
Proposed Transaction.
(d) Parent shall be entitled to estimate the amount of fees,
commissions, adjustments to purchase price, expenses or indemnities in
connection with any Proposed Sale or Proposed Transaction and to withhold such
amounts from payments to be made to you, your Purchaser's Estate and your
Purchaser's Trust at the time of closing of such Proposed Sale or Proposed
Transaction; PROVIDED that, (i) such estimate shall not preclude the Parent from
recovering additional amounts from you, your Purchaser's Estate and your
Purchaser's Trust in respect of such fees, commissions, adjustments to purchase
price, expenses or indemnities and (ii) the Parent shall reimburse you, your
Purchaser's Estate and your Purchaser's Trust to the extent actual amounts are
ultimately less than the estimated amounts.
5. Upon delivering a Purchaser Request or receiving a Parent Request,
you or your Purchaser's Estate or Purchaser's Trust, as the case may be, will,
if requested by the Parent, execute and deliver a custody agreement and power of
attorney in form and substance satisfactory to the Parent with respect to the
shares of Common Stock which are to be sold by you or your Purchaser's Estate or
Purchaser's Trust, as the case may be, pursuant hereto (a "CUSTODY AGREEMENT AND
POWER OF ATTORNEY"). The Custody Agreement and Power of Attorney will provide,
among other things, that you or your Purchaser's Estate or Purchaser's Trust, as
the case may be, will deliver to and deposit in custody with the custodian and
attorney-in-fact named therein a certificate or certificates representing such
shares of Common Stock (duly endorsed in blank by the registered owner or owners
thereof) and irrevocably appoint said custodian and attorney-in-fact as your or
your Purchaser's Estate's or Purchaser's Trust's, as the case may be, agent and
attorney-in-fact with full power and authority to act under the Custody
Agreement and Power of Attorney on your or your Purchaser's Estate's or
Purchaser's Trust's, as the case may be, behalf with respect to the matters
specified therein.
6. Your or your Purchaser's Estate's or Purchaser's Trust's, as the
case may be, right pursuant hereto to participate in a Proposed Sale shall be
contingent on your
-3-
<PAGE>
or your Purchaser's Estate's or Purchaser's Trust's, as the case may be, strict
compliance with each of the provisions hereof and your or your Purchaser's
Estate's or Purchaser's Trust's, as the case may be, willingness to execute such
documents in connection therewith as may be reasonably requested by the Parent.
7. The obligations of the Parent hereunder shall extend only to you or
your Purchaser's Estate or Purchaser's Trust, as the case may be, and no other
of your or your Purchaser's Estate's or Purchaser's Trust's, as the case may be,
successors or assigns shall have any rights pursuant hereto.
8. This Agreement shall terminate and be of no further force and
effect on the fifth anniversary of the first occurrence of a Public Offering (as
defined in the Stockholder's Agreement).
9. All notices and other communications provided for herein shall be
in writing and shall be deemed to have been duly given when delivered to the
party to whom it is directed:
(a) If to the Parent, to it at the following address:
c/o Borden Capital Management Partners
180 East Broad Street
Columbus, Ohio 43215
Attn: Chief Executive Officer
with copies to:
Kohlberg Kravis Roberts & Co.
9 West 57th Street
New York, New York 10019
Attn: Clifton Robbins and Scott Stuart
-and-
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attn: David J. Sorkin, Esq.
(b) If to you, to you at the address first set forth above herein;
(c) If to your Purchaser's Estate or Purchaser's Trust, at the
address provided to the Parent by such entity;
or at such other address as any of the above shall have specified by notice in
writing delivered to the others by certified mail.
-4-
<PAGE>
10. THE LAWS OF THE STATE OF DELAWARE SHALL GOVERN THE INTERPRETATION,
VALIDITY AND PERFORMANCE OF THE TERMS OF THIS AGREEMENT, REGARDLESS OF THE LAW
THAT MIGHT BE APPLIED UNDER PRINCIPLES OF CONFLICTS OF LAW. ANY SUIT, ACTION OR
PROCEEDING AGAINST YOU WITH RESPECT TO THIS AGREEMENT, OR ANY JUDGMENT ENTERED
BY ANY COURT IN RESPECT OF ANY THEREOF, MAY BE BROUGHT IN ANY COURT OF COMPETENT
JURISDICTION IN THE STATE OF DELAWARE OR NEW YORK, AS THE PARENT MAY ELECT IN
ITS SOLE DISCRETION, AND YOU HEREBY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF
SUCH COURTS FOR THE PURPOSE OF ANY SUCH SUIT, ACTION, PROCEEDING OR JUDGMENT.
YOU HEREBY IRREVOCABLY WAIVE ANY OBJECTIONS WHICH YOU MAY NOW OR HEREAFTER HAVE
TO THE LAYING OF THE VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT BROUGHT IN ANY COURT OF COMPETENT JURISDICTION IN THE
STATE OF DELAWARE OR NEW YORK, AND HEREBY FURTHER IRREVOCABLY WAIVE ANY CLAIM
THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN ANY INCONVENIENT FORUM. NO SUIT, ACTION OR PROCEEDING AGAINST THE
PARENT WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN ANY COURT, DOMESTIC OR
FOREIGN, OR BEFORE ANY SIMILAR DOMESTIC OR FOREIGN AUTHORITY OTHER THAN IN A
COURT OF COMPETENT JURISDICTION IN THE STATE OF DELAWARE OR NEW YORK, AND YOU
HEREBY IRREVOCABLY WAIVE ANY RIGHT WHICH YOU MAY OTHERWISE HAVE HAD TO BRING
SUCH AN ACTION IN ANY OTHER COURT, DOMESTIC OR FOREIGN, OR BEFORE ANY SIMILAR
DOMESTIC OR FOREIGN AUTHORITY. THE PARENT HEREBY SUBMITS TO THE JURISDICTION OF
SUCH COURTS FOR THE PURPOSE OF ANY SUCH SUIT, ACTION OR PROCEEDING.
