<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 3, 1998
REGISTRATION NO. 333-56857
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- -------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
ALLIANCE LAUNDRY SYSTEMS LLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 35820 39-1927923
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR P.O. BOX 990
ORGANIZATION) RIPON, WISCONSIN 54971-0990
TELEPHONE: (920) 748-3121
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
THOMAS F. L'ESPERANCE
P.O. BOX 990
RIPON, WISCONSIN 54971-0990
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPY TO:
LANCE C. BALK
KIRKLAND & ELLIS
153 EAST 53RD STREET
NEW YORK, NEW YORK 10022-4675
TELEPHONE: (212) 446-4800
---------------
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. [_]
---------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE(2)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9 5/8% Senior
Subordinated Notes due
2008................... $110,000,000 $1,000 $110,000,000 $32,450
- -------------------------------------------------------------------------------
Guarantee(3)............ N/A N/A N/A N/A
</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(f)(2) based upon the book value of the securities
as of June 9, 1998.
(2) Previously paid.
(3) The Guarantee by Alliance Laundry Holdings LLC of the payment of principal
and interest on the Notes is being registered hereby. Pursuant to Rule
457(g), no registration fee is required with respect to the Guarantee.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
(continued from previous page)
ALLIANCE LAUNDRY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 35820 39-1928505
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR CLASSIFICATION CODE NUMBER) IDENTIFICATION
ORGANIZATION) NUMBER)
ALLIANCE LAUNDRY HOLDINGS LLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 35820 52-2055893
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR CLASSIFICATION CODE NUMBER) IDENTIFICATION
ORGANIZATION) NUMBER)
<PAGE>
OFFERING MEMORANDUM
[LOGO]
ALLIANCE
LAUNDRY SYSTEMS
ALLIANCE LAUNDRY SYSTEMS LLC
ALLIANCE LAUNDRY CORPORATION
OFFER TO EXCHANGE THEIR SERIES B 9 5/8% SENIOR SUBORDINATED NOTES
DUE 2008 FOR ANY AND ALL OF THEIR OUTSTANDING SERIES A
9 5/8% SENIOR SUBORDINATED NOTES DUE 2008
---------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1998, UNLESS EXTENDED.
---------------
Alliance Laundry Systems LLC, a Delaware limited liability company
("Alliance" or the "Company"), and Alliance Laundry Corporation, a Delaware
corporation and wholly owned subsidiary of the Company ("ALC" and, together
with the Company, the "Issuers"), hereby offer (the "Exchange Offer"), upon
the terms and conditions set forth in this Offering Memorandum (the "Offering
Memorandum") and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), to exchange $1,000 principal amount of its Series B 9 5/8%
Senior Subordinated Notes due 2008 (the "Exchange Notes"), which will have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to a Registration Statement of which this Offering Memorandum
is a part, for each $1,000 principal amount of its outstanding Series A 9 5/8%
Senior Subordinated Notes due 2008 (the "Notes"), of which $110,000,000
principal amount is outstanding. The Issuers' payment obligations under the
Exchange Notes will be jointly and severally, irrevocably and fully and
unconditionally guaranteed on a senior subordinated basis (the "Guarantees")
by Alliance Laundry Holdings LLC, a Delaware limited liability company and
parent of the Company, and each of the Company's future direct and indirect
domestic subsidiaries (the "Guarantors"). The Guarantees will be subordinated
to the guarantees of Senior Debt issued by the Guarantors under the Senior
Credit Facility. The form and terms of the Exchange Notes are the same as the
form and term of the Notes (which they replace) except that the Exchange Notes
will have been registered under the Securities Act and, therefore, will not
bear legends restricting their transfer and will not contain certain
provisions relating to an increase in the interest rate which were included in
the terms of the Notes in certain circumstances relating to the timing of the
Exchange Offer. The Exchange Notes will evidence the same debt as the Notes
(which they replace) and will be issued under and be entitled to the benefits
of the Indenture dated May 5, 1998 between the Issuers and United States Trust
Company of New York (the "Indenture") governing the Notes. See "The Exchange
Offer" and "Description of the Exchange Notes."
Neither Issuer has issued, and does not have any current firm arrangements
to issue, any indebtedness to which the Exchange Notes would rank senior or
pari passu in right of payment. The Exchange Notes will be general unsecured
obligations of the Issuers and will be subordinate in right of payment to all
existing and future Senior Debt (as defined) and will be senior or pari passu
in right of payment to all existing and future subordinated indebtedness of
the Issuers. As of July 26, 1998, the Company and its Subsidiaries (as
defined) had $200.0 million of Senior Debt outstanding (exclusive of $67.5
million available under the Revolving Credit Facility (as defined), which
would also be Senior Debt). See "Capitalization," "Description of Senior
Credit Facility" and "Description of the Exchange Notes--Subordination."
The Issuers will accept for exchange any and all Notes validly tendered and
not withdrawn prior to 5:00 p.m., New York City time, on , 1998, unless
extended by the Issuers in their sole discretion (the "Expiration Date").
Notwithstanding the foregoing, the Issuers will not extend the Expiration Date
beyond , 1998. Tenders of Notes may be withdrawn at any time prior to 5:00
p.m. on the Expiration Date. The Exchange Offer is subject to certain
customary conditions. The Notes were sold by the Issuers on May 5, 1998 (the
"Note Offering") to the Initial Purchasers (as defined) in a transaction not
registered under the Securities Act in reliance upon an exemption under the
Securities Act. The Initial Purchasers subsequently placed the Notes with
qualified institutional buyers in reliance upon Rule 144A under the Securities
Act and in offshore transactions pursuant to Regulation S under the Securities
Act. Accordingly, the Notes may not be reoffered, resold or otherwise
transferred in the United States unless registered under the Securities Act or
unless an applicable exemption from the registration requirements of the
Securities Act is available. The Exchange Notes are being offered hereunder in
order to satisfy the obligations of the Issuers under the Registration Rights
Agreement entered into by the Issuers in connection with the offering of the
Notes. See "The Exchange Offer".
With respect to resales of Exchange Notes, 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 Issuers believe the Exchange
Notes issued pursuant to the Exchange Offer may be offered for resale, resold
and otherwise transferred by any holder thereof (other than any such holder
that is an "affiliate" of either Alliance or ALC 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. See "The Exchange
Offer--Purpose and Effect of the Exchange Offer" and "The Exchange Offer--
Resales of the Exchange Notes." Each broker-dealer (a "Participating 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
participating Broker-Dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Offering
Memorandum, as it may be amended or supplemented from time to time, may be
used by a Participating Broker-Dealer in connection with resales of Exchange
Notes received in exchange for Notes where such Notes were acquired by such
Participating Broker-Dealer as a result of market-making activities or other
trading activities. The Issuers have agreed that, for a period of up to one
year from the consummation of the Exchange Offer, it will make this Prospectus
available to any Participating Broker-Dealer for use in connection with any
such resale. See "Plan of Distribution."
If any holder of Notes is an affiliate of either Alliance or ALC, is engaged
in or intends to engage in or has any arrangement or understanding with any
person to participate in the distribution of the Exchange Notes to be acquired
in the Exchange Offer, such holder (i) cannot rely on the applicable
interpretations of the Commission and (ii) must comply with the registration
requirements of the Securities Act in connection with any resale transaction.
Holders of Notes not tendered and accepted in the Exchange Offer will
continue to hold such Notes and will be entitled to all the rights and
benefits and will be subject to the limitations applicable thereto under the
Indenture and with respect to transfer under the Securities Act. The Issuers
will pay all the expenses incurred by them incident to the Exchange Offer. See
"The Exchange Offer."
---------------
SEE "RISK FACTORS" ON PAGE 13 FOR A DESCRIPTION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY HOLDERS WHO TENDER THEIR NOTES IN THE EXCHANGE OFFER.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS OFFERING MEMORANDUM. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Offering Memorandum is , 1998.
<PAGE>
There has not previously been any public market for the Notes or the
Exchange Notes. The Issuers do not intend to list the Exchange Notes on any
securities exchange or to seek approval for quotation through any automated
quotation system. There can be no assurance that an active market for the
Exchange Notes will develop. See "Risk Factors--Absence of Public Market."
Moreover, to the extent that Notes are tendered and accepted in the Exchange
Offer, the trading market for untendered and tendered but unaccepted Notes
could be adversely affected.
AVAILABLE INFORMATION
The Issuers have filed with the Commission a Registration Statement on Form
S-4 (the "Exchange Offer Registration Statement," which term shall encompass
all amendments, exhibits, annexes and schedules thereto) pursuant to the
Securities Act, and the rules and regulations promulgated thereunder, covering
the Exchange Notes being offered hereby. This Offering Memorandum does not
contain all the information set forth in the Exchange Offer Registration
Statement. For further information with respect to the Issuers and the
Exchange Offer, reference is made to the Exchange Offer Registration
Statement. Statements made in this Offering Memorandum as to the contents of
any contract, agreement or other document referred to are not necessarily
complete. With respect to each such contract, agreement or other document
filed as an exhibit to the Exchange Offer Registration Statement, reference is
made to the exhibit for a more complete description of the document or matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference. The Exchange Offer Registration Statement, including the
exhibits thereto, can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at the Regional Offices of the Commission at 75 Park
Place, New York, New York 10007 and at Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
can be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Additionally,
the Commission maintains a web site (http://www.sec.gov) that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission, including the
Issuers.
As a result of the filing of the Exchange Offer Registration Statement with
the Commission, the Issuers will become subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith will be required to file periodic reports
and other information with the Commission. The obligation of the Issuers to
file periodic reports and other information with the Commission will be
suspended if the Exchange Notes are held of record by fewer than 300 holders
as of the beginning of any fiscal year of the Issuers other than the fiscal
year in which the Exchange Offer Registration Statement is declared effective.
The Issuers will nevertheless be required to continue to file reports with the
Commission if the Exchange Notes are listed on a national securities exchange.
In the event the Issuers cease to be subject to the informational requirements
of the Exchange Act, Alliance will be required under the Indenture to continue
to file with the Commission the annual and quarterly reports, information,
documents or other reports, including, without limitation, reports on Forms
10-K, 10-Q and 8-K, which would be required pursuant to the informational
requirements of the Exchange Act. Under the Indenture, the Issuers shall file
with the Trustee annual, quarterly and other reports within fifteen days after
it files such reports with the Commission. Further, to the extent that annual
or quarterly reports are furnished by the Issuers to unitholders generally it
will mail such reports to holders of Exchange Notes. The Issuers will furnish
annual and quarterly financial reports to unitholders of the Issuers and will
mail such reports to holders of Exchange Notes pursuant to the Indenture, thus
holders of Exchange Notes will receive financial reports every quarter. Annual
reports delivered to the Trustee and the holders of Exchange Notes will
contain financial information that has been examined and reported upon, with
an opinion expressed by an independent public or certified public accountant.
The Issuers will also furnish such other reports as may be required by law.
----------------
This Offering Memorandum includes "forward-looking statements" which appear
in a number of places in this Offering Memorandum and include statements
regarding the intent, belief or current expectations of the
i
<PAGE>
Company or its officers with respect to, among other things, the use of
proceeds of the Offering, the ability to borrow funds under the Senior Credit
Facility, the ability to successfully implement operating strategies,
including trends affecting the Company's business, financial condition and
results of operations. All statements other than statements of historical
facts included in this Offering Memorandum, including, without limitation, the
statements under "Offering Memorandum Summary," "Unaudited Pro Forma Combined
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business," and located elsewhere herein
regarding industry prospects and the Company's financial position are forward-
looking statements. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. Although
the Issuers believe that the expectations reflected in such forward-looking
statements are reasonable, they can give no assurance that such expectations
will prove to have been correct. Important factors that could cause actual
results to differ materially from the Issuers' expectations (the "Cautionary
Statements") are disclosed in this Offering Memorandum, including, without
limitation, in conjunction with the forward-looking statements included in
this Offering Memorandum under "Risk Factors," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business."
All subsequent written and oral forward-looking statements attributable to
the Issuers or persons acting on their behalf are expressly qualified in their
entirety by the Cautionary Statements and Risk Factors contained throughout
this Offering Memorandum.
MARKET SHARE DATA
The market share data presented herein are based upon estimates by
management of the Company, utilizing various third party sources, where
available. While management believes that such estimates are reasonable and
reliable, in certain cases, such estimates cannot be verified by information
available from independent sources. Accordingly, no assurance can be given
that such market share data are accurate in all material respects.
----------------
TRADEMARKS AND TRADENAMES
The following items referred to in this document are trademarks that are
federally registered in the United States and abroad pursuant to applicable
intellectual property laws and are the property of the Company: Speed Queen,
Huebsch and UniMac.
The following items referred to in this document are trademarks owned by the
Company, for which applications for registration are pending in the United
States pursuant to applicable intellectual property laws: MicroMaster and
CardMate Plus.
ii
<PAGE>
OFFERING MEMORANDUM SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Offering Memorandum. Each prospective investor is urged to
read this Offering Memorandum in its entirety, including information set forth
under the heading "Risk Factors." As used in this Offering Memorandum, unless
the context requires otherwise, references to "Alliance" or the "Company" with
respect to periods prior to the Transactions refer to the commercial laundry
business of Raytheon Company, a Delaware corporation ("Raytheon"), historically
conducted by Alliance Laundry Holdings LLC (the "Parent," formerly known as
Raytheon Commercial Laundry LLC) and its predecessors and subsidiaries and with
respect to periods subsequent to the Transactions, refer collectively to
Alliance Laundry Systems LLC and its subsidiaries. As used herein, the term
"stand alone commercial laundry equipment" refers to commercial laundry
equipment excluding dry cleaning equipment and custom engineered, continuous
process laundry systems and the term "stand alone commercial laundry industry"
includes laundromats, multi-housing laundries and on-premise laundries and
excludes dry cleaners and continuous process laundries. The financial
statements presented herein for all periods except March 29, 1998, have been
prepared on a combined basis. The financial statements presented herein as of
and for the quarter ended March 29, 1998 have been prepared on a consolidated
basis.
THE COMPANY
Alliance believes it is the leading designer, manufacturer and marketer of
stand alone commercial laundry equipment in North America and a leader
worldwide. Under the well-known brand names of Speed Queen, UniMac and Huebsch,
the Company produces a full line of commercial washing machines and dryers with
load capacities from 16 to 250 pounds. The Company believes it has had the
leading market share in the North American stand alone commercial laundry
equipment industry for the last five years and has progressively increased its
market share from approximately 21% in 1993 to 38% in 1997. The Company
attributes its industry leading position to: (i) the quality, reliability and
functionality of its products; (ii) the breadth of its product offerings; (iii)
its extensive distributor network and strategic alliances with key customers;
and (iv) its substantial investment in new product development and
manufacturing capabilities. As a result of its market leadership, the Company
has an installed base of equipment that it believes is the largest in the
industry and that generates significant recurring sales of replacement
equipment and service parts. Internationally, the Company has developed
targeted opportunities, generating equipment sales of $45.5 million in 1997. In
addition, pursuant to an agreement, the Company supplies consumer washing
machines to a large consumer appliance company ("Appliance Co.") for sale at
retail. For 1997, the Company generated net sales of $347.7 million and EBITDA
(as defined) of $57.2 million.
The Company believes it has developed the most extensive distribution
networks to each of the three distinct customer groups within the North
American stand alone commercial laundry equipment industry: (i) laundromats;
(ii) multi-housing laundries, consisting primarily of common laundry facilities
in apartment buildings, universities and military installations; and (iii) on-
premise laundries, consisting primarily of in-house laundry facilities in
hotels, hospitals, nursing homes and prisons. The Company estimates that in
over 80% of the North American market its laundromat and on-premise laundry
distributors are either the number one or number two distributor for their
respective selling regions. In addition, the Company's in-house sales force has
developed superior relationships with leading route operators that own, install
and maintain commercial laundry equipment in multi-housing laundries, a
critical factor in enabling the Company to grow its market share.
Internationally, the Company sells its laundry equipment through distributors
and to retailers.
With an investment of over $70.0 million since 1994, the Company has
substantially completed the development of many new products, the redesign of
existing products and the modernization of its three manufacturing facilities
in Wisconsin, Florida and Kentucky. Since January 1, 1997, the Company has
introduced new product designs and new product models that comprise over 85% of
its current product offerings. The Company believes its considerable investment
in its product line and manufacturing capabilities has strengthened and will
continue to enhance its market leadership position.
1
<PAGE>
INDUSTRY OVERVIEW
The Company estimates that North American stand alone commercial laundry
equipment sales were approximately $500.0 million in 1997, of which the
Company's equipment sales represented approximately $187.0 million. The Company
believes that North American sales of stand alone commercial laundry equipment
have grown at a compound annual rate of approximately 4.5% since 1993. North
American commercial laundry equipment sales historically have been relatively
insulated from business and economic cycles, given that economic conditions do
not tend to affect the frequency of use, or replacement, of laundry equipment.
Management believes industry growth will be sustained by continued population
expansion and by customers increasingly "trading up" to equipment with enhanced
functionality, raising average selling prices.
Manufacturers of stand alone commercial laundry equipment compete on their
ability to satisfy several customer criteria, including: (i) equipment
reliability and durability; (ii) performance criteria such as water and energy
efficiency, load capacity and ease of use; (iii) availability of innovative
technologies such as cashless payment systems and advanced electronic controls,
which improve ease of use and management audit capabilities; and (iv) value-
added services such as rapid spare parts delivery, equipment financing and
computer aided assistance in the design of commercial laundries.
COMPANY STRENGTHS
MARKET LEADER WITH SIGNIFICANT INSTALLED BASE. The Company believes it led
the North American industry in sales to all customer groups, with a 38% market
share overall in 1997. The Company's market share has increased progressively
during the last five years for each customer group. As a result of its leading
market position, the Company has achieved superior brand recognition and
extensive distribution capabilities. The Company's market position has also
allowed it to establish what it believes to be the largest installed base in
its industry, which generates a significant level of recurring sales of
replacement equipment and service parts and provides a platform for sales
growth.
INDUSTRY-LEADING PRODUCT OFFERING. The Company believes its product line
leads the industry in reliability, breadth of offerings, functionality and
advanced features. Its development team of more than 120 engineers and
technical personnel, together with its marketing and sales personnel, work with
the Company's major customers to redesign and enhance the Company's products to
better meet customer needs. For example, the Company has introduced since
January 1, 1997 new product designs and new product models that comprise over
85% of its current product offerings; the Company's new products emphasize
efficiency and new technology, facilitating ease of use as well as improving
performance and reliability. In addition, the Company believes it is the only
manufacturer in North America to produce a full product line (including
washers, dryers, washer-extractors and tumblers for all customer groups),
thereby providing customers with a single source for all their stand alone
commercial laundry equipment needs.
EXTENSIVE AND LOYAL DISTRIBUTION NETWORKS. The Company believes it has
developed the industry's most extensive North American distribution networks.
The Company estimates its distributors are either the number one or number two
distributor for their respective selling regions in over 80% of the North
American market. Most of the Company's distributors have been customers for
over ten years. In addition, through its in-house sales force the Company has
developed excellent relationships with industry-leading route operators, who
are direct customers of the Company. The Company believes its strong
relationships with its customers are based, in part, on the quality, breadth
and performance of its products and on its comprehensive value-added services.
LEADING NATIONAL BRANDS. The Company markets and sells its products under the
widely recognized brand names Speed Queen, UniMac and Huebsch. A survey
commissioned by the Company in 1993 of more than 1,000 commercial laundry
distributors and end-users ranked Speed Queen as the leader in terms of brand
awareness and as an industry leader for quality and reliability. In the same
study, UniMac was ranked a leading brand in the stand alone on-premise laundry
industry; Huebsch and Speed Queen ranked first and second, respectively, in
customer satisfaction.
2
<PAGE>
STRONG AND INCENTIVIZED MANAGEMENT TEAM. Led by Chief Executive Officer
Thomas L'Esperance, the Company believes it has assembled the strongest
management team in the commercial laundry equipment industry. The Company's
seven executive officers have over 80 years of combined experience in the
commercial laundry equipment and appliance industries. This management team has
executed numerous strategic initiatives, including: (i) ongoing refinements to
its product offerings; (ii) the development of strategic alliances with key
customers; (iii) the implementation of manufacturing cost reduction and quality
improvement programs; and (iv) the acquisition and successful integration of
the commercial washer-extractor business of the UniMac Company ("UniMac"). In
addition, senior management (the "Management Investors") owns approximately 19%
of the Company on a diluted basis.
BUSINESS STRATEGY
The Company's strategy is to achieve profitable growth by offering a full
line of the most reliable and functional stand alone commercial laundry
equipment, along with comprehensive value-added services. The key elements of
the Company's strategy are as follows:
OFFER FULL LINE OF SUPERIOR PRODUCTS AND SERVICES. The Company seeks to
satisfy all of a customer's stand alone commercial laundry equipment needs with
its full line of products and services. The Company seeks to compete with other
manufacturers in the commercial laundry equipment industry by introducing new
products, features and value-added services tailored to meet evolving customer
requirements. In 1997, for example, the Company began field tests for a new
line of small-chassis frontload washers, offering multi-housing laundries
increased water and energy efficiency. In addition, in 1997, the Company
introduced its Automatic Balance System for topload washers, providing
industry-leading out-of-balance handling; Alliance's new topload washers
generate a higher g-force, thereby reducing moisture left in the laundry and
drying time, ultimately reducing operating costs for the Company's customers.
DEVELOP AND STRENGTHEN ALLIANCES WITH KEY CUSTOMERS. The Company has
developed and will continue to pursue long-term alliances and multi-year supply
agreements with key customers. The Company is the predominant supplier of new
laundry equipment to Coinmach Corporation ("Coinmach"), the largest and fastest
growing operator of multi-housing laundries in North America. Similarly, the
Company is the supplier of substantially all of the laundry equipment purchased
by SpinCycle, Inc. ("SpinCycle"), an emerging leader in the North American
laundromat industry.
CONTINUOUSLY IMPROVE MANUFACTURING OPERATIONS. The Company seeks to
continuously enhance its product quality and reduce costs through refinements
to manufacturing processes. The Company achieves such improvements through
collaboration among key customers and its engineering and marketing personnel.
Since 1995, the Company has progressively reduced manufacturing costs through
improvements in raw material usage and labor efficiency, among other factors.
These improvements are driven in part by the Company's goalsharing programs,
through which the Company's manufacturing teams share in a portion of the cost
reductions they achieve.
THE SPONSOR
Bain Capital, Inc. ("Bain"), founded in 1984, manages capital in excess of
$1.5 billion and has invested in more than 100 companies. Bain is one of the
most experienced and successful private equity investors in the United States,
and the firm's principals have extensive experience working with companies on a
wide range of operational challenges. Bain's investment strategy is to acquire
companies in partnership with excellent management teams and to improve the
long-term value of businesses. The firm typically invests in companies that are
market share leaders with strong strategic positions and significant
opportunities for growth. Following consummation of the Transactions,
affiliates of Bain own 54.9% of the outstanding equity interests of the Parent.
In addition, Bain has entered into the Management Services Agreement (as
defined) with the Company pursuant to which Bain will provide general
management, acquisition and financial services.
3
<PAGE>
THE TRANSACTIONS
On May 5, 1998 the Company completed the offering of the Notes (the "Note
Offering") and the recapitalization of the Parent (the "Recapitalization")
through (i) the Merger whereby, among other things, Bain/RCL, L.L.C., a
Delaware limited liability company ("Bain LLC"), the BRS Investors (as defined)
and the Management Investors (collectively with Bain LLC and the BRS Investors,
the "Securityholders") acquired 93% of the common equity of the Parent, of
which the Company is a direct wholly-owned subsidiary, and (ii) financings
whereby the Company entered into and borrowed under the Senior Credit Facility
and entered into a $250.0 million off-balance sheet receivables and equipment
financing facility (the "Asset Backed Facility"). In addition, simultaneously
with the consummation of each of the other Transactions, the Parent completed
the Parent Contribution (as defined).
The transactions contemplated by the Merger Agreement (as defined) were
funded by: (i) $200.0 million of term loan borrowings by the Company pursuant
to the Senior Credit Facility; (ii) the Note Offering, with aggregate gross
proceeds of $110.0 million (substantially all of the amounts in clauses (i) and
(ii) was distributed to the Parent to fund the Merger and related fees and
expenses); (iii) the issuance by the Parent of the Seller Subordinated Note (as
defined) to Raytheon, with a principal amount of $9.0 million; (iv) the
issuance by the Parent of the Seller Preferred Equity (as defined) to Raytheon
with a liquidation value of approximately $6.0 million; (v) an equity
investment in the Parent by the Securityholders of approximately $47.1 million
(the "Investors Equity Contribution"); and (vi) a retained equity investment in
the Parent by Raytheon with a fair market value of approximately $3.5 million
(the "Raytheon Equity"). The Offering, the Senior Credit Facility, the
Investors Equity Contribution, the Parent Contribution, the Merger, the Asset
Backed Facility and the issuance of the Seller Subordinated Note and the Seller
Preferred Equity are collectively referred to herein as the "Transactions."
Each of the Transactions was conditioned upon each of the others, and
consummation of each of the Transactions occurred simultaneously. See "The
Transactions."
----------------
The executive offices of the Company are located at Shepard Street, Ripon,
Wisconsin 54971-0990, and its telephone number is (920) 748-3121.
4
<PAGE>
THE NOTE OFFERING
NOTES.......................
The Notes were sold by the Alliance and ALC on
May 5, 1998 to Lehman Brothers Inc. and Credit
Suisse First Boston Corporation (the "Initial
Purchasers") pursuant to a Purchase Agreement
dated May 5, 1998 (the "Purchase Agreement"). The
Initial Purchasers subsequently resold the Notes
to qualified institutional buyers pursuant to
Rule 144A under the Securities Act and to a
limited number of institutional accredited
investors that agreed to comply with certain
transfer restrictions and other conditions. ALC
is a wholly owned subsidiary of Alliance that was
incorporated for the sole purpose of serving as a
co-issuer of the Notes in order to facilitate the
Note Offering. ALC does not have any substantial
operations or assets of any kind and will not
have any revenues. Prospective investors in the
Exchange Notes should not expect ALC to
participate in servicing the interest, principal
obligations or Liquidated Damages, if any, on the
Exchange Notes. See "Description of the Exchange
Notes--Certain Covenants."
EXCHANGE AND REGISTRATION
RIGHTS AGREEMENT........... Pursuant to the Purchase Agreement, the Issuers
and the Initial Purchasers entered into a
Registration Rights Agreement dated May 5, 1998,
which grants the holder of the Notes certain
exchange and registration rights. The Exchange
Offer is intended to satisfy such exchange rights
which terminate upon the consummation of the
Exchange Offer.
THE EXCHANGE OFFER
SECURITIES OFFERED..........
$110,000,000 aggregate principal amount of Series
B 9 5/8% Senior Subordinated Notes due 2008.
THE EXCHANGE OFFER.......... $1,000 principal amount of the Exchange Notes in
exchange for each $1,000 principal amount of
Notes. As of the date hereof, $110,000,000
aggregate principal amount of Notes are
outstanding. The Issuers will issue the Exchange
Notes to holders on or promptly after the
Expiration Date.
Based on an interpretation by the staff of the
Commission set forth in no-action letters issued
to third parties, the Issuers believe that the
Exchange Notes issued pursuant to the Exchange
Offer in exchange for Notes may be offered for
resale, resold and otherwise transferred by any
holder thereof (other than any such holder which
is an "affiliate" of either Alliance or ALC
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 that such
holder does not intend to participate and has no
arrangement or understanding with any person to
participate in the distribution of such Exchange
Notes.
5
<PAGE>
Each Participating 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 Participating
Broker-Dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the
Securities Act. This Offering Memorandum, as it
may be amended or supplemented from time to time,
may be used by a Participating Broker-Dealer in
connection with resales of Exchange Notes
received in exchange for Notes where such Notes
were acquired by such Participating Broker-Dealer
as a result of market-making activities or other
trading activities. The Issuers have agreed that,
for a period of up to one year from the
consummation of the Exchange Offer, it will make
this Offering Memorandum available to any
Participating Broker-Dealer for use in connection
with any such resale. See "Plan of Distribution."
Any holder who tenders in the Exchange Offer with
the intention to participate, or for the purpose
of participating, in a distribution of the
Exchange Notes could not rely on the position of
the staff of the Commission enunciated in no-
action letters and, in the absence of an
exemption therefrom, must comply with the
registration and prospectus delivery requirements
of the Securities Act in connection with any
resale transaction. Failure to comply with such
requirements in such instance may result in such
holder incurring liability under the Securities
Act for which the holder is not indemnified by
the Issuers.
EXPIRATION DATE............. 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.
ACCRUED INTEREST ON THE
EXCHANGE NOTES AND THE Each Exchange Note will bear interest from its
NOTES...................... issuance date. Holders of Notes that are accepted
for exchange will receive, in cash, accrued
interest thereon to, but not including, the
issuance date of the Exchange Notes. Such
interest will be paid with the first interest
payment on the Exchange Notes. Interest on the
Notes accepted for exchange will cease to accrue
upon issuance of the Exchange Notes.
CONDITIONS TO THE EXCHANGE The Exchange Offer is subject to certain
OFFER...................... customary conditions, which may be waived by the
Issuers. See "The Exchange Offer--Conditions."
PROCEDURES FOR TENDERING Each holder of Notes wishing to accept the
NOTES...................... Exchange Offer must complete, sign and date the
accompanying Letter of Transmittal, or a
facsimile thereof, in accordance with the
instructions contained herein and therein, and
mail or otherwise deliver such Letter of
6
<PAGE>
Transmittal, or such facsimile, together with the
Notes and any other required documentation to the
Exchange Agent (as defined) at the address set
forth herein. Delivery of the Notes may also be
made by book-entry transfer in accordance with
the procedures described below. Confirmation of
such book-entry transfer must be received by the
Exchange Agent prior to the Expiration Date. By
executing the Letter of Transmittal or effecting
delivery by book-entry transfer, each holder will
represent to the Issuers that, among other
things, the Exchange Notes acquired pursuant to
the Exchange Offer are being obtained in the
ordinary course of business of the person
receiving such Exchange Notes, whether or not
such person is the holder, that neither the
holder nor any such other person has any
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 either
Alliance or ALC. See "The Exchange Offer--Purpose
and Effect of the Exchange Offer" and "--
Procedures for Tendering."
UNTENDERED NOTES............ Following the consummation of the Exchange Offer,
holders of Notes eligible to participate but who
do not tender their Notes will not have any
further exchange rights and such Notes will
continue to be subject to certain restrictions on
transfer. Accordingly, the liquidity of the
market for such Notes could be adversely
affected.
CONSEQUENCES OF FAILURE TO
EXCHANGE...................
The Notes that are not exchanged pursuant to the
Exchange Offer will remain restricted securities.
Accordingly, such Notes may be resold only: (i)
to the Issuers; (ii) pursuant to Rule 144A or
Rule 144 under the Securities Act or pursuant to
some other exemption under the Securities Act;
(iii) outside the United States to a foreign
person pursuant to the requirements of Rule 904
under the Securities Act; or (iv) pursuant to an
effective registration statement under the
Securities Act. See "The Exchange Offer--
Consequences of Failure to Exchange."
SHELF REGISTRATION If any holder of the Notes (other than any such
STATEMENT.................. holder which is an "affiliate" of either Alliance
or ALC within the meaning of Rule 405 under the
Securities Act) is not eligible under applicable
securities laws to participate in the Exchange
Offer, and such holder has provided information
regarding such holder and the distribution of
such holder's Notes to the Issuers for use
therein, the Issuers have agreed to register the
Notes on a shelf registration statement (the
"Shelf Registration Statement") and use its best
efforts to cause it to be declared effective by
the Commission as promptly as practicable on or
after the consummation of the Exchange Offer. The
Issuers have agreed to maintain the continuous
effectiveness of the Shelf Registration Statement
for, under certain circumstances, a maximum of
two years, to cover resales of the Notes held by
any such holders.
7
<PAGE>
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS.......... Any beneficial owner whose 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 owner's
own behalf, such owner must, prior to completing
and executing the Letter of Transmittal and
delivering its Notes, either make appropriate
arrangements to register ownership of the Notes
in such owner's name or obtain a properly
completed bond power from the registered holder.
The transfer of registered ownership may take
considerable time. The Issuers will keep the
Exchange Offer open for not less than twenty days
in order to provide for the transfer of
registered ownership.
GUARANTEED DELIVERY Holders of Notes who wish to tender their Notes
PROCEDURES................. and whose Notes are not immediately available or
who cannot deliver their Notes, the Letter of
Transmittal or any other documents required by
the Letter of Transmittal to the Exchange Agent
(or comply with the procedures for book-entry
transfer) prior to the Expiration Date must
tender their Notes according to the guaranteed
delivery procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures."
WITHDRAWAL RIGHTS........... Tenders may be withdrawn at any time prior to
5:00 p.m., New York City time, on the Expiration
Date.
ACCEPTANCE OF NOTES AND
DELIVERY OF EXCHANGE The Issuers will accept for exchange any and all
NOTES...................... 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--Terms of the Exchange Offer."
USE OF PROCEEDS............. There will be no cash proceeds to the Issuers
from the exchange pursuant to the Exchange Offer.
EXCHANGE AGENT.............. United States Trust Company of New York.
THE EXCHANGE NOTES
GENERAL..................... The form and terms of the Exchange Notes are the
same as the form and terms of the Notes (which
they replace) except that: (i) the Exchange Notes
bear a Series B designation; (ii) the Exchange
Notes have been registered under the Securities
Act and, therefore, will not bear legends
restricting the transfer thereof; and (iii) the
holders of Exchange Notes will not be entitled to
certain rights under the Exchange and
Registration Rights Agreement, including the
provisions providing for an increase in the
interest rate on the
8
<PAGE>
Notes in certain circumstances relating to the
timing of the Exchange Offer, which rights will
terminate when the Exchange Offer is consummated.
See "The Exchange Offer--Purpose and Effect of
the Exchange Offer." The Exchange Notes will
evidence the same debt as the Notes and will be
entitled to the benefits of the Indenture. See
"Description of Exchange Notes." The Notes and
the Exchange Notes are referred to herein
collectively as the "Senior Subordinated Notes."
SECURITIES OFFERED..........
$110,000,000 aggregate principal amount of Series
B 9 5/8% Senior Subordinated Notes due 2008 of
the Issuers.
MATURITY DATE............... May 1, 2008.
INTEREST PAYMENT DATES...... May 1 and November 1, commencing November 1,
1998.
EVENTS OF DEFAULT...........
An Event of Default occurs under the Indenture in
instances such as the failure to pay principal
when due, the failure to pay any interest within
30 days of when due and payable, the failure to
perform or comply with various covenants under
the Indenture or the default under the terms of
certain other indebtedness of the Company. See
"Description of Exchange Notes--Events of
Default."
OPTIONAL REDEMPTION......... The Exchange Notes will be redeemable at the
option of the Issuers, in whole or in part, at
any time on or after May 1, 2003, at the
redemption prices set forth herein, plus accrued
and unpaid interest and Liquidated Damages, if
any, thereon to the date of redemption. In
addition, at any time prior to May 1, 2001, the
Issuers may, in their discretion, redeem up to
35% of the aggregate principal amount of the
Notes issued under the Indenture at a redemption
price of 109.625% of the principal amount
thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the date
of redemption, with the net cash proceeds of one
or more Equity Offerings, provided that at least
65% of the aggregate principal amount of the
Exchange Notes issued under the Indenture remains
outstanding immediately after each such
redemption. See "Description of the Exchange
Notes--Optional Redemption."
CHANGE OF CONTROL........... In the event of a Change of Control, holders of
the Notes will have the right to require the
Issuers to purchase their Notes, in whole or in
part, at a price equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon
to the date of purchase. At any time on or prior
to May 1, 2003, the Exchange Notes may also be
redeemed in whole, but not in part, at the option
of the Issuers, upon the occurrence of a Change
of Control (but in no event more than 90 days
after the occurrence of such Change of Control),
at a redemption price equal to 100% of the
principal amount thereof plus the Applicable
Premium as of, and accrued but unpaid interest
and Liquidated Damages thereon, if any, to, the
date of redemption (subject to the right of
holders on the relevant record date to receive
interest due
9
<PAGE>
on the relevant interest payment date). There can
be no assurance that the Company will have the
financial resources necessary or be able to
arrange financing to repurchase the Exchange
Notes upon a Change of Control. See "Description
of the Exchange Notes--Repurchase at the Option
of Holders--Change of Control;--Optional
Redemption."
RANKING.....................
The Exchange Notes will be general unsecured
obligations of the Issuers, subordinate in right
of payment to all existing and future Senior Debt
of the Issuers, including all borrowings of the
Company and its subsidiaries under the Senior
Credit Facility. Concurrently with the Note
Offering, the Company entered into a new $275.0
million Senior Credit Facility. As of May 5,
1998, after consummation of the Transactions,
including the Offering, borrowings under the
Senior Credit Facility and application of the net
proceeds therefrom, the Company and its
Subsidiaries had $200.0 million of Senior Debt
outstanding (exclusive of $75.0 million available
under the Revolving Credit Facility which would
also be Senior Debt). See "Capitalization,"
"Description of Senior Credit Facility" and
"Description of the Exchange Notes--
Subordination."
GUARANTEES.................. The Issuers' payment obligations under the
Exchange Notes will be jointly and severally
guaranteed on a senior subordinated basis (the
"Guarantees") by the Parent and each of the
Company's future direct and indirect Domestic
Subsidiaries (the "Guarantors"). The Exchange
Notes will not be guaranteed by any of the
Company's current direct and indirect Domestic
Subsidiaries or current or future Foreign
Subsidiaries (the "Non-Guarantor Subsidiaries").
For the fiscal year ended December 31, 1997, the
Non-Guarantor Subsidiaries accounted for 2.0% of
the Company's net sales and generated $2.1
million of EBITDA. The Guarantees will be
subordinated to the guarantees of Senior Debt
issued by the Guarantors under the Senior Credit
Facility. See "Description of the Exchange
Notes--Exchange Note Guarantees."
CERTAIN COVENANTS........... The indenture pursuant to which the Exchange
Notes will be issued (the "Indenture") will
contain certain covenants that, among other
things, limit the ability of the Company, its
Restricted Subsidiaries (as defined) and, with
respect to clause (i), any Guarantor to (i) incur
additional indebtedness and issue preferred
stock, (ii) pay dividends or make certain other
restricted payments, (iii) enter into
transactions with affiliates, (iv) make certain
asset dispositions, (v) merge or consolidate
with, or transfer all or substantially all of its
assets to, another Person (as defined), (vi)
encumber assets under certain circumstances,
(vii) restrict dividends and other payments from
Restricted Subsidiaries or (viii) engage in
certain business activities. See "Description of
the Exchange Notes--Certain Covenants." In
addition, under certain circumstances, the
Issuers will be required to offer to purchase the
Exchange Notes at a price equal to 100% of the
principal amount thereof, plus accrued and
10
<PAGE>
unpaid interest and Liquidated Damages, if any,
thereon to the date of purchase, with the
proceeds of certain Asset Sales (as defined). See
"Description of the Exchange Notes--Certain
Covenants;--Repurchase at the Option of Holders--
Asset Sales."
For additional information regarding the
Exchange Notes, see "Description of Exchange
Notes."
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE EXCHANGE NOTES, SEE "RISK FACTORS."
11
<PAGE>
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA COMBINED FINANCIAL AND OPERATING
DATA
The following table sets forth (i) summary historical combined financial data
of the Company for the four years ended December 31, 1997 and for the quarter
ended March 30, 1997 and summary historical consolidated financial data of the
Company for the quarter ended March 29, 1998 and (ii) summary unaudited pro
forma combined financial data for the fiscal year ended December 31, 1997 and
summary unaudited pro forma consolidated financial data for the quarter ended
March 29, 1998. Since following the Transactions the Parent is a holding
company with no operations other than those of the Company and its
subsidiaries, the historical combined financial statements of the Parent
represent the historical results of operations of the Company. The summary
historical combined financial data for the four years ended December 31, 1997
were derived from the audited combined financial statements of the Company,
which for the three years ended December 31, 1997 are included elsewhere
herein, together with the report of Coopers & Lybrand, L.L.P., independent
accountants. The summary historical combined financial data of the Company for
the quarter ended March 30, 1997 and the summary historical consolidated
financial data for the quarter ended March 29, 1998 were each derived from
unaudited financial statements that were prepared on the same basis as the
audited financial statements and that, in the opinion of management, include
normal recurring adjustments and adjustments necessary for a fair presentation
of the combined results of operations and financial condition of the Company as
it operated as a unit of Raytheon. The summary historical consolidated
financial data for the quarter ended March 29, 1998 are not necessarily
indicative of the results for the full year. The summary unaudited pro forma
combined statements of income and other operating data for the fiscal year
ended December 31, 1997 and the summary unaudited pro forma consolidated
statement of income and other operating data for the quarter ended March 29,
1998 give effect to the Transactions as if each had occurred on January 1, 1997
and January 1, 1998, respectively. The summary unaudited pro forma consolidated
balance sheet data at March 29, 1998 give effect to the Transactions as if each
had occurred on March 29, 1998. The summary unaudited pro forma combined
financial data and the summary unaudited pro forma consolidated financial data
are intended for informational purposes and should not be considered indicative
of either future results of operations or the results that might have occurred
if the Transactions had been consummated on the indicated date or had been in
effect for the period presented. The following table should be read in
conjunction with "Selected Historical Combined Financial Data," "Unaudited Pro
Forma Combined Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the historical combined
financial statements and the notes related thereto of the Company included
elsewhere in this Offering Memorandum.
<TABLE>
<CAPTION>
PRO FORMA
YEARS ENDED DECEMBER 31, QUARTERS ENDED PRO FORMA QUARTER
----------------------------------- ------------------- YEAR ENDED ENDED
MARCH 30, MARCH 29, DECEMBER 31, MARCH 29,
1994 1995 1996 1997 1997 1998 1997(/1/) 1998(/1/)
-------- -------- -------- -------- --------- --------- ------------ ---------
(DOLLARS IN THOUSANDS) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME:
Net sales............... $267,445 $324,529 $318,263 $347,709 $80,475 $83,295 $346,546 $82,777
Cost of sales........... 208,543 259,272 246,017 263,932 61,881 63,945 263,932 63,945
-------- -------- -------- -------- ------- ------- -------- -------
Gross profit............ 58,902 65,257 72,246 83,777 18,594 19,350 82,614 18,832
Selling, general and
administrative expense. 29,782 35,360 34,464 41,070 9,128 10,580 41,940 10,763
Nonrecurring costs(/2/). -- 574 3,704 -- -- -- -- --
-------- -------- -------- -------- ------- ------- -------- -------
Operating income....... 29,120 29,323 34,078 42,707 9,466 8,770 40,674 8,069
Other income, net....... 312 778 685 -- -- -- -- --
Interest expense........ -- -- -- -- -- -- 31,287 7,662
-------- -------- -------- -------- ------- ------- -------- -------
Income before taxes..... 29,432 30,101 34,763 42,707 9,466 8,770 9,387 407
Provision for income
taxes(/3/)............. 11,265 11,545 13,408 16,431 3,643 3,385 -- --
-------- -------- -------- -------- ------- ------- -------- -------
Net income.............. $ 18,167 $ 18,556 $ 21,355 $ 26,276 $ 5,823 $ 5,385 $ 9,387 $ 407
======== ======== ======== ======== ======= ======= ======== =======
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA
YEARS ENDED DECEMBER 31, QUARTERS ENDED PRO FORMA QUARTER
----------------------------------- -------------------- YEAR ENDED ENDED
MARCH 30, MARCH 29, DECEMBER 31, MARCH 29,
1994 1995 1996 1997 1997 1998 1997(/1/) 1998(/1/)
------- ------- ------- -------- --------- --------- ------------ ---------
(DOLLARS IN THOUSANDS) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OTHER OPERATING DATA:
EBITDA(/4/)............. $37,573 $40,948 $45,908 $ 57,152 $ 12,466 $ 12,497 $ 55,119 $ 11,796
EBITDA Margin(/5/)...... 14.0% 12.6% 14.4% 16.4% 15.5% 15.0% 15.9% 14.3%
Cash interest
expense(/6/)........... $ -- $ -- $ -- $ -- $ -- $ -- $ 28,632 $ 7,067
Depreciation and
amortization........... 8,141 10,847 11,145 14,445 3,000 3,727 14,445 3,727
Capital
expenditures(/7/)...... 11,579 16,177 22,030 22,623 7,949 1,457 22,623 1,457
Operating cash flows.... 19,381 17,517 77,192 40,067 2,058 19,035 -- --
Ratio of EBITDA to cash interest expense................. -- -- 1.9x 1.7x
Ratio of earnings to
fixed charges(/8/)..... 149.6x 153.0x 96.8x 108.8x 95.7x 88.7x 1.3x 1.1x
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital................................. $ 15,434 $ 13,205 $ 5,325
Total assets.................................... 205,086 227,615 234,881
Total debt...................................... -- -- 315,146
Parent company investment/(members' deficit).... 148,573 135,824 (166,008)
</TABLE>
- -------
(1) See "Unaudited Pro Forma Combined Financial Data."
(2) Nonrecurring costs associated primarily with reductions in work force. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations--Results of Operations."
(3) Subsequent to the consummation of the Transactions, the Company will not
be a tax paying entity. Historical amounts represent the Company's tax
attributes as a division of Raytheon as calculated on a separate return
basis. See "Unaudited Pro Forma Combined Financial Data."
(4) "EBITDA," as presented, represents income before income taxes plus
depreciation and amortization, interest and expense. Adjusted EBITDA for
the year ended December 31, 1997 totals $54.5 million and is calculated by
adding to EBITDA (as described above) certain items of income and expense
primarily related to the Appliance Co. Transaction (as defined) including:
(i) the impact of lower contractual selling prices for sales of consumer
topload washers to Appliance Co. compared to sales of such washers to
Raytheon's consumer appliance business prior to the Appliance Co.
Transaction; (ii) the elimination of one time transition costs; and (iii)
the elimination of costs incurred by the Company prior to the Appliance
Co. Transaction that would have been reimbursed by Appliance Co. under the
terms of the Appliance Co. Supply Agreement (as defined). See Supplemental
Adjustments in the Unaudited Pro Forma Combined Statements of Income for
additional disclosure regarding these adjustments. EBITDA and Adjusted
EBITDA should not be considered alternatives 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 as a measure of the Company's liquidity. Because
EBITDA and Adjusted EBITDA are not calculated identically by all
companies, the presentation herein may not be comparable to other
similarly titled measures of other companies. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
(5) Represents EBITDA as a percentage of net sales.
(6) Cash interest expense represents pro forma interest expense less
amortization of deferred financing costs.
(7) Excludes purchases of assets related to the November 1994 acquisition of
the business of UniMac. For each of the four years ended December 31,
1997, capital expenditures excluding those relating to major new products,
significant product redesigns and major capacity additions would have been
less than $10.0 million.
(8) For purposes of computing this ratio, earnings consist of income before
income taxes plus fixed charges. Fixed charges consist of interest expense
on all indebtedness and the estimated interest portion of rental expense.
13
<PAGE>
RISK FACTORS
Holders of the Notes should carefully consider the risk factors set forth
below, as well as the other information appearing elsewhere in this Offering
Memorandum, before tendering their Notes in the Exchange Offer.
Certain statements, estimates, predictions and projections contained herein
under "Offering Memorandum Summary," "Risk Factors," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Business,"
in addition to certain statements contained elsewhere herein, are "forward-
looking statements" within the meaning of Section 27A of the Securities Act
and Section 21E of the Exchange Act. These forward-looking statements are
prospective, involving risks and uncertainties. While these forward-looking
statements, and any assumptions upon which they are based, are made in good
faith and reflect the Company's current judgment regarding the direction of
its business, actual results will almost always vary, sometimes materially,
from any estimates, predictions, projections, assumptions or other future
performance suggested herein. Some important factors (but not necessarily all
factors) that could affect the Company's revenues, growth strategies, future
profitability and operating results, or that otherwise could cause actual
results to differ materially from those expressed in or implied by any
forward-looking statement, include the following: lack of operating history as
an independent public company; inability to enter into and borrow under the
Senior Credit Facility; ability to successfully implement operating
strategies; working capital adjustments; payments pursuant to indemnification
arrangements; changes in economic conditions; competition; regulatory
difficulties; and the other matters referred to herein or elsewhere in this
Offering Memorandum. Holders of the Notes are urged to carefully consider
these factors in connection with the forward-looking statements. The Company
does not undertake to release publicly any revisions to forward-looking
statements that may be made to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
RISKS RELATING TO THE NOTES
Substantial Leverage
The Company incurred significant debt in connection with the Transactions.
As of May 5, 1998, the Company had outstanding indebtedness of $310.0 million,
including $200.0 million drawn under the Term Loan Facility and $110.0 million
of the Notes, and had a significant members' deficit. In addition, the Company
had available borrowings of up to $75.0 million under the Revolving Credit
Facility. In addition, subject to restrictions in the Senior Credit Facility
and the Indenture, the Company may incur additional indebtedness from time to
time to finance acquisitions or capital expenditures. For the year ended
December 31, 1997, after giving pro forma effect to the Transactions, the
Company's ratio of earnings to fixed charges would have been 1.3 to 1.
The Company's ability to make scheduled payments of principal of, or to pay
the premium, if any, interest or Liquidated Damages, if any, on, or to
refinance, its indebtedness (including the Exchange Notes), or to fund planned
capital expenditures will depend on its future performance, which, to a
certain extent, is subject to general economic, financial, competitive,
legislative, regulatory and other factors that are beyond its control. Based
upon the current level of operations and certain anticipated improvements,
management believes that cash flow from operations and available cash,
together with available borrowings under the Senior Credit Facility, will be
adequate to meet the Company's future liquidity needs for at least the next
several years. There can be no assurance, however, that the Company's business
will generate sufficient cash flow from operations, that anticipated revenue
growth and operating improvements will be realized or that future borrowings
will be available under the Senior Credit Facility in an amount sufficient to
enable the Company to service its indebtedness, including the Exchange Notes,
or to fund its other liquidity needs. The Company may be required to refinance
all or a portion of the principal of the Exchange Notes on or prior to
maturity. There can be no assurance, however, that such refinancing would be
available on commercially reasonable terms or at all. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."
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The degree to which the Company has been leveraged following the
Transactions could have important consequences to holders of the Exchange
Notes, including, but not limited to: (i) making it more difficult for the
Company to satisfy its obligations with respect to the Exchange Notes; (ii)
increasing the Company's vulnerability to general adverse economic and
industry conditions; (iii) limiting the Company's ability to obtain additional
financing to fund future working capital, capital expenditures, research and
development and other general corporate requirements; (iv) requiring the
dedication of a substantial portion of the Company's cash flow from operations
to the payment of principal of, and interest on, its indebtedness, thereby
reducing the availability of such cash flow to fund working capital, capital
expenditures, research and development or other general corporate purposes;
(v) limiting the Company's flexibility in planning for, or reacting to,
changes in its business and the industry in which it competes; and (vi)
placing the Company at a competitive disadvantage compared to less leveraged
competitors. In addition, the Indenture and the Senior Credit Facility contain
financial and other restrictive covenants that limit the ability of the
Company to, among other things, borrow additional funds. Failure by the
Company to comply with such covenants could result in an event of default
which, if not cured or waived, could have a material adverse effect on the
Company's business, financial condition and results of operations. If the
Company cannot generate sufficient cash to meet its obligations as they become
due or refinance such obligations, the Company may have to sell assets or
reduce capital expenditures. In addition, the degree to which the Company is
leveraged could prevent it from repurchasing all of the Exchange Notes
tendered to it upon the occurrence of a Change of Control. See "Description of
Senior Credit Facility" and "Description of the Exchange Notes--Repurchase at
the Option of Holders--Change of Control."
Subordination of the Exchange Notes; Guarantees
The Exchange Notes will be contractually subordinated to all Senior Debt
including all obligations under the Senior Credit Facility. 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, the holders of
Senior Debt will be entitled to be paid in full in cash before any payment may
be made with respect to the Exchange Notes. In addition, the subordination
provisions of the Indenture will provide that payments with respect to the
Exchange Notes can be blocked in the event of defaults on Designated Senior
Debt (as defined). In the event of a bankruptcy, liquidation or reorganization
of the Company, holders of the Notes will participate ratably with all holders
of subordinated indebtedness of the Company that is deemed to be of the same
class as the Exchange Notes, and potentially with all other general creditors
of the Company, based upon the respective amounts owed to each holder or
creditor, in the remaining assets of the Company. In any of the foregoing
events, there can be no assurance that there would be sufficient assets to pay
amounts due on the Exchange Notes. As a result, holders of the Exchange Notes
may receive less, ratably, than holders of Senior Debt. At May 5, 1998, after
giving effect to the Transactions, the aggregate amount of consolidated
indebtedness and other liabilities to which the Exchange Notes were
subordinated was approximately $200.0 million, consisting of secured
borrowings under the Term Loan Facility. In addition, the Company had
available borrowings of up to $75.0 million under the Revolving Credit
Facility, all of which would constitute Senior Debt. Subject to certain
limitations, the Indenture will permit the Company to incur additional
indebtedness. Substantially all of the assets of the Company will or may in
the future be pledged to secure other indebtedness of the Company or its
Subsidiaries. See "The Transactions," "Description of Senior Credit Facility"
and "Description of the Exchange Notes--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock."
The Issuers' payment obligations under the Exchange Notes will be jointly
and severally guaranteed on a senior subordinated basis by the Parent and each
of the Company's future direct and indirect domestic subsidiaries. The
Exchange Notes will not be guaranteed by any of the Company's current direct
and indirect domestic subsidiaries or current or future foreign subsidiaries.
For the fiscal year ended December 31, 1997, the Non-Guarantor Subsidiaries
accounted for 2.0% of the Company's net sales and generated $2.1 million of
EBITDA . The Guarantees will be subordinated to the guarantees of Senior Debt
issued by the Guarantors under the Senior Credit Facility. Additionally, the
Company's payment obligations under the Notes will be structurally
subordinated to indebtedness of the Company's subsidiaries. See "Description
of the Exchange Notes--Subordination;--Exchange Note Guarantees."
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Restrictions Imposed by the Senior Credit Facility and the Indenture
The Senior Credit Facility requires the Company to maintain specified
financial ratios and tests, among other obligations, including a minimum
interest coverage ratio and a maximum leverage ratio. In addition, the Senior
Credit Facility contains affirmative and negative covenants customary for
financings of that type, including, among other things, limitations on the
Company's ability to incur additional indebtedness and make acquisitions and
capital expenditures. A failure to comply with such covenants could lead to an
event of default thereunder, which could result in an acceleration of such
indebtedness. Such an acceleration would constitute an event of default under
the Indenture relating to the Exchange Notes. If an event of default exists on
Designated Senior Debt, subordination provisions in the Indenture may restrict
payments to holders of the Exchange Notes until holders of Senior Debt are
paid in full or such default is cured or waived or has ceased to exist. In
addition, the Indenture restricts, among other things, the Company's ability
to incur additional indebtedness, sell assets, create liens or other
encumbrances, make certain payments and dividends or merge or consolidate. A
failure to comply with the restrictions in the Indenture could result in an
event of default under the Indenture. See "Description of Senior Credit
Facility" and "Description of the Exchange Notes--Certain Covenants."
Fraudulent Transfer
A significant portion of the net proceeds of the Offering were paid as a
dividend to the Parent and used to consummate the Merger. Under applicable
provisions of the United States Bankruptcy Code or comparable provisions of
state fraudulent transfer or conveyance laws, if the Company, at the time it
issued the Notes, (i) incurred such indebtedness with intent to hinder, delay
or defraud creditors or (ii)(a) received less than reasonably equivalent value
or fair consideration for incurring such indebtedness and (b)(1) was insolvent
at the time of incurrence, (2) was rendered insolvent by reason of such
incurrence (and the application of the proceeds thereof), (3) was engaged or
was about to engage in a business or transaction for which the assets
remaining with the Company constituted unreasonably small capital to carry on
its businesses or (4) intended to incur, or believed that it would incur,
debts beyond its ability to pay such debts as they mature, then, in each case,
a court of competent jurisdiction could void, in whole or in part, the Notes,
or, in the alternative, subordinate the Notes to existing and future
indebtedness of the Company. The measure of insolvency for purposes of the
foregoing will vary depending upon the law applied in such case. Generally,
however, the Company would be considered insolvent if the sum of its debts,
including contingent liabilities, was greater than all of its assets at fair
valuation or if the present fair saleable value of its assets was less than
the amount that would be required to pay the probable liability on its
existing debts, including contingent liabilities, as they become absolute and
matured. The Company believes that, for purposes of all such insolvency,
bankruptcy and fraudulent transfer or conveyance laws, the Notes were issued
without the intent to hinder, delay or defraud creditors and for proper
purposes and in good faith and that the Company, after the issuance of the
Notes and the application of the proceeds thereof, was solvent, will have
sufficient capital for carrying on its business and will be able to pay its
debts as they mature. There can be no assurance, however, that a court passing
on such questions would agree with the Company's view.
Limitations on Change of Control
In the event of a Change of Control, the Issuers will be required to make an
offer for cash to repurchase the Exchange Notes at 101% of the principal
amount thereof, plus accrued and unpaid interest, and Liquidated Damages, if
any, thereon to the repurchase date. The provisions of the Indenture may not,
however, afford holders of the Exchange Notes protection in the event of a
highly leveraged transaction, reorganization, restructuring, merger or similar
transaction involving the Company that may adversely affect holders of
Exchange Notes, if such transaction does not result in a Change of Control. A
Change of Control will result in an event of default under the Senior Credit
Facility and may result in a default under other indebtedness of the Company
that may be incurred in the future. The Senior Credit Facility will prohibit
the purchase of outstanding Exchange Notes prior to repayment of the
borrowings under the Senior Credit Facility, and any exercise by the holders
of the Exchange Notes of their right to require the Issuers to repurchase the
Exchange Notes will cause an event of default under the Senior Credit
Facility. In addition, prior to repurchasing the Exchange Notes upon
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a Change of Control, the Company must either repay all outstanding
indebtedness under the Senior Credit Facility or obtain the consent of the
lenders. If the Company does not obtain such consent or repay its outstanding
indebtedness under the Senior Credit Facility, the Company would remain
effectively prohibited from offering to purchase the Exchange Notes. Finally,
there can be no assurance that the Company will have the financial resources
necessary or be able to arrange financing to repay obligations under the
Senior Credit Facility and the Indenture or to repurchase the Exchange Notes
upon a Change of Control. See "Description of the Exchange Notes--Repurchase
at the Option of Holders--Change of Control."
ABSENCE OF PUBLIC MARKET
Prior to the Exchange Offer, there has been no public market for the Notes.
The Notes have not been registered under the Securities Act and will be
subject to restrictions on transferability to the extent that they are not
exchanged for Exchange Notes by holders who are entitled to participate in
this Exchange Offer. The holders of Notes (other than any such holder that is
an "affiliate" of either Alliance or ALC within the meaning of Rule 405 under
the Securities Act) who are not eligible to participate in the Exchange Offer
are entitled to certain registration rights, and the Issuers are required to
file a Shelf Registration Statement with respect to such Notes. The Exchange
Notes are new securities for which there currently is no market. The Exchange
Notes are eligible for trading by qualified buyers in the Private Offerings,
Resale and Trading though Automated Linkages (PORTAL) market. The Issuers do
not intend to apply for listing of the Exchange Notes on any securities
exchange or for quotation through the National Association of Securities
Dealers Automated Quotation System. Although the Exchange Notes are eligible
for trading through PORTAL, the Exchange Notes may trade at a discount from
their initial offering price, depending upon prevailing interest rates, the
market for similar securities, the Company's performance and other factors.
The Issuers have been advised by the Initial Purchasers that they currently
intend to make a market in the Exchange Notes as permitted by applicable law
and regulations; however, the Initial Purchasers are not obligated to do so
and any such market-making activities, if commenced, may be discontinued at
any time without notice. In addition, such market-making activities may be
limited during the Exchange Offer and pendency of the Shelf Registration
Statement. Therefore, there can be no assurance that an active market for any
of the Exchange Notes will develop, either prior to or after the Issuers'
performance of their obligations under the Registration Rights Agreement. See
"Description of the Exchange Notes."
The Exchange Notes generally will be permitted to be resold or otherwise
transferred (subject to the restrictions described under "Description of
Exchange Notes") by each holder without the requirement of further
registration. The Exchange Notes, however, will also constitute a new issue of
securities with no established trading market. The Exchange Offer will not be
conditioned upon any minimum or maximum aggregate principal amount of Notes
being tendered for exchange. No assurance can be given as to the liquidity of
the trading market for the Exchange Notes, or, in the case of non-exchanging
holders of Notes, the trading market for the Notes following the Exchange
Offer.
The liquidity of, and trading market for, the Exchange Notes also may be
adversely affected by general declines in the market or by declines in the
market for similar securities. Such declines may adversely affect such
liquidity and trading markets independently of the financial performance of,
and prospects for, the Company.
EXCHANGE OFFER PROCEDURES
Issuance of the Exchange Notes in exchange for the Notes pursuant to the
Exchange Offer will be made only after a timely receipt by the Issuers of such
Notes, a properly completed and duly executed Letter of Transmittal and all
other required documents. Therefore, holders of the Notes desiring to tender
such Notes in exchange for Exchange Notes should allow sufficient time to
ensure timely delivery. The Issuers are under no duty to give notification of
defects or irregularities with respect to the tenders of Notes for exchange.
Notes that are not tendered or are tendered but not accepted will, following
the consummation of the Exchange Offer, continue to be subject to the existing
restrictions upon transfer thereof and, upon consummation of the Exchange
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<PAGE>
Offer, certain registration rights under the Registration Rights Agreement
will terminate. In addition, any holder of Notes who tenders in the Exchange
Offer for the purpose of participating in a distribution of the Exchange Notes
may be deemed to have received restricted securities and, if so, will be
required to comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any resale transactions. Each
Participating Broker-Dealer that receives Exchange Notes for its own account
in exchange for Notes, where such Notes were acquired by such Participating
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 Notes are tendered and accepted in the Exchange Offer, the trading
market for untendered and tendered but unaccepted Notes could be adversely
affected. See "The Exchange Offer."
COMPANY-SPECIFIC RISKS
Appliance Co. Transaction
The Company has mutual supply agreements with Appliance Co. that terminate
in 1999 (subject to certain extension rights). Pursuant to such agreements,
(i) the Company purchases commercial small-chassis frontload washers and
dryers from Appliance Co.'s Searcy, Arkansas facility and (ii) Appliance Co.
purchases consumer topload washers from the Company's Ripon, Wisconsin
facility (the "Appliance Co. Supply Agreement"). Consumer topload washers sold
to Appliance Co. currently comprise a substantial percentage of the unit
volume of the Ripon facility and represented approximately 22% of 1997 net
sales. Upon the termination of the Appliance Co. Supply Agreement, the Company
will experience a significant decline in unit volume. This volume decline may
result in an increase in the Company's average cost per unit, due to, among
other factors, unabsorbed manufacturing overhead, reduced raw materials
purchasing scale and reduced manufacturing efficiency. In addition, a failure
by the Company to successfully implement the reconfiguration of the Ripon
plant and thereby to partially offset any impact on the Company's cost per
unit following this volume decline could have a material adverse effect on the
Company's business, financial condition and results of operations. See "--
Ripon Transition" and "Business--Ripon Transition;--Appliance Co.
Transaction."
The Company relies on Appliance Co. to supply it with commercial small-
chassis frontload washers and dryers and will continue to rely on Appliance
Co. until the Company has established manufacturing capability for such
products at the Ripon facility (expected to be September 1998 and 1999 for
frontload washers and dryers, respectively). Products sourced from Appliance
Co. represented 9% of the Company's 1997 net sales. In the event Appliance Co.
is unable or unwilling to continue to manufacture commercial small-chassis
frontload washers and dryers for the Company, it could have a material adverse
effect on the Company's business, financial condition and results of
operations. There can be no assurance that Appliance Co. will continue to
supply products that are consistent with the Company's standards or that any
disagreements will not result therefrom. In this regard, the Company has
occasionally received and may in the future receive shipments of products from
Appliance Co. that fail to conform with the Company's quality control
standards. In such event, the Company risks the loss of revenue from the sale
of such frontload washers and dryers. The failure of Appliance Co. to supply
frontload washers and dryers that conform to the Company's standards could
have a material adverse effect on the Company's business, financial condition
and results of operations, as well as on its reputation in the marketplace.
See "Ripon Transition" and "Business--Ripon Transition." For a discussion of
pending litigation with Appliance Co., see "Business--Appliance Co.
Transaction."
Ripon Transition
The Company expects to establish manufacturing capability at the Ripon
facility for commercial small-chassis frontload washers by September 1998 and
for dryers by September 1999. Full implementation of the Company's plan to
introduce small-chassis frontload washer and dryer production and to cease
production of consumer topload washers for Appliance Co. is expected to
require aggregate capital expenditures of approximately $13.0 million in 1998
and 1999 and result in aggregate nonrecurring expenses (such as plant
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reconfiguration expenses, severance expenses and manufacturing start-up
expenses) of approximately $5.0 million in 1998 and 1999. There can be no
assurance, however, that the reconfiguration of the Ripon plant will be
completed on time or will not exceed estimated costs. In addition, there can
be no assurance that the Ripon plant will not experience any production
problems once reconfiguration is completed and frontload washer and dryer
production begins. To the extent that such transition is not completed in a
timely manner or within expected costs or to the extent that production
problems occur, it could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business--Ripon
Transition;--Appliance Co. Transaction."
Dependence Upon Significant Customers
The Company's top ten equipment customers (excluding Appliance Co.)
accounted for approximately 27% of 1997 net sales, of which no single customer
accounted for more than 8% of net sales for such period. While the Company
believes its relationships with such customers are stable, many arrangements
are by purchase order and are terminable at will at the option of either
party. In addition, Appliance Co. accounted for 22% of 1997 net sales. The
Company's business also depends upon the financial viability of its customers.
A significant decrease or interruption in business from the Company's
significant customers could result in loss of future business and could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "--Appliance Co. Transaction," "Business--Appliance
Co. Transaction."
Possible Fluctuations in the Cost of Raw Materials; Possible Loss of
Suppliers
The major raw materials and components the Company purchases for its
production process are motors, stainless steel, aluminum, electronic controls,
corrugated boxes and plastics; in addition, the Company externally sources
finished frontload washers and dryers from Appliance Co. The price and
availability of these raw materials and components are subject to market
conditions affecting supply and demand. Raw material costs increased
significantly in 1995 due to increases in commodity prices and as a result of
such increase, the 1995 results of the Company were adversely affected. There
can be no assurance that increases in raw material or component costs (to the
extent the Company is unable to pass on such higher costs to customers) or
future price fluctuations in raw materials will not have a material adverse
effect on the Company's business, financial condition and results of
operations. In addition, there can be no assurance that the loss of suppliers
or a significant delay in the supply of externally manufactured finished goods
from Appliance Co. or of components would not have a material adverse effect
on the Company's business, financial condition and results of operations. See
"--Appliance Co. Transaction," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business--Manufacturing."
Competition
Within the North American stand alone commercial laundry equipment industry,
the Company competes with several large competitors. With respect to
laundromats, the Company's principal competitors include Wascomat (the
exclusive North American distributor of Electrolux AB products), Maytag
Corporation and The Dexter Company. In multi-housing, key competitors include
Maytag Corporation and Whirlpool Corporation. In on-premise laundry, the
Company competes primarily with Pellerin Milnor Corporation, American Dryer
Corporation and Wascomat. There can be no assurance that significant new
competitors or increased competition from existing competitors will not have a
material adverse effect on the Company's business, financial condition and
results of operations.
Certain of the Company's principal competitors have greater financial
resources and/or are less leveraged than the Company and may be better able to
withstand market conditions within the commercial laundry industry. There can
be no assurance that the Company will not encounter increased competition in
the future, which could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business--
Competition."
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Absence of Recent Independent Operating History
The Company has benefited in the past from Raytheon's procurement leverage
with respect to insurance selection, travel services, telecommunications and
computer hardware and operating systems, audit, tax, banking and legal
services and retirement/benefits plan selection. No long-term agreement exists
or is contemplated between Raytheon and the Company for the supply of such
services subsequent to the consummation of the Transactions. While management
believes the Company will be able to procure adequate replacement services
from third-party suppliers, there can be no assurance that such services will
be obtained at favorable prices. As part of the Transactions, the Company and
Raytheon entered into a transition services agreement pursuant to which
Raytheon will continue to provide the Company with certain of such services
for a period of at least 90 days after the closing of the Transactions. See
"Certain Relationships and Related Transactions--Transition Services
Agreement."
Foreign Sales Risk
Sales of equipment to international customers represented approximately
13.0% of 1997 net sales and may increase in the future. Demand for the
Company's products are and may be affected by economic and political
conditions in each of the countries in which it sells its products and by
certain other risks of doing business abroad, including fluctuations in the
value of currencies (which may affect demand for products priced in United
States dollars), import duties, changes to import and export regulations
(including quotas), possible restrictions on the transfer of funds, labor or
civil unrest, long payment cycles, greater difficulty in collecting accounts
receivable and the burdens and cost of compliance with a variety of foreign
laws. Changes in policies by foreign governments could result in, for example,
increased duties, higher taxation, currency conversion limitations, or
limitations on imports or exports, any of which could have a material adverse
effect on the Company's business, financial condition and results of
operations.
Risks Relating to Asset Backed Facility
The Company offers an extensive financing program to end-users, primarily
laundromat owners, to assist in their purchases of new equipment from the
Company's distributors or, in the case of route operators, from the Company.
Typical terms include 2-7 year loans with an average principal amount of
approximately $50,000. At the Closing, the Company entered into a five year
Asset Backed Facility to finance both new equipment loans as well as the
future sale of trade receivables through off-balance sheet bankruptcy remote
subsidiaries (the "Financing Subsidiaries"). A significant increase in the
cost of funding the Financing Subsidiaries could have a material adverse
effect on the Company's business, financial condition and results of
operations. In addition, if certain limits in the size of the Asset Backed
Facility are reached (either overall size or certain sublimits), additional
indebtedness may be required to fund the financing programs. The Company's
inability to incur such indebtedness to fund the financing programs could
result in the loss of sales and have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Significant Transactions--Equipment Financing Program,"
"Business--Sales and Marketing--Equipment Financing" and "Description of Asset
Backed Facility."
Dependence on Key Personnel
The Company is dependent on the continued services of its senior management
team. Although the Company believes it could replace key employees in an
orderly fashion should the need arise, the loss of such key personnel could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Management--Directors and Executive Officers."
Labor Relations
Approximately 634 of the Company's employees at its Wisconsin facilities are
represented by The United Steel Workers of America. The Company is
periodically in negotiations with The United Steel Workers of
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America, and the collective bargaining agreement covering employees at its
Wisconsin facilities expires in February 1999. Although the Company expects to
renew the existing agreement or negotiate a new agreement without a work
stoppage, there can be no assurance that the Company can successfully
negotiate a new agreement or that work stoppages by certain employees will not
occur. Any such work stoppages could have a material adverse effect on the
Company's business, financial condition and results of operations. Although
the Company believes that its relations with its union employees are generally
satisfactory, there can be no assurance that the Company will not at some
point be subject to work stoppages by some of its employees and, if such
events were to occur, that there would not be a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Employees."
Computer System; Year 2000 Issue
The Company is evaluating the extent to which its computer operating systems
will be disrupted upon the turn of the century as a result of the widely-known
dating system flaw inherent in most operating systems (the "Year 2000 Issue").
While the Company believes that new software being installed into its computer
system will address the Year 2000 Issue, there can be no assurance that the
new software will be installed in time to remedy the Year 2000 Issue, that the
Company's computer operating systems will not be disrupted upon the turn of
the century or that such modifications will not require unanticipated capital
expenditures. Any such disruption, whether caused by the Company's systems or
those of any of its suppliers or customers, could have a material adverse
effect on the Company's business, financial condition and results of
operations.
Controlling Shareholders
The Securityholders beneficially own substantially all of the outstanding
membership interests of the Parent and collectively control the affairs and
policies of the Company, including the ability to amend the Company's
Certificate of Formation and the LLC Agreement (as defined). Circumstances may
occur in which the interests of the Securityholders could be in conflict with
the interests of the holders of the Exchange Notes. In addition, the
Securityholders may have an interest in pursuing acquisitions, divestitures or
other transactions that, in their judgment, could enhance their equity
investment, even though such transactions might involve risks to the holders
of the Notes. See "Security Ownership."
Environmental, Health and Safety Requirements
The Company and its operations are subject to comprehensive and frequently
changing federal, state and local environmental and occupational health and
safety laws and regulations, including laws and regulations governing
emissions of air pollutants, discharges of wastewater and storm water and the
disposal of solid and hazardous wastes. The Company is also subject to
liability for the investigation and remediation of environmental contamination
(including contamination caused by other parties) at the properties it owns or
operates and at other properties where the Company or predecessors have
arranged for the disposal of hazardous substances. As a result, the Company is
involved, from time to time, in administrative and judicial proceedings and
inquiries relating to environmental matters. There can be no assurance that
the Company will not be involved in such proceedings in the future and that
the aggregate amount of future clean-up costs and other environmental
liabilities will not have a material adverse effect on the Company's business,
financial condition and results of operations. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Environmental
Liabilities" and "Business--Environmental, Health and Safety Matters."
Federal, state and local governments could enact laws or regulations
concerning environmental matters that affect the Company's operations or
facilities or increase the cost of producing, or otherwise adversely affect
the demand for, the Company's products. The Company cannot predict the
environmental liabilities that may result from legislation or regulations
adopted in the future, the effect of which could be retroactive. Nor can the
Company predict how existing or future laws and regulations will be
administered or interpreted or what environmental conditions may be found to
exist at the Company's facilities or at other properties where the
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Company or its predecessors have arranged for the disposal of hazardous
substances. The enactment of more stringent laws or regulations or stricter
interpretation of existing laws and regulations could require expenditures by
the Company, some of which could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Environmental, Health and Safety Matters."
Pursuant to the Merger Agreement, and subject to a three year notice period
following the Closing, Raytheon has agreed to indemnify the Company for
certain environmental liabilities in excess of $1,500,000 in the aggregate
arising from the operations of the Company and its predecessors prior to the
Merger, including with respect to environmental liabilities at the Ripon
facility. In addition to the Raytheon indemnification, with respect to the
Marianna, Florida facility, a former owner of the property has agreed to
indemnify the Company for certain environmental liabilities. In the event that
Raytheon or the former owner fail to honor their respective obligations under
these indemnifications, such liabilities could be borne directly by the
Company and could be material.
Reliance on Trademarks and Other Intellectual Property
The Company holds numerous United States and foreign trademarks that
management believes have significant value and are important in the marketing
of its products to customers. The Company owns numerous United States and
foreign patents and has patent applications pending in the United States and
abroad. In addition, the Company owns United States (federal and state) and
foreign registered trade names and service marks and has applications for the
registration of trade names and service marks pending in the United States and
abroad. The Company also owns several United States copyright registrations
and a wide array of unpatented proprietary technology and know-how. Further,
the Company licenses certain intellectual property rights from third parties.
The Company's ability to compete effectively with other companies depends,
to a significant extent, on its ability to maintain the proprietary nature of
its owned and licensed intellectual property. Although the Company's
trademarks are currently registered with the United States Patent and
Trademark Office and in all 50 states and are registered or have applications
pending in 58 foreign countries, there can be no assurance that the Company's
trademarks cannot be circumvented, do not or will not violate the proprietary
rights of others or that the Company would not be prevented from using its
trademarks if challenged. Any challenge to the Company for its use of its
trademarks could have a material adverse effect on the Company's business,
financial condition and results of operations, as a result of either a
negative ruling with regard to the Company's use, validity or enforceability
of its trademarks or because of the time consumed and the legal costs of
defending against such a claim. In addition, there can be no assurance that
the Company will have the financial resources necessary to enforce or defend
its trademarks. In addition, there can be no assurance as to the degree of
protection offered by the various patents, the likelihood that patents will be
issued for pending patent applications or, with regard to the licensed
intellectual property, that the licenses will not be terminated. If the
Company were unable to maintain the proprietary nature of its intellectual
property, such loss could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business--
Patents and Trademarks."
22
<PAGE>
THE TRANSACTIONS
OVERVIEW
On May 5, 1998, pursuant to an Agreement and Plan of Merger (the "Merger
Agreement") among Bain LLC, RCL Acquisitions, L.L.C., a Delaware limited
liability company ("MergeCo"), the Parent and Raytheon, MergeCo was merged
with and into the Parent (the "Merger") with the Parent being the surviving
entity. Prior to the Merger, Raytheon owned 100% of the equity securities of
the Parent and Bain LLC, the BRS Investors and the Management Investors owned
100% of the equity securities of MergeCo. As a result of the Merger (i)
Raytheon's limited liability company interest in the Parent was converted into
the right to receive (a) an aggregate amount of cash equal to $339.5 million,
subject to pre-closing and post-closing adjustments (which at Closing were
estimated to result in a reduction of $24.8 million, substantially all of
which was due to working capital levels) (b) a Junior Subordinated Promissory
Note from the Parent in the original principal amount of $9.0 million which
matures in 2009 (the "Seller Subordinated Note"), (c) preferred membership
interests of the Parent with a liquidation value of approximately $6.0 million
which are mandatorily redeemable in 2009 (the "Seller Preferred Equity") and
(d) Common Units (as defined) of the Parent representing 7% of the total
common membership interests of the Parent and (ii) Bain LLC's, the BRS
Investors' and the Management Investors' limited liability company interests
in MergeCo were converted into the right to receive up to 93% of the total
common membership interests of the Parent. Pursuant to the Merger Agreement,
immediately following the Merger, the corporate name of the Parent was changed
to "Alliance Laundry Holdings LLC."
The Merger Agreement contains various other provisions customary for
transactions of this size and type, including representations and warranties
with respect to the condition and operations of the business, covenants with
respect to the conduct of the business prior to the Closing (as defined) and
various closing conditions.
The transactions contemplated by the Merger Agreement were funded by: (i)
$200.0 million of term loan borrowings by the Company pursuant to the Senior
Credit Facility; (ii) the Note Offering, with aggregate gross proceeds of
$110.0 million (substantially all of the amounts in clauses (i) and (ii) were
distributed to the Parent to fund the Merger and related fees and expenses);
(iii) the issuance by the Parent of the Seller Subordinated Note to Raytheon
in the original principal amount of $9.0 million; (iv) the issuance by the
Parent of the Seller Preferred Equity with a liquidation value of
approximately $6.0 million; (v) the Investors Equity Contribution; and (vi)
the Raytheon Equity. Each of the Transactions was conditioned upon
consummation of each of the others, and consummation of each of the
Transactions occurred simultaneously.
Simultaneous with the consummation of each of the other Transactions (the
"Closing"), the Parent contributed (the "Parent Contribution") substantially
all of its assets and liabilities to the Company. Immediately after the
consummation of the Transactions, the Company became the only direct
subsidiary of the Parent and succeeded to substantially all of the assets and
liabilities of the Parent.
SENIOR CREDIT FACILITY
In connection with the Transactions, the Company entered into a credit
agreement (the "Senior Credit Facility") with a syndicate of financial
institutions (the "Lenders") for which Lehman Brothers Inc. acted as arranger
and Lehman Commercial Paper Inc. acted as syndication agent. The Senior Credit
Facility is comprised of a term loan facility aggregating $200.0 million (the
"Term Loan Facility") and a $75.0 million revolving credit facility (the
"Revolving Credit Facility"), which was made available in conjunction with the
issuance of the Notes. The Term Loan Facility requires no principal payments
during the first two years and amortizes at the rate of $1.0 million per year
for years three through five, $40.0 million for year six and $157.0 million
for year seven. The borrowings under the Term Loan Facility, together with the
aggregate gross proceeds from the issuance of the Notes and from the Investors
Equity Contribution, were used to consummate the Merger and pay fees and
expenses in connection with the Transactions. In addition, the Revolving
Credit Facility provides financing for future working capital and other
general corporate purposes. See "Description of Senior Credit Facility."
23
<PAGE>
ASSET BACKED FACILITY
In connection with the Transactions, the Company, through the Financing
Subsidiaries, entered into a $250.0 million Asset Backed Facility to finance
trade receivables and notes receivable related to equipment loans. The Company
offers equipment financing to end-users of its commercial laundry equipment to
assist in their purchases of new equipment from the Company's distributors or,
in the case of route operators, from the Company. See "Description of Asset
Backed Facility."
24
<PAGE>
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of the Company's
obligations under the Registration Rights Agreement. The Company will not
receive any cash proceeds from the issuance of the Exchange Notes in the
Exchange Offer. The sources and uses of funds from the proceeds from the Note
Offering, the Investors Equity Contribution and borrowings under the Senior
Credit Facility as of May 5, 1998 are set forth below:
<TABLE>
<CAPTION>
MAY 5, 1998
---------------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
SOURCES OF FUNDS
Senior Credit Facility(/1/):
Revolving Credit Facility...................... $ --
Term Loan Facility............................. 200.0
9 5/8% Senior Subordinated Notes due 2008........ 110.0
Seller Subordinated Note(/2/).................... 9.0
Seller Preferred Equity(/2/)..................... 6.0
Raytheon Equity(/2/)............................. 3.5
Investors Equity Contribution(/3/)............... 47.1
------
Total sources of funds(/4/).................... $375.6
======
USES OF FUNDS
Merger consideration(/3/)(/4/)................... $333.2
Fees and expenses of the Transactions............ 22.1
Notes received from management(/5/).............. 1.8
Excess cash to fund working capital(/4/)......... 18.5
------
Total uses of funds............................ $375.6
======
</TABLE>
- --------
(1) The Company received commitments of up to $275.0 million for the Senior
Credit Facility, of which $200.0 million was in the form of a Term Loan
Facility and $75.0 million was in the form of a Revolving Credit Facility
maturing in 2003. At May 5, 1998, the Company borrowed $200.0 million
under the Term Loan Facility and had no amounts outstanding under the
Revolving Credit Facility. The Term Loan Facility requires no principal
payments during the first two years and amortizes at the rate of $1.0
million per year for years three through five, $40.0 million for year six
and $157.0 million for year seven. See "Description of Senior Credit
Facility."
(2) The Seller Subordinated Note and the Seller Preferred Equity issued by the
Parent and the Raytheon Equity represent non-cash Merger consideration
paid to Raytheon. The Seller Subordinated Note pays interest-in-kind and
is not redeemable until 2009 or upon a change of control or an initial
public offering. The Seller Preferred Equity does not accrete or accrue or
pay dividends and is mandatorily redeemable in 2009 or upon a change of
control or an initial public offering.
(3) Reflects the issuance of membership interests in the Parent to the
Securityholders in exchange for a capital contribution of $47.1 million.
(4) The Merger consideration of $358.0 is subject to pre-closing and post-
closing adjustments estimated as of May 5, 1998 to result in a reduction
of $24.8 million, substantially all of which was due to changes in working
capital levels. In addition, as a result of this reduction, the Company
did not sell any notes receivable or accounts receivable to generate funds
for use as of the Closing.
(5) The Parent loaned approximately $1.8 million to the Management Investors
to finance a portion of their purchase of membership interests in the
Parent.
25
<PAGE>
CAPITALIZATION
The following table sets forth as of March 29, 1998 the historical
capitalization of the Parent and pro forma capitalization of the Company as
adjusted to give effect to the Transactions, including the sale of the Notes
pursuant to the Note Offering, as if they had occurred on March 29, 1998. This
table should be read in conjunction with the "Selected Historical Combined
Financial Data" and "Unaudited Pro Forma Combined Financial Data" and the
historical combined financial statements of the Company and notes related
thereto included elsewhere in this Offering Memorandum.
<TABLE>
<CAPTION>
MARCH 29, 1998
-----------------------
PARENT COMPANY
(HISTORICAL) (PRO FORMA)
------------ ----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Long-term debt:
Senior Credit Facility:
Revolving Credit Facility(/1/).................... $ -- $ 5.1
Term Loan Facility................................ -- 200.0
9 5/8% Senior Subordinated Notes due 2008........... -- 110.0
------ -------
Total long-term debt.............................. -- 315.1
------ -------
Parent company investment/(members' defi-
cit)(/2/)(/3/)....................................... 135.8 (166.0)
------ -------
Total capitalization.............................. $135.8 $ 149.1
====== =======
</TABLE>
- --------
(1) The Revolving Credit Facility provides for revolving loans in the
aggregate principal amount of $75.0 million and matures in 2003. Pursuant
to the Merger Agreement, the cash Merger consideration was reduced by
$24.8 million at the Closing, primarily due to changes in working capital
levels. This working capital adjustment is subject to review provisions of
the Merger Agreement, and therefore the impact of these adjustments has
not been reflected in the March 29, 1998 pro forma capitalization. If the
impact of these adjustments were to be recorded, revolver borrowings would
be reduced and excess cash would be recorded to fund future working
capital requirements.
(2) Reflects the net distribution to the Parent to fund the Transactions. See
"Unaudited Pro Forma Combined Balance Sheet" and the notes related
thereto.
(3) The pro forma Parent's members' deficit is estimated to be $181.0 million,
which is $15.0 million greater than the Company's pro forma deficit due to
the $9.0 million Seller Subordinated Note and the $6.0 million mandatorily
redeemable Seller Preferred Equity, neither of which was contributed to
the Company.
26
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The Unaudited Pro Forma Combined Financial Data for the year ended December
31, 1997 and the Unaudited Pro Forma Consolidated Financial Data as of and for
the quarter ended March 29, 1998 are based on the historical financial
statements of the Parent as adjusted to give effect to the Transactions. Since
following the Transactions, the Parent is a holding company with no operations
other than those of the Company and its subsidiaries, the historical combined
financial statements of the Parent represent the historical financial position
and results of operations of the Company. The pro forma adjustments were
applied to the historical combined financial statements to reflect and account
for the Merger as a recapitalization. Accordingly, the historical basis of the
Company's assets and liabilities has not been impacted by the Transactions.
The following Unaudited Pro Forma Consolidated Balance Sheet as of March 29,
1998 gives effect to the Transactions as if they had occurred on such date.
The following Unaudited Pro Forma Combined Statement of Income for the year
ended December 31, 1997 and the Unaudited Pro Forma Consolidated Statement of
Income for the quarter ended March 29, 1998 give effect to the Transactions as
if they had occurred on January 1, 1997 and January 1, 1998, respectively. See
"The Transactions." The Unaudited Pro Forma Combined Statements of Income are
for informational purposes only and do not purport to represent what the
Company's results of operations would have been if the Transactions had
occurred as of the dates indicated or what such results will be for any future
periods. The Unaudited Pro Forma Combined Financial Data are based upon
assumptions the Company believes are reasonable and should be read in
conjunction with the historical combined financial statements and the notes
related thereto included elsewhere in this Offering Memorandum.
27
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 29, 1998
<TABLE>
<CAPTION>
PARENT COMPANY*
-------------------------------------- ---------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA PRO FORMA
---------- ----------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash...................... $ 1,607 $ -- $ 1,607 $ 1,607
Accounts receivable, net.. 50,505 -- 50,505 50,505
Inventory, net............ 36,350 -- 36,350 36,350
Deferred taxes............ 7,880 (7,880)(/2/) -- --
Prepaid expenses.......... 2,265 -- 2,265 2,265
-------- --------- --------- ---------
Total current assets.... 98,607 (7,880) 90,727 90,727
Notes receivable.......... 4,917 (1,270)(/1/) 3,647 3,647
Property, plant and equip-
ment, net................ 66,810 -- 66,810 66,810
Goodwill, net............. 50,944 -- 50,944 50,944
Debt issuance costs....... -- 16,239 (/1/) 16,239 16,239
Other assets.............. 6,337 177 (/1/) 6,514 6,514
-------- --------- --------- ---------
Total assets............ $227,615 $ 7,266 $ 234,881 $ 234,881
======== ========= ========= =========
LIABILITIES, MANDATORILY
REDEEMABLE SECURITIES AND
EQUITY
Current liabilities:
Accounts payable.......... $ 20,477 -- $ 20,477 $ 20,477
Finance Program obliga-
tion..................... 44,633 -- 44,633 44,633
Other current liabilities. 20,292 -- 20,292 20,292
-------- --------- --------- ---------
Total current liabili-
ties................... 85,402 -- 85,402 85,402
Deferred compensation....... -- 341 (/1/) 341 341
Deferred taxes.............. 6,389 (6,389)(/2/) -- --
Long-term debt:
Senior Credit Facility.... -- 205,146 (/1/) 205,146 205,146
Senior Subordinated Notes. -- 110,000 (/1/) 110,000 110,000
Seller Subordinated Note.. -- 9,000 (/1/) 9,000 --
-------- --------- --------- ---------
Total liabilities....... 91,791 318,098 409,889 400,889
Mandatorily redeemable
Seller Preferred Equity.... -- 6,000 (/1/) 6,000 --
Equity:
Common membership inter-
ests..................... -- 47,100 (/1/) 50,645 --
3,545 (/1/)
Notes receivable from man-
agement.................. -- (1,763)(/1/) (1,763) --
Parent company investment/
Retained earnings (defi-
cit)...................... 135,824 (363,932)(/3/) (229,890) --
(341)(/1/)
50 (/1/)
(1,491)(/2/)
-------- --------- --------- ---------
Total equity (deficit).. 135,824 (316,832) (181,008) --
-------- --------- --------- ---------
Contributed capital (defi-
cit)....................... -- -- -- (166,008)
-------- --------- --------- ---------
Total liabilities,
mandatorily redeemable
securities and equity...... $227,615 $ 7,266 $ 234,881 $ 234,881
======== ========= ========= =========
</TABLE>
- --------
* Immediately prior to the Merger, the Parent formed the Company as a wholly-
owned subsidiary with a $1 capital contribution and simultaneously with the
consummation of the Merger contributed all of its assets and substantially
all of its liabilities to the Company.
28
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(1) Reflects the consummation of the Transactions as well as fees and expenses
related thereto.
<TABLE>
<CAPTION>
(DOLLARS
IN
THOUSANDS)
----------
<S> <C>
Sources of Funds:
Senior Credit Facility:
Revolving Credit Facility(d).................................. $ 5,146
Term Loan Facility............................................ 200,000
9 5/8% Senior Subordinated Notes due 2008....................... 110,000
Asset Backed Facility(a)........................................ 1,143
Seller Subordinated Note........................................ 9,000
Seller Preferred Equity......................................... 6,000
Raytheon Equity(b).............................................. 3,545
Investors Equity Contribution(c)(e)............................. 47,100
--------
Total sources of funds(d)................................... $381,934
========
Uses of Funds:
Merger consideration(d)......................................... $358,045
Financing related fees.......................................... 16,239
Fees and expenses related to the Merger......................... 5,887
Notes received from management(e)............................... 1,763
--------
Total uses of funds(d)...................................... $381,934
========
</TABLE>
(a) Concurrent with the Transactions, on a pro forma basis at March 29,
1998, the Company would have sold an incremental $1.3 million of
eligible notes receivable under the Asset Backed Facility and would
have received cash proceeds of $1.1 million. As a result, the Company
would have recognized a gain of $0.1 million and recorded an asset of
$0.2 million, which includes a residual interest in the transferred
notes receivable of $0.1 million and an interest receivable of $0.1
million.
(b) Reflects certain common membership interests retained by Raytheon.
(c) Reflects the issuance of membership interests in the Parent to the
Securityholders in exchange for a capital contribution of $47.1
million.
(d) In connection with the Transactions, the Parent redeemed Raytheon's
membership interests having a fair value of $354.5 million subject to
pre- and post-closing working capital adjustments. Raytheon would have
received $339.5 million in cash, a $9.0 million Seller Subordinated
Note and $6.0 million of Seller Preferred Equity while retaining a $3.5
million common membership interest in the Parent. However, pursuant to
the Merger Agreement, the cash Merger consideration was reduced by
$24.8 million at Closing due primarily to changes in working capital
levels. This working capital adjustment is subject to review provisions
of the Merger Agreement, and therefore, the impact of these adjustments
has not been reflected in the March 29, 1998 pro forma combined balance
sheet. If the impact of these adjustments were to be reflected in the
pro forma consolidated balance sheet, merger consideration and revolver
borrowings would be reduced and excess cash would be recorded.
(e) The Parent loaned approximately $1.8 million to the Management
Investors to finance a portion of their purchase of common membership
interests in the Parent.
(2) Represents the elimination of deferred taxes recorded in the historical
financial statements. Historical amounts represent the Company's tax
attributes as a division of Raytheon as calculated on a separate return
basis. As the Company and the Parent are limited liability companies, the
individuals or entities who ultimately hold common membership interests in
these limited liabilities companies are responsible for income taxes. As a
result, the Company will not reflect a provision for income taxes or the
effects of deferred taxes in its financial statements. Subject to certain
limitations, the Company anticipates that it will distribute amounts
necessary to pay income taxes related to its operations should the
Securityholders have income tax
29
<PAGE>
obligations related to the ownership of their common membership interests.
For income tax purposes, the tax basis of the Company's assets was stepped
up to fair market value on the date of the Transactions for the
Securityholders. If the Company were to reflect income taxes in its
financial statements, a deferred tax asset of approximately $85.0 million
would have been recorded on a pro forma basis as of March 29, 1998 as a
result of these book/tax basis differences. This deferred tax asset would be
reduced by a valuation allowance of approximately the same amount since the
realizability of the asset does not meet the requirements for recognition
under Statement of Financial Accounting Standards No. 109 "Accounting for
Income Taxes."
(3) Represents the net change in retained earnings (deficit) as a result of
the redemption and subsequent retirement of existing membership interests in
conjunction with the Merger.
<TABLE>
<CAPTION>
(DOLLARS
IN
THOUSANDS)
----------
<S> <C>
Redemption of membership interests and distributions to Raytheon. $(339,500)
Issuance of Seller Preferred Equity.............................. (6,000)
Issuance of Seller Subordinated Note............................. (9,000)
Transfer of Raytheon retained interest to common membership equi-
ty.............................................................. (3,545)
Estimated fees and expenses related to the Merger................ (5,887)
---------
$(363,932)
=========
</TABLE>
30
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRO FORMA SUPPLEMENTAL PRO FORMA
HISTORICAL* ADJUSTMENTS PRO FORMA ADJUSTMENTS AS ADJUSTED
----------- ----------- --------- ------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales............... $347,709 $ (1,163)(/1/) $346,546 $(3,633)(/6/) $342,913
Cost of sales........... 263,932 -- 263,932 (2,028)(/7/) 261,904
-------- -------- -------- ------- --------
Gross profit.......... 83,777 (1,163) 82,614 (1,605) 81,009
Selling, general and
administrative expense. 41,070 (130)(/2/) 41,940 (971)(/8/) 40,969
1,000 (/3/)
-------- -------- -------- ------- --------
Operating income...... 42,707 (2,033) 40,674 (634) 40,040
Interest expense........ -- 31,287 (/4/) 31,287 -- 31,287
-------- -------- -------- ------- --------
Income before taxes..... 42,707 (33,320) 9,387 (634) 8,753
Provision for income
taxes.................. 16,431 (16,431)(/5/) -- -- --
-------- -------- -------- ------- --------
Net income.............. $ 26,276 $(16,889) $ 9,387 $ (634) $ 8,753
======== ======== ======== ======= ========
</TABLE>
- --------
* The historical combined statement of income represents the results of
operations of the Parent. Since following the Transactions the Parent became
a holding company with no operations other than those of the Company and its
subsidiaries, the Unaudited Pro Forma Combined Statement of Income represents
the results of operations of the Company.
