<PAGE>
As filed with the Securities and Exchange Commission on August 5, 1998
Registration No. 333-60247
333-60247-01
333-60247-02
333-60247-03
333-60247-04
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________
AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
___________________
COYNE INTERNATIONAL ENTERPRISES CORP.
BLUE RIDGE TEXTILE MANUFACTURING, INC.
CLEAN TOWEL SERVICE, INC.
OHIO GARMENT RENTAL, INC.
MIDWAY-CTS BUFFALO, LTD.
(Exact name of registrants as specified in their charter)
<TABLE>
<S> <C> <C>
NEW YORK 7210 16-6040758
GEORGIA 7210 58-2018333
GEORGIA 7210 58-1205265
OHIO 7210 34-1261376
NEW YORK 7210 16-1469155
- --------------------------------------------------------------------------------
(State or other jurisdiction of (Primary standard industrial (I.R.S. employer
incorporation or organization) classification code number) identification no.)
- -------------------------------------------------------------------------------------------------------
</TABLE>
140 CORTLAND AVENUE
SYRACUSE, NY 13221
(315) 475-1626
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
____________________
THOMAS M. COYNE
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER
COYNE INTERNATIONAL ENTERPRISES CORP.
140 CORTLAND AVENUE
SYRACUSE, NY 13221
TELEPHONE: (315) 475-1626
FACSIMILE: (315) 475-9978
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
_____________________
Copy to:
FRANCIS E. DEHEL, ESQUIRE
BLANK ROME COMISKY & MCCAULEY LLP
ONE LOGAN SQUARE
PHILADELPHIA, PENNSYLVANIA 19103
TELEPHONE: (215) 569-5500
FACSIMILE: (215) 569-5555
_____________________
<PAGE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b)under the Securities Act, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
EACH CLASS OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER NOTE(1) OFFERING PRICE(1) FEE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11 1/4% Series B Senior
Subordinated Notes due 2008 $75,000,000 $1,000 $75,000,000 $22,125(3)
- -----------------------------------------------------------------------------------------------------------------
Guarantees of 11 1/4%
Series B Senior $75,000,000 (2) (2) None
Subordinated Notes due 2008
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(f).
(2) No further fee is payable pursuant to Rule 457(n).
(3) Such fee was previously paid by the Registrant on July 30, 1998
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>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED AUGUST 5, 1998
PROSPECTUS
COYNE INTERNATIONAL ENTERPRISES CORP.
OFFER TO EXCHANGE ITS 11 1/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2008,WHICH
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, FOR ANY AND
ALL OF ITS OUTSTANDING 11 1/4% SERIES A SENIOR SUBORDINATED NOTES DUE 2008.
The Exchange Offer will expire at 5:00 p.m., New York City time, on ,
1998, unless extended.
-----------
Coyne International Enterprises Corp. d/b/a/ Coyne Textile Services ("CTS" or
the "Company"), a New York corporation, hereby offers (the "Exchange Offer"),
upon the terms and conditions set forth in this Prospectus (the "'Prospectus")
and the accompanying Letter of Transmittal (the "'Letter of Transmittal"), to
exchange $1,000 principal amount of its 11 1/4% 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 Prospectus is a part, for each $1,000
principal amount of its outstanding 11 1/4% Series A Senior Subordinated Notes
due 2008 (the "'Initial Notes"), of which $75,000,000 principal amount is
outstanding. The Exchange Notes and the Initial Notes are each sometimes
referred to herein as the "'Notes." The form and terms of the Exchange Notes
are the same as the form and terms of the Initial Notes (which they replace),
except that the Exchange Notes (i) will bear a Series B designation and a
different CUSIP number from the Initial Notes, (ii) will have been registered
under the Securities Act and, therefore, will not bear legends restricting
their transfer and (iii) will no longer be entitled to certain rights under the
Registration Rights Agreement (as defined herein). The Exchange Notes evidence
the same debt as the Initial Notes and will be issued under and be entitled to
the benefits of the Indenture, dated as of June 26, 1998 (the "Indenture"),
between the Company, the Guarantors (as defined herein) and IBJ Schroder Bank &
Trust Company, as trustee (the "Trustee"), which also governs the Initial
Notes. See "Exchange Offer."
The Exchange Notes will be general unsecured obligations of the Company, will
rank subordinate in right of payment to all Senior Debt (as defined herein) and
will rank senior or pari passu in right of payment to all existing and future
subordinated indebtedness of the Company. The Exchange Notes will be
unconditionally guaranteed (the "Subsidiary Guarantees") on a senior
subordinated basis by all of the Company's current and future Domestic
Subsidiaries (as defined herein) other than Receivables Subsidiaries (as
defined herein) (the "Guarantors"). The Subsidiary Guarantees will be general
unsecured obligations of the Guarantors, will rank subordinate in right of
payment to all Senior Debt of the Guarantors and will rank senior or pari passu
in right of payment to all existing and future subordinated indebtedness of the
Guarantors. As of April 30, 1998, on an as adjusted basis, the Company and its
subsidiaries had approximately $10.6 million of Senior Debt outstanding.
The Notes mature on June 1, 2008, unless previously redeemed. Interest on the
Notes is payable semiannually on June 1 and December 1, commencing December 1,
1998. The Notes will be redeemable at the option of the Company, in whole or in
part, on or after June 1, 2003, at the redemption prices set forth herein, plus
accrued and unpaid interest thereon and Liquidated Damages (as defined herein),
if any, to the redemption date. Upon a Change of Control (as defined herein),
the Company will be required to make an offer to repurchase all outstanding
Notes at 101% of the principal amount thereof plus accrued and unpaid interest
thereon and Liquidated Damages, if any, to the date of repurchase. (Cover
continued on following page.)
-----------
See "RISK FACTORS" BEGINNING ON PAGE 19 HEREIN FOR A DESCRIPTION OF CERTAIN
RISKS TO BE CONSIDERED BY HOLDERS WHO TENDER THEIR INITIAL NOTES IN THE
EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSIONER OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1998.
<PAGE>
The Company will accept for exchange any and all Initial Notes duly tendered
and not validly withdrawn prior to 5:00 p.m., New York City time, on ,
1998, unless extended by the Company in its sole discretion (the "'Expiration
Date"). Tenders of Initial Notes may be withdrawn at any time prior to 5:00
p.m. New York City time on the Expiration Date. The Exchange Offer is subject
to certain customary conditions. The Initial Notes were sold by the Company on
June 26, 1998 to NationsBanc Montgomery Securities, LLC and First Union
Capital Markets, a division of Wheat First Securities, Inc. (the "Initial
Purchasers") in a transaction not registered under the Securities Act in
reliance upon an exemption from registration under the Securities Act (the
"Offering"). The Initial Purchasers subsequently resold the Initial Notes in
the United States to qualified institutional buyers in reliance upon Rule 144A
under the Securities Act. Accordingly, the Initial 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 Company under the
Registration Rights Agreement (as defined herein) entered into by the Company
in connection with the Offering. See "Exchange Offer."
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Company believes
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 the Company within the meaning of Rule
405 under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business
and such holder has no arrangement or understanding with any person to
participate in the distribution of such Exchange Notes. See "Exchange Offer."
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer (a "Participating Broker-Dealer") 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 Prospectus, 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 Initial Notes where such Initial Notes
were acquired by such Participating Broker-Dealer as a result of market-making
activities or other trading activities. The Company has agreed that for a
period ending on the earlier of (i) 180 days from the date on which the
Exchange Offer Registration Statement is declared effective, and (ii) the date
on which a Participating Broker-Dealer is no longer required to deliver a
prospectus in connection with market making or other trading activities, it
will make this Prospectus available to any Participating Broker-Dealer for use
in connection with any such resale; provided, however, that the Company and
the Guarantors will have no obligation to amend or supplement this Prospectus
unless the Company has received written notice from a Participating Broker-
Dealer of their prospectus delivery requirements under the Securities Act
within fifteen (15) business days following consummation of the Exchange
Offer. See "Plan of Distribution."
Holders of Initial Notes not tendered and accepted in the Exchange Offer
will continue to hold such Initial 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. In
the event that any changes in law or the applicable interpretations of the
staff of the Commission do not permit the Company to effect the Exchange Offer
or if any holder of the Initial Notes (other than any such holder which is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) is not eligible to participate in the Exchange Offer, and such holder has
satisfied certain conditions relating to the provision of information to the
Company for use therein, the Company will, at its cost, use its best efforts
to (a) file a shelf registration statement (the "Shelf Registration
Statement") covering resales of the Initial Notes, (b) cause the Shelf
Registration Statement to be declared effective under the Securities Act and
(c) keep continuously effective the Shelf Registration Statement for a period
of at least two years. Other than as set forth above, holders of Initial Notes
not tendered in the Exchange Offer will not retain any rights under the
Registration Rights Agreement, except in limited circumstances. The Company
will pay all the expenses incurred by it incident to the Exchange Offer. See
"Exchange Offer."
<PAGE>
The Initial Notes are eligible for trading in the Private Offerings, Resales
and Trading through Automated Linkages ("PORTAL") Market. There has not
previously been any public market for the Initial Notes or the Exchange Notes.
The Company does 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. If a market for the Exchange Notes should develop, the Exchange
Notes could trade at a discount from their principal amount. See "Risk
Factors--Absence of Public Market Could Adversely Affect the Value of Notes."
Moreover, to the extent that Initial Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered and tendered but unaccepted
Initial Notes could be adversely affected.
The Company will not receive any proceeds from, and has agreed to bear all
registration expenses of, the Exchange Offer. No underwriter is being used in
connection with the Exchange Offer. See "'Exchange Offer--Fees and Expenses."
<PAGE>
AVAILABLE INFORMATION
The Company and the Guarantors have filed with the Commission a Registration
Statement on Form S-4 (the "Exchange Offer Registration Statement," which term
shall encompass all amendments, exhibits, annexes and schedules thereto)
pursuant to the Securities Act, and the rules and regulations promulgated
thereunder, covering the Exchange Notes being offered hereby. This Prospectus
does not contain all the information set forth in the Exchange Offer
Registration Statement. For further information with respect to the Company,
the Guarantors and the Exchange Offer, reference is made to the Exchange Offer
Registration Statement. Statements made in this Prospectus as to the contents
of any contract, agreement or other document referred to are not necessarily
complete. With respect to each such contract, agreement or other document
filed as an exhibit to the Exchange Offer Registration Statement, reference is
made to the exhibit for a more complete description of the document or matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference. The Exchange Offer Registration Statement, including the
exhibits thereto, can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, 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. The
Commission also maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
http://www.sec.gov.
As a result of the filing of the Exchange Offer Registration Statement with
the Commission, the Company and the Guarantors 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 Company and the Guarantors 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
Company other than the fiscal year in which the Exchange Offer Registration
Statement is declared effective. The Company will nevertheless be required to
continue to file reports with the Commission if the Exchange Notes are listed
on a national securities exchange. The Indenture provides that, whether or not
required by the rules and regulations of the Commission, so long as any Notes
are outstanding and commencing with information relating to the fiscal quarter
ended July 31, 1998, the Company will furnish to the holders of Notes (i) all
quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the
Company were required to file such Forms, including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and, with
respect to the annual information only, a report thereon by the Company's
certified independent accountants and (ii) all current reports that would be
required to be filed with the Commission on Form 8-K if the Company were
required to file such reports, in each case, within the time periods specified
in the Commission's rules and regulations. In addition, commencing after the
consummation of the Exchange Offer, whether or not required by the rules and
regulations of the Commission, the Company will file a copy of all such
information and reports with the Commission for public availability (unless
the Commission will not accept such a filing) within the time periods
specified in the Commission's rules and regulations, and make such information
available to securities analysts and prospective investors upon their
reasonable request. In addition, each of the Company and the Guarantors has
agreed that, for so long as any Notes remain outstanding, it 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.
i
<PAGE>
NOTE REGARDING FORWARD-LOOKING INFORMATION
THE INFORMATION CONTAINED IN THIS PROSPECTUS CONTAINS "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995, WHICH ARE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH
AS "MAY," "WILL," "COULD," "SHOULD," "EXPECT," "ANTICIPATE," "INTEND," "PLAN,"
"ESTIMATE" OR "CONTINUE" OR THE NEGATIVE THEREOF OR OTHER VARIATIONS THEREOF.
SUCH FORWARD-LOOKING STATEMENTS ARE NECESSARILY BASED ON VARIOUS ASSUMPTIONS
AND ESTIMATES AND ARE INHERENTLY SUBJECT TO VARIOUS RISKS AND UNCERTAINTIES,
INCLUDING RISKS AND UNCERTAINTIES RELATING TO THE POSSIBLE INVALIDITY OF THE
UNDERLYING ASSUMPTIONS AND ESTIMATES AND POSSIBLE CHANGES OR DEVELOPMENTS IN
SOCIAL, ECONOMIC, BUSINESS, INDUSTRY, MARKET, LEGAL AND REGULATORY
CIRCUMSTANCES AND CONDITIONS AND ACTIONS TAKEN OR OMITTED TO BE TAKEN BY THIRD
PARTIES, INCLUDING CUSTOMERS, SUPPLIERS, BUSINESS PARTNERS AND COMPETITORS AND
LEGISLATIVE, REGULATORY, JUDICIAL AND OTHER GOVERNMENTAL AUTHORITIES AND
OFFICIALS. IN ADDITION TO ANY RISKS AND UNCERTAINTIES SPECIFICALLY IDENTIFIED
IN THE TEXT SURROUNDING SUCH FORWARD-LOOKING STATEMENTS, THE STATEMENTS IN
"RISK FACTORS" CONSTITUTE CAUTIONARY STATEMENTS IDENTIFYING IMPORTANT FACTORS
THAT COULD CAUSE ACTUAL AMOUNTS, RESULTS, EVENTS AND CIRCUMSTANCES TO DIFFER
MATERIALLY FROM THOSE REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS.
ii
<PAGE>
SUMMARY
The following summary information is qualified in its entirety by reference
to, and should be read in conjunction with, the more detailed information and
Consolidated Financial Statements, including the notes thereto, appearing
elsewhere in this Prospectus. As used herein, unless the context otherwise
requires, the terms "Company" and "CTS" refer to Coyne International
Enterprises Corp. d/b/a Coyne Textile Services and its subsidiaries. The
Company uses a 52/53 week fiscal year ending on the last Saturday in October.
For convenience, the dating of the financial information in this Prospectus has
been labeled as of and for the years ended October 31, 1997, 1996, 1995, 1994
and 1993 and as of and for the periods ended April 30, 1998 and 1997, as the
case may be, rather than the actual fiscal year end or fiscal period end dates.
THE COMPANY
GENERAL
The Company provides textile rental products and laundering services from 40
locations to approximately 40,000 accounts in diversified industries throughout
the eastern United States. Textile rental products provided by the Company
include workplace uniforms, protective clothing, shop towels and other reusable
absorbent products, floormats and treated mops and other dust control products.
The Company primarily rents textile products to clients under laundry service
contracts, but also sells products to clients and launders client-owned items.
Most of the Company's accounts are subject to written contracts that range in
duration from three to five years. The Company's products and services are
distributed through its route-based distribution system comprised of 18
industrial laundry plants and 21 sales, service and distribution laundry
terminals that allow the Company to provide rental services to customers in
geographic areas outside of the immediate area of an industrial laundry plant.
CTS manufactures shop towels, dust mops and several other products used in the
laundry business at its manufacturing subsidiary, Blue Ridge Textile
Manufacturing, Inc. ("Blue Ridge"), and intends to begin floormat manufacturing
in fiscal 1998.
The Company focuses on the value-added aspects of the textile rental
business, such as the heavy soil (e.g., printing inks, oils and solvents) and
protective garment sectors. The Company's products and services assist
customers with their corporate image, the productivity and safety of their
employees and the environmental impact of their businesses. For example, the
Company has built industry-leading heavy soil laundry plants, which minimize
its customers' environmental exposure and have allowed the Company to carve out
a leading position in the heavy soil sector of the textile rental services
industry. In addition, the Company works with clients to design, source and
manage protective uniform programs for specific applications, such as flame or
chemical retardant clothing for industrial workers. Further, the Company is one
of the first launderers to offer garment tracking technologies that provide its
customers with superior accountability for rented garments.
The Company's customer base is diversified across a variety of industries.
Customers range in size from large nationally-recognized businesses such as
ALCOA, Eckerd Drugs, Hershey, Oneida, United Technologies and Xerox, to smaller
businesses such as gas stations and other retail businesses. In particular, the
Company is a leading provider of textile rental services to the printing
industry throughout its service area, with customers including The New York
Times and USA Today. For the year ended October 31, 1997, the Company had net
sales and EBITDA of $122.9 million and $15.5 million, respectively, and for the
twelve months ended April 30, 1998, the Company had net sales and EBITDA of
$129.0 million and $15.6 million, respectively.
The Company was founded and incorporated in New York in 1929 and has been
owned and operated by the Coyne family since its inception.
1
<PAGE>
INDUSTRY OVERVIEW
The textile rental industry in the United States, which had 1997 revenues in
excess of $9 billion, consists of two segments: the industrial segment
(uniforms, protective clothing, shop towels, floormats and dust control
products) and the linen segment (sheets, tablecloths and other linen items). In
1997, approximately 96% of the Company's business was derived from the
industrial segment. The primary product in the industrial segment is uniforms
which accounted for approximately one-half of the Company's revenues in 1997.
According to industry data compiled by the Uniform and Textile Service
Association ("UTSA"), approximately 46 million of the 128 million people in the
United States civilian workforce at the beginning of 1997 wore some form of
specialized work clothing. Of this total, only 15.4 million people or 33.5%
wore employer-owned uniforms and only 6.5 million people or 14.1% wore
employer-rented uniforms. The UTSA estimated that uniform rental services alone
generated approximately $4.8 billion and $5.3 billion in revenues during 1996
and 1997, respectively, and that this industry has grown at a compound annual
rate of approximately 7.2% since 1983.
The Company believes that much of the uniform industry's overall growth has
resulted from an increasing number of companies choosing to use uniform rental
services to maintain a high-quality corporate image, improve employee safety,
productivity and morale and reduce costs. In addition, the growth in jobs,
particularly in the service sector, has increased the number of potential
uniform wearers. In 1996 alone, more than ten million new jobs were created in
the United States with an estimated 65-70% of these jobs accounted for by
service industries whose employees tend to wear uniforms. CTS also believes
that growth in the rental segment of the industry in particular will be driven
by the broad trends to outsource non-core business functions. Growing markets
for uniforms identified by the Company include building services,
communications, food processing, heating/ventilation/air conditioning,
landscaping, pest control, pharmaceuticals, security and trucking.
In addition, the Company believes its industry-leading environmental
capabilities and protective clothing expertise strategically position it to
realize long-term benefits from continuing government regulation of the
environment and the workplace. Increasingly stringent environmental regulations
have been and continue to be the catalyst for a shift toward the outsourcing of
the laundering of heavy soil items. Additionally, government mandated safety
regulations for reflective wear and flame retardant garments and the most
recent report to Congress under The Workers' Family Protection Act from the
National Institute for Occupational Safety and Health ("NIOSH"), which states
that home laundering is inadequate in decontaminating work clothes, are
creating new opportunities for uniform service companies like CTS. The market
for flame retardant clothing has been fueled by Occupational Safety and Health
Agency ("OSHA") regulations holding employers responsible for supplying
appropriate clothing based on an evaluation of potential workplace hazards.
Employers are prohibited from supplying clothing that, when exposed to flames
or arcs, could increase the extent of wearer injury. Growth in demand for
environmental services and protective clothing is particularly valuable to the
Company because these markets involve long-term relationships with customers
and make use of the Company's technical knowledge of regulations, products,
fabric types, climatic conditions and job functions.
Although the industrial textile rental industry includes several national
companies, the industry remains highly fragmented. Based on information
obtained from Cleary Gull Reiland & McDevitt, an investment firm that closely
follows the uniform rental industry, there are currently over 700 uniform
rental businesses in operation, the majority of which are single facility
operators. The Company believes that many of these smaller companies are being
forced to exit the market due to a lack of economies of scale and the cost of
complying with increasingly stringent environmental standards. The Company
further believes that the industry will continue to experience consolidation in
the future and that strategic acquisition opportunities will become available.
2
<PAGE>
COMPETITIVE STRENGTHS
The Company believes it has the following competitive strengths:
Superior Environmental Capabilities. The Company has built industry-leading
laundry waste-water treatment facilities and has developed a reputation as an
environmental leader. As a result, the Company believes that it is a leading
provider of heavy soil textile services to manufacturing and printing
businesses in the eastern United States. The Company also believes that it is
the largest provider of shop towels within its service area. Shop towels are
reusable cotton industrial wiping cloths that are essential to the printing and
furniture finishing industries and many manufacturing operations. Products such
as shop towels contaminated with petroleum, chemical solvents or printing inks
require specialized cleaning services that comply with environmental
regulations. The Company's industry-leading waste-water treatment equipment
recovers and recycles waste for use in fuel blending programs, thereby reducing
the amount of hazardous substances sent to landfills for disposal and
minimizing its customers' environmental exposure. The Company has built a
strong environmental team that is directed by a senior manager with extensive
experience both in the textile rental industry and as a former appointed
official of the Environmental Protection Agency ("EPA"). CTS has been endorsed
by many of the state and regional printing associations and services large
printing operations such as The New York Times and USA Today. As an extension
to its product line, the Company pioneered its Reusable Absorbent System
("RAS") products, which are used to absorb free liquids, such as lubricating
oils, around machines and equipment. The Company's RAS products are an
environmentally responsible and cost-effective alternative to traditional
disposable absorbents, and promote the EPA policy of waste minimization.
Finally, the Company processes heavy soil work for many of its competitors that
lack the same waste-water treatment capabilities as CTS. By providing heavy
soil laundry services to other industrial laundry facilities, CTS is able to
develop relationships with launderers that may be sold in the ongoing market
consolidation.
Protective Clothing Expertise. The Company believes that it is a recognized
leader in the rental and servicing of protective garments and has substantial
experience in designing, sourcing and managing these garments. Applications for
these protective garments include airplane refueling, metal and glass
manufacturing, oil refineries, petrochemical companies, pyrotechnic and
munitions companies and utilities. These garments are specially manufactured to
protect the wearer from a variety of workplace dangers. OSHA regulations hold
employers responsible for supplying appropriate clothing based on an evaluation
of potential workplace hazards. The protective clothing market requires
knowledge of regulations, products, fabric types, climatic conditions and job
functions. CTS has the expertise to help its customers conform to OSHA
regulations, the technical knowledge required to evaluate different types of
protective garments and the laundering capabilities to process the garments in
a manner that ensures the garments retain their protective properties over
their expected wear-life. The Company believes that its expertise in protective
garments in conjunction with the high-level of control provided by its garment
tracking capabilities gives it a significant advantage in the protective
garment market. ALCAN, ALCOA and Virginia Power are just a few of the major
accounts whose employees wear protective garments provided by CTS.
Garment Tracking Capabilities. The Company believes that it is one of the
first industrial launderers to implement bar-coding technologies, which provide
customers with superior accountability for rented garments and more economical
administration. CTS has invested in both bar-coding and radio frequency
identification technologies that give each rented garment a specific identity.
As a result, both CTS and its customers save time and money while promoting
productivity and improving inventory control. Garment tracking is particularly
important for protective clothing because of its higher replacement cost and
the necessity to closely monitor garment use compared to expected wear-life to
ensure the continued protective properties of the clothing. Further, the
Company provides both on-line and printed reporting to its customers. Bar-
coding is in place at most major accounts whose employees wear protective
garments provided by CTS, including ALCOA, Wyeth-Ayerst and Xerox.
3
<PAGE>
Platform for Growth. The Company's recent investments in plants and equipment
have created laundry plant capacity to support growth without commensurate
increases in cost. In particular, the Company has introduced high-speed,
automated equipment in a majority of its laundry facilities. As a result, the
Company believes its existing plants and equipment could process approximately
25% more volume without significant increases in plant and equipment costs. The
Company believes that this capacity will allow it to support increased business
generated by its recently expanded sales force, respond faster to major account
installations, open laundry terminals in contiguous areas and take advantage of
acquisition opportunities.
Superior Fleet and Distribution Capabilities. The Company has developed a
superior fleet of approximately 450 trucks which provides a cost-effective link
among the Company's laundry plants, laundry terminals and customers. The
Company's fleet leverages existing laundry plant capacity by allowing the
Company to allocate work among its laundry plants in response to cost factors
and fluctuations in volume or capacity, and to enter into new contiguous
markets with minimal capital expenditures. The Company's trucks are a key tool
in projecting the Company's image, by displaying the corporate name, logo and
slogan "WE RENT CLEAN!" These trucks, which are custom-built in the Company's
Syracuse transportation facility, enhance productivity, quality of service and
safety. In addition, CTS saves approximately half of the costs associated with
purchasing a comparable fleet. Further, CTS has transportation facilities
throughout its service area that allow the fleet to be maintained at very high
standards. The Company has received multiple National Private Truck Council
Awards for the quality of its fleet and related maintenance.
BUSINESS STRATEGY
The Company intends to continue to grow its business by focusing on the
following strategies:
Leverage Competitive Strengths. The Company's superior environmental
capabilities, protective garment expertise and garment tracking capabilities
have enabled it to secure leadership positions in the heavy soil and protective
garment sectors of the market. CTS intends to focus on these sectors and then
leverage client relationships to sell additional products and generate
additional laundering service contracts. CTS believes that leveraging its
leadership position in these areas and expanding the number of services
provided to existing customers is an efficient and cost-effective method for
achieving future growth.
Leverage Existing Route System. The Company believes it can significantly
increase revenues and improve profitability by increasing sales along its
existing routes. Most of the geographic areas in which the Company has laundry
plants and truck routes contain a significant number of potential customers.
The Company intends to continue its penetration of these geographic areas by
using its recently increased sales force to aggressively market its expertise
in the heavy soil and protective garment niches of the market. Over the last
two years, the Company has increased the number of dedicated sales associates
from 25 to approximately 100 to ensure that all potential customers in existing
geographic areas are actively marketed. The Company also utilizes its route
salespeople to maximize sales to existing customers and develop new customer
relationships along existing routes.
Expand Geographic Scope in Contiguous Markets. The Company seeks to obtain
new business by utilizing its recently increased sales force to expand into
contiguous market areas that can be serviced from existing Company facilities.
The Company identifies attractive geographic markets for its services based on
the size of the market, the number and type of available customers and the
presence of existing competitors. Typically, the Company has expanded by
opening a laundry terminal location to service a new major account or buying a
small competitor and building the business over time, thereby leveraging the
Company's existing laundry plant investment. In addition, the Company has a
national account sales organization which targets larger customers with
nationwide operations that the Company can serve as the primary supplier of
textile rental services.
4
<PAGE>
Provide Superior Customer Service. The Company seeks to distinguish itself
from its competitors by providing superior customer service. The Company serves
its customers with approximately 300 route salespersons, who generally interact
on a weekly basis with their customers, and more than 150 service support
people, who are responsible for expeditiously handling customer requirements
regarding the outfitting of new customer employees, garment repair and
replacement, billing inquiries and other matters. In addition, the Company
offers its customers a range of service options, including full-service rental
programs in which rental products are cleaned and maintained by the Company,
leasing programs in which these products are cleaned and maintained by
individual employees and direct sales of garments and other textile items. The
Company's newly-implemented Customer Management Program ("CMP") is a
computerized management tool used to measure and direct customer service
activities. This program gathers and organizes customer service data, delivers
key information regarding customer satisfaction to management and helps ensure
more targeted service to address customer preferences. Compensation of the
Company's managers in the laundry business is directly tied to their business
units' financial performance and customer satisfaction as determined by the
Company's CMP.
Pursue Strategic Acquisitions. The Company seeks to acquire textile rental
businesses that have customer accounts under contract, excellent service
reputations, and the size and quality of routes to serve as the Company's base
for expansion in an existing or new geographic market. In many cases, the
Company has purchased customer contracts and routes without buying fixed assets
normally associated with such contracts or routes. The textile rental industry
has experienced significant consolidation in recent years but remains highly
fragmented. The Company believes that increasingly stringent environmental
regulations are forcing many smaller companies to exit the market, which
provides the Company with significant opportunities for acquisitions and
expansion.
5
<PAGE>
THE OFFERING
Initial Notes............... The Initial Notes were sold by the Company on
June 26, 1998 pursuant to a Purchase Agreement
dated June 23, 1998 (the "Purchase Agreement").
The Initial Purchasers subsequently resold the
Initial Notes in the United States to qualified
institutional buyers pursuant to Rule 144A under
the Securities Act.
Registration Rights Pursuant to the Purchase Agreement, the Company
Agreement ................. and the Initial Purchasers entered into a
Registration Rights Agreement, dated June 26,
1998 (the "Registration Rights Agreement"), which
grants the holders of the Initial 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.......... $75,000,000 in aggregate principal amount of 11
1/4% Series B Senior Subordinated Notes of the
Company due 2008.
The Exchange Offer.......... $1,000 principal amount of the Exchange Notes in
exchange for each $1,000 principal amount of
Initial Notes. As of the date hereof, $75,000,000
aggregate principal amount of Initial Notes are
outstanding. The Company will issue the Exchange
Notes to holders on or promptly after the
Expiration Date.
Based on no-action letters issued by the staff of
the Securities and Exchange Commission (the
"Commission") to third parties, the Company
believes 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 the Company within the meaning of
Rule 405 under the Securities Act) without
compliance with the registration and prospectus
delivery provisions of the Securities Act,
provided that such Exchange Notes are acquired in
the ordinary course of such holder's business and
such holder has no arrangement or understanding
with any person to participate in the
distribution of such Exchange Notes.
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 Prospectus, 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 Initial Notes where such
Initial Notes were acquired by such Participating
Broker-Dealer as a result of market-making
activities or other
6
<PAGE>
trading activities. The Company has agreed that
for a period ending on the earlier of (i) 180
days from the date on which the Exchange Offer
Registration Statement is declared effective, and
(ii) the date on which a Participating Broker-
Dealer is no longer required to deliver a
prospectus in connection with market making or
other trading activities, it will make this
Prospectus available to any Participating Broker-
Dealer for use in connection with any such
resale; provided, however, that the Company and
the Guarantors will have no obligation to amend
or supplement this Prospectus unless the Company
has received written notice from a Participating
Broker-Dealer of their prospectus delivery
requirements under the Securities Act within
fifteen (15) business days following consummation
of the Exchange Offer. 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 cannot 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 Company.
Expiration Date............. 5:00 p.m., New York City time, on , 1998,
unless the Exchange Offer is extended by the
Company in its sole discretion, in which case the
term "Expiration Date" means that latest date and
time to which the "Exchange Offer is extended.
Accrued Interest on the
Exchange Notes and Initial Interest on each Exchange Note will accrue from
Notes...................... the last date on which interest was paid on the
Initial Note surrendered in exchange thereof or,
if no interest has been paid on the Initial Note,
from the date of original issuance of such
Initial Note. No interest will be paid on the
Initial Notes accepted for exchange, and holders
of Initial Notes whose Initial Notes are accepted
for exchange will be deemed to have waived the
right to receive any payment in respect of
interest on the Initial Notes accrued up to the
date of the 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
Company. See "Exchange Offer--Conditions."
Procedures for Tendering Each holder of Initial Notes wishing to accept
Initial Notes.............. the 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
Transmittal, or such facsimile thereof, together
with the Initial Notes and any other required
documentation to the Exchange Agent (as defined
herein) at the address set forth
7
<PAGE>
herein. By executing the Letter of Transmittal,
each holder will represent to the Company that,
among other things, the Exchange Notes acquired
pursuant to the Exchange Offer are being obtained
in the ordinary course of business of the person
receiving such Exchange Notes, whether or not
such person is the holder, 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 the Company.
In the case of any holder that is not a broker-
dealer, each such holder, by tendering, will also
represent to the Company that such holder is not
engaged in, and does not intend to engage in, a
distribution of the Exchange Notes. Each
Participating Broker-Dealer that receives
Exchange Notes for its own account in exchange
for Initial Notes, where such Initial 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 "Exchange
Offer--Purpose and Effect of the Exchange Offer"
and "--Procedures for Tendering" and "Plan of
Distribution."
Untendered Initial Notes.... Following the consummation of the Exchange Offer,
holders of Initial Notes eligible to participate
but who do not tender their Initial Notes will
not have any further exchange rights and such
Initial Notes will continue to be subject to
certain restrictions on transfer. Accordingly,
the liquidity of the market for such Initial
Notes could be adversely affected.
Consequences of Failure to The Initial Notes that are not exchanged pursuant
Exchange................... to the Exchange Offer will remain restricted
securities. Accordingly, such Initial Notes may
be resold only (i) to the Company, (ii) pursuant
to an effective registration statement under the
Securities Act, (iii) pursuant to Rule 144A under
the Securities Act, (iv) outside the United
States to a foreign person pursuant to the
requirements of Rule 904 under the Securities
Act, or (v) pursuant to Rule 144 under the
Securities Act or pursuant to some other
exemption from registration under the Securities
Act . See "Exchange Offer--Consequences of
Failure to Exchange."
Shelf Registration In the event that any changes in law or the
Statement.................. applicable interpretations of the staff of the
Commission do not permit the Company to effect
the Exchange Offer or if any holder of the
Initial Notes (other than any such holder which
is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) is
not eligible to participate in the Exchange
Offer, and such holder has satisfied certain
conditions relating to the provision of
information to the Company for use therein, the
Company will, at its cost, use its best efforts
to (a) file a shelf registration statement (the
"Shelf Registration Statement") covering resales
of the Initial Notes, (b)
8
<PAGE>
cause the Shelf Registration Statement to be
declared effective under the Securities Act and
(c) keep continuously effective the Shelf
Registration Statement for a period of at least
two years. Other than as set forth above, holders
of Initial Notes who do not tender in the
Exchange Offer will not have any continuing
rights under the Registration Rights Agreement.
Special Procedures for
Beneficial Owners.......... Any beneficial owner whose Initial 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 Initial
Notes, either make appropriate arrangements to
register ownership of the Initial 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.
Guaranteed Delivery Holders of Initial Notes who wish to tender their
Procedures................. Initial Notes and whose Initial Notes are not
immediately available or who cannot deliver their
Initial 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 Initial
Notes according to the guaranteed delivered
procedures set forth in "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. See "Exchange Offer--Withdrawal of Tenders"
Acceptance of Initial Notes
and Delivery of Exchange The Company will accept for exchange any and all
Notes...................... Initial Notes which are duly tendered in the
Exchange Offer and not validly withdrawn 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 "Exchange
Offer--Terms of the Exchange Offer.
Certain Tax Consequences.... The exchange pursuant to the Exchange Offer
should not be a taxable event for Federal income
tax purposes. See "Certain Federal Income Tax
Considerations"
Use of Proceeds............. There will be no cash proceeds to the Company
from the exchange pursuant to the Exchange Offer.
See "Use of Proceeds."
Exchange Agent.............. IBJ Schroder Bank & Trust Company
9
<PAGE>
THE EXCHANGE NOTES
General..................... The form and terms of the Exchange Notes are the
same as the form and terms of the Initial Notes
(which they replace) except that (i) the Exchange
Notes bear a Series B designation and a different
CUSIP number from the Initial Notes, (ii) the
Exchange Notes have been registered under the
Securities Act and, therefore, will not bear
legends restricting the transfer thereof and
(iii) the Exchange Notes will not contain certain
provisions included in the terms of the Initial
Notes relating to the timing of the Exchange
Offer. In addition, the holders of Exchange Notes
will not be entitled to certain rights under the
Registration Rights Agreement, including the
provisions providing for the payment of
Liquidated Damages in the event the Company fails
to satisfy certain obligations under the
Registration Rights Agreement, which rights will
terminate when the Exchange Offer is consummated.
See "Exchange Offer--Purpose and Effect of
Exchange Offer." The Exchange Notes will evidence
the same debt as the Initial Notes and will be
entitled to the benefits of the Indenture. See
"Description of Notes."
Securities Offered.......... $75,000,000 in aggregate principal amount of 11
1/4% Series B Senior Subordinated Notes due 2008
of the Company.
Maturity Date............... June 1, 2008.
Interest Payment Dates...... June 1 and December 1 of each year, commencing
December 1, 1998.
Subsidiary Guarantees....... The Exchange Notes will be unconditionally
guaranteed by each of the existing and future
Domestic Subsidiaries (as defined herein) of the
Company (each a "Guarantor" and, collectively,
the "Guarantors") other than the Receivables
Subsidiaries (as defined herein).
Subordination............... The Exchange Notes will be general unsecured
obligations of the Company, will rank subordinate
in right of payment to all Senior Debt and will
rank senior or pari passu in right of payment to
all existing and future subordinated indebtedness
of the Company. The Subsidiary Guarantees will be
general unsecured obligations of the Guarantors,
will rank subordinate in right of payment to all
Senior Debt of the Guarantors and will rank
senior or pari passu in right of payment to all
existing and future subordinated indebtedness of
the Guarantors. As of April 30, 1998, on an as
adjusted basis, the Exchange Notes would have
been subordinate to approximately $10.6 million
of Senior Debt. See "Risk Factors--
Subordination."
Optional Redemption......... On or after June 1, 2003, the Company may redeem
the Notes, in whole or in part, at the redemption
prices set forth herein, plus accrued and unpaid
interest thereon and Liquidated Damages, if any,
to the date of redemption. See "Description of
Notes--Optional Redemption."
10
<PAGE>
Change of Control........... Upon a Change of Control (as defined herein), the
Company will be required to make an offer to
repurchase all outstanding Notes at 101% of the
principal amount thereof plus accrued and unpaid
interest thereon and Liquidated Damages, if any,
to the date of repurchase. See "Description of
Notes--Repurchase at the Option of Holders--
Change of Control."
Covenants...................
The Indenture restricts, among other things, the
ability of the Company and its subsidiaries to
incur additional indebtedness, issue
preferred stock, enter into sale and leaseback
transactions, incur liens, pay dividends or make
certain other restricted payments, apply net
proceeds from certain asset sales, enter into
certain transactions with affiliates, merge or
consolidate with any other person, sell stock of
subsidiaries, and assign, transfer, lease, convey
or otherwise dispose of substantially all of the
assets of the Company. See "Description of
Notes--Certain Covenants."
Use of Proceeds............. The net proceeds of the Offering were used to
repay certain indebtedness, to repurchase
outstanding common stock warrants and for working
capital and general corporate purposes. See "Use
of Proceeds."
11
<PAGE>
SUMMARY UNAUDITED AS ADJUSTED FINANCIAL INFORMATION
The unaudited financial information set forth in the following table is
adjusted to give effect to the sale of the Initial Notes and the application of
the proceeds therefrom as described in "Use of Proceeds" as if such
transactions had been consummated on the first day of each period presented.
The unaudited as adjusted financial information is presented for illustrative
purposes only and is not necessarily indicative of results that would have been
reported had such transactions actually occurred on the date specified, nor is
it indicative of the Company's future results. Operating results for the six
month period ended April 30, 1998 are not necessarily indicative of the results
that may be expected for the year ending October 31, 1998. All financial
information in this table should be read in conjunction with the notes below
and the Company's Consolidated Financial Statements, the related notes, and
other information contained elsewhere in this Prospectus.
<TABLE>
<CAPTION>
TWELVE MONTHS
SIX MONTHS ENDED
YEAR ENDED ENDED APRIL 30,
OCTOBER 31, 1997 APRIL 30, 1998 1998
---------------- -------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue.................... $122,935 $ 67,028 $129,004
Gross profit................... 30,147 16,175 31,585
Income from operations......... 10,792 4,979 10,699
Interest expense (1)........... 26,743 22,214 26,870
Loss before income taxes and
extraordinary charge (2)...... $(15,951) $(17,235) $(16,171)
OTHER DATA:
Capital expenditures........... $ 2,584 $ 2,951 $ 4,313
Depreciation and amortization.. 5,004 2,617 5,171
EBITDA (3)..................... 15,496 7,446 15,570
EBITDA margin (3).............. 12.6% 11.1% 12.1%
Ratio of earnings to fixed
charges (4)................... -- -- --
Ratio of debt to EBITDA........ 5.3x 5.7x 5.3x
BALANCE SHEET DATA (AT PERIOD
END):
Working capital................ $ 11,297
Total assets................... 113,726
Total debt..................... 83,067
Shareholders' equity (deficit)
(5)........................... (8,910)
</TABLE>
- -------
(1) Reflects an interest rate of 11 1/4% on the Initial Notes. Included in
interest expense, for each respective period, is a $17,257 charge for the
cost to redeem common stock warrants held by Capital Resource Lenders II
and Exeter Venture Lenders (the "Warrants") over their book carrying value.
The Warrants were redeemed with a portion of the proceeds of the Offering.
The Warrants were issued in 1994 in connection with the issuance of
subordinated notes having a face value of $12,000 (the "Old Notes") which
were also redeemed with a portion of the proceeds of the Offering.
(2) Excludes extraordinary charges attributable to the Old Notes of $1,292,
$1,013, and $1,150, respectively, for the write-off of unamortized
financing charges and original issue discount, net of taxes.
(3) The term EBITDA as used herein represents income from operations plus
depreciation and amortization, excluding amortization associated with
rental merchandise. EBITDA has been presented because the Company believes
it is commonly used in this or a similar format by investors to analyze and
compare operating performance and to determine a company's ability to
service and/or incur debt. However, EBITDA should not be considered in
isolation or as a substitute for net income, cash flow from operations or
any other measure of income or cash flow that is prepared in accordance
with generally accepted accounting principles, or as a measure of a
company's profitability or liquidity. EBITDA margin represents the
percentage of EBITDA to net revenue. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the
Consolidated Financial Statements of the Company and the related notes
thereto included elsewhere in this Prospectus.
(4) The ratio of earnings to fixed charges is computed by dividing earnings by
fixed charges. Earnings consist of income (loss) before income taxes plus
fixed charges, excluding capitalized interest. Earnings include a $17,257
pretax charge for the redemption of the Warrants. Fixed charges include
interest, whether expensed or capitalized, amortization of deferred
financing costs and that portion of rental expense estimated to be
attributable to interest. For the fiscal year ended October 31, 1997, the
six-months ended April 30, 1998 and the twelve-months ended April 30, 1998,
earnings were insufficient to cover fixed charges by $15,951, $17,235 and
$16,171, respectively.
(5) Shareholders' deficit includes a one-time charge of $17,257 incurred to
redeem the Warrants and reflects charges of $1,150, net of tax, associated
with the repayment of the Old Notes and various senior debt obligations as
of May 1, 1997. The amount of the shareholders' deficit varies in other
tables presented herein as a result of different effective dates of these
transactions for presentation purposes.
12
<PAGE>
SUMMARY HISTORICAL FINANCIAL INFORMATION
The information set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements of the Company as of
October 31, 1996 and 1997 and for each of the three years in the period ended
October 31, 1997, including the notes thereto, appearing elsewhere herein.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED OCTOBER 31, ENDED APRIL 30,
------------------------------------------------ -----------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenue............ $107,745 $110,407 $117,768 $119,085 $122,935 $60,959 $67,028
Gross profit........... 24,221 23,003 25,231 25,737 30,147 14,737 16,175
Income from operations
(1)................... 7,222 5,292 7,595 8,179 10,792 5,072 4,979
Interest expense (2)... 4,659 5,516 6,254 6,786 6,715 3,410 20,652
Income (loss) before
income taxes and
cumulative effect of
change in accounting
principle............. 2,563 (224) 1,341 1,393 4,077 1,662 (15,673)
Provision for income
taxes................. 1,425 413 890 847 2,025 826 237
Income (loss) before
cumulative effect of
change in accounting
principles............ 1,138 (637) 451 546 2,052 836 (15,910)
Cumulative effect of
change in accounting
for income taxes (3).. -- (829) -- -- -- -- --
<CAPTION>
Net income (loss)...... $ 1,138 $ (1,466) $ 451 $ 546 $ 2,052 $ 836 $(15,910)
OTHER DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Capital expenditures
(4)................... $ 4,745 $ 9,915 $ 8,731 $ 9,820 $ 2,584 $ 1,222 $ 2,951
Depreciation and
amortization.......... 3,366 3,780 4,416 4,779 5,289 2,596 2,755
EBITDA (5)............. 10,367 8,804 11,463 12,370 15,496 7,372 7,446
EBITDA margin (5)...... 9.6% 8.0% 9.7% 10.4% 12.6% 12.1% 11.1%
Ratio of earnings to
fixed charges (6)..... 1.4x -- 1.2x 1.2x 1.5x 1.4x --
BALANCE SHEET DATA (AT
PERIOD END):
Working capital........ $ 4,763 $ 8,812 $ 11,255 $ 6,608 $ 6,769 $ 6,877 $ 5,427
Total assets........... 77,478 85,001 93,170 97,432 102,621 95,573 110,116
Total debt............. 45,435 48,020 56,680 58,051 58,557 56,510 58,816
Warrants............... -- 1,743 1,743 1,743 1,743 1,743 19,000
Shareholders' equity
(deficit) (7)......... 7,978 6,996 7,373 7,845 9,897 8,681 (6,014)
</TABLE>
- --------
(1) Income from operations for 1993 and 1994 includes gains from property
insurance claims of $364 and $828, respectively.
(2) Included in the six months ended April 30, 1998 is $17,257 of cost to
redeem the Warrants over their book carrying value. The Warrants were
issued in connection with the issuance of the Old Notes which were also
redeemed with a portion of the proceeds of the Offering.
(3) Attributable to the Company's adoption of Statement of Financial Accounting
Standards ("SFAS") No. 109 "Accounting for Income Taxes," effective
November 1, 1993.
(4) Capital expenditures in 1993 through 1996 included costs associated with
the construction of laundry plants in Buffalo, NY, Richmond, VA and New
Bedford, MA.
(5) The term EBITDA as used herein represents income from operations plus
depreciation and amortization, excluding amortization associated with
rental merchandise. EBITDA has been presented because the Company believes
it is commonly used in this or a similar format by investors to analyze and
compare operating performance and to determine a company's ability to
service and/or incur debt. However, EBITDA should not be considered in
isolation or as a substitute for net income, cash flow from operations or
any other measure of income or cash flow that is prepared in accordance
with generally accepted accounting principles, or as a measure of a
company's profitability or liquidity. EBITDA margin represents the
percentage of EBITDA to net revenue. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the
Consolidated Financial Statements of the Company and the related notes
thereto included elsewhere in this Prospectus.
(6) The ratio of earnings to fixed charges is computed by dividing earnings by
fixed charges. Earnings consist of income (loss) before income taxes plus
fixed charges, excluding capitalized interest. Earnings for the six months
ended April 30, 1998 include a $17,257 pretax charge for the redemption of
the Warrants. Fixed charges include interest, whether expensed or
capitalized, amortization of deferred financing costs and original issue
discount attributable to the Old Notes, and that portion of rental expense
estimated to be attributable to interest. For the year ended October 31,
1994 and the six months ended April 30, 1998, earnings were insufficient to
cover fixed charges by $224 and $15,673, respectively.
(7) Shareholders' deficit at April 30, 1998 includes a one-time charge of
$17,257 incurred to redeem the Warrants.
13
<PAGE>
RISK FACTORS
This Prospectus includes "forward looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act of 1934, as amended ("Exchange Act"). Although the Company believes that
its plans, intentions and expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such plans,
intentions or expectations will be achieved. Important factors that could
cause actual results to differ materially from the Company's forward-looking
statements are set forth below and elsewhere in this Prospectus. All forward-
looking statements attributable to the Company or persons acting on its behalf
are expressly qualified in their entirety by the cautionary statements set
forth below and elsewhere in this Prospectus.
LEVERAGE
The Company is highly leveraged. After giving an as adjusted effect to the
Offering and the application of the proceeds therefrom as of April 30, 1998,
the Company would have had total indebtedness of approximately $85.6 million
and shareholders' deficit of approximately $6.9 million. The Company and its
subsidiaries will be permitted to incur substantial additional indebtedness in
the future. See "Capitalization" and "Selected Financial and Operating Data"
and "Description of Notes."
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 Notes), or to fund planned capital expenditures
and research and development expense 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, anticipated cost savings
and revenue growth, management believes that cash flow from operations and
available cash, together with available borrowings under the New Credit
Facility (as defined herein), will be adequate to meet the Company's future
liquidity needs for the next several years. The Company may, however, need to
refinance all or a portion of the principal of the Notes on or prior to
maturity. There can be no assurance that 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 New Credit Facility in an amount sufficient to enable the
Company to service its indebtedness, including the Notes, or to fund its other
liquidity needs. In addition, there can be no assurance that the Company will
be able to effect any such refinancing on commercially reasonable terms or at
all. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
The degree to which the Company is leveraged could have important
consequences to holders of the Notes, including, but not limited to: (i)
making it more difficult for the Company to satisfy its obligations with
respect to the 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 and
(vi) placing the Company at a competitive disadvantage vis-a-vis less
leveraged competitors. In addition, the Indenture and the New Credit Facility
contain financial and other restrictive covenants that will 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. In addition, the degree to which the Company is leveraged could
prevent it from repurchasing all of the Notes tendered to it upon the
occurrence of a Change of Control. See "Description of Notes--Repurchase at
Option of Holder--Change of Control" and "Description of Other Indebtedness--
New Credit Facility."
14
<PAGE>
SUBORDINATION
The Notes and the Subsidiary Guarantees are subordinated in right of payment
to all existing and future Senior Debt of the Company and the Guarantors.
However, the Indenture will provide that the Company will not, and will not
permit any of the Guarantors to, incur or otherwise become liable for 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 or any of the
Subsidiary Guarantees. 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
before any payment may be made with respect to the Notes. In addition, the
subordination provisions of the Indenture will provide that payments with
respect to the Notes will be blocked in the event of a payment default on
Senior Debt and may be blocked for up to 179 days each year in the event of
certain non-payment defaults on Senior Debt. 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 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 Notes. As a result,
holders of Notes may receive less, ratably, than the holders of Senior Debt.
As of April 30, 1998, on an as adjusted basis after giving effect to the
Offering and the application of the proceeds therefrom, the aggregate amount
of Senior Debt of the Company and its subsidiaries would have been
approximately $10.6 million, and giving effect to borrowing restrictions,
approximately $44 million would have been available for additional borrowing
under the New Credit Facility. The Indenture permits the incurrence of
substantial additional indebtedness, including Senior Debt, by the Company and
its subsidiaries in the future. See "Description of Other Indebtedness--New
Credit Facility."
POSSIBLE INABILITY TO FUND A CHANGE OF CONTROL OFFER
Upon a Change of Control, the Company will be required to offer to
repurchase all outstanding Notes at 101% of the principal amount thereof plus
accrued and unpaid interest and Liquidated Damages, if any, to the date of
repurchase. However, there can be no assurance that sufficient funds will be
available at the time of any Change of Control to make any required
repurchases of Notes tendered or that restrictions in the New Credit Facility
will allow the Company to make such required repurchases. Notwithstanding
these provisions, the Company could enter into certain transactions, including
certain recapitalizations, that would not constitute a Change of Control but
would increase the amount of debt outstanding at such time. See "Description
of Notes--Repurchase at Option of Holders."
FRAUDULENT CONVEYANCE
Under applicable provisions of federal bankruptcy law or comparable
provisions of state fraudulent transfer law, if, among other things, the
Company or any Guarantor, at the time it incurred the indebtedness evidenced
by the Notes or its Subsidiary Guarantee, (i) (a) was or is insolvent or
rendered insolvent by reason of such occurrence or (b) was or is engaged in a
business or transaction for which the assets remaining with the Company or
such Guarantor constituted unreasonably small capital or (c) intended or
intends to incur, or believed or believes that it would incur, debts beyond
its ability to pay such debts as they mature, and (ii) the Company or such
Guarantor received or receives less than reasonably equivalent value or fair
consideration for the incurrence of such indebtedness, then the Notes and the
Subsidiary Guarantees, and any pledge or other security interest securing such
indebtedness, could be voided, or claims in respect of the Notes or the
Subsidiary Guarantees could be subordinated to all other debts of the Company
or such Guarantor, as the case may be. In addition, the payment of interest
and principal by the Company pursuant to the Notes or the payment of amounts
by a Guarantor pursuant to a Subsidiary Guarantee could be voided and required
to be returned to the person making such payment, or to a fund for the benefit
of the creditors of the Company or such Guarantor, as the case may be.
15
<PAGE>
The measures of insolvency for purposes of the foregoing considerations will
vary depending upon the law applied in any proceeding with respect to the
foregoing. Generally, however, the Company or Guarantor would be considered
insolvent if (i) the sum of its debts, including contingent liabilities, were
greater than the saleable value of all of its assets at a fair valuation or if
the present fair saleable value of its assets were less than the amount that
would be required to pay its probable liability on its existing debts,
including contingent liabilities, as they become absolute and mature or (ii)
it could not pay its debts as they become due.
On the basis of historical financial information, recent operating history
and other factors, the Company and each Guarantor believes that, after giving
effect to the indebtedness incurred in connection with the Offering and the
New Credit Facility, it is not insolvent, does not have unreasonably small
capital for the business in which it is engaged and has not incurred debts
beyond its ability to pay such debts as they mature. There can be no
assurance, however, as to what standard a court would apply in making such
determinations or that a court would agree with the Company's or the
Guarantors' conclusions in this regard.
COMPETITION
The textile rental industry is highly competitive and several firms in the
industry are larger and have substantially greater financial and other
resources than the Company. The Company's leading competitors include ARAMARK
Corporation, Cintas Corporation, G&K Services, Inc., Unifirst Corp. and Unitog
Company. The Company also competes with numerous local and regional companies,
many of which enjoy cost advantages in their respective markets. In addition,
the Company may increasingly face competition in the future from businesses
that focus on selling uniforms and other related items. The Company believes
that the primary competitive factors that affect its operations are price and
its ability to meet customer specifications, which include design, quality and
service. To the extent existing or future competitors seek to gain or retain
market share by reducing prices, the Company may be required to lower its
prices, thereby adversely impacting operating results. As a result of these
factors, there can be no assurance that competition from existing or potential
competitors will not have a materially adverse effect on the Company's results
of operations. The Company's competitors also generally compete with the
Company for acquisition candidates, which has the effect of increasing the
price for acquisitions and reducing the number of available acquisition
candidates. See "Business--Competition."
GENERAL ECONOMIC CONDITIONS
The Company's business may be adversely affected by national or regional
economic slowdowns or by certain industry specific slowdowns. The Company's
operating results may also be adversely affected by events or conditions in a
particular area, such as adverse weather and other factors. In addition, the
Company's operating results may be adversely affected by increases in interest
rates that may lead to a decline in economic activity, while simultaneously
resulting in a higher interest expense to the Company under its New Credit
Facility.
SEASONALITY AND QUARTERLY FLUCTUATIONS
Historically, the Company's revenues and operating results have varied from
quarter to quarter and are expected to continue to fluctuate in the future.
These fluctuations have been due to a number of factors including: general
economic conditions in the Company's markets; the timing of acquisitions and
of commencing start-up operations and related costs; the effectiveness of
integrating acquired businesses and start-up operations; the timing of capital
expenditures; seasonal rental and purchasing patterns of the Company's
customers; and price changes in response to competitive factors. In addition,
the Company's operating results historically have been seasonally lower during
the third fiscal quarter (May, June and July) than during the other quarters
of the fiscal year. The Company incurs various costs in integrating or
establishing newly acquired businesses or start-up operations, and the
profitability of a new location is generally expected to be lower in the
initial period of its operation than in subsequent periods. Start-up
operations in particular lack the support of an existing customer base and
require a significantly longer period to develop sales opportunities and meet
targeted operating results. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Seasonality."
16
<PAGE>
ENVIRONMENTAL REGULATION
The Company and its operations are subject to various federal, state and
local laws and regulations governing, among other things, the generation,
handling, storage, transportation, treatment and disposal of hazardous wastes
and other substances. In particular, the Company generates and must dispose of
significant quantities of laundry waste-water including detergent, petroleum
and other residues. In the past, the Company has settled or contributed to the
settlement of actions or claims brought against the Company relating to the
disposal of hazardous materials and there can be no assurance that the Company
will not have to expend material amounts to remediate the consequences of any
such disposal in the future. Further, under environmental laws, an owner or
lessee of real estate may be liable for the costs of removal or remediation of
certain hazardous or toxic substances located on or in or emanating from such
property, as well as related costs of investigation and property damage. Such
laws often impose liability without regard to whether the owner or lessee knew
of or was responsible for the presence of such hazardous or toxic substances.
There can be no assurance that acquired or leased locations have been operated
in compliance with environmental laws and regulations or that future uses or
conditions will not result in the imposition of liability upon the Company
under such laws or expose the Company to third-party actions such as tort
suits.
In addition, the EPA has recently proposed a federal environmental
regulatory framework applicable to industrial laundry operations, called
categorical pre-treatment standards, which would replace local regulations.
These regulations, scheduled to take effect in 1999, if implemented as
proposed, would require the Company and its competitors to expend substantial
amounts on compliance, thereby increasing operating costs and capital
expenditures. To the extent such costs and expenses could not be offset by
price increases, the Company's results of operations could be adversely
affected. Further, there can be no assurance of the final form of these
regulations or of the future course of environmental regulations in general.
Until such regulations are finalized, the Company is not able to determine the
cost of compliance.
The Company also believes that a substantial amount of its revenues are
attributable to customers that are concerned about environmental issues and
are seeking an environmentally responsible solution to their laundry needs.
Any changes in existing environmental regulations could affect such customer's
perceived value of the Company's services, possibly to a material degree.
ACQUISITIONS
The Company intends in the future to selectively pursue acquisitions of
textile rental businesses, routes and customer contracts, although the Company
has no present understandings, commitments or agreements with respect to any
such acquisitions. Future acquisitions by the Company could result in the
incurrence of debt and contingent liabilities and an increase in amortization
expenses related to goodwill and other intangible assets, which could have a
material adverse effect upon the Company's business, financial condition and
results of operations. Acquisitions involve numerous risks, including
difficulties in the assimilation of the operations, technologies, services and
products of the acquired assets and the diversion of management's attention
from other business concerns. In the event that any such acquisition were to
occur, there can be no assurance that the Company's business, financial
condition and results of operations would not be materially adversely
affected. In addition, attractive acquisitions are difficult to identify and
complete for a number of reasons, including competition among prospective
buyers. There can be no assurance that the Company will be able to complete
future acquisitions. In order to finance such acquisitions, it may be
necessary for the Company to obtain additional funds either through public or
private financings, including bank and other secured and unsecured borrowings
and the issuance of debt or equity securities.