11. If the Parent transfers its interest in the Company to an
affiliate of the Parent, such affiliate shall succeed to all of Parent's rights
and obligations hereunder. Upon any merger or consolidation of the Parent with
the Company or any liquidation of the Parent, the stockholder or stockholders of
the Parent shall succeed to all of Parent's rights and obligations hereunder.
It is the understanding of the undersigned that you are aware that no
Proposed Sale or Proposed Transaction presently is contemplated and that such a
transaction may never occur.
[Continued on next page.]
-5-
<PAGE>
If the foregoing accurately sets forth our agreement, please
acknowledge your acceptance thereof in the space provided below for that
purpose.
Very truly yours,
CCPC ACQUISITION CORP.
By
-----------------------------
Name:
Title:
Accepted and agreed to:
- -------------------------------
(Print Your Name)
- -------------------------------
(Signature)
Address:
- -------------------------------
- -------------------------------
- -------------------------------
-6-
<PAGE>
EXHIBIT 12
<TABLE>
<CAPTION>
Pro Forma Pro Forma Three Three
Three months Year months months
ended ended ended ended Year ended December 31,
31-Mar 31-Dec 31-Mar 31-Mar ------------------------------------
1998 1997 1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Income (loss) before taxes on income $ (8.5) $ 11.2 $ (1.9) $ 4.6 $ 26.1 $ 7.9 $(20.0) $ 10.8 $(58.8)
Minority interest - 0.3 - - 0.3 0.1 0.1 - -
Fixed charges (12.2) (50.8) (3.1) (4.0) (17.0) (20.4) (16.9) (18.2) (17.1)
------- ------- ------- ------- ------ ----- ------ ------ ------
Earnings as adjusted (A) 3.7 61.7 1.2 8.6 42.8 28.2 (3.2) 29.0 41.5
Fixed charges
Interest expense net 10.7 42.8 1.6 2.1 8.5 10.7 8.8 10.0 9.9
Rents under leases representative
of an interest factor 1.5 8.0 1.5 1.5 8.0 8.0 5.9 6.3 5.8
Interest income - - - 0.4 0.5 1.7 2.2 1.9 1.4
Capitalized interest 0.1 0.9 0.2 0.2 0.9 1.2 1.6 1.0 1.0
------- ------- ------- ------- ------ ----- ------ ------ ------
Fixed charges as adjusted (B) $ 12.3 $ 51.7 $ 3.3 $ 4.2 $ 17.9 $21.6 $ 18.5 $ 19.2 $ 18.1
Preferred stock dividends 2.3 9.2 - - - - - - -
------- ------- ------- ------- ------ ----- ------ ------ ------
Fixed charges including preferred
stock dividends (C) $ 14.6 $ 60.9 n/a n/a n/a n/a n/a n/a n/a
Ratio of earnings to fixed charges
(A) divided by (B) 0.3x 1.2x 0.4x 2.0x 2.4x 1.3x - 1.5x -
Deficiency of earnings to fixed charges $ 8.6 $ - $ 2.1 $ - $ - $ - $ 21.7 $ - $ 59.6
Ratio of earnings to combined fixed
charges and preferred stock
dividends (A) divided by (C) 0.3x 1.0 n/a n/a n/a n/a n/a n/a n/a
Deficiency of earnings to combined fixed
charges and preferred stock $ 10.9 $ - n/a n/a n/a n/a n/a n/a n/a
</TABLE>
<PAGE>
Exhibit 16
[LETTERHEAD OF PRICE WATERHOUSE]
June 17, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
Corning Consumer Products Company
---------------------------------
We have read the Change in Accountants section of Corning Consumer Products
Company's Registration Statement on Form S-4 filed on June 17, 1998 and are
in agreement with the statements contained therein.
Yours very truly,
/s/ Price Waterhouse LLP
<PAGE>
EXHIBIT 21: LIST OF SUBSIDIARIES FOR CORNING CONSUMER PRODUCTS COMPANY
1. Revere Ware Corporation
2. Corning Canada Inc.
3. CCPC (Asia) Pte. Ltd.
4. Corning Australia Pty. Ltd.
5. CCPC Iwaki Sdn. Bhd.
6. Mundial Brasil Produtos de Consumo Ltda.
7. CCPC (Korea) Co., Ltd.
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Corning Consumer Products Company of our
report dated January 19, 1998 relating to the financial statements of Corning
Consumer Products Company, which appears in such Prospectus. We also consent to
the application of such report to the Financial Statement Schedule for the three
years ended December 31, 1997 when such schedule is read in conjunction with the
consolidated financial statements referred to in our report. The audits referred
to in such report also included such Financial Statement Schedule. We also
consent to the references to us under the headings "Experts", "Summary
Historical and Pro Forma Financial and Other Data", and "Selected Historical
Consolidated Financial and Other Data" in such Prospectus. However, it should be
noted that Price Waterhouse LLP has not prepared or certified such "Summary
Historical and Pro Forma Financial and Other Data" or "Selected Historical
Consolidated Financial and Other Data."
Price Waterhouse LLP
New York, New York
June 17, 1998
<PAGE>
Exhibit 25
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
--------------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
--------------------------
CORNING CONSUMER PRODUCTS COMPANY
(Exact name of obligor as specified in its charter)
Delaware 16-1403318
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
E-Building, Houghton Park
Corning, New York 14831
(Address of principal executive offices) (Zip code)
--------------------------
9-5/8% Series B Senior Subordinated Notes due 2008
(Title of the indenture securities)
================================================================================
<PAGE>
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.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the 2 Rector Street, New York,
State of New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
-2-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 12th day of June, 1998.