31
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
QUARTER ENDED MARCH 29, 1998
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL* ADJUSTMENTS PRO FORMA
----------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales....................... $83,295 $ (518)(/1/) $82,777
Cost of sales................... 63,945 -- 63,945
------- ------- -------
Gross profit................... 19,350 (518) 18,832
Selling, general and
administrative expense......... 10,580 (67)(/2/) 10,763
250 (/3/)
------- ------- -------
Operating income............... 8,770 (701) 8,069
Interest expense................ -- 7,662 (/4/) 7,662
------- ------- -------
Income before taxes............. 8,770 (8,363) 407
Provision for income taxes...... 3,385 (3,385)(/5/) --
------- ------- -------
Net income...................... $ 5,385 $(4,978) $ 407
======= ======= =======
</TABLE>
- --------
* The historical consolidated statement of income represents the results of
operations of the Parent. Since following the Transactions the Parent
became a holding company with no operations other than those of the Company
and its subsidiaries, the Unaudited Pro Forma Combined Statement of Income
represents the results of operations of the Company.
32
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
(1) Represents the reduction in gain recorded on the sale of notes receivable
originated in the equipment financing program, as follows:
<TABLE>
<CAPTION>
QUARTER
YEAR ENDED ENDED
DECEMBER 31, MARCH 29,
1997 1998
------------ ---------
<S> <C> <C>
Historical gain on equipment financing program..... $(6,220) $(2,433)
Estimated gain under the Asset Backed Facility..... 5,057 1,915
------- -------
Net decrease in net sales........................ $(1,163) (518)
======= =======
</TABLE>
The Company recognizes a gain when notes receivable originated by the
Company are sold to the Financing Subsidiaries. If the Asset Backed Facility
had been in place for all of 1997 and in the quarter ended March 29, 1998,
the pro forma gain would have been lower than the gain recognized by the
Company under its historical program principally as a result of two factors:
(i) the historical program borrowed at a lower interest rate and (ii) the
advance rate for notes receivable under the Asset Backed Facility is limited
to 90% of eligible notes receivable, as compared to a 100% advance rate
under the historical program. These two factors are partially offset by (x)
the impact of using estimates (when determining the gain to be recorded
under the Asset Backed Facility) that reflect the performance of equipment
loans similar to those expected to be sold under the Asset Backed Facility
and (y) in 1997, the impact of the additional pro forma gain from sales of
notes receivable that were precluded from being sold as a result of having
reached the maximum availability under the historical program. The interest
earned on the Company's 10% retained interest will be recorded as income as
cash proceeds are received in subsequent years. If the Asset Backed Facility
had been in place for all of 1997 or for the quarter ended March 29, 1998,
the December 31, 1997 and March 29, 1998 balance sheets would have included
an asset totaling approximately $9.6 million and $5.3 million, respectively,
related to the residual interest in the notes that had been sold; such asset
would have been funded from operating cash flow.
(2) Represents the reduction in loss recorded on the sale of trade
receivables, as follows:
<TABLE>
<CAPTION>
QUARTER
YEAR ENDED ENDED
DECEMBER 31, MARCH 29,
1997 1998
------------ ---------
<S> <C> <C>
Historical loss on the trade receivables financing
program........................................... $(3,440) $(694)
Estimated loss under the Asset Backed Facility .... 3,310 627
------- -----
Net decrease in selling, general and administra-
tive expense.................................... $ (130) (67)
======= =====
</TABLE>
The Company recognizes a loss on trade receivables sold to the Financing
Subsidiaries. The pro forma loss is less than the historical loss as the
advance rate for trade receivables under the Asset Backed Facility is
limited to 85% compared to a 100% advance rate under the historical program.
The impact of this lower advance rate is partially offset by the higher
interest rate in the Asset Backed Facility. If the Asset Backed Facility had
been in place for all of 1997 or for the quarter ended March 29, 1998, the
December 31, 1997 and March 29, 1998 balance sheets would have included an
asset totaling approximately $11.2 million and $9.4 million, respectively,
related to the residual interest in the trade receivables that had been
sold; such asset would have been funded from operating cash flow.
(3) Represents the $1.0 million annual management fee to be paid to Bain for
consulting and financial services to be provided to the Company. See
"Certain Relationships and Related Transactions--Management Services
Agreement."
(4) The increase in pro forma interest expense as a result of the Transactions
is as follows:
33
<PAGE>
<TABLE>
<CAPTION>
QUARTER
YEAR ENDED ENDED
DECEMBER 31, MARCH 29,
1997 1998
------------ ---------
Senior Credit Facility:
<S> <C> <C>
Revolving Credit Facility(a)...................... $ 1,194 $ 207
Term Loan Facility(b)............................. 16,850 4,213
9 5/8% Senior Subordinated Notes due 2008(c)...... 10,588 2,647
------- ------
Cash interest expense............................... 28,632 7,067
Non-cash interest expense(d)........................ 2,655 595
------- ------
Net increase in interest expense.................. $31,287 $7,662
======= ======
</TABLE>
(a) Represents interest and commitment fees on the $75.0 million Revolving
Credit Facility using an assumed interest rate of 8.175% (LIBOR plus
2.375%, assuming an average annual outstanding balance of $10.9 million
for 1997 and $5.8 million for the quarter ended March 29, 1998).
(b) Represents interest on the Term Loan Facility using an assumed interest
rate of 8.425% (LIBOR plus 2.625%).
(c) Represents interest on the Notes using an interest rate of 9.625%.
(d) Represents amortization of $16.2 million in deferred financing costs
utilizing a weighted average maturity of 6.7 years.
An increase or decrease in the assumed weighted average interest rate on the
Senior Credit Facility of 0.125% would change pro forma interest expense by
$0.3 million for the year ended December 31, 1997.
(5) Represents the elimination of the historical provision for income tax.
Historical amounts represent the Company's tax attributes as a division of
Raytheon as calculated on a separate return basis. As the Parent and the
Company are both limited liability companies, the individuals or entities
who ultimately hold common membership interests in these limited liability
companies are responsible for income taxes. Subject to certain limitations,
the Company anticipates that it will distribute amounts necessary to pay
income taxes related to its operations should the Securityholders have
income tax obligations related to the ownership of their common membership
interests. If the Company was a tax paying entity and were to record a
provision for income taxes, the pro forma provision for income taxes would
be based on: (i) the historical tax provision using historical amounts; (ii)
the direct tax effects of the pro forma transactions and offering
adjustments described herein at an estimated 38.5% effective tax rate; and
(iii) the direct tax effects of the amortization of the step-up in basis for
income tax purposes resulting from the Investors Equity Contribution,
estimated at a 38.5% effective tax rate. As a result of the incremental
interest expense and the deductibility of the amortization of the step-up in
basis for tax purposes, on a pro forma basis, the Company would have
recorded a tax loss in 1997 and for the quarter ended March 29, 1998.
(6) Under the terms of the Appliance Co. Supply Agreement, the Company sells
consumer topload washers to Appliance Co. at a negligible margin to cost,
whereas sales to Raytheon's former consumer appliance business generated
modest margins. The adjustment reflects the revenues that the Company would
have realized from sales of consumer topload washers to Raytheon's former
consumer appliance business from January 1, 1997 to September 10, 1997 under
the terms of the Appliance Co. Supply Agreement had the Appliance Co.
Transaction occurred on January 1, 1997. See "Business--Appliance Co.
Transaction."
(7) Represents the elimination of $0.9 million of one-time transition costs
incurred in connection with the Appliance Co. Transaction and approximately
$1.1 million of costs that would have been reimbursed under the terms of the
Appliance Co. Supply Agreement had the Appliance Co. Transaction occurred on
January 1, 1997. See "Business--Appliance Co. Transaction."
(8) Under the terms of the Appliance Co. Supply Agreement, the Company charges
Appliance Co. for certain engineering costs incurred by the Company for the
production of consumer topload washers sold to Appliance Co. The adjustment
reflects the amount that would have been charged to Raytheon's former
consumer appliance business from January 1, 1997 to September 10, 1997 under
the terms of the Appliance Co. Supply Agreement had the Appliance Co.
Transaction occurred on January 1, 1997. See "Business--Appliance Co.
Transaction."
34
<PAGE>
SELECTED HISTORICAL COMBINED FINANCIAL DATA
The following table sets forth selected historical combined financial data
of the Company for the five years ended December 31, 1997 and for the quarter
ended March 30, 1997 and selected historical consolidated financial data of
the Company for the quarter ended March 29, 1998. Since following the
Transactions the Parent is a holding company with no operations other than
those of the Company and its subsidiaries, the historical combined financial
statements of the Parent represent the historical results of operations of the
Company. The selected historical combined financial data for the fiscal year
ended December 31, 1993 was derived from unaudited combined financial
statements of the Company. The selected historical combined financial data for
the four years ended December 31, 1997 were derived from the audited combined
financial statements of the Company which for the three years ended December
31, 1997 are included elsewhere in this Offering Memorandum, together with the
report thereon of Coopers & Lybrand, L.L.P., independent accountants. The
selected historical combined financial data of the Company for the quarter
ended March 30, 1997 and the selected historical consolidated financial data
of the Company for the quarter ended March 29, 1998 were each derived from
unaudited financial statements that were prepared on the same basis as the
audited financial statements and that, in the opinion of management, include
normal recurring adjustments and adjustments necessary for a fair presentation
of the combined results of operations and financial condition of the Company
as it operated as a unit of Raytheon. The selected historical consolidated
financial data for the quarter ended March 29, 1998 are not necessarily
indicative of the results for the full year. The following table should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the historical combined financial
statements and the notes related thereto of the Company included elsewhere in
this Offering Memorandum.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, QUARTERS ENDED
------------------------------------------------ -------------------
MARCH 30, MARCH 29,
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- -------- --------- ---------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME:
Net sales............... $232,703 $267,445 $324,529 $318,263 $347,709 $80,475 $83,295
Cost of sales........... 176,961 208,543 259,272 246,017 263,932 61,881 63,945
-------- -------- -------- -------- -------- ------- -------
Gross profit............ 55,742 58,902 65,257 72,246 83,777 18,594 19,350
Selling, general and
administrative expense. 30,272 29,782 35,360 34,464 41,070 9,128 10,580
Nonrecurring costs(/1/). -- -- 574 3,704 -- -- --
-------- -------- -------- -------- -------- ------- -------
Operating income........ 25,470 29,120 29,323 34,078 42,707 9,466 8,770
Other income, net....... 318 312 778 685 -- -- --
Interest expense........ -- -- -- -- -- -- --
Income before taxes..... 25,788 29,432 30,101 34,763 42,707 9,466 8,770
-------- -------- -------- -------- -------- ------- -------
Provision for income
taxes(/2/)............. 9,169 11,265 11,545 13,408 16,431 3,643 3,385
-------- -------- -------- -------- -------- ------- -------
Net income.............. $ 16,619 $ 18,167 $ 18,556 $ 21,355 $ 26,276 $ 5,823 $ 5,385
======== ======== ======== ======== ======== ======= =======
OTHER OPERATING DATA:
EBITDA(/3/)............. $ 33,962 $ 37,573 $ 40,948 $ 45,908 $ 57,152 $12,466 $12,497
EBITDA Margin(/4/)...... 14.6% 14.0% 12.6% 14.4% 16.4% 15.5% 15.0%
Depreciation and
amortization........... $ 8,174 $ 8,141 $ 10,847 $ 11,145 $ 14,445 $ 3,000 $ 3,727
Operating cash flows.... 15,762 19,381 17,517 77,192 40,067 2,058 19,035
Capital
expenditures(/5/)...... 5,985 11,579 16,177 22,030 22,623 7,949 1,457
Ratio of earnings to
fixed charges(/6/)..... 131.2x 149.6x 153.0x 96.8x 108.8x 95.7x 88.7x
BALANCE SHEET DATA (AT
END OF PERIOD):
Working capital
(deficit).............. $ 78,920 $ (5,222) $ 66,673 $ 23,899 $ 15,434 $13,205
Total assets............ 163,509 201,496 220,063 186,553 205,086 227,615
Total debt.............. 3,493 1,400 1,100 1,000 -- --
Parent company
investment............. 121,908 93,335 175,317 141,546 148,573 135,824
</TABLE>
35
<PAGE>
- --------
(1) Nonrecurring costs associated primarily with reductions in work force. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Results of Operations."
(2) Subsequent to the consummation of the Transactions, the Company is not a
tax paying entity. Historical amounts represent the Company's tax attributes
as a division of Raytheon as calculated on a separate return basis. See
"Unaudited Pro Forma Combined Financial Data."
(3) "EBITDA," as presented, represents income before income taxes plus
depreciation, amortization, and interest expense. EBITDA is included because
management believes that such information provides an additional basis for
evaluating the Company's ability to pay interest, repay debt and make
capital expenditures. 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 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.
(4) Represents EBITDA as a percentage of net sales.
(5) Excludes purchase of assets related to the November 1994 acquisition of
the business of UniMac. For each of the five years ended December 31, 1997,
capital expenditures excluding those relating to major new products,
significant product redesign and major capacity additions, would have been
less than $10.0 million.
(6) For purposes of computing this ratio, earnings consist of income before
income taxes plus fixed charges. Fixed charges consist of interest expense
on all indebtedness and the estimated interest portion of rental expense.
The Company had no significant interest or rental expense for the periods
presented.
36
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the financial condition and results
of operations covers periods before the consummation of the Transactions. In
connection with the Transactions, the Company has entered into financing
arrangements and significantly altered its capital structure. As a result of
the Transactions, the Company is operating as a stand alone entity for the
first time, and the historical combined financial statements and notes related
thereto reflect management's estimates of certain costs associated with
operating as a stand alone entity and reflect taxes that are not applicable to
the Company following the consummation of the Transactions. Additionally,
since September 10, 1997 the Company has sold consumer laundry equipment to
Appliance Co. at negligible margins to cost compared to modest margins for
sales to Raytheon's consumer appliance business in prior periods. Accordingly,
the results of operations for the periods subsequent to the consummation of
the Transactions will not necessarily be comparable to prior periods. See "The
Transactions," "Capitalization," "Unaudited Pro Forma Combined Financial
Data," "Selected Historical Combined Financial Data," "Description of Senior
Credit Facility," "Description of Asset Backed Facility" and the historical
combined financial statements and notes related thereto included elsewhere in
this Offering Memorandum.
OVERVIEW
The Company believes it is the leading designer, manufacturer and marketer
of stand alone commercial laundry equipment in North America and a leader
worldwide. Under the well-known brand names of Speed Queen, UniMac and
Huebsch, the Company produces a full line of commercial washing machines and
dryers with load capacities from 16 to 250 pounds. The Company's commercial
products are sold to three distinct customer groups: (i) laundromats; (ii)
multi-housing laundries, consisting primarily of common laundry facilities in
apartment buildings, universities and military installations; and (iii) on-
premise laundries, consisting primarily of in-house laundry facilities of
hotels, hospitals, nursing homes and prisons. In addition, pursuant to the
Appliance Co. Supply Agreement, the Company supplies consumer washing machines
to the consumer appliance business of Appliance Co. for sale at retail.
Internationally, the Company has developed targeted opportunities, generating
equipment sales of $45.5 million in 1997. The Company's net sales have grown
at a compound annual rate of 10.6% to $347.7 million in 1997 from $232.7
million in 1993. For this same period operating income has grown at a compound
annual rate of 13.8% to $42.7 million in 1997 from $25.5 million in 1993.
SIGNIFICANT TRANSACTIONS
Appliance Co. Transaction
The Company's former parent, Raytheon, sold its consumer appliance business
to Appliance Co. on September 10, 1997. In connection with the Appliance Co.
Transaction, the Company entered into a two year agreement to supply consumer
topload washers to Appliance Co. at selling prices that approximate cost.
Prior to this supply agreement, transfers of product to Raytheon's consumer
appliance business generated modest margins; in addition, in 1997, the Company
incurred $0.9 million of transition costs associated with the Appliance Co.
Transaction and $2.1 million of costs which would have been reimbursed under
the terms of the Appliance Co. Supply Agreement. If this supply agreement had
been in place for the full year of 1997, net sales would have been lower by
approximately $3.6 million and operating income would have been lower by
approximately $0.6 million. Accordingly, the results of operations for the
periods subsequent to the Appliance Co. Transaction will not necessarily be
comparable to prior periods. A similar supply agreement is in place for the
Company to purchase commercial small-chassis frontload washers and dryers from
Appliance Co. for one year and two years, respectively.
Ripon Transition
The Company is in the process of establishing at its Ripon facility the
capability to manufacture small-chassis frontload washers and dryers beginning
in September 1998 and September 1999, respectively; until such
37
<PAGE>
time, the Company will continue to source these products from Appliance Co.
Similarly, the Company anticipates that Appliance Co. will no longer purchase
consumer topload washers from the Company after September 1999. As a result,
the Company will experience a significant decline in unit volume. The
Company's plan to introduce small-chassis frontload washer and dryer
production and to cease production of consumer topload washers for Appliance
Co. (the "Transition Plan") is expected to require aggregate capital
expenditures of approximately $13.0 million in 1998 and 1999 and nonrecurring
expenses (such as plant reconfiguration, severance expenses and manufacturing
start-up expenses) of approximately $5.0 million in 1998 and 1999. To the
extent that the Transition Plan is not completed in a timely manner or within
expected costs, it could have a material adverse effect on the Company's
business, financial condition and results of operations.
Equipment Financing Program
Since 1992, the Company has provided equipment financing to laundromat
owners, multi-housing route operators and on-premise laundry operators. From
1992 to January 1996, the Company provided financing through several external
sources. Under these programs, the Company originated financing transactions
and sold the notes receivable and the servicing rights to third parties.
In January 1996, the Company developed an in-house program to replace its
external financing programs, thereby retaining the benefits and risks
associated with these financings. As notes receivable in this program were
sold to the Company's Financing Subsidiaries, the Company recognized a gain in
accordance with generally accepted accounting principles.
Subsequent to March 29, 1998, the Company received a prepayment of notes
receivable from a large customer totaling approximately $42.7 million. The
notes receivable had been sold by the Company to its Financing Subsidiaries.
The Company anticipates that it will reduce second quarter earnings by
approximately $1.0 million to reflect the write-off of the asset recorded when
the Company sold such notes receivable to the Financing Subsidiaries.
RESULTS OF OPERATIONS
The following table sets forth the Company's historical net sales for the
periods indicated:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31, QUARTERS ENDED
--------------------- -----------------------------
1995 1996 1997 MARCH 30, 1997 MARCH 29, 1998
------- ------ ------ -------------- --------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net sales
Commercial laundry
equipment............ $ 213.4 $209.1 $239.3 $ 52.6 $51.7
Appliance Co. consumer
laundry equipment.... 79.4 77.0 76.9 19.6 23.3
Service parts......... 31.8 32.1 31.6 8.3 8.3
------- ------ ------ ------ -----
$ 324.5 $318.3 $347.7 $ 80.5 $83.3
======= ====== ====== ====== =====
</TABLE>
38
<PAGE>
The following table sets forth certain condensed historical financial data
for the Company expressed as a percentage of net sales for each of the periods
indicated:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31, QUARTERS ENDED
------------------- -----------------------------
1995 1996 1997 MARCH 30, 1997 MARCH 29, 1998
----- ----- ----- -------------- --------------
<S> <C> <C> <C> <C> <C>
Net sales............. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales......... 79.9% 77.3% 75.9% 76.9% 76.8%
Gross profit.......... 20.1% 22.7% 24.1% 23.1% 23.2%
Selling, general and
administrative
expense.............. 10.9% 10.8% 11.8% 11.3% 12.7%
Nonrecurring costs.... 0.2% 1.2% 0.0% 0.0% 0.0%
Operating income...... 9.0% 10.7% 12.3% 11.8% 10.5%
</TABLE>
QUARTER ENDED MARCH 29, 1998 COMPARED TO QUARTER ENDED MARCH 30, 1997
Net sales. Net sales for the quarter ended March 29, 1998 increased $2.8
million, or 3.5%, to $83.3 million from $80.5 million for the quarter ended
March 30, 1997. This increase was due to an increase in consumer laundry
equipment sales of $3.7 million, partially offset by slightly lower commercial
laundry equipment sales. The decrease in commercial laundry equipment sales
was due to a decrease of $3.7 million in sales to international customers as
the Company's products (priced in U.S. dollars) became less competitive due to
unfavorable exchange rate movements. The international sales decrease was
partially offset by increases of (i) $1.4 million in North America equipment
sales and (ii) $1.4 million due to increased volume of equipment financing
promissory notes originated and sold through the Company's off-balance sheet
equipment financing program.
Gross profit. Gross profit for the quarter ended March 29, 1998 increased
$0.8 million, or 4.1%, to $19.4 million from $18.6 million for the quarter
ended March 30, 1997. Gross profit as a percentage of net sales increased to
23.2% for the quarter ended March 29, 1998 from 23.1% for the quarter ended
March 30, 1997. This increase was primarily attributable to manufacturing
efficiencies and growth in the Company's equipment financing program,
partially offset by a decrease in Appliance Co. consumer laundry selling
prices under the Appliance Co. Supply Agreement, increased depreciation, and
one time warranty costs of $0.4 million related to a new product introduction.
Selling, general and administrative expense. Selling, general and
administrative expense for the quarter ended March 29, 1998 increased $1.5
million, or 15.9%, to $10.6 million from $9.1 million for the quarter ended
March 30, 1997. Selling, general and administrative expense as a percentage of
net sales increased to 12.7% for the quarter ended March 29, 1998 from 11.3%
for the quarter ended March 30, 1997. The increase in selling, general and
administrative expense was primarily due to an increase of $1.0 million in
selling and distribution expense and $0.4 million in administrative expense.
Operating income. As a result of the foregoing operating income for the
quarter ended March 29, 1998 decreased $0.7 million, or 7.4%, to $8.8 million
from $9.5 million for the quarter ended March 30, 1997. Operating income as a
percentage of net sales decreased to 10.5% for the quarter ended March 29,
1998 from 11.8% for the quarter ended March 30, 1997.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Net sales. Net sales for 1997 increased $29.4 million, or 9.3%, to $347.7
million from $318.3 million for 1996. This increase was due to an increase in
commercial laundry sales of $30.2 million partially offset by slight
reductions in Appliance Co. consumer laundry equipment sales and service
parts. The increase in commercial laundry equipment sales consisted of
increases of: (i) $14.7 million in laundromat sales due to the inclusion of a
full year of sales to a new laundromat customer compared to two months in the
prior year as well as increased sales to existing and other new customers;
(ii) $4.7 million in multi-housing customer sales primarily due to
39
<PAGE>
increased sales to key customers under supply agreements; (iii) $3.7 million
in on-premise laundry sales due in part to the Company's new product offerings
in 1996 and 1997; (iv) $5.6 million due to increased volume of equipment
financing promissory notes originated and sold pursuant to the Company's off-
balance sheet equipment financing program; and (v) $1.5 million in other
commercial laundry equipment sales.
Gross profit. Gross profit for 1997 increased $11.6 million, or 16.0%, to
$83.8 million from $72.2 million for 1996. Gross profit as a percentage of net
sales increased to 24.1% for 1997 from 22.7% for 1996. This increase was
primarily attributable to an increase in commercial laundry equipment sales
volume and related efficiencies, manufacturing cost reductions and growth in
the Company's equipment financing program, which were partially offset by a
decrease in Appliance Co. consumer laundry equipment selling prices under the
Appliance Co. Supply Agreement, costs related to the Appliance Co.
Transaction, new product start-up costs as well as increased depreciation.
Selling, general and administrative expense. Selling, general and
administrative expense for 1997 increased $6.6 million, or 19.2%, to $41.1
million from $34.5 million for 1996. Selling, general and administrative
expense as a percentage of net sales increased to 11.8% for 1997 from 10.8%
for 1996. The increase in selling, general and administrative expense was
primarily due to a $3.4 million loss on sale recognized in connection with the
increased level of trade receivables sold through the Company's Financing
Subsidiaries, an increase of $1.9 million in selling and distribution expense
resulting from increased sales and an increase of $1.3 million in engineering
expense principally to support new product introductions.
Operating income. Operating income for 1997 increased $8.6 million, or
25.3%, to $42.7 million from $34.1 million for 1996. Operating income as a
percentage of net sales increased to 12.3% for 1997 from 10.7% for 1996. The
increase in operating income was primarily due to the factors discussed above;
in addition, nonrecurring costs of $3.7 million were incurred in 1996
primarily associated with the elimination of certain redundant processes as
part of the consolidation of Raytheon's appliance businesses, which included
the Company. See Note G to the Company's historical combined financial
statements and notes related thereto included elsewhere herein.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net sales. Net sales for 1996 decreased $6.2 million, or 1.9%, to $318.3
million from $324.5 million for 1995. This decrease was due to declines in
commercial laundry equipment sales of $4.3 million and in Appliance Co.
consumer laundry equipment sales of $2.4 million, partially offset by a slight
increase in sales of service parts. The decrease in commercial laundry
equipment sales was due to decreases of (i) $8.6 million in sales to Maytag
Corporation, a competitor of the Company, which terminated its supply
agreement with UniMac after the Company's acquisition of the washer-extractor
business of UniMac and (ii) $8.8 million in sales to international customers
as the Company's products became less competitive due to unfavorable exchange
rate movements and newly instituted importation duties that no longer apply to
the Company's products. This decrease was partially offset by increases of:
(i) $3.5 million in laundromat sales principally as a result of sales to a new
customer beginning in the fourth quarter of 1996; (ii) $6.4 million in multi-
housing laundry sales due to increased sales to key customers under supply
agreements; and (iii) $3.4 million in on-premise laundry sales due in part to
the Company's new product offerings in 1996. The decrease in Appliance Co.
consumer laundry equipment sales was primarily the result of lower unit
volume.
Gross profit. Gross profit for 1996 increased $7.0 million, or 10.7%, to
$72.2 million from $65.3 million for 1995. Gross profit as a percentage of net
sales increased to 22.7% for 1996 from 20.1% for 1995. The increase in gross
profit, despite lower net sales, was primarily attributable to manufacturing
process improvements and lower material purchase costs for aluminum, motors,
corrugated boxes and plastics. Material purchase costs had increased
significantly in 1995 due to increases in commodity prices and returned to
historical levels in 1996.
40
<PAGE>
Selling, general and administrative expense. Selling, general and
administrative expense for 1996 decreased $0.9 million, or 2.5%, to $34.5
million from $35.4 million for 1995. Selling, general and administrative
expense as a percentage of net sales decreased to 10.8% for 1996 from 10.9%
for 1995. The decrease in selling, general and administrative expense was
primarily due to reductions in work force implemented in 1995 and 1996.
Operating income. Operating income for 1996 increased $4.8 million, or
16.4%, to $34.1 million from $29.3 million for 1995. Operating income as a
percentage of net sales increased to 10.7% for 1996 from 9.0% for 1995. The
increase in operating income was primarily due to the factors discussed above,
partially offset by the impact of nonrecurring costs of $3.7 million incurred
in 1996 (primarily associated with the consolidation of Raytheon's appliance
businesses, which included the Company), compared to $0.6 million of
nonrecurring severance and benefit costs incurred in 1995 associated with
reductions in work force. See Note G to the Company's historical combined
financial statements and notes related thereto included elsewhere herein.
LIQUIDITY AND CAPITAL RESOURCES
Post-Transactions
Following the Transactions, the Company's principal sources of liquidity are
cash flow generated from operations and borrowings under the $75.0 million
Revolving Credit Facility. The Company's principal uses of liquidity are to
meet debt service requirements, finance the Company's capital expenditures and
provide working capital. The Company expects that capital expenditures in 1998
will not exceed $15.0 million. The Company expects that ongoing requirements
for debt service, capital expenditures and working capital will be funded by
internally generated cash flow and borrowings under the Revolving Credit
Facility. The Company has incurred substantial indebtedness in connection with
the Transactions. Following the Transactions, the Company has approximately
$310.0 million of combined indebtedness outstanding. The Company's debt
service obligations could have important consequences to holders of the
Exchange Notes. See "Risk Factors--Risks Relating to the Exchange Notes--
Substantial Leverage."
At May 5, 1998, after giving effect to the Transactions, the Company
borrowed $200.0 million under the Term Loan Facility, issued $110.0 million of
the Notes and had additional availability of approximately $75.0 million under
the Revolving Credit Facility.
The $200.0 million Term Loan Facility amortizes quarterly and is repayable
in the following aggregate annual amounts:
<TABLE>
<CAPTION>
AMOUNT DUE
----------
(DOLLARS
YEAR IN
---- MILLIONS)
<S> <C>
1............................ $ 0.0
2............................ $ 0.0
3............................ $ 1.0
4............................ $ 1.0
5............................ $ 1.0
6............................ $ 40.0
7............................ $157.0
</TABLE>
The Term Loan Facility is also subject to mandatory prepayment with the
proceeds of certain debt incurrences, asset sales and a portion of Excess Cash
Flow (as defined in the Senior Credit Facility). The Revolving Credit Facility
will terminate in 2003. See "Description of Senior Credit Facility."
Concurrent with the Closing of the other Transactions, the Company entered
into the Asset Backed Facility, which provides $250.0 million of off-balance
sheet financing for trade receivables and equipment loans. The finance
programs have been and will continue to be structured in a manner that
qualifies for off-balance sheet treatment in accordance with generally
accepted accounting principles. It is expected that under the Asset Backed
41
<PAGE>
Facility, the Company will continue to act as originator and servicer of the
equipment financing promissory notes and the trade receivables. See
"Description of Asset Backed Facility."
The Company's ability to make scheduled payments of principal of, or to pay
the interest or Liquidated Damages, if any, on, or to refinance, its
indebtedness (including the Exchange Notes), or to fund planned capital
expenditures, will depend upon its future performance, which, in turn, is
subject to general economic, financial, competitive and other factors that are
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 capital
expenditures, working capital, interest payments and scheduled principal
payments. There can be no assurance, however, that the Company's business will
continue to generate sufficient cash flow from operations in the future to
service its debt and make necessary capital expenditures after satisfying
certain liabilities arising in the ordinary course of business. 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
would be available or that any such sales of assets or additional financing
could be obtained. See "Risk Factors--Risks Relating to the Exchange Notes--
Substantial Leverage."
Historical
Historically, the Company's principal sources of funds have been operations
and short-term funding from Raytheon. The Company's principal uses of funds
have been capital expenditures and distributions to Raytheon as described
below.
Cash generated from operations for the quarter ended March 29, 1998, of
$19.0 million was principally derived from net income and the sale of trade
and notes receivable pursuant to the Company's off-balance sheet financing
facilities. During the first quarter, the maximum availability under the off-
balance sheet equipment financing facility was increased by $24.5 million from
its previous limit allowing the Company to sell during the first quarter
additional notes receivable previously retained.
The Company's cash generated from operations during the year ended December
31, 1997 of $40.1 million decreased from $77.2 million for the year ended
December 31, 1996. The decrease is primarily attributable to the one time
impact in 1996 of the initial sale of $56.7 million of trade receivables
through the Company's off-balance sheet financing facility and to the higher
levels of notes receivable retained at December 31, 1997. These impacts were
partially offset by a decrease in inventory levels in 1997. The Company
retained a portion of notes receivable eligible for sale under its off-balance
sheet equipment financing facility at December 31, 1997, as a result of having
reached the maximum availability under that facility. Inventory decreased
during the year ended December 31, 1997 principally due to the transfer of
consumer laundry finished goods inventory to Appliance Co. at the time of the
Appliance Co. transaction. The Company generated cash from operations of $17.5
million during the year ended December 31, 1995 impacted principally by net
income, depreciation and changes in trade and notes receivable and inventory
balances.
Historically, cash has been transferred between the Company and Raytheon
based on the Company's cash position. For the quarter ended March 29, 1998 and
the years ended December 31, 1997 and 1996, respectively, the Company
transferred cash to Raytheon of $18.1 million, $19.2 million and $55.1 million
(including dividends of $7.7 million), respectively. The substantial transfer
in 1996 was attributable to the cash generated from the initial sale of trade
receivables through the Company's off-balance sheet financing facility. During
the year ended December 31, 1995, cash of $63.4 million (net of dividends of
$6.3 million) was transferred to the Company from Raytheon to help fund
operations.
Capital Expenditures
The Company's capital expenditures for the quarters ended March 29, 1998 and
March 30, 1997 were approximately $1.5 million and $7.9 million, respectively.
For the years ended December 31, 1997, 1996 and
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1995, capital expenditures were approximately $22.6 million, $22.0 million and
$16.2 million, respectively. For all periods presented, capital expenditures
included investments for major new product updates and designs (approximately
$16.4 million) and modernization programs at all three of the Company's
manufacturing facilities, primarily related to increasing production capacity
and reducing manufacturing cost (approximately $22.9 million). Other capital
expenditures of $21.5 million for the three years ended December 31, 1997
included ongoing cost improvements and maintenance programs.
YEAR 2000
The Company is evaluating the extent to which its computer operating systems
will be disrupted upon the turn of the century as a result of the Year 2000
Issue. While the Company believes that new software being installed into its
computer system will address the Year 2000 Issue, there can be no assurance
that the new software will be installed in time to remedy the Year 2000 Issue
or that the Company's computer operating systems will not be disrupted upon
the turn of the century. Any such disruption, whether caused by the Company's
systems or those of any of its suppliers or customers, could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Risk Factors--Company-Specific Risks--Computer System; Year
2000 Issue."
ENVIRONMENTAL LIABILITIES
Federal, state and local governments could enact laws or regulations
concerning environmental matters that affect the Company's operations or
facilities or increase the cost of producing, or otherwise adversely affect
the demand for, the Company's products. The Company cannot predict the
environmental liabilities that may result from legislation or regulations
adopted in the future, the effect of which could be retroactive. Nor can the
Company predict how existing or future laws and regulations will be
administered or interpreted or what environmental conditions may be found to
exist at Company facilities or at other properties where the Company or
predecessors have arranged for the disposal of hazardous substances. The
enactment of more stringent laws or regulations or stricter interpretation of
existing laws and regulations could require expenditures by the Company, some
of which could be material. See "Business--Environmental, Health and Safety
Matters."
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information," which changes the manner in which public
companies report information about their operating segments. SFAS No. 131,
which is based on the management approach to segment reporting, establishes
requirements to report selected segment information quarterly and to report
entity-wide disclosures about products and services, major customers, and the
geographic locations in which the entity holds assets and reports revenue. The
Company will adopt SFAS No. 131 for the fiscal year ended December 31, 1998.
In February 1998, the FASB issued SFAS No. 132, "Employees Disclosures about
Pensions and Other Postretirement Benefits." The new requirements require
increased disclosures for public entities. SFAS No. 132 only affects
disclosure issues and does not change any existing measurements or recognition
provisions previously required. The statement is effective for fiscal years
beginning after December 15, 1997. Reclassification for earlier periods is
required for comparative purposes. The Company will adopt SFAS No. 132 for the
fiscal year ended December 31, 1998.
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BUSINESS
Alliance believes it is the leading designer, manufacturer and marketer of
stand alone commercial laundry equipment in North America and a leader
worldwide. Under the well-known brand names of Speed Queen, UniMac and
Huebsch, the Company produces a full line of commercial washing machines and
dryers with load capacities from 16 to 250 pounds. The Company believes it has
had the leading market share in the North American stand alone commercial
laundry equipment industry for the last five years and has progressively
increased its market share from approximately 21% in 1993 to 38% in 1997. The
Company attributes its industry leading position to: (i) the quality,
reliability and functionality of its products; (ii) the breadth of its product
offerings; (iii) its extensive distributor network and strategic alliances
with key customers; and (iv) its substantial investment in new product
development and manufacturing capabilities. As a result of its market
leadership, the Company has an installed base of equipment that it believes is
the largest in the industry and that generates significant recurring sales of
replacement equipment and service parts. Internationally, the Company has
developed targeted opportunities, generating equipment sales of $45.5 million
in 1997. In addition, pursuant to an agreement, the Company supplies consumer
washing machines to a large consumer appliances company ("Appliance Co.") for
sale at retail. For 1997, the Company generated net sales of $347.7 million
and EBITDA (as defined) of $57.2 million.
The Company believes it has developed the most extensive distribution
networks to each of the three distinct customer groups within the North
American stand alone commercial laundry equipment industry: (i) laundromats;
(ii) multi-housing laundries, consisting primarily of common laundry
facilities in apartment buildings, universities and military installations;
and (iii) on-premise laundries, consisting primarily of in-house laundry
facilities in hotels, hospitals, nursing homes and prisons. The Company
estimates that in over 80% of the North American market its laundromat and on-
premise laundry distributors are either the number one or number two
distributor for their respective selling regions. In addition, the Company's
in-house sales force has developed superior relationships with leading route
operators that own, install and maintain commercial laundry equipment in
multi-housing laundries, a critical factor in enabling the Company to grow its
market share. Internationally, the Company sells its laundry equipment through
distributors and to retailers.
With an investment of over $70.0 million since 1994, the Company has
substantially completed the development of many new products, the redesign of
existing products and the modernization of its three manufacturing facilities
in Wisconsin, Florida and Kentucky. Since January 1, 1997, the Company has
introduced new product designs and new product models that comprise over 85%
of its current product offerings. The Company believes its considerable
investment in its product line and manufacturing capabilities has strengthened
and will continue to enhance its market leadership position.
ALC is a wholly owned subsidiary of Alliance that was incorporated for the
sole purpose of serving as a co-issuer of the Notes in order to facilitate the
Note Offering. ALC does not have any substantial operations or assets of any
kind and will not have any revenues. Prospective investors in the Exchange
Notes should not expect ALC to participate in servicing the interest,
principal obligations or Liquidated Damages, if any, on the Exchange Notes.
See "Description of the Exchange Notes--Certain Covenants."
COMPANY STRENGTHS
MARKET LEADER WITH SIGNIFICANT INSTALLED BASE. The Company believes it led
the North American industry in sales to all customer groups, with a 38% market
share overall in 1997. The Company's market share has increased progressively
during the last five years for each customer group. As a result of its leading
market position, the Company has achieved superior brand recognition and
extensive distribution capabilities. The Company's market position has also
allowed it to establish what it believes to be the largest installed base in
its industry, which generates a significant level of recurring sales of
replacement equipment and service parts and provides a platform for sales
growth.
INDUSTRY-LEADING PRODUCT OFFERING. The Company believes its product line
leads the industry in reliability, breadth of offerings, functionality and
advanced features. Its development team of more than 120
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engineers and technical personnel, together with its marketing and sales
personnel, work with the Company's major customers to redesign and enhance the
Company's products to better meet customer needs. For example, the Company has
introduced since January 1, 1997 new product designs and new product models
that comprise over 85% of its current product offerings; the Company's new
products emphasize efficiency and new technology, facilitating ease of use as
well as improving performance and reliability. In addition, the Company
believes it is the only manufacturer in North America to produce a full
product line (including washers, dryers, washer-extractors and tumblers for
all customer groups), thereby providing customers with a single source for all
their stand alone commercial laundry equipment needs.
EXTENSIVE AND LOYAL DISTRIBUTION NETWORKS. The Company believes it has
developed the industry's most extensive North American distribution networks.
The Company estimates its distributors are either the number one or number two
distributor for their respective selling regions in over 80% of the North
American market. Most of the Company's distributors have been customers for
over ten years. In addition, through its in-house sales force the Company has
developed excellent relationships with industry-leading route operators, who
are direct customers of the Company. The Company believes its strong
relationships with its customers are based, in part, on the quality, breadth
and performance of its products and on its comprehensive value-added services.
LEADING NATIONAL BRANDS. The Company markets and sells its products under
the widely recognized brand names Speed Queen, UniMac and Huebsch. A survey
commissioned by the Company in 1993 of more than 1,000 commercial laundry
distributors and end-users ranked Speed Queen as the leader in terms of brand
awareness and as an industry leader for quality and reliability. In the same
study, UniMac was ranked a leading brand in the stand alone on-premise laundry
industry; Huebsch and Speed Queen ranked first and second, respectively, in
customer satisfaction.
STRONG AND INCENTIVIZED MANAGEMENT TEAM. Led by Chief Executive Officer
Thomas L'Esperance, the Company believes it has assembled the strongest
management team in the commercial laundry equipment industry. The Company's
seven executive officers have over 80 years of combined experience in the
commercial laundry equipment and appliance industries. This management team
has executed numerous strategic initiatives, including: (i) ongoing
refinements to its product offerings; (ii) the development of strategic
alliances with key customers; (iii) the implementation of manufacturing cost
reduction and quality improvement programs; and (iv) the acquisition and
successful integration of the commercial washer-extractor business of the
UniMac Company ("UniMac"). In addition, senior management (the "Management
Investors") owns approximately 19% of the Company on a diluted basis.
BUSINESS STRATEGY
The Company's strategy is to achieve profitable growth by offering a full
line of the most reliable and functional stand alone commercial laundry
equipment, along with comprehensive value-added services. The key elements of
the Company's strategy are as follows:
OFFER FULL LINE OF SUPERIOR PRODUCTS AND SERVICES. The Company seeks to
satisfy all of a customer's stand alone commercial laundry equipment needs
with its full line of products and services. The Company seeks to compete with
other manufacturers in the commercial laundry equipment industry by
introducing new products, features and value-added services tailored to meet
evolving customer requirements. In 1997, for example, the Company began field
tests for a new line of small-chassis frontload washers, offering multi-
housing laundries increased water and energy efficiency. In addition, in 1997,
the Company introduced its Automatic Balance System for topload washers,
providing industry-leading out-of-balance handling; Alliance's new topload
washers generate a higher g-force, thereby reducing moisture left in the
laundry and drying time, ultimately reducing operating costs for the Company's
customers.
DEVELOP AND STRENGTHEN ALLIANCES WITH KEY CUSTOMERS. The Company has
developed and will continue to pursue long-term alliances and multi-year
supply agreements with key customers. The Company is the predominant supplier
of new laundry equipment to Coinmach Corporation ("Coinmach"), the largest and
fastest
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growing operator of multi-housing laundries in North America. Similarly, the
Company is the supplier of substantially all of the laundry equipment
purchased by SpinCycle, Inc. ("SpinCycle"), an emerging leader in the North
American laundromat industry.
CONTINUOUSLY IMPROVE MANUFACTURING OPERATIONS. The Company seeks to
continuously enhance its product quality and reduce costs through refinements
to manufacturing processes. The Company achieves such improvements through
collaboration among key customers and its engineering and marketing personnel.
Since 1995, the Company has progressively reduced manufacturing costs through
improvements in raw material usage and labor efficiency, among other factors.
These improvements are driven in part by the Company's goalsharing programs,
through which the Company's manufacturing teams share in a portion of the cost
reductions they achieve.
INDUSTRY OVERVIEW
The Company estimates that North American stand alone commercial laundry
equipment sales were approximately $500.0 million in 1997, of which the
Company's equipment sales represented approximately $187.0 million. The
Company believes that North American sales of stand alone commercial laundry
equipment have grown at a compound annual rate of approximately 4.5% since
1993. North American commercial laundry equipment sales historically have been
relatively insulated from business and economic cycles, given that economic
conditions do not tend to affect the frequency of use, or replacement, of
laundry equipment. Management believes industry growth will be sustained by
continued population expansion and by customers increasingly "trading up" to
equipment with enhanced functionality, raising average selling prices.
Manufacturers of stand alone commercial laundry equipment compete on their
ability to satisfy several customer criteria, including: (i) equipment
reliability and durability; (ii) performance criteria such as water and energy
efficiency, load capacity and ease of use; (iii) availability of innovative
technologies such as cashless payment systems and advanced electronic
controls, which improve ease of use and management audit capabilities; and
(iv) value-added services such as rapid spare parts delivery, equipment
financing and computer aided assistance in the design of commercial laundries.
Outside of the stand alone commercial laundry equipment market, the Company
does not participate in manufacturing or selling commercial dry cleaning
equipment or custom engineered, continuous process laundry systems. Each of
these other markets is distinct from the stand alone commercial laundry
equipment market, employing different technologies and distribution networks
and serving different customer groups.
CUSTOMER CATEGORIES. Each of the stand alone commercial laundry equipment
industry's three primary customer groups--laundromat operators, multi-housing
laundry operators and on-premise laundry operators--is served through a
different distribution channel and has different requirements with respect to
equipment load capacity, performance and sophistication. For example,
equipment purchased by multi-housing route operators is most similar to
consumer machines sold at retail, while equipment purchased by laundromats and
on-premise laundries has greater durability, delivers increased capacity and
provides superior cleaning and drying capabilities.
LAUNDROMATS. Management estimates that laundromats accounted for
approximately 52% of North American stand alone commercial laundry equipment
sales in 1997. These approximately 35,000 facilities typically provide walk-
in, self-service washing and drying. Laundromats primarily purchase commercial
topload washers, washer-extractors and tumblers. Washer-extractors and
tumblers are larger-capacity, higher-performance washing machines and dryers,
respectively. Laundromats have historically been owned and operated by sole
proprietors. Laundromat owners typically rely on distributors to provide
equipment, technical and repair support and broader business services. For
example, distributors may host seminars for potential laundry proprietors on
laundromat investment opportunities. Independent proprietors also look to
distributors and manufacturers for equipment financing. Given the laundromat
owner's reliance on the services of its local distributor, the Company
believes that a strong distributor network in local markets differentiates
manufacturers in serving this customer group.
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In addition to distributor relationships, the Company believes laundromat
owners choose among different manufacturers' products based on, among other
things: (i) availability of equipment financing; (ii) reputation, reliability
and ease and cost of repair; (iii) the water and energy efficiency of the
products (approximately 22% to 25% of annual gross wash and dry income of
laundromats is consumed by utility costs, according to the Coin Laundry
Association ("CLA")); and (iv) the efficient use of physical space in the
store (since 15% to 20% of annual gross income of laundromats is expended for
rent according to the CLA).
MULTI-HOUSING LAUNDRIES. Management believes that multi-housing laundries
accounted for approximately 26% of North American stand alone commercial
laundry equipment sales in 1997. These laundries include common laundry
facilities in multi-family apartment and condominium complexes, universities
and military installations.
Most products sold to multi-housing laundries are small-chassis topload and
frontload washers and small-chassis dryers similar in appearance to those sold
at retail to the consumer market but offering a variety of enhanced durability
and performance features. For example, topload washers sold to multi-housing
laundries typically last up to 12,000 cycles, approximately twice as long as
the expected life of a consumer machine.
Multi-housing laundries are managed primarily by route operators who
purchase, install and service the equipment under contract with building
management. Route operators pay rent (which may include a portion of the
laundry's revenue) to building management. Route operators are typically
direct customers of commercial laundry equipment manufacturers such as the
Company and tend to maintain their own service and technical staffs. Route
operators compete for long-term contracts on the basis of, among other things:
(i) the reputation and durability of their equipment; (ii) the level of
maintenance and quality of repair service; (iii) the ability of building
management to audit laundry equipment revenue; and (iv) the water and energy
efficiency of products.
The Company believes reliability and durability are key criteria for route
operators in selecting equipment, as they seek to minimize the cost of
repairs. The Company also believes route operators prefer water and energy
efficient equipment that offers enhanced electronic monitoring and tracking
features demanded by building management companies. Given their investments in
spare parts inventories and in technician training, route operators are
reluctant to change equipment suppliers. Therefore, the Company believes an
installed base gives a commercial laundry equipment manufacturer a competitive
advantage.
ON-PREMISE LAUNDRIES. Management believes that on-premise laundries
accounted for approximately 22% of North American stand alone commercial
laundry equipment sales in 1997. On-premise commercial laundries are located
at a wide variety of businesses that wash or process textiles or laundry in
large quantities, such as hotels and motels, hospitals, nursing homes, sports
facilities, car washes and prisons.
Most products sold to on-premise laundries are washer-extractors and
tumblers, primarily in larger capacities up to 250 pounds. These machines
process significantly larger loads of textiles in shorter times than equipment
typically sold to laundromats or multi-housing customer groups. Effective and
rapid washing (i.e., reduced cycle time) of hotel sheets, for example, reduces
both a hotel's linen requirements and labor costs of washing and drying
linens. The Company believes that in a typical hotel on-premise laundry, up to
50% of the cost of operations is labor.
On-premise laundries typically purchase equipment through a distributor who
provides a range of selling and repair services on behalf of manufacturers. As
with laundromats, the Company believes a strong distributor network is a
critical element of sales success. On-premise laundries select their equipment
based on the availability of specified product features, including, among
other things: (i) reputation and reliability of products; (ii) load capacity
and cycle time; (iii) water and energy efficiency; and (iv) ease of use. In
addition, the availability of technical support and service is important to an
on-premise laundry's selection of an equipment supplier.
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TRENDS AND CHARACTERISTICS
Growth Drivers. The Company believes that continued population expansion in
North America has and will drive steady demand for garment and textile
laundering by all customer groups purchasing commercial laundry equipment. The
Company believes population growth has historically supported replacement and
some modest growth in the installed base of commercial laundry equipment.
According to the U.S. Census Bureau, the United States population has grown at
a compound annual rate of 0.9% since 1988 and is projected to grow at
approximately 1.0% per year on average over the next ten years.
In addition, customers are increasingly "trading up" to equipment with
enhanced functionality, raising average selling prices. For example, national
customers in the laundromat and multi-housing customer groups are more likely
to take advantage of recently available electronic features, which the Company
believes provide such customers with a competitive advantage. Moreover,
customers are moving towards equipment with increased water and energy
efficiency as the result of government and consumer pressure and a focus on
operating cost containment.
Limited Cyclicality. North American commercial laundry equipment sales
historically have been relatively insulated from business and economic cycles
because economic conditions do not tend to affect the frequency of use, or
replacement, of laundry equipment. Management believes industry growth will be
sustained by continued population expansion and by customers increasingly
"trading up" to equipment with enhanced functionality, raising average selling
prices. Under all economic conditions, owners of commercial laundries
typically delay equipment replacement until such equipment can no longer be
economically repaired or until competition forces the owner to upgrade such
equipment to provide improved appearance or functionality. The economic life
of such equipment and thus timing of replacement of such equipment are also
generally unaffected by economic conditions; the economic life of stand alone
commercial laundry equipment is generally 7-14 years.
International Growth. The Company anticipates growth in demand for
commercial laundry equipment in international markets, especially in
developing countries where laundry machine penetration remains low. As of
1995, only 40% of the population of South America and 20% of the Asian
population had a washer in their home, compared to over 70% in North America.
Reducing Customer Operating Costs. The time required to wash and dry a given
load of laundry (i.e., cycle time) has a significant impact on the economics
of a commercial laundry operation. Accordingly, commercial laundry equipment
manufacturers produce equipment that provides progressively shorter cycle
times through improved technology and product innovation to decrease labor
costs and increase the volume of laundry that can be processed in a given time
period. Examples of methods of reducing cycle time are: (i) increasing the
fill, wash and drain rates; (ii) increasing water extraction capability by
increasing spin rate; and (iii) decreasing the number of unfinished wash
cycles by improving out-of-balance performance.
PRODUCTS
OVERVIEW. The Company offers a full line of stand alone commercial laundry
washers and dryers, with service parts and value-added services supporting its
products, under the Speed Queen, Huebsch and UniMac brands throughout North
America and in over sixty foreign countries. The Company's products range from
small washers and dryers primarily for use in laundromats and multi-housing
laundry rooms to large laundry equipment with load capacities of up to 250
pounds used in on-premise laundries. The Company also benefits from domestic
and international sales of service parts for its large installed base of
commercial laundry equipment. Internationally, the Company sells laundry
equipment under the Speed Queen and private label brands. In addition, the
Company produces consumer laundry washers for Appliance Co. under a supply
agreement. See "--Appliance Co. Transaction."
WASHERS. Washers, including consumer products sold to Appliance Co.,
represented approximately 63% of 1997 net sales and include washer-extractors,
topload washers and frontload washers.
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Washer-Extractors. The Company manufactures washer-extractors, its largest
washer products, to process from 18 to 250 pounds of laundry per load. Washer-
extractors extract water from laundry with spin speeds that produce over
300g's of centrifugal force, thereby reducing the time and energy costs for
the drying cycle. Sold under the Speed Queen, UniMac and Huebsch brands, these
products represented approximately 24% of 1997 net sales. Washer-extractors
that process up to 80 pounds of laundry per load are sold to laundromats, and
washer-extractors that process up to 250 pounds of laundry per load are sold
to on-premises laundries. Washer-extractors are built to be extremely durable
due to the enormous g-force generated by spinning several hundred pounds of
water-soaked laundry, to the constant use of the equipment and to the high
cost of failure to the user.
In 1997, the Company introduced new features and increased capacity for
washer-extractors. The Company believes this redesign further strengthens the
Speed Queen and UniMac brands of on-premise laundry equipment as the leading
products within the industry. Increased capacity models allow the Company to
address a broader on-premise laundry customer base. The redesigned line
combines greater productivity at less cost with more options to meet the
demands of on-premise laundry customers, including improved features such as
the Ultra-soft wash cycle, which allows laundering of the most delicate hand-
washable draperies or bedspreads.
Topload Washers. Topload washers are small-chassis washers with the
capability to process up to 18 pounds of laundry per load with spin speeds
that produce up to 150g's. Sold primarily to multi-housing laundries and
laundromats under the Speed Queen and Huebsch brands, these products
represented approximately 17% of 1997 net sales. In addition, the Company's
sales of consumer washers to Appliance Co. represented approximately 22% of
1997 net sales.
In 1997, the Company introduced its Automatic Balance System ("ABS"), which
it believes provides the industry-leading out-of-balance handling. New topload
washers with ABS deliver higher g-force, reducing moisture left in the
laundry, thereby reducing drying time and energy usage.
Frontload Washers. In October 1997, the Company began field tests of a new
small-chassis frontload washer with the capability to process up to 18 pounds
of laundry per load. Frontload washers are sold under the Speed Queen brand to
laundromat and multi-housing customers. The frontload washer's advanced design
uses 28% less water compared to commercial topload washers. Furthermore,
decreased usage of hot water and superior water extraction in the high g-force
spin cycle reduce energy consumption. This new frontload washer is available
with front controls (front accessibility complies with Americans with
Disabilities Act regulations) and can be purchased with a matching small-
chassis dryer (single or stacked). The Company will source frontload washers
from Appliance Co. through September 1998. See "--Appliance Co. Transaction"
and "--Ripon Transition."
DRYERS. Dryers represented approximately 26% of 1997 net sales and include
tumbler dryers, standard dryers and stacked dryers. The Company also sells a
new line of stacked frontload washers and dryers.
Tumbler Dryers. Tumblers are very large dryers with the capability of drying
up to 170 pounds of laundry per load. Tumblers represented approximately 17%
of 1997 net sales. Tumblers are sold primarily to laundromats and on-premise
laundries under all three of the Company's brands. The Company's new tumbler
dryer design, introduced in October 1997, features commonality of internal
components between models, reducing parts inventory and improving
serviceability. These units have 33% to 50% fewer moving parts as compared to
their previous design. In addition, these tumblers reduce drying time using
22% less energy as compared to their previous design. The Company's new
product offering expands the capacity range of the tumbler dryer line to
include the 25 pound single dryer, which is popular in foreign markets.
Standard Dryers. Standard dryers are small capacity dryers with the
capability to process up to 18 pounds of laundry per load. Sold under the
Speed Queen and Huebsch brands, standard dryers (including stacked dryers)
represented approximately 9% of 1997 net sales. In 1997, the Company
introduced its newly designed standard dryer, which serves the multi-housing
and international consumer markets. The Company believes the dryer's increased
capacity, measuring 7.1 cubic feet, is among the largest in the industry. The
size of the loading door
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opening has also been increased to improve loading accessibility. The Company
believes that the increased drying capacity and enhanced operational
convenience that these improvements provide are critical factors to a
customer's product satisfaction. The Company will source its standard and
stacked dryers from Appliance Co. until September 1999. See "--Appliance Co.
Transaction" and "--Ripon Transition."
Stacked Dryers and Stacked Frontload Washers and Dryers. To enable its
multi-housing customers to conserve valuable floor space, the Company offers a
stacked unit consisting of two 18 pound standard dryers and will offer a
stacked unit consisting of an 18 pound frontload washer paired with an 18
pound standard dryer. The Company believes it will be the only manufacturer of
stacked frontload washer and dryer units.
SERVICE PARTS. The Company benefits from the recurring sales of service
parts to its large installed base. Such sales accounted for approximately 9%
of 1997 net sales. The Company offers immediate response service whereby many
of its parts are available on a 24-hour turnaround for emergency repair parts
orders.
OTHER VALUE-ADDED SERVICES. The Company believes its customers attach
significant importance to the value-added services it provides. The Company
offers services that it believes are significant drivers of high customer
satisfaction, such as equipment financing (which accounted for approximately
2% of 1997 net sales), laundromat site selection assistance, investment
seminar training materials, computer-aided commercial laundry room design,
sales and service training for distributors, technical support and service
training material. In addition, the Company believes it offers an unmatched
range of complementary customer services and support, including toll-free
technical support and on-call installation and repair service through its
highly trained distributors. The Company believes its extensive service
capabilities, in addition to the dependability and functionality of its
products, will continue to differentiate its products from the competition.
CUSTOMERS
The Company's customers include more than: (i) 120 distributors to
laundromats; (ii) 110 distributors to on-premise laundries; (iii) 110 route
operators serving multi-housing laundries; and (iv) 75 international
distributors serving more than 60 countries.
The Company's top ten equipment customers (excluding Appliance Co.)
accounted for approximately 27% of 1997 net sales. Coinmach, the largest
multi-housing route operator in the United States, Macke Laundry Service, L.P.
(which was acquired by Coinmach in early 1998), Lead Laundry Equipment and
SpinCycle, an emerging leader in the laundromat industry, were the Company's
largest customers (excluding Appliance Co.), none of which individually
accounted for more than 8% of 1997 net sales. In addition, sales to Appliance
Co. accounted for 22% of 1997 net sales. See "--Appliance Co. Transaction."
SALES AND MARKETING
SALES FORCE. The Company's sales force of approximately 30 is structured to
serve the needs of each customer group. In addition, the Company, through a
staff of approximately 40 professionals, provides customers and distributors
with a wide range of value-added services such as laundromat site selection
assistance, investment seminar training materials, computer-aided commercial
laundry room design, sales and service training and technical support.
MARKETING PROGRAMS. The Company supports its sales force and distributors
through a balanced marketing program of advertising and industry trade shows.
Advertising expenses totaled $3.4 million in 1997 and included a variety of
forms, from print and electronic media to direct mail. In addition, Company
representatives attended over 40 trade shows in 1997 to introduce new
products, maintain contact with customers, develop new customer relationships
and generate demand for the Company's products.
EQUIPMENT FINANCING. The Company, through the Financing Subsidiaries, offers
an extensive off-balance sheet equipment financing program to end-users,
primarily laundromat owners, to assist in their purchases of new
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equipment. Typical terms include 2-7 year loans with an average principal
amount of approximately $50,000. Management believes that the Company's off-
balance sheet equipment financing program is among the industry's most
comprehensive and that the program is an important component of its marketing
activities. In addition, this service provides the Company with stable,
recurring income.
The program is structured to minimize risk of loss. The Company adheres to
strict underwriting procedures, including comprehensive applicant credit
analysis (generally including credit bureau, bank, trade and landlord
references, site analysis including demographics of the location and multiple
year pro-forma cash flow projections), the receipt of collateral and
distributor assistance in remarketing collateral in the event of default. As a
result of these risk management tools, losses from the program have been
minimal. Net write-offs inclusive of loans sold to third parties since the
inception of the program in 1992 have been approximately 0.1% as of December
31, 1997. In addition, pursuant to the Merger Agreement, Raytheon has
indemnified the Company for substantially all of the liabilities that might
arise from recourse to the Company in the event of default on existing
portfolios of loans sold prior to Closing. See "Certain Relationships and
Related Transactions" and "Description of Asset Backed Facility."
RESEARCH AND DEVELOPMENT
The Company's engineering organization is staffed with over 120 engineers
and technical support staff. The Company's recent research and development
efforts have focused primarily on continuous improvement in the reliability,
performance, capacity, energy and water conservation, sound levels and
regulatory compliance of its commercial laundry equipment. The Company's
engineers and technical personnel, together with its marketing and sales
personnel, collaborate with the Company's major customers to redesign and
enhance its products to better meet customer needs. Research and development
spending has increased from $4.8 million in 1994 to $7.6 million in 1997. The
Company has developed numerous proprietary innovations that the Company uses
in select products. Over the past two years, the Company has rolled out its
MicroMaster line of electronically controlled tumblers and washer-extractors
under the Speed Queen brand as well as its CardMate Plus debit card cashless
system designed to replace coin payment systems. The Company believes this
array of new products allows it to continue to be an innovative leader in
electronic controls equipment. The Company believes improvements made to
existing products and the introduction of new products have supported the
Company's market leadership position.
COMPETITION
Within the North American stand alone commercial laundry equipment industry,
the Company competes with several large competitors. The Company believes,
however, it is the only participant in the North American stand alone
commercial laundry equipment industry to serve significantly all three
customer groups with a full line of washer-extractors, washers, tumbler dryers
and standard dryers. With respect to laundromats, the Company's principal
competitors include Wascomat (the exclusive North American distributor of
Electrolux AB products), Maytag Corporation and The Dexter Company. In multi-
housing, the principal competitors include Maytag Corporation and Whirlpool
Corporation. In on-premise laundry, the Company competes primarily with
Pellerin Milnor Corporation, American Dryer Corporation and Wascomat. The
Company does not believe that a significant new competitor has entered the
North American stand alone commercial laundry equipment industry during the
last ten years, however there can be no assurance that significant new
competitors or existing competitors will not compete for the business of
different customer groups in the future. Consequently, there can be no
assurance that the Company will be able to compete effectively in the future.
Certain of the Company's principal competitors have greater financial
resources and/or are less leveraged than the Company and may be better able to
withstand market conditions within the commercial laundry industry. There can
be no assurance that the Company will not encounter increased competition in
the future, which could have a material adverse effect on the Company's
business, financial condition and results of operations.
51
<PAGE>
MANUFACTURING
The Company owns and operates three manufacturing facilities in Wisconsin,
Florida and Kentucky--with an aggregate of more than 800,000 square feet. The
facilities are organized to focus on specific product segments, although each
facility serves multiple customer groups. The Ripon plant presently produces
the Company's topload washers and is expected to produce the Company's other
small-chassis products: frontload washers, beginning in the fall of 1998, and
dryers, beginning in fall of 1999. The Company's large-chassis products are
produced in Marianna (washer-extractors) and Madisonville (tumblers). The
Company's manufacturing plants primarily engage in fabricating, machining,
painting, assembly and finishing operations. The Company also operates four
regional distribution centers, of which three are owned and one is leased. The
Company believes that existing manufacturing facilities provide adequate
production capacity to meet expected product demand. See "--Ripon Transition."
The Company purchases substantially all raw materials and components from a
variety of independent suppliers. Key material inputs for manufacturing
processes include motors, stainless steel, aluminum, electronic controls,
corrugated boxes and plastics; in addition, the Company externally sources
finished frontload washers and dryers. The Company believes there are readily
available alternative sources of raw materials from other suppliers. The
Company has developed long-term relationships with many of its suppliers and
has sourced materials from nine of its ten largest suppliers for at least five
years.
The Company is committed to achieving continuous improvement in all aspects
of its business in order to maintain its industry leading position. All of the
Company's manufacturing facilities are ISO 9001 certified.
PROPERTIES
The following table sets forth certain information regarding significant
facilities operated by the Company as of December 31, 1997:
<TABLE>
<CAPTION>
APPROXIMATE
LOCATION FUNCTION/PRODUCTS SQUARE FEET OWNED/LEASED
-------- ----------------------------- ----------- ------------
<S> <C> <C> <C>
Production Facilities
Ripon, WI............... Manufacture Small Washers 425,400 Owned
Marianna, FL............ Manufacture Washer-Extractors 222,200 Owned(/1/)
Madisonville, KY........ Manufacture Tumbler Dryers 152,700 Owned
Omro, WI................ Die Cast Facility 37,200 Leased(/2/)
---------
Subtotal 837,500
Regional Distribution
Centers
Ripon, WI............... Washers, Dryers, Tumblers 138,700 Owned
Ripon, WI............... Service Parts 60,800 Owned
Madisonville, KY........ Tumblers 80,000 Leased(/3/)
Marianna, FL............ Washers, Washer-Extractors 37,000 Owned
---------
Subtotal 316,500
Other
Ripon, WI............... Div. Support 65,700 Owned
Engineering, Procurement 43,100 Owned
---------
Subtotal 108,800
---------
Total 1,262,800
=========
</TABLE>
- --------
(1) The Marianna building is owned, however, the land is leased from the city
of Marianna.
(2) This facility was leased for the Company through July, 1998 at which time
the transition to outsourced aluminum die castings was completed.
(3) Up to 80,000 square feet of warehouse space is available and is rented on
an as needed basis. Currently 40,000 square feet is rented.
52
<PAGE>
The Company believes existing manufacturing facilities provide adequate
production capacity to meet product demand. See "--Ripon Transition."
APPLIANCE CO. TRANSACTION
On September 10, 1997, Raytheon (the former parent of the Company) completed
the sale of its consumer appliances business to Appliance Co. (the "Appliance
Co. Transaction"). Prior to the Appliance Co. Transaction, Raytheon owned two
plants that manufactured laundry equipment for both consumer and commercial
use on the same production lines: (i) a facility in Searcy, Arkansas that
manufactures small-chassis frontload washers and dryers and (ii) a facility in
Ripon, Wisconsin that manufactures small-chassis topload washers. In
connection with the Appliance Co. Transaction, Raytheon sold the Searcy
facility to Appliance Co. and retained the Ripon facility. In addition,
Appliance Co. entered into a supply agreement (the "Appliance Co. Supply
Agreement"), including license and cross license agreements to purchase
consumer topload washers from the Company until September 1999 (subject to
certain extension rights), and the Company entered into a supply agreement
with Appliance Co., including license and cross license agreements to purchase
commercial small-chassis frontload washers and dryers until September 1998 and
September 1999, respectively. Under both supply agreements, products are sold
at prices that approximate cost.
On April 17, 1998, Appliance Co. filed suit in the United States District
Court for the Southern District of New York against Raytheon and the Company
seeking (i) declaratory relief that the Company is bound by a non-compete
agreement between Appliance Co. and Raytheon that prohibits the participation
by Raytheon and corporate affiliates of Raytheon in the consumer retail
distribution laundry market, and (ii) unspecified damages from Raytheon and
the Company for breach of the non-compete agreement. On June 2, 1998,
Appliance Co. filed an amended complaint reiterating the allegations of the
original complaint and also asserting that, by virtue of the manner in which
they consummated the sale of the Company by Raytheon, both the Company and
Bain Capital, Inc. tortiously interfered with the non-compete agreement
between Appliance Co. and Raytheon. Appliance Co. now claims to be entitled to
damages in excess of $100 million and also contends that, if the Company is
not bound by the non-compete agreement, then Appliance Co. should also be
relieved of any obligations under the non-compete agreement. Raytheon has
agreed to pay the attorney's fees and costs incurred by the Company and Bain
in contesting this lawsuit. The defendants dispute all Appliance Co.
allegations and deny that Appliance Co. is entitled to any damages. There can
be no assurance, however, that the Company will prevail in the lawsuit and,
accordingly, the Company may be prohibited for some period of time from
participating in the consumer retail distribution laundry market. The Company
does not currently participate in this market. In addition, although the
Company does not believe that it is reasonably likely that Appliance Co. will
prevail in the lawsuit, if Appliance Co. did prevail, the Company could be
required to pay the claimed damages in excess of $100 million and if so, such
payment would have a material adverse effect on the Company's business,
financial condition and results of operations.
Previously, in early 1998, Appliance Co. alleged that Raytheon had breached
certain of its obligations under the sale agreement governing the Appliance
Co. Transaction and under the Appliance Co. Supply Agreement, primarily
relating to the establishment of full volume production of frontload washers
at Appliance Co.'s Searcy facility. The Company is being indemnified by
Raytheon with respect to this dispute and believes that the dispute will be
resolved without any material monetary obligation to the Company.
RIPON TRANSITION
The Company is in the process of establishing at its Ripon facility the
capability to manufacture small-chassis frontload washers and dryers beginning
in September 1998 and September 1999, respectively; until such time, the
Company will continue to source these products from Appliance Co. Similarly,
the Company expects Appliance Co. to begin producing topload washers at its
own facilities in September 1999. The Company's plan to introduce small-
chassis frontload washer and dryer production and to cease production of
consumer topload washers for Appliance Co. (the "Transition Plan") is expected
to require aggregate capital expenditures of approximately $13.0 million in
1998 and 1999 and nonrecurring expenses (such as plant reconfiguration,
severance expenses and manufacturing start-up expenses) of approximately $5.0
million in 1998 and 1999. The Company is confident in its ability to
successfully execute the Transition Plan for the following reasons: (i)
53
<PAGE>
except for certain discrete improvements, the Company is replicating
production processes, equipment and tooling that its own engineers designed
and installed in the Searcy facility and (ii) the Company will benefit from
experience in the Searcy facility to improve upon existing designs and
manufacturing processes at the Ripon facility.
Consumer topload washers sold to Appliance Co. accounted for a substantial
percentage of the unit volume of the Ripon facility and represented
approximately 22% of 1997 net sales. The Company expects the decline in
topload washer production volume at the Ripon facility resulting from
termination of the Appliance Co. Supply Agreement will be offset in part by
the introduction of dryer and frontload washer production and by growth in
sales to other customers.
After implementation of the Transition Plan, the Company believes the Ripon
facility will be the world's largest facility dedicated to manufacturing
small-chassis commercial laundry equipment, comprised of three "focused
factories," each with its own dedicated manufacturing and engineering teams.
The Company believes the implementation of the Transition Plan will enable it
to respond more flexibly and rapidly to customer requirements with product
changes as a result of (i) improved communication and coordination among the
design, engineering, marketing and sales organizations centralized at the
Ripon facility and (ii) the ability to concentrate exclusively on medium
volume, higher margin products.
NEW BUSINESS OPPORTUNITIES
The Company is evaluating a number of new business opportunities. For
example, the Company sees a potential opportunity to become a full-line
supplier of environmentally safe dry-cleaning equipment as the dry-cleaning
industry comes under increasing regulatory and consumer pressure to provide
environmentally friendly services. The cornerstone of this strategy is the
development of a CO/2/-based dry cleaning machine, based on a technology for
which the Company holds one of only two North American licenses. The Company
is also evaluating certain opportunities to increase sales of existing
products in international markets.
PATENTS AND TRADEMARKS
The Company's trademarks are currently registered with the United States
Patent and Trademark Office and in all 50 states and registered or
applications are pending in 58 foreign countries. Management believes that
such trademarks have significant value and are important in the marketing of
its products to customers. The Company owns numerous United States and foreign
patents and has patent applications pending in the United States and abroad.
In addition, the Company owns United States (federal and state) and foreign
registered trade names and service marks and has applications for the
registration of trade names and service marks pending in the United States and
abroad. The Company also owns several United States copyright registrations
and a wide array of unpatented proprietary technology and know-how. Further,
the Company licenses certain intellectual property rights from third parties.
The Company's ability to compete effectively with other companies depends, to
a significant extent, on its ability to maintain the proprietary nature of its
owned and licensed intellectual property.
LEGAL PROCEEDINGS
Various claims and legal proceedings generally incidental to the normal
course of business are pending or threatened against the Company. While the
Company cannot predict the outcome of these matters, in the opinion of
management, any liability arising thereunder will not have a material adverse
effect on the Company's business, financial condition and results of
operations after giving effect to provisions already recorded. In addition,
the Company is currently involved in litigation with Appliance Co. which the
Company believes will not result in material monetary obligation to the
Company. See "Business--Appliance Co. Transaction."
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS
The Company and its operations are subject to comprehensive and frequently
changing federal, state and local environmental and occupational health and
safety laws and regulations, including laws and regulations
54
<PAGE>
governing emissions of air pollutants, discharges of waste and storm water and
the disposal of hazardous wastes. The Company is also subject to liability for
the investigation and remediation of environmental contamination (including
contamination caused by other parties) at the properties it owns or operates
and at other properties where the Company or predecessors have arranged for
the disposal of hazardous substances. As a result, the Company is involved,
from time to time, in administrative and judicial proceedings and inquires
relating to environmental matters. There can be no assurance that the Company
will not be involved in such proceedings in the future and that the aggregate
amount of future clean-up costs and other environmental liabilities will not
have a material adverse effect on the Company's business, financial condition
and results of operations. The Company believes that its facilities and
operations are in material compliance with all environmental, health and
safety laws.
Federal, state and local governments could enact laws or regulations
concerning environmental matters that affect the Company's operations or
facilities or increase the cost of producing, or otherwise adversely affect
the demand for, the Company's products. The Company cannot predict the
environmental liabilities that may result from legislation or regulations
adopted in the future, the effect of which could be retroactive. Nor can the
Company predict how existing or future laws and regulations will be
administered or interpreted or what environmental conditions may be found to
exist at the Company's facilities or at other properties where the Company or
its predecessors have arranged for the disposal of hazardous substances.
Certain environmental investigatory and remedial work is underway or planned
at, or relating to, the Company's Marianna, Florida and Ripon, Wisconsin
manufacturing facilities and at a facility in Omro, Wisconsin formerly leased
by the Company. With respect to the Marianna facility, such work is being
conducted by a former owner of the property and is being funded through an
escrow account, the balance of which the Company believes to be adequate based
on current allocated amounts in the escrow account and current estimates
received by the Company by third parties of remaining remediation. With
respect to the Ripon facility, such work will be conducted by the Company. The
Company currently expects to incur costs of approximately $200,000 through
1999 at the Ripon facility to complete remedial work, subject to the Raytheon
indemnification described below. There can be no assurance, however, that
additional remedial costs will not be incurred by the Company in the future
with respect to the Ripon facility. With respect to the Omro facility, the
Company leased the Omro facility through July 1998 at which time it completed
a transition to outsourced aluminum die castings. The remedial work is being
conducted by Raytheon, the current owner of the facility, at Raytheon's sole
cost and expense. The Company does not currently expect to incur any costs
with respect to the remediation of the Omro facility.
Pursuant to the Merger Agreement, and subject to a three year notice period
following the Closing, Raytheon has agreed to indemnify the Company for
certain environmental liabilities in excess of $1,500,000 in the aggregate
arising from the operations of the Company and its predecessors prior to the
Merger, including with respect to environmental liabilities at the Ripon
facility. In addition to the Raytheon indemnification, with respect to the
Marianna, Florida facility, a former owner of the property has agreed to
indemnify the Company for certain environmental liabilities. In the event that
Raytheon or the former owner fail to honor their respective obligations under
these indemnifications, such liabilities could be borne directly by the
Company and could be material.
The Company has also received an order from the U.S. Environmental
Protection Agency requiring participation in clean-up activities at the Marina
Cliffs site in South Milwaukee, Wisconsin, the location of a former drum
reconditioner. The Company believes that any liability related to the site
will be borne by a prior owner of the Company's Ripon facility. In the
unlikely event the Company were to incur liability related to the site, the
Company currently estimates allocated remediation costs of less than $100,000.
EMPLOYEES
As of April 1998, the Company had approximately 1,743 full-time employees.
Approximately 634 of the Company's employees at its Ripon, Wisconsin and Omro,
Wisconsin facilities are represented by The United Steel Workers of America.
The Company is periodically in negotiations with The United Steel Workers of
America. The Company considers its overall relations with its work force to be
satisfactory. The Company's current contract with The United Steel Workers of
America for its Ripon and Omro employees is set to expire in February 1999.
55
<PAGE>
MANAGEMENT
MANAGERS AND EXECUTIVE OFFICERS
The representatives to the Board of Managers and executive officers of the
Company following the Merger are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Thomas F. L'Esperance... 49 Chief Executive Officer and Manager
Jeffrey J. Brothers..... 51 Senior Vice President, Sales and Marketing
Bruce P. Rounds......... 42 Vice President, Chief Financial Officer
Herman W. Beach......... 51 Vice President, Washer-Extractor/Tumbler Operations
R. Scott Gaster......... 45 Vice President, Washer and Dryer Operations
Robert T. Wallace....... 42 Vice President, Controller
Scott L. Spiller........ 47 Vice President, Law and Human Resources
Edward W. Conard........ 41 Manager
Robert C. Gay........... 46 Manager
Stephen C. Sherrill..... 43 Manager
Stephen M. Zide......... 38 Manager
</TABLE>
THOMAS F. L'ESPERANCE has been Chief Executive Officer of the Company since
March 1996. He had served as President of the Amana Home Appliance Company
from 1993 to 1996 and was President of Caloric Corporation, a manufacturer of
appliances, for two years prior thereto.
JEFFREY J. BROTHERS has been Senior Vice President of Sales and Marketing of
the Company since October 1989. He has been employed with the Company since
1977. Mr. Brothers has been involved in sales for the Company since 1983 and
has held other positions such as Manager of Distribution Development, Plant
Controller and Financial Analyst.
BRUCE P. ROUNDS joined the Company in 1989 as Vice President of Finance and
was promoted to his current position in February 1998. He held the position of
Vice President, Business Development, for the Company from 1996 to 1998.
Before coming to the Company, he served in a variety of capacities for eight
years at Mueller Company and for three years with Price Waterhouse. He is a
Certified Public Accountant.
HERMAN W. BEACH has worked for Raytheon and the Company for nearly 20 years
and has held his current position since April 1996. His employment with
Raytheon began in the Missile Systems Company for two years. His career with
the Company began in 1980 with positions in Human Resources and Strategic
Planning. Mr. Beach's prior work experiences include the Tennessee Valley
Authority and H.D. Lee Company.
R. SCOTT GASTER joined the Company as Vice President, Procurement and
Materials, in June 1995. He took on the added responsibility of Vice President
of Washer and Dryer Operations in July 1997. Mr. Gaster has also retained his
former purchasing responsibilities. Prior to joining the Company, he was
employed by GKN Automotive, Inc. from 1979 to 1995 in such positions as
Director of Procurement and Logistics, Corporate Purchasing Agent and
Purchasing Manager.
ROBERT T. WALLACE has been Vice President, Controller, of the Company since
June 1996. He held positions as Controller and Manager-Reporting and Analysis
for the Company from 1990 to 1996. Mr. Wallace's previous experience includes
two years as Controller of Alcolac (chemicals), four years as Manager of
Reporting and Analysis with Mueller Company, five years with Ohmeda and two
years with Price Waterhouse. He is a Certified Public Accountant.
56
<PAGE>
SCOTT L. SPILLER has been Vice President of Law & Human Resources, and
General Counsel of the Company since February 1998. From April 1996 to
February 1998, Mr. Spiller was practicing law as a sole proprietor. Prior to
that, he was General Counsel and Secretary of the Company for ten years.
EDWARD W. CONARD serves as a Manager following the Merger. He has been a
Managing Director of Bain since March 1993. From 1990 to 1992, Mr. Conard was
a director of Wasserstein Perella, an investment banking firm that specializes
in mergers and acquisitions. Previously, he was a Vice President of Bain &
Company, where he headed the management consulting firm's operations practice
area. Mr. Conard also serves as a director of Waters Corporation, Details
Holdings Corp., Details, Inc. and Cambridge Automotive.
ROBERT C. GAY serves as a Manager following the Merger. Mr. Gay has been a
Managing Director of Bain since 1993 and has been a General Partner of Bain
Venture Capital since 1989. From 1988 through 1989, Mr. Gay was a principal of
Bain Venture Capital. Mr. Gay is Vice Chairman of the Board of Directors of
IHF Capital, Inc., parent of ICON Health & Fitness Inc. Mr. Gay also serves as
a director of Alliance Entertainment Corp., GT Bicycles, Inc., Physio-Control
International Corporation, Cambridge Industries, Inc., Nutraceutical
Corporation, American Pad & Paper Company, GS Technologies and Small Fry Snack
Foods Limited.
STEPHEN C. SHERRILL serves as a Manager following the Merger. Mr. Sherrill
has been a principal of Bruckmann, Rosser, Sherrill & Co., L.P. since its
formation in 1995. Mr. Sherrill was an officer of Citicorp Venture Capital,
Ltd. from 1983 through 1994. Mr. Sherrill is a director of Galey & Lord, Inc.,
Jitney-Jungle Stores of America, Inc., Restaurant Associates Corp., B & G
Foods, Inc., Windy Hill Pet Food Company, Inc. and HealthPlus Corporation.
STEPHEN M. ZIDE serves as a Manager following the Merger and has been an
Associate at Bain since August 1997. Previously, he was a partner at the law
firm of Kirkland & Ellis from 1992 to 1995 and a private investor from 1995 to
1997. Mr. Zide also serves as a director of Details Holdings Corp. and
Details, Inc.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and long-
term compensation for services in all capacities to the Company or its
predecessor for 1997 of those persons who served as (i) the chief executive
officer during 1997 and (ii) the other four most highly compensated executive
officers of the Company or its predecessor for 1997 (collectively, the "Named
Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------
OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)
--------------------------- ---- --------- -------- ---------------
<S> <C> <C> <C> <C>
Thomas F. L'Esperance............... 1997 250,000 90,000 60,000(/1/)
R. Scott Gaster..................... 1997 131,700 15,000 14,700(/1/)
Jeffrey J. Brothers................. 1997 123,012 17,000 14,645(/1/)
Herman W. Beach..................... 1997 120,696 17,000 14,369(/1/)
Bruce P. Rounds..................... 1997 119,700 17,000 14,963(/1/)
</TABLE>
- --------
(1)Represents payments under retention agreements from Raytheon.
RETENTION AGREEMENTS
In connection with the Merger, the Company has succeeded to retention
agreements originally entered into by Raytheon Commercial Laundry LLC in
connection with the sale of its commercial laundry business. The retention
agreements are with certain key executives, managers and commissioned
salespeople, including Mr. L'Esperance, Mr. Gaster, Mr. Brothers, Mr. Beach,
Mr. Rounds and Mr. Wallace and have remaining terms of approximately two
years. As of March 29, 1998, the Company's remaining aggregate commitment
under these agreements was $3.7 million.
57
<PAGE>
EMPLOYMENT AGREEMENT
In connection with the Merger, the Company entered into an employment
agreement with Thomas F. L'Esperance. Such agreement provides for: (i) a five
year employment term; (ii) a minimum base salary and bonus following the end
of each fiscal year so long as the Company employs Mr. L'Esperance; (iii)
severance benefits; (iv) non-competition, non-solicitation and confidentiality
agreements; and (v) other terms and conditions of Mr. L'Esperance's
employment.
EXECUTIVE UNIT PURCHASE AGREEMENT
In connection with the Merger, MergeCo entered into Executive Unit Purchase
Agreements with certain members of management of the Company (each, an
"Executive"), including Mr. L'Esperance, Mr. Gaster, Mr. Brothers, Mr. Beach,
Mr. Rounds, Mr. Spiller and Mr. Wallace. Such agreements govern the sale to
the Executives of common membership interests of MergeCo in exchange for cash
and/or a promissory note from the Executive and provide for repurchase rights
and restrictions on transfer of the common units. In connection with the
Merger, the Executives' membership interests in MergeCo were converted into
common membership interests of the Parent.
DEFERRED COMPENSATION AGREEMENT
In connection with the Merger, Raytheon, the Company and the Parent entered
into Deferred Compensation Agreements with certain Executives, including Mr.
L'Esperance, Mr. Gaster, Mr. Brothers, Mr. Beach, Mr. Rounds and Mr. Wallace
whereby the Company assumed certain long term compensation obligations earned
by management under programs established by Raytheon. Such agreements provide
for the deferral of compensation until the earlier of (i) the payment of a
lump sum (the "Benefit Amount") to the Executive ten years after the date of
such agreement, regardless of whether the Executive is employed by the Company
as of such date or (ii) the payment of the Benefit Amount upon the occurrence
of certain events described therein.
PENSION PLAN
Substantially all eligible salaried employees of the Company, including
executive officers of the Company, are covered under the Alliance Laundry
Systems Retirement Income Plan (the "Pension Plan"). The cost of the Pension
Plan is borne entirely by the Company. Annual amounts of normal retirement
pension commencing at age 65 based on the highest consecutive sixty months of
compensation over the prior ten years of service are illustrated in the
following table:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
-----------------------------------------------
REMUNERATION 15 20 25 30 35 40
------------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
$ 50,000........................ 9,450 12,600 14,700 16,800 18,900 21,000
75,000........................ 15,669 20,892 24,373 27,855 31,377 34,819
100,000........................ 22,419 29,892 34,873 39,855 44,837 49,819
150,000........................ 35,919 47,892 55,873 63,855 71,837 79,819
200,000........................ 49,419 65,892 76,873 87,855 98,837 109,819
300,000........................ 76,419 101,892 118,873 135,855 152,837 169,819
400,000........................ 103,419 137,872 160,873 183,855 206,837 229,819
500,000........................ 130,419 173,892 202,873 231,855 260,837 289,819
</TABLE>
The annual pension amount is equal to the participant's highest consecutive
sixty months of compensation over the prior ten years of service less the
participant's primary social security amount, multiplied by 1.8% for each of
the first 20 years of service and multiplied by 1.2% for each year of Benefit
Service in excess of 20. The participant's final average earnings is defined
generally as a the highest consecutive five year average of the
58
<PAGE>
participant's base salary and bonus during the last ten years. The amount of
earnings that can be recognized for plan purposes is limited by the IRS to
$160,000 in 1998. A participant vests in his benefits accrued under the
Pension Plan after five years of service.
Respective years of benefit service under the Pension Plan, through December
31, 1997, are as follows: Mr. L'Esperance 0; Mr. Gaster 0; Mr. Brothers 19;
Mr. Beach 18; and Mr. Rounds 7. Mr. L'Esperance will be covered under Raytheon
plans through April 1998, at which time he will become a participant under the
Pension Plan.
SAVINGS PLANS
Substantially all of the salaried employees, including executive officers of
the Company, participate in a 401(k) savings plan established by the Company
(the "Company 401(k) Plan"). Prior to the transaction, such employees
participated in a 401(k) plan and an ESOP sponsored by Raytheon. As part of
the Transactions, Raytheon transferred the account balances associated with
the Company employees in the Raytheon 401(k) plan to the Company 401(k) Plan.
Employees are permitted to defer a portion of their income under the Company
401(k) Plan and the Company will match such contribution. The matching
contribution is consistent with that under the prior Raytheon plan which
provided a matching contribution equal to 50% of the first 6% of the
employee's contribution. In addition, employees received a contribution under
the Raytheon ESOP equal to 0.5% of W-2 pay. This contribution is made as a
supplemental contribution to the Company 401(k) Plan in the form of a
discretionary cash contribution (instead of membership interests).
COMPENSATION OF MANAGERS
The Company will reimburse Managers for any out-of-pocket expenses incurred
by them in connection with services provided in such capacity. In addition,
the Company may compensate Managers for services provided in such capacity.
59
<PAGE>
SECURITY OWNERSHIP
The Parent owns all of the outstanding equity interests of the Company. The
following table sets forth certain information regarding the approximate
beneficial ownership of the Parent's common equity interests held by (i) each
person (other than Managers and executive officers of the Company) known to
the Company to own more than 5% of the outstanding common membership interests
of the Company, (ii) certain Managers of the Company and (iii) the Named
Executive Officers of the Company. The Parent's common equity interests are
comprised of four classes of membership units including Class A, Class L,
Class B and Class C.
<TABLE>
<CAPTION>
PERCENTAGE OF
COMMON MEMBERSHIP
NAME AND ADDRESS OF BENEFICIAL OWNER INTERESTS
- ------------------------------------ -----------------
<S> <C>
Bain Funds(/1/)(/2/).......................................... 54.9%
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
BRS Investors(/3/)............................................ 27.7%
c/o Bruckmann, Rosser, Sherrill & Co., L.P.
126 East 56th Street, 29th Floor
New York, NY 10022
Management Investors(/4/)..................................... 9.4%
c/o Alliance Laundry Systems LLC
P.O. Box 990
Ripon, WI 54971-0990
Raytheon Company.............................................. 7.0%
141 Spring Street
Lexington, Massachusetts 02173
Edward Conard(/1/)(/2/)(/5/).................................. 54.9%
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Robert Gay(/1/)(/2/)(/5/)..................................... 54.9%
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Stephen Sherrill(/3/)(/6/).................................... 27.7%
c/o Bruckmann, Rosser, Sherrill & Co., L.P.
126 East 56th Street, 29th Floor
New York, NY 10022
Stephen Zide(/1/)(/2/)........................................ 16.3%
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Thomas F. L'Esperance(/4/).................................... 3.4%
c/o Alliance Laundry Systems LLC
P.O. Box 990
Ripon, WI 54971-0990
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF
COMMON MEMBERSHIP
NAME AND ADDRESS OF BENEFICIAL OWNER INTERESTS
- ------------------------------------ -----------------
<S> <C>
R. Scott Gaster(/4/)......................................... 0.6%
c/o Alliance Laundry Systems LLC
P.O. Box 990
Ripon, WI 54971-0990
Jeffrey J. Brothers(/4/)..................................... 0.8%
c/o Alliance Laundry Systems LLC
P.O. Box 990
Ripon, WI 54971-0990
Herman W. Beach(/4/)......................................... 0.9%
c/o Alliance Laundry Systems LLC
P.O. Box 990
Ripon, WI 54971-0990
Bruce P. Rounds(/4/)......................................... 0.7%
c/o Alliance Laundry Systems LLC
P.O. Box 990
Ripon, WI 54971-0990
All Managers and executive officers as a group (21
persons)(/1/)(/2/)(/3/)(/4/)................................ 92.0%
</TABLE>
- --------
(1) Amounts shown reflect interests in Bain/RCL, L.L.C. which beneficially
owns 55.9% of the outstanding common membership interests of the Company
through its ownership of Class A and Class L membership units in the
Parent.
(2) Amounts shown reflect the aggregate interests held by Bain Capital Fund V,
L.P. ("Fund V"), Bain Capital Fund V-B, L.P. ("Fund V-B"), BCIP Trust
Associates II ("BCIP Trust"), BCIP Trust Associates II-B ("BCIP Trust II-
B"), BCIP Associates II ("BCIP") and BCIP Associates II-B ("BCIP II-B")
(collectively, the "Bain Funds"), for the Bain Funds and Messrs. Conard
and Gay and the aggregate interests held by BCIP Trust, BCIP Trust II-B,
BCIP and BCIP II-B for Mr. Zide.
(3) Amounts shown reflect the aggregate interests held by Bruckmann, Rosser,
Sherrill & Co., L.P. ("BRS"), BCB Family Partners, L.P., NAZ Family
Partners, L.P., Paul D. Kaminski, Bruce C. Bruckmann, Donald J. Bruckmann,
Harold O. Rosser, Stephen C. Sherrill, H. Virgil Sherrill, Nancy A. Zweng,
John Rice Edmonds, Susan Kaider, Marilena Tibrea, Walker C. Simmons and
MLPF&S Custodian FBO Paul Kaminski (collectively, the "BRS Investors.")
(4) Includes Class A and Class L membership units in the Parent but excludes
Class B and Class C membership units which are subject to vesting and
generally have no voting rights, representing on a fully diluted basis
approximately 10.6% of Parent's membership units for the Management
Investors, 3.1% for Mr. L'Esperance, 1.3% for Mr. Gaster, 1.4% for Mr.
Brothers, 1.3% for Mr. Beach and 1.3% for Mr. Rounds.
(5) Messrs. Conard and Gay are each Managing Directors of Bain Capital
Investors V, Inc., the sole general partner of Bain Capital Partners V,
L.P. ("BCPV"), and are limited partners of BCPV, the sole general partner
of Fund V and Fund V-B. Accordingly Messrs. Conard and Gay may be deemed
to beneficially own the interests owned by Fund V and Fund V-B. Messrs.
Conard and Gay are each general partners of BCIP, BCIP II-B, BCIP Trust
and BCIP Trust II-B and, accordingly, may be deemed to beneficially own
the interests owned by BCIP, BCIP II-B, BCIP Trust and BCIP Trust II-B.
Each such person disclaims beneficial ownership of any such shares in
which he does not have a pecuniary interest.
(6) Mr. Sherrill is a director of BRSE Associates, Inc., the sole general
partner of BRS Partners, L.P., the sole general partner of BRS and,
accordingly, may be deemed to beneficially own the interests owned by BRS.
Mr. Sherrill disclaims beneficial ownership of any such shares in which he
does not have a pecuniary interest.
61
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PARENT SECURITYHOLDERS AGREEMENT
Upon the consummation of the Merger, the Parent, Raytheon and the
Securityholders entered into a securityholders agreement (the "Securityholders
Agreement"). The Securityholders Agreement: (i) restricts the transfer of the
equity interests of the Parent; (ii) grants tag-along rights on certain
transfers of equity interests of the Parent; (iii) requires the
Securityholders to consent to a sale of the Parent to an independent third
party if such sale is approved by certain holders of the then outstanding
equity interests of the Parent; and (iv) grants preemptive rights on certain
issuances of equity interests of the Parent. Certain of the foregoing
provisions of the Securityholders Agreement will terminate upon the
consummation of an Initial Public Offering or a Liquidity Event (each as
defined in the Securityholders Agreement).
MANAGEMENT SERVICES AGREEMENT
In connection with the Transactions, the Company entered into a Management
Services Agreement (the "Management Services Agreement") with Bain pursuant to
which Bain agreed to provide: (i) general executive and management services;
(ii) identification, support, negotiation and analysis of acquisitions and
dispositions; (iii) support, negotiation and analysis of financial
alternatives; and (iv) other services agreed upon by the Company and Bain. In
exchange for such services, Bain will receive (i) an annual management fee of
$1.0 million, plus reasonable out-of-pocket expenses (payable quarterly) and
(ii) a transaction fee in an amount in accordance with the general practices
of Bain at the time of the consummation of any additional acquisition or
divestiture by the Company and of each financing or refinancing (currently
approximately 1.0% of total financings). The Management Services Agreement has
an initial term of ten years subject to automatic one-year extensions unless
the Company or Bain provides written notice of termination.