CONTROLLING SHAREHOLDERS
All of the Company's equity securities are owned of record by J. Stanley
Coyne or trusts established by him. See "Principal Shareholders." As a result,
J. Stanley Coyne and such trusts have the ability to elect the Board of
Directors of the Company, to approve or disapprove other matters requiring
shareholder approval, and to control the affairs and policies of the Company.
The interests of J. Stanley Coyne and such trusts as the sole equity holders
of the Company may differ from the interests of holders of the Notes.
17
<PAGE>
DEPENDENCE ON SENIOR MANAGEMENT; ABILITY TO ATTRACT AND RETAIN QUALIFIED
PERSONNEL
The Company's success is largely dependent on the skills, experience and
efforts of its senior management and certain other key personnel. If, for any
reason, one or more senior executives or key personnel were not to remain
active in the Company, the Company's results of operations could be adversely
affected. The Company's future success also depends upon its ability to
attract and retain qualified managers and technical and marketing personnel,
as well as a sufficient number of hourly workers. There is competition in the
market for the services of such qualified personnel and hourly workers and the
Company's failure to attract and retain such personnel or workers could
adversely affect the Company's results of operations. See "Business--
Employees" and "Management."
INFORMATION SYSTEMS; YEAR 2000
The Company has made a substantial investment in its information systems and
intends to spend significant amounts on its information systems in the future.
In particular, the Company is currently implementing new billing and route
accounting systems which are millennium ("Year 2000") compliant. Additionally
the Company is currently evaluating the programming code in its other existing
computer and software systems. The issue with respect to Year 2000 is whether
systems will properly recognize date sensitive information when the year
changes to 2000. Systems that do not properly recognize such information could
generate erroneous data or cause complete system failures. There can be no
assurance that the Year 2000 problem will not have a material adverse effect
on the results of operations of the Company.
UNIONIZED WORK FORCE
As of April 30, 1998 the Company was subject to 29 collective bargaining
agreements covering approximately 800 of the Company's 1700 employees and the
number of employees of the Company covered by collective bargaining agreements
could increase in the future. There can be no assurance that the unions will
not engage in a work stoppage or strike in the future. Although the Company
believes that relations with the unions are satisfactory, a prolonged work
stoppage or strike by its unionized work force could have a material adverse
effect on the Company's results of operations. See "Business--Employees."
Certain employees of the Company are covered by union sponsored,
collectively bargained, multiemployer pension plans (the "Union Plans") which
may be subject to the withdrawal liability provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). In the event
that the Company incurs a complete or partial withdrawal from any of the Union
Plans, either by reducing or completely terminating all contributions to a
Union Plan or by permanently ceasing to have a legal obligation to contribute
to such Union Plan, the Company may be liable for its share of unfunded vested
benefits, if any, related to such Union Plan. Information from the
administrators of the Union Plans is not available to permit the Company to
determine its share of unfunded vested benefits, if any, related to the Union
Plans. The Company does not believe that it will incur such liability and, as
such, the Company has not recorded a charge for such liability. There can be
no assurance, however, that the Company will not be liable for any such
withdrawal liability, which liability could have a material adverse effect on
the Company's financial condition and results of operations. Such liability
may also cause an Event of Default under the Indenture and a default under the
Company's other indebtedness, including the New Credit Facility.
ABSENCE OF A PUBLIC MARKET COULD ADVERSELY AFFECT THE VALUE OF NOTES
Prior to the Exchange Offer, there has not been any public market for the
Exchange Notes. The Initial Notes have not been registered under the
Securities Act and are 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 Initial Notes
who are not eligible to participate in the Exchange Offer are entitled to
certain registration rights, and the Company is required to file a Shelf
Registration Statement with respect to such Initial Notes. However, to the
extent the Initial Notes are tendered and accepted in the Exchange Offer, the
trading
18
<PAGE>
market for the remaining untendered Initial Notes could be adversely affected.
The Exchange Notes will constitute a new issue of securities with no
established trading market. The Company does not intend to list the Exchange
Notes on any national securities exchange or to seek the admission thereof to
trading in the National Association of Securities Dealers Automated Quotation
System. The Initial Purchasers have advised the Company that they currently
intend to make a market in the Exchange Notes, but they are not obligated to
do so and may discontinue such market making at any time. In addition, such
market making activity will be subject to the limits imposed by the Securities
Act and the Exchange Act and may be limited during the Exchange Offer and the
pendency of any Shelf Registration Statements. Accordingly, no assurance can
be given that an active public or other market will develop for the Exchange
Notes or as to the liquidity of the trading market for the Exchange Notes. If
a trading market does not develop or is not maintained, holders of the
Exchange Notes may experience difficulty in reselling the Exchange Notes or
may be unable to sell them at all. If a market for the Exchange Notes
develops, any such market may be discontinued at any time.
If a public trading market develops for the Exchange Notes, future trading
prices of the Exchange Notes will depend on many factors, including, among
other things, prevailing interest rates, the Company's operating results and
the market for similar securities. Depending on prevailing interest rates, the
market for similar securities and other factors, including the financial
condition of the Company, the Exchange Notes may trade at a discount from
their principal amount.
FAILURE TO FOLLOW EXCHANGE OFFER PROCEDURES COULD ADVERSELY AFFECT HOLDERS
Issuance of the Exchange Notes in exchange for the Initial Notes pursuant to
the Exchange Offer will be made only after a timely receipt by the Company of
such Initial Notes, a properly completed and duly executed Letter of
Transmittal and all other required documents. Therefore, holders of the
Initial Notes desiring to tender such Initial Notes in exchange for Exchange
Notes should allow sufficient time to ensure timely delivery. Neither the
Company nor the Exchange Agent is under any duty to give notification of
defects or irregularities with respect to the tenders of Initial Notes for
exchange. Initial 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 Offer, certain registration rights under the Registration Rights
Agreement will terminate. In addition, any holder of Initial 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 Initial Notes, where such Initial 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 New Notes. Subject to
certain exceptions, the Company has agreed that for a period ending on the
earlier of (i) 180 days from the date on which the Exchange Offer Registration
Statement is declared effective, and (ii) the date on which a Participating
Broker-Dealer is no longer required to deliver a prospectus in connection with
market making or other trading activities, it will make this Prospectus
available to any Participating Broker-Dealer for use in connection with any
such resale; provided, however, that the Company and the Subsidiary Guarantors
will have no obligation to amend or supplement this Prospectus unless the
Company has received written notice from a Participating Broker-Dealer of
their prospectus delivery requirements under the Securities Act within fifteen
business days following consummation of the Exchange Offer. See "Plan of
Distribution." To the extent that Initial Notes are tendered and accepted in
the Exchange Offer, the trading market for untendered and tendered but
unaccepted Initial Notes could be adversely affected. See "Exchange Offer."
19
<PAGE>
USE OF PROCEEDS
This Exchange Offer is intended to satisfy certain of the Company's
obligations under the Purchase Agreement and the Registration Rights
Agreement. The Company will not receive any cash proceeds from the issuance of
the Exchange Notes offered hereby. In consideration for issuing the Exchange
Notes contemplated in this Prospectus, the Company will receive Initial Notes
in like principal amount, the form and terms of which are the same as the
forms and terms of the Exchange Notes (which they replace), except as
otherwise described herein. The Initial Notes surrendered in exchange for
Exchange Notes will be retired and canceled and cannot be reissued.
Accordingly, issuance of the Exchange Notes will not result in any increase or
decrease in the indebtedness of the Company. As such, no effect has been given
to the Exchange Offer in the summary unaudited as adjusted financial
information or capitalization tables.
The proceeds received by the Company from the Offering were used principally
to repay certain indebtedness, repurchase the Warrants and pay transaction
fees and expenses relating thereto.
The following table and footnotes thereto set forth the source and uses of
funds in connection with the Offering (dollars in thousands):
<TABLE>
<S> <C>
SOURCE OF FUNDS:
Initial Notes........................................................ $75,000
USES OF FUNDS:
Repayment of old credit facilities (1)............................... $31,952
Redemption of Old Notes (2).......................................... 12,000
Redemption of Warrants (3)........................................... 19,000
Repayment of other debt.............................................. 5,092
Working capital and general corporate purposes....................... 3,956
Transaction fees and expenses........................................ 3,000
-------
Total Uses......................................................... $75,000
=======
</TABLE>
- --------
(1) Includes repayment of old credit facilities consisting of loans payable to
NationsBank, N.A. (the "Bank"), an affiliate of NationsBanc Montgomery
Securities LLC, and the other lender thereto as follows: (a) a term loan
in the amount of $5,900 with interest payable monthly at an annual
interest rate equal to the Bank's prime rate plus 1.25%; (b) a term loan
in the amount of $10,000 with interest payable monthly at an annual
interest rate equal to the Bank's prime rate plus 1.5%; (c) an acquisition
facility in the amount of $1,047 with interest payable monthly at an
annual interest rate equal to the Bank's prime rate plus 1.75%; and (d) a
revolving credit facility in the amount of $15,005 with interest payable
monthly at an annual interest rate equal to the Bank's prime rate plus
1.0%. The Bank's prime rate was 8.5% at April 30, 1998.
(2) The Old Notes were payable to Capital Resource Lenders II and Exeter
Venture Lenders with interest payable quarterly at an annual interest rate
of 12.0%.
(3) Represents amounts paid or payable in connection with the redemption of
the Warrants as follows: $6,000 for the Warrants, $11,000 for an early
termination fee and $2,000 for a management fee. The $2,000 management fee
is payable over an 18 month period.
20
<PAGE>
CAPITALIZATION
The following table sets forth (i) the capitalization of the Company as of
April 30, 1998 and (ii) the capitalization of the Company on an as adjusted
basis to give effect to the Offering of the Initial Notes and the application
of the proceeds therefrom. This table should be read in conjunction with the
Company's Consolidated Financial Statements and the notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AT APRIL 30, 1998
--------------------
ACTUAL AS ADJUSTED
------- -----------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Long-term debt, including current maturities:
Senior debt:
Old credit facilities (1).............................. $31,952 --
Other debt (2)......................................... 15,676 $ 10,584
Subordinated debt:
Old Notes (2)(3)....................................... 11,188 --
Initial Notes.......................................... -- 75,000
------- --------
Total long-term debt..................................... 58,816 85,584
Warrants (2)............................................... 19,000 --
Shareholders' equity (deficit) (4)......................... (6,014) (6,860)
------- --------
Total capitalization................................... $71,802 $ 78,724
======= ========
</TABLE>
- --------
(1) Contemporaneously with the completion of the Offering, the Company's old
credit facility was amended. See "Description of Other Indebtedness--New
Credit Facility."
(2) Reflects repayment of certain existing obligations from the proceeds of
the Offering. See "Use of Proceeds." For presentation purposes, this
assumes the payment of the entire $19,000 Warrant redemption obligation on
April 30, 1998. The management fee portion of this obligation ($2,000) is
payable over 18 months commencing on the closing of the Offering.
(3) Represents the carrying value of "Old Notes" having a face value of
$12,000.
(4) Shareholders' deficit includes a one-time charge of $17,257 incurred to
redeem the Warrants and reflects an after-tax extraordinary charge of
approximately $846 associated with the repayment of the Old Notes and
various senior debt obligations as of April 30, 1998. The amount of the
shareholders' deficit varies in other tables presented herein as a result
of different effective dates of these transactions for presentation
purposes.
21
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
The selected financial data set forth below for the Company as of October
31, 1997 and 1996 and for each of the three years in the period ended October
31, 1997 are derived from the audited Consolidated Financial Statements
included elsewhere herein. The selected financial data for the years ended
October 31, 1993 and 1994 and for the six month period ended April 30, 1997
and 1998 are derived from unaudited Consolidated Financial Statements. The
unaudited Consolidated Financial Statements include all adjustments consisting
of normal recurring accruals, which the Company considers necessary for a fair
presentation of the financial position and the results of operations for these
periods. Operating results for the six months ended April 30, 1998 are not
necessarily indicative of the results that may be expected for the entire year
ended October 31, 1998. The data should be read in conjunction with the
Consolidated Financial Statements and related notes, and other financial
information included herein.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, SIX MONTHS ENDED APRIL 30,
---------------------------------------------------------------- ---------------------------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- ------------------------ ------- ------------------------
ACTUAL AS ADJUSTED(8) ACTUAL ACTUAL AS ADJUSTED(8)
-------- -------------- ------- -------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Net revenue........ $107,745 $110,407 $117,768 $119,085 $122,935 $122,935 $60,959 $ 67,028 $ 67,028
Gross profit....... 24,221 23,003 25,231 25,737 30,147 30,147 14,737 16,175 16,175
Income from
operations (1).... 7,222 5,292 7,595 8,179 10,792 10,792 5,072 4,979 4,979
Interest expense
(2)............... 4,659 5,516 6,254 6,786 6,715 26,743 3,410 20,652 22,214
Income (loss)
before provision
for income taxes,
extraordinary item
and cumulative
effect of change
in accounting
principles........ 2,563 (224) 1,341 1,393 4,077 (15,951) 1,662 (15,673) (17,235)
Provision for
income taxes...... 1,425 413 890 847 2,025 116 826 237 (388)
Income (loss)
before
extraordinary item
and cumulative
effect of change
in accounting
principles........ 1,138 (637) 451 546 2,052 (16,067) 836 (15,910) (16,847)
Extraordinary item,
net of tax (3).... -- -- -- -- -- 1,292 -- -- 1,013
Cumulative effect
of change in
accounting for
income taxes (4).. -- (829) -- -- -- -- -- -- --
Net income (loss).. $ 1,138 $ (1,466) $ 451 $ 546 $ 2,052 $(17,359) $ 836 $(15,910) $(17,860)
OTHER DATA:
Capital
expenditures (5).. $ 4,745 $ 9,915 $ 8,731 $ 9,820 $ 2,584 $ 2,584 $ 1,222 $ 2,951 $ 2,951
Depreciation and
amortization...... 3,366 3,780 4,416 4,779 5,289 5,004 2,596 2,755 2,617
EBITDA (6)......... 10,367 8,804 11,463 12,370 15,496 15,496 7,372 7,446 7,446
EBITDA margin (6).. 9.6% 8.0% 9.7% 10.4% 12.6% 12.6% 12.1% 11.1% 11.1%
Ratio of earnings
to fixed charges
(7)............... 1.4x -- 1.2x 1.2x 1.5x -- 1.4x -- --
BALANCE SHEET DATA
(AT PERIOD END):
Working capital.... $ 4,763 $ 8,812 $ 11,255 $ 6,608 $ 6,769 $ 10,822 $ 6,877 $ 5,427 $ 14,530
Total assets....... 77,478 85,001 93,170 97,432 102,621 105,488 95,573 110,116 115,937
Total debt......... 45,435 48,020 56,680 58,051 58,557 81,500 56,510 58,816 85,192
Warrants........... -- 1,743 1,743 1,743 1,743 -- 1,743 19,000 --
Shareholders'
equity (deficit)
(9)............... 7,978 6,996 7,373 7,845 9,897 (9,515) 8,681 (6,014) (7,963)
</TABLE>
- -------
(1) Income from operations for 1993 and 1994 includes gains from property
insurance claims of $364 and $828, respectively.
(2) Included in the as adjusted columns and the six months ended April 30,
1998 is a $17,257 charge for the cost to redeem the Warrants over their
book carrying value. The Warrants were redeemed with a portion of the
proceeds of the Offering. The Warrants were issued in connection with the
issuance of the Old Notes which were also redeemed with a portion of the
proceeds of the Offering.
(3) Represents the extraordinary charge attributable to the write-off of
unamortized financing charges and original issue discount, net of taxes.
(4) Attributed to the Company's adoption of Statement of Financial Accounting
Standards ("SFAS") No. 109 "Accounting for Income Taxes," effective
November 1, 1993.
(5) Capital expenditures in 1993 through 1996 included costs associated with
the construction of laundry plants in Buffalo, NY, Richmond, VA and New
Bedford, MA.
(6) The term EBITDA as used herein represents income from operations plus
depreciation and amortization, excluding amortization associated with
rental merchandise. EBITDA has been presented because the Company believes
it is commonly used in this or a similar format by investors to analyze
and compare operating performance and to determine a company's ability to
service and/or incur debt. However, EBITDA should not be considered in
isolation or as a substitute for net income, cash flow from operations or
any other measure of income or cash flow that is prepared in accordance
with generally accepted accounting principles, or as a measure of a
company's profitability or liquidity. EBITDA margin represents the
percentage of EBITDA to net revenue. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the
Consolidated Financial Statements of the Company and the related notes
thereto included elsewhere in this Prospectus.
(7) The ratio of earnings to fixed charges is computed by dividing earnings by
fixed charges. Earnings consist of income (loss) before income taxes plus
fixed charges, excluding capitalized interest. Earnings for the six months
ended April 30, 1998 and as adjusted earnings for the year ended October
31, 1997 and six months ended April 30, 1998 include a $17,257 pretax
charge for the redemption of the Warrants (see notes to the Consolidated
Financial Statements). Fixed charges include interest, whether expensed or
capitalized, amortization of deferred financing costs and original issue
discount attributable to the Old Notes, and that portion of rental expense
estimated to be attributable to interest. On an as adjusted basis,
earnings were insufficient to cover fixed charges for the fiscal year
ended October 31, 1997 and the six months ended April 30, 1998 by $15,951
and $17,235, respectively. Actual earnings for the fiscal year ended
October 31, 1994 and the six months ended April 30, 1998 were insufficient
to cover fixed charges by $224 and $15,673 , respectively .
(8) The "As Adjusted" amounts give effect to the sale of the Initial Notes and
the application of proceeds as described in "Use of Proceeds," as if such
transactions had been consummated on the first day of the period
presented.
(9) Actual shareholders' deficit at April 30, 1998 includes a one-time charge
of $17,257 incurred to redeem the Warrants. Shareholders' deficit, as
adjusted includes the $17,257 charge and $1,150 of charges net of tax
associated with the repayment of the Old Notes and various senior debt
obligations. The amount of the shareholders' deficit varies in other
tables presented herein as a result of different effective dates of these
transactions for presentation purposes.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following should be read in conjunction with the "Selected Financial and
Operating Data," the Company's Consolidated Financial Statements and the
related notes thereto contained in this Prospectus.
The Company was founded in 1929 and currently provides textile rental
products and laundering services from 40 locations to approximately 40,000
accounts in diversified industries. Historically, the Company has grown
through a combination of internal growth at its existing locations, new
location start-ups and acquisitions. The Company has financed its new location
start-ups and acquisitions principally with internally generated cash flow,
secured borrowings and seller financing. Since the beginning of fiscal 1995,
the Company has completed various small acquisitions of routes and customer
contracts from local laundry companies, which in the aggregate have
contributed modestly to revenues. The Company has recently focused on
increasing revenues and profitability across its locations through investments
in sales force personnel and training, information systems, facilities and
equipment designed to improve asset utilization and through targeted marketing
efforts.
The Company's principal business is the rental and servicing of workplace
uniforms, protective clothing, industrial shop towels and other textile rental
products such as floormats and dust mops. The Company typically serves its
customers pursuant to written service contracts that range in duration from
three to five years. For fiscal 1995, 1996 and 1997, the Company's garment
rental operations (which include laundry services) produced approximately 48%
of its revenues, the rental of shop towels produced approximately 26% of its
revenues, and the rental of other products accounted for approximately 19% of
revenue in each of those years. In addition, the Company sells a full range of
garments, towels and other items directly to customers. These sales produced
on average approximately 7% of the Company's revenues in each of fiscal 1995,
1996 and 1997.
Although the Company's revenues grew modestly from $118 million in fiscal
1995 to $123 million in fiscal 1997, a compound annual rate of 2.1%, the
Company achieved a higher rate of earnings growth through the realization of
operating efficiencies and cost controls. EBITDA increased $4.0 million and
EBITDA as a percentage of revenue increased from 9.7% in fiscal 1995 to 12.6%
in fiscal 1997. The improved performance resulted, in large part, from the
realization of operating efficiencies and cost controls achieved in connection
with the Company's strategic management program initiated in 1996.
Additionally, the Company began compensating key personnel based on EBITDA
performance.
RESULTS OF OPERATIONS
The following table presents certain statements of historical operations
data as a percentage of sales for the periods indicated and should be read in
conjunction with the other financial information of CTS contained elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED OCTOBER 31, ENDED APRIL 30,
------------------------- ----------------
1995 1996 1997 1997 1998
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net revenue...................... 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit..................... 21.4 21.6 24.5 24.2 24.1
Selling expense.................. 2.0 1.7 2.6 2.3 4.1
Income from operations........... 6.4 6.9 8.8 8.3 7.4
Interest expense................. 5.3 5.7 5.5 5.6 5.1
Income before redemption of War-
rants and income taxes.......... 1.1% 1.2% 3.3% 2.7% 2.3%
</TABLE>
Six Months Ended April 30, 1998 Compared to the Six Months Ended April 30,
1997
Net Revenue. Net revenues were $67.0 million for the six months ended April
30, 1998, representing an increase of $6.0 million or approximately 10.0% as
compared to $61.0 million for the six months ended April
23
<PAGE>
30, 1997. The increase can be attributed to growth from existing operations
(6.2%), due substantially to the Company's recent investment in its sales
organization, and acquisitions (3.8%) of several small routes subsequent to
the first half of fiscal 1997.
Gross Profit. Gross profit for the six months ended April 30, 1998 of $16.2
million was $1.4 million or 9.8% greater than the same period last year. The
increase in gross profit was due to the increase in revenue. Gross margin was
24.1% for the period as compared with 24.2% for the same period last year.
Gross margin declined due to one-time costs associated with certain process
improvement initiatives, start-up activities in Florida and the Company
catalog business, each implemented in 1998.
Selling, General and Administrative Expense. Selling, general and
administrative expense was $11.2 million for the six months ended April 30,
1998, representing an increase of $1.5 million or 15.8% over the same period
in 1997. This increase was due primarily to selling expense which increased
$1.4 million or 93.5% to $2.7 million for the six months ended April 30, 1998.
The increase can be attributed to the significant expansion of the Company's
sales organization during fiscal 1998. This expansion included increases in
the number of personnel and related training costs, as well as related sales
and marketing costs. The Company anticipates that this expansion will generate
additional revenues; the Company began to see the impact of increased sales
during the first and second quarters of fiscal 1998. Growth in revenues is
expected to lag behind new selling costs, as it takes time for new sales
personnel to build books of long-term contracts.
Income from Operations. Income from operations was $5.0 million for the six
months ended April 30, 1998 as compared to $5.1 million for the six months
ended April 30, 1997. This nominal decrease resulted from an increase in one-
time costs associated with the significant investment in the sales
organization.
Interest Expense. Interest expense was $3.4 million for the six months ended
April 30, 1998 and for the six months ended April 30, 1997. Interest expense
remained at 1997 levels due to comparable rates and outstanding borrowings
during the periods. In May 1998, the Company entered into an agreement to
redeem the Warrants for $19.0 million. The excess of the redemption payment
over the book value of the Warrants of $17.3 million has been included in
interest expense for the six months ended April 30, 1998.
Income Taxes. The Company's tax provision of $0.2 million for the six month
period ended April 30, 1998 was $0.6 million less than the tax provision for
the same period in 1997. This reduction was due to the one-time charge
associated with management fees under the Warrant redemption agreement.
Net Income (Loss). Net loss was ($15.9) million for the six months ended
April 30, 1998, compared with net income of $0.8 million for the six months
ended April 30, 1997. This decrease was due to the one-time charge of $17.3
million associated with the Warrant redemption agreement. Excluding the
repurchase of the Warrants, net income for the six months ended April 30, 1998
would have been $0.8 million.
Fiscal Year 1997 Compared to Fiscal Year 1996
Net Revenue. Net revenue was $122.9 million in fiscal 1997, representing an
increase of $3.8 million or 3.2% as compared to $119.1 million in fiscal 1996.
The increase can be attributed to growth from existing operations (2.2%) and
acquisitions (1.0%). Several small acquisitions, primarily in the Atlanta and
Charlotte markets, during fiscal 1997 contributed $1.2 million during the
period.
Gross Profit. Gross profit for fiscal 1997 of $30.1 million was $4.4 million
greater than fiscal 1996. Gross margin improved to 24.5% for fiscal 1997 as
compared with 21.6% in fiscal 1996. This significant increase was due
primarily to the realization of operating efficiencies and cost controls
resulting from process improvement initiatives implemented in connection with
the Company's strategic management program.
Selling, General and Administrative Expense. Selling, general and
administrative expense was $19.4 million in fiscal 1997, representing an
increase of $1.8 million or 10.2% as compared to $17.6 million in fiscal 1996.
This increase was due primarily to selling expense which increased $1.2
million or 57.3% to $3.2 million
24
<PAGE>
in fiscal 1997 as compared to $2.0 million in fiscal 1996. The increase can be
attributed to the significant expansion of the Company's sales organization
during fiscal 1997. This expansion included increases in the number of
personnel and related sales and marketing costs.
Income from Operations. Income from operations was $10.8 million in fiscal
1997, representing an increase of $2.6 million or 31.9% as compared to $8.2
million in fiscal 1996. This increase was due to both the revenue increase and
specific cost control programs in the laundering plants and in the corporate
offices implemented in fiscal 1997 which allowed for more efficient operations
and effective cost control.
Interest Expense. Interest expense remained at 1997 levels due to comparable
rates and outstanding borrowings during the years.
Income Taxes. The Company's effective tax rate for fiscal 1997 was
approximately 49.7% compared to an effective tax rate of approximately 60.8% in
fiscal 1996. This reduction in rate was due primarily to the significant
increase in taxable income during the period in relation to certain non-
deductible expenses such as the amortization of goodwill and meal and
entertainment costs.
Net Income. Net income was $2.1 million in fiscal 1997, representing an
increase of $1.6 million as compared to $0.5 million in fiscal 1996. The
improvement in net income was due to increased revenue in conjunction with
certain cost control initiatives which were part of the Company's strategic
management program.
Fiscal Year 1996 Compared to Fiscal Year 1995
Net Revenue. Net revenue was $119.1 million in fiscal 1996, representing an
increase of $1.3 million or 1.1% as compared to $117.8 million in fiscal 1995.
Revenues improved slightly due to price increases during fiscal 1996.
Gross Profit. Gross profit for fiscal 1996 of $25.7 million was $0.5 million
greater than fiscal 1995. Gross margin was 21.6% in fiscal 1996 compared with
21.4% in fiscal 1995. This modest increase was attributable to increased
revenue.
Selling, General and Administrative Expense. Selling, general and
administrative expense was $17.6 million in fiscal 1996, representing an
increase of $.4 million or 2.3% as compared to $17.2 million in fiscal 1995.
Income from Operations. Income from operations was $8.2 million in fiscal
1996, representing an increase of $0.6 million or 7.7% as compared to $7.6
million in fiscal 1995.
Interest Expense. Interest expense was $6.8 million in fiscal 1996,
representing an increase of $0.5 million or 8.5% as compared to $6.3 million in
fiscal 1995. The increase was due to a corresponding increase in debt
outstanding.
Income Taxes. The Company's effective tax rate in fiscal 1996 was
approximately 60.8% compared to an effective tax rate of approximately 66.4% in
fiscal 1995. This reduction in rate was primarily due to the effect of
permanent differences relating to the amortization of route intangibles.
Net Income. Net income was $0.5 million in fiscal 1996 and 1995.
SEASONALITY
The Company's operating results historically have been seasonally lower
during the third fiscal quarter (May, June and July) primarily because the
Company's floormat business is lower during this period than during the other
quarters of the fiscal year. Certain customers of CTS arrange to have the
floormats removed from their
25
<PAGE>
accounts during the late spring and early summer months. In addition, schools
reduce or curtail their business during these months. See "Risk Factors--
Seasonality."
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity have been cash flow from
operations and borrowings under the old revolving credit facilities. For
information concerning the Company's old credit facilities and New Credit
Facility, see "Use of Proceeds" and "Description of Indebtedness--New Credit
Facility."
Net income was $2.1 million in fiscal 1997, representing an increase of $1.6
million as compared to $0.5 million in fiscal 1996. Cash provided by operating
activities of $6.3 million in fiscal 1997 was $1.3 million less than fiscal
1996 due to the significant investment in uniforms in service, as a result of
new rental contracts. Further, the cash used in investing activities of $2.2
million was approximately $1.7 million lower than the prior year. This
reduction was due to financing activities that allowed for investments to be
transacted with debt rather than cash. These investments included seller
financed acquisitions of $3.5 million, net of cash acquired, and purchases of
property, plant and equipment of $1.5 million. Net cash used in financing
activities of $3.1 million was $0.9 million less than fiscal 1996. The primary
financing activity in fiscal 1996 was repayment of long-term debt. During
fiscal 1997 the Company's repayments of long-term debt increased by $1.1
million. Cash at the end of fiscal 1997 of $1.3 million was $0.9 million
greater than at the beginning of the year.
During fiscal 1997, total capital expenditures amounted to $2.6 million,
primarily for laundry equipment and route vehicles. Capital expenditures were
$9.8 million in fiscal 1996 and $8.8 million in fiscal 1995. During fiscal
1996, the Company completed construction of its Buffalo, New York laundry
plant. During fiscal 1995, the Company completed construction of its New
Bedford, Massachusetts laundry plant. Maintenance capital expenditures are
expected to be approximately $4.0 million per year for the next several years.
During fiscal 1997, the Company acquired certain assets of several
industrial laundries which were accounted for as purchase transactions. The
aggregate purchase price of $4.6 million consisted of cash of $1.1 million and
notes payable of $3.5 million. The purchase price was allocated to various
assets, consisting primarily of purchased routes ($3.2 million).
On June 26, 1998, the Company sold to the Initial Purchasers $75,000,000
principal amount of the Initial Notes. The Initial Notes bear interest at 11
1/4% per annum from June 26, 1998, payable semiannually on June 1 and December
1 of each year, commencing on December 1, 1998.
Under the terms of the Registration Rights Agreement, the Company is
obligated to consummate the Exchange Offer pursuant to an effective
registration statement or to cause resales of the Initial Notes to be
registered under the Securities Act pursuant to an effective Shelf
Registration Statement. If the Exchange Offer Registration Statement or the
Shelf Registration Statement is not filed or declared effective, or if the
Exchange Offer is not consummated within the time periods set forth in the
Registration Rights Agreement, the Company will be required to pay Liquidated
Damages to each holder of Initial Notes. See "Description of Notes--
Registration Rights; Liquidated Damages."
The Initial Notes are general unsecured obligations of the Company, rank
subordinate in right of payment to all Senior Debt and rank senior or pari
passu in right of payment to all existing and future subordinated indebtedness
of the Company. The Initial Notes are unconditionally guaranteed on a senior
subordinated basis by all of the Company's current and future Domestic
Subsidiaries other than Receivables Subsidiaries. The Subsidiary Guarantees
are general unsecured obligations of the Guarantors, rank subordinate in right
of payment to all Senior Debt of the Guarantors and rank senior or pari passu
in right of payment to all existing and future subordinated indebtedness of
the Guarantors. The Initial Notes are redeemable at the option of the Company,
in whole or in part, on or after June 1, 2003, at the redemption prices set
forth herein, plus accrued and unpaid interest thereon and Liquidated Damages,
if any, to the redemption date. Upon a Change of Control, the Company will be
required to make an offer to repurchase all outstanding Initial Notes at 101%
of the principal
26
<PAGE>
amount thereof plus accrued and unpaid interest thereon and Liquidated
Damages, if any, to the date of repurchase.
The Company's ability to make scheduled payments of principal of, or to pay
the interest on, or to refinance, its indebtedness (including the Notes), or
to fund planned capital expenditures and research and development expense will
depend on its future performance, which, to a certain extent, is subject to
general economic, financial, competitive, legislative, regulatory and other
factors that are beyond its control. Based upon the current level of
operations and anticipated revenue growth, management believes that cash flow
from operations and available cash, together with the proceeds from the
Offering and available borrowings under the New Credit Facility, will be
adequate to meet the Company's future liquidity needs for the next several
years. The Company may, however, need to refinance all or a portion of the
principal of the Notes on or prior to maturity. There can be no assurance that
the Company's business will generate sufficient cash flow from operations,
that anticipated revenue growth and operating improvements will be realized or
that future financings, including borrowings will be available under the New
Credit Facility in an amount sufficient to enable the Company to service its
indebtedness, including the Notes, or to fund its other liquidity needs. In
addition, there can be no assurance that the Company will be able to effect
any such refinancing on commercially reasonable terms or at all.
The degree to which the Company is leveraged could have important
consequences to holders of the Notes, including, but not limited to: (i)
making it more difficult for the Company to satisfy its obligations with
respect to the 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 and
(vi) placing the Company at a competitive disadvantage vis-a-vis less
leveraged competitors. In addition, the Indenture and the New Credit Facility
will contain financial and other restrictive covenants that will 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. In addition, the degree to which the Company is leveraged
could prevent it from repurchasing all of the Notes tendered to it upon the
occurrence of a Change of Control. See "Description of Notes--Repurchase at
Option of Holder--Change of Control" and "Description of Other Indebtedness--
New Credit Facility."
INFORMATION SYSTEMS; YEAR 2000
The Company intends to invest approximately $2.0 million during each of
fiscal 1998 and 1999 on information systems hardware and software to upgrade
certain of its Company-wide systems. In particular, the Company is currently
implementing new billing and route accounting systems which are millennium
("Year 2000") compliant. Additionally, the Company is currently evaluating the
programming code in its other existing computer and software systems.
The issue with respect to Year 2000 is whether systems will properly
recognize date sensitive information when the year changes to 2000. Systems
that do not properly recognize such information could generate erroneous data
or cause complete system failures. There can be no assurance that the Year
2000 problem will not have a material adverse effect on the results of
operations of the Company.
EFFECTS OF INFLATION
Inflation has had the effect of increasing the reported amounts of the
Company's revenues and costs. However, the Company believes that it has been
able to recover increases in costs attributable to inflation through increases
in its prices and improvements in its productivity.
27
<PAGE>
BUSINESS
GENERAL
The Company provides textile rental products and laundering services from 40
locations to approximately 40,000 accounts in diversified industries
throughout the eastern United States. Textile rental products provided by the
Company include workplace uniforms, protective clothing, shop towels and other
reusable absorbent products, floormats and treated mops and other dust control
products. The Company primarily rents textile products to clients under
laundry service contracts, but also sells products to clients and launders
client-owned items. Most of the Company's accounts are subject to written
contracts that range in duration from three to five years. The Company's
products and services are distributed through its route-based distribution
system comprised of 18 industrial laundry plants and 21 sales, service and
distribution laundry terminals that allow the Company to provide rental
services to customers in geographic areas outside of the immediate area of an
industrial laundry plant. CTS manufactures shop towels, dust mops and several
other products used in the laundry business at its Blue Ridge manufacturing
subsidiary and intends to begin floormat manufacturing in fiscal 1998.
The Company focuses on the value-added aspects of the textile rental
business, such as the heavy soil (e.g., printing inks, oils and solvents) and
protective garment sectors. The Company's products and services assist
customers with their corporate image, the productivity and safety of their
employees and the environmental impact of their businesses. For example, the
Company has built industry-leading heavy soil laundry plants, which minimize
its customers' environmental exposure and have allowed the Company to carve
out a leading position in the heavy soil sector of the textile rental services
industry. In addition, the Company works with clients to design, source and
manage protective uniform programs for specific applications, such as flame or
chemical retardant clothing for industrial workers. Further, the Company is
one of the first launderers to offer garment tracking technologies that
provide its customers with superior accountability for rented garments.
The Company's customer base is diversified across a variety of industries.
Customers range in size from large nationally-recognized businesses such as
ALCOA, Eckerd Drugs, Hershey, Oneida, United Technologies and Xerox, to
smaller businesses, such as gas stations and other retail businesses. In
particular, the Company is a leading provider of textile rental services to
the printing industry throughout its service area, with customers including
The New York Times and USA Today. For the year ended October 31, 1997, the
Company had net sales and EBITDA of $122.9 million and $15.5 million,
respectively, and for the twelve months ended April 30, 1998, the Company had
net sales and EBITDA of $129.0 million and $15.6 million, respectively.
The Company was founded and incorporated in New York in 1929 and has been
owned and operated by the Coyne family since its inception. The Company's
principal executive offices are located at 140 Cortland Avenue, Syracuse, New
York, 13221 and its telephone number is (315) 475-1626.
INDUSTRY OVERVIEW
The textile rental industry in the United States, which had 1997 revenues in
excess of $9 billion, consists of two segments: the industrial segment
(uniforms, protective clothing, shop towels, floormats and dust control
products) and the linen segment (sheets, tablecloths and other linen items).
In 1997, approximately 96% of the Company's business was derived from the
industrial segment. The primary product in the industrial segment is uniforms
which accounted for approximately 50.0% of the Company's revenues in 1997.
According to industry data compiled by the UTSA, approximately 46 million of
the 128 million people in the United States civilian workforce at the
beginning of 1997 wore some form of specialized work clothing. Of this total,
only 15.4 million people or 33.5% wore employer-owned uniforms and only 6.5
million people or 14.1% wore employer-rented uniforms. The UTSA estimated that
uniform rental services alone generated approximately $4.8 billion and $5.3
billion in revenues during 1996 and 1997, respectively, and that this industry
has grown at a compound annual rate of approximately 7.2% since 1983.
The Company believes that much of the uniform industry's overall growth has
resulted from an increasing number of companies choosing to use uniform rental
services to maintain a high-quality corporate image,
28
<PAGE>
improve employee safety, productivity and morale and reduce costs. In
addition, the growth in jobs, particularly in the service sector, has
increased the number of potential uniform wearers. In 1996 alone, more than
ten million new jobs were created in the United States with an estimated 65-
70% of these jobs accounted for by service industries whose employees tend to
wear uniforms. CTS also believes that growth in the rental segment of the
industry in particular will be driven by the broad trends to outsource non-
core business functions. Growing markets for uniforms identified by the
Company include building services, communications, food processing,
heating/ventilation/air conditioning, landscaping, pest control,
pharmaceuticals, security and trucking.
In addition, the Company believes its industry-leading environmental
capabilities and protective clothing expertise strategically position it to
realize long-term benefits from continuing government regulation of the
environment and the workplace. Increasingly stringent environmental
regulations have been and continue to be the catalyst for a shift toward the
outsourcing of the laundering of heavy soil items. Additionally, government
mandated safety regulations for reflective wear and flame retardant garments
and the most recent report to Congress under The Workers' Family Protection
Act from the NIOSH, which states that home laundering is inadequate in
decontaminating work clothes, are creating new opportunities for uniform
service companies like CTS. The market for flame retardant clothing has been
fueled by OSHA regulations holding employers responsible for supplying
appropriate clothing based on an evaluation of potential workplace hazards.
Employers are prohibited from supplying clothing that, when exposed to flames
or arcs, could increase the extent of wearer injury. Growth in demand for
environmental services and protective clothing is particularly valuable to the
Company because these markets involve long-term relationships with customers
and make use of the Company's technical knowledge of regulations, products,
fabric types, climatic conditions and job functions.
Although the industrial textile rental industry includes several national
companies, the industry remains highly fragmented. Based on information
obtained from Cleary Gull Reiland & McDevitt, an investment firm that closely
follows the uniform rental industry, there are currently over 700 uniform
rental businesses in operation, the majority of which are single facility
operators. The Company believes that many of these smaller companies are being
forced to exit the market due to a lack of economies of scale and the cost of
complying with increasingly stringent environmental standards. The Company
further believes that the industry will continue to experience consolidation
in the future and that strategic acquisition opportunities will become
available.
COMPETITIVE STRENGTHS
The Company believes it has the following competitive strengths:
Superior Environmental Capabilities. The Company has built industry-leading
laundry waste-water treatment facilities and has developed a reputation as an
environmental leader. As a result, the Company believes that it is a leading
provider of heavy soil textile services to manufacturing and printing
businesses in the eastern United States. The Company also believes that it is
the largest provider of shop towels within its service area. Shop towels are
reusable cotton industrial wiping cloths that are essential to the printing
and furniture finishing industries and many manufacturing operations. Products
such as shop towels contaminated with petroleum, chemical solvents or printing
inks require specialized cleaning services that comply with environmental
regulations. The Company's industry-leading waste-water treatment equipment
recovers and recycles waste for use in fuel blending programs, thereby
reducing the amount of hazardous substances sent to landfills for disposal and
minimizing its customers' environmental exposure. The Company has built a
strong environmental team that is directed by a senior manager with extensive
experience both in the textile rental industry and as a former appointed
official of the EPA. CTS has been endorsed by many of the state and regional
printing associations and services large printing operations such as The New
York Times and USA Today. As an extension to its product line, the Company
pioneered its Reusable Absorbent System ("RAS") products, which are used to
absorb free liquids, such as lubricating oils, around machines and equipment.
The Company's RAS products are an environmentally responsible and cost-
effective alternative to traditional disposable absorbents, and promote the
EPA policy of waste minimization. Finally, the Company processes heavy soil
work for many of its competitors that lack the same waste-water treatment
capabilities as CTS. By providing heavy soil laundry
29
<PAGE>
services to other industrial laundry facilities, CTS is able to develop
relationships with launderers that may be sold in the ongoing market
consolidation.
Protective Clothing Expertise. The Company believes that it is a recognized
leader in the rental and servicing of protective garments and has substantial
experience in designing, sourcing and managing these garments. Applications
for these protective garments include airplane refueling, metal and glass
manufacturing, oil refineries, petrochemical companies, pyrotechnic and
munitions companies and utilities. These garments are specially manufactured
to protect the wearer from a variety of workplace dangers. OSHA regulations
hold employers responsible for supplying appropriate clothing based on an
evaluation of potential workplace hazards. The protective clothing market
requires knowledge of regulations, products, fabric types, climatic conditions
and job functions. CTS has the expertise to help its customers conform to OSHA
regulations, the technical knowledge required to evaluate different types of
protective garments and the laundering capabilities to process the garments in
a manner that ensures the garments retain their protective properties over
their expected wear-life. The Company believes that its expertise in
protective garments in conjunction with the high-level of control provided by
its garment tracking capabilities gives it a significant advantage in the
protective garment market. ALCAN, ALCOA and Virginia Power are just a few of
the major accounts whose employees wear protective garments provided by CTS.
Garment Tracking Capabilities. The Company believes that it is one of the
first industrial launderers to implement bar-coding technologies, which
provide customers with superior accountability for rented garments and more
economical administration. CTS has invested in both bar-coding and radio
frequency identification technologies that give each rented garment a specific
identity. As a result, both CTS and its customers save time and money while
promoting productivity and improving inventory control. Garment tracking is
particularly important for protective clothing because of its higher
replacement cost and the necessity to closely monitor garment use compared to
expected wear-life to ensure the continued protective properties of the
clothing. Further, the Company provides both on-line and printed reporting to
its customers. Bar-coding is in place at most major accounts whose employees
wear protective garments provided by CTS, including ALCOA, Wyeth-Ayerst and
Xerox.
Platform for Growth. The Company's recent investments in plants and
equipment have created laundry plant capacity to support growth without
commensurate increases in cost. In particular, the Company has introduced
high-speed, automated equipment in a majority of its laundry facilities. As a
result, the Company believes its existing plants and equipment could process
approximately 25% more volume without significant increases in plant and
equipment costs. The Company believes that this capacity will allow it to
support increased business generated by its recently expanded sales force,
respond faster to major account installations, open laundry terminals in
contiguous areas and take advantage of acquisition opportunities.
Superior Fleet and Distribution Capabilities. The Company has developed a
superior fleet of approximately 450 trucks which provides a cost-effective
link among the Company's laundry plants, laundry terminals and customers. The
Company's fleet leverages existing laundry plant capacity by allowing the
Company to allocate work among its laundry plants in response to cost factors
and fluctuations in volume or capacity, and to enter into new contiguous
markets with minimal capital expenditures. The Company's trucks are a key tool
in projecting the Company's image, by displaying the corporate name, logo and
slogan "WE RENT CLEAN!" These trucks, which are custom-built in the Company's
Syracuse transportation facility, enhance productivity, quality of service and
safety. In addition, CTS saves approximately half of the costs associated with
purchasing a comparable fleet. Further, CTS has transportation facilities
throughout its service area that allow the fleet to be maintained at very high
standards. The Company has received multiple National Private Truck Council
Awards for the quality of its fleet and related maintenance.
BUSINESS STRATEGY
The Company intends to continue to grow its business by focusing on the
following strategies:
30
<PAGE>
Leverage Competitive Strengths. The Company's superior environmental
capabilities, protective garment expertise and garment tracking capabilities
have enabled it to secure leadership positions in the heavy soil and
protective garment sectors of the market. CTS intends to focus on these
sectors and then leverage client relationships to sell additional products and
generate additional laundering service contracts. CTS believes that leveraging
its leadership position in these areas and expanding the number of services
provided to existing customers is an efficient and cost-effective method for
achieving future growth.
Leverage Existing Route System. The Company believes it can significantly
increase revenues and improve profitability by increasing sales along its
existing routes. Most of the geographic areas in which the Company has laundry
plants and truck routes contain a significant number of potential customers.
The Company intends to continue its penetration of these geographic areas by
using its recently increased sales force to aggressively market its expertise
in the heavy soil and protective garment niches of the market. Over the last
two years, the Company has increased the number of dedicated sales associates
from 25 to approximately 100 to ensure that all potential customers in
existing geographic areas are actively marketed. The Company also utilizes its
route salespeople to maximize sales to existing customers and develop new
customer relationships along existing routes.
Expand Geographic Scope in Contiguous Markets. The Company seeks to obtain
new business by utilizing its recently increased sales force to expand into
contiguous market areas that can be serviced from existing Company facilities.
The Company identifies attractive geographic markets for its services based on
the size of the market, the number and type of available customers and the
presence of existing competitors. Typically, the Company has expanded by
opening a laundry terminal location to service a new major account or buying a
small competitor and building the business over time, thereby leveraging the
Company's existing laundry plant investment. In addition, the Company has a
national account sales organization which targets larger customers with
nationwide operations that the Company can serve as the primary supplier of
textile rental services.
Provide Superior Customer Service. The Company seeks to distinguish itself
from its competitors by providing superior customer service. The Company
serves its customers with approximately 300 route salespersons, who generally
interact on a weekly basis with their customers, and more than 150 service
support people, who are responsible for expeditiously handling customer
requirements regarding the outfitting of new customer employees, garment
repair and replacement, billing inquiries and other matters. In addition, the
Company offers its customers a range of service options, including full-
service rental programs in which rental products are cleaned and maintained by
the Company, leasing programs in which these products are cleaned and
maintained by individual employees and direct sales of garments and other
textile items. The Company's newly-implemented Customer Management Program
("CMP") is a computerized management tool used to measure and direct customer
service activities. This program gathers and organizes customer service data,
delivers key information regarding customer satisfaction to management and
helps ensure more targeted service to address customer preferences.
Compensation of the Company's managers in the laundry business is directly
tied to their business units' financial performance, and customer satisfaction
as determined by the Company's CMP.
Pursue Strategic Acquisitions. The Company seeks to acquire textile rental
businesses that have customer accounts under contract, excellent service
reputations, and the size and quality of routes to serve as the Company's base
for expansion in an existing or new geographic market. In many cases, the
Company has purchased customer contracts and routes without buying fixed
assets normally associated with such contracts or routes. The textile rental
industry has experienced significant consolidation in recent years but remains
highly fragmented. The Company believes that increasingly stringent
environmental regulations are forcing many smaller companies to exit the
market, which provides the Company with significant opportunities for
acquisitions and expansion.
31
<PAGE>
PRODUCTS AND SERVICES
The Company provides its customers with personalized workplace uniforms and
protective work clothing in a broad range of styles, colors, sizes and
fabrics. The Company's uniform products include shirts, pants, jackets,
coveralls, jumpsuits, smocks, aprons and specialized protective wear, such as
fire retardant and chemical protective garments. The Company also offers non-
garment items and services, such as shop towels, floormats, dust-control mops
and other textile products. Below is a chart displaying the approximate
percentages of revenues, by product-type:
<TABLE>
<CAPTION>
UNIFORM & RAS & DUST CONTROL & DIRECT HOSPITAL &
PERIOD GARMENT RENTALS SHOP TOWELS MAT PRODUCTS SALES LINEN PRODUCTS
- ------ --------------- ----------- -------------- ------ --------------
<S> <C> <C> <C> <C> <C>
Fiscal 1995............. 49.5% 27.2% 14.5% 5.6% 3.2%
Fiscal 1996............. 48.7 27.0 14.2 6.7 3.4
Fiscal 1997............. 48.8 27.3 13.9 6.8 3.2
Fiscal 1998(1).......... 47.2 27.9 14.6 6.5 3.8
</TABLE>
- --------
(1)For the six month period ended April 30, 1998.
The Company offers its customers a range of garment service options,
including full-service rental programs in which garments are owned, cleaned
and serviced by the Company and lease programs in which garments are cleaned
and maintained by its customers' individual employees. The Company also offers
the opportunity to purchase garments and related items directly. As part of
its full-service rental business, the Company picks up a customer's soiled
uniforms or other items on a periodic basis (usually weekly) and, at the same
time, delivers cleaned and processed replacement items. The Company's
centralized services, specialized equipment and economies of scale generally
allow it to be more cost-effective in providing garment services than
customers could be by themselves, particularly those customers with high
employee turnover rates. Accordingly, the Company believes its services are
appealing to customers who seek to outsource non-core functions. The Company's
uniform programs help customers foster greater corporate identity, present a
consistent, high-quality image and improve employee safety, productivity and
morale.
The Company offers its customers "green" programs which focus on pollution
prevention. These programs are based on the Company's shop towel product which
is highly absorbent and reusable. CTS is endorsed by many of the state and
regional printing associations and services large printing operations such as
The New York Times and USA Today. Further, the Company offers its customers
Reusable Absorbent Systems ("RAS") socks and pads. RAS products provide
customers with environmentally responsible alternatives to single-use
disposable absorbents and promote the EPA policy of waste minimization. RAS
programs are in place at many large national accounts such as Crouse Hinds,
General Motors and United Technologies.
In recent years, the Company has made a significant corporate investment in
waste-water treatment in 10 of its 18 laundry plants. The Company's industry-
leading waste-water treatment capabilities allow it to process textiles
contaminated with petroleum, chemical solvents or printing inks that require
specialized cleaning services that comply with environmental regulations.
These facilities capture more than 98% of the waste solvents and oils in
liquid form and then recycle this liquid waste as a supplemental fuel in a
secondary fuel recycling program. This technology reduces the amount of waste-
water sludge sent to landfills for disposal and minimizes a customer's future
environmental liabilities. As a result of the Company's superior environmental
capabilities in the heavy soil sector market, the Company estimates that most
of the printing associations in the eastern United States have endorsed CTS as
the preferred provider of heavy soil textile services. CTS provides such
services to approximately 75% of the printing accounts in the eastern United
States. All CTS environmental matters are managed by the Company's
environmental team that is directed by a senior manager with extensive
experience both in the industry and as a former appointed official of the EPA.
This individual is recognized by both the TRSA and UTSA as a leading industry
expert in environmental matters and serves on their respective environmental
committees.
32
<PAGE>
Finally, the Company processes heavy soil textile products for many of its
competitors because these competitors do not have the same waste treatment
capabilities as CTS. This permits the Company to develop relationships with
laundries that may be sold in the ongoing market consolidation.
Most of the Company's accounts are subject to written service contracts. The
Company's typical service contract ranges in duration from three to five years
with automatic "evergreen" renewals, except upon prior written notice, and
provides for significant liquidated damages upon early termination by the
customer.
The Company believes that it is one of the first industrial launderers to
implement bar-coding and radio frequency garment identification technologies.
These technologies allow the Company and its customers to track a garment from
pick-up at the customer's location through processing at the Company and
delivery back to the customer. Garment tracking is particularly important for
protective clothing because of its higher replacement cost and the need to
closely monitor garment use compared to expected wear-life. Garments can be
tracked by the use of bar code labels, which are permanently affixed to the
garment and which can be read by route salespeople using hand-held laser
scanners. The Company is able to provide reports to customers detailing the
status of every garment at all times. In addition, customized reports are
available and customers have the option to have direct-link PC capability,
allowing them access to real-time information about individual employee
garments. The Company believes that its tracking system improves inventory
control and efficiency by reducing human error that results in missing
uniforms and incomplete deliveries.
Soiled textile items are returned to the laundry plant directly from the
route system. These items are sorted by soil type and water washed in highly
automated industrial laundry equipment using customized wash formulas that
insure the cleanliness of these products while maximizing wear-life. Items are
then dried, sorted, folded and moved to the route staging area in the plant or
sent back to the terminal for distribution to the customer. In addition to
water washing, a small number of specialty items such as leather gloves are
dry cleaned. Chemicals used in dry cleaning operations are recycled. Waste-
water from water washing is processed in plant waste-water treatment
facilities and discharged in accordance with local municipal requirements.
SOURCING ACTIVITIES
The Company actively manages its supply chain and has, from time to time,
brought certain items in-house for manufacture on an opportunistic basis. For
example, due to the cost and inconsistent quality of shop towels available,
the Company began manufacturing shop towels in 1992. All of the shop towels
used in the Company's laundry business are produced at the Company's Blue
Ridge manufacturing facility and are marketed under the Blue Ridge name.
Approximately two-thirds of Blue Ridge manufactured shop towels are sold to
customers other than CTS. Although other sources of shop towels are available,
the Company believes that the superior performance of the Blue Ridge shop
towel, particularly in terms of durability and absorption, is a significant
advantage in securing heavy soil business. Blue Ridge manufactures dust mops,
aprons, laundry bags and RAS socks and pads and intends to begin floormat
production in late 1998. The Blue Ridge operations represented approximately
5.0% of the Company's revenues in fiscal 1997.
In order to take advantage of the opportunities presented by the North
American Free Trade Agreement, the Company manufactures work pants and shirts
in Mexico under agreements with several Mexican manufacturers. While the
Company does not anticipate substantial growth in its manufacturing
operations, it continues to consider manufacturing opportunities in order to
gain an advantage in the marketplace.
The Company has also developed, in conjunction with a New Zealand based
manufacturer, chemically protective and flame retardant garments that comply
with American National Standards Institute ("ANSI") standards for exclusive
distribution by CTS in the United States.
The Company purchases other rental merchandise from a variety of sources
including Garment Corporation of America, Perfect Jacket, RedKap and Universal
Overall. The Company believes that it is not dependent on any one supplier and
that alternative sources are available at comparable prices. The availability
of alternative
33
<PAGE>
manufacturers and the Company's ability to change suppliers and manufacture
textile products allow it to optimally meet its merchandise requirements in
terms of quantity, quality and price.
CUSTOMERS
The Company's customer base is diversified across a variety of industries
and customers range in size from large nationally-recognized businesses such
as ALCOA, Eckerd Drugs, Hershey, Oneida, United Technologies and Xerox, to
smaller businesses, such as gas stations and other retail businesses. Typical
customers include automobile service centers and dealers, delivery services,
food and general merchandise retailers, food processors and service
operations, light manufacturers, maintenance facilities, printers and
publishers, restaurants, service companies, soft and durable goods
wholesalers, transportation companies, and others who require employee
clothing for image, identification, protection or utility purposes. The
Company currently services approximately 40,000 accounts in diversified
industries from 40 locations throughout the eastern United States. During the
past five years, no single customer accounted for more than 5.0% of total
revenues in any year.
SALES, MARKETING AND DISTRIBUTION
In 1996, the Company made a strategic decision to increase its sales force
from 25 to its current level of approximately 100 dedicated sales associates
to leverage its investment in laundry plants, laundry terminals and their
waste-water treatment facilities. Sales associates market the Company's
products and services to potential customers and develop new accounts. The
selling efforts of the sales force are managed by regional sales managers who
are also responsible for major account relationships within their region.
Rental and direct sales programs on the national level are handled by the
National Account Marketing Department, which call directly on existing and
prospective rental and direct sale national accounts. The regional sales
managers and National Account Marketing Department report directly to the Vice
President of Sales.
The Company's route salespeople continue to be an integral component of the
Company's sales and marketing efforts. Route salespeople have responsibility
for increasing sales to existing customers and establishing new customer
relationships along their routes. All of the Company's route salespeople are
paid commissions based on the weekly revenue of their route. Further, route
salespeople are incented to obtain an executed written contract from every
customer. CTS believes that its approach results in a professional sales team
that is highly motivated.
Each of the Company's dedicated sales associates and route salespeople is a
member of a laundry plant team. The compensation of each member is tied to the
collective performance of the laundry plant team.
The Company's catalog business operates under the Blue Ridge name and
distributes over 150,000 catalogs each season. This catalog offers a variety
of industrial garments and image apparel that is personalized with the logos
and names of its customers. The focus of the catalog is to facilitate the
growth of the Company's direct sales business and to establish relationships
with accounts currently under contract with competitors.
COMPETITION
The industrial segment of the textile rental industry is highly competitive.
The Company believes that the top five companies (ARAMARK Corporation, Cintas
Corporation, G&K Services, Inc., Unifirst Corporation and Unitog Company) in
the industrial segment of the industry currently account for approximately
half of the industry's sales. The Company believes that it is one of a small
group of companies that have revenues of approximately $50 million up to $200
million and which collectively account for approximately 25% of revenues from
the industrial segment. Within the industrial segment of the textile rental
industry, the Company believes it has established itself as a leader in the
heavy soil sector. The remainder of the industry is made up of over 700
smaller businesses, many of which serve one or a limited number of markets or
geographic service areas and generate annual revenues of less than $1.0
million. The Company believes that the primary competitive factors that affect
its operations are price and its ability to meet customers' product
specifications, which include design,
34
<PAGE>
quality and service. The Company believes it maintains prices comparable to
those of its major competitors. The Company also believes that its ability to
compete effectively is enhanced by its environmental capabilities and its
superior customer service and support.