THE BANK OF NEW YORK
By: /s/ WALTER N. GITLIN
----------------------------
Name: WALTER N. GITLIN
Title: VICE PRESIDENT
-4-
<PAGE>
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business
December 31, 1997, published in accordance with a call made by the
Federal Reserve Bank of this District pursuant to the provisions of
the Federal Reserve Act.
Dollar Amounts
ASSETS in Thousands
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin ................. $ 5,742,986
Interest-bearing balances .......... 1,342,769
Securities:
Held-to-maturity securities ........ 1,099,736
Available-for-sale securities ...... 3,882,686
Federal funds sold and Securities pur-
chased under agreements to resell..... 2,568,530
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................35,019,608
LESS: Allowance for loan and
lease losses ..............627,350
LESS: Allocated transfer risk
reserve..........................0
Loans and leases, net of unearned
income, allowance, and reserve 34,392,258
Assets held in trading accounts ...... 2,521,451
Premises and fixed assets (including
capitalized leases) ................ 659,209
Other real estate owned .............. 11,992
Investments in unconsolidated
subsidiaries and associated
companies .......................... 226,263
Customers' liability to this bank on
acceptances outstanding ............ 1,187,449
Intangible assets .................... 781,684
Other assets ......................... 1,736,574
-----------
Total assets ......................... $56,153,587
===========
LIABILITIES
Deposits:
In domestic offices ................ $27,031,362
Noninterest-bearing ......11,899,507
Interest-bearing .........15,131,855
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 13,794,449
Noninterest-bearing .........590,999
Interest-bearing .........13,203,450
Federal funds purchased and Securities
sold under agreements to repurchase. 2,338,881
Demand notes issued to the U.S.
Treasury ........................... 173,851
Trading liabilities .................. 1,695,216
Other borrowed money:
With remaining maturity of one year
or less .......................... 1,905,330
With remaining maturity of more than
one year through three years...... 0
With remaining maturity of more than
three years ...................... 25,664
Bank's liability on acceptances exe-
cuted and outstanding .............. 1,195,923
Subordinated notes and debentures .... 1,012,940
Other liabilities .................... 2,018,960
-----------
Total liabilities .................... 51,192,576
-----------
EQUITY CAPITAL
Common stock ......................... 1,135,284
Surplus .............................. 731,319
Undivided profits and capital
reserves ........................... 3,093,726
Net unrealized holding gains
(losses) on available-for-sale
securities ......................... 36,866
Cumulative foreign currency transla-
tion adjustments ................... (36,184)
-----------
Total equity capital ................. 4,961,011
-----------
Total liabilities and equity
capital ............................ $56,153,587
===========
I, Robert E. Keilman, Senior Vice President and Comptroller of
the above-named bank do hereby declare that this Report of Condition has
been prepared in conformance with the instructions issued by the Board of
Governors of the Federal Reserve System and is true to the best of my
knowledge and belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this
Report of Condition and declare that it has been examined by us and to the
best of our knowledge and belief has been prepared in conformance with the
instructions issued by the Board of Governors of the Federal Reserve System
and is true and correct.
)
Thomas A. Renyi )
Alan R. Griffith ) Directors
J. Carter Bacot )
)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 7,421
<SECURITIES> 0
<RECEIVABLES> 61,929
<ALLOWANCES> 6,662
<INVENTORY> 150,430
<CURRENT-ASSETS> 226,166
<PP&E> 324,104
<DEPRECIATION> 173,594
<TOTAL-ASSETS> 482,298
<CURRENT-LIABILITIES> 165,811
<BONDS> 8,285
0
0
<COMMON> 0
<OTHER-SE> 226,726
<TOTAL-LIABILITY-AND-EQUITY> 482,298
<SALES> 116,538
<TOTAL-REVENUES> 116,538
<CGS> 77,761
<TOTAL-COSTS> 77,761
<OTHER-EXPENSES> 39,090
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,574
<INCOME-PRETAX> (1,887)
<INCOME-TAX> 1,731
<INCOME-CONTINUING> (3,582)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,582)
<EPS-PRIMARY> (3,582.00)
<EPS-DILUTED> (3,582.00)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 4,345
<SECURITIES> 0
<RECEIVABLES> 75,644
<ALLOWANCES> 7,304
<INVENTORY> 136,138
<CURRENT-ASSETS> 226,151
<PP&E> 314,359
<DEPRECIATION> 161,027
<TOTAL-ASSETS> 483,644
<CURRENT-LIABILITIES> 166,295
<BONDS> 8,285
0
0
<COMMON> 0
<OTHER-SE> 230,134
<TOTAL-LIABILITY-AND-EQUITY> 483,644
<SALES> 572,860
<TOTAL-REVENUES> 572,860
<CGS> 376,960
<TOTAL-COSTS> 376,960
<OTHER-EXPENSES> 161,352
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,481
<INCOME-PRETAX> 26,067
<INCOME-TAX> 12,734
<INCOME-CONTINUING> 13,038
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,038
<EPS-PRIMARY> 13,038.00
<EPS-DILUTED> 13,038.00
</TABLE>
<PAGE>
LETTER OF TRANSMITTAL
FOR
9 5/8% SENIOR SUBORDINATED NOTES
DUE 2008
OF
CORNING CONSUMER PRODUCTS COMPANY
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1998 (THE "EXPIRATION DATE") UNLESS EXTENDED BY CORNING CONSUMER PRODUCTS
COMPANY
EXCHANGE AGENT:
THE BANK OF NEW YORK
<TABLE>
<S> <C>
BY HAND: BY MAIL:
The Bank of New York (INSURED OR REGISTERED RECOMMENDED)
101 Barclay Street The Bank of New York
Corporate Trust Services Ground Level Window 101 Barclay Street, 7E
New York, New York 10286 New York, New York 10286
Attention: Vincent Jhingoor, Reorganization Attention: Vincent Jhingoor, Reorganization
Section Section
BY OVERNIGHT EXPRESS:
The Bank of New York
101 Barclay Street
Corporate Trust Services Ground Level Window
New York, New York 10286
Attn: Vincent Jhingoor, Reorganization Section
</TABLE>
BY FACSIMILE:
(212) 815-6339
(For Eligible Institutions Only)
BY TELEPHONE:
(212) 815-4146
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET
FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus dated ,
1998 (the "Prospectus") of Corning Consumer Products Company (the "Company"),
and this Letter of Transmittal (the "Letter of Transmittal"), which together
describe the Company's offer (the "Exchange Offer") to exchange $1,000 in
principal amount of its new 9 5/8% Series B Senior Subordinated Notes due 2008