PARENT REGISTRATION RIGHTS AGREEMENT
Upon the consummation of the Merger, the Parent, Raytheon and the
Securityholders, entered into a registration rights agreement (the "Parent
Registration Rights Agreement"). Under the Parent Registration Rights
Agreement, the holders of a majority of the Registrable Securities (as defined
in the Parent Registration Rights Agreement) owned by Bain LLC have the right,
subject to certain conditions, to require the Parent to register any or all of
their common equity interests of the Parent under the Securities Act at the
Parent's expense. In addition, all holders of Registrable Securities are
entitled to request the inclusion of any common equity interests of the Parent
subject to the Parent Registration Rights Agreement in any registration
statement at the Parent's expense whenever the Parent proposes to register any
of its common equity interests under the Securities Act. In connection with
all such registrations, the Parent has agreed to indemnify all holders of
Registrable Securities against certain liabilities, including liabilities
under the Securities Act.
PARENT AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
Bain LLC, the BRS Investors, the Management Investors and Raytheon
(collectively, the "Members") have entered into an Amended and Restated
Limited Liability Company Agreement (the "LLC Agreement"). The LLC Agreement
governs the relative rights and duties of the Members.
Membership Interests. The ownership interests of the members in the Parent
consist of preferred units (the "Preferred Units") and common units (the
"Common Units"). The Common Units represent the common equity of the Company.
Holders of the Preferred Units are entitled to return of capital contributions
prior to any distributions made to holders of the Common Units.
Distributions. Subject to any restrictions contained in any financing
agreements to which the Parent or any of its Affiliates (as defined in the LLC
Agreement) is a party, the Board of Managers (the "Board") may make
distributions, whether in cash, property or securities of the Parent, at any
time or from time to time in the following order of priority:
62
<PAGE>
First, to the holders of Preferred Units, an amount determined by the
aggregate Unreturned Capital (as defined and described in the LLC
Agreement).
Second, to the holders of Class L Common Units (the "Class L Units"), the
aggregate unpaid amount accrued on such Class L Units on a daily basis, at
a rate of 12% per annum.
Third, to the holders of Class L Units, an amount determined by the
aggregate Unreturned Capital.
Fourth, to the holders of Common Units, an amount equal to the amount of
such distribution that has not been distributed pursuant to clauses First
through Third above.
The Parent may distribute to each holder of units within 75 days after the
close of each fiscal year such amounts as determined by the Board to be
appropriate to enable each holder of units to pay estimated income tax
liabilities.
Management. The Board consists of five individuals (each a
"Representative"). Pursuant to the Securityholders Agreement, the holder of
the majority of the Common Units held by the BRS Investors appointed one
Representative. The members of the Parent holding a majority of the Bain Units
(as defined in the LLC Agreement) appointed the remaining Representatives. The
initial Board consists of Messrs. L'Esperance, Conard, Gay, Zide and Sherrill.
TRANSITION SERVICES AGREEMENT
Upon consummation of the Merger, the Company and Raytheon entered into a
Transition Services Agreement (the "Transition Services Agreement") pursuant
to which Raytheon provides to the Company certain services that it had
previously provided to the Company's predecessor, Raytheon Commercial Laundry
LLC. Such transitional services are to be provided for at least 90 days and
include general accounting, legal and computer systems support, and the data
related thereto, as well as various other transitional services.
PARENT SELLER SUBORDINATED NOTE
Upon the consummation of the Merger, the Parent issued a Junior Subordinated
Promissory Note (the "Seller Subordinated Note") in the principal amount of
$9.0 million due August 21, 2009, to Raytheon. Pursuant to the terms of the
Seller Subordinated Note, interest accrues at the rate of 19.0% per annum
until the eighth anniversary of the date of issuance of the Seller
Subordinated Note and at a rate of 13.0% thereafter. The Seller Subordinated
Note is subordinated in priority and subject in right and priority of payment
to certain indebtedness described therein.
PARENT SELLER PREFERRED EQUITY
Upon the consummation of the Merger, the Parent issued mandatorily
redeemable preferred membership interests (the "Seller Preferred Equity") with
a liquidation value of $6.0 million to Raytheon. The Seller Preferred Equity
does not accrete, accrue or pay dividends and is redeemable at the earlier of
(i) a Change of Control (as defined therein), (ii) any initial public offering
or (iii) 2009. The holders of the Seller Preferred Equity are entitled to
receive distributions from the Parent in an amount equal to their Unreturned
Capital (as defined therein) prior to distributions in respect of any other
membership interests of the Parent. See "--Parent Amended and Restated Limited
Liability Company Agreement."
MANAGEMENT INVESTOR PROMISSORY NOTES
In connection with the Transactions, the Parent entered into promissory
notes (the "Promissory Notes") aggregating approximately $1.8 million with Mr.
L'Esperance, Mr. Gaster, Mr. Brothers, Mr. Beach, Mr. Rounds and Mr. Wallace
to help finance the purchase of Common Units in the Parent. The Promissory
Notes bear interest at a rate of 5.94% per annum and mature on June 5, 2008.
63
<PAGE>
DESCRIPTION OF SENIOR CREDIT FACILITY
In connection with the Transactions, the Company entered into a credit
agreement (the "Senior Credit Facility") with a syndicate of financial
institutions (the "Lenders") for which Lehman Brothers Inc. acted as arranger
and Lehman Commercial Paper Inc. acted as syndication agent. The following is
a summary of the material terms and conditions of the Senior Credit Facility
and is subject to the detailed provisions of the Senior Credit Facility and
the various related documents entered into in connection therewith.
Loans; Interest Rates. The Senior Credit Facility is comprised of a $200.0
million Term Loan Facility and a $75.0 million Revolving Credit Facility,
which were made available in conjunction with the issuance of the Senior
Subordinated Notes. The proceeds of the Senior Credit Facility, together with
the proceeds of this Offering, provided a portion of the financing for the
Transactions and certain expenses related to the Transactions and provide
financing for future working capital and other general corporate purposes.
The Term Loan Facility was available for one drawing on the date of the
Closing and will be repaid in full at the end of seven years. The Revolving
Credit Facility is available on a revolving basis during the period commencing
on the date of the Closing and ending on the date that is five years after the
date of the Closing. The Term Loan Facility bears interest, at the Company's
election, at either the Base Rate plus a margin ranging from 1.125% to 1.625%
or the Eurodollar Rate plus a margin ranging from 2.125% to 2.625%. The
Revolving Credit Facility bears interest, at the Company's election, at either
the Base Rate plus a margin ranging from 0.625% to 1.375% or the Eurodollar
Rate plus a margin ranging from 1.625% to 2.375%.
Repayment. The principal amounts of the Term Loan Facility are repayable in
quarterly installments in the following approximate aggregate annual amounts:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------
<S> <C>
1......................................... $ 0
2......................................... 0
3......................................... 1,000,000
4......................................... 1,000,000
5......................................... 1,000,000
6......................................... 40,000,000
7......................................... 157,000,000
</TABLE>
Security. The obligations under the Senior Credit Facility and the related
documents are secured by a first priority lien upon substantially all of the
real and personal property of the Company and its Domestic Subsidiaries (other
than the Financing Subsidiaries) and a pledge of all of the capital stock of
the Company's subsidiaries (provided that no lien will be granted on the
assets of foreign subsidiaries and no capital stock of foreign subsidiaries
will be pledged).
Guarantees. The obligations of the Company under the Senior Credit Facility
are guaranteed by the Parent and substantially all of the Company's
subsidiaries (other than the Financing Subsidiaries) (provided that no
guarantee by a foreign subsidiary shall be made).
Prepayments. The Company will be required to make prepayments, with
customary exceptions, on loans under the Senior Credit Facility in an amount
equal to 100% of the net proceeds of the incurrence of certain indebtedness,
100% of the net proceeds received by the Company and its subsidiaries (other
than certain net proceeds reinvested in the business of the Company or its
subsidiaries) from the disposition of certain assets (and certain recovery
events in connection therewith) including proceeds from the sale of stock of
any of the Company's subsidiaries and 75% of excess cash flow (which
percentage may be reduced to 50% under certain circumstances).
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<PAGE>
Conditions and Covenants. The obligations of the lenders under the Senior
Credit Facility are subject to the satisfaction of certain conditions
precedent, including consummation of the Offering, customary for similar
credit facilities or otherwise appropriate under the circumstances. The
Company and each of its subsidiaries are subject to certain negative covenants
contained in the Senior Credit Facility, including without limitation
covenants that restrict, subject to specified exceptions: (i) the incurrence
of additional indebtedness and other obligations and the granting of
additional liens; (ii) mergers, consolidations, amalgamations, liquidations,
dissolutions and dispositions of assets; (iii) investments, loans and
advances; (iv) dividends, stock repurchases and redemptions; (v) prepayment or
repurchase of other indebtedness and amendments to certain agreements
governing indebtedness, including the Indenture and the Notes; (vi) engaging
in transactions with affiliates; (vii) capital expenditures; (viii) sales and
leasebacks; (ix) changes in fiscal periods; (x) changes of lines of business;
and (xi) entering into agreements which prohibit the creation of liens or
limit the Company's subsidiaries ability to pay dividends. The Senior Credit
Facility also contains customary affirmative covenants, including compliance
with environmental laws, maintenance of corporate existence and rights,
maintenance of insurance, property and interest rate protection, financial
reporting, inspection of property, books and records, and the pledge of
additional collateral and guarantees from certain new subsidiaries. In
addition, the Senior Credit Facility requires the Company to maintain
compliance with certain specified financial covenants including maximum
capital expenditures, a maximum ratio of total debt to EBITDA (as defined in
the Senior Credit Facility) and a minimum interest coverage ratio. Certain of
these financial, negative and affirmative covenants are more restrictive than
those set forth in the Indenture.
The Senior Credit Facility requires the Company to maintain compliance with
two financial covenants which are tested at the end of each fiscal quarter of
the Company for the period of the preceding four consecutive fiscal quarters
(or on an annualized basis in the case of the Consolidated Interest Coverage
Ratio for the first fiscal year from the Closing Date). The Consolidated
Leverage Ratio (as defined in the Senior Credit Facility) prohibits the
Company from exceeding specified ratios (which decline over time) of
Consolidated Total Debt (as defined in the Senior Credit Facility) for the
applicable period to Consolidated EBITDA (as defined in the Senior Credit
Facility) for such period. The other financial test, the Consolidated Interest
Coverage Ratio (as defined in the Senior Credit Facility) requires the Company
to maintain specified minimum ratios (which increase over time) of
Consolidated EBITDA (as defined in the Senior Credit Facility) for the
applicable period to Consolidated Cash Interest Expense (as defined in the
Senior Credit Facility) for such period. The Senior Credit Facility also
limits the amount of capital expenditures that the Company and its
Subsidiaries may make in any fiscal year.
Events of Default. The Senior Credit Facility also includes events of
default that are typical for senior credit facilities and appropriate in the
context of the Transactions, including, without limitation, nonpayment of
principal, interest, fees or reimbursement obligations with respect to letters
of credit, violation of covenants, inaccuracy of representations and
warranties in any material respect, cross default to certain other
indebtedness and agreements, bankruptcy and insolvency events, material
judgments and liabilities, defaults or judgements under ERISA and change of
control. The occurrence of any of such events of default could result in
acceleration of the Company's obligations under the Senior Credit Facility and
foreclosure on the collateral securing such obligations, which could have
material adverse results to holders of the Exchange Notes.
65
<PAGE>
DESCRIPTION OF ASSET BACKED FACILITY
In connection with the Transactions, a special purpose single member limited
liability company (the "SPE") that is a Subsidiary of the Company entered into
a $250.0 million revolving loan agreement (the "Asset Backed Facility") with
Lehman Commercial Paper Inc. (the "Facility Lender"), an affiliate of Lehman
Brothers Inc., an Initial Purchaser of the Notes. The SPE is operated in a
fashion intended to ensure that its assets and liabilities are distinct from
those of the Company and its other affiliates, and its assets are not
available to satisfy claims of creditors of the Company and its other
subsidiaries. As a result of the foregoing, the SPE was not consolidated as a
part of the financial statements of the Company. The SPE constitutes an
"Unrestricted Subsidiary" and a "Securitization Entity" under the Indenture.
In addition, the transactions described in this section constitute "Qualified
Securitization Transactions" under the Indenture.
The Company sells certain eligible trade receivables and certain eligible
equipment loans to the SPE. For financial reporting purposes, the transfer of
trade receivables and equipment loans from the Company to the SPE is recorded
as a sale and results in the derecognition of trade receivables and equipment
loans from the financial statements of the Company.
The following is a summary of the material terms and conditions of the Asset
Backed Facility and is subject to the detailed provisions of the Asset Backed
Facility and the various related documents entered into in connection
therewith.
Facility Amount. The Asset Backed Facility is a $250.0 million facility,
with sublimits of $100.0 million for loans on eligible trade receivables and
$200.0 million for loans on eligible equipment loans. The amount of loans may
be increased or decreased, subject to certain standard conditions precedent.
The Asset Backed Facility has a term of five years. The obligation of the SPE
under the Asset Backed Facility is a recourse obligation of the SPE.
Advance Rate. Loans under the Asset Backed Facility are secured by a pledge
of receivables owned by the SPE. With respect to loans secured by trade
receivables, the Facility Lender will make loans up to but not exceeding 85%
of the outstanding amount of eligible trade receivables. With respect to loans
secured by equipment loans, the Facility Lender will make loans up to but not
exceeding the lesser of 90% of the outstanding principal balance of eligible
equipment loans or 90% of the market value with respect to eligible equipment
loans, as determined by the Facility Lender in its reasonable discretion. The
eligibility of both trade receivables and equipment loans is subject to
certain concentration and other limits. In addition, after 24 months in the
Asset Backed Facility, an otherwise eligible equipment loan will no longer be
considered an eligible equipment loan, subject to two automatic six-month
extensions upon payment of a fee if such equipment loans have not been
securitized or otherwise disposed of by the SPE.
Interest Rate. The interest rate of loans under the Asset Backed Facility is
generally equal to one-month LIBOR (adjusted for reserves, if applicable) plus
1.00% per annum.
Credit Enhancement. The SPE provides additional credit enhancement to the
Facility Lender (consisting of an irrevocable letter of credit, an
unconditional lending commitment of the Lenders under the Senior Credit
Facility or a cash collateral account) in an amount not to exceed 10% of the
aggregate principal amount of loans outstanding under the Asset Backed
Facility up to $125.0 million and 5% of the aggregate principal amount of
loans outstanding above $125 million. The additional credit enhancement is
provided by the Lenders. The Company is obligated under the reimbursement
provisions of the Senior Credit Facility to reimburse the Lenders for any
drawings on the credit enhancement by the Facility Lender. If the credit
enhancement is not replenished by the Company after a drawing, the Facility
Lender will not be obligated to make further loans under the Asset Backed
Facility and the Asset Backed Facility will begin to amortize. In addition, at
any time when (i) the aggregate principal amount of loans outstanding under
the Asset Backed Facility exceeds $125.0 million and (ii) the delinquency or
default ratios with respect to trade receivables or equipment loans exceed
certain specified levels (an "Excess Spread Sweep Event"), and for four months
after a cure of such excess delinquency or default
66
<PAGE>
ratios, the collections on the equipment loans (after payment of accrued
interest on the loans under the Asset Backed Facility) will be directed into
an excess spread sweep account in the name of the Facility Lender until the
amount on deposit in such account is equal to five percent of the aggregate
principal amount of loans outstanding under the Asset Backed Facility.
Collateral. In order to secure payment of principal and of interest on the
loans and other amounts owing to the Facility Lender under the Asset Backed
Facility documents, the SPE has assigned, pledged, and granted to the Facility
Lender a security interest in all of its right, title and interest in, to and
under trade receivables and equipment loans originated by the Company and
related assets. The Facility Lender will release its security interest in some
or all of such collateral under certain specified conditions.
Prepayment. Early repayment of the loans under the Asset Backed Facility
will be required upon the occurrence of certain "events of default," which
include: (i) default in the payment of any principal of or interest on any
loan under the Asset Backed Facility when due, (ii) the bankruptcy of the SPE,
the Company or the issuer of the letter of credit or provider of the line of
credit, (iii) any materially adverse change in the properties, business,
condition or prospects of the SPE or the Company, or any other condition which
constitutes a material impairment of the SPE's ability to perform it
obligations under the Asset Backed Facility and related documents, (iv)
specified defaults by the SPE or the Company on certain of their respective
obligations, (v) delinquency, dilution or default ratios on pledged
receivables exceeding certain specified ratios in any given month, (vi) the
ratio of (a) the indebtedness of the Company and its subsidiaries minus
indebtedness subordinated to the loans under the Asset Backed Facility to (b)
the sum of the tangible net worth of the Company and its subsidiaries and the
amount of debt subordinated to the loans under the Asset Backed Facility
exceeding a specified amount and (vii) a number of other specified events.
The SPE expects to effect term securitizations of equipment loans on a
periodic basis and to use the proceeds to repay the loans under the Asset
Backed Facility. There is no assurance, however, that such securitizations
will be at an equivalent advance rate or that the cost of funds will be
equivalent to or more favorable than the cost of funds under the Asset Backed
Facility. In addition, no sooner than the date which is three months prior to
the time that an equipment loan will cease to be eligible for financing, or
will have a substantially reduced value, under the Asset Backed Facility, the
SPE will cause such equipment loan to be included (and may include other
specified equipment loans) in a term securitization or to be otherwise
disposed of on terms and conditions as favorable to the SPE as are obtainable
in the market.
67
<PAGE>
DESCRIPTION OF THE EXCHANGE NOTES
GENERAL
The Exchange Notes will be issued pursuant to an Indenture (the "Indenture")
among the Company ALC, the Parent and United States Trust Company of New York,
as trustee (the "Trustee"). 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 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
does not purport to be complete and is qualified in its entirety by reference
to the Indenture, including the definitions therein of certain terms used
below. Copies of the proposed form of Indenture and the Registration Rights
Agreement are available to Holders as set forth below under "--Additional
Information." The definitions of certain terms used in the following summary
are set forth below under "--Certain Definitions." For purposes of this
summary, the term "Company" refers only to Alliance Laundry Systems LLC and
not to any of its Subsidiaries.
ALC is a wholly owned subsidiary of the Company that was incorporated in
Delaware for the purpose of serving as a co-issuer of the Notes in order to
facilitate the Note Offering. The Company believes that certain prospective
purchasers of the Exchange Notes may be restricted in their ability to
purchase debt securities of limited liability companies, such as the Company,
unless such debt securities are jointly issued by a corporation. ALC will not
have any business operations or assets and will not have any revenues. As a
result, prospective purchasers of the Notes should not expect ALC to
participate in servicing the interest, principal obligations and Liquidated
Damages, if any, on the Notes. See "--Certain Covenants."
The Exchange Notes will be general unsecured obligations of the Issuers and
will be subordinated in right of payment to all current and future Senior
Debt, including permitted borrowings under the Senior Credit Facility. The
Exchange Notes will rank pari passu in right of payment with all senior
subordinated Indebtedness of the Issuers issued in the future, if any, and
senior in right of payment to all subordinated Indebtedness of the Issuers
issued in the future, if any. As of May 5, 1998, on a pro forma basis giving
effect to the application of the net proceeds from the Offering, the Company
would have had Senior Debt of approximately $200.0 million. The Indenture will
permit the incurrence of additional indebtedness, including additional Senior
Debt, subject to certain restrictions, in the future. See "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock."
As of the date of the Indenture, all of the Issuers' Subsidiaries will be
Restricted Subsidiaries, other than the SPE, Alliance Commercial Appliances
Receivables LLC, Alliance Commercial Appliances Finance LLC and Alliance
Laundry S.A. However, under certain circumstances, the Issuers 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.
The Indenture provides that two Officers (as defined in the Indenture) shall
sign the Exchange Notes for each of the Issuers by manual or facsimile
signature. In addition, the Indenture provides that the Trustee shall, upon a
written order of each of the Issuers signed by two Officers of each Issuer,
authenticate Exchange Notes for original issue up to the aggregate principal
amount of $200.0 million. The Trustee may (at the expense of the Issuers)
appoint an authenticating agent acceptable to the Issuers to authenticate
Exchange Notes. An authenticating agent may authenticate Exchange Notes
whenever the Trustee may do so.
PRINCIPAL, MATURITY AND INTEREST
The Exchange Notes will be limited in aggregate principal amount to $200.0
million, of which $110.0 million will be issued in the Offering, and will
mature on May 1, 2008. Interest on the Exchange 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. Additional Exchange Notes may
be issued from time to time after the Offering, subject to the provisions of
the
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Indenture described below under the caption "--Certain Covenants--Incurrence
of Indebtedness and Issuance of Preferred Stock." Interest on the Exchange
Notes will accrue from the most recent date to which interest has been paid
or, if no interest has been paid, from the date of original issuance. Interest
will be computed on the basis of a 360-day year comprised of twelve 30-day
months. Principal, premium, if any, and interest and Liquidated Damages
thereon, if any, on the Exchange Notes will be payable at the office or agency
of the Issuers maintained for such purpose within the City and State of New
York or, at the option of the Issuers, payment of interest and Liquidated
Damages, if any, may be made by check mailed to the Holders of the Exchange
Notes at their respective addresses set forth in the register of Holders of
Notes; provided that all payments of $1,000 or more principal, premium, if
any, interest and Liquidated Damages, if any, with respect to Exchange Notes
the Holders of which have given wire transfer instructions to the Issuers at
least ten business days prior to the applicable payment date will be required
to be made by wire transfer of immediately available funds to the accounts
specified by the Holders thereof. Until otherwise designated by the Issuers,
the Issuers' office or agency in New York will be the office of the Trustee
maintained for such purpose. The Exchange Notes will be issued in
denominations of $1,000 and integral multiples thereof.
SUBORDINATION
The payment of principal of, premium, if any, and interest on the Exchange
Notes, Liquidated Damages, if any, Change of Control Payments or other
obligations of the Issuers in respect of the Exchange Notes (collectively, the
"Note Payments") will be subordinated in right of payment, as set forth in the
Indenture, to the prior payment in full of all Senior Debt, whether
outstanding on the date of the Indenture or thereafter incurred.
Upon any distribution to creditors of the Issuers in a liquidation or
dissolution of any Issuer or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to such Issuer or its property, an
assignment for the benefit of creditors or any marshalling of such Issuer's
assets and liabilities, the holders of Senior Debt will be entitled to receive
payment in full in cash of all Obligations due in respect of such Senior Debt
(including interest after the commencement of any such proceeding at the rate
specified in the applicable Senior Debt, whether or not such claim is allowed
under applicable law) before the Holders of Exchange Notes will be entitled to
receive any payment with respect to the Exchange Notes, and until all
Obligations with respect to Senior Debt are paid in full in cash, any
distribution to which the Holders of Exchange Notes would be entitled shall be
made to the holders of Senior Debt (except that Holders of Exchange Notes may
receive and retain Permitted Junior Securities and payments made from the
trust described under "--Legal Defeasance and Covenant Defeasance").
The Issuers also may not make any Note Payment or any deposit pursuant to
provisions described under "--Legal Defeasance and Covenant Defeasance"
(except in Permitted Junior 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 Designated Senior Debt
occurs and is continuing beyond any applicable period of grace or (ii) any
other default occurs and is continuing with respect to Designated Senior Debt
that permits holders of the Designated Senior Debt as to which such default
relates to accelerate its maturity and the Trustee receives a notice of such
default (a "Payment Blockage Notice") from a representative of the holders of
any Designated Senior Debt. Payments on the Exchange Notes may and shall be
resumed (a) in the case of a payment default, upon the date on which such
default is cured or waived or has ceased to exist or such Designated Senior
Debt has been discharged or repaid in full in cash and (b) in case of a
nonpayment default, the earlier of the date on which such nonpayment default
is cured or waived or 179 days after the date on which the applicable Payment
Blockage Notice is received or has ceased to exist or such Designated Senior
Debt has been discharged or repaid in full in cash, unless the maturity of any
Designated Senior Debt has been accelerated. No new period of payment blockage
may be commenced unless and until (i) 360 days have elapsed since the
commencement of the effectiveness of the immediately prior Payment Blockage
Notice and (ii) all scheduled payments of principal, premium, if any, and
interest on the Notes that have come due have been paid in full in cash. No
nonpayment default that existed or was continuing on the date of delivery of
any Payment Blockage Notice to the Trustee
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shall be, or be made, the basis for a subsequent Payment Blockage Notice
unless such default shall have been waived for a period of not less than 180
days.
The Indenture further requires that the Issuers promptly notify holders of
Senior Debt if payment of the Exchange Notes is accelerated because of an
Event of Default.
As a result of the subordination provisions described above, in the event of
a liquidation or insolvency, Holders of Exchange Notes may recover less
ratably than creditors of the Issuers who are holders of Senior Debt. After
giving effect to the Transactions, including the Offering and the application
of the proceeds therefrom, the principal amount of Senior Debt outstanding at
May 5, 1998 was approximately $200.0 million. The Indenture limits, subject to
certain limitations, the amount of additional Indebtedness, including Senior
Debt, that the Issuers and their subsidiaries can incur. See "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock."
"Designated Senior Debt" means (i) any Indebtedness outstanding under the
Senior Credit Facility and (ii) any other Senior Debt permitted under the
Indenture the principal amount of which is $25.0 million or more and that has
been designated by the Issuers as "Designated Senior Debt."
"Permitted Junior Securities" means Equity Interests in or debt securities
of any Issuer or any Guarantor that are issued pursuant to a plan of
reorganization of such Issuer or such Guarantor and are subordinated to all
Senior Debt (and any debt securities issued in exchange for Senior Debt) to
substantially the same extent as, or to a greater extent than, the Senior
Subordinated Notes are subordinated to Senior Debt pursuant to Article 10 of
the Indenture so long as (i) the effect of the issuance of such Equity
Interests or debt securities is not to cause the Exchange Notes (or the
relevant Note Guarantee) to be treated as part of the same class of claims or
any class of claims pari passu with, or senior to, such Senior Debt pursuant
to such plan of reorganization and (ii) the rights of the holders of such
Senior Debt are not altered or impaired without their consent.
"Senior Debt" means (i) all Indebtedness outstanding under Senior Credit
Facilities and all Hedging Obligations with respect thereto, (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 Exchange Notes and the Note Guarantees and (iii) all
Obligations of the Company and any Note Guarantor with respect to the
foregoing. Notwithstanding anything to the contrary in the foregoing, Senior
Debt will not include (w) any liability for federal, state, local or other
taxes owed or owing by the Issuers, (x) any Indebtedness of the Company or any
Guarantor to any of their Subsidiaries or other Affiliates (other than
Indebtedness of the Company or any Note Guarantor to Sankaty Partners
representing Sankaty Partners' participation in any one or more of the Senior
Credit Facilities where Sankaty Partners is one of the institutional lenders
to such Senior Credit Facilities), (y) any trade payables or (z) any
Indebtedness that is incurred in violation of the restrictions described under
"Incurrence of Indebtedness and Issuance of Preferred Stock" below; provided
that Indebtedness under Senior Credit Facilities will be Senior Debt if the
holders of such Senior Debt shall have received a written certificate from an
officer of the Company to the effect that the incurrence of such Indebtedness
does not (or in the case of up to $75.0 million of revolving credit
Indebtedness available to be borrowed under the Senior Credit Facility after
the date of the initial borrowing thereunder, that the incurrence of such
entire committed amount would not) violate the Indenture.
PARENT GUARANTEE
The obligations of the Issuers under the Exchange Notes and the Indenture
are guaranteed (the "Parent Guarantee") on a senior subordinated basis by the
Parent. The Parent Guarantee is subordinated in right of payment to all Senior
Debt of the Parent to the same extent that the Exchange Notes are subordinated
to Senior Debt of the Issuers. Since the Parent is a holding company with no
significant operations, the Parent Guarantee provides little, if any,
additional credit support for the Exchange Notes, and investors should not
rely on the Parent Guarantee in evaluating an investment in the Exchange
Notes.
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NOTE GUARANTEES
After the date of the Indenture, the Issuers will cause each newly acquired
or created Domestic Subsidiary (each, a "Note Guarantor"), to execute and
deliver to the Trustee a supplemental indenture pursuant to which such
Subsidiary will guarantee (each, a "Note Guarantee") payment of the Exchange
Notes. Each such Note Guarantor as primary obligor and not merely as surety,
will jointly and severally, irrevocably and fully and unconditionally
Guarantee, on a senior subordinated basis, the performance and punctual
payment when due, whether at Stated Maturity, by acceleration or otherwise, of
all obligations of the Issuers under the Indenture and the Exchange Notes,
whether for principal of or interest on the Exchange Notes, expenses,
indemnification or otherwise (all such obligations guaranteed by such Note
Guarantors being herein called the "Guaranteed Obligations"). Such Note
Guarantors will agree to pay, in addition to the amount stated above, any and
all expenses (including reasonable counsel fees and expenses) incurred by the
Trustee or the Holders in enforcing any rights under the Note Guarantees.
The obligations of each Note Guarantor will be limited to the maximum
amount, as will, after giving effect to all other contingent and fixed
liabilities of such Note Guarantor, result in the obligations of such Note
Guarantor under the Note Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under federal or state law.
Each such Note Guarantee shall be a continuing Guarantee and shall (i)
remain in full force and effect until payment in full of the principal amount
of all outstanding Exchange Notes (whether by payment at maturity, purchase,
redemption, defeasance, retirement or other acquisition) and all other
Guaranteed Obligations then due and owing, unless earlier terminated as
described below, (ii) be binding upon such Note Guarantor and (iii) inure to
the benefit of and be enforceable by the Trustee, the Holders and their
successors, transferees and assignees.
The Indenture provides that, subject to the provisions described in the next
succeeding paragraph, no Note Guarantor may consolidate or merge with or into
(whether or not such Note Guarantor is the surviving Person) another Person
unless (i) the Person formed by or surviving any such consolidation or merger
(if other than a Note Guarantor or the Company) assumes all the obligations of
such Note Guarantor under the Note Guarantee, the Registration Rights
Agreement and the Indenture pursuant to a supplemental indenture, in form
reasonably satisfactory to the Trustee, and (ii) if such merger or
consolidation is with a Person other than the Company or a Restricted
Subsidiary, (x) immediately after such transaction, no Default or Event of
Default exists and (y) the Company will, at the time of such transaction after
giving pro forma effect thereto, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the covenant described below under the caption "--Incurrence of
Indebtedness and Issuance of Preferred Stock."
Notwithstanding the preceding paragraph, concurrently with any sale or
disposition (by merger or otherwise) of any Note Guarantor in accordance with
the terms of the Indenture (including the covenant described under "--Asset
Sales") by the Company or a Restricted Subsidiary to any Person that is not an
Affiliate of the Company, such Note Guarantor will automatically and
unconditionally be released from all obligations under its Note Guarantee;
provided that the Net Proceeds of such sale or other disposition are applied
in accordance with the applicable provisions of the Indenture. See "--
Repurchase at the Option of Holders--Asset Sales."
In addition, any Note Guarantee of any Note Guarantor will be automatically
and unconditionally released and discharged upon the merger or consolidation
of such Note Guarantor with and into the Company or another Note Guarantor
that is the surviving Person in such merger or consolidation.
"Guarantors" means each of (i) the Parent and (ii) any Subsidiary that
executes a Note Guarantee in accordance with the provisions of the Indenture,
and their respective successors and assigns.
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OPTIONAL REDEMPTION
The Exchange Notes are not redeemable at the Issuers' option prior to May 1,
2003. Thereafter, the Exchange Notes are subject to redemption at any time at
the option of the Issuers, in whole or in part, upon not less than 30 nor more
than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to the applicable redemption date, if
redeemed during the twelve-month period beginning on May 1 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>
Notwithstanding the foregoing, at any time prior to May 1, 2001, the Issuers
may on any one or more occasions redeem up to 35% of the aggregate principal
amount of Exchange Notes issued under the Indenture at a redemption price of
109.625% of the principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to the redemption date, with the net cash
proceeds of any Equity Offerings; provided that at least 65% of the aggregate
principal amount of Exchange Notes issued under the Indenture remains
outstanding immediately after each occurrence of such redemption (excluding
Exchange Notes held by the Issuers and their Subsidiaries); and provided,
further, that each such redemption shall occur within 45 days of the date of
the closing of such Equity Offering.
If less than all of the Senior Exchange are to be redeemed at any time,
selection of Exchange Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities
exchange, if any, on which the Exchange Notes are listed, or, if the Exchange
Notes are not so listed, on a pro rata basis, by lot or by such method as the
Trustee shall deem fair and appropriate; provided that no Exchange Notes of
$1,000 or less shall be redeemed in part. Notices of redemption shall be
mailed by first class mail at least 30 but not more than 60 days before the
redemption date to each Holder of Exchange Notes to be redeemed at its
registered address. Notices of redemption may not be conditional. If any
Exchange Note is to be redeemed in part only, the notice of redemption that
relates to such Exchange Note shall state the portion of the principal amount
thereof to be redeemed. A new Exchange Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof
upon cancellation of the original Exchange Note. Exchange Notes called for
redemption become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on Exchange Notes or portions of
them called for redemption.
At any time prior to May 1, 2003, the Exchange Notes may also be redeemed,
as a whole but not in part, at the option of the Issuers upon the occurrence
of a Change of Control, upon not less than 30 nor more than 60 days prior
notice (but in no event may any such redemption occur more than 90 days after
the occurrence of such Change of Control) 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 and Liquidated Damages thereon, if any, to the date of
redemption (the "Redemption Date").
"Applicable Premium" means, with respect to any Exchange Note on any
Redemption Date, the greater of (i) 1.0% of the principal amount of such
Exchange Note or (ii) the excess of (A) the present value at such Redemption
Date of (1) the redemption price of such Exchange Note at May 1, 2003 (such
redemption price being set forth in the table above) plus (2) all required
interest payments due on such Exchange Note through May 1, 2003 (excluding
accrued but unpaid interest), computed using a discount rate equal to the
Treasury Rate at such Redemption Date plus 75 basis points over (B) the
principal amount of such Exchange Note, if greater.
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"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 or 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.
MANDATORY REDEMPTION
Except as set forth below under "--Repurchase at the Option of Holders," the
Issuers are not required to make mandatory redemption or sinking fund payments
with respect to the Exchange Notes.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
Upon the occurrence of a Change of Control, each Holder of Exchange Notes
will have the right to require the Issuers to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of such Holder's Exchange
Notes pursuant to the offer described below (the "Change of Control Offer") at
an offer price in cash equal to 101% of the aggregate principal amount thereof
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to
the date of purchase (the "Change of Control Payment"). Within ten days
following any Change of Control, the Issuers will mail a notice to each Holder
describing the transaction or transactions that constitute the Change of
Control and offering to repurchase Exchange Notes on the date specified in
such notice, which date shall be no earlier than 30 days and no later than 60
days from the date such notice is mailed (the "Change of Control Payment
Date"), pursuant to the procedures required by the Indenture and described in
such notice. The Issuers will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to
the extent such laws and regulations are applicable in connection with the
repurchase of the Exchange Notes as a result of a Change of Control.
On the Change of Control Payment Date, the Issuers will, to the extent
lawful, (i) accept for payment all Exchange Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all
Exchange Notes or portions thereof so tendered and (iii) deliver or cause to
be delivered to the Trustee the Exchange Notes so accepted together with an
Officers' Certificate stating the aggregate principal amount of Exchange Notes
or portions thereof being purchased by the Issuers. The Paying Agent will
promptly mail to each Holder of Exchange Notes so tendered the Change of
Control Payment for such Exchange Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each
Holder a new Exchange Note equal in principal amount to any unpurchased
portion of the Exchange Notes surrendered, if any; provided that each such new
Exchange Note will be in a principal amount of $1,000 or an integral multiple
thereof. The Indenture will provide that, prior to complying with the
provisions of this covenant, but in any event within 90 days following a
Change of Control, the Issuers will either repay all outstanding Senior Debt
or obtain the requisite consents, if any, under all agreements governing
outstanding Senior Debt to permit the repurchase of Exchange Notes required by
this covenant. The Issuers will publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date.
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The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit the Holders of the Exchange Notes to require
that the Issuers repurchase or redeem the Exchange Notes in the event of a
takeover, recapitalization or similar transaction.
The Senior Credit Facility limits the ability of the Issuers to purchase any
Exchange Notes and also provides that certain change of control events with
respect to the Company would constitute a default thereunder. Any future
credit facilities or other agreements relating to Senior Debt to which the
Issuers become a party may contain similar restrictions and provisions. In the
event a Change of Control occurs at a time when the Issuers is prohibited from
purchasing Exchange Notes, the Issuers could seek the consent of its lenders
to the purchase of Exchange Notes or could attempt to refinance the borrowings
that contain such prohibition. If the Issuers do not obtain such a consent or
repay such borrowings, the Issuers will remain prohibited from purchasing
Exchange Notes. In such case, the Issuers' failure to purchase tendered
Exchange Notes would constitute an Event of Default under the Indenture which
would, in turn, constitute as default under the Senior Credit Facility. In
such circumstances, the subordination provisions in the Indenture would likely
restrict payments to the Holders of Exchange Notes. See "--Subordination."
The Issuers will not be required to make a Change of Control Offer upon a
Change of Control (i) if a third party makes the Change of Control Offer in
the manner, at the times and otherwise in compliance with the requirements set
forth in the Indenture applicable to a Change of Control Offer made by the
Issuers and purchases all Exchange Notes validly tendered and not withdrawn
under such Change of Control Offer or (ii) the Issuers exercise their option
to purchase all the Exchange Notes upon a Change of Control as described above
under the caption "Optional Redemption."
Asset Sales
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company or the Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value (evidenced by a resolution of the Board of Managers set forth in an
Officers' Certificate delivered to the Trustee) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 75% of the
consideration therefore 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 (x) any liabilities (as shown on the Company's or such
Restricted Subsidiary's most recent balance sheet), of the Company or any
Restricted Subsidiary (other than contingent liabilities and liabilities that
are by their terms subordinated to the Notes or any guarantee thereof) that
are assumed by the transferee of any such assets pursuant to a customary
novation agreement that releases the Company or such Restricted Subsidiary
from further liability and (y) any securities, notes or other obligations
received by the Company or any such Restricted Subsidiary from such transferee
that are immediately converted by the Company or such Restricted Subsidiary
into cash (to the extent of the cash received), shall be deemed to be cash for
purposes of this provision.
Notwithstanding the immediately preceding paragraph, the Company and its
Restricted Subsidiaries are permitted to consummate an Asset Sale without
complying with the prior paragraph if (i) the Company or the applicable
Restricted Subsidiary, as the case may be, receives consideration at the time
of such Asset Sale at least equal to the fair market value of the assets or
other property sold, issued or otherwise disposed of (as evidenced by a
resolution of the Company's Board of Managers set forth in an Officers'
Certificate delivered to the Trustee) and (ii) at least 75% of the
consideration for such Asset Sale constitutes a controlling interest in a
Permitted Business, long-term assets used or useful in a Permitted Business
and/or cash or Cash Equivalents; provided that any cash or Cash Equivalents
received by the Company or any of its Restricted Subsidiaries in connection
with any Asset Sale permitted to be consummated under this paragraph shall
constitute Net Proceeds subject to the provisions of the next succeeding
paragraph.
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Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds, at its option, (i) to repay Senior
Debt and, in the case of any Senior Debt under any revolving credit facility,
effect a corresponding commitment reduction under such credit facility, (ii)
to the acquisition of a controlling interest in a Permitted Business, the
making of a capital expenditure or the acquisition of other Additional Assets
or (iii) a combination of prepayment and investment permitted by the forgoing
clauses (i) and (ii). Pending the final application of any such Net Proceeds,
the Company may temporarily reduce revolving credit borrowings or otherwise
invest such Net Proceeds in any manner that is not prohibited by the
Indenture. Any Net Proceeds from Asset Sales that are not applied or invested
as provided in the first sentence of this paragraph will be deemed to
constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds
exceeds $10.0 million, the Issuers will be required to make an offer to all
Holders of Exchange Notes (an "Asset Sale Offer") to purchase the maximum
principal amount of Exchange Notes that may be purchased out of the Excess
Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the date of purchase, in accordance with the
procedures set forth in the Indenture (the first date the aggregate of all
such Net Proceeds is equal to $10.0 million or more shall be deemed an "Asset
Sale Offer Trigger Date"). Each Asset Sale Offer will be mailed to the record
Holders as shown on the register of Holders within 25 days following the Asset
Sale Offer Trigger Date, with a copy to the Trustee, and shall comply with the
procedures set forth in the Indenture. Upon receiving notice of the Asset Sale
Offer, Holders may elect to tender their Exchange Notes in whole or in part in
integral multiples of $1,000 in exchange for cash. To the extent that any
Excess Proceeds remain after consummation of an Asset Sale Offer, the Company
may use such Excess Proceeds for any purpose not otherwise prohibited by the
Indenture. If the aggregate principal amount of Exchange Notes tendered into
such Asset Sale Offer surrendered by Holders thereof exceeds the amount of
Excess Proceeds, the Trustee shall select the Exchange Notes to be purchased
on a pro rata basis. Upon completion of such offer to purchase, the amount of
Excess Proceeds shall be reset at zero.
The Issuers will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Exchange Notes pursuant to an Asset Sale Offer. To the extent
that the provisions of any securities laws or regulations conflict with the
Asset Sale provisions of the Indenture, the Issuers shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the Asset Sale provisions of the Indenture by
virtue thereof.
CERTAIN COVENANTS
Restricted Payments
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any other payment or distribution on account of the Company's
or any of its Restricted Subsidiaries' Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation
involving the Company or any of its Restricted Subsidiaries) or to the direct
or indirect holders of the Company's or any of its Restricted Subsidiaries'
Equity Interests in their capacity as such (other than dividends or
distributions payable in Equity Interests (other than Disqualified Stock) of
the Company or to the Company or a Restricted Subsidiary of the Company); (ii)
purchase, redeem or otherwise acquire or retire for value (including, without
limitation, in connection with any merger or consolidation involving the
Company) any Equity Interests of the Company or any direct or indirect parent
of the Company or other Affiliate of the Company (other than any such Equity
Interests owned by the Company or any Restricted Subsidiary); (iii) make any
payment on or with respect to, or purchase, redeem, defease or otherwise
acquire or retire for value any Indebtedness that is subordinated to the
Senior Subordinated Notes or any guarantee thereof, except a payment of
interest or principal at Stated Maturity; or (iv) make any Restricted
Investment (all such payments and other actions set forth in clauses (i)
through (iv) above being collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
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(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described below under caption "--Incurrence of Indebtedness and Issuance of
Preferred 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 date of the Indenture (excluding Restricted Payments
permitted by clauses (ii), (iii), (iv), (vi), (vii), (viii) and (ix) of the
next succeeding paragraph), is less than the sum, without duplication, of
(i) 50% of the Consolidated Net Income of the Company and its Restricted
Subsidiaries for the period (taken as one accounting period) from the
beginning of the first fiscal quarter commencing after the date of the
Indenture to the end of the Company's most recently ended fiscal quarter
for which internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such period is
a deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net
proceeds (including the fair market value of property other than cash
(determined in good faith by the Board of Managers as evidenced by a
certificate filed with the Trustee, except that in the event the value of
any non-cash consideration shall be $15.0 million or more, the value shall
be as determined based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing))
received by the Company since the date of the Indenture as a contribution
to its common equity capital or from the issue or sale of Equity Interests
(other than Disqualified Stock) of the Company (excluding any net proceeds
from an Equity Offering or capital contribution to the extent used to
redeem Notes in accordance with the optional redemption provisions of the
Notes) or from the issue or sale of Disqualified Stock or debt securities
of the Company that have been converted into such Equity Interests (other
than Equity Interests (or Disqualified Stock or convertible debt
securities) sold to a Subsidiary of the Company), plus (iii) to the extent
that any Restricted Investment that was made after the date of the
Indenture is sold for cash or otherwise liquidated or repaid for cash, the
cash return of capital with respect to such Restricted Investment (less the
cost of disposition, if any), plus (iv) any dividends (the fair market
value of property other than cash shall be determined in good faith by the
Board of Managers as evidenced by a certificate filed with the Trustee,
except that in the event the value of any non-cash consideration shall be
$15.0 million or more, the value shall be as determined based upon an
opinion or appraisal issued by an accounting, appraisal or investment
banking firm of national standing) received by the Company or a Restricted
Subsidiary after the date of the Indenture from an Unrestricted Subsidiary
of the Company, to the extent that such dividends were not otherwise
included in Consolidated Net Income of the Company for such period, plus
(v) to the extent that any Unrestricted Subsidiary is redesignated as a
Restricted Subsidiary after the date of the Indenture, if as a result of
such redesignation, (x) the Fixed Charge Coverage Ratio of the Company on a
pro forma basis is lower than such ratio immediately prior thereto, then
the lesser of (A) the fair market value of the Company's Investment in such
Subsidiary as of the date of such redesignation or (B) such fair market
value as of the date on which such Subsidiary was originally designated as
an Unrestricted Subsidiary or (y) the Fixed Charge Coverage Ratio of the
Company on a pro forma basis is equal to or higher than such ratio
immediately prior thereto, the fair market value of the Company's
Investment in such Subsidiary as of the date of such redesignation;
provided, further that any increase in the amount of Restricted Payments
permitted to be incurred as a result of application of subparagraphs (iii),
(iv) or (v) above related to dividends, returns of capital or redesignation
of foreign joint ventures shall be reduced by the difference between (A)
the fair market value of any equipment (as determined by sales by the
Company of comparable equipment to unaffiliated third parties) transferred
to such joint ventures in reliance on subparagraph (xii) of the covenant
entitled "Transactions with Affiliates" and (B) the value received by the
Company or any Restricted Subsidiary from such joint venture with respect
to such equipment transfer.
The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any Equity Interests of
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the Company or subordinated Indebtedness of the Company or any Guarantors in
exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Subsidiary of the Company) of, other Equity Interests of
the Company (other than any Disqualified Stock); provided that the amount of
any such net cash proceeds that are utilized for any such redemption,
repurchase, retirement, defeasance or other acquisition shall be excluded from
clause (ii) of the preceding paragraph provided that no Default or Event of
Default shall have occurred and be continuing immediately after such
transaction; (iii) the defeasance, redemption, repurchase or other acquisition
of subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness; (iv) the payment of any dividend by a
Restricted Subsidiary of the Company to the holders of its Equity Interests on
a pro rata basis; (v) the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of the Parent, the Company or any
Restricted Subsidiary of the Company held by any member of the Company's (or
any of its Restricted Subsidiaries') management pursuant to any management
agreement, stock option agreement or similar agreement; provided that the
aggregate price paid for all such repurchased, redeemed, acquired or retired
Equity Interests shall not exceed $5.0 million in the aggregate since the date
of the Indenture (and shall be increased by the amount of any net cash
proceeds to the Company from (x) sales of Equity Interests of the Parent to
management employees subsequent to the date of the Indenture and (y) any "key-
man" life insurance policies which are used to make such redemptions or
repurchases) and no Default or Event of Default shall have occurred and be
continuing immediately after such transaction; provided further, that the
cancellation of Indebtedness owing to the Company from members of management
of the Company or any of its Restricted Subsidiaries in connection with such a
repurchase of Capital Stock of the Parent will not be deemed to constitute a
Restricted Payment under the Indenture; (vi) the making of distributions,
loans or advances to the Parent in an amount not to exceed $1.5 million per
annum in order to permit the Parent to pay required and ordinary operating
expenses of the Parent (including, without limitation, directors' fees,
indemnification obligations, professional fees and expenses, but excluding any
payments on or repurchases of the Seller Subordinated Note or the Seller
Preferred Equity); (vii) distributions to the Parent to fund the required tax
obligations of the Parent or its members related to income generated by the
Company and its Restricted Subsidiaries and taxable to such members, including
the tax distributions contemplated by Article IV of the LLC Agreement as in
effect on the date of the Indenture; (viii) repurchases of Capital Stock
deemed to occur upon the exercise of stock options if such Capital Stock
represents a portion of the exercise price thereof; (ix) distributions to the
Parent to fund the Transactions (as described under "Use of Proceeds"); (x)
distributions to the Parent to purchase or redeem the Seller Subordinated Note
and the Seller Preferred Equity pursuant to change of control provisions
contained in the governing instrument relating thereto; provided, however,
that (x) no offer or purchase obligation may be triggered in respect of such
Seller Subordinated Note or Seller Preferred Equity unless a corresponding
obligation also arises with respect to the Notes and (y) in any event, no
repurchase or redemption of any such Seller Subordinated Note or Seller
Preferred Equity may be consummated unless and until the Issuers shall have
satisfied all repurchase obligations with respect to any required purchase
offer made with respect to the Notes; provided, however, that such purchases
or redemption of the Seller Subordinated Note or the Seller Preferred Equity
shall be included in the calculation of the amount of Restricted Payments and
provided that no Default or Event of Default shall have occurred and be
continuing as a consequence thereof; and (xi) if no Default or Event of
Default shall have occurred and be continuing or would occur as a consequence
thereof, other Restricted Payments in an aggregate amount not to exceed $5.0
million since the date of the Indenture. In addition, any dividend which is
declared but not paid shall not be included in the calculation of Restricted
Payments under clause (c), and any dividend which is declared and paid shall
be included only once in the calculation of Restricted Payments under clause
(c).
The Board of Managers may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash)
in the Subsidiary so designated will be deemed to be Restricted Payments at
the time of such designation and will reduce the amount available for
Restricted Payments under the first paragraph of this covenant. All such
outstanding Investments will be deemed to constitute Investments in an amount
equal to the fair market value of such Investments at the time of such
designation. Such designation will only be permitted if such Restricted
Payment would be permitted at such time and if such Restricted Subsidiary
otherwise meets the definition of an Unrestricted Subsidiary.
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The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any non-cash Restricted Payment shall be determined
by the Board of Managers whose resolution with respect thereto shall be
delivered to the Trustee, such determination to be based upon an opinion or
appraisal issued by an accounting, appraisal or investment banking firm of
national standing if such fair market value exceeds $15.0 million. Not later
than the date of making any Restricted Payment, the Company shall deliver to
the Trustee an Officers' Certificate stating that such Restricted Payment is
permitted and setting forth the basis upon which the calculations required by
the covenant "Restricted Payments" were computed, together with a copy of any
fairness opinion or appraisal required by the Indenture.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that the Issuers will not, and will not permit any of
their 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") any
Indebtedness (including Acquired Debt) and that the Issuers will not issue any
Disqualified Stock and will not permit any of their Restricted Subsidiaries to
issue any shares of preferred stock; provided, however, that the Company or
any Guarantor may incur Indebtedness (including Acquired Debt) or issue shares
of Disqualified Stock or preferred stock if (i) no Default or Event of Default
shall have occurred and be continuing at the time of or as a consequence of
the incurrence of any such Indebtedness or the issuance of any such
Disqualified Stock and (ii) the Fixed Charge Coverage Ratio for the Company's
most recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock is issued would
have been at least 2.0 to 1.0, 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, at the beginning of such four-quarter period.
The provisions of the first paragraph of this covenant will not apply to the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company (and the guarantee thereof by the
Guarantors) of Indebtedness and letters of credit under one or more Senior
Credit Facilities; provided that the aggregate principal amount of all
Indebtedness (with letters of credit being deemed to have a principal
amount equal to the maximum potential liability of the Company and its
Restricted Subsidiaries thereunder) outstanding under all Senior Credit
Facilities after giving effect to such incurrence does not exceed an amount
equal to the greater of (x) $275.0 million less the aggregate amount of all
repayments of any term Indebtedness and all commitment reductions of any
revolving indebtedness, in each case, under one or more Senior Credit
Facilities pursuant to clause (i) of the third paragraph of the covenant
described above under the caption "--Asset Sales" and (y) the Company's
Borrowing Base;
(ii) the incurrence by the Issuers of Indebtedness represented by the
Notes and the Guarantees thereof by the Guarantors in an aggregate
principal amount of $110.0 million outstanding on the date of the
Indenture;
(iii) the incurrence by a Restricted Subsidiary that is a Foreign
Subsidiary and is not a Guarantor of the Exchange Notes in an amount at any
one time outstanding that does not exceed (x) $3.0 million plus (y) the
Borrowing Base of such Restricted Subsidiary; provided, that none of the
Company or any other such Restricted Subsidiary shall be obligated,
directly or indirectly, to pay principal, premium, interest or other
amounts thereon or in respect thereof (including by way of net worth
requirements, equity keepwells, etc.);
(iv) the incurrence by the Company and its Subsidiaries of other
Indebtedness outstanding on the date of the Indenture for so long as such
Indebtedness remains outstanding;
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(v) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness (including Capitalized Lease Obligations) 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 outstanding not
to exceed the greater of (x) $10.0 million and (y) 7.5% of Total Assets at
the time of any incurrence thereof (including any Refinancing Indebtedness
with respect thereto) (which amount may, but need not, be incurred in whole
or in part under the Senior Credit Facilities);
(vi) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness 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;
(vii) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness arising from agreements of the Company or a Restricted
Subsidiary of the Company providing for indemnification, adjustment of
purchase price, earn out or other similar obligations, in each case,
incurred or assumed in connection with the disposition of any business,
assets or a Restricted Subsidiary of the Company, other than guarantees of
Indebtedness incurred by any Person acquiring all or any portion of such
business, assets or Restricted Subsidiary for the purpose of financing such
acquisition; provided that the maximum assumable liability in respect of
all such Indebtedness shall at no time exceed the gross proceeds actually
received by the Company and its Restricted Subsidiaries in connection with
such disposition;
(viii) the incurrence by the Company or any of its Restricted
Subsidiaries of obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted Subsidiary
of the Company in the ordinary course of business;
(ix) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness in connection with an industrial revenue bond in an
aggregate principal amount not to exceed $10.0 million for the expansion of
the Company's Madisonville, Kentucky facility;
(x) the incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to refund, refinance or replace Indebtedness (other than
intercompany Indebtedness) that was permitted by the Indenture to be
incurred under the first paragraph hereof or clauses (ii) and (iv) of this
paragraph or any Indebtedness issued to so refund, refinance or replace
such Indebtedness;
(xi) the incurrence by the Company or any of its Restricted Subsidiaries
of intercompany Indebtedness between or among the Company and any of its
Restricted Subsidiaries; provided, however, that (i) if the Company is the
obligor on such Indebtedness, such Indebtedness is expressly subordinated
to the prior payment in full in cash of all Obligations with respect to the
Notes and (ii)(A) any subsequent issuance or transfer of Equity Interests
that results in any such Indebtedness being held by a Person other than the
Company or a Restricted Subsidiary thereof and (B) any sale or other
transfer of any such Indebtedness to a Person that is not either the
Company or a Restricted Subsidiary thereof shall be deemed, in each case,
to constitute an incurrence of such Indebtedness by the Company or such
Subsidiary, as the case may be, that was not permitted by this clause (xi);
(xii) the incurrence by the Company or any of its Restricted Subsidiaries
of Hedging Obligations that are incurred in the normal course of business
and not for speculative purposes used for fixing or hedging currency or
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of this Indenture to be outstanding provided,
however, that in the case of Hedging Obligations that are incurred for the
purpose of fixing or hedging interest rate risks with respect to
Indebtedness, the notional principal amount of any such Hedging Obligation
does not exceed the principal amount of the Indebtedness to which such
Hedging Obligation relates;
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(xiii) the guarantee by the Company or any of the Guarantors of
Indebtedness that was permitted to be incurred by another provision of this
covenant;
(xiv) the incurrence by the Company's Unrestricted Subsidiaries of Non-
Recourse Debt, provided, however, that if any such Indebtedness ceases to
be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company that was not permitted by this clause (xiv);
(xv) the incurrence by a Securitization Entity of Indebtedness in a
Qualified Securitization Transaction that is Non-Recourse Debt with respect
to the Company and its other Restricted Subsidiaries (except for Standard
Securitization Undertakings and Limited Originator Recourse); and
(xvi) the incurrence by the Company or any of its Restricted Subsidiaries
that is a Guarantor of additional Indebtedness and/or the issuance of
Disqualified Stock in an aggregate principal amount or aggregate
liquidation value, as applicable (or accreted value, as applicable) at any
time outstanding, including all Permitted Refinancing Indebtedness incurred
to refund, refinance or replace any Indebtedness incurred pursuant to this
clause (xvi), not to exceed $30.0 million.
For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories
of Permitted Debt described in clauses (i) through (xvi) above or is entitled
to be incurred pursuant to the first paragraph of this covenant, the Company
shall, in its sole discretion, classify or later reclassify such item of
Indebtedness in any manner that complies with this covenant. Accrual of
interest, accretion or amortization of original issue discount and the payment
of interest on any Indebtedness in the form of additional Indebtedness with
the same terms will not be deemed to be an incurrence of Indebtedness for
purposes of this covenant; provided, in each such case, that the amount
thereof is included in Fixed Charges of the Company as accrued.
Liens
The Indenture provides that the Company will not and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, assume
or otherwise cause or suffer to exist or become effective any Lien of any kind
securing Indebtedness or trade payables (other than Permitted Liens) upon any
of their property or assets, now owned or hereafter acquired, unless (i) in
the case of Liens securing Indebtedness that is expressly subordinated or
junior in right of payment to the Notes, the Notes are secured on a senior
basis to the obligations so secured until such time as such obligations are no
longer secured by a Lien and (ii) in all other cases, the Notes are secured on
an equal and ratable basis with the obligations so secured until such time as
such obligations are no longer secured by a Lien.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries (1)
on its Capital Stock or (2) with respect to any other interest or
participation in, or measured by, its profits, or (b) pay any indebtedness
owed to the Company or any of its Restricted Subsidiaries, (ii) make loans or
advances to the Company or any of its Restricted Subsidiaries or (iii)
transfer any of its properties or assets to the Company or any of its
Restricted Subsidiaries. However, the foregoing restrictions will not apply to
encumbrances or restrictions existing under or by reason of (a) Existing
Indebtedness as in effect on the date of the Indenture, (b) the Senior Credit
Facility as in effect as of the date of the Indenture, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive, taken as a whole, with
respect to such dividend and other payment restrictions than those contained
in the Senior Credit Facility as in effect on the date of the Indenture, (c)
the Indenture and the Notes, (d) applicable law, (e) any instrument
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governing Indebtedness or Capital Stock of a Person acquired by the Company or
any of its Restricted Subsidiaries as in effect at the time of such
acquisition (except to the extent such Indebtedness was incurred in connection
with or in contemplation of such acquisition), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of
any Person, other than the Person, or the property or assets of the Person, so
acquired, provided that, in the case of Indebtedness, such Indebtedness was
permitted by the terms of the Indenture to be incurred, (f) customary non-
assignment provisions in leases entered into in the ordinary course of
business and consistent with past practices, (g) purchase money obligations
for property acquired in the ordinary course of business that impose
restrictions of the nature described in clause (iii) above on the property so
acquired, (h) any agreement for the sale of a Restricted Subsidiary that
restricts distributions by that Restricted Subsidiary pending its sale, (i)
Permitted Refinancing Indebtedness, provided that the restrictions contained
in the agreements governing such Permitted Refinancing Indebtedness are no
more restrictive, taken as a whole, than those contained in the agreements
governing the Indebtedness being refinanced, (j) secured Indebtedness
otherwise permitted to be incurred pursuant to the provisions of the covenant
described above under the caption "Liens" that limits the right of the debtor
to dispose of the assets securing such Indebtedness, (k) provisions with
respect to the disposition or distribution of assets or property in joint
venture agreements and other similar agreements entered into in the ordinary
course of business, (l) restrictions on cash or other deposits or net worth
imposed by customers under contracts entered into in the ordinary course of
business, (m) any Purchase Money Note, or other Indebtedness or other
contractual requirements of a Securitization Entity in connection with a
Qualified Securitization Transaction; provided that such restrictions apply
only to such Securitization Entity, (n) other Indebtedness of a Restricted
Subsidiary that is a Guarantor permitted to be incurred subsequent to the date
of the Indenture pursuant to the provisions of the covenant described above
under the caption "Incurrence of Indebtedness and Issuance of Preferred
Stock"; provided that any such restrictions are ordinary and customary with
respect to the type of Indebtedness or preferred stock being incurred or
issued (under the relevant circumstances), and (o) any encumbrances or
restrictions imposed by any amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings of the
contracts, instruments or obligations referred to in clauses (a) through (n)
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 Managers, 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.
Merger, Consolidation, or Sale of Assets
The Indenture provides that neither Issuer may consolidate or merge with or
into (whether or not such Issuer is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially
all of its properties or assets in one or more related transactions, to
another corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United
States, any state thereof or the District of Columbia; (ii) the entity or
Person formed by or surviving any such consolidation or merger (if other than
such Issuer) or the entity or Person to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made assumes all the
obligations of the Issuers under the Registration Rights Agreement, the
Exchange Notes and the Indenture pursuant to a supplemental indenture in a
form reasonably satisfactory to the Trustee; (iii) immediately prior thereto
and immediately after such transaction no Default or Event of Default exists;
and (iv) except in the case of a merger of the Company with or into a
Restricted Subsidiary of the Company and except in the case of a merger
entered into solely for the purpose of reincorporating the Company in another
jurisdiction, the Company or the entity or Person formed by or surviving any
such consolidation or merger (if other than the Company), or to which such
sale, assignment, transfer, lease, conveyance or other disposition shall have
been made will immediately after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter
period, (x) be permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of the covenant described above under the caption "--Incurrence of
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Indebtedness and Issuance of Preferred Stock" or (y) the Fixed Charge Coverage
Ratio for the Company or the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company) would be greater than such
ratio for the Company or such surviving entity immediately prior to such
transaction.
Notwithstanding the foregoing, the Company is permitted to reorganize as a
corporation in accordance with the procedures established in the Indenture,
provided that the Company shall have delivered to the Trustee an opinion of
counsel in the United States reasonably acceptable to the Trustee confirming
that such reorganization is not adverse to holders of the Exchange Notes (it
being recognized that such reorganization shall not be deemed adverse to the
holders of the Exchange Notes solely because (i) of the accrual of deferred
tax liabilities resulting from such reorganization or (ii) the successor or
surviving corporation (a) is subject to income tax as a corporate entity or
(b) is considered to be an "includible corporation" of an affiliated group of
corporations within the meaning of the Code or any similar state or local law)
and certain other conditions are satisfied.
The entity or the Person formed by or surviving any consolidation or merger
(if other than the Company) will succeed to, and be substituted for, and may
exercise every right and power of, the Issuers under the Indenture, but, in
the case of a lease of all or substantially all its assets, neither Issuer
will be released from the obligation to pay the principal of and interest on
the Exchange Notes.
Transactions with Affiliates
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer
or otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for
the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless (i) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Restricted Subsidiary than those
that would have been obtained in a comparable transaction by the Company or
such Restricted Subsidiary with an unrelated Person and (ii) the Company
delivers to the Trustee (a) with respect to any Affiliate Transaction or
series of related Affiliate Transactions involving aggregate consideration in
excess of $3.0 million, a resolution of the Board of Managers set forth in an
Officers' Certificate certifying that such Affiliate Transaction complies with
clause (i) above and that such Affiliate Transaction has been approved by a
majority of the disinterested members of the Board of Managers and (b) with
respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $10.0 million, an
opinion as to the fairness to the Holders of such Affiliate Transaction from a
financial point of view issued by an accounting, appraisal or investment
banking firm of national standing. Notwithstanding the foregoing, the
following items shall not be deemed to be Affiliate Transactions: (i) any
employment agreement entered into by the Company or any of its Restricted
Subsidiaries in the ordinary course of business and consistent with the past
practice of the Company or such Restricted Subsidiary, (ii) transactions
exclusively between or among the Company and/or its Restricted Subsidiaries
provided such transactions have not otherwise been prohibited by the
Indenture, (iii) payment of reasonable directors fees to Persons who are not
otherwise Affiliates of the Company, (iv) transactions effected as part of a
Qualified Securitization Transaction, (v) Restricted Payments that are
permitted by the provisions of the Indenture described above under the caption
"--Restricted Payments," (vi) reasonable fees and compensation paid to and
indemnity provided on behalf of, officers, directors, employees or consultants
of the Company or any Subsidiary as determined in good faith by the Company's
Board of Managers or senior management, (vii) the payment of consulting and
advisory fees, annual management fees and related expenses to the Principals
made pursuant to any financial advisory, financing, underwriting or placement
agreement or in respect of other investment banking activities, including,
without limitation, in connection with acquisitions or divestitures which are
approved by the Board of Managers of the Company or such Restricted Subsidiary
in good faith, (viii) any agreement as in effect on the date of the Indenture
or any amendment thereto or any transaction contemplated thereby (including
pursuant to any amendment thereto) in any replacement agreement thereto so
long as any such amendment or replacement agreement is not more
disadvantageous to the Holders in any material respect than the original
agreement as in
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effect on the date of the Indenture, (ix) payments or loans to employees or
consultants which are approved by the Board of Managers of the Company in good
faith, (x) 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 date of
the Indenture 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 date of the Indenture shall only be permitted by this clause (x) to
the extent that the terms of any such amendment or new agreement are not
otherwise disadvantageous to the Holders of the Notes in any material respect,
(xi) transactions with customers, clients, suppliers, joint venture partners
or purchasers or sellers of goods or services, in each case in the ordinary
course of business (including, without limitation, pursuant to joint venture
agreements) and otherwise in compliance with the terms of the Indenture which
are fair to the Company or its Restricted Subsidiaries, in the good faith
determination of the Board of Managers 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 and (xii) in the case of
foreign joint ventures, transfers of equipment for sale outside of North
America in exchange for value not less than the Company's cost of producing
such equipment.
No Senior Subordinated Debt
The Indenture provides that (i) the Issuers will not, directly or
indirectly, incur any Indebtedness that is subordinate or junior in right of
payment to any Senior Debt and senior in any respect in right of payment to
the Notes and (ii) no Guarantor will incur any Indebtedness that is
subordinate or junior in right of payment to its Guarantor Senior Debt and
senior in any respect in right of payment to such Guarantor's Guarantee.
Limitation on Issuances of Guarantees of Indebtedness
The Indenture will provide that the Company will not permit any Restricted
Subsidiary, directly or indirectly, to guarantee or pledge any assets to
secure the payment of any other Indebtedness of the Company unless such
Restricted Subsidiary simultaneously executes and delivers a supplemental
indenture to the Indenture providing for the Guarantee of the payment of the
Exchange Notes by such Restricted Subsidiary, which Guarantee shall be senior
to or pari passu with such Restricted Subsidiary's Guarantee of or pledge to
secure such other Indebtedness, unless such other Indebtedness is Senior Debt,
in which case the Guarantee of the Exchange Notes may be subordinated to the
Guarantee of such Senior Debt to the same extent as the Exchange Notes are
subordinated to such Senior Debt. Notwithstanding the foregoing, any such
Guarantee by a Subsidiary of the Notes shall provide by its terms that it
shall be automatically and unconditionally released and discharged upon any
sale, exchange or transfer, to any Person not an Affiliate of the Company, of
all of the Company's stock in, or all or substantially all the assets of, such
Restricted Subsidiary, which sale, exchange or transfer is made in compliance
with the applicable provisions of the Indenture. The form of such Guarantee
will be attached as an exhibit to the Indenture.
Business Activities
The Company will not, and will not permit any Restricted Subsidiary to,
engage in any business other than Permitted Businesses, except to such extent
as would not be material to the Company and its Restricted Subsidiaries taken
as a whole and ALC will not own any operating assets or other properties or
conduct any business other than to serve as an Issuer and obligor on the
Senior Subordinated Notes.
Payments for Consent
The Indenture provides that neither the Company nor any of its Subsidiaries
will, directly or indirectly, pay or cause to be paid any consideration,
whether by way of interest, fee or otherwise, to any Holder of any Notes for
or as an inducement to any consent, waiver or amendment of any of the terms or
provisions of the Indenture
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or the Exchange Notes unless such consideration is offered to be paid or is
paid to all Holders of the Exchange Notes that consent, waive or agree to
amend in the time frame set forth in the solicitation documents relating to
such consent, waiver or agreement.
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission"), so
long as any Exchange Notes are outstanding, the Issuers will furnish to the
Holders of Exchange Notes (i) all quarterly and annual financial information
that would be required to be contained in a filing with the Commission on
Forms 10-Q and 10-K if the Issuers were required to file such Forms, including
a "Management's Discussion and Analysis of Financial Condition and Results of
Operations" that describes the financial condition and results of operations
of the Issuers and its consolidated Subsidiaries (showing in reasonable
detail, either on the face of the financial statements or in the footnotes
thereto the financial condition and results of operations of the Issuers and
their Restricted Subsidiaries separate from the financial condition and
results of operations of the Unrestricted Subsidiaries of the Issuers) and,
with respect to the annual information only, a report thereon by the Issuers'
certified independent accountants and (ii) all current reports that would be
required to be filed with the Commission on Form 8-K if the Issuers were
required to file such reports, in each case within the time periods specified
in the Commission's rules and regulations. For so long as the Parent is a
Guarantor of the Exchange Notes, the Indenture will permit the Issuers to
satisfy its obligations in this covenant with respect to financial information
relating to the Issuers by furnishing financial information relating to the
Parent; provided that the same is accompanied by consolidating information
that explains in reasonable detail the differences between the information
relating to the Parent, on the one hand, and the information relating to the
Issuers and their Restricted Subsidiaries on a stand-alone basis, on the other
hand. In addition, following the consummation of the exchange offer
contemplated by the Registration Rights Agreement, whether or not required by
the rules and regulations of the Commission, the Issuers will file a copy of
all such information and reports with the Commission for public availability
within the time periods specified in the Commission's rules and regulations
(unless the Commission will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. In addition, the Issuers and the Guarantors have agreed that, for so
long as any Exchange Notes remain outstanding, they will furnish to the
Holders and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Exchange Notes (whether or not
prohibited by the subordination provisions of the Indenture); (ii) default in
payment when due of the principal of or premium, if any, on the Exchange Notes
(whether or not prohibited by the subordination provisions of the Indenture);
(iii) failure by the Issuers or any of their Restricted Subsidiaries to comply
with the provisions described under the captions "--Change of Control," or "--
Merger, Consolidation or Sale of Assets;" (iv) failure by the Issuers or any
of their Restricted Subsidiaries for 30 days after written notice by the
Trustee or Holders of at least 25% in principal amount of the then outstanding
Notes to comply with the provisions described under the captions "--Asset
Sales," "--Restricted Payments" or "--Incurrence of Indebtedness and Issuance
of Preferred Stock"; (v) failure by the Issuers or any of their Restricted
Subsidiaries for 30 days after written notice by the Trustee or Holders of at
least 25% in principal amount of the then outstanding Exchange Notes for 60
days after notice to comply with any of its other agreements in the Indenture
or the Exchange Notes; (vi) default under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Subsidiaries (other than a Securitization Entity) (or the payment of which is
guaranteed by the Company or any of its Subsidiaries (other than a
Securitization Entity)) whether such Indebtedness or guarantee now exists, or
is created after the date of the Indenture, which default (a) is caused by a
failure to pay principal of or premium, if any, or interest on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the
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date of such default (a "Payment Default") or (b) results in the acceleration
of such Indebtedness prior to its express maturity and, in each case, the
principal amount of any such Indebtedness, together with the principal amount
of any other such Indebtedness under which there has been a Payment Default or
the maturity of which has been so accelerated, aggregates $10.0 million or
more; (vii) failure by the Company or any of its Subsidiaries to pay final
judgments aggregating in excess of $10.0 million, which judgments are not
paid, discharged or stayed for a period of 60 days; (viii) certain events of
bankruptcy or insolvency with respect to the Issuers or any of their
Subsidiaries; and (ix) except as permitted by the Indenture, any Guarantee
shall be held in any judicial proceeding to be unenforceable or invalid or
shall cease for any reason to be in full force and effect or any Guarantor, or
any Person acting on behalf of any Guarantor, shall deny or disaffirm its
obligations under its Guarantee.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Exchange Notes may
declare all the Exchange Notes to be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, with respect to the Issuers, any
Restricted Subsidiary of the Company that constitutes a Significant Subsidiary
or any group of Restricted Subsidiaries that, taken together, would constitute
a Significant Subsidiary, all outstanding Senior Subordinated Notes will
become due and payable without further action or notice. Holders of the
Exchange Notes may not enforce the Indenture or the Exchange Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Exchange Notes may direct
the Trustee in its exercise of any trust or power. The Trustee may withhold
from Holders of the Exchange Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest.
The Holders of a majority in aggregate principal amount of the Exchange
Notes then outstanding by notice to the Trustee may on behalf of the Holders
of all of the Exchange Notes waive any existing Default or Event of Default
and its consequences under the Indenture except a continuing Default or Event
of Default in the payment of interest on, or the principal of, the Exchange
Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Issuers,
as such, shall have any liability for any obligations of the Company under the
Exchange Notes, the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder of Exchange Notes
by accepting a Exchange Note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Exchange
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 Issuers may, at their option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Exchange Notes and to
have each Guarantor's obligations discharged with respect to its Guarantee
("Legal Defeasance") except for (i) the rights of Holders of outstanding
Exchange Notes to receive payments in respect of the principal of, premium, if
any, and interest and Liquidated Damages, if any, on such Exchange Notes when
such payments are due from the trust referred to below, (ii) the Issuers'
obligations with respect to the Exchange Notes concerning issuing temporary
Exchange Notes, registration of Exchange Notes, mutilated, destroyed, lost or
stolen Exchange 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 Issuers' obligations in
connection therewith and (iv) the Legal Defeasance provisions of the
Indenture.
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In addition, the Issuers may, at their option and at any time, elect to have
the obligations of the Issuers 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 Exchange Notes.
In the event Covenant Defeasance occurs, certain events (not including non-
payment, bankruptcy, receivership, rehabilitation and insolvency events)
described under "Events of Default" will no longer constitute an Event of
Default with respect to the Exchange Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Issuers must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Senior Subordinate Notes, cash in U.S. dollars, non-
callable Government Securities, or a combination thereof, in such amounts as
will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any, and
interest and Liquidated Damages, if any, on the outstanding Exchange Notes on
the stated maturity or on the applicable redemption date, as the case may be,
and the Issuers must specify whether the Exchange Notes are being defeased to
maturity or to a particular redemption date; (ii) in the case of Legal
Defeasance, the Issuers shall have delivered to the Trustee an opinion of
counsel in the United States reasonably acceptable to the Trustee confirming
that (A) the Issuers have received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of the Indenture,
there has been a change in the applicable federal income tax law, in either
case to the effect that, and based thereon such Opinion of Counsel shall
confirm that, the Holders of the outstanding Exchange Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if such
Legal Defeasance had not occurred; (iii) in the case of Covenant Defeasance
the Issuers shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming that the Holders
of the outstanding Exchange Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance and will
be subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Covenant Defeasance had
not occurred; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such deposit)
or insofar as Events of Default from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day after the date of
deposit; (v) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material agreement
or instrument (other than the Indenture) to which the Issuers or any of their
Subsidiaries are a party or by which the Issuers or any of their Restricted
Subsidiaries are bound; (vi) the Issuers must have delivered to the Trustee an
Opinion of Counsel (subject to customary qualifications and assumptions) to
the effect that after the 91st day following the deposit, the trust funds will
not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally; (vii)
the Issuers must deliver to the Trustee an Officers' Certificate stating that
the deposit was not made by the Issuers with the intent of preferring the
Holders of Exchange Notes over the other creditors of the Issuers or with the
intent of defeating, hindering, delaying or defrauding creditors of the
Issuers or others; and (viii) the Issuers must deliver to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange the 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
Issuers may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Issuers are not required to transfer or
exchange any Exchange Note selected for redemption. Also, the Issuers are not
required to transfer or exchange any Exchange Note for a period of 15 days
before a selection of Exchange Notes to be redeemed.
The registered Holder of an Exchange Note will be treated as the owner of it
for all purposes.
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AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Exchange Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the Exchange Notes then
outstanding (including, without limitation, consents obtained in connection
with a purchase of, or tender offer or exchange offer for, Exchange Notes),
and any existing default or compliance with any provision of the Indenture or
the Exchange Notes may be waived with the consent of the Holders of a majority
in principal amount of the then outstanding Exchange Notes (including, without
limitation, consents obtained in connection with a purchase of, or tender
offer or exchange for, Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Exchange Notes held by a non-consenting Holder): (i)
reduce the principal amount of Exchange Notes whose Holders must consent to an
amendment, supplement or waiver, (ii) reduce the principal of or change the
fixed maturity of any Exchange Note or alter the provisions with respect to
the redemption of the Exchange 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 Exchange Note, (iv) waive a Default or Event of Default in the payment
of principal of or premium, if any, or interest on the Exchange Notes (except
a rescission of acceleration of the Exchange Notes by the Holders of at least
a majority in aggregate principal amount of the Exchange Notes and a waiver of
the payment default that resulted from such acceleration), (v) make any
Exchange Note payable in money other than that stated in the Exchange Notes,
(vi) make any change in the provisions of the Indenture relating to waivers of
past Defaults or the rights of Holders of Exchange Notes to receive payments
of principal of or premium, if any, or interest on the Exchange Notes, (vii)
waive a redemption payment with respect to any Exchange Note (other than a
payment required by one of the covenants described above under the caption "--
Repurchase at the Option of Holders") or (viii) make any change in the
foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of Exchange
Notes, the Issuers and the Trustee may amend or supplement the Indenture or
the Exchange Notes to cure any ambiguity, defect or inconsistency, to provide
for uncertificated Exchange Notes in addition to or in place of certificated
Exchange Notes, to provide for the assumption of the Issuers' obligations to
Holders of Exchange Notes in the case of a merger or consolidation or sale of
all or substantially all of the Company's assets, to add additional guarantees
with respect to the Exchange Notes, including any new Exchange Note
Guarantees, to make any change that would provide any additional rights or
benefits to the Holders of Exchange Notes or that does not adversely affect
the legal rights under the Indenture of any such Holder, or to comply with
requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
In addition, any amendment to the provisions of Article 10 of the Indenture
(which relate to subordination) will require the consent of the Holders of at
least 75% in aggregate principal amount of the Notes then outstanding if such
amendment would adversely affect the rights of Holders of Exchange Notes.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Issuers, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage
in other transactions; however, if it acquires any conflicting interest it
must eliminate such conflict within 90 days, apply to the Commission for
permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding
Exchange Notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Indenture provides that in case an Event of
Default shall occur (which shall not be cured), the Trustee will be required,
in the exercise of its power, to use the degree of care of a prudent man in
the conduct of his own affairs. Subject to such provisions, the Trustee will
be under no obligation to
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exercise any of its rights or powers under the Indenture at the request of any
Holder of Exchange Notes, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
ADDITIONAL INFORMATION
Anyone who receives this Offering Memorandum may obtain a copy of the
Indenture and Exchange and Registration Rights Agreement without charge by
writing to Alliance Laundry Systems LLC, P.O. Box 990, Ripon, WI 54971-0990,
Attention: Chief Financial Officer.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) to be used by the Company or a Restricted
Subsidiary in a Permitted Business; (ii) the Capital Stock of a Person that
becomes a Restricted Subsidiary as a result of the acquisition of such Capital
Stock by the Company or a Restricted Subsidiary of the Company; or (iii)
Capital Stock constituting a minority interest in any Person that at such time
is a Restricted Subsidiary of the Company; provided, however, that, in the
case of clauses (ii) and (iii), such Restricted Subsidiary is primarily
engaged in a Permitted Business.
"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.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory in the ordinary course of business
consistent with past practices (provided that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company and
its Subsidiaries taken as a whole will be governed by the provisions of the
Indenture described above under the caption "--Change of Control" and/or the
provisions described above under the caption "--Merger, Consolidation or Sale
of Assets" and not by the provisions of the Asset Sale covenant), and (ii) the
issue or sale by the Company or any of its Restricted Subsidiaries of Equity
Interests of any of the Company's Subsidiaries, in the case of either clause
(i) or (ii), whether in a single transaction or a series of related
transactions (a) that have a fair market value in excess of $1.0 million or
(b) for net proceeds in excess of $1.0 million. Notwithstanding the foregoing,
the following items shall not be deemed to be Asset Sales: (i) a transfer of
assets by the Company to a Restricted Subsidiary or by a Restricted Subsidiary
to the Company or to another Restricted Subsidiary, (ii) an issuance of Equity
Interests by a Restricted Subsidiary to the Company or to another Restricted
Subsidiary, (iii) a Restricted Payment that is permitted by the covenant
described above under the caption "--Restricted Payments," (iv) the sale or
discount, in each case without recourse, of accounts receivable arising in the
ordinary course of business, but only in connection with the compromise or
collection thereof, (v) the factoring of accounts receivable arising in the
ordinary course of business pursuant to arrangements customary in the
industry, (vi) the licensing of intellectual property, (vii)
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disposals or replacements of obsolete, uneconomical, negligible, worn out or
surplus property in the ordinary course of business, (viii) sales of equipment
loans on a non-recourse basis to a third party in an amount at least equal to
75% of the fair market value thereof, and (ix) sales of receivables, equipment
loans and related assets (including contract rights) of the type specified in
the definition of "Qualified Securitization Transaction" to a Securitization
Entity for the fair market value thereof, including consideration in the
amount specified in the proviso to the definition of Qualified Securitization
Transaction.
"Borrowing Base" means, with respect to any Person, the sum of (x) up to 90%
of the net book value of the non-affiliated accounts receivable of such Person
in accordance with GAAP and (y) up to 60% of the net book value of the
inventory of such Person in accordance with GAAP.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of,
the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof (provided that the full faith and credit
of the United States is pledged in support thereof) having maturities of not
more than six months from the date of acquisition, (iii) certificates of
deposit and eurodollar time deposits with maturities of six months or less
from the date of acquisition, bankers' acceptances with maturities not
exceeding six months and overnight bank deposits, in each case with any lender
party to the Senior Credit Facility or with any domestic commercial bank
having capital and surplus in excess of $500 million and a Thompson Bank Watch
Rating of "B" or better, (iv) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clauses
(ii) and (iii) above entered into with any financial institution meeting the
qualifications specified in clause (iii) above, (v) commercial paper having
the highest rating obtainable from Moody's Investors Service, Inc. or Standard
& Poor's Corporation and in each case maturing within six months after the
date of acquisition and (vi) money market funds at least 95% of the assets of
which constitute Cash Equivalents of the kinds described in clauses (i)-(v) of
this definition.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all
or substantially all of the assets of the Company and its Restricted
Subsidiaries taken as a whole to any "person" (as such term is used in Section
13(d)(3) of the Exchange Act), whether or not otherwise in compliance with the
provisions of the Indenture (other than the Principals and their Related
Parties), (ii) the adoption of a plan relating to the liquidation or
dissolution of the Company, (iii) the consummation of the first transaction
(including, without limitation, any merger or consolidation) the result of
which is that any "person" (as defined above) becomes the "beneficial owner"
(as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act,
except that a person shall be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
currently exercisable or is exercisable only upon the occurrence of a
subsequent condition), directly or indirectly, of more of the Voting Stock of
the Company (measured by voting power rather than number of shares) than is at
the time "beneficially owned" (as defined above) by the Principals and their
Related Parties in the aggregate or (iv) the first day on which a majority of
the members of the Board of Managers of the Company or the Parent are not
Continuing Managers (as defined below).
Clause (i) of the definition of Change of Control includes a phrase relating
to the sale, lease, transfer, conveyance or other disposition of "all or
substantially all" of the assets of the Company and its Restricted
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Subsidiaries taken as a whole. Although there is a developing body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
Holder of Exchange Notes to require the Issuers to repurchase such Exchange
Notes as a result of a sale, lease, transfer, conveyance or other disposition
of less than all of the assets of the Company and its Restricted Subsidiaries
taken as a whole to another Person or group may be uncertain.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with
an Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes, including foreign
withholding taxes to the extent paid, based on income or profits of such
Person and its Restricted Subsidiaries for such period, to the extent that
such provision for taxes was included in computing such Consolidated Net
Income, plus (iii) consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued and whether
or not capitalized (including, without limitation, amortization of original
issue discount, non-cash interest payments, the interest component of any
deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other
fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), to the extent that any such expense was deducted in computing
such Consolidated Net Income, plus (iv) depreciation, amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-cash
expenses (excluding any such non-cash expense to the extent that it represents
an accrual of or reserve for cash expenses in any future period or
amortization of a prepaid cash expense that was paid in a prior period) of
such Person and its Restricted Subsidiaries for such period to the extent that
such depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income, plus (v) one time non-cash legal,
accounting and debt issuance charges resulting from the Transactions, minus
(vi) non-cash items increasing such Consolidated Net Income for such period,
in each case, on a consolidated basis and determined in accordance with GAAP.
Consolidated Cash Flow shall exclude the amortization of debt issuance costs.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms
of its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Restricted Subsidiary or
its stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition
shall be excluded, (iv) the cumulative effect of a change in accounting
principles shall be excluded, (v) any one time non-cash charges relating to
the Transition Plan in an amount not to exceed $5.0 million shall be excluded,
and (vi) the Net Income (but not loss) of any Unrestricted Subsidiary shall be
excluded, whether or not distributed to the Company or one of its
Subsidiaries.
"Continuing Managers" means, as of any date of determination, any member of
the Board of Managers of the Company who (i) was a member of such Board of
Managers on the date of the Indenture, (ii) was nominated for election or
elected to such Board of Managers with the approval of a majority of the
Continuing Managers who were members of such Board at the time of such
nomination or election or (iii) was nominated by a Principal pursuant to the
Securityholders Agreement.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
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"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.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of
any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature; provided, however, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the
right to require the Issuers to repurchase such Capital Stock upon the
occurrence of a Change of Control or an Asset Sale shall not constitute
Disqualified Stock if the terms of such Capital Stock provide that the Issuers
may not repurchase or redeem any such Capital Stock pursuant to such
provisions unless such repurchase or redemption complies with the covenant
described above under the caption "--Certain Covenants--Restricted Payments."
"Domestic Subsidiary" means any Restricted Subsidiary of the Company other
than a Foreign Subsidiary.
"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 offering of Qualified Capital Stock of the
Parent, the Company or any successor thereto; provided that, in the event of
any Equity Offering by the Parent, the Parent contributes to the common equity
capital of the Company (other than as Disqualified Stock) the portion of the
net cash proceeds of such Equity Offering necessary to pay the aggregate
redemption price (plus accrued interest and Liquidated Damages thereon, if
any, to the redemption date) of the Notes to be redeemed pursuant to the
preceding paragraph.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Senior Credit Facility) in
existence on the date of the Indenture, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person
and its Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of original issue discount, non-
cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, commissions, discounts and other fees and charges incurred
in respect of letter of credit or bankers' acceptance financings, and net
payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated
interest of such Person and its Restricted Subsidiaries that was capitalized
during such period, and (iii) any interest expense on Indebtedness of another
Person that is Guaranteed by such Person or one of its Restricted Subsidiaries
or secured by a Lien on assets of such Person or one of its Restricted
Subsidiaries (whether or not such guarantee or Lien is called upon) and (iv)
all dividend payments, whether or not in cash, on any series of Preferred
Stock of such Person or any of its Restricted Subsidiaries, other than
dividend payments on Equity Interests payable solely in Equity Interests of
the Company (other than Disqualified Stock) or to the Company or a Restricted
Subsidiary of the Company. Fixed Charges shall exclude the amortization of
debt issuance costs.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person
and its Restricted Subsidiaries for such period. In the event that the
referent Person or any of its Restricted Subsidiaries incurs, assumes,
Guarantees or redeems any Indebtedness (other than revolving credit
borrowings) or issues or redeems preferred stock subsequent to the
commencement of the period for which the Fixed Charge Coverage Ratio is being
calculated but prior to the date on which the event for which the calculation
of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the
Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to
such incurrence, assumption, guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at
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the beginning of the applicable four-quarter reference period. In addition,
for purposes of making the computation referred to above, Consolidated Cash
Flow and Fixed Charges shall be calculated after giving effect on a pro forma
basis for the period of such calculation to (i) acquisitions that have been
made by the Company or any of its Restricted Subsidiaries, including through
mergers or consolidations and including any related financing transactions,
during the four-quarter reference period or subsequent to such reference
period and on or prior to the Calculation Date as if such transaction had
occurred on the first day of the four-quarter reference period and
Consolidated Cash Flow for such reference period shall be calculated without
giving effect to clause (iii) of the proviso set forth in the definition of
Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded and
(iii) the Fixed Charges attributable to discontinued operations, as determined
in accordance with GAAP and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the
obligations giving rise to such Fixed Charges will not be obligations of the
referent Person or any of its Restricted Subsidiaries following the
Calculation Date. 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
consistent with Article 11 of Regulation S-X, promulgated pursuant to the
Securities Act, as such Regulation is in effect on the date of the Indenture.
"Foreign Subsidiary" means (a) any Restricted Subsidiary of the Company that
is not organized under the laws of the United States of America or any state
thereof or the District of Columbia and (b) any Restricted Subsidiary of the
Company that has no material assets other than securities of one or more
Foreign Subsidiaries, and other assets relating to an ownership interest in
any such securities or Subsidiaries.
"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 date of the Indenture, except that
calculations made for purposes of determining compliance with the terms of the
covenants and with other provisions of the Indenture shall be made without
giving effect to depreciation, amortization or other expenses recorded as a
result of the application of purchase accounting in accordance with Accounting
Principles Board Opinion Nos. 16 and 17.
"guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) currency exchange or interest rate swap agreements,
interest rate cap agreements and interest rate collar agreements and (ii)
other agreements or arrangements designed to protect such Person against
fluctuations in interest rates or currency exchange rates.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced
by bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable,
if and to the extent any of the foregoing (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all Indebtedness of others
secured by a Lien on any asset of such Person (whether or not such
Indebtedness is assumed by such Person) and, to the extent not otherwise
included, the guarantee by such Person of any indebtedness of any other Person
(but excluding, with respect to Indebtedness of a Qualified Securitization
Entity, any Limited Originator Recourse or Standard Securitization
Undertakings that might be deemed to constitute guarantees). The amount
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of any Indebtedness outstanding as of any date shall be (i) the accreted value
thereof, in the case of any Indebtedness issued with original issue discount,
and (ii) the principal amount thereof, together with any interest thereon that
is more than 30 days past due, in the case of any other Indebtedness. For
purposes of calculating the amount of Indebtedness of a Securitization Entity
outstanding as of any date, the face or notional amount of any interest in
receivables or equipment that is outstanding as of such date shall be deemed
to be Indebtedness but any such interests held by Affiliates of such
Securitization Entity shall be excluded for purposes of such calculation.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other Obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Subsidiary of the
Company such that, after giving effect to any such sale or disposition, such
Person is no longer a Restricted Subsidiary of the Company, the Company shall
be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Equity Interests of such
Subsidiary not sold or disposed of in an amount determined as provided in the
final paragraph of the covenant described above under the caption "--
Restricted Payments."
"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).
"Limited Originator Recourse" means a reimbursement obligation to the
Company or a Restricted Subsidiary in connection with a drawing on a letter of
credit, revolving loan commitment, cash collateral account or other such
credit enhancement issued to support Indebtedness of a Securitization Entity
under a facility for the financing of trade receivables and the warehousing of
equipment loans and leases; provided that the available amount of any such
form of credit enhancement at any time shall not exceed 10.0% of the principal
amount of such Indebtedness at such time.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but
not loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b)
the disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any
of its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain
(but not loss), together with any related provision for taxes on such
extraordinary or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of
any non-cash consideration received in any Asset Sale), net of the direct
costs relating to such Asset Sale (including, without limitation, legal,
accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied
to the repayment of Indebtedness (other than Senior Debt under one or more of
the Company's Senior Credit Facilities) secured by a Lien on the asset or
assets that were the subject of such Asset Sale and any reserve for adjustment
in respect of the sale price of such asset or assets established in accordance
with GAAP.
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"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other
than the Notes being offered hereby) of the Company or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity; and
(iii) as to which the lenders have been notified in writing that they will not
have any recourse to the stock or assets of the Company or any of its
Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Parent" means Alliance Laundry Holdings LLC, a Delaware limited liability
company, or any corporation as successor thereto.
"Permitted Business" means the lines of business conducted by the Company
and its Subsidiaries on the date hereof and businesses that are reasonably
similar, ancillary or related thereto or which constitute a reasonable
extension or expansion thereof.
"Permitted Investments" means (i) any Investment in the Company or in a
Wholly Owned Restricted Subsidiary of the Company that is a Note Guarantor
(whether existing on the date of the Indenture or created thereafter); (ii)
any Investment in Cash Equivalents; (iii) any Investment by the Company or any
Restricted Subsidiary of the Company in a Person, if as a result of such
Investment (x) such Person becomes a Wholly Owned Restricted Subsidiary of the
Company or (y) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Wholly Owned Restricted Subsidiary and Note
Guarantor of the Company; (iv) any Investment made as a result of the receipt
of non-cash consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption "--Repurchase
at the Option of Holders--Asset Sales"; (v) any acquisition of assets solely
in exchange for the issuance of Equity Interests (other than Disqualified
Stock) of the Company; (vi) Hedging Obligations permitted under the caption
"--Incurrence of Indebtedness and Issuance of Preferred Stock"; (vii) any
Investment by the Company or a Subsidiary of the Company in a Securitization
Entity or any Investment by a Securitization Entity in any other Person in
connection with a Qualified Securitization Transaction; provided that any
Investment in a Securitization Entity is in the form of a Purchase Money Note
or an equity interest and (viii) other Investments in any Person having an
aggregate fair market value (measured on the date each such Investment was
made and without giving effect to subsequent changes in value), when taken
together with all other Investments made pursuant to this clause (viii) that
are at the time outstanding, not to exceed the greater of (x) $7.5 million and
(y) 7.5% of Total Assets.