EMPLOYEES
As of April 30, 1998, the Company had approximately 1,700 employees. CTS is
a party to 29 collective bargaining agreements covering approximately 800
employees. These bargaining agreements expire periodically through 2001. The
Company's only work stoppage in the last ten years occurred in 1994 with
respect to one bargaining unit of one Company facility. This stoppage
represented a limited number of employees and had no material impact on the
Company's operations. The Company believes that its relationships with both
its union and non-union employees are good.
FACILITIES
As of April 30, 1998, the Company provided textile rental services from 40
facilities. The Company owns 21 of its facilities, including its corporate
headquarters in Syracuse, New York, and leases the balance of its facilities
pursuant to leases expiring between October 1998 and December 1999 with
options to renew in most cases, except for leases for certain garages and
small distribution facilities which are leased on a month-to-month basis. The
following table summarizes certain information concerning the Company's
facilities.
<TABLE>
<CAPTION>
APPROXIMATE
LOCATION PRINCIPAL USE SQUARE FOOTAGE
- -------- ------------- --------------
<S> <C> <C>
Atlanta, GA* Laundry Plant/Laundry Terminal 18,000
Baltimore, MD** Laundry Plant/Laundry Terminal 85,000
Beckley, WV* Laundry Terminal 7,500
Belleville, NJ** Laundry Plant/Laundry Terminal 22,800
Betsy Layne, KY* Laundry Terminal 6,500
Blue Ridge, GA Manufacturing 42,500
Bristol, TN Laundry Plant/Laundry Terminal 27,200
Buffalo, NY*** Laundry Plant/Laundry Terminal 92,000
Burlington, VT Laundry Terminal 9,180
Cinnaminson, NJ* Laundry Terminal 10,000
Charlotte, NC* Laundry Terminal 7,500
Chattanooga, TN* Laundry Terminal 8,200
Cleveland, OH Laundry Plant/Laundry Terminal 85,000
Erie, PA Laundry Terminal 47,000
Evansville, IN* Laundry Terminal 7,500
Fairmont, WV* Laundry Terminal 6,500
Greenville, SC* Laundry Terminal 5,000
Hazleton, PA* Laundry Terminal 7,500
Huntington, WV Laundry Plant/Laundry Terminal 180,000
Joliet, IL* Laundry Terminal 8,000
Lakeland, FL* Laundry Plant/Laundry Terminal 12,000
Lewiston, ME* Laundry Terminal 6,500
London, KY** Laundry Plant/Laundry Terminal 24,000
Long Island, NY* Laundry Terminal 6,500
Nashville, TN* Laundry Terminal 7,500
New Bedford, MA** Laundry Plant/Laundry Terminal 85,000
Philadelphia, PA Laundry Plant 85,000
Pittsburgh, PA* Laundry Terminal 6,500
Raleigh, NC* Laundry Terminal 8,200
Richmond, VA Laundry Plant/Laundry Terminal 49,000
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE
LOCATION PRINCIPAL USE SQUARE FOOTAGE
- -------- ------------- --------------
<S> <C> <C>
Schenectady, NY** Laundry Plant/Laundry Terminal 25,000
Seaford, DE* Laundry Terminal 6,200
Smithboro, NY Laundry Terminal 6,500
Syracuse, NY Laundry Plant/Corporate Headquarters 220,000
Toledo, OH Laundry Plant/Laundry Terminal 65,000
Waterbury, CT Laundry Plant/Laundry Terminal 108,000
Winchester, VA* Laundry Terminal 9,200
Woodbridge, NJ* Corporate Sales Office 900
Worcester, MA Laundry Plant/Laundry Terminal 75,000
York, PA** Laundry Plant/Laundry Terminal 34,000
</TABLE>
- --------
* Indicates leased facility.
** Company owns laundry plant but leases garage.
*** Financed by industrial revenue bonds.
LEGAL PROCEEDINGS
The Company is a party to various litigation matters incidental to the
conduct of its business. The Company does not believe that the outcome of any
of the matters in which it is currently involved will have a material adverse
effect on its financial condition, results of operations or cash flows.
ENVIRONMENTAL MATTERS
The Company and its operations are subject to various federal, state and
local laws and regulations governing, among other things, the generation,
handling, storage, transportation, treatment and disposal of hazardous wastes
and other substances. In particular, industrial laundries use and must dispose
of detergent waste-water and other residues. The Company is attentive to the
environmental concerns surrounding the disposal of these materials and has
through the years taken measures to avoid their improper disposal. In the
past, the Company has settled, or contributed to the settlement of, actions or
claims brought against the Company relating to the disposal of hazardous
materials and there can be no assurance that the Company will not have to
expend material amounts to remediate the consequences of any such disposal in
the future. There have been no environmental claims brought against the
Company that have had a material adverse effect.
Further, under environmental laws, an owner or lessee of real estate may be
liable for the costs of removal or remediation of certain hazardous or toxic
substances located on or in or emanating from such property, as well as
related costs of investigation and property damage. Such laws often impose
liability without regard to whether the owner or lessee knew of or was
responsible for the presence of such hazardous or toxic substances. There can
be no assurances that acquired or leased locations have been operated in
compliance with environmental laws and regulations or that future uses or
conditions will not result in the imposition of liability upon the Company
under such laws or expose the Company to third-party actions such as tort
suits.
In addition, the EPA has recently proposed categorical pre-treatment
standards, which form the basis for a federal environmental regulatory
framework applicable to industrial laundry operations that would replace local
regulations. Scheduled to take effect in 1999, these regulations, if
implemented as proposed, would require the Company, and its competitors, to
expend substantial amounts on compliance, thereby increasing the Company's
operating costs and capital expenditures. To the extent such costs and
expenses could not be offset through price increases, the Company's results of
operations could be adversely affected. Until such regulations are finalized,
the Company is not able to determine the cost of compliance.
36
<PAGE>
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following table sets forth certain information regarding the Company's
directors, executive officers and key employees:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Thomas M. Coyne......... 60 Chairman of the Board, President and Chief Executive Officer
J. Patrick Barrett...... 61 Director
Thomas C. Crowley
(1)(2)................. 51 Director
James W. Maher.......... 63 Director
William D. Matthews..... 63 Director
Wallace J. McDonald
(1).................... 57 Director
David P. O'Hara......... 51 Director and Assistant Secretary
Raymond T. Ryan (1)(2).. 69 Director
Dennis J. Bossi......... 53 Vice President of Operations
Paul H. Briele.......... 35 Director of Information Systems
John G. Harshall........ 50 Vice President of Operations
Donald F. X. Keegan..... 36 Vice President, Chief Financial Officer & Treasurer
Thomas E. Krebbeks...... 44 Corporate Controller
David I. Murray......... 48 Senior Vice President of Laundry Operations
Maher M. Najjar......... 36 Director of Technology
Stephen P. Naughton..... 42 Vice President, Reusable Absorbent Systems
Anthony F. O'Connor..... 48 Vice President of Sales & Marketing
Alexander Pobedinsky.... 36 General Counsel and Secretary
Paul E. Rebuck.......... 53 Director of Transportation
Frank E. Reid........... 81 Vice President of Operations
Robert E. Rudd.......... 44 Vice President of Engineering
Robert B. Schaffer...... 63 Director of Environmental Affairs
Timothy O. Taylor....... 44 Vice President of Blue Ridge Textile Manufacturing, Inc.
</TABLE>
- --------
(1) Member of the Audit and Finance Committee.
(2) Member of the Human Resource and Compensation Committee.
Thomas M. Coyne is Chairman of the Board, President and Chief Executive
Officer of the Company. Mr. Coyne joined the Company in 1977 after spending 17
years with an engineering and construction company. He has served in various
positions responsible for plant operations and sales before his promotion to
President in 1982. Mr. Coyne currently serves on the Board of the Textile
Rental Services Association.
J. Patrick Barrett has been a director since July, 1998. He has been
President of Telergy, Inc., a telecommunication company, since April, 1998;
Chairman of Carpat Investments, a private investment firm, since 1987; was
Chairman and CEO of Avis Inc. from 1981 to 1987 and has been a director of
Lincoln National Corp. since 1990.
Thomas C. Crowley has been a Director of the Company since 1993. Mr. Crowley
has been the Executive Vice President of Evergreen Bancorp, Inc. in Glenn
Falls, New York since 1994. From 1979 to 1993, Mr. Crowley was an executive
with Fleet Bank.
James W. Maher has been a Director of the Company since 1995. From 1980 to
1995, Mr. Maher was the Chief Executive Officer and President of Crouse Irving
Memorial Hospital in Syracuse, New York.
William D. Matthews has been a Director of the Company since January 1997.
Mr. Matthews has been the Chairman of the Board and Chief Executive Officer of
Oneida, Ltd. in Oneida, New York since 1986. Oneida, Ltd. is listed on The New
York Stock Exchange. Mr. Matthews has been a director of CONMED Corporation
since 1997.
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<PAGE>
Wallace J. McDonald has been a Director of the Company since 1987. Mr.
McDonald has been a partner with the law firm of Bond, Schoeneck & King, LLP
based in Syracuse, New York since 1967.
David P. O'Hara has been a Director of the Company since 1982. Mr. O'Hara
was General Counsel and Secretary of the Company from 1981 to 1997. He
currently is Assistant Secretary of the Company and a partner with the law
firm of O'Hara, Hanlon, Knych & Pobedinsky, LLP based in Syracuse, New York.
Raymond T. Ryan has been a Director of the Company since 1991. From March
1991 through July 1995 he served as Chief Financial Officer of the Company. He
is currently Assistant Treasurer of the Company. Mr. Ryan has been an employee
of the Outaouais Group, Inc. since 1991. Mr. Ryan is a retired partner of
Coopers and Lybrand, LLP and was the tax partner for Coyne for 16 years.
Dennis J. Bossi has been a Vice President of Operations of the Company since
January 1984. From 1976 to 1983, Mr. Bossi was the Vice President of
Administration for Fisher Foods, Inc. where he served in various positions of
increasing responsibility.
Paul H. Briele joined the Company's MIS Department in September 1986. In
March 1996, he was promoted to his current position of Director of Information
Systems.
John G. Harshall joined the Company in October 1986 as General Manager of
the York, Pennsylvania laundry operation. In February 1995, Mr. Harshall was
promoted to his current position of Vice President of Operations. From 1984 to
1986, Mr. Harshall was a consultant to the grocery industry. From 1979 to
1983, he was the Senior Vice President of Store Operations for Fisher Foods,
Inc.
Donald F. X. Keegan has served as Vice President, Chief Financial Officer
and Treasurer of the Company since August 1995. From 1990 to 1995, Mr. Keegan
was Vice President of Operations and Chief Financial Officer of Jos. J.
Pietrafesa Co., a private label manufacturer of men's fine tailored clothing.
Mr. Keegan is a certified public accountant who began his career with Arthur
Andersen & Co. in New York, New York in 1983.
Thomas E. Krebbeks has been the Corporate Controller of the Company since
1991. Mr. Krebbeks began his career with Ernst & Young and is a certified
public accountant.
David I. Murray joined the Company in June 1998 as the Senior Vice President
of Operations. Prior to joining Coyne, Mr. Murray was employed with The Budget
Corporation from August 1993 to September 1997 as Vice President and General
Manager in the Rental Car Division. From November of 1991 to July 1997, Mr.
Murray was President/CEO of Consumers Auto Choice of Fresno, California.
Maher M. Najjar joined the Company's MIS Department in 1989. In August 1995
he was promoted to his current position of Director of Technology. He
currently serves on the Research Development Committee of the Textile Rental
Services Association.
Stephen P. Naughton joined the Company in 1989 as Director of Environmental
Affairs. In 1994, he assumed his current position of Vice President, Reusable
Absorbent Systems with direct responsibility for RAS marketing.
Anthony F. O'Connor joined the Company in October 1992 as General Manager of
the Belleville, New Jersey laundry operation. In February 1995, Mr. O'Connor
was promoted to Vice President of Operations. In July 1996, Mr. O'Connor was
promoted to his current position of Vice President of Sales & Marketing. From
1983 to 1992, Mr. O'Connor was a General Manager with ARAMARK Corporation.
Alexander Pobedinsky has been the General Counsel and Secretary of the
Company since 1997. Mr. Pobedinsky has been associated with the law firm of
O'Hara, Hanlon, Knych and Pobedinsky, LLP based in Syracuse, New York since
1991 and became a partner in 1996.
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<PAGE>
Paul E. Rebuck joined the Company in February 1996 as Director of
Transportation. From 1990 to 1996, Mr. Rebuck was the Director of
Transportation for P&C Supermarkets, a Penn Traffic Company.
Frank E. Reid has been a Vice President of Operations of the Company since
1995. Prior to joining the Company, Mr. Reid was a General Manager for 20
years with Unifirst Corporation in Springfield, Massachusetts.
Robert E. Rudd joined the Company in 1979. Since then he has held positions
in various aspects of plant operations, including plant redesign, automation
and construction. He was promoted to his current position of Vice President of
Engineering in October 1996.
Robert B. Schaffer joined the Company in 1993 as Director of Environmental
Affairs. Mr. Schaffer currently serves on the Environmental Committees of both
the Uniform and Textile Service Association and the Textile Rental Services
Association. From 1980 through 1992, Mr. Schaffer was a consultant with Ogden
Corp. where he was the leading environmental consultant to the UTSA and TRSA.
Prior to becoming a consultant, he worked for the EPA for 11 years.
Timothy O. Taylor joined the Company in October 1992 as General Manager of
Blue Ridge Textile Manufacturing, Inc. In 1995, he was promoted to his current
position of Vice President of Blue Ridge Textile Manufacturing, Inc.
COMPENSATION OF DIRECTORS
The Company pays each director a fee of $2,500 for each Board meeting
attended and $500 for each Committee meeting attended. The Board normally
meets four times per year and Committees meet two times per year. Directors
who are also employees of the Company or who provide other paid consulting or
advisory services to the Company do not receive compensation as directors. The
Company also reimburses each director for ordinary and necessary travel
expenses related to such directors attendance at Board of Directors and
Committee meetings.
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned by the Company's
President and each of the other four most highly compensated officers of the
Company (collectively, the "Named Executive Officers") for services rendered
in all capacities to the Company during the fiscal year ended October 31,
1997:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------- ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION (1)
--------------------------- ---------- --------- ----------------
<S> <C> <C> <C>
Thomas M. Coyne
Chairman of the Board, President and
Chief Executive Officer................. $ 206,507 $ 50,000 $3,381
Donald F. X. Keegan
Vice President, Chief Financial Officer
and Treasurer........................... $ 130,000 $ 27,500 $2,827
Dennis J. Bossi
Vice President of Operations............. $ 115,000 $ 20,000 $2,785
Anthony F. O'Connor
Vice President of Sales and Marketing.... $ 85,231 $ 15,000 $1,518
John G. Harshall
Vice President of Operations............. $ 84,327 $ 20,000 $1,590
</TABLE>
- --------
(1) Consists of premiums for disability policies paid by the Company of $981,
$427, $991, $0 and $0 and the Company matching contributions under the
401(k) Plan of $2,400, $2,400, $1,794, $1,518 and $1,590 for the benefit
of Messrs. Coyne, Keegan, Bossi, O'Connor and Harshall, respectively.
39
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The Company's Human Resources and Compensation Committee consists of Messrs.
Crowley and Ryan.
Mr. Ryan served as Chief Financial Officer of the Company from March 1991
through July 1995 and is currently Assistant Treasurer of the Company. Except
as described above, no officer of the Company serves as a member of the Human
Resources and Compensation Committee. Transactions with certain of the members
of such committee are discussed below under "Professional Services."
Robert C. Ammerman was a director of the Company and a member of the Human
Resources and Compensation Committee from 1994 until May 1998. Mr. Ammerman is
a partner of Capital Resource Partners, L.P. which is an affiliate of one of
the holders of the Old Notes and the Warrants. The Old Notes and the Warrants
were redeemed with a portion of the proceeds from the Offering.
CERTAIN TRANSACTIONS WITH MEMBERS OF THE COYNE FAMILY
At the Company's discretion, the Company has made salary continuation
payments totaling $100,000 per year to each of J. Stanley Coyne, a principal
shareholder of the Company, and Gerald Coyne, a son of J. Stanley Coyne,
including payments of such amounts in each of the last three fiscal years. In
addition, the Company has paid certain medical and personal expenses of J.
Stanley Coyne aggregating $74,104, $36,048, $93,451 and $38,021 during the
fiscal years ended October 31, 1995, 1996, and 1997 and the six months ended
April 30, 1998, respectively.
The Company has an outstanding note receivable from J. Stanley Coyne in the
amount of $1,256,250. This note bears interest at the applicable federal rate
as determined by the Internal Revenue Service (6.4% at October 31, 1997). This
note will become payable, with accrued interest, upon the death of J. Stanley
Coyne.
The Company has guaranteed the obligations of J. Stanley Coyne under a
promissory note payable in 2003 in the approximate amount of $2.0 million,
including accrued interest.
The Company makes advancements of $2,500 per month to Susan Whitney, the
daughter of J. Stanley Coyne. As of April 30, 1998, the total amount
outstanding was $20,000. The Company is also making advancements of $2,231 per
month to Gerald Coyne, a son of J. Stanley Coyne, to be used as mortgage
payments on his home. As of April 30, 1998, the total amount outstanding was
$68,000. These advancements will continue for thirty years or until the death
of Gerald Coyne and his wife. All advancements will be repaid to the Company
from such person's share of The J. Stanley Coyne Inter Vivos Irrevocable Trust
with interest at an annual rate of 9.5%.
The Company acquired certain residential property in central New York in
1995 at a cost of $320,000 for use by Thomas M. Coyne, Chairman of the Board,
President of the Company and Chief Executive Officer. Mr. Coyne paid the down
payment of $75,000 and the Company assumed a mortgage of $245,000 payable at
$2,900 per month for ten years. The mortgage bears interest at 7.5%. The
Company made mortgage payments of $0, $34,898, $34,898, and $17,449 during the
fiscal years ended October 31, 1995, 1996, and 1997 and the six months ended
April 30, 1998, respectively. The balance of the mortgage at April 30, 1998
was $203,217. Thomas M. Coyne has an option to acquire this property any time
for the unpaid balance of the mortgage, but in no event less than $100,000.
The Company approved a loan of $110,000 to Thomas M. Coyne in December 1997
at an interest rate of 9.5%. As of April 30, 1998, the total amount advanced
and outstanding was $75,000. This loan is payable at a rate of $2,000 per
month beginning January 1999, plus mandatory prepayments of principal equal to
Thomas M. Coyne's after-tax bonuses received from the Company.
40
<PAGE>
PROFESSIONAL SERVICES
Raymond T. Ryan, a director of the Company, member of the Human Resources
and Compensation Committee, Audit and Finance Committee, and the Assistant
Treasurer of the Company, is an employee of The Outaouais Group, Inc., a
consulting firm, which provides various accounting, tax and financial services
to the Company. The Company paid fees of $0, $77,421, $68,662, and $32,496 to
The Outaouais Group, Inc. for various services during the fiscal years ended
October 31, 1995, 1996, and 1997 and the six months ended April 30, 1998,
respectively.
David P. O'Hara, a director and Assistant Secretary of the Company and
Alexander Pobedinsky, General Counsel and Secretary of the Company, are
partners with the law firm of O'Hara, Hanlon, Knych & Pobedinsky, LLP, which
provides legal services for the Company, including services in each of the
last three fiscal years. The Company paid fees of $623,456, $621,410,
$519,287, and $261,929 to O'Hara, Hanlon, Knych & Pobedinsky, LLP for various
services during the fiscal years ended October 31, 1995, 1996, and 1997 and
the six months ended April 30, 1998, respectively.
Wallace J. McDonald, a director of the Company and member of the Audit and
Finance Committee, is a partner in the law firm of Bond, Schoeneck & King,
LLP, which provides legal services for the Company, including services in each
of the last three fiscal years.
41
<PAGE>
PRINCIPAL SHAREHOLDERS
The Company is authorized to issue 100,000 shares of Class A Common Stock,
par value $.01 per share ("Class A Common Stock"), 99,000 shares of Class B
Common Stock, par value $.01 ("Class B Common Stock"), 30,000 shares of Class
A Preferred Stock, par value $100 per share ("Class A Preferred Stock"), and
5,000 shares of Class B Preferred Stock, par value $500 per share ("Class B
Preferred Stock"). As of the date of this Prospectus, 2,923 shares of Class A
Common Stock, 74,030 shares of Class B Common Stock, 23,107 shares of Class A
Preferred Stock and 2,991 shares of Class B Preferred Stock were issued and
outstanding.
The shares of Class A Common Stock and Class B Common Stock are identical in
all respects, except for voting rights and certain conversion rights. Each
share of Class A Common Stock is entitled to one vote on all matters submitted
to a vote of the Company's shareholders. The shares of Class A Common Stock
are not convertible. The shares of Class B Common Stock do not have voting
rights, except as provided by applicable law. Each share of Class B Common
Stock will convert automatically into one share of Class A Common Stock upon
the happening of a sale of substantially all of the assets of the Company, any
sale of common stock, merger, consolidation, recapitalization or other change
in ownership of the capital stock of the Company that results in the
shareholders of the Company as of October 7, 1994 owning less than 51% of the
voting power of the Company, or the initial public offering of the Company's
Common Stock.
The shares of Class A Preferred Stock and Class B Preferred Stock are
identical in all respects, except for their stated par value and dividends.
The holders of both Class A and Class B Preferred Stock are entitled to non-
cumulative dividends at a rate of 5% per annum as and when such dividends are
declared by the Board of Directors out of funds legally available therefor. No
dividends may be declared or paid on the Class B Preferred Stock unless the
full 5% dividend for the current year shall have been declared and paid on the
Class A Preferred Stock. Historically, the Company has not paid dividends on
its preferred stock.
All of the Company's equity securities are owned of record by the Coyne
family or trusts established by them.
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK
------------------------------------------------- -------------------------------------------------
CLASS A (VOTING) CLASS B (NON-VOTING) CLASS A (NON-VOTING) CLASS B (NON-VOTING)
------------------------ ------------------------ ------------------------ ------------------------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
SHARES SHARES SHARES SHARES
BENEFICIALLY PERCENTAGE BENEFICIALLY PERCENTAGE BENEFICIALLY PERCENTAGE BENEFICIALLY PERCENTAGE
OWNED(1) OF CLASS OWNED (1) OF CLASS OWNED (1) OF CLASS OWNED (1) OF CLASS
------------ ---------- ------------ ---------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J. Stanley Coyne
Revocable Trust (2)(3).. -- -- 63,305 85.5% 19,745 85.5% 2,272 80.0%
J. Stanley Coyne Inter
Vivos Irrevocable Trust
(2)(4)................. 1,020 34.9% -- -- -- -- -- --
Thomas M. Coyne Blue
Ridge Trust (2)(5)..... 1,903 65.1% -- -- -- -- -- --
J. Stanley Coyne (2).... 1,020 (6) 34.9% 74,030 (7) 100% 23,107 (8) 100% 2,991 (9) 100%
</TABLE>
- --------
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "SEC") and includes voting or
investment power with respect to the securities. Accordingly they may
include securities owned by or for, among others, the spouse and/or minor
children or the individual and any other relative who has the same home as
such individual, as well as other securities as to which the individual
has or shares voting or investment power or has the right to acquire under
outstanding stock option within 60 days after the date of this table.
(2) The address of such beneficial owner is c/o Coyne International
Enterprises Corp., 140 Cortland Avenue, P.O. Box 4854, Syracuse, New York
13221.
(3) The trustees of this trust are J. Stanley Coyne, David P. O'Hara, Thomas
M. Coyne, Raymond T. Ryan and Wallace J. McDonald, who share voting and
investment power with respect to the shares held by this trust
42
<PAGE>
and who may be deemed to be the beneficial owner of all such shares. Such
trustees disclaim beneficial ownership of these shares.
(4) The trustees of this trust are J. Stanley Coyne, David P. O'Hara, Thomas M.
Coyne, Raymond T. Ryan and Wallace J. McDonald, who share voting and
investment power with respect to the shares held by this trust and who may
be deemed to be the beneficial owner of all such shares. Such trustees
disclaim beneficial ownership of these shares.
(5) The trustees of this trust are Raymond T. Ryan and David P. O'Hara, who
share voting and investment power with respect to the shares held by this
trust and who may be deemed to be the beneficial owner of all such shares.
Such trustees disclaim beneficial ownership of these shares.
(6) Includes 1,020 shares owned by the J. Stanley Coyne Inter Vivos Irrevocable
Trust, of which J. Stanley Coyne is a co-trustee.
(7) Includes 63,305 shares owned by the J. Stanley Coyne Revocable Trust, of
which J. Stanley Coyne is a co-trustee.
(8) Includes 19,745 shares owned by the J. Stanley Coyne Revocable Trust, of
which J. Stanley Coyne is a co-trustee.
(9) Includes 2,272 shares owned by the J. Stanley Coyne Revocable Trust, of
which J. Stanley Coyne is a co-trustee.
43
<PAGE>
DESCRIPTION OF OTHER INDEBTEDNESS
NEW CREDIT FACILITY
Contemporaneously with the completion of the Offering , the Company amended
its old credit facility led by NationsBank, N.A. (the "Bank") (as amended, the
"New Credit Facility") to provide for (i) a $25.0 million revolving credit
facility, subject to availability as described below, (ii) a $20.0 million
capital expenditure facility and (iii) a $10.0 million acquisition facility.
All loans under the New Credit Facility will bear interest, at the Company's
option, at either (i) the Bank's prime rate plus 0.375% (in the case of the
revolving credit facility) or 0.625% (in the case of the capital expenditure
and acquisition facilities) or (ii) the London Interbank Offered Rate
("LIBOR") plus 2.25% (in the case of the revolving credit facility) or 2.5%
(in the case of the capital expenditure and acquisition facilities). Advances
under the revolving credit facility will be limited to (a) up to 85% of the
Company's eligible accounts receivable plus (b) the lesser of (i) the sum of
50% of the amount of eligible inventory consisting of new merchandise plus 25%
of the amount of eligible inventory consisting of in-service inventory or (ii)
$12.5 million. Additionally, the Company is required to maintain a minimum
available balance under the revolving credit facility of $1.0 million.
Advances under the capital expenditure facility will be based on up to 100% of
the net purchase price of the fixed assets for the first $4.0 million in any
year and 80% thereafter. Interest only is payable on the capital expenditure
facility during the first two years; thereafter, principal is payable in 20
quarterly payments, provided that all loans will come due upon termination of
the revolving credit facility. Advances under the acquisition facility will be
based on reasonable purchase price multiples provided that the proposed
acquisition generates sufficient cash flow to service the acquisition debt and
provided further that acquisitions in excess of $3.5 million in any fiscal
year will require the Bank's consent. Interest only is payable on the
acquisition facility during the first year; thereafter, principal will be
payable in 12 quarterly payments; provided that all loans will come due upon
termination of the revolving credit facility. The Company shall be required to
make annual mandatory prepayments in an amount equal to the lesser of (i)
$2,000,000 or (ii) 35% of the Company's excess cash flow, payable with
delivery of the Company's annual financial statements, to be applied to reduce
acquisition loans and capital expenditure loans.
The initial term of the New Credit Facility is five years and will renew for
additional one year periods thereafter unless terminated by either party. In
the event that the New Credit Facility is terminated by the Company prior to
the end of the original term, the Company will pay a fee of $262,500 except in
certain circumstances. The Company will pay an unused line fee of 0.375% per
year on the unused portion of the revolving credit facility up to $15.0
million and 0.25% per year on the unused portion in excess of $15.0 million,
payable monthly in arrears. The Company will pay letter of credit fees of 2.0%
per year on all outstanding letters of credit.
Borrowings under the New Credit Facility will be secured by a first priority
lien on the Company's accounts receivable and inventory as well as assets
financed under the capital expenditure facility and assets acquired through
acquisitions. The New Credit Facility will contain customary covenants and
restrictions on the Company's ability to engage in certain activities. In
addition, the New Credit Facility will provide that the Company must meet
certain financial conditions including (i) a minimum fixed charge coverage
ratio, (ii) a maximum ratio of funded debt to EBITDA, (iii) a minimum EBITDA
requirement and (iv) certain limitations on capital expenditures. The New
Credit Facility also will include customary events of default.
INDUSTRIAL REVENUE BOND FINANCING
In 1994, Midway-CTS Buffalo, Ltd. ("Midway"), a wholly-owned subsidiary of
the Company, entered into a $2.6 million industrial revenue bond financing
(the "IRB Financing") relating to the Company's Buffalo, New York facility
(the "Buffalo Facility"). In connection with the IRB Financing, Midway is
party to a lease-purchase agreement with the Erie County Industrial
Development Agency pertaining to the Buffalo Facility and
44
<PAGE>
is a guarantor of the industrial revenue development bonds issued by the Erie
County Industrial Development Agency that financed such facility. The Buffalo
Facility lease payments equal the interest and principal payments due under
the related industrial development revenue bonds. The IRB Financing expires in
2005, bears a variable interest rate (which was 10% at April 30, 1998), and
has a 20 year amortization schedule with a bullet payment due at expiration.
45
<PAGE>
EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Initial Notes were originally sold by the Company on June 26, 1998 to
the Initial Purchasers pursuant to the Purchase Agreement. The Initial
Purchasers subsequently resold the Initial Notes to qualified institutional
buyers in reliance on Rule 144A under the Securities Act. As a condition to
the Purchase Agreement, the Company entered into the Registration Rights
Agreement pursuant to which the Company agreed, for the benefit of the holders
of the Initial Notes, at the Company's cost to (i) file an Exchange Offer
Registration Statement with the Commission on or prior to 45 days after the
date of the original issuance of the Initial Notes, (ii) use its best efforts
to have the Exchange Offer Registration declared effective by the Commission
on or prior to 135 days after the date of the original issuance of the Initial
Notes, and (iii) cause the Exchange Offer to be consummated on the earliest
practicable date after the Exchange Offer Registration Statement has become
effective, but in no event later than 30 business days after the effective
date.
Upon the Exchange Offer Registration Statement being declared effective, the
Company will offer the Exchange Notes in exchange for surrender of the Initial
Notes. The Company will keep the Exchange Offer open for not less than 30 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 Initial Notes. For each
Initial Note validly tendered to the Company pursuant to the Exchange Offer
and not withdrawn by the holder thereof, the holder of such Initial Note will
receive an Exchange Note having a principal amount equal to that of the
tendered Initial Note.
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Company believes
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 the Company within the meaning of Rule
405 under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business
and such holder has no arrangement or understanding with any person to
participate in the distribution of such Exchange Notes.
Each holder of the Initial Notes (other than certain specified holders) who
wishes to exchange Initial Notes for Exchange Notes in the Exchange Offer will
be required to represent to the Company in the Letter of Transmittal, that,
among other things, the Exchange Notes acquired pursuant to the Exchange Offer
are being acquired in the ordinary course of business of the person receiving
such Exchange Notes, whether or not such person is the holder, that neither
the holder nor any such other person has 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 in an "affiliate," as defined
under Rule 405 of the Securities Act, of the Company. In the case of any
holder that is not a broker-dealer, each such holder, by tendering, will also
represent to the Company that such holder is not engaged in, and does not
intend to engage in, a distribution of the Exchange Notes. Each Participating
Broker-Dealer that receives Exchange Notes for its own account in exchange for
Initial Notes, where such Initial 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 Commission has taken the position
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 Initial Notes), with the
prospectus contained in the Exchange Offer Registration Statement so long as
the prospectus otherwise meets the requirements of the Securities Act. Under
the Registration Rights Agreement, the Company is required to allow
Participating Broker-Dealers and other persons subject to similar prospectus
delivery requirements, if any, to use the prospectus contained in the Exchange
Offer Registration Statement in connection with the resale of such Exchange
Notes. Subject to the exception described in the next paragraph, the Company
has agreed that for a period ending on the earlier of (i) 180 days from the
date on which the Exchange Offer Registration Statement is declared effective,
and (ii) the date on which a Participating Broker-Dealer is no longer required
to deliver a prospectus in connection with market making or other trading
activities, it will make this Prospectus available to any Participating
Broker-Dealer for use in connection with any such resale; provided, however,
that the Company and the Guarantors will
46
<PAGE>
have no obligation to amend or supplement this Prospectus unless the Company
has received written notice from a Participating Broker-Dealer of their
prospectus delivery requirements under the Securities Act within fifteen (15)
business days following consummation of the Exchange Offer. See "Plan of
Distribution."
The Company shall not be required to amend or supplement the Exchange Offer
Registration Statement if (i) in the judgment of the Company's Board of
Directors exercised reasonably and in good faith the use of the Exchange Offer
Registration Statement and the disclosure required to be made therein would
materially interfere with a valid business purpose of the Company or the
Guarantors and (ii) the Company delivers a notice to such effect to such
Broker-Dealers setting forth the period of time (which shall not be greater
than 60 days) for which the Company's obligation to so amend or supplement the
Exchange Offer Registration Statement will be suspended.
In the event that any changes in law or the applicable interpretations of
the staff of the Commission do not permit the Company to effect the Exchange
Offer or if any holder of the Initial Notes is not eligible to participate in
the Exchange Offer, and subject to the exception described in the next
paragraph, the Company will, at its cost (a) file the Shelf Registration
Statement covering resales of the Initial Notes, (b) use its best efforts to
cause the Shelf Registration Statement to be declared effective under the
Securities Act and (c) use its best efforts to keep continuously effective the
Shelf Registration Statement for a period of at least two years. The Company
will, in the event of the filing of a Shelf Registration Statement, provide to
each holder of the Initial Notes copies of the prospectus which is a part of
the Shelf Registration Statement, notify each such holder when the Shelf
Registration Statement for the Initial Notes has become effective and take
certain other actions as are required to permit unrestricted resales of the
Initial Notes. A holder of Initial Notes that sells such Initial Notes
pursuant to the Shelf Registration Statement generally will be required to be
named as a selling security holder 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 Registration Rights Agreement which are
applicable to such a holder (including certain indemnification obligations).
In addition, each holder of the Initial Notes will be required to deliver
information to be used in connection with the Shelf Registration Statement and
to provide comments on the Shelf Registration Statement within the time
periods set forth in the Registration Rights Agreement in order to have their
Initial Notes included in the Shelf Registration Statement and to benefit from
the provisions regarding Liquidated Damages set forth below.
If in the judgment of the Company's Board of Directors exercised reasonably
and in good faith the use of the Shelf Registration Statement and the
disclosure required to be made therein would materially interfere with a valid
business purpose of the Company or the Guarantors, the Company may deliver a
notice to such effect to the holders, and upon receipt of such notice, the
holders shall cease distribution of the Notes under a Shelf Registration
Statement for the period of time set forth in such notice (which shall not be
greater than 60 days).
If (a) the Company fails to file any of the Registration Statements required
by the Registration Rights Agreement on or before the date specified for such
filing, (b) any of such Registration Statements is not declared effective by
the Commission on or prior to the date specified for such effectiveness (the
"Effectiveness Target Date"), (c) the Company fails to consummate the Exchange
Offer within 30 business days after 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 for its intended purpose
without being succeeded immediately by a post-effective amendment to such
Registration Statement that cures such failure and that is itself immediately
declared effective (each such event referred to in clauses (a) through (d)
above a "Registration Default"), then the Company and the Guarantors will pay
Liquidated Damages to each Holder of Initial Notes, with respect to the first
90-day period immediately following the occurrence of such Registration
Default, in an amount equal to $.05 per week per $1,000 principal amount of
Initial 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 Initial
Notes with respect to each subsequent 90-day period until all Registration
Defaults have been cured, up to a maximum amount of Liquidated Damages of $.30
per week per $1,000 principal amount of Initial Notes. Following the cure of
all Registration Defaults, the accrual of Liquidated Damages will cease.
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<PAGE>
This summary of certain provisions of the Registration Rights Agreement does
not purport to be complete and is subject to, and is qualified in its entirety
by, all the provisions of the Registration Rights Agreement, a copy of which
is available upon request to the Company.
Following the consummation of the Exchange Offer, holders of the Initial
Notes who were eligible to participate in the Exchange Offer but who did not
tender their Initial Notes will not have any further registration rights and
such Initial Notes will continue to be subject to certain restrictions on
transfer. Accordingly, the liquidity of the market for such Initial Notes
could be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Initial
Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. The Company will issue $1,000 principal amount
of Exchange Notes in exchange for each $1,000 principal amount of outstanding
Initial Notes accepted in the Exchange Offer. Holders may tender some or all
of their Initial Notes pursuant to the Exchange Offer. However, Initial 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 Initial Notes (which they replace), except that (i) the Exchange Notes
will bear a Series B description and a different CUSIP number from the Initial
Notes, (ii) as of the date hereof the Exchange Notes have been registered
under the Securities Act and, therefore, will not bear legends restricting
their transfer and (iii) the Exchange Notes will not contain certain
provisions included in the terms of the Initial Notes relating to the timing
of the Exchange Offer. In addition, the holders of Exchange Notes will not be
entitled to certain rights under the Registration Rights Agreement, including
the provisions providing for the payment of Liquidated Damages in the event
the Company fails to satisfy certain obligations under the Registration Rights
Agreement, which rights will terminate when the Exchange Offer is consummated.
The Exchange Notes will evidence the same debt as the Initial Notes and will
be entitled to the benefits of the Indenture.
As of the date of this Prospectus, $75,000,000 aggregate principal amount of
Initial Notes were outstanding. The Company has fixed the close of business on
[ ], 1998 as the record date for the Exchange Offer for purposes of
determining the persons to whom this Prospectus and the Letter of Transmittal
will be mailed initially.
Holders of the Initial Notes do not have any appraisal or dissenters' rights
under the New York Business Corporation Law or the Indenture in connection
with the Exchange Offer. The Company intends to conduct the Exchange Offer in
accordance with the applicable requirements of the Exchange Act and the rules
and regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Initial Notes
when, as and if the Company has 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 Company.
If any tendered Initial 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 Initial Notes will be
returned to the tendering holder thereof, at the Company's expense, as
promptly as practicable after the Expiration Date.
Holders who tender Initial 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 Initial
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than transfer taxes in certain circumstances, in connection
with the Exchange Offer. See "--Fees and Expenses."
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EXPIRATION DATE; EXTENSION; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on ,
1998, unless the Company, in its 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.
In order to extend the Exchange Offer, the Company 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, on the next business day after the previously scheduled Expiration
Date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Initial 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 prior to the Expiration Date, 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
Interest on each Exchange Note will accrue from the last date on which
interest was paid on the Initial Note surrendered in exchange therefor or, if
no interest has been paid on the Initial Note, from the date of original
issuance of Initial Note. No interest will be paid on the Initial Notes
accepted for exchange, and holders of Initial Notes whose Initial Notes are
accepted for exchange will be deemed to have waived the right to receive any
payment in respect of interest on the Initial Notes accrued up to the date of
the issuance of the Exchange Notes.
Interest on the Exchange Notes is payable semi-annually on each June 1 and
December, commencing on December 1, 1998.
PROCEDURES FOR TENDERING
Only a holder of Initial Notes may tender such Initial Notes in the Exchange
Offer. For a holder to validly tender Initial Notes pursuant to the Exchange
Offer, a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantee, or (in the case of
a book-entry transfer) an Agent's Message (as defined below) in lieu of the
Letter of Transmittal, and any other required documents, must be received by
the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration
Date. The tender of Initial Notes via Agent's Message will not constitute
notice to the Company of a holder's status as a Participating Broker-Dealer.
Participating Broker-Dealers desiring to provide such notice must still do so
in writing within fifteen business days following the consummation of the
Exchange Offer. See "--Resale of the Exchange Notes." To be tendered
effectively, the Initial Notes, the Letter of Transmittal (or Agent's Message)
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 Initial
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. The term "Agent's Message"
means a message, transmitted by the Book-Entry Transfer Facility (as defined
below) to and received by the Exchange Agent and forming a part of a book-
entry confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the tendering participant, which
acknowledgment states that such participant has received and agrees to be
bound by the terms of the Letter of Transmittal and that the Company may
enforce the terms of the Letter of Transmittal against such participant.
By executing the Letter of Transmittal or delivering an Agent's Message,
each holder will make to the Company the representations set forth above in
the fourth paragraph under "Purpose and Effect of the Exchange Offer."
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The tender by a holder and the acceptance thereof by the Company will
constitute an agreement between such holder and the Company in accordance with
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF INITIAL 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 INITIAL NOTES SHOULD BE SENT TO
THE COMPANY. 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 Initial 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 the 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 Initial 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 the Letter of Transmittal or the notice of withdrawal, as the
case may be, 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 Initial Notes listed therein, such Initial 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 Initial
Notes with the signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Initial 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 evidence satisfactory to the
Company of their authority to so act must be submitted with the Letter of
Transmittal.
The Company understands that the Exchange Agent will make a request promptly
after the date of this Prospectus to establish accounts with respect to the
Initial 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 Initial Notes by causing such Book-Entry
Transfer Facility to transfer such Initial Notes into the Exchange Agent's
account with respect to the Initial Notes in accordance with the Book-Entry
Transfer Facility's procedures for such transfer. Although delivery of the
Initial 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 or Agent's Message 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.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Initial Notes will be
determined by the Company in its sole discretion, which determination will be
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final and binding. The Company reserves the absolute right to reject any and
all Initial Notes not properly tendered or any Initial Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right in its sole discretion to waive
any defects, irregularities or conditions of tender as to particular Initial
Notes. The Company's 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 Initial Notes must be cured
within such time as the Company shall determine. Although the Company intends
to notify holders of defects or irregularities with respect to tenders of
Initial Notes, neither the Company, the Exchange Agent nor any other person
shall incur any liability for failure to give such notification. Tenders of
Initial Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Initial 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 Initial Notes and (i) whose Initial Notes
are not immediately available, (ii) who cannot deliver their Initial 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 Initial Notes and principal amount of Initial Notes tendered,
stating that the tender is being made thereby and guaranteeing that, within
three New York Stock Exchange trading days after the Expiration Date, the
Letter of Transmittal (or facsimile thereof) together with the
certificate(s) representing the Initial Notes (or a confirmation of book-
entry transfer of such Initial 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
(c) such properly completed and executed Letter of Transmittal or
facsimile thereof, as well as the certificate(s) representing all tendered
Initial Notes in proper form for transfer (or a confirmation of book-entry
transfer of such Initial 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 three 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 Initial Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Initial 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 Initial Notes in the Exchange Offer, a telegram,
telex, facsimile transmission or letter 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 Initial Notes to be withdrawn (the
"Depositor"), (ii) identify the Initial Notes to be withdrawn (including the
certificate number(s) and principal amount of such delivered Initial Notes,
or, in the case of Initial Notes transferred by book-entry transfer, the name
and number of the account at the Book-Entry Transfer Facility to be credited
and the transaction code number), (iii) state that such Depositor is
withdrawing its election to have the Initial Notes exchanged and specify the
name in which any such Initial Notes are to be registered and (iv) be
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signed by the holder in the same manner as the original signature on the
Letter of Transmittal by which such Initial Notes were tendered (including any
required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee with respect to the Initial Notes register the
transfer of such Initial Notes into the name of the person withdrawing the
tender. All questions as to the validity, form and eligibility (including time
of receipt) of such notices will be determined by the Company, whose
determination shall be final and binding on all parties. Any Initial 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 Initial Notes so withdrawn are validly retendered. Any Initial
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 Initial 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 Company shall not
be required to accept for exchange, or exchange Exchange Notes for, any
Initial Notes, and may terminate or amend the Exchange Offer as provided
herein prior to the Expiration Date, 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 reasonable judgment of the Company, might materially impair
the ability of the Company to proceed with the Exchange Offer or any
material adverse development has occurred in any existing action or
proceeding with respect to the Company or any of its subsidiaries; or
(b) any law, statute, rule, regulation or interpretation by the staff of
the Commission is proposed, adopted or enacted, which, in the reasonable
judgment of the Company, might materially impair the ability of the Company
to proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Company; or
(c) any governmental approval has not been obtained, which approval the
Company shall, in its reasonable discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
If the Company determines in its sole discretion that any of the conditions
are not satisfied, the Company may (i) refuse to accept any Initial Notes and
return all tendered Initial Notes to the tendering holders, (ii) extend the
Exchange Offer and retain all Initial Notes theretofore tendered prior to the
expiration of the Exchange Offer, subject, however, to the rights of holders
to withdraw such Initial Notes (see "--Withdrawal of Tenders") or (iii) waive
such unsatisfied conditions with respect to the Exchange Offer and accept all
properly tendered Initial Notes which have not been withdrawn.
EXCHANGE AGENT
IBJ Schroder Bank & Trust Company has been appointed as Exchange Agent for
the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
By registered or certified mail:
IBJ Schroder Bank & Trust Company
P.O. Box 84
Bowling Green Station
New York, NY 10274-0084
Attention: Reorganization Department
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By overnight or hand delivery:
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Attention: Securities Processing Window, Subcellar 1
(SCI)
By Facsimile: (212) 858-2611
Confirm: (212) 858-2103
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF
INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, facsimile, telephone or in person by officers and
regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection
therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. 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
Initial 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 Initial Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such Initial
Notes may be resold only (i) to the Company, (ii) pursuant to a registration
statement which has been declared effective under the Securities Act, in each
case in accordance with any applicable securities laws of any state of the
United States, (iii) so long as the Initial 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, (iv) outside the United States to a foreign person in a
transaction meeting the requirements of Rule 904 under the Securities Act or
(vi) 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 Company),
in each case in accordance with any applicable securities laws of any state of
the United States and in accordance with the Indenture. Holders of Initial
Notes not tendered in the Exchange Offer will not retain any rights under the
Registration Rights Agreement, except in limited circumstances.
RESALE OF THE EXCHANGE NOTES
With respect to resales of Exchange Notes, based on an interpretation by the
staff of the Commission set forth in no-action letters issued to third
parties, the Company believes that a holder or other person who receives
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Exchange Notes, whether or not such person is the holder (other than a person
that is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) who receives Exchange Notes in exchange for Initial Notes in
the ordinary course of business and who is not participating, does not intend
to participate, and has no arrangement or understanding with a 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
Initial Notes, where such Initial 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. Subject to the exceptions described in
the next paragraph, the Company has agreed that for a period ending on the
earlier of (i) 180 days from the date on which the Exchange Offer Registration
Statement is declared effective, and (ii) the date on which a Participating
Broker-Dealer is no longer required to deliver a prospectus in connection with
market making or other trading activities, it will make this Prospectus
available to any Participating Broker-Dealer for use in connection with any
such resale; provided, however, that the Company and the Guarantors will have
no obligation to amend or supplement this Prospectus unless the Company has
received written notice from a Participating Broker-Dealer of their prospectus
delivery requirements under the Securities Act within fifteen (15) business
days following consummation of the Exchange Offer.
The Company shall not be required to amend or supplement the Exchange Offer
Registration Statement if (i) in the judgment of the Company's Board of
Directors exercised reasonably and in good faith the use of the Exchange Offer
Registration Statement and the disclosure required to be made therein would
materially interfere with a valid business purpose of the Company or the
Guarantors and (ii) the Company delivers a notice to such effect to such
Broker-Dealers setting forth the period of time (which shall not be greater
than 60 days) for which the Company's obligation to so amend or supplement the
Exchange Offer Registration Statement will be suspended.
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DESCRIPTION OF NOTES
GENERAL
The Initial Notes were issued, and the Exchange Notes will be issued,
pursuant to an Indenture (the "Indenture") among the Company, the Guarantors
and IBJ Schroder Bank & Trust Company, as trustee (the "Trustee"), in a
private transaction that is not subject to the registration requirements of
the Securities Act. See "Notice to Investors." 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 (the "Trust Indenture Act"). The
Notes are subject to all such terms, and Holders of Notes are referred to the
Indenture and the Trust Indenture Act for a statement thereof. The following
summary of the material provisions of the Indenture and the Registration
Rights Agreement does not purport to be complete and is qualified in its
entirety by reference to the Indenture and the Registration Rights Agreement,
including the definitions therein of certain terms used below. Copies of the
proposed form of Indenture and Registration Rights Agreement are available 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 Description of Notes, the term "Company"
refers only to Coyne International Enterprises Corp. and not to any of its
Subsidiaries.
The Notes will be general unsecured obligations of the Company and will be
subordinated in right of payment to all current and future Senior Debt
including obligations under the New Credit Facility and the IRB Financing. As
of April 30, 1998, on an as adjusted basis giving effect to the Offering and
the application of the proceeds therefrom, the Company and its subsidiaries
would have had Senior Debt of approximately $10.6 million. The Indenture will
permit the incurrence of additional Senior Debt in the future.
The form and terms of the Exchange Notes are the same as the form and terms
of the Initial Notes (which they replace), except that (i) the Exchange Notes
will bear a Series B description and a different CUSIP number from the Initial
Notes, (ii) as of the date hereof, the Exchange Notes have been registered
under the Securities Act and, therefore, will not bear legends restricting
their transfer and (iii) the Exchange Notes will not contain certain
provisions included in the terms of the Initial Notes relating to the timing
of the Exchange Offer. In addition, the holders of Exchange Notes will not be
entitled to certain rights under the Registration Rights Agreement, including
the provisions providing for the payment of Liquidated Damages in the event
the Company fails to satisfy certain obligations under the Registration Rights
Agreement, which rights will terminate when the Exchange Offer is consummated.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $150.0 million, of
which $75.0 million were issued in the Offering, and will mature on June 1,
2008. Interest on the Notes will accrue at the rate of 11.25% per annum and
will be payable semi-annually in arrears on June 1 and December 1, commencing
on December 1, 1998, to Holders of record on the immediately preceding May 15
and November 15. Additional Notes may be issued from time to time, subject to
the provisions of the Indenture described below under the caption "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock."
Interest on the Notes will accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from the date of original
issuance. Interest will be computed on the basis of a 360-day year comprised
of twelve 30-day months. Principal, premium, if any, and interest and
Liquidated Damages on the Notes will be payable at the office or agency of the
Company maintained for such purpose within the City and State of New York or,
at the option of the Company, payment of interest and Liquidated Damages may
be made by check mailed to the Holders of the Notes at their respective
addresses set forth in the register of Holders of Notes; provided that all
payments of principal, premium, interest and Liquidated Damages with respect
to Notes the Holders of which have given wire transfer instructions to the
Company will be required to be made by wire transfer of immediately available
funds to the accounts specified by the Holders thereof. Until otherwise
designated by the Company, the Company's office or agency in New York will be
the office of the Trustee maintained for such purpose. The Notes will be
issued in denominations of $1,000 and integral multiples thereof.
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SUBSIDIARY GUARANTEES
The Company's payment obligations under the Notes are jointly and severally
guaranteed (the "Subsidiary Guarantees") by each of the Company's current and
future Domestic Subsidiaries other than Receivables Subsidiaries. The
Subsidiary Guarantee of each Guarantor is subordinated to the prior payment in
full of all Senior Debt of such Guarantor, which, on an as adjusted basis
giving effect to the Offering and the application of the proceeds therefrom,
would include approximately $2.5 million of Senior Debt outstanding as of
April 30, 1998, and the amounts for which the Guarantors will be liable under
the guarantees issued from time to time with respect to Senior Debt. The
obligations of each Guarantor under its Subsidiary Guarantee is limited so as
not to constitute a fraudulent conveyance under applicable law. See, however,
"Risk Factors--Fraudulent Conveyance."
The Indenture provides that no Guarantor may consolidate with or merge with
or into (whether or not such Guarantor is the surviving Person), another
corporation, Person or entity whether or not affiliated with such Guarantor
unless (i) subject to the provisions of the following paragraph, the Person
formed by or surviving any such consolidation or merger (if other than such
Guarantor) assumes all the obligations of such Guarantor pursuant to a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the Notes, the Indenture, the Registration Rights Agreement and
(ii) immediately after giving effect to such transaction, no Default or Event
of Default exists.
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the capital stock of any
Guarantor, then such Guarantor (in the event of a sale or other disposition,
by way of such a merger, consolidation or otherwise, of all of the capital
stock of such Guarantor) or the corporation acquiring the property (in the
event of a sale or other disposition of all of the assets of such Guarantor)
will be released and relieved of any obligations under its Subsidiary
Guarantee; provided that the Net Proceeds of such sale or other disposition
are applied in accordance with the applicable provisions of the Indenture. See
"Redemption or Repurchase at Option of Holders--Asset Sales."
SUBORDINATION
The payment of principal of, premium, if any, and interest and Liquidated
Damages on the Notes is 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. The
subordination is for the benefit of the holders of Senior Debt.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshaling of the Company's
assets and liabilities, the holders of Senior Debt will be entitled to receive
payment in full 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) before the Holders of Notes will be
entitled to receive any payment with respect to the Notes, and until all
Obligations with respect to Senior Debt are paid in full, any distribution to
which the Holders of Notes would be entitled shall be made to the holders of
Senior Debt (except that Holders of Notes may receive and retain Permitted
Junior Securities and payments made from the trust described under "--Legal
Defeasance and Covenant Defeasance").
The Company also may not make any payment upon or in respect of the Notes
(except in Permitted Junior Securities or from the trust described under "--
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 the Company or the holders of any
Designated Senior Debt. Payments on the Notes may and shall be resumed
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(a) in the case of a payment default, upon the date on which such default is
cured or waived and (b) in case of a nonpayment default, the earlier of the
date on which such nonpayment default is cured or waived or 179 days after the
date on which the applicable Payment Blockage Notice is received, unless the
maturity of any Designated Senior Debt has been accelerated. No new period of
payment blockage may be commenced unless and until (i) 360 days have elapsed
since the effectiveness of the immediately prior Payment Blockage Notice and
(ii) all scheduled payments of principal, premium, if any, 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 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 90 days.
The Indenture further requires that the Company promptly notify holders of
Senior Debt if payment of the Notes is accelerated because of an Event of
Default.
As a result of the subordination provisions described above, in the event of
a liquidation or insolvency, Holders of Notes may recover less ratably than
creditors of the Company who are holders of Senior Debt. On an as adjusted
basis, after giving effect to the Offering and the application of the proceeds
therefrom, the principal amount of Senior Debt outstanding at April 30, 1998
would have been approximately $10.6 million. The Indenture limits, subject to
certain financial tests, the amount of additional Indebtedness, including
Senior Debt, that the Company and its subsidiaries can incur. See "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock."
OPTIONAL REDEMPTION
The Notes are not redeemable at the Company's option prior to June 1, 2003.
Thereafter, the Notes will be subject to redemption at any time at the option
of the Company, in whole or in part, upon not less than 30 nor more than 60
days' notice, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest and Liquidated
Damages thereon to the applicable redemption date, if redeemed during the
twelve-month period beginning on June 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2003................................................................. 105.625%
2004................................................................. 103.750%
2005................................................................. 101.875%
2006 and thereafter.................................................. 100.000%
</TABLE>
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which
the Notes are listed, or, if the Notes are not so listed, on a pro rata basis,
by lot or by such method as the Trustee shall deem fair and appropriate;
provided that no Notes of $1,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail at least 30 but not more than
60 days before the redemption date to each Holder of Notes to be redeemed at
its registered address. Notices of redemption may not be conditional. If any
Note is to be redeemed in part only, the notice of redemption that relates to
such Note shall state the portion of the principal amount thereof to be
redeemed. A new Note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Note. Notes called for redemption become due on the date fixed
for redemption. On and after the redemption date, interest ceases to accrue on
Notes or portions of them called for redemption.
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
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REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the
offer described below (the "Change of Control Offer") at an offer price in
cash equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of
purchase (the "Change of Control Payment"). Within thirty (30) days following
any Change of Control, the Company will mail a notice to each Holder
describing the transaction or transactions that constitute the Change of
Control and offering to repurchase Notes on the date specified in such notice,
which date shall be no earlier than 30 days and no later than 60 days from the
date such notice is mailed (the "Change of Control Payment Date"), pursuant to
the procedures required by the Indenture and described in such notice. The
Company will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable in connection with the repurchase of the
Notes as a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating
the aggregate principal amount of Notes or portions thereof being purchased by
the Company. The Paying Agent will promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Indenture
provides that, prior to complying with the provisions of this covenant, but in
any event within 90 days following a Change of Control, the Company will
either repay all outstanding Senior Debt or obtain the requisite consents, if
any, under all agreements governing outstanding Senior Debt to permit the
repurchase of Notes required by this covenant. The Company will publicly
announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit the Holders of the Notes to require that the
Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
The New Credit Facility limits the ability of the Company to purchase Notes
and also provides that certain change of control events with respect to the
Company would constitute a default thereunder. Any future credit agreements or
other agreements relating to Senior Debt to which the Company becomes a party
may contain similar restrictions and provisions. In the event a Change of
Control occurs at a time when the Company is prohibited from purchasing Notes,
the Company could seek the consent of its lenders to the purchase of Notes or
could attempt to refinance the borrowings that contain such prohibition. If
the Company does not obtain such a consent or repay such borrowings, the
Company will remain prohibited from purchasing Notes. In such case, the
Company's failure to purchase tendered Notes would constitute an Event of
Default under the Indenture which would, in turn, constitute a default under
the New Credit Facility. In such circumstances, the subordination provisions
in the Indenture would likely restrict payments to the Holders of Notes. See
"Risk Factors--Change of Control."
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the Indenture applicable to a Change of Control Offer made by the
Company and purchases all Notes validly tendered and not withdrawn under such
Change of Control Offer.
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The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a Holder of Notes to require the Company to
repurchase such Notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of the Company and its
Subsidiaries taken as a whole to another Person or group may be uncertain.