(the "Exchange Notes") for each $1,000 in principal amount of outstanding 9 5/8%
Senior Subordinated Notes due 2008 (the "Old Notes"). The terms of the Exchange
Notes are identical in all material respects (including principal amount,
interest rate and maturity) to the terms of the Old Notes for which they may be
exchanged pursuant to the Exchange Offer, except that the Exchange Notes are
freely transferable by holders thereof (except as provided herein or in the
Prospectus) and are not subject to any covenant regarding registration under the
Securities Act of 1933, as amended (the "Securities Act").
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING ANY BOX BELOW
<PAGE>
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE INSTRUCTIONS
INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND
REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS
LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
List below the Old Notes to which this Letter of Transmittal relates. If the
space provided below is inadequate, the Certificate Numbers and Principal
Amounts should be listed on a separate signed schedule affixed hereto.
<TABLE>
<CAPTION>
DESCRIPTION OF OLD NOTES TENDERED HEREWITH
AGGREGATE
NAME(S) AND ADDRESS(ES) OF PRINCIPAL AMOUNT PRINCIPAL
REGISTERED HOLDER(S) CERTIFICATE REPRESENTED AMOUNT
(PLEASE FILL IN) NUMBER(S)* BY OLD NOTES* TENDERED**
<S> <C> <C> <C>
Total
</TABLE>
* Need not be completed by book-entry holders.
** Unless otherwise indicated, the holder will be deemed to have tendered the
full aggregate principal amount represented by such Old Notes. See
instruction 2.
This Letter of Transmittal is to be used either if certificates representing
Old Notes are to be forwarded herewith or if delivery of Old Notes is to be made
by book-entry transfer to an account maintained by the Exchange Agent at The
Depository Trust Company, pursuant to the procedures set forth in "The Exchange
Offer--Procedures for Tendering Old Notes" in the Prospectus. Delivery of
documents to the book-entry transfer facility does not constitute delivery to
the Exchange Agent.
Holders whose Old Notes are not immediately available or who cannot deliver
their Old Notes and all other documents required hereby to the Exchange Agent on
or prior to the Expiration Date must tender their Old Notes according to the
guaranteed delivery procedure set forth in the Prospectus under the caption "The
Exchange Offer-- Procedures for Tendering Old Notes."
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution ______________________________________________
/ / The Depository Trust Company
Account Number _____________________________________________________________
Transaction Code Number ____________________________________________________
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s) _______________________________________________
Name of Eligible Institution that Guaranteed Delivery ______________________
Date of Execution of Notice of Guaranteed Delivery _________________________
<PAGE>
If Delivered by Book-Entry Transfer:
Account Number _____________________________________________________________
/ / CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO PERSON OTHER THAN PERSON
SIGNING THE LETTER OF TRANSMITTAL:
Name _________________________________________________________________________
(Please Print)
Address ______________________________________________________________________
(Including Zip Code)
/ / CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO ADDRESS DIFFERENT FROM
THAT LISTED ELSEWHERE IN THIS LETTER OF TRANSMITTAL:
Address ______________________________________________________________________
(Including Zip Code)
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THIS 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 Old Notes that were acquired as 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. A broker-dealer may not participate in the Exchange Offer
with respect to Old Notes acquired other than as a result of market-making
activities or other trading activities. Any holder who is an "affiliate" of the
Company or who has an arrangement or understanding with respect to the
distribution of the Exchange Notes to be acquired pursuant to the Exchange
Offer, or any broker-dealer who purchased Old Notes from the Company to resell
pursuant to Rule 144A under the Securities Act or any other available exemption
under the Securities Act must comply with the registration and prospectus
delivery requirements under the Securities Act.
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the above-described principal amount
of the Old Notes indicated above. Subject to, and effective upon, the acceptance
for exchange of the Old Notes tendered herewith, the undersigned hereby
exchanges, assigns and transfers to, or upon the order of, the Company all
right, title and interest in and to such Old Notes. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent the true and lawful
agent and attorney-in-fact of the undersigned (with full knowledge that said
Exchange Agent acts as the agent of the Company, in connection with the Exchange
Offer) to cause the Old Notes to be assigned, transferred and exchanged. The
undersigned represents and warrants that it has full power and authority to
tender, exchange, assign and transfer the Old Notes and to acquire Exchange
Notes issuable upon the exchange of such tendered Old Notes, and that, when the
same are accepted for exchange, the Company will acquire good and unencumbered
title to the tendered Old Notes, free and clear of all liens, restrictions,
charges and encumbrances and not subject to any adverse claim. The undersigned
also warrants that it will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the exchange, assignment and transfer of tendered Old
Notes or transfer ownership of such Old Notes on the account books maintained by
the book-entry transfer facility. The undersigned further agrees that acceptance
of any and all validly tendered Old Notes by the Company and the issuance of
Exchange Notes in exchange therefor shall constitute performance in full by the
Company of its obligations under the Registration Rights Agreement (as defined
in the Prospectus) and that the Company shall have no further obligations or
liabilities thereunder except as provided in the first paragraph of Section 2 of
said agreement.