"Permitted Liens" means (i) Liens securing Senior Debt (including the Senior
Credit Facilities); (ii) Liens in favor of the Company and any Restricted
Subsidiary; (iii) Liens on property of a Person existing at the time such
Person is merged into or consolidated with the Company or any Restricted
Subsidiary of the Company; provided that such Liens were in existence prior to
the contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with the
Company; (iv) Liens on property existing at the time of acquisition thereof by
the Company or any Subsidiary of the Company, provided that such Liens were in
existence prior to the contemplation of such acquisition; (v) Liens incurred
or deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance or other kinds of social
security, or to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature incurred
in the ordinary course of business; (vi) purchase money Liens to finance
property or assets of the Company or any Restricted Subsidiary of the Company
acquired in the ordinary course of business; provided, however, that (A) the
related purchase money Indebtedness shall not exceed the cost of such property
or assets and shall not be secured by any property or assets of the Company or
any Restricted Subsidiary of the Company other than the property and assets so
acquired and (B)
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the Lien securing such Indebtedness shall be created within 90 days of such
acquisition; (vii) Liens existing on the date of the Indenture; (viii) Liens
for taxes, assessments or governmental charges or claims that are not yet
delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded, provided that any
reserve or other appropriate provision as shall be required in conformity with
GAAP shall have been made therefor; (ix) statutory liens of landlords,
mechanics, suppliers, vendors, warehousemen, carriers or other like Liens
arising in the ordinary course of business; (x) judgment Liens not giving rise
to an Event of Default so long as any appropriate legal proceeding that may
have been duly initiated for the review of such judgment shall not have been
finally terminated or the period within which such proceeding may be initiated
shall not have expired; (xi) easements, rights-of-way, zoning and similar
restrictions and other similar encumbrances or title defects incurred or
imposed, as applicable, in the ordinary course of business and consistent with
industry practices which, in the aggregate, are not substantial in amount, and
which do not in any case materially detract from the value of the property
subject thereto (as such property is used by the Company or its Subsidiaries)
or interfere with the ordinary conduct of the business of the Company or such
Subsidiaries; provided, however, that any such Liens are not incurred in
connection with any borrowing of money or any commitment to loan any money or
to extend any credit; (xii) Liens on assets transferred to a Securitization
Entity or on assets of a Securitization Entity, in either case incurred in
connection with a Qualified Securitization Transaction; (xiii) Liens incurred
in the ordinary course of business of the Company or any Restricted Subsidiary
of the Company with respect to obligations that do not exceed $5.0 million at
any one time outstanding and that (a) are not incurred in connection with the
borrowing of money or the obtaining of advances or credit (other than trade
credit in the ordinary course of business) and (b) do not in the aggregate
materially detract from the value of the property or materially impair the use
thereof in the operation of business by the Company or such Subsidiary; (xiv)
Liens on assets of Guarantors to secure Senior Debt of such Guarantors that
were permitted by the Indenture to be incurred; (xv) Liens on assets of
Unrestricted Subsidiaries that secure Non-Recourse Debt of Unrestricted
Subsidiaries; (xvi) any interest or title of a lessor under any Capital Lease
Obligation; (xvii) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other goods;
(xviii) Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating to such
letters of credit and products and proceeds thereof; (xix) Liens encumbering
deposits made to secure obligations arising from statutory, regulatory,
contractual or warranty requirements of the Company or any of its Restricted
Subsidiaries, including rights of offset and set-off; (xx) Liens securing
Hedging Obligations which Hedging Obligations relate to Indebtedness that is
otherwise permitted under the Indenture; (xxi) leases or subleases granted to
others that do not materially interfere with the ordinary course of business
of the Company and its Restricted Subsidiaries; (xxii) Liens arising from
filing Uniform Commercial Code financing statements regarding leases; (xxiii)
Liens in favor of customs and revenue authorities arising as a matter of law
to secure payment of customer duties in connection with the importation of
goods; (xxiv) Liens securing Indebtedness under Currency Agreements; and (xxv)
Liens securing Indebtedness of Restricted Subsidiaries that are Foreign
Subsidiaries incurred in reliance on clause (iii) of the second paragraph of
the covenant described above under the caption "--Incurrence of Indebtedness
and Issuance of Preferred Stock."
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries or any Disqualified Stock of the Company
issued in exchange for, or the net proceeds of which are used to extend,
refinance, renew, replace, defease or refund other Indebtedness of the Company
or any of its Restricted Subsidiaries (other than intercompany Indebtedness);
provided that: (i) the principal amount (or accreted value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal amount
of (or accreted value, if applicable), plus accrued interest on, the
Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded
(plus the amount of reasonable expenses incurred in connection therewith);
(ii) such Permitted Refinancing Indebtedness has a final maturity date no
earlier than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of,
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the
Senior Subordinated Notes, such Permitted Refinancing Indebtedness has a final
maturity date later than the final
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maturity date of, and is subordinated in right of payment to, the Exchange
Notes on terms at least as favorable to the Holders of Exchange Notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded or is Disqualified Stock;
and (iv) such Indebtedness is incurred either by the Company or by the
Restricted Subsidiary who is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded or is Disqualified Stock.
"Principals" means Bain Capital, Inc., Bruckmann, Rosser, Sherrill & Co.,
L.P., their respective affiliates and executive officers of the Company as of
the date of the Indenture.
"Purchase Money Note" means a promissory note of a Securitization Entity
evidencing a line of credit, which may be irrevocable, from the Company or any
Restricted Subsidiary of the Company in connection with a Qualified
Securitization Transaction, which note shall be repaid from cash available to
the Securitization Entity, other than amounts required to be established as
reserves pursuant to agreements, amounts paid to investors in respect of
interest, principal and other amounts owing to such investors and amounts paid
in connection with the purchase of newly generated receivables or newly
acquired equipment.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Stock.
"Qualified Securitization Transaction" means any transaction or series of
transactions pursuant to which the Company or any of its Restricted
Subsidiaries may sell, convey or otherwise transfer to (a) a Securitization
Entity (in the case of a transfer by the Company or any of its Restricted
Subsidiaries) and (b) any other Person (in case of a transfer by a
Securitization Entity), or may grant a security interest in, any receivables
or equipment loans (whether now existing or arising or acquired in the future)
of the Company or any of its Restricted Subsidiaries, and any assets related
thereto including, without limitation, all collateral securing such
receivables and equipment loans, all contracts and contract rights and all
Guarantees or other obligations in respect of such receivables and equipment
loans, proceeds of such receivables and equipment loans and other assets
(including contract rights) which are customarily transferred or in respect of
which security interests are customarily granted in connection with asset
securitization transactions involving receivables and equipment (collectively,
"transferred assets"); provided that in the case of any such transfer by the
Company or any of its Restricted Subsidiaries, the transferor receives cash or
Purchase Money Notes in an amount which (when aggregated with the cash and
Purchase Money Notes received by the Company and its Restricted Subsidiaries
upon all other such transfers of transferred assets during the ninety days
preceding such transfer) is at least equal to 75% of the aggregate face amount
of all receivables so transferred during such day and the ninety preceding
days.
"Related Party" with respect to any Principal means (A) any controlling
stockholder, 60% (or more) owned Subsidiary, or spouse or immediate family
member (in the case of an individual) of such Principal or (B) any trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding a 60% or more controlling
interest of which consist of such Principal and/or such other Persons referred
to in the immediately preceding clause (A).
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary; provided that, on the date of
the Indenture, all Subsidiaries of the Company shall be Restricted
Subsidiaries (other than the SPE, Alliance Commercial Appliances Receivables
LLC, Alliance Commercial Appliances Finance LLC and Alliance Laundry S.A.).
"Securitization Entity" means a Wholly Owned Subsidiary of the Company (or
another Person in which the Company or any Restricted Subsidiary of the
Company makes an Investment and to which the Company or any Restricted
Subsidiary of the Company transfers receivables or equipment and related
assets) that engages in no activities other than in connection with the
financing of receivables or equipment and that is designated by the Board of
Managers of the Company (as provided below) as a Securitization Entity (a) no
portion of the Indebtedness or any other Obligations (contingent or otherwise)
of which (i) is guaranteed by the Company or
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any Restricted Subsidiary of the Company other than pursuant to Standard
Securitization Undertakings or Limited Originator Recourse, (ii) is recourse
to or obligates the Company or any Restricted Subsidiary of the Company (other
than the Securitization Entity) in any way other than pursuant to Standard
Securitization Undertakings or Limited Originator Recourse or (iii) subjects
any property or asset of the Company or any Restricted Subsidiary of the
Company (other than the Securitization Entity), directly or indirectly,
contingently or otherwise, to the satisfaction thereof, other than pursuant to
Standard Securitization Undertakings or Limited Originator Recourse, (b) with
which neither the Company nor any Restricted Subsidiary of the Company has any
material contract, agreement, arrangement or understanding other than on terms
no less favorable to the Company or such Restricted Subsidiary than those that
might be obtained at the time from Persons that are not Affiliates of the
Company, other than fees payable in the ordinary course of business in
connection with servicing receivables of such entity and (c) to which neither
the Company nor any Restricted Subsidiary of the Company has any obligation to
maintain or preserve such entity's financial condition or cause such entity to
achieve certain levels of operating results. Any such designation by the Board
of Managers of the Company shall be evidenced to the Trustee by filing with
the Trustee a certified copy of the resolution of the Board of Managers of the
Company giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions.
"Seller Preferred Equity" means preferred membership interests with a
liquidation value of $6.0 million due August 21, 2009 issued by the Parent to
Raytheon.
"Seller Subordinated Note" means a junior subordinated promissory note in
the principal amount of $9.0 million due August 21, 2009 issued by the Parent
to Raytheon.
"Senior Credit Facility" means that certain Senior Credit Facility, dated as
of May 5, 1998, by and among the Company, General Electric Capital
Corporation, as administrative agent, and Lehman Commercial Paper Inc., as
syndication agent, providing for up to $75.0 million of revolving credit
borrowings and up to $200.0 million of term loan borrowings, including any
related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, and in each case as amended, modified,
renewed, refunded, replaced or refinanced from time to time.
"Senior Credit Facilities" means, with respect to the Company, one or more
debt facilities (including, without limitation, the Senior Credit Facility) or
commercial paper facilities with banks or other institutional lenders
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 such receivables)
or letters of credit, in each case, as amended, restated, modified, renewed,
refunded, replaced or refinanced in whole or in part from time to time.
"Significant Subsidiary" means any Restricted 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.
"SPE" means the special purpose single member limited liability company that
is a Subsidiary of the Company and that entered into a $250.0 million
revolving loan agreement with Lehman Commercial Paper Inc. at the Closing.
"Standard Securitization Undertakings" means representations, warranties,
covenants and indemnities entered into by the Company or any Subsidiary of the
Company that are reasonably customary in receivables or equipment loan
transactions.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original
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documentation governing such Indebtedness, and shall not include any
contingent obligations to repay, redeem or repurchase any such interest or
principal prior to the date originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total
voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof) and (ii) any partnership (a) the sole
general partner or the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners of which are such
Person or of one or more Subsidiaries of such Person (or any combination
thereof).
"Total Assets" means the total consolidated assets of the Company and its
Restricted Subsidiaries, as set forth on the Company's most recent
consolidated balance sheet, except that calculations made for the purpose of
determining compliance with the terms of the covenants and with other
provisions of the Indenture shall be made without giving effect to goodwill,
deferred financing costs and other intangibles shown on the balance sheet as a
result of the application of purchase accounting in accordance with Accounting
Principles Board Opinion Nos. 16 and 17.
"Transition Plan" means the process by the Company of establishing at its
Ripon, Wisconsin facility the capability to manufacture small-chassis
frontload washers and dryers beginning in September 1998 and September 1999,
respectively, and to cease production of consumer topload washers for
Appliance Co.
"Unrestricted Subsidiary" means each of the SPE, Alliance Commercial
Appliances Receivables LLC, Alliance Commercial Appliances Finance LLC and
Alliance Laundry S.A. In addition, "Unrestricted Subsidiary" means (i) any
Subsidiary that is designated by the Board of Managers as an Unrestricted
Subsidiary pursuant to a Board Resolution; but only to the extent that such
Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b) is not
party to any agreement, contract, arrangement or understanding with the
Company or any Restricted Subsidiary of the Company unless the terms of any
such agreement, contract, arrangement or understanding are no less favorable
to the Company or such Restricted Subsidiary than those that might be obtained
at the time from Persons who are not Affiliates of the Company; (c) is a
Person with respect to which neither the Company nor any of its Restricted
Subsidiaries has any direct or indirect obligation (x) to subscribe for
additional Equity Interests or (y) to maintain or preserve such Person's
financial condition or to cause such Person to achieve any specified levels of
operating results; (d) has not guaranteed or otherwise directly or indirectly
provided credit support for any Indebtedness of the Company or any of its
Restricted Subsidiaries; and (e) has at least one director on its board of
directors that is not a director or executive officer of the Company or any of
its Restricted Subsidiaries and has at least one executive officer that is not
a director or executive officer of the Company or any of its Restricted
Subsidiaries. Any such designation by the Board of Managers shall be evidenced
to the Trustee by filing with the Trustee a certified copy of the Board
Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions and
was permitted by the covenant described above under the caption "Certain
Covenants--Restricted Payments." If, at any time, any Unrestricted Subsidiary
would fail to meet the foregoing requirements as an Unrestricted Subsidiary,
it shall thereafter cease to be an Unrestricted Subsidiary for purposes of the
Indenture and any Indebtedness of such Subsidiary shall be deemed to be
incurred by a Restricted Subsidiary of the Company as of such date (and, if
such Indebtedness is not permitted to be incurred as of such date under the
covenant described under the caption "Incurrence of Indebtedness and Issuance
of Preferred Stock," the Company shall be in default of such covenant). The
Board of Managers of the Company may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided that such designation shall
be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of
the Company of any outstanding Indebtedness of such Unrestricted Subsidiary
and such designation shall only be permitted if (i) such Indebtedness is
permitted under the covenant described under the caption "Certain Covenants--
Incurrence of Indebtedness and Issuance of Preferred Stock," calculated on a
pro forma basis as if such designation had occurred at the beginning of the
four-quarter reference period, (ii) such Subsidiary shall execute a Note
Guarantee and deliver an opinion of counsel in accordance with the terms of
the Indenture and (iii) no Default or Event of Default would be in existence
following such designation.
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"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 or the Board of Managers of such Person, as the case may be.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall
at the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Notes were originally sold by the Issuers on May 5, 1998 to the Initial
Purchasers pursuant to the Purchase Agreement. The Initial Purchasers
subsequently resold the Notes to qualified institutional buyers in reliance on
Rule 144A under the Securities Act and in offshore transactions pursuant to
Regulation S under the Securities Act. As a condition to the Purchase
Agreement, the Issuers entered into the Registration Rights Agreement with the
Initial Purchasers pursuant to which the Issuers have agreed to: (i) to use
their respective best efforts to file with the Commission on or prior to 90
calendar days after the date of issuance of the Notes (the "Issue Date") a
registration statement on an appropriate form under the Securities Act (the
"Exchange Offer Registration Statement") relating to a registered exchange
offer (the "Exchange Offer") for the Notes under the Securities Act and (ii)
use their respective best efforts to cause the Exchange Offer Registration
Statement to become effective within 180 calendar days after the Issue Date.
Upon the effectiveness of the Exchange Offer Registration Statement, unless it
would not be permitted by applicable law or Commission policy, the Issuers
will promptly offer to exchange any and all of the outstanding Notes for the
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 Issuers will keep the Exchange Offer open for not less than 20 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. For each Note
surrendered to the Issuers pursuant to the Exchange Offer, the holder of such
Note will receive an Exchange Note having a principal amount equal to that of
the surrendered Note. Interest on each Exchange Note will accrue from the date
of its original issue.
Under existing interpretations of the staff of the Commission contained in
several no-action letters to third parties, the Issuers believe that the
Exchange Notes would in general be freely tradeable after the Exchange Offer
without further registration under the Securities Act. However, any purchaser
of Notes who is an "affiliate" of either Alliance or ALC or who intends to
participate in the Exchange Offer for the purpose of distributing the Exchange
Notes: (i) will not be able to rely on the interpretation of the staff of the
Commission; (ii) will not be able to tender its Notes in the Exchange Offer;
and (iii) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or transfer of
the Notes, unless such sale or transfer is made pursuant to an exemption from
such requirements.
If (i) the Issuers are not required to file the Exchange Offer Registration
Statement or permitted to effect the Exchange Offer because the Exchange Offer
is not permitted by applicable law or Commission policy; or (ii) any Holder of
Transfer Restricted Securities notifies the Issuers prior to the 20th day
following commencement of the Exchange Offer that (a) it is prohibited by law
or Commission policy from participating in the Exchange Offer or (b) that it
may not resell the Exchange Notes acquired by it in the Exchange Offer to the
public without delivering a prospectus and the prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resales or (c) that it is a Broker-Dealer and owns Notes acquired directly
from the Issuers or an affiliate of the Issuers, then the Issuers 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 Note and each Exchange
Note, the Holder of which is subject to prospectus delivery requirements of
the Securities Act in order to sell such Note or Exchange Note, until the
occurrence of any of the following events: (i) the first date on which such
Note may be exchanged for an Exchange Note in the Exchange Offer, if following
such exchange such Holder would be entitled to resell such Exchange Note to
the public without complying with the prospectus delivery requirements of the
Securities Act; (ii) the date on which such Note has been registered pursuant
to an effective Shelf Registration Statement under the Securities Act and
disposed of in accordance with the "Plan of Distribution" section of the
Offering Memorandum contained in such Shelf Registration Statement; (iii) the
date on which such Note is sold to the public pursuant to Rule 144 under the
Securities Act or by a Broker-Dealer pursuant to the "Plan of Distribution"
contemplated by the Exchange Offer Registration Statement (including
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delivery of the Offering Memorandum contained therein); or (iv) such Note or
Exchange Note, as the case may be, shall have ceased to be outstanding.
The Issuers will use their respective best efforts to cause the Exchange
Offer Registration Statement or, if applicable, the Shelf Registration
Statement (each, a "Registration Statement") to become effective under the
Securities Act by the Commission as soon as practicable after the filing
thereof but in no event later than 180 calendar days after the Issue Date.
Upon the effectiveness of the Exchange Offer Registration Statement, unless
it would not be permitted by applicable law or Commission policy, the Issuers
will promptly commence the Exchange Offer to enable each Holder of the Notes
(other than Holders who are affiliates (within the meaning of the Securities
Act) of either Alliance or ALC or underwriters (as defined in the Securities
Act) with respect to the Exchange Notes) to exchange the Notes for Exchange
Notes. If applicable, the Issuers shall keep the Shelf Registration Statement
continuously effective for, under certain circumstances, a maximum of two
years after the Issue Date.
In the event that, for any reason whatsoever: (a) the Issuers fail to file
any of the Registration Statements on or before the date specified for such
filing; (b) any of such Registration Statements is not declared effective by
the Commission on or prior to the date specified for such effectiveness (the
"Effectiveness Target Date"); (c) the Issuers fail to consummate the Exchange
Offer within 30 Business Days of the Effectiveness Target Date with respect to
the Exchange Offer Registration Statement; or (d) the Shelf Registration
Statement or the Exchange Offer Registration Statement is declared effective
but thereafter ceases to be effective or usable in connection with resales of
Transfer Restricted Securities during the periods specified in the Exchange
and Registration Rights Agreement (each such event referred to in clauses (a)
through (d) above a "Registration Default"), then the Issuers will pay
liquidated damages ("Liquidated Damages") to each Holder of Notes, with
respect to the first 90 calendar day period, or any portion thereof,
immediately following the occurrence of a Registration Default, in an amount
equal to $.05 per week per $1,000 principal amount of Notes held by such
Holder. The amount of the Liquidated Damages will increase by an additional
$.05 per week per $1,000 principal amount of Notes with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up
to a maximum amount of Liquidated Damages for all Registration Defaults of
$.50 per week per $1,000 principal amount of Notes. Following the cure of all
Registration Defaults, the accrual of Liquidated Damages will cease.
The Issuers (i) shall make available for a period of up to one year from 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 all expenses incident to the
Exchange Offer (including the expense of one counsel to the Holders covered
thereby) and will indemnify certain holders of the Notes (including any
broker-dealer) against certain liabilities, including liabilities under the
Securities Act. A broker-dealer which 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 Notes who wishes to exchange such Notes for Exchange Notes in
the Exchange Offer will be required to make representations in the Letter of
Transmittal that (a) it is not an "affiliate" of either Alliance or ALC
(within the meaning of Rule 405 of the Securities Act); (b) it is not engaged
in and does not intend to engage in, and has no arrangement or understanding
with any person to participate in, a distribution of the Exchange Notes to be
issued in the Exchange Offer; (c) it is acquiring the Exchange Notes in its
ordinary course of business; and (d) if it is a Participating Broker-Dealer
holding Notes acquired for its own account as a result of market-making
activities or other trading activities, it acknowledges that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with
any resale of Exchange Notes received in respect of such Exchange Notes
pursuant to the Exchange Offer. The Commission has taken the position and the
Issuers believe that Participating Broker-Dealers may fulfill their prospectus
delivery requirements with respect to the Exchange Notes (other than a resale
of an unsold allotment from the original sale of the Notes) with the
prospectus contained in the Exchange Offer Registration Statement. Under the
Registration Rights Agreement,
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the Issuers are required to allow Participating Broker-Dealers and other
persons, if any, subject to similar prospectus delivery requirements to use
the prospectus contained in the Exchange Offer Registration Statement in
connection with the resale of such Exchange Notes.
If the holder is a Participating Broker-Dealer, it will be required to
include a representation in such Participating Broker-Dealer's letter of
transmittal with respect to the Exchange Offer that such Participating Broker-
Dealer has not entered into any arrangement or understanding with the Issuers
or any affiliate of the Issuers to distribute the Exchange Notes.
Holders of the Notes will be required to make certain representations to the
Issuers (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 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
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 Notes are outstanding, the Issuers will continue to
provide to holders of the Notes and to prospective purchasers of the Notes the
information required by Rule 144A(d)(4) under the Securities Act.
The foregoing description of the Registration Rights Agreement contains a
discussion of all material elements thereof, but does not purport to be
complete and is qualified in its entirety by reference to all provisions of
the Registration Rights Agreement. The Issuers will provide a copy of the
Registration Rights Agreement to holders of Notes identified to the Issuers by
any Initial Purchasers upon request.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Offering
Memorandum and in the Letter of Transmittal, the Issuers will accept any and
all Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. The Issuers will issue $1,000 principal amount
of Exchange Notes in exchange for each $1,000 principal amount of outstanding
Notes accepted in the Exchange Offer. Holders may tender some or all of their
Notes pursuant to the Exchange Offer. However, Notes may be tendered only in
integral multiples of $1,000.
The form and terms of the Exchange Notes are the same as the form and terms
of the Notes except that: (i) the Exchange Notes bear a Series B designation
and a different CUSIP Number from the Notes; (ii) the Exchange Notes have been
registered under the Securities Act and hence will not bear legends
restricting the transfer thereof; and (iii) the holders of the Exchange Notes
will not be entitled to certain rights under the Registration Rights
Agreement, including the provisions providing for an increase in the interest
rate on the Notes in certain circumstances relating to the timing of the
Exchange Offer, all of which rights will terminate when the Exchange Offer is
terminated. The Exchange Notes will evidence the same debt as the Notes and
will be entitled to the benefits of the Indenture.
As of the date of this Offering Memorandum, $110,000,000 aggregate principal
amount of Notes were outstanding. The Issuers have fixed the close of business
on , 1998 as the record date for the Exchange Offer for purposes of
determining the persons to whom this Offering Memorandum and the Letter of
Transmittal will be mailed initially.
Holders of Notes do not have any appraisal or dissenters' rights under the
General Corporation Law of Delaware or the Indenture in connection with the
Exchange Offer. The Issuers intend to conduct the Exchange Offer in accordance
with the applicable requirements of the Exchange Act and the rules and
regulations of the Commission thereunder.
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The Issuers shall be deemed to have accepted validly tendered Notes when, as
and if the Issuers have given oral or written notice thereof to the Exchange
Agent. The Exchange Agent will act as agent for the tendering holders for the
purpose of receiving the Exchange Notes from the Issuers.
If any tendered Notes are not accepted for exchange because of an invalid
tender, the occurrence of certain other events set forth herein or otherwise,
the certificates for any such unaccepted Notes will be returned, without
expense, to the tendering holder thereof as promptly as practicable after the
Expiration Date.
Holders who tender Notes in the Exchange Offer will 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 Notes pursuant to
the Exchange Offer. The Issuers will pay all charges and expenses, other than
transfer taxes in certain circumstances, in connection with the Exchange
Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1998, unless the Issuers, in their sole discretion, extends the Exchange
Offer, in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended. Notwithstanding the foregoing,
the Company will not extend the Expiration Date beyond , 1998.
In order to extend the Exchange Offer, the Issuers will notify the Exchange
Agent of any extension by oral or written notice and will mail to the
registered holders an announcement thereof, each prior to 9:00 a.m., New York
City time, in the next business day after the previously scheduled expiration
date.
The Issuers reserve the right, in its sole discretion, (i) to delay
accepting any Notes, to extend the Exchange Offer or to terminate the Exchange
Offer if any of the conditions set forth below under "--Conditions" shall not
have been satisfied, by giving oral or written notice of such delay, extension
or termination to the Exchange Agent or (ii) to amend the terms of the
Exchange Offer in any manner. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral
or written notice thereof to the registered holders.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest form their date of issuance. Holders
of Notes that are accepted for exchange will receive, in cash, accrued
interest thereon to, but not including, the date of issuance of the Exchange
Notes. Such interest will be paid with the first interest payment on the
Exchange Notes on November 1, 1998. Interest on the Notes accepted for
exchange will cease to accrue upon issuance of the Exchange Notes.
Interest on the Exchange Notes is payable semi-annually on each May 1 and
November 1 commencing on November 1, 1998.
PROCEDURES FOR TENDERING
Only a holder of Notes may tender such Notes in the Exchange Offer. To
tender in the Exchange Offer, a holder must complete, sign and date the Letter
of Transmittal, or a facsimile thereof, have the signatures thereon guaranteed
if required by the Letter of Transmittal, and mail or otherwise deliver such
Letter of Transmittal or such facsimile, together with the Notes and any other
required documents, to the Exchange Agent prior to 5:00 p.m., New York City
time, on the Expiration Date. To be tendered effectively, the Notes, Letter of
Transmittal and other required documents must be completed and received by the
Exchange Agent at the address set forth below under "Exchange Agent" prior to
5:00 p.m., New York City time, on the Expiration Date. Delivery of the Notes
may be made by book-entry transfer in accordance with the procedures described
below. Confirmation of such book-entry transfer must be received by the
Exchange Agent prior to the Expiration Date.
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By executing the Letter of Transmittal, each holder will make to the Issuers
the representations set forth in the eighth paragraph under the heading "--
Purpose and Effect of the Exchange Offer."
The tender by a holder and the acceptance thereof by the Issuers will
constitute agreement between such holder and the Issuers in accordance with
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE RISK OF
THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO
CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE
EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR NOTES SHOULD BE SENT TO THE
ISSUERS. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL
BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH
HOLDERS.
Any beneficial owner whose Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to
tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See
"Instruction to Registered Holder and/or Book-Entry Transfer Facility
Participant from Owner" included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Notes tendered pursuant thereto are tendered (i) by a registered
holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal
or (ii) for the account of an Eligible Institution. In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case
maybe, are required to be guaranteed, such guarantee must be by a member firm
of the Medallion System (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Notes listed therein, such Notes must be endorsed or accompanied
by a properly completed bond power, signed by such registered holder as such
registered holder's name appears on such Notes with the signature thereon
guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, offices of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Issuers of their authority to so act must be submitted with the Letter of
Transmittal.
The Issuers understand that the Exchange Agent will make a request promptly
after the date of this Offering Memorandum to establish accounts with respect
to the Notes at the book-entry transfer facility, The Depository Trust Company
(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 Notes by causing such Book-Entry Transfer
Facility to transfer such Notes into the Exchange Agent's account with respect
to the Notes in accordance with the Book-Entry Transfers Facility's procedures
for such transfer. Although delivery of the 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 properly completed and
duly executed 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. Delivery of
documents to the Book-Entry Transfer Facility does not constitute delivery to
the Exchange Agent.
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The Depositary and DTC have confirmed that the Exchange Offer is eligible
for the DTC Automated Tender Offer Program ("ATOP"). Accordingly, DTC
participants may electronically transmit their accept-ance of the Exchange
Offer by causing DTC to transfer Notes to the Depositary in accordance with
DTC's ATOP procedures for transfer. DTC will then send an Agent's Message to
the Depositary.
The term "Agent's Message" means a message transmitted by DTC, received by
the Depositary and forming part of the confirmation of a book-entry transfer,
which states that DTC has received an express acknowledgment from the
participant in DTC tendering Notes which are the subject of such book-entry
confirmation, that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that Pen-Tab may enforce such agreement
against such participant. In the case of an Agent's Message relating to
guaranteed delivery, the term means a message transmitted by DTC and received
by the Depositary, which states that DTC has received an express
acknowledgment from the participant in DTC tendering Notes that such
participant has received and agrees to be bound by the Notice of Guaranteed
Delivery.
Notwithstanding the foregoing, in order to validly tender in the Exchange
Offer with respect to Securities transferred pursuant to ATOP, a DTC
participant using ATOP must also properly complete and duly execute and
applicable Letter of Transmittal and deliver it to the Depositary. Pursuant to
authority granted by DTC, any DTC participant which has Notes credited to its
DTC account at any time (and thereby held of record by DTC's nominee) may
directly provide a tender as though it were the registered holder by so
completing, executing and delivering the applicable Letter of Transmittal to
the Depositary. DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO
THE DEPOSITARY.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Notes and withdrawal of tendered Notes will
be determined by the Issuers in their sole discretion, which determination
will be final and binding. The Issuers reserve the absolute right to reject
any and all Notes not properly tendered or any Notes the Issuers' acceptance
of which would, in the opinion of counsel for the Issuers, be unlawful. The
Issuers also reserves the right in their sole discretion to waive any defects,
irregularities or conditions of tender as to particular Notes. The Issuers'
interpretation of the terms and conditions of the Exchange Offer (including
the instructions in the Letter of Transmittal) will be final and binding on
all parties. Unless waived, any defects or irregularities in connection with
tenders of Notes must be cured within such time as the Issuers shall
determine. Although the Issuers intend, to notify holders of defects or
irregularities with respect to tenders of Notes, neither the Issuers, the
Exchange Agent nor any other person shall incur any liability for failure to
give such notification. Tenders of Notes will not be deemed to have been made
until such defects or irregularities have been cured or waived. Any Notes
received by the Exchange Agent that are not properly tendered and as to which
the defects or irregularities have not been cured or waived will be returned
by the Exchange Agent to the tendering holders, unless otherwise provided in
the Letter of Transmittal, as soon as practicable following the Expiration
Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Notes and (i) whose Notes are not
immediately available, (ii) who cannot deliver their Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent or (iii) who
cannot complete the procedures for book-entry transfer, prior to the
Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number(s)
of such Notes and the principal amount of Notes tendered, stating that the
tender is being made thereby and guaranteeing that, within five New York
Stock Exchange trading days after the Expiration Date, the Letter of
Transmittal (or facsimile thereof) together with the certificate(s)
representing the Notes (or a confirmation of book-entry transfer of such
Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility), and any other documents required by the Letter of Transmittal
will be deposited by the Eligible Institution with the Exchange Agent; and
105
<PAGE>
(c) such properly completed and executed Letter of Transmittal (of
facsimile thereof), as well as the certificate(s) representing all tendered
Notes in proper form for transfer (or a confirmation of book-entry transfer
of such Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility), and all other documents required by the Letter of Transmittal
are received by the Exchange Agent upon five New York Stock Exchange
trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Notes may be withdrawn at
any time prior to 5:00 p.m., New York City time, on the Expiration Date. To
withdraw a tender of Notes in the Exchange offer, a telegram, telex, letter or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time,
on the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having deposited the Notes to be withdrawn (the
"Depositor"), (ii) identify the Notes to be withdrawn (including the
certificate number(s) and principal amount of such Notes, or, in the case of
Notes transferred by book-entry transfer, the name and number of the account
at the Book-Entry Transfer Facility to be credited), (iii) be signed by the
holder in the same manner as the original signature on the Letter of
Transmittal by which such Notes were tendered (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
have the Trustee with respect to the Notes register the transfer of such Notes
into the name of the person withdrawing the tender and (iv) specify the name
in which any such Notes are to be registered, if different form that of the
Depositor. All questions as to the validity, form and eligibility (including
time of receipt) of such notices will be determined by the Issuers, whose
determination shall be final and binding on all parties. Any Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no Exchange Notes will be issued with respect thereto
unless the Notes so withdrawn are validly retendered. Any Notes which have
been tendered but which are not accepted for exchange will be returned to the
holder thereof without cost to such holder as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Notes may be retendered by following one of the procedures described
above under "--Procedures for Tendering" at any time prior to the Expiration
Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Issuers shall not
be required to accept for exchange, or exchange Exchange Notes for, any Notes,
and may terminate or amend the Exchange Offer as provided herein before the
acceptance of such Notes, if:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offer
which, in the sole judgment of the Issuers, might materially impair the
ability of the Issuers to proceed with the Exchange Offer or any material
adverse development has occurred in any existing action or proceeding with
respect to the Issuers or any of their respective subsidiaries; or
(b) any law, statute, rule, regulation or interpretation by the staff of
the Commission is proposed, adopted or enacted, which, in the sole judgment
of the Issuers, might materially impair the ability of the Issuers to
proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Issuers; or
(c) any governmental approval has not been obtained, which approval the
Issuers shall, in their sole discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
If the Issuers determine in their sole discretion that any of the conditions
are not satisfied, the Issuers may (i) refuse to accept any Notes and return
all tendered Notes to the tendering holders, (ii) extend the Exchange
106
<PAGE>
Offer and retain all Notes tendered prior to the expiration of the Exchange
Offer, subject, however, to the rights of holders to withdraw such Notes (see
"--Withdrawal of Tenders") or (iii) waive such unsatisfied conditions with
respect to the Exchange Offer and accept all properly tendered Notes which
have not been withdrawn.
EXCHANGE AGENT
United States Trust Company of New York has been appointed as Exchange Agent
for the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Offering Memorandum or of the Letter of Transmittal
and requests for Notice of Guaranteed Delivery should be directed to the
Exchange Agent addressed as follows:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
Delivery to an address other than as set forth above will not constitute a
valid delivery.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Issuers. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Issuers and their respective affiliates.
The Issuers have 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 Issuers 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 cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Issuers. Such expenses include fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs,
among others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the Notes,
which is face value, as reflected in the Company's accounting records on the
date of exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company. The expenses of the Exchange Offer will be expensed
over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Notes that are not exchanged for Exchange Notes pursuant to the Exchange
Offer will remain restricted securities. Accordingly, such Notes may be resold
only; (i) to the Company (upon redemption thereof or otherwise); (ii) so long
as the Notes are eligible for resale pursuant to Rule 144A, to a person inside
the United States whom the seller reasonably believes is a qualified
institutional buyer within the meaning of Rule 144A under the Securities Act
in a transaction meeting the requirements of Rule 144A, in accordance with
Rule 144 under the Securities Act, or pursuant to another exemption from the
registration requirements of the Securities Act (and based upon an opinion of
counsel reasonably acceptable to the Issuers); (iii) outside the United States
to a foreign person in a transaction meeting the requirements of Rule 904
under the Securities Act; or (iv) 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.
107
<PAGE>
RESALES OF THE EXCHANGE NOTES
With respect to resales of Exchange Notes, based on interpretations by the
staff of the Commission set forth in no-action letters issued to third
parties, the Issuers believe that a holder or other person who receives
Exchange Notes, whether or not such person is the holder (other than a person
that is an "affiliate" of either Alliance or ACL within the meaning of Rule
405 under the Securities Act) who receives Exchange Notes in exchange for
Notes in the ordinary course of business and who is not participating, does
not intend to participate, and has no arrangement or understanding with person
to participate, in the distribution of the Exchange Notes, will be allowed to
resell the Exchange Notes to the public without further registration under the
Securities Act and without delivering to the purchasers of the Exchange Notes
a prospectus that satisfies the requirements of Section 10 of the Securities
Act. However, if any holder acquires Exchange notes in the Exchange Offer for
the
purpose of distributing or participating in a distribution of the Exchange
Notes, such holder cannot rely on the position of the staff of the Commission
enunciated in such no-action letters or any similar interpretive letters, and
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction, unless an exemption
from registration is otherwise available. Further, each Participating Broker-
Dealer that receives Exchange Notes for its own account in exchange for Notes,
where such Notes were acquired by such Participating 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.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent
to the Issuers in the Letter of Transmittal that (a) it is not an "affiliate"
of either Alliance or ALC (within the meaning of Rule 405 of the Securities
Act); (b) it is not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any person to participate in, a distribution
of the Exchange Notes to be issued in the Exchange Offer; (c) it is acquiring
the Exchange Notes in its ordinary course of business; and (d) if it is a
Participating Broker-Dealer holding Notes acquired for its own account as a
result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of Exchange Notes received in
respect of such Exchange Notes pursuant to the Exchange Offer. As indicated
above, each Participating Broker-Dealer that receives and Exchange Note for
its own account in exchange for Notes must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. For a
description of the procedures for such resales by Participating Broker-
Dealers, see "Plan of Distribution."
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion (including the opinion of special counsel described
below) is based upon current provisions of the Internal Revenue Code of 1986,
as amended, applicable Treasury regulations, judicial authority and
administrative rulings and practice. There can be no assurance that the
Internal Revenue Service (the "Service") will not take a contrary view, and no
ruling from the Service has been or will be sought. Legislative, judicial or
administrative changes or interpretations may be forthcoming that could alter
or modify the statements and conditions set forth herein. Any such changes or
interpretations may or may not be retroactive and could affect the tax
consequences to holders. Certain holders (including insurance companies, tax-
exempt organizations, financial institutions, broker-dealers, foreign
corporations and persons who are not citizens or residents of the United
States) may be subject to special rules not discussed below. The Issuers
recommend that each holder consult such holder's own tax advisor as to the
particular tax consequences of exchanging such holder's Notes for Exchange
Notes, including the applicability and effect of any state, local or foreign
tax laws.
Kirkland & Ellis, special counsel to the Issuers, has advised the Issuers
that in its opinion, the exchange of the Notes for Exchange Notes pursuant to
the Exchange Offer will not be treated as an "exchange" for federal income tax
purposes because the Exchange Notes will not be considered to differ
materially in kind or extent from the Notes. Rather, the Exchange Notes
received by a holder will be treated as a continuation of the Notes in the
hands of such holder. As a result, there will be no federal income tax
consequences to holders exchanging Notes for Exchange Notes pursuant to the
Exchange Offer.
108
<PAGE>
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with
any resale of Exchange Notes received in respect of such Notes pursuant to the
Exchange Offer. This Offering Memorandum, as it may be amended or supplemented
from time to time, may be used by a Participating Broker-Dealer in connection
with resales of Exchange Notes received in exchange for Notes where such Notes
were acquired as a result of market-making activities or other trading
activities. The Issuers have agreed that for a period of up to one year from
the consummation of the Exchange Offer, it will make this Offering Memorandum,
as amended or supplemented, available to any Participating Broker-Dealer for
use in connection with any such resale. In addition, until , 1998, all
dealers effecting transactions in the Exchange Notes may be required to
deliver a prospectus.
The Issuers will not receive any proceeds from any sales of the Exchange
Notes by Participating Broker-Dealers. Exchange Notes received by
Participating 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 market
prices prevailing at the time of resale, at prices related to such prevailing
market prices or negotiated prices. Any such resale may be made directly to
purchaser or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such Participating Broker-
Dealer and/or the purchasers of any such Exchange Notes. Any Participating
Broker-Dealer that resells the 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 a under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a Participating Broker-Dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
With respect to resales of Exchange Notes, based on interpretations by the
staff of the Commission set forth in no-action letters issued to third
parties, the Issuers believe that a holder or other person who receives
Exchange Notes, whether or not such person is the holder (other than a person
that is an "affiliate" of either Alliance or ACL within the meaning of Rule
405 under the Securities Act) who receives Exchange Notes in exchange for
Notes in the ordinary course of business and who is not participating, does
not intend to participate, and has no arrangement or understanding with person
to participate, in the distribution of the Exchange Notes, will be allowed to
resell the Exchange Notes to the public without further registration under the
Securities Act and without delivering to the purchasers of the Exchange Notes
a prospectus that satisfies the requirements of Section 10 of the Securities
Act. However, if any holder acquires Exchange Notes in the Exchange Offer for
the purpose of distributing or participating in a distribution of the Exchange
Notes, such holder cannot rely on the position of the staff of the Commission
enunciated in such no-action letters or any similar interpretive letters, and
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction and such a secondary
resale transaction should be covered by an effective registration statement
containing the selling security holder information required by Item 507 or
508, as applicable, of Regulation S-K under the Securities Act, unless an
exemption from registration is otherwise available. Further, each
Participating Broker-Dealer that receives Exchange Notes for its own account
in exchange for Notes, where such Notes were acquired by such Participating
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. The Issuers have agreed that, for a
period of up to one year from the consummation of the Exchange Offer, it will
make this Offering Memorandum available to any Participating Broker-Dealer for
use in connection with any such resale.
109
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to issuance of the Exchange Notes offered
hereby will be passed upon for the Issuers by Kirkland & Ellis, New York, New
York.
EXPERTS
The combined financial statements of the Company as of December 31, 1996 and
1997 and for each of the three years in the period ended December 31, 1997,
included in this Offering Memorandum, have been included herein in reliance on
the report, which includes an explanatory paragraph regarding the fact that
the Company operated as a unit of Raytheon Company, PricewaterhouseCoopers
LLP, independent accountants, given on the authority of that firm as experts
in auditing and accounting.
110
<PAGE>
COMMERCIAL LAUNDRY BUSINESS OF RAYTHEON COMPANY
INDEX TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants......................................... F-2
Combined Financial Statements:
Combined Statements of Assets, Liabilities and Parent Company Investment
at December 31, 1996 and 1997 and March 29, 1998* (Unaudited).......... F-3
Combined Statements of Income for the years ended December 31, 1995,
1996 and 1997, and for the quarters ended March 30, 1997 and March 29,
1998* (Unaudited)...................................................... F-4
Combined Statements of Parent Company Investment for the years ended
December 31, 1995, 1996 and 1997, and for the quarter ended March 29,
1998* (Unaudited)...................................................... F-5
Combined Statements of Cash Flows for the years ended December 31, 1995,
1996 and 1997, and for the quarters ended March 30, 1997 and March 29,
1998* (Unaudited)...................................................... F-6
Notes to Combined Financial Statements.................................... F-7
</TABLE>
* The financial statements at and for the quarter ended March 29, 1998 are
prepared on a consolidated basis (See Note A--Basis of presentation).
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Raytheon Company:
We have audited the accompanying combined statements of assets, liabilities
and parent company investment of the Commercial Laundry Business of Raytheon
Company ("Commercial Laundry" as defined in Note A) as of December 31, 1996
and 1997 and the related combined statements of income, parent company
investment, and cash flows for each of the three years in the period ended
December 31, 1997. These financial statements are the responsibility of
Commercial Laundry's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
Commercial Laundry is an operating unit of Raytheon Company. As discussed in
Note A, certain costs and expenses presented in the financial statements
represent allocations and management's estimates of the costs of services
provided to Commercial Laundry by Raytheon Company. As a result, the financial
statements presented may not be indicative of the financial position or
results of operations that would have been achieved had Commercial Laundry
operated as a nonaffiliated entity.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Commercial
Laundry as of December 31, 1996 and 1997 and the combined 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.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
January 23, 1998
F-2
<PAGE>
COMMERCIAL LAUNDRY BUSINESS OF RAYTHEON COMPANY
COMBINED STATEMENTS OF ASSETS, LIABILITIES
AND PARENT COMPANY INVESTMENT
(IN THOUSANDS)
<TABLE>
<CAPTION>
CONSOLIDATED
CONSOLIDATED PRO FORMA
DECEMBER 31, MARCH 29, MARCH 29,
----------------- ------------ ------------
1996 1997 1998 1998
ASSETS -------- -------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Current assets:
Cash............................. $ 962 $ 1,208 $ 1,607 $ 1,607
Accounts receivable (net of
allowance for doubtful accounts
of $590, $451 and $498 at
December 31, 1996 and 1997 and
March 29, 1998, respectively)... 9,274 21,648 50,505 50,505
Inventory, net................... 44,260 33,714 36,350 36,350
Deferred taxes................... 8,361 7,860 7,880 --
Prepaid expenses................. 1,044 1,732 2,265 2,265
-------- -------- -------- ---------
Total current assets........... 63,901 66,162 98,607 90,727
Notes receivable................... 4,403 12,424 4,917 3,647
Property, plant and equipment, net. 63,730 69,701 66,810 66,810
Goodwill (net of accumulated
amortization of $3,247, $4,747 and
$5,122 at December 31, 1996 and
1997 and March 29, 1998,
respectively)..................... 52,818 51,318 50,944 50,944
Debt issuance costs................ -- -- -- 16,239
Other assets....................... 1,701 5,481 6,337 6,514
-------- -------- -------- ---------
Total assets................... $186,553 $205,086 $227,615 $ 234,881
======== ======== ======== =========
<CAPTION>
LIABILITIES AND PARENT COMPANY
INVESTMENT
<S> <C> <C> <C> <C>
Current liabilities:
Accounts payable................. 17,881 17,410 20,477 20,477
Finance Program obligation....... 1,356 11,829 44,633 44,633
Other current liabilities........ 20,765 21,489 20,292 20,292
-------- -------- -------- ---------
Total current liabilities...... 40,002 50,728 85,402 85,402
Deferred compensation............ -- -- -- 341
Deferred taxes................... 4,005 5,785 6,389 --
Long-term debt:
Industrial Revenue Bonds........ 1,000 -- -- --
Senior Credit Facility.......... -- -- -- 205,146
Senior Subordinated Notes....... -- -- -- 110,000
-------- -------- -------- ---------
Total liabilities.............. 45,007 56,513 91,791 400,889
Commitments and contingencies (See
Note J)
Parent company investment.......... 141,546 148,573 135,824 --
Contributed capital (deficit)...... -- -- -- (166,008)
-------- -------- -------- ---------
Total liabilities and parent
company investment............ $186,553 $205,086 $227,615 $ 234,881
======== ======== ======== =========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-3
<PAGE>
COMMERCIAL LAUNDRY BUSINESS OF RAYTHEON COMPANY
COMBINED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
CONSOLIDATED
QUARTER QUARTER
ENDED ENDED
MARCH 30, MARCH 29,
1995 1996 1997 1997 1998
-------- -------- -------- --------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales:
Commercial laundry......... $213,381 $209,123 $239,255 $52,573 $51,725
Appliance Co. consumer
laundry................... 79,382 76,992 76,853 19,637 23,296
Service parts.............. 31,766 32,148 31,601 8,265 8,274
-------- -------- -------- ------- -------
324,529 318,263 347,709 80,475 83,295
Cost of sales................ 259,272 246,017 263,932 61,881 63,945
-------- -------- -------- ------- -------
Gross profit................. 65,257 72,246 83,777 18,594 19,350
Selling, general and
administrative expense...... 35,360 34,464 41,070 9,128 10,580
Nonrecurring costs........... 574 3,704 -- -- --
-------- -------- -------- ------- -------
Operating income......... 29,323 34,078 42,707 9,466 8,770
Other income, net............ 778 685 -- -- --
-------- -------- -------- ------- -------
Income before taxes...... 30,101 34,763 42,707 9,466 8,770
Provision for income taxes... 11,545 13,408 16,431 3,643 3,385
-------- -------- -------- ------- -------
Net income............... $ 18,556 $ 21,355 $ 26,276 $ 5,823 $ 5,385
======== ======== ======== ======= =======
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-4
<PAGE>
COMMERCIAL LAUNDRY BUSINESS OF RAYTHEON COMPANY
COMBINED STATEMENTS OF PARENT COMPANY INVESTMENT
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, CONSOLIDATED
---------------------------- MARCH 29,
1995 1996 1997 1998
-------- -------- -------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Parent company investment, beginning
of period.......................... $ 93,335 $175,317 $141,546 $148,573
Net income.......................... 18,556 21,355 26,276 5,385
Dividends........................... (6,317) (7,746) -- --
Net transfers (to)/from parent...... 69,743 (47,380) (19,249) (18,134)
-------- -------- -------- --------
Parent company investment, end of
period............................. $175,317 $141,546 $148,573 $135,824
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-5
<PAGE>
COMMERCIAL LAUNDRY BUSINESS OF RAYTHEON COMPANY
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
CONSOLIDATED
QUARTER QUARTER
YEARS ENDED DECEMBER 31, ENDED ENDED
--------------------------- MARCH 30, MARCH 29,
1995 1996 1997 1997 1998
------- -------- -------- --------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income.............. $18,556 $ 21,355 $ 26,276 $ 5,823 $ 5,385
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization......... 10,847 11,145 14,445 3,000 3,727
(Gain) loss on sale of
property, plant and
equipment............ (30) (19) (32) (20) 40
Deferred income taxes. (2,058) 1,073 2,281 2,281 584
Changes in assets and
liabilities:
Trade and notes
receivable......... (5,483) 49,105 (20,395) (19,879) (21,350)
Inventory........... (6,646) (3,453) 10,546 718 (2,636)
Other assets........ 884 (2,019) (3,780) (4,415) (1,389)
Accounts payable.... 2,105 (2,054) (471) 4,019 3,067
Finance Program
obligation......... -- 1,356 10,473 12,734 32,804
Other current
liabilities........ (658) 703 724 (2,203) (1,197)
------- -------- -------- ------- -------
Net cash provided
by operating
activities....... 17,517 77,192 40,067 2,058 19,035
------- -------- -------- ------- -------
Cash flows from investing
activities:
Additions to property,
plant and equipment.... (16,177) (22,030) (22,623) (7,949) (1,457)
Proceeds on disposal of
property, plant and
equipment.............. 430 853 3,051 1,308 955
Acquisition of business
less cash acquired..... (65,100) -- -- -- --
------- -------- -------- ------- -------
Net cash (used in)
investing
activities....... (80,847) (21,177) (19,572) (6,641) (502)
------- -------- -------- ------- -------
Cash flows from financing
activities:
Transfers (to) from
parent................. 69,743 (47,380) (19,249) 4,003 (18,134)
Dividend payments to
parent................. (6,317) (7,746) -- -- --
Increase (decrease) in
long-term debt......... (300) (100) (1,000) -- --
------- -------- -------- ------- -------
Net cash provided
by (used in)
financing
activities....... 63,126 (55,226) (20,249) 4,003 (18,134)
------- -------- -------- ------- -------
Increase (decrease) in
cash..................... (204) 789 246 (580) 399
Cash at beginning of
period................... 377 173 962 962 1,208
------- -------- -------- ------- -------
Cash at end of period..... $ 173 $ 962 $ 1,208 $ 382 $ 1,607
======= ======== ======== ======= =======
Supplemental disclosures
of cash flow information:
Cash paid for:
Interest.............. $ 91 $ 70 $ 33 $ 20 $ --
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-6
<PAGE>
COMMERCIAL LAUNDRY BUSINESS OF RAYTHEON COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS)
INFORMATION AS OF MARCH 29, 1998, AND FOR THE QUARTERS ENDED MARCH 30, 1997
AND MARCH 29, 1998, IS UNAUDITED
A. ACCOUNTING POLICIES:
Basis of Presentation
The Commercial Laundry Business of Raytheon Company ("Commercial Laundry")
is an operating unit of Raytheon Company (the "Parent"). Commercial Laundry
designs, manufactures and services a full line of commercial laundry equipment
for sale in the U.S. and for export to numerous international markets.
Commercial Laundry also manufactures consumer washing machines for sale to
Appliance Co. (see "Sale to Appliance Co.") and international customers.
Commercial Laundry produces all of its products in the U.S. at three
manufacturing plants located in Ripon, Wisconsin, Marianna, Florida and
Madisonville, Kentucky. In 1996, Raytheon Appliances, S.A. was established to
build, own and operate high quality coin laundromats in Latin America.
All material intercompany transactions have been eliminated.
These financial statements present Commercial Laundry's combined results of
operations and its financial condition as it operated as a unit of the Parent,
including certain adjustments necessary for a fair presentation of the
business. The financial statements presented may not be indicative of the
results that would have been achieved had Commercial Laundry operated as an
unaffiliated entity. Since Commercial Laundry did not operate as a stand-alone
legal entity until September 10, 1997, the financial statements have been
presented on a combined basis for the years ended December 31, 1995 and 1996
and the quarter ended March 30, 1997. Although Commercial Laundry was a stand-
alone legal entity at December 31, 1997, it did not operate as such for the
majority of 1997 and therefore the financial statements at December 31, 1997
and the year then ended have also been presented on a combined basis.
Interim Financial Information
The combined financial statements of Commercial Laundry as of March 29, 1998
and for the quarters ended March 30, 1997 and March 29, 1998 are unaudited.
Adjustments consisting of normal recurring adjustments and adjustments
necessary to present the combined results of operations and financial
condition of Commercial Laundry as it operated as a unit of the Parent have
been made, which in the opinion of management are necessary for a fair
presentation. Results of operations for the quarter ended March 29, 1998 are
not necessarily indicative of the results that may be expected for the full
year or for any future period.
Background
Commercial Laundry originated from the acquisition of Speed Queen Company
("Speed Queen") by the Parent in October of 1979. Speed Queen operated as a
separate subsidiary of the Parent until March 31, 1996 when it was merged into
Amana Refrigeration, Inc. ("Amana"), a wholly-owned subsidiary of the Parent,
which manufactures and services home appliances. In connection with this
consolidation, the Speed Queen legal entity was dissolved and Amana
Refrigeration, Inc. was renamed Raytheon Appliances, Inc. On September 10,
1997, in connection with the sale by the Parent of its consumer laundry
business (See Sale to Appliance Co.), Raytheon Appliances, Inc. was dissolved.
Concurrently, Raytheon Commercial Laundry LLC was established as a limited
liability company to carry on the commercial laundry portion of the Parent's
appliance business. In addition, the legal entity Alliance Laundry S.A. became
a wholly-owned subsidiary of the newly established entity, Raytheon Commercial
Laundry LLC. Similarly, two special-purpose wholly-owned subsidiaries
established for the purpose of selling accounts receivable and notes
receivable off-balance sheet became wholly-owned subsidiaries of Raytheon
Commercial Laundry LLC (See Sales of Accounts Receivable and Notes
Receivable).
F-7
<PAGE>
COMMERCIAL LAUNDRY BUSINESS OF RAYTHEON COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS)
INFORMATION AS OF MARCH 29, 1998, AND FOR THE QUARTERS ENDED MARCH 30, 1997
AND MARCH 29, 1998, IS UNAUDITED
Sale to Appliance Co.
Historically, Commercial Laundry reported as one of five operating units
comprising the Parent's appliances division. On September 10, 1997, the Parent
sold three of the five operating units of its appliances division to a large
consumer appliance company ("Appliance Co." or the "Appliance Co.
Transaction"). As a result of this sale, the Parent divested its consumer
appliance, heating and air conditioning, and commercial cooking operating
units, while retaining its commercial laundry and control systems operating
units. In connection with the sale, the Parent also sold to Appliance Co. a
laundry manufacturing plant in Searcy, Arkansas ("Searcy"). This plant was
acquired by the Parent as part of the Speed Queen acquisition. Searcy's
operations are predominately related to the production of consumer laundry
equipment (approximately 80% consumer and 20% commercial).
Given that Searcy's operations are principally unrelated to the commercial
laundry business and since Searcy was sold as part of the Appliance Co.
Transaction, the plant's operations have been excluded from the Commercial
Laundry combined financial statements. All assets and liabilities of Searcy
have been excluded from these financial statements, except for certain tooling
and dies which are specific to the production of commercial laundry products
and were retained by Commercial Laundry subsequent to the sale. Production of
commercial product by Searcy has been reflected as being purchased by
Commercial Laundry at standard cost for all periods presented. Outstanding
payables associated with these purchases from Searcy of $1.5 million and $1.3
million are included in accounts payable at December 31, 1996 and 1997,
respectively.
On September 10, 1997, $10.4 million of consumer laundry inventory was
located at the Ripon plant. This inventory was sold by the Parent as part of
the Appliance Co. Transaction. Commercial Laundry recorded the transfer of
this inventory to its Parent at book value as a reduction to inventory and
parent company investment.
Effective September 10, 1997, in connection with the Appliance Co.
Transaction, Commercial Laundry and Appliance Co. entered into two supply
agreements. Under the first supply agreement, Commercial Laundry has agreed to
purchase small chassis front loading washing machines from Appliance Co. for
one year and small chassis dryers, stack dryers, and stack front loading
washer/dryer combinations for two years commencing on September 10, 1997.
Commercial Laundry has agreed to purchase a minimum of 144,000 machines over
the two year period at an approximate cost of $40 million. Failure to purchase
the minimum quantity in any twelve month period would result in damages due
Appliance Co. of $45 per unit of shortfall. Commercial Laundry is currently
developing the production capability to produce those products purchased from
Appliance Co. at its Ripon, Wisconsin facility.
Under a second agreement (the "Appliance Co. Purchase Agreement"), Appliance
Co. has agreed to purchase a specified quantity of top loading washing
machines from Commercial Laundry annually over the term of the agreement.
Commercial Laundry believes that Appliance Co. will ultimately seek
alternative sources for the production of top loading washing machines. The
loss of these revenues and related production is not expected to have a
material impact on the carrying value of recorded assets.
Cash Management
Under Commercial Laundry's cash management program, which is handled through
the treasury function of its parent, checks and amounts in transit are not
considered reductions of cash or accounts payable until presented to the
appropriate banks for payment. At December 31, 1996 and 1997 and March 29,
1998, checks and amounts in transit were $2.9 million, $3.8 million and $6.0
million, respectively.
F-8
<PAGE>
COMMERCIAL LAUNDRY BUSINESS OF RAYTHEON COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS)
INFORMATION AS OF MARCH 29, 1998, AND FOR THE QUARTERS ENDED MARCH 30, 1997
AND MARCH 29, 1998, IS UNAUDITED
Revenue Recognition
Commercial Laundry Revenue
Commercial Laundry revenue is recognized upon shipment. Commercial Laundry
revenues include sales of consumer laundry products to international
customers.
Appliance Co. Consumer Laundry Revenue
Commercial Laundry sells consumer laundry products manufactured at its
Ripon, Wisconsin plant to Appliance Co. and its predecessor Amana. Revenues
from consumer laundry sales to Amana have been recognized upon shipment at
standard cost plus 7% for all periods presented prior to September 10, 1997.
Subsequent to September 10, 1997, sales of consumer laundry products are made
to Appliance Co. at standard cost plus 0.6% in accordance with the Appliance
Co. Purchase Agreement.
Service Parts Revenue
Service parts revenue is recognized upon shipment.
Financing Program Revenue
Commercial Laundry sells notes receivable and accounts receivable through
its special-purpose bankruptcy remote entities, Raytheon Commercial Appliances
Financing Corporation and Raytheon Commercial Appliances Receivables
Corporation, to a third-party bank (see Notes B and C). Commercial Laundry, as
servicing agent, retains collection and administrative responsibilities for
the notes. Commercial Laundry earns a servicing fee, based on the average
outstanding balance. In addition, Commercial Laundry records gains or losses
on the sales of notes receivable and accounts receivable in the period in
which such sales occur in accordance with Statement of Financial Accounting
Standard No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabilities". Commercial Laundry also recognizes
interest income on notes receivable retained in the period the interest is
earned. Servicing revenue, interest income on notes receivable retained, and
gains on the sale of notes receivable are included in Commercial Laundry
revenues. Losses on the sales of accounts receivable are recognized in the
period in which such sales occur and are included in selling, general and
administrative expenses.
Inventories
Inventories are stated at cost using the first-in, first-out method but not
in excess of net realizable value.
Warranty Liabilities
The cost of warranty obligations are estimated and provided for at the time
of sale. Standard product warranties cover most parts for two years (three
years for products sold beginning in June 1997) and certain parts for five
years.
Research and Development Expenses
Research and development expenditures are expensed as incurred. Research and
development costs were $5.8 million, $6.3 million, $7.6 million, $1.8 million
and $1.6 million in 1995, 1996 and 1997 and for the quarters ended March 30,
1997 and March 29, 1998, respectively.
F-9
<PAGE>
COMMERCIAL LAUNDRY BUSINESS OF RAYTHEON COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS)
INFORMATION AS OF MARCH 29, 1998, AND FOR THE QUARTERS ENDED MARCH 30, 1997
AND MARCH 29, 1998, IS UNAUDITED
Advertising Expenses
The Company expenses advertising costs as incurred. Commercial Laundry
incurred advertising expenses of $2.8 million, $3.0 million, $3.4 million,
$0.6 million and $0.5 million in 1995, 1996 and 1997 and for the quarters
ended March 30, 1997 and March 29, 1998, respectively.
Property, Plant and Equipment
Property, plant and equipment is stated at cost. Betterments and major
renewals are capitalized and included in property, plant and equipment while
expenditures for maintenance and repairs and minor renewals are charged to
expense. When assets are retired or otherwise disposed of, the assets and
related allowances for depreciation and amortization are eliminated and any
resulting gain or loss is reflected in other income.
Provisions for depreciation are computed generally on a declining-balance or
straight-line method. Depreciation provisions are based on the following
estimated useful lives: buildings 40 years; machinery and equipment (including
production tooling) 5 to 10 years. Leasehold improvements are amortized over
the lesser of the remaining life of the lease or the estimated useful life of
the improvement.
Intangibles
Goodwill represents the excess of the acquisition cost over the fair value
of the net assets acquired in purchase transactions, and is amortized using
the straight-line method over 40 years. At each balance sheet date, Commercial
Laundry evaluates the realizability of goodwill based on expectations of non-
discounted cash flows and operating income. Based on its most recent analysis,
Commercial Laundry believes that no material impairment of goodwill exists at
the balance sheet date.
In 1996, Commercial Laundry purchased the LaveRap tradename and franchise
rights for use in developing high quality coin laundromats in Latin America.
These intangibles were recorded at a cost of $1.6 million and are being
amortized on a straight-line basis over 15 years. The net book value of these
intangibles is included in other assets.
Federal and Foreign Income Taxes
Historically, Commercial Laundry's operations have been included in the
consolidated income tax returns filed by the Parent. Income tax expense in
Commercial Laundry's statement of income is calculated on a separate tax
return basis as if Commercial Laundry had operated as a stand alone entity.
The provision for income taxes is calculated in accordance with Statement of
Financial Accounting Standards ("SFAS 109"), "Accounting for Income Taxes, "
which requires the recognition of deferred income taxes using the liability
method.
Parent Company Investment
Commercial Laundry receives short-term funding from its Parent to meet its
periodic cash flow needs. Commercial Laundry paid dividends from its earnings
to its Parent of $6.3 million and $7.7 million for 1995 and 1996,
respectively. No dividends were paid to its Parent in 1997 or for the quarter
ended March 29, 1998. Interest expense associated with the Parent's general
corporate debt has not been allocated to the combined financial statements.
Commercial Laundry participates in numerous benefit plans of the Parent (see
Note K).
F-10
<PAGE>
COMMERCIAL LAUNDRY BUSINESS OF RAYTHEON COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS)
INFORMATION AS OF MARCH 29, 1998, AND FOR THE QUARTERS ENDED MARCH 30, 1997
AND MARCH 29, 1998, IS UNAUDITED
Certain services are provided to Commercial Laundry by its Parent, primarily
related to treasury, taxes, legal and risk management. The estimated costs of
such services have been included in these financial statements. Management
believes these allocations are reasonable. The Parent provides certain
supplemental services to Commercial Laundry related primarily to general tax
and legal, audit and human resources which are not material and have been
excluded from these financial statements. During a portion of 1996 and a
portion of 1997, certain administrative services were performed by Amana on
behalf of Commercial Laundry. In 1996, these costs were not material and were
excluded from these financial statements. The estimated cost of these services
which consisted mainly of accounting and payroll services have been reflected
in the income statement in 1997.
All transfers to and from the Parent have been reported in the parent
company investment account.
Sales of Accounts Receivable and Notes Receivable (See Notes B and C)
Effective January 1, 1997, Commercial Laundry adopted Statement of Financial
Accounting Standards No. 125 ("SFAS 125"), "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." According
to SFAS 125, a transfer of financial assets in which the transferor surrenders
control over those assets is accounted for as a sale to the extent that
consideration other than beneficial interests in the transferred assets is
received in exchange. Beginning in 1997, Commercial Laundry sold a significant
portion of accounts receivable and notes receivable to third parties through
special-purpose bankruptcy remote entities designed to meet the SFAS 125
requirements for sale treatment. Accordingly, Commercial Laundry removes these
receivables from its balance sheet at the time of transfer. The special-
purpose bankruptcy remote entities include Raytheon Commercial Appliances
Receivables Corporation ("RAYCAR") through which Commercial Laundry sells
eligible trade accounts receivable and Raytheon Commercial Appliances
Financing Corporation ("RAYCAF") through which Commercial Laundry sells
eligible notes receivable. In a subordinated capacity, Commercial Laundry
retains rights to the residual portion of interest earned on the notes
receivable sold. In determining the gain on sales of notes receivable, the
investment in the sold receivable pool is allocated between the portion sold
and the portion retained, based on their relative fair values.
Under these arrangements Commercial Laundry acts as sub-servicer of the
accounts receivable and notes receivable sold. As sub-servicer, Commercial
Laundry continues to administer and collect amounts outstanding on such
receivables. At December 31, 1997 and March 29, 1998, Commercial Laundry had
collected approximately $7.2 million and $40.4 million of accounts receivable,
respectively, which were subsequently transferred through a monthly settlement
process. At the balance sheet dates, these amounts were recorded as an accrued
liability. At December 31, 1997 and March 29, 1998, Commercial Laundry had
collected approximately $1.9 million and $1.6 million of notes receivable
which were subsequently transferred to the buyers through a monthly settlement
process. At the balance sheet dates, these amounts were recorded as accounts
payable.
Long-term Debt
Long-term debt at December 31, 1996 consisted of industrial revenue bonds
with a face value of $1.0 million carrying interest at a variable rate per
annum equal to 60% of the prime rate. These bonds were repaid in full in May
1997.
Impairment of Long-Lived Assets
In 1996, Commercial Laundry adopted Statement of Financial Accounting
Standards No. 121 ("SFAS 121"), "Accounting for the Impairment of Long-Lived
Assets to be Disposed Of." Adoption of SFAS 121 did not have a material impact
on Commercial Laundry's financial position or results of operations.
F-11
<PAGE>
COMMERCIAL LAUNDRY BUSINESS OF RAYTHEON COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS)
INFORMATION AS OF MARCH 29, 1998, AND FOR THE QUARTERS ENDED MARCH 30, 1997
AND MARCH 29, 1998, IS UNAUDITED
Risks and Uncertainties
The raw material component of Commercial Laundry's products consists mainly
of commodity materials such as steel, aluminum, copper, plastic and cardboard,
over which the company has limited control. Fluctuations in the costs of such
commodities can vary widely resulting in significant material cost variances.
Wage costs for certain employees at the Ripon plant are determined by a
collective bargaining agreement which expires on February 28, 1999. Wage
increases through the term of the current agreement are not expected to be
significant.
Commercial Laundry has obtained financing for its day to day operations from
its Parent (see "Parent Company Investment").
Credit Risk
Financial instruments that potentially subject Commercial Laundry to
concentrations of credit risk include trade accounts receivable and notes
receivable.
Concentrations of credit risk with respect to trade receivables and notes
receivable are limited because a large number of geographically diverse
customers make up Commercial Laundry's customer base, thus spreading the
credit risk. Commercial Laundry controls credit risk through credit approvals,
credit limits and monitoring procedures. Bad debt expenses have not been
material.
Reclassifications
Certain amounts in prior year financial statements have been reclassified to
conform to the current year presentation.
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.
Recently Issued Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 131, "Disclosure about Segments of an Enterprise and Related Information,"
which changes the manner in which public companies report information about
their operating segments. SFAS No. 131, which is based on the management
approach to segment reporting, establishes requirements to report selected
segment information quarterly and to report entity-wide disclosures about
products and services, major customers and the geographic locations in which
the entity holds assets and reports revenue. Commercial Laundry will adopt
SFAS No. 131 for its fiscal year ending December 31, 1998.
In February 1998, FASB issued SFAS No. 132, "Employees' Disclosures about
Pensions and Other Postretirement Benefits." The new requirements require
increased disclosures for public entities. SFAS No. 132 only affects
disclosure issues and does not change any existing measurement or recognition
provisions previously required. The statement is effective for fiscal years
beginning after December 15, 1997. Reclassification for earlier periods is
required for comparative purposes. Commercial Laundry will adopt SFAS No. 132
for its fiscal year ended December 31, 1998.
F-12
<PAGE>
COMMERCIAL LAUNDRY BUSINESS OF RAYTHEON COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS)
INFORMATION AS OF MARCH 29, 1998, AND FOR THE QUARTERS ENDED MARCH 30, 1997
AND MARCH 29, 1998, IS UNAUDITED
B. CUSTOMER FINANCING:
Since 1992, Commercial Laundry has offered a variety of equipment financing
programs (capital leases) to finance equipment purchases. These capital leases
are transferred immediately to third parties who administer the contracts and
earn all associated interest revenues ("External Financing"). These External
Financings have terms ranging from 2 to 7 years and carry market interest
rates as set by the third-party lender. These third parties have recourse
against Commercial Laundry ranging from 15% to 100%. Under these programs,
Commercial Laundry sold $48.0 million and $20.2 million during the years ended
1995 and 1996, respectively. At December 31, 1996 and 1997 and March 29, 1998,
the uncollected balance of leases with recourse under these programs was
$131.0 million, $102.4 million and $41.0 million, respectively.
In 1996, Commercial Laundry established an internal financing organization
to originate and administer promissory notes (the "Notes" or "Internal
Financing") for financing of equipment purchases and laundromat operations.
These notes typically have terms ranging from Prime plus 2% to Prime plus 3%
for variable notes and 11.5% to 14.5% for fixed notes. The average interest
rate for all notes ranges from 10.25% to 14.5% and have terms ranging from 2
to 7 years. All notes allow the holder to prepay outstanding principle amounts
without penalty, and are therefore subject to prepayment risk. Commercial
Laundry through its special-purpose bankruptcy remote entity, RAYCAF, has an
agreement with Falcon Asset Securitization Corporation (the "Bank"), a wholly-
owned subsidiary of First Chicago/NBD under which it sold (prior to the
Transactions) defined pools of notes receivable. Under the terms of the
agreement with the Bank, the Bank is paid interest based on the 30-day
commercial paper rate plus 0.3% (as of December 31, 1997 and as of March 29,
1998) and has recourse against Commercial Laundry ranging from 15% to 100%.
The Company, as servicing agent, retains collection and administrative
responsibilities for the Notes. In 1996 and 1997 under its financing program,
Commercial Laundry sold $55.9 million and $105.0 million, respectively. For
the quarter ended March 29, 1998, Commercial Laundry sold $43.5 million under
its financing program. Under the terms of Commercial Laundry's agreement with
the Bank, uncollected balances on notes receivable sold may not exceed $159.5
million at March 29, 1998 (increased in 1998 from the previous limit of $135.0
million). The total amount uncollected at December 31, 1996 and 1997 and at
March 29, 1998, was $52.0 million, $134.0 million and $154.9 million,
respectively.
Gains on sales of notes receivable in 1996 and 1997, and for the quarters
ended March 30, 1997 and March 29, 1998 of approximately $0.6 million, $6.2
million, $1.0 million and $2.4 million, respectively, are included in
Commercial Laundry revenues.
Subsequent to March 29, 1998 Commercial Laundry received a prepayment of
notes receivable from a large customer totaling approximately $42.7 million.
The impact of this prepayment will be recorded in Commercial Laundry's second
quarter results.
C. SALES OF ACCOUNTS RECEIVABLE:
Commercial Laundry has entered into an agreement through its special-purpose
bankruptcy remote entity, RAYCAR, with the Preferred Receivables Funding
Corporation, a wholly-owned subsidiary of First Chicago/NBD to sell certain
defined pools of trade accounts receivable. Under the terms of the agreement,
interest is charged based on the 30-day commercial paper rate plus 0.3% (as of
December 31, 1997). The interest rates are adjusted based on the Parent's debt
rating. The agreement contains recourse provisions ranging from
F-13
<PAGE>
COMMERCIAL LAUNDRY BUSINESS OF RAYTHEON COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS)
INFORMATION AS OF MARCH 29, 1998, AND FOR THE QUARTERS ENDED MARCH 30, 1997
AND MARCH 29, 1998, IS UNAUDITED
23% to 100%. As collections reduce accounts receivable included in the pools,
Commercial Laundry sells additional accounts receivable to bring the amount
sold up to the maximum permitted by the agreement. Commercial Laundry, as
servicing agent, retains collection and administrative responsibility for the
accounts receivable. Under this agreement, Commercial Laundry sold $56.7
million, $284.5 million and $37.3 million in 1996 and 1997, and during the
quarter ended March 29, 1998, respectively. Under the terms of the agreement,
uncollected balances on trade accounts receivable sold may not exceed $80
million (increased in 1998 from the previous limit of $60 million). The total
amount uncollected at December 31, 1996 and 1997, and March 29, 1998 was $56.7
million, $74.6 million and $63.0 million, respectively.
Losses on sales of trade accounts receivable of $3.4 million, $0.7 million
and $0.7 million in 1997 and for the quarters ended March 30, 1997 and March
29, 1998, respectively, are included in selling, general and administrative
expenses.
D. INVENTORIES:
Inventories consisted of the following at:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- MARCH 29,
1996 1997 1998
------- ------- ---------
<S> <C> <C> <C>
Materials and purchased parts....................... $15,354 $16,701 $16,579
Work in process..................................... 6,105 3,530 3,458
Finished goods...................................... 26,769 17,785 20,547
Less: inventory reserves............................ (3,968) (4,302) (4,234)
------- ------- -------
Total........................................... $44,260 $33,714 $36,350
======= ======= =======
</TABLE>
E. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consisted of the following at:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ MARCH 29,
1996 1997 1998
-------- -------- ---------
<S> <C> <C> <C>
Land............................................. $ 536 $ 556 $ 550
Buildings and leasehold improvements............. 24,168 26,788 25,898
Machinery and equipment.......................... 112,956 137,245 138,214
-------- -------- --------
137,660 164,589 164,662
Less: accumulated depreciation................... (87,853) (98,555) (100,244)
-------- -------- --------
49,807 66,034 64,418
Construction in process.......................... 13,923 3,667 2,392
-------- -------- --------
Property, plant and equipment, net............... $ 63,730 $ 69,701 $ 66,810
======== ======== ========
</TABLE>
Depreciation expense was $9.5 million, $9.5 million, $12.9 million, $2.6
million and $3.4 million for the years ended December 31, 1995, 1996 and 1997,
and for the quarters ended March 30, 1997 and March 29, 1998, respectively.
F-14
<PAGE>
COMMERCIAL LAUNDRY BUSINESS OF RAYTHEON COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS)
INFORMATION AS OF MARCH 29, 1998, AND FOR THE QUARTERS ENDED MARCH 30, 1997
AND MARCH 29, 1998, IS UNAUDITED
F. OTHER CURRENT LIABILITIES:
The major components of other current liabilities consisted of the following
at:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- MARCH 29,
1996 1997 1998
------- ------- ---------
<S> <C> <C> <C>
Warranty reserve...................................... $ 5,493 $ 4,748 $ 4,533
Workers' compensation................................. 1,585 1,585 1,585
Accrued sales promotion and cooperative advertising... 3,953 4,338 4,265
Salaries, wages and other employee benefits........... 6,775 5,878 4,768
Other current liabilities............................. 2,959 4,940 5,141
------- ------- -------
Total............................................. $20,765 $21,489 $20,292
======= ======= =======
</TABLE>
G. NONRECURRING COSTS:
During 1996, Commercial Laundry incurred $3.7 million in costs associated
with severance and benefit payments to reduce headcount and eliminate certain
redundant processes as part of the consolidation of Speed Queen into Amana
Refrigeration, Inc. (see Note A).
H. FEDERAL AND FOREIGN INCOME TAXES:
Commercial Laundry's combined financial statements reflect a charge for
federal, state and foreign income taxes based on income as if Commercial
Laundry had been subject to income tax on a separate return basis. The charge
was computed in accordance with SFAS 109 and the charge is based on the
current tax rates.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31, QUARTERS ENDED
------------------------ -------------------
MARCH 30, MARCH 29,
1995 1996 1997 1997 1998
------- ------- ------- --------- ---------
<S> <C> <C> <C> <C> <C>
Current income tax expense:
Federal and foreign............ $11,121 $10,081 $11,576 $2,570 $2,288
State.......................... 2,482 2,254 2,574 572 513
------- ------- ------- ------ ------
13,603 12,335 14,150 3,142 2,801
Deferred income tax expense
(benefit):
Federal and foreign............ (1,694) 883 1,877 411 481
State.......................... (364) 190 404 90 103
------- ------- ------- ------ ------
(2,058) 1,073 2,281 501 584
------- ------- ------- ------ ------
Net provision................ $11,545 $13,408 $16,431 $3,643 $3,385
======= ======= ======= ====== ======
</TABLE>
F-15
<PAGE>
COMMERCIAL LAUNDRY BUSINESS OF RAYTHEON COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS)
INFORMATION AS OF MARCH 29, 1998, AND FOR THE QUARTERS ENDED MARCH 30, 1997
AND MARCH 29, 1998, IS UNAUDITED
The provision for income taxes for the years 1995 through 1997 and the
quarters ended March 30, 1997 and March 29, 1998 differs from the U.S.
statutory rate due to the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31, QUARTERS ENDED
------------------------- -------------------
MARCH 30, MARCH 29,
1995 1996 1997 1997 1998
------- ------- ------- --------- ---------
<S> <C> <C> <C> <C> <C>
Tax at statutory rate........... $10,535 $12,167 $14,894 $3,301 $3,071
State income tax net of federal
tax benefit.................... 1,377 1,588 1,936 429 400
Other, net...................... (367) (347) (399) (87) (86)
------- ------- ------- ------ ------
$11,545 $13,408 $16,431 $3,643 $3,385
======= ======= ======= ====== ======
</TABLE>
Current income tax expense amounts are included as a transfer to the Parent
in the parent company investment account. The effect of temporary differences
which give rise to deferred income tax balances was as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------- MARCH 29,
1996 1997 1998
------ ------ ---------
<S> <C> <C> <C>
Current deferred tax assets:
Inventory reserve................................... $1,774 $1,588 $1,879
Accounts receivable allowances...................... 1,274 2,384 2,403
Warranty reserve.................................... 2,172 1,878 1,793
Accrued vacation.................................... 736 435 435
Other reserves...................................... 2,405 1,575 1,370
------ ------ ------
8,361 7,860 7,880
Noncurrent deferred tax liabilities:
Depreciation and amortization....................... (4,005) (5,785) (6,389)
------ ------ ------
Net deferred tax assets........................... $4,356 $2,075 $1,491
====== ====== ======
</TABLE>
I. EMPLOYEE STOCK PLANS:
As an operating unit of its Parent, Commercial Laundry has no employee stock
option plan; however, certain employees of Commercial Laundry participate in
the Parent's stock option plans.
The Parent has three stock option plans. The 1976 Stock Option Plan provides
for the grant of both incentive and nonqualified stock options at an exercise
price which is 100% of the fair market value on the date of grant. The 1991
Stock Plan provides for the grant of incentive stock options at an exercise
price which is 100% of the fair market value, and nonqualified stock options
at an exercise price which may be less than the fair market value on the date
of grant. The 1995 Stock Option Plan provides for the grant of both incentive
and nonqualified stock options at an exercise price which is not less than
100% of the fair market value on the date of grant.
The plans also provide that all stock options may be exercised in their
entirety 12 months after the date of grant. Incentive stock options terminate
10 years from the date of grant, and those stock options granted after
December 31, 1986 become exercisable to a maximum of $100,000 per year.
Nonqualified stock options terminate 11 years from the date of grant or 10
years and a day if issued in connection with the 1995 Stock Option Plan.
F-16
<PAGE>
COMMERCIAL LAUNDRY BUSINESS OF RAYTHEON COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS)
INFORMATION AS OF MARCH 29, 1998, AND FOR THE QUARTERS ENDED MARCH 30, 1997
AND MARCH 29, 1998, IS UNAUDITED
The following stock option information relates to options granted to
Commercial Laundry employees under the Parent's plans. Shares exercisable at
the corresponding weighted average exercise price at December 31, 1997, 1996,
and 1995, respectively, were 95,928 at $44.19, 73,861 at $34.22, and 52,222 at
$30.57.
Information for 1995, 1996, and 1997 follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
SHARES OPTION PRICE
------- ----------------
<S> <C> <C>
Outstanding at December 31, 1994................... 62,562 $30.81
Granted ......................................... 36,238 39.03
Exercised........................................ (10,340) 32.02
------- ------
Outstanding at December 31, 1995................... 88,460 $34.04
Granted.......................................... 48,950 52.56
Exercised........................................ (14,599) 33.14
------- ------
Outstanding at December 31, 1996................... 122,811 $41.53
Granted.......................................... 115,000 51.69
Exercised........................................ (26,883) 32.60
------- ------
Outstanding at December 31, 1997................... 210,928 $48.20
------- ------
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------- ---------------------------------------------------
SHARES WEIGHTED AVERAGE SHARES
EXERCISE OUTSTANDING AT CONTRACTUAL WEIGHTED AVERAGE EXERCISABLE AT WEIGHTED AVERAGE
PRICE RANGE DECEMBER 31, 1997 REMAINING LIFE EXERCISE PRICE DECEMBER 31, 1997 EXERCISE PRICE
----------- ----------------- ---------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
$22.98 to $28.44 6,040 5.2 $28.40 6,040 $28.40
$32.88 to $39.03 40,938 7.1 36.52 40,938 36.52
$51.69 to $52.56 163,950 9.2 51.95 48,950 52.56
------- ------
Total 210,928 95,928
======= ======
</TABLE>
The Parent applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees", and related interpretations, in accounting for
its plans. Accordingly, no compensation expense is recognized for its stock-
based compensation plans. The Parent has adopted the disclosure-only
provisions of SFAS No. 123, "Accounting for Stock-based Compensation"
accordingly, no compensation expense is recognized for the stock option plans.
Had compensation cost for the stock options awarded to Commercial Laundry
employees been determined based on the fair value at the grant date for awards
under these plans, consistent with the methodology prescribed under SFAS No.
123 and had such compensation expense been reflected in net income of
Commercial Laundry, Commercial Laundry's net income would have approximated
the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Net income--as reported........................... $26,276 $21,355 $18,556
Net income--pro forma............................. $25,819 $21,131 $18,483
</TABLE>
F-17
<PAGE>
COMMERCIAL LAUNDRY BUSINESS OF RAYTHEON COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS)
INFORMATION AS OF MARCH 29, 1998, AND FOR THE QUARTERS ENDED MARCH 30, 1997
AND MARCH 29, 1998, IS UNAUDITED
The weighted-average fair value of each option granted in 1997, 1996, and
1995, respectively, is estimated as $9.95, $10.80 and $7.13 on the date of
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions:
<TABLE>
<S> <C>
Expected life............................................ 4 years
Assumed annual dividend growth rate (5 year historical
rate)................................................... 6%
Expected volatility...................................... 15%
Risk free interest rate (month-end yields on 4 year
treasury strips equivalent zero coupon)................. 5% to 7.5% range
Assumed annual forfeiture rate........................... 5%
</TABLE>
The effects of applying SFAS No. 123 in this pro forma disclosure are not
indicative of future amounts. SFAS No. 123 does not apply to awards prior to
1995.
J. COMMITMENTS AND CONTINGENCIES:
At March 29, 1998, Commercial Laundry had commitments under long-term
operating leases requiring approximate annual rentals as follows:
<TABLE>
<S> <C>
March 30, 1998 through December 31, 1998.......................... $251
Year ending December 31, 1999..................................... 297
Year ending December 31, 2000..................................... 187
Year ending December 31, 2001..................................... 34
Year ending December 31, 2002..................................... 27
Thereafter........................................................ 75
----
$871
====
</TABLE>
Rental expense for 1995, 1996, 1997, and for the quarters ended March 30,
1997 and March 29, 1998 amounted to $0.6 million, $1.1 million, $1.2 million,
$0.3 million and $0.3 million, respectively.
Commercial Laundry's Marianna, Florida plant is located on property leased
from the Marianna Municipal Airport Development Authority (acting on behalf of
the City of Marianna). The lease expires on February 28, 2005 and may be
renewed at Commercial Laundry's option for five additional consecutive ten
year terms.
Commercial Laundry has retention agreements with certain key executives,
managers and commissioned salespeople with remaining terms of approximately
two years. Commercial Laundry's remaining aggregate commitment under these
agreements was $3.7 million at December 31, 1997 and March 29, 1998.
Recurring costs associated with Commercial Laundry's environmental
compliance program are not material and are expensed as incurred. Commercial
Laundry is involved in various stages of investigation and cleanup relative to
remediation of certain sites. All appropriate costs incurred in connection
therewith have been expensed. Due to the complexity of environmental laws and
regulations, the varying costs and effectiveness of alternative cleanup
methods and technologies, the uncertainty of insurance coverage, and the
unresolved extent of Commercial Laundry's responsibility, it is difficult to
determine the ultimate outcome of these matters. However, in the opinion of
management, any liability will not have a material affect on Commercial
Laundry's financial position, liquidity or results of operations after giving
affect to provisions already recorded.
Commercial Laundry adopted Statement of Position 96-1 (SOP 96-1).
"Environmental Remediation Liabilities", in 1997. SOP 96-1 provides
authoritative guidance with respect to specific accounting issues that are
present in the recognition, measurement, display, and disclosure of
environmental remediation liabilities. The adoption did not have a material
impact on Commercial Laundry's financial position or results of operations.
F-18
<PAGE>
COMMERCIAL LAUNDRY BUSINESS OF RAYTHEON COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS)
INFORMATION AS OF MARCH 29, 1998, AND FOR THE QUARTERS ENDED MARCH 30, 1997
AND MARCH 29, 1998, IS UNAUDITED
Commercial Laundry adopted the American Institute of Certified Public
Accountants Statement of Position 96-1, Environmental Remediation Liabilities,
in 1997. The adoption of the standard did not have a material affect on
Commercial Laundry's financial position or results of operations.
Various claims and legal proceedings generally incidental to the normal
course of business are pending or threatened against Commercial Laundry. While
the ultimate liability from these proceedings is difficult to determine, in
the opinion of management, any additional liability will not have a material
effect on Commercial Laundry's financial position, liquidity or results of
operations.
K. PENSION AND OTHER EMPLOYEE BENEFITS:
Commercial Laundry has several pension and retirement plans covering the
majority of employees. The major plans covering salaried and management
employees provide pension benefits that are based on the five highest
consecutive years of the employee's compensation in the ten years before
retirement. Plans covering hourly and union employees generally provide
benefits of stated amounts for each year of service, but in some cases can use
a final average pay based calculation. Commercial Laundry's funding policy for
the salaried plans is to contribute annually at a rate that is intended to
remain at a level percentage of compensation for the covered employees.
Commercial Laundry's funding policy on the hourly and union plans is to
contribute annually at a rate that is intended to remain level for the covered
employees. Unfunded prior service costs under the funding policy are generally
amortized over periods from 10 to 30 years.
Total pension expense for Commercial Laundry's plans was $0.3 million, $0.7
million and $0.2 million in 1995 through 1997, respectively, including the
following components:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31: 1995 1996 1997
- ------------------------- ------ ------ ------
<S> <C> <C> <C>
Service cost benefits
earned during the period. $1,057 $1,233 $1,118
Interest cost on projected
benefit obligation....... 1,403 1,590 1,650
Actual (gain)/loss on
assets................... (6,196) (4,508) (2,278)
Net amortization and
deferral................. 4,032 2,158 (315)
Curtailment adjustments... -- 213(/1/) --
------ ------ ------
Net periodic pension
costs.................... $ 296 $ 686 $ 175
====== ====== ======
Assumptions used in the
accounting were:
Discount rate........... 7.50% 7.75% 7.25%
Expected long-term rate
of return on assets.... 9.00% 9.25% 9.25%
Rate of increase in
compensation levels.... 4.50% 4.50% 4.50%
</TABLE>
(1) Various plan curtailments were recognized as a result of workforce
reductions which were planned as part of the restructuring program.
F-19
<PAGE>
COMMERCIAL LAUNDRY BUSINESS OF RAYTHEON COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS)
INFORMATION AS OF MARCH 29, 1998, AND FOR THE QUARTERS ENDED MARCH 30, 1997
AND MARCH 29, 1998, IS UNAUDITED
The following table sets forth the funded status of Commercial Laundry's
over funded and under funded plans on a combined basis at December 31:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation................................ $(19,174) $(23,269)
======== ========
Accumulated benefit obligation........................... $(20,471) $(24,812)
======== ========
Projected benefit obligation............................. $(22,992) $(27,546)
======== ========
Plan assets at fair value................................ 30,150 37,661
Projected benefit obligation less than plan assets....... 7,158 10,115
Unrecognized net (gain).................................. (8,799) (11,523)
Prior service cost not yet recognized in net periodic
pension cost............................................ 1,643 1,657
Unrecognized net (assets) at transition.................. (577) (467)
-------- --------
Prepaid (accrued) pension cost........................... $ (575) $ (218)
======== ========
</TABLE>
Plan assets primarily include equity and fixed income securities.
Commercial Laundry's salaried pension plan provides that in the event of a
termination of the plan within three years after an involuntary change of
control of Commercial Laundry, the assets of the plan will be applied to
satisfy all liabilities to participants and beneficiaries in accordance with
Section 4044 of the Employee Retirement Income Security Act of 1974. Any
remaining assets will be applied on a pro rata basis to increase the benefits
to the participants and beneficiaries.
In addition to providing pension benefits, Commercial Laundry (through its
Parent) provides certain health care and life insurance benefits for retired
employees. Substantially, all of Commercial Laundry's employees may become
eligible for these benefits if they reach normal retirement age while working
for Commercial Laundry. Retiree health plans are paid for in part by employee
contributions, which are adjusted annually. Benefits are provided through
various insurance companies whose charges are based either on the benefits
paid during the year or annual premiums. Health benefits are provided to
retirees, their covered dependents, and beneficiaries. Retiree life insurance
plans are noncontributory and cover the retiree only.
In 1993, the Parent adopted Statement of Financial Accounting Standards No.
106 ("SFAS 106"), "Employer's Accounting for Postretirement Benefits Other
than Pensions," which requires recognition of an accumulated postretirement
benefit obligation for retiree costs existing at the time of implementation,
as well as an incremental expense recognition for changes in the obligation
attributable to each successive year. Past service costs are amortized over
the allowable 20 year period.
F-20
<PAGE>
COMMERCIAL LAUNDRY BUSINESS OF RAYTHEON COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS)
INFORMATION AS OF MARCH 29, 1998, AND FOR THE QUARTERS ENDED MARCH 30, 1997
AND MARCH 29, 1998, IS UNAUDITED
The net postretirement benefit cost for Commercial Laundry in 1995, 1996 and
1997 included the following components:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31: 1995 1996 1997
- ------------------------- ---- ---- ----
<S> <C> <C> <C>
Service cost benefits earned during the period................ $ 35 $ 45 $ 52
Interest cost on projected benefit obligation................. 109 110 107
Net amortization and deferral................................. 63 64 63
---- ---- ----
Net postretirement benefit costs.............................. $207 $219 $222
==== ==== ====
Assumptions used in the accounting were:
Discount rate............................................... 7.50% 7.75% 7.25%
Expected long-term rate of return on assets................. 8.50% 8.75% 8.75%
Rate of increase in compensation levels..................... 4.50% 4.50% 4.50%
Health care trend rate in the first year.................... 7.50% 7.00% 6.50%
Gradually declining to a trend rate in the years 2001 &
beyond of.................................................. 5.00% 5.00% 5.00%
</TABLE>
The following amounts are recognized in the balance sheet at December 31:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Accumulated postretirement benefit obligation:
Retirees......................................... $ (58) $ (255) $ (342)
Active employees eligible for benefits........... (111) (83) (63)
Active employees not yet eligible for benefits... (1,339) (1,006) (1,125)
------- ------- -------
Total obligation............................... (1,508) (1,344) (1,530)
Plan assets at fair value.......................... -- -- --
------- ------- -------
Total obligation (in excess of) plan assets........ (1,508) (1,344) (1,530)
Unrecognized net (gain)............................ 185 22 147
Unrecognized net obligation at transition.......... 1,000 942 893
------- ------- -------
Prepaid (accrued) postretirement benefit cost...... $ (323) $ (380) $ (490)
======= ======= =======
The effect of a one percentage point increase in
the assumed health care trend rate for each future
year on:
1) Aggregate of service and interest cost......... $ 8 $ 9 $ 9
2) Accumulated postretirement benefit obligation.. $ 83 $ 80 $ 92
</TABLE>
Commercial Laundry's employees also participate in the Parent's Savings and
Investment Plan and the Parent's Employee Stock Ownership Plan.
Under the terms of the Savings and Investment Plan, a defined contribution
plan, covered employees are allowed to contribute up to 17 percent of their
pay up to a limit of $9,500. Commercial Laundry contributes amounts equal to
50 percent of the employee's contributions, up to a maximum of three percent
of the employee's pay. Total expense for the plan was $1.0 million in 1995,
1996 and 1997. In the quarters ended March 30, 1997 and March 29, 1998 the
expense totaled $0.2 million.
Commercial Laundry's annual contribution to the Employee Stock Ownership
Plan is approximately one half of one percent of salaries and wages, limited
to $150,000 of substantially all United States salaried and a
F-21
<PAGE>
COMMERCIAL LAUNDRY BUSINESS OF RAYTHEON COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS)
INFORMATION AS OF MARCH 29, 1998, AND FOR THE QUARTERS ENDED MARCH 30, 1997
AND MARCH 29, 1998, IS UNAUDITED
majority of hourly employees. The expense was $0.3 million, $0.1 million, $0.3
million, $0.1 million and $0.1 million for 1995, 1996 and 1997, and for the
quarters ended March 30, 1997 and March 29, 1998, respectively.
Commercial Laundry's employees are covered under the Parent's workers
compensation program. Commercial Laundry's allocated expense for workers
compensation during the three years ended December 31, 1995, 1996 and 1997,
and the quarters ended March 30, 1997 and March 29, 1998 was $0.9 million,
$1.0 million, $0.8 million, $0.3 million and $0.3 million, respectively.
L. EXPORT SALES:
Export sales were $54.2 million, $45.4 million, $45.5 million, $11.7 million
and $8.0 million in 1995, 1996 and 1997, and for the quarters ended March 30,
1997 and March 29, 1998, respectively.
M. ACQUISITIONS:
In November 1994, Commercial Laundry expanded its commercial laundry product
line with the acquisition of UniMac, Inc., a manufacturer of front loading
washing machines, for $75.1 million in cash ($10.0 million paid in 1994 and
$65.1 million paid in 1995). Goodwill of $60.0 million is being amortized on a
straight-line basis over 40 years.