Asset Sales
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the
Subsidiary, as the case may be) receives consideration at the time of such
Asset Sale at least equal to the fair market value (evidenced by a resolution
of the Board of Directors set forth in an Officers' Certificate delivered to
the Trustee) of the assets or Equity Interests issued or sold or otherwise
disposed of and (ii) at least 80% of the consideration therefor received by the
Company or such Subsidiary is in the form of cash; provided that the amount of
(x) any liabilities (as shown on the Company's or such Subsidiary's most recent
balance sheet) of the Company or any 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
and either (1) such assumption is evidenced by a customary novation agreement
that releases the Company or such Subsidiary from further liability or (2) all
such liabilities are paid in full within five days of such Asset Sale by the
transferee of such assets and (y) any securities, notes or other obligations
received by the Company or any such Subsidiary from such transferee that are
contemporaneously (subject to ordinary settlement periods) converted by the
Company or such Subsidiary into cash (to the extent of the cash received),
shall be deemed to be cash for purposes of this provision.
Within 180 days after the receipt of any Net Proceeds from an Asset Sale, the
Company may apply such Net Proceeds, at its option, (a) to repay Senior Debt
(and to correspondingly reduce lending commitments with respect thereto in the
case of Senior Debt that is term Indebtedness or revolving credit Indebtedness
and was incurred pursuant to a Credit Facility), (b) to the acquisition of a
majority of the assets of, or a majority of the Voting Stock of, another
Permitted Business, the making of a capital expenditure or the acquisition of
other long-term assets that are used or useful in a Permitted Business or (c)
reimburse the Company or its Subsidiaries for expenditures made, and costs
incurred to repair, rebuild, replace or restore property subject to loss,
damage or taking to the extent that Net Proceeds consist of insurance proceeds
received on account of such loss, damage or taking. 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 $5.0 million, the Company will be required to make an
offer to all Holders of Notes and all holders of other Indebtedness containing
provisions similar to those set forth in the Indenture with respect to offers
to purchase or redeem with the proceeds of sales of assets (an "Asset Sale
Offer") to purchase the maximum principal amount of Notes and such other
Indebtedness that may be purchased out of the Excess Proceeds, at an offer
price in cash in an amount equal to 100% of the principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of purchase, in accordance with the procedures set forth in the Indenture and
such other Indebtedness. To the extent that any Excess Proceeds remain after
consummation of an Asset Sale Offer, the Company may use such Excess Proceeds
for any purpose not otherwise prohibited by the Indenture. If the aggregate
principal amount of Notes and such other Indebtedness tendered into such Asset
Sale Offer surrendered by Holders thereof exceeds the amount of Excess
Proceeds, the Trustee shall select the Notes and such other Indebtedness to be
purchased on a pro rata basis. Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be reset at zero.
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CERTAIN COVENANTS
Restricted Payments
The Indenture provides that the Company will not, and will not permit any of
its 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 Subsidiaries' Equity Interests (including, without limitation, any payment
in connection with any merger or consolidation involving the Company or any of
its Subsidiaries) or to the direct or indirect holders of the Company's or any
of its 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 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 (other than any such Equity Interests owned by the Company or
any Subsidiary of the Company that is a Guarantor); (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, 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 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 Subsidiaries after
the date of the Indenture (excluding Restricted Payments permitted by
clauses (ii), (iii), (iv), (vii) and (viii) of the next succeeding
paragraph), is less than the sum, without duplication, of (i) 50% of the
Consolidated Net Income of the Company for the period (taken as one
accounting period) from the beginning of the first fiscal quarter
commencing after the date of the Indenture to the end of the Company's most
recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such Consolidated
Net Income for such period is a deficit, less 100% of such deficit), plus
(ii) 100% of the aggregate net cash proceeds received by the Company since
the date of the Indenture as a contribution to its common equity capital or
from the issue or sale of Equity Interests of the Company (other than
Disqualified Stock) or from the issue or sale of Disqualified Stock or debt
securities of the Company that have been converted into such Equity
Interests (other than Equity Interests (or Disqualified Stock or
convertible debt securities) sold to a Subsidiary of the Company), plus
(iii) to the extent that any Restricted Investment that was made after the
date of the Indenture is sold for cash or otherwise liquidated or repaid
for cash, the lesser of (A) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any) and (B) the
initial amount of such Restricted Investment, plus (iv) $2.0 million.
The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any pari passu or subordinated Indebtedness or Equity Interests
of the Company in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a 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
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clause (c) (ii) of the preceding paragraph; (iii) the defeasance, redemption,
repurchase or other acquisition of pari passu or subordinated Indebtedness with
the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness;
(iv) the payment of any dividend by a Subsidiary of the Company to the holders
of its common Equity Interests on a pro rata basis; (v) the repurchase,
redemption or other acquisition or retirement for value of any Equity Interests
of the Company or any Subsidiary of the Company held by any member of the
Company's (or any of its Subsidiaries') management pursuant to any management
equity subscription agreement or stock option agreement; provided that the
aggregate price paid for all such repurchased, redeemed, acquired or retired
Equity Interests shall not exceed $250,000 in any twelve-month period and no
Default or Event of Default shall have occurred and be continuing immediately
after such transaction; (vi) Permitted Payments; (vii) the Distribution and
(viii) in the event the Company is converted into an entity that is not subject
to income taxation by a government authority, the payment of dividends to
reimburse holders of the Company's equity interests for any income taxes owed
and payable to such governmental authority incurred by such holders solely as a
result of their status as holders of the Company's Equity Interests; provided
that such amounts shall not exceed the tax liability of the Company had it been
subject to corporate income taxation of such governmental authority for the
corresponding period; and provided further that any such payment shall be used
by such holder of the Company's Equity Interests to pay such taxes owed and
payable.
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
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any non-cash Restricted Payment shall be determined by the
Board of Directors whose resolution with respect thereto shall be delivered to
the Trustee, such determination to be based upon an opinion or appraisal issued
by an accounting, appraisal or investment banking firm of national standing if
such fair market value exceeds $1.0 million. Not later than the date of making
any Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by the covenant "Restricted
Payments" were computed, together with a copy of any fairness opinion or
appraisal required by the Indenture.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) and that the Company will not issue any Disqualified Stock and
will not permit any of its Subsidiaries to issue any shares of preferred stock;
provided, however, that the Company may incur Indebtedness (including Acquired
Debt) or issue shares of Disqualified Stock if the Fixed Charge Coverage Ratio
for the Company's most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the date on
which such additional Indebtedness is incurred or such Disqualified Stock is
issued would have been at least 2.0 to 1; 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 of Indebtedness and letters of credit
pursuant to Credit Facilities; provided that the aggregate principal amount of
all Indebtedness and letters of credit (with letters of credit being deemed to
have a principal amount equal to the maximum potential liability of the Company
and its Subsidiaries thereunder) outstanding under all Credit Facilities after
giving effect to such incurrence does not exceed the greater of (x) $55.0
million less the aggregate amount of all Net Proceeds of Asset Sales applied to
repay Indebtedness under a Credit Facility and reduce lending commitments with
respect thereto pursuant to the covenant described above under the caption "--
Repurchase at the Option of Holders--Asset Sales" and (y) the Borrowing Base as
of the date of any such incurrence;
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(ii) the incurrence by the Company and the Guarantors of the Existing
Indebtedness;
(iii) the incurrence by the Company and the Guarantors of up to $75.0 million
in aggregate principal amount of Notes and the issuance of the Exchange Notes;
(iv) the incurrence by the Company or any of its Subsidiaries of additional
Indebtedness represented by Capital Lease Obligations, mortgage financings or
purchase money obligations, in each case incurred for the purpose of financing
all or any part of the purchase price or cost of construction or improvement of
property, plant or equipment used in the business of the Company or such
Subsidiary, in an aggregate principal amount at any one time outstanding under
this clause (iv), including all Permitted Refinancing Indebtedness incurred to
refund, refinance or replace any Indebtedness incurred pursuant to this clause
(iv), not to exceed $3.0 million;
(v) the incurrence by the Company or any of its 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 (iii), (iv) or (v) of this paragraph;
(vi) the incurrence by the Company or any of its Subsidiaries of Hedging
Obligations that are incurred for the purpose of fixing or hedging interest
rate risk with respect to any floating rate Indebtedness that is permitted by
the terms of this Indenture to be outstanding;
(vii) the guarantee by the Company or any Guarantor of Indebtedness of the
Company or a Subsidiary of the Company that was permitted to be incurred by
another provision of this covenant;
(viii) the incurrence by the Company or any of its Subsidiaries of
intercompany Indebtedness between or among the Company and any of its Wholly
Owned Subsidiaries (other than Receivables Subsidiaries) or any of the
Guarantors; 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 Wholly-Owned
Subsidiary thereof (other than a Receivables Subsidiary) or a Guarantor and (B)
any sale or other transfer of any such Indebtedness to a Person that is not
either the Company or a Wholly-Owned Subsidiary thereof (other than a
Receivables Subsidiary) or a Guarantor 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 (viii);
(ix) the incurrence by the Company or any of its Subsidiaries of Indebtedness
incurred in respect of performance, surety and similar bonds provided by the
Company or any of its Subsidiaries in the ordinary course of business;
(x) the incurrence by the Company or any of its Subsidiaries of Indebtedness
in respect of letters of credit relating to workers' compensation claims and
self-insurance or similar requirements in the ordinary course of business;
(xi) the incurrence of Indebtedness arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or from
guarantees or letters of credit, surety bonds or performance bonds securing any
such obligations of the Company or any such Subsidiary pursuant to such
agreements, in each case incurred in connection with the disposition of any
business, assets or Subsidiary of the Company, other than Guarantees of
Indebtedness incurred by any Person acquiring all or any portion of such
business, assets or Subsidiary for the purpose of financing such acquisition,
provided that none of the foregoing results in Indebtedness required to be
reflected as indebtedness on the balance sheet of the Company, or any such
Subsidiary in accordance with GAAP and the maximum aggregate liability in
respect of all such Indebtedness shall at no time exceed 100% of the gross
proceeds actually received by the Company and its Subsidiaries in connection
with such disposition; and
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(xii) the incurrence by the Company or any of its Subsidiaries of additional
Indebtedness in an aggregate principal amount (or accreted value, as
applicable) at any time outstanding, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any Indebtedness incurred
pursuant to this clause (xii), not to exceed $3.0 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 (xii) 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, but only among
clauses (i) through (xii) of the definition of Permitted Debt) such item of
Indebtedness in any manner that complies with this covenant. Accrual of
interest, accretion or amortization of original issue discount, the payment of
interest on any Indebtedness in the form of additional Indebtedness with the
same terms, and the payment of dividends on Disqualified Stock in the form of
additional shares of the same class of Disqualified Stock will not be deemed to
be an incurrence of Indebtedness or an issuance of Disqualified Stock for
purposes of this covenant; provided, in each such case, that the amount thereof
is included in Fixed Charges of the Company as accrued. The Company shall not
be deemed to be in breach of this covenant solely as the result of fluctuations
in currency exchange rates or as a result of changes in accounting principles
that become effective after the date of the Indenture.
Liens
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien securing Indebtedness or trade payables on any asset now owned
or hereafter acquired, or any income or profits therefrom or assign or convey
any right to receive income therefrom, except Permitted Liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that the Company will not, and will not permit any of
its 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 Subsidiary to (i)(a) pay dividends or make any other
distributions to the Company or any of its 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 Subsidiaries, (ii) make loans or advances to the Company or any of
its Subsidiaries or (iii) transfer any of its properties or assets to the
Company or any of its Subsidiaries. However, the foregoing restrictions will
not apply to encumbrances or restrictions existing under or by reason of (a)
the New 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 New Credit Facility as in effect on the date of the Indenture,
(b) the Indenture and the Notes, (c) applicable law, (d) any instrument
governing Indebtedness or Capital Stock of a Person acquired by the Company or
any of its 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, (e) customary non-assignment provisions in
leases entered into in the ordinary course of business and consistent with past
practices, (f) 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, (g) any agreement for the sale of a
Subsidiary that restricts distributions by that Subsidiary pending its sale,
(h) 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, (i) 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
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the debtor to dispose of the assets securing such Indebtedness, (j) provisions
with respect to the disposition or distribution of assets or property in joint
venture agreements and other similar agreements entered into in the ordinary
course of business, and (k) restrictions on cash or other deposits or net worth
imposed by customers under contracts entered into in the ordinary course of
business.
Merger, Consolidation, or Sale of Assets
The Indenture provides that the Company may not consolidate or merge with or
into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially
all of its properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United
States, any state thereof or the District of Columbia; (ii) the entity or
Person formed by or surviving any such consolidation or merger (if other than
the Company) or the entity or Person to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made assumes all the
obligations of the Company under the Registration Rights Agreement, the Notes
and the Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee; (iii) immediately after such transaction no
Default or Event of Default exists; and (iv) except in the case of a merger of
the Company with or into a Wholly Owned Subsidiary of the Company, the Company
or the entity or Person formed by or surviving any such consolidation or merger
(if other than the Company), or to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made (A) will have
Consolidated Net Worth immediately after the transaction equal to or greater
than the Consolidated Net Worth of the Company immediately preceding the
transaction and (B) will, at the time of such transaction and after giving pro
forma effect thereto as if such transaction had occurred at the beginning of
the applicable four-quarter period, 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 Indebtedness and Issuance of Preferred Stock."
Transactions with Affiliates
The Indenture provides that the Company will not, and will not permit any of
its 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 Subsidiary than those that would have been obtained in
a comparable transaction by the Company or such Subsidiary with an unrelated
Person and (ii) the Company delivers to the Trustee (a) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $1.0 million, a resolution of the Board of
Directors set forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (i) above and that such Affiliate Transaction
has been approved by a majority of the disinterested members of the Board of
Directors and (b) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in excess of
$5.0 million, an opinion as to the fairness to the Holders of such Affiliate
Transaction from a financial point of view issued by an accounting, appraisal
or investment banking firm of national standing. Notwithstanding the foregoing,
the following items shall not be deemed to be Affiliate Transactions: (i) any
employment agreement or arrangement entered into by the Company or any of its
Subsidiaries in the ordinary course of business and consistent with the past
practice of the Company or such Subsidiary, (ii) transactions between or among
the Company and/or its Subsidiaries, (iii) payment of reasonable directors fees
to Persons who are not otherwise Affiliates of the Company, (iv) Restricted
Payments that are permitted by the provisions of the Indenture described above
under the caption "--Restricted Payments," (v) the Distribution, (vi) Permitted
Payments, (vii) reasonable and customary indemnification of any officer,
director or employee of the Company or any of its Subsidiaries in accordance
with any applicable law, and (viii) the conversion of the Company into an
entity which is not subject to income taxation by a governmental authority.
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Sale and Leaseback Transactions
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, enter into any sale and leaseback transaction; provided
that the Company may enter into a sale and leaseback transaction if (i) the
Company could have (a) incurred Indebtedness in an amount equal to the
Attributable Debt relating to such sale and leaseback transaction pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of the
covenant described above under the caption "--Incurrence of Indebtedness and
Issuance of Preferred Stock" and (b) incurred a Lien to secure such
Indebtedness pursuant to the covenant described above under the caption "--
Liens," (ii) the gross cash proceeds of such sale and leaseback transaction are
at least equal to the fair market value (as determined in good faith by the
Board of Directors and set forth in an Officers' Certificate delivered to the
Trustee) of the property that is the subject of such sale and leaseback
transaction and (iii) the transfer of assets in such sale and leaseback
transaction is permitted by, and the Company applies the proceeds of such
transaction in compliance with, the covenant described above under the caption
"--Optional Redemption--Asset Sales."
Additional Subsidiary Guarantees
The Indenture provides that if the Company or any of its Subsidiaries shall
acquire or create another Domestic Subsidiary after the date of the Indenture,
or if any current or future Subsidiary becomes a Domestic Subsidiary of the
Company after the date of the Indenture, then such newly acquired or created
Subsidiary shall become a Guarantor and execute a Supplemental Indenture and
deliver an Opinion of Counsel, in accordance with the terms of the Indenture;
provided that this provision shall not be applicable to a Subsidiary that has
been properly designated as a Receivables Subsidiary.
No Senior Subordinated Debt
The Indenture provides that (i) the Company will not incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to any Senior Debt and senior in any
respect in right of payment to the Notes, and (ii) no Guarantor will incur,
create, issue, assume, guarantee or otherwise become liable for any
Indebtedness that is subordinate or junior in right of payment to the Senior
Guarantees and senior in any respect in right of payment to the Subsidiary
Guarantees.
Payments for Consent
The Indenture provides that neither the Company nor any of its Subsidiaries
will, directly or indirectly, pay or cause to be paid any consideration,
whether by way of interest, fee or otherwise, to any Holder of any Notes for or
as an inducement to any consent, waiver or amendment of any of the terms or
provisions of the Indenture or the Notes unless such consideration is offered
to be paid or is paid to all Holders of the Notes that consent, waive or agree
to amend in the time frame set forth in the solicitation documents relating to
such consent, waiver or agreement.
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission"), so
long as any Notes are outstanding and commencing with information relating to
the fiscal quarter ended July 31, 1998, the Company will furnish to the Holders
of Notes (i) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and 10-K
if the Company were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereon by the Company's
certified independent accountants and (ii) all current reports that would be
required to be filed with the Commission on Form 8-K if the Company were
required to file such reports, in each case within the time periods specified
in the Commission's rules and regulations. In addition, following the
consummation of the Exchange Offer, whether or not required by the rules and
regulations of the Commission, the Company will file a copy of all such
information and reports with the
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Commission for public availability within the time periods specified in the
Commission's rules and regulations (unless the Commission will not accept such
a filing) and make such information available to securities analysts and
prospective investors upon request. In addition, the Company and the Guarantors
have agreed that, for so long as any Notes remain outstanding, they will
furnish to the Holders and to securities analysts and prospective investors,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act. The Company and the Guarantors shall at
all times comply with Section 314(a) of the Trust Indenture Act of 1939, as
amended.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes (whether or not prohibited by the
subordination provisions of the Indenture); (ii) default in payment when due of
the principal of or premium, if any, on the Notes (whether or not prohibited by
the subordination provisions of the Indenture); (iii) failure by the Company or
any of its Subsidiaries to comply with the provisions described under the
captions "--Change of Control," "--Asset Sales," "--Restricted Payments" or "--
Incurrence of Indebtedness and Issuance of Preferred Stock," (iv) failure by
the Company or any of its Subsidiaries for 60 days after notice to comply with
any of its other agreements in the Indenture or the Notes; (v) default under
any mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any Indebtedness for money borrowed by
the Company or any of its Subsidiaries (or the payment of which is guaranteed
by the Company or any of its Subsidiaries) whether such Indebtedness or
guarantee now exists, or is created after the date of the Indenture, which
default (a) is caused by a failure to pay principal of or premium, if any, or
interest on such Indebtedness prior to the expiration of the grace period
provided in such Indebtedness on the date of such default (a "Payment Default")
or (b) results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $5.0 million or more; (vi) failure by the Company or
any of its Subsidiaries to pay final judgments aggregating in excess of $5.0
million, which judgments are not paid, discharged or stayed for a period of 60
days; (vii) except as permitted by the Indenture, any Subsidiary Guarantee
shall be held in any judicial proceeding to be unenforceable or invalid or
shall cease for any reason to be in full force and effect or any Guarantor, or
any Person acing on behalf of any Guarantor, shall deny or disaffirm its
obligations under its Subsidiary Guarantee; and (viii) certain events of
bankruptcy or insolvency with respect to the Company or any of its
Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately. Notwithstanding the foregoing,
in the case of an Event of Default arising from certain events of bankruptcy or
insolvency, with respect to the Company, any Significant Subsidiary or any
group of Subsidiaries that, taken together, would constitute a Significant
Subsidiary, all outstanding Notes will become due and payable without further
action or notice. Holders of the Notes may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest.
In the case of any Event of Default occurring by reason of any willful action
(or inaction) taken (or not taken) by or on behalf of the Company with the
intention of avoiding payment of the premium that the Company would have had to
pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to June
1, 2003 by reason of any willful action (or inaction) taken (or not taken) by
or on behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to June 1, 2003 then the premium specified
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in the Indenture shall also become immediately due and payable to the extent
permitted by law upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company or
any Guarantor , as such, shall have any liability for any obligations of the
Company or any Guarantor under the Notes, the Indenture or the Registration
Rights Agreement or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Each Holder of Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
and Liquidated Damages on such Notes when such payments are due from the trust
referred to below, (ii) the Company's obligations with respect to the Notes
concerning issuing temporary Notes, registration of Notes, mutilated,
destroyed, lost or stolen Notes and the maintenance of an office or agency for
payment and money for security payments held in trust, (iii) the rights,
powers, trusts, duties and immunities of the Trustee, and the Company's
obligations in connection therewith and (iv) the Legal Defeasance provisions of
the Indenture. In addition, the Company may, at its option and at any time,
elect to have the obligations of the Company released with respect to certain
covenants that are described in the Indenture ("Covenant Defeasance") and
thereafter any omission to comply with such obligations shall not constitute a
Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest and Liquidated Damages
on the outstanding Notes on the stated maturity or on the applicable redemption
date, as the case may be, and the Company must specify whether the Notes are
being defeased to maturity or to a particular redemption date; (ii) in the case
of Legal Defeasance, the Company shall have delivered to the Trustee an opinion
of counsel in the United States reasonably acceptable to the Trustee confirming
that (A) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of the Indenture, there
has been a change in the applicable federal income tax law, in either case to
the effect that, and based thereon such opinion of counsel shall confirm that,
the Holders of the outstanding Notes will not recognize income, gain or loss
for federal income tax purposes as a result of such Legal Defeasance and will
be subject to federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Legal Defeasance had not
occurred; (iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to
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the Trustee confirming that the Holders of the outstanding Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Covenant Defeasance had not occurred; (iv) no Default or Event of
Default shall have occurred and be continuing on the date of such deposit
(other than a Default or Event of Default resulting from the borrowing of funds
to be applied to such deposit) or insofar as Events of Default from bankruptcy
or insolvency events are concerned, at any time in the period ending on the
91st day after the date of deposit; (v) such Legal Defeasance or Covenant
Defeasance will not result in a breach or violation of, or constitute a default
under any material agreement or instrument (other than the Indenture) to which
the Company or any of its Subsidiaries is a party or by which the Company or
any of its Subsidiaries is bound; (vi) the Company must have delivered to the
Trustee an opinion of counsel to the effect that after the 91st day following
the deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; (vii) the Company must deliver to the Trustee an
Officers' Certificate stating that the deposit was not made by the Company with
the intent of preferring the Holders of Notes over the other creditors of the
Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and (viii) the Company must deliver to the
Trustee an Officers' Certificate and an opinion of counsel, each stating that
all conditions precedent provided for relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture. The
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and the Company may require a
Holder to pay any taxes and fees required by law or permitted by the Indenture.
The Company is not required to transfer or exchange any Note selected for
redemption. Also, the Company is not required to transfer or exchange any Note
for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed maturity
of any Note or alter the provisions with respect to the redemption of the Notes
(other than provisions relating to the covenants described above under the
caption "--Repurchase at the Option of Holders"), (iii) reduce the rate of or
change the time for payment of interest on any Note, (iv) waive a Default or
Event of Default in the payment of principal of or premium, if any, or interest
on the Notes (except a rescission of acceleration of the Notes by the Holders
of at least a majority in aggregate principal amount of the Notes and a waiver
of the payment default that resulted from such acceleration), (v) make any Note
payable in money other than that stated in the Notes, (vi) make any change in
the provisions of the Indenture relating to waivers of past Defaults or the
rights of Holders of Notes to receive payments of principal of or premium, if
any, or interest on the Notes, (vii) waive a redemption payment with respect to
any Note (other than a payment required by one of the covenants described above
under the caption "--Repurchase at the Option of Holders") or (viii) make any
change in the foregoing amendment and waiver provisions. In addition, any
amendment to the provisions of Article 10 of the Indenture (which relate to
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subordination) will require the consent of the Holders of at least 75% in
aggregate principal amount of the Notes then outstanding if such amendment
would adversely affect the rights of Holders of Notes.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to Holders of Notes in the case of a
merger or consolidation or sale of all or substantially all of the Company's
assets, to make any change that would provide any additional rights or
benefits to the Holders of Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, or to comply with requirements
of the Commission in order to effect or maintain the qualification of the
Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage
in other transactions; however, if it acquires any conflicting interest it
must eliminate such conflict within 90 days, apply to the Commission for
permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the
Indenture at the request of any Holder of Notes, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture and
Registration Rights Agreement without charge by writing to Coyne International
Enterprises Corp., 140 Cortland Avenue, Syracuse New York 13221, Attention:
Chief Financial Officer.
BOOK-ENTRY, DELIVERY AND FORM
The Initial Notes are represented by one Note in registered, global form
without interest coupons(the "Initial Global Note"). The Exchange Notes
initially will be represented by one or more Notes in registered, global form
without interest coupons (collectively, the "Exchange Global Notes" and,
together with the Initial Global Note, the "Global Notes"). The Global Notes
are deposited upon issuance with the Trustee as custodian for The Depository
Trust Company ("DTC"), in New York, New York, and registered in the name of
DTC or its nominee, in each case for credit to an account of a direct or
indirect participant in DTC as described below.
Except as set forth below, the Global Notes may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Notes may not be exchanged for
Notes in certificated form except in the limited circumstances described
below. See "--Exchange of Book-Entry Notes for Certificated Notes." Except in
the limited circumstances described below, owners of beneficial interests in
the Global Notes will not be entitled to receive physical delivery of
Certificated Notes (as defined below).
Transfers of beneficial interests in the Global Notes will be subject to the
applicable rules and procedures of DTC and its direct or indirect
participants, which may change from time to time.
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Initially, the Trustee will act as Paying Agent and Registrar. The Notes may
be presented for registration of transfer and exchange at the offices of the
Registrar.
DEPOSITORY PROCEDURES
The following description of the operations and procedures of DTC are
provided solely as a matter of convenience. These operations and procedures
are solely within the control of DTC and are subject to changes by DTC from
time to time. The Company takes no responsibility for these operations and
procedures and urges investors to contact DTC or their participants directly
to discuss these matters.
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic book-
entry changes in accounts of its Participants. The Participants include
securities brokers and dealers (including the Initial Purchasers), banks,
trust companies, clearing corporations and certain other organizations. Access
to DTC's system is also available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may
beneficially own securities held by or on behalf of DTC only through the
Participants or the Indirect Participants. The ownership interests in, and
transfers of ownership interests in, each security held by or on behalf of DTC
are recorded on the records of the Participants and Indirect Participants.
DTC has also advised the Company that, pursuant to procedures established by
it, (i) upon deposit of the Exchange Global Notes, DTC will credit the
accounts of Participants with portions of the principal amount of the Exchange
Global Notes equal to the principal amount of the Initial Notes tendered in
the Exchange Offer and (ii) ownership of such interests in the Global Notes
will be shown on, and the transfer of ownership thereof will be effected only
through, records maintained by DTC (with respect to the Participants) or by
the Participants and the Indirect Participants (with respect to other owners
of beneficial interest in the Exchange Global Notes).
All interests in a Global Note may be subject to the procedures and
requirements of DTC. The laws of some states require that certain persons take
physical delivery in definitive form of securities that they own.
Consequently, the ability to transfer beneficial interests in a Global Note to
such persons will be limited to that extent. Because DTC can act only on
behalf of Participants, which in turn act on behalf of Indirect Participants
and certain banks, the ability of a person having beneficial interests in a
Global Note to pledge such interests to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
interests, may be affected by the lack of a physical certificate evidencing
such interests.
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTEREST IN THE GLOBAL NOTES WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
"HOLDERS" THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal of, and premium, if any, Liquidated
Damages, if any, and interest on a Global Note registered in the name of DTC
or its nominee will be payable to DTC in its capacity as the registered Holder
under the Indenture. Under the terms of the Indenture, the Company and the
Trustee will treat the persons in whose names the Notes, including the Global
Notes, are registered as the owners thereof for the purpose of receiving such
payments and for any and all other purposes whatsoever. Consequently, neither
the Company, the Trustee nor any agent of the Company or the Trustee has or
will have any responsibility or liability for (i) any aspect of DTC's records
or any Participant's or Indirect Participant's records relating to or payments
made on account of beneficial ownership interest in the Global Notes, or for
maintaining, supervising or reviewing any of DTC's records or any
Participant's or Indirect Participant's records relating to the beneficial
ownership interests in the Global Notes or (ii) any other matter relating to
the actions and practices of DTC or any of its Participants or Indirect
Participants. DTC has advised the Company that its current practice, upon
receipt of any payment in respect of securities such as the Notes (including
principal and interest), is to credit the accounts of the relevant
Participants with the payment on the payment date, in amounts proportionate to
their respective holdings in the
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principal amount of beneficial interest in the relevant security as shown on
the records of DTC unless DTC has reason to believe it will not receive payment
on such payment date. Payments by the Participants and the Indirect
Participants to the beneficial owners of Notes will be governed by standing
instructions and customary practices and will be the responsibility of the
Participants or the Indirect Participants and will not be the responsibility of
DTC, the Trustee or the Company. Neither the Company nor the Trustee will be
liable for any delay by DTC or any of its Participants in identifying the
beneficial owners of the Notes, and the Company and the Trustee may
conclusively rely on and will be protected in relying on instructions from DTC
or its nominee for all purposes.
Interest in the Exchange Global Notes are expected to be eligible to trade in
DTC's Same-Day Funds Settlement System and secondary market trading activity in
such interests will, therefore, settle in immediately available funds, subject
in all cases to the rules and procedures of DTC and its Participants. See "--
Same Day Settlement and Payment." Transfers between Participants in DTC will be
effected in accordance with DTC's procedures, and will be settled in same day
funds.
DTC has advised the Company that it will take any action permitted to be
taken by a Holder of Notes only at the direction of one or more Participants to
whose account DTC has credited the interests in the Global Notes and only in
respect of such portion of the aggregate principal amount of the Notes as to
which such Participant or Participants has or have given such direction.
However, if there is an Event of Default under the Notes, DTC reserves the
right to exchange the Global Notes for legended Notes in certificated form, and
to distribute such Notes to its Participants.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the Global Notes among Participants,it is under no obligation
to perform or to continue to perform such procedures, and such procedures may
be discontinued at any time. Neither the Company nor the Trustee nor any of
their respective agents will have any responsibility for the performance by DTC
or its respective Participants or Indirect Participants of their respective
obligations under the rules and procedures governing their operations.
EXCHANGE OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES
A Global Note is exchangeable for definitive Notes in registered certificated
form ("Certificated Notes") if (i) DTC (x) notifies the Company that it is
unwilling or unable to continue as depositary for the Global Notes and the
Company thereupon fails to appoint a successor depositary or (y) has ceased to
be a clearing agency registered under the Exchange Act, (ii) the Company, at
its option, notifies the Trustee in writing that it elects to cause the
issuance of the Certificated Notes or (iii) there shall have occurred and be
continuing an Event of Default with respect to the Notes. In addition,
beneficial interests in a Global Note may be exchanged for Certificated Notes
upon request but only upon prior written notice given to the Trustee by or on
behalf of DTC in accordance with the Indenture. In all cases, Certificated
Notes delivered in exchange for any Global Note or beneficial interests therein
will be registered in the names, and issued in any approved denominations,
requested by or on behalf of the depositary (in accordance with its customary
procedures).
SAME DAY SETTLEMENT AND PAYMENT
The Indenture requires that principal, premium, if any, and interest and
Liquidated Damages on the Notes will be payable at the office or agency of the
Company maintained for such purpose within the City and State of New York or,
at the option of the Company, payment of interest and Liquidated Damages may be
made by check mailed to the Holders of the Notes at their respective addresses
set forth in the register of Holders of Notes; provided that all payments of
principal, premium, interest and Liquidated Damages with respect to Notes the
Holders of which have given wire transfer instructions to the Company will be
required to be made by wire transfer of immediately available funds to the
accounts specified by the Holders thereof. The Notes represented by the Global
Notes are expected to be eligible to trade in the PORTAL market and to trade in
the Depositary's Same-Day Funds Settlement System, and any permitted secondary
market trading activity in such Notes will, therefore, be required by the
Depositary to be settled in immediately available funds. The Company expects
that secondary trading in any certificated Notes will also be settled in
immediately available funds.
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Because of time zone differences, the securities account of a Euroclear
System ("Euroclear") or Cedel S.A. ("Cedel") participant purchasing an interest
in a Global Note from a Participant in DTC will be credited, and any such
crediting will be reported to the relevant Euroclear or Cedel participant,
during the securities settlement processing day (which must be a business day
for Euroclear and Cedel) immediately following the settlement date of DTC. DTC
has advised the Company that cash received in Euroclear or Cedel as a result of
sales of interests in a Global Note by or through a Euroclear or Cedel
participant to a Participant in DTC will be received with value on the
settlement date of DTC but will be available in the relevant Euroclear or Cedel
cash account only as of the business day for Euroclear or Cedel following DTC's
settlement date.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Holders of the Exchange Notes are not entitled to any registration rights
with respect to the Exchange Notes.
The Company and the Initial Purchasers entered into the Registration Rights
Agreement. Pursuant to the Registration Rights Agreement, the Company agreed to
file with the Commission the Exchange Offer Registration Statement on the
appropriate form under the Securities Act with respect to the Exchange Notes.
The Registration Statement of which this Prospectus forms a part constitutes
the Exchange Offer Registration Statement. Upon the effectiveness of the
Exchange Offer Registration Statement, the Company will offer to the Holders of
Transfer Restricted Securities pursuant to the Exchange Offer who are able to
make certain representations the opportunity to exchange their Transfer
Restricted Securities for Exchange Notes. If (i) the Company is not required to
file the Exchange Offer Registration Statement or permitted to consummate the
Exchange Offer because the Exchange Offer is not permitted by applicable law or
Commission policy or (ii) any Holder of Transfer Restricted Securities notifies
the Company prior to the 20th day following consummation of the Exchange Offer
that (A) it is prohibited by law or Commission policy from participating in the
Exchange Offer or (B) that it may not resell the Exchange Notes acquired by it
in the Exchange Offer to the public without delivering a prospectus and the
prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales or (C) that it is a broker-dealer and
owns Initial Notes acquired directly from the Company or an affiliate of the
Company, the Company will file with the Commission a Shelf Registration
Statement to cover resales of the Initial Notes by the Holders thereof who
satisfy certain conditions relating to the provision of information in
connection with the Shelf Registration Statement. The Company will use its best
efforts to cause the applicable registration statement to be declared effective
as promptly as possible by the Commission. For purposes of the foregoing,
"Transfer Restricted Securities" means each Initial Note until (i) the date on
which such Note has been exchanged by a person other than a broker-dealer for
an Exchange Note in the Exchange Offer, (ii) following the exchange by a
broker-dealer in the Exchange Offer of an Initial Note for an Exchange Note,
the date on which such Exchange Note is sold to a purchaser who receives from
such broker-dealer on or prior to the date of such sale a copy of the
prospectus contained in the Exchange Offer Registration Statement, (iii) the
date on which such Initial Note has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement or (iv) the date on which such Note is distributed to the public
pursuant to Rule 144 under the Act.
The Registration Rights Agreement provides that (i) the Company will file an
Exchange Offer Registration Statement with the Commission on or prior to 45
days after the Closing Date, (ii) the Company will use its best efforts to have
the Exchange Offer Registration Statement declared effective by the Commission
on or prior to 135 days after the Closing Date, (iii) unless the Exchange Offer
would not be permitted by applicable law or Commission policy, the Company will
commence the Exchange Offer and use its best efforts to issue on or prior to 30
business days after the date on which the Exchange Offer Registration Statement
was declared effective by the Commission, Exchange Notes in exchange for all
Initial Notes tendered prior thereto in the Exchange Offer and (iv) if
obligated to file the Shelf Registration Statement, the Company will use its
best efforts to file the Shelf Registration Statement with the Commission on or
prior to 30 days after such filing obligation arises and to cause the Shelf
Registration to be declared effective by the Commission on or prior to 90 days
after such obligation arises. If (a) the Company fails to file any of the
Registration Statements required by the Registration
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Rights Agreement on or before the date specified for such filing, (b) any of
such Registration Statements is not declared effective by the Commission on or
prior to the date specified for such effectiveness (the "Effectiveness Target
Date"), or (c) the Company fails to consummate 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 Registration Rights
Agreement (each such event referred to in clauses (a) through (d) above a
"Registration Default"), then the Company will pay "Liquidated Damages" to each
Holder of Initial Notes, with respect to the first 90-day period immediately
following the occurrence of the first Registration Default in an amount equal
to $.05 per week per $1,000 principal amount of Initial 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 Initial 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 $.30
per week per $1,000 principal amount of Notes. All accrued Liquidated Damages
will be paid by the Company on each Damages Payment Date to the Global Note
Holder by wire transfer of immediately available funds or by federal funds
check and to Holders of Certificated Securities by wire transfer to the
accounts specified by them or by mailing checks to their registered addresses
if no such accounts have been specified. Following the cure of all Registration
Defaults, the accrual of Liquidated Damages will cease.
Holders of Initial Notes will be required to make certain representations to
the Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver certain
information to be used in connection with the Shelf Registration Statement and
to provide comments on the Shelf Registration Statement within the time periods
set forth in the Registration Rights Agreement in order to have their Notes
included in the Shelf Registration Statement and benefit from the provisions
regarding Liquidated Damages set forth above.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference is
made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i) Indebtedness
of any other Person existing at the time such other Person is merged with or
into or became a Subsidiary of such specified Person, including, without
limitation, Indebtedness incurred in connection with, or in contemplation of,
such other Person merging with or into or becoming a Subsidiary of such
specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset
acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the Voting Stock of a Person shall be
deemed to be control.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than a sale or lease 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 Subsidiaries
of Equity Interests
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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 (whether by
sale, lease, conveyance, other disposition, merger, consolidation, division or
otherwise) by the Company to a Wholly Owned Subsidiary (other than a
Receivables Subsidiary) or a Guarantor by a Subsidiary to the Company or to a
Wholly Owned Subsidiary (other than a Receivables Subsidiary) or a Guarantor,
(ii) an issuance of Equity Interests by a Wholly Owned Subsidiary to the
Company or to another Wholly Owned Subsidiary, (iii) a Restricted Payment that
is permitted by the covenant described above under the caption "--Restricted
Payments;" (iv) the sale to a Receivables Subsidiary of accounts receivables
and related assets that are customarily transferred in an asset securitization
transaction; and (v) the sale of up to $2.0 million of assets since the date of
the Indenture. A transfer of assets by the Company or a Wholly-Owned Subsidiary
(other than a Receivables Subsidiary) of the Company to a Person other than the
Company or another Wholly Owned Subsidiary (other than a Receivables
Subsidiary), shall be deemed an Asset Sale only to the extent of the percentage
of the Equity Interests in the transferee that are owned by Persons other than
the Company or Wholly Owned Subsidiaries (other than a Receivables Subsidiary)
of the Company.
"Attributable Debt" in respect of a sale and leaseback transaction means, at
the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Borrowing Base" means, as of any date, an amount equal to the sum of (a)
85.0% of the face amount of all accounts receivable owned by the Company and
the Guarantors as of such date that are not more than 90 days past due and (b)
50.0% of the book value of all inventory owned by the Company and the
Guarantors as of such date, all calculated on a consolidated basis and in
accordance with GAAP. To the extent that information is not available as to the
amount of accounts receivable or inventory as of a specific date, the Company
may utilize the most recent available information for purposes of calculating
the Borrowing Base.
"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 New 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.
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"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 Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act) other than a Principal or a Related Party of a Principal, (ii) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" (as defined above),
other than the Principals and their Related Parties, becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
currently exercisable or is exercisable only upon the occurrence of a
subsequent condition), directly or indirectly, of more than 50% of the Voting
Stock of the Company (measured by voting power rather than number of shares),
(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 defined above), 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
Directors of the Company are not Continuing Directors.
"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 or the disposition of securities held by such Person and its
Subsidiaries (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its 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
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance costs
and original issue discount, non-cash interest payments, the interest component
of any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with respect to
Attributable Debt, 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 Subsidiaries for such period
to the extent that such depreciation, amortization and other non-cash expenses
were deducted in computing such Consolidated Net Income, minus (v) non-cash
items increasing such Consolidated Net Income for such period, in each case, on
a consolidated basis and determined in accordance with GAAP. Notwithstanding
the foregoing, the provision for taxes on the income or profits of, and the
depreciation and amortization and other non-cash expenses of, a Subsidiary of
the referent Person shall be added to Consolidated Net Income to compute
Consolidated Cash Flow only to the extent that a corresponding amount would be
permitted at the date of determination to be dividended to the Company by such
Subsidiary without prior governmental approval (that has not been obtained),
and without direct or indirect restriction pursuant to the terms of its charter
and all agreements, instruments, judgments, decrees, orders, statutes, rules
and governmental regulations applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its 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 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 Subsidiary thereof that is a Guarantor,
(ii) the Net Income of any Subsidiary shall be excluded to the extent that the
declaration or payment of dividends or similar distributions by that 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
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of its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that 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 and (iv) the cumulative effect of a change in accounting
principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such
Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that
by its terms is not entitled to the payment of dividends unless such dividends
may be declared and paid only out of net earnings in respect of the year of
such declaration and payment, but only to the extent of any cash received by
such Person upon issuance of such preferred stock, less (x) all write-ups
(other than write-ups resulting from foreign currency translations and write-
ups of tangible assets of a going concern business made within 12 months after
the acquisition of such business) subsequent to the date of the Indenture in
the book value of any asset owned by such Person or a consolidated Subsidiary
of such Person, (y) all investments as of such date in unconsolidated
Subsidiaries and in Persons that are not Subsidiaries (except, in each case,
Permitted Investments), and (z) all unamortized debt discount and expense and
unamortized deferred charges as of such date, all of the foregoing determined
in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any member of
the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Credit Facilities" means, with respect to the Company, one or more debt
facilities (including, without limitation, the New 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. Indebtedness
under Credit Facilities outstanding on the date on which Notes are first issued
and authenticated under the Indenture shall be deemed to have been incurred on
such date in reliance on the exception provided by clause (i) the definition of
Permitted Debt.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Designated Senior Debt" means (i) any Indebtedness outstanding under the New
Credit Facility (ii) any other Senior Debt permitted under the Indenture the
principal amount of which is $10.0 million or more and that has been designated
by the Company as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of
any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature; provided, however, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the right
to require the Company to repurchase such Capital Stock upon the occurrence of
a Change of Control or an Asset Sale shall not constitute Disqualified Stock if
the terms of such Capital Stock provide that the Company may not repurchase or
redeem any such Capital Stock pursuant to such provisions unless such
repurchase or redemption complies with the covenant described above under the
caption "--Certain Covenants--Restricted Payments."
"Distribution" means the payment of amounts aggregating no more than $19.0
million to Capital Resources Lenders II and Exeter Venture Lenders in
connection with the purchase of certain warrants of the Company, certain of
which payments may occur as much as two years after the closing of the
Offering.
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"Domestic Subsidiary" means, with respect to the Company, any Subsidiary of
the Company that was formed under the laws of the United States of America or
that Guarantee or otherwise provides credit support for any Indebtedness of the
Company.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the New 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 Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, imputed interest with respect to Attributable Debt,
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 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 Subsidiaries or secured by a Lien on assets of such Person
or one of its Subsidiaries (whether or not such Guarantee or Lien is called
upon) and (iv) the product of (a) all dividend payments, whether or not in
cash, on any series of preferred stock of such Person or any of its
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 Subsidiary of the Company, times (b) a fraction, the numerator of
which is one and the denominator of which is one minus the then current
combined federal, state and local statutory tax rate of such Person, expressed
as a decimal, in each case, on a consolidated basis and in accordance with
GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
referent Person or any of its 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 the beginning of the applicable four-quarter
reference period. In addition, for purposes of making the computation referred
to above, (i) acquisitions that have been made by the Company or any of its
Subsidiaries, including through mergers or consolidations and including any
related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
shall be deemed to have occurred on the first day of the four-quarter reference
period and Consolidated Cash Flow for such reference period shall be calculated
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 Subsidiaries following the
Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
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"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Guarantors" means each of (i) Blue Ridge Textile Manufacturing, Inc., Clean
Towel Service, Inc., Ohio Garment Rental, Inc. and Midway--CTS Buffalo, Ltd.,
and (ii) any other Subsidiary that executes a Subsidiary Guarantee in
accordance with the provisions of the Indenture, and their respective
successors and assigns.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable,
if and to the extent any of the foregoing (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all Indebtedness of others
secured by a Lien on any asset of such Person (whether or not such Indebtedness
is assumed by such Person) and, to the extent not otherwise included, the
Guarantee by such Person of any indebtedness of any other Person. The amount of
any Indebtedness outstanding as of any date shall be (i) the accreted amount
thereof, in the case of any Indebtedness issued with original issue discount,
and (ii) the principal amount thereof, together with any interest thereon that
is more than 30 days past due, in the case of any other Indebtedness.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Subsidiary of the Company sells or otherwise disposes of
any Equity Interests of any direct or indirect Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of the covenant described
above under the caption "--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).
"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 Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries
and (ii) any extraordinary gain (but not loss), together with any related
provision for taxes on such extraordinary gain (but not loss).
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<PAGE>
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its 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 under a Credit Facility) secured by a Lien on the asset or assets
that were the subject of such Asset Sale and any reserve for adjustment in
respect of the sale price of such asset or assets established in accordance
with GAAP.
"New Credit Facility" means that certain Credit Facility, dated as of June
26, 1998, by and among the Company and NationsBank, N.A. and the other lenders
party thereto, providing for up to $25.0 million of secured revolving credit
borrowings and up to $30.0 million of secured term debt, 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.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Business" means any business conducted by the Company or any of
its Subsidiaries as of the date hereof and any business reasonably related or
incidental thereto.
"Permitted Investments" means (a) any Investment in the Company or in a
Subsidiary of the Company that is a Guarantor; (b) any Investment in Cash
Equivalents; (c) any Investment by the Company or any Subsidiary of the Company
in a Person, if as a result of such Investment (i) such Person becomes a
Subsidiary of the Company and a Guarantor or (ii) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or a Subsidiary of the
Company that is a Guarantor; (d) any Investment made as a result of the receipt
of non-cash consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption "--Repurchase at
the Option of Holders--Asset Sales;" (e) any acquisition of assets solely in
exchange for the issuance of Equity Interests (other than Disqualified Stock)
of the Company; (f) any Investment by the Company or a Subsidiary of the
Company in a Receivables Subsidiary or any Investment by a Receivables
Subsidiary in any other Person or assets in connection with a Qualified
Receivables Transaction; provided that any Investment in any such Person is in
the form of a Purchase Money Note, an equity interest or interests in accounts
receivables generated by the Company or a Subsidiary of the Company and
transferred to any Person in connection with a Qualified Receivables
Transaction or any such Person owning such accounts receivables; (g) repurchase
of the Notes; (h) Investments by the Company and its Subsidiaries outstanding
on the date of the Indenture; and (i) 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 (i) that are at the
time outstanding, not to exceed $1.0 million.
"Permitted Junior Securities" means Equity Interests in the Company or any
Guarantor or debt securities that 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.
"Permitted Liens" means (i) Liens existing on the date of the Indenture; (ii)
Liens securing Senior Debt that was permitted to be incurred under the
Indenture; (iii) Liens securing Permitted Refinancing Indebtedness that was
incurred to refinance any Indebtedness that had been secured by a Lien
permitted under the Indenture and that was incurred in accordance with the
provisions of the Indenture, provided, however, that such Liens (a) are not
materially less favorable to the Holders and are not materially more favorable
to the lienholders with respect to such Liens than the Liens in respect of the
Indebtedness being refinanced and (b) do not extend to or
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<PAGE>
cover any property or assets of the Company or any of its Subsidiaries not
securing the Indebtedness so refinanced; (iv) Liens securing the Notes; (v)
Liens securing Indebtedness of a Person existing at the time such Person
becomes a Subsidiary, provided that such Liens were in existence prior to the
contemplation of such acquisition, merger or consolidation, were not incurred
in anticipation thereof, and do not extend to any other assets; (vi) Liens
incurred in the ordinary course of business of the Company or any Subsidiary of
the Company with respect to obligations that do not exceed $5.0 million at any
time outstanding and that are not incurred in connection with the borrowing of
money or obtaining advances or credit (other than trade credit incurred in the
ordinary course of business); (vii) Liens imposed by governmental authorities
for taxes, assessments or other charges or claims either (a) not delinquent or
(b) contested in good faith by appropriate proceedings and as to which the
Company or any of its Subsidiaries shall have set aside on its books such
reserves as may be required pursuant to GAAP; (viii) statutory Liens of
landlords, carriers, warehousemen, mechanics, suppliers, materialmen, repairmen
and other like Liens arising by operation of law in the ordinary course of
business for sums not yet delinquent or being contested in good faith, if such
reserves or other appropriate provisions, if any, as shall be required by GAAP
shall have been made in respect thereof; (ix) Liens incurred or deposits made
in the ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security or similar
obligations, including any Lien securing letters of credit issued in the
ordinary course of business in connection therewith, or to secure the
performance of tenders, statutory obligations, surety and appeal bonds, bids,
leases, government contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of borrowed
money) incurred in the ordinary course of business; (x) judgment Liens not
giving rise to an Event of Default so long as such Lien is adequately bonded
and any appropriate legal proceedings which may have been duly initiated for
the review of such judgment shall not have been finally terminated or the
period within which such proceedings may be initiated shall not have expired;
(xi) easements, rights-of-way, zoning restrictions, minor defects or
irregularities with title and other similar charges or encumbrances in respect
of real property not materially detracting from the value of the property
subject thereto and not interfering in any material respect with the ordinary
conduct of business of the Company or any of its Subsidiaries; (xii) Liens upon
specific items of inventory or other goods and proceeds of any Person securing
such person's obligations in respect of banker's acceptance issued or created
for the account of such Person to facilitate the purchase, shipment or storage
of such inventory or other goods in the ordinary course of business; (xiii)
Liens in favor of the Company or a Guarantor; (xiv) leases or subleases granted
to others not interfering in any material respects with the business of the
Company or its Subsidiaries; (xv) Liens arising out of consignment or similar
arrangements for the sale of goods entered into by the Company or any of its
Subsidiaries in the ordinary course of business.
"Permitted Payments" means payments to repurchase Equity Interests of the
Company in order to satisfy certain estate planning obligations of the estate
of J. Stanley Coyne, which payments will not exceed $1.0 million in each of the
second, third, fourth, fifth and sixth calendar years following the death of J.
Stanley Coyne and $2.25 million in each of the seventh, eighth, ninth and tenth
calendar years following the death of J. Stanley Coyne, plus an additional
amount of $2.0 million in the calendar year 2003; provided that no such payment
shall be made prior to the death of J. Stanley Coyne; and provided further,
that the maximum amount of Permitted Payments in a specified calendar year
following the death of J. Stanley Coyne shall be increased by an amount equal
to the difference between the maximum amount of Permitted Payments that could
have been made by the Company in each of the prior specified calendar years
following the death of J. Stanley Coyne and the actual amount of Permitted
Payments made by the Company in each of such prior specified calendar years
following the death of J. Stanley Coyne.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company or
any of its Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its 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
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<PAGE>
date later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of, the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the
Notes, such Permitted Refinancing Indebtedness has a final maturity date later
than the final maturity date of, and is subordinated in right of payment to,
the Notes on terms at least as favorable to the Holders of Notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness
is incurred either by the Company or by the Subsidiary who is the obligor on
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Principals" means J. Stanley Coyne and Thomas M. Coyne.
"Purchase Money Note" means a promissory note evidencing a line of credit,
which may be irrevocable, from, or evidencing other Indebtedness owed to, the
Company or any Subsidiary of the Company in connection with a Qualified
Receivables Transaction, which note shall be repaid from cash available to the
maker of such note, 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.
"Qualified Receivables Transaction" means any transaction or series of
transactions that may be entered into by the Company or any Subsidiary of the
Company pursuant to which the Company or any Subsidiary of the Company may
sell, convey or otherwise transfer to (a) a Receivables Subsidiary (in the case
of a transfer by the Company or any Subsidiary of the Company) and (b) any
other Person (in the case of a transfer by a Receivables Subsidiary), or may
grant a security interest in, any accounts receivables (whether now existing or
arising in the future) of the Company or any Subsidiary of the Company, and any
assets related thereto including, without limitation, all collateral securing
such accounts receivables, all contracts and all guarantees or other
obligations in respect of such accounts receivables, proceeds of such accounts
receivable and other assets that are customarily transferred, or in respect of
which security interests are customarily granted, in connection with asset
securitization transactions involving accounts receivable.
"Receivables Subsidiary" means a Wholly Owned Subsidiary of the Company that
engages in no activities other than in connection with the financing of
accounts receivable and that is designated by the Board of Directors of the
Company (as provided below) as a Receivables Subsidiary (a) no portion of the
Indebtedness or any other Obligations (contingent or otherwise) of which (i) is
guaranteed by the Company or any other Subsidiary of the Company (excluding
guarantees of Obligations (other than the principal of, and interest on,
Indebtedness)) pursuant to Standard Securitization Undertakings, (ii) is
recourse to or obligates the Company or any other Subsidiary of the Company in
any way other than pursuant to Standard Securitization Undertakings or (iii)
subjects any property or asset of the Company or any other Subsidiary of the
Company, directly or indirectly, contingently or otherwise, to the satisfaction
thereof, other than pursuant to Standard Securitization Undertakings, (b) with
which neither the Company nor any other Subsidiary of the Company has any
material contract, agreement, arrangement or undertaking (except in connection
with a Purchase Money Note or Qualified Receivables Transaction) other than on
terms no less favorable to the Company or such other 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 accounts receivables, and (c) to which neither the
Company nor any other 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
Directors of the Company shall be evidenced to the Trustee by filing with the
Trustee a certified copy of the resolution of the Board of Directors of the
Company giving effect to such designation and an Officers' Certificate
certifying, to the best of such officer's knowledge and belief after consulting
with counsel, that such designation complied with the foregoing conditions.
"Related Party" with respect to any Principal means (i) any controlling
stockholder, 80% (or more) owned Subsidiary, or spouse, ex-spouse, immediate
family member or lineal descendant (in the case of an individual)
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of such Principal or (ii) any trust, corporation, partnership or other entity,
the beneficiaries, stockholders, partners, owners or Persons beneficially
holding an 80% or more controlling interest of which consist of such Principal
and/or such other Persons referred to in the immediately preceding clause (i).
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Senior Debt" means (i) all Indebtedness outstanding under 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
Notes or the Subsidiary Guarantees and (iii) all Obligations 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 Company, (x) any Indebtedness of the Company
to any of its Subsidiaries or other Affiliates, (y) any trade payables or (z)
any Indebtedness that is incurred in violation of the Indenture.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"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 an accounts receivable transaction.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a
combination thereof) and (ii) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person or of one or
more Subsidiaries of such Person (or any combination thereof).
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary (other than a
Receivables 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
Subsidiaries (other than a Receivables Subsidiary) of such Person or by such
Person and one or more Wholly Owned Subsidiaries of such Person.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion 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 Company
recommends that each holder consult such holder's own tax advisor as to the
particular tax consequences of exchanging such holder's Initial Notes for
Exchange Notes, including the applicability and effect of any state, local or
foreign tax laws.
The exchange of the Initial 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 should not be considered to differ materially in
kind or extent from the Initial Notes. Rather, the Exchange Notes received by a
holder will be treated as a continuation of the Initial Notes in the hands of
such holder. As a result there will be no federal income tax consequences to
holders exchanging Initial Notes for Exchange Notes pursuant to the Exchange
Offer. If, however, the exchange of Initial Notes for Exchange Notes were
treated as an "exchange" for federal income tax purposes, such exchange should
constitute a recapitalization for federal income tax purposes. Holders
exchanging Initial Notes for Exchange Notes pursuant to such recapitalization
should not recognize any gain or loss upon the exchange.
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PLAN OF DISTRIBUTION
The Exchange Notes will be offered by the Company to the holders of the
Initial Notes in exchange for the Initial Notes pursuant to the Exchange
Offer.
Except as described below, a broker-dealer may not participate in the
Exchange Offer in connection with a distribution of the Exchange Notes. 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. This
Prospectus, 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 Initial Notes where such Notes were acquired as
a result of market-making activities or other trading activities. Subject to
the exception described in the next paragraph, the Company has agreed that for
a period ending on the earlier of (i) 180 days from the date on which the
Exchange Offer Registration Statement is declared effective, and (ii) the date
on which a Participating Broker-Dealer is no longer required to deliver a
prospectus in connection with market making or other trading activities, it
will make this Prospectus available to any Participating Broker-Dealer for use
in connection with any such resale; provided, however, that the Company and
the Guarantors will have no obligation to amend or supplement this Prospectus
unless the Company has received written notice from a Participating Broker-
Dealer of their prospectus delivery requirements under the Securities Act
within fifteen (15) business days following consummation of the Exchange
Offer. In addition, until , 1998, all dealers effecting transactions in
the Exchange Notes may be required to deliver a prospectus.
The Company shall not be required to amend or supplement the Exchange Offer
Registration Statement if (i) in the judgment of the Company's board of
Directors exercised reasonably and in good faith the use of the Exchange Offer
Registration Statement and the disclosure required to be made therein would
materially interfere with a valid business purpose of the Company or the
Guarantors and (ii) the Company delivers a notice to such effect to such
Broker-Dealers setting forth the period of time (which shall not be greater
than 60 days) for which the Company's obligation to so amend or supplement the
Exchange Offer Registration Statement will be suspended.
The Company 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
purchasers 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 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.
The Company has agreed to pay all expenses incident to the Exchange Offer
other than commissions or concessions of any brokers or dealers and expenses
of counsel for the holders of the Exchange Notes and will indemnify the
holders of the Exchange Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
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LEGAL MATTERS
The validity of the issuance of the Exchange Notes offered by the Company
hereby will be passed upon for the Company by Blank Rome Comisky & McCauley
LLP, Philadelphia, Pennsylvania.
INDEPENDENT AUDITORS
The consolidated balance sheets as of October 31, 1997 and 1996, and the
consolidated statements of operations and retained earnings and cash flows for
each of the three years in the period ended October 31, 1997, included in this
Prospectus and Exchange Offer Registration Statement, have been included herein
in reliance on the report of PricewaterhouseCoopers, LLP, independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
FINANCIAL STATEMENTS OF COYNE INTERNATIONAL ENTERPRISES CORP.
AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report............................................. F-2
Consolidated Balance Sheets as of October 31, 1997 and 1996.............. F-3
Consolidated Statements of Operations and Retained Earnings for the years
ended
October 31, 1997, 1996 and 1995......................................... F-4
Consolidated Statements of Cash Flows for the years ended October 31,
1997, 1996 and 1995..................................................... F-5
Notes to Consolidated Financial Statements............................... F-6
Consolidated Balance Sheets as of April 30, 1998 (Unaudited) and as of
October 31, 1997........................................................ F-15
Consolidated Statements of Operations and Retained Earnings (Deficit) for
the six months
ended April 30, 1998 and 1997 (Unaudited)............................... F-16
Consolidated Statements of Cash Flows for the six months ended April 30,
1998 and 1997
(Unaudited)............................................................. F-17
Notes to Consolidated Financial Statements (Unaudited)................... F-18
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Coyne International Enterprises Corp.
We have audited the accompanying consolidated balance sheets of Coyne
International Enterprises Corp. and Subsidiaries as of October 31, 1997 and
1996 and the related consolidated statements of operations and retained
earnings, and cash flows for each of the three years in the period ended
October 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Coyne
International Enterprises Corp. and Subsidiaries as of October 31, 1997 and
1996, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended October 31, 1997 in conformity
with generally accepted accounting principles.
PricewaterhouseCoopers LLP
Syracuse, New York
December 19, 1997
F-2
<PAGE>
COYNE INTERNATIONAL ENTERPRISES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
OCTOBER 31,
-------------------------
1997 1996
------------ -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ 1,272,192 $ 348,134
Receivables, principally trade.................... 11,957,651 11,385,624
Inventories....................................... 5,131,861 4,744,426
Uniforms and other rental items in service, net... 23,559,751 20,751,447
Prepaid expense and other assets.................. 729,876 1,526,984
------------ -----------
Total current assets.......................... 42,651,331 38,756,615
------------ -----------
Property, plant and equipment, net.................. 41,799,938 43,051,847
Purchased routes and acquisition intangibles, net... 16,549,578 13,179,023
Deferred financing costs, net....................... 745,649 949,528
Deferred income tax................................. 500,000 1,160,545
Other assets........................................ 374,248 334,876
------------ -----------
$102,620,744 $97,432,434
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt.............. $ 7,849,570 $ 6,470,035
Bank overdraft.................................... 1,700,982
Accounts payable.................................. 8,318,802 9,656,923
Accrued expenses:
Salaries and employee benefits.................. 3,275,202 1,872,684
Other........................................... 6,122,105 6,468,807
Deferred income taxes............................. 8,615,000 7,681,000
------------ -----------
Total current liabilities..................... 35,881,661 32,149,449
Long-term debt, net of current maturities........... 39,650,469 40,785,444
Subordinated debentures, net of original issue
discount........................................... 11,057,144 10,795,669
Other liabilities................................... 4,391,322 4,113,302
------------ -----------
Total liabilities............................. 90,980,596 87,843,864
------------ -----------
Redeemable common stock warrants.................... 1,743,086 1,743,086
Shareholders' equity:
Preferred stock--5% non-cumulative, non-voting,
callable at par:
Class A--$100 par value; authorized 30,000;
issued and outstanding 23,107.................. 2,310,700 2,310,700
Class B--$500 par value; authorized 5,000;
issued 4,991 and outstanding 2,991............. 2,495,500 2,495,500
Common stock--$.01 par value:
Class A--voting; authorized 100,000; issued and
outstanding 2,923.............................. 29 29
Class B--non-voting; authorized 99,000; issued
and outstanding 74,030......................... 740 740
Additional paid-in capital........................ 849,512 849,512
Retained earnings................................. 5,663,768 3,612,190
------------ -----------
11,320,249 9,268,671
Less:
Cost of 2,000 shares of Class B preferred stock
held in treasury............................... (166,667) (166,667)
Shareholder note receivable..................... (1,256,520) (1,256,520)
------------ -----------
Total shareholders' equity.................... 9,897,062 7,845,484
------------ -----------
Commitments and contingencies
$102,620,744 $97,432,434
============ ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
COYNE INTERNATIONAL ENTERPRISES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
--------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Revenue:
Rental operations...................... $114,671,684 $111,090,673 $111,225,265
Direct sales........................... 8,263,079 7,994,194 6,542,956
------------ ------------ ------------
122,934,763 119,084,867 117,768,221
------------ ------------ ------------
Operating expenses:
Cost of rental operations.............. 86,985,898 87,721,417 88,789,230
Cost of direct sales................... 5,801,679 5,626,040 4,223,759
Selling, general and administrative.... 19,355,384 17,558,105 17,160,947
------------ ------------ ------------
112,142,961 110,905,562 110,173,936
------------ ------------ ------------
Income from operations............... 10,791,802 8,179,305 7,594,285
Interest expense......................... 6,715,224 6,786,065 6,253,768
------------ ------------ ------------
Income before income taxes........... 4,076,578 1,393,240 1,340,517
Income taxes............................. 2,025,000 847,000 890,000
------------ ------------ ------------
NET INCOME........................... 2,051,578 546,240 450,517
Retained earnings, beginning of year..... 3,612,190 3,065,950 2,615,433
------------ ------------ ------------
RETAINED EARNINGS, END OF YEAR....... $ 5,663,768 $ 3,612,190 $ 3,065,950
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
COYNE INTERNATIONAL ENTERPRISES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
----------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.......................... $ 2,051,578 $ 546,240 $ 450,517
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation of property, plant and
equipment......................... 4,147,655 3,688,268 3,377,967
Amortization expense............... 1,140,994 1,090,600 1,037,776
Provision for deferred income
taxes............................. 1,595,000 402,000 315,000
Changes in operating assets and
operating liabilities:
Accounts receivable............... (271,471) 861,707 (766,598)
Inventories....................... (252,128) 66,694 (2,618,312)
Uniforms in service............... (2,808,304) (1,229,739) 2,163,299
Prepaid expenses and other
assets........................... 778,894 825,572 (76,949)
Accounts payable and other
liabilities...................... (107,932) 1,309,126 (1,864,059)
------------ ------------ ------------
Net cash provided by operating
activities...................... 6,274,286 7,560,468 2,018,641
------------ ------------ ------------
Cash flows from investing activities:
Purchases of property, plant and
equipment.......................... (1,086,633) (3,938,734) (5,601,927)
Acquisition of business, net of cash
acquired........................... (1,122,101)
------------ ------------ ------------
Net cash used in investing
activities...................... (2,208,734) (3,938,734) (5,601,927)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from long-term borrowings.. 121,565,225 121,377,464 127,460,857
Payments under long-term debt
obligations........................ (126,287,871) (125,293,673) (123,272,756)
Increase in bank overdrafts......... 1,700,982
Deferred financing costs incurred... (119,830) (105,904) (534,565)
------------ ------------ ------------
Net cash (used in) provided by
financing activities............ (3,141,494) (4,022,113) 3,653,536
------------ ------------ ------------
Net increase (decrease) in cash
and cash equivalents............ 924,058 (400,379) 70,250
Cash and cash equivalents:
Beginning of year................... 348,134 748,513 678,263
------------ ------------ ------------
End of year...................... $ 1,272,192 $ 348,134 $ 748,513
============ ============ ============
Supplemental disclosure of cash flow
information:
Interest paid....................... $ 6,204,883 $ 6,266,669 $ 5,615,797
Income taxes paid................... 514,144 446,873 796,746
Assets acquired under capital lease
obligations........................ 1,497,313 5,883,197 3,189,977
Seller financed debt................ 3,469,893
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
COYNE INTERNATIONAL ENTERPRISES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Description
The Company provides a highly specialized service to businesses of all
types--from small service companies to major corporations that employ
thousands of people. The Company designs and implements corporate identity
uniform programs for its customers in connection with renting or selling its
uniform services to customers and other accessories throughout the eastern
United States. In addition, the Company manufactures shop towels which are
sold throughout the United States.
Principles of Consolidation and Revenue Recognition
The consolidated financial statements include the accounts of Coyne
International Enterprises Corp. and its wholly-owned Subsidiaries (the
Company). All intercompany accounts have been eliminated. The Company
recognizes rental revenues when the services are delivered to customers. The
Company records direct sales upon shipment to the customer.
Fiscal Year
The Company uses a fifty-two/fifty-three week fiscal year ending on the last
Saturday in October. Accordingly, the financial statements are for the 52
weeks ended October 25, 1997 and October 26, 1996 and October 28, 1995. For
convenience, the dating of the accompanying financial statements, and notes
herein, have been labeled as of and for the years ended October 31, 1997, 1996
and 1995 rather than the actual fiscal year end dates.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Ultimate results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less, at date of purchase, to be cash equivalents.
Inventories
Inventories represent primarily new garments which are valued at the lower
of average cost or market.
Uniforms and Other Rental Items in Service
Rental garments, mats and towels in service are carried at cost and
amortized on a straight-line basis over their estimated income-producing
lives, ranging principally from 10 to 60 months.
Property, Plant and Equipment
Property, plant and equipment items are recorded at cost with provision for
depreciation by charges to operations on a straight-line basis over their
estimated useful lives which range from fifteen to forty years for buildings
and improvements, three to ten years for machinery and equipment and three to
eight years for vehicles.
F-6
<PAGE>
COYNE INTERNATIONAL ENTERPRISES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Maintenance and repairs are charged to expense when incurred. Construction in
process consists primarily of capital expenditures for plant renovations and
vehicle re-builds. The Company capitalizes interest during the period of major
construction projects.
Purchased Routes and Acquisition Intangibles
The Company's acquisitions of rental operations and routes have generally
been accounted for by using the purchase method. The purchase method allocates
the amounts paid to the net assets acquired based on their respective fair
values. The amounts paid in excess of fair value of the acquired net assets
and goodwill acquired after October 31, 1970, is amortized on a straight-line
basis over forty years. The Company assesses the recoverability of goodwill by
determining whether the amortization of the goodwill balance over the
remaining life can be recovered through undiscounted future operating cash
flows and reviews for impairment whenever events or changes in circumstances
(i.e. plant closure) indicate that the carrying amount of an asset may not be
fully recoverable.
Routes acquired before October 31, 1970 are carried at a cost of $764,310.
These intangibles are also regularly evaluated and in the opinion of
management have not diminished in value and accordingly have not been
amortized.
The Company has certain contracts with non-compete arrangements which are
charged to operations on a straight-line basis over the periods of the
respective agreements which range from 5 to 10 years.
Deferred Financing Costs
Deferred financing costs incurred in obtaining long-term debt are stated at
cost less accumulated amortization. Amortization of deferred financing costs
is provided using the effective interest write-off method over the term of the
obligation and aggregated $324,000, $327,000 and $286,000 for the years ended
October 31, 1997, 1996 and 1995.
Other Liabilities
The Company, under certain insurance programs, retains portions of expected
losses primarily relating to workers' compensation and employees' medical
insurance. A provision for claims under the self-insured program is recorded
based upon the Company's estimate, after consultation with insurance advisors,
of the aggregate liability for claims incurred.
Advertising Costs
The Company expenses advertising costs as incurred.
Fair Value of Financial Instruments
The carrying amount of cash, accounts receivable and trade accounts payable
approximates fair value because of the short maturity of these instruments.
The fair value of the Company's long-term debt approximated its carrying value
at October 31, 1997, 1996 and 1995.
Income Taxes
The Company and its subsidiaries file a consolidated federal income tax
return, and where permitted state tax returns. Provisions for deferred taxes
are recognized based on the difference between the financial statement and tax
basis of assets and liabilities using enacted tax rates in effect in the years
in which the differences are expected to reverse.
F-7
<PAGE>
COYNE INTERNATIONAL ENTERPRISES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Recent Accounting Pronouncements
Financial Accounting Standards Board Statement No. 130 ("SFAS No. 130"),
"Reporting Comprehensive Income," issued in June 1997, and effective for
fiscal years beginning after December 15, 1997, establishes standards for
report and display of comprehensive income and its components in the financial
statements. The adoption of SFAS No. 130 will have no impact on the Company's
consolidated results of operations, financial position or cash flows.
2. ACQUISITIONS
During 1997, the Company acquired certain assets of several industrial
laundries which were accounted for as purchase transactions. The aggregate
purchase price of $4,594,000 consisted of cash of $1,124,000 and notes payable
of $3,470,000 at varying rates of interest and installment payments through
January 2004. The purchase price was allocated to accounts receivable
($300,000) rental garments ($135,000), equipment ($312,000) covenants not to
compete ($763,000), purchased routes ($3,166,000) and liabilities assumed of
($82,000).
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment includes:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Land............................................. $ 2,436,218 $ 2,520,658
Buildings and improvements....................... 37,770,291 37,298,632
Machinery and equipment.......................... 36,466,316 40,350,481
Vehicles......................................... 6,187,631 5,030,893
Construction in process.......................... 276,444 1,223,837
------------ ------------
83,136,900 86,424,501
Less accumulated depreciation.................... (41,336,962) (43,372,654)
------------ ------------
$ 41,799,938 $ 43,051,847
============ ============
</TABLE>
During 1996 approximately $97,000 of interest costs were capitalized.
Amortization expense on capital leases was approximately $1,469,000, $856,000
and $553,000 in 1997, 1996 and 1995, respectively.
4. PURCHASED ROUTES AND ACQUISITION INTANGIBLES
The following summarizes the individual components of purchased routes and
acquisition intangibles at October 31:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Goodwill........................................... $ 764,310 $ 764,310
Purchased route.................................... 22,027,074 18,892,293
Covenants not to compete........................... 1,146,916 373,041
----------- -----------
23,938,300 20,029,644
Less: Accumulated amortization..................... (7,388,722) (6,850,621)
----------- -----------
$16,549,578 $13,179,023
=========== ===========
</TABLE>
Amortization expense for purchased routes and acquisition intangibles
aggregated $556,000, $510,000 and $593,000 for the years ended October 31,
1997, 1996 and 1995.
F-8
<PAGE>
COYNE INTERNATIONAL ENTERPRISES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. LONG-TERM DEBT
As of October 31, long-term debt consists of the following:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
NationsBank, N.A. (Nations) revolver, interest
payable monthly at the Bank's prime rate plus
1.0%.............................................. $13,477,683 $13,000,000
Term loan payable to Nations, with interest due
monthly at the Bank's prime rate plus 1.25%.
Principal payable in quarterly installments of
$925,000 in fiscal year 1998 and $1,012,500 in
1999.............................................. 7,750,000 10,950,000
Term loan payable to Nations, with interest due
monthly at the Bank's prime rate plus 1.5%.
Principal payable upon the earlier of the
expiration of the Revolving Credit Facility, or
the scheduled quarterly installment due dates
commencing January 1, 2000 and maturing in 2002... 10,000,000 10,000,000
Nations acquisition loan facility, interest payable
monthly at the Bank's prime rate plus 1.75%....... 646,617
Capital lease obligations payable in monthly
installments with interest, at rates ranging from
7.4% to 14.8%, payable through 2003, net book
value of capital leases was approximately
$10,344,000 and $6,431,000, respectively.......... 8,514,398 8,763,372
Industrial Development Revenue Bonds payable in
monthly installments with interest, ranging from
72% of prime to prime, through 2005............... 3,289,961 3,562,726
Other debt obligations payable in monthly
installments with interest, at rates ranging from
6% to 10.3%, payable through 2005................. 3,821,380 979,381
----------- -----------
47,500,039 47,255,479
Less current maturities............................ 7,849,570 6,470,035
----------- -----------
$39,650,469 $40,785,444
=========== ===========
Senior subordinated notes payable to Capital
Resource Lenders II (Capital) and Exeter Venture
Lenders (Exeter), net of unamortized debt discount
of $942,856 and $1,204,331 at October 31, 1997 and
1996. Annual interest at 12%, due quarterly.
Principal payable in quarterly installments
commencing September 30, 1999 through maturity
September 30, 2002................................ $11,057,144 $10,795,669
=========== ===========
</TABLE>
The prime rate at October 31, 1997 and 1996 was 8.5% and 8.25%,
respectively.
Nations
The term loans and revolving debt payable to Nations are provided for in the
Financing and Security Agreement (the Nations agreement). The revolving credit
under this facility is available through October 1, 1999, with one year
extensions available at the discretion of Nations and is computed based on
eligible accounts receivable and inventory, as defined, not to exceed
$16,000,000 (1996 base was $13,000,000).
The terms of the Nations agreement include various covenants, which provide,
among other things, for the maintenance of certain minimum levels of net worth
and cash flow, limitations on the debt leverage of the Company, and
limitations on capital expenditures.
F-9
<PAGE>
COYNE INTERNATIONAL ENTERPRISES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Collateral pledged under the Nations agreement includes all inventory,
accounts receivable, equipment, customer lists, and real property. As
permitted under the agreement, certain equipment and real property is subject
to first security interests in favor of other lenders.
The Nations agreement provides for an Acquisition Loan Facility of up to
$6,000,000. Borrowings under this facility totalled $647,000 at October 31,
1997. There were no borrowings under the facility at October 31, 1996. In
addition, the Nations agreement includes a material adverse change clause
which permits the financial institution to call its debt in the event of a
material adverse change in the business. Management does not anticipate any
such adverse changes in the next twelve-months, however there can be no
assurances.
Capital and Exeter
The senior subordinated notes to Capital and Exeter are provided for in the
Senior Subordinated Note and Warrant Purchase Agreement (the Capital
agreement). The notes are unsecured and may be redeemed in advance of the
scheduled maturity at the option of the Company at par value. Under the terms
of the Capital agreement, mandatory prepayment in full would be required if
certain events of liquidity or public sales of Company stock occurred, as
defined in the agreement.
In connection with the Capital agreement, common stock warrants were issued
to Capital and Exeter to purchase up to 642 shares of the Company's Class A
common stock and up to 16,250 shares of the Company's Class B common stock at
$.01 per share (see Note 7). The estimated fair value of the warrants, at the
date of issuance of $1,743,000, has been recorded as debt discount and is
being amortized over the life of the notes. Amortization expense was
approximately $261,000 in 1997, 1996 and 1995.
The terms of the Capital agreement include various covenants, which provide,
among other things, for the maintenance of certain minimum levels of net worth
and cash flow, limitations on dividend payments, the debt leverage of the
Company, and limitations on capital expenditures.
Industrial Development Revenue Financing
The Company's corporate headquarters, its Buffalo, New York plant and its
Blue Ridge, Georgia plant were financed under separate long-term lease
arrangements with the Industrial Development Agencies of the local counties.
The leases have been accounted for as capital leases. Accordingly, the related
assets are included in the consolidated balance sheet of the Company.
Similarly, an amount equivalent to the principal amount of the Agency's
revenue bonds outstanding related to those properties is included as a
liability. While the bonds are not a debt of the Company, the long-term lease
obligates the Company to payments equal to interest and amortization of such
bonds and provides for the ultimate reversion of the properties to the Company
at the end of the bond agreement.
At October 31, 1997, payments due on all long-term debt arrangements for
each of the next five years and thereafter are as follows:
<TABLE>
<CAPTION>
SENIOR CAPITAL
SUBORDINATED LONG-TERM LEASE
NOTES DEBT OBLIGATIONS
------------ ------------ -----------
<S> <C> <C> <C>
1998................................ $ 4,930,356 $ 2,919,214
1999................................ $ 1,200,000 19,085,051 2,617,286
2000................................ 2,400,000 6,744,588 1,774,763
2001................................ 3,600,000 4,746,610 892,529
2002................................ 4,800,000 642,041 168,435
Thereafter.......................... 2,836,995 142,171
------------ ------------ -----------
12,000,000 38,985,641 8,514,398
Less: Unamortized original issue
discount........................... (942,856)
------------ ------------ -----------
$ 11,057,144 $ 38,985,641 $ 8,514,398
============ ============ ===========
</TABLE>
F-10
<PAGE>
COYNE INTERNATIONAL ENTERPRISES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. INCOME TAXES
The components of income tax expense for the years ended October 31, were as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------- --------- ---------
<S> <C> <C> <C>
Current tax expense:
Federal.................................... $ 245,000 $ 315,000 $ 400,000
State...................................... 185,000 130,000 175,000
----------- --------- ---------
430,000 445,000 575,000
Deferred tax expense......................... 1,595,000 402,000 315,000
----------- --------- ---------
Income tax expense......................... $ 2,025,000 $ 847,000 $ 890,000
=========== ========= =========
</TABLE>
A reconciliation of the federal statutory income tax rate and the Company's
effective income tax rate is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory tax rate......................................... 34.0% 34.0% 34.0%
State taxes, net of federal benefit........................ 7.3 10.4 10.5
Non-deductible items....................................... 6.2 16.4 21.9
Other...................................................... 2.2
---- ---- ----
Effective rate........................................... 49.7% 60.8% 66.4%
==== ==== ====
</TABLE>
The tax effects of temporary differences that give rise to deferred tax
assets (liabilities) at October 31, were as follows:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Current:
Rental garments in service.................... $ (9,192,000) $ (8,041,901)
Inventory..................................... 119,000 93,031
Accrued expenses.............................. 458,000 267,870
------------ ------------
Current deferred tax liability.............. (8,615,000) (7,681,000)
------------ ------------
Non-current:
Fixed assets.................................. (3,032,000) (2,594,097)
Deferred compensation......................... 524,000 508,834
Other liabilities............................. 1,170,000 1,046,699
Alternative minimum tax credit carryforward... 1,838,000 1,681,910
Net operating loss carryforward............... 433,186
Investment tax credit carryforward............ 84,013
------------ ------------
Non-current deferred tax asset.............. 500,000 1,160,545
------------ ------------
Net deferred tax liability.................. $ (8,115,000) $ (6,520,455)
============ ============
</TABLE>
At October 31, 1997, the Company has alternative minimum tax credit
carryforwards, which are available indefinitely, of $1,838,000 available to
offset future regular federal income tax.
F-11
<PAGE>
COYNE INTERNATIONAL ENTERPRISES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. SHAREHOLDERS' EQUITY
Upon the happening of certain events, each Class B common share then issued
and outstanding shall automatically be converted into one Class A common
share. These events are as follows: (a) a disposition of substantially all the
assets of the corporation, (b) transactions in the common stock resulting in
Coyne family ownership being less than 51%, or (c) a public offering of the
Company's common shares.
In connection with the issuance of Senior Subordinated Notes, the
noteholders received warrants to purchase shares of the Company's common stock
(see Note 5). The warrants contain a put option feature whereby the holder has
the right to sell to the Company all of the warrants, at fair market value, as
defined, in equal installments in each of the years ended September 30, 2000
and 2001. Correspondingly, the Company has the right during the year ended
September 30, 2002 to repurchase all of the warrants and or warrant shares at
fair market value, as defined. The Company has not recorded any adjustment to
the established warrant amount as of October 31, 1997 or 1996 as management is
unable to reasonably estimate its future value, if any. Additionally, the
warrants contain antidilution provisions and expire upon the later of the date
of full repayment of the notes, or September 30, 2002.
8. SHAREHOLDER NOTE RECEIVABLE
The Company has an outstanding note receivable from its principal
shareholder in the amount of $1,256,250. This note bears interest at the
Applicable Federal Rate as defined by the Internal Revenue Service, 6.4%
October 31, 1997. Interest income on the note was not recognized in fiscal
1997. The total amount due as of October 31, 1997 approximates $1,336,000.
9. COMMITMENTS AND CONTINGENCIES
The Company and its operations are subject to various federal, state and
local regulations relating to environmental matters, including laws which
require the investigation and, in some cases, remediation of environmental
contamination. The Company's policy is to accrue and charge to operations
environmental investigation and remediation expenses when it is probable that
a liability has been incurred and an amount is reasonably estimable.
Certain claims have been filed or are pending against the Company arising
from the conduct of its business. In the opinion of management, all matters
are without merit and the Company intends to defend such claims vigorously.
Based on information currently available, management believes that the outcome
of any such claims will not have a material adverse effect on its business,
financial condition or results of operations.
10. OPERATING LEASES
The Company has noncancellable operating lease commitments for certain
operating facilities, transportation, manufacturing and office equipment,
which expire at various dates through 2004. Rent expense under operating
leases approximated $2,476,000, $2,649,000 and $3,933,000 during 1997, 1996
and 1995, respectively. Minimum annual rental commitments at October 31, 1997
are as follows:
<TABLE>
<S> <C>
1998............................................................ $ 1,813,000
1999............................................................ 709,000
2000............................................................ 198,000
2001............................................................ 109,000
2002............................................................ 88,000
Thereafter...................................................... 48,000
-----------
Total minimum lease payments.................................. $ 2,965,000
===========
</TABLE>
F-12
<PAGE>
COYNE INTERNATIONAL ENTERPRISES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. PENSION PLANS
All full-time nonunion and certain union employees are eligible to
participate in one of three 401(k) plans after one year of service. The
Company matches a portion of the employees' salary reduction contributions and
contributes a base contribution of no less than 3% of eligible participant
compensation. The Company contributions under the 401(k) plan, which vest over
a seven-year employment period, were approximately $680,000, $686,000 and
$482,000 in 1997, 1996 and 1995, respectively. Certain employees of the
Company are covered by union sponsored, collectively bargained, multi-employer
pension plans (Union Plans). The Company charged to expense $1,150,000,
$1,182,000 and $1,169,000 in 1997, 1996 and 1995, for such plans. These
contributions are determined in accordance with the provisions of negotiated
labor contracts and generally are based on the number of hours worked. The
Company may be liable for its share of unfunded vested benefits, if any,
related to the Union Plans. Information from the Union Plans' administrators
is not available to permit the Company to determine its share, if any, of
unfunded vested benefits.
The Company maintains a defined benefit plan for certain employees at one of
its plants. The most recent valuation stated an accumulated plan benefit
obligation of approximately $490,000 and plan assets with a fair market value
of approximately $763,000.
The Company has unfunded deferred compensation agreements with three
individuals. The cost of the plans is being, or has been previously, charged
to income during service periods.
12. RELATED PARTY TRANSACTIONS
The Company has guaranteed the obligations of J. Stanley Coyne, a principal
shareholder of the Company, under a promissory note payable in 2003. At
October 31, 1997, the outstanding balance, including unpaid accrued interest,
approximates $1,711,000.
At the Company's discretion, the Company has made salary continuation
payments totaling $100,000 per year to each of J. Stanley Coyne, a principal
shareholder of the Company, and Gerald Coyne, a son of J. Stanley Coyne,
including payments of such amounts in each of the last three fiscal years. In
addition, the Company has paid certain medical and personal expenses of J.
Stanley Coyne aggregating $73,979, $44,088, and $93,451 during the fiscal
years ended October 31, 1995, 1996, and 1997, respectively.
The Company acquired certain residential property in central New York in
1995 at a cost of $320,000. Thomas M. Coyne, Chairman of the Board and
President of the Company, paid the down payment of $75,000 and the Company
assumed a mortgage of $245,000 payable at $2,900 per month for ten years. The
mortgage bears interest at 7.5%. The Company made mortgage payments of $0,
$15,928, and $18,317 during the fiscal years ended October 31, 1995, 1996, and
1997, respectively. Thomas M. Coyne has an option to acquire this property any
time for the unpaid balance of the mortgage, but in no event less than
$100,000.
F-13
<PAGE>
COYNE INTERNATIONAL ENTERPRISES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1998 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................ $ 570,298 $ 1,272,192
Receivables, principally trade................... 13,372,682 11,957,651
Inventories...................................... 6,452,940 5,131,861
Uniforms and other rental items in service, net.. 27,309,696 23,559,751
Prepaid expense and other assets................. 426,175 729,876
------------ ------------
Total current assets......................... 48,131,791 42,651,331
------------ ------------
Property, plant and equipment, net................. 42,643,191 41,799,938
Purchased routes and acquisition intangibles, net.. 16,772,377 16,549,578
Deferred financing costs, net...................... 669,625 745,649
Deferred income tax................................ 1,525,000 500,000
Other assets....................................... 374,255 374,248
------------ ------------
$110,116,239 $102,620,744
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt............. $ 8,799,090 $ 7,849,570
Bank overdraft................................... 1,626,053 1,700,982
Accounts payable................................. 12,233,596 8,318,802
Accrued expenses:
Salaries and employee benefits.................. 3,992,235 3,275,202
Other........................................... 6,203,651 6,122,105
Deferred income taxes............................ 9,850,000 8,615,000
------------ ------------
Total current liabilities.................... 42,704,625 35,881,661
Long-term debt, net of current maturities.......... 38,828,719 39,650,469
Subordinated debentures, net of original issue
discount.......................................... 11,187,882 11,057,144
Other liabilities.................................. 4,408,627 4,391,322
------------ ------------
Total liabilities............................ 97,129,853 90,980,596
------------ ------------
Redeemable common stock warrants................... 19,000,000 1,743,086
------------ ------------
Shareholders' equity:
Preferred stock--5% non-cumulative, non-voting,
callable at par:
Class A--$100 par value; authorized 30,000;
issued and outstanding 23,107................. 2,310,700 2,310,700
Class B--$500 par value; authorized 5,000;
issued 4,991; outstanding 2,991............... 2,495,500 2,495,500
Common stock--$.01 par value:
Class A--voting; authorized 100,000 shares,
issued and outstanding 2,923.................. 29 29
Class B--non-voting; authorized 99,000;
issued and outstanding 74,030................. 740 740
Additional paid-in capital....................... 849,512 849,512
Retained earnings (deficit)...................... (10,246,908) 5,663,768
------------ ------------
(4,590,427) 11,320,249
Less:
Cost of 2,000 shares of Class B preferred stock
held in treasury.............................. (166,667) (166,667)
Shareholder note receivable.................... (1,256,520) (1,256,520)
------------ ------------
Total shareholders' equity (deficit)......... (6,013,614) 9,897,062
------------ ------------
Commitments and contingencies
$110,116,239 $102,620,744
============ ============
</TABLE>
See notes to consolidated financial statements.
F-14
<PAGE>
COYNE INTERNATIONAL ENTERPRISES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
<TABLE>
<CAPTION>
SIX MONTHS ENDED APRIL
30,
-------------------------
1998 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
Revenue:
Rental operations.................................. $ 62,015,866 $57,038,173
Direct sales....................................... 5,012,343 3,921,123
------------ -----------
67,028,209 60,959,296
------------ -----------
Operating expenses:
Cost of rental operations.......................... 47,110,518 43,480,496
Cost of direct sales............................... 3,742,506 2,742,163
Selling, general and administrative................ 11,196,340 9,665,089
------------ -----------
62,049,364 55,887,748
------------ -----------
Income from operations........................... 4,978,845 5,071,548
------------ -----------
Interest expense including redemption of common stock
warrants in 1998 of $17,256,914..................... 20,652,521 3,409,093
------------ -----------
(Loss) income before income taxes................ (15,673,676) 1,662,455
Income taxes......................................... 237,000 826,240
------------ -----------
NET (LOSS) INCOME ............................... (15,910,676) 836,215
Retained earnings, beginning of the year............. 5,663,768 3,612,190
------------ -----------
RETAINED EARNINGS (DEFICIT), END OF PERIOD....... $(10,246,908) $ 4,448,405
============ ===========
</TABLE>
See notes to consolidated financial statements.
F-15
<PAGE>
COYNE INTERNATIONAL ENTERPRISES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED APRIL
30,
-------------------------
1998 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income.................................. $(15,910,676) $ 836,198
Adjustments to reconcile net (loss) income to net
cash provided by
operating activities:
Depreciation of plant and equipment.............. 2,107,360 2,050,425
Amortization expense............................. 647,836 545,417
Provision for deferred income taxes.............. 210,000 412,604
Redemption of stock warrants..................... 17,256,914
Changes in operating assets and operating
liabilities:
Accounts receivable............................. (1,415,031) 117,844
Inventories..................................... (1,321,079) (406,215)
Uniforms in service............................. (3,749,945) (169,069)
Prepaid expenses and other assets............... 303,694 655,880
Accounts payable and other liabilities.......... 4,730,686 (888,739)
------------ -----------
Net cash provided by operating activities....... 2,859,759 3,154,345
------------ -----------
Cash flows from investing activities:
Purchases of property, plant and equipment......... (2,950,622) (676,588)
Acquisition of business, net of cash acquired...... (582,975) (6,463)
------------ -----------
Net cash used in investing activities........... (3,533,597) (683,051)
------------ -----------
Cash flows from financing activities:
Proceeds from long-term borrowings................. 75,409,917 58,955,037
Decrease in bank overdrafts........................ (74,929) --
Payments under long-term debt obligations.......... (75,282,146) (60,971,871)
Deferred financing costs incurred.................. (80,898) (55,000)
------------ -----------
Net cash used in financing activities........... (28,056) (2,071,834)
------------ -----------
Net increase (decrease) in cash................. (701,894) 399,460
Cash and cash equivalents:
Beginning of year.................................. 1,272,192 348,134
------------ -----------
End of period...................................... $ 570,298 $ 747,594
============ ===========
</TABLE>
F-16
<PAGE>
COYNE INTERNATIONAL ENTERPRISES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the six-month
period ended April 30, 1998 are not necessarily indicative of the results that
may be expected for the year ended October 31, 1998. For further information,
refer to the consolidated financial statements and footnotes thereto contained
herein.
NOTE B--REDEMPTION OF STOCK WARRANTS
In May 1998 the Company entered into an agreement with its senior
subordinated noteholders to redeem the outstanding common stock warrants for
$19,000,000 comprised of $6,000,000 for the warrants, $11,000,000 for an early
termination fee and $2,000,000 for a management fee. The excess of this
settlement over the book value of the stock warrants has been reported as a
charge of $17,256,000 in the accompanying financial statements.
NOTE C--INCOME TAXES
The Company's effective tax rate differs from the statutory rate of 34% due
to non deductible costs associated with the redemption of the common stock
warrants described in Note B and other non deductible costs.
NOTE D--LONG TERM OBLIGATIONS
The agreement to redeem the outstanding common stock warrants, and the
resulting charge, constituted an event of default under the Company's bank
credit facility and its subordinated notes. On May 29, 1998 the banks and the
subordinated noteholders amended their agreements or waived this default, as
well as certain other covenant violations.
NOTE E--SUBSEQUENT EVENT
On June 26, 1998, pursuant to a purchase agreement dated June 23, 1998, the
Company sold, at par, $75,000,000 of 11 1/4% Senior Subordinated Notes due
2008 ("Notes").The proceeds of the Notes were used primarily to retire certain
existing debt obligations, redeem outstanding redeemable common stock
warrants, and for general corporate purposes. As a result of the transactions,
the Company recognized an extraordinary charge of approximately $780,000, net
of a $520,000 tax benefit, for write-off of deferred financing and unamortized
issue discounts pertaining to the retired debt.
F-17
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PRO-
SPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY.THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE EXCHANGE NOTES IN ANY JURISDIC-
TION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SO-
LICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THE INFORMATION CON-
TAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................................................... i
Summary.................................................................. 1
Risk Factors............................................................. 14
Use of Proceeds.......................................................... 20
Capitalization........................................................... 21
Selected Financial and Operating Data.................................... 22
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 23
Business................................................................. 28
Management............................................................... 37
Certain Relationships and Related Transactions........................... 40
Principal Shareholders................................................... 42
Description of Other Indebtedness........................................ 44
Exchange Offer........................................................... 46
Description of Notes..................................................... 55
Certain Federal Income Tax Considerations ............................... 83
Plan of Distribution..................................................... 84
Legal Matters............................................................ 85
Independent Auditors..................................................... 85
Index to Consolidated Financial Statements............................... F-1
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OFFER TO EXCHANGE ITS 11 1/4% SENIOR B SENIOR SUBORDINATED NOTES DUE 2008 WHICH
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, FOR ANY AND
ALL OF ITS OUTSTANDING 11 1/4% SERIES A SENIOR SUBORDINATED NOTES DUE 2008
---------------
PROSPECTUS
---------------
[ ], 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LOGO
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company and Midway-CTS Buffalo Ltd. are both incorporated under the
laws of the State of New York. Section 723 of the New York Business Corporation
Law contains provisions entitling directors and officers of New York
corporations to indemnification from judgments, fines, amounts paid in
settlement and reasonable expenses, including attorneys' fees, as the result of
an action or proceeding in which they may be included by reason of being or
having been a director or officer of a New York corporation, provided said
officers or directors acted in good faith.
The Company also maintains directors' and officers' liability insurance
covering certain liabilities that may be incurred by directors and officers of
the Company in the performance of their duties.
Clean Towel Service, Inc. and Blue Ridge Textile Manufacturing, Inc. are
both incorporated under the laws of the State of Georgia. The Bylaws of Clean
Towel Service, Inc., a copy of which are filed as Exhibit 3.6, provide for
mandatory indemnification of directors, officers and other persons in certain
circumstances. Generally, the Georgia Business Corporation Code provides that a
corporation may indemnify an individual who is a party to a proceeding because
he or she is or was a director against liability incurred in the proceeding if:
(1) such individual conducted himself or herself in good faith; and (2) such
individual reasonably believed: (A) in the case of conduct in his or her
official capacity, that such conduct was at least not opposed to the best
interests of the corporation; (B) in all other cases, that such conduct was at
least not opposed to the best interests of the corporation; and (C) in the case
of any criminal proceeding, that the individual had no reasonable cause to
believe such conduct was unlawful. Similar indemnification is available for
officers of the corporation.
Ohio Garment Rental Inc. is incorporated under the laws of the State of
Ohio. The Bylaws of Ohio Garment Rental, Inc., a copy of which are filed as
Exhibit 3.8, provide for the mandatory indemnification of directors, officers
and other persons in certain circumstances. Generally, under the Ohio General
Corporation Law, a corporation may indemnify or agree to indemnify any person
who was or is a party, or is threatened to be made a party, to any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, other than an action by or in the right of the
corporation, by reason of the fact that he 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, trustee, officer, employee, member, manager, or
agent of another corporation, domestic or foreign, nonprofit or for profit, a
limited liability company, or a partnership, joint venture, trust, or other
enterprise, against expenses, including attorneys' fees, judgments, fines, and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit, or proceeding, if he acted in good faith and in manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, if he has no
reasonable cause to believe his conduct was unlawful. In addition, a corporation
may indemnify or agree to indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending, or completed action
or suit by or in the right of the corporation to procure a judgement in its
favor, by reason of the fact that he 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, trustee, officer, employee, member, manager, or agent of another
corporation, domestic or foreign, nonprofit or for profit, a limited liability
company, or a partnership, joint venture, trust, or other enterprise, against
expenses, including attorney's fees, actually and reasonable incurred by him in
connection with the defense or settlement of such action or suit, if he acted in
good faith and in a manner he reasonable believed to be in or not opposed to the
best interests of the corporation, except that no indemnification shall be made
in respect of certain circumstances.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
3.1 Amended and Restated Articles of Incorporation of the
Company
3.2 Amended and Restated Bylaws of the Company
3.3 Articles of Incorporation of Blue Ridge Textile
Manufacturing, Inc.
3.4 Bylaws of Blue Ridge Textile Manufacturing, Inc.
3.5 Articles of Incorporation of Clean Towel Service, Inc.
3.6 Bylaws of Clean Towel Service, Inc.
3.7 Articles of Incorporation of Ohio Garment Rental, Inc.
II-1
<PAGE>
3.8 Bylaws of Ohio Garment Rental, Inc.
3.9 Certificate of Incorporation of Midway-CTS Buffalo, Ltd.
3.10 Bylaws of Midway-CTS Buffalo, Ltd.
4.1 Indenture, dated as of June 26, 1998, by and among the
Company, Blue Ridge Textile Manufacturing, Clean Towel
Service, Inc., Ohio Garment Rental, Inc. and Midway-CTS
Buffalo, Ltd., as guarantors and IBJ Schroder Bank & Trust
Company, as trustee
4.2 Form of 11 1/4% Senior Subordinated Note due 2008
5.1 Opinion of Blank Rome Comisky & McCauley LLP
10.1 Amended and Restated Financing Agreement, dated as of June
26, 1998, between the Company, Blue Ridge Textile
Manufacturing, Inc., Clean Towel Service, Inc., Midway-CTS
Buffalo, Ltd., Ohio Garment Rental, Inc., (collectively,
the "Borrowers") and NationsBank, N.A. (the "Lender")
10.2 Revolving Credit Note, dated as of June 26, 1998, between
the Borrowers and the Lender.
10.3 Capital Expenditure Note, dated as of June 26, 1998,
between the Borrowers and the Lender.
10.4 Acquisition Loan Note, dated as of June 26, 1998, between
the Borrowers and the Lender.
10.5 Lease Purchase Agreement, dated as of December 1, 1994,
between the Erie County Industrial Development Agency and
Midway-CTS Buffalo, Ltd.
10.6 Form of the $2,600,000 Industrial Development Revenue Bond
issued by the Erie County Industrial Development Agency.
10.7 Lessee Guaranty Agreement, dated as of December 1, 1994
between Midway-CTS Buffalo, Ltd. and Key Bank of New York.
10.8 Purchase Agreement, dated as of June 23,1998, by and among
the Company, Blue Ridge Textile Manufacturing, Inc., Clean
Towel Service, Inc., Midway-CTS Buffalo, Ltd., Ohio
Garment Rental, Inc., NationsBank Montgomery Securities
LLC and First Union Capital Markets, a division of Wheat
First Securities, Inc.
II-2
<PAGE>
10.9 Registration Rights Agreement , dated as of June 26,1998,
by and among the Company, Blue Ridge Textile
Manufacturing, Inc., Clean Towel Service, Inc., Ohio
Garment Rental, Inc., Midway-CTS Buffalo, Inc.,
NationsBank Montgomery Securities LLC and First Union
Capital Markets, a division of Wheat First Securities,
Inc.
10.10 Promissory Note dated September 27, 1994 from J. Stanley
Coyne payable to the Company and related Mortgage Deed
10.11 Indemnification Agreement of J. Stanley Coyne and Guaranty
by the Company.
12.1 Statement of Computation of Ratio of Earnings to Fixed
Charges
21.1 Subsidiaries of the Company
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Blank Rome Comisky & McCauley LLP (See
Exhibit 5.1)
24.1 Power of attorney (included on 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
(b) Financial Statement Schedules
Schedule VIII - Valuation and Qualifying Accounts and Reserves.
- ----------------
* To be filed by amendment
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-3
<PAGE>
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the registration statement;
notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement:
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally promptly 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.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 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 of 1933 and will be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Syracuse, New York on July 28, 1998.
COYNE INTERNATIONAL ENTERPRISES CORP.
By: /s/
-----------------------------------------------
Thomas M. Coyne
Chairman of the Board, President and
Chief Executive Officer
Each person whose signature appears below hereby authorizes Thomas M. Coyne
or Donald F. X. Keegan to file one or more Amendments, including Post-Effective
Amendments, to this Registration Statement, which Amendments may make such
changes as Thomas M. Coyne or Donald F. X. Keegan deem appropriate, and each
person whose signature appears below, individually and in each capacity stated
below hereby appoints Thomas M. Coyne or Donald F. X. Keegan as attorney-in-
fact to execute in his name and on his behalf any such Amendments to this
Registration Statement.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE Capacity Date
- ------------------------------------- ------------------------------ --------------------------------
<S> <C> <C>
/s/
- ----------------------------
Thomas M. Coyne Chairman of the Board, July 28, 1998
President and Chief
Executive Officer
(Principal Executive
Officer)
/s/
- ----------------------------
Donald F. X. Keegan Vice President, Chief
Financial Officer and July 28, 1998
Treasurer (Principal
Financial and Accounting
Officer)
/s/
- ----------------------------
Thomas C. Crowley Director July 28, 1998
- ----------------------------
James W. Maher Director July , 1998
/s/
- ----------------------------
William D. Matthews Director July 28, 1998
/s/
- ----------------------------
Wallace J. McDonald Director July 28, 1998
/s/
- ----------------------------
David P. O'Hara Director and Assistant July 28, 1998
Secretary
/s/
- ----------------------------
Raymond T. Ryan Director July 28, 1998
/s/
- ----------------------------
J. Patrick Barrett Director July 28, 1998
</TABLE>
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Syracuse, New York on July 28, 1998.
BLUE RIDGE TEXTILE MANUFACTURING, INC.
By: /s/
----------------------------------------
Thomas M. Coyne
President
Each person whose signature appears below hereby authorizes Thomas M. Coyne
or Donald F. X. Keegan to file one or more Amendments, including Post-Effective
Amendments, to this Registration Statement, which Amendments may make such
changes as Thomas M. Coyne or Donald F. X. Keegan deem appropriate, and each
person whose signature appears below, individually and in each capacity stated
below hereby appoints Thomas M. Coyne or Donald F. X. Keegan as attorney-in-
fact to execute in his name and on his behalf any such Amendments to this
Registration Statement.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE Capacity Date
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
/s/
- ------------------------------
Thomas M. Coyne President and Director July 28, 1998
(Principal Executive
Officer)
/s/
- ------------------------------
Donald F. X. Keegan Vice President (Principal July 28, 1998
Financial and Accounting
Officer)
/s/
- ------------------------------
David P. O'Hara Director and Assistant July 28, 1998
Secretary
/s/
- ------------------------------
Raymond T. Ryan Director July 28, 1998
</TABLE>
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Syracuse, New York on July 28, 1998.
CLEAN TOWEL SERVICE, INC.
By: /s/
-----------------------------------
Thomas M. Coyne
President
Each person whose signature appears below hereby authorizes Thomas M. Coyne
or Donald F. X. Keegan to file one or more Amendments, including Post-Effective
Amendments, to this Registration Statement, which Amendments may make such
changes as Thomas M. Coyne or Donald F. X. Keegan deem appropriate, and each
person whose signature appears below, individually and in each capacity stated
below hereby appoints Thomas M. Coyne or Donald F. X. Keegan as attorney-in-
fact to execute in his name and on his behalf any such Amendments to this
Registration Statement.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE Capacity Date
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
/s/
- -----------------------------------
Thomas M. Coyne President and Director July 28, 1998
(Principal Executive
Officer)
/s/
- -----------------------------------
Donald F. X. Keegan Vice President (Principal July 28, 1998
Financial and Accounting
Officer)
/s/
- -----------------------------------
David P. O'Hara Director and Assistant July 28, 1998
Secretary
/s/
- -----------------------------------
Raymond T. Ryan Director July 28, 1998
</TABLE>
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Syracuse, New York on July 28, 1998.
OHIO GARMENT RENTAL, INC.
By: /s/
-----------------------------------
Thomas M. Coyne
President
Each person whose signature appears below hereby authorizes Thomas M. Coyne
or Donald F. X. Keegan to file one or more Amendments, including Post-Effective
Amendments, to this Registration Statement, which Amendments may make such
changes as Thomas M. Coyne or Donald F. X. Keegan deem appropriate, and each
person whose signature appears below, individually and in each capacity stated
below hereby appoints Thomas M. Coyne or Donald F. X. Keegan as attorney-in-
fact to execute in his name and on his behalf any such Amendments to this
Registration Statement.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE Capacity Date
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
/s/
- -----------------------------------
Thomas M. Coyne President and Director July 28, 1998
(Principal Executive
Officer)
/s/
- -----------------------------------
Donald F. X. Keegan Vice President (Principal July 28, 1998
Financial and Accounting
Officer)
/s/
- -----------------------------------
David P. O'Hara Director and Assistant July 28, 1998
Secretary
/s/
- -----------------------------------
Raymond T. Ryan Director July 28, 1998
</TABLE>
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Syracuse, New York on July 28, 1998.
MIDWAY-CTS BUFFALO, LTD.
By: /s/
-----------------------------------
Thomas M. Coyne
President
Each person whose signature appears below hereby authorizes Thomas M. Coyne
or Donald F. X. Keegan to file one or more Amendments, including Post-Effective
Amendments, to this Registration Statement, which Amendments may make such
changes as Thomas M. Coyne or Donald F. X. Keegan deem appropriate, and each
person whose signature appears below, individually and in each capacity stated
below hereby appoints Thomas M. Coyne or Donald F. X. Keegan as attorney-in-
fact to execute in his name and on his behalf any such Amendments to this
Registration Statement.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE Capacity Date
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
/s/
- ----------------------------------
Thomas M. Coyne President and Director July 28, 1998
(Principal Executive
Officer)
/s/
- ----------------------------------
Donald F. X. Keegan Vice President (Principal July 28, 1998
Financial and Accounting
Officer)
/s/
- ----------------------------------
David P. O'Hara Director and Assistant July 28, 1998
Secretary
/s/
- ----------------------------------
Raymond T. Ryan Director July 28, 1998
</TABLE>
II-9
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
COYNE INTERNATIONAL ENTERPRISES CORP.
PURSUANT TO SECTION 807 OF THE NEW YORK
BUSINESS CORPORATION LAW
The undersigned, being the President and Secretary of Coyne International
Enterprises Corp., hereby certify as follows:
1. The name of the corporation is Coyne International Enterprises Corp.
2. The date its Certificate of Incorporation was filed by the Department
of State is June 23, 1961.
3. The Certificate of Incorporation as now in full force and effect is
hereby amended to effect the following changes:
(a) Article 2 is hereby amended to read as follows:
"2. The purpose for which this corporation is formed is to engage in
any lawful act or activity for which corporations may be formed under
the Business Corporation Law."
(b) Articles 7 and 8 relating to original directors and incorporators
of the corporation are hereby deleted.
(c) Article 9 relating to contracts between the corporation and other
firms or corporations is renumbered as Article 7.
(d) Article 10 relating to purchase of capital stock is renumbered as
Article 8.
(e) Article 11 relating to By-laws of the corporation is renumbered as
Article 9.
<PAGE>
(f) Article 12 relating to service of process is renumbered as
Article 11 and is amended to read as follows:
"11. The address to which the Secretary of State shall mail a copy of
any process against the corporation which may be served upon him is
c/o O'Hara, Hanlon, Knych & Pobedinsky, LLP, One Park Place,
Syracuse,New York 13202."
(g) Article 13 relating to the designation of the Secretary of State
as agent for sevice of process is renumbered as Article 10.
(h) Article 14 relating to conversion of shares is hereby deleted.
4. The text of the Certificate of Incorporation, as amended, is hereby
restated as further amended to read as fully set forth herein:
1. The name of the corporation shall be Coyne International
Enterprises Corp.
2. The purpose for which this corporation is formed is to engage in
any lawful act or activity for which corporations may be formed under
the Business Corporation Law.
3. (a) The aggregate number of shares which the corporation is
authorized to issue is 234,000 shares of which 30,000 shares shall be
Class A preferred shares with a par value of $100.00 per share, 5,000
shall be Class B preferred shares with a par value of $500.00 per
share, and 199,000 of which shall be common shares having a par value
of $.01 per share. The common shares shall be divided into 100,000
Class A common shares and 99,000 Class B common shares.
2
<PAGE>
(b) The designations, relative rights, preferences and
limitations of each class of shares shall be as follows:
(1) Dividend Rights. The holders of Class A and B preferred
---------------
shares shall be entitled to non-cumulative dividends as and when
declared by the Board of Directors out of funds legally available
therefore, at a rate of five percent (5%) per annum and no more,
payable quarterly, semi-annually or annually, on such dates as
may be determined by the Board of Directors. No dividends shall
be declared or paid on the Class B preferred shares unless the
full five percent (5%) dividend for the current year shall have
been declared and paid on all shares of Class A preferred. No
dividend shall be declared or paid in any fiscal year on the
common shares until the five percent (5%) dividend on both
classes of the preferred shares for that year has been declared
or paid. After full non-cumulative dividends at a rate of five
percent (5%) per annum for the then current year shall have been
declared and paid to the holders of Class A and B preferred
shares, and after making any such provision for working capital
and reserves as the Board of Directors in its sole discretion may
deem desirable, additional dividends may be declared, paid or set
apart during that year to be paid exclusively to the holders of
the common shares, share and share alike. Subject to the
foregoing provisions, the preferred shares shall not be entitled
to participate in any other additional surplus, net profits or
earnings of the corporation.
(2) Voting Rights. The entire voting rights of the
-------------
corporation shall be vested in the Class A common shares and each
issued and outstanding Class A common share shall have one vote.
(3) Liquidation Rights. In case of liquidation,
------------------
dissolution, or distribution of the assets of the
3
<PAGE>
corporation, the holders of the preferred shares shall be
paid the par value of their preferred shares before any
amount shall be paid to the common shares. After payment on
the par value of the preferred shares, the balance of the
assets and funds of the corporation shall be distributed
solely among the holders of the common shares. A
consolidation or merger of the corporation with or into any
other corporation shall not constitute a liquidation,
dissolution, or winding up within the meaning of this
paragraph.
(4) Common Shares. Except for voting rights, all of which
-------------
shall be in the Class A shares, the Class A and Class B
common shares shall have identical rights and preferences.
(5) Callable Preferred. At any time, the corporation shall
------------------
have the right to redeem all or any part of its issued and
outstanding preferred shares, at a price equal to the par
value of the shares redeemed. The Board of Directors shall
have full power and discretion to determine and select from
the outstanding preferred shares particular shares for
redemption and its proceedings and action in this connection
shall not be subject to attack. Shares may be redeemed from
either or both classes of preferred shares. The corporation
may, at its election, issue debentures in exchange for
preferred shares payable in 40 equal quarterly installments
including principal and interest at 6%.
4. The principal offices of the corporation shall be located in
the City of Syracuse, Onondaga County, New York.
5. The duration of the corporation shall be perpetual.
6. The number of directors shall be not less than three nor
more than ten.
4
<PAGE>
7. No contract or other transaction between the corporation and
any other corporation shall be affected or invalidated by the fact
that any one or more of the directors of this corporation is, or
are interested in, or is a director of, or officer, or are
directors of such other corporation, and any director or
directors, individually or jointly, may be a party, or parties to,
or may be interested in any contract or transaction of this
corporation, or in which this corporation is interested; and no
contract, act or transaction of this corporation with any person
or persons, firm or corporation shall be affected or invalidated
by the fact that any directors or director of this corporation is
a party or parties to, or interested in such contract, act or
transaction, or in any way connected with such person or persons,
firm, association or corporation.
8. No holder of any share of capital stock of this corporation,
shall, because of his ownership of capital stock, have a pre-
emptive or other right to purchase, subscribe for or take any part
of any capital stock or any part of the notes, debentures, bonds
or other securities convertible into or carrying options or
warrants to purchase capital stock of this corporation, authorized
by this certificate of incorporation and issued, optioned or sold
by it after its incorporation, whether the capital stock issued or
sold, be capital stock authorized by this certificate of
incorporation or be authorized by an amended certificate, duly
filed and in effect at the time of the issuance or sale of such
capital stock. Any part of the capital stock and any part of the
notes, debentures, bonds, or other securities convertible into or
carrying options or warrants to purchase capital stock of this
corporation authorized by this certificate of incorporation or by
an amended certificate duly filed, may at any time be issued,
optioned for sale and sold or disposed of by this corporation,
pursuant to resolution of its Board of Directors to such persons
and upon such terms and conditions as may, to the Board seem
proper and advisable without first offering the said capital stock
or any part thereof to existing stockholders.
5
<PAGE>
9. Subject to provisions of the By-laws made by incorporators or
stockholders, the Board of Directors may make By-laws and may from
time to time alter, amend, or repeal any By-laws, and any By-laws
made by the directors may be altered, amended or repealed by the
stockholders at any annual meeting, or at any special meeting
provided notice of such proposed alteration, amendment or repeal
shall be included in the notice of such annual or special meeting.
10. The Secretary of State of the State of New York is hereby
designated as agent of this corporation upon whom all process in
any action or proceeding against the corporation may be served
within the State of New York.
11. The address to which the Secretary of State shall mail a copy
of any process against the corporation which may be served upon
him is c/o O'Hara, Hanlon, Knych & Pobedinsky, LLP, One Park
Place, Syracuse, New York 13202.
5. This Restated Certificate of Incorporation was authorized by
unanimous vote of the Board of Directors and by unanimous written consent of all
shareholders of record. In witness of the foregoing, we have executed this
certificate and affirmed the truth of the statements contained herein under the
penalty of perjury on July 22, 1998.
COYNE INTERNATIONAL ENTERPRISES CORP.
By: /s/ Thomas M. Coyne
----------------------------------
Thomas M. Coyne, President
By: /s/ Alexander Pobedinsky
----------------------------------
Alexander Pobedinsky, Secretary
6
<PAGE>
BY - LAWS
of
COYNE INTERNATIONAL ENTERPRISES CORP.
-------------------------------------
ARTICLE I
Stockholders Meeting
--------------------
Section 1. Annual Meeting. The annual meeting of the stockholders shall
--------------
be held on the fourth Friday of January each year at 10:30 o'clock A.M. in the
forenoon, at the principal office of the corporation, or such places as the
Board of Directors shall authorize. If such date shall be a legal holiday, the
meeting shall be held on the next secular day following at the same hour.
Notice of such meeting shall be given by the Secretary as required by law, by
serving personally or by mailing not less than ten days and not more than forty
days previous to such meeting, postage prepaid, a copy of such notice, addressed
to each stockholder of record. Any and all notices of such meeting may be
waived by any stockholder by written waiver or by personal attendance thereat.
Section 2. Special Meetings. Special meetings of stockholders for any
----------------
purpose other than those regulated by statute may be called by a resolution of
the majority of the Board of Directors upon ten days notice to each stockholder
of record. Such notice shall be given by the Secretary and shall contain a
statement of the business to be transacted at such meeting. It shall be served
personally or sent by mail addressed to each stockholder of record at his last
known Post Office Address.
The Board of Directors shall also in like manner call a special
meeting of the stockholders whenever so requested in writing by stockholders
representing not less than 50% of the capital stock of the Company.
The President may, in his discretion, call a special meeting of
stockholders upon ten days notice by mail, addressed to the stockholders as
their respective addresses appear upon the books of the corporation.
No business other than that specified in the call for the
meetings shall be transacted at any special meeting of the stockholders. Notice
of special meeting may be waived by any stockholder by written waiver or by
personal attendance thereat.
1
<PAGE>
Section 3. Voting. Stockholders entitled to vote at meetings may do so in
------
person or by proxy appointed by an instrument in writing subscribed by the
stockholder or by his duly authorized attorney. Each stockholder shall be
entitled to one vote for each share of voting stock registered in his name on
the books of the Company. The Board of Directors is authorized to fix in
advance by resolution a record date for the determination of the stockholders
entitled to notice of and to vote at any meetings of stockholders.