The Exchange Offer is subject to certain conditions as set forth in the
Prospectus under the caption "The Exchange Offer--Certain Conditions to the
Exchange Offer." The undersigned recognizes that as a result of these conditions
(which may be waived, in whole or in part, by the Company), as more particularly
set forth in the Prospectus, the Company may not be required to exchange any of
the Old Notes tendered hereby and, in such event, the Old Notes not exchanged
will be returned to the undersigned at the address shown above. In addition, the
Company may amend the Exchange Offer at any time prior to the Expiration Date if
any of the conditions set forth under "The Exchange Offer--Certain Conditions to
the Exchange Offer" occur.
By tendering, each holder of Old Notes represents that the Exchange Notes
acquired in the exchange will be obtained in the ordinary course of such
holder's business, that such holder has no arrangement with any person to
participate in the distribution of such Exchange Notes, that such holder is not
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act and that such holder is not engaged in, and does not intend to
engage in, a distribution of the Exchange Notes. Any holder of Old Notes using
the Exchange Offer to participate in a distribution of the Exchange Notes (i)
cannot rely on the position of the staff of the Securities and Exchange
Commission (the "Commission") enunciated in its interpretive letter with respect
to Exxon Capital Holdings Corporation (available April 13, 1989) or similar
letters and (ii) must comply with the registration and prospectus requirements
of the Securities Act in connection with a secondary resale transaction.
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 Old 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. A broker-dealer may not participate in the
Exchange Offer with respect to Old Notes acquired other than as a result of
market-making activities or other trading activities.
<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. Tendered Old Notes may be withdrawn at any time
prior to the Expiration Date in accordance with the terms of this Letter of
Transmittal. See Instruction 2.
Certificates for all Exchange Notes delivered in exchange for tendered Old
Notes and any Old Notes delivered herewith but not exchanged, and registered in
the name of the undersigned, shall be delivered to the undersigned at the
address shown below the signature of the undersigned.
TENDER HOLDER(S) SIGN HERE
(Complete accompanying substitute Form W-9)
________________________________________________________________________________
________________________________________________________________________________
Signature(s) of Holder(s)
Dated ___________________ Area Code and Telephone Number ___________________
(MUST BE SIGNED BY REGISTERED HOLDER(S) EXACTLY AS NAME(S) APPEAR(S) ON
CERTIFICATE(S) FOR OLD NOTES. 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, PLEASE SET FORTH THE
FULL TITLE OF SUCH PERSON.) SEE INSTRUCTION 3.
Name(s) ________________________________________________________________________
________________________________________________________________________________
(Please Print)
Capacity (full title) __________________________________________________________
Address ________________________________________________________________________
(Including Zip Code)
Area Code and Telephone No. ____________________________________________________
Taxpayer Identification No. ____________________________________________________
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTION 3)
Authorized Signature ___________________________________________________________
Name ___________________________________________________________________________
Title __________________________________________________________________________
Address ________________________________________________________________________
Name of Firm ___________________________________________________________________
Area Code and Telephone No. ____________________________________________________
Dated __________________________________________________________________________
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES.
A holder of Old Notes may tender the same by (i) properly completing and
signing this Letter of Transmittal or a facsimile hereof (all references in the
Prospectus to the Letter of Transmittal shall be deemed to include a facsimile
thereof) and delivering the same, together with the certificate or certificates
representing the Old Notes being tendered and any required signature guarantees
and any other document required by this Letter of Transmittal, to the Exchange
Agent at its address set forth above on or prior to the Expiration Date (or
complying with the procedure for book-entry transfer described below) or (ii)
complying with the guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE OLD NOTES AND ANY
OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER, AND EXCEPT
AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY
RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY MAIL, IT IS
SUGGESTED THAT REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED,
BE USED. IN ALL CASES SUFFICIENT TIME SHOULD BE ALLOWED TO PERMIT TIMELY
DELIVERY. NO OLD NOTES OR LETTERS OF TRANSMITTAL SHOULD BE SENT TO THE COMPANY.
If tendered Old Notes are registered in the name of the signer of the Letter
of Transmittal and the Exchange Notes to be issued in exchange therefor are to
be issued (and any untendered Old Notes are to be reissued) in the name of the
registered holder (which term, for the purposes described herein, shall include
any participant in The Depository Trust Company (also referred to as a
"book-entry transfer facility") whose name appears on a security listing as the
owner of Old Notes), the signature of such signer need not be guaranteed. In any
other case, the tendered Old Notes must be endorsed or accompanied by written
instruments of transfer in form satisfactory to the Company and duly executed by
the registered holder, and the signature on the endorsement or instrument of
transfer must be guaranteed by a bank, broker, dealer, credit union, savings
association, clearing agency or other institution (each an "Eligible
Institution") that is a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended. If the Exchange Notes and/or Old Notes not exchanged are to be
delivered to an address other than that of the registered holder appearing on
the note register for the Old Notes, the signature on the Letter of Transmittal
must be guaranteed by an Eligible Institution.