N. SUBSEQUENT EVENTS (UNAUDITED)
Merger of Business
The Parent and Raytheon Commercial Laundry LLC entered into an Agreement and
Plan of Merger (the "Merger Agreement") with Bain LLC and RCL Acquisitions LLC
("MergerCo") pursuant to which, MergerCo was merged on May 4, 1998 with and
into Raytheon Commercial Laundry LLC (the "Merger") with Raytheon Commercial
Laundry LLC (renamed immediately following the Merger to "Alliance Laundry
Systems LLC") being the surviving entity. Prior to the Merger, Raytheon owned
100% of the equity securities of Raytheon Commercial Laundry LLC and Bain LLC,
the BRS Investors and certain members of management owned 100% of the equity
securities of MergerCo. As a result of the Merger (i) the Parent's limited
liability company interest in Commercial Laundry LLC was converted into the
right to receive (a) an aggregate amount of cash equal to $339.5 million,
subject to pre-closing and post-closing working capital adjustments, (b) a
Junior Subordinated Promissory Note from Alliance Laundry Systems LLC
("Alliance Laundry") in the original principal amount of $9.0 million which
matures in 2009, (c) preferred membership interests of Alliance Laundry with a
liquidation value of approximately $6.0 million which are mandatorily
redeemable in 2009 and (d) common units of Alliance Laundry representing 7% of
the total common membership interests of Alliance Laundry and (ii) Bain LLC's,
the BRS Investors' and certain members of management's limited liability
company interests in MergerCo were converted into 93% of the total common
membership interests of Alliance Laundry. The Merger has been accounted for as
a recapitalization.
The transactions contemplated by the Merger Agreement were funded in large
part through the issuance of various debt instruments including a $200.0
million term loan borrowing and the issuance of $110.0 million of senior
subordinated notes due in 2008. Also in connection with the Merger, Alliance
Laundry entered into a $250.0 million revolving loan agreement to finance
trade accounts receivable and notes receivable related to equipment loans.
This agreement was entered into through newly established special purpose
entities. Sales of accounts receivable and notes receivable subsequent to the
Merger will be transacted under these new arrangements (see notes B and C for
discussion of previous arrangements).
Due to the significance of the Merger, an unaudited proforma balance sheet
has been provided on the face of the financial statements for the most recent
balance sheet date. The unaudited proforma balance sheet as of March 29, 1998
gives effect to the Merger as if it occurred on such date. The Merger has been
accounted for as a recapitalization and therefore the basis in the assets and
liabilities is unchanged.
F-22
<PAGE>
COMMERCIAL LAUNDRY BUSINESS OF RAYTHEON COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS)
INFORMATION AS OF MARCH 29, 1998, AND FOR THE QUARTERS ENDED MARCH 30, 1997
AND MARCH 29, 1998, IS UNAUDITED
Litigation
On April 17, 1998, Appliance Co. filed suit in the United States District
Court for the Southern District of New York against Raytheon Company
("Raytheon") and Commercial Laundry seeking (i) declaratory relief that
Commercial Laundry is bound by a non-compete agreement between Appliance Co.
and Raytheon that prohibits the participation by Raytheon and corporate
affiliates of Raytheon in the consumer retail distribution laundry market, and
(ii) unspecified damages from Raytheon and Commercial Laundry for breach of
the non-compete agreement. On June 2, 1998, Appliance Co. filed an amended
complaint reiterating the allegations of the original complaint and also
asserting that, by virtue of the manner in which they consummated the sale of
Commercial Laundry by Raytheon, both Commercial Laundry and Bain Capital, Inc.
tortiously interfered with the non-compete agreement between Appliance Co. and
Raytheon. Appliance Co. now claims to be entitled to damages in excess of $100
million and also contends that, if Commercial Laundry (Alliance Laundry
subsequent to the Merger) is not bound by the non-compete agreement, then
Appliance Co. should also be relieved of any obligations under the non-compete
agreement. Raytheon has agreed to pay the attorneys' fees and costs incurred
by Alliance Laundry and Bain in contesting this lawsuit. The defendants
dispute all Appliance Co. allegations and deny that Appliance Co. is entitled
to any damages. There can be no assurance, however, that Alliance Laundry will
prevail in the lawsuit and, accordingly, Alliance Laundry may be prohibited
for some period of time from participating in the consumer retail distribution
laundry market. Alliance Laundry does not currently participate in this
market.
Previously, in early 1998, Appliance Co. alleged that Raytheon had breached
certain of its obligations under the sale agreement governing the Appliance
Co. Transaction and under a related supply agreement, primarily relating to
the establishment of full volume production of frontload washers at Appliance
Co.'s Searcy facility. Alliance Laundry is being indemnified by Raytheon with
respect to this dispute and does not believe that the dispute will have a
material impact on Alliance Laundry's financial position.
F-23
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT IN THIS OFFERING MEMORANDUM, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE ISSUERS OR THE INITIAL PURCHASERS. THIS OFFERING MEMORANDUM
DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
ANY SECURITIES OTHER THAN THE EXCHANGE NOTES OFFERED HEREBY NOR DOES IT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY OF THE
EXCHANGE NOTES TO ANY PERSON IN ANY JURISDICTION IN WHICH IT WOULD BE UNLAWFUL
TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF
THIS OFFERING MEMORANDUM NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN
THE FACTS SET FORTH IN THIS OFFERING MEMORANDUM OR IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF.
-----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Offering Memorandum Summary............................................... 1
Risk Factors.............................................................. 14
The Transactions.......................................................... 23
Use of Proceeds........................................................... 25
Capitalization............................................................ 26
Unaudited Pro Forma Combined Financial Data............................... 27
Selected Historical Combined Financial Data............................... 35
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 37
Business.................................................................. 44
Management................................................................ 56
Security Ownership........................................................ 60
Certain Relationships and Related Transactions............................ 62
Description of Senior Credit Facility..................................... 64
Description of Asset Backed Facility...................................... 66
Description of the Exchange Notes......................................... 68
The Exchange Offer ....................................................... 100
Certain United States Federal Income Tax Considerations................... 108
Plan of Distribution...................................................... 109
Legal Matters............................................................. 110
Experts................................................................... 110
Index to Combined Financial Statements.................................... F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$110,000,000
[LOGO]
ALLIANCE
LAUNDRY SYSTEMS
ALLIANCE LAUNDRY SYSTEMS LLC
ALLIANCE LAUNDRY CORPORATION
OFFER TO EXCHANGE THEIR SERIES B
9 5/8% SENIOR SUBORDINATED
NOTES DUE 2008 FOR SERIES A
9 5/8% SENIOR SUBORDINATED
NOTES DUE 2008
-----------------
OFFERING MEMORANDUM
-----------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
SCHEDULE I
COMMERCIAL LAUNDRY BUSINESS OF RAYTHEON COMPANY
SCHEDULE OF COMBINED VALUATION ACCOUNTS
(IN THOUSANDS)
ACCOUNTS RECEIVABLE:
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING CHARGES TO END OF
OF PERIOD EXPENSE DEDUCTIONS PERIOD
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Year ended:
December 31, 1995................. $1,324 205 97 $1,432
December 31, 1996................. $1,432 643 129 $1,946
December 31, 1997................. $1,946 3,218 669 $4,495
Quarter ended:
March 30, 1997.................... $1,946 283 4 $2,225
March 29, 1998*................... $4,495 997 780 $4,712
INVENTORY:
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING CHARGES TO END OF
OF PERIOD EXPENSE DEDUCTIONS PERIOD
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Year ended:
December 31, 1995................. $3,198 3,146 1,526 $4,818
December 31, 1996................. $4,818 836 1,686 $3,968
December 31, 1997................. $3,968 1,625 1,291 $4,302
Quarter ended:
March 30, 1997.................... $3,968 214 51 $4,131
March 29, 1998*................... $4,302 294 362 $4,234
</TABLE>
- --------
* Amounts at March 29, 1998 and on a consolidated basis.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors of
Raytheon Company:
In connection with our audits of the combined financial statements of the
Commercial Laundry Business of Raytheon Company as of December 31, 1996 and
1997, and for the three years then ended, we have also audited the financial
statement schedule referred to on page II-6 of this Form S-4.
In our opinion, this financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly,
in all material respects, the information required to be included herein.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
January 23, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Each of Alliance Laundry Systems LLC (the "Company") and Alliance Laundry
Holdings LLC (the "Parent") is a limited liability company organized under the
laws of the State of Delaware. Section 18-108 of the Delaware Limited
Liability Company Act (the "DLLCA") provides that, subject to such standards
and restrictions, if any, as are set forth in its limited liability company
agreement, a limited liability company may, and shall have the power to,
indemnify and hold harmless any member or manager or other persons from and
against any and all claims and demands whatsoever.
Section 6.4 of the Parent's Limited Liability Company Agreement (the "Parent
LLC Agreement") provides, among other things, that the Company shall indemnify
and hold harmless any Person (each an "Indemnified Person") to the fullest
extent permitted under the DLLCA, as the same exists or as thereafter amended,
substituted or replaced (but, in the case of any such amendment, substitution
or replacement only to the extent that such amendment, substitution or
replacement permits the Parent to provide broader indemnification rights than
the Parent is providing immediately prior to such amendment), against all
expenses, liabilities and losses (including attorneys' fees, judgments, fines,
excise taxes or penalties) reasonably incurred or suffered by such Person (or
one or more of such Person's Affiliates) by reason of the fact that such
Person is or was a Unitholder or is or was serving as a Representative,
officer, director, principal, member, employee or agent of the Parent or is or
was serving at the request of the Parent as a Representative, officer,
director, principal, member, employee or agent of another corporation,
partnership, joint venture, limited liability company, trust or other
enterprise; provided that (unless the Board otherwise consents) no Indemnified
Person shall be indemnified for any expenses, liabilities and losses suffered
that are attributable to such Indemnified Person's or its Affiliates' gross
negligence, willful misconduct or knowing violation of law or for any present
or future breaches of any representations, warranties or covenants by such
Indemnified Person or its Affiliates contained herein or in the other
agreements with the Parent. The Parent LLC Agreement further provides that
expenses, including attorneys' fees, incurred by any such Indemnified Person
in defending a proceeding shall be paid by the Parent in advance of the final
disposition of such proceeding, including any appeal therefrom, upon receipt
of an undertaking by or on behalf of such Indemnified Person to repay such
amount if it shall ultimately be determined that such Indemnified Person is
not entitled to be indemnified by the Parent.
The Parent LLC Agreement defines "Person" as an individual or a corporation,
partnership, limited liability company, trust, unincorporated organization,
association or other entity. The Parent LLC Agreement defines "Affiliate" of
any Person as any Person that directly or indirectly controls, is controlled
by, or is under common control with the Person in question. The Parent LLC
Agreement defines "Unitholder" as any owner of one or more Units as reflected
on the Parent's books and records. In addition, as used in the Parent LLC
Agreement, each member of the Parent's Board is referred to as a
"Representative". According to the LLC Agreement, the Parent shall have power
to purchase and maintain insurance on behalf of any Indemnified Party against
any expense, liability or loss incurred by such Person in any capacity or
arising out of its status as such, whether or not the Parent would have power
to indemnify against such liability or cost.
Section 4.3 of the Company's Limited Liability Company Agreement (the
"Company LLC Agreement") provides, among other things, that, except as limited
by law and subject to the provisions of Section 4.3, each person and entity
shall be entitled to be indemnified and held harmless on an as incurred basis
by the Company (but only after first making a claim for indemnification
available from any other source and only to the extent indemnification is not
provided by that source) to the fullest extent permitted under the DLLCA
(including indemnification for negligence, gross negligence and breach of
fiduciary duty to the extent so authorized) as amended from time to time (but,
in the case of any such amendment, only to the extent that such amendment
permits the Company to provide broader indemnification rights than such law
permitted the Company to provide
II-1
<PAGE>
prior to such amendment) against all losses, liabilities and expenses,
including attorneys' fees and expenses, arising from claims, actions and
proceedings in which such person or entity may be involved, as a party or
otherwise, by reason of his being or having been on the Board, a Participant
or officer of the Company, or by reason of his serving at the request of the
Company as a director, officer, manager, member, partner, employee or agent of
another limited liability company or of a corporation, partnership, joint
venture, trust or other enterprise, including a service with respect to an
employee benefit plan whether or not such person or entity continues to be
such at the time any such loss, liability or expense is paid or incurred. The
Company LLC Agreement further provides that the rights of indemnification
provided in Section 4.3 are in addition to any rights to which such person may
otherwise be entitled by contract or as a matter of law and shall extend to
his successors and assigns. In particular, and without limitation of the
foregoing, such person or entity shall be entitled to indemnification by the
Company against expenses (as incurred), including attorneys' fees and
expenses, incurred by such person or entity upon the delivery by such person
or entity to the Company of a written undertaking (reasonably acceptable to
the Board). The Company may, to the extent authorized from time to time by the
Board, grant rights to indemnification and to advancement of expenses to any
employee or agent of the Company to the fullest extent of the provisions of
Section 4.3 with respect to the indemnification and advancement of expenses of
the Board, Participants and officers of the Company.
The Company LLC Agreement defines "Participant" as a Member, a Terminated
Member or an Assignee. The Company LLC Agreement defines "Member" as the
Parent and any Person admitted to the Company as a Substituted Member or
Additional Member, but only so long as such Person is shown on the Company's
books and records as the owner of one or more Units. The Company LLC Agreement
defines "Terminated Member" as a Person who has ceased to be a Member pursuant
to Section 4.7 of the Company LLC Agreement. In addition, the Company LLC
Agreement defines "Assignee" as a Person or entity to whom a LLC interest has
been transferred in a Transfer described in Section 4.4, unless and until such
person or entity becomes a Member with respect to such LLC interest.
Alliance Laundry Corporation (the "Corporation") is a Delaware corporation.
Section 145 of the General Corporation Law of the State of Delaware provides
that a Delaware corporation may indemnify any person who were, are or are
threatened to be made, parties to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative of investigative
(other than an action by or in the right of such corporation), by reason of
the fact that such person is or was an officer, director, employee or agent of
such corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding, provided such person acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the corporation's best interests and, with respect to any criminal action
or proceeding, had no reasonable cause to believe that his conduct was
illegal. A Delaware corporation may indemnify any persons who are, were or are
threatened to be made, a party to any threatened, pending or completed action
or suit by or in the right of the corporation by reasons of the fact that such
person was a director, officer, employee or agent of such corporation, or is
or was serving at the request of such corporation as a director, officer,
employee or agent of another corporation as a director, officer, employee or
agent of another corporation or enterprise. The indemnity may include expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit, provided
such person acted in good faith and in a manner he reasonably believed to be
in or not opposed to the corporation's best interests, provided that no
indemnification is permitted without judicial approval if the officer,
director, employee or agent is adjudged to be liable to the corporation. Where
an officer, director, employee or agent is successful on the merits or
otherwise in the defense of any action referred to above, the corporation must
indemnify him against the expenses which such officer or director has actually
and reasonably incurred.
The Certificate of Incorporation of the Corporation provides that to the
fullest extent permitted by the General Corporation Law of the State of
Delaware as the same exists or may thereafter be amended, a director of the
Corporation shall not be liable to the Corporation or its stockholders for
monetary damages for a breach
II-2
<PAGE>
of fiduciary duty as a director. The Certificate of Incorporation of the
Corporation further provides that any repeal or modification of this provision
of the Certificate of Incorporation of the Corporation shall not adversely
affect any right or protection of a director of the Corporation existing at
the time of such repeal or modification.
Article V of the Bylaws of the Corporation provides that each person who was
or is made a party or is threatened to be made a party to or is involved in
any action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he, or
a person of whom he is the legal representative, is or was a director or
officer, of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee, fiduciary, or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
shall be indemnified and held harmless by the Corporation to the fullest
extent which it is empowered to do so unless prohibited from doing so by the
General Corporation Law of the State of Delaware, as the same exists or may
thereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide
prior to such amendment) against all expense, liability and loss (including
attorneys' fees actually and reasonably incurred by such person in connection
with such proceeding) and such indemnification shall inure to the benefit of
his heirs, executors and administrators; provided, however, that, except as
provided in Section 2 of the Bylaws of the Corporation, the Corporation shall
indemnify any such person seeking indemnification in connection with a
proceeding initiated by such person only if such proceeding was authorized by
the board of directors of the Corporation. Article V of the Bylaws of the
Corporation further provides that the right to indemnification conferred in
Article V of the Bylaws of the Corporation shall be a contract right and,
subject to Sections 2 and 5 of the Bylaws of the Corporation, shall include
the right to be paid by the Corporation the expenses incurred in defending any
such proceeding in advance of its final disposition. The Corporation may, by
action of its board of directors, provide indemnification to employees and
agents of the Corporation with the same scope and effect as the foregoing
indemnification of directors and officers.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation
or enterprise, against any liability asserted against him and incurred by him
in any such capacity, arising out of his status as such, whether or not the
corporation would otherwise have the power to indemnify him under Section 145.
The Corporation's Bylaws provide for the maintenance of insurance under the
circumstances described in Section 145.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
registrants pursuant to the foregoing provisions, the registrants have been
informed that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act of
1933 and is therefore unenforceable.
II-3
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
<TABLE>
<C> <S>
2.1 Agreement and Plan of Merger, dated as of February 21, 1998, by and
among Bain/RCL, L.L.C., RCL Acquisitions, L.L.C., Raytheon Commercial
Laundry LLC and Raytheon Company.***
2.2 Amendment No. 1 to Agreement and Plan of Merger, dated as of May 2,
1998, by and among Bain/RCL, L.L.C., RCL Acquisitions, L.L.C., Raytheon
Commercial Laundry LLC and Raytheon Company.***
3.1 Certificate of Formation of Alliance Laundry Systems LLC***
3.2 Amended and Restated Limited Liability Company Agreement of Alliance
Laundry Systems LLC.***
3.3 Certificate of Incorporation of Alliance Laundry Corporation.***
3.4 Bylaws of Alliance Laundry Corporation.***
4.1 Indenture, dated as of May 5, 1998, among Alliance Laundry Systems LLC,
Alliance Laundry Corporation, the Guarantors and United States Trust
Company of New York.*
5.1 Opinion and Consent of Kirkland & Ellis.*
8.1 Opinion of Kirkland & Ellis as to federal income tax consequences.*
10.1 Purchase Agreement, dated as of April 29,1998, by and among Alliance
Laundry Systems LLC, Alliance Laundry Corporation and the Initial
Purchasers.***
10.2 Registration Rights Agreement, dated as of May 5, 1998, by and among
Alliance Laundry Systems LLC, Alliance Laundry Corporation, Alliance
Laundry Holdings LLC, and Lehman Brothers Inc. and Credit Suisse First
Boston Corporation.***
10.3 Credit Agreement, dated as of May 5, 1998, among Alliance Laundry
Holdings LLC, Alliance Laundry Systems LLC, the several banks or other
financial institutions or entities from time to time parties to this
Agreement, Lehman Brothers Inc., Lehman Commercial Paper Inc., and
General Electric Capital Corporation.***
10.4 Loan and Security Agreement dated May 5, 1998, between Alliance Laundry
Receivables Warehouse LLC, the Lenders and Lehman Commercial Paper
Inc.***
10.5 Amended and Restated Limited Liability Agreement of Alliance Laundry
Holdings LLC, dated as of May 5, 1998.***
10.6 Alliance Laundry Holdings LLC, Securityholders Agreement, dated as of
May 5, 1998, between Alliance Laundry Holdings LLC and the
Securityholders.***
10.7 Alliance Laundry Holdings LLC, Registration Rights Agreement, made as if
May 5, 1998, by and among Alliance Laundry Holdings LLC, Raytheon
Company, Bain/RCL and the Securityholders.***
10.8 Employment Agreement, made as of May 5, 1998, by and between Alliance
Laundry Systems LLC and Thomas F. L'Esperance.***
10.9 IRA and Executive Unit Purchase Agreement, made as of May 5, 1998, by
and between RCL Acquisitions, LLC, Thomas F. L'Esperance and Stifel,
Nicolaus Custodian for Thomas F. L'Esperance IRA and Stifel, Nicolaus
Custodian for Paula K. L'Esperance IRA.***
10.10 IRA and Executive Unit Purchase Agreement, made as of May 5, 1998, by
and between RCL Acquisitions, LLC, R. Scott Gaster and Robert W. Baird
& Co. Inc. TTEE for R. Scott Gaster IRA.***
10.11 IRA and Executive Unit Purchase Agreement, made as of May 5, 1998, by
and between RCL Acquisitions, L.L.C., Jeffrey J. Brothers and Delaware
Charter Guarantee and Trust Company, TTEE for Jeffrey J. Brothers,
IRA.***
10.12 Executive Unit Purchase Agreement, made as of May 5, 1998, by and
between RCL Acquisitions, L.L.C., and Herman Beach.***
10.13 IRA and Executive Unit Purchase Agreement, made as of May 5, 1998, by
and between RCL Acquisitions, L.L.C., Bruce P. Rounds and Stifel,
Nicolaus Custodian for Bruce P. Rounds IRA.***
10.14 IRA and Executive Unit Purchase Agreement, made as of May 5, 1998, by
and between RCL Acquisitions, L.L.C., Scott L. Spiller and Stifel,
Nicolaus Custodian for Scott Spiller IRA.***
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <S>
10.15 IRA and Executive Unit Purchase Agreement, made as of May 5, 1998, by
and between RCL Acquisitions, L.L.C., Robert T. Wallace and Edward
Jones, Cust FBO Robert T. Wallace, IRA.***
10.16 Deferred Compensation Agreement, made and entered into as of May 5,
1998, by and among Thomas F. L'Esperance, Raytheon Company, Alliance
Laundry Holdings LLC, and Alliance Laundry Systems LLC.***
10.17 Deferred Compensation Agreement, made and entered into as of May 5,
1998, by and among R. Scott Gaster, Alliance Laundry Holdings LLC, and
Alliance Laundry Systems LLC.***
10.18 Deferred Compensation Agreement, made and entered into as of May 5,
1998, by and among Jeffrey J. Brothers, Alliance Laundry Holdings LLC
and Alliance Laundry Systems LLC.***
10.19 Deferred Compensation Agreement, made and entered into as of May 5,
1998, by and among Herman W. Beach, Alliance Laundry Holdings LLC and
Alliance Laundry Systems LLC.***
10.20 Deferred Compensation Agreement, made and entered into as of May 5,
1998, by and among Bruce P. Rounds, Alliance Laundry Holdings LLC and
Alliance Laundry Systems LLC.***
10.21 Deferred Compensation Agreement, made and entered into as of May 5,
1998, by and among Robert T. Wallace, Alliance Laundry Holdings LLC and
Alliance Laundry Systems LLC.***
10.22 Retention Agreement, dated as of September 30, 1997, by and between
Thomas F. L'Esperance and Raytheon Commercial Laundry LLC.***
10.23 Amendment No. 1 to Retention Agreement, dated as of April , 1998, be
and between Thomas F. L'Esperance and Raytheon Commercial Laundry
LLC.***
10.24 Retention Agreement, dated as of September 30, 1997, by and between R.
Scott Gaster and Raytheon Commercial Laundry LLC.***
10.25 Amendment No. 1 to Retention Agreement, dated as of April , 1998, by
and between R. Scott Gaster and Raytheon Commercial Laundry LLC.***
10.26 Retention Agreement, dated as of September 30, 1997, by and between
Jeffrey J. Brothers and Raytheon Commercial Laundry LLC.***
10.27 Amendment No. 1 to Retention Agreement, dated as of April , 1998, by
and between Jeffrey J. Brothers and Raytheon Commercial Laundry LLC.***
10.28 Retention Agreement, dated as of September 30, 1997, by and between
Herman W. Beach and Raytheon Commercial Laundry LLC.***
10.29 Amendment No. 1 to Retention Agreement, dated as of April , 1998, by
and between Herman W. Beach and Raytheon Commercial Laundry LLC.***
10.30 Retention Agreement, dated as of September 30, 1997, by and between
Bruce P. Rounds and Raytheon Commercial Laundry LLC.***
10.31 Amendment No. 1 to Retention Agreement, dated as of April , 1998, by
and between Bruce P. Rounds and Raytheon Commercial Laundry LLC.***
10.32 Retention Agreement, dated as of September 30, 1997, by and between
Robert T. Wallace and Raytheon Commercial Laundry LLC.***
10.33 Amendment No. 1 to Retention Agreement, dated as of April , 1998, by
and between Robert T. Wallace and Raytheon Commercial Laundry LLC.***
10.34 Promissory Note, dated as of May 5, 1998, from Thomas F. L'Esperance to
RCL Acquisitions, L.L.C.***
10.35 Promissory Note, dated as of May 5, 1998, from R. Scott Gaster to RCL
Acquisitions, L.L.C.***
10.36 Promissory Note, dated as of May 5, 1998, from Jeffrey J. Brothers to
RCL Acquisitions, L.L.C.***
10.37 Promissory Note, dated as of May 5, 1998, from Herman W. Beach to RCL
Acquisitions, L.L.C.***
10.38 Promissory Note, dated as of May 5, 1998, from Bruce P. Rounds to RCL
Acquisitions, L.L.C.***
10.39 Promissory Note, dated as of May 5, 1998, from Robert T. Wallace to RCL
Acquisitions, L.L.C.***
10.40 Advisory Agreement, dated as of , 1998, by and between Alliance
Laundry Systems LLC, and Bain Capital, Inc.***
10.41 Transition Services Agreement, dated as of May , 1998, by and among
Bain/RCL, L.L.C., RCL Acquisitions, L.L.C., Raytheon Company, and
Raytheon Commercial Laundry LLC.***
10.42 Junior Subordinated Promissory Note, dated as of , 1998, from
Alliance Laundry Holdings LLC to Raytheon Company.***
</TABLE>
II-5
<PAGE>
<TABLE>
<C> <S>
10.43 Supply Agreement, dated as of September 10, 1997, between Appliance Co.
and Raytheon Commercial Laundry LLC.*+
10.44 Supply Agreement II, dated as of September 10, 1997, between Appliance
Co. and Raytheon Commercial Laundry LLC.*+
10.45 Supply Agreement, dated as of May 1, 1998, by and among Coinmach
Corporation, Super Laundry Equipment Corporation and Raytheon
Commercial Laundry LLC (incorporated by reference from exhibit 10.57
to Coinmach Corporation's Annual Report on Form 10-K dated as of June
29, 1998, file number 033-49830).*
12.1 Statement of Computation of Ratios.***
21.1 Subsidiaries of Alliance Laundry Systems LLC.*
23.1 Consent of PricewaterhouseCoopers LLP*
23.2 Consent of Kirkland & Ellis (included in exhibits 5.1 and 8.1).*
24.1 Powers of Attorney (included in signature page).***
25.1 Statement of Eligibility of Trustee on Form T-1.***
27.1 Financial Data Schedule.***
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Form of Tender Instructions.*
</TABLE>
- --------
* Filed herewith
** To be filed by amendment
*** Previously filed
+ Confidential treatment has been requested for certain omitted portions of
this exhibit
(B) FINANCIAL STATEMENT SCHEDULES
Combined Schedule of Valuation Accounts
(C) REPORT OF INDEPENDENT ACCOUNTANTS
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 thereof) 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 the 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; and
(4) If the registrant is a foreign private issuer, to file a post-effective
amendment to the registration statement to include any financial statements
required by Rule 3-19 of the chapter at the start of any delayed offering or
throughout a continuous offering. Financial statements and information
otherwise required by Section 10(a) (3) of the Act need not be furnished,
provided, that the registrant includes in the prospectus, by means of a
II-6
<PAGE>
post-effective amendment, financial statements required pursuant to this
paragraph (a)(4) and other information necessary to ensure that all other
information in the prospectus is at least as current as the date of those
financial statements. Notwithstanding the foregoing, with respect to
registration statements on Form F-3, a post-effective amendment need not be
filed to include financial statements and information required by Section
10(a)(3) of the Act or Rule 3-19 of this chapter is such financial statements
and information are contained in periodic reports filed with or furnished to
the Commission by the registrant pursuant to section 13 or section 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference in the
Form F-3.
(1) 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 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 underwriters, in addition to
the information called for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, 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 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described
under Item 20 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 Securities 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 Securities Act and will be governed
by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
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.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
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-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 2 TO REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
RIPON, STATE OF WISCONSIN, ON AUGUST 3, 1998.
Alliance Laundry Systems LLC
/s/ Thomas F. L'Esperance
By: _________________________________
Name: Thomas F. L'Esperance
Title: President, Chief Executive
Officer and Manager
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 2 TO REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED BY THE
FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATION ON AUGUST 3,
1998:
SIGNATURE CAPACITY
/s/ Thomas F. L'Esperance President, Chief Executive Officer
- ------------------------------------- and Manager (principal executive
THOMAS F. L'ESPERANCE officer)
/s/ Bruce P. Rounds Vice President/Chief Financial
- ------------------------------------- Officer (principal financial and
BRUCE P. ROUNDS accounting officer)
* Manager
- -------------------------------------
EDWARD W. CONARD
* Manager
- -------------------------------------
ROBERT C. GAY
* Manager
- -------------------------------------
STEPHEN C. SHERRILL
* Vice President and
- ------------------------------------- Manager
- --------
STEPHEN M. ZIDE
* means signed by attorney-in-fact
II-8
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 2 TO REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
RIPON, STATE OF WISCONSIN, ON AUGUST 3, 1998.
Alliance Laundry Holdings LLC
/s/ Thomas F. L'Esperance
By: _________________________________
Name: Thomas F. L'Esperance
Title: President, Chief Executive
Officer and Manager
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 2 TO REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED BY THE
FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATION ON AUGUST 3,
1998:
SIGNATURE CAPACITY
/s/ Thomas F. L'Esperance President, Chief Executive Officer
- ------------------------------------- and Manager (principal executive
THOMAS F. L'ESPERANCE officer)
/s/ Bruce P. Rounds Vice President/Chief Financial
- ------------------------------------- Officer (principal financial
BRUCE P. ROUNDS and accounting officer)
* Manager
- -------------------------------------
EDWARD W. CONARD
* Manager
- -------------------------------------
ROBERT C. GAY
* Manager
- -------------------------------------
STEPHEN C. SHERRILL
* Vice President and
- ------------------------------------- Manager
STEPHEN M. ZIDE
- --------
* means signed by attorney-in-fact
II-9
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 2 TO REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
RIPON, STATE OF WISCONSIN, ON AUGUST 3, 1998.
Alliance Laundry Corporation
/s/ Thomas F. L'Esperance
By: _________________________________
Name: Thomas F. L'Esperance
Title: President, Chief Executive
Officer and Director
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 2 TO REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED BY THE
FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATION ON AUGUST 3,
1998:
SIGNATURE CAPACITY
/s/ Thomas F. L'Esperance President, Chief Executive Officer
- ------------------------------------- and Director (principal executive
THOMAS F. L'ESPERANCE officer)
/s/ Bruce P. Rounds Vice President/Chief Financial
- ------------------------------------- Officer (principal financial and
BRUCE P. ROUNDS accounting officer)
* Director
- -------------------------------------
EDWARD W. CONARD
* Director
- -------------------------------------
ROBERT C. GAY
* Director
- -------------------------------------
STEPHEN C. SHERRILL
* Vice President and
- ------------------------------------- Director
STEPHEN M. ZIDE
- --------
* means signed by attorney-in-fact
II-10
<PAGE>
EXHIBITS INDEX
(A) EXHIBITS.
<TABLE>
<C> <S>
2.1 Agreement and Plan of Merger, dated as of February 21, 1998, by and
among Bain/RCL, L.L.C., RCL Acquisitions, L.L.C., Raytheon Commercial
Laundry LLC and Raytheon Company.***
2.2 Amendment No. 1 to Agreement and Plan of Merger, dated as of May 2,
1998, by and among Bain/RCL, L.L.C., RCL Acquisitions, L.L.C., Raytheon
Commercial Laundry LLC and Raytheon Company.***
3.1 Certificate of Formation of Alliance Laundry Systems LLC***
3.2 Amended and Restated Limited Liability Company Agreement of Alliance
Laundry Systems LLC.***
3.3 Certificate of Incorporation of Alliance Laundry Corporation.***
3.4 Bylaws of Alliance Laundry Corporation.***
4.1 Indenture, dated as of May 5, 1998, among Alliance Laundry Systems LLC,
Alliance Laundry Corporation, the Guarantors and United States Trust
Company of New York.*
5.1 Opinion and Consent of Kirkland & Ellis.*
8.1 Opinion of Kirkland & Ellis as to federal income tax consequences.*
10.1 Purchase Agreement, dated as of April 29,1998, by and among Alliance
Laundry Systems LLC, Alliance Laundry Corporation and the Initial
Purchasers.***
10.2 Registration Rights Agreement, dated as of May 5, 1998, by and among
Alliance Laundry Systems LLC, Alliance Laundry Corporation, Alliance
Laundry Holdings LLC, and Lehman Brothers Inc. and Credit Suisse First
Boston Corporation.***
10.3 Credit Agreement, dated as of May 5, 1998, among Alliance Laundry
Holdings LLC, Alliance Laundry Systems LLC, the several banks or other
financial institutions or entities from time to time parties to this
Agreement, Lehman Brothers Inc., Lehman Commercial Paper Inc., and
General Electric Capital Corporation.***
10.4 Loan and Security Agreement dated May 5, 1998, between Alliance Laundry
Receivables Warehouse LLC, the Lenders and Lehman Commercial Paper
Inc.***
10.5 Amended and Restated Limited Liability Agreement of Alliance Laundry
Holdings LLC, dated as of May 5, 1998.***
10.6 Alliance Laundry Holdings LLC, Securityholders Agreement, dated as of
May 5, 1998, between Alliance Laundry Holdings LLC and the
Securityholders.***
10.7 Alliance Laundry Holdings LLC, Registration Rights Agreement, made as if
May 5, 1998, by and among Alliance Laundry Holdings LLC, Raytheon
Company, Bain/RCL and the Securityholders.***
10.8 Employment Agreement, made as of May 5, 1998, by and between Alliance
Laundry Systems LLC and Thomas F. L'Esperance.***
10.9 IRA and Executive Unit Purchase Agreement, made as of May 5, 1998, by
and between RCL Acquisitions, LLC, Thomas F. L'Esperance and Stifel,
Nicolaus Custodian for Thomas F. L'Esperance IRA and Stifel, Nicolaus
Custodian for Paula K. L'Esperance IRA.***
10.10 IRA and Executive Unit Purchase Agreement, made as of May 5, 1998, by
and between RCL Acquisitions, LLC, R. Scott Gaster and Robert W. Baird
& Co. Inc. TTEE for R. Scott Gaster IRA.***
10.11 IRA and Executive Unit Purchase Agreement, made as of May 5, 1998, by
and between RCL Acquisitions, L.L.C., Jeffrey J. Brothers and Delaware
Charter Guarantee and Trust Company, TTEE for Jeffrey J. Brothers,
IRA.***
10.12 Executive Unit Purchase Agreement, made as of May 5, 1998, by and
between RCL Acquisitions, L.L.C., and Herman Beach.***
10.13 IRA and Executive Unit Purchase Agreement, made as of May 5, 1998, by
and between RCL Acquisitions, L.L.C., Bruce P. Rounds and Stifel,
Nicolaus Custodian for Bruce P. Rounds IRA.***
10.14 IRA and Executive Unit Purchase Agreement, made as of May 5, 1998, by
and between RCL Acquisitions, L.L.C., Scott L. Spiller and Stifel,
Nicolaus Custodian for Scott Spiller IRA.***
10.15 IRA and Executive Unit Purchase Agreement, made as of May 5, 1998, by
and between RCL Acquisitions, L.L.C., Robert T. Wallace and Edward
Jones, Cust FBO Robert T. Wallace, IRA.***
10.16 Deferred Compensation Agreement, made and entered into as of May 5,
1998, by and among Thomas F. L'Esperance, Raytheon Company, Alliance
Laundry Holdings LLC, and Alliance Laundry Systems LLC.***
10.17 Deferred Compensation Agreement, made and entered into as of May 5,
1998, by and among R. Scott Gaster, Alliance Laundry Holdings LLC, and
Alliance Laundry Systems LLC.***
</TABLE>
<PAGE>
<TABLE>
<C> <S>
10.18 Deferred Compensation Agreement, made and entered into as of May 5,
1998, by and among Jeffrey J. Brothers, Alliance Laundry Holdings LLC
and Alliance Laundry Systems LLC.***
10.19 Deferred Compensation Agreement, made and entered into as of May 5,
1998, by and among Herman W. Beach, Alliance Laundry Holdings LLC and
Alliance Laundry Systems LLC.***
10.20 Deferred Compensation Agreement, made and entered into as of May 5,
1998, by and among Bruce P. Rounds, Alliance Laundry Holdings LLC and
Alliance Laundry Systems LLC.***
10.21 Deferred Compensation Agreement, made and entered into as of May 5,
1998, by and among Robert T. Wallace, Alliance Laundry Holdings LLC and
Alliance Laundry Systems LLC.***
10.22 Retention Agreement, dated as of September 30, 1997, by and between
Thomas F. L'Esperance and Raytheon Commercial Laundry LLC.***
10.23 Amendment No. 1 to Retention Agreement, dated as of April , 1998, be
and between Thomas F. L'Esperance and Raytheon Commercial Laundry
LLC.***
10.24 Retention Agreement, dated as of September 30, 1997, by and between R.
Scott Gaster and Raytheon Commercial Laundry LLC.***
10.25 Amendment No. 1 to Retention Agreement, dated as of April , 1998, by
and between R. Scott Gaster and Raytheon Commercial Laundry LLC.***
10.26 Retention Agreement, dated as of September 30, 1997, by and between
Jeffrey J. Brothers and Raytheon Commercial Laundry LLC.***
10.27 Amendment No. 1 to Retention Agreement, dated as of April , 1998, by
and between Jeffrey J. Brothers and Raytheon Commercial Laundry LLC.***
10.28 Retention Agreement, dated as of September 30, 1997, by and between
Herman W. Beach and Raytheon Commercial Laundry LLC.***
10.29 Amendment No. 1 to Retention Agreement, dated as of April , 1998, by
and between Herman W. Beach and Raytheon Commercial Laundry LLC.***
10.30 Retention Agreement, dated as of September 30, 1997, by and between
Bruce P. Rounds and Raytheon Commercial Laundry LLC.***
10.31 Amendment No. 1 to Retention Agreement, dated as of April , 1998, by
and between Bruce P. Rounds and Raytheon Commercial Laundry LLC.***
10.32 Retention Agreement, dated as of September 30, 1997, by and between
Robert T. Wallace and Raytheon Commercial Laundry LLC.***
10.33 Amendment No. 1 to Retention Agreement, dated as of April , 1998, by
and between Robert T. Wallace and Raytheon Commercial Laundry LLC.***
10.34 Promissory Note, dated as of May 5, 1998, from Thomas F. L'Esperance to
RCL Acquisitions, L.L.C.***
10.35 Promissory Note, dated as of May 5, 1998, from R. Scott Gaster to RCL
Acquisitions, L.L.C.***
10.36 Promissory Note, dated as of May 5, 1998, from Jeffrey J. Brothers to
RCL Acquisitions, L.L.C.***
10.37 Promissory Note, dated as of May 5, 1998, from Herman W. Beach to RCL
Acquisitions, L.L.C.***
10.38 Promissory Note, dated as of May 5, 1998, from Bruce P. Rounds to RCL
Acquisitions, L.L.C.***
10.39 Promissory Note, dated as of May 5, 1998, from Robert T. Wallace to RCL
Acquisitions, L.L.C.***
10.40 Advisory Agreement, dated as of , 1998, by and between Alliance
Laundry Systems LLC, and Bain Capital, Inc.***
10.41 Transition Services Agreement, dated as of May , 1998, by and among
Bain/RCL, L.L.C., RCL Acquisitions, L.L.C., Raytheon Company, and
Raytheon Commercial Laundry LLC.***
10.42 Junior Subordinated Promissory Note, dated as of , 1998, from
Alliance Laundry Holdings LLC to Raytheon Company.***
10.43 Supply Agreement, dated as of September 10, 1997, between Appliance Co.
and Raytheon Commercial Laundry LLC.*+
10.44 Supply Agreement II, dated as of September 10, 1997, between Appliance
Co. and Raytheon Commercial Laundry LLC.*+
10.45 Supply Agreement, dated as of May 1, 1998, by and among Coinmach
Corporation, Super Laundry Equipment Corporation and Raytheon
Commercial Laundry LLC (incorporated by reference from exhibit 10.57 to
Coinmach Corporation's Annual Report on Form 10-K dated as of June 29,
1998, file number 033-49830).*
12.1 Statement of Computation of Ratios.***
21.1 Subsidiaries of Alliance Laundry Systems LLC.*
23.1 Consent of PricewaterhouseCoopers LLP*
23.2 Consent of Kirkland & Ellis (included in exhibits 5.1 and 8.1).*
</TABLE>
2
<PAGE>
<TABLE>
<C> <S>
24.1 Powers of Attorney (included in signature page).***
25.1 Statement of Eligibility of Trustee on Form T-1.***
27.1 Financial Data Schedule.***
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Form of Tender Instructions.*
</TABLE>
- -------
* Filed herewith
** To be filed by amendment
*** Previously filed
+ Confidential treatment has been requested for certain omitted portions of
this exhibit
3
<PAGE>
EXHIBIT 4.1
EXECUTION COPY
------------------------------------------------------------------------
ALLIANCE LAUNDRY SYSTEMS LLC
AND
ALLIANCE LAUNDRY CORPORATION, AS
ISSUERS
ALLIANCE LAUNDRY HOLDINGS LLC
AND
EACH NEWLY ACQUIRED OR
CREATED DOMESTIC SUBSIDIARY
OF THE ISSUERS, AS
GUARANTORS
9 5/8% SENIOR SUBORDINATED NOTES DUE 2008
INDENTURE
Dated as of May 5, 1998
UNITED STATES TRUST COMPANY OF NEW YORK, as
Trustee
------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture Act Section Indenture Section
<S> <C>
310(a)(1)........................................................................7.10
(a)(2)......................................................................7.10
(a)(3)......................................................................N.A.
(a)(4)......................................................................N.A.
(a)(5)......................................................................7.10
(i)(b)......................................................................7.10
(ii)(c).....................................................................N.A.
311(a)......................................................................7.11
(b).........................................................................7.11
(iii)(c)....................................................................N.A.
312(a)............................................................................2.5
(b)(5).......................................................................13.3
(iv)(c)......................................................................13.3
313(a)............................................................................7.6
(b)(1).......................................................................10.3
(b)(2).......................................................................7.7
(v)(c).......................................................................7.6
13.2
(v)(d).......................................................................7.6
314(a)............................................................................4.3;
13.2
(A)(b).......................................................................10.2
(c)(1).......................................................................13.4
(c)(2).......................................................................13.4
(c)(3)......................................................................N.A.
(vi)(e)......................................................................13.5
(f).........................................................................N.A.
315(a)............................................................................7.1
(b)..........................................................................7.5
13.2
(B)(c).......................................................................7.1
(d)..........................................................................7.1
(e).........................................................................6.11
316(a)(last sentence).............................................................2.9
(a)(1)(A)....................................................................6.5
(a)(1)(B)....................................................................6.4
(a)(2)......................................................................N.A.
(b)..........................................................................6.7
(C)(c)......................................................................2.12
317(a)(1).........................................................................6.8
(a)(2).......................................................................6.9
(b)..........................................................................2.2
318 (a)..........................................................................13.1
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(b).........................................................................N.A.
(c)..........................................................................13.1
</TABLE>
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
2
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
<S> <C> <C>
SECTION 1.1 DEFINITIONS................................................. 1
SECTION 1.2 OTHER DEFINITIONS........................................... 23
SECTION 1.3 INCORPORATION BY REFERENCE OF TRUST
INDENTURE ACT............................................... 23
SECTION 1.4 RULES OF CONSTRUCTION....................................... 24
SECTION 1.5 ONE CLASS OF SECURITIES..................................... 24
ARTICLE 2.
THE NOTES
SECTION 2.1 FORM AND DATING............................................. 25
SECTION 2.2 EXECUTION AND AUTHENTICATION................................ 26
SECTION 2.3 REGISTRAR AND PAYING AGENT.................................. 27
SECTION 2.4 PAYING AGENT TO HOLD MONEY IN TRUST......................... 27
SECTION 2.5 HOLDER LISTS................................................ 27
SECTION 2.6 TRANSFER AND EXCHANGE....................................... 28
SECTION 2.7 REPLACEMENT NOTES........................................... 41
SECTION 2.8 OUTSTANDING NOTES........................................... 41
SECTION 2.9 TREASURY NOTES.............................................. 42
SECTION 2.10 TEMPORARY NOTES............................................. 42
SECTION 2.11 CANCELLATION................................................ 42
SECTION 2.12 DEFAULTED INTEREST.......................................... 42
SECTION 2.13 CUSIP NUMBERS............................................... 43
</TABLE>
-i-
<PAGE>
<TABLE>
Page
ARTICLE 3.
REDEMPTION AND PREPAYMENT
<S> <C> <C>
SECTION 3.1 NOTICES TO TRUSTEE.......................................... 43
SECTION 3.2 SELECTION OF NOTES TO BE REDEEMED........................... 43
SECTION 3.3 NOTICE OF REDEMPTION........................................ 44
SECTION 3.4 EFFECT OF NOTICE OF REDEMPTION.............................. 45
SECTION 3.5 DEPOSIT OF REDEMPTION PRICE................................. 45
SECTION 3.6 NOTES REDEEMED IN PART...................................... 45
SECTION 3.7 OPTIONAL REDEMPTION......................................... 45
SECTION 3.8 MANDATORY REDEMPTION........................................ 46
SECTION 3.9 OFFER TO PURCHASE BY APPLICATION OF EXCESS
PROCEEDS........................................................... 46
ARTICLE 4.
COVENANTS
SECTION 4.1 PAYMENT OF NOTES............................................ 48
SECTION 4.2 MAINTENANCE OF OFFICE OR AGENCY............................. 49
SECTION 4.3 REPORTS..................................................... 49
SECTION 4.4 COMPLIANCE CERTIFICATE...................................... 50
SECTION 4.5 TAXES....................................................... 51
SECTION 4.6 STAY, EXTENSION AND USURY LAWS.............................. 51
SECTION 4.7 RESTRICTED PAYMENTS......................................... 51
SECTION 4.8 DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING SUBSIDIARIES.............................................. 55
SECTION 4.9 INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF
PREFERRED STOCK............................................. 56
</TABLE>
-ii-
<PAGE>
<TABLE>
Page
----
<S> <C> <C>
SECTION 4.10 ASSET SALES................................................. 59
SECTION 4.11 TRANSACTIONS WITH AFFILIATES................................ 61
SECTION 4.12 LIENS....................................................... 62
SECTION 4.13 BUSINESS ACTIVITIES......................................... 63
SECTION 4.14 CORPORATE EXISTENCE......................................... 63
SECTION 4.15 OFFER TO REPURCHASE UPON CHANGE OF
CONTROL..................................................... 63
SECTION 4.16 NO SENIOR SUBORDINATED DEBT................................. 64
SECTION 4.17 LIMITATION ON ISSUANCES OF GUARANTEES OF
INDEBTEDNESS....................................................... 64
SECTION 4.18 PAYMENTS FOR CONSENT........................................ 65
ARTICLE 5.
SUCCESSORS
SECTION 5.1 MERGER, CONSOLIDATION, OR SALE OF ASSETS.................... 65
SECTION 5.2 SUCCESSOR CORPORATION SUBSTITUTED........................... 66
ARTICLE 6.
EVENTS OF DEFAULT
SECTION 6.1 EVENTS OF DEFAULT........................................... 67
SECTION 6.2 ACCELERATION................................................ 69
SECTION 6.3 OTHER REMEDIES.............................................. 70
SECTION 6.4 WAIVER OF PAST DEFAULTS..................................... 70
SECTION 6.5 CONTROL BY MAJORITY......................................... 70
SECTION 6.6 LIMITATION ON SUITS......................................... 70
SECTION 6.7 RIGHTS OF HOLDERS OF NOTES TO RECEIVE
PAYMENT............................................................ 71
</TABLE>
-iii-
<PAGE>
<TABLE>
Page
----
<S> <C> <C>
SECTION 6.8 COLLECTION SUIT BY TRUSTEE.................................. 71
SECTION 6.9 TRUSTEE MAY FILE PROOFS OF CLAIM............................ 71
SECTION 6.10 PRIORITIES.................................................. 72
SECTION 6.11 FOR COSTS................................................... 72
ARTICLE 7.
TRUSTEE
SECTION 7.1 DUTIES OF TRUSTEE........................................... 73
SECTION 7.2 RIGHTS OF TRUSTEE........................................... 74
SECTION 7.3 INDIVIDUAL RIGHTS OF TRUSTEE................................ 75
SECTION 7.4 TRUSTEES DISCLAIMER......................................... 75
SECTION 7.5 NOTICE OF DEFAULTS.......................................... 75
SECTION 7.6 REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.................. 76
SECTION 7.7 COMPENSATION AND INDEMNITY.................................. 76
SECTION 7.8 REPLACEMENT OF TRUSTEE...................................... 77
SECTION 7.9 SUCCESSOR TRUSTEE BY MERGER, ETC............................ 78
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION............................... 78
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST
COMPANY............................................................ 78
SECTION 7.12 OTHER CAPACITIES............................................ 79
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.1 OPTION TO EFFECT LEGAL DEFEASANCE OR
COVENANT DEFEASANCE................................................ 79
SECTION 8.2 LEGAL DEFEASANCE AND DISCHARGE.............................. 79
</TABLE>
-iv-
<PAGE>
<TABLE>
Page
----
<S> <C> <C>
SECTION 8.3 COVENANT DEFEASANCE......................................... 80
SECTION 8.4 CONDITIONS TO LEGAL OR COVENANT
DEFEASANCE......................................................... 80
SECTION 8.5 DEPOSITED MONEY AND GOVERNMENT SECURITIES
TO BE HELD IN TRUST; OTHER MISCELLANEOUS
PROVISIONS......................................................... 81
SECTION 8.6 REPAYMENT TO ISSUERS........................................ 82
SECTION 8.7 REINSTATEMENT............................................... 82
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.1 WITHOUT CONSENT OF HOLDERS OF NOTES......................... 83
SECTION 9.2 WITH CONSENT OF HOLDERS OF NOTES............................ 84
SECTION 9.3 COMPLIANCE WITH TRUST INDENTURE ACT......................... 85
SECTION 9.4 REVOCATION AND EFFECT OF CONSENTS........................... 85
SECTION 9.5 NOTATION ON OR EXCHANGE OF NOTES............................ 86
SECTION 9.6 TRUSTEE TO SIGN AMENDMENTS, ETC............................. 86
ARTICLE 10.
SUBORDINATION
SECTION 10.1 AGREEMENT TO SUBORDINATE.................................... 86
SECTION 10.2 CERTAIN DEFINITIONS......................................... 86
SECTION 10.3 LIQUIDATION; DISSOLUTION; BANKRUPTCY........................ 87
SECTION 10.4 DEFAULT ON DESIGNATED SENIOR DEBT........................... 88
SECTION 10.5 ACCELERATION OF SECURITIES.................................. 89
SECTION 10.6 WHEN DISTRIBUTION MUST BE PAID OVER......................... 89
SECTION 10.7 NOTICE BY ISSUERS........................................... 89
</TABLE>
-v-
<PAGE>
<TABLE>
Page
----
<S> <C> <C>
SECTION 10.8 SUBROGATION................................................. 89
SECTION 10.9 RELATIVE RIGHTS............................................. 90
SECTION 10.10 SUBORDINATION MAY NOT BE IMPAIRED BY
ISSUERS OR GUARANTORS....................................... 90
SECTION 10.11 DISTRIBUTION OR NOTICE TO REPRESENTATIVE.................... 90
SECTION 10.12 ARTICLE 10 NOT TO PREVENT EVENTS OF DEFAULT
OR LIMIT RIGHT TO ACCELERATE................................ 91
SECTION 10.13 RIGHTS OF TRUSTEE AND PAYING AGENT.......................... 91
SECTION 10.14 AUTHORIZATION TO EFFECT SUBORDINATION....................... 91
SECTION 10.15 AMENDMENTS.................................................. 91
SECTION 10.16 TRUSTEE'S COMPENSATION NOT PREJUDICED....................... 91
ARTICLE 11.
GUARANTEE
SECTION 11.1 UNCONDITIONAL GUARANTEE..................................... 92
SECTION 11.2 SEVERABILITY................................................ 92
SECTION 11.3 LIMITATION OF GUARANTOR'S LIABILITY......................... 93
SECTION 11.4 CONTRIBUTION................................................ 93
SECTION 11.5 EXECUTION OF GUARANTEE...................................... 93
SECTION 11.6 ADDITIONAL NOTE GUARANTEES.................................. 94
SECTION 11.7 SUBORDINATION OF SUBROGATION AND OTHER
RIGHTS...................................................... 94
ARTICLE 12.
SUBORDINATION OF GUARANTEE
SECTION 12.1 GUARANTEE OBLIGATIONS SUBORDINATED TO
SENIOR DEBT........................................................ 94
</TABLE>
-vi-
<PAGE>
<TABLE>
Page
----
<S> <C>
SECTION 12.2 NO PAYMENT IN CERTAIN CIRCUMSTANCES;
PAYMENT OVER OF PROCEEDS UPON DISSOLUTION,
ETC................................................................ 94
SECTION 12.3 SUBROGATION................................................. 96
SECTION 12.4 OBLIGATIONS OF GUARANTORS UNCONDITIONAL..................... 97
SECTION 12.5 NOTICE TO TRUSTEE........................................... 97
SECTION 12.6 RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF
LIQUIDATING AGENT........................................... 98
SECTION 12.7 TRUSTEE'S RELATION TO GUARANTOR SENIOR
DEBT........................................................ 98
SECTION 12.8 SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS
OR OMISSIONS OF THE PARENT, THE GUARANTORS
OR HOLDERS OF SENIOR DEBT.......................................... 99
SECTION 12.9 NOTEHOLDERS AUTHORIZE TRUSTEE TO
EFFECTUATE SUBORDINATION OF GUARANTEE.............................. 99
SECTION 12.10 THIS ARTICLE NOT TO PREVENT EVENTS OF
DEFAULT............................................................ 99
SECTION 12.11 TRUSTEE'S COMPENSATION NOT PREJUDICED....................... 99
SECTION 12.12 NO WAIVER OF GUARANTEE SUBORDINATION
PROVISIONS........................................................ 100
ARTICLE 13.
MISCELLANEOUS
SECTION 13.1 TRUST INDENTURE ACT CONTROLS............................... 100
SECTION 13.2 NOTICES.................................................... 100
SECTION 13.3 COMMUNICATION BY HOLDERS OF NOTES WITH
OTHER HOLDERS OF NOTES............................................ 101
SECTION 13.4 CERTIFICATE AND OPINION AS TO CONDITIONS
PRECEDENT......................................................... 102
</TABLE>
-vii-
<PAGE>
<TABLE>
<S> <C>
Page
----
SECTION 13.5 STATEMENTS REQUIRED IN CERTIFICATE OR
OPINION............................................................102
SECTION 13.6 RULES BY TRUSTEE AND AGENTS.................................102
SECTION 13.7 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS,
EMPLOYEES AND SHAREHOLDERS.........................................103
SECTION 13.8 GOVERNING LAW...............................................103
SECTION 13.9 NO ADVERSE INTERPRETATION OF OTHER
AGREEMENTS.........................................................103
SECTION 13.10 SUCCESSORS..................................................103
SECTION 13.11 SEVERABILITY................................................103
SECTION 13.12 COUNTERPART ORIGINALS.......................................103
SECTION 13.13 TABLE OF CONTENTS, HEADINGS, ETC............................103
</TABLE>
-viii-
<PAGE>
EXHIBITS:
A Form of Note
B Form of Certificate of Transfer
C Form of Certificate of Exchange
D Form of Supplemental Indenture
E Form of Parent Guarantee
-ix-
<PAGE>
INDENTURE dated as of May 5, 1998 among Alliance Laundry Systems LLC,
a Delaware limited liability company (the "Company"), Alliance Laundry
Corporation, a Delaware corporation ("ALC" and, together with the Company, the
"Issuers"), the Guarantors (as defined herein) identified on the signature pages
hereto and United States Trust Company of New York, as trustee (the "Trustee").
The Issuers, the Guarantors and the Trustee agree as follows for the
benefit of the other parties and for the equal and ratable benefit of the
Holders of the 9 5/8% Senior Subordinated Notes due 2008 (the "Initial Notes")
and the 9 5/8% Senior Subordinated Notes due 2008 if and when issued in the
Exchange Offer (the "New Notes" and, together with the Initial Notes, the
"Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 DEFINITIONS.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any assets acquired by such specified Person.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) to be used by the Company or a Restricted
Subsidiary in a Permitted Business; (ii) the Capital Stock of a Person that
becomes a Restricted Subsidiary as a result of the acquisition of such Capital
Stock by the Company or a Restricted Subsidiary of the Company; or (iii) Capital
Stock constituting a minority interest in any Person that at such time is a
Restricted Subsidiary of the Company; provided, however, that, in the case of
clauses (ii) and (iii), such Restricted Subsidiary is primarily engaged in a
Permitted Business.
"Additional Notes" means up to $90.0 million in aggregate principal
amount of Notes (other than the Initial Notes) issued under this Indenture in
accordance with Sections 2.2 and 4.9 hereof.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise.
"Agent" means any Registrar, Paying Agent, co-registrar,
authenticating agent or securities custodian.
<PAGE>
2
"Alliance Commercial Appliances Finance LLC" means Alliance Laundry
Finance LLC, a Delaware limited liability company.
"Alliance Commercial Appliances Receivables LLC" means Alliance
Laundry Receivables LLC, a Delaware limited liability company.
"Alliance Laundry S.A." means Alliance Laundry S.A., an Argentine
corporation.
"Appliance Co." means a large consumer appliance company to which the
Company supplies consumer washing machines for sale at retail.
"Applicable Premium" means, with respect to any Note on any Redemption
Date, the greater of (i) 1.0% of the principal amount of such Note or (ii) the
excess of (A) the present value at such Redemption Date of (1) the redemption
price of such Note at May 1, 2003 (such redemption price being set forth in the
table above) plus (2) all required interest payments due on such Note through
May 1, 2003 (excluding accrued but unpaid interest), computed using a discount
rate equal to the Treasury Rate at such Redemption Date plus 75 basis points
over (B) the principal amount of such Note, if greater.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and Cedel that apply to such transfer or
exchange.
"Asset Backed Facility" means the $250.0 million revolving loan
agreement entered into between the SPE and Lehman Commercial Paper Inc. on the
date of this Indenture.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets or rights (including, without limitation, by way of a
sale and leaseback) other than sales of inventory in the ordinary course of
business consistent with past practice (provided that the sale, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company and its Subsidiaries taken as a whole will be governed by the provisions
of Section 4.15 hereof and/or the provisions of Section 5.1 hereof and not by
the provisions of Section 4.10 hereof), and (ii) the issue or sale by the
Company or any of its Restricted Subsidiaries of Equity Interests of any of the
Company's Subsidiaries, in the case of either clause (i) or (ii), whether in a
single transaction or a series of related transactions (a) that have a fair
market value in excess of $1.0 million or (b) for Net Proceeds in excess of $1.0
million. Notwithstanding the foregoing, the following items shall not be deemed
to be Asset Sales: (i) a transfer of assets by the Company to a Restricted
Subsidiary or by a Restricted Subsidiary to the Company or to another Restricted
Subsidiary, (ii) an issuance of Equity Interests by a Restricted Subsidiary to
the Company or to another Restricted Subsidiary, (iii) a Restricted Payment that
is permitted by Section 4.7 hereof, (iv) the sale or discount, in each case
without recourse, of accounts receivable arising in the ordinary course of
business, but only in connection with the compromise or collection thereof, (v)
the factoring of accounts receivable arising in the ordinary course of business
pursuant to arrangements
<PAGE>
3
customary in the industry, (vi) the licensing of intellectual property, (vii)
disposals or replacements of obsolete, uneconomical, negligible, worn out or
surplus property in the ordinary course of business, (viii) sales of equipment
loans on a non-recourse basis to a third party in an amount at least equal to
75% of the fair market value thereof, and (ix) sales of receivables, equipment
loans and related assets (including contract rights) of the type specified in
the definition of "Qualified Securitization Transaction" to a Securitization
Entity for the fair market value thereof, including consideration in the amount
specified in the proviso to the definition of "Qualified Securitization
Transaction."
"Bain LLC" means Bain/RCL, L.L.C., a Delaware limited liability
company.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"Board of Directors" means the Board of Directors of ALC or any
committee thereof duly authorized to act on behalf of such Board.
"Board of Managers" means the Board of Managers of the Company or of
the Parent, as the case may be, or any committee thereof duly authorized to act
on behalf of such Board.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
or the general partner, in the case of a limited partnership, or member, in the
case of a limited liability company, of such Person (or, if such Person is a
partnership, one of its general partners) to have been duly adopted by the Board
of Directors of such Person or the general partner, in the case of a limited
partnership, or member, in the case of a limited liability company, of such
Person and to be in full force and effect on the date of such certification, and
delivered to the Trustee.
"Borrowing Base" means, with respect to any Person, the sum of (x) up
to 90% of the net book value of the non-affiliated accounts receivable of such
Person in accordance with GAAP and (y) up to 60% of the net book value of the
inventory of such Person in accordance with GAAP.
"Broker-Dealer" has the meaning set forth in the Registration Rights
Agreement.
"BRS Investors" means Bruckmann, Rosser, Sherrill & Co., L.P., BCB
Family Partners, L.P., NAZ Family Partners, L.P., Paul D. Kaminski, Bruce C.
Bruckmann, Donald J. Bruckmann, Harold O. Rosser, Stephen C. Sherrill, H. Virgil
Sherrill, Nancy A. Zweng, John Rice Edmonds, Susan Kaider, Marilena Tibrea,
Walker C. Simmons and MLPF&S Custodian FBO Paul Kaminski.
"Business Day" means any day other than a Legal Holiday.
<PAGE>
4
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participation, 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 distribution of
assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof (provided that the full
faith and credit of the United States is pledged in support thereof) having
maturities of not more than six months from the date of acquisition, (iii)
certificates of deposit and eurodollar time deposits with maturities of six
months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case
with any lender party to the Senior Credit Facility or with any domestic
commercial bank having capital and surplus in excess of $500.0 million and a
Thompson Bank Watch Rating of "B" or better, (iv) repurchase obligations with a
term of not more than seven days for underlying securities of the types
described in clauses (ii) and (iii) above entered into with any financial
institution meeting the qualifications specified in clause (iii) above, (v)
commercial paper having the highest rating obtainable from Moody's Investors
Service, Inc. or Standard & Poor's Corporation and in each case maturing within
six months after the date of acquisition and (vi) money market funds at least
95% of the assets of which constitute Cash Equivalents of the kinds described in
clauses (i) through (v) of this definition.
"Cedel" means Cedel Bank, S.A.
"Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance, or other disposition (other than by way
of merger or consolidation), in one or a series of related transactions, of all
or substantially all of the assets of the Company and its Restricted
Subsidiaries taken as a whole to any "person" (as such term is used in Section
13(d)(3) of the Exchange Act), whether or not otherwise in compliance with the
provisions of the Indenture (other than the Principals and their Related
Parties), (ii) the adoption of a plan relating to the liquidation or dissolution
of the Company, (iii) the consummation of the first transaction (including,
without limitation, any merger or consolidation) the result of which is that any
"person" (as defined above) becomes the "beneficial owner" (as such term is
defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a
person shall be deemed to have "beneficial ownership" of all securities that
such person has the right to acquire, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more of the Voting Stock of the Company
(measured by voting power rather than number of shares) than is at the time
"beneficially owned" (as defined above) by the
<PAGE>
5
Principals and their Related Parties in the aggregate or (iv) the first day on
which a majority of the members of the Board of Managers of the Company or the
Parent are not Continuing Managers (as defined below).
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning assigned to it in the preamble to this
Indenture.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus (i) an
amount equal to any extraordinary loss plus any net loss realized in connection
with an Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes, including foreign
withholding taxes to the extent paid, based on income or profits of such Person
and its Restricted Subsidiaries for such period, to the extent that such
provision for taxes was included in computing such Consolidated Net Income, plus
(iii) consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations), to the extent that any
such expense was deducted in computing such Consolidated Net Income, plus (iv)
depreciation, amortization (including amortization of goodwill and other
intangibles but excluding amortization of prepaid cash expenses that were paid
in a prior period) and other non-cash expenses (excluding any such non-cash
expense to the extent that it represents an accrual of or reserve for cash
expenses in any future period or amortization of a prepaid cash expense that was
paid in a prior period) of such Person and its Restricted Subsidiaries for such
period to the extent that such depreciation, amortization and other non-cash
expenses were deducted in computing such Consolidated Net Income, plus (v) one
time non-cash legal, accounting and debt issuance charges resulting from the
Transactions, minus (vi) non-cash items increasing such Consolidated Net Income
for such period, in each case, on a consolidated basis and determined in
accordance with GAAP. Consolidated Cash Flow shall exclude the amortization of
debt issuance costs.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the Net Income (but not loss) of any Person that is
not a Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment,
<PAGE>
6
decree, order, statute, rule or governmental regulation applicable to that
Restricted Subsidiary or its stockholders, (iii) the Net Income of any Person
acquired in a pooling of interests transaction for any period prior to the date
of such acquisition shall be excluded, (iv) the cumulative effect of a change in
accounting principles shall be excluded, (v) any one time non-cash charges
relating to the Transition Plan in an amount not to exceed $5.0 million shall be
excluded, and (vi) the Net Income (but not loss) of any Unrestricted Subsidiary
shall be excluded, whether or not distributed to the Company or one of its
Subsidiaries.
"Continuing Managers" means, as of any date of determination, any
member of the Board of Managers of the Company who (i) was a member of such
Board of Managers on the date of this Indenture, (ii) was nominated for election
or elected to such Board of Managers with the approval of a majority of the
Continuing Managers who were members of such Board at the time of such
nomination or election or (iii) was nominated by a Principal pursuant to the
Securityholders Agreement.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 13.2 hereof or such other address as to which the
Trustee may give notice to the Company.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"Custodian" means the Trustee, as custodian with respect to the Notes
in global form, or any successor entity thereto.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Definitive Note" means a certificated Note registered in the name of
the Holder thereof and issued in accordance with Section 2.6 hereof, in the form
of Exhibit A-1 hereto except that such Note shall not bear the Global Note
Legend and shall not have the "Schedule of Exchanges of Interests in the Global
Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.3 hereof as
the Depositary with respect to the Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature; provided, however, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the right
to require
<PAGE>
7
the Issuers to repurchase such Capital Stock upon the occurrence of a Change of
Control or an Asset Sale shall not constitute Disqualified Stock if the terms of
such Capital Stock provide that the Issuers may not repurchase or redeem any
such Capital Stock pursuant to such provisions unless such repurchase or
redemption complies with Section 4.7 hereof.
"Domestic Subsidiary" means any Restricted Subsidiary of the Company
other than a Foreign Subsidiary.
"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 offering of Qualified Capital Stock of the
Parent, the Company or any successor thereto; provided that, in the event of any
Equity Offering by the Parent, the Parent contributes to the common equity
capital of the Company (other than as Disqualified Stock) the portion of the net
cash proceeds of such Equity Offering necessary to pay the aggregate redemption
price (plus accrued interest and Liquidated Damages thereon, if any, to the
redemption date) of the Notes to be redeemed pursuant to the preceding
paragraph.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in
the Registration Rights Agreement.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Senior Credit Facility) in
existence on the date of this Indenture, until such amounts are repaid.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person and
its Restricted Subsidiaries for such period. In the event that the referent
Person or any of its Restricted Subsidiaries incurs, assumes, guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues or
redeems preferred stock subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated but prior to the date on
which the event for which the calculation of the Fixed Charge Coverage Ratio is
made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, guarantee or
redemption of Indebtedness, or such issuance or redemption of preferred stock,
as if the same had occurred at
<PAGE>
8
the beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, Consolidated Cash Flow and
Fixed Charges shall be calculated after giving effect on a pro forma basis for
the period of such calculation to (i) acquisitions that have been made by the
Company or any of its Restricted Subsidiaries, including through mergers or
consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date as if such transaction had occurred on the first
day of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (iii) of
the proviso set forth in the definition of Consolidated Net Income, and (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP and operations or
businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the referent Person or any of its Restricted Subsidiaries
following the Calculation Date. 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 consistent with Article 11 of Regulation S-X, promulgated pursuant to
the Securities Act, as such Regulation is in effect on the date of this
Indenture.
"Fixed Charges" means, with respect to any Person for any period, the
sum, without duplication, of (i) the consolidated interest expense of such
Person and its Restricted Subsidiaries for such period, whether paid or accrued
(including without limitation, amortization of original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations) and (ii) the consolidated interest of
such Person and its Restricted Subsidiaries that was capitalized during such
period and (iii) any interest expense on Indebtedness of another Person that is
guaranteed by such Person or one of its Restricted Subsidiaries or secured by a
Lien on assets of such Person or one of its Restricted Subsidiaries (whether or
not such guarantee or Lien is called upon) and (iv) all dividend payments,
whether or not in cash, on any series of Preferred Stock of such Person or any
of its Restricted Subsidiaries, other than dividend payments on Equity Interests
payable solely in Equity Interests of the Company (other than Disqualified
Stock) or to the Company or a Restricted Subsidiary of the Company. Fixed
Charges shall exclude the amortization of debt issuance costs.
"Foreign Subsidiary" means (a) any Restricted Subsidiary of the
Company that is not organized under the laws of the United States of America or
any state thereof or the District of Columbia and (b) any Restricted Subsidiary
of the Company that has no material assets other than securities of one or more
Foreign Subsidiaries, and other assets relating to an ownership interest in any
such securities or Subsidiaries.
<PAGE>
9
"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 date of this Indenture, except that
calculations made for purposes of determining compliance with the terms of the
covenants and with other provisions of this Indenture shall be made without
giving effect to depreciation, amortization or other expenses recorded as a
result of the application of purchase accounting in accordance with Accounting
Principles Board Opinion Nos. 16 and 17.
"Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A hereto issued in accordance with Section 2.1, 2.6(b)(iv), 2.6(d)(ii)
or 2.6(f) hereof.
"Global Note Legend" means the legend set forth in Section 2.6(g)(ii),
which is required to be placed on all Global Notes issued under this Indenture.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.
"guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Guarantee" means (i) the Parent Guarantee, (ii) each Note Guarantee
and (iii) any guarantee of the Notes to be executed by any Subsidiary of the
Company pursuant to the provisions of this Indenture.
"Guarantors" means each of (i) the Parent and (ii) any Subsidiary that
executes a Note Guarantee in accordance with the provisions of this Indenture,
and their respective successors and assigns.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) currency exchange or interest rate swap
agreements, interest rate cap agreements and interest rate collar agreements and
(ii) other agreements or arrangements designed to protect such Person against
fluctuations in interest rates or currency exchange rates.
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds,
<PAGE>
10
notes, debentures or similar instruments or letters of credit (or reimbursement
agreements in respect thereof) or banker's acceptances or representing Capital
Lease Obligations or the balance deferred and unpaid of the purchase price of
any property or representing any Hedging Obligations, except any such balance
that constitutes an accrued expense or trade payable, if and to the extent any
of the foregoing (other than letters of credit and Hedging Obligations) would
appear as a liability upon a balance sheet of such Person prepared in accordance
with GAAP, as well as all Indebtedness of others secured by a Lien on any asset
of such Person (whether or not such Indebtedness is assumed by such Person) and,
to the extent not otherwise included, the guarantee by such Person of any
Indebtedness of any other Person (but excluding, with respect to Indebtedness of
a Qualified Securitization Entity, any Limited Originator Recourse or Standard
Securitization Undertakings that might be deemed to constitute guarantees). The
amount of any Indebtedness outstanding as of any date shall be (i) the accreted
value thereof, in the case of any Indebtedness issued with original issue
discount, and (ii) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any other
Indebtedness. For purposes of calculating the amount of Indebtedness of a
Securitization Entity outstanding as of any date, the face or notional amount of
any interest in receivables or equipment that is outstanding as of such date
shall be deemed to be Indebtedness but any such interests held by Affiliates of
such Securitization Entity shall be excluded for purposes of such calculation.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Independent Financial Advisor" means a reputable accounting,
appraisal or investment banking firm of national standing.
"Indirect Participant" means a Person who holds a beneficial interest
in a Global Note through a Participant.
"Initial Notes" means $110.0 million in aggregate principal amount of
Notes issued under this Indenture on the date hereof.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other Obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Subsidiary of the
Company such that, after giving effect to any such sale or disposition, such
Person is no longer a Restricted Subsidiary of the Company, the Company shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Equity Interests of such Subsidiary not
sold or disposed of in an amount determined as provided in third to last
paragraph of Section 4.7 hereof.
<PAGE>
11
"Investors Equity Contribution" means the equity investment in the
Parent by Bain LLC and senior management of the Company of approximately $47.1
million.
"Issuers" has the meaning assigned to it in the preamble to this
Indenture.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue on
such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be prepared
by the Issuers and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Limited Originator Recourse" means a reimbursement obligation to the
Company or a Restricted Subsidiary in connection with a drawing on a letter of
credit, revolving loan commitment, cash collateral account or other such credit
enhancement issued to support Indebtedness of a Securitization Entity under a
facility for the financing of trade receivables and the warehousing of equipment
loans and leases; provided that the available amount of any such form of credit
enhancement any time shall not exceed 10.0% of the principal amount of such
Indebtedness at such time.
"Liquidated Damages" means all liquidated damages then owing pursuant
to Section 5 of the Registration Rights Agreement.
"LLC Agreement" means the Amended and Restated Limited Liability
Company Agreement entered into among Bain LLC, Raytheon and the other members as
parties thereto.
"MergeCo" means RCL Acquisitions, L.L.C., a Delaware limited liability
company.
"Merger" means the merger of MergeCo with and into the Parent, with
the Parent being the surviving entity.
"Net Income" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any
<PAGE>
12
related provision for taxes on such gain (but not loss), realized in connection
with (a) any Asset Sale (including, without limitation, dispositions pursuant to
sale and leaseback transactions) or (b) the disposition of any securities by
such Person or any of its Restricted Subsidiaries or the extinguishment of any
Indebtedness of such Person or any of its Restricted Subsidiaries and (ii) any
extraordinary or nonrecurring gain (but not loss), together with any related
provision for taxes on such extraordinary or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing agreements), amounts required to be applied to
the repayment of Indebtedness (other than Senior Debt under one or more of the
Company's Senior Credit Facilities) secured by a Lien on the asset or assets
that were the subject of such Asset Sale and any reserve for adjustment in
respect of the sale price of such asset or assets established in accordance with
GAAP.
"New Notes" has the meaning assigned to it in the preamble to this
Indenture.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries (a) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise), or (c) constitutes the lender; and (ii) no default with respect
to which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Notes being offered hereby) of the Company or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity; and
(iii) as to which the lenders have been notified in writing that they will not
have any recourse to the stock or assets of the Company or any of its Restricted
Subsidiaries.
"Non-US. Person" means a Person who is not a U.S. Person.
"Note Guarantee" means the supplemental indenture, in the form of
Exhibit D hereto, executed and delivered to the Trustee pursuant to which each
Note Guarantor will guarantee payment of the Notes.
"Note Guarantor" means each newly acquired or created Domestic
Subsidiary that executes and delivers a Note Guarantee.
"Notes" has the meaning assigned to it in the preamble to this
Indenture.
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13
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Initial Notes by the Company.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of any
Person by either the principal executive officer or the principal financial
officer, the treasurer or the principal accounting officer of such Person that
meets the requirements of Section 13.5 hereof.
"144A Global Note" means a global note in the form of Exhibit A-l
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold in reliance on Rule 144A.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
13.5 hereof. The counsel may be an employee of or counsel to the Issuers, any
Subsidiary of the Issuers or the Trustee.
"Parent" means Alliance Laundry Holdings LLC, a Delaware limited
liability company, or any corporation as successor thereto.
"Parent Contribution" means the contribution by the Parent of
substantially all of its assets and liabilities to the Company.
"Parent Guarantee" means the guarantee in the form of Exhibit E hereto
by the Parent of the Obligations of the Issuers under the Notes and this
Indenture.
"Participant" means, with respect to the Depositary, Euroclear or
Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and Cedel).
"Permitted Business" means the lines of business conducted by the
Company and its Subsidiaries on the date hereof and businesses that are
reasonably similar, ancillary or related thereto or which constitute a
reasonable extension or expansion thereof.
"Permitted Investments" means (i) any Investment in the Company or in
a Wholly Owned Restricted Subsidiary of the Company that is a Note Guarantor
(whether
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14
existing on the date of this Indenture or created thereafter); (ii) any
Investment in Cash Equivalents; (iii) any Investment by the Company or any
Restricted Subsidiary of the Company in a Person, if as a result of such
Investment (x) such Person becomes a Wholly Owned Restricted Subsidiary of the
Company or (y) such Person is merged, consolidated or amalgamated with or into,
or transfers or conveys substantially all of its assets to, or is liquidated
into, the Company or a Wholly Owned Restricted Subsidiary and Note Guarantor of
the Company; (iv) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in compliance
with the provisions of Section 4.10 hereof; (v) any acquisition of assets solely
in exchange for the issuance of Equity Interests (other than Disqualified Stock)
of the Company; (vi) Hedging Obligations permitted by Section 4.9 hereof; (vii)
any Investment by the Company or a Subsidiary of the Company in a Securitization
Entity or any Investment by a Securitization Entity in any other Person in
connection with a Qualified Securitization Transaction; provided that any
Investment in a Securitization Entity is in the form of a Purchase Money Note or
an equity interest and (viii) other Investments in any Person having an
aggregate fair market value (measured on the date each such Investment was made
and without giving effect to subsequent changes in value), when taken together
with all other Investments made pursuant to this clause (viii) that are at the
time outstanding, not to exceed the greater of (x) $7.5 million and (y) 7.5% of
Total Assets.
"Permitted Liens" means (i) Liens securing Senior Debt (including the
Senior Credit Facilities); (ii) Liens in favor of the Company and any Restricted
Subsidiary; (iii) Liens on property of a Person existing at the time such Person
is merged into or consolidated with the Company or any Restricted Subsidiary of
the Company; provided that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not extend to any assets
other than those of the Person merged into or consolidated with the Company;
(iv) Liens on property existing at the time of acquisition thereof by the
Company or any Subsidiary of the Company, provided that such Liens were in
existence prior to the contemplation of such acquisition; (v) Liens incurred or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance or other kinds of social security, or to
secure the performance of statutory obligations, surety or appeal bonds,
performance bonds or other obligations of a like nature incurred in the ordinary
course of business; (vi) purchase money Liens to finance property or assets of
the Company or any Restricted Subsidiary of the Company acquired in the ordinary
course of business; provided, however, that (A) the related purchase money
Indebtedness shall not exceed the cost of such property or assets and shall not
be secured by any property or assets of the Company or any Restricted Subsidiary
of the Company other than the property and assets so acquired and (B) the Lien
securing such Indebtedness shall be created within 90 days of such acquisition;
(vii) Liens existing on the date of this Indenture; (viii) Liens for taxes,
assessments or governmental charges or claims that are not yet delinquent or
that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded, provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (ix) statutory liens of landlords, mechanics, suppliers,
vendors, warehousemen, carriers or other like Liens arising in the ordinary
course of business; (x) judgment Liens not giving rise to an Event of Default so
long as any appropriate legal proceeding that may have been duly initiated for
the review of
<PAGE>
15
such judgment shall not have been finally terminated or the period within which
such proceeding may be initiated shall not have expired; (xi) easements, rights-
of-way, zoning and similar restrictions and other similar encumbrances or title
defects incurred or imposed, as applicable, in the ordinary course of business
and consistent with industry practices which, in the aggregate, are not
substantial in amount, and which do not in any case materially detract from the
value of the property subject thereto (as such property is used by the Company
or its Subsidiaries) or interfere with the ordinary conduct of the business of
the Company or such Subsidiaries; provided, however, that any such Liens are not
incurred in connection with any borrowing of money or any commitment to loan any
money or to extend any credit; (xii) Liens on assets transferred to a
Securitization Entity or on assets of a Securitization Entity, in either case
incurred in connection with a Qualified Securitization Transaction; (xiii) Liens
incurred in the ordinary course of business of the Company or any Restricted
Subsidiary of the Company with respect to obligations that do not exceed $5.0
million at any one time outstanding and that (a) are not incurred in connection
with the borrowing of money or the obtaining of advances or credit (other than
trade credit in the ordinary course of business) and (b) do not in the aggregate
materially detract from the value of the property or materially impair the use
thereof in the operation of business by the Company or such Subsidiary; (xiv)
Liens on assets of Guarantors to secure Senior Debt of such Guarantors that were
permitted by this Indenture to be incurred; (xv) Liens on assets of Unrestricted
Subsidiaries that secure Non-Recourse Debt of Unrestricted Subsidiaries; (xvi)
any interest or title of a lessor under any Capital Lease Obligation; (xvii)
Liens upon specific items of inventory or other goods and proceeds of any Person
securing such Person's obligations in respect of bankers' acceptances issued or
created for the account of such Person to facilitate the purchase, shipment or
storage of such inventory or other goods; (xviii) Liens securing reimbursement
obligations with respect to commercial letters of credit which encumber
documents and other property relating to such letters of credit and products and
proceeds thereof; (xix) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual or warranty requirements of the
Company or any of its Restricted Subsidiaries, including rights of offset and
set-off; (xx) Liens securing Hedging Obligations which Hedging Obligations
relate to Indebtedness that is otherwise permitted under this Indenture; (xxi)
leases or subleases granted to others that do not materially interfere with the
ordinary course of business of the Company and its Restricted Subsidiaries;
(xxii) Liens arising from filing Uniform Commercial Code financing statements
regarding leases; (xxiii) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of customer duties in connection
with the importation of goods; (xxiv) Liens securing Indebtedness under Currency
Agreements; (xxv) Liens securing Indebtedness of Restricted Subsidiaries that
are Foreign Subsidiaries incurred in reliance on clause (iii) of the second
paragraph of Section 4.9 hereof; and (xxvi) Liens in favor of the Trustee and
any predecessor of the Trustee.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Restricted Subsidiaries or any Disqualified Stock of the
Company issued in exchange for, or the net proceeds of which are used to extend,
refinance, renew, replace, defease or refund other Indebtedness of the Company
or any of its Restricted Subsidiaries (other than intercompany Indebtedness);
provided that: (i) the principal amount (or accreted value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal amount of
(or accreted value, if applicable), plus accrued interest on, the
<PAGE>
16
Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded
(plus the amount of reasonable expenses incurred in connection therewith); (ii)
such Permitted Refinancing Indebtedness has a final maturity date no earlier
than the final maturity date of, and has a Weighted Average Life to Maturity
equal to or greater than the Weighted Average Life to Maturity of, the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the Notes,
such Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the Notes on
terms at least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded or is Disqualified Stock; and (iv) such
Indebtedness is incurred either by the Company or by the Restricted Subsidiary
who is the obligor on the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded or is Disqualified Stock.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or agency or political subdivision
thereof or any other entity.
"Preferred Stock" means any Capital Stock of a Person, however
designated, which entitles the holder thereof to a preference with respect to
dividends, distributions or liquidation proceeds of such person over the holder
of the other Capital Stock issued by such Person.
"Principals" means Bain Capital, Inc., Bruckmann, Rosser, Sherrill &
Co., L.P., their respective affiliates and executive officers of the Company as
of the date of this Indenture.
"Private Placement Legend" means the legend set forth in Section
2.6(g)(i) to be placed on all Notes issued under this Indenture except where
otherwise permitted by the provisions of this Indenture.
"Purchase Money Note" means a promissory note of a Securitization
Entity evidencing a line of credit, which may be irrevocable, from the Company
or any Restricted Subsidiary of the Company in connection with a Qualified
Securitization Transaction, which note shall be repaid from cash available to
the Securitization Entity, other than amounts required to be established as
reserves pursuant to agreements, amounts paid to investors in respect of
interest, principal and other amounts owing to such investors and amounts paid
in connection with the purchase of newly generated receivables or newly acquired
equipment.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Stock.
<PAGE>
17
"Qualified Securitization Transaction" means any transaction or series
of transactions pursuant to which the Company or any of its Restricted
Subsidiaries may sell, convey or otherwise transfer to (a) a Securitization
Entity (in the case of a transfer by the Company or any of its Restricted
Subsidiaries) and (b) any other Person (in case of a transfer by a
Securitization Entity), or may grant a security interest in, any receivables or
equipment loans (whether now existing or arising or acquired in the future) of
the Company or any of its Restricted Subsidiaries, and any assets related
thereto including, without limitation, all collateral securing such receivables
and equipment loans, all contracts and contract rights and all guarantees or
other obligations in respect of such receivables and equipment loans, proceeds
of such receivables and equipment loans and other assets (including contract
rights) which are customarily transferred or in respect of which security
interests are customarily granted in connection with asset securitization
transactions involving receivables and equipment (collectively, "transferred
assets"); provided that in the case of any such transfer by the Company or any
of its Restricted Subsidiaries, the transferor receives cash or Purchase Money
Notes in an amount which (when aggregated with the cash and Purchase Money Notes
received by the Company and its Restricted Subsidiaries upon all other such
transfers of transferred assets during the ninety days preceding such transfer)
is at least equal to 75% of the aggregate face amount of all receivables so
transferred during such day and the ninety preceding days.
"Raytheon" means Raytheon Company, a Delaware corporation.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of May 5, 1998, by and among the Issuers, the Parent and the
other parties named on the signature pages thereof, as such agreement may be
amended, modified or supplemented from time to time.
"Regulation S" means Regulation S promulgated under the Securities
Act.
"Regulation S Global Note" means a Regulation S Temporary Global Note
or Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global Note in
the form of Exhibit A-1 hereto bearing the Global Note Legend and the Private
Placement Legend and deposited with or on behalf of and registered in the name
of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary global Note in
the form of Exhibit A-2 hereto bearing the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee, issued in a denomination equal to the outstanding principal amount
of the Notes initially sold in reliance on Rule 903 of Regulation S.
"Related Party" with respect to any Principal means (A) any
controlling stockholder, 60% (or more) owned Subsidiary, or spouse or immediate
family member (in
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18
the case of an individual) of such Principal or (B) any trust, corporation,
partnership or other entity, the beneficiaries, stockholders, partners, owners
or Persons beneficially holding a 60% or more controlling interest of which
consist of such Principal and/or such other Persons referred to in the
immediately preceding clause (A).
"Responsible Officer," when used with respect to the Trustee, means
any officer within the Corporate Trust Office of the Trustee (or any successor
group of the Trustee) or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of his knowledge of and
familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing the
Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private
Placement Legend.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Period" means the 40-day restricted period as defined in
Regulation S.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary; provided that, on the
date of this Indenture, all Subsidiaries of the Company shall be Restricted
Subsidiaries (other than the SPE, Alliance Commercial Appliances Receivables
LLC, Alliance Commercial Appliances Finance LLC and Alliance Laundry S.A.).
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Notes and the Guarantees issued under this
Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Securitization Entity" means a Wholly Owned Subsidiary of the Company
(or another Person in which the Company or any Restricted Subsidiary of the
Company makes
<PAGE>
19
an Investment and to which the Company or any Restricted Subsidiary of the
Company transfers receivables or equipment and related assets) that engages in
no activities other than in connection with the financing of receivables or
equipment and that is designated by the Board of Managers of the Company (as
provided below) as a Securitization Entity (a) no portion of the Indebtedness or
any other Obligations (contingent or otherwise) of which (i) is guaranteed by
the Company or any Restricted Subsidiary of the Company other than pursuant to
Standard Securitization Undertakings or Limited Originator Recourse, (ii) is
recourse to or obligates the Company or any Restricted Subsidiary of the Company
(other than the Securitization Entity) in any way other than pursuant to
Standard Securitization Undertakings or Limited Originator Recourse or (iii)
subjects any property or asset of the Company or any Restricted Subsidiary of
the Company (other than the Securitization Entity), directly or indirectly,
contingently or otherwise, to the satisfaction thereof, other than pursuant to
Standard Securitization Undertakings or Limited Originator Recourse, (b) with
which neither the Company nor any Restricted Subsidiary of the Company has any
material contract, agreement, arrangement or understanding other than on terms
no less favorable to the Company or such Restricted Subsidiary than those that
might be obtained at the time from Persons that are not Affiliates of the
Company, other than fees payable in the ordinary course of business in
connection with servicing receivables of such entity and (c) to which neither
the Company nor any Restricted Subsidiary of the Company has any obligation to
maintain or preserve such entity's financial condition or cause such entity to
achieve certain levels of operating results. Any such designation by the Board
of Managers of the Company shall be evidenced to the Trustee by filing with the
Trustee a certified copy of the resolution of the Board of Managers of the
Company giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions.
"Securityholders Agreement" means the securityholders agreement
entered into among the Parent, Raytheon, Bain LLC, the BRS Investors and senior
management of the Company after the date of this Indenture.
"Seller Preferred Equity" means preferred membership interests with a
liquidation value of $6.0 million due August 21, 2009 issued by the Parent to
Raytheon.
"Seller Subordinated Note" means a junior subordinated promissory note
in the principal amount of $9.0 million due August 21, 2009 issued by the Parent
to Raytheon.
"Senior Credit Facility" means that certain Senior Credit Facility,
dated as of May 5, 1998, by and among the Company, General Electric Capital
Corporation, as administrative agent, and Lehman Commercial Paper Inc., as
syndication agent, providing for up to $75.0 million of revolving credit
borrowings and up to $200.0 million of term loan borrowings, including any
related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, and in each case as amended, modified,
renewed, refunded, replaced or refinanced from time to time.
"Senior Credit Facilities" means, with respect to the Company, one or
more debt facilities (including, without limitation, the Senior Credit Facility)
or commercial paper facilities with banks or other institutional lenders
providing for revolving credit loans, term
<PAGE>
20
loans, receivables financing (including through the sale of receivables to such
lenders or to special purpose entities formed to borrow from such lenders
against such receivables) or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time.
"Shelf Registration Statement" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Restricted 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 of this Indenture.
"SPE" means the special purpose single member limited liability
company that is a Subsidiary of the Company and that will enter into the Asset
Backed Facility on the date of this Indenture.
"Standard Securitization Undertakings" means representations,
warranties, covenants and indemnities entered into by the Company or any
Subsidiary of the Company that are reasonably customary in receivables or
equipment loan transactions.
"Stated Maturity" means, with respect to any installment of interest
or principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subordinated Obligations" means any Indebtedness of the Issuers that
is expressly subordinated or junior in right of payment to the Notes.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
77bbbb) as in effect on the date on which this Indenture is qualified under the
TIA.
"Total Assets" means the total consolidated assets of the Company and
its Restricted Subsidiaries, as set forth on the Company's most recent
consolidated balance sheet, except that calculations made for the purpose of
determining compliance with the terms of the covenants and with other provisions
of this Indenture shall be made without
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21
giving effect to goodwill, deferred financing costs and other intangibles shown
on the balance sheet as a result of the application of purchase accounting in
accordance with Accounting Principles Board Opinions Nos. 16 and 17.
"Transactions" means the collective reference to the Offering, the
Senior Credit Facility, the Investors Equity Contribution, the Parent
Contribution, the Merger, the Asset Backed Facility and the issuance of the
Seller Subordinated Note and the Seller Preferred Equity.
"Transition Plan" means the process by the Company of establishing at
its Ripon, Wisconsin facility the capability to manufacture small-chassis
frontload washers and dryers beginning in September 1998 and September 1999,
respectively, and to cease production of consumer topload washers for Appliance
Co.
"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 or 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 Sates 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 above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Unrestricted Global Note" means a permanent global Note in the form
of Exhibit A-1 attached hereto that bears the Global Note Legend and that has
the "Schedule of Exchanges of Interests in the Global Note" attached thereto,
and that is deposited with or on behalf of and registered in the name of the
Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"Unrestricted Definitive Note" means one or more Definitive Notes that
do not bear and are not required to bear the Private Placement Legend.
"Unrestricted Subsidiary" means each of the SPE, Alliance Commercial
Appliances Receivables LLC, Alliance Commercial Appliances Finance LLC and
Alliance Laundry S.A. In addition, "Unrestricted Subsidiary" means (i) any
Subsidiary that is designated by the Board of Managers as an Unrestricted
Subsidiary pursuant to a Board Resolution; but only to the extent that such
Subsidiary: (a) has no Indebtedness other than
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22
Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the Company
unless the terms of any such agreement, contract, arrangement or understanding
are no less favorable to the Company or such Restricted Subsidiary than those
that might be obtained at the time from Persons who are not Affiliates of the
Company; (c) is a Person with respect to which neither the Company nor any of
its Restricted Subsidiaries has any direct or indirect obligation (x) to
subscribe for additional Equity Interests or (y) to maintain or preserve such
Person's financial condition or to cause such Person to achieve any specified
levels of operating results; (d) has not guaranteed or otherwise directly or
indirectly provided credit support for any Indebtedness of the Company or any of
its Restricted Subsidiaries; and (e) has at least one director on its board of
directors that is not a director or executive officer of the Company or any of
its Restricted Subsidiaries and has at least one executive officer that is not a
director or executive officer of the Company or any of its Restricted
Subsidiaries. Any such designation by the Board of Managers shall be evidenced
to the Trustee by filing with the Trustee a certified copy of the Board
Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions and was
permitted by the provisions of Section 4.7 hereof. If, at any time, any
Unrestricted Subsidiary would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of this Indenture and any Indebtedness of such
Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date in accordance with the provisions of Section 4.9
hereof, the Company shall be in default of such provision). The Board of
Managers of the Company may at any time designate any Unrestricted Subsidiary to
be a Restricted Subsidiary; provided that such designation shall be deemed to be
an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any
outstanding Indebtedness of such Unrestricted Subsidiary and such designation
shall only be permitted if (i) such Indebtedness is permitted under Section 4.9
hereof, calculated on a pro forma basis as if such designation had occurred at
the beginning of the four-quarter reference period, (ii) such Subsidiary shall
execute a Note Guarantee and deliver an Opinion of Counsel in accordance with
the terms of this Indenture and (iii) no Default or Event of Default would be in
existence following such designation.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"Voting Stock" of any person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors or the Board of Managers of such Person, as the case may be.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
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23
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person.
SECTION 1.2 OTHER DEFINITIONS.