Section 4. Quorum. The holders of shares of any class, having voting
------
power aggregating such number of the issued and outstanding shares of such class
as may be required by the Certificate of Incorporation (or any amendments
thereto then in effect) or, in the absence of such requirement, aggregating at
least a majority of such shares, present in person or represented by proxy at
any meeting duly called, shall constitute a quorum for the transaction of any
business or specified item of business, except as otherwise provided by statute.
However, a lesser number when not constituting a quorum may adjourn a stated
meeting to a date certain by giving 5 days written notice to the other
stockholders of such adjourned meeting.
Section 5. Manner of Voting at Stockholders' Meeting. At all meetings of
-----------------------------------------
stockholders, except as otherwise expressly provided by the Certificate of
Incorporation (and any amendments thereto then in effect) or by statute, the
voting shall be determined by a majority vote of the shares of capital stock
present in person or by proxy, provided, however, that any qualified voter may
demand a stock vote, and in that case, such stock vote shall immediately be
taken. Except as otherwise expressly provided by statute or by these By-laws,
all voting shall be viva voce except that stock vote shall be by ballot, each of
which shall state the name of the stockholder voting and the number of shares of
stock owned and voted by him, and if such ballot be cast by proxy, it shall also
state the name of such proxy.
ARTICLE II
Directors
---------
Section 1. Number. The affairs and the business of the company shall be
------
managed by a Board of at least three (3) and not more than ten (10) directors
who need not be stockholders of the Corporation. The number of directors shall,
within the limits prescribed in this Section, be determined from time to time by
resolution of the Board of Directors.
Section 2. How elected. At the annual meeting the persons duly elected by
-----------
the votes cast at the election held thereat shall become the directors for the
ensuing year.
2
<PAGE>
Section 3. Term of Office. The term of office of each of the directors
--------------
shall be until the next meeting of stockholders and thereafter until a successor
be elected.
Section 4. Duties of Directors. The Board of Directors shall have the
-------------------
control and general management of the affairs and business of the Corporation.
Such directors shall in all cases act as a Board regularly convened by a
majority, and they may adopt such rules and regulations for the conduct of their
meetings, and the management of the Corporation as they may deem proper, not
inconsistent with these By-laws and the laws of the State of New York, and in
conformity with the Certificate of Incorporation and any amendments thereto then
in effect.
Section 5. Directors' Meetings. Regular meetings of the Board of
-------------------
Directors shall be held immediately following the annual meetings of
stockholders. Special meetings of the Board of Directors may be called by the
President in his discretion at any time and shall be called upon the written
request of two directors.
Notice of special meetings of the Board of Directors shall be
given by service upon each director in person or by mailing to him at his last
known Post Office address, at least five days before the date therein designated
for such meetings, including the day of mailing, a notice thereof specifying the
time and place of such meeting.
In case of special meetings, such notice shall specify the
business to be brought before the meeting and no business other than that
specified in such notice shall be transacted at any special meeting.
Any and all notices of meeting may be waived by any director by
written waiver or by personal attendance thereat.
At any meeting of the Board a lawful quorum, and the number of
votes necessary for the transaction of business or any specified item of
business thereat shall consist of such number of the directors as shall be
specified in the Certificate of Incorporation (and amendments thereto then in
effect) or, in the absence of such specification, a majority of the whole number
of directors; but in the event of a quorum not being present, a lesser number
may adjourn the meeting to some future time not more than twenty days later.
At all meetings of the Board of Directors each director is to
have one vote, irrespective of the number of shares of stock of the Company that
he may hold.
3
<PAGE>
At any meeting at which every member of the Board of Directors
shall be present, though held without notice, any business may be transacted
which might have been transacted if the meeting had been duly called.
See Amendment Page B-1 (Stockholder - 3/26/75) (Stockholder -1/27/78)
Section 6. Vacancies. Whenever any vacancy shall occur in the Board of
---------
Directors by death, resignation or otherwise, the same shall be filled without
undue delay by a majority vote by ballot of the remaining members of the Board
at a special meeting which shall be called for that purpose. Such special
meeting shall be held within thirty days after the occurrence of such vacancy.
The person so chosen shall hold office until his successor shall have been
elected at a special or annual meeting of the stockholders. New places on the
Board due to increases in the number of directors may be filled prior to any
election by stockholders for a term lasting until such election by the vote of
the majority of the Board of Directors.
Section 7. Removal of Directors. Any one or more of the Directors may be
--------------------
removed, for cause, at any time by a vote of the stockholders holding a majority
of the stock at any special meeting called for such purpose.
ARTICLE III
Officers
--------
Section 1. Number of Officers. The officers of the Company shall be a
------------------
President, a Vice President, a Treasurer, a Secretary and an Assistant Secretary
and any officer may hold more than one office, except that the office of
President and Secretary shall not be held by the same person. The Board of
Directors may appoint such other officers, agents and employees as in their sole
discretion they shall deem advisable, who shall be subject to recall at all
times by a majority vote of the Board of Directors.
Section 2. Election of Officers. The officers of the Company shall be
--------------------
elected annually by the Board of Directors at its meeting held immediately after
the annual meeting of stockholders and shall hold office for one year and until
their successors have been duly elected and qualified.
Section 3. Removal of Officers. Any officer may be removed at any special
-------------------
meeting of the Board called for that purpose at which a majority of the
Directors are present.
4
<PAGE>
Section 4. President. The President shall when present preside at all
---------
meetings of the Directors, unless the Board shall have elected a Chairman from
their number, and act as temporary Chairman at and call to order all meetings of
the stockholders, and regulate the order of business thereat, and he shall have
power to call special meetings of the stockholders and directors for any purpose
or purposes, appoint and discharge and fix the compensation, subject to the
approval of the directors, of all employees and agents of the Company and fix
their compensation, make and sign contracts and agreements in the name and
behalf of the Company; he shall see that the books, reports, statements and
certificates required by the statute under which this Company is organized or
any other laws applicable thereto are properly kept, made and filed according to
law; and he shall enforce these By-laws and generally do and perform all acts
incident to the office of President or which are authorized or required by law.
Section 5. Vice President. In the absence of or inability of the
--------------
President to act, the Vice President shall perform the duties of the President
and shall perform such other functions as the Board of Directors may from time
to time designate.
Section 6. The Secretary. The Secretary, or Assistant Secretary, shall:
-------------
(a) Keep the Minutes of the meetings of the
Board of Directors and of the stockholders
in appropriate books
(b) Give and serve all notice of all meetings of
the Company
(c) Be custodian of the records and of the seal
of the Company and affix the latter when
required and may sign all certificates of
stock not countersigned by the Treasurer
(d) Keep the stock and transfer books in such a
manner as to show at any time the amount of
capital stock, the manner and the time the
same was paid for, the names of the owners
respective places of residence or their Post
Office addresses, the number of shares owned
by each of them and the time at which each
person became owner, and keep such stock and
transfer book open daily during the usual
business hours at the office of the Company
subject to the inspection of any person duly
authorized, as prescribed by law
(e) Lay before the Board of Directors at their
stated meetings all communications addressed
to him officially by the President or any
officer or shareholder of the Company, and
attend to all correspondence incident to the
5
<PAGE>
office of Secretary.
Section 7. The Treasurer. The Treasurer shall:
-------------
(a) Have the care and custody of and be
responsible for all the funds and
securities of the Company and deposit
of such funds and securities in the
name of the Company in such a bank and
safe deposit vaults as the Directors may
designate
(b) Exhibit at all reasonable times his books
and accounts to any director or stockholder
of the Company upon application at the
office of the Company during business hours
(c) Have the right to countersign all certificates
of stock signed by the President or Vice
President
(d) Render a statement of the condition of the
finances of the Company at each stated meet-
ing of the Board of Directors if called upon
to do so, and a full financial report at the
annual meeting of the stockholders. He
shall keep at the office of the Corporation
books of account of all its business and
transactions and such books of account as
the Board of Directors may require. He
shall do and perform all duties pertaining
to the office of Treasurer.
Section 8. Duties of Officers May be Delegated. In the case of the
-----------------------------------
absence of any officer of the Corporation or for any reason that the Board may
deem sufficient, the Board may, except as specifically otherwise provided in
these By-Laws, delegate the powers or duties of such officers to any other
officer or any director for the time being, provided a majority of the entire
Board concur therein.
Section 9. Vacancies - How Filled. Should any vacancy occur by death,
----------------------
resignation or otherwise, the same shall be filled, without undue delay, by the
Board of Directors at its next regular or at a special meting called for that
purpose.
Section 10. Compensation of Officers. The officers shall receive such
------------------------
salary or compensation as may be determined by the Board of Directors.
6
<PAGE>
ARTICLE IV
Certificates of Stock
---------------------
Section 1. Issue of Certificate of Stock. The President shall
-----------------------------
cause to be issued to each stockholder one or more certificates, under the seal
of the Corporation, signed by the President (or Vice President) and the
Treasurer (or Secretary) certifying the number of shares owned by him in the
Corporation.
Section 2. Transfer of Shares. The shares of stock of the
------------------
Corporation shall be transferable only upon its books by the registered holders
thereof in person or by their duly authorized attorneys or legal
representatives, surrender of the old certificates to the Secretary, or to such
other person as the Directors may designate, by whom they shall be cancelled and
new certificates shall thereupon be issued. The Board of Directors shall have
authority to fix in advance by resolution a record date for the determination of
the stockholders entitled to notice of and to vote at any meeting of
stockholders.
Section 3. Lost Certificates. If the holder of any stock shall lose
-----------------
the certificate thereof, he shall immediately notify the Company of the facts
and the Board of Directors may then cause a new certificate to be issued to him
subject to the deposit of a bond or other indemnity in such form and with such
sureties, if any, as the Board may require.
ARTICLE V
Seal
----
The seal of the Corporation shall be as follows:
ARTICLE VI
Dividends
---------
The Board of Directors shall by vote declare dividends from the
surplus of the Corporation as provided and permitted by law, whenever in their
opinion the condition of the Corporation's affairs will render it expedient for
such dividends to be declared.
7
<PAGE>
ARTICLE VII
Negotiable Instruments
----------------------
All checks, notes or other negotiable instruments shall be signed on
behalf of this Corporation by such of the officers, agents and employees as the
Board of Directors may from time to time designate.
ARTICLE VIII
Amendments
----------
These By-laws may be amended, altered or added to by the vote of the
Board of Directors of this Corporation at any regular meeting of said Board, or
at a special meeting of Directors called for that purpose, provided a quorum of
the Directors is present at such regular or special meeting. These By-laws, and
any amendments thereto and new By-laws added by the Directors may be amended,
altered or replaced by the stockholders at any annual or special meeting of the
stockholders. Whenever any provision of these By-laws or any amendment thereto
shall conflict with a provision in the Certificate of Incorporation (and any
amendment thereto then in effect), the applicable provisions in such Certificate
(so amended) shall prevail and control.
8
<PAGE>
Amendment to By-laws - by Consent of Sole Shareholder of Voting Shares - March
26, 1975:
Section 5, Directors' Meetings, of Article II, Directors, is amended by the
addition of the following paragraph at the end of the Section:
"Any action required or permitted to be taken by the Board or any
committee thereof may be taken without a meeting if all members of the Board or
of the committee consent in writing to the adoption of a resolution authorizing
the action. The resolution and the written consents thereto by the members of
the Board or committee shall be filed with the Minutes of the proceedings of the
Board or committee."
Amendment to By-Laws - by annual meeting of the Shareholder -January 27, 1978:
Section 5, Directors' Meetings, of Article II, Directors, is amended by the
addition of the following paragraph at the end of the Section:
"Any one or more members of the Board or any committee thereof may
participate in a meeting of such Board or committee by means of a conference
telephone or similar communications equipment allowing all persons participating
in the meeting to hear each other at the same time. Participation by such means
shall constitute presence in person at a meeting."
B-1
<PAGE>
ARTICLES OF INCORPORATION
OF
BLUE RIDGE TEXTILE MANUFACTURING, INC.
1.
. The name of the Corporation is Blue Ridge Textile Manufacturing, Inc.
2.
The corporation is authorized to issue 100 shares of voting stock,
designated as "Voting Common Stock" and 10,000 shares of non-voting stock,
designated as "Non-Voting Common Stock." Each share of Voting Common Stock shall
have one vote on each matter submitted to a vote of the shareholders of the
Corporation. The holders of shares of Voting and Non-Voting Common Stock shall
be entitled to receive, in proportion to the number of shares of Voting and Non-
Voting Common Stock held, the net assets of the Corporation upon dissolution.
3.
The street address and county of the initial registered office of the
Corporation in the State of Georgia is 1201 Peachtree Street, N.E. Atlanta,
Georgia 30361, Fulton County. The initial registered agent of the Corporation
at such address is CT Corporation System.
4.
The Incorporator's name and address is Raymond T. Ryan, c/o O'Hara &
Hanlon, One Park Place, Syracuse, New York 12202.
5.
The mailing address of the initial principal office of the Corporation is
c/o Ryan & Ryan, 9 Albany Street, Cazenovia, NY 13035.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Incorporation.
/s/
-----------------------------------
Incorporator
<PAGE>
BY-LAWS
-------
OF
--
BLUE RIDGE TEXTILE MANUFACTURING, INC.
--------------------------------------
ARTICLE I- OFFICES
------------------
The office of the Corporation shall be located in the City and State designated
in the Articles of Incorporation. The Corporation may also maintain offices at
such other places within or without the United States as the Board of Directors
may, from time to time, determine.
ARTICLE II - MEETING SHAREHOLDERS
---------------------------------
Section 1 - Annual Meetings:
- ----------------------------
The annual meeting of the shareholders of the Corporation shall be held within
five months after the close of the fiscal year of the Corporation, for the
purpose of electing directors, and transacting such other business as may
properly come before the meeting.
Section 2 - Special Meetings:
- -----------------------------
Special meetings of the shareholders may be called at any time by the Board of
Directors or by the President, and shall be called by the President or the
Secretary at the written request of the holders of ten per cent (10%) of the
shares then outstanding and entitled to vote thereat, or as otherwise required
under the provisions of the Law of the State of Georgia ("Corporation Law").
Section 3 - Place of Meetings.
- -----------------------------
All meetings of shareholders shall be held at the principal office of the
Corporation, or at such other places as shall be designated in the notices or
waivers of notice of such meetings.
Section 4 - Notice of Meetings:
- -------------------------------
(a) Written notice of each meeting of shareholders, whether annual or special,
stating the time when and place where it is to be held, shall be served either
personally or by mail, not less than ten or more than fifty days before the
meeting, upon each shareholder of record entitled to vote at such meeting, and
to any other shareholder to whom the giving of notice may be required by law,
Notice of a special meeting shall also state the purpose or purposes for which
the meeting is called, and shall indicate that it is being issued by, or at the
direction of, the person or persons calling the meeting. If, at any meeting,
action is proposed to be taken that would, if taken, entitle shareholders to
receive payment for their shares to the Georgia Business Corporation Code, the
notice of such
By-Laws-1
<PAGE>
meeting shall include a statement of that purpose and to that effect. If mailed,
such notice shall be directed to each such shareholder at his address, as it
appears in the records of the shareholders of the Corporation, unless he shall
have previously filed with the Secretary of the Corporation a written request
that notices intended for him be mailed to some other address, in which case, it
shall be mailed to the address designated in such request.
(b) Notice of any meeting need not be given to any person who may become a
shareholder of record after the mailing of such notice and prior to the meeting,
or to any shareholder who attends such meeting, in person or by proxy, or to any
shareholder who, in person or by proxy, submits a signed waiver of notice either
before or after such meeting. Notice of any adjourned meeting of shareholders
need not be given, unless otherwise required by statute.
Section 5 - Quorum:
- ------------------
(a) Except as otherwise provided herein, or by statute, or in the Articles of
Incorporation (such Articles and any amendments thereof being hereinafter
collectively referred to as the "Articles of Incorporation"), at all meetings of
shareholders of the Corporation, the presence at the commencement of such
meetings in person or by proxy of shareholders holding of record a majority of
the total number of shares of the Corporation then issued and outstanding and
entitled to vote, shall be necessary and sufficient to constitute a quorum for
the transaction of any business. The withdrawal of any shareholder after the
commencement of a meeting shall have no effect on the existence of a quorum,
after a quorum has been established at such meeting,
(b) Despite the absence of a quorum at any annual or special meeting of
shareholders, the shareholders, by a majority of the votes cast by the holders
of shares entitled to vote thereon, may adjourn the meeting. At any such
adjourned meeting at which a quorum is present, any business may be transacted
which might have been transacted at the meeting as originally called if a quorum
had been present.
Section 6 - Voting:
- -------------------
(a) Except as otherwise provided by statute or by the Articles of
Incorporation, any corporate action, other than the election of directors to be
taken by vote of the shareholders, shall be authorized by a majority of votes
cast at a meeting of shareholders by the holders of shares entitled to vote
thereon.
(b) Except as otherwise provided by statute or, by Articles of Incorporation,
at each meeting of shareholders, each shareholder of record of shares of the
Corporation entitled to vote thereat, shall be entitled to one vote for each
share registered on his name on the books of the Corporation.
(c) Each shareholder entitled to vote or express consent or dissent without a
meeting, may do so by proxy; provided, however, that the instrument authorizing
such proxy to act shall have been
By-Laws-2
<PAGE>
executed in writing by the shareholder himself, or by his attorney-in-fact
thereunto duly authorized in writing. No proxy shall be valid after the
expiration of eleven months from the date of its execution, unless the persons
executing it shall have specified therein the length of time it is to continue
in force. Such instrument shall be exhibited to the Secretary at the meeting
and shall be filed with the records of the Corporation.
(d) Any resolution in writing, signed by all of the shareholders entitled to
vote thereon, shall be and constitute action by such shareholders to the effect
therein expressed, with the same force and effect as if the same had been duly
passed by unanimous vote at a duly called meeting of shareholders and such
resolution so signed shall be inserted in the Minute Book of the Corporation
under its proper date.
ARTICLE III - BOARD OF DIRECTORS
--------------------------------
Section 1 - Number, Election and Term of Office
- -----------------------------------------------
(a) The number of the directors of the Corporation shall be three (3), unless
and until otherwise determined by vote of a majority of the entire Board of
Directors. The number of Directors shall not be less than three, unless all of
the outstanding shares are owned beneficially and of record by less than three
shareholders, in which event the number of directors shall not be less than the
number of shareholders.
(b) Except as may otherwise be provided herein for in the Articles of
Incorporation, the members of the Board of Directors of the Corporation, who
need not be shareholders, shall be elected by a majority of the votes cast at a
meeting of shareholders, by the holders of shares entitled to vote in the
election.
(c) Each director shall hold office until the annual meeting of the
shareholders next succeeding his election, and until his successor is elected
and qualified, or until his prior death, resignation or removal.
Section 2 - Duties and Powers:
- ------------------------------
The Board of Directors shall be responsible for the control and management of
the affairs, property and interests of the Corporation, and may exercise all
powers of the Corporation, except as are in the Articles of Incorporation or by
statute expressly conferred upon or reserved to the shareholders.
Section 3 - Annual and Regular Meetings; Notice:
- ------------------------------------------------
(a) A regular annual meeting of the Board of Directors shall be held
immediately following the annual meeting of the shareholders at the place of
such annual meeting of shareholders.
(b) The Board of Directors, from time to time, may provide by resolution for
the holding of other regular meetings of the Board of Directors, and may fix the
time and place thereof.
By-Laws-3
<PAGE>
c) Notice of any regular meeting of the Board of Directors shall not be
required to be given and, if given, need not specify the purpose of the meeting;
provided, however, that in case the Board of Directors shall fix or change the
time or place of any regular meeting, notice of such action shall be given to
each director who shall not have been present at the meeting at which such
action was taken within the time limited, and in the manner set forth in
paragraph (b) of Section 4 of this Article III, with respect to special
meetings, unless such notice shall be waived in the manner set forth in
Paragraph (c) of such Section 4.
Section 4 - Special Meetings; Notice:
- -------------------------------------
(a) Special meetings of the Board of Directors shall be held whenever called by
the President or by one of the directors, at such time and place as may be
specified in the respective notices or waivers of notice thereof.
(b) Notice of special meetings shall be mailed directly to each director,
addressed to him at his residence or usual place of business, at least two days
before the day on which the meeting is to be held, or shall be sent to him at
such place by telegram, radio or cable, or shall be delivered to him personally
or given to him orally, not later than the day before the day on which the
meeting is to be held. A notice, or waiver of notice, except as required by
Section 8 of this Article III, need not specify the purpose of the meeting.
(c) Notice of any special meeting shall not be required to be given to any
director who shall attend such meeting without protesting prior thereto or at
its commencement, the lack of notice to him, or who submits a signed waiver of
notice, whether before or after the meeting. Notice of any adjourned meeting
shall not be required to be given.
Section 5 - Chairman:
- ---------------------
At all meetings of the Board of Directors the Chairman of the Board, if any and
if present, shall preside. If there shall be no Chairman, or he shall be
absent, then the President shall preside, and in his absence, a Chairman chosen
by the Directors shall preside.
Section 6 - Quorum and Adjournments:
- ------------------------------------
(a) At all meetings of the Board of Directors, the presence of a majority of
the entire Board shall be necessary and sufficient to constitute a quorum for
the transaction of business, except as otherwise provided by law, by the
Articles of Incorporation, or by these By-Laws.
(b) A majority of the directors present at the time and place of any regular or
special meeting, although less than a quorum, may adjourn the same from time to
time without notice, until a quorum shall be present.
By-Laws-4
<PAGE>
Section 7 - Manner of Acting:
- -----------------------------
(a) At all meetings of the Board of Directors, each director present shall have
one vote, irrespective of the number of shares of stock, if any, which he may
hold.
(b) Except as otherwise provided by statute, by the Articles of Incorporation,
or these By-Laws, the action of a majority of the directors present at any
meeting at which a quorum is present shall be the act of the Board of Directors.
Any action authorized in writing, by all of the directors entitled to vote
thereon and filed with the minutes of the Corporation shall be the act of the
Board of Directors with the same force and effect as if the same had been passed
by unanimous vote at a duly called meeting of the Board.
Section 8 - Vacancies:
- ----------------------
Any vacancy in the Board of Directors occurring by reason of an increase in the
number of directors, or by reason of the death, resignation, disqualification,
removal (unless a vacancy created by the removal of a director by the
shareholders shall be filed by the shareholders at the meeting at which the
removal was effected) or inability to act of any director, or otherwise, shall
be filled for the unexpired portion of the term by a majority vote of the
remaining directors, though less than a quorum, at any regular meeting or
special meeting of the Board of Directors called for that purpose.
Section 9 - Resignation:
- ------------------------
Any director may resign at any time by giving written notice to the Board of
Directors, the President or the Secretary of the Corporation. Unless otherwise
specified in such written notice, such resignation shall take effect upon
receipt hereof by the Board of Directors or such officer, and the acceptance of
such resignation shall not be necessary to make it effective.
Section 10 - Removal:
- ---------------------
Any director may be removed with or without cause at any time by the
shareholders, at a special meeting of the shareholders called for that purpose,
and may be removed for cause by action of the Board.
Section II - Salary:
- --------------------
No stated salary shall be paid to directors, as such, for their services, but by
resolution of the Board of Directors a fixed sum and expenses of attendance, if
any, may be allowed for attendance at each regular or special meeting of the
Board; provided, however, that nothing herein contained shall be construed to
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor.
By-Laws-5
<PAGE>
Section 12 - Contracts:
- -----------------------
(a) No contract or other transaction between this Corporation and any other
Corporation shall be impaired, affected or invalidated nor shall any director be
liable in any way by reason of the fact that any one or more of the directors of
this Corporation is or are interested in, or is a director or officer, or are
directors or officers of such other Corporation, provided that such facts are
disclosed or made known to the Board of Directors.
(b) Any director, personally and individually, may be a party to or may be
interested in any contract or transaction of this Corporation, and no director
shall be liable in any way by reason of such interest, provided that the fact of
such interest be disclosed or made known to the Board of Directors, and provided
that the Board of Directors shall authorize, approve or ratify such contract or
transaction by the vote (not counting the vote of any such director) of a
majority of a quorum, notwithstanding the presence of any such director at the
meeting at which such action is taken. Such director or directors may be counted
in determining the presence of a quorum at such meeting. This Section shall not
be construed to impair or invalidate or in any way affect any contract or other
transaction which would otherwise be valid under the law (common, statutory or
otherwise) applicable thereto.
Section 13 - Committees:
- ------------------------
The Board of Directors, by resolution adopted by a majority of the entire Board,
may from time to time designate from among its members an executive committee
and such other committees, and alternate members thereof, as they deem
desirable, each consisting of three or more members, with such powers and
authority (to the extent permitted by law) as may be provided in such
resolution. Each such committee shall serve at the pleasure of the Board.
ARTICLE IV - OFFICERS
----------------------
Section 1 - Number, Qualifications, Election and Term of Office:
- ----------------------------------------------------------------
(a) The officers of the Corporation shall consist of a President, a Secretary,
a Treasurer, and such other officers, including a Chairman of the Board of
Directors, and one or more Vice Presidents, as the Board of Directors may from
time to time deem advisable. Any officer other than the Chairman of the Board of
Directors may be, but is not required to be, a director of the Corporation. Any
two or more officers may be held by the same person, except the offices of
President and Secretary.
(b) The officers of the Corporation shall be elected by the Board of Directors
at the regular annual meeting of the Board following the annual meeting of
shareholders.
(c) Each officer shall hold office until the annual meeting of the Board of
Directors next succeeding his election, and until his successor has been elected
and qualified, or until his death, resignation or removal.
By-Laws-6
<PAGE>
Section 2 - Resignation:
- ------------------------
Any officer may resign at any time by giving written notice of such resignation
to the Board of Directors, or to the President or the Secretary of the
Corporation. Unless otherwise specified in such written notice, such
resignation shall take effect upon receipt thereof by the Board of Directors or
such officer, and the acceptance of such resignation shall not be necessary to
make it effective.
Section 3 - Removal:
- --------------------
Any officer may be removed, either with or without cause, and a successor
elected by the Board at any time.
Section 4 - Vacancies:
- ----------------------
A vacancy in any office by reason of death, resignation, inability to act,
disqualification, or any other cause, may at any time be filled for the
unexpired portion of the term by the Board of Directors.
Section 5 - Duties of Officers:
- -------------------------------
Officers of the Corporation shall, unless otherwise provided by the Board of
Directors, each have such powers and duties as generally pertain to their
respective offices as well as such powers and duties as may be set forth in
these By-Laws, or may from time to time be specifically conferred or imposed by
the Board of Directors. The President shall be the chief executive officer of
the Corporation.
Section 6 - Sureties and Bonds:
- -------------------------------
In case the Board of Directors shall so require, any officer, employee or agent
of the Corporation shall execute to the Corporation a bond in such sum, and with
such surety or sureties as the Board of Directors may direct, conditioned upon
the faithful performance of his duties to the Corporation, including
responsibility for negligence and for the accounting for all property, funds or
securities of the Corporation which may come into his hands.
Section 7 - Shares of Other Corporations:
- -----------------------------------------
Whenever the Corporation is the holder of shares of any other corporation, any
right or power of the Corporation as such shareholder (including the attendance,
acting and voting at shareholders' meetings and execution of waivers, consents,
proxies or other instruments) may be exercised on behalf of the Corporation by
the President, any Vice President, or such other person as the Board of
Directors may authorize.
By-Laws-7
<PAGE>
ARTICLE V - SHARES OF STOCK
----------------------------
Section 1 - Certificate of Stock:
- ---------------------------------
(a) The certificates representing shares of the Corporation shall be in such
form as shall be adopted by the Board of Directors, and shall be numbered and
registered in the order issued. They shall bear the holder's name and the
number of shares, and shall be signed by (i) the Chairman of the Board or the
President or a Vice President, and (ii) the Secretary or any Assistant
Secretary, and may bear the corporate seal.
(b) No certificate representing shares shall be issued until the full amount of
consideration therefor has been paid, except as otherwise permitted by law.
(c) The Board of Directors may authorize the issuance of certificates for
fractions of a share which shall entitle the holder to exercise voting rights,
receive dividends and participate in liquidating distributions, in proportion to
the fractional holdings; or it may authorize the payment in cash of the fair
value of fractions of a share as of the time when those entitled to receive such
fractions are determined; or it may authorize the issuance, subject to such
conditions as may be permitted by law, of scrip in registered or bearer form
over the signature of an officer or agent of the Corporation, exchangeable as
therein provided for full shares, but such scrip shall not entitle the holder to
any rights of a shareholder, except as therein provided.
Section 2 - Lost or Destroyed Certificates:
- -------------------------------------------
The holder of any certificate representing shares of the Corporation shall
immediately notify the Corporation of any loss or destruction of the certificate
representing the same. The Corporation may issue a new certificate in the place
of any certificate theretofore issued by it, alleged to have been lost or
destroyed. On production of such evidence of loss or destruction as the Board
of Directors in its discretion nay require, the Board of Directors may, in it
discretion, require the owner of the lost or destroyed certificate, or his legal
representatives, to give the Corporation a bond in such sum as the Board may
direct, and with such surety or sureties as may be satisfactory to the Board, to
indemnify the Corporation against any claims, loss, liability or damage it may
suffer on account of the issuance of the new certificate. A new certificate may
be issued without requiring any such evidence or bond when, in the judgment of
the Board of Directors, it is proper so to do.
Section 3 - Transfers of Shares:
- --------------------------------
(a) Transfers of shares of the Corporation shall be made on the share records
of the Corporation only by the holder of record thereof, in person or by his
duly authorized attorney, upon surrender for cancellation of the certificate or
certificates representing such shares, with an assignment or power of transfer
endorsed thereon or delivered therewith, duly executed, with such proof of the
authenticity of the signature and of authority to transfer and of payment of
transfer taxes as the Corporation or its agents may require.
By-Laws-8
<PAGE>
(b) The Corporation shall be entitled to treat the holder of record of any
share or shares as the absolute owner thereof for all purposes and, accordingly,
shall not be bound to recognize any legal, equitable or other claim to, or
interest in, such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise expressly
provided by law.
Section 4 - Record Date:
- ------------------------
In lieu of closing the share records of the Corporation, the Board of Directors
may fix, in advance, a date not exceeding fifty days, nor less than ten days, as
the record date for the determination of shareholders entitled to receive notice
of, or vote at, any meeting of shareholders, or to consent to any proposal
without a meeting, or for the purpose of determining shareholders entitled to
receive payment of any dividends, or allotment of any rights, or for the purpose
of any other action. If no record date is fixed, the record date for
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if no notice is given, the day on which the
meeting is held; the record date for determining shareholders for any other
purpose shall be at the close of business on the day on which the resolution of
the directors relating thereto is adopted. When a determination of shareholders
of record entitled to notice of or to vote at any meeting of shareholders has
been made as provided for herein, such determination shall apply to any
adjournment thereof, unless the directors fix a new record date for the
adjourned meeting.
Section 5 - Restrictions on Transfers:
- --------------------------------------
(a) If any shareholder shall desire to sell or transfer any part shares of
stock in the Corporation, the shareholder shall first offer to sell the shares
to the Corporation at a price per share equal to the then book value of each of
the shares as of the last day of calendar month next preceding the date the
shares are offered for sale. Book value shall be determined by the independent
accountant for the Corporation and such valuation shall be in accordance with
generally accepted accounting principles consistent with the method of
accounting then employed by the Corporation and shall be binding upon the
parties.
(b) The offer to sell shall be communicated in writing by the selling
shareholder to the Board of Directors of the Corporation and to all other
Shareholders and the Corporation shall have a period of thirty (30) days after
receipt of such notice in which to exercise its right to purchase the shares at
a price determined as above. If the Corporation shall refuse or neglect to
notify the selling shareholder in writing of its intention to purchase the
shares within the thirty (30) day period, or if the Corporation is prohibited by
law from making such a purchase or redemption, the selling shareholder shall
then notify in writing the other shareholders of the intention to sell and the
number of shares offered for sale and the other shareholders shall have an
additional period thirty (30) days within which to accept the offer to sell upon
the same terms and conditions as offered to the Corporation, each of the other
shareholders having the right to purchase the number of shares owned by the
selling shareholder equal to such purchasing shareholders' proportionate
ownership of the Corporation immediately prior to the receipt of such offer to
sell.
By-Laws-9
<PAGE>
(c) If neither the Corporation nor the other shareholders elect to purchase the
shares, the shareholder desiring to sell or transfer shares shall be free to
sell to any other person or corporation free of any restrictions provided
herein; provided, however, that such sale or transfer shall not be on terms less
favorable to the selling shareholder unless the less favorable terms are re-
offered to the Corporation and/or the other shareholders as provided above. If
the sale or transfer to any other person or Corporation is not completed within
ninety (90) days after the expiration of the periods of time set forth in this
By-Law the selling shareholder must, before making any subsequent sale or
transfer, re-offer the shares to the Corporation and/or the other shareholders
as herein provided.
(d) The closing of the sale and transfer of such shares to the Corporation or
to the other shareholders of the Corporation shall take place within sixty (60)
days after the acceptance of the selling shareholders' offer to sell and the
purchase price so determined shall be paid by the purchasers to the seller.
Simultaneously with such payments, the stock of the selling shareholder shall be
delivered to the purchaser in such form as to effectively transfer such shares,
at which time such selling shareholders' rights as a shareholder of the
Corporation shall cease to exist as to the shares so transferred.
(e) On the death of a shareholder, the Corporation shall purchase and the
estate or personal representative of the deceased shareholder shall sell the
decedent's stock in the Corporation for a consideration equal to the book value
of such stock as established by the accountant for the Corporation as provided
above. In the event the Corporation is then prohibited by law from making such
purchase or redemption of the decedent's shares of stock in the Corporation, the
then surviving shareholders of the Corporation shall purchase and the decedent's
estate shall sell all of the shares of stock owned by the decedent at the same
price and upon the same terms and conditions as set forth above. In the event of
the survival of two or more shareholders of the Corporation; each shall be
jointly and severally liable to the decedent's estate for the purchase price,
but as between them they shall share such liability in the ratio that the number
of the shares of stock respectively owned by them at the time of the decedents'
death bears to the aggregate number of such shares and the shares of stock owned
by the decedent's estate shall, in like manner be apportioned between them based
upon their proportionate ownership of the shares of stock of the Corporation at
the date of the decedent's death. The closing of the sale and purchase of the
shares by the Corporation or, in the event of its inability to complete the
purchase, by the surviving shareholders, shall be made within ninety (90) days
after the date of the deceased shareholder's death and the purchase price shall
be paid to the estate of the decedent under the terms of this By-Law. In making
the valuation of the shares, the accountants for the Corporation shall determine
the book value as herein provided as of the end of the calendar month next
preceding the date of the decedent's death.
(f) No shareholder of the Corporation shall sell or offer to sell to a person
not a party to an agreement incorporating the terms of this By-Law nor transfer
or assign any right, title or interest in or to any stock, nor shall the heirs,
personal representatives, successors, or assigns make any such sale or transfer
of such shares after the death of any of the shareholders except in accordance
with the terms and conditions of this By-Law. Certificates of stock subject to
this By-Law shall be endorsed to clearly indicate that the certificate of stock
is subject to a stock purchase restriction
By-Laws-10
<PAGE>
between its owners, the issuing corporation, and the other shareholders thereof,
and is transferable only in accordance with the restriction.
(g) In the event a shareholder ceases, regardless of the reason, to be an
employee of Coyne Textile Services, that shareholder's stock shall be disposed
of in the same manner and under the same terms and conditions as is provided for
in Section 5(e) above.
(h) This By-Law shall be null and void upon the occurrence of any of the
following events: (a) cessation of the Corporation business or enterprise during
the lifetime of the shareholders; (b) bankruptcy or receivership or dissolution
of the Corporation; (c) death of all of the shareholder simultaneously or within
a period of thirty (30) days, one from the other, or (d) a mutual agreement of
termination executed by all of the shareholders of the Corporation and shown in
the minute book.
ARTICLE VI - DIVIDENDS
----------------------
Subject to applicable laws, dividends may be declared and paid out of any funds
available therefor, as often, in such amounts, and at such time or times as the
Board of Directors may determine.
ARTICLE VII - FISCAL YEAR
-------------------------
The fiscal year of the Corporation shall be fixed by the Board of Directors from
time to time, subject to applicable law.
ARTICLE VIII - CORPORATE SEAL
-----------------------------
The corporate seal, if any, shall be in such form as shall be approved from time
to time by the Board of Directors.
ARTICLE IX - AMENDMENTS
-----------------------
Section 1 - By Shareholders:
- ---------------------------
All by-laws of the Corporation shall be subject to alteration or repeal, and new
by-laws may be made, by a majority vote of the shareholders at the time entitled
to vote in the election of directors.
Section 2 - By Directors:
- ------------------------
The Board of Directors shall have power to make, adopt, alter, amend and repeal,
from time to time, by-laws of the Corporation; provided, however, that the
shareholders entitled to vote with
By-Laws-11
<PAGE>
respect thereto as in this Article IX above-provided may alter, amend or repeal
by-laws made by the Board of Directors, except that the Board of Directors shall
have no power to change the quorum for meetings of shareholders or of the Board
of Directors, or to change any provisions of the by-laws with respect to the
removal of directors or the filling of vacancies in the Board resulting from the
removal by the shareholders. If any by-law regulating an impending election of
directors is adopted, amended or repealed by the Board of Directors, there shall
be set forth in the notice of the next meeting of shareholders for the election
of directors, the by-law so adopted, amended or repealed, together with a
concise statement of the changes made.
The undersigned Incorporator certifies the foregoing by-laws have been
adopted as the first by-laws of the Corporation, in accordance with the
requirements of the Corporation Law.
Dated: October 22, 1992
----------------
/s/ Raymond T. Ryan
-------------------------------------
Incorporator
By-Laws-12
<PAGE>
ARTICLES OF INCORPORATION
OF
CLEAN TOWEL SERVICE, INC.
I.
The name of the corporation is
"CLEAN TOWEL SERVICE, INC."
II.
The corporation shall have perpetual duration.
III.
The corporation is organized for the purpose of owning, operating and
managing a commercial towel laundry business; to launder, clean, renovate,
repair, dye and otherwise service institutional, industrial and other commercial
fabrics of all kinds; to engage in the cleaning and dyeing business in all of
its phases; to buy, sell and deal in all materials, equipment, and property
appurtenant or incidental to and useful in the towel cleaning, dyeing and
repairing business; and to engage in any other lawful activities and to exercise
all the powers now or hereafter conferred by the laws of the State of Georgia
upon corporations.
IV.
The corporation shall have authority to issue not more than 200,000 shares
of common stock of $1.00 par value.
V.
The corporation shall not commence business until it shall have received
not less than $500.00 in payment for the issuance of shares of stock.
<PAGE>
VI.
The initial registered office of the corporation shall be at 3814 Central
Avenue, Doraville, Georgia, 30340. The initial registered agent of the
corporation shall be Marvin Lee.
VII.
The initial Board of Directors shall consist of two members who shall be:
Marvin Lee whose address is 438 Emmett Street, Riverdale, Georgia, and Harold D.
Priest whose address is 3984 Camelot Court, Tucker, Georgia.
VIII.
The name and address of the incorporator is Marvin Lee, 438 Emmett Street,
Riverdale, Georgia.
IN WITNESS WHEREOF, the undersigned executes these Articles of
Incorporation.
/s/ Phillip L. Martin
------------------------------------------
Counsel for Petitioner
Philip L. Martin
750 Columbia Drive
Decatur, Georgia 30030
Ph. 377-6461
<PAGE>
BY-LAWS
OF
CLEAN TOWEL SERVICE, INC.
ARTICLE ONE
OFFICES
1.1 The address of the registered office of the corporation is 3814
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Central Avenue, Doraville, Ga.; and the name of the registered agent at this
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address is Marvin Lee.
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1.2 The corporation may have offices at such place or places (within or
without the State of Georgia) as the Board of Directors may from time to time
appoint or the business of the corporation may require or make desirable.
ARTICLE TWO
SHAREHOLDERS MEETINGS
2.1 All meetings of the shareholders shall be held at the office of the
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Corporation or, at such place as may be fixed from time to time by the Board of
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Directors.
2.2 An annual meeting of the shareholders shall be held on the 2nd Tuesday
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of October in each year, if not a legal holiday, and if a legal holiday, then on
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the next following day not a legal holiday, at 10:00 o'clock in the A.M., EDT
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time, at which the shareholders shall elect by a plurality vote a Board of
Directors and transact such other business as may properly be brought before the
meeting.
2.3 Special meetings of the shareholders, for any purpose or purposes,
unless otherwise prescribed by statute or the articles of incorporation, may be
called by (the Chairman of the Board or) the President, and shall be called by
(the Chairman of the Board or) the President or the secretary when so directed
by the Board of Directors, or at the request in writing
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of any two or more directors, or at the request in writing of shareholders
owning a majority in amount of the entire capital stock of the corporation
issued and outstanding and entitled to vote. Such request shall state the
purpose or purposes of the proposed meeting.
2.4 Except as otherwise required by statute or the articles of
incorporation, written notice of each meeting of the shareholders, whether
annual or special, shall be served, either personally or by mail, upon each
shareholder of record entitled to vote at such meeting, not less than ten nor
more than 50 days before such meeting. If mailed, such notice shall be directed
to a shareholder at his post office address last shown on the records of the
corporation. Notice of any special meeting of shareholders shall state the
purpose or purposes for which the meeting is called. Notice of any meeting of
shareholders shall not be required to be given to any shareholder who, in person
or by his attorney thereunto authorized, either before or after such meeting,
shall waive such notice. Attendance of a shareholder at a meeting, either in
person or by proxy, shall of itself constitute waiver of notice and waiver of
any and all objections to the place of the meeting, the time of the meeting, and
the manner in which it has been called or convened, except when a shareholder
attends a meeting solely for the purpose of stating, at the beginning of the
meeting, any such objection or objections to the transaction of business.
Notice of any adjourned meeting need not be given otherwise than by announcement
at the meeting at which the adjournment is taken.
2.5 The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall be
requisite and shall constitute a quorum at all meetings of the shareholders for
the transaction of business, except as otherwise provided by law, by the
articles of incorporation, or by these by-laws. If, however, such majority
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shall not be present or represented at any meeting of the shareholders, the
shareholders entitled to vote thereat, present in person or by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until the requisite amount of voting stock shall be
present. At such adjourned meeting at which a quorum shall be present in person
or by proxy, any business may be transacted that might have been transacted at
the meeting as originally called.
2.6 At every meeting of the shareholders, including (but without
limitation of the generality of the foregoing language) meetings of shareholders
for the election of directors, any shareholder having the right to vote shall be
entitled to vote in person or by proxy, but no proxy shall be voted after eleven
months from its date, unless said proxy provides for a longer period. Each
shareholder shall have one vote for each share of stock having voting power,
registered in his name on the books of the corporation. If a quorum is present,
the affirmative vote of the majority of the shares represented at the meeting
and entitled to vote on the subject matter shall be the act of the shareholders,
except as otherwise provided by law, by the articles of incorporation or by
these by-laws.
2.7 Whenever the vote of shareholders at a meeting thereof is required or
permitted to be taken in connection with any corporate action, the meeting and
vote of the shareholders may be dispensed with, if all of the shareholders who
would have been entitled to vote upon the action if such meeting were held shall
consent in writing to such corporate action being taken.
ARTICLE THREE
DIRECTORS
3.1 Except as may be otherwise provided by any legal agreement among
shareholders,
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the property and business of the corporation shall be managed by its Board of
Directors. In addition to the powers and authority by these by-laws expressly
conferred upon it, the Board of Directors may exercise all such powers of the
corporation and do all such lawful acts and things as are not by law, by any
legal agreement among shareholders, by the articles of incorporation or by these
by-laws directed or required to be exercised or done by the shareholders.
3.2 The Board of Directors shall consist of two members, the precise
number to be fixed by resolution of the shareholders from time to time. Each
director (whether elected at an annual meeting of shareholders or otherwise)
shall hold office until the annual meeting of shareholders held next after his
election and until a qualified successor shall be elected, or until his earlier
death, resignation, incapacity to serve or removal. Directors need not be
shareholders.
3.3 If any vacancy shall occur among the directors by reason of death,
resignation, incapacity to serve, increase in the number of directors, or
otherwise, the remaining directors shall continue to act, and such vacancies may
be filled by a majority of the directors then in office, though less than a
quorum, and, if not theretofore filled by action of the directors, may be filled
by the shareholders at any meeting held during the existence of such vacancy.
3.4 The Board of Directors may hold its meetings at such place or places
(within or without the State of Georgia) as it may from time to time determine.
3.5 Directors may be allowed such compensation for attendance at regular
or special meetings of the Board of Directors and of any special or standing
committees thereof as may be from time to time determined by resolution of the
Board of Directors.
ARTICLE FOUR
COMMITTEES
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4.1 (a) The Board of Directors may by resolution adopted by a majority of
the entire Board, designate an Executive Committee of three or more directors.
Each member of the executive Committee shall hold office until the first meeting
of the Board of Directors after the annual meeting of shareholders next
following his election and until his successor member of the Executive Committee
is elected, or until his death, resignation or removal, or until he shall cease
to be a director.
(b) During the intervals between the meetings of the Board of
Directors, the Executive Committee may exercise all of the powers of the Board
of Directors in the management of the business affairs of the corporation,
including all powers herein or in the articles of incorporation specifically
granted to the Board of Directors, and may authorize the seal of the corporation
to be affixed to all papers which may require it; provided, however, that the
Executive Committee shall not have the power to amend or repeal any resolution
of the Board of Directors that by its terms shall not be subject to amendment or
repeal by the Executive Committee, and the Executive Committee shall not have
the authority of the Board of Directors in reference to (1) amending the
articles of incorporation or by-laws of the corporation; (2) adopting a plan of
merger or consolidation; (3) the sale, lease, exchange or other disposition of
all or substantially all the property and assets of the corporation; or (4) a
voluntary dissolution of the corporation or a revocation of any such voluntary
dissolution.
(c) The Executive Committee shall meet from time to time on call of
(the Chairman of the Board or) the President or of any two or more members of
the Executive Committee. Meetings of the Executive Committee may be held at
such place of places, within or without the State of Georgia, as the Executive
Committee shall determine or as may be specified
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or fixed in the respective notices or waivers of such meetings. The Executive
Committee may fix its own rules of procedure, including provision for notice of
its meetings. It shall keep a record of its proceedings and shall report these
proceedings to the Board of Directors at the meeting thereof held next after
they have been taken, and all such proceedings shall be subject to revision or
alteration by the Board of Directors except to the extent that action shall have
been taken pursuant to or in reliance upon such proceedings prior to any such
revision or alteration.
(d) The Executive Committee shall act by majority vote of its members.
(e) The Board of Directors, by resolution adopted in accordance with
paragraph (a) of this section, may designate one or more directors as alternate
members of any such committee, who may act in the place and stead of any absent
member of members at any meeting of such committee.
4.2 The Board of Directors, by resolution adopted by a majority of the
entire Board, may designate one or more additional committees, each committee to
consist of three or more of the directors of the corporation, which shall have
such name or names and shall have and may exercise such powers of the Board of
Directors in the management of the business and affairs of the corporation,
except the powers denied to the Executive Committee, as may be determined from
time to time by the Board of Directors.
4.3 The Board of Directors shall have power at any time to remove any
member of any committee, with or without cause, and to fill vacancies in and to
dissolve any such committee.
ARTICLE FIVE
MEETINGS OF THE BOARD OF DIRECTORS
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5.1 Each newly elected Board of Directors shall meet at the place and time
which shall have been determined, in accordance with the provisions of these by-
laws, for the holding of the regular meeting of the Board of Directors scheduled
to be held next following the annual meeting of the shareholders at which the
newly elected Board of Directors shall have been elected, or, if no place and
time shall have been fixed for the holding of such meeting of the Board of
Directors, then immediately following the close of such annual meeting of
shareholders and at the place thereof, or such newly elected Board of Directors
may hold such meeting at such place and time as shall be fixed by the consent in
writing of all the directors. In any such case no notice of such meeting to the
newly elected directors shall be necessary in order legally to constitute the
meeting.
5.2 Regular meetings of the Board of Directors may be held without notice
at such time and place (within or without the State of Georgia) as shall from
time to time be determined by the Board of Directors.
5.3 Special meetings of the Board of Directors may be called by (the
Chairman of the Board or) the President on not less than two days= notice by
mail, telegram, cablegram or personal delivery to each director and shall be
called by (the Chairman of the Board,) the President or the Secretary in like
manner and on like notice on the written request of any two more directors. Any
such special meeting shall be held at such time and place (within or without the
State of Georgia) as shall be stated in the notice of meeting.
5.4 No notice of any meeting of the Board of Directors need state the
purposes thereof.
5.5 At all meetings of the Board of Directors, the presence of one-third
of the
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authorized number of directors, but not less than two directors, shall be
necessary and sufficient to constitute a quorum for the transaction of business.
The act of a majority of the directors present at any meeting at which there is
a quorum shall be the act of the Board of Directors, except as may be otherwise
specifically provided by law, by the articles of incorporation or by these by-
laws. In the absence of a quorum a majority of the directors present at any
meeting may adjourn the meeting from time to time until a quorum be had. Notice
of any adjourned meeting need only be given by announcement at the meeting at
which the adjournment is taken.
5.6 Any action required or permitted to be taken by any meeting of the
Board of Directors or of any committee thereof may be taken without a meeting
if, prior to such action, a written consent thereto is signed by all members of
the Board of such committee, as the case may be, and such written consent is
filed with the minutes of the proceedings of the Board or committee.
ARTICLE SIX
OFFICERS
6.1 The Board of Directors at its first meeting after each annual meeting
or shareholders shall elect the following officers: (A Chairman of the Board), a
President, one or more Vice Presidents (one of whom may be designated Executive
Vice President), a Secretary and a Treasurer. The Board of Directors at any
time and from time to time may appoint such other officers as it shall deem
necessary, including one or more Assistant Vice Presidents, one or more
Assistant Treasurers, and one or more Assistant Secretaries, who shall hold
their offices for such terms as shall be determined by the Board of Directors
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board of Directors (or the
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Chairman of the Board).
6.2 Any person may hold any two or more offices, except that no person may
hold both the offices of President and Secretary. No officer need be a
shareholder.
6.3 The salaries of the officers of the corporation shall be fixed by the
Board of Directors, except that the Board of Directors may delegate to any
officer or officers the power to fix the compensation of any officer appointed
in accordance with the second sentence of Section 6.1 of these by-laws.
6.4 Each officer of the corporation shall hold office until his successor
is chosen or until his earlier resignation, death or removal, or the termination
of his office. Any officer may be removed by the Board of Directors whenever in
its judgment the best interests of the corporation will be served thereby.
Chairman of the Board*
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6.5 The Chairman of the Board shall be the chief executive officer of the
corporation and shall have the general active management of the business of the
corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. He shall be ex officio a member of all
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standing committees, unless otherwise provided in the resolution appointing the
same. The Chairman of the Board shall call meetings of the shareholders, the
Board of Directors and the Executive Committee to order and shall act as
chairman of such meetings.
President
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* If the Chairman of the Board is not to be the cheif executive
officers, the description of the President's power and responsibilities must be
changed accordingly.
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6.6 In the event of the death or disability of the Chairman of the Board
or at his request or when specifically authorized by the Board of Directors, the
President shall have the powers and perform the duties of the Chairman of the
Board. The President shall also have such powers and perform such duties as are
specifically imposed upon him by law and as may be assigned to him by the Board
of Directors or the Chairman of the Board. The President shall be ex officio a
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member of all standing committees, unless otherwise provided in the resolution
appointing the same. In the absence of the Chairman of the Board, the President
shall call meetings of the shareholders, the Board of Directors, and the
Executive Committee to order and shall act as Chairman of such meetings.
Vice Presidents
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6.7 The Vice Presidents shall perform such duties as are generally
performed by vice presidents. The Vice Presidents shall perform such other
duties and exercise such other powers as the Board of Directors (or the Chairman
of the Board) shall request or delegate. The Assistant Vice Presidents shall
have such powers, and shall perform such duties, as may be prescribed from time
to time by the Board of Directors, (the Chairman of the Board) or the President.
Secretary
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6.8 The Secretary shall attend all sessions of the Board of Directors and
all meetings of the shareholders and record all votes and the minutes of all
proceedings in books to be kept for that purpose and shall perform like duties
for the standing committees when required. He shall give, or cause to be given,
any notice required to be given of any meetings of the shareholders and of the
Board of Directors, and shall perform such other duties as may be prescribed by
the Board of Directors (or the Chairman of the Board), under whose supervision
he shall be. The
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Assistant Secretary or Assistant Secretaries shall, in the absence or disability
of the Secretary, or at his request, perform his duties and exercise his powers
and authority.
Treasurer
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6.9 The Treasurer shall have charge of and be responsible for all funds,
securities, receipts and disbursements of the corporation, and shall deposit, or
cause to be deposited, in the name of the corporation, all monies or other
valuable effects, in such banks, trust companies or other depositories as shall,
from time to time, be selected by the Board of Directors; he shall render to
(the Chairman of the Board), the President and to the Board of Directors,
whenever requested, an account of the financial condition of the corporation,
and in general, he shall perform all the duties incident to the office of a
Treasurer of a corporation, and such other duties as may be assigned to him by
the Board of Directors, (the Chairman of the Board) or the President.
6.10 In case of the absence of any officer of the corporation, or for any
other reason that the Board of Directors may deem sufficient, the Board of
Directors may delegate, for the time being, any or all of the powers or duties
of such officer to any officer or to any director.
ARTICLE SEVEN
CAPITAL STOCK
7.1 The interest of each shareholder shall be evidenced by a certificate
or certificates representing shares of stock of the corporation which shall be
in such form as the Board of Directors may from time to time adopt and shall be
numbered and shall be entered in the books of the corporation as they are
issued. Each certificate shall exhibit the holder=s name, the number of shares
and class of shares and series, if any, represented thereby, a statement that
the
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corporation is organized under the laws of the State of Georgia, and the par
value of each share or a statement that the shares are without par value. Each
certificate shall be signed by (the Chairman of the Board), the President or a
Vice President and the Treasurer or a Assistant Treasurer or the Secretary or an
Assistant Secretary and shall be sealed with the seal of the corporation;
provided, however, that where such certificate is signed by a transfer agent, or
by a transfer clerk acting on behalf of the corporation and a registrar, the
signature of any such officer and such seal, may be facsimile. In case any
officer or officers who shall have signed, or whose facsimile signature or
signatures shall have been used on, any such certificate or certificates shall
cease to be such officer or officers of the corporation, whether because of
death, resignation or otherwise, before such certificate or certificates shall
have been delivered by the corporation, such certificate or certificates may
nevertheless be delivered as though the person or persons who signed such
certificate or certificates or whose facsimile signatures shall have been used
thereon had not ceased to be such officer or officers.
7.2 The corporation shall keep a record of the shareholders of the
corporation which readily shows, in alphabetical order or by alphabetical index,
and by classes of stock, the names of the shareholders entitled to vote, with
the address of and the number of shares held by each. Said record shall be
presented at all meetings of the shareholders.
7.3 Transfers of stock shall be made on the books of the corporation only
by the person named in the certificate, or by attorney lawfully constituted in
writing, and upon surrender of the certificate therefor, or in the case of a
certificate alleged to have been lost, stolen or destroyed, upon compliance with
the provisions of Section 7.7 of these by-laws.
7.4 (a) For the purpose of determining shareholders entitled to notice of
or to vote
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at any meeting of shareholders or any adjournment thereof, or entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors may provide
that the stock transfer books shall be closed for a stated period but not to
exceed fifty days. If the stock transfer books shall be closed for the purpose
of determining shareholders entitled to notice of or to vote at a meeting of
shareholders, such books shall be closed for at least ten days immediately
preceding such meeting.
(b) In lieu of closing the stock transfer books, the Board of
Directors may fix in advance a date as the record date for any such
determination of shareholders, such date to be not more than fifty days and, in
case of a meeting of shareholders, not less than ten days, prior to the date on
which the particular action, requiring such determination of shareholders, is to
be taken.
7.5 The corporation shall be entitled to treat the holder of any share of
stock of the corporation as the person entitled to vote such share, to receive
any dividend or other distribution with respect to such share, and for all other
purposes and accordingly shall not be bound to recognize any equitable or other
claim to or interest in such share on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by law.
7.6 The Board of Directors may appoint one or more transfer agents and one
or more registrars and may require each stock certificate to bear the signature
or signatures of a transfer agent or a registrar or both.
7.7 Any person claiming a certificate of stock to be lost, stolen or
destroyed shall make an affidavit or affirmation of the fact in such manner as
the Board of Directors may require and shall if the directors so require, give
the corporation a bond of indemnity in form and amount
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and with one or more sureties satisfactory to the Board of Directors, whereupon
an appropriate new certificate may be issued in lieu of the one alleged to have
been lost, stolen or destroyed.
ARTICLE EIGHT
MISCELLANEOUS
Inspection of Books
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8.1 The Board of Directors shall have power to determine which accounts
and books of the corporation, if any, shall be open to the inspection of
shareholders, except such as may by law be specifically open to inspection, and
shall have power to fix reasonable rules and regulations not in conflict with
the applicable law for the inspection of accounts and books which by law or by
determination of the Board of Directors shall be open to inspection, and the
shareholders= rights in this respect are and shall be restricted and limited
accordingly.
Fiscal Year
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8.2 The corporation shall be on a October 1-Sept. 30 fiscal year.
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Seal
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8.3 The corporate seal shall be in such form as the Board of Directors may
from time to time determine.
Annual Statements
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8.4 Not later than four months after the close of each fiscal year, and in
any case prior to the next annual meeting of shareholders, the corporation shall
prepare:
(1) A balance sheet showing in reasonable detail the
financial condition of the corporation as of the close
of its fiscal year, and
(2) A profit and loss statement showing the results of its
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operation during its fiscal year.