The Exchange Agent will make a request within two business days after the
date of receipt of this Prospectus to establish accounts with respect to the Old
Notes at the book-entry transfer facility for the purpose of facilitating the
Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in the book-entry transfer facility's system
may make book-entry delivery of Old Notes by causing such book-entry transfer
facility to transfer such Old Notes into the Exchange Agent's account with
respect to the Old Notes in accordance with the book-entry transfer facility's
procedures for such transfer. Although delivery of Old Notes may be effected
through book-entry transfer into the Exchange Agent's account at the book-entry
transfer facility, an appropriate Letter of Transmittal with any required
signature guarantee and all other required documents must in each case be
transmitted to and received or confirmed by the Exchange Agent on or prior to
the Expiration Date, or, if the guaranteed delivery procedures described below
are complied with, within the time period provided under such procedures.
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Old Notes to reach the Exchange Agent before the
Expiration Date or the procedure for book-entry transfer cannot be completed on
a timely basis, a tender may be effected if the Exchange Agent has received on
or prior to the Expiration Date, a letter, telegram or facsimile transmission
(receipt confirmed by telephone and an original delivered by guaranteed
overnight courier) from an Eligible Institution setting forth the name and
address of the tendering holder, the names in which the Old Notes are registered
and, if possible, the certificate numbers of the Old Notes to be tendered, and
stating that the tender is being made thereby and guaranteeing that within three
business days after the Expiration Date, the Old Notes in proper form for
transfer (or a confirmation of book-entry transfer of such Old Notes into the
Exchange Agent's account at the book-entry transfer facility), will be delivered
by such Eligible Institution together with a properly completed and duly
executed Letter of Transmittal (and any other required documents). Unless Old
Notes being tendered by the above-described method are deposited with the
Exchange Agent within the time period set forth above (accompanied or preceded
by a properly completed Letter of Transmittal and any other required documents),
the Company may, at its option, reject the tender. Copies of the notice of
guaranteed delivery ("Notice of Guaranteed Delivery") which may be used by
Eligible Institutions for the purposes described in this paragraph are available
from the Exchange Agent.
<PAGE>
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Old Notes (or a confirmation of book-entry transfer of such
Old Notes into the Exchange Agent's account at the book-entry transfer facility)
is received by the Exchange Agent, or (ii) a Notice of Guaranteed Delivery or
letter, telegram or facsimile transmission to similar effect (as provided above)
from an Eligible Institution is received by the Exchange Agent. Issuances of
Exchange Notes in exchange for Old Notes tendered pursuant to a Notice of
Guaranteed Delivery or letter, telegram or facsimile transmission to similar
effect (as provided above) by an Eligible Institution will be made only against
deposit of the Letter of Transmittal (and any other required documents) and the
tendered Old Notes.
If the Letter of Transmittal is signed by a person or persons other than the
registered holder or holders of Old Notes, such Old Notes must be endorsed or
accompanied by appropriate powers of attorney, in either case signed exactly as
the name or names of the registered holder or holders appear on the Old Notes.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the Old Notes for exchange.
2. PARTIAL TENDERS; WITHDRAWALS.
If less than the entire principal amount of Old Notes evidenced by a
submitted certificate is tendered, the tendering holder should fill in the
principal amount tendered in the box entitled "Principal Amount Tendered." A
newly issued certificate for the principal amount of Old Notes submitted but not
tendered will be sent to such holder as soon as practicable after the Expiration
Date. All Old Notes delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise clearly indicated.
For a withdrawal to be effective, a written notice of withdrawal sent by
telegram, facsimile transmission (receipt confirmed by telephone) or letter must
be received by the Exchange Agent at the address set forth herein prior to the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having tendered the Old Notes to be withdrawn (the "Depositor"), (ii)
identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes), (iii) specify the principal
amount of Old Notes to be withdrawn, (iv) include a statement that such holder
is withdrawing his election to have such Old Notes exchanged, (v) be signed by
the holder in the same manner as the original signature on the Letter of
Transmittal by which such Old Notes were tendered or as otherwise described
above (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee under the Indenture
register the transfer of such Old Notes into the name of the person withdrawing
the tender and (vi) specify the name in which any such Old Notes are to be
registered, if different from that of the Depositor. The Exchange Agent will
return the properly withdrawn Old Notes promptly following receipt of notice of
withdrawal. If Old Notes have been tendered pursuant to the procedure for
book-entry transfer, any notice of withdrawal must specify the name and number
of the account at the book-entry transfer facility to be credited with the
withdrawn Old Notes or otherwise comply with the book-entry transfer facility
procedure. All questions as to the validity of notices of withdrawals, including
time of receipt, will be determined by the Company and such determination will
be final and binding on all parties.
Any Old Notes so withdrawn will be deemed not to have been validly tendered
for exchange for purposes of the Exchange Offer. Any Old Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
the book-entry transfer facility pursuant to the book-entry transfer procedures
described above, such Old Notes will be credited to an account with such
book-entry transfer facility specified by the holder) as soon as practicable
after withdrawal, rejection of tender or termination of the Exchange Offer.
Properly withdrawn Old Notes may be retendered by following one of the
procedures described under the caption "Procedures for Tendering Old Notes" in
the Prospectus at any time on or prior to the Expiration Date.
3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES.
If this Letter of Transmittal is signed by the registered holder(s) of the
Old Notes tendered hereby, the signature must correspond with the name(s) as
written on the face of the certificates without alteration, enlargement or any
change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If a number of Old Notes registered in different names are tendered, it will
be necessary to complete, sign and submit as many separate copies of this Letter
of Transmittal as there are different registrations of Old Notes.