Defined in
Term Section
"Affiliate Transaction"..................................4.11
"Asset Sale Offer".......................................4.10
"Authentication Order"................................... 2.2
"Change of Control Offer"................................4.15
"Change of Control Payment"..............................4.15
"Change of Control Payment Date".........................4.15
"Covenant Defeasance".................................... 8.3
"Designated Senior Debt".................................10.2
"DTC".................................................... 2.3
"Event of Default"....................................... 6.1
"Excess Proceeds"........................................4.10
"Funding Guarantor"......................................11.4
"incur".................................................. 4.9
"Legal Defeasance"....................................... 8.2
"Offer Amount"........................................... 3.9
"Offer Period"........................................... 3.9
"Paying Agent"........................................... 2.3
"Payment Blockage Notice"................................10.4
"Payment Default"........................................ 6.1
"Permitted Debt"......................................... 4.9
"Permitted Junior Securities"............................10.2
"Purchase Date".......................................... 3.9
"Redemption Date"........................................ 3.7
"Registrar".............................................. 2.3
"Representative".........................................10.2
"Restricted Payments".................................... 4.7
"Senior Debt"............................................10.2
"Successor Guarantor".................................... 5.2
SECTION 1.3 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
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24
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes and the Guarantees;
"indenture security Holder" means a Holder of a Security;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"Obligor" on the indenture securities means the Issuers, the
Guarantors and any successor obligor upon the indenture securities.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
SECTION 1.4 RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) or is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act shall
be deemed to include substitute, replacement or successor sections or rules
adopted by the SEC from time to time.
SECTION 1.5 ONE CLASS OF SECURITIES.
The Initial Notes and the New Notes shall vote and consent together on
all matters as one class and none of the Initial Notes or the New Notes shall
have the right to vote or consent as a separate class on any matter.
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25
ARTICLE 2.
THE NOTES
SECTION 2.1 FORM AND DATING.
(a) General.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A hereto. The Securities may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Security shall be dated the date of its authentication. The Notes
shall be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Securities shall constitute,
and are hereby expressly made, a part of this Indenture and the Issuers, the
Guarantors and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby. However,
to the extent any provision of any Security conflicts with the express
provisions of this Indenture, the provisions of this Indenture shall govern and
be controlling.
(b) Global Notes.
Notes issued in global form shall be substantially in the form of
Exhibits A-1 or A-2 attached hereto (including the Global Note Legend thereon
and the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Notes issued in definitive form shall be substantially in the form of
Exhibit A-l attached hereto (but without the Global Note Legend thereon and
without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time endorsed
thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the aggregate principal amount of
outstanding Notes represented thereby shall be made by the Trustee or the Note
Custodian, at the direction of the Trustee, in accordance with written
instructions given by the Holder thereof as required by Section 2.6 hereof.
(c) Temporary Global Notes
Notes offered and sold in reliance on Regulation S shall be issued
initially in the form of the Regulation S Temporary Global Note, which shall be
deposited on behalf of the purchasers of the Notes represented thereby with the
Trustee, at its New York office, as custodian for the Depositary, and registered
in the name of the Depositary or the nominee of the Depositary for the accounts
of designated agents holding on behalf of Euroclear or Cedel Bank, duly executed
by the Issuers and authenticated by the Trustee as hereinafter provided.
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26
The Restricted Period shall be terminated upon the receipt by the Trustee of (i)
a written certificate from the Depositary, together with copies of certificates
from Euroclear and Cedel Bank certifying that they have received certification
of non-United States beneficial ownership of 100% of the aggregate principal
amount of the Regulation S Temporary Global Note (except to the extent of any
beneficial owners thereof who acquired an interest therein during the Restricted
Period pursuant to another exemption from registration under the Securities Act
and who will take delivery of a beneficial ownership interest in a 144A Global
Note bearing a Private Placement Legend, all as contemplated by Section
2.6(a)(ii) hereof), and (ii) an Officers' Certificate from the Company.
Following the termination of the Restricted Period, beneficial interests in the
Regulation S Temporary Global Note shall be exchanged for beneficial interests
in Regulation S Permanent Global Notes pursuant to the Applicable Procedures.
Simultaneously with the authentication of Regulation S Permanent Global Notes,
the Trustee shall cancel the Regulation S Temporary Global Note. The aggregate
principal amount of the Regulation S Temporary Global Note and the Regulation S
Permanent Global Notes may from time to time be increased or decreased by
adjustments made on the records of the Trustee and the Depositary or its
nominee, as the case may be, in connection with transfers of interest as
hereinafter provided.
(d) Euroclear Cedel Procedures Applicable.
The provisions of the "Operating Procedures of the Euroclear System"
and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and
Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall be
applicable to transfers of beneficial interests in the Regulation S Temporary
Global Note and the Regulation S Global Notes that are held by Participants
through Euroclear or Cedel Bank.
SECTION 2.2 EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Notes for each of the Issuers by manual or
facsimile signature. The Issuers' seals, if any, shall be reproduced on the
Notes and may be in facsimile form.
If an Officer whose signature is on a Security no longer holds that
office at the time a Security is authenticated, the Security shall nevertheless
be valid.
A Security shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Security has been authenticated under this Indenture.
The Trustee shall, upon a written order of each of the Issuers signed
by two Officers of each Issuer (an "Authentication Order"), authenticate Notes
for original issue up to the aggregate principal amount of $200,000,000. The
aggregate principal amount of Notes outstanding at any time may not exceed such
amount except as provided in Section 2.7 hereof.
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27
The Trustee may (at the expense of the Issuers) appoint an
authenticating agent acceptable to the Issuers to authenticate Notes. An
authenticating agent may authenticate Notes whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as an
Agent to deal with Holders or an Affiliate of the Issuers and has the same
protections under Article 7 herein.
SECTION 2.3 REGISTRAR AND PAYING AGENT.
The Issuers shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Issuers may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Issuers may change any
Paying Agent or Registrar without notice to any Holder. The Issuers shall
notify the Trustee in writing of the name and address of any Agent not a party
to this Indenture. If the Issuers fail to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Issuers, any of
their Subsidiaries or any Guarantor may act as Paying Agent or Registrar.
The Issuers initially appoint The Depository Trust Company ("DTC") to
act as Depositary with respect to the Global Notes.
The Issuers initially appoint the Trustee to act as the Registrar and
Paying Agent and to act as Note Custodian with respect to the Global Notes.
SECTION 2.4 PAYING AGENT TO HOLD MONEY IN TRUST.
The Issuers shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Liquidated Damages, if any, or interest on the Notes, and
will notify the Trustee in writing of any default by the Issuers in making any
such payment. While any such default continues, the Trustee may require a
Paying Agent to pay all money held by it to the Trustee. The Issuers at any
time may require a Paying Agent to pay all money held by it to the Trustee.
Upon payment over to the Trustee, the Paying Agent (if other than an Issuer or a
Subsidiary) shall have no further liability for the money. If an Issuer, a
Subsidiary or a Guarantor acts as Paying Agent, it shall segregate and hold in a
separate trust funds for the benefit of the Holders all money held by it as
Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the
Issuers, the Trustee shall serve as Paying Agent for the Notes.
SECTION 2.5 HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise
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comply with TIA (S) 312(a). If the Trustee is not the Registrar, the Issuers
shall furnish to the Trustee at least seven Business Days before each interest
payment date and at such other times as the Trustee may request in writing, a
list in such form and as of such date as the Trustee may reasonably require of
the names and addresses of the Holders of Notes and the Issuers shall otherwise
comply with TIA (S) 312(a).
SECTION 2.6 TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Notes.
A Global Note may not be transferred as a whole except by the
Depositary to a nominee of the Depositary, by a nominee of the Depositary to the
Depositary or to another nominee of the Depositary, or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. All Global Notes will be exchanged by the Issuers for Definitive
Notes if (i) the Issuers deliver to the Trustee written notice from the
Depositary that it is unwilling or unable to continue to act as Depositary or
that it is no longer a clearing agency registered under the Exchange Act and, in
either case, a successor Depositary is not appointed by the Issuers within 120
days after the date of such notice from the Depositary or (ii) the Issuers in
their sole discretion determine that the Global Notes (in whole but not in part)
should be exchanged for Definitive Notes and deliver a written notice to such
effect to the Trustee; provided that in no event shall the Regulation S
Temporary Global Note be exchanged by the Issuers for Definitive Notes prior to
(x) the expiration of the Restricted Period and (y) the receipt by the Registrar
of any certificates required pursuant to Rule 903(c)(3)(ii)(B) under the
Securities Act. Upon the occurrence of either of the preceding events in (i) or
(ii) above, Definitive Notes shall be issued in such names as the Depositary
shall instruct the Trustee in writing. Global Notes also may be exchanged or
replaced, in whole or in part, as provided in Sections 2.7 and 2.10 hereof.
Every Note authenticated and delivered in exchange for, or in lieu of, a Global
Note or any portion thereof, pursuant to this Section 2.6 or Section 2.7 or 2.10
hereof, shall be authenticated and delivered in the form of, and shall be, a
Global Note. A Global Note may not be exchanged for another Note other than as
provided in this Section 2.6(a), however, beneficial interests in a Global Note
may be transferred and exchanged as provided in Section 2.6(b),(c) or (f)
hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes.
The transfer and exchange of beneficial interests in the Global Notes
shall be effected through the Depositary, in accordance with the provisions of
this Indenture and the Applicable Procedures. Beneficial interests in the
Restricted Global Notes shall be subject to restrictions on transfer comparable
to those set forth herein to the extent required by the Securities Act.
Transfers of beneficial interests in the Global Notes also shall require
compliance with either subparagraph (i) or (ii) below, as applicable, as well as
one or more of the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred to
Persons who take
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29
delivery thereof in the form of a beneficial interest in the same
Restricted Global Note in accordance with the transfer restrictions set
forth in the Private Placement Legend; provided, however, that prior to the
expiration of the Restricted Period, transfers of beneficial interests in
the Temporary Regulation S Global Note may not be made to a U.S. Person or
for the account or benefit of a U.S. Person (other than an Initial
Purchaser). Beneficial interests in any Unrestricted Global Note may be
transferred to Persons who take delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note. No written orders or
instructions shall be required to be delivered to the Registrar to effect
the transfers described in this Section 2.6(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests
in Global Notes. In connection with all transfers and exchanges of
beneficial interests that are not subject to Section 2.6(b)(i) above, the
transferor of such beneficial interest must deliver to the Registrar either
(A) (1) a written order from a Participant or an Indirect Participant given
to the Depositary in accordance with the Applicable Procedures directing
the Depositary to credit or cause to be credited a beneficial interest in
another Global Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given in accordance with the
Applicable Procedures containing information regarding the Participant
account to be credited with such increase or (B) (1) a written order from a
Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to cause
to be issued a Definitive Note in an amount equal to the beneficial
interest to be transferred or exchanged and (2) instructions given by the
Depositary to the Registrar containing information regarding the Person in
whose name such Definitive Note shall be registered to effect the transfer
or exchange referred to in (1) above; provided that in no event shall
Definitive Notes be issued upon the transfer or exchange of beneficial
interests in the Regulation S Temporary Global Note prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Registrar of
any certificates required pursuant to Rule 903 under the Securities Act.
Upon consummation of an Exchange Offer by the Issuers and the Parent in
accordance with Section 2.6(f) hereof, the requirements of this Section
2.6(b)(ii) shall be deemed to have been satisfied upon receipt by the
Registrar of the instructions contained in the Letter of Transmittal
delivered by the Holder of such beneficial interests in the Restricted
Global Notes. Upon satisfaction of all of the requirements for transfer or
exchange of beneficial interests in Global Notes contained in this
Indenture and the Notes or otherwise applicable under the Securities Act,
the Trustee shall adjust the principal amount of the relevant Global
Note(s) pursuant to Section 2.6(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted
Global Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of Section 2.6(b)(ii) above and the
Registrar receives the following:
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(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
certifications in item (1) thereof; and
(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Temporary Global Note or the
Regulation S Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (2) thereof.
(iv) Transfer and Exchange of Beneficial Interests in a
Restricted Global Note for Beneficial Interests in the Unrestricted Global
Note. A beneficial interest in any Restricted Global Note may be exchanged
by any holder thereof for a beneficial interest in an Unrestricted Global
Note or transferred to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note if the exchange or
transfer complies with the requirements of Section 2.6(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of the beneficial interest to be transferred, in the
case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
New Notes or (3) a Person who is an affiliate (as defined in Rule 144)
of the Issuers;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to the
Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a beneficial interest in an Unrestricted Global
Note, a certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the form
of a beneficial interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
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31
and, in each such case set forth in this subparagraph (D), if the Registrar
so requests or if the Applicable Procedures so require, an Opinion of
Counsel in form reasonably acceptable to the Registrar to the effect that
such exchange or transfer is in compliance with the Securities Act and that
the restrictions on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance with the
Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D)
above at a time when an Unrestricted Global Note has not yet been issued, the
Issuers shall issue and, upon receipt of an Authentication Order in accordance
with Section 2.2 hereof, the Trustee shall authenticate one or more Unrestricted
Global Notes in an aggregate principal amount equal to the aggregate principal
amount of beneficial interests transferred pursuant to subparagraph (B) or (D)
above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(i) Beneficial Interests in Restricted Global Notes to
Restricted Definitive Notes. If any holder of a beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest for a
Restricted Definitive Note or to transfer such beneficial interest to a
Person who takes delivery thereof in the form of a Restricted Definitive
Note, then, upon receipt by the Registrar of the following documentation:
(A) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
Restricted Definitive Note, a certificate from such holder in the form
of Exhibit C hereto, including the certifications in item (2)(a)
thereof;
(B) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications
in item (1) thereof;
(C) if such beneficial interest is being transferred to a Non-
U.S. Person in an offshore transaction in accordance with Rule 903 or
Rule 904 under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (2)
thereof;
(D) if such beneficial interest is being transferred pursuant to
an exemption from the registration requirements of the Securities Act
in accordance with Rule 144 under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications
in item (3)(a) thereof;
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(E) if such beneficial interest is being transferred to the
Issuers or any of their Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (3)(b)
thereof; or
(F) if such beneficial interest is being transferred pursuant to
an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable
Global Note to be reduced accordingly pursuant to Section 2.6(h) hereof,
and the Issuers shall execute and the Trustee shall upon receipt of an
Authentication Order authenticate and deliver to the Person designated in
the instructions a Definitive Note in the appropriate principal amount.
Any Definitive Note issued in exchange for a beneficial interest in a
Restricted Global Note pursuant to this Section 2.6(c) shall be registered
in such name or names and in such authorized denomination or denominations
as the holder of such beneficial interest shall instruct the Registrar
through instructions from the Depositary and the Participant or Indirect
Participant. The Trustee shall (at the expense of the Issuers) deliver
such Definitive Notes to the Persons in whose names such Notes are so
registered. Any Definitive Note issued in exchange for a beneficial
interest in a Restricted Global Note pursuant to this Section 2.6(c)(i)
shall bear the Private Placement Legend and shall be subject to all
restrictions on transfer contained therein.
(ii) Notwithstanding Sections 2.6(c)(i)(A) and (C) hereof, a
beneficial interest in the Regulation S Temporary Global Note may not be
exchanged for a Definitive Note or transferred to a Person who takes
delivery thereof in the form of a Definitive Note prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Registrar of
any certificates required pursuant to Rule 903(c)(3)(ii)(B) under the
Securities Act, except in the case of a transfer pursuant to an exemption
from the registration requirements of the Securities Act other than Rule
903 or Rule 904.
(iii) Beneficial Interests in Restricted Global Notes to
Unrestricted Definitive Notes. A holder of a beneficial interest in a
Restricted Global Note may exchange such beneficial interest for an
Unrestricted Definitive Note or may transfer such beneficial interest to a
Person who takes delivery thereof in the form of an Unrestricted Definitive
Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of such beneficial interest, in the case of an
exchange, or the transferee, in the case of a transfer, certifies in
the applicable Letter of Transmittal that it is not (1) a broker-
dealer, (2) a Person participating in the distribution of the New
Notes or (3) a Person who is an affiliate (as defined in Rule 144) of
the Issuers;
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(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to the
Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a Definitive Note that does not bear the Private
Placement Legend, a certificate from such holder in the form of
Exhibit C hereto, including the certifications in item (1)(b)
thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the form
of a Definitive Note that does not bear the Private Placement
Legend, a certificate from such holder in the form of Exhibit B
hereto, including the certifications in item (4) thereof,
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to the
effect that such exchange or transfer is in compliance with the Securities
Act and that the restrictions on transfer contained herein and in the
Private Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
(iv) Beneficial Interests in Unrestricted Global Notes to
Unrestricted Definitive Notes. If any holder of a beneficial interest in
an Unrestricted Global Note proposes to exchange such beneficial interest
for a Definitive Note or to transfer such beneficial interest to a Person
who takes delivery thereof in the form of a Definitive Note, then, upon
satisfaction of the conditions set forth in Section 2.6(b)(ii) hereof, the
Trustee shall cause the aggregate principal amount of the applicable Global
Note to be reduced accordingly pursuant to Section 2.6(h) hereof, and the
Issuers shall execute and the Trustee shall upon receipt of an
Authentication Order authenticate and (at the expense of the Issuers)
deliver to the Person designated in the instructions a Definitive Note in
the appropriate principal amount. Any Definitive Note issued in exchange
for a beneficial interest pursuant to this Section 2.6(c)(iii) shall be
registered in such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall instruct the
Registrar through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall (at the expense of the Issuers)
deliver such Definitive Notes to the Persons in whose names such Notes are
so registered. Any Definitive Note issued in exchange for a beneficial
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34
interest pursuant to this Section 2.6(c)(iii) shall not bear the Private
Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests.
(i) Restricted Definitive Notes to Beneficial Interests in
Restricted Global Notes. If any Holder of a Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a Restricted
Global Note or to transfer such Restricted Definitive Note to a Person who
takes delivery thereof in the form of a beneficial interest in a Restricted
Global Note, then, upon receipt by the Registrar of the following
documentation:
(A) if the Holder of such Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global Note, a
certificate from such Holder in the form of Exhibit C hereto, including the
certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being transferred to a
QIB in accordance with Rule 144A under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications in
item (1) thereof;
(C) if such Restricted Definitive Note is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule 903 or
Rule 904 under the Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (2) thereof;
(D) if such Restricted Definitive Note is being transferred
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(a) thereof;
(E) if such Restricted Definitive Note is being transferred to
the Issuers or any of their Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (3)(b)
thereof; or
(F) if such Restricted Definitive Note is being transferred
pursuant to an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof, the Trustee shall cancel the
Restricted Definitive Note, increase or cause to be increased the aggregate
principal amount of, in the case of clause (A) above, the appropriate
Restricted Global Note, in the case of clause (B) above, the 144A Global
Note, and in the case of clause (C) above, the Regulation S Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive Note may
exchange such Note for
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35
a beneficial interest in an Unrestricted Global Note or transfer such
Restricted Definitive Note to a Person who takes delivery thereof in the
form of a beneficial interest in an Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement and the
Holder, in the case of an exchange, or the transferee, in the case of a
transfer, certifies in the applicable Letter of Transmittal that it is not
(1) a broker-dealer, (2) a Person participating in the distribution of the
New Notes or (3) a Person who is an affiliate (as defined in Rule 144) of
the Issuers;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to the
Exchange Offer Registration Statement in accordance with the Registration
Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes to
exchange such Notes for a beneficial interest in the Unrestricted
Global Note, a certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (1)(c) thereof; or
(2) if the Holder of such Definitive Notes proposes to
transfer such Notes to a Person who shall take delivery thereof in the
form of a beneficial interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to the
effect that such exchange or transfer is in compliance with the Securities
Act and that the restrictions on transfer contained herein and in the
Private Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in
this Section 2.6(d)(ii), the Trustee shall cancel the Definitive Notes and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note
or transfer such Definitive
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36
Notes to a Person who takes delivery thereof in the form of a beneficial
interest in an Unrestricted Global Note at any time. Upon receipt of a
written request for such an exchange or transfer, the Trustee shall cancel
the applicable Unrestricted Definitive Note and increase or cause to be
increased the aggregate principal amount of one of the Unrestricted Global
Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global Note has not yet been issued,
the Issuers shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.2 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes.
Upon request by a Holder of Definitive Notes and such Holder's
compliance with the provisions of this Section 2.6(e), the Registrar shall
register the transfer or exchange of Definitive Notes. Prior to such
registration of transfer or exchange, the requesting Holder shall present or
surrender to the Registrar the Definitive Notes duly endorsed or accompanied by
a written instruction of transfer in form satisfactory to the Registrar duly
executed by such Holder or by his attorney, duly authorized in writing. In
addition, the requesting Holder shall provide any additional certifications,
documents and information, as applicable, required pursuant to the following
provisions of this Section 2.6(e).
(i) Restricted Definitive Notes to Restricted Definitive Notes. Any
Restricted Definitive Note may be transferred to and registered in the name
of Persons who take delivery thereof in the form of a Restricted Definitive
Note if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A under the
Securities Act, then the transferor must deliver a certificate in the
form of Exhibit B hereto, including the certifications in item (1)
thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule
904, then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (2) thereof;
and
(C) if the transfer will be made pursuant to any other exemption
from the registration requirements of the Securities Act, then the
transferor must deliver a certificate in the form of Exhibit B hereto,
including the certifications, certificates and Opinion of Counsel
required by item (3) thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive
Notes. Any Restricted Definitive Note may be exchanged by the Holder
thereof for an
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37
Unrestricted Definitive Note or transferred to a Person or Persons who take
delivery thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating in the
distribution of the New Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Issuers;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Broker-Dealer pursuant to
the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes
proposes to exchange such Notes for an Unrestricted Definitive
Note, a certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (I)(d) thereof; or
(2) if the Holder of such Restricted Definitive Notes
proposes to transfer such Notes to a Person who shall take
delivery thereof in the form of an Unrestricted Definitive Note,
a certificate from such Holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests, an Opinion of Counsel in form reasonably
acceptable to the Registrar to the effect that such exchange or
transfer is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance with the
Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive
Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes
to a Person who takes delivery thereof in the form of an Unrestricted
Definitive Note. Upon receipt of a request to register such a transfer,
the Registrar shall register the Unrestricted Definitive Notes pursuant to
the instructions from the Holder thereof.
(f) Exchange Offer.
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38
Upon the occurrence of the Exchange Offer in accordance with the
Registration Rights Agreement, the Issuers shall issue and, upon receipt of an
Authentication Order in accordance with Section 2.2, the Trustee shall
authenticate (i) one or more Unrestricted Global Notes in an aggregate principal
amount equal to the principal amount of the beneficial interests in the
Restricted Global Notes tendered for acceptance by Persons that certify in the
applicable Letters of Transmittal that (x) they are not broker-dealers, (y) they
are not participating in a distribution of the New Notes and (z) they are not
affiliates (as defined in Rule 144) of the Issuers, and accepted for exchange in
the Exchange Offer and (ii) Definitive Notes in an aggregate principal amount
equal to the principal amount of the Restricted Definitive Notes accepted for
exchange in the Exchange Offer. Concurrently with the issuance of such Notes,
the Trustee shall cause the aggregate principal amount of the applicable
Restricted Global Notes to be reduced accordingly, and the Issuers shall execute
and the Trustee shall authenticate and (at the expense of the Issuers) deliver
to the Persons designated by the Holders of Definitive Notes so accepted
Definitive Notes in the appropriate principal amount.
(g) Legends.
The following legends shall appear on the face of all Global Notes and
Definitive Notes issued under this Indenture unless specifically stated
otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each Global Note
and each Definitive Note (and all Notes issued in exchange therefor or
substitution thereof) shall bear the legend in substantially the following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISION OF SECTION 5 OF
THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE
SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE ISSUERS THAT (A)
SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) (a)
TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER (AS DEFINED IN RULE 144A OF THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A
<PAGE>
39
TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 UNDER THE
SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION
OF COUNSEL IF THE ISSUERS SO REQUEST), (2) TO EITHER ISSUER OR (3) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE
WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR
ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A)
ABOVE."
(B) Notwithstanding the foregoing, any Global Note or Definitive Note
issued pursuant to subparagraphs (b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii),
(e)(ii), (e)(iii) or (f) to this Section 2.6 (and all Notes issued in exchange
therefor or substitution thereof) shall not bear the Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS
MAY BE REQUIRED PURSUANT TO SECTION 2.7 OF THE INDENTURE, (II) THIS GLOBAL
NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.6(a)
OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE
FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS
GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR
WRITTEN CONSENT OF THE ISSUERS."
(iii) Regulation S Temporary Global Note Legend. The Regulation S
Temporary Global Note shall bear a legend in substantially the following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES,
ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER
NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL
BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON."
(h) Cancellation and/or Adjustment of Global Notes.
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40
At such time as all beneficial interests in a particular Global Note
have been exchanged for Definitive Notes or a particular Global Note has been
redeemed, repurchased or cancelled in whole and not in part, each such Global
Note shall be returned to or retained and cancelled by the Trustee in accordance
with Section 2.11 hereof. At any time prior to such cancellation, if any
beneficial interest in a Global Note is exchanged for or transferred to a Person
who will take delivery thereof in the form of a beneficial interest in another
Global Note or for Definitive Notes, the principal amount of Notes represented
by such Global Note shall be reduced accordingly and an endorsement shall be
made on such Global Note by the Trustee or by the Depositary at the direction of
the Trustee to reflect such reduction; and if the beneficial interest is being
exchanged for or transferred to a Person who will take delivery thereof in the
form of a beneficial interest in another Global Note, such other Global Note
shall be increased accordingly and an endorsement shall be made on such Global
Note by the Trustee or by the Depositary at the direction of the Trustee to
reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Issuers shall execute and the Trustee shall authenticate Global Notes and
Definitive Notes upon receipt of an Authentication Order in accordance with
Section 2.2 hereof or upon receipt of a written request of the Registrar.
(ii) No service charge shall be made to a holder of a
beneficial interest in a Global Note or to a Holder of a Definitive Note
for any registration of transfer or exchange, but the Issuers may require
payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any such
transfer taxes or similar governmental charge payable upon exchange or
transfer pursuant to Sections 2.10, 3.6, 3.9, 4.10, 4.15 and 9.5 hereof).
(iii) The Registrar shall not be required to register the
transfer of or exchange any Note selected for redemption in whole or in
part, except the unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive Notes
shall be the valid obligations of the Issuers, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Global Notes
or Definitive Notes surrendered upon such registration of transfer or
exchange.
(v) The Issuers shall not be required (A) to issue, to register
the transfer of or to exchange any Notes during a period beginning at the
opening of business 15 days before the day of any selection of Notes for
redemption under Section 3.2 hereof and ending at the close of business on
the day of selection, (B) to register the transfer of or to exchange any
Note so selected for redemption in whole or in part, except the unredeemed
portion of any Note being redeemed in part or (c) to register the transfer
<PAGE>
41
of or to exchange a Note between a record date and the next succeeding
interest payment date.
(vi) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and the Issuers may deem and
treat the Person in whose name any Note is registered as the absolute owner
of such Note for the purpose of receiving payment of principal of and
interest on such Notes and for all other purposes, and none of the Trustee,
any Agent or the Issuers shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive
Notes in accordance with the provisions of Section 2.2 hereof.
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Registrar pursuant to this Section 2.6 to
effect a registration of transfer or exchange may be submitted by
facsimile.
SECTION 2.7 REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee or the Issuers and
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Note, the Issuers shall issue and the Trustee, upon receipt of an
Authentication Order, shall authenticate a replacement Note if the Trustee's
requirements are met. If required by the Trustee or the Issuers, an indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and the Issuers to protect the Issuers, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Note is
replaced. The Issuers and the Trustee may charge for their expenses in
replacing a Note.
Every replacement Note is an additional obligation of the Issuers and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
SECTION 2.8 OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section as not outstanding. Except as set forth in Section 2.9 hereof, a Note
does not cease to be outstanding because the Issuers or an Affiliate of the
Issuers holds the Note; however, Notes held by the Issuers or a Subsidiary of
the Issuers shall not be deemed to be outstanding for purposes of Section 3.7(b)
hereof.
If a Note is replaced pursuant to Section 2.7 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
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If the principal amount of any Note is considered paid under Section
4.1 hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than an Issuer, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
SECTION 2.9 TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Issuers or any Guarantor, or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Issuers or any
Guarantor shall be considered as though not outstanding, except that for the
purposes of determining whether the Trustee shall be protected in relying on any
such direction, waiver or consent, only Notes that the Trustee knows are so
owned shall be so disregarded.
SECTION 2.10 TEMPORARY NOTES.
Until certificates representing Notes are ready for delivery, the
Issuers may prepare and the Trustee, upon receipt of an Authentication Order,
shall authenticate temporary Notes. Temporary Notes shall be substantially in
the form of certificated Notes but may have variations that the Issuers consider
appropriate for temporary Notes and as shall be reasonably acceptable to the
Trustee.
Without unreasonable delay, the Issuers shall prepare and the Trustee
shall authenticate Definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
SECTION 2.11 CANCELLATION.
The Issuers at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee and no one else shall cancel all Notes surrendered for registration
of transfer, exchange, payment, replacement or cancellation and shall destroy
cancelled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all cancelled Notes shall be
delivered (at the expense of the Issuers) to the Issuers. The Issuers may not
issue new Notes to replace Notes that it has paid or that have been delivered to
the Trustee for cancellation.
SECTION 2.12 DEFAULTED INTEREST.
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43
If the Issuers default in a payment of interest on the Notes, they
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.1 hereof. The Issuers shall notify the Trustee in
writing of the amount of defaulted interest proposed to be paid on each Note and
the date of the proposed payment. The Issuers shall fix or cause to be fixed
each such special record date and payment date, provided that no such special
record date shall be less than 10 days prior to the related payment date for
such defaulted interest. At least 15 days before the special record date, the
Issuers (or, upon the written request of the Issuers, the Trustee in the name
and at the expense of the Issuers) shall mail or cause to be mailed to Holders a
notice that states the special record date, the related payment date and the
amount of such interest to be paid.
SECTION 2.13 CUSIP NUMBERS.
The Issuers in issuing the Notes 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 Notes or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Notes, and any such redemption shall not be affected by
any defect in or omission of such numbers.
In the event that the Issuers shall issue and the Trustee shall
authenticate any Additional Notes pursuant to this Indenture, the Issuers shall
use their best efforts to obtain the same CUSIP number for such Additional Notes
as is printed on the Notes outstanding at such time; provided, however, that if
any series of Additional Notes is determined, pursuant to an Opinion of Counsel,
to be a different class of security than the Notes outstanding at such time for
federal income tax purposes, the Issuers may obtain a CUSIP number for such
series of Additional Notes that is different from the CUSIP number printed on
the Notes then outstanding.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
SECTION 3.1 NOTICES TO TRUSTEE.
If the Issuers elect to redeem Notes pursuant to the optional
redemption provisions of Section 3.7 hereof, they shall furnish to the Trustee,
at least 30 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant to
which the redemption shall occur, (ii) the redemption date, (iii) the principal
amount of Notes to be redeemed and (iv) the redemption price.
SECTION 3.2 SELECTION OF NOTES TO BE REDEEMED.
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If less than all of the Notes are to be redeemed or purchased in an
offer to purchase at any time, the Trustee shall select the Notes to be redeemed
or purchased among the Holders of the Notes in compliance with the requirements
of the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not so listed, on a pro rata basis, by lot or in
accordance with any other method the Trustee considers fair and appropriate. In
the event of partial redemption by lot, the particular Notes to be redeemed
shall be selected, unless otherwise provided herein, not less than 30 nor more
than 60 days prior to the redemption date by the Trustee from the outstanding
Notes not previously called for redemption.
The Trustee shall promptly notify the Issuers of the Notes selected
for redemption and, in the case of any Note selected for partial redemption, the
principal amount thereof to be redeemed. Notes and portions of Notes selected
shall be in amounts of $1,000 or whole multiples of $1,000; except that if all
of the Notes of a Holder are to be redeemed, the entire outstanding amount of
Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed.
Except as provided in the preceding sentence, provisions of this Indenture that
apply to Notes called for redemption also apply to portions of Notes called for
redemption.
SECTION 3.3 NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.9 hereof, at least 30 days but
not more than 60 days before a redemption date, the Issuers shall mail or cause
to be mailed, by first class mail, a notice of redemption to each Holder whose
Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the redemption date upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Issuers default in making such redemption payment,
interest on Notes called for redemption ceases to accrue on and after the
redemption date;
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(g) the paragraph of the Notes and/or Section of this Indenture pursuant to
which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy of the
CUSIP number, if any, listed in such notice or printed on the Notes.
At the Issuers' request, the Trustee shall give the notice of
redemption in the Issuers' name and at their expense; provided, however, that
the Issuers shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
SECTION 3.4 EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.3
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
SECTION 3.5 DEPOSIT OF REDEMPTION PRICE.
One Business Day prior to the redemption date, the Issuers shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall promptly return to the Issuers any
money deposited with the Trustee or the Paying Agent by the Issuers in excess of
the amounts necessary to pay the redemption price of, and accrued interest on,
all Notes to be redeemed.
If the Issuers comply with the provisions of the preceding paragraph,
on and after the redemption date, interest shall cease to accrue on the Notes or
the portions of Notes called for redemption. If a Note is redeemed on or after
an interest record date but on or prior to the related interest payment date,
then any accrued and unpaid interest shall be paid to the Person in whose name
such Note was registered at the close of business on such record date. If any
Note called for redemption shall not be so paid upon surrender for redemption
because of the failure of the Issuers to comply with the preceding paragraph,
interest shall be paid on the unpaid principal, from the redemption date until
such principal is paid, and to the extent lawful on any interest not paid on
such unpaid principal, in each case at the rate provided in the Notes and in
Section 4.1 hereof.
SECTION 3.6 NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Issuers shall
issue and, upon receipt of an Authentication Order, the Trustee shall
authenticate for the Holder at the expense of the Issuers a new Note equal in
principal amount to the unredeemed portion of the Note surrendered.
SECTION 3.7 OPTIONAL REDEMPTION.
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(a) Except as set forth in clauses (b) or (c) of this Section 3.7, the
Issuers shall not have the option to redeem the Notes pursuant to this Section
3.7 prior to May 1, 2003. Thereafter, the Issuers shall have the option to
redeem the Notes, in whole or in part, upon not less than 30 nor more than 60
days' notice, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest and Liquidated Damages,
if any, thereon to the applicable redemption date, if redeemed during the
twelve-month period beginning on May 1 of the years indicated below:
YEAR REDEMPTION PRICE
---- ----------------
2003 104.813%
2004 103.208%
2005 101.604%
2006 and thereafter 100.000%
(b) Notwithstanding the provisions of clause (a) of this Section 3.7,
at any time prior to May 1, 2001, the Issuers may, on any one or more occasions,
redeem up to 35% of the aggregate principal amount of Notes issued under this
Indenture at a redemption price of 109.625% of the principal amount thereof,
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the
redemption date, with the net cash proceeds of any Equity Offerings; provided
that at least 65% of the aggregate principal amount of Notes issued under this
Indenture remains outstanding immediately after the occurrence of such
redemption (excluding Notes held by the Issuers and their Subsidiaries); and
provided further, that such redemption shall occur within 45 days of the date of
the closing of such Equity Offering.
(c) At any time prior to May 1, 2003, the Notes may also be redeemed,
as a whole but not in part, at the option of the Issuers upon the occurrence of
a Change of Control, upon not less than 30 nor more than 60 days' prior notice
(but in no event may any such redemption occur more than 90 days after the
occurrence of such Change of Control) 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 and Liquidated Damages thereon, if any, to the date of
redemption (the "Redemption Date").
(d) Any redemption pursuant to this Section 3.7 shall be made pursuant
to the provisions of Section 3.1 through 3.6 hereof.
SECTION 3.8 MANDATORY REDEMPTION.
The Issuers shall not be required to make mandatory redemption or
sinking fund payments with respect to the Notes.
SECTION 3.9 OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
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47
In the event that, pursuant to Section 4.10 hereof, the Issuers shall
be required to commence an Asset Sale Offer, they shall follow the procedures
specified below.
The Asset Sale Offer shall remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Offer Period"). No later than
five Business Days after the termination of the Offer Period (the "Purchase
Date"), the Issuers shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Notes tendered in response to the Asset
Sale Offer. Payment for any Notes so purchased shall be made in the same manner
as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Issuers shall send,
by first class mail, a written notice to the Trustee and to each of the Holders,
with a copy to the Trustee. The notice shall contain all instructions and
materials necessary to enable such Holders to tender Notes pursuant to the Asset
Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice,
which shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section
3.9 and Section 4.10 hereof and the length of time the Asset Sale Offer
shall remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue
to accrete or accrue interest;
(d) that, unless the Issuers default in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to
accrete or accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an
Asset Sale Offer may only elect to have all of such Note purchased and may
not elect to have only a portion of such Note purchased;
(f) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, or transfer by book-entry transfer, to the Issuers, a
depositary, if appointed by the Issuers, or a
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48
Paying Agent at the address specified in the notice at least three days
before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Issuers, the depositary or the Paying Agent, as the case may be, receives,
not later than the expiration of the Offer Period, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Note the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have such Note
purchased;
(h) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Issuers shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Issuers so that only Notes in denominations of $1,000,
or integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Issuers shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale
Offer, or if less than the Offer Amount has been tendered, all Notes tendered,
and shall deliver to the Trustee an Officers' Certificate stating that such
Notes or portions thereof were accepted for payment by the Issuers in accordance
with the terms of this Section 3.9. The Issuers, the Depositary or the Paying
Agent, as the case may be, shall promptly (but in any case not later than five
days after the Purchase Date) mail or deliver to each tendering Holder an amount
equal to the purchase price of the Notes tendered by such Holder and accepted by
the Issuers for purchase, and the Issuers shall promptly issue a new Note, and
the Trustee, upon receipt of an Authentication Order from the Issuers shall
authenticate and mail or deliver such new Note to such Holder, in a principal
amount equal to any unpurchased portion of the Note surrendered. Any Note not
so accepted shall be promptly mailed or delivered by the Issuers to the Holder
thereof. The Issuers shall publicly announce the results of the Asset Sale Offer
on the Purchase Date.
Other than as specifically provided in this Section 3.9, any purchase
pursuant to this Section 3.9 shall be made pursuant to the provisions of
Sections 3.1 through 3.6 hereof.
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49
ARTICLE 4.
COVENANTS
SECTION 4.1 PAYMENT OF NOTES.
The Issuers shall pay or cause to be paid the principal of, premium,
if any, and interest and Liquidated Damages, if any, on the Notes on the dates
and in the manner provided in the Notes. Principal, premium, if any, and
interest and Liquidated Damages, if any, shall be considered paid on the date
due if the Paying Agent, if other than the Issuers or a Subsidiary thereof,
holds as of 10:00 a.m. Eastern Time on the due date money deposited by the
Issuers in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest and Liquidated Damages, if any,
then due. The Issuers shall pay all Liquidated Damages, if any, in the same
manner on the dates and in the amounts set forth in the Registration Rights
Agreement.
The Issuers shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal at the rate equal
to 1% per annum in excess of the then applicable interest rate on the Notes to
the extent lawful; they shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace period) at the same
rate to the extent lawful.
SECTION 4.2 MAINTENANCE OF OFFICE OR AGENCY.
The Issuers shall maintain in the Borough of Manhattan, the City of
New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Issuers in respect of the Notes and this Indenture may be
served. The Issuers shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Issuers shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Issuers may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Issuers of their obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes. The Issuers shall give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
The Issuers hereby designate the Corporate Trust Office of the Trustee
as one such office or agency of the Company in accordance with Section 2.3.
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50
SECTION 4.3 REPORTS.
(a) Whether or not required by the rules and regulations of the SEC,
so long as any Notes are outstanding, the Issuers shall furnish to the Trustee
and the Holders of Notes (i) all quarterly and annual financial information that
would be required to be contained in a filing with the SEC on Forms 10-Q and 10-
K if the Issuers were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" that
describes the financial condition and results of operations of the Issuers and
their consolidated Subsidiaries (showing in reasonable detail, either on the
face of the financial statements or in the footnotes thereto, the financial
condition and results of operations of the Issuers and their Restricted
Subsidiaries separate from the financial condition and results of operations of
the Unrestricted Subsidiaries of the Issuers) and, with respect to the annual
information only, a report thereon by the Issuers' certified independent
accountants and (ii) all current reports that would be required to be filed with
the SEC on Form 8-K if the Issuers were required to file such reports, in each
case within the time periods specified in the SEC's rules and regulations. For
so long as the Parent is a Guarantor of the Notes, the Issuers shall satisfy
their obligations in this covenant with respect to financial information
relating to the Issuers by furnishing financial information relating to the
Parent; provided that the same is accompanied by consolidating information that
explains in reasonable detail the differences between the information relating
to the Parent, on the one hand, and the information relating to the Issuers and
their Restricted Subsidiaries on a stand-alone basis, on the other hand. In
addition, following the consummation of the exchange offer contemplated by the
Registration Rights Agreement, whether or not required by the rules and
regulations of the SEC, the Issuers shall file a copy of all such information
and reports with the SEC for public availability within the time periods
specified in the SEC's rules and regulations (unless the SEC will not accept
such a filing) and make such information available to securities analysts and
prospective investors upon request.
(b) For so long as any Notes remain outstanding, the Issuers and the
Guarantors shall furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
SECTION 4.4 COMPLIANCE CERTIFICATE.
(a) The Issuers and each Guarantor (to the extent that such Guarantor
is so required under the TIA) shall deliver to the Trustee, within 90 days after
the end of each fiscal quarter, an Officers' Certificate stating that a review
of the activities of the Issuers and their Subsidiaries during the preceding
fiscal year has been made under the supervision of the signing Officers with a
view to determining whether the Issuers have kept, observed, performed and
fulfilled their obligations under this Indenture, and further stating, as to
each such Officer signing such certificate, that to the best of his or her
knowledge the Issuers have kept, observed, performed and fulfilled each and
every covenant contained in this Indenture and are not in default in the
performance or observance of any of the terms, provisions and conditions of this
Indenture (or, if a Default or Event of Default shall have occurred, describing
all such Defaults or Events of Default of which he or she may have knowledge
<PAGE>
51
and what action the Issuers are taking or propose to take with respect thereto)
and that to the best of his or her knowledge no event has occurred and remains
in existence by reason of which payments on account of the principal of or
interest, if any, on the Notes is prohibited or if such event has occurred, a
description of the event and what action the Issuers are taking or propose to
take with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.3(a) above shall be accompanied by a
written statement of the Issuers' independent public accountants (who shall be a
firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Issuers have violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Issuers shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Issuers are taking or propose to take with
respect thereto.
SECTION 4.5 TAXES.
The Issuers shall pay, and shall cause each of their Subsidiaries to
pay, prior to delinquency, all material taxes, assessments, and governmental
levies except such as are contested in good faith and by appropriate proceedings
or where the failure to effect such payment is not adverse in any material
respect to the Holders of the Notes.
SECTION 4.6 STAY, EXTENSION AND USURY LAWS.
Each of the Issuers and the Guarantors covenants (to the extent that
it may lawfully do so) that it shall not at any time insist upon, plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law wherever enacted, now or at any time hereafter in force,
that may affect the covenants or the performance of this Indenture; and the
Issuers and each Guarantor (to the extent that they may lawfully do so) hereby
expressly waive all benefit or advantage of any such law, and covenant that they
shall not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law had been enacted.
SECTION 4.7 RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity
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52
Interests (including, without limitation, any payment in connection with any
merger or consolidation involving the Company or any of its Restricted
Subsidiaries) or to the direct or indirect holders of the Company's or any of
its Restricted Subsidiaries' Equity Interests in their capacity as such (other
than dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company or to the Company or a Restricted Subsidiary
of the Company); (ii) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or consolidation
involving the Company) any Equity Interests of the Company or any direct or
indirect parent of the Company or other Affiliate of the Company (other than any
such Equity Interests owned by the Company or any Restricted Subsidiary); (iii)
make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is subordinated to
the Notes or any guarantee thereof, except a payment of interest or principal at
Stated Maturity; or (iv) make any Restricted Investment (all such payments and
other actions set forth in clauses (i) through (iv) above being collectively
referred to as "Restricted Payments"), unless, at the time of and after giving
effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had been
made at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of the covenant described
below under Section 4.9 hereof; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted Subsidiaries
after the date of this Indenture (excluding Restricted Payments permitted by
clauses (ii), (iii), (iv), (vi), (vii), (viii) and (ix) of the next succeeding
paragraph), is less than the sum, without duplication, of (i) 50% of the
Consolidated Net Income of the Company and its Restricted Subsidiaries for the
period (taken as one accounting period) from the beginning of the first fiscal
quarter commencing after the date of this Indenture to the end of the Company's
most recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such Consolidated Net
Income for such period is a deficit, less 100% of such deficit), plus (ii) 100%
of the aggregate net proceeds (including the fair market value of property other
than cash (determined in good faith by the Board of Managers as evidenced by a
certificate filed with the Trustee, except that in the event the value of any
non-cash consideration shall be $15.0 million or more, the value shall be as
determined based upon an opinion or appraisal issued by an Independent Financial
Advisor)) received by the Company since the date of this Indenture as a
contribution to its common equity capital or from the issue or sale of Equity
Interests (other than Disqualified Stock) of the Company (excluding any net
proceeds from an Equity Offering or capital contribution to the extent used to
redeem Notes in accordance with the optional redemption provisions of the Notes)
or from the issue or sale of Disqualified Stock or debt securities of the
Company that have been converted into such Equity Interests (other than Equity
Interests (or Disqualified Stock or convertible debt securities) sold to a
Subsidiary of the Company), plus (iii) to the extent that
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53
any Restricted Investment that was made after the date of this Indenture is sold
for cash or otherwise liquidated or repaid for cash, the cash return of capital
with respect to such Restricted Investment (less the cost of disposition, if
any), plus (iv) any dividends (the fair market value of property other than cash
shall be determined in good faith by the Board of Managers as evidenced by a
certificate filed with the Trustee, except that in the event the value of any
non-cash consideration shall be $15.0 million or more, the value shall be as
determined based upon an opinion or appraisal issued by an Independent Financial
Advisor) received by the Company or a Restricted Subsidiary after the date of
this Indenture from an Unrestricted Subsidiary of the Company, to the extent
that such dividends were not otherwise included in Consolidated Net Income of
the Company for such period, plus (v) to the extent that any Unrestricted
Subsidiary is redesignated as a Restricted Subsidiary after the date of this
Indenture, if as a result of such redesignation, (x) the Fixed Charge Coverage
Ratio of the Company on a pro forma basis is lower than such ratio immediately
prior thereto, then the lesser of (A) the fair market value of the Company's
Investment in such Subsidiary as of the date of such redesignation or (B) such
fair market value as of the date on which such Subsidiary was originally
designated as an Unrestricted Subsidiary or (y) the Fixed Charge Coverage Ratio
of the Company on a pro forma basis is equal to or higher than such ratio
immediately prior thereto, the fair market value of the Company's Investment in
such Subsidiary as of the date of such redesignation; provided, further that any
increase in the amount of Restricted Payments permitted to be incurred as a
result of application of subparagraphs (iii), (iv) or (v) above related to
dividends, returns of capital or redesignation of foreign joint ventures shall
be reduced by the difference between (A) the fair market value of any equipment
(as determined by sales by the Company of comparable equipment to unaffiliated
third parties) transferred to such joint ventures in reliance on subparagraph
(xii) of the covenant entitled "Transactions with Affiliates" and (B) the value
received by the Company or any Restricted Subsidiary from such joint venture
with respect to such equipment transfer.
The foregoing provisions shall not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of this
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any Equity Interests of the Company or subordinated Indebtedness
of the Company or any Guarantors in exchange for, or out of the net cash
proceeds of the substantially concurrent sale (other than to a Subsidiary of the
Company) of, other Equity Interests of the Company (other than any Disqualified
Stock); provided that the amount of any such net cash proceeds that are utilized
for any such redemption, repurchase, retirement, defeasance or other acquisition
shall be excluded from clause (ii) of the preceding paragraph provided that no
Default or Event of Default shall have occurred and be continuing immediately
after such transaction; (iii) the defeasance, redemption, repurchase or other
acquisition of subordinated Indebtedness with the net cash proceeds from an
incurrence of Permitted Refinancing Indebtedness; (iv) the payment of any
dividend by a Restricted Subsidiary of the Company to the holders of its Equity
Interests on a pro rata basis; (v) the repurchase, redemption or other
acquisition or retirement for value of any Equity Interests of the Parent, the
Company or any Restricted Subsidiary of the Company held by any member of the
Company's (or any of its Restricted Subsidiaries') management pursuant to any
management agreement, stock option agreement or similar
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54
agreement; provided that the aggregate price paid for all such repurchased,
redeemed, acquired or retired Equity Interests shall not exceed $5.0 million in
the aggregate since the date of this Indenture (and shall be increased by the
amount of any net cash proceeds to the Company from (x) sales of Equity
Interests of the Parent to management employees subsequent to the date of this
Indenture and (y) any "key-man" life insurance policies which are used to make
such redemptions or repurchases) and no Default or Event of Default shall have
occurred and be continuing immediately after such transaction; provided further,
that the cancellation of Indebtedness owing to the Company from members of
management of the Company or any of its Restricted Subsidiaries in connection
with such a repurchase of Capital Stock of the Parent will not be deemed to
constitute a Restricted Payment under this Indenture; (vi) the making of
distributions, loans or advances to the Parent in an amount not to exceed $1.5
million per annum in order to permit the Parent to pay required and ordinary
operating expenses of the Parent (including, without limitation, directors'
fees, indemnification obligations, professional fees and expenses, but excluding
any payments on or repurchases of the Seller Subordinated Note or the Seller
Preferred Equity); (vii) distributions to the Parent to fund the required tax
obligations of the Parent or its members related to income generated by the
Company and its Restricted Subsidiaries and taxable to such members, including
the tax distributions contemplated by Article IV of the LLC Agreement as in
effect on the date of this Indenture; (viii) repurchases of Capital Stock deemed
to occur upon the exercise of stock options if such Capital Stock represents a
portion of the exercise price thereof; (ix) distributions to the Parent to fund
the Transactions; (x) distributions to the Parent to purchase or redeem the
Seller Subordinated Note and the Seller Preferred Equity pursuant to change of
control provisions contained in the governing instrument relating thereto;
provided, however, that (x) no offer or purchase obligation may be triggered in
respect of such Seller Subordinated Note or Seller Preferred Equity unless a
corresponding obligation also arises with respect to the Notes and (y) in any
event, no repurchase or redemption of any such Seller Subordinated Note or
Seller Preferred Equity may be consummated unless and until the Issuers shall
have satisfied all repurchase obligations with respect to any required purchase
offer made with respect to the Notes; provided, however, that such purchases or
redemption of the Seller Subordinated Note or the Seller Preferred Equity shall
be included in the calculation of the amount of Restricted Payments and provided
that no Default or Event of Default shall have occurred and be continuing as a
consequence thereof; and (xi) if no Default or Event of Default shall have
occurred and be continuing or would occur as a consequence thereof, other
Restricted Payments in an aggregate amount not to exceed $5.0 million since the
date of this Indenture. In addition, any dividend which is declared but not paid
shall not be included in the calculation of Restricted Payments under clause
(c), and any divided which is declared and paid shall be included only once in
the calculation of Restricted Payments under clause (c).
The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any non-cash Restricted Payment shall be determined by
the Board of Managers of the Company whose resolution with respect thereto shall
be delivered to the Trustee, such determination to be based upon an opinion or
appraisal issued by an Independent Financial Advisor if such fair market value
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55
exceeds $15.0 million. Not later than the date of making any Restricted Payment,
the Company shall deliver to the Trustee an Officers' Certificate stating that
such Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this Section 4.7 were computed, together with a copy of
any fairness opinion or appraisal required by this Indenture.
The Board of Managers may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash) in
the Subsidiary so designated will be deemed to be Restricted Payments at the
time of such designation and will reduce the amount available for Restricted
Payments under the first paragraph of this covenant. All such outstanding
Investments will be deemed to constitute Investments in an amount equal to the
fair market value of such Investments at the time of such designation. Such
designation will only be permitted if such Restricted Payment would be permitted
at such time and if such Restricted Subsidiary otherwise meets the definition of
an Unrestricted Subsidiary.
Any designation of an Unrestricted Subsidiary by the Board of Managers
shall be evidenced to the Trustee by filing with the Trustee a certified copy of
the resolution of the Board of Managers of the Company giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the terms of the Indenture governing the designation of
Unrestricted Subsidiaries and was permitted by this Section 4.7. If, at any
time, any Unrestricted Subsidiary fails to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary
shall be deemed to be incurred by a Restricted Subsidiary of the Company as of
such date (and, if such Indebtedness is not permitted to be incurred as of such
date under the covenant described under Section 4.9 hereof, the Company shall be
in default of such covenant). The Board of Managers of the Company may at any
time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (i) such Indebtedness is permitted under Section 4.9 hereof
calculated on a pro forma basis as if such designation had occurred at the
beginning of the four-quarter reference period, (ii) such Subsidiary shall
execute a Note Guarantee and deliver an Opinion of Counsel in accordance with
the terms of this Indenture and (iii) no Default or Event of Default would be in
existence following such designation.
SECTION 4.8 DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (i) (a) pay dividends or make any other distributions
to the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or
(2) with respect to any other interest or participation in, or measured by,
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56
its profits, or (b) pay any Indebtedness owed to the Company or any of its
Restricted Subsidiaries, (ii) make loans or advances to the Company or any of
its Restricted Subsidiaries or (iii) transfer any of its properties or assets to
the Company or any of its Restricted Subsidiaries. However, the foregoing
restrictions will not apply to encumbrances or restrictions existing under or by
reason of (a) Existing Indebtedness as in effect on the date of this Indenture
(b) the Senior Credit Facility as in effect as of the date of this Indenture,
and any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof, provided that
such amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are no more restrictive, taken as a
whole, with respect to such dividend and other payment restrictions than those
contained in the Senior Credit Facility as in effect on the date of this
Indenture, (c) this Indenture and the Notes, (d) applicable law, (e) any
instrument governing Indebtedness or Capital Stock of a Person acquired by the
Company or any of its Restricted Subsidiaries as in effect at the time of such
acquisition (except to the extent such Indebtedness was incurred in connection
with or in contemplation of such acquisition), which encumbrance or restriction
is not applicable to any Person, or the properties or assets of any Person,
other than the Person, or the property or assets of the Person, so acquired,
provided that, in the case of Indebtedness, such Indebtedness was permitted by
the terms of this Indenture to be incurred, (f) customary non-assignment
provisions in leases entered into in the ordinary course of business and
consistent with past practices, (g) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (iii) above on the property so acquired, (h) any
agreement for the sale of a Restricted Subsidiary that restricts distributions
by that Restricted Subsidiary pending its sale, (i) Permitted Refinancing
Indebtedness, provided that the restrictions contained in the agreements
governing such Permitted Financing Indebtedness are no more restrictive, taken
as a whole, than those contained in the agreements governing the Indebtedness
being refinanced, (j) secured Indebtedness otherwise permitted to be incurred
pursuant to the provisions of the covenant described in Section 4.12 hereof that
limits the right of the debtor to dispose of the assets securing such
Indebtedness, (k) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements and other similar agreements
entered into in the ordinary course of business, (1) restrictions on cash or
other deposits or net worth imposed by customers under contracts entered into in
the ordinary course of business, (m) any Purchase Money Note, or other
Indebtedness or other contractual requirements of a Securitization Entity in
connection with a Qualified Securitization Transaction; provided that such
restrictions apply only to such Securitization Entity, (n) other Indebtedness of
a Restricted Subsidiary that is a Guarantor permitted to be incurred subsequent
to the date of this Indenture pursuant to the provisions of the covenant
described in Section 4.9 hereof; provided that any such restrictions are
ordinary and customary with respect to the type of Indebtedness or preferred
stock being incurred or issued (under the relevant circumstances), and (o) any
encumbrances or restrictions imposed by any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings of the contracts, instruments or obligations referred to in clauses
(a) through (n) 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 Managers,
no more restrictive with respect to such dividend and other
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57
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.
SECTION 4.9 INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED
STOCK.
The Issuers shall not, and shall not permit any of their 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") any Indebtedness (including Acquired
Debt) and the Issuers shall not issue any Disqualified Stock and shall not
permit any of their Restricted Subsidiaries to issue any shares of preferred
stock; provided, however, that the Company or any Guarantor may incur
Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock or
preferred stock if (i) no Default or Event of Default shall have occurred and be
continuing at the time of or as consequence of the incurrence of any such
Indebtedness or the issuance of any such Disqualified Stock and (ii) the Fixed
Charge Coverage Ratio for the Company's most recently ended four full fiscal
quarters for which internal financial statements are available immediately
preceding the date on which such additional Indebtedness is incurred or such
Disqualified Stock is issued would have been at least 2.0 to 1.0, 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, at the beginning of such
four-quarter period.
The provisions of the first paragraph of this Section 4.9 shall not
apply to the incurrence of any of the following items of Indebtedness
(collectively, "Permitted Debt"):
(i) the incurrence by the Company (and the guarantee thereof by
the Guarantors) of Indebtedness and letters of credit under one or more
Senior Credit Facilities; provided that the aggregate principal amount of
all Indebtedness (with letters of credit being deemed to have a principal
amount equal to the maximum potential liability of the Company and its
Restricted Subsidiaries thereunder) outstanding under all Senior Credit
Facilities after giving effect to such incurrence does not exceed an amount
equal to the greater of (x) $275.0 million less the aggregate amount of all
repayments of any term Indebtedness and all commitment reductions of any
revolving Indebtedness, in each case, under one or more Senior Credit
Facilities pursuant to clause (i) of the third paragraph of the covenant
described in Section 4.10 hereof and (y) the Company's Borrowing Base;
(ii) the incurrence by the Issuers of Indebtedness represented
by the Notes and the Guarantees thereof by the Guarantors in an aggregate
principal amount of $110.0 million outstanding on the date of this
Indenture;
(iii) the incurrence by a Restricted Subsidiary that is a
Foreign Subsidiary and is not a Guarantor of the Notes in an amount at any
one time outstanding that does not exceed (x) $3.0 million plus (y) the
Borrowing Base of such Restricted
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58
Subsidiary; provided, that none of the Company or any other such Restricted
Subsidiary shall be obligated, directly or indirectly, to pay principal,
premium, interest or other amounts thereon or in respect thereof (including
by way of net worth requirements, equity keepwells, etc.);
(iv) the incurrence by the Company and its Subsidiaries of
other Indebtedness outstanding on the date of this Indenture for so long as
such Indebtedness remains outstanding;
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness (including Capitalized Lease Obligations) 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
outstanding not to exceed the greater of (x) $10.0 million and (y) 7.5% of
Total Assets at the time of any incurrence thereof (including any
Refinancing Indebtedness with respect thereto) (which amount may, but need
not, be incurred in whole or in part under the Senior Credit Facilities);
(vi) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness 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;
(vi) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness arising from agreements of the Company or a
Restricted Subsidiary of the Company providing for indemnification,
adjustment of purchase price, earn out or other similar obligations, in
each case, incurred or assumed in connection with the disposition of any
business, assets or a Restricted Subsidiary of the Company, other than
guarantees of Indebtedness incurred by any Person acquiring all or any
portion of such business, assets or Restricted Subsidiary for the purpose
of financing such acquisition; provided that the maximum assumable
liability in respect of all such Indebtedness shall at no time exceed the
gross proceeds actually received by the Company and its Restricted
Subsidiaries in connection with such disposition;
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted Subsidiary
of the Company in the ordinary course of business;
(ix) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness in connection with an industrial revenue bond
in an aggregate principal amount not to exceed $10.0 million for the
expansion of the Company's Madisonville, Kentucky facility;
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(x) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to refund, refinance or replace Indebtedness
(other than intercompany Indebtedness) that was permitted by this Indenture
to be incurred under the first paragraph hereof or clauses (ii) and (iv) of
this paragraph or any Indebtedness issued to so refund, refinance or
replace such Indebtedness;
(xi) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and
any of its Restricted Subsidiaries; provided, however, that (i) if the
Company is the obligor on such Indebtedness, such Indebtedness is expressly
subordinated to the prior payment in full in cash of all Obligations with
respect to the Notes and (ii)(A) any subsequent issuance or transfer of
Equity Interests that results in any such Indebtedness being held by a
Person other than the Company or a Restricted Subsidiary thereof and (B)
any sale or other transfer of any such Indebtedness to a Person that is not
either the Company or a Restricted Subsidiary thereof shall be deemed, in
each case, to constitute an incurrence of such Indebtedness by the Company
or such Subsidiary, as the case may be, that was not permitted by this
clause (xi);
(xii) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred in the normal course
of business and not for speculative purposes used for fixing or hedging
currency or interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Indenture to be
outstanding; provided, however, that in the case of Hedging Obligations
that are incurred for the purpose of fixing or hedging interest rate risks
with respect to Indebtedness, the notional principal amount of any such
Hedging Obligation does not exceed the principal amount of the Indebtedness
to which such Hedging Obligation relates;
(xiii) the guarantee by the Company or any of the Guarantors of
Indebtedness that was permitted to be incurred by another provision of this
covenant ;
(xiv) the incurrence by the Company's Unrestricted Subsidiaries
of Non-Recourse Debt; provided, however, that if any such Indebtedness
ceases to be Non-Recourse Debt of an Unrestricted Subsidiary, such event
shall be deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company that was not permitted by this clause (xiv);
(xv) the incurrence by a Securitization Entity of Indebtedness
in a Qualified Securitization Transaction that is Non-Recourse Debt with
respect to the Company and its other Restricted Subsidiaries (except for
Standard Securitization Undertakings and Limited Originator Recourse); and
(xvi) the incurrence by the Company or any of its Restricted
Subsidiaries that is a Guarantor of additional Indebtedness and/or the
issuance of Disqualified Stock in an aggregate principal amount or
aggregate liquidation value, as applicable (or
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accreted value, as applicable) at any time outstanding, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any Indebtedness incurred pursuant to this clause (xvi), not to exceed
$30.0 million.
For purposes of determining compliance with this covenant, in the event that an
item of Indebtedness meets the criteria of more than one of the categories of
Permitted Debt described in clauses (i) through (xvi) above or is entitled to be
incurred pursuant to the first paragraph of this covenant, the Company shall, in
its sole discretion, classify or later reclassify such item of Indebtedness in
any manner that complies with this covenant. Accrual of interest, accretion or
amortization of original issue discount and the payment of interest on any
Indebtedness in the form of additional Indebtedness with the same terms will not
be deemed to be an incurrence of Indebtedness for purposes of this covenant;
provided, in each such case, that the amount thereof is included in Fixed
Charges of the Company as accrued.
SECTION 4.1 ASSET SALES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company or 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 (evidenced by a
resolution of the Board of Managers set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of and (ii) at least 75% of the consideration therefor
received by the Company or such Restricted Subsidiary, as the case may be, is in
the form of cash or Cash Equivalents; provided that the amount of (x) any
liabilities (as shown on the Company's or such Restricted Subsidiary's most
recent balance sheet) of the Company or any Restricted Subsidiary (other than
contingent liabilities and liabilities that are by their terms subordinated to
the Notes or any guarantee thereof) that are assumed by the transferee of any
such assets pursuant to a customary novation agreement that releases the Company
or such Restricted Subsidiary from further liability and (y) any securities,
notes or other obligations received by the Company or any such Restricted
Subsidiary from such transferee that are immediately converted by the Company or
such Restricted Subsidiary into cash (to the extent of the cash received) shall
be deemed to be cash for purposes of this provision.
Notwithstanding the immediately preceding paragraph, the Company and
its Restricted Subsidiaries shall be permitted to consummate an Asset Sale
without complying with the prior paragraph if (i) the Company or the applicable
Restricted Subsidiary, as the case may be, receives consideration at the time of
such Asset Sale at least equal to the fair market value of the assets or other
property sold, issued or otherwise disposed of (as evidenced by a resolution of
the Company's Board of Managers set forth in an Officers' Certificate delivered
to the Trustee) and (ii) at least 75% of the consideration for such Asset Sale
constitutes a controlling interest in a Permitted Business, long-term assets
used or useful in a Permitted Business and/or cash or Cash Equivalents; provided
that any cash or Cash Equivalents received by the Company or any of its
Restricted Subsidiaries in connection with any Asset Sale permitted to be
consummated under this paragraph shall constitute Net Proceeds subject to the
provisions of the next succeeding paragraph.
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Within 365 days after the receipt of any Net Proceeds from an Asset
Sale, the Company may apply such Net Proceeds, at its option, (i) to repay
Senior Debt and, in the case of any Senior Debt under any revolving credit
facility, effect a corresponding commitment reduction under such credit
facility, (ii) to the acquisition of a controlling interest in a Permitted
Business, the making of a capital expenditure or the acquisition of other
Additional Assets or (iii) a combination of prepayment and investment permitted
by the forgoing clauses (i) and (ii). Pending the final application of any such
Net Proceeds, the Company may temporarily reduce revolving credit borrowings or
otherwise invest such Net Proceeds in any manner that is not prohibited by this
Indenture. Any Net Proceeds from Asset Sales that are not applied or invested
as provided in the first sentence of this paragraph will be deemed to constitute
"Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $10.0
million, the Issuers will be required to make an offer to all Holders of Notes
(an "Asset Sale Offer") to purchase the maximum principal amount of Notes that
may be purchased out of the Excess Proceeds, at an offer price in cash in an
amount equal to 100% of the principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of purchase, in
accordance with the procedures set forth in this Indenture (the first date the
aggregate of all such Net Proceeds is equal to $10.0 million or more shall be
deemed an "Asset Sale Offer Trigger Date"). Each Asset Sale Offer will be
mailed to the record Holders as shown on the register of Holders within 25 days
following the Asset Sale Offer Trigger Date, with a copy to the Trustee, and
shall comply with the procedures set forth in this Indenture. Upon receiving
notice of the Asset Sale Offer, Holders may elect to tender their Notes in whole
or in part in integral multiples of $1,000 in exchange for cash. To the extent
that any Excess Proceeds remain after consummation of an Asset Sale Offer, the
Company may use such Excess Proceeds for any purpose not otherwise prohibited by
this Indenture. If the aggregate principal amount of Notes tendered into such
Asset Sale Offer surrendered by Holders thereof exceeds the amount of Excess
Proceeds, the Trustee shall select the Notes to be purchased among the Holders
of the Notes in compliance with the requirements of the principal national
securities exchange, if any, on which the Notes are listed or, if the Notes are
not so listed, on a pro rata basis, by lot or in accordance with any other
method the Trustee considers fair and appropriate. Upon completion of such
offer to purchase, the amount of Excess Proceeds shall be reset at zero.
The Issuers 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 and regulations are applicable in connection with the
repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with the Asset Sale
provisions of this Indenture, the Issuers shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached their
obligations under the Asset Sale provisions of this Indenture by virtue thereof.
SECTION 4.11 TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any
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62
transaction, contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless (i) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Restricted Subsidiary than those
that would have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person and (ii) the Company delivers to
the Trustee (a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $3.0
million, a resolution of the Board of Managers set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Managers and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $10.0 million, an opinion as to the
fairness to the Holders of such Affiliate Transaction from a financial point of
view issued by an Independent Financial Advisor. Notwithstanding the foregoing,
the following items shall not be deemed to be Affiliate Transactions: (i) any
employment agreement entered into by the Company or any of its Restricted
Subsidiaries in the ordinary course of business and consistent with the past
practice of the Company or such Restricted Subsidiary, (ii) transactions
exclusively between or among the Company and/or its Restricted Subsidiaries,
provided such transactions have not otherwise been prohibited by this Indenture,
(iii) payment of reasonable directors fees to Persons who are not otherwise
Affiliates of the Company, (iv) transactions effected as part of a Qualified
Securitization Transaction, (v) Restricted Payments that are permitted by the
provisions of Section 4.7 hereof, (vi) reasonable fees and compensation paid to,
and indemnity provided on behalf of, officers, directors, employees or
consultants of the Company or any Subsidiary as determined in good faith by the
Company's Board of Managers or senior management, (vii) the payment of
consulting and advisory fees, annual management fees and related expenses to the
Principals made pursuant to any financial advisory, financing, underwriting or
placement agreement or in respect of other investment banking activities,
including, without limitation, in connection with acquisitions or divestitures
which are approved by the Board of Managers of the Company or such Restricted
Subsidiary in good faith, (viii) any agreement as in effect on the date of this
Indenture or any amendment thereto or any transaction contemplated thereby
(including pursuant to any amendment thereto) in any replacement agreement
thereto so long as any such amendment or replacement agreement is not more
disadvantageous to the Holders in any material respect than the original
agreement as in effect on the date of this Indenture, (ix) payments or loans to
employees or consultants which are approved by the Board of Managers of the
Company in good faith, (x) 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 date of this
Indenture 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 date of this Indenture shall only be permitted by this clause (x) to the
extent that the terms of any such amendment or new agreement are not otherwise
disadvantageous to the Holders of the Notes in any material respect, (xi)
transactions with customers, clients, suppliers, joint venture partners or
purchasers or sellers of goods or services, in each case in the ordinary course
of
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63
business (including, without limitation, pursuant to joint venture agreements)
and otherwise in compliance with the terms of this Indenture which are fair to
the Company or its Restricted Subsidiaries, in the good faith determination of
the Board of Managers 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 and (xii) in the case of foreign joint ventures,
transfers of equipment for sale outside of North America in exchange for value
not less than the Company's cost of producing such equipment.
SECTION 4.12 LIENS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or otherwise
cause or suffer to exist or become effective any Lien of any kind securing
Indebtedness or trade payables (other than Permitted Liens) upon any of their
property or assets, now owned or hereafter acquired, unless (i) in the case of
Liens securing Indebtedness that is expressly subordinated or junior in right of
payment to the Notes, the Notes are secured on a senior basis to the obligations
so secured until such time as such obligations are no longer secured by a Lien
and (ii) in all other cases, the Notes are secured on an equal and ratable basis
with the obligations so secured until such time as such obligations are no
longer secured by a Lien.
SECTION 4.13 BUSINESS ACTIVITIES.
The Company shall not, and shall not permit any Restricted Subsidiary
to, engage in any line of business other than Permitted Businesses, except to
such extent as would not be material to the Company and its Restricted
Subsidiaries taken as a whole, and ALC shall not own any operating assets or
other properties or conduct any business other than to serve as an Issuer and
obligor on the Notes.
SECTION 4.14 CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Issuers shall do or cause to be done
all things necessary to preserve and keep in full force and effect (i) their
limited liability company or corporate existence, and the corporate,
partnership, limited liability company or other existence of each of their
Subsidiaries, in accordance with the respective organizational documents (as the
same may be amended from time to time) of the Issuers or any such Subsidiary and
(ii) the rights (charter and statutory), licenses and franchises of the Issuers
and their Subsidiaries; provided, however, that the Issuers shall not be
required to preserve any such right, license or franchise, or the corporate,
partnership, limited liability company or other existence of any of their
Subsidiaries, if the Board of Managers or the Board of Directors, as the case
may be, shall determine that the preservation thereof is no longer desirable in
the conduct of the business of the Issuers and their Subsidiaries, taken as a
whole, and that the loss thereof is not adverse in any material respect to the
Holders of the Notes.
SECTION 4.15 OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
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(a) Upon the occurrence of a Change of Control, each Holder of Notes
shall have the right to require the Issuers to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to
the offer described in this Section 4.15 (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of purchase (the "Change of Control Payment"). Within 10 days following any
Change of Control, the Issuers shall mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase Notes on the date specified in such notice, which date shall be no
earlier than 30 days and no later than 60 days from the date such notice is
mailed (the "Change of Control Payment Date"), pursuant to the procedures
required by this Indenture and described in such notice. The Issuers 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 and
regulations are applicable in connection with the repurchase of the Notes as a
result of a Change of Control.
(b) On a Change of Control Payment Date, the Issuers shall, to the
extent lawful, (i) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (iii) deliver or cause to be delivered to
the Trustee the Notes so accepted together with an Officers' Certificate stating
the aggregate principal amount of Notes or portions thereof being purchased by
the Issuers. The Paying Agent shall promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee shall
upon receipt of an Authentication Order authenticate and mail (or cause to be
transferred by book entry) to each Holder a new Note equal in principal amount
to any unpurchased portion of the Notes surrendered, if any; provided that each
such new Note shall be in a principal amount of $1,000 or an integral multiple
thereof. Prior to complying with the provisions of this Section 4.15, but in
any event within 90 days following a Change of Control, the Issuers shall either
repay all outstanding Senior Debt or obtain the requisite consents, if any,
under all agreements governing outstanding Senior Debt to permit the repurchase
of Notes required by this Section 4.15. The Issuers shall publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Payment Date.
The Change of Control provisions described above will be applicable
whether or not other provisions of this Indenture are applicable.
(c) Notwithstanding anything to the contrary in this Section 4.15, the
Issuers shall not be required to make a Change of Control Offer upon a Change of
Control (i) if a third party makes the Change of Control Offer in a manner, at
the times and otherwise in compliance with the requirements set forth in this
Section 4.15 and Section 3.9 hereof and purchases all Notes validly tendered and
not withdrawn under such Change of Control Offer or (ii) the Issuers exercise
their option to purchase all the Notes upon a Change of Control as described in
Section 3.7 hereof.
SECTION 4.16 NO SENIOR SUBORDINATED DEBT.
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Notwithstanding the provisions of Section 4.9 hereof, (i) the Issuers
shall not, directly or indirectly, incur any Indebtedness that is subordinate or
junior in right of payment to any Senior Debt and senior in any respect in right
of payment to the Notes and (ii) no Guarantor shall incur any Indebtedness that
is subordinate or junior in right of payment to its Guarantor Senior Debt and
senior in any respect in right of payment to such Guarantor's Guarantee.
SECTION 4.17 LIMITATION ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS.
The Company shall not permit any Restricted Subsidiary, directly or
indirectly, to guarantee or pledge any assets to secure the payment of any other
Indebtedness of the Company unless such Restricted Subsidiary simultaneously
executes and delivers a supplemental indenture to this Indenture providing for
the Guarantee of the payment of the Notes by such Restricted Subsidiary, which
Guarantee shall be senior to or pari passu with such Restricted Subsidiary's
Guarantee of or pledge to secure such other Indebtedness, unless such other
Indebtedness is Senior Debt, in which case the Guarantee of the Notes may be
subordinated to the Guarantee of such Senior Debt to the same extent as the
Notes are subordinated to such Senior Debt. Notwithstanding the foregoing, any
such Guarantee by a Subsidiary of the Notes shall provide by its terms that it
shall be automatically and unconditionally released and discharged upon any
sale, exchange or transfer, to any Person not an Affiliate of the Company, of
all of the Company's stock in, or all or substantially all the assets of, such
Restricted Subsidiary, which sale, exchange or transfer is made in compliance
with the applicable provisions of this Indenture.
SECTION 4.18 PAYMENTS FOR CONSENT.
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of this
Indenture or the Notes unless such consideration is offered to be paid or is
paid to all Holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
ARTICLE 5.
SUCCESSORS
SECTION 5.1 MERGER, CONSOLIDATION, OR SALE OF ASSETS.
Neither Issuer may consolidate or merge with or into (whether or not
such Issuer is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions, to another corporation, Person or
entity unless (i) the Company is the surviving corporation or the entity or the
Person formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, assignment, transfer, lease,
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conveyance or other disposition shall have been made is a corporation organized
or existing under the laws of the United States, any state thereof or the
District of Columbia; (ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than such Issuer) or the entity or Person to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made assumes all the obligations of the Issuers under the
Registration Rights Agreement, the Notes and this Indenture pursuant to a
supplemental indenture in a form satisfactory to the Trustee; (iii) immediately
prior thereto and immediately after such transaction no Default or Event of
Default exists; and (iv) except in the case of a merger of the Company with or
into a Restricted Subsidiary of the Company and except in the case of a merger
entered into solely for the purpose of reincorporating the Company in another
jurisdiction, the Company or the entity or Person formed by or surviving any
such consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made will immediately after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter period,
(x) be permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of the
covenant described in Section 4.9 hereof or (y) the Fixed Charge Coverage Ratio
for the Company or the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company) would be greater than such
ratio for the Company or such surviving entity immediately prior to such
transaction.
Notwithstanding the foregoing, the Company shall be permitted to
reorganize as a corporation in accordance with the procedures established in
this Indenture, provided that the Company shall have delivered to the Trustee an
Opinion of Counsel in the United States reasonably acceptable to the Trustee
confirming that such reorganization is not adverse to Holders of the Notes (it
being recognized that such reorganization shall not be deemed adverse to the
Holders of the Notes solely because (i) of the accrual of deferred tax
liabilities resulting from such reorganization or (ii) the successor or
surviving corporation (a) is subject to income tax as a corporate entity or (b)
is considered to be an "includible corporation" of an affiliated group of
corporations within the meaning of the Code or any similar state or local law)
and certain other conditions are satisfied.
The entity or the Person formed by or surviving any consolidation or
merger (if other than the Company) will succeed to, and be substituted for, and
may exercise every right and power of, the Issuers under this Indenture, but, in
the case of a lease of all or substantially all its assets, neither Issuer will
be released from the obligation to pay the principal of and interest on the
Notes.
SECTION 5.2 SUCCESSOR CORPORATION SUBSTITUTED.
(a) Upon any consolidation or merger, or any sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the assets of the Company in accordance with Section 5.1 hereof, the successor
corporation formed by such consolidation or into or with which the Company is
merged or to which such sale, assignment, transfer, lease, conveyance or other
disposition is made shall succeed to, and be substituted for (so that from and
after the date of such consolidation, merger, sale, lease,
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conveyance or other disposition, the provisions of this Indenture referring to
the "Company" shall refer instead to the successor corporation and not to the
Company), and may exercise every right and power of the Company under this
Indenture with the same effect as if such successor Person had been named as the
Company herein; provided, however, that the predecessor Company shall not be
relieved from the obligation to pay the principal of and interest on the Notes
except in the case of a sale of all of the Company's assets that meets the
requirements of Section 5.1 hereof.
(b) 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 consultation 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, partnership or limited liability company
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, the Registration Rights
Agreement and such Guarantor's Guarantee pursuant to a supplemental indenture or
other documents or instruments in form reasonably satisfactory to the Trustee;
and (iii) if such merger or consolidation is with a Person other than the
Company or a Restricted Subsidiary, (x) immediately after such transaction no
Default or Event of Default shall have occurred and be continuing any (y) the
Company will, at the time of such transaction after giving pro forma effect
thereto, be permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the covenant
described in Section 4.9 hereof. The Successor Guarantor will succeed to, and be
substituted for, such Guarantor under this Indenture, the Registration Rights
Agreement and such Guarantor's Guarantee.
ARTICLE 6.
EVENTS OF DEFAULT
SECTION 6.1 EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(a) the Issuers default in the payment when due of interest on, or
Liquidated Damages, if any, with respect to, the Notes and such default
continues for a period of 30 days, whether or not such payment is
prohibited by the provisions of Article 10 hereof;
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(b) the Issuers default in the payment when due of principal of or
premium, if any, on the Notes, whether or not such payment is prohibited by
the provisions of Article 10 hereof;
(c) the Issuers or any of their Restricted Subsidiaries fail to
comply with any of the provisions of Sections 4.15 or 5.1 hereof;
(d) the Issuers or any of their Restricted Subsidiaries fail for 30
days after written notice by the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Notes to comply with the
provisions of Sections 4.7, 4.9 or 4.10;
(e) the Issuers, any of their Restricted Subsidiaries or any
Guarantor fails to observe or perform any other covenant, representation,
warranty or other agreement in this Indenture or the Notes for 60 days
after written notice to the Issuers by the Trustee or the Holders of at
least 25% in aggregate principal amount of the Notes then outstanding;
(f) the Company or any of its Subsidiaries defaults under any
mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any Indebtedness for money borrowed
by the Company or any of its Subsidiaries (other than a Securitization
Entity) (or the payment of which is guaranteed by the Company or any of its
Subsidiaries (other than a Securitization Entity)), whether such
Indebtedness or guarantee now exists, or is created after the date of this
Indenture, which default (a) is caused by a failure to pay principal of or
premium, if any, or interest on such Indebtedness prior to the expiration
of the grace period provided in such Indebtedness on the date of such
default (a "Payment Default") or (b) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any
other such Indebtedness under which there has been a Payment Default or the
maturity of which has been so accelerated, aggregates $10.0 million or
more;
(g) the Company or any of its Subsidiaries fail to pay a final
judgment or final judgments for the payment of money which are entered by a
court or courts of competent jurisdiction against the Company or any of its
Subsidiaries and such judgment or judgments remain undischarged for a
period (during which execution shall not be effectively stayed) of 60 days,
provided that the aggregate of all such undischarged judgments exceeds $10
million (excluding amounts covered by insurance);
(h) the Issuers or any of their Subsidiaries pursuant to or within
the meaning of Bankruptcy Law:
(i) commence a voluntary case,
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(ii) consent to the entry of an order for relief
against them in an involuntary case,
(iii) consent to the appointment of a Custodian of them or
for all or substantially all of their property,
(iv) make a general assignment for the benefit of their
creditors, or
(v) generally are not paying their debts as they become
due; or
(i) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Issuers or any of their
Subsidiaries in an involuntary case;
(ii) appoints a Custodian of the Issuers or any of
their Subsidiaries or for all or substantially all of the property of the
Issuers or any of their Subsidiaries; or
(iii) orders the liquidation of the Issuers or any of their
Subsidiaries; and the order or decree remains unstayed and in effect for 60
consecutive days.
(j) except as permitted by this Indenture, any Guarantee is held in
any judicial proceeding to be unenforceable or invalid or ceases for any
reason to be in full force and effect or any Guarantor, or any Person
acting on behalf of any Guarantor, denies or disaffirms its obligations
under its Guarantee.
SECTION 6.2 ACCELERATION.
If any Event of Default (other than an Event of Default specified in
clause (h) or (i) of Section 6.1 hereof with respect to the Issuers or any
Subsidiaries) occurs and is continuing, the Trustee or the Holders of at least
25% in principal amount of the then outstanding Notes may declare all the Notes
to be due and payable immediately; provided, that so long as Senior Debt or any
commitment therefore is outstanding under the Senior Credit Facility, any such
notice shall not be effective until the earlier of (i) five Business Days after
such notice is delivered to the representative for such Senior Debt or (ii) the
acceleration of the Senior Debt under the Senior Credit Facility.
Notwithstanding the foregoing, if an Event of Default specified in clause (h) or
(i) of Section 6.1 hereof occurs with respect to the Issuers, any Restricted
Subsidiary of the Company that constitutes a Significant Subsidiary or any group
of Restricted Subsidiaries that, taken together, would constitute a Significant
Subsidiary, all outstanding Notes shall be due and payable without further
action or notice. Holders of the Notes may not enforce this Indenture or the
Notes except as provided in this 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
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trust or power. The Trustee may withhold from Holders of the Notes notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest. The Holders of a majority in aggregate
principal amount of the then outstanding Notes by notice to the Trustee may on
behalf of the Holders of all of the Notes rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default (except nonpayment of principal, interest
or premium that has become due solely because of the acceleration) have been
cured or waived.
The Holders of a majority in aggregate principal amount of the Notes
then outstanding by written notice to the Trustee may on behalf of the Holders
of all of the Notes waive any existing Default or Event or Default and its
consequences under this Indenture except a continuing Default or Event of
Default in the payment of interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee quarterly a written
statement regarding compliance with this Indenture, and the Company is required
upon becoming aware of any Default or Event of Default, to deliver to the
Trustee a written statement specifying such Default or Event of Default.
SECTION 6.3 OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee, in its
sole discretion, may pursue any available remedy to collect the payment of
principal, premium, if any, interest and Liquidated Damages, if any, on the
Notes or to enforce the performance of any provision of the Notes or this
Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
SECTION 6.4 WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal amount of
the then outstanding Notes by written notice to the Trustee may on behalf of the
Holders of all of the Notes waive an existing Default or Event of Default and
its consequences hereunder, except a continuing Default or Event of Default in
the payment of the principal of, premium and Liquidated Damages, if any, or
interest on, the Notes (including in connection with an offer to purchase)
(provided, however, that the Holders of a majority in aggregate principal amount
of the then outstanding Notes may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration).
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
SECTION 6.5 CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture or that the Trustee determines may be
unduly prejudicial to the rights of other Holders of Notes or that may involve
the Trustee in personal liability. The Trustee may take any other action
consistent with this Indenture relating to any such direction.
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SECTION 6.6 LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this Indenture
or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee security and indemnity satisfactory to the
Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
security and indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights
of another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
SECTION 6.7 RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
SECTION 6.8 COLLECTION SUIT BY TRUSTEE.
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If an Event of Default specified in Section 6.1(a) or (b) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name and
as trustee of an express trust against the Issuers for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Notes and interest on overdue principal and, to the extent lawful,
interest and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the compensation, fees, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.9 TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the compensation, fees, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Issuers
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the compensation, fees, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under or
in connection with this Indenture. To the extent that the payment of any such
compensation, fees, expenses, disbursements and advances of the Trustee, its
agents and counsel, and any other amounts due the Trustee under or in connection
with this Indenture out of the estate in any such proceeding, shall be denied
for any reason, payment of the same shall be secured by a perfected, first
priority Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise, and such Lien in favor of a
predecessor Trustee shall be senior to the Lien in favor of the current Trustee.
Nothing herein contained shall be deemed to authorize the Trustee to authorize
or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder, or to authorize the Trustee to vote in respect of the
claim of any Holder in any such proceeding.
SECTION 6.10 PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee (including any predecessor Trustee), its agents
and attorneys for amounts due under Section 7.7 hereof, including payment of all
compensation, fees, expenses and liabilities incurred, and all advances made, by
the Trustee and the costs and expenses of collection;
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Second: to Holders of Notes for amounts due and unpaid on the Notes
for principal, premium and Liquidated Damages, if any, and interest, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium and Liquidated Damages, if any and
interest, respectively; and
Third: to the Issuers or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
SECTION 6.11 FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.7 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
ARTICLE 7.
TRUSTEE
SECTION 7.1 DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall
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examine the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section ;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.5 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), (c), (e) and (f) of this Section.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be under
no obligation to exercise any of its rights and powers under this Indenture at
the request or direction of any Holders, unless such Holder shall have offered
and, if requested, provided to the Trustee security and indemnity satisfactory
to it against any loss, liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Issuers.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
SECTION 7.2 RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document believed by
it to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document, but the
Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Issuers, personally or by agent or attorney.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall
not be liable for any action it takes or omits to take in good faith in reliance
on such Officers' Certificate or Opinion of Counsel. The Trustee may consult
with counsel and the written advice of such counsel or any Opinion of Counsel
shall be full and complete authorization and protection from liability
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in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Issuers shall be sufficient if
signed by an Officer of each of the Issuers.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered and, if requested,
provided to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities that might be incurred by it in compliance with such
request or direction.
(g) No permissive right of the Trustee to act hereunder shall be
construed as a duty.
(h) Whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officers' Certificate, an Opinion of Counsel, or both.
(i) Except with respect to Section 4.1 hereof, the Trustee shall have
no duty to inquire as to the performance of the Issuers' covenants in Article 4
hereof. In addition, the Trustee shall not be deemed to have knowledge
(including actual knowledge) of any Default or Event of Default except (i) any
Event of Default occurring pursuant to Sections 6.1(a) and 6.1(b) hereof or (ii)
any Default or Event of Default of which the Trustee shall have received written
notification or obtained actual knowledge.
(j) The Trustee shall not be deemed to have notice or knowledge
(including actual knowledge) of any matter unless a Responsible Officer has
actual knowledge thereof or unless written notice thereof is received by the
Trustee at the Corporate Trust Office of the Trustee and such notice references
the Notes generally, the Issuers or this Indenture.
SECTION 7.3 INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Issuers or any
Affiliate of the Issuers with the same rights it would have if it were not
Trustee. However, in the event that the Trustee
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acquires any conflicting interest it must eliminate such conflict within 90
days, apply to the SEC for permission to continue as trustee or resign. Any
Agent may do the same with like rights and duties. The Trustee is also subject
to Sections 7.10 and 7.11 hereof.
SECTION 7.4 TRUSTEES DISCLAIMER.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture, the Notes, the Registration
Rights Agreement or the Offering Memorandum; it shall not be accountable for the
Issuers' use of the proceeds from the Notes or any money paid to the Issuers or
upon the Issuers' direction under any provision of this Indenture; it shall not
be responsible for the use or application of any money received by any Paying
Agent other than the Trustee, and it shall not be responsible for any statement
or recital herein or any statement in the Notes or any other document in
connection with the sale of the Notes or pursuant to this Indenture other than
its certificate of authentication.
SECTION 7.5 NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if the
Trustee receives written notice thereof, the Trustee shall (at the expense of
the Issuers) mail to Holders of Notes a notice of the Default or Event of
Default within 90 days after it occurs. Except in the case of a Default or Event
of Default in payment of principal of, premium, if any, Liquidated Damages, if
any, or interest on any Note, the Trustee may withhold the notice if and so long
as a committee of its Responsible Officers in good faith determines that
withholding the notice is in the interests of the Holders of the Notes.
SECTION 7.6 REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, and for so long as Notes remain outstanding, the
Trustee shall (at the expense of the Issuers) mail to the Holders of the Notes a
brief report dated as of such reporting date that complies with TIA (S) 313(a)
(but if no event described in TIA (S) 313(a) has occurred within the twelve
months preceding the reporting date, no report need be transmitted). The
Trustee also shall comply with TIA (S) 313(b)(2). The Trustee shall also
transmit by mail all reports as required by TIA (S) 313(c).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to the Issuers and filed with the SEC and each stock
exchange on which the Notes are listed in accordance with TIA (S) 313(d). The
Issuers shall promptly notify the Trustee when the Notes are listed on any stock
exchange.
SECTION 7.7 COMPENSATION AND INDEMNITY.
The Issuers and the Guarantors jointly and severally agree to pay to
the Trustee from time to time compensation as agreed upon by the Trustee and the
Issuers, and, in the absence of any such agreement, reasonable compensation for
its acceptance of this Indenture and services hereunder. The Trustee's
compensation shall not be limited by any
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law on compensation of a trustee of an express trust. The Issuers and the
Guarantors shall reimburse the Trustee promptly upon request for all
disbursements, advances and expenses incurred or made by it in addition to the
compensation for its services. Such expenses shall include the compensation,
disbursements and expenses of the Trustee's agents and counsel .
The Issuers and the Guarantors shall indemnify the Trustee against any
and all losses, liabilities or expenses incurred by it arising out of or in
connection with the acceptance or administration of its duties under this
Indenture, including the costs and expenses of enforcing this Indenture against
the Issuers and the Guarantors (including this Section 7.7) and defending itself
against any claim (whether asserted by the Issuers, the Guarantors or any Holder
or any other person) or liability in connection with, relating to, or arising
out of (i) the exercise or performance of any of its powers or duties hereunder,
or in connection herewith, and (ii) the validity, invalidity, adequacy or
inadequacy of this Indenture, the Guarantees, the Notes, the Registration Rights
Agreement and the Offering Memorandum, except to the extent any such loss,
liability or expense may be attributable to its negligence or bad faith. The
Trustee shall notify the Issuers and the Guarantors promptly of any claim for
which it intends to seek indemnity. Failure by the Trustee to so notify the
Issuers and the Guarantors shall not relieve the Issuers and the Guarantors of
their obligations hereunder. The Issuers and the Guarantors shall defend the
claim and the Trustee shall cooperate in the defense. The Trustee may have
separate counsel and the Issuers and the Guarantors shall pay the fees and
expenses of such counsel. The Issuers and the Guarantors need not pay for any
settlement made without their consent, which consent shall not be unreasonably
withheld.
The obligations of the Issuers and the Guarantors to the Trustee under
this Indenture shall survive the satisfaction and discharge of this Indenture
and shall be secured by a Lien as provided in Section 6.9 hereof.
To secure the Issuers' and the Guarantors' payment obligations in this
Section, the Trustee shall have a Lien prior to the Notes on all money or
property held or collected by the Trustee, except that held in trust to pay
principal and interest on particular Notes. Such Lien shall survive the
satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(g) or (b) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA (S) 313(b)(2) to
the extent applicable.
SECTION 7.8 REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
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The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Issuers. The Holders of Notes of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Issuers in writing. The Issuers may
by a Board Resolution remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Issuers shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Issuers.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuers, or
the Holders of Notes of at least 10% in principal amount of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after receiving a written request by any Holder of a
Note who has been a bona fide Holder of a Note for at least six months, fails to
comply with Section 7.10, such Holder of a Note may petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuers. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, provided
all sums owing to the Trustee hereunder have been paid and subject to the Lien
provided for in Section 7.7 hereof. Notwithstanding replacement of the Trustee
pursuant to this Section 7.8, the Issuers' obligations under Section 7.7 hereof
shall continue for the benefit of the retiring Trustee.
SECTION 7.9 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee or any Agent consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor
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corporation without any further act shall be the successor Trustee or Agent, as
the case may be.
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that together with its direct parent, if any, or in the case of
a corporation included in a bank holding company system, its related bank
holding company, has a combined capital and surplus of at least $50 million as
set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA (S) 310(a)(1), (2) and (5). The Trustee is subject to TIA
(S) 310(b).
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
SECTION 7.12 THER CAPACITIES.
All references in this Indenture to the Trustee shall be deemed to
refer to the Trustee in its capacity as Trustee and in its capacities as any
Agent, to the extent acting in such capacities, and every provision of this
Indenture relating to the conduct or affecting the liability or offering
protection, immunity or indemnity to the Trustee shall be deemed to apply with
the same force and effect to the Trustee acting in its capacities as any Agent.
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.1 OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT
DEFEASANCE.
The Issuers may, at their option and at any time, elect to have either
Section 8.2 or 8.3 hereof be applied to all outstanding Notes and the Guarantees
upon compliance with the conditions set forth below in this Article 8.
SECTION 8.2 LEGAL DEFEASANCE AND DISCHARGE.