Upon written request, the corporation promptly shall mail to any shareholder of
record a copy of the most recent such balance sheet and profit and loss
statement.
Appointments of Agents
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8.5 (The Chairman of the Board or) the President or any Vice President
shall be authorized and empowered in the name and as the act and deed of the
corporation to name and appoint general and special agents, representatives and
attorneys to represent the corporation in the United States or in any foreign
country or countries and to name and appoint attorneys and proxies to vote any
shares of stock in any other corporation at any time owned or held of record by
the corporation, and to prescribe, limit and define the powers and duties of
such agents, representatives, attorneys, and proxies and to make substitution,
revocation or cancellation in whole or in part of any power or authority
conferred on any such agent, representative, attorney or proxy. All powers of
attorney or other instruments under which such agents, representatives,
attorneys, or proxies shall be so named and appointed shall be signed and
executed by (the Chairman of the Board or) the President or a Vice President,
and the corporate seal shall be affixed thereto. Any substitution, revocation
or cancellation shall be signed in like manner, provided always that any agent,
representative, attorney or proxy when so authorized by the instrument
appointing him may substitute or delegate his powers in whole or in part and
revoke and cancel such substitutions or delegations. No special authorization
by the Board of Directors shall be necessary in connection with the foregoing,
but his by-law shall be deemed to constitute full and complete authority to the
officers above designated to do all the acts and things as they deem necessary
or incidental thereto or in connection therewith.
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Indemnification
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8.6 (a) Under the circumstances prescribed in paragraphs (c) and (d) of
this section, the corporation shall indemnify and hold harmless any person who
was or is a party or is threatened to be made a party of any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys=
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in a manner he reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
pleas of nolo contendere or its equivalent, shall not, of itself, create a
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presumption that the person did not act in a manner which he reasonably believed
to be in or not opposed to the best interests of the corporation, and with
respect to any criminal action or proceeding, had reasonable cause to believe
that his conduct was unlawful.
(b) Under the circumstances prescribed in paragraphs (c) and (d) of
this section, the corporation shall indemnify and hold harmless any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact he is or was a
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director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys= fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit, if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation; except that no indemnification
shall be made in respect of any claim issue or matter as to which such person
shall have been adjudged to be liable for negligence or misconduct in the
performance of his duty to the corporation, unless and only to the extent that
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnify for such expenses which the court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in paragraphs (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys= fees) actually and reasonably
incurred by him in connection therewith.
(d) Except as provided in paragraph (c) of this section and except as
may be ordered by a court, any indemnification under paragraphs (a) (b) of this
section shall be made by the corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in paragraphs (a) and (b). Such determination shall be
made (1) by the Board of Directors by a majority vote of a quorum consisting of
directors who
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were not parties to such action, suit or proceeding, or (2) if such a quorum in
not obtainable, or, even if obtainable, if a quorum of disinterested directors
so directs, by the firm of independent legal counsel then employed by the
corporation, in a written opinion.
(e) Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the corporation in advance of the final disposition of
such action, suit or proceeding as authorized by the Board of Directors in the
specific case upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the corporation as
authorized in this section.
(f) The indemnification provided by this section shall not be deemed
exclusive of any other right to which the persons indemnified hereunder shall be
entitled and shall inure to the benefit of the heirs, executors or
administrators of such persons.
(g) The corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of this section.
(h) If any expenses or other amounts are paid by way of
indemnification, otherwise than by court order or by an insurance carrier
pursuant to insurance maintained by the corporation, the corporation shall, not
later than the next annual meeting to the shareholders,
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unless such meeting is held within three months from the date of such payment,
and, in any event, within fifteen months from the date of such payment, send by
first class mail to its shareholders of record at the time entitled to vote for
the election of directors, a statement specifying the persons paid, the amounts
paid, and the nature and status at the time of such payment of the litigation or
threatened litigation.
ARTICLE NINE
NOTICES: WAIVERS OF NOTICE
9.1 Except as otherwise specifically provided in these by-laws, whenever
under the provisions of these by-laws notice is required to be given to any
shareholder, director or officer, it shall not be construed to mean personal
notice, but such notice may be given either by personal notice or by radio,
cable or telegraph, or by mail by depositing the same in the post office or
letter box in a postpaid sealed wrapper, addressed to such shareholder, officer
or director at such address as appears on the books of the corporation, and such
notice shall be deemed to be given at the time when the same shall be thus sent
or mailed.
9.2 When any notice whatever is required to be given by law, by the
articles of incorporation or by these by-laws, a waiver thereof by the person or
persons entitled to said notice given before or after the time stated therein,
in writing, which shall include a waiver given by telegraph, radio, or cable,
shall be deemed equivalent thereto. No notice of any meeting need be given to
any person who shall attend such meeting.
ARTICLE TEN
EMERGENCY POWERS
10.1 The Board of Directors may adopt emergency by-laws subject to repeal
or change
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by action of the shareholders, which shall, notwithstanding any provision of
law, the articles of incorporation or these by-laws, be operative during any
emergency in the conduct of the business of the corporation resulting from an
attack on the United States or on a locality in which the corporation conducts
its business or customarily holds meetings of its board of directors or its
shareholders, or during any nuclear or atomic disaster, or during the existence
of any catastrophe, or other similar emergency condition, as a result of which a
quorum of the Board of Directors or a standing committee thereof cannot readily
be convened for action. The emergency by-laws may make any provision that may be
practical and necessary for the circumstances of the emergency.
10.2 The Board of Directors, either before or during any such emergency,
may provide, and from time to time modify, lines of succession in the event that
during such an emergency any or all officers or agents of the corporation shall
for any reason be rendered incapable of discharging their duties.
10.3 The Board of Directors, either before or during any such emergency,
may, effective in the emergency, change the head office or designate several
alternative head offices or regional offices, or authorize the officers so to
do.
10.4 To the extent not inconsistent with any emergency by-laws so adopted,
these by-laws shall remain in effect during any such emergency and upon its
termination the emergency by-laws shall cease to be operative.
10.5 Unless otherwise provided in emergency by-laws, notice of any meeting
of the Board of Directors during any such emergency may be given only to such of
the directors as it may be feasible to reach at the time, and by such means as
may be feasible at the time, including
20
<PAGE>
publication, radio or television.
10.6 To the extent required to constitute a quorum at any meeting of the
Board of Directors during any such emergency, the officers of the corporation
who are present shall, unless otherwise provided in emergency by-laws, be
deemed, in order of rank and within the same rank in order of seniority,
directors for such meeting.
10.7 No officer, director, agent or employee acting in accordance with any
emergency by-laws shall be liable except for willful misconduct. No officer,
director, agent or employee shall be liable for any action taken by him in good
faith in such a emergency in furtherance of the ordinary business affairs of the
corporation even though not authorized by the by-laws then in effect.
ARTICLE ELEVEN
AMENDMENTS
11.1 The by-laws of the corporation may be altered or amended and new by-
laws may be adopted by the shareholders at any annual or special meeting of the
shareholders or by the Board of Directors at any regular or special meeting of
the Board of Directors; provided, however, that, if such action is to be taken
at a meeting of the shareholders, notice of the general nature of the proposed
change in the by-laws shall have been given in the notice of meeting.
21
<PAGE>
ARTICLES OF INCORPORATION
OF
HOLD, INC.
The undersigned, being a citizen of the United States and desiring to form
a corporation for profit under the General Corporation Law, Chapter 1701 of the
Ohio Revised Code, does hereby certify:
FIRST: The name of the corporation shall be HOLD, INC.
SECOND: The place in Ohio where the principal office of the
Corporation is to be located is the City of Cleveland,
County of Cuyahoga.
THIRD: The purpose for which the Corporation is formed is to engage
in any lawful act or activity for which corporations may be
formed under Sections 1701.01 to 1701.98, inclusive, of the
Ohio Revised Code.
FOURTH: The number of shares which the Corporation is authorized to
have outstanding is Five Hundred (500), all of which are
common shares without par value.
FIFTH: The minimum amount of stated capital with which the
corporation shall begin business is Five Hundred Dollars
($500).
IN WITNESS WHEREOF, I have hereunto subscribed my name this 14th day of June,
----
1978.
/s/ Edward F. Meyers, Jr.
---------------------------------------------
Edward F. Meyers, Jr.
Sole Incorporator
<PAGE>
CERTIFICATE OF AMENDMENT
------------------------
TO THE
------
ARTICLES OF INCORPORATION
-------------------------
OF
--
HOLD, INC.
----------
The undersigned, STEPHEN A. ALBANESE and EDWARD F. MEYERS, JR., the
President and Assistant Secretary, respectively, of Hold, Inc., an Ohio
corporation, do hereby certify that the following resolution was adopted and
approved by the unanimous written consent of the shareholders of said
Corporation on the 20th day of June, 1983.
"RESOLVED: That the Articles of Incorporation of this corporation be
amended by deleting therefrom present Article FIRST and substituting
therefor the following new Article FIRST:
FIRST: The name of the corporation shall be
OHIO GARMENT RENTAL, INC."
IN WITNESS WHEREOF, STEPHEN A. ALBANESE, President, and EDWARD F. MEYERS,
JR., Assistant Secretary, of Hold, Inc., acting for and on behalf of said
corporation, have hereunto subscribed their names this 20th day of June, 1983.
----
/s/ Stephen A. Albanese
--------------------------------------
President
/s/ Edward F. Meyers, Jr.
--------------------------------------
Assistant Secretary
<PAGE>
CODE OF REGULATIONS
-------------------
OF
--
HOLD, INC.
----------
ARTICLE I
---------
OFFICES
- -------
Section 1. Principal Office
----------------
The principal office of the Corporation shall be in Cleveland, Ohio, or at
such other place in the State of Ohio as may be designated from time to time by
the Board of Directors.
Section 2. Other Offices
-------------
The Corporation may also have offices at such other places without, as well
as within, the State of Ohio as the Board Directors shall from time to time
determine.
ARTICLE II
----------
SHAREHOLDERS
- ------------
Section 1. Annual Meeting
--------------
The annual meeting of shareholders shall be held at the principal office of
the Corporation or at such other place as may be determined by the Board of
Directors and designated in the notice of said meeting, at Cleveland, Ohio, on
the first Wednesday in October of each year, if not a legal holiday, for the
purpose of fixing the number of and electing Directors and considering reports
to be laid before said meeting. Upon due notice there may also be considered
and acted upon at an annual meeting any matter which could properly be
considered and acted upon at a special meeting, in which case and for which
purpose the annual meeting shall also be considered as, and shall be, a special
meeting. If the annual meeting shall not be held or if Directors shall not be
elected thereat, a special meeting may be called and held for that purpose.
Section 2. Special Meeting
---------------
Special meetings of the shareholders may be called by the Chairman of the
Board, the President, or, in the case of the President's absence, death or
disability, the Vice President authorized to exercise the authority of the
President, or by the Directors by action at a meeting, or a majority of the
Directors acting without a meeting, or by the person or persons holding not less
than twenty-five percent of all of the shares outstanding and entitled to vote
thereat.
Upon request in writing delivered either in person or by registered mail to
the President or Secretary by any person or persons entitled to call a meeting
of shareholders, it shall be the duty of
<PAGE>
the President or Secretary to give the shareholders entitled thereto, notice of
a meeting to be held on a day not less than ten nor more than sixty days after
the receipt of such request, as such officer may specify. If such notice shall
not be given within fifteen days after the delivery of such request, the person
or persons calling the meeting may fix the time of meeting and give notice
thereof as hereinafter provided in Section 4 of this ARTICLE II, or cause such
notice to be given by any designated representative.
Section 3. Place of Meetings
-----------------
Any meeting of the shareholders of the Corporation may be held either
within or without the State of Ohio.
Section 4. Notice of Meetings
------------------
Notice of all shareholders' meetings, whether annual or special, shall be
given in writing and may be given by the Chairman of the Board, the President or
a Vice President, or by the Secretary or an Assistant Secretary (or in case of
their refusal, by the person or persons entitled to call meetings under the
provisions of these Regulations), which notice shall state the purpose or
purposes for which the meeting is called and the time and place where it is to
be held. Not more than sixty nor less than seven days prior to any such
meeting, a copy of such notice shall be served upon or mailed to each
shareholder of record entitled to notice thereof, directed, postage prepaid, to
his last address as it appears upon the records of the Corporation. If any
meeting shall be adjourned to another time or place, no further notice as to
such reconvened meeting need be given other than by announcement at the meeting
at which such adjournment shall be taken. No business shall be transacted at
any such reconvened meeting except as might have been lawfully transacted at the
meeting at which such adjournment shall have been taken.
Section 5. Waiver of Notice
----------------
Notice of the time, place and purpose of any meeting of shareholders may be
waived in writing, either before or after the holding of such meeting, by any
shareholder, which writing shall be filed with or entered upon the records of
the meeting. The attendance of any shareholder at any such meeting without
protesting the lack of proper notice, prior to or at the commencement of the
meeting, shall be deemed to be a waiver by him of notice of such meeting.
Section 6. Shareholders Entitled to Notice and to Vote
-------------------------------------------
The Board of Directors may fix a date, which shall not be a past date, not
exceeding sixty days preceding the date of any meeting of shareholders as a
record date for the determination of the shareholders entitled to notice of such
meeting or to vote thereat, and/or the Board of Directors may close the books of
the Corporation against transfer of shares during the whole or any part of such
period, including the date of the meeting of the shareholders and the period
ending with the date, if any, to which adjourned.
-2-
<PAGE>
Section 7. Inspectiors of Election
-----------------------
In advance of any meeting of shareholders, the Board of Directors may
appoint Inspectors of Election to act at such meeting and at any adjournment or
adjournments thereof. If such Inspectors shall not be so appointed, the
Chairman of any such meeting may, and on the request of any shareholder or his
proxy shall, make such appointments. No such Inspector need be a shareholder of
the Corporation.
In case any person appointed as such Inspector shall fail or refuse to act,
the vacancy may be filled by appointment made by the Board of Directors in
advance of the meeting; or if not so filled, such vacancy may, and on request of
any shareholder or his proxy shall, be filled at the meeting of the Chairman
thereof.
The Inspectors shall determine the number of shares outstanding, the voting
rights of each, the shares represented at the meeting, the existence of a
quorum, the authenticity, validity and effect of proxies; shall receive votes,
ballots, consents, waivers or releases, hear and determine all challenges and
questions in any way arising in connection with the vote, count and tabulate all
votes, consents, waivers and releases, determine and announce the result, and do
such acts as may be proper to conduct the election or vote with fairness to all
shareholders. On request, the Inspectors shall make a report in writing of any
challenge, question or matter determined by them, and shall make and execute a
certificate of any fact found by them.
If there shall be three or more Inspectors, the decision, act or
certificate of a majority shall be effective in all respects as the decision,
act or certificate of all. The certificate of the Inspectors shall be prima
facie evidence of the facts stated therein and of the vote as certified by them.
Section 8. Quorum
------
The shareholders present in person or by proxy at any meeting of
shareholders shall constitute a quorum for such meeting, but no action required
by law, the Articles or the Regulations to be authorized or taken by the holders
of a designated proportion of the shares of any particular class or of each
class, may be authorized or taken by a lesser proportion.
The holders of a majority of the voting shares represented at a meeting,
whether or not a quorum is present, may adjourn such meeting from time to time.
Section 9. Voting
------
Except when votes are cumulated in the election of Directors as hereinafter
provided and except as otherwise provided in the Articles, each outstanding
share regardless of class shall entitle the holder thereof to one vote on each
matter properly submitted to the shareholders for their vote, consent, waiver,
release, or other action.
-3-
<PAGE>
If notice in writing shall be given by any shareholder to the President,
Vice President, or the Secretary of the Corporation, not less than forty-eight
hours before the time fixed for the holding of a meeting of the shareholders for
the purpose of electing Directors, that such shareholder desires that the voting
at such election shall be cumulative, and if an announcement of the giving of
such notice shall be made upon the convening of the meeting by the Chairman or
Secretary or by or on behalf of the shareholder giving such notice, each
shareholder shall have the right to cumulate such voting power as he shall
possess and to give one candidate as many votes as shall be equal to the number
of Directors to be elected multiplied by the number of his votes, or to
distribute his votes on the same principle among two or more candidates, as he
may see fit.
Section 10. Proxies
-------
A person who shall be entitled to attend a shareholders' meeting, to vote
thereat, or to execute consents, waivers, or releases, may be represented at
such meeting or vote thereat, and execute consents, waivers, and releases, and
exercise any of his other rights, by proxy or proxies appointed by a writing
signed by such person.
A telegram or cablegram appearing to have been transmitted by such person,
or a photographic, photostatic, or equivalent reproduction of a writing,
appointing a proxy shall be sufficient in writing.
No appointment of a proxy shall be valid after the expiration of eleven
months after it is made unless the writing shall specify the date on which it is
to expire or the length of time it is to continue in force.
Unless the writing appointing a proxy shall otherwise provide:
(1) Each proxy shall have the power of substitution and, when three or
more proxies shall be appointed, a majority of them or of their
substitutes may appoint one or more substitutes to act for all;
(2) If more than one proxy shall be appointed, then (a) with respect to
voting or executing consents, waivers, or releases, or objections to
consents at a shareholders' meeting, a majority of such proxies as
shall attend the meeting, or if only one shall attend then that one,
may exercise all the voting and consenting authority thereat; and if
one or more shall attend and a majority shall not agree on any
particular issue, each proxy so attending shall be entitled to
exercise such authority with respect to an equal number of shares; (b)
with respect to exercising any other authority, a majority shall act
for all;
(3) A writing appointing a proxy shall not be revoked by the death or
incompetency of the maker unless, before the vote shall be taken or
the authority granted shall be otherwise exercised, written notice of
such death or incompetency shall be given to
-4-
<PAGE>
the Corporation by the executor or administrator of the estate of such
maker or by the fiduciary having control of the shares in respect of
which the proxy shall have been appointed;
(4) The presence at a meeting of the person appointing a proxy shall not
revoke this appointment. Without affecting any vote previously taken,
the person appointing a proxy may revoke the appointment not otherwise
revoked, by giving notice to the Corporation is writing or in open
meeting.
Section 11. Acting Without Meeting
----------------------
Any action which may be authorized or taken at a meeting of the
shareholders may be authorized or taken without a meeting with the affirmative
vote or approval of, and in a writing or writings signed by all the shareholders
who would be entitled to notice of a meeting of the shareholders held for such
purpose, which writing or writings shall be filed with or entered upon the
records of the Corporation.
Section 12. Accounts and Reports to Shareholders
------------------------------------
The Corporation shall keep correct and complete books and records of
account, together with minutes of the proceedings of its incorporators,
shareholders, Directors, and committees of the Directors, and records of its
shareholders showing their names and addresses and the number and class of
shares issued or transferred of record to or by them from time to time.
At the annual meeting of shareholders, or the meeting held in lieu thereof,
the Corporation shall lay before the shareholders a financial statement
consisting of a balance sheet and a statement of profit and loss and surplus in
the form required by law. The financial statement shall have appended thereto a
certificate in the form required by law. Upon the written request of any
shareholder made within sixty days after notice of any such meeting shall have
been given, the Corporation, not later than the fifth day after receiving such
request or the fifth day before such meeting, whichever shall be the later date,
shall mail to such shareholder a copy of such financial statement.
Any shareholder of the Corporation, upon written demand stating the
specific purpose thereof, shall have the right to examine in person or by agent
or attorney at any reasonable time and for any reasonable and proper purpose,
the Articles of the Corporation, its Regulations, its books and records of
account, minutes, and records of shareholders aforesaid, and voting trust
agreements, if any, on file with the Corporation, and to make copies or extracts
thereof.
-5-
<PAGE>
ARTICLE III
-----------
BOARD OF DIRECTORS
- ------------------
Section 1. Authority and Term of Office
----------------------------
Except where the law, the Articles, or these Regulations require action to
be authorized or taken by shareholders, all the authority of the Corporation
shall be exercised by the Directors, who shall manage or conduct the business of
the Corporation. The Directors shall be elected at the annual meeting of the
shareholders or, if not so elected, at a special meeting of the shareholders
called for that purpose. Each director shall hold office until the next annual
meeting of the shareholders or a special meeting of the shareholders called for
that purpose, as the case may be, and until his successor shall be elected and
qualified, or until his earlier resignation, removal from office or death.
Each person elected a Director of the Corporation shall qualify as such by
either (a) accepting in writing his election as a Director, (b) being present
and acting as a Director in a duly called meeting of the Board of Directors, or
(c) consenting to the taking and adopting of a Resolution.
Section 2. Number of Directors
-------------------
The number of Directors of the Corporation, none of whom need by
shareholders, shall be not less than that required by Ohio Revised Code Section
1701.56(A). The number of Directors shall be fixed by the shareholders at each
annual meeting, or at a special meeting of the shareholders called for the
purpose of electing Directors, as the case may be, at which a quorum shall be
present, by the affirmative vote of the holders of a majority of the shares
which shall be represented at the meeting and entitled to vote on such proposal.
Section 3. Vacancies
---------
The office of a Director shall become vacant if he shall die, or resign by
a writing signed by him and delivered to the Corporation, and the Board of
Directors may declare vacant the office of a Director:
(1) If he shall be declared of unsound mind by an order of court or shall
be adjudicated a bankrupt;
(2) If he shall not qualify within sixty days after his election as
provided by these Regulations.
The remaining Directors though less than a majority of the whole authorized
number of Directors, may, by the vote of a majority of their number, fill any
vacancy in the Board for the unexpired term. Within the meaning of this
Section, a vacancy shall exist in case the shareholders increase the authorized
number of Directors but fail at the meeting at which such increase is
-6-
<PAGE>
authorized, or an adjournment thereof, to elect the additional Directors
provided for, or in case the shareholders shall fail at any time to elect the
whole authorized number of Directors.
Section 4. Meetings
--------
The annual meeting of the Board of Directors shall be held immediately
after the annual meeting of the shareholders and such meeting may be held
without further notice.
Other meetings of the Directors may be called by the Chairman of the Board,
the President, any Vice President, or any two Directors.
Meetings of the Directors may be held at any place within or without the
State of Ohio.
Written notice of the time and place of each meeting of the Directors,
other than the annual meeting, shall be given to each Director either by
personal delivery or by mail, telegram or cablegram at least two days before the
meeting, which notice need not specify the purpose of the meeting. Such notice
may be waived in writing either before or after the holding of such meeting.
Such writing may be by telegram, cablegram or radiogram. The attendance of any
Director at any such meeting without protesting the lack of proper notice prior
to or at the announcement of the meeting, shall be deemed to be a waiver by him
of notice of such meeting.
Section 5. Quorum
------
A majority of the whole authorized number of Directors shall be necessary
to constitute a quorum for a meeting of the Directors, except that a majority of
the Directors in office shall constitute a quorum for filling a vacancy in the
Board. The act of a majority of Directors present at a meeting at which a
quorum shall be present shall be the act of the Board of Directors. If at any
meeting there shall be less than a quorum present, the majority of those present
may adjourn the meeting from time to time without notice other than announcement
at the meeting, until a quorum shall attend.
Section 6. Fixing of Record Dates
----------------------
The Board of Directors may fix a date, which shall not be a past date, not
exceeding sixty days preceding any dividend or distribution payment date or any
date for the receipt or exercise of rights of purchase of or subscription for,
or exchange or conversion of, shares or other securities, subject to contract
rights with respect thereto, or any date for the participation in the execution
of written consents, waivers or releases, as a record date for the determination
of the shareholders entitled to receive such dividends or distributions, receive
or exercise such rights, or participate in the execution of such consents,
waivers or releases, and/or the Board of Directors may close the books of the
Corporation against transfer of shares during the whole or any part of such
period.
-7-
<PAGE>
Section 7. Committees
----------
The Board of Directors may from time to time create an Executive Committee
or any other committee of the Directors, to consist of not less than three
Directors, and may authorize the delegation to any such committee of any of the
authority of the Directors, however conferred, other than that of filling
vacancies among the Directors or in any committee of the Directors.
The Directors may appoint one or more Directors as alternate members of any
such committee, who may take the place of any absent member or members at any
meeting of such committee.
Each such committee shall serve at the pleasure of the Directors, shall act
only in the intervals between meetings of the Directors, and shall be subject to
the control and direction of the Directors.
Any such committee may act by a majority of its members at a meeting or by
a writing or writings signed by all of its members.
An act or authorization of an act by any such committee within the
authority delegated to it shall be as effective for all purposes as the act or
authorization of the Directors.
The Board of Directors shall fix the compensation of the Chairman of the
Board and of the President and shall fix or authorize the President to fix the
compensation of any or all other officers. The Board of Directors may allow
compensation to members of any committee and may vote compensation to any
Director for attendance at meetings or for any special services.
Section 8. Action Without Meeting
----------------------
Any action which may be authorized or taken at a meeting of the Directors
may be authorized or taken without a meeting with the affirmative vote or
approval of, and in a writing or writings signed by, all the Directors, which
writings shall be filed with or entered upon the records of the Corporation.
Section 9. When Duties of Officers May be Delegated
----------------------------------------
The Board of Directors may for any reason that may seem sufficient to the
Board, and effective for such length of time, which may be unlimited, as the
Board may determine, delegate any or all of the duties and powers of the
Corporation to any other officer.
-8-
<PAGE>
ARTICLE V
---------
CERTIFICATES
- ------------
Section 1. Certificates
------------
The certificates representing shares of the Corporation shall be in such
form, consistent with law, as shall be approved by the Board of Directors.
Section 2. Transfer and Registration
-------------------------
The Board of Directors shall have the authority to make such rules and
regulations, not inconsistent with law, the articles or these Regulations, as it
may deem expedient concerning the issuance, transfer and registration of
certificates for shares and the shares represented thereby, and may appoint
transfer agents and registrars thereof.
Transfer books may be kept in any state of the United States or in any
foreign country for the purposes of transferring shares issued by the
Corporation; but if no transfer agent shall be appointed to act in this state,
the Corporation shall keep an office in this state at which shares shall be
transferable, and at which it shall keep books in which shall be recorded the
names and addresses of all shareholders and all transfers of shares.
Section 3. Substituted Certificates
------------------------
Any person claiming a certificate for shares alleged to have been lost,
stolen or destroyed, shall make an affidavit or affirmation of the fact, give
the Corporation and its registrar or registrars and its transfer agent or agents
a bond or indemnity satisfactory to the Board, and, if required by the Board of
Directors, advertise the same in such manner as the Board of Directors may
require, whereupon a new certificate may be issued of the same tenor and for the
same number of shares as the one alleged to have been lost, stolen or destroyed.
ARTICLE IV
----------
OFFICERS
- --------
Section 1. Officers
--------
The Corporation may have a Chairman of the Board of Directors and shall
have a President, a Secretary and a Treasurer, all of whom shall be chosen by
the Board of Directors. The Corporation may also have an Executive Vice
President, one or more Vice Presidents, Assistant Secretaries, Assistant
Treasurers and such other officers as the Board may deem necessary, all of whom
shall be chosen by the Board of Directors or by an officer or officers
designated by it. The Chairman of the Board shall be, but the other officers
may but need not be, a member of the Board of Directors. Each
-9-
<PAGE>
officer shall hold office until his successor shall be chosen and qualified,
unless otherwise specified by the Board of Directors. Any officer shall be
subject to removal, with or without cause, at any time by the vote of a majority
of the Board of Directors.
Any two or more offices may, in the discretion of the Board of Directors,
be held at the same time by the same person. However, no officer shall execute,
acknowledge or ratify any instrument in more than one capacity if such
instrument shall be required by law or by the Regulations or By-Laws to be
executed, acknowledged or verified by any two or more officers.
Section 2. Chairman of the Board
---------------------
The Chairman of the Board shall have the authority to preside at all
meetings of the shareholders and of the Board of Directors, and shall have such
other duties and powers as are to be assigned to or vested in him by the Board
of Directors or by the Executive Committee.
Section 3. The President
-------------
The President shall be the chief executive officer of the Corporation, and
in the absence of the Chairman of the Board shall have the authority to preside
at all meetings of the shareholders and of the Board of Directors. Subject to
the direction of the Board of Directors and the Executive Committee, he shall
have general charge and authority over the business of the Corporation. He
shall from time to time make such reports of the business of the Corporation as
the Board of Directors may require, and shall make a report of the business of
the Corporation for the preceding fiscal year to the shareholders at each annual
meeting. The President shall have such other duties and powers as may be
assigned to or vested in him by the Board of Directors or by the Executive
Committee.
Section 4. The Vice President
------------------
The Executive Vice President, or, if there be none, the Vice Presidents, in
the order of their seniority by designation (or, if not designated, in the order
of their seniority at election), shall perform the duties of the President in
the absence or during his disability to act. The Executive Vice President and
the Vice Presidents shall have such other duties and powers as may be assigned
to or vested in them by the Board of Directors or by the Executive Committee or
by the President.
Section 5. The Secretary
-------------
The Secretary shall issue notices of all meetings for which notice shall be
required to be given, shall keep the minutes of all meetings, shall have charge
of the corporate seal and corporate record books, shall cause to be prepared for
each meeting of shareholders the list of shareholders entitled to vote thereat,
and shall have such other duties and powers as may be assigned to or vested in
him by the Board of Directors, the Executive Committee or the President.
-10-
<PAGE>
Section 6. The Treasurer
-------------
The Treasurer shall have the custody of all moneys and securities of the
Corporation and shall keep adequate and correct accounts of the Corporation's
business transactions, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, stated capital and shares, shall prepare and lay
before the shareholders' meetings the data referred to in Section 12 of Article
II hereof, and shall mail copies of such data as required in said Section to any
shareholder requesting same. The funds of the Corporations shall be deposited
in the name of the Corporation by the Treasurer in such depositories as the
Board of Directors may from time to time designate. The Treasurer shall have
such other duties and powers as may be assigned to or vested in him by the Board
of Directors, the Executive Committee or the President.
Section 7. Other Officers
--------------
Other officers of the Corporation shall have such duties and powers as may
be assigned to or vested in them by the Board of Directors, the Executive
Committee or the President.
Section 8. Authority to Sign
-----------------
Except as otherwise specifically provided by the Board of Directors or by
the Executive Committee, checks, notes, drafts, contracts or other instruments
authorized by the Board of Directors or by the Executive Committee shall be
executed and delivered on behalf of the Corporation by the President, the
Treasurer or a Vice-President, and by the Secretary, Assistant Secretary or an
Assistant Treasurer.
ARTICLE VI
----------
RESIGNATION OF DIRECTORS AND OFFICERS
- -------------------------------------
Any Director or officer may resign at any time by delivering written notice
to the Corporation. Any such resignation shall take effect immediately or at
such other time as may be specified therein. Unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
-11-
<PAGE>
ARTICLE VII
-----------
INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES
- ----------------------------------------------------
The Corporation shall indemnify and reimburse any person who then is or
shall have been a Director, officer or employee of the Corporation, or who then
is serving or shall have served at its request as a Director, officer or
employee of another corporation, for expenses (including attorneys' fees),
judgments, decrees, fines, penalties or settlements incurred or paid in
connection with the defense of any pending or threatened action, suit or
proceeding, criminal or civil, to which he then is or may be a party by reason
of being or having been such Director, officer or employee; provided that:
(1) He shall be adjudicated or determined not to have been negligent
or guilty of misconduct in the performance of his duty to the Corporation
or other corporation of which he then is or shall have been a Director,
officer or employee; and
(2) It shall be determined that he acted in good faith in what he
reasonably believed to be the best interests of the Corporation or other
corporation of which he then is or shall have been a Director, officer or
employee; and
(3) In any matter the subject of a criminal action, suit or
proceeding, it shall be determined that he had no reasonable cause to
believe that his conduct was unlawful.
The determination as to (2) or (3) of the preceding paragraph, and, in the
absence of an adjudication by a court of competent jurisdiction the
determination as to (1), shall be made as follows:
(a) By the Directors of the Corporation acting at a meeting at which a
quorum consisting of Directors who shall not be parties to or threatened
with any such action, suit or proceeding shall be present, provided that
any Director who shall be a party to or threatened with any such action,
suit or proceeding shall not be qualified to vote on such determination.
(b) If a quorum of qualified Directors cannot be obtained to vote on
such determination, it shall be made by independent legal counsel, selected
by the Directors, in the form of a written opinion.
The indemnification provided by this ARTICLE VII shall not be deemed
exclusive of any other rights to which such person may be entitled, and shall
inure to the benefit of the heirs, executors and administrators of such person.
The Corporation may purchase and maintain insurance against any liability
asserted against or incurred by any person who, in his capacity of being or
having been a Director, officer or employee as aforesaid, may be indemnified or
reimbursed pursuant to the provisions of this ARTICLE VII, whether or not the
Corporation would have the power to
-12-
<PAGE>
indemnify or reimburse such person under the provisions of this ARTICLE VII.
ARTICLE VIII
------------
MISCELLANEOUS
- -------------
Section 1. Voting Shares Held by the Corporation
-------------------------------------
Unless otherwise ordered by the Board of Directors, the Treasurer in person
or by proxy or proxies appointed by him shall have full power and authority on
behalf of the Corporation to vote, act and consent with respect to any shares
issued by other corporations which the Corporation may own.
The Corporation shall not directly or indirectly vote any shares issued by
it.
Section 2. Seal
----
The Corporation shall have no seal.
Section 3. Amendments
----------
These Regulations may be amended in any respect or superseded by new
Regulations, in whole or in part, by the affirmative vote or the written consent
of the shareholders entitled to exercise a majority of the voting power on such
proposal; provided, however, that if an amendment shall be adopted by written
consent without a meeting of the shareholders, it shall be the duty of the
Secretary to enter the amendment in the records of the Corporation and to mail a
copy of such amendment to each shareholder who shall have been entitled to vote
thereon and shall not have participated in the adoption thereof.
-13-
<PAGE>
HOLD, INC.
----------
ACTION OF SHAREHOLDERS TAKEN WITHOUT A MEETING
October 29, 1978
----------------
Pursuant to the authority of Section 1701.54 of the Ohio Revised Code, the
undersigned, being all of the shareholders of HOLD, INC., do hereby take and
authorize the following action in writing without a meeting:
AMENDMENT TO CODE OF REGULATIONS
RESOLVED: That Article III, Section 3 of the Code of Regulations of the
Corporation is amended by deleting in its entirety the second full
paragraph thereof and substituting therefor the following new paragraph:
"The remaining Directors though less than a majority of the whole
authorized number of Directors, may, by unanimous vote but not
otherwise, fill any vacancy in the Board for the unexpired term.
Within the meaning of this Section, a vacancy shall exist in case the
shareholders increase the authorized number of Directors but fail at
the meeting at which such increase is authorized, or an adjournment
thereof, to elect the additional Directors provided for, or in case
the shareholders shall fail at any time to elect the whole authorized
number of Directors."
RESOLVED FURTHER: That Article III, Section 5 of the Code of Regulations of
the Corporation is hereby amended by deleting in its entirety present Section 5
and substituting therefore the following new Section 5:
"Section 5. Quorum
------
A majority of the whole authorized number of Directors shall be
necessary to constitute a quorum for a meeting of the Directors,
except that a majority of the Directors in office shall constitute a
quorum for filling a vacancy in the Board. The act of a majority of
Directors present at a meeting at which a quorum is present shall be
the act of the Board of Directors except in the following instances
where the act of all of the Directors present at a meeting where a
quorum is present shall be required to constitute an act of the Board
of Directors:
(a) The determination of the time when, the terms under
which, and the consideration for which the Corporation issues,
disposes of, or receives subscriptions for, its shares including
treasury shares.
<PAGE>
(b) The extension, modification or amendment in any way of
the Credit Agreement, dated September 13, 1978, among the
Corporation, Union Commerce Bank and others, or any other
agreement which places restrictions on the ability of the
Corporation to redeem any of its shares.
(c) The redemption by the Corporation of any of its shares
currently issued and outstanding except if such redemption is pro
rata or is pursuant to the Share Purchase agreement, dated
September 12, 1978, among the Corporation, Stephen A. Albanese,
Ned S. Bearden, Ned S. Bearden, Trustee, and John P. Blaser or
pursuant to the Share Purchase Agreement dated September 12, 1978
among the Corporation, Frederick G. Heman and Robert M. Berman.
(d) The partial or complete liquidation of a subsidiary of
this Corporation."
/s/
----------------------------------------
Stephen A. Albanese, Voting Trustee
under Voting Trust Agreement
dated September 12, 1978
/s/
----------------------------------------
Ned S. Bearden, Voting Trustee
under Voting Trust Agreement
dated September 12, 1978
/s/
----------------------------------------
John P. Blaser, Voting Trustee
under Voting Trust Agreement
dated September 12, 1978
-2-
<PAGE>
Certificate of Incorporation of
MIDWAY-CTS BUFFALO, LTD.
pursuant to Section 402 of the Business Corporation Law
IT IS HEREBY CERTIFIED THAT:
The name of the corporation is MIDWAY-CTS BUFFALO, LTD.
The purposes for which this corporation is formed are as follows:
To engage in any lawful act or activity for which corporations may be
formed under the Business Corporation Law. This corporation is not
formed to engage in any act or activity for which approval by an state
department, official, board, agency or other body is required without
such approval first being obtained.
The corporation, in furtherance of its corporate purposes above set forth, shall
have all of the powers enumerated in Section 202 of the Business Corporation Law
or any other statute of the State of New York.
The aggregate number of shares the corporation shall have the authority to issue
is one hundred (100) voting shares with no par value and one thousand (1000)
non-voting shares with no par value.
The office of the corporation is to be located in the County of Onondaga, State
of New York.
The Secretary of State is designated as agent of the corporation upon whom the
process in any action or proceeding against it may be served. The postal
address to which the Secretary of State shall mail a copy of the process against
the corporation served upon him is 140 Cortland Avenue, Syracuse, NY 13221.
The corporation elects to name a registered agent. The registered agent for the
corporation shall be:
CT Corporation System
1633 Broadway
New York, NY 10019
The undersigned incorporator is over the age of eighteen years.
IN WITNESS WHEREOF, this certificate has been subscribed this 30th day of
September, 1994, by the undersigned who affirms that the statements made herein
are true under the penalties of perjury.
James Geraci
194 Washington Ave. /s/ James Geraci
-----------------------------
Albany, NY 12210
<PAGE>
BY-LAWS
-------
OF
--
MIDWAY-CTS BUFFALO, LTD.
ARTICLE I - OFFICES
-------------------
The office of the Corporation shall be located in the City, County and State
designated in the Certificate of Incorporation. The Corporation may also
maintain offices at such other places within or without the United States as the
Board of Directors may, from time to time, determine.
ARTICLE II - MEETING OF SHAREHOLDERS
------------------------------------
Section 1 - Annual Meetings:
- ----------------------------
The annual meeting of the shareholders of the Corporation shall be held within
five months after the close of the fiscal year of the Corporation, for the
purpose of electing directors, and transacting such other business as may
properly come before the meeting.
Section 2 - Special Meetings:
- -----------------------------
Special meetings of the shareholders may be called at any time by the Board of
Directors or by the President, and shall be called by the President or the
Secretary at the written request of the holders of ten percent (10%) of the
shares then outstanding and entitled to vote thereat, or as otherwise required
under the provisions of the Business Corporation Law.
Section 3 - Place of Meetings:
- ------------------------------
All meetings of shareholders shall be held at the principal office of the
Corporation, or at such other places within or without the State of New York as
shall be designated in the notices or waivers of notice of such meetings.
Section 4 - Notice of Meetings:
- -------------------------------
(a) Written notice of each meeting of shareholders, whether annual or special,
stating the
By-Laws-1
<PAGE>
time when and place where it is to be held, shall be served either personally or
by mail, not less than ten or more than fifty days before the meeting, upon each
shareholder of record entitled to vote at such meeting, and to any other
shareholder to whom the giving of notice may be required by law. Notice of a
special meeting shall also state the purpose or purposes for which the meeting
is called, and shall indicate that it is being issued by, or at the direction
of, the person or persons calling the meeting. If, at any meeting, action is
proposed to be taken that would, if taken, entitle shareholders to receive
payment for their shares pursuant to the Business Corporation Act, the notice of
such meeting shall include a statement of that purpose and to that effect. If
mailed, such notice shall be directed to each such shareholder at his address,
as it appears on the records of the shareholders of the Corporation, unless he
shall have previously filed with the Secretary of the Corporation a written
request that notices intended for him be mailed to some other address, in which
case, it shall be. mailed to the address designated in such request.
(b) Notice of any meeting need not be given to any person who may become a
shareholder of record after the mailing of such notice, and prior to the
meeting, or to any shareholder who attends such meeting, in person or by proxy,
or to any shareholder who, in person or by proxy, submits a signed waiver of
notice either before or after such meeting. Notice of any adjourned meeting of
shareholders need not be given, unless otherwise required by statute.
Section 5 - Quorum:
- ------------------
(a) Except as otherwise provided herein, or by statute, or in the Certificate
of Incorporation (such Certificate and any amendments thereof being hereinafter
collectively referred to as the "Certificate of Incorporation"), at all meetings
of shareholders of the Corporation, the presence at the commencement of such
meetings in person or by proxy of shareholders holding of record a majority of
the total number of shares of the Corporation then issued and outstanding and
entitled to vote, shall be necessary and sufficient to constitute a quorum for
the transaction of any business. The withdrawal of any shareholder after the
commencement of a meeting shall have no effect on the existence of a quorum,
after a quorum has been established at such meeting.
(b) Despite the absence of a quorum at any annual or special meeting of
shareholders, the shareholders, by a majority of the votes cast by the holders
of shares entitled to vote thereon, may adjourn the meeting. At any such
adjourned meeting at which a quorum is present, any business may be transacted
which might have been transacted at the meeting as originally called if a quorum
had been present.
Section 6 - Voting:
- ------------------
(a) Except as otherwise provided by statute or by the Certificate of
Incorporation, any corporate action, other than the election of directors to be
taken by vote of the shareholders, shall be authorized by a majority of votes
cast at a meeting of shareholders by the holders of shares entitled to vote
thereon.
(b) Except as otherwise provided by statute or by the Certificate of
Incorporation, at each meeting of shareholders, each holder of record of stock
of the Corporation entitled to vote thereat,
By-Laws-2
<PAGE>
shall be entitled to one vote for each share of stock registered in his name on
the books of the Corporation.
(c) Each shareholder entitled to vote or to express consent or dissent without
a meeting, may do so by proxy; provided, however, that the instrument
authorizing such proxy to act shall have been executed in writing by the
shareholder himself, or by his attorney-in-fact thereunto duly authorized in
writing. No proxy shall be valid after the expiration of eleven months from the
date of its execution, unless, the persons executing it shall have specified
therein the length of time it is to continue in force. Such instrument shall be
exhibited to the Secretary at the meeting and shall be filed with the records of
the Corporation.
(d) Any resolution in writing, signed by all of the shareholders entitled to
vote thereon, shall be and constitute action by such shareholders to the effect
therein expressed, with the same force and effect as if the same had been duly
passed by unanimous vote at a duly called meeting of shareholders and such
resolution so signed shall be inserted in the Minute Book of the Corporation
under its proper date.
ARTICLE III - BOARD OF DIRECTORS
--------------------------------
Section 1 - Number, Election and Term of Office:
- ------------------------------------------------
(a) The number of the directors of the Corporation shall be three (3), unless
and until otherwise determined by vote of a majority of the entire Board of
Directors. The number of Directors shall not be less than three, unless all of
the outstanding shares are owned beneficially and of record by less than three
shareholders, in which event the number of directors shall not be less than the
number of shareholders.
(b) Except as may otherwise be provided herein or in the Certificate of
Incorporation, the members of the Board of Directors of the Corporation, who
need not be shareholders, shall be elected by a majority of the votes cast at a
meeting of shareholders, by the holders of shares entitled to vote in the
election.
(c) Each director shall hold office until the annual meeting of the
shareholders next succeeding his election, and until his successor is elected
and qualified, or until his prior death, resignation or removal.
Section 2 - Duties and Powers:
- ------------------------------
The Board of Directors shall be responsible for the control and management of
the affairs, property and interests of the Corporation, and may exercise all
powers of the Corporation, except as are in the Certificate of Incorporation or
by statute expressly conferred upon or reserved to the shareholders.
By-Laws-3
<PAGE>
Section 3 - Annual and Regular Meetings; Notice:
- -----------------------------------------------
(a) A regular annual meeting of the Board of Directors shall be held
immediately following the annual meeting of the shareholders at the place of
such annual meeting of shareholders.
(b) The Board of Directors, from time to time, may provide by resolution for
the holding of other regular meetings of the Board of Directors, and may fix the
time and place thereof.
(c) Notice of any regular meeting of the Board of Directors shall not be
required to be given and, if given, need not specify the purpose of the meeting;
provided, however, that in case the Board of Directors shall fix or change the
time or place of any regular meeting, notice of such action shall be given to
each director who shall not have been present at the meeting at which such
action was taken within the time limited, and in the manner set forth in
paragraph (b) of Section 4 of this Article III, with respect to special
meetings, unless such notice shall be waived in the manner set forth in
paragraph (c) of such Section 4.
Section 4 - Special Meetings: Notice:
- -------------------------------------
(a) Special meetings of the Board of Directors shall be held whenever called by
the President or by one of the directors, at such time and place as may be
specified in the respective notices or waivers of notice thereof.
(b) Notice of special meetings shall be mailed directly to each director,
addressed to him at his residence or usual place of business, at least two (2)
days before the day on which the meeting is to be held, or shall be sent to him
at such place by telegram, radio or cable, or shall be delivered to him
personally or given to him orally, not later than the day before the day on
which the meeting is to be held. A notice, or waiver of notice, except as
required by Section 8 of this Article III, need not specify the purpose of the
meeting.
(c) Notice of any special meeting shall not be required to be given to any
director who shall attend such meeting without protesting prior thereto or at
its commencement, the lack of notice to him, or who submits a signed waiver of
notice, whether before or after the meeting. Notice of any adjourned meeting
shall not be required to be given.
Section 5 - Chairman:
- ---------------------
(a) At all meetings of the Board of Directors, the Chairman of the Board, if
any and if present, shall preside. If there shall be no Chairman, or he shall be
absent, then the President shall preside, and in his absence, a Chairman chosen
by the Directors shall preside.
Section 6 - Quorum and Adjournments:
- ------------------------------------
(a) At all meetings of the Board of Directors, the presence of a majority of
the entire Board shall be necessary and sufficient to constitute, a quorum for
the transaction of business, except as otherwise provided by law, by the
Articles of Incorporation, or by these By-Laws. Participation of
By-Laws-4
<PAGE>
any one or more members of the Board by means of a conference telephone or
similar communications; equipment, allowing all persons participating in the
meeting to hear each other at the same time, shall constitute presence in person
at any such meeting.
(b) A majority of the directors present at the time and place of any regular or
special meeting, although less than a quorum, may adjourn the same from time to
time without notice, until a quorum shall be present.
Section 7 - Manner of Acting:
- -----------------------------
(a) At all meetings of the Board of Directors, each director present shall have
one vote, irrespective of the number of shares of stock, if any, which he may
hold.
(b) Except as otherwise provided by statute, by the Certificate of
Incorporation, or these By-Laws, the action of a majority of the directors
present at any meeting at which a quorum is present shall be the act of the
Board of Directors. Any action authorized, in writing, by all of the directors
entitled to vote thereon and filed with the minutes of the Corporation shall be
the act of the Board of Directors with the same force and effect as if the same
had been passed by unanimous vote at a duly called meeting of the Board.
Section 8 - Vacancies:
- ----------------------
Any vacancy in the Board of Directors occurring by reason of an increase in the
number of directors, or by reason of the death, resignation, disqualification,
removal (unless a vacancy created by the removal of a director by the
shareholders shall be filled by the shareholders at the meeting at which the
removal was effected) or inability to act of any director, or otherwise, shall
be filled for the unexpired portion of the term by a majority vote of the
remaining directors, though less than a quorum, at any regular meeting or
special meeting of the Board of Directors called for that purpose.
Section 9 - Resignation:
- ------------------------
Any director may resign at any time by giving written notice to the Board of
Directors, the President or the Secretary of the Corporation. Unless otherwise
specified in such written notice, such resignation shall take effect upon
receipt thereof by the Board of Directors or such officer, and the acceptance of
such resignation shall not be necessary to make it effective.
Section 10 - Removal:
- ---------------------
Any director may be removed with or without cause at any time by the
shareholders, at a special meeting of the shareholders called for that purpose,
and may be removed for cause by action of the Board.
By-Laws-5
<PAGE>
Section 11 - Salary:
- --------------------
No stated salary shall be paid to directors, as such, for their services, but by
resolution of the Board of Directors a fixed sum and expenses of attendance, if
any, may be allowed for attendance at each regular or special meeting of the
Board; provided, however, that nothing herein contained shall be construed to
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor.
Section 12 - Contracts:
- -----------------------
(a) No contract or other transaction between this Corporation and any other
Corporation shall be impaired, affected or invalidated nor shall any director be
liable in any way by reason of the fact that any one or more of the directors of
this Corporation is or are interested in, or is a director or officer, or are
directors or officers of such other Corporation, provided that such facts are
disclosed or made known to the Board of Directors.
(b) Any director, personally and individually, may be a party to or may be
interested in any contract or transaction of this Corporation, and no director
shall be liable in any way by reason of such interest, provided that the fact of
such interest be disclosed or made known to the Board of Directors, and provided
that the Board of Directors shall authorize, approve or ratify such contract or
transaction by the vote (not counting the vote of any such director) of a
majority of a quorum, notwithstanding the presence of any such director at the
meeting at which such action is taken. Such director or directors may be counted
in determining the presence of a quorum at such meeting. This Section shall not
be construed to impair or invalidate or in any way affect any contract or other
transaction which would otherwise be valid under the law (common, statutory or
otherwise) applicable thereto.
Section 13 - Committees:
- ------------------------
The Board of Directors, by resolution adopted by a majority of the entire Board,
may from time to time designate from among its members an executive committee
and such other committees, and alternate members thereof; as they deem
desirable, each consisting of three or more members, with such powers and
authority (to the extent permitted by law) as may be provided in such
resolution. Each such committee shall serve at the pleasure of the Board. At
all meetings of a committee, the presence of all members of the committee shall
be necessary to constitute a quorum for the transaction of business, except as
otherwise provided by said resolution or by these By-laws. Participation of any
one or more members of the committee by means of a conference telephone or
similar communications equipment allowing all persons participating in the
meeting to hear each other at the same time, shall constitute presence in person
at any such meeting. Any action authorized in writing by all of the members of
a committee entitled to vote thereon and filed with the minutes of the Committee
shall be the act of the committee with the same force and effect as if the same
had been passed by unanimous vote at a duly called meeting of the committee.
By-Laws-6
<PAGE>
ARTICLE IV - OFFICERS
---------------------
Section 1 - Number, Qualifications, Election and Term of Office:
- ----------------------------------------------------------------
(a) The officers of the Corporation shall consist of a President, a Secretary,
a Treasurer, and such other officers, including a Chairman of the Board of
Directors, and one or more Vice Presidents, as the Board of Directors may from
time to time deem advisable. Any officer other than the Chairman of the Board of
Directors may be, but is not required to be, a director of the Corporation. Any
two or more offices may be held by the same person.
(b) The officers of the Corporation shall be elected by the Board of Directors
at the regular annual meeting of the Board following the annual meeting of
shareholders.
(c) Each officer shall hold office until the annual meeting of the Board of
Directors next succeeding his election, and until his successor shall have been
elected and qualified, or until his death, resignation or removal.
Section 2 - Resignation:
- ------------------------
Any officer may resign at any time by giving written notice of such resignation
to the Board of Directors, or to the President or the Secretary of the
Corporation. Unless otherwise specified in such written notice, such
resignation shall take effect upon receipt thereof by the Board of Directors or
by such officer, and the acceptance of such resignation shall not be necessary
to make it effective.
Section 3 - Removal:
- --------------------
Any officer may be removed, either with or without cause, and a successor
elected by the Board at any time.
Section 4 - Vacancies:
- ----------------------
A vacancy in any office by reason of death, resignation, inability to act,
disqualification, or any other cause, may at any time be filled for the
unexpired portion of the term by the Board of Directors.
Section 5 - Duties of Officers:
- -------------------------------
Officers of the Corporation shall, unless otherwise provided by the Board of
Directors, each have such powers and duties as generally pertain to their
respective offices as well as such powers and duties as may be set forth in
these by-laws, or may from time to time be specifically conferred or imposed by
the Board of Directors. The President shall be the chief executive officer of
the Corporation.
By-Laws-7
<PAGE>
Section 6 - Sureties and Bonds:
- -------------------------------
In case the Board of Directors shall so require, any officer, employee or agent
of the Corporation shall execute to the Corporation a bond in such sum, and with
such surety or sureties as the Board of Directors may direct, conditioned upon
the faithful performance of his duties to the Corporation, including
responsibility for negligence and for the accounting for all property, funds or
securities of the Corporation which may come into his hands.
Section 7 - Shares of Other Corporations:
- -----------------------------------------
Whenever the Corporation is the holder of shares of any other corporation, any
right or power of the Corporation as such shareholder (including the attendance,
acting and voting at shareholders' meetings and execution of waivers, consents,
proxies or other instruments) may be exercised on behalf of the Corporation by
the President, any Vice President, or such other person as the Board of
Directors may authorize.
ARTICLE V - SHARES OF STOCK
-----------------------------
Section 1 - Certificate of Stock:
- ---------------------------------
(a) The certificates representing shares of the Corporation shall be in such
form as shall be adopted by the Board of Directors, and shall be numbered and
registered in the order issued. They shall bear the holder's name and the number
of shares, and shall be signed by (i) the Chairman of the Board or the President
or a Vice President, and (ii) the Secretary or Treasurer, or any Assistant
Secretary or Assistant Treasurer, and may bear the corporate seal.
(b) No certificate representing shares shall be issued until the full amount of
consideration therefor has been paid, except as otherwise permitted by law.
(c) The Board of Directors may authorize the issuance of certificates for
fractions of a share which shall entitle the holder to exercise voting rights,
receive dividends and participate in liquidating distributions, in proportion to
the fractional holdings; or it may authorize the payment in cash of the fair
value of fractions of a share as of the time when those entitled to receive such
fractions are determined; or it may authorize the issuance, subject to such
conditions as may be permitted by law, of scrip in registered or bearer form
over the signature of an officer or agent of the Corporation, exchangeable as
therein provided for full shares, but such scrip shall not entitle the holder to
any rights of a shareholder, except as therein provided.
Section 2 - Lost or Destroyed Certificates:
- -------------------------------------------
The holder of any certificate representing shares of the Corporation shall
immediately notify the Corporation of any loss or destruction of the certificate
representing the same. The Corporation may issue a new certificate in the place
of any certificate theretofore issued by it, alleged to have been lost or
destroyed. On production of such evidence of loss or destruction as the Board
of
By-Laws-8
<PAGE>
Directors in its discretion may require, the Board of Directors may, in its
discretion, require the owner of the lost or destroyed certificate, or his legal
representatives, to give the Corporation a bond in such sum as the Board may
direct, and with such surety or sureties as may be satisfactory to the Board, to
indemnify the Corporation against any claims, loss, liability or damage it may
suffer on account of the issuance of the new certificate. A new certificate may
be issued without requiring any such evidence or bond when, in the judgment of
the Board of Directors, it is proper so to do.
Section 3 - Transfers of Shares:
- --------------------------------
(a) Transfers of shares of the Corporation shall be made on the share records
of the Corporation only by the holder of record thereof, in person or by his
duly authorized attorney, upon surrender for cancellation of the certificate or
certificates representing such shares, with an assignment or power of transfer
endorsed thereon or delivered therewith, duly executed, with such proof of the
authenticity of the signature and of authority to transfer and of payment of
transfer taxes as the Corporation or its agents may require.
(b) The Corporation shall be entitled to treat the holder of record of any
share or shares as the absolute owner thereof for all purposes and, accordingly,
shall not be bound to recognize any legal, equitable or other claim to, or
interest in, such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise expressly
provided by law.
Section 4 - Record Date:
- ------------------------
In lieu of closing the share records of the Corporation, the Board of Directors
may fix, in advance, a date not exceeding fifty days, nor less than ten days, as
the record date for the determination of shareholders entitled to receive notice
of, or to vote at, any meeting of shareholders, or to consent to any proposal
without a meeting, or for the purpose of determining shareholders entitled to
receive payment of any dividends, or allotment of any rights, or for the purpose
of any other action. If no record date is fixed, the record date for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if no notice is given, the day on which the
meeting is held; the record date for determining shareholders for any other
purpose shall be at the close of business on the day on which the resolution of
the directors relating thereto is adopted. When a determination of shareholders
of record entitled to notice of or to vote at any meeting of shareholders has
been made as provided for herein, such determination shall apply to any
adjournment thereof, unless the directors fix a new record date for the
adjourned meeting.
ARTICLE VI - DIVIDENDS
----------------------
Subject to applicable law, dividends may be declared and paid out of any funds
available therefor, as often, in such amounts, and at such time or times as the
Board of Directors may determine.
By-Laws-9
<PAGE>
ARTICLE VII - FISCAL YEAR
-------------------------
The fiscal year of the Corporation shall be fixed by the Board of Directors from
time to time, subject to applicable law.
ARTICLE VIII - CORPORATE SEAL
-----------------------------
The corporate seal, if any, shall be in such form as shall be approved from time
to time by the Board of Directors.
ARTICLE IX - AMENDMENTS
-----------------------
Section 1 - By Shareholders:
- ----------------------------
All by-laws of the Corporation shall be subject to alteration or repeal, and new
by-laws may be made, by a majority vote of the shareholders at the time entitled
to vote in the election of directors.
Section 2 - By Directors:
- -------------------------
The Board of Directors shall have power to make, adopt, alter, amend and repeal,
from time to time, by-laws of the Corporation; provided, however, that the
shareholders entitled to vote with respect thereto as in this Article IX above-
provided may alter, amend or repeal by-laws made by the Board of Directors,
except that the Board of Directors shall have no power to change the quorum for
meetings of shareholders or of the Board of Directors, or to change any
provisions of the by-laws with respect to the removal of directors or the
filling of vacancies in the Board resulting from the removal by the
shareholders. If any by-law regulating an impending election of directors is
adopted, amended or repealed by the Board of Directors, there shall be set forth
in the notice of the next meeting of shareholders for the election of directors,
the by-law so adopted, amended or repealed, together with a concise statement of
the changes made.