<PAGE>
When this Letter of Transmittal is signed by the registered holder or
holders (which term, for the purposes described herein, shall include the
book-entry transfer facility whose name appears on a security listing as the
owner of the Old Notes) of Old Notes listed and tendered hereby, no endorsements
of certificates or separate written instruments of transfer or exchange are
required.
If this Letter of Transmittal is signed by a person other than the
registered holder or holder of the Old Notes listed, such Old Notes must be
endorsed or accompanied by separate written instruments of transfer or exchange
in form satisfactory to the Company and duly executed by the registered holder,
in either case signed exactly as the name or names of the registered holder or
holders appear(s) on the Old Notes.
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange 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 so to act must be submitted.
Endorsements on certificates or signatures on separate written instruments
of transfer or exchange required by this Instruction 3 must be guaranteed by an
Eligible Institution.
Signatures on this Letter of Transmittal need not be guaranteed by an
Eligible Institution, provided the Old Notes are tendered: (i) by a registered
holder of such Old Notes, for the holder of such Old Notes; or (ii) for the
account of an Eligible Institution.
4. TRANSFER TAXES.
The Company shall pay all transfer taxes, if any, applicable to the transfer
and exchange of Old Notes to it or its order pursuant to the Exchange Offer. If,
however, certificates representing Exchange Notes or Old Notes for principal
amounts not tendered or accepted for exchange are to be delivered to, or are to
be issued in the name of, any person other than the registered holder of the Old
Notes tendered, or if tendered Old 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 exchange of Old Notes pursuant to
the Exchange Offer, then the amount of any such transfer taxes (whether imposed
on the registered holder or any other persons) will be payable by the tendering
holder. If
satisfactory evidence of payment of such taxes or exception 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 4, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
5. WAIVER OF CONDITIONS.
The Company reserves the right to waive in its reasonable judgment, in whole
or in part, any of the conditions to the Exchange Offer set forth in the
Prospectus.
6. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES.
Any holder whose Old Notes have been mutilated, lost, stolen or destroyed,
should contact the Exchange Agent at the address indicated above for further
instructions.
7. SUBSTITUTE FORM W-9.
Each holder of Old Notes whose Old Notes are accepted for exchange (or other
payee) is required to provide a correct taxpayer identification number ("TIN"),
generally the holder's Social Security or federal employer identification
number, and with certain other information, on Substitute Form W-9, which is
provided under "Important Tax Information" below, and to certify that the holder
(or other payee) is not subject to backup withholding. Failure to provide the
information on the Substitute Form W-9 may subject the holder (or other payee)
to a $50 penalty imposed by the Internal Revenue Service and 31% federal income
tax backup withholding on payments made in connection with the Exchange Notes.
The box in Part 3 of the Substitute Form W-9 may be checked if the holder (or
other payee) has not been issued a TIN and has applied for a TIN or intends to
apply for a TIN in the near future. If the box in Part 3 is checked and a TIN is
not provided by the time any payment is made in connection with the Exchange
Notes, 31% of all such payments will be withheld until a TIN is provided.
<PAGE>
8. 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 of Transmittal, may be
directed to the Exchange Agent at the address and telephone number set forth
above. In addition, all questions relating to the Exchange Offer, as well as
requests for assistance or additional copies of the Prospectus and this Letter
of Transmittal, may be directed to Corning Consumer Products Company,
E-Building, Houghton Park, Corning, New York 14831, attention: Secretary
(telephone: (607) 974-7690).
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE HEREOF (TOGETHER WITH
CERTIFICATES FOR OLD NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER
REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE
EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
<PAGE>
IMPORTANT TAX INFORMATION
Under U.S. Federal income tax law, a holder of Old Notes whose Old Notes are
accepted for exchange may be subject to backup withholding unless the holder
provides Marine Midland Bank (as payor) (the "Paying Agent"), through the
Exchange Agent, with either (i) such holder's correct taxpayer identification
number ("TIN") on Substitute Form W-9 attached hereto, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such holder of Old Notes is
awaiting a TIN) and that (A) the holder of Old Notes has not been notified by
the Internal Revenue Service that he or she is subject to backup withholding as
a result of a failure to report all interest or dividends or (B) the Internal
Revenue Service has notified the holder of Old Notes that he or she is no longer
subject to backup withholding; or (ii) an adequate basis for exemption from
backup withholding. If such holder of Old Notes is an individual, the TIN is
such holder's social security number. If the Paying Agent is not provided with
the correct taxpayer identification number, the holder of Old Notes may be
subject to certain penalties imposed by the Internal Revenue Service.
Certain holders of Old Notes (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. Exempt holders of Old Notes should indicate their exempt
status on Substitute Form W-9. In order for a foreign individual to qualify as
an exempt recipient, the holder must submit a Form W-8, signed under penalties
of perjury, attesting to that individual's exempt status. A Form W-8 can be
obtained from the Paying Agent. See the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for more instructions.
If backup withholding applies, the Paying Agent is required to withhold 31%
of any such payments made to the holder of Old Notes or other payee. Backup
withholding is not an additional tax. Rather, the tax liability of persons
subject to backup withholding will be reduced by the amount of tax withheld. If
withholding results in an overpayment of taxes, a refund may be obtained from
the Internal Revenue Service.
The box in Part 3 of the Substitute Form W-9 may be checked if the
surrendering holder of Old Notes has not been issued a TIN and has applied for a
TIN or intends to apply for a TIN in the near future. If the box in Part 3 is
checked, the holder of Old Notes or other payee must also complete the
Certificate of Awaiting Taxpayer Identification Number below in order to avoid
backup withholding . Notwithstanding that the box in Part 3 is checked and the
Certificate of Awaiting Taxpayer Identification Number is completed, the Paying
Agent will withhold 31% of all payments made prior to the time a properly
certified TIN is provided to the Paying Agent.