Upon the Issuers' exercise under Section 8.1 hereof of the option
applicable to this Section 8.2, the Issuers shall, subject to the satisfaction
of the conditions set forth in Section 8.4 hereof, be deemed to have been
discharged from their obligations with respect to
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all outstanding Notes and to have each Guarantor's obligations discharged with
respect to its Guarantee on the date the conditions set forth below are
satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance
means that the Issuers shall be deemed to have paid and discharged the entire
Indebtedness represented by the outstanding Notes, which shall thereafter be
deemed to be "outstanding" only for the purposes of Section 8.5 hereof and the
other Sections of this Indenture referred to in (a) and (b) below, and to have
satisfied all its other obligations under such Notes and this Indenture (and the
Trustee, on demand of and at the expense of the Issuers, shall execute proper
instruments acknowledging the same), except for the following provisions which
shall survive until otherwise terminated or discharged hereunder: (a) the rights
of Holders of outstanding Notes to receive solely from the trust fund described
in Section 8.4 hereof, and as more fully set forth in such Section, payments in
respect of the principal of, premium, if any, and interest and Liquidated
Damages, if any, on such Notes when such payments are due, (b) the Issuers'
obligations with respect to such Notes under Article 2 and Section 4.2 hereof,
(c) the rights, powers, trusts, duties and immunities of the Trustee and any
Agent hereunder and the Issuers' and Guarantors' obligations in connection
therewith, including, without limitation, Article 7 and Section 8.5 and 8.7
hereunder, and (d) this Article 8. Subject to compliance with this Article 8,
the Issuers may exercise their option under this Section 8.2 notwithstanding the
prior exercise of its option under Section 8.3 hereof.
SECTION 8.3 COVENANT DEFEASANCE.
Upon the Issuers' exercise under Section 8.1 hereof of the option
applicable to this Section 8.3, the Issuers and each Guarantor shall, subject to
the satisfaction of the conditions set forth in Section 8.4 hereof, be released
from its obligations under the covenants contained in Sections 4.7, 4.8, 4.9,
4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.18, 4.19, and 5.1 hereof with respect to
the outstanding Notes on and after the date the conditions set forth in Section
8.4 are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Notes shall not be deemed outstanding for accounting purposes). For this
purpose, Covenant Defeasance means that, with respect to the outstanding Notes,
the Issuers may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such covenant, whether
directly or indirectly, by reason of any reference elsewhere herein to any such
covenant or by reason of any reference in any such covenant to any other
provision herein or in any other document and such omission to comply shall not
constitute a Default or an Event of Default under Section 6.1 hereof, but,
except as specified above, the remainder of this Indenture and such Notes shall
be unaffected thereby. In addition, upon the Company's exercise under Section
8.1 hereof of the option applicable to this Section 8.3 hereof, subject to the
satisfaction of the conditions set forth in Section 8.4 hereof, Sections 6.1(d)
through 6.1(f) hereof shall not constitute Events of Default.
SECTION 8.4 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
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The following shall be the conditions to the application of either
Section 8.2 or 8.3 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Issuers must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, cash in United States dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest and
Liquidated Damages, if any, on the outstanding Notes on the stated maturity or
on the applicable redemption date, as the case may be, and the Issuers must
specify whether the Notes are being defeased to maturity or to a particular
redemption date;
(b) in the case of an election under Section 8.2 hereof, the Issuers
shall have delivered to the Trustee an Opinion of Counsel in the United States
acceptable to the Trustee confirming that (A) the Issuers have received from, or
there has been published by, the Internal Revenue Service a ruling or (B) since
the date of this Indenture, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based thereon such
Opinion of Counsel shall confirm that, the Holders of the outstanding Notes will
not recognize income, gain or loss for federal income tax purposes as a result
of such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.3 hereof, the Issuers
shall have delivered to the Trustee an Opinion of Counsel in the United States
acceptable to the Trustee confirming that the Holders of the outstanding Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit) or insofar
as Sections 6.1(h) or 6.1(i) hereof are concerned, at any time in the period
ending on the 91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, any material agreement
or instrument (other than this Indenture) to which the Issuers or any of their
Subsidiaries is a party or by which the Issuers or any of their Restricted
Subsidiaries are bound;
(f) the Issuers shall have delivered to the Trustee an Opinion of
Counsel (subject to customary qualifications and assumptions) to the effect that
on the 91st day following the deposit, the trust funds will not be subject to
the effect of any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally;
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(g) the Issuers shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Issuers with the intent
of preferring the Holders of Notes over any other creditors of the Issuers or
with the intent of defeating, hindering, delaying or defrauding creditors of the
Issuers or others;
(h) the Issuers shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with; and
(i) the Trustee shall have received such other documents, assurances
and Opinion of Counsel as the Trustee shall have reasonably required.
SECTION 8.5 DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD
IN TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.6 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.5, the
"Trustee") pursuant to Section 8.4 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including an Issuer acting as Paying Agent), to the
Holders of such Notes of all sums due and to become due thereon in respect of
principal, premium, if any, and interest, but such money need not be segregated
from other funds except to the extent required by law.
The Issuers and the Guarantors jointly and severally agree to pay and
indemnify the Trustee against any tax, fee or other charge imposed on or
assessed against the cash or non-callable Government Securities deposited
pursuant to Section 8.4 hereof or the principal and interest received in respect
thereof other than any such tax, fee or other charge which by law is for the
account of the Holders of the outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Issuers from time to time upon the request
of the Issuers any money or non-callable Government Securities held by it as
provided in Section 8.4 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 8.4(a) hereof), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
SECTION 8.6 REPAYMENT TO ISSUERS.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Issuers, in trust for the payment of the principal of, premium, if any,
Liquidated Damages, if any, or interest on any Note and remaining unclaimed for
two years after such principal, and premium, if any, Liquidated Damages, if any,
or interest has become due and payable shall be paid to the Issuers on their
request or (if then held by the Issuers) shall
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be discharged from such trust; and the Holder of such Note shall thereafter, as
a secured creditor, look only to the Issuers for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Issuers as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Issuers cause to be
published once, in The New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
will be repaid to the Issuers.
SECTION 8.7 REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States
dollars or noncallable Government Securities in accordance with Section 8.2 or
8.3 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Issuers' obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.2 or 8.3 hereof until such time as the Trustee or Paying Agent is
permitted by such court or governmental authority to apply all such money in
accordance with Section 8.2 or 8.3 hereof, as the case may be; provided,
however, that, if the Issuers make any payment of principal of, premium, if any,
Liquidated Damages, if any, or interest on any Note following the reinstatement
of their obligations, the Issuers shall be subrogated to the rights of the
Holders of such Notes to receive such payment from the money held by the Trustee
or Paying Agent.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.1 WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.2 of this Indenture, the Issuers, the
Guarantors and the Trustee may amend or supplement this Indenture, the
Guarantees or the Notes without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes or to alter the provisions of Article 2 hereof (including the
related definitions) in a manner that does not materially adversely affect any
Holder;
(c) to provide for the assumption of the Issuers' obligations to the
Holders of the Notes by a successor to the Company pursuant to Article 5 hereof;
(d) to add additional guarantees with respect to the Notes, including
any new Note Guarantees;
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(e) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights hereunder of any Holder of the Note; or
(f) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA.
Upon the request of the Issuers accompanied by a resolution of their
respective Board of Managers or Board of Directors, as the case may be,
authorizing the execution of any such amended or supplemental Indenture, and
upon receipt by the Trustee of the documents described in Section 7.2 hereof,
the Trustee shall join with the Issuers in the execution of any amended or
supplemental Indenture authorized or permitted by the terms of this Indenture
and to make any further appropriate agreements and stipulations that may be
therein contained, but the Trustee shall not be obligated to enter into such
amended or supplemental Indenture that affects its own rights, duties or
immunities under this Indenture or otherwise.
SECTION 9.2 WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.2, the Issuers and the
Trustee may amend or supplement this Indenture (including Sections 3.9, 4.10 and
4.15 hereof) and the Notes and the Guarantees may be amended or supplemented
with the consent of the Holders of at least a majority in principal amount of
the Notes then outstanding voting as a single class (including consents obtained
in connection with a tender offer or exchange offer for, or purchase of, the
Notes), and, subject to Sections 6.4 and 6.7 hereof, any existing Default or
Event of Default (other than a Default or Event of Default in the payment of the
principal of, premium, if any, Liquidated Damages, if any, or interest on the
Notes, except a payment default resulting from an acceleration that has been
rescinded) or compliance with any provision of this Indenture, the Notes or the
Guarantees may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Notes voting as a single class
(including consents obtained in connection with a tender offer or exchange offer
for, or purchase of, the Notes). Without the consent of at least 75% in
principal amount of the Notes then outstanding (including consents obtained in
connection with a tender offer or exchange offer for, or purchase of, such
Notes), no waiver or amendment to this Indenture may make any change in the
provisions of Sections 3.9, 4.10 or 4.15 hereof that adversely affects the
rights of any Holder of Notes. Section 2.8 hereof shall determine which Notes
are considered to be "outstanding" for purposes of this Section 9.2.
Upon the request of the Issuers accompanied by a resolution of their
respective Board of Managers or Board of Directors, as the case may be,
authorizing the execution of any such amended or supplemental Indenture, and
upon receipt by the Trustee of evidence satisfactory to the Trustee of the
consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of
the documents described in Section 7.2 hereof, the Trustee shall join with the
Issuers in the execution of such amended or supplemental Indenture unless such
amended or supplemental Indenture directly affects the Trustee's own rights,
duties or
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immunities under this Indenture or otherwise, in which case the Trustee may in
its discretion, but shall not be obligated to, enter into such amended or
supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes
under this Section 9.2 to approve the particular form of any proposed amendment
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Issuers shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Issuers to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.4 and 6.7 hereof, the Holders of a
majority in aggregate principal amount of the Notes then outstanding voting as a
single class may waive compliance in a particular instance by the Issuers with
any provision of this Indenture or the Notes. However, without the consent of
each Holder affected, an amendment or waiver under this Section 9.2 may not
(with respect to any Notes held by a non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent
to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note
or alter or waive any of the provisions with respect to the redemption of the
Notes except as provided above with respect to Sections 3.9, 4.10 and 4.15
hereof;
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest or Liquidated Damages, if any, on the Notes
(except a rescission of acceleration of the Notes by the Holders of at least a
majority in aggregate principal amount of the then outstanding Notes and a
waiver of the payment default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive payments
of principal of or premium, if any, or interest or Liquidated Damages, if any,
on the Notes;
(g) waive a redemption payment with respect to any Note (other than a
payment required by one of the covenants described in Sections 4.10 and 4.15);
or
(h) make any change in the foregoing amendment and waiver provisions.
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SECTION 9.3 COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes shall be
set forth in an amended or supplemental Indenture that complies with the TIA as
then in effect.
SECTION 9.4 REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
SECTION 9.5 NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Issuers in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.6 TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article Nine if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Issuers may not sign an amendment or supplemental Indenture until the Board
of Managers approves it. In executing any amended or supplemental indenture,
the Trustee shall be entitled to receive and (subject to Section 7.1 hereof)
shall be fully protected in relying upon, in addition to the documents required
by Section 13.4 hereof, an Officer's Certificate and an Opinion of Counsel
stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture.
ARTICLE 10.
SUBORDINATION
SECTION 10.1 AGREEMENT TO SUBORDINATE.
The Issuers agree, and each Holder by accepting a Note agrees, that
the Indebtedness evidenced by the Notes is subordinated in right of payment, to
the extent and in
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the manner provided in this Article 10, to the prior payment in full, in cash or
Cash Equivalents, of all Senior Debt (whether outstanding on the date hereof or
hereafter created, incurred, assumed or guaranteed), and that the subordination
is for the benefit of the holders of Senior Debt.
SECTION 10.2 CERTAIN DEFINITIONS.
"Designated Senior Debt" means, (i) any Indebtedness outstanding under
the Senior Credit Facility and (ii) and any other Senior Debt permitted
hereunder the principal amount of which is $25.0 million or more and that has
been designated by the Issuers as "Designated Senior Debt."
"Permitted Junior Securities" means Equity Interests in or debt
securities of any Issuer or any Guarantor that are issued pursuant to a plan of
reorganization of such Issuer or such Guarantor and are subordinated to all
Senior Debt (and any debt securities issued in exchange for Senior Debt) to
substantially the same extent as, or to a greater extent than, the Notes are
subordinated to Senior Debt pursuant to Article 10 of the Indenture so long as
(i) the effect of the issuance of such Equity Interests or debt securities is
not to cause the Notes (or relevant Note Guarantee) to be treated as part of the
same class of claims or any class of claims pari passu with, or senior to, such
Senior Debt pursuant to such plan of reorganization and (ii) the rights of the
holders of such Senior Debt are not altered or impaired without their consent.
"Representative" means the indenture trustee or other trustee, agent
or representative for any Senior Debt.
"Senior Debt" means (i) all Indebtedness outstanding under Senior
Credit Facilities and all Hedging Obligations with respect thereto, (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 Notes and the Note Guarantees and (iii) all Obligations of the
Company and any Note Guarantor with respect to the foregoing. Notwithstanding
anything to the contrary in the foregoing, Senior Debt will not include (w) any
liability for federal, state, local or other taxes owed or owing by the Issuers,
(x) any Indebtedness of the Company or any Guarantor to any of their
Subsidiaries or other Affiliates (other than Indebtedness of the Company or any
Note Guarantor to Sankaty Partners representing Sankaty Partners' participation
in any one or more of the Senior Credit Facilities where Sankaty Partners is one
of the institutional lenders to such Senior Credit Facilities), (y) any trade
payables or (z) any Indebtedness that is incurred in violation of the
restrictions described in Section 4.9 hereof; provided that Indebtedness under
Senior Credit Facilities will be Senior Debt if the holders of such Senior Debt
shall have received a written certificate from an officer of the Company to the
effect that the incurrence of such Indebtedness does not (or in the case of up
$75.0 million of revolving credit Indebtedness available to be borrowed under
the Senior Credit Facility after the date of the initial borrowing thereunder,
that the incurrence of such entire committed amount would not) violate this
Indenture.
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A distribution may consist of cash, securities or other property, by
set-off or otherwise.
SECTION 10.3 LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any distribution to creditors of the Issuers in a liquidation or
dissolution of any Issuer or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to such Issuer or its property, in
an assignment for the benefit of creditors or any marshalling of such Issuer's
assets and liabilities:
(1) holders of Senior Debt shall be entitled to receive payment in
full in cash of all Obligations due in respect of such Senior Debt (including
interest after the commencement of any such proceeding at the rate specified in
the applicable Senior Debt, whether or not such claim is allowed under
applicable law) before Holders of the Notes shall be entitled to receive any
payment with respect to the Notes (except that Holders may receive and retain
(i) Permitted Junior Securities and (ii) payments made from any defeasance trust
created pursuant to Section 8.1 hereof); and
(2) until all Obligations with respect to Senior Debt (as provided in
subsection (1) above) are paid in full, any distribution to which Holders would
be entitled but for this Article 10 shall be made to holders of Senior Debt
(except that Holders of Notes may receive and retain (i) Permitted Junior
Securities and (ii) payments made from any defeasance trust created pursuant to
Section 8.1 hereof), as their interests may appear.
SECTION 10.4 DEFAULT ON DESIGNATED SENIOR DEBT.
The Issuers may not make any payment or distribution to the Trustee or
any Holder in respect of Obligations with respect to the Notes and may not
acquire from the Trustee or any Holder any Notes for cash or property (other
than (i) Permitted Junior Securities and (ii) payments made from any defeasance
trust created pursuant to Section 8.1 hereof) until all principal and other
Obligations with respect to the Senior Debt have been paid in full if:
(i) a default in the payment of any principal of, premium, if any,
or interest with respect to Designated Senior Debt occurs and is continuing
beyond any applicable grace period in the agreement, indenture or other
document governing such Designated Senior Debt; or
(ii) a default, other than a payment default defined in (i), on
Designated Senior Debt occurs and is continuing that then permits holders
of the Designated Senior Debt as to which such default relates to
accelerate its maturity and the Trustee receives a notice of the default (a
"Payment Blockage Notice") from a Representative of the holders of any
Designated Senior Debt. If the Trustee receives any such Payment Blockage
Notice, no subsequent Payment Blockage Notice shall be effective for
purposes of this Section unless and until at least 360 days shall have
elapsed since the commencement of the effectiveness of the immediately
prior Payment Blockage
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Notice. No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be, or be
made, the basis for a subsequent Payment Blockage Notice unless such
default shall have been cured or waived for a period of at least 180 days.
The Issuers may and shall resume payments on and distributions in
respect of the Notes and may acquire them upon the earlier of:
(1) in the case of a default referred to in Section 10.4(i) hereof,
the date upon which such default is cured or waived or has ceased to exist or
such Designated Senior Debt has been discharged or repaid in full in cash, or
(2) in the case of a default referred to in Section 10.4(ii) hereof,
the earlier of the date on which such default is cured or waived or 179 days
after the date on which the applicable Payment Blockage Notice is received or
has ceased to exist or such Designated Senior Debt has been discharged or repaid
in full in cash, unless the maturity of any Designated Senior Debt has been
accelerated,
if this Article 10 otherwise permits the payment, distribution or acquisition at
the time of such payment or acquisition.
SECTION 10.5 ACCELERATION OF SECURITIES.
If payment of the Securities is accelerated because of an Event of
Default, the Issuers shall promptly notify holders of Senior Debt of the
acceleration.
SECTION 10.6 WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee or any Holder receives any payment of
any Obligations with respect to the Notes at a time when the Trustee or such
Holder, as applicable, has actual knowledge that such payment is prohibited by
Section 10.4 hereof, such payment shall be held by the Trustee or such Holder,
in trust for the benefit of, and shall be paid forthwith over and delivered,
upon written request, to, the holders of Senior Debt as their interests may
appear or their Representative under the indenture or other agreement (if any)
pursuant to which Senior Debt may have been issued, as their respective
interests may appear, for application to the payment of all Obligations with
respect to Senior Debt remaining unpaid to the extent necessary to pay such
Obligations in full in accordance with their terms, after giving effect to any
concurrent payment or distribution to or for the holders of Senior Debt.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically set
forth in this Article 10, and no implied covenants or obligations with respect
to the holders of Senior Debt shall be read into this Indenture against the
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt, and shall not be liable to any such holders if the
Trustee shall pay over or distribute to or on behalf of Holders or the Company
or any other
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Person money or assets to which any holders of Senior Debt shall be entitled by
virtue of this Article 10, except if such payment is made as a result of the
willful misconduct or negligence of the Trustee.
SECTION 10.7 NOTICE BY ISSUERS.
The Issuers shall promptly notify in writing the Trustee and the
Paying Agent of any facts known to the Issuers that would cause a payment of any
Obligations with respect to the Notes to violate this Article 10, but failure to
give such notice shall not affect the subordination of the Notes to the Senior
Debt as provided in this Article 10.
SECTION 10.8 SUBROGATION.
After all Senior Debt is paid in full and until the Notes are paid in
full, Holders of Notes shall be subrogated (equally and ratably with all other
Indebtedness pari passu with the Notes) to the rights of holders of Senior Debt
to receive distributions applicable to Senior Debt to the extent that
distributions otherwise payable to the Holders of Notes have been applied to the
payment of Senior Debt. A distribution made under this Article 10 to holders of
Senior Debt that otherwise would have been made to Holders of Notes is not, as
between the Issuers and Holders, a payment by the Issuers on the Notes.
SECTION 10.9 RELATIVE RIGHTS.
This Article 10 defines the relative rights of Holders of Notes and
holders of Senior Debt. Nothing in this Indenture shall:
(1) impair, as between the Issuers and Holders of Notes, the
obligation of the Issuers, which is absolute and unconditional, to pay principal
of and interest on the Notes in accordance with their terms;
(2) affect the relative rights of Holders of Notes and creditors of
the Issuers other than their rights in relation to holders of Senior Debt; or
(3) prevent the Trustee or any Holder of Notes from exercising its
available remedies upon a Default or Event of Default, subject to the rights of
holders and owners of Senior Debt to receive distributions and payments
otherwise payable to Holders of Notes.
If the Issuers fail because of this Article 10 to pay principal of or
interest on a Note on the due date, the failure is still a Default or Event of
Default.
SECTION 10.10 SUBORDINATION MAY NOT BE IMPAIRED BY ISSUERS OR
GUARANTORS.
No right of any holder of Senior Debt to enforce the subordination of
the Indebtedness evidenced by the Notes or the related Guarantee shall be
impaired by any act or
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failure to act by the Issuers, any Guarantor or any Holder or by the failure of
the Issuers, any Guarantor or any Holder to comply with this Indenture.
SECTION 10.11 DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of the Issuers referred to
in this Article 10, the Trustee and the Holders of Notes shall be entitled to
rely upon any order or decree made by any court of competent jurisdiction or
upon any certificate of such Representative or of the liquidating trustee or
agent or other Person making any distribution to the Trustee or to the Holders
of Notes for the purpose of ascertaining the Persons entitled to participate in
such distribution, the holders of the Senior Debt and other Indebtedness of the
Issuers, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article 10.
SECTION 10.12 ARTICLE 10 NOT TO PREVENT EVENTS OF DEFAULT OR LIMIT
RIGHT TO ACCELERATE.
The failure to make a payment in respect of the Notes, whether
directly or pursuant to any Guarantee, by reason of any provision in this
Article 10 shall not be construed as preventing the occurrence of a Default or
Event of Default. Nothing in this Article 10 shall have any effect on the right
of the Holders or the Trustee to accelerate the maturity of the Notes or to make
a claim for payment under any Guarantee.
SECTION 10.13 RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Notes to violate this Article 10. Only the Issuers or a
Representative may give the notice. Nothing in this Article 10 shall impair the
claims of, or payments to, the Trustee under or pursuant to Section 7.7 hereof.
The Trustee in its individual or any other capacity may hold Senior
Debt with the same rights it would have if it were not Trustee. Any Agent may
do the same with like rights.
SECTION 10.14 AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of Notes, by the Holder's acceptance thereof, authorizes
and directs the Trustee on such Holder's behalf to take such action as may be
necessary or
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appropriate to effectuate the subordination as provided in this Article 10, and
appoints the Trustee to act as such Holder's attorney-in-fact for any and all
such purposes. If the Trustee does not file a proper proof of claim or proof of
debt in the form required in any proceeding referred to in Section 6.9 hereof at
least 30 days before the expiration of the time to file such claim, the
Representatives are hereby authorized to file an appropriate claim for and on
behalf of the Holders of the Notes.
SECTION 10.15 AMENDMENTS.
The provisions of this Article 10 shall not be amended or modified
without the written consent of the Holders of at least 75% in aggregate
principal amount of the Notes then outstanding if such amendment would adversely
affect the rights of Holders of Notes.
SECTION 10.16 TRUSTEE'S COMPENSATION NOT PREJUDICED.
Nothing in this Article 10 shall apply to amounts due to the Trustee
pursuant to other sections in this Indenture.
ARTICLE 11.
GUARANTEE
SECTION 11.1 UNCONDITIONAL GUARANTEE.
Each Guarantor hereby unconditionally, jointly and severally,
guarantees to each Holder of a Note authenticated by the Trustee and to the
Trustee and its successors and assigns that: the principal of, interest and
Liquidated Damages, if any, on the Notes will be promptly paid in full when due,
subject to any applicable grace period, whether at maturity, by acceleration or
otherwise, and interest on the overdue principal and interest on any overdue
interest on the Notes and all other obligations of the Issuers to the Holders or
the Trustee hereunder or under the Notes will be promptly paid in full or
performed, all in accordance with the terms hereof and thereof; subject,
however, to the limitations set forth in Section 11.3. Each Guarantor hereby
agrees that its obligations hereunder shall be unconditional, irrespective of
the validity, regularity or enforceability of the Notes or this Indenture, the
absence of any action to enforce the same, any waiver or consent by any Holder
of the Notes with respect to any provisions hereof or thereof, the recovery of
any judgment against the Issuers, any action to enforce the same or any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense of a Guarantor. Each Guarantor hereby waives diligence, presentment,
demand of payment, filing of claims with a court in the event of insolvency or
bankruptcy of an Issuer, any right to require a proceeding first against an
Issuer, protest, notice and all demands whatsoever and covenants that the Parent
Guarantee or the Note Guarantee, as the case may be, will not be discharged
except by complete performance of the obligations contained in the Notes and
this Indenture. If any Holder or the Trustee is required by any court or
otherwise to return to an Issuer or any Guarantor, or any custodian, trustee,
liquidator or other similar official acting in relation to an Issuer or any
Guarantor, any amount paid by an Issuer or any Guarantor to the Trustee or
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such Holder, the Parent Guarantee and each Note Guarantee, to the extent
theretofore discharged, shall be reinstated in full force and effect. Each
Guarantor further agrees that, as between each Guarantor, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article 6 for
the purpose of the Parent Guarantee and each Note Guarantee, notwithstanding any
stay, injunction or other prohibition preventing such acceleration in respect of
the obligations guaranteed hereby, and (y) in the event of any acceleration of
such obligations as provided in Article 6, such obligations (whether or not due
and payable) shall become due and payable by each Guarantor for the purpose of
the Parent Guarantee and each Note Guarantee.
SECTION 11.2 SEVERABILITY.
In case any provision of this Article 11 shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 11.3 LIMITATION OF GUARANTOR'S LIABILITY.
Each Guarantor, and by its acceptance hereof each Holder and the
Trustee, hereby confirms that it is the intention of all such parties that the
Parent Guarantee and each Note Guarantee not constitute a fraudulent transfer or
conveyance for purposes of Title 11 of the United States Code, as amended, the
Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any
similar U.S. Federal or state or other applicable law. To effectuate the
foregoing intention, the Holders and each Guarantor hereby irrevocably agree
that the obligations of each Guarantor under the Parent Guarantee and each Note
Guarantee shall be limited to the maximum amount as will, after giving effect to
all other contingent and fixed liabilities of such Guarantor and after giving
effect to any collections from or payments made by or on behalf of any other
Guarantor in respect of the obligations of such other Guarantor pursuant to
Section 11.4, result in the obligations of such Guarantor not constituting such
a fraudulent transfer or conveyance.
SECTION 11.4 CONTRIBUTION.
In order to provide for just and equitable contribution among the
Guarantors, the Guarantors agree, inter se, that in the event any payment or
distribution is made by any Guarantor (a "Funding Guarantor") under the Parent
Guarantee or a Note Guarantee, as the case may be, such Funding Guarantor shall
be entitled to a contribution from all other Guarantors in a pro rata amount,
based on the net assets of each Guarantor (including the Funding Guarantor),
determined in accordance with GAAP, subject to Section 11.3, for all payments,
damages and expenses incurred by such Funding Guarantor in discharging the
Issuers' obligations with respect to the Notes or any other Guarantor's
obligations under the Parent Guarantee or a Note Guarantee, as the case may be.
SECTION 11.5 EXECUTION OF GUARANTEE.
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To further evidence the Parent Guarantee and each Note Guarantee to
the Holders, each of the Guarantors hereby agrees to execute a guarantee to be
endorsed on each Note ordered to be authenticated and delivered by the Trustee.
Each Guarantor hereby agrees that its guarantee set forth in Section 11.1 shall
remain in full force and effect notwithstanding any failure to endorse on each
Note a guarantee. Each such guarantee shall be signed on behalf of each
Guarantor by its Chairman of the Board, its President or one of its Vice
Presidents prior to the authentication of the Note on which it is endorsed, and
the delivery of such Note by the Trustee, after the authentication thereof
hereunder, shall constitute due delivery of such guarantee on behalf of such
Guarantor. Such signature upon the guarantee may be a manual or facsimile
signature of such officer and may be imprinted or otherwise reproduced on the
guarantee, and in case such officer who shall have signed the guarantee shall
cease to be such officer before the Note on which such guarantee is endorsed
shall have been authenticated and delivered by the Trustee or disposed of by the
Issuers, such Note nevertheless may be authenticated and delivered or disposed
of as though the Person who signed the guarantee had not ceased to be such
officer of such Guarantor.
SECTION 11.6 ADDITIONAL NOTE GUARANTEES.
If the Company or any of its Restricted Subsidiaries shall acquire or
create another Domestic Subsidiary after the date of this Indenture, or if any
Subsidiary becomes a Domestic Subsidiary after the date of this Indenture, then
such newly acquired or created Subsidiary shall execute a Note Guarantee and
deliver an Opinion of Counsel, in accordance with the terms hereof; provided,
that all Subsidiaries that have properly been designated as Unrestricted
Subsidiaries in accordance herewith shall not be subject to the requirements of
this covenant for so long as they continue to constitute Unrestricted
Subsidiaries.
SECTION 11.7 SUBORDINATION OF SUBROGATION AND OTHER RIGHTS.
Each Guarantor hereby agrees that any claim against an Issuer that
arises from the payment, performance or enforcement of such Guarantor's
obligations under the Parent Guarantee or a Note Guarantee or this Indenture,
including, without limitation, any right of subrogation, shall be subject and
subordinate to, and no payment with respect to any such claim of such Guarantor
shall be made before, the payment in full in cash of all outstanding Notes in
accordance with the provisions provided therefor in this Indenture.
ARTICLE 12.
SUBORDINATION OF GUARANTEE
SECTION 12.1 GUARANTEE OBLIGATIONS SUBORDINATED TO SENIOR DEBT.
Each Guarantor covenants and agrees, and the Trustee and each Holder
of the Notes by his acceptance thereof likewise covenants and agrees, that the
Parent Guarantee and each Note Guarantee shall be issued subject to the
provisions of this Article 12; and each person holding any Note, whether upon
original issue or upon transfer, assignment or exchange thereof, accepts and
agrees that all payments of the principal of and interest on the
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Notes pursuant to the Parent Guarantee and each Note Guarantee made by or on
behalf of any Guarantor shall, to the extent and in the manner set forth in this
Article 12, be subordinated and junior in right of payment to the prior payment
in full in cash or Cash Equivalents of all amounts payable under Senior Debt of
such Guarantor.
SECTION 12.2 NO PAYMENT IN CERTAIN CIRCUMSTANCES; PAYMENT OVER OF
PROCEEDS UPON DISSOLUTION, ETC.
(a) Upon any payment or distribution of assets of a Guarantor of any
kind or character, whether in cash, property or securities, to creditors upon
any liquidation, dissolution, winding up, reorganization, assignment for the
benefit of creditors or marshaling of assets of a Guarantor or in a bankruptcy,
reorganization, insolvency, receivership or other similar proceeding relating to
a Guarantor or its property, whether voluntary or involuntary, all Obligations
due or to become due upon all Senior Debt shall first be paid in full in cash or
Cash Equivalents, or such payment duly provided for to the satisfaction of the
holders of Senior Debt, before any payment or distribution of any kind or
character is made by or on behalf of such Guarantor on account of any
Obligations on the Parent Guarantee or the Note Guarantee of such Guarantor, as
the case may be, or for the acquisition of any of the Notes for cash or property
or otherwise (except that holders of the Notes may receive Permitted Junior
Securities and payments made from any defeasance trust created pursuant to
Section 8.1 hereof). Before any payment may be made by, or on behalf of, any
Guarantor of the principal of, premium, if any, Liquidated Damages, if any, or
interest on the Notes upon any such dissolution or winding-up or total
liquidation or reorganization, any payment or distribution of assets or
securities of such Guarantor of any kind or character, whether in cash, property
or securities, to which the Holders of the Notes or the Trustee on their behalf
would be entitled, but for the subordination provisions of this Indenture, shall
be made by such Guarantor or by any receiver, trustee in bankruptcy, liquidation
trustee, agent or other Person making such payment or distribution, directly to
the holders of the Senior Debt of such Guarantor (pro rata to such holders on
the basis of the respective amounts of such Senior Debt held by such holders) or
their representatives or to the trustee or trustees or agent or agents under any
agreement or indenture pursuant to which any of such Senior Debt may have been
issued, as their respective interests may appear, to the extent necessary to pay
all such Senior Debt in full in cash after giving effect to any prior or
concurrent payment, distribution or provision therefor to or for the holders of
such Senior Debt.
(b) In the event that, notwithstanding the foregoing provision
prohibiting such payment or distribution, any payment or distribution of assets
or securities of any Guarantor of any kind or character, whether in cash,
property or securities, shall be received by the Trustee or any Holder of Notes
at a time when such payment or distribution is prohibited by Section 12.2(a) and
before all obligations in respect of the Senior Debt of such Guarantor are paid
in full in cash or Cash Equivalents, such payment or distribution shall be
received and held in trust for the benefit of, and shall be paid over or
delivered to, the holders of such Senior Debt (pro rata to such holders on the
basis of the respective amounts of such Senior Debt held by such holders) or
their respective representatives, or to the trustee or trustees or agent or
agents under any indenture pursuant to which any of such Senior Debt may have
been issued, as their respective interests may appear, for application
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to the payment of such Senior Debt remaining unpaid until all such Senior Debt
has been paid in full in cash or Cash Equivalents after giving effect to any
prior or concurrent payment, distribution or provision therefor to or for the
holders of such Senior Debt.
The consolidation of any Guarantor with, or the merger of any
Guarantor with or into, another corporation or the liquidation or dissolution of
any Guarantor following the conveyance or transfer of its property as an
entirety, or substantially as an entirety, to another corporation upon the terms
and conditions provided in Article 5 shall not be deemed a dissolution, winding-
up, liquidation or reorganization for the purposes of this Section 12.2 if such
other corporation shall, as a part of such consolidation, merger, conveyance or
transfer, comply with the conditions stated in Article 5.
If any default occurs and is continuing in the payment when due,
whether at maturity, upon any redemption, by acceleration or otherwise, of any
principal of, interest on, unpaid drawings for letters of credit issued in
respect of, or regularly accruing fees with respect to, any Senior Debt, no
payment of any kind or character shall be made by or on behalf of a Guarantor or
any other Person on its behalf with respect to any Obligations on the Parent
Guarantee or the Note Guarantee of such Guarantor or to acquire any of the Notes
for cash or property or otherwise (except that holders of the Notes may receive
payments made from any defeasance trust created pursuant to Section 8.1 hereof).
In addition, if any other event of default occurs and is continuing
with respect to any Designated Senior Debt, as such event of default is defined
in the instrument creating or evidencing such Designated Senior Debt, permitting
the holders of such Designated Senior Debt then outstanding to accelerate the
maturity thereof and if the Representative for the respective issue of
Designated Senior Debt gives a Payment Blockage Notice to the Trustee, then,
unless and until all events of default have been cured or waived or have ceased
to exist or the Trustee receives notice from the Representative for the
respective issue of Designated Senior Debt terminating the Payment Blockage
Period, during the Payment Blockage Period, neither Guarantor, nor any other
Person on Guarantor's behalf, shall (x) make any payment of any kind or
character with respect to any Obligations on the Parent Guarantee or the Note
Guarantee of such Guarantor or (y) acquire any of the Notes for cash or property
or otherwise (except that holders of the Notes may receive payments made from
any defeasance trust created pursuant to Section 8.1 hereof).
Notwithstanding anything herein to the contrary, in no event will a
Payment Blockage Period extend beyond 179 days from the date the Payment
Blockage Notice is delivered and only one such Payment Blockage Period may be
commenced within any 360 consecutive days. No event of default which existed or
was continuing on the date of the commencement of any Payment Blockage Period
with respect to the Designated Senior Debt shall be, or be made, the basis for
commencement of a second Payment Blockage Period by the Representative of such
Designated Senior Debt whether or not within a period of 360 consecutive days,
unless such event of default shall have been cured or waived for a period of not
less than 180 consecutive days (it being acknowledged that any subsequent
action, or any breach of any financial covenants for a period commencing after
the date of commencement of such Payment Blockage Period that, in either case,
would give rise to an
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event of default pursuant to any provisions under which an event of default
previously existed or was continuing shall constitute a new event of default for
this purpose).
SECTION 12.3 SUBROGATION.
Upon the payment in full in cash or Cash Equivalents of all Senior
Debt of a Guarantor, or provision for payment, the Holders of the Notes shall be
subrogated to the rights of the holders of such Senior Debt to receive payments
or distributions of cash, property or securities of such Guarantor made on such
Senior Debt until the principal of and interest or Liquidated Damages, if any,
on the Notes shall be paid in full in cash or Cash Equivalents; and, for the
purposes of such subrogation, no payments or distributions to the holders of
such Senior Debt of any cash, property or securities to which the Holders of the
Notes or the Trustee on their behalf would be entitled except for the provisions
of this Article 12, and no payment over pursuant to the provisions of this
Article 12 to the holders of such Senior Debt by Holders of the Notes or the
Trustee on their behalf shall, as between such Guarantor, its creditors other
than holders of such Senior Debt, and the Holders of the Notes, be deemed to be
a payment by such Guarantor to or on account of such Senior Debt. It is
understood that the provisions of this Article 12 are and are intended solely
for the purpose of defining the relative rights of the Holders of the Notes, on
the one hand, and the holders of Senior Debt of each Guarantor, on the other
hand.
If any payment or distribution to which the Holders of the Notes would
otherwise have been entitled but for the provisions of this Article 12 shall
have been applied, pursuant to the provisions of this Article 12, to the payment
of all amounts payable under Senior Debt of a Guarantor, then and in such case,
the Holders of the Notes shall be entitled to receive from the holders of such
Senior Debt any payments or distributions received by such holders of Senior
Debt in excess of the amounts required to make payment in full in cash of such
Senior Debt.
SECTION 12.4 OBLIGATIONS OF GUARANTORS UNCONDITIONAL.
Subject to Sections 11.3 and 10.4, nothing contained in this Article
12 or elsewhere in this Indenture or in the Notes or the Parent Guarantee or the
Note Guarantees is intended to or shall impair as among each of the Guarantors
and the Holders of the Notes, the obligation of each Guarantor, which is
absolute and unconditional, to pay to the Holders of the Notes the principal of
and interest or Liquidated Damages, if any, on the Notes as and when the same
shall become due and payable in accordance with the terms of the Parent
Guarantee or the Note Guarantee of such Guarantor, or is intended to or shall
affect the relative rights of the Holders of the Notes and creditors of any
Guarantor other than the holders of Senior Debt of such Guarantor, nor shall
anything herein or therein prevent the Holder of any Note or the Trustee on
their behalf from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article 12 of the holders of Senior Debt in respect of cash, property or
securities of any Guarantor received upon the exercise of any such remedy.
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Without limiting the generality of the foregoing, nothing contained in
this Article 12 shall restrict the right of the Trustee or the Holders of Notes
to take any action to declare the Notes to be due and payable prior to their
stated maturity pursuant to Section 6.1 or to pursue any rights or remedies
hereunder; provided, however, that all Senior Debt of any Guarantor then due and
payable shall first be paid in full in cash or Cash Equivalents before the
Holders of the Notes or the Trustee are entitled to receive any direct or
indirect payment from such Guarantor of principal of or interest or Liquidated
Damages, if any, on the Notes pursuant to the Parent Guarantee or the Note
Guarantee, as the case may be.
SECTION 12.5 NOTICE TO TRUSTEE.
The Issuers shall give prompt written notice to the Trustee of any
fact known to the Issuers which would prohibit the making of any payment to or
by the Trustee in respect of the Notes pursuant to the provisions of this
Article 12. The Trustee shall not be charged with knowledge of the existence of
any event of default with respect to any Senior Debt of a Guarantor or of any
other facts which would prohibit the making of any payment to or by the Trustee
unless and until the Trustee shall have received notice in writing at its
Corporate Trust Office to that effect signed by an Officer of an Issuer, or by a
holder of Senior Debt of a Guarantor or trustee or agent therefor; and prior to
the receipt of any such written notice, the Trustee shall, subject to Article 7,
be entitled to assume that no such facts exist. Nothing contained in this
Section 12.5 shall limit the right of the holders of Senior Debt of a Guarantor
to recover payments as contemplated by Section 12.3. The Trustee shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself or itself to be a holder of any Senior Debt of a Guarantor
(or a trustee on behalf of, or other representative of, such holder) to
establish that such notice has been given by a holder of such Senior Debt or a
trustee or representative on behalf of any such holder.
In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any Person as a holder of
Senior Debt of a Guarantor to participate in any payment or distribution
pursuant to this Article 12, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Senior Debt held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and any other facts pertinent to the
rights of such Person under this Article 12, and if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
SECTION 12.6 RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING
AGENT.
Upon any payment or distribution of assets or securities of a
Guarantor referred to in this Article 12, the Trustee and the Holders of the
Notes shall be entitled to rely upon any order or decree made by any court of
competent jurisdiction in which bankruptcy, dissolution, winding-up, liquidation
or reorganization proceedings are pending, or upon a certificate of the
receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, delivered to the Trustee or to the Holders
of the
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Notes for the purpose of ascertaining the persons entitled to participate in
such distribution, the holders of Senior Debt of such Guarantor and other
indebtedness of such Guarantor, the amounts thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article 12.
SECTION 12.7 TRUSTEE'S RELATION TO GUARANTOR SENIOR DEBT.
The Trustee and any Paying Agent shall be enticed to all the rights
set forth in this Article 12 with respect to any Senior Debt of a Guarantor
which may at any time be held by them in their individual or any other capacity
to the same extent as any other holder of Senior Debt of a Guarantor, and
nothing in this Indenture shall deprive the Trustee or any Paying Agent of any
of its rights as such holder.
With respect to the holders of Senior Debt of a Guarantor, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article 12, and no implied covenants or
obligations with respect to the holders of such Senior Debt shall be read into
this Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Debt of a Guarantor. The Trustee shall
not be liable to any such holders if the Trustee shall in good faith mistakenly
pay over or distribute to Holders of Notes or to the Issuers or to any other
person cash, property or securities to which any holders of Guarantor Senior
Debt shall be entitled by virtue of this Article 12 or otherwise.
SECTION 12.8 SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR OMISSIONS
OF THE PARENT, THE GUARANTORS OR HOLDERS OF SENIOR
DEBT.
No right of any present or future holders of any Senior Debt of a
Guarantor to enforce subordination as provided herein shall at any time in any
way be prejudiced or impaired by any act or failure to act on the part of any
Guarantor or by any act or failure to act, in good faith, by any such holder, or
by any noncompliance by any Guarantor with the terms of this Indenture,
regardless of any knowledge thereof which any such holder may have or otherwise
be charged with. The provisions of this Article 12 are intended to be for the
benefit of, and shall be enforceable directly by, the holders of Senior Debt of
a Guarantor.
<PAGE>
100
SECTION 12.8 NOTEHOLDERS AUTHORIZE TRUSTEE TO EFFECTUATE
SUBORDINATION OF GUARANTEE.
Each Holder of Notes by his acceptance of such Notes authorizes and
expressly directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Article 12, and appoints the Trustee his attorney-in-fact for such purposes,
including, in the event of any dissolution, winding-up, total liquidation or
reorganization of any Guarantor (whether in bankruptcy, insolvency,
receivership, reorganization or similar proceedings or upon an assignment for
the benefit of creditors or otherwise) tending towards liquidation of the
business and assets of such Guarantor, the filing of a claim for the unpaid
balance of its or his Notes in the form required in those proceedings.
SECTION 12.10 THIS ARTICLE NOT TO PREVENT EVENTS OF DEFAULT.
The failure to make a payment on account of principal of or interest
on the Notes by reason of any provision of this Article 12 shall not be
construed as preventing the occurrence of an Event of Default.
SECTION 12.11 TRUSTEE'S COMPENSATION NOT PREJUDICED.
Nothing in this Article 12 shall apply to amounts due to the Trustee
pursuant to other sections in this Indenture.
SECTION 12.12 NO WAIVER OF GUARANTEE SUBORDINATION PROVISIONS.
Without in any way limiting the generality of Section 12.8, the
holders of Senior Debt of a Guarantor may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the Notes,
without incurring responsibility to the Holders of the Notes and without
impairing or releasing the subordination provided in this Article 12 or the
obligations hereunder of the Holders of the Notes to the holders of such Senior
Debt, do any one or more of the following: (a) change the manner, place or terms
of payment or extend the time of payment of, or renew or alter, such Senior Debt
or any instrument evidencing the same or any agreement under which such Senior
Debt is outstanding or secured; (b) sell, exchange, release or otherwise deal
with any property pledged, mortgaged or otherwise securing such Senior Debt; (c)
release any Person liable in any manner for the collection of such Senior Debt;
and (d) exercise or refrain from exercising any rights against any Guarantor and
any other Person.
<PAGE>
101
ARTICLE 13.
MISCELLANEOUS
SECTION 13.1 TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA (S) 31 8(c), the imposed duties shall control.
SECTION 13.2 NOTICES.
Any notice or communication by the Issuers, the Guarantors or the
Trustee to the others is duly given if in writing and delivered in Person or
mailed by first class mail (registered or certified, return receipt requested),
telex, telecopier or overnight air courier guaranteeing next day delivery, to
the others' address
If to the Issuers and/or any Guarantor:
Alliance Laundry Systems LLC
Alliance Laundry Corporation
Shepard Street
Ripon, Wisconsin 54971
Telecopier No.: (920) 748-4429
Attention: Chief Financial Officer
With a copy to:
Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, New York 10022
Telecopier No.: (212) 446-4900
Attention: Lance C. Balk, Esq.
If to the Trustee:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Telecopier No.: (212) 852-1626
Attention: Corporate Trust Department
The Issuers, the Guarantors or the Trustee, by notice to the others
may designate additional or different addresses for subsequent notices or
communications.
<PAGE>
102
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA (S) 313(c), to the extent required by the TIA. Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it, except for notices or communications to the Trustee, which shall be
effective only upon actual receipt thereof.
If the Issuers mail a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
SECTION 13.4 COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS
OF NOTES.
Holders may communicate pursuant to TIA (S) 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Issuers,
the Trustee, the Registrar and anyone else shall have the protection of TIA (S)
312(c).
SECTION 13.4 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Issuers to the Trustee to take
any action under this Indenture, the Issuers shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 13.5 hereof) stating that, in the opinion of the signers, all conditions
precedent and covenants, if any, provided for in this Indenture relating to the
proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 13.5 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
SECTION 13.5 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
<PAGE>
103
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA (S) 314(a)(4)) shall comply with the provisions of TIA
(S) 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him or her to
express an informed opinion as to whether or not such covenant or condition has
been satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
SECTION 13.6 RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 13.7 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES
AND SHAREHOLDERS.
No director, officer, employee, incorporator or stockholder of the
Issuers, as such, shall have any liability for any obligations of the Company
under the Notes, the Guarantees, this Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder of
Notes by accepting a Note waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the Notes. Such
waiver may not be effective to waive liabilities under the federal securities
laws and it is the view of the SEC that such a waiver is against public policy.
SECTION 13. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE GUARANTEES WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 13.9 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
<PAGE>
104
This Indenture may not be used to interpret any other indenture, loan
or debt agreement of the Issuers or its Subsidiaries or of any other Person.
Any such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 13.10 SUCCESSORS.
All agreements of the Issuers in this Indenture and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors.
SECTION 13.11 SEVERABILITY.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 13.12 COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 13.13 TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
<PAGE>
105
SIGNATURES
Dated as of May 5, 1998
ALLIANCE LAUNDRY SYSTEMS LLC
By:
-----------------------------
Name:
Title:
ALLIANCE LAUNDRY CORPORATION
By:
-----------------------------
Name:
Title:
ALLIANCE LAUNDRY HOLDINGS LLC
By:
-----------------------------
Name:
Title:
UNITED STATES TRUST COMPANY
OF NEW YORK
By:
-----------------------------
Name:
Title:
<PAGE>
EXHIBIT A-1
(Face of Note)
[Insert the Global Note Legend, if applicable pursuant to the provisions of the
Indenture]
[Insert the Private Placement Legend, if applicable pursuant to the provisions
of the Indenture]
CUSIP/CINS _________
95/8% Senior Subordinated Notes due 2008
No.______ $__________
ALLIANCE LAUNDRY SYSTEMS LLC
ALLIANCE LAUNDRY CORPORATION
promises to pay to__________________________________________________________
or registered assigns,
the principal sum
of_____________________________________________________________________
Dollars on May 1, 2008.
Interest Payment Dates: May 1 and November 1
Record Dates: April 15 and October 15
ALLIANCE LAUNDRY SYSTEMS LLC
ALLIANCE LAUNDRY CORPORATION
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
This is one of the Global
Notes referred to in the
within-mentioned Indenture:
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
By: Dated: May 5, 1998
-------------------------
Name:
Title:
A-1-1
<PAGE>
(Back of Note)
9 5/8% Senior Subordinated Notes due 2008
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. Interest. Alliance Laundry Systems LLC, a Delaware limited
liability company (the "Company"), and Alliance Laundry Corporation, a Delaware
corporation ("ALC" and, together with the Company, the "Issuers") promise to pay
interest on the principal amount of this Note at 9 5/8% per annum from May 5,
1998 until maturity and shall pay the Liquidated Damages, if any, payable
pursuant to Section 5 of the Registration Rights Agreement referred to below.
The Issuers shall pay interest and Liquidated Damages, if any, semi-annually on
May 1 and November 1 of each year, or if any such day is not a Business Day, on
the next succeeding Business Day (each an "Interest Payment Date"). Interest on
the Notes will accrue from the most recent date to which interest has been paid
or, if no interest has been paid, from the date of issuance; provided that if
there is no existing Default in the payment of interest, and if this Note is
authenticated between a record date referred to on the face hereof and the next
succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date; provided, further, that the first Interest
Payment Date shall be November 1, 1998. The Issuers shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue principal and premium, if any, from time to time on demand at a rate
that is 1% per annum in excess of the rate then in effect; they shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages, if
any (without regard to any applicable grace periods) from time to time on demand
at the same rate to the extent lawful. Interest will be computed on the basis of
a 360-day year of twelve 30-day months.
2. Method of Payment. The Issuers will pay interest on the Notes
(except defaulted interest) and Liquidated Damages, if any, to the Persons who
are registered Holders of Notes at the close of business on the April 15 or
October 15 next preceding the Interest Payment Date, even if such Notes are
canceled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture (as herein defined) with
respect to defaulted interest. The Notes will be payable as to principal,
premium and Liquidated Damages, if any, and interest at the office or agency of
the Issuers maintained for such purpose within the City and State of New York,
or, at the option of the Issuers, payment of interest and Liquidated Damages, if
any, may be made by check mailed to the Holders at their addresses set forth in
the register of Holders, and provided that all payments of $1,000 or more
principal, premium, if any, interest and Liquidated Damages, if any, with
respect to Notes the Holders of which have given wire transfer instructions to
the Issuers at least ten business days prior to the applicable payment date will
be required to be made by wire transfer of immediately available funds to the
accounts specified by the Holders thereof. Such payment shall be in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts.
3. Paying Agent and Registrar. Initially, United States Trust
Company of New York, the Trustee under the Indenture, will act as Paying Agent
and Registrar. The Issuers may change any Paying Agent or Registrar without
notice to any Holder. The Issuers, any of their Subsidiaries or any Guarantor
may act in any such capacity.
4. Indenture. The Issuers issued the Notes under an Indenture dated
as of May 5, 1998, as amended or supplemented from time to time ("Indenture"),
among the Issuers, the Parent and the Trustee. The terms of the Notes include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939, as amended (15 U.S. Code (S)(S) 77aaa-
77bbbb). The Notes
A-1-2
<PAGE>
are subject to all such terms, and Holders are referred to the Indenture and
such Act for a statement of such terms. To the extent any provision of this Note
conflicts with the express provisions of the Indenture, the provisions of the
Indenture shall govern and be controlling. The Notes are obligations of the
Issuers limited to $200.0 million in aggregate principal amount.
The payment of principal of, and premium, if any, and interest on, and
other Obligations evidenced by, the Notes is subordinated in right of payment,
to the extent and in the manner provided in the Indenture, to the prior payment
in full of all present and future Senior Debt (as defined in the Indenture) of
the Issuers. Each Holder of this Note, by accepting the same, (i) agrees to
such provisions, (ii) authorizes and directs the Trustee on such Holder's behalf
to take such action as may be necessary or appropriate to effectuate the
subordination as provided in the Indenture and (iii) appoints the Trustee to act
as attorney-in-fact for any and all such purposes.
5. Optional Redemption.
(a) Except as set forth in subparagraph (b) of this Paragraph 5, the
Notes will not be redeemable at the Issuers' option prior to May 1, 2003.
Thereafter, the Notes will be subject to redemption at any time at the option of
the Issuers, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Liquidated Damages thereon
to the applicable redemption date, if redeemed during the twelve-month period
beginning on May 1 of the years indicated below:
Year Redemption Price
---- ----------------
2003...................... 104.813%
2004...................... 103.208%
2005...................... 101.604%
2006 and thereafter....... 100.000%
(b) Notwithstanding the provisions of subparagraph (a) of this
Paragraph 5, at any time prior to May 1, 2001, the Issuers may on any one or
more occasions redeem up to 35% of the aggregate principal amount of Notes
issued under the Indenture at a redemption price of 109.625% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the redemption date, with the net cash proceeds of any Equity
Offerings; provided that at least 65% of the aggregate principal amount of Notes
issued under the Indenture remains outstanding immediately after the occurrence
of such redemption (excluding Notes held by the Issuers and its Subsidiaries);
and provided further that such redemption shall occur within 45 days of the date
of the closing of such Equity Offering.
(c) At any time prior to May 1, 2003, the Notes may also be redeemed,
as a whole but not in part, at the option of the Issuers upon the occurrence of
a Change of Control, upon not less than 30 nor more than 60 days' prior notice
(but in no event may any such redemption occur more than 90 days after the
occurrence of such Change of Control) 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 and Liquidated Damages thereon, if any, to the date of
redemption (the "Redemption Date").
A-1-3
<PAGE>
6. Mandatory Redemption.
Except as set forth in paragraph 7 below, the Issuers shall not be
required to make mandatory redemption or sinking fund payments with respect to
the Notes.
7. Repurchase at Option of Holder.
(a) Upon the occurrence of a Change of Control, the Issuers shall be
required to make an offer (a "Change of Control Offer") to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at
an offer price in cash equal to 101% of the aggregate principal amount thereof
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the
date of purchase (the "Change of Control Payment"). Within 10 days following any
Change of Control, the Issuers shall mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase Notes on the date specified in such notice, which date shall be no
earlier than 30 days and no later than 60 days from the date such notice is
mailed (the "Change of Control Payment Date"), pursuant to the procedures
required by the Indenture and described in such notice.
(b) If the Company or a Restricted Subsidiary consummates any Asset
Sale for which the aggregate amount of Excess Proceeds exceeds $10.0 million,
the Issuers shall commence an offer to all Holders of Notes (an "Asset Sale
Offer") pursuant to Section 3.9 of the Indenture to purchase the maximum
principal amount of Notes that may be purchased out of the Excess Proceeds at an
offer price in cash in an amount equal to 100% of the principal amount thereof
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the
date of purchase, in accordance with the procedures set forth in the Indenture.
To the extent that any Excess Proceeds remain after consummation of an Asset
Sale Offer, the Company may use such Excess Proceeds for any purpose not
otherwise prohibited by the Indenture. If the aggregate principal amount of
Notes tendered into such Asset Sale surrendered by Holders thereof exceeds the
amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on
a pro rata basis. Holders of Notes that are the subject of an offer to purchase
will receive an Asset Sale Offer from the Issuers prior to any related purchase
date and may elect to have such Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes.
8. Notice of Redemption. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date, interest ceases to accrue on Notes
or portions thereof called for redemption.
9. Denominations, Transfer, Exchange. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Issuers may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Issuers need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Issuers
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the next succeeding Interest Payment Date.
10. Persons Deemed Owners. The registered Holder of a Note may be
treated as its owner for all purposes.
A-1-4
<PAGE>
11. Amendment, Supplement and Waiver. Subject to certain exceptions,
the Indenture, the Guarantees or the Notes may be amended or supplemented with
the consent of the Holders of at least a majority in principal amount of the
then outstanding Notes voting as a single class, and any existing default or
compliance with any provision of the Indenture, the Guarantees or the Notes may
be waived with the consent of the Holders of a majority in principal amount of
the then outstanding Notes voting as a single class. Without the consent of any
Holder of a Note, the Indenture, the Guarantees or the Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Issuers' obligations to Holders of the Notes
in case of a merger or consolidation, to add additional guarantees with respect
to the Notes, to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, or to comply with the
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act.
12. Defaults and Remedies.
An "Event of Default" occurs if: (i) the Issuers default in the
payment when due of interest on, or Liquidated Damages, if any, with respect to,
the Notes and such default continues for a period of 30 days, whether or not
such payment is prohibited by the provisions of Article 10 of the Indenture;
(ii) the Issuers default in the payment when due of principal of or premium, if
any, on the Notes, whether or not such payment is prohibited by the provisions
of Article 10 of the Indenture; (iii) the Issuers or any of their Restricted
Subsidiaries fail to comply with any of the provisions of Sections 4.15 or 5.1
of the Indenture; (iv) the Issuers or any of their Restricted Subsidiaries fail
for 30 days after written notice by the Trustee or the Holders of at least 25%
in principal amount of the then outstanding Notes to comply with the provisions
of Sections 4.7, 4.9 or 4.10 of the Indenture; (v) the Issuers, any of their
Restricted Subsidiaries or any Guarantor fails to observe or perform any other
covenant, representation, warranty or other agreement in the Indenture or the
Notes for 60 days after written notice to the Issuers by the Trustee or the
Holders of at least 25% in aggregate principal amount of the Notes then
outstanding; (vi) the Company or any of its Subsidiaries defaults under any
mortgage, indenture or instrument under which there may be issued or by which
there may be secured or evidenced any Indebtedness for money borrowed by the
Company or any of its Subsidiaries (other than a Securitization Entity) (or the
payment of which is guaranteed by the Company or any of its Subsidiaries (other
than a Securitization Entity)), whether such Indebtedness or guarantee now
exists, or is created after the date of the Indenture, which default (a) is
caused by a failure to pay principal of or premium, if any, or interest on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b) results in
the acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated, aggregates $10.0
million or more; (vii) the Company or any of its Subsidiaries fail to pay a
final judgment or final judgments for the payment of money which are entered by
a court or courts of competent jurisdiction against the Company or any of its
Subsidiaries and such judgment or judgments remain undischarged for a period
(during which execution shall not be effectively stayed) of 60 days, provided
that the aggregate of all such undischarged judgments exceeds $10 million
(excluding amounts covered by insurance); (viii) certain events of bankruptcy or
insolvency with respect to the Issuers or any of their Subsidiaries; and (ix)
except as permitted by the Indenture, any Guarantee is held in any judicial
proceeding to be unenforceable or invalid or ceases for any reason to be in full
force and effect or any Guarantor, or any Person acting on behalf of any
Guarantor, denies or disaffirms its obligations under its Guarantee. If any
Event of Default occurs and is continuing, the Trustee or the Holders of at
least 25% in principal amount of the then outstanding Notes may declare all the
Notes to be due and payable. Notwithstanding the foregoing, in the case of an
Event of Default arising from certain events of bankruptcy or insolvency, all
outstanding Notes shall be due and payable without further action
A-1-5
<PAGE>
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 in writing direct the Trustee
in its exercise of any trust or power. The Trustee may withhold from Holders of
the Notes notice of any continuing Default or Event of Default (except a Default
or Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest. The Holders of a
majority in aggregate principal amount of the Notes then outstanding by written
notice to the Trustee may on behalf of the Holders of all of the Notes waive any
existing Default or Event of Default and its consequences under the Indenture
except a continuing Default or Event of Default in the payment of interest on,
or the principal of, the Notes. The Company is required to deliver to the
Trustee annually a statement regarding compliance with the Indenture, and the
Company is required upon becoming aware of any Default or Event of Default, to
deliver to the Trustee a statement specifying such Default or Event of Default.
13. Trustee Dealings With Issuers. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Issuers or their Affiliates, and may otherwise deal with the
Issuers or their Affiliates, as if it were not the Trustee.
14. No Recourse Against Others. No director, officer, employee,
incorporator or stockholder of the Issuers, as such, shall have any liability
for any obligations of the Company 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 the 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
SEC that such a waiver is against public policy.
15. Authentication. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
16. Abbreviations. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. Additional Rights of Holders of Restricted Global Notes and
Restricted Definitive Notes. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Registration Rights
Agreement dated as of May 5, 1998, among the Issuers, the Parent and the parties
named on the signature pages thereof or, in the case of Additional Notes,
Holders of Restricted Global Notes and Restricted Definitive Notes shall have
the rights set forth in one or more registration rights agreements, if any,
between the Issuers, the Parent and the other parties thereto, relating to
rights given by the Issuers to the purchasers of any Additional Notes
(collectively, the "Registration Rights Agreement").
18. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Issuers have caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
In the event that the Issuers shall issue and the Trustee shall
authenticate any Additional Notes pursuant to the Indenture, the Issuers shall
use their best efforts to obtain the same CUSIP number for such Additional Notes
as is printed on the Notes outstanding at such time; provided, however, that if
any
A-1-6
<PAGE>
series of Additional Notes is determined, pursuant to an Opinion of Counsel, to
be a different class of security than the Notes outstanding at such time for
federal income tax purposes, the Issuers may obtain a CUSIP number for such
series of Additional Notes that is different from the CUSIP number printed on
the Notes then outstanding.
19. Guarantees. This Note will be entitled to the benefits of
certain Guarantees made for the benefit of the Holders. Reference is hereby
made to the Indenture for a statement of the respective rights, limitations of
rights, duties and obligations thereunder of the Guarantors, the Trustee and the
Holders.
The Issuers will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Alliance Laundry Systems LLC
Alliance Laundry Corporation
Shepard Street
Ripon, Wisconsin 54971
Attention: Chief Financial Officer
A-1-7
<PAGE>
Assignment Form
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
to transfer this Note on the books of the Issuers. The agent may substitute
another to act for him.
- --------------------------------------------------------------------------------
Date: _______________________
Your Signature:_____________________________________________
(Sign exactly as your name appears on the face of this Note)
Tax Identification No.:
-------------------------------------
SIGNATURE GUARANTEE:
--------------------------------
Signatures must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Registrar,
which requirements include membership or participation in
the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
A-1-8
<PAGE>
Option of Holder to Elect Purchase
If you want to elect to have this Note purchased by the Issuers
pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
Section 4.10 Section 4.15
If you want to elect to have only part of the Note purchased by the
Issuers pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $________
Date: _________________
Your Signature:
---------------------------------------------
(Sign exactly as your name appears on the face of this Note)
Tax Identification No.:
-------------------------------------
SIGNATURE GUARANTEE:
----------------------------------
Signatures must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Registrar,
which requirements include membership or participation in
the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
A-1-9
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE/(1)/
The following exchanges of a part of this Global Note for an interest
in another Global Note or for a Definitive Note, or exchanges of a part of
another Global Note or Definitive Note for an interest in this Global Note, have
been made:
Principal
Amount of Amount Signature
Amount of increase of this of
decrease in in Global Note authorized
Principal Principal following officer
Amount Amount of such of Trustee
of this this decrease (or or Note
Date of Exchange Global Note Global Note increase) Custodian
- ---------------- ----------- ----------- ------------ -----------
- ----------------
/(1)/ This should be included only if the Debenture is issued in global form.
A-1-10
<PAGE>
EXHIBIT A-2
(Face of Regulation S Temporary Global Note)
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND
THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE
AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN
DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE 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. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"),
TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE 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.
THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR THE ACCOUNT
OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (2) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903
OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) TO AN INSTITUTIONAL
ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (5) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (B) IN
ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED
STATES AND OTHER JURISDICTIONS.
CUSIP/CINS____________________
9 5/8% Senior Subordinated Notes due 2008
No.______ $_______________
A-2-1
<PAGE>
ALLIANCE LAUNDRY SYSTEMS LLC
ALLIANCE LAUNDRY CORPORATION
promises to pay to
--------------------------------------------------------------
or registered assigns,
the principal sum of
-------------------------------------------------------
Dollars on May 1, 2008.
Interest Payment Dates: May 1 and November 1
Record Dates: April 15 and October 15
ALLIANCE LAUNDRY SYSTEMS LLC
ALLIANCE LAUNDRY CORPORATION
By:
-------------------------------
Name:
Title:
By:
-------------------------------
Name:
Title:
This is one of the Global
Notes referred to in the
within-mentioned Indenture:
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
By: Dated: May 5, 1998
---------------------------------
Name:
Title:
A-2-2
<PAGE>
(Back of Regulation S Temporary Global Note)
9 5/8% Senior Subordinated Notes due 2008
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Alliance Laundry Systems LLC, a Delaware limited liability
company (the "Company"), and Alliance Laundry Corporation, a Delaware
corporation ("ALC" and, together with the Company, the "Issuers") promise to pay
interest on the principal amount of this Note at 9 5/8% per annum from May 5,
1998 until maturity and shall pay the Liquidated Damages, if any, payable
pursuant to Section 5 of the Registration Rights Agreement referred to below.
The Issuers shall pay interest and Liquidated Damages, if any, semi-annually on
May 1 and November 1 of each year, or if any such day is not a Business Day, on
the next succeeding Business Day (each an "Interest Payment Date"). Interest on
the Notes will accrue from the most recent date to which interest has been paid
or, if no interest has been paid, from the date of issuance; provided that if
there is no existing Default in the payment of interest, and if this Note is
authenticated between a record date referred to on the face hereof and the next
succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date; provided, further, that the first Interest
Payment Date shall be November 1, 1998. The Issuers shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue principal and premium, if any, from time to time on demand at a rate
that is 1% per annum in excess of the rate then in effect; they shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages, if
any (without regard to any applicable grace periods) from time to time on demand
at the same rate to the extent lawful. Interest will be computed on the basis of
a 360-day year of twelve 30-day months.
Until this Regulation S Temporary Global Note is exchanged for one or
more Regulation S Permanent Global Notes, the Holder hereof shall not be
entitled to receive payments of interest hereon; until so exchanged in full,
this Regulation S Temporary Global Note shall in all other respects be entitled
to the same benefits as other Notes under the Indenture.
2. METHOD OF PAYMENT. The Issuers will pay interest on the Notes
(except defaulted interest) and Liquidated Damages, if any, to the Persons who
are registered Holders of Notes at the close of business on the April 15 or
October 15 next preceding the Interest Payment Date, even if such Notes are
canceled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture (as herein defined) with
respect to defaulted interest. The Notes will be payable as to principal,
premium and Liquidated Damages, if any, and interest at the office or agency of
the Issuers maintained for such purpose within the City and State of New York,
or, at the option of the Issuers, payment of interest and Liquidated Damages, if
any, may be made by check mailed to the Holders at their addresses set forth in
the register of Holders, and provided that all payments of $1,000 or more
principal, premium, if any, interest and Liquidated Damages, if any, with
respect to Notes the Holders of which have given wire transfer instructions to
the Issuers at least ten business days prior to the applicable payment date will
be required to be made by wire transfer of immediately available funds to the
accounts specified by the Holders thereof. Such payment shall be in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts.
3. Paying Agent and Registrar. Initially, United States Trust
Company of New York, the Trustee under the Indenture, will act as Paying Agent
and Registrar. The Issuers may change any Paying
A-2-3
<PAGE>
Agent or Registrar without notice to any Holder. The Issuers, any of their
Subsidiaries or any Guarantor may act in any such capacity.
4. INDENTURE. The Issuers issued the Notes under an Indenture dated
as of May 5, 1998, as amended or supplemented from time to time ("Indenture"),
among the Issuers, the Parent and the Trustee. The terms of the Notes include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939, as amended (15 U.S. Code (S)(S) 77aaa-
77bbbb). The Notes are subject to all such terms, and Holders are referred to
the Indenture and such Act for a statement of such terms. To the extent any
provision of this Note conflicts with the express provisions of the Indenture,
the provisions of the Indenture shall govern and be controlling. The Notes are
obligations of the Issuers limited to $200.0 million in aggregate principal
amount.
The payment of principal of, and premium, if any, and interest on, and
other Obligations evidenced by, the Notes is subordinated in right of payment,
to the extent and in the manner provided in the Indenture, to the prior payment
in full of all present and future Senior Debt (as defined in the Indenture) of
the Issuers. Each Holder of this Note, by accepting the same, (i) agrees to
such provisions, (ii) authorizes and directs the Trustee on such Holder's behalf
to take such action as may be necessary or appropriate to effectuate the
subordination as provided in the Indenture and (iii) appoints the Trustee to act
as attorney-in-fact for any and all such purposes.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraph (b) of this Paragraph 5, the
Notes will not be redeemable at the Issuers' option prior to May 1, 2003.
Thereafter, the Notes will be subject to redemption at any time at the option of
the Issuers, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Liquidated Damages thereon
to the applicable redemption date, if redeemed during the twelve-month period
beginning on May 1 of the years indicated below:
Year Redemption Price
---- ----------------
2003............................... 104.813%
2004............................... 103.208%
2005............................... 101.604%
2006 and thereafter................ 100.000%
(b) Notwithstanding the provisions of subparagraph (a) of this
Paragraph 5, at any time prior to May 1, 2001, the Issuers may on any one or
more occasions redeem up to 35% of the aggregate principal amount of Notes
issued under the Indenture at a redemption price of 109.625% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the redemption date, with the net cash proceeds of any Equity
Offerings; provided that at least 65% of the aggregate principal amount of Notes
issued under the Indenture remains outstanding immediately after the occurrence
of such redemption (excluding Notes held by the Issuers and its Subsidiaries);
and provided further that such redemption shall occur within 45 days of the date
of the closing of such Equity Offering.
(c) At any time prior to May 1, 2003, the Notes may also be redeemed,
as a whole but not in part, at the option of the Issuers upon the occurrence of
a Change of Control, upon not less than 30
A-2-4
<PAGE>
nor more than 60 days' prior notice (but in no event may any such redemption
occur more than 90 days after the occurrence of such Change of Control) 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 and Liquidated Damages thereon, if any, to the
date of redemption (the "Redemption Date").
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Issuers shall not be
required to make mandatory redemption or sinking fund payments with respect to
the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) Upon the occurrence of a Change of Control, the Issuers shall be
required to make an offer (a "Change of Control Offer") to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at
an offer price in cash equal to 101% of the aggregate principal amount thereof
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the
date of purchase (the "Change of Control Payment"). Within 10 days following any
Change of Control, the Issuers shall mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase Notes on the date specified in such notice, which date shall be no
earlier than 30 days and no later than 60 days from the date such notice is
mailed (the "Change of Control Payment Date"), pursuant to the procedures
required by the Indenture and described in such notice.
(b) If the Company or a Restricted Subsidiary consummates any Asset
Sale for which the aggregate amount of Excess Proceeds exceeds $10.0 million,
the Issuers shall commence an offer to all Holders of Notes (an "Asset Sale
Offer") pursuant to Section 3.9 of the Indenture to purchase the maximum
principal amount of Notes that may be purchased out of the Excess Proceeds at an
offer price in cash in an amount equal to 100% of the principal amount thereof
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the
date of purchase in accordance with the procedures set forth in the Indenture.
To the extent that any Excess Proceeds remain after consummation of an Asset
Sale Offer, the Company may use such Excess Proceeds for any purpose not
otherwise prohibited by the Indenture. If the aggregate principal amount of
Notes tendered into such Asset Sale surrendered by Holders thereof exceeds the
amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on
a pro rata basis. Holders of Notes that are the subject of an offer to purchase
will receive an Asset Sale Offer from the Issuers prior to any related purchase
date and may elect to have such Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date, interest ceases to accrue on Notes
or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Issuers may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Issuers need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Issuers
need not exchange
A-2-5
<PAGE>
or register the transfer of any Notes for a period of 15 days before a selection
of Notes to be redeemed or during the period between a record date and the next
succeeding Interest Payment Date.
This Regulation S Temporary Global Note is exchangeable in whole or in
part for one or more Global Notes only (i) on or after the termination of the
40-day restricted period (as defined in Regulation S) and (ii) upon presentation
of certificates (accompanied by an Opinion of Counsel, if applicable) required
by Article 2 of the Indenture. Upon exchange of this Regulation S Temporary
Global Note for one or more Global Notes, the Trustee shall cancel this
Regulation S Temporary Global Note.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture, the Guarantees or the Notes may be amended or supplemented with
the consent of the Holders of at least a majority in principal amount of the
then outstanding Notes voting as a single class, and any existing default or
compliance with any provision of the Indenture, the Guarantees or the Notes may
be waived with the consent of the Holders of a majority in principal amount of
the then outstanding Notes voting as a single class. Without the consent of any
Holder of a Note, the Indenture, the Guarantees or the Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Issuers' obligations to Holders of the Notes
in case of a merger or consolidation, to add additional guarantees with respect
to the Notes, to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, or to comply with the
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act.
12. DEFAULTS AND REMEDIES.
An "Event of Default" occurs if: (i) the Issuers default in the
payment when due of interest on, or Liquidated Damages, if any, with respect to,
the Notes and such default continues for a period of 30 days, whether or not
such payment is prohibited by the provisions of Article 10 of the Indenture;
(ii) the Issuers default in the payment when due of principal of or premium, if
any, on the Notes, whether or not such payment is prohibited by the provisions
of Article 10 of the Indenture; (iii) the Issuers or any of their Restricted
Subsidiaries fail to comply with any of the provisions of Sections 4.15 or 5.1
of the Indenture; (iv) the Issuers or any of their Restricted Subsidiaries fail
for 30 days after written notice by the Trustee or the Holders of at least 25%
in principal amount of the then outstanding Notes to comply with the provisions
of Sections 4.7, 4.9 or 4.10 of the Indenture; (v) the Issuers, any of their
Restricted Subsidiaries or any Guarantor fails to observe or perform any other
covenant, representation, warranty or other agreement in the Indenture or the
Notes for 60 days after written notice to the Issuers by the Trustee or the
Holders of at least 25% in aggregate principal amount of the Notes then
outstanding; (vi) the Company or any of its Subsidiaries defaults under any
mortgage, indenture or instrument under which there may be issued or by which
there may be secured or evidenced any Indebtedness for money borrowed by the
Company or any of its Subsidiaries (other than a Securitization Entity) (or the
payment of which is guaranteed by the Company or any of its Subsidiaries (other
than a Securitization Entity)), whether such Indebtedness or guarantee now
exists, or is created after the date of the Indenture, which default (a) is
caused by a failure to pay principal of or premium, if any, or interest on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b) results in
the acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated, aggregates $10.0
million or more; (vii)
A-2-6
<PAGE>
the Company or any of its Subsidiaries fail to pay a final judgment or final
judgments for the payment of money which are entered by a court or courts of
competent jurisdiction against the Company or any of its Subsidiaries and such
judgment or judgments remain undischarged for a period (during which execution
shall not be effectively stayed) of 60 days, provided that the aggregate of all
such undischarged judgments exceeds $10 million (excluding amounts covered by
insurance); (viii) certain events of bankruptcy or insolvency with respect to
the Issuers or any of their Subsidiaries; and (ix) except as permitted by the
Indenture, any Guarantee is held in any judicial proceeding to be unenforceable
or invalid or ceases for any reason to be in full force and effect or any
Guarantor, or any Person acting on behalf of any Guarantor, denies or disaffirms
its obligations under its Guarantee. If any Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Notes may declare all the Notes to be due and payable.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, all outstanding Notes shall be due
and payable 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 in writing direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders of the Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal or interest) if it determines that withholding notice
is in their interest. The Holders of a majority in aggregate principal amount of
the Notes then outstanding by written notice to the Trustee may on behalf of the
Holders of all of the Notes waive any existing Default or Event of Default and
its consequences under the Indenture except a continuing Default or Event of
Default in the payment of interest on, or the principal of, the Notes. The
Company is required to deliver to the Trustee annually a statement regarding
compliance with the Indenture, and the Company is required upon becoming aware
of any Default or Event of Default, to deliver to the Trustee a statement
specifying such Default or Event of Default.
13. TRUSTEE DEALINGS WITH ISSUERS. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Issuers or their Affiliates, may otherwise deal with the
Issuers or their Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator or stockholder, of the Issuers, as such, shall have any liability
for any obligations of the Company 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 the 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
SEC that such a waiver is against public policy.
15. AUTHENTICATION. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Registration Rights
Agreement dated as of May 5, 1998, among the Issuers, the Parent and the parties
named on the signature pages thereof or, in the case of Additional Notes,
Holders of Restricted Global Notes and Restricted Definitive Notes shall have
the rights set forth in one or more registration rights agreements, if any,
between
A-2-7
<PAGE>
the Issuers, the Parent and the other parties thereto, relating to rights given
by the Issuers to the purchasers of any Additional Notes (collectively, the
"Registration Rights Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Issuers have caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
In the event that the Issuers shall issue and the Trustee shall
authenticate any Additional Notes pursuant to the Indenture, the Issuers shall
use their best efforts to obtain the same CUSIP number for such Additional Notes
as is printed on the Notes outstanding at such time; provided, however, that if
any series of Additional Notes is determined, pursuant to an Opinion of Counsel,
to be a different class of security than the Notes outstanding at such time for
federal income tax purposes, the Issuers may obtain a CUSIP number for such
series of Additional Notes that is different from the CUSIP number printed on
the Notes then outstanding.
19. Guarantees. This Note will be entitled to the benefits of
certain Guarantees made for the benefit of the Holders. Reference is hereby
made to the Indenture for a statement of the respective rights, limitations of
rights, duties and obligations thereunder of the Guarantors, the Trustee and the
Holders.
The Issuers will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Alliance Laundry Systems LLC
Alliance Laundry Corporation
Shepard Street
Ripon, Wisconsin 54971
Attention: Chief Financial Officer
A-2-8
<PAGE>
Assignment Form
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
to transfer this Note on the books of the Issuers. The agent may substitute
another to act for him.
- --------------------------------------------------------------------------------
Date:
-----------------------
Your Signature:
-------------------------
(Sign exactly as your name appears on
the face of this Note)
Tax Identification No.:
-----------------
SIGNATURE GUARANTEE:
--------------------
Signatures must be guaranteed by an
"eligible guarantor institution" meeting
the requirements of the Registrar, which
requirements include membership or
participation in the Security Transfer
Agent Medallion Program ("STAMP") or
such other "signature guarantee program"
as may be determined by the Registrar in
addition to, or in substitution for,
STAMP, all in accordance with the
Securities Exchange Act of 1934, as
amended.
A-2-9
<PAGE>
Option of Holder to Elect Purchase
If you want to elect to have this Note purchased by the Issuers
pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
Section 4.10 Section 4.15
If you want to elect to have only part of the Note purchased by the
Issuers pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $_________
Date: _________________
Your Signature:
------------------------
(Sign exactly as your name appears on
the face of this Note)
Tax Identification No.:
----------------
SIGNATURE GUARANTEE:
--------------------
Signatures must be guaranteed by an
"eligible guarantor institution"
meeting the requirements of the
Registrar, which requirements include
membership or participation in the
Security Transfer Agent Medallion
Program ("STAMP") or such other
"signature guarantee program" as may be
determined by the Registrar in addition
to, or in substitution for, STAMP, all
in accordance with the Securities
Exchange Act of 1934, as amended.
A-2-10
<PAGE>
SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE
The following exchanges of a part of this Regulation S Temporary
Global Note for an interest in another Global Note, or of other Restricted
Global Notes for an interest in this Regulation S Temporary Global Note, have
been made:
<TABLE>
<CAPTION>
Principal Amount
Amount of Amount of increase of this Global Note Signature of
decrease in in Principal following such authorized officer
Principal Amount Amount of this decrease (or of Trustee or Note
Date of Exchange of this Global Note Global Note increase) Custodian
- ---------------- ------------------- ------------- -------------- ---------------
<S> <C> <C> <C> <C>
</TABLE>
A-2-11
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Alliance Laundry Systems LLC
Alliance Laundry Corporation
Shepard Street
Ripon, Wisconsin 54971
Attention: Chief Financial Officer
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Department
Re: 9 5/8% Senior Subordinated Notes due 2008
-----------------------------------------
Reference is hereby made to the Indenture, dated as of May 5, 1998
(the "Indenture"), among Alliance Laundry Systems LLC (the "Company") and
Alliance Laundry Corporation ("ALC" and, together with the Company, the
"Issuers"), as issuers, Alliance Laundry Holdings LLC, as guarantor, and United
States Trust Company of New York, as trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
__________________ (the "Transferor") owns and proposes to transfer
the Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $____ in such Note[s] or interests (the "Transfer"), to
______ (the "Transferee"), as further specified in Annex A hereto. In connection
with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. Check if Transferee will take delivery of a beneficial interest in the
----------------------------------------------------------------------
144A Global Note or a Definitive Note Pursuant to Rule 144A. The Transfer is
- -----------------------------------------------------------
being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
2. Check if Transferee will take delivery of a beneficial interest in the
----------------------------------------------------------------------
Temporary Regulation S Global Note, the Regulation S Global Note or a Definitive
- --------------------------------------------------------------------------------
Note pursuant to Regulation S. The Transfer is being effected pursuant to and in
- -----------------------------
accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly,
the Transferor hereby further certifies that (i) the Transfer is not being made
to a person in the United States and (x) at the time the buy order was
originated, the Transferee was outside the United States or such Transferor and
any Person acting on its behalf reasonably believed and believes that the
Transferee was outside the United States or (y) the transaction was executed in,
on or through the facilities
B-1-1
<PAGE>
of a designated offshore securities market and neither such Transferor nor any
Person acting on its behalf knows that the transaction was prearranged with a
buyer in the United States, (ii) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S
under the Securities Act, (iii) the transaction is not part of a plan or scheme
to evade the registration requirements of the Securities Act and (iv) if the
proposed transfer is being made prior to the expiration of the Restricted
Period, the transfer is not being made to a U.S. Person or for the account or
benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of
the proposed transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will be subject to the
restrictions on Transfer enumerated in the Private Placement Legend printed on
the Regulation S Global Note, the Temporary Regulation S Global Note and/or the
Definitive Note and in the Indenture and the Securities Act.
3. Check and complete if Transferee will take delivery of a beneficial
-------------------------------------------------------------------
interest in the IAI Global Note or a Definitive Note pursuant to any provision
- ------------------------------------------------------------------------------
of the Securities Act other than Rule 144A or Regulation S. The Transfer is
- ----------------------------------------------------------
being effected in compliance with the transfer restrictions applicable to
beneficial interests in Restricted Global Notes and Restricted Definitive Notes
and pursuant to and in accordance with the Securities Act and any applicable
blue sky securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) such Transfer is being effected pursuant to and in accordance with
Rule 144 under the Securities Act;
or
(b) such Transfer is being effected to the Issuers or a subsidiary
thereof;
or
(c) such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
(d) such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration requirements of the
Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor
hereby further certifies that it has not engaged in any general solicitation
within the meaning of Regulation D under the Securities Act and the Transfer
complies with the transfer restrictions applicable to beneficial interests in a
Restricted Global Note or Restricted Definitive Notes and the requirements of
the exemption claimed, which certification is supported by ( 1) a certificate
executed by the Transferee and (2) if such Transfer is in respect of a principal
amount of Notes at the time of transfer of less than $250,000, an Opinion of
Counsel provided by the Transferor or the Transferee (a copy of which the
Transferor has attached to this certification), to the effect that such Transfer
is in compliance with the Securities Act. Upon consummation of the proposed
transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the IAI Global
Note and/or the Definitive Notes and in the Indenture and the Securities Act.
4. Check if Transferee will take delivery of a beneficial interest in an
---------------------------------------------------------------------
Unrestricted Global Note or of an Unrestricted Definitive Note.
- --------------------------------------------------------------
B-1-2
<PAGE>
(a) Check if Transfer is Pursuant to Rule 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the Securities
Act and in compliance with the transfer restrictions contained in the Indenture
and any applicable blue sky securities laws of any state of the United States
and (ii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will no longer be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Restricted Global Notes, on Restricted
Definitive Notes and in the Indenture.
(b) Check if Transfer is Pursuant to Regulation S. (i) The Transfer is
being effected pursuant to and in accordance with Rule 903 or Rule 904 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.
(c) Check if Transfer is Pursuant to Other Exemption. (i) The Transfer
is being effected pursuant to and in compliance with an exemption from the
registration requirements of the Securities Act other than Rule 144, Rule 903 or
Rule 904 and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any State of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will not be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the Restricted Global Notes or
Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuers.
---------------------------
[Insert Name of Transferor]
By:
------------------------
Name:
Title:
Dated: _____________, ______
B-1-3
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) a beneficial interest in the:
(i) 144A Global Note (CUSIP _____), or
(ii) Regulation S Global Note (CUSIP _____), or
(iii) IAI Global Note (CUSIP _____); or
(b) a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) a beneficial interest in the:
(i) 144A Global Note (CUSIP _____), or
(ii) Regulation S Global Note (CUSIP _____), or
(iii) a IAI Global Note (CUSIP _____), or
(iv) Unrestricted Global Note (CUSIP _____); or
(b) a Restricted Definitive Note; or
(c) an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-1-4
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Alliance Laundry Systems LLC
Alliance Laundry Corporation
Shepard Street
Ripon, Wisconsin 54971
Attention: Chief Financial Officer
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Department
Re: 9 5/8% Senior Subordinated Notes due 2008
--------------------------------------
(CUSIP ____________________)
Reference is hereby made to the Indenture, dated as of May 5, 1998
(the "Indenture"), among Alliance Laundry Systems LLC (the "Company") and
Alliance Laundry Corporation ("ALC" and, together with the Company, the
"Issuers"), as issuers, Alliance Laundry Holdings LLC, as guarantor, and United
States Trust Company of New York, as trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
________________ (the "Owner") owns and proposes to exchange the
Note[s] or interest in such Note[s] specified herein, in the principal amount of
$______ in such Note[s] or interests (the "Exchange"). In connection with the
Exchange, the Owner hereby certifies that:
1. Exchange of Restricted Definitive Notes or Beneficial Interests in a
Restricted Global Note for Unrestricted Definitive Notes or Beneficial Interests
in an Unrestricted Global Note
(a) Check if Exchange is from beneficial interest in a Restricted
-------------------------------------------------------------
Global Note to beneficial interest in an Unrestricted Global Note. In connection
- -----------------------------------------------------------------
with the Exchange of the Owner's beneficial interest in a Restricted Global Note
for a beneficial interest in an Unrestricted Global Note in an equal principal
amount, the Owner hereby certifies (i) the beneficial interest is being acquired
for the Owner's own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to the Global
Notes and pursuant to and in accordance with the United States Securities Act of
1933, as amended (the "Securities Act"), (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the beneficial
interest in an Unrestricted Global Note is being acquired in compliance with any
applicable blue sky securities laws of any state of the United States.
(b) Check if Exchange is from beneficial interest in a Restricted
-------------------------------------------------------------
Global Note to Unrestricted Definitive Note. In connection with the Exchange of
- -------------------------------------------
the Owner's beneficial interest in a Restricted Global Note for an Unrestricted
Definitive Note, the Owner hereby certifies (i) the Definitive Note is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes and pursuant to and in accordance with the Securities
Act, (iii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act and (iv) the
C-1
<PAGE>
Definitive Note is being acquired in compliance with any applicable blue sky
securities laws of any state of the United States.
(c) Check if Exchange is from Restricted Definitive Note to beneficial
------------------------------------------------------------------
interest in an Unrestricted Global Note. In connection with the Owner's Exchange
- ---------------------------------------
of a Restricted Definitive Note for a beneficial interest in an Unrestricted
Global Note, the Owner hereby certifies (i) the beneficial interest is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to
Restricted Definitive Notes and pursuant to and in accordance with the
Securities Act, (iii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) Check if Exchange is from Restricted Definitive Note to
-------------------------------------------------------
Unrestricted Definitive Note. In connection with the Owner's Exchange of a
- ----------------------------
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. Exchange of Restricted Definitive Notes or Beneficial Interests in
Restricted Global Notes for Restricted Definitive Notes or Beneficial Interests
in Restricted Global Notes
(a) Check if Exchange is from beneficial interest in a Restricted
-------------------------------------------------------------
Global Note to Restricted Definitive Note. In connection with the Exchange of
- -----------------------------------------
the Owner's beneficial interest in a Restricted Global Note for a Restricted
Definitive Note with an equal principal amount, the Owner hereby certifies that
the Restricted Definitive Note is being acquired for the Owner's own account
without transfer. Upon consummation of the proposed Exchange in accordance with
the terms of the Indenture, the Restricted Definitive Note issued will continue
to be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Definitive Note and in the Indenture
and the Securities Act.
(b) Check if Exchange is from Restricted Definitive Note to beneficial
------------------------------------------------------------------
interest in a Restricted Global Note. In connection with the Exchange of the
- ------------------------------------
Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE]
144A Global Note, Regulation S Global Note, IAI Global Note with an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer and (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, and in compliance with any applicable blue sky securities
laws of any state of the United States. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the beneficial interest
issued will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the relevant Restricted Global Note and in the
Indenture and the Securities Act.
C-2
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuers.
----------------------
[Insert Name of Owner]
By:
------------------
Name:
Title:
Dated:_______________, _______
C-3
<PAGE>
EXHIBIT D
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT NOTE GUARANTORS
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
_______________, among _______________ (the "Guaranteeing Subsidiary"), a
subsidiary of [Alliance Laundry Systems LLC][Alliance Laundry Corporation] (or
its permitted successor), a Delaware [limited liability company] [corporation],
Alliance Laundry Systems LLC (the "Company") and Alliance Laundry Corporation
("ALC" and, together with the Company, the "Issuers"), as issuers under the
indenture referred to below, the other Guarantors (as defined in the indenture
referred to herein) and United States Trust Company of New York, as trustee
under the indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Issuers have heretofore executed and delivered to the
Trustee an indenture (the "Indenture"), dated as of May 5, 1998 providing for
the issuance of an aggregate principal amount of up to $200.0 million of 9 5/8%
Senior Subordinated Notes due 2008 (the "Notes");
WHEREAS, the Indenture provides that under certain circumstances the
Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental
indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally
guarantee all of the Issuers' Obligations under the Notes and the Indenture on
the terms and conditions set forth herein (the "Note Guarantee"); and
WHEREAS, pursuant to Section 9.1 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:
1. Capitalized Terms. Capitalized terms used herein without definition shall
have the meanings assigned to them in the Indenture.
2. Agreement to Guarantee. The Guaranteeing Subsidiary hereby
agrees as follows:
(a) Along with all Note Guarantors named in the Indenture, to jointly
and severally Guarantee to each Holder of a Note authenticated
and delivered by the Trustee and to the Trustee and its
successors and assigns, irrespective of the validity and
enforceability of the Indenture, the Notes or the obligations of
the Issuers hereunder or thereunder, that:
(i) the principal of and interest on the Notes will be promptly
paid in full when due, whether at maturity, by acceleration,
redemption or otherwise, and interest on the overdue
principal of and interest on the Notes, if any, if lawful,
and all other obligations of the Issuers to the Holders or
the Trustee hereunder or thereunder will be promptly paid in
full or performed, all in accordance with the terms hereof
and thereof; and
D-1
<PAGE>
(ii) in case of any extension of time of payment or renewal of
any Notes or any of such other obligations, that same will
be promptly paid in full when due or performed in accordance
with the terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise. Failing
payment when due of any amount so guaranteed or any
performance so guaranteed for whatever reason, the Note
Guarantors shall be jointly and severally obligated to pay
the same immediately.
(b) The obligations hereunder shall be unconditional, irrespective of
the validity, regularity or enforceability of the Notes or the
Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any
provisions hereof or thereof, the recovery of any judgment
against the Issuers, any action to enforce the same or any other
circumstance which might otherwise constitute a legal or
equitable discharge or defense of a Note Guarantor.
(c) The following is hereby waived: diligence presentment, demand of
payment, filing of claims with a court in the event of insolvency
or bankruptcy of the Issuers, any right to require a proceeding
first against the Issuers, protest, notice and all demands
whatsoever.
(d) This Note Guarantee shall not be discharged except by complete
performance of the obligations contained in the Notes and the
Indenture.
(e) If any Holder or the Trustee is required by any court or
otherwise to return to the Issuers, the Note Guarantors, or any
custodian, Trustee, liquidator or other similar official acting
in relation to either the Issuers or the Note Guarantors, any
amount paid by either to the Trustee or such Holder, this Note
Guarantee, to the extent theretofore discharged, shall be
reinstated in full force and effect.
(f) The Guaranteeing Subsidiary shall not be entitled to any right of
subrogation in relation to the Holders in respect of any
obligations guaranteed hereby until payment in full of all
obligations guaranteed hereby.
(g) As between the Note Guarantors, on the one hand, and the Holders
and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in
Article 6 of the Indenture for the purposes of this Note
Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the
obligations guaranteed hereby, and (y) in the event of any
declaration of acceleration of such obligations as provided in
Article 6 of the Indenture, such obligations (whether or not due
and payable) shall forthwith become due and payable by the Note
Guarantors for the purpose of this Note Guarantee.
(h) The Note Guarantors shall have the right to seek contribution
from any non-paying Note Guarantor so long as the exercise of
such right does not impair the rights of the Holders under the
Guarantee.
(i) The obligations of each Note Guarantor will be limited to the
maximum amount, as will, after giving effect to all other
contingent and fixed liabilities of such Note
D-2
<PAGE>
Guarantor, result in the obligations of such Note Guarantor under
the Note Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under federal or state law.
(j) This Note Guarantee inures to the benefit of and is enforceable
by the Trustee, the Holders and their successors, transferees and
assigns.
3. Execution and Delivery. Each Guaranteeing Subsidiary agrees that
the Note Guarantees shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of such Note Guarantee.
4. Guaranteeing Subsidiary May Consolidate, Etc. on Certain Terms.
(a) The Guaranteeing Subsidiary may not consolidate with or merge
with or into (whether or not such Note Guarantor is the surviving
Person) another corporation, Person or entity whether or not
affiliated with such Note Guarantor unless:
(i) the Person formed by or surviving any such consolidation or
merger (if other than a Note Guarantor or the Company)
unconditionally assumes all the obligations of such Note
Guarantor, pursuant to a supplemental indenture in form and
substance reasonably satisfactory to the Trustee, under the
Note Guarantee, the Indenture and the Registration Rights
Agreement on the terms set forth herein or therein; and
(ii) if such merger or consolidation is with a Person other than
the Company or a Restricted subsidiary, (x) immediately
after such transaction, no Default or Event of Default
exists and (y) the Company will, at the time of such
transaction after giving pro forma effect thereto, be
permitted to incur at least $1.00 of additional indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth
in the covenant described in Section 4.9 of the Indenture.
(b) In case of any such consolidation, merger, sale or conveyance and
upon the assumption by the successor corporation, by supplemental
indenture, executed and delivered to the Trustee and satisfactory
in form to the Trustee, of the Note Guarantee endorsed upon the
Notes and the due and punctual performance of all of the
covenants and conditions of the Indenture to be performed by the
Note Guarantor, such successor corporation shall succeed to and
be substituted for the Note Guarantor with the same effect as if
it had been named herein as a Note Guarantor. Such successor
corporation thereupon may cause to be signed any or all of the
Note Guarantees to be endorsed upon all of the Notes issuable
hereunder which theretofore shall not have been signed by the
Issuers and delivered to the Trustee. All the Note Guarantees so
issued shall in all respects have the same legal rank and benefit
under the Indenture as the Note Guarantees theretofore and
thereafter issued in accordance with the terms of the Indenture
as though all of such Note Guarantees had been issued at the date
of the execution hereof.
(c) Except as set forth in Articles 4 and 5 of the Indenture, and
notwithstanding clauses (a) and (b) above, nothing contained in
the Indenture or in any of the Notes shall prevent any
consolidation or merger of a Note Guarantor with or into the
Company or another Note Guarantor, or shall prevent any sale or
conveyance of the property
D-3
<PAGE>
of a Note Guarantor as an entirety or substantially as an
entirety to the Company or another Note Guarantor.
5. Releases.
(a) In the event of a sale or other disposition of all of the assets
of any Note Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all to the capital
stock of any Note Guarantor, then such Note Guarantor (in the
event of a sale or other disposition, by way of merger,
consolidation or otherwise, of all of the capital stock of such
Note Guarantor) or the corporation acquiring the property (in the
event of a sale or other disposition of all or substantially all
of the assets of such Note Guarantor) will be released and
relieved of any obligations under its Note Guarantee; provided
that the Net Proceeds of such sale or other disposition are
applied in accordance with the applicable provisions of the
Indenture, including without limitation Section 4.10 of the
Indenture. Upon delivery by the Issuers to the Trustee of an
Officers' Certificate and an Opinion of Counsel to the effect
that such sale or other disposition was made by the Issuers in
accordance with the provisions of the Indenture, including
without limitation Section 4.10 of the Indenture, the Trustee
shall execute any documents reasonably required in order to
evidence the release of any Note Guarantor from its obligations
under its Note Guarantee.
(b) Any Note Guarantor not released from its obligations under its
Note Guarantee shall remain liable for the full amount of
principal of and interest on the Notes and for the other
obligations of any Note Guarantor under the Indenture as provided
in Article 10 of the Indenture.
6. No Recourse Against Others. No director, officer, employee,
incorporator or stockholder of the Guaranteeing Subsidiary, as such, shall have
any liability for any obligations of the Company or any Guaranteeing Subsidiary
under the Notes, any Note Guarantees, the Indenture or this Supplemental
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of the Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
7. Fees and Expenses. The Guaranteeing Subsidiary hereby agrees to
pay any and all expenses (including reasonable counsel fees and expenses)
incurred by the Trustee or the Holders in enforcing any rights under the Note
Guarantees.
8. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
9. Counterparts. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
D-4
<PAGE>
10. Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction hereof.
11. The Trustee. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Guaranteeing Subsidiary and the Issuers.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: __________, _____
[Guaranteeing Subsidiary]
By:
----------------------------
Name:
Title:
UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee
By:
----------------------------
Name:
Title:
D-5
<PAGE>
EXHIBIT E
FORM OF PARENT GUARANTEE
SENIOR SUBORDINATED GUARANTEE
The Parent (as defined in the Indenture referred to in the Note upon
which this notation is endorsed) hereby unconditionally guarantees on a senior
subordinated basis (such guarantee being referred to herein as the Parent
Guarantee) the due and punctual payment of the principal of, premium, if any,
interest and Liquidated Damages, if any, on the Notes, whether at maturity, by
acceleration or otherwise, the due and punctual payment of interest on the
overdue principal, premium, if any, interest and Liquidated Damages, if any, on
the Notes, and the due and punctual performance of all other obligations of the
Issuers to the Holders or the Trustee, all in accordance with the terms set
forth in Article 11 of the Indenture.
The obligations of the Parent to the Holders of Notes and to the
Trustee pursuant to this Parent Guarantee and the Indenture are expressly set
forth, and are expressly subordinated and subject in right of payment to the
prior payment in full of all Senior Debt (as defined in the Indenture) of the
Parent, to the extent and in the manner provided in Article 11 and Article 12 of
the Indenture, and reference is hereby made to such Indenture for the precise
terms of this Parent Guarantee therein made. This Parent Guarantee will rank
pari passu in right of payment with any future senior subordinated indebtedness
of the Parent and will rank senior in right of payment to any other future
subordinated obligations of the Parent.
This Parent Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Notes upon which this Parent
Guarantee is noted shall have been executed by the Trustee under the Indenture
by the manual signature of one of its authorized officers.
This Parent Guarantee shall be governed by and construed in accordance
with the laws of the State of New York without regard to principles of conflicts
of law thereof.
This Parent Guarantee is subject to release upon the terms set forth
in the Indenture.
ALLIANCE LAUNDRY HOLDINGS LLC
By:
------------------------------------
Name:
Title:
E-1
<PAGE>
EXHIBIT 5.1
KIRKLAND & ELLIS
PARTNERSHIPS INCLUDING PROFESSIONAL CORPORATIONS
Citicorp Center
153 East 53rd Street
New York, New York 10022-4675
212 446-4800
Facsimile:
212 446-4900
July 13, 1998
Alliance Laundry Systems LLC
Shepard Street
P.O. Box 990
Ripon, Wisconsin 54971-0990
Re: Offer by Alliance Laundry Systems LLC and Alliance Laundry Corporation to
Exchange their Series B 9 5/8% Senior Subordinated Notes due 2008 for any
and all Notes due 2008 of their outstanding Series A 9 5/8% Senior
Subordinated Notes due 2008
Ladies and Gentlemen:
We are acting as special counsel to Alliance Laundry Systems LLC, a Delaware
limited liability company (the "Company") and Alliance Laundry Corporation
("ALC" and, together with the Company, the "Issuers"), in connection with the
proposed registration by the Issuers of up to $110,000,000 in aggregate
principal amount of the Issuer's Series B 9 5/8% Senior Subordinated Notes due
2008 (the "Exchange Notes"), pursuant to a Registration Statement on Form S-4
originally filed with the Securities and Exchange Commission (the "Commission")
on June 15, 1998 under the Securities Act of 1933, as amended (the "Securities
Act") (such Registration Statement, as amended or supplemented, is hereinafter
referred to as the "Registration Statement"), for the purpose of effecting an
exchange offer (the "Exchange Offer") for the Company's outstanding Series A 9
5/8% Senior Subordinated Notes due 2008 (the "Notes").
<PAGE>
Alliance Laundry Systems LLC
July 13, 1998
Page 2
The Exchange Notes are to be issued pursuant to the Senior Subordinated Note
Indenture (the "Senior Subordinated Note Indenture"), dated as of May 5, 1998,
among the Issuers, the guarantors named therein (the "Guarantors"), and The
United States Trust Company of New York, as trustee (the "Trustee"), in exchange
for and in replacement of the Company's outstanding Senior Subordinated Notes,
of which $110,000,000 in aggregate principal amount is outstanding.
In connection with the Exchange Offer, we have examined originals, or copies
certified or otherwise identified to our satisfaction, of such documents,
corporate records and other instruments as we have deemed necessary for the
purposes of this opinion, including (i) the corporate and organizational
documents of the Company, ALC, and the Guarantors, (ii) minutes and records of
the corporate proceedings of the Company, ALC, and the Guarantors with respect
to the issuance of the Exchange Notes, (iii) the Registration Statement and
exhibits thereto and (iv) the Registration Rights Agreement, dated as of May 5,
1998, by and among the Issuers, Alliance Laundry Holdings LLC, and Lehman
Brothers Inc. and Credit Suisse First Boston Corporation.
For purposes of this opinion, we have assumed the authenticity of all
documents submitted to us as originals, the conformity to the originals of all
documents submitted to us as copies and the authenticity of the originals of all
documents submitted to us as copies. We have also assumed the genuineness of the
signatures of persons signing all documents in connection with which this
opinion is rendered, the authority of such persons signing on behalf of the
parties thereto other than the Issuers and the Guarantors, and the due
authorization, execution and delivery of all documents by the parties thereto
other than the Issuers and the Guarantors. As to any facts material to the
opinions expressed herein which we have not independently established or
verified, we have relied upon statements and representations of officers and
other representatives of the Issuers, the Guarantors, and others.
<PAGE>
Alliance Laundry System LLC
July 13, 1998
Page 3
Based upon and subject to the foregoing qualifications, assumptions and
limitations and the further limitations set forth below, we are of the opinion
that:
(1) The Company is a limited liability company existing and in good standing
under the Delaware Limited Liability Company Act.
(2) ALC is a corporation existing and in good standing under the Delaware
General Corporation Law.
(3) The issuance of the Exchange Notes has been duly authorized by each of
the Issuers.
(4) Each Guarantee has been duly authorized by the respective Guarantor.
(5) When, as and if (i) the Registration Statement shall have become
effective pursuant to the provisions of the Securities Act, (ii) the Indenture
shall have been qualified pursuant to the provisions of the Trust Indenture Act
of 1939, as amended, (iii) the Notes shall have been validly tendered to the
Company, (iv) the Exchange Notes shall have been issued in the form and
containing the terms described in the Registration Statement, the Indenture,
the resolutions of the Company's Board of Managers (or authorized committee
thereof) and ALC's Board of Directors (or authorized committee thereof)
authorizing the foregoing and any legally required consents, approvals,
authorizations and other order of the Commission and any other regulatory
authorities to be obtained, the Exchange Notes when issued pursuant to the
Exchange Offer will be legally issued, fully paid and nonassessable and will
constitute valid and binding obligations of the Company and ALC and the
Guarantees will constitute valid and binding obligations of the Guarantors under
the terms and conditions described in the Registration Statement, the Indenture,
the resolutions of the Guarantors' Board of Managers (or authorized committee
thereof) authorizing the foregoing and any legally required consents, approvals,
authorizations and other order of the Commission and any other regulatory
authorities to be obtained.
Our opinions expressed above are subject to the qualifications that we
express no opinion as to the applicability of, compliance with, or effect of (i)
any bankruptcy, insolvency, reorganization, fraudulent transfer, fraudulent
conveyance, moratorium or other similar law affecting the enforcement of
creditors' rights generally, (ii) general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law), (iii)
public policy considerations which may limit the rights of parties to obtain
certain remedies and (iv) any laws except the laws of the State of New York and
the General Corporation Law of the State of Delaware. We advise you that issues
addressed by this letter may be governed in whole or in part by other laws, but
we express no opinion as to whether any relevant difference exists between the
laws upon which our opinions are based and any other laws which may actually
govern. For
<PAGE>
Alliance Laundry Systems LLC
July 13, 1998
Page 4
purposes of the opinion in paragraphs 1 and 2, we have relied exclusively upon
recent certificates issued by the Delaware Secretary of State, and such opinion
is not intended to provide any conclusion or assurance beyond that conveyed by
such certificates. We have assumed without investigation that there has been no
relevant change or development between the respective dates of such certificates
and the date of this letter.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement. We also consent to the reference to our firm under the
heading "Legal Matters" in the Registration Statement. In giving this consent,
we do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of the rules and regulations of
the Commission.
We do not find it necessary for the purposes of this opinion, and accordingly
we do not purport to cover herein, the application of the securities or "Blue
Sky" laws of the various states to the issuance of the Exchange Notes.
This opinion is limited to the specific issues addressed herein, and no
opinion may be inferred or implied beyond that expressly stated herein. We
assume no obligation to revise or supplement this opinion should the present
laws of the States of Delaware or New York be changed by legislative action,
judicial decision or otherwise.
This opinion is furnished to you in connection with the filing of the
Registration Statement, and is not to be used, circulated, quoted or otherwise
relied upon for any other purposes.
Yours very truly,
/s/ Kirkland & Ellis
KIRKLAND & ELLIS
<PAGE>
EXHIBIT 8.1
KIRKLAND & ELLIS
PARTNERSHIPS INCLUDING PROFESSIONAL CORPORATIONS
Citicorp Center
153 East 53rd Street
New York, New York 10022-4675
212 446-4800
Facsimile:
212 446-4900
July 13, 1998
Alliance Laundry Systems LLC
Shepard Street
P.O. Box 990
Ripon, Wisconsin 54971-0990
Re: Offer by Alliance Laundry Systems LLC and Alliance Laundry Corporation
----------------------------------------------------------------------
to Exchange their Series B 9 5/8% Senior Subordinated Notes due 2008
-----------------------------------------------------------------------
for any and all their Series A 9 5/8% Senior Subordinated Notes due 2008
------------------------------------------------------------------------
We have acted as special counsel to Alliance Laundry Systems LLC (the
"Company") and Alliance Laundry Corporation ("ALC" and, together with the
-------
Company, the "Issuers") in connection with their offer (the "Exchange Offer")
--------------
to Exchange their Series B 9 5/8% Senior Subordinated Notes due 2008 (the
"Exchange Notes") for any and all of their Series A 9 5/8% Senior Subordinated
--------------
Notes due 2008 (the "Notes")
-----
You have requested our opinion as to certain United States federal income tax
consequences of the Exchange Offer. In preparing our opinion, we have reviewed
and relied upon the Company's Registration Statement on Form S-4, filed with the
Securities and Exchange Commission (the "Commission") on June 15, 1998 (the
"Registration Statement"), and such other documents as we deemed necessary.
----------------------
<PAGE>
On the basis of the foregoing, it is our opinion that the exchange of the
Notes for Exchange Notes pursuant to the Exchange Offer will not be treated as
an "exchange" for United States federal income tax purposes.
The opinions set forth above are based upon the applicable provisions of the
Internal Revenue Code of 1986, as amended; the Treasury Regulations promulgated
or proposed thereunder; current positions of the Internal Revenue Service (the
"IRS") contained in published revenue rulings, revenue procedures, and
---
announcements; existing judicial decisions; and other applicable authorities. No
tax rulings have been sought from the IRS with respect to any of the matters
discussed herein. Unlike a ruling from the IRS, opinions of counsel are not
binding on the IRS. Hence, no assurance can be given that the opinions stated in
this letter will not be successfully challenged by the IRS or by a court. We
express no opinion concerning any United States federal income tax consequences
of the Exchange Offer except as expressly set forth above.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm and the summarization
of this opinion under the section titled "Certain United States Federal Income
Tax Consequences" in the Registration Statement.
Very truly yours,
/s/ Kirkland & Ellis
Kirkland & Ellis
<PAGE>
EXHIBIT 10.43
SUPPLY AGREEMENT
BETWEEN
[APPLIANCE CO.]
AND
RAYTHEON COMMERCIAL LAUNDRY LLC
DATED AS OF
September 10, 1997
<PAGE>
SUPPLY AGREEMENT
----------------
As of the 10th day of September, 1997, [Appliance Co.] (hereinafter
referred to as "Buyer") and Raytheon Commercial Laundry LLC, a Delaware limited
liability company, with its principal office at Shepard Street, Ripon, Wisconsin
54971 (hereinafter referred to as "Seller"), in consideration of the mutual
covenants contained herein and such other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, hereby agree as
follows:
Section 1. SALE AND PURCHASE.
Seller will manufacture and sell to Buyer, and Buyer will purchase from
Seller, ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST ** Seller's
obligations hereunder are limited to the Products.
Section 2. TERM OF AGREEMENT
(a) This Agreement shall be in effect from ** OMITTED PURSUANT TO
CONFIDENTIAL TREATMENT REQUEST **
(b) In the event of non-renewal at Buyer's request, ** OMITTED PURSUANT
TO CONFIDENTIAL TREATMENT REQUEST **
(c) For purposes of this Agreement, the term "Final Termination Date"
shall mean the last date for which this Agreement is effective,
including all renewals or other extensions.
Section 3. PURCHASE PRICE
(a) The unit prices of the Products shall be the prices set forth
opposite the model number on ** OMITTED PURSUANT TO CONFIDENTIAL
TREATMENT REQUEST **
(b) If the Buyer chooses to renew this Agreement in accordance with
Section 2(a), ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST **
- ---------------
** Multiple asterisks indicate that the portion of this document so marked has
been omitted as a confidential portion of this document and has been filed
separately with the Commission.
<PAGE>
Section 4. PRICE INCREASES.
** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST **.
-2-
<PAGE>
Section 5. PURCHASE LIMITS
(a) Buyer shall purchase from Seller ** OMITTED PURSUANT TO
CONFIDENTIAL TREATMENT REQUEST **
(b) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST **
(c) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST **
Section 6. PURCHASE PROCEDURES
(a) Beginning on the Effective Date and each week thereafter, Buyer
shall provide Seller with (i) a production order (a "Production Order")
setting forth total quantities of Product by model number to be
purchased by Buyer per week ** OMITTED PURSUANT TO CONFIDENTIAL
TREATMENT REQUEST **
-3-
<PAGE>
Section 7. SHIPMENT
(a) Shipment information and production schedules will be electronically
communicated, telephoned, or faxed to:
Buyer
** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST **
(b) Within twenty-four (24) hours of shipment, Seller will communicate
to Buyer a shipment notification (the "Shipment Notification"),
referencing Buyer's Production Order and citing any deviations
therefrom. Seller shall issue shipping documents and invoices billing
Buyer for Products promptly upon delivery of such Products to Buyer.
** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST **
-4-
<PAGE>
Section 8. DELIVERY, TITLE AND RISK OF LOSS
(a) Subject to the provisions of this Agreement, Products shall be
delivered to Buyer in accordance with instructions of Buyer submitted to
Seller from time to time. ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT
REQUEST **
(b) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST **
Section 9. DELAYS IN DELIVERY
(a) Time is of the essence for all deliveries pursuant to this
Agreement. ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST **
(b) If Seller does not comply with Buyer's requirements herein, Buyer
may, in addition to any other remedies which Buyer may have under the
Uniform Commercial Code or this Agreement, ** OMITTED PURSUANT TO
CONFIDENTIAL TREATMENT REQUEST **
(c) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST **.
(d) Neither party shall be liable for any failure, inability or delay in
performing its obligations hereunder if such failure, inability or delay
is due to an act of God, war, explosion or sabotage, accident, casualty,
Government law, Order or Regulation. Due diligence and every reasonable
effort shall be used by each party in curing such cause and in resuming
performance, such as substitution of material sources or utilization of
overtime or additional workers. ** OMITTED PURSUANT TO CONFIDENTIAL
TREATMENT REQUEST **
-5-
<PAGE>
(a) Products manufactured by Seller for Buyer under this Agreement shall
be of Seller's design and manufacture, except for those changes
specified elsewhere herein, shall conform in quality and safety to
comparable Seller models, and shall be inspected at Seller's factory in
accordance with Seller's standard factory test procedures.
(b) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST **
(c) Samples for test purposes will be supplied to Buyer by Seller for
each new model planned for purchase by Buyer in an amount to be mutually
agreed upon by the parties. Such samples will generally lack U.L. and
other code board approvals and are not merchantable by Buyer. ** OMITTED
PURSUANT TO CONFIDENTIAL TREATMENT REQUEST ** Samples shall otherwise
be delivered in accordance with the same terms as govern the delivery of
Products.
(d) Buyer's prior acceptance of any prototype shall not prejudice
Buyer's right to reject said samples produced as a result of such
prototype, and Buyer shall be under no obligation to purchase Products
resulting from the acceptance of such prototypes if Buyer subsequently
rejects said samples.
(e) For new models, Seller shall prepare and supply to Buyer product
information for each model. This will include operating instructions,
care and maintenance, special safety warnings and installation
instructions. Buyer will then develop the artwork and send it to Seller
for technical review. After approval, Buyer will send negatives or disks
to Seller for the owner's manual installation instruction book (one
book). The artwork will be delivered within twenty-eight (28) days from
receipt of final changes to Seller, and Seller will print the manuals
for use in production. Within fourteen (14) days of Initial production,
Seller will deliver to Buyer ten (10) copies of the printed manual for
Buyer-required archiving.
Section 11. NEW PROPOSALS
(a) Buyer or Seller (the "Proposing Party") may, at any time, propose in
writing to the other party (the "Responding Party") additional changes
to the design, appearance, manufacture, materials, or other aspects of
production of any Product (each a "Proposal"), which proposal shall
provide a brief description of the reasons for such Proposal and the
expected benefits, including cost savings, to result from implementation
of such Proposal.
-6-
<PAGE>
** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST **.
Section 12. TOOLING, UNIQUE MATER1ALS OR EQUIPMENT
If design changes implemented pursuant to Sections 10 or 11 require
specific tooling, equipment or material different from that required for
Seller's manufacture of Products for Buyer and different from that
required for manufacture of Products for sale by Seller itself or by
Seller to other customers, Seller agrees to develop tooling as required
by Buyer to achieve appropriate Product differentiation. ** OMITTED
PURSUANT TO CONFIDENTIAL TREATMENT REQUEST ** Buyer reserves the right
to review all tooling, equipment or material and associated
documentation at any time and reserves the right to first piece article
approval as may be specified by Buyer.
Section 13. QUALITY CONTROL PLANS AND GOALS
(a) At Buyer's request, Seller shall submit its documented quality
plans (each, a "Quality Plan") for Products to Buyer for review. If
Buyer reasonably determines that any Quality Plan is not adequate to
assure that the Products will meet the quality levels specified under
Section 17 hereof ("Warranty: Epidemic Failures") or Buyer's desired
level of quality (which such desired level of quality shall be
commercially reasonable), the parties agree to discuss and resolve those
elements of the Quality Plan which Buyer has determined are not
adequate.
(b) At such time as the parties shall agree, and at least twice per
year, Seller and Buyer shall review and discuss Seller's written plans
and proposals regarding the improvement
-7-
<PAGE>
of the Products' quality and the likely effect of such plans and
proposals. ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST **
Section 14. TRADEMARKS
(a) The Products shall, except as otherwise provided below, bear only
the ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST ** trade
names and/or trademarks. Any rights which may accrue from the use of
any such trademarks or trade names on such Products shall inure to the
sole benefit of Buyer. At Buyer's request, the Products may also bear
the "Speed Queen" trade names and/or trademarks, in which case all such
rights shall continue to inure to the sole benefit of Seller.
(b) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST **
(c) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST **
(d) It is understood and agreed that the names and trademarks of each of
the parties hereto shall remain such party's sole and exclusive
property, and neither Seller nor Buyer nor the divisions, subsidiaries,
or affiliates thereof shall use or authorize the use of trade names or
trademarks on Products covered by this contract which are so similar to
the names or trademarks of the other party as to be likely to cause
confusion of origin or otherwise deceive the public. Upon termination or
expiration of this Agreement, each party will, upon the request of the
other, execute such documents respecting the other's trademarks as might
be necessary or desirable to fully restore to the respective parties
hereto any and all rights which might inadvertently have been lost or
jeopardized as a result of operations under this Agreement.
(e) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST **
-8-
<PAGE>
(f) Anything to the contrary notwithstanding, in the event any statute,
law, rule or regulation of any of the states or other jurisdictions in
which the Products are sold requires that the name of the manufacturer
of Products be indicated or manifested thereon, such identification as
is necessary to comply with such statute, law, rule or regulation may be
placed on the Products.
(g) Seller agrees not to use any of Buyer's trademarks or trade names on
or in connection with the Products except as permitted under this
Agreement, and not to sell or dispose of any Products bearing any of
Buyer's trademarks or trade names to any one other than Buyer, unless
expressly authorized in writing by Buyer.
(h) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST **
Section 15. PATENTS
(a) Seller hereby represents that, to the best of its knowledge, there
are no third party patent, trade secret, or copyright rights which would
be infringed by the manufacture, use or sale of the Products to be
supplied hereunder.
(b) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST **
-9-
<PAGE>
(c) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST **
(d) Nothing in this Agreement shall constitute or be construed as a
grant by one party to the other party of any right or license under any
patent (including any design patent or utility models) or any other
proprietary right or interest in any designs, design data or "know-how"
suggestions, ideas or any other technical information (hereinafter
collectively called "Technical Information") disclosed by one party to
the other hereunder, and the disclosing party shall have the right,
free of any claim for compensation by the receiving party based on such
disclosure, whether or not such rights are subject to registration as
identical property rights, to patent, register, use, license, assign and
alienate, in any manner whatsoever as the disclosing party sees fit, any
Technical Information disclosed hereunder.
(e) The provisions of this Section 15 shall survive any termination of
this Agreement.
Section 16. CONFIDENTIAL INFORMATION
(a) The parties understand and agree that information concerning **
OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST **
(b) The parties agree that during the effectiveness of this Agreement,
each party may disclose Technical Information or other information,
suggestions, or ideas relating to the Products, or to parts thereof,
or to designs or methods of manufacture, tests, or use thereof, to the
other party to be used in the manufacture of Product. ** OMITTED
PURSUANT TO CONFIDENTIAL TREATMENT REQUEST **
-10-
<PAGE>
(c) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST **
(d) The execution of this Agreement or any action taken hereunder by
Buyer shall not constitute, nor in any way be construed as, an
acknowledgment or admission by Buyer of the validity or scope of any
Technical Information which may be supplied by Seller to Buyer during
the term of this Agreement.
Section 17. WARRANTY: EPIDEMIC FAILURE
(a) Buyer shall be responsible for the administration and all costs
associated with Warranty; ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT
REQUEST **
(b)
(c) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST **
(d) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST **
(e) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST **
-11-
<PAGE>
(f) Notwithstanding any other provision of this Agreement, Seller
warrants that the Products and parts sold to Buyer by Seller under this
Agreement shall be of merchantable quality and shall be fit for the use
for which they were intended.
(g) The provisions of this Section 17 shall survive any termination of
this Agreement.
Section 18. REPLACEMENT PARTS
(a) Except as provided in subsection (e), ** OMITTED PURSUANT TO
CONFIDENTIAL TREATMENT REQUEST **
(b) General replacement parts currently in production shall be available
for delivery within a reasonable time, ** OMITTED PURSUANT TO
CONFIDENTIAL TREATMENT REQUEST **
(c) All replacement parts sold to Buyer for Products for the Initial
Term of the Agreement will be invoiced ** OMITTED PURSUANT TO
CONFIDENTIAL TREATMENT REQUEST **
(d) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST ** Parts will
be packaged individually and marked according to Buyer's packing
instructions. Seller is responsible for proper identification of country
of origin in accordance with U.S. customs regulations.
(e) Buyer may, at its discretion, place orders for replacement parts
directly with Seller's suppliers unless Seller owns the tools or
equipment which the supplier would utilize for the manufacture of such
parts. Seller shall include sufficient information on all purchased
parts to enable Buyer to purchase the part from the original supplier,
including the original supplier's name, catalog number, and a complete
electrical or functional description, if applicable, and available to
Seller.
(f) When a particular model that Buyer purchases from Seller is
discontinued, or when running changes are made to a current model,
certain parts may become obsolete to Seller's production line. For
example, this may occur when model changes require alteration of
tools, dies, jigs or fixtures with the result that some parts can no
longer be produced for replacement purposes.
(i) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST **
-12-
<PAGE>
(ii) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST **
(iii) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST **
(g) Seller shall provide Buyer with:
(i) part drawings sufficient for inspection purposes for all
parts which Buyer desires to order. The drawings shall include
main assemblies, subassemblies, and detail drawings together
with a list of related parts (bill of materials). Materials,
finishes, dimensions, tolerances, and any other special
manufacturing specifications shall be clearly indicated. Seller
shall not substitute one part for another without prior Buyer
approval, if such substitute would effect form, fit or function;
(ii) for Buyer's cataloging of new models, Seller shall prepare
and deliver to Buyer Product Service exploded camera ready art,
positives and/or negatives, replacement parts list, including
exploded view of the Product and parts prices and two sets of
blueprints of Product. This material shall be delivered to Buyer
ninety (90) days prior to initial production of the finished
Product. For replacement parts, Seller shall furnish Buyer with
a reproducible current replacement parts list as product
changes; and
(iii) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST **
(h) All replacement parts delivered are subject to inspection and
evaluation before final acceptance by Buyer and will be warranted as
follows:
(i) All functional parts, components, and assemblies are
guaranteed against any defects in design, material, or
workmanship; ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT
REQUEST ** all non-functional parts, components, and assemblies
are guaranteed against any defects in design, material, or
workmanship ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT
REQUEST **
(ii) If any parts offered by Seller are defective in material or
workmanship, or do not conform to Seller's warranty, Buyer shall
have the option of:
(A) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT
REQUEST **
-13-
<PAGE>
(B) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT
REQUEST **
(iii) Seller shall be notified promptly of any and all rejects
and may examine and evaluate such defects within fifteen (15)
working days after receipt of notice. ** OMITTED PURSUANT TO
CONFIDENTIAL TREATMENT REQUEST **
(i) In the event of a fire, flood or other event which prevents Seller
from furnishing Buyer required proprietary parts, Seller shall permit
Buyer to have manufactured all proprietary parts or assemblies which
Buyer requires for as long as the Seller is not in a position to supply
them. In the event Seller is sold to or otherwise acquired by another
company, Seller shall require the acquiring company to assume all
obligations of Seller's company to supply replacement parts to Buyer.
Section 19. SERVICE AND SERVICE TRAINING MATERIALS
Seller shall prepare and deliver to Buyer basic information on new
models or update basic information on revised models thirty (30) days
prior to initial production of finished Product. Service training
material shall include all necessary props or complete Products required
to effectively train field service personnel. ** OMITTED PURSUANT TO
CONFIDENTIAL TREATMENT REQUEST **
Section 20. PRODUCT CERTIFICATION AND COMPLIANCE WITH LAW
(a) Seller shall be responsible for and shall take all necessary steps
to ensure that the Products comply with all applicable laws, rules and
regulations, including all laws, rules and regulations applicable in the
country to which Seller states that the Products are currently certified
for sale.
(b) In the event Buyer makes a request to Seller and provides Seller
with the applicable federal, state or local government specifications
and requirements, or in the event any governmental agency makes such
request or otherwise so requires, Seller shall determine and advise
Buyer in writing whether the Products covered in this Agreement conform
to the government specifications and standards applicable thereto;
provided that Seller is obligated to provide such information only with
respect to Products of which the expected annual purchase hereunder
exceeds the level sufficient to cause investigation by applicable
governmental authorities.
(c) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST **
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<PAGE>
(d) The review or approval by Buyer of any designs, engineering
drawings, quality control procedures, testing of any Seller processes or
equipment by Buyer, or any other aspect of the design and manufacture of
Products hereunder shall in no way relieve Seller of the responsibility
for producing Products which are of good workmanship and performance
and of merchantable quality and fit for the purpose intended.
Section 21. HAZARDOUS CONDITIONS; PRODUCT RECALL
(a) In the event that Seller or Buyer learns of any issue relating to a
potential safety hazard or unsafe condition in the Products covered by
this Agreement or is advised of such by competent authorities of any
Government having jurisdiction over such Products, it will immediately
advise the other party by the most expeditious means of communication.
** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST **
(b) In the event that any Products are found by Seller, Buyer or by any
governmental agency or court having jurisdiction to contain a defect,
serious quality or performance deficiency, or not be in compliance with
any standard or requirement so as to require or make advisable that such
Products be reworked or recalled, Seller will promptly communicate all
relevant facts to Buyer and undertake all corrective actions including
those required to meet all obligations imposed by laws, regulations, or
orders, and shall file all necessary papers, corrective action programs
and other related documents; provided that Buyer shall cooperate with
and assist Seller in any such filing and corrective action, and provided
that nothing contained in this section shall preclude Buyer from taking
such action as may be required of it under any such law or regulation.
** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST **
Section 22. PRODUCT LIABILITY
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<PAGE>
Seller agrees to protect, defend, ** OMMITTED PURSUANT TO CONFIDENTIAL
TREATMENT REQUEST **
Section 23. ASBESTOS, AND PCB
Seller certifies, based on Seller's qualitative determination, that the
Products or parts thereof do not contain asbestos or PCB's at this time and
Seller will not introduce into the Products or replacement components any
parts that contain asbestos or PCB's.
Section 24. COMPLIANCE WITH LAWS
Seller agrees to comply with the applicable provisions of any federal,
state or local law or ordinance and all orders, rules and regulations
issued thereunder. Any provisions, representations or agreements required
thereby to be included in the Agreement resulting from execution of this
Agreement are incorporated herein by reference. Seller will, if requested,
furnish any certifications of compliance required by law or regulation.
Section 25. WORK ON OTHER PARTY'S PREMISES
Buyer's representative shall, upon giving Seller advance notice, have
reasonable access to Seller's premises during working hours to observe work
in progress and to perform an audit on the implementation of any quality
control requirements. The parties shall take all necessary precautions to
prevent injury to person or property during the progress of work and shall
indemnify each other and such other's successors, assigns, agents,
employees and customers against all loss which may result in any way from
any act or omission of either party, agents, employees, or subcontractors.
Performance of audits or testing of equipment or procedures shall not
relieve Seller of any responsibility under quality requirements or warranty
provisions.
Section 26. FURTHER ASSURANCES
Buyer hereby agrees to cooperate with Seller in connection with all matters
relating to this Agreement.
Section 27. ASSIGNMENT
Neither this Agreement, nor any of the rights or interests of Buyer or
Seller hereunder may be assigned, transferred or conveyed by operation of
law or otherwise without the prior written consent of the other party,
except to an affiliate of the transferring party or,
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<PAGE>
in the case of Seller, to any party to which all or substantially all of
the assets and businesses of Seller are also, directly or indirectly,
transferred or conveyed by operation of law at the same time.
Section 28. TERMINATION
** OMMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST **
Section 29. GOVERNING LAW
This Agreement and the relations between the parties under it shall be construed
in accordance with the substantive law of the State of New York. In enforcing
this contract, the parties may initiate proceedings in any appropriate
jurisdiction as they deem fit. The service of any writ or summons or any legal
process in respect to any such action or proceeding may be effected by
forwarding a copy of the writ of summons or statement of
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<PAGE>
claim or other legal process by prepaid letter to the address of the
parties in the Notice provision below.
Section 30. NOTICES
Any notice, request, consent, demand or other communication given or
required to be given under this Agreement shall be effective only if in
writing and delivered personally or mailed by first class registered or
certified mail, postage prepaid, return receipt requested, telex or faxed,
addressed to the respective addresses of the parties as follows:
Notices to Buyer:
** OMMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST **
Notices to Seller:
Raytheon Commercial Laundry, LLC
Shephard Street
Ripon, WI 54971
ATTN: President
Fax: 414-748-4334
Section 31. SURVIVAL OF RIGHTS OF PARTIES
The termination of this Agreement shall not release either party from any
liability, obligation or agreement which, pursuant to any provision of this
Agreement, is to survive or be performed after such expiration or
termination.
Section 32. SUBJECT HEADINGS
The subject headings of this Agreement have been placed thereon for the
convenience of the parties only and shall not be considered in any question
of interpretation or construction of this Agreement.
Section 33. WAIVER
The failure of either party to enforce at any time or for any period of
time any provision, of this Agreement shall not be construed as a waiver of
such provision or of the right of such party thereafter to enforce such
provision.
Section 34. ENTIRE AGREEMENT
(a) All agreements between Buyer and Seller for the sale of the Products by
Seller to Buyer shall include and be governed exclusively by the terms and
conditions set forth in this Agreement, except as the parties may otherwise
agree in writing duly executed by their respective duly authorized
representatives which expressly references this
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Agreement. In case of any conflict between this Agreement and any
Production Order, purchase order, acceptance, correspondence, memorandum,
or document for or relating to the Products exchanged by Buyer and Seller
during the term of this Agreement which is not executed by duly authorized
representatives of both parties, this Agreement shall govern and prevail.
Any printed terms and conditions of any such documents shall, in any event,
be deemed deleted and shall not be binding upon the parties.
(b) The foregoing contains the entire and only agreement between the
parties respecting the manufacture of Products and sale thereof by Seller
to Buyer and the purchase by Buyer from Seller of such Products. All prior
and collateral representations, promise or conditions in connection with
the subject matter are merged herein. Any representation, promise or
condition not incorporated herein shall not be binding upon either party.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed in duplicate as of the date first above written.
[APPLIANCE CO.]
BY: ** OMMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST **
BY:
--------------------------------
Title:
RAYTHEON COMMERCIAL LAUNDRY LLC
BY: /s/ Bruce P. Rounds
--------------------------------
Title: Vice President Business Development & Secretary
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<PAGE>
EXHIBIT 10.44
SUPPLY AGREEMENT II
BETWEEN
RAYTHEON COMMERCIAL LAUNDRY LLC
AND
[APPLIANCE CO.]
DATED AS OF
SEPTEMBER 10, 1997
<PAGE>
SUPPLY AGREEMENT II
-------------------
As of the 10th day of September, 1997, Raytheon Commercial Laundry LLC,
a Delaware limited liability company, with its principal office at Shepard
Street, Ripon, Wisconsin, 54971 (hereinafter referred to as "Buyer") and
[Appliance Co.] (hereinafter referred to as "Seller"), in consideration of the
mutual covenants contained herein and such other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
hereby agree as follows:
Section 1. SALE AND PURCHASE
Seller will manufacture and sell to Buyer, and Buyer will purchase from
Seller, **OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST**
Section 2. TERM OF AGREEMENT
(a) This Agreement shall be in effect from **OMITTED PURSUANT TO
CONFIDENTIAL TREATMENT REQUEST**
(b) For purposes of this Agreement the "Expiration Date" shall mean,
**OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST**
(c) In the event of non-renewal at Buyer's request, **OMITTED PURSUANT
TO CONFIDENTIAL TREATMENT REQUEST**
- --------------------
** Multiple asterisks indicate that the portion of this document so marked has
been omitted as a confidential portion of this document and has been filed
separately with the Commission.
<PAGE>
Section 3. PURCHASE PRICE.
(a) The unit prices of the Products shall be the prices set forth
opposite the model number on **OMITTED PURSUANT TO CONFIDENTIAL
TREATMENT REQUEST.**
(b) If the Buyer chooses to renew this Agreement in accordance with
Section 2(a), **OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST.**
Section 4. PURCHASE LIMITS
(a) Buyer shall purchase from Seller the following **OMITTED PURSUANT TO
CONFIDENTIAL TREATMENT REQUEST.**
(b) **OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST.**
(c) **OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST.**
Section 5. PRICE INCREASES.
**OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST.**
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<PAGE>
Section 6. PURCHASE PROCEDURES
(a) Beginning on the Effective Date and each week thereafter, Buyer
shall provide Seller with (i) a production order (a "Production Order")
setting forth total quantities of Product by model number to be
purchased by Buyer per week **OMITTED PURSUANT TO CONFIDENTIAL TREATMENT
REQUEST.**
(b) **OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST.**
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<PAGE>
(i) **OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST.**
(ii) **OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST.**
(c) **OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST.**
(d) **OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST.**
(e) **OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST.**
Section 7. SHIPMENT
(a) Shipment information and production schedules will be electronically
communicated, telephoned, or faxed to:
Buyer
Shepherd Street
Ripon, WI 54971
Phone: 414-748-1730
Fax: 414-748-4334
(b) Within twenty-four (24) hours of shipment, Seller will communicate
to Buyer a shipment notification (the "Shipment Notification"),
referencing Buyer's Production Order and citing any deviations
therefrom. Seller shall issue shipping documents and invoices billing
Buyer for Products promptly upon delivery of such Products to Buyer.
**OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST.**
Section 8. DELIVERY, TITLE AND RISK OF LOSS
(a) Subject to the provisions of this Agreement, Products shall be
delivered to Buyer in accordance with instructions of Buyer submitted to
Seller from time to time. **OMITTED PURSUANT TO CONFIDENTIAL TREATMENT
REQUEST.**
(b) **OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST.**
Section 9. DELAYS IN DELIVERY
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<PAGE>
(a) Time is of the essence for all deliveries pursuant to this Agreement.
**OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST**
(b) If Seller does not comply with Buyer's requirements herein, Buyer may, in
addition to any other remedies which Buyer may have under the Uniform Commercial
Code or this Agreement, **OMITTED PURSUANT TO CONFIDENTIAL TREATMENT
REQUEST**
(c) **OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST**
(d) Neither party shall be liable for any failure, inability or delay in
performing its obligations hereunder if such failure, inability or delay is due
to an act of God, war, explosion or sabotage, accident, casualty, Government
law, Order or Regulation. Due diligence and every reasonable effort shall be
used by each party in curing such cause and in resuming performance, such as
substitution of material sources or utilization of overtime or additional
workers. **OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST**
Section 10. DESIGN; PRODUCT CHANGES
(a) Products manufactured by Seller for Buyer under this Agreement shall
be of Seller's design and manufacture, except for those changes
specified elsewhere herein, shall conform in quality and safety to
comparable Seller models, and shall be inspected at Seller's factory in
accordance with Seller's standard factory test procedures.
(b) **OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST**
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<PAGE>
(c) Samples for test purposes will be supplied to Buyer by Seller for
each new model planned for purchase by Buyer in an amount to be mutually
agreed upon by the parties. Such samples will generally lack U.L. and
other code board approvals and are not merchantable by Buyer. **OMITTED
PURSUANT TO CONFIDENTIAL TREATMENT REQUEST** Samples shall otherwise be
delivered in accordance with the same terms as govern the delivery of
Products.
(d) Buyer's prior acceptance of any prototype shall not prejudice
Buyer's right to reject said samples produced as a result of such
prototype, and Buyer shall be under no obligation to purchase Products
resulting from the acceptance of such prototypes if Buyer subsequently
rejects said samples.
(e) For new models, Seller shall prepare and supply to Buyer product
information for each model. This will include operating instructions,
care and maintenance, special safety warnings and installation
instructions. Buyer will then develop the artwork and send it to Seller
of technical review. After approval, Buyer will send negatives or disks
to Seller for the owner's manual installation instruction book (one
book). The artwork will be delivered within twenty-eight (28) days from
receipt of final changes to Seller, and Seller will print the manuals
for use in production. Within fourteen (14) days of Initial production,
Seller will deliver to Buyer ten (10) copies of the printed manual for
Buyer-required archiving.
Section 11. NEW PROPOSALS
(a) Buyer or Seller (the "Proposing Party") may, at any time, propose in
writing to the other party (the "Responding Party") additional changes
to the design, appearance, manufacture, materials, or other aspects of
production of any Product (each a "Proposal"), which proposal shall
provide a brief description of the reasons for such Proposal and the
expected benefits, including cost savings, to result from implementation
of such Proposal. **OMITTED PURSUANT TO CONFIDENTIAL TREATMENT
REQUEST**
(b) Upon acceptance of any Proposal, the Seller shall follow the
procedures outlined in Section 10(c) with respect to production of
samples.
(c) **OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST**
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<PAGE>
Section 12. TOOLING, UNIQUE MATERIALS OR EQUIPMENT
If design changes implemented pursuant to Section 10 or 11 require
specific tooling, equipment or material different from that required for
Seller's manufacture of Products for Buyer and different from that
required for manufacture of Products for sale by Seller itself or by Seller
to other customers, Seller agrees to develop tooling as required by Buyer
to achieve appropriate Product differentiation. ** OMITTED PURSUANT TO
CONFIDENTIAL TREATMENT REQUEST** Buyer reserves the right to review all
tooling, equipment or material and associated documentation at any time and
reserves the right to first piece article approval as may be specified by
Buyer.
Section 13. COMMERCIAL UNIQUE DESIGNS
(a) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST**
(b) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST**
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<PAGE>
(c) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST**
-8-
<PAGE>
(d) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST**
Section 14. INCOMPLETE HOME DESIGNS
** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST**
Section 15. ENGINEERING SUPPORT
** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST**
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<PAGE>
Section 16. TOOLING, UNIQUE MATERIALS OR EQUIPMENT
If design changes implemented pursuant to Sections 15 or 16 require
specific tooling, equipment or material different from that required for
Seller's manufacture of Products for Buyer and different from that required
for manufacture of Products for sale by Seller itself or by Seller to other
customers, Seller agrees to develop tooling as required by Buyer to achieve
appropriate Product differentiation. **OMITTED PURSUANT TO CONFIDENTIAL
TREATMENT REQUEST** Buyer reserves the right to review all tooling,
equipment or material and associated documentation at any time and reserves
the right to first piece article approval as may be specified by Buyer.
Section 17. QUALITY CONTROL PLANS AND GOALS
(a) At Buyer's request, Seller shall submit its documented quality plans
(each, a "Quality Plan") for Products to Buyer for review. If Buyer
reasonably determines that any Quality Plan is not adequate to assure that
the Products will meet the quality levels specified under Section 20 hereof
("Warranty: Epidemic Failures") or Buyer's desired level of quality (which
such desired level of quality shall be commercially reasonable), the
parties agree to discuss and resolve those elements of the Quality Plan
which Buyer has determined are not adequate.
(b) At such time as the parties shall agree, and at least twice per year,
Seller and Buyer shall review and discuss Seller's written plans and
proposals regarding the improvement of the Products' quality and the likely
effect of such plans and proposals. **OMITTED PURSUANT TO CONFIDENTIAL
TREATMENT REQUEST**
Section 18. TRADEMARK
(a) The Products shall, except as otherwise provided below, bear only the
**OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST** trade names and/or
trademarks. Any rights which may accrue from the use of any such trademarks
or trade names on such Products shall inure to the sole benefit of Buyer.
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<PAGE>
(b) **OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST**
(c) **OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST**
(d) It is understood and agreed that the names and trademarks of each of
the parties hereto shall remain such party's sole and exclusive property,
and neither Seller nor Buyer nor the divisions, subsidiaries, or affiliates
thereof shall use or authorize the use of trade names or trademarks on
Products covered by this contract which are so similar to the names or
trademarks of the other party as to be likely to cause confusion of origin
or otherwise deceive the public. Upon termination or expiration of this
Agreement, each party will, upon the request of the other, execute such
documents respecting the other's trademarks as might be necessary or
desirable to fully restore to the respective parties hereto any and all
rights which might inadvertently have been lost or jeopardized as a result
of operations under this Agreement.
(e) Buyer agrees not to use any trademarks or trade names of Seller on or
in connection with the Products, nor to refer to Seller or any of its
divisions, subsidiaries or affiliates in any of Buyer's promotional
literature or in any other advertising relating to the Products. Buyer will
take all reasonable acts to discourage any use of Seller's trademarks or
trade names by any dealer or distributor in connection with Products.
(f) Anything to the contrary notwithstanding, in the event any statute,
law, rule or regulation of any of the states or other jurisdictions in
which the Products are sold requires that the name of the manufacturer of
Products be indicated or manifested thereon, such identification as is
necessary to comply with such statute, law, rule or regulation may be
placed on the Products.
(g) Seller agrees not to use any of Buyer's trademarks or trade names on or
in connection with the Products except as permitted under this Agreement,
and not to sell or dispose of any Products bearing any of Buyer's
trademarks or trade names to any one other than Buyer, unless expressly
authorized in writing by Buyer.
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<PAGE>
Section 19. PATENTS
(a) Seller hereby represents that, to the best of its knowledge, there are
no third party patent, trade secret, or copyright rights which would be
infringed by the manufacture, use or sale of the Products to be supplied
hereunder.
(b) **OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST**
(c) **OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST**
(d) Nothing in this Agreement shall constitute or be construed as a grant
by one party to the other party of any right or license under any patent
(including any design patent or utility models) or any other proprietary
right or interest in any designs, design data, or "know-how" suggestions,
ideas or any other technical information (hereinafter collectively called
"Technical Information") disclosed by one party to the other hereunder, and
the disclosing party shall have the right, free of any claim for
compensation by the receiving party based on such disclosure, whether or
not such rights are subject to registration as identical property rights,
to patent, register, use, license, assign and alienate, in any manner
whatsoever as the disclosing party sees fit, any Technical Information
disclosed hereunder.
(e) The provisions of this Section 18 shall survive any termination of this
Agreement.
Section 20. CONFIDENTIAL INFORMATION
(a) **OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST**
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<PAGE>
(b) The parties agree that during the effectiveness of this Agreement, each
party may disclose Technical Information or other information, suggestions,
or ideas relating to the Products, or to parts thereof, or to designs or
methods of manufacture, tests, or use thereof, to the other party to be
used in the manufacture of Product. **OMITTED PURSUANT TO CONFIDENTIAL
TREATMENT REQUEST**
(c) **OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST**
(d) The execution of this Agreement or any action taken hereunder by Buyer
shall not constitute, nor in any way be construed as, an acknowledgment or
admission by Buyer of the validity or scope of any Technical Information
which may be supplied by Seller to Buyer during the term of this Agreement.
Section 21. WARRANTY: EPIDEMIC FAILURE
(a) Buyer shall be responsible for the administration and all costs
associated with Warranty; **OMITTED PURSUANT TO CONFIDENTIAL TREATMENT
REQUEST**
(b) **OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST**
(c) **OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST**
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<PAGE>
(d) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST. **
(e) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST. **
(f) Notwithstanding any other provision of this Agreement, Seller
warrants that the Products and parts sold to Buyer by Seller under this
Agreement shall be of merchantable quality and shall be fit for the use
for which they were intended.
(g) The provisions of this Section 20 shall survive any termination of
this Agreement.
Section 22. REPLACEMENT PARTS
(a) Except as provided in subsection (e) ** OMITTED PURSUANT TO
CONFIDENTIAL TREATMENT REQUEST. **
(b) General replacement parts currently in production shall be available
for delivery within a reasonable time, ** OMITTED PURSUANT TO
CONFIDENTIAL TREATMENT REQUEST. **
(c) All replacement parts sold to Buyer for Products for the initial
term of the agreement will be invoiced ** OMITTED PURSUANT TO
CONFIDENTIAL TREATMENT REQUEST. **
(d) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST. ** Parts will
be packaged individually and marked according to Buyer's packing
instructions. Seller is responsible for proper identification of country
of origin in accordance with U.S. customs regulations.
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<PAGE>
(e) Buyer may, at its discretion, place orders for replacement parts
directly with Seller's suppliers unless Seller owns the tools or
equipment which the supplier would utilize for the manufacture of such
parts. Seller shall include sufficient information on all purchased
parts to enable Buyer to purchase the part from the original supplier,
including the original supplier's name, catalog number, and a complete
electrical or functional description, if applicable, and available to
Seller.
(f) When a particular model that Buyer purchases from Seller is
discontinued, or when running changes are made to a current model,
certain parts may become obsolete to Seller's production line. For
example, this may occur when model changes require alteration of tools,
dies, jigs or fixtures with the result that some parts can no longer be
produced for replacement purposes.
(i) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST. **
(ii) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST. **
(iii) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST. **
(g) Seller shall provide Buyer with:
(i) part drawings sufficient for inspection purposes for all
parts which Buyer desires to order. The drawings shall include
main assemblies, subassemblies, and detail drawings together
with a list of related parts (bill of materials). Materials,
finishes, dimensions, tolerances, and any other special
manufacturing specifications shall be clearly indicated. Seller
shall not substitute one part for another without prior Buyer
approval, if such substitute would effect form, fit or function;
(ii) for Buyer's cataloging of new models, Seller shall prepare
and deliver to Buyer Product Service exploded camera ready art,
positives and/or negatives, replacement parts list, including
exploded view of the Product and parts prices and two sets of
blueprints of Product. This material shall be delivered to Buyer
ninety (90) days prior to initial production of the finished
Product. For replacement parts, Seller shall furnish Buyer with
a reproducible current replacement parts list as product
changes; and
(iii) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST. **
(h) All replacement parts delivered are subject to inspection and evaluation
before final acceptance by Buyer and will be warranted as follows:
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(i) All functional parts, components, and assemblies are
guaranteed against any defects in design, material, or
workmanship, ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT
REQUEST ** all non-functional parts, components, and assemblies
are guaranteed against any defects in design, material, or
workmanship ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT
REQUEST **
(ii) If any parts offered by Seller are defective in material or
workmanship, or do not conform to Seller's warranty, Buyer
shall have the option of:
(A) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT
REQUEST **
(B) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT
REQUEST **
(iii) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST **
(i) In the event of a fire, flood or other event which prevents Seller
from furnishing Buyer required proprietary parts, Seller shall permit
Buyer to have manufactured all proprietary parts or assemblies which
Buyer requires for as long as the Seller is not in a position to supply
them. In the event Seller is sold to or otherwise acquired by another
company, Seller shall require the acquiring company to assume all
obligations of Seller's company to supply replacement parts to Buyer.
Section 23. SERVICE AND SERVICE TRAINING MATERIALS
Seller shall prepare and deliver to Buyer basic information on new
models or update basic information on revised models thirty (30) days
prior to initial production of finished Product. Service training
material shall include all necessary props or complete Products required
to effectively train field service personnel. ** OMITTED PURSUANT TO
CONFIDENTIAL TREATMENT REQUEST **
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Section 24. PRODUCT CERTIFICATION AND COMPLIANCE WITH LAW
(a) Seller shall be responsible for and shall take all necessary steps
to ensure that the Products comply with all applicable laws, rules and
regulations, including all laws, rules and regulations applicable in the
country to which Seller states that the Products are currently certified
for sale.
(b) In the event Buyer makes a request to Seller and provides Seller
with the applicable federal, state or local government specifications
and requirements, or in the event any governmental agency makes such
request or otherwise so requires, Seller shall determine and advise
Buyer in writing whether the Products covered in this Agreement conform
to the government specifications and standards applicable thereto;
provided that Seller is obligated to provide such information only with
respect to Products of which the expected annual purchase hereunder
exceeds the level sufficient to cause investigation by applicable
governmental authorities.
(c) ** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST. **
(d) The review or approval by Buyer of any designs, engineering
drawings, quality control procedures, testing of any Seller processes or
equipment by Buyer, or any other aspect of the design and manufacture of
Products hereunder shall in no way relieve Seller of the responsibility
for producing Products which are of good workmanship and performance and
of merchantable quality and fit for the purpose intended.
Section 25. HAZARDOUS CONDITIONS; PRODUCT RECALL
(a) In the event that Seller or Buyer learns of any issue relating to a
potential safety hazard or unsafe condition in the Products covered by
this Agreement or is advised of such by competent authorities of any
Government having jurisdiction over such Products, it will immediately
advise the other party by the most expeditious means of communication.
** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST. **
(b) In the event that any Products are found by Seller, Buyer or by any
governmental agency or court having jurisdiction to contain a defect,
serious quality or performance deficiency, or not be in compliance with
any standard or requirement so as to require or make advisable that such
Products be reworked or recalled, Seller will promptly communicate all
relevant facts to Buyer and undertake all corrective actions including
those required to meet all obligations imposed by laws, regulations, or
orders, and shall
-17-
<PAGE>
file all necessary papers, corrective action programs and other related
documents; provided that Buyer shall cooperate with and assist Seller in
any such filing and corrective action, and provided that nothing
contained in this section shall preclude Buyer from taking such action
as may be required of it under any such law or regulation. ** OMITTED
PURSUANT TO CONFIDENTIAL TREATMENT REQUEST. **
Section 26. PRODUCT LIABILITY
Seller agrees to protect, defend, ** OMITTED PURSUANT TO CONFIDENTIAL
TREATMENT REQUEST. **
Section 27. ASBESTOS, AND PCB.
Seller certifies, based on Seller's qualitative determination, that the
Products or parts thereof do not contain asbestos or PCB's at this time
and Seller will not introduce into the Products or replacement
components any parts that contain asbestos or PCB's.
Section 28. COMPLIANCE WITH LAWS.
Seller agrees to comply with the applicable provisions of any federal,
state or local law or ordinance and all orders, rules and regulations
issued thereunder. Any provisions, representations or agreements
required thereby to be included in the Agreement resulting from
execution of this Agreement are incorporated herein by reference. Seller
will, if requested, furnish any certifications of compliance required by
law or regulation.
Section 29. WORK ON OTHER PARTY'S PREMISES.
-18-
<PAGE>
Buyer's representative shall, upon giving Seller advance notice, have
reasonable access to Seller's premises during working hours to observe
work in progress and to perform an audit on the implementation of any
quality control requirements. The parties shall take all necessary
precautions to prevent injury to person or property during the progress
of work and shall indemnify each other and such other's successors,
assigns, agents, employees and customers against all loss which may
result in any way from any act or omission of either party, agents,
employees, or subcontractors. Performance of audits or testing of
equipment or procedures shall not relieve Seller of any responsibility
under quality requirements or warranty provisions.
Section 30. FURTHER ASSURANCES.
Buyer hereby agrees to cooperate with Seller in connection with all
matters relating to this Agreement.
Section 31. FURTHER ASSURANCES.
Buyer hereby agrees to cooperate with Seller in connection with all
matters relating to this Agreement.
Section 32. ASSIGNMENT.
Neither this Agreement, nor any of the rights or interests of Buyer or
Seller hereunder may be assigned, transferred or conveyed by operation
of law or otherwise without the prior written consent of the other
party, except to an affiliate of the transferring party or, in the case
of Seller, to any party to which all or substantially all of the assets
and businesses of Seller are also, directly or indirectly, transferred
or conveyed by operation of law at the same time.
Section 33. TERMINATION.
** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST. **
-19-
<PAGE>
Section 34. GOVERNING LAW.
This Agreement and the relations between the parties under it shall be
construed in accordance with the substantive law of the State of New
York. In enforcing this contract, the parties may initiate proceedings
in any appropriate jurisdiction as they deem fit. The service of any
writ or summons or any legal process in respect to any such action or
proceeding may be effected by forwarding a copy of the writ of summons
or statement of claim or other legal process by prepaid letter to the
address of the parties in the Notice provision below.
Section 35. NOTICES.
Any notice, request, consent, demand or other communication given or
required to be given under this Agreement shall be effective only if in
writing and delivered personally or mailed by first class registered or
certified mail, postage prepaid, return receipt requested, telex or
faxed, addressed to the respective addresses of the parties as follows:
Notices to Buyer:
Raytheon Commercial Laundry, LLC
Shepard Street
Ripon, WI 54971
ATTN: President
Fax: (414) 748-4334
Notices to Buyer:
** OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST. **
Section 36. SURVIVAL OF RIGHTS OF PARTIES.
-20-
<PAGE>
The termination of this Agreement shall not release either party from
any liability, obligation or agreement which, pursuant to any provision
of this Agreement, is to survive or be performed after such expiration
or termination.
Section 37. SUBJECT HEADINGS.
The subject headings of this Agreement have been placed thereon for the
convenience of the parties only and shall not be considered in any
question of interpretation or construction of this Agreement.
Section 38. WAIVER.
The failure of either party to enforce at any time or for any period of
time any provision, of this Agreement shall not be construed as a waiver
of such provision or of the right of such party thereafter to enforce
such provision.
Section 39. ENTIRE AGREEMENT.
(a) All agreements between Buyer and Seller for the sale of the Products
by Seller to Buyer shall include and be governed exclusively by the
terms and conditions set forth in this Agreement, except as the parties
may otherwise agree in writing duly executed by their respective duly
authorized representatives which expressly references this Agreement. In
case of any conflict between this Agreement and any Production Order,
purchase order, acceptance, correspondence, memorandum, or document for
or relating to the Products exchanged by Buyer and Seller during the
term of this Agreement which is not executed by duly authorized
representatives of both parties, this Agreement shall govern and
prevail. Any printed terms and conditions of any such documents shall,
in any event, be deemed deleted and shall not be binding upon the
parties.
(b) The foregoing contains the entire and only agreement between the
parties respecting the manufacture of Products and sale thereof by
Seller to Buyer and the purchase by Buyer from Seller of such Products.
All prior and collateral representations, promise or conditions in
connection with the subject matter are merged herein. Any
representation, promise or condition not incorporated herein shall not
be binding upon either party.
-21-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed in duplicate as of the date first above written.
RAYTHEON COMMERCIAL LAUNDRY LLC
BY: /s/ Bruce P. Rounds
-----------------------------------
Title: VICE PRESIDENT BUSINESS
DEVELOPMENT & SECRETARY
[APPLIANCE CO.]
BY: ** OMITTED PURSUANT TO CONFIDENTIAL
TREATMENT REQUEST. **
-----------------------------------
BY:
-----------------------------------
-22-
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF ALLIANCE LAUNDRY SYSTEMS LLC
--------------------------------------------
---------------------------------------------------------------------
NAME OF SUBSIDIARY PLACE OF INCORPORATION
------------------ ----------------------
---------------------------------------------------------------------
1. Alliance Laundry Corporation Delaware
---------------------------------------------------------------------
2. Alliance Commercial Appliance Delaware
Receivables LLC
---------------------------------------------------------------------
3. Alliance Commercial Appliances Delaware
Finance LLC
---------------------------------------------------------------------
4. Alliance Laundry S.A. Argentina
---------------------------------------------------------------------
5. Alliance Laundry Receivables Delaware
Warehouse LLC
---------------------------------------------------------------------
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 (File
No. 333-56857) of our report dated January 23, 1998 on our audits of the
combined financial statements and financial statement schedule of the
Commercial Laundry Business of Raytheon Company. We also consent to the
references to our firm under the captions "Experts", "Selected Historical
Combined Financial Data", and "Summary Historical and Unaudited Pro Forma
Combined Financial and Operating Data."
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
August 3, 1998
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
9 5/8% SENIOR SUBORDINATED NOTES DUE 2008
OF
ALLIANCE LAUNDRY SYSTEMS LLC
AND
ALLIANCE LAUNDRY CORPORATION
Pursuant to the Offering Memorandum Dated , 1998
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON [ ], 1998 UNLESS EXTENDED (THE "EXPIRATION DATE").
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
If you desire to accept the Exchange Offer, this Letter of Transmittal
should be completed, signed, and submitted to the Exchange Agent:
By Overnight Courier: By Hand: By Registered or
United States Trust United States Trust Certified Mail:
Company of New York Company of New York United States Trust
770 Broadway, 13th Floor 111 Broadway Company of New York
New York, New York 10003 Lower Level P.O. Box 844
Attn: Corporate Trust Attn: Corporate Trust Attn: Corporate Trust
Services Services Services Cooper Station
Telephone: (800) 548-6565 New York, New York New York, New York 10276-0844
Facsimile: (212) 420-6152 10006 Telephone: (800) 548-6565
Facsimile: (212) 420-6152
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
FOR ANY QUESTIONS REGARDING THIS LETTER OF TRANSMITTAL OR FOR ANY ADDITIONAL
INFORMATION, YOU MAY CONTACT THE EXCHANGE AGENT BY TELEPHONE AT (800) 548-6565
OR BY FACSIMILE AT (212) 420-6152.
The undersigned hereby acknowledges receipt of the Offering Memorandum dated
, 1998 (the "Offering Memorandum") of Alliance Laundry Systems LLC, a
Delaware limited liability company (the "Company") and Alliance Laundry
Corporation, a Delaware corporation ("ALC" and, together with the Company, the
"Issuers"), and this Letter of Transmittal (the "Letter of Transmittal"), that
together constitute the Issuer's offer (the "Exchange Offer") to exchange
$1,000 in principal amount of its Series B 9 5/8% Senior Subordinated Notes
due 2008 (the "Exchange Notes"), which have been registered under the
Securities Act of 1933, as amended (together with the rules and regulations
promulgated thereunder, the "Securities Act"), pursuant to a Registration
Statement for each $1,000 in principal amount of its outstanding Series A 9
5/8% Senior Subordinated Notes due 2008 (the "Notes"), of which $110,000,000
aggregate principal amount is outstanding.
The Letter of Transmittal is to be used by holders of Notes if (i)
certificates representing Notes are to be physically delivered to the Exchange
Agent herewith by such holders; (ii) tender of Notes is to be made by book-
entry transfer to the Exchange Agent's account at the Depository Trust Company
<PAGE>
(the "Book-Entry Transfer Facility") pursuant to the procedures set forth
under the caption "The Exchange Offer--Procedures for Tendering" in the
Offering Memorandum; or (iii) tender of Notes is to be made according to the
guaranteed delivery procedures set forth under the caption "The Exchange
Offer--Guaranteed Delivery Procedures" in the Prospectus; and, in each case,
instructions are not being transmitted through the DTC Automated Tender Offer
Program ("ATOP").
Holders of Notes that are tendering by book-entry transfer to the Exchange
Agent's account at the Book-Entry Transfer Facility can execute the tender
through ATOP for which the transaction will be eligible. The Book-Entry
Transfer Facility participants that are accepting the Exchange Offer must
transmit their acceptances to the Book-Entry Transfer Facility which will
verify the acceptance and execute a book-entry delivery to the Exchange
Agent's account at the Book-Entry Transfer Facility. The Book-Entry Transfer
Facility will then send an Agent's Message to the Exchange Agent for its
acceptance. Delivery of the Agent's Message by the Book-Entry Transfer
Facility will satisfy the terms of the Exchange Offer as to execution and
delivery of a Letter of Transmittal by the participant identified in the
Agent's Message.
The undersigned hereby tenders the Notes described in Box 1 below (the
"Tendered Notes") pursuant to the terms and conditions described in the
Offering Memorandum and this Letter of Transmittal. The undersigned is the
registered owner of all the Tendered Notes and the undersigned represents that
it has received from each beneficial owner of the Tendered Notes ("Beneficial
Owners") a duly completed and executed form of "Instructions to Registered
Holder and/or Book-Entry Transfer Facility Participant from Beneficial Owner"
accompanying this Letter of Transmittal, instructing the undersigned to take
the action described in this Letter of Transmittal.
Subject to, and effective upon, the acceptance for exchange of the Tendered
Notes, the undersigned hereby exchanges, assigns, and transfers to, or upon
the order of, the Issuer, all right, title, and interest in, to, and under the
Tendered Notes.
Please issue the Exchange Notes exchanged for Tendered Notes in the name(s)
of the undersigned. Similarly, unless otherwise indicated under "Special
Delivery Instructions" below (Box 3), please send or cause to be sent the
certificates for the Exchange Notes (and accompanying documents, as
appropriate) to the undersigned at the address shown below in Box 1.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as the true and lawful agent and attorney in fact of the undersigned
with respect to the Tendered Notes, with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest), to (i) deliver the Tendered Notes to the Issuers or cause ownership
of the Tendered Notes to be transferred to, or upon the order of, the Issuers,
on the books of the registrar for the Notes and deliver all accompanying
evidences of transfer and authenticity to, or upon the order of, the Issuers
upon receipt by the Exchange Agent, as the undersigned's agent, of the
Exchange Notes to which the undersigned is entitled upon acceptance by the
Issuers of the Tendered Notes pursuant to the Exchange Offer, and (ii) receive
all benefits and otherwise exercise all rights of beneficial ownership of the
Tendered Notes, all in accordance with the terms of the Exchange Offer.
The undersigned understands that tenders of Notes pursuant to the procedures
described under the caption "The Exchange Offer" in the Offering Memorandum
and in the instructions hereto will constitute a binding agreement between the
undersigned and the Issuers upon the terms and subject to the conditions of
the Exchange Offer, subject only to withdrawal of such tenders on the terms
set forth in the Offering Memorandum under the caption "The Exchange Offer--
Withdrawal of Tenders." All authority herein conferred or agreed to be
conferred shall survive the death or incapacity of the undersigned and any
Beneficial Owner(s), and every obligation of the undersigned or any Beneficial
Owners hereunder shall be binding upon the heirs, representatives, successors,
and assigns of the undersigned and such Beneficial Owner(s).
2
<PAGE>
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, exchange, assign, and transfer the Tendered
Notes and that the Issuers will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges, encumbrances, and adverse
claims when the Tendered Notes are acquired by the Issuers as contemplated
herein. The undersigned and each Beneficial Owner will, upon request, execute
and deliver any additional documents reasonably requested by the Issuers or
the Exchange Agent as necessary or desirable to complete and give effect to
the transactions contemplated hereby.
The undersigned hereby represents and warrants that the information set
forth in Box 2 is true and correct.
By accepting the Exchange Offer, the undersigned hereby represents and
warrants that (i) the Exchange Notes to be acquired by the undersigned and any
Beneficial Owner(s) in connection with the Exchange Offer are being acquired
by the undersigned and any Beneficial Owner(s) in the ordinary course of
business of the undersigned and any Beneficial Owner(s), (ii) the undersigned
and each Beneficial Owner are not participating, do not intend to participate,
and have no arrangement or understanding with any person to participate, in
the distribution of the Exchange Notes, (iii) except as otherwise disclosed in
writing herewith, neither the undersigned nor any Beneficial Owner is an
"affiliate," as defined in Rule 405 under the Securities Act, of the Issuers,
and (iv) the undersigned and each Beneficial Owner acknowledge and agree that
any person participating in the Exchange Offer with the intention or for the
purpose of distributing the Exchange Notes must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
a secondary resale of the Exchange Notes acquired by such person and cannot
rely on the position of the Staff of the Securities and Exchange Commission
(the "Commission") set forth in the no-action letters that are discussed in
the section of the Offering Memorandum entitled "The Exchange Offer." In
addition, by accepting the Exchange Offer, the undersigned hereby (i)
represents and warrants that, if the undersigned or any Beneficial Owner of
the Notes is a Participating Broker-Dealer, such Participating Broker-Dealer
acquired the Notes for its own account as a result of market-making activities
or other trading activities and has not entered into any arrangement or
understanding with either of the Issuers or any affiliate of either of the
Issuers (within the meaning of Rule 405 under the Securities Act) to
distribute the Exchange Notes to be received in the Exchange Offer, and (ii)
acknowledges that, by receiving Exchange Notes for its own account in exchange
for Notes, where such Notes were acquired as a result of market-making
activities or other trading activities, such Participating Broker-Dealer will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes.
[_]CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED HEREWITH.
[_]CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE
"Use of Guaranteed Delivery" BELOW (Box 4).
[_]CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE "Use of Book-Entry Transfer" BELOW (Box 5).
3
<PAGE>
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING THE
BOXES
BOX 1
DESCRIPTION OF NOTES TENDERED
(Attach additional signed pages, if necessary)
<TABLE>
- --------------------------------------------------------------------------------------------------
<CAPTION>
NAME(S) AND ADDRESS(ES) OF REGISTERED AGGREGATE
NOTE HOLDER(S), EXACTLY AS NAME(S) APPEAR(S) ON CERTIFICATE PRINCIPAL AMOUNT AGGREGATE
NOTE CERTIFICATE(S) NUMBER(S) OF REPRESENTED BY PRINCIPAL AMOUNT
(PLEASE FILL IN, IF BLANK) NOTES* CERTIFICATE(S) TENDERED**
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
TOTAL
- --------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by persons tendering by book-entry transfer.
** The minimum permitted tender is $1,000 in principal amount of Notes.
All other tenders must be in integral multiples of $1,000 of principal
amount. Unless otherwise indicated in this column, the principal
amount of all Note Certificates identified in this Box 1 or delivered
to the Exchange Agent herewith shall be deemed tendered. See
Instruction 4.
BOX 2
BENEFICIAL OWNER(S)
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
STATE OF PRINCIPAL RESIDENCE OF EACH PRINCIPAL AMOUNT OF TENDERED NOTES
BENEFICIAL OWNER OF TENDERED NOTES HELD FOR ACCOUNT OF BENEFICIAL OWNER
- -------------------------------------------------------------------------------
<S> <C>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
BOX 3
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
TO BE COMPLETED ONLY IF EXCHANGE NOTES EXCHANGED FOR NOTES AND UNTENDERED
NOTES ARE TO BE SENT TO SOMEONE OTHER THAN THE UNDERSIGNED, OR TO THE UN-
DERSIGNED AT AN ADDRESS OTHER THAN THAT SHOWN ABOVE.
Mail Exchange Note(s) and any
untendered Notes to:
Name(s):
---------------------------------------------------------------------------
(please print)
Address:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(include Zip Code)
Tax Identification or
Social Security No.:
BOX 4
USE OF GUARANTEED DELIVERY
(SEE INSTRUCTION 2)
TO BE COMPLETED ONLY IF NOTES ARE BEING TENDERED BY MEANS OF A NOTICE OF
GUARANTEED DELIVERY.
Name(s) of Registered Holder(s):
---------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery: _______________________
Name of Institution which Guaranteed Delivery: ____________________________
BOX 5
USE OF BOOK-ENTRY TRANSFER
(SEE INSTRUCTION 1)
TO BE COMPLETED ONLY IF DELIVERY OF TENDERED NOTES IS TO BE MADE BY BOOK-
ENTRY TRANSFER.
Name of Tendering Institution: ____________________________________________
Account Number: ___________________________________________________________
Transaction Code Number: __________________________________________________
5
<PAGE>
BOX 6
TENDERING HOLDER SIGNATURE
(SEE INSTRUCTIONS 1 AND 5)
IN ADDITION, COMPLETE SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
X _________________________________ Signature Guarantee
(If required by Instruction 5)
X _________________________________
(Signature of Authorized Signature
Registered
Holder(s) or
Authorized
Signatory)
X _________________________________
Name: _____________________________
(please print)
Note: The above lines must be
signed by the registered holder(s)
of Notes as their name(s) ap-
pear(s) on the Notes or by
persons(s) authorized to become
registered holder(s) (evidence of
which authorization must be trans-
mitted with this Letter of Trans-
mittal). If signature is by a
trustee, executor, administrator,
guardian, attorney-in-fact, offi-
cer, or other person acting in a
fiduciary or representative capac-
ity, such person must set forth
his or her full title below. See
Instruction 5.
Title: ____________________________
Name of Firm: _____________________
(Must be an
Eligible
Institution as
defined in
Instruction 2)
Address: __________________________
-----------------------------
-----------------------------
(include Zip Code)
Name(s): __________________________ Area Code and Telephone Number:
---------------------------- -----------------------------
Capacity: _________________________ Dated: ____________________________
----------------------------
Street Address: ___________________
----------------------------
BOX 7
----------------------------
(include Zip Code)
BROKER-DEALER STATUS
Area Code and Telephone Number:
- --------------------------------------------------------------------------------
----------------------------
[_]Check this box if the Beneficial Owner of the Notes is a Participating
Broker-Dealer and such Participating Broker-Dealer acquired the Notes
for its own account as a result of market-making activities or other
trading activities.
Tax Identification or Social
Security Number:
----------------------------
6
<PAGE>
PAYOR'S NAME: ALLIANCE LAUNDRY SYSTEMS LLC
Name (if joint names, list first and circle the name
of the person or entity whose number you enter in
Part 1 below. See instructions if your name has
changed.)
SUBSTITUTE
FORM W-9
---------------------------------------------------------
DEPARTMENT OF THE Address
TREASURY
---------------------------------------------------------
INTERNAL REVENUE City, State and ZIP Code
SERVICE
---------------------------------------------------------
List account number(s) here (optional)
---------------------------------------------------------
PART 1--PLEASE PROVIDE YOUR TAXPAYER Social
IDENTIFICATION NUMBER ("TIN") IN THE Security
BOX AT RIGHT AND CERTIFY BY SIGNING Number or
AND DATING BELOW. TIN
---------------------------------------------------------
PART 2--Check the box if you are NOT subject to
backup withholding under the provisions of section
3406(a)(1)(C) of the Internal Revenue Code because
(1) you have not been notified that you are subject
to backup withholding as a result of failure to
report all interest or dividends or (2) the Internal
Revenue Service has notified you that you are no
longer subject to backup withholding. [_]
---------------------------------------------------------
PART
CERTIFICATION--UNDER THE PENALTIES OF 3 --
PERJURY, I CERTIFY THAT THE Awaiting
INFORMATION PROVIDED ON THIS FORM IS TIN [_]
TRUE, CORRECT, AND COMPLETE.
SIGNATURE _______________ DATE ________
NOTE: WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAX-
PAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FAILURE TO COMPLETE
AND RETURN THIS FORM MAY RESULT IN BACKUP FOR ADDITIONAL DETAILS.
7
<PAGE>
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND NOTES. A properly completed
and duly executed copy of this Letter of Transmittal, including Substitute
Form W-9, and any other documents required by this Letter of Transmittal must
be received by the Exchange Agent at its address set forth herein, and either
certificates for Tendered Notes must be received by the Exchange Agent at its
address set forth herein or such Tendered Notes must be transferred pursuant
to the procedures for book-entry transfer described in the Offering Memorandum
under the caption "The Exchange Offer--Procedure for Tendering" (and a
confirmation of such transfer received by the Exchange Agent), in each case
prior to 5:00 p.m., New York City time, on the Expiration Date. The method of
delivery of certificates for Tendered Notes, this Letter of Transmittal and
all other required documents to the Exchange Agent is at the election and risk
of the tendering holder and the delivery will be deemed made only when
actually received by the Exchange Agent. If delivery is by mail, registered
mail with return receipt requested, properly insured, is recommended. Instead
of delivery by mail, it is recommended that the Holder use an overnight or
hand delivery service. In all cases, sufficient time should be allowed to
assure timely delivery. No Letter of Transmittal or Notes should be sent to
the Issuers. Neither the Issuers nor the registrar is under any obligation to
notify any tendering holder of the Issuers' acceptance of Tendered Notes prior
to the closing of the Exchange Offer.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Notes
but whose Notes are not immediately available, and who cannot deliver their
Notes, this Letter of Transmittal or any other documents required hereby to
the Exchange Agent prior to the Expiration Date must tender their Notes
according to the guaranteed delivery procedures set forth below, including
completion of Box 4. Pursuant to such procedures: (i) such tender must be made
by or through a firm which is a member of a recognized Medallion Program
approved by the Securities Transfer Association Inc. (an "Eligible
Institution") and the Notice of Guaranteed Delivery must be signed by the
holder; (ii) prior to the Expiration Date, the Exchange Agent must have
received from the holder and the Eligible Institution a properly completed and
duly executed Notice of Guaranteed Delivery (by mail or hand delivery) setting
forth the name and address of the holder, the certificate number(s) of the
Tendered Notes and the principal amount of Tendered Notes, stating that the
tender is being made thereby and guaranteeing that, within three New York
Stock Exchange trading days after the Expiration Date, this Letter of
Transmittal together with the certificate(s) representing the Notes and any
other required documents will be deposited by the Eligible Institution with
the Exchange Agent; and (iii) such properly completed and executed Letter of
Transmittal, as well as all other documents required by this Letter of
Transmittal and the certificate(s) representing all Tendered Notes in proper
form for transfer, must be received by the Exchange Agent within three New
York Stock Exchange trading days after the Expiration Date. Any holder who
wishes to tender Notes pursuant to the guaranteed delivery procedures
described above must ensure that the Exchange Agent receives the Notice of
Guaranteed Delivery relating to such Notes prior to 5:00 p.m., New York City
time, on the Expiration Date. Failure to complete the guaranteed delivery
procedures outlined above will not, of itself, affect the validity or effect a
revocation of any Letter of Transmittal form properly completed and executed
by an Eligible Holder who attempted to use the guaranteed delivery process.
3. BENEFICIAL OWNER INSTRUCTIONS TO REGISTERED HOLDERS. Only a holder in
whose name Tendered Notes are registered on the books of the registrar (or the
legal representative or attorney-in-fact of such registered holder) may
execute and deliver this Letter of Transmittal. Any Beneficial Owner of
Tendered Notes who is not the registered holder must arrange promptly with the
registered holder to execute and deliver this Letter of Transmittal on his or
her behalf through the execution and delivery to the registered holder of the
Instructions to Registered Holder and/or Book-Entry Transfer Facility
Participant from Beneficial Owner form accompanying this Letter of
Transmittal.
8
<PAGE>
4. PARTIAL TENDERS. Tenders of Notes will be accepted only in integral
multiples of $1,000 in principal amount. If less than the entire principal
amount of Notes held by the holder is tendered, the tendering holder should
fill in the principal amount tendered in the columns labeled "Aggregate
Principal Amount Tendered" of the box entitled "Description of Notes Tendered"
(Box 1) above . The entire principal amount of Notes delivered to the Exchange
Agent will be deemed to have been tendered unless otherwise indicated. If the
entire principal amount of all Notes held by the holder is not tendered, then
Notes for the principal amount of Notes not tendered and Exchange Notes issued
in exchange for any Notes tendered and accepted will be sent to the Holder at
his or her registered address, unless a different address is provided in the
appropriate box on this Letter of Transmittal, as soon as practicable
following the Expiration Date.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the
registered holder(s) of the Tendered Notes, the signature must correspond with
the name(s) as written on the face of the Tendered Notes without alteration,
enlargement or any change whatsoever.
If any of the Tendered Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any Tendered
Notes are held in different names, it will be necessary to complete, sign and
submit as many separate copies of the Letter of Transmittal as there are
different names in which Tendered Notes are held.
If this Letter of Transmittal is signed by the registered holder(s) of
Tendered Notes, and Exchange Notes issued in exchange therefor are to be
issued (and any untendered principal amount of Notes is to be reissued) in the
name of the registered holder(s), then such registered holder(s) need not and
should not endorse any Tendered Notes, nor provide a separate bond power. In
any other case, such registered holder(s) must either properly endorse the
Tendered Notes or transmit a properly completed separate bond power with this
Letter of Transmittal, with the signature(s) on the endorsement or bond power
guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any Tendered Notes, such Tendered Notes must be
endorsed or accompanied by appropriate bond powers, in each case, signed as
the name(s) of the registered holder(s) appear(s) on the Tendered Notes, with
the signature(s) on the endorsement or bond power guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Tendered Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations, or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and, unless waived by
the Issuers, evidence satisfactory to the Issuers of their authority to so act
must be submitted with this Letter of Transmittal.
Endorsements on Tendered Notes or signatures on bond powers required by this
Instruction 5 must be guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution unless the Tendered Notes are tendered (i) by a registered holder
who has not completed the box set forth herein entitled "Special Delivery
Instructions" (Box 3) or (ii) by an Eligible Institution.
6. SPECIAL DELIVERY INSTRUCTIONS. Tendering holders should indicate, in the
applicable box (Box 3), the name and address to which the Exchange Notes
and/or substitute Notes for principal amounts not tendered or not accepted for
exchange are to be sent, if different from the name and address of the person
signing this Letter of Transmittal. In the case of issuance in a different
name, the taxpayer identification or social security number of the person
named must also be indicated.
9
<PAGE>
7. TRANSFER TAXES. The Issuers will pay all transfer taxes, if any,
applicable to the exchange of Tendered Notes pursuant to the Exchange Offer.
If, however, a transfer tax is imposed for any reason other than the transfer
and exchange of Tendered Notes pursuant to the Exchange Offer, then the amount
of any such transfer taxes (whether imposed on the registered holder or on any
other person) will be payable by the tendering holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted with
this Letter of Transmittal, the amount of such transfer taxes will be billed
directly to such tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Tendered Notes listed in this Letter
of Transmittal.
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that the
holder(s) of any Tendered Notes which are accepted for exchange must provide
the Issuers (as payor) with their correct taxpayer identification number
("TIN"), which, in the case of a holder who is an individual, is his or her
social security number. If the Issuers are not provided with the correct TIN,
the Holder may be subject to backup withholding and a $50 penalty imposed by
the Internal Revenue Service. (If withholding results in an over-payment of
taxes, a refund may be obtained.) Certain holders (including, among others,
all corporations and certain foreign individuals) are not subject to these
backup withholding and reporting requirements. See the enclosed "Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9"
for additional instructions.
To prevent backup withholding, each holder of Tendered Notes must provide
such holder's correct TIN by completing the Substitute Form W-9 set forth
herein, certifying that the TIN provided is correct (or that such holder is
awaiting a TIN), and that (i) the holder has not been notified by the Internal
Revenue Service that such holder is subject to backup withholding as a result
of failure to report all interest or dividends or (ii) the Internal Revenue
Service has notified the holder that such holder is no longer subject to
backup withholding. If the Tendered Notes are registered in more than one name
or are not in the name of the actual owner, consult the "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
information on which TIN to report.
The Issuers reserves the right in their sole discretion to take whatever
steps are necessary to comply with the Issuers' obligation regarding backup
withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form, eligibility
(including time of receipt), acceptance and withdrawal of Tendered Notes will
be determined by the Issuers in their sole discretion, which determination
will be final and binding. The Issuers reserve the right to reject any and all
Notes not validly tendered or any Notes the Issuers' acceptance of which
would, in the opinion of the Issuers or their counsel, be unlawful. The
Issuers also reserves the right to waive any conditions of the Exchange Offer
or defects or irregularities in tenders of Notes as to any ineligibility of
any holder who seeks to tender Notes in the Exchange Offer. The interpretation
of the terms and conditions of the Exchange Offer (including this Letter of
Transmittal and the instructions hereto) by the Issuers shall be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Notes must be cured within such time as the Issuers
shall determine. Neither the Issuers, the Exchange Agent nor any other person
shall be under any duty to give notification of defects or irregularities with
respect to tenders of Notes, nor shall any of them incur any liability for
failure to give such notification. Tenders of Notes will not be deemed to have
been made until such defects or irregularities have been cured or waived. Any
Notes received by the Exchange Agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering holders, unless otherwise
provided in this Letter of Transmittal, as soon as practicable following the
Expiration Date.
10. WAIVER OF CONDITIONS. The Issuers reserve the absolute right to amend,
waive or modify any of the conditions in the Exchange Offer in the case of any
Tendered Notes.
10
<PAGE>
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or
contingent tender of Notes or transmittal of this Letter of Transmittal will
be accepted.
12. MUTILATED, LOST, STOLEN OR DESTROYED NOTES. Any tendering Holder whose
Notes have been mutilated, lost, stolen or destroyed should contact the
Exchange Agent at the address indicated herein for further instructions.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance and requests for additional copies of the Offering Memorandum or
this Letter of Transmittal may be directed to the Exchange Agent at the
address indicated herein. Holders may also contact their broker, dealer,
commercial bank, trust company or other nominee for assistance concerning the
Exchange Offer.
14. ACCEPTANCE OF TENDERED NOTES AND ISSUANCE OF NOTES; RETURN OF
NOTES. Subject to the terms and conditions of the Exchange Offer, the Issuers
will accept for exchange all validly tendered Notes as soon as practicable
after the Expiration Date and will issue Exchange Notes therefor as soon as
practicable thereafter. For purposes of the Exchange Offer, the Issuers shall
be deemed to have accepted tendered Notes when, as and if the Issuers have
given written or oral notice (immediately followed in writing) thereof to the
Exchange Agent. If any Tendered Notes are not exchanged pursuant to the
Exchange Offer for any reason, such unexchanged Notes will be returned,
without expense, to the undersigned at the address shown in Box 1 or at a
different address as may be indicated herein under "Special Delivery
Instructions" (Box 3).
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the procedures set
forth in the Offering Memorandum under the caption "The Exchange Offer."
11
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
9 5/8% SENIOR SUBORDINATED NOTES DUE 2008
OF
ALLIANCE LAUNDRY SYSTEMS LLC
AND
ALLIANCE LAUNDRY CORPORATION
Pursuant to the Offering Memorandum Dated , 1998
This form must be used by a holder of 9 5/8% Senior Subordinated Notes due
2008 (the "Notes") of Alliance Laundry Systems LLC, a Delaware limited
liability company (the "Company") and Alliance Laundry Corporation, a Delaware
corporation ("ALC" and, together with the Company, the "Issuers"), who wishes
to tender Notes to the Exchange Agent pursuant to the guaranteed delivery
procedures described in "The Exchange Offer--Guaranteed Delivery Procedures"
of the Company's Offering Memorandum, dated , 1998 (the "Offering
Memorandum") and in Instruction 2 to the related Letter of Transmittal. Any
holder who wishes to tender Notes pursuant to such guaranteed delivery
procedures must ensure that the Exchange Agent receives this Notice of
Guaranteed Delivery prior to the Expiration Date of the Exchange Offer.
Capitalized terms used but not defined herein have the meanings ascribed to
them in the Offering Memorandum or the Letter of Transmittal.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON [ ], 1998 UNLESS EXTENDED (THE "EXPIRATION DATE").
United States Trust Company of New York
(the "Exchange Agent")
By Overnight Courier: By Hand By Registered or
United States Trust United States Trust Certified Mail:
Company of New York Company of New York United States Trust
770 Broadway, 13th Floor 111 Broadway Company of New York
New York, New York 10003 Lower Level P.O. Box 844
Attn: Corporate Trust Attn: Corporate Trust Attn: Corporate Trust
Services Services Services
Telephone: (800) 548-6565 New York, New York 10006 Cooper Station
New York, New York
10276-0844
Telephone: (800) 548-6565
Facsimile: (212) 420-6152
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE WILL
NOT CONSTITUTE A VALID DELIVERY.
Facsimile: (212) 420-
6152
<PAGE>
This form 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" under the instructions thereto, such signature guarantee must
appear in the applicable space provided in the signature box on the Letter of
Transmittal.
Ladies and Gentlemen:
The undersigned hereby tenders to the Issuers, upon the terms and subject to
the conditions set forth in the Offering Memorandum and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Notes set forth below pursuant to the guaranteed delivery procedures set forth
in the Offering Memorandum and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Notes listed below:
<TABLE>
<CAPTION>
CERTIFICATE NUMBER(S) (IF KNOWN) OF NOTES OR AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
ACCOUNT NUMBER AT THE BOOK-ENTRY FACILITY AMOUNT REPRESENTED AMOUNT TENDERED
- ----------------------------------------------------------------------------------------
<S> <C> <C>
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
PLEASE SIGN AND COMPLETE
- --------------------------------------------------------------------------------
Signatures of Registered Holder(s)
or Authorized Signatory: ____________
_____________________________________ Date: _______ , 1998
Address: ____________________________
_____________________________________ _____________________________________
Name(s) of Registered Holder(s): ____ Area Code and Telephone No. _________
_____________________________________
_____________________________________
This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly
as their name(s) appear on certificates for Notes or on a security position
listing as the owner of Notes, or by person(s) authorized to become
Holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
Please print name(s) and address(es)
Name(s): ____________________________________________________________________
_____________________________________________________________________________
Capacity: ___________________________________________________________________
Address(es): ________________________________________________________________
_____________________________________________________________________________
3
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., or is a commercial bank or trust company having an office or
correspondent in the United States, or is otherwise an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended, guarantees deposit with the Exchange Agent
of the Letter of Transmittal (or facsimile thereof), together with the Notes
tendered hereby in proper form for transfer (or confirmation of the book-
entry transfer of such Notes into the Exchange Agent's account at the Book-
Entry Transfer Facility described in the Offering Memorandum under the
caption "The Exchange Offer--Guaranteed Delivery Procedures" and in the
Letter of Transmittal) and any other required documents, all by 5:00 p.m.,
New York City time, on the third New York Stock Exchange trading day
following the Expiration Date.
Name of firm ________________________ _____________________________________
Address _____________________________ (Authorized Signature)
_____________________________________ Name ________________________________
(Include Zip Code) (Please Print)
Area Code and Tel. No. ______________ Title _______________________________
Dated ___________________ , 1998
DO NOT SEND SECURITIES WITH THIS FORM. ACTUAL SURRENDER OF SECURITIES MUST BE
MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF TRANSMITTAL.
4
<PAGE>
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed and
duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by
the Exchange Agent at its address set forth herein prior to the Expiration
Date. The method of delivery of this Notice of Guaranteed Delivery and any
other required documents to the Exchange Agent is at the election and sole
risk of the holder, and the delivery will be deemed made only when actually
received by the Exchange Agent. If delivery is by mail, registered mail with
return receipt requested, properly insured, is recommended. As an alternative
to delivery by mail, the holders may wish to consider using an overnight or
hand delivery service. In all cases, sufficient time should be allowed to
assure timely delivery. For a description of the guaranteed delivery
procedures, see Instruction 2 of the Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Notes
referred to herein, the signature must correspond with the name(s) written on
the face of the Notes without alteration, enlargement, or any change
whatsoever. If this Notice of Guaranteed Delivery is signed by a participant
of the Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of the Notes, the signature must correspond with the name
shown on the security position listing as the owner of the Notes.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Notes listed or a participant of the Book-Entry
Transfer Facility, this Notice of Guaranteed Delivery must be accompanied by
appropriate bond powers, signed as the name of the registered holder(s)
appears on the Notes or signed as the name of the participant shown on the
Book-Entry Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and submit with the Letter of Transmittal evidence
satisfactory to the Issuers of such person's authority to so act.
3. Requests for Assistance or Additional Copies. Questions and requests for
assistance and requests for additional copies of the Offering Memorandum may
be directed to the Exchange Agent at the address specified in the Offering
Memorandum. Holders may also contact their broker, dealer, commercial bank,
trust company, or other nominee for assistance concerning the Exchange Offer.
5
<PAGE>
EXHIBIT 99.3
INSTRUCTIONS TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER
OF
ALLIANCE LAUNDRY SYSTEMS LLC
AND
ALLIANCE LAUNDRY CORPORATION
9 5/8% SENIOR SUBORDINATED NOTES DUE 2008
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Offering Memorandum,
dated , 1998 (the "Offering Memorandum") of Alliance Laundry Systems
LLC, a Delaware limited liability company (the "Company") and Alliance Laundry
Corporation, a Delaware Corporation ("ALC" and, together with the Company, the
"Issuers"), and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Issuers' offer (the "Exchange
Offer"). Capitalized terms used but not defined herein have the meanings
ascribed to them in the Offering Memorandum.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to action to be taken by you relating to the Exchange
Offer with respect to the 9 5/8% Senior Subordinated Notes due 2008 (the
"Notes") held by you for the account of the undersigned.
The aggregate face amount of the Notes held by you for the account of the
undersigned is (FILL IN AMOUNT): $ of the 9 5/8% Senior Subordinated
Notes due 2008.
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
[_]TO TENDER the following Notes held by you for the account of the
undersigned (INSERT PRINCIPAL AMOUNT OF NOTES TO BE TENDERED, IF ANY):
$
[_]NOT TO TENDER any Notes held by you for the account of the undersigned.
If the undersigned instruct you to tender the Notes held by you for the
account of the undersigned, it is understood that you are authorized (a) to
make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representation and warranties contained in
the Letter of Transmittal that are to be made with respect to the undersigned
as a beneficial owner, including but not limited to the representations that
(i) the undersigned's principal residence is in the state of (FILL IN STATE)
, (ii) the undersigned is acquiring the Exchange Notes in the
ordinary course of business of the undersigned, (iii) the undersigned is not
participating, does not participate, and has no arrangement or understanding
with any person to participate in the distribution of the Exchange Notes, (iv)
the undersigned acknowledges that any person participating in the Exchange
Offer for the purpose of distributing the Exchange Notes must comply with the
registration and prospectus delivery requirements of the Securities Act of
1933, as amended (the "Act"), in connection with a secondary resale
transaction of the Exchange Notes acquired by such person and cannot rely on
the position of the Staff of the Securities and Exchange Commission set forth
in no-action letters that are discussed in the section of the Offering
Memorandum entitled "The Exchange Offer--Resales of the Exchange Notes," and
(v) the undersigned is not an "affiliate," as defined in Rule 405 under the
Act, of either of the Issuers; (b) to agree, on behalf of the undersigned, as
set forth in the Letter of Transmittal; and (c) to take such other action as
necessary under the Offering Memorandum or the Letter of Transmittal to effect
the valid tender of such Notes.
<PAGE>
SIGN HERE
Name of beneficial owner(s): ________________________________________________
Signature(s): _______________________________________________________________
Name (please print): ________________________________________________________
Address: ____________________________________________________________________
______________________________________________________________________
______________________________________________________________________
Telephone number: ___________________________________________________________
Taxpayer Identification or Social Security Number: __________________________
Date: _______________________________________________________________________