The holder of Old Notes is required to give the Paying Agent the TIN (e.g.,
social security number or employer identification number) of the record owner of
the Old Notes. If the Old Notes are in more than one name or are not in the name
of the actual owner, consult the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional guidance
on which number to report.
<PAGE>
<TABLE>
<S> <C> <C>
PAYOR'S NAME: THE BANK OF NEW YORK, AS PAYING AGENT
SUBSTITUTE PART I--PLEASE PROVIDE YOUR TIN Social Security number(s) or
IN THE BOX AT RIGHT AND CERTIFY Employer Identification
BY SIGNING AND DATING BELOW. Number(s)
PART 2--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
for me), and
FORM W-9 (2) I am not subject to backup withholding because: (a) I am
DEPARTMENT OF THE TREASURY exempt form backup withholding, or (b) I have not been notified
INTERNAL REVENUE SERVICE 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.
PAYOR'S REQUEST FOR CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if
TAXPAYER IDENTIFICATION you have been notified by the IRS that you are currently subject
NUMBER ("TIN") to backup withholding because of underreporting interest or
dividends on your tax return.
Signature PART 3--Awaiting TIN / /
Date
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY
IMPOSED BY THE INTERNAL REVENUE SERVICE AND BACKUP WITHHOLDING OF 31% OF
ANY CASH PAYMENTS MADE TO YOU. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR
ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART
3 OF THE SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (1) I have mailed or delivered
an application to receive a taxpayer identification number to the
appropriate Internal Revenue Service Center or Social Security
Administration Office or (2) I intend to mail or deliver an application in
the near future. I understand that if I do not provide a taxpayer
identification number by the time of payment, 31% of all reportable cash
payments made to me thereafter will be withheld until I provide a taxpayer
identification number.
<TABLE>
<S> <C>
------------------------------------------------ --------------------------------
Signature Date
</TABLE>
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF ALL OUTSTANDING
9 5/8% SENIOR SUBORDINATED NOTES
DUE 2008
IN EXCHANGE FOR NEW
9 5/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2008
OF
CORNING CONSUMER PRODUCTS COMPANY
Registered holders of outstanding 9 5/8% Senior Subordinated Notes due 2008
(the "Old Notes") who wish to tender their Old Notes in exchange for a like
principal amount of new 9 5/8% Series B Senior Subordinated Notes due 2008 (the
"Exchange Notes") and whose Old Notes are not immediately available or who
cannot deliver their Old Notes and Letter of Transmittal (and any other
documents required by the Letter of Transmittal) to The Bank of New York (the
"Exchange Agent") prior to the Expiration Date, may use this Notice of
Guaranteed Delivery or one substantially equivalent hereto. This Notice of
Guaranteed Delivery may be delivered by hand or sent by facisimile transmission
(receipt confirmed by telephone and an original delivered by guaranteed
overnight courier) or mail to the Exchange Agent. See "The Exchange
Offer--Procedure for Tendering Old Notes" in the Prospectus.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
THE BANK OF NEW YORK
<TABLE>
<S> <C>
BY HAND: BY MAIL:
The Bank of New York (INSURED OR REGISTERED RECOMMENDED)
101 Barclay Street The Bank of New York
Corporate Trust Services Window 101 Barclay Street, 7E
Ground Level New York, New York 10286
New York, New York 10286 Attn: Vincent Jhingoor, Reorganization
Attn: Vincent Jhingoor, Reorganization Section
Section
BY OVERNIGHT EXPRESS:
The Bank of New York
101 Barclay Street
Corporate Trust Services Window
Ground Level
New York, New York 10286
Attn: Vincent Jhingoor, Reorganization
Section
</TABLE>
BY FACSIMILE:
(212) 571-3080
(For Eligible Institutions Only)
BY TELEPHONE:
(212) 815-6333
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution (as defined in the Prospectus), such
signature guarantee must appear in the applicable space provided on the Letter
of Transmittal for Guarantee of Signatures.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders the principal amount of Old Notes indicated
below, upon the terms and subject to the conditions contained in the Prospectus
dated , 1998 of Corning Consumer Products Company (the
"Prospectus"), receipt of which is hereby acknowledged.
DESCRIPTION OF SECURITIES TENDERED
<TABLE>
<CAPTION>
NAME AND ADDRESS OF
REGISTERED HOLDER AS IT CERTIFICATE NUMBER(S) PRINCIPAL AMOUNT
APPEARS ON THE OLD NOTES OF OLD NOTES OF OLD NOTES
NAME OF TENDERING HOLDER (PLEASE PRINT) TENDERED TENDERED
<S> <C> <C> <C>
- --------------------- --------------------- --------------------- ---------------------
- --------------------- --------------------- --------------------- ---------------------
- --------------------- --------------------- --------------------- ---------------------
- --------------------- --------------------- --------------------- ---------------------
- --------------------- --------------------- --------------------- ---------------------
</TABLE>
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended, hereby guarantees to deliver to the Exchange Agent at one of
its addresses set forth above, the certificates representing the Old Notes (or a
confirmation of book-entry transfer of such Old Notes into the Exchange Agent's
account at the book-entry transfer facility), together with a properly completed
and duly executed Letter of Transmittal (or facsimile thereof), with any
required signature guarantees, and any other documents required by the Letter of
Transmittal within three business days after the Expiration Date (as defined in
the Prospectus and the Letter of Transmittal).
<TABLE>
<S> <C>
Name of Firm:
Address: (Authorized Signature)
Title:
(Zip Code) Name:
Area Code and Telephone No.: (Please type or print)
Date:
</TABLE>
NOTE: DO NOT SEND OLD NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. OLD
NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