The undersigned Incorporator certifies the he has adopted the foregoing
by-laws as the first by-laws of the Corporation, in accordance with the
requirements of the Business Corporation Law.
Dated:_____________________
/s/ David P. O'Hara
-----------------------------
Incorporator
By-Laws-10
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EXHIBIT 4.1
EXECUTION COPY
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Coyne International Enterprises Corp.
$150,000,000
SERIES A AND SERIES B
11 1/4% SENIOR SUBORDINATED NOTES DUE 2008
INDENTURE
_____________________________________
Dated as of June 26, 1998
_____________________________________
IBJ SCHRODER BANK & TRUST COMPANY
Trustee
______________
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CROSS-REFERENCE TABLE*
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Trust Indenture Act Section Indenture Section
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310 (a)(1)........................ 7.10
(a)(2)............................ 7.10
(a)(3)............................ N.A.
(a)(4)............................ N.A.
(a)(5)............................ 7.10
(b)............................... 7.10
(c)............................... N.A.
311(a)............................ 7.11
(b)............................... 7.11
(i)(c)............................ N.A.
312 (a)........................... 2.05
(b)............................... 13.03
(c)............................... 13.03
313(a)............................ 7.06
(b)(2)............................ 7.07
(c)............................... 7.06; 13.02
(d)............................... 7.06
314(a)............................ 4.03; 13.02
(c)(1)............................ 13.04
(c)(2)............................ 13.04
(c)(3)............................ N.A.
(e)............................... 13.05
(f)............................... N.A.
315 (a)........................... 7.01
(b)............................... 7.05; 13.02
(A)(c)............................ 7.01
(d)............................... 7.01
(e)............................... 6.11
316 (a)(last sentence)............ 2.09
(a)(1)(A)......................... 6.05
(a)(1)(B)......................... 6.04
(a)(2)............................ N.A.
(b)............................... 6.07
(c)............................... 2.12
317 (a)(1)........................ 6.08
(a)(2)............................ 6.09
(b)............................... 2.04
318 (a)........................... 13.01
(b)............................... N.A.
(c)............................... 12.01
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N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
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TABLE OF CONTENTS
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ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE..................... 1
SECTION 1.01. DEFINITIONS............................................... 1
SECTION 1.02. OTHER DEFINITIONS......................................... 16
SECTION 1.03. TRUST INDENTURE ACT DEFINITIONS........................... 16
SECTION 1.04. RULES OF CONSTRUCTION..................................... 17
ARTICLE 2. THE NOTES...................................................... 17
SECTION 2.01. FORM AND DATING........................................... 17
SECTION 2.02. EXECUTION AND AUTHENTICATION.............................. 19
SECTION 2.03. REGISTRAR AND PAYING AGENT................................ 19
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST....................... 20
SECTION 2.05. HOLDER LISTS.............................................. 20
SECTION 2.06. TRANSFER AND EXCHANGE..................................... 20
SECTION 2.07. REPLACEMENT NOTES......................................... 32
SECTION 2.08. OUTSTANDING NOTES......................................... 32
SECTION 2.09. TREASURY NOTES............................................ 33
SECTION 2.10. TEMPORARY NOTES........................................... 33
SECTION 2.11. CANCELLATION.............................................. 33
SECTION 2.12. DEFAULTED INTEREST........................................ 33
SECTION 2.13. CUSIP NUMBERS............................................. 33
ARTICLE 3. REDEMPTION AND PREPAYMENT...................................... 34
SECTION 3.01. NOTICES TO TRUSTEE........................................ 34
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED......................... 34
SECTION 3.03. NOTICE OF REDEMPTION...................................... 34
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SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION...................................... 35
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE......................................... 35
SECTION 3.06. NOTES REDEEMED IN PART.............................................. 36
SECTION 3.07. OPTIONAL REDEMPTION................................................. 36
SECTION 3.08. MANDATORY REDEMPTION................................................ 36
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS................. 36
ARTICLE 4. COVENANTS................................................................ 38
SECTION 4.01. PAYMENT OF NOTES.................................................... 38
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY..................................... 38
SECTION 4.03. REPORTS............................................................. 39
SECTION 4.04. COMPLIANCE CERTIFICATE.............................................. 39
SECTION 4.05. TAXES............................................................... 40
SECTION 4.06. STAY, EXTENSION AND USURY LAWS...................................... 40
SECTION 4.07. RESTRICTED PAYMENTS................................................. 40
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES...... 42
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.......... 43
SECTION 4.10. ASSET SALES......................................................... 45
SECTION 4.11. TRANSACTIONS WITH AFFILIATES........................................ 46
SECTION 4.12. LIENS............................................................... 46
SECTION 4.13. SALE AND LEASEBACK TRANSACTIONS.................................... 46
SECTION 4.14. CORPORATE EXISTENCE................................................. 47
SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.......................... 47
SECTION 4.16. NO SENIOR SUBORDINATED DEBT......................................... 48
SECTION 4.17. ADDITIONAL SUBSIDIARY GUARANTEES.................................... 48
SECTION 4.18. PAYMENTS FOR CONSENT................................................ 48
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ARTICLE 5. SUCCESSORS...................................................................... 48
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS............................. 48
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.................................... 49
ARTICLE 6. DEFAULTS AND REMEDIES........................................................... 49
SECTION 6.01. EVENTS OF DEFAULT.................................................... 49
SECTION 6.02. ACCELERATION......................................................... 50
SECTION 6.03. OTHER REMEDIES....................................................... 51
SECTION 6.04. WAIVER OF PAST DEFAULTS.............................................. 51
SECTION 6.05. CONTROL BY MAJORITY.................................................. 52
SECTION 6.06. LIMITATION ON SUITS.................................................. 52
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT........................ 52
SECTION 6.08. COLLECTION SUIT BY TRUSTEE........................................... 52
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM..................................... 53
SECTION 6.10. PRIORITIES........................................................... 53
SECTION 6.11. UNDERTAKING FOR COSTS................................................ 53
ARTICLE 7. TRUSTEE......................................................................... 54
SECTION 7.01. DUTIES OF TRUSTEE.................................................... 54
SECTION 7.02. RIGHTS OF TRUSTEE.................................................... 55
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE......................................... 55
SECTION 7.04. TRUSTEE'S DISCLAIMER................................................. 55
SECTION 7.05. NOTICE OF DEFAULTS................................................... 56
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES........................... 56
SECTION 7.07. COMPENSATION AND INDEMNITY........................................... 56
SECTION 7.08. REPLACEMENT OF TRUSTEE............................................... 57
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC..................................... 58
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SECTION 7.10. ELIGIBILITY; DISQUALIFICATION................................................................ 58
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY............................................ 58
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE................................................................ 59
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE...................................... 59
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE................................................................ 59
SECTION 8.03. COVENANT DEFEASANCE........................................................................... 59
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.................................................... 60
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN
Trust; OTHER MISCELLANEOUS PROVISIONS......................................................... 61
SECTION 8.06. REPAYMENT TO COMPANY.......................................................................... 61
SECTION 8.07. REINSTATEMENT................................................................................. 62
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER......................................................................... 62
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES........................................................... 62
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES.............................................................. 63
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT........................................................... 64
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS............................................................. 64
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.............................................................. 64
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC............................................................... 65
ARTICLE 10. SUBORDINATION.......................................................................................... 65
SECTION 10.01. AGREEMENT TO SUBORDINATE...................................................................... 65
SECTION 10.02. CERTAIN DEFINITIONS........................................................................... 65
SECTION 10.03. LIQUIDATION; DISSOLUTION; BANKRUPTCY.......................................................... 66
SECTION 10.04. DEFAULT ON DESIGNATED SENIOR DEBT............................................................. 66
SECTION 10.05. ACCELERATION OF NOTES......................................................................... 67
SECTION 10.06. WHEN DISTRIBUTION MUST BE PAID OVER........................................................... 67
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SECTION 10.07. NOTICE BY COMPANY............................................................................. 67
SECTION 10.08. SUBROGATION................................................................................... 68
SECTION 10.09. RELATIVE RIGHTS............................................................................... 68
SECTION 10.10. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.................................................. 68
SECTION 10.11. DISTRIBUTION OR NOTICE TO REPRESENTATIVE...................................................... 68
SECTION 10.12. RIGHTS OF TRUSTEE AND PAYING AGENT............................................................ 69
SECTION 10.13. AUTHORIZATION TO EFFECT SUBORDINATION......................................................... 69
ARTICLE 11. SUBSIDIARY GUARANTEES.............................................................................. 69
SECTION 11.01. SUBSIDIARY GUARANTEE.......................................................................... 69
SECTION 11.02. SUBORDINATION OF SUBSIDIARY GUARANTEE......................................................... 70
SECTION 11.03. LIMITATION ON GUARANTOR LIABILITY............................................................. 70
SECTION 11.04. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE................................................ 71
SECTION 11.05. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS............................................ 71
SECTION 11.06. RELEASES FOLLOWING SALE OF ASSETS............................................................. 72
ARTICLE 12. SATISFACTION AND DISCHARGE......................................................................... 72
SECTION 12.01. SATISFACTION AND DISCHARGE OF INDENTURE....................................................... 72
SECTION 12.02. APPLICATION OF TRUST MONEY.................................................................... 73
ARTICLE 13. MISCELLANEOUS...................................................................................... 73
SECTION 13.01. TRUST INDENTURE ACT CONTROLS.................................................................. 73
SECTION 13.02. NOTICES....................................................................................... 74
SECTION 13.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES................................. 75
SECTION 13.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT............................................ 75
SECTION 13.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION................................................. 75
SECTION 13.06. RULES BY TRUSTEE AND AGENTS................................................................... 76
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SECTION 13.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND SHAREHOLDERS...................... 76
SECTION 13.08. GOVERNING LAW................................................................................. 76
SECTION 13.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS................................................. 76
SECTION 13.10. SUCCESSORS.................................................................................... 76
SECTION 13.11. SEVERABILITY.................................................................................. 76
SECTION 13.12. COUNTERPART ORIGINALS......................................................................... 76
SECTION 13.13. TABLE OF CONTENTS, HEADINGS, ETC.............................................................. 77
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EXHIBITS
Exhibit A-1 FORM OF NOTE
Exhibit A-2 FORM OF REGULATION S TEMPORARY GLOBAL NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL
ACCREDITED INVESTOR
Exhibit E FORM OF NOTATION OF SUBSIDIARY GUARANTEE
Exhibit F FORM OF SUPPLEMENTAL INDENTURE
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INDENTURE dated as of June 26, 1998 by and among Coyne International
Enterprises Corp., a New York corporation (the "Company"), the Guarantors named
on the signature page hereto and IBJ Schroder Bank & Trust Company, as trustee
(the "Trustee").
The Company, the Guarantors and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the Holders of
the 11 1/4% Series A Senior Subordinated Notes due 2008 (the "Series A Notes")
and the 11 1/4% Series B Senior Subordinated Notes due 2008 (the "Series B
Notes" and, together with the Series A Notes, the "Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"144A Global Note" means a global note in the form of Exhibit A-1
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Additional Notes" means up to $75.0 million in aggregate
principal amount of Notes (other than the Initial Notes) issued under this
Indenture in accordance with Sections 2.02 and 4.09 hereof.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of the Voting Stock of a
Person shall be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and CEDEL that apply to such transfer or
exchange.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets or rights (including, without limitation, by way of a
sale and leaseback) other than a sale or lease 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
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Subsidiaries taken as a whole shall be governed by the provisions of Section
4.15 hereof and/or the provisions of Section 5.01 hereof and not by the
provisions of Section 4.10 hereof), and (ii) the issue or sale by the Company or
any of its 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 (whether by sale, lease, conveyance,
other disposition, merger, consolidation, division or otherwise) by the Company
to a Wholly Owned Subsidiary (other than a Receivables Subsidiary) or a
Guarantor by a Subsidiary to the Company or to a Wholly Owned Subsidiary (other
than a Receivables Subsidiary) or a Guarantor, (ii) an issuance of Equity
Interests by a Wholly Owned Subsidiary to the Company or to another Wholly Owned
Subsidiary, (iii) a Restricted Payment that is permitted by the Section 4.07
hereof (iv) the sale to a Receivables Subsidiary of accounts receivables and
related assets that are customarily transferred in an asset securitization
transaction; and (v) the sale of up to $2.0 million of assets since the date
hereof. A transfer of assets by the Company or a Wholly-Owned Subsidiary (other
than a Receivables Subsidiary) of the Company to a Person other than the Company
or another Wholly Owned Subsidiary (other than a Receivables Subsidiary), shall
be deemed an Asset Sale only to the extent of the percentage of the Equity
Interests in the transferee that are owned by Persons other than the Company or
Wholly Owned Subsidiaries (other than a Receivables Subsidiary) of the Company.
"Attributable Debt" in respect of a sale and leaseback
transaction means, at the time of determination, the present value (discounted
at the rate of interest implicit in such transaction, determined in accordance
with GAAP) of the obligation of the lessee for net rental payments during the
remaining term of the lease included in such sale and leaseback transaction
(including any period for which such lease has been extended or may, at the
option of the lessor, be extended).
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal
or state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company,
or any authorized committee of the Board of Directors.
"Borrowing Base" means, as of any date, an amount equal to the
sum of (a) 85.0% of the face amount of all accounts receivable owned by the
Company and the Guarantors as of such date that are not more than 90 days past
due and (b) 50.0% of the book value of all inventory owned by the Company and
the Guarantors as of such date, all calculated on a consolidated basis and in
accordance with GAAP. To the extent that information is not available as to the
amount of accounts receivable or inventory as of a specific date, the Company
may utilize the most recent available information for purposes of calculating
the Borrowing Base.
"Broker-Dealer" has the meaning set forth in the Registration
Rights Agreement.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
2
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"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 New 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.
"CEDEL" means CEDEL Bank, SA.
"Change of Control" means the occurrence of any of the following:
(i) the sale, lease, transfer, conveyance or other disposition (other than by
way of merger or consolidation), in one or a series of related transactions, of
all or substantially all of the assets of the Company and its Subsidiaries taken
as a whole to any "person" (as such term is used in Section 13(d)(3) of the
Exchange Act) other than a Principal or a Related Party of a Principal, (ii) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" (as defined above),
other than the Principals and their Related Parties, becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
currently exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 50% of the Voting Stock of the
Company (measured by voting power rather than number of shares), (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 defined above), 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 Directors of the Company are
not Continuing Directors.
"Company" means Coyne International Enterprises Corp., and any
and all successors thereto.
"Consolidated Cash Flow" means, with respect to any Person for
any period, the Consolidated Net Income of such Person for such period plus (i)
an amount equal to any extraordinary loss plus any net loss realized in
connection with an Asset Sale or the disposition of securities held by
3
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such Person and its Subsidiaries (to the extent such losses were deducted in
computing such Consolidated Net Income), plus (ii) provision for taxes based on
income or profits of such Person and its 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
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance costs
and original issue discount, non-cash interest payments, the interest component
of any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with respect to
Attributable Debt, 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 Subsidiaries for such period to the extent that
such depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income, minus (v) non-cash items increasing such
Consolidated Net Income for such period, in each case, on a consolidated basis
and determined in accordance with GAAP. Notwithstanding the foregoing, the
provision for taxes on the income or profits of, and the depreciation and
amortization and other non-cash expenses of, a Subsidiary of the referent Person
shall be added to Consolidated Net Income to compute Consolidated Cash Flow only
to the extent that a corresponding amount would be permitted at the date of
determination to be dividended to the Company by such Subsidiary without prior
governmental approval (that has not been obtained), and without direct or
indirect restriction pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for
any period, the aggregate of the Net Income of such Person and its 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
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 Subsidiary thereof that is a
Guarantor, (ii) the Net Income of any Subsidiary shall be excluded to the extent
that the declaration or payment of dividends or similar distributions by that
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 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 and (iv) the
cumulative effect of a change in accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of
any date, the sum of (i) the consolidated equity of the common stockholders of
such Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-
4
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ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date hereof in the book value of any asset
owned by such Person or a consolidated Subsidiary of such Person, (y) all
investments as of such date in unconsolidated Subsidiaries and in Persons that
are not Subsidiaries (except, in each case, Permitted Investments), and (z) all
unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination,
any member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date of the Indenture or (ii) was nominated for
election or elected to such Board of Directors with the approval of a majority
of the Continuing Directors who were members of such Board at the time of such
nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address
of the Trustee specified in Section 13.02 hereof or such other address as to
which the Trustee may give notice to the Company.
"Credit Facilities" means, with respect to the Company, one or
more debt facilities (including, without limitation, the New 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. Indebtedness under Credit Facilities
outstanding on the date on which Notes are first issued and authenticated under
this Indenture shall be deemed to have been incurred on such date in reliance on
the exception provided by clause (i) of the definition of Permitted Debt.
"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 2.06 hereof, in
the form of Exhibit A-1 hereto except that such Note shall not bear the Global
-----------
Note Legend and shall not have the "Schedule of Exchanges of Interests in the
Global Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or issued
in whole or in part in global form, the Person specified in Section 2.03 hereof
as the Depositary with respect to the Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Disqualified Stock" means any Capital Stock that, by its terms
(or by the terms of any security into which it is convertible, or for which it
is exchangeable, at the option of the holder thereof), or upon the happening of
any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature; provided, however, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the right
to require the Company to repurchase such Capital Stock upon the occurrence of a
Change of Control or an Asset Sale shall not constitute Disqualified Stock if
the terms of such Capital Stock provide that the Company may not repurchase or
redeem any such Capital Stock pursuant to such provisions unless such repurchase
or redemption complies with Section 4.07 hereof.
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"Distribution" means the payment of amounts aggregating no more
than $19.0 million to Capital Resources Lenders II and Exeter Venture Lenders in
connection with the purchase of certain warrants of the Company, certain of
which payments may occur as much as two years after the closing of the Offering.
"Domestic Subsidiary" means, with respect to the Company, any
Subsidiary of the Company that was formed under the laws of the United States of
America or that Guarantee or otherwise provides credit support for any
Indebtedness of the Company.
"Equity Interests" means Capital Stock and all warrants, options
or other rights to acquire Capital Stock (but excluding any debt security that
is convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Notes" means the Series B Notes issued in the Exchange
Offer pursuant to Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the Registration
Rights Agreement.
"Exchange Offer Registration Statement" has the meaning set forth
in the Registration Rights Agreement.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the New Credit Facility) in
existence on the date hereof, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period,
the sum, without duplication, of (i) the consolidated interest expense of such
Person and its Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, imputed interest with respect to Attributable Debt,
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 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 Subsidiaries or secured by a Lien on assets of such Person or one of
its Subsidiaries (whether or not such Guarantee or Lien is called upon) and (iv)
the product of (a) all dividend payments, whether or not in cash, on any series
of preferred stock of such Person or any of its 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 Subsidiary of the
Company, times (b) a fraction, the numerator of which is one and the denominator
of which is one minus the then current combined federal, state and local
statutory tax rate of such Person, expressed as a decimal, in each case, on a
consolidated basis and in accordance with GAAP.
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"Fixed Charge Coverage Ratio" means with respect to any Person
for any period, the ratio of the Consolidated Cash Flow of such Person for such
period to the Fixed Charges of such Person for such period. In the event that
the referent Person or any of its 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 the beginning of the applicable four-quarter
reference period. In addition, for purposes of making the computation referred
to above, (i) acquisitions that have been made by the Company or any of its
Subsidiaries, including through mergers or consolidations and including any
related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
shall be deemed to have occurred on the first day of the four-quarter reference
period and Consolidated Cash Flow for such reference period shall be calculated
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 shall not be obligations of the referent
Person or any of its Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, which are in effect on the date hereof.
"Global Note Legend" means the legend set forth in Section
2.06(g)(ii), which is required to be placed on all Global Notes issued under
this Indenture.
"Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A-1 or A-2 hereto issued in accordance with Section 2.01, 2.06(b)(iv),
- ----------- ---
2.06(d)(ii) or 2.06(f) hereof.
"Government Securities" means direct obligations of, or
obligations guaranteed by, the United States of America, and the payment for
which the United States pledges its full faith and credit.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, by way of a
pledge of assets or through letters of credit or reimbursement agreements in
respect thereof), of all or any part of any Indebtedness.
"Guarantors" means each of (i) Blue Ridge Textile Manufacturing,
Inc., Clean Towel Service, Inc., Ohio Garment Rental, Inc. and Midway--CTS
Buffalo, Ltd., and (ii) any other Subsidiary that executes a Subsidiary
Guarantee in accordance with the provisions of this Indenture, and their
respective successors and assigns.
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"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Holder" means a Person in whose name a Note is registered.
"IAI Global Note" means the global Note in the form of Exhibit
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A-1 hereto bearing the Global Note Legend and the Private Placement Legend and
- ---
deposited with or on behalf of and registered in the name of the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold to Institutional Accredited Investors.
"Indebtedness" means, with respect to any Person, any
indebtedness of such Person, whether or not contingent, in respect of borrowed
money or evidenced by bonds, notes, debentures or similar instruments or letters
of credit (or reimbursement agreements in respect thereof) or banker's
acceptances or representing Capital Lease Obligations or the balance deferred
and unpaid of the purchase price of any property or representing any Hedging
Obligations, except any such balance that constitutes an accrued expense or
trade payable, if and to the extent any of the foregoing (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, as well as all Indebtedness of
others secured by a Lien on any asset of such Person (whether or not such
Indebtedness is assumed by such Person) and, to the extent not otherwise
included, the Guarantee by such Person of any indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date shall be (i) the
accreted amount thereof, in the case of any Indebtedness issued with original
issue discount, and (ii) the principal amount thereof, together with any
interest thereon that is more than 30 days past due, in the case of any other
Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from
time to time.
"Indirect Participant" means a Person who holds a beneficial
interest in a Global Note through a Participant.
"Initial Notes" means $75.0 million in aggregate principal amount
of Notes issued under this Indenture on the date hereof.
"Initial Purchaser" shall have the meaning assigned to such term
in the Offering Memorandum.
"Institutional Accredited Investor" means an institution that is
an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who are not also QIBs.
"Investments" means, with respect to any Person, all investments
by such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Subsidiary of the Company sells or otherwise disposes of
any Equity Interests of any direct or indirect Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of the Company, the Company shall be deemed to
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<PAGE>
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
Section 4.07 hereof.
"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 Company and sent to all Holders of the Notes for use by such
Holders in connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law (including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Liquidated Damages" means all amounts owing pursuant to Section
5 of the Registration Rights Agreement.
"Net Income" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however, (i) any
gain (but not loss), together with any related provision for taxes on such gain
(but not loss), realized in connection with (a) any Asset Sale (including,
without limitation, dispositions pursuant to sale and leaseback transactions) or
(b) the disposition of any securities by such Person or any of its Subsidiaries
or the extinguishment of any Indebtedness of such Person or any of its
Subsidiaries and (ii) any extraordinary gain (but not loss), together with any
related provision for taxes on such extraordinary gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its 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 under a Credit Facility) secured by a Lien on the asset or assets
that were the subject of such Asset Sale and any reserve for adjustment in
respect of the sale price of such asset or assets established in accordance with
GAAP.
"New Credit Facility" means that certain Credit Facility, dated
as of June 26, 1998, by and among the Company and NationsBank, N.A. and the
other lenders party thereto, providing for up to $25.0 million of secured
revolving credit borrowings and up to $30.0 million of secured term debt,
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.
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<PAGE>
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Note Custodian" means the Trustee, as custodian with respect to
the Notes in global form, or any successor entity thereto.
"Notes" has the meaning assigned to it in the preamble to this
Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Initial Notes by the
Company.
"Offering Memorandum" means the Offering Memorandum, dated June
23, 1998, pursuant to which the Initial Notes were offered and sold.
"Officer" means, with respect to the Company or any Guarantor,
any Co-Chairman of the Board, President, Chief Executive Officer, Chief
Operating Officer, Chief Financial Officer, Senior Vice President, Vice
President, Treasurer or Secretary of such Person.
"Officers Certificate" means a certificate that meets the
requirements of Section 13.5 and has been signed by two Officers.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
13.05 hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
"Participant" means, with respect to the Depositary, Euroclear or
CEDEL, a Person who has an account with the Depositary, Euroclear or CEDEL,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and CEDEL).
"Permitted Business" means any business conducted by the Company
or any of its Subsidiaries as of the date hereof and any business reasonably
related or incidental thereto.
"Permitted Investments" means (a) any Investment in the Company
or in a Subsidiary of the Company that is a Guarantor; (b) any Investment in
Cash Equivalents; (c) any Investment by the Company or any Subsidiary of the
Company in a Person, if as a result of such Investment (i) such Person becomes a
Subsidiary of the Company and a Guarantor or (ii) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or a Subsidiary of the
Company that is a Guarantor; (d) any Investment made as a result of the receipt
of non-cash consideration from an Asset Sale that was made pursuant to and in
compliance with the Section 4.10 hereof; (e) any acquisition of assets solely in
exchange for the issuance of Equity Interests (other than Disqualified Stock) of
the Company; (f) any Investment by the Company or a Subsidiary of the Company in
a Receivables Subsidiary or any Investment by a Receivables Subsidiary in any
other Person or assets in connection with a Qualified Receivables Transaction;
provided that any Investment in any such Person is in the form of a Purchase
Money Note, an equity interest or interests in accounts receivables generated by
the Company or a Subsidiary of the Company and transferred to any Person in
connection with a Qualified Receivables Transaction or any such Person owning
such accounts receivables; (g) repurchase of the Notes; (h) Investments by the
Company and its Subsidiaries
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outstanding on the date hereof; and (i) 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 (i) that are at
the time outstanding, not to exceed $1.0 million.
"Permitted Liens" means (i) Liens existing on the date hereof; (ii)
Liens securing Senior Debt that was permitted to be incurred under this
Indenture; (iii) Liens securing Permitted Refinancing Indebtedness that was
incurred to refinance any Indebtedness that had been secured by a Lien permitted
under this Indenture and that was incurred in accordance with the provisions of
this Indenture, provided, however, that such Liens (a) are not materially less
favorable to the Holders and are not materially more favorable to the
lienholders with respect to such Liens than the Liens in respect of the
Indebtedness being refinanced and (b) do not extend to or cover any property or
assets of the Company or any of its Subsidiaries not securing the Indebtedness
so refinanced; (iv) Liens securing the Notes; (v) Liens securing Indebtedness of
a Person existing at the time such Person becomes a Subsidiary, provided that
such Liens were in existence prior to the contemplation of such acquisition,
merger or consolidation, were not incurred in anticipation thereof, and do not
extend to any other assets; (vi) Liens incurred in the ordinary course of
business of the Company or any Subsidiary of the Company with respect to
obligations that do not exceed $5.0 million at any time outstanding and that are
not incurred in connection with the borrowing of money or obtaining advances or
credit (other than trade credit incurred in the ordinary course of business);
(vii) Liens imposed by governmental authorities for taxes, assessments or other
charges or claims either (a) not delinquent or (b) contested in good faith by
appropriate proceedings and as to which the Company or any of its Subsidiaries
shall have set aside on its books such reserves as may be required pursuant to
GAAP; (viii) statutory Liens of landlords, carriers, warehousemen, mechanics,
suppliers, materialmen, repairmen and other like Liens arising by operation of
law in the ordinary course of business for sums not yet delinquent or being
contested in good faith, if such reserves or other appropriate provisions, if
any, as shall be required by GAAP shall have been made in respect thereof; (ix)
Liens incurred or deposits made in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other types of social
security or similar obligations, including any Lien securing letters of credit
issued in the ordinary course of business in connection therewith, or to secure
the performance of tenders, statutory obligations, surety and appeal bonds,
bids, leases, government contracts, performance and return-of-money bonds and
other similar obligations (exclusive of obligations for the payment of borrowed
money) incurred in the ordinary course of business; (x) judgment Liens not
giving rise to an Event of Default so long as such Lien is adequately bonded and
any appropriate legal proceedings which may have been duly initiated for the
review of such judgment shall not have been finally terminated or the period
within which such proceedings may be initiated shall not have expired; (xi)
easements, rights-of-way, zoning restrictions, minor defects or irregularities
with title and other similar charges or encumbrances in respect of real property
not materially detracting from the value of the property subject thereto and not
interfering in any material respect with the ordinary conduct of business of the
Company or any of its Subsidiaries; (xii) Liens upon specific items of inventory
or other goods and proceeds of any Person securing such person's obligations in
respect of banker's acceptance issued or created for the account of such Person
to facilitate the purchase, shipment or storage of such inventory or other goods
in the ordinary course of business; (xiii) Liens in favor of the Company or a
Guarantor; (xiv) leases or subleases granted to others not interfering in any
material respects with the business of the Company or its Subsidiaries; (xv)
Liens arising out of consignment or similar arrangements for the sale of goods
entered into by the Company or any of its Subsidiaries in the ordinary course of
business.
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"Permitted Payments" means payments to repurchase Equity Interests of
the Company in order to satisfy certain estate planning obligations of the
estate of J. Stanley Coyne, which payments shall not exceed $1.0 million in each
of the second, third, fourth, fifth and sixth calendar years following the death
of J. Stanley Coyne and $2.25 million in each of the seventh, eighth, ninth and
tenth calendar years following the death of J. Stanley Coyne, plus an additional
amount of $2.0 million in the calendar year 2003; provided that no such payment
shall be made prior to the death of J. Stanley Coyne; and provided further, that
the maximum amount of Permitted Payments in a specified calendar year following
the death of J. Stanley Coyne shall be increased by an amount equal to the
difference between the maximum amount of Permitted Payments that could have been
made by the Company in each of the prior specified calendar years following the
death of J. Stanley Coyne and the actual amount of Permitted Payments made by
the Company in each of such prior specified calendar years following the death
of J. Stanley Coyne.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Subsidiaries issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its 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 later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of, the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the Notes,
such Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the Notes on
terms at least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by
the Company or by the Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, incorporated or unincorporated association,
joint-stock company, trust, unincorporated organization or government or other
agency or political subdivision thereof or other entity of any kind.
"Preferred Stock," of any person, means Capital Stock of such Person
of any class or series (however designated) that ranks prior, as to payment of
dividends or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person, to shares of Capital
Stock of any other class or series of such Person.
"Principals" means J. Stanley Coyne and Thomas M. Coyne.
"Private Placement Legend" means the legend set forth in Section
2.06(g)(i) to be placed on all Notes issued under this Indenture except where
otherwise permitted by the provisions of this Indenture.
"Purchase Money Note" means a promissory note evidencing a line of
credit, which may be irrevocable, from, or evidencing other Indebtedness owed
to, the Company or any Subsidiary of the Company in connection with a Qualified
Receivables Transaction, which note shall be repaid from cash
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available to the maker of such note, 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.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Qualified Receivables Transaction" means any transaction or series of
transactions that may be entered into by the Company or any Subsidiary of the
Company pursuant to which the Company or any Subsidiary of the Company may sell,
convey or otherwise transfer to (a) a Receivables Subsidiary (in the case of a
transfer by the Company or any Subsidiary of the Company) and (b) any other
Person (in the case of a transfer by a Receivables Subsidiary), or may grant a
security interest in, any accounts receivables (whether now existing or arising
in the future) of the Company or any Subsidiary of the Company, and any assets
related thereto including, without limitation, all collateral securing such
accounts receivables, all contracts and all guarantees or other obligations in
respect of such accounts receivables, proceeds of such accounts receivable and
other assets that are customarily transferred, or in respect of which security
interests are customarily granted, in connection with asset securitization
transactions involving accounts receivable.
"Receivables Subsidiary" means a Wholly Owned Subsidiary of the
Company that engages in no activities other than in connection with the
financing of accounts receivable and that is designated by the Board of
Directors of the Company (as provided below) as a Receivables Subsidiary (a) no
portion of the Indebtedness or any other Obligations (contingent or otherwise)
of which (i) is guaranteed by the Company or any other Subsidiary of the Company
(excluding guarantees of Obligations (other than the principal of, and interest
on, Indebtedness)) pursuant to Standard Securitization Undertakings, (ii) is
recourse to or obligates the Company or any other Subsidiary of the Company in
any way other than pursuant to Standard Securitization Undertakings or (iii)
subjects any property or asset of the Company or any other Subsidiary of the
Company, directly or indirectly, contingently or otherwise, to the satisfaction
thereof, other than pursuant to Standard Securitization Undertakings, (b) with
which neither the Company nor any other Subsidiary of the Company has any
material contract, agreement, arrangement or undertaking (except in connection
with a Purchase Money Note or Qualified Receivables Transaction) other than on
terms no less favorable to the Company or such other 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 accounts receivables, and (c) to which neither the
Company nor any other 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
Directors of the Company shall be evidenced to the Trustee by filing with the
Trustee a certified copy of the resolution of the Board of Directors of the
Company giving effect to such designation and an Officers' Certificate
certifying, to the best of such officer's knowledge and belief after consulting
with counsel, that such designation complied with the foregoing conditions.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date hereof, by and among the Company and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time and, with respect to any Additional
Notes, one or more registration rights agreements between the Company and the
other parties thereto, as such agreement(s) may be amended, modified or
supplemented from time to time, relating to rights given by the Company to the
purchasers of Additional Notes to register such Additional Notes under the
Securities Act.
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"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 (i) any
controlling stockholder, 80% (or more) owned Subsidiary, or spouse, ex-spouse,
immediate family member or lineal descendant (in the case of an individual) of
such Principal or (ii) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially holding an
80% or more controlling interest of which consist of such Principal and/or such
other Persons referred to in the immediately preceding clause (i).
"Responsible Officer," when used with respect to the Trustee, means
any officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing the
Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private
Placement Legend.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Period" means the 40-day restricted period as defined in
Regulation S.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
14
<PAGE>
"Shelf Registration Statement" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the date
hereof.
"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 an accounts
receivable transaction.
"Stated Maturity" means, with respect to any installment of interest
or principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantee" means the subordinated Guarantee by each
Guarantor of the Company's payment obligations under this Indenture and the
Notes, executed pursuant to the provisions of this Indenture.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
77bbbb) as in effect on the date on which this Indenture is qualified under the
TIA.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Unrestricted Definitive Note" means one or more Definitive Notes that
do not bear and are not required to bear the Private Placement Legend.
"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.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
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"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 Subsidiary" of any Person means a Subsidiary (other than
a Receivables 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
Subsidiaries (other than a Receivables Subsidiary) of such Person or by such
Person and one or more Wholly Owned Subsidiaries of such Person.
SECTION 1.02. OTHER DEFINITIONS.
Defined in
Term Section
---- -------
"Affiliate Transaction" 4.11
"Asset Sale Offer" 4.10
"Authentication Order" 2.02
"Change of Control Offer" 4.15
"Change of Control Payment" 4.15
"Change of Control Payment Date" 4.15
"Covenant Defeasance" 8.03
"Designated Senior Debt 10.02
"Designation" 4.07
"Event of Default" 6.01
"ExcessProceeds" 4.10
"incur" 4.09
"Legal Defeasance" 8.02
"Offer Amount" 3.09
"Offer Period" 3.09
"Paying Agent" 2.03
"Payment Blockage Notice" 10.04
"Permitted Indebtedness" 4.09
"Permitted Junior Securities" 10.02
"Purchase Date" 3.09
"Redemption Date" 3.07
"Registrar" 2.03
"Representative" 10.02
"Restricted Payments" 4.07
"Revocation" 4.07
"Senior Debt" 10.02
SECTION 1.03. TRUST INDENTURE ACT DEFINITIONS
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
16
<PAGE>
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Notes or the Subsidiary Guarantees means the Company
and the Guarantors, respectively and any successor obligor upon the Notes and
the Subsidiary Guarantees, respectively.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act
shall be deemed to include substitute, replacement of successor sections or
rules adopted by the SEC from time to time.
ARTICLE 2.
THE NOTES
SECTION 2.01. FORM AND DATING.
(a) General.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibits A-1 and A-2 hereto. The Notes may have
------------ ---
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes
shall be in denominations of $1,000 and integral multiples thereof.
17
<PAGE>
The terms and provisions contained in the Notes shall constitute, and
are hereby expressly made, a part of this Indenture and the Company, the
Guarantors and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby. However,
to the extent any provision of any Note conflicts with the express provisions of
this Indenture, the provisions of this Indenture shall govern and be
controlling.
(b) Global Notes.
Notes issued in global form shall be substantially in the form of
Exhibits A-1 or A-2 attached hereto (including the Global Note Legend thereon
- ------------ ---
and the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Notes issued in definitive form shall be substantially in the form of
Exhibit A-1 attached hereto (but without the Global Note Legend thereon and
- -----------
without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time endorsed
thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the aggregate principal amount of
outstanding Notes represented thereby shall be made by the Trustee or the Note
Custodian, at the direction of the Trustee, in accordance with instructions
given by the Holder thereof as required by Section 2.06 hereof.
(c) Temporary Global Notes.
Notes offered and sold in reliance on Regulation S shall be issued
initially in the form of the Regulation S Temporary Global Note, which shall be
deposited on behalf of the purchasers of the Notes represented thereby with the
Trustee, at its New York office, as custodian for the Depositary, and registered
in the name of the Depositary or the nominee of the Depositary for the accounts
of designated agents holding on behalf of Euroclear or CEDEL Bank, duly executed
by the Company and authenticated by the Trustee as hereinafter provided. The
Restricted Period shall be terminated upon the receipt by the Trustee of (i) a
written certificate from the Depositary, together with copies of certificates
from Euroclear and CEDEL Bank certifying that they have received certification
of non-United States beneficial ownership of 100% of the aggregate principal
amount of the Regulation S Temporary Global Note (except to the extent of any
beneficial owners thereof who acquired an interest therein during the Restricted
Period pursuant to another exemption from registration under the Securities Act
and who will take delivery of a beneficial ownership interest in a 144A Global
Note or an IAI Global Note bearing a Private Placement Legend, all as
contemplated by Section 2.06(a)(ii) hereof), and (ii) an Officers' Certificate
from the Company. Following the termination of the Restricted Period,
beneficial interests in the Regulation S Temporary Global Note shall be
exchanged for beneficial interests in Regulation S Permanent Global Notes
pursuant to the Applicable Procedures. Simultaneously with the authentication
of Regulation S Permanent Global Notes, the Trustee shall cancel the Regulation
S Temporary Global Note. The aggregate principal amount of the Regulation S
Temporary Global Note and the Regulation S Permanent Global Notes may from time
to time be increased or decreased by adjustments made on the records of the
Trustee and the Depositary or its nominee, as the case may be, in connection
with transfers of interest as hereinafter provided.
(d) Euroclear and CEDEL Procedures Applicable.
The provisions of the "Operating Procedures of the Euroclear System"
and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and
Conditions of CEDEL Bank" and
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"Customer Handbook" of CEDEL Bank shall be applicable to transfers of beneficial
interests in the Regulation S Temporary Global Note and the Regulation S
Permanent Global Notes that are held by Participants through Euroclear or CEDEL
Bank.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Notes For the Company by manual or
facsimile signature.
If an Officer whose signature is on a Note no longer holds that office
at the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature shall be conclusive evidence that the Note has
been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers (an "Authentication Order"), authenticate Notes for original issue up
to the aggregate principal amount stated in paragraph 4 of the Notes. The
aggregate principal amount of Notes outstanding at any time may not exceed such
amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders or an
Affiliate of the Company.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall
notify the Trustee in writing of the name and address of any Agent not a party
to this Indenture. If the Company fails to appoint or maintain another entity
as Registrar or Paying Agent, the Trustee shall act as such. The Company or any
of its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Note Custodian with respect to the Global Notes.
The Trustee is authorized to enter into a letter of representations
with DTC in the form provided to the Trustee by the Company and to act in
accordance with such letter.
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SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Liquidated Damages, if any, or interest on the Notes, and
will promptly notify the Trustee in writing of any default by the Company in
making any such payment. While any such default continues, the Trustee may
require a Paying Agent to pay all money held by it to the Trustee. The Company
at any time may require a Paying Agent to pay all money held by it to the
Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the
Company or a Subsidiary) shall have no further liability for the money. If the
Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the benefit of the Holders all money held by it as
Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the
Company, the Trustee shall serve as Paying Agent for the Notes.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Company shall otherwise comply with TIA (S) 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Notes.
A Global Note may not be transferred as a whole except by the
Depositary to a nominee of the Depositary, by a nominee of the Depositary to the
Depositary or to another nominee of the Depositary, the Depositary or any such
nominee to a successor Depositary or a nominee of such successor Depositary.
All Global Notes will be exchanged by the Company for Definitive Notes if (i)
the Company delivers to the Trustee 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 Company within 120 days after the
date of such notice from the Depositary or (ii) the Company in its sole
discretion determines that the Global Notes (in whole but not in part) should be
exchanged for Definitive Notes and delivers a written notice to such effect to
the Trustee; provided that in no event shall the Regulation S Temporary Global
Note be exchanged by the Company for Definitive Notes prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Registrar of any
certificates determined by the Company to be required pursuant to Rule
903(c)(3)(ii)(B) under the Securities Act. Upon the occurrence of either of the
preceding events in (i) or (ii) above, Definitive Notes shall be issued in such
names as the Depositary shall instruct the Trustee. Global Notes also may be
exchanged or replaced, in whole or in part, as provided in Sections 2.07 and
2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu
of, a Global Note or any portion thereof, pursuant to this Section 2.06 or
Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form
of, and shall be, a Global Note. A Global Note may not be exchanged for another
Note other than as provided in this Section 2.06(a), however, beneficial
interests in a Global Note may be transferred and exchanged as provided in
Section 2.06(b),(c) or (f) hereof.
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(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
delivery thereof in the form of a beneficial interest in the same Restricted
Global Note in accordance with the transfer restrictions set forth in the
Private Placement Legend; provided, however, that prior to the expiration of
the Restricted Period, transfers of beneficial interests in the Temporary
Regulation S Global Note may not be made to a U.S. Person or for the account
or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial
interests in any Unrestricted Global Note may be transferred to Persons who
take delivery thereof in the form of a beneficial interest in an Unrestricted
Global Note. No written orders or instructions shall be required to be
delivered to the Registrar to effect the transfers described in this Section
2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in Global
Notes. In connection with all transfers and exchanges of beneficial interests
that are not subject to Section 2.06(b)(i) above, the transferor of such
beneficial interest must deliver to the Depositary 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 determined by the Company to be required
pursuant to Rule 903 under the Securities Act. Upon consummation of an
Exchange Offer by the Company in accordance with Section 2.06(f) hereof, the
requirements of this Section 2.06(b)(ii) shall be deemed to have been
satisfied upon receipt by the Registrar of the instructions contained in the
Letter of Transmittal delivered by the Holder of such beneficial interests in
the Restricted Global Notes. Upon satisfaction of all of the requirements for
transfer or exchange of beneficial interests in Global Notes contained in this
Indenture and the Notes or otherwise applicable under the Securities Act, the
Trustee shall adjust the principal amount of the relevant Global Note(s)
pursuant to Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted Global Note.
A beneficial interest in any Restricted Global Note may be transferred to a
Person who takes delivery thereof in the form
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<PAGE>
of a beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of Section 2.06(b)(ii) above and the Registrar
receives the following:
(A) if the transferee will take delivery in the form of a beneficial
interest in the 144A Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the certifications
---------
in item (1) thereof;
(B) if the transferee will take delivery in the form of a beneficial
interest in the Regulation S Temporary Global Note or the Regulation S
Global Note, then the transferor must deliver a certificate in the form
of Exhibit B hereto, including the certifications in item (2) thereof;
---------
and
(C) if the transferee will take delivery in the form of a beneficial
interest in the IAI Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the certifications
---------
and certificates and Opinion of Counsel required by item (3) thereof, if
applicable.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted Global
Note for Beneficial Interests in the Unrestricted Global Note. A beneficial
interest in any Restricted Global Note may be exchanged by any holder thereof
for a beneficial interest in an Unrestricted Global Note or transferred to a
Person who takes delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note if the exchange or transfer complies with the
requirements of Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the holder
of the beneficial interest to be transferred, in the case of an exchange,
or the transferee, in the case of a transfer, certifies in the applicable
Letter of Transmittal or via the Depositary's book-entry system that it
is not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an affiliate
(as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a 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
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the form of a beneficial interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit B hereto, including the
---------
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar
so requests or if the Applicable Procedures so require, an Opinion of
Counsel in form reasonably acceptable to the Registrar to the effect that
such exchange or transfer is in compliance with the Securities Act and that
the restrictions on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance with the
Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D)
above at a time when an Unrestricted Global Note has not yet been issued, the
Company shall issue and, upon receipt of an Authentication Order in accordance
with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(i) Beneficial Interests in Restricted Global Notes to Restricted
Definitive Notes. If any holder of a beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a Restricted
Definitive Note or to transfer such beneficial interest to a Person who takes
delivery thereof in the form of a Restricted Definitive Note, then, upon
receipt by the Registrar of the following documentation:
(A) if the holder of such beneficial interest in a Restricted Global
Note proposes to exchange such beneficial interest for a Restricted
Definitive Note, a certificate from such holder in the form of Exhibit C
---------
hereto, including the certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A, 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, 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, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item
---------
(3)(a) thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from
the registration requirements of the Securities Act other than those
listed in subparagraphs (B) through (D) above,
23
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a certificate to the effect set forth in Exhibit B hereto, including
---------
the certifications, certificates and Opinion of Counsel required by
item (3) thereof, if applicable;
(F) if such beneficial interest is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item
---------
(3)(b) thereof; or
(G) if such beneficial interest is being transferred pursuant to
an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
---------
the certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable
Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof,
and the Company shall execute and the Trustee shall authenticate and
deliver to the Person designated in the instructions a Definitive Note in
the appropriate principal amount. Any Definitive Note issued in exchange
for a beneficial interest in a Restricted Global Note pursuant to this
Section 2.06(c) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Registrar through written instructions from the
Depositary and the Participant or Indirect Participant. The Trustee shall
deliver such Definitive Notes to the Persons in whose names such Notes are
so registered. Any Definitive Note issued in exchange for a beneficial
interest in a Restricted Global Note pursuant to this Section 2.06(c)(i)
shall bear the Private Placement Legend and shall be subject to all
restrictions on transfer contained therein.
(ii) Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a beneficial
interest in the Regulation S Temporary Global Note may not be exchanged for a
Definitive Note or transferred to a Person who takes delivery thereof in the
form of a Definitive Note prior to (x) the expiration of the Restricted Period
and (y) the receipt by the Registrar of any certificates determined by the
Company to be required pursuant to Rule 903(c)(3)(ii)(B) under the Securities
Act, except in the case of a transfer pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 903 or Rule
904.
(iii) Beneficial Interests in Restricted Global Notes to Unrestricted
Definitive Notes. A holder of a beneficial interest in a Restricted Global
Note may exchange such beneficial interest for an Unrestricted Definitive Note
or may transfer such beneficial interest to a Person who takes delivery
thereof in the form of an Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of such beneficial interest, in the case of an
exchange, or the transferee, in the case of a transfer, certifies
in the applicable Letter of Transmittal that it is not (1) a broker-
dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined in
Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
24
<PAGE>
(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 2.06(b)(ii) hereof, the Trustee shall cause
the aggregate principal amount of the applicable Global Note to be reduced
accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute
and the Trustee shall authenticate and deliver to the Person designated in the
instructions a Definitive Note in the appropriate principal amount. Any
Definitive Note issued in exchange for a beneficial interest pursuant to this
Section 2.06(c)(iii) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Registrar through instructions from the Depositary
and the Participant or Indirect Participant. The Trustee shall deliver such
Definitive Notes to the Persons in whose names such Notes are so registered.
Any Definitive Note issued in exchange for a beneficial interest pursuant to
this Section 2.06(c)(iii) shall not bear the Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests.
(i) Restricted Definitive Notes to Beneficial Interests in Restricted
Global Notes. If any Holder of a Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global Note or to
transfer such Restricted Definitive Notes to a Person who takes delivery
thereof in the form of a beneficial interest in a Restricted Global Note,
then, upon receipt by the Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global
Note, a certificate from
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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, 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, 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, a certificate to the
effect set forth in Exhibit B hereto, including the certifications
---------
in item (3)(a) thereof;
(E) if such Restricted Definitive Note is being transferred to an
Institutional Accredited Investor in reliance on an exemption from
the registration requirements of the Securities Act other than those
listed in subparagraphs (B) through (D) above, a certificate to the
effect set forth in Exhibit B hereto, including the certifications,
---------
certificates and Opinion of Counsel required by item (3) thereof, if
applicable;
(F) if such Restricted Definitive Note is being transferred to
the Company or any of its Subsidiaries, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in item
---------
(3)(b) thereof; or
(G) if such Restricted Definitive Note is being transferred
pursuant to an effective registration statement under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto,
---------
including the certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or cause
to be increased the aggregate principal amount of, in the case of clause
(A) above, the appropriate Restricted Global Note, in the case of clause
(B) above, the 144A Global Note, in the case of clause (c) above, the
Regulation S Global Note, and in all other cases, the IAI Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in Unrestricted
Global Notes. A Holder of a Restricted Definitive Note may exchange such Note
for a beneficial interest in an Unrestricted Global Note or transfer such
Restricted Definitive Note to a Person who takes delivery thereof in the form
of a beneficial interest in an Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in
the case of a transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a
Person who is an affiliate (as defined in Rule 144) of the Company;
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<PAGE>
(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 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note or
transfer such Definitive Notes to a Person who takes delivery thereof in the
form of a beneficial interest in an Unrestricted Global Note at any time.
Upon receipt of a request for such an exchange or transfer, the Trustee shall
cancel the applicable Unrestricted Definitive Note and increase or cause to be
increased the aggregate principal amount of one of the Unrestricted Global
Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest in a Global Note is effected pursuant to subparagraphs
(ii)(B), (ii)(D) or (iii) above at a time when an Unrestricted Global Note has
not yet been issued, the Company shall issue and, upon receipt of an
Authentication Order in accordance with Section 2.02 hereof, the Trustee shall
authenticate one or more Unrestricted Global Notes in an aggregate principal
amount equal to the principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes.
Upon request by a Holder of Definitive Notes and such Holder's
compliance with the provisions of this Section 2.06(e), the Registrar shall
register the transfer or exchange of Definitive Notes. Prior to such
registration of transfer or exchange, the requesting Holder shall present or
surrender to the Registrar the Definitive Notes duly endorsed or accompanied by
a written instruction of transfer in
27
<PAGE>
form satisfactory to the Registrar duly executed by such Holder or by his
attorney, duly authorized in writing. In addition, the requesting Holder shall
provide any additional certifications, documents and information, as applicable,
required pursuant to the following provisions of this Section 2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive Notes. Any
Restricted Definitive Note may be transferred to and registered in the name of
Persons who take delivery thereof in the form of a Restricted Definitive Note
if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A, then the
transferor must deliver a certificate in the form of Exhibit B
---------
hereto, including the certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule
904, then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (2) thereof;
---------
and
(C) if the transfer will be made pursuant to any other exemption
from the registration requirements of the Securities Act, then the
transferor must deliver a certificate in the form of Exhibit B
---------
hereto, including the certifications, certificates and Opinion of
Counsel required by item (3) thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any
Restricted Definitive Note may be exchanged by the Holder thereof for an
Unrestricted Definitive Note or transferred to a Person or Persons who take
delivery thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in
the case of a transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a
Person who is an affiliate (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Broker-Dealer pursuant to
the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes proposes
to exchange such Notes for an Unrestricted Definitive Note, a
certificate from such Holder in the form of Exhibit C hereto,
---------
including the certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive Notes proposes
to transfer such Notes to a Person who shall take delivery thereof in
the form of an Unrestricted Definitive Note, a certificate from such
Holder in the form of Exhibit B hereto, including the certifications
---------
in item (4) thereof;
28
<PAGE>
and, in each such case set forth in this subparagraph (D), if the Registrar
so requests, an Opinion of Counsel in form reasonably acceptable to the
Company to the effect that such exchange or transfer is in compliance with
the Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A
Holder of Unrestricted Definitive Notes may transfer such Notes to a Person
who takes delivery thereof in the form of an Unrestricted Definitive Note.
Upon receipt of a request to register such a transfer, the Registrar shall
register the Unrestricted Definitive Notes pursuant to the instructions from
the Holder thereof.
(f) Exchange Offer.
Upon the occurrence of the Exchange Offer in accordance with the
Registration Rights Agreement, the Company shall issue and, upon receipt of an
Authentication Order in accordance with Section 2.02 hereof, 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 or via the Depositary's book-entry system that
(x) they are not broker-dealers, (y) they are not participating in a
distribution of the Exchange Notes and (z) they are not affiliates (as defined
in Rule 144) of the Company, and accepted for exchange in the Exchange Offer and
(ii) Definitive Notes in an aggregate principal amount equal to the principal
amount of the Restricted Definitive Notes accepted for exchange in the Exchange
Offer. Concurrently with the issuance of such Notes, the Trustee shall cause the
aggregate principal amount of the applicable Restricted Global Notes to be
reduced accordingly, and the Company shall execute and the Trustee shall
authenticate and make available for delivery to the Persons designated by the
Holders of Definitive Notes so accepted Definitive Notes in the appropriate
principal amount.
(g) Legends. The following legends shall appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each Global
Note and each Definitive Note (and all Notes issued in exchange
therefor or substitution thereof) shall bear the legend in
substantially the following form:
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR IN ACCORDANCE WITH AN APPLICABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (SUBJECT TO THE
DELIVERY OF SUCH EVIDENCE, IF ANY REQUIRED UNDER THE INDENTURE PURSUANT TO
WHICH THIS NOTE IS ISSUED) AND IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF
THE
29
<PAGE>
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER OR ANOTHER EXEMPTION UNDER
THE SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR
THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT
OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF
THE COMPANY SO REQUESTS), SUBJECT TO THE RECEIPT BY THE REGISTRAR OF A
CERTIFICATION OF THE TRANSFEROR AND AN OPINION OF COUNSEL TO THE EFFECT
THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (2) TO THE
COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH
CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE 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 RESTRICTION SET FORTH IN (A)
ABOVE."
(B) Notwithstanding the foregoing, any Global Note or Definitive
Note issued pursuant to subparagraphs (b)(iv), (c)(ii), (c)(iii),
(d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06
(and all Notes issued in exchange therefor or substitution thereof)
shall not bear the Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS
MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL
NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a)
OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE
FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS
GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR
WRITTEN CONSENT OF THE COMPANY."
(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
30
<PAGE>
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.
At such time as all beneficial interests in a particular Global
Note have been exchanged for Definitive Notes or a particular Global Note has
been redeemed, repurchased or canceled in whole and not in part, each such
Global Note shall be returned to or retained and canceled by the Trustee in
accordance with Section 2.11 hereof. At any time prior to such cancellation, if
any beneficial interest in a Global Note is exchanged for or transferred to a
Person who will take delivery thereof in the form of a beneficial interest in
another Global Note or for Definitive Notes, the principal amount of Notes
represented by such Global Note shall be reduced accordingly and an endorsement
shall be made on such Global Note by the Trustee or by the Depositary at the
direction of the Trustee to reflect such reduction; and if the beneficial
interest is being exchanged for or transferred to a Person who will take
delivery thereof in the form of a beneficial interest in another Global Note,
such other Global Note shall be increased accordingly and an endorsement shall
be made on such Global Note by the Trustee or by the Depositary at the direction
of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Global Notes and
Definitive Notes upon the Company's order or at the Registrar's request.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Note or to a Holder of a Definitive Note for any
registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes
or similar governmental charge payable upon exchange or transfer pursuant
to Sections 2.10, 3.06, 3.09, 4.10, 4.15 and 9.05 hereof).
(iii) The Registrar shall not be required to register the transfer of
or exchange any Note selected for redemption in whole or in part, except
the unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive Notes
shall be the valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Global Notes
or Definitive Notes surrendered upon such registration of transfer or
exchange.
(v) The Company shall not be required (A) to issue, to register the
transfer of or to exchange any Notes during a period beginning at the
opening of business 15 days before the day of the mailing of notice of
redemption under Section 3.02 hereof and ending at the close of business on
such day, (B) to register the transfer of or to exchange any Note so
selected for redemption in whole or in part, except the unredeemed portion
of any Note being redeemed in part or (c) to register the transfer of or to
exchange a Note between a record date and the next succeeding Interest
Payment Date.
31
<PAGE>
(vi) Prior to due presentment for the registration of a transfer of
any Note, the Trustee, any Agent and the Company may deem and treat the
Person in whose name any Note is registered as the absolute owner of such
Note for the purpose of receiving payment of principal of and interest on
such Notes and for all other purposes, and none of the Trustee, any Agent
or the Company shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive
Notes in accordance with the provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Registrar pursuant to this Section 2.06 to
effect a registration of transfer or exchange may be submitted by
facsimile.
Section 2.07. Replacement Notes
If any mutilated Note is surrendered to the Trustee or the
Company and the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Note, the Company shall issue and the Trustee,
upon receipt of an Authentication Order, shall authenticate a replacement Note
if the Trustee's requirements are met. If required by the Trustee or the
Company, an indemnity bond must be supplied by the Holder that is sufficient in
the judgment of the Trustee and the Company to protect the Company, the Trustee,
any Agent and any authenticating agent from any loss that any of them may suffer
if a Note is replaced. The Company may charge for its expenses in replacing a
Note.
Every replacement Note is an additional obligation of the
Company and shall be entitled to all of the benefits of this Indenture equally
and proportionately with all other Notes duly issued hereunder.
Section 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes
authenticated by the Trustee except for those canceled by it, those delivered to
it for cancellation, those reductions in the interest in a Global Note effected
by the Trustee in accordance with the provisions hereof, and those described in
this Section as not outstanding. Except as set forth in Section 2.09 hereof, a
Note does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Note; however, Notes held by the Company or a Subsidiary of
the Company shall not be deemed to be outstanding for purposes of Section
3.07(b) hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Note is held by a bona fide purchaser or protected purchaser.
If the principal amount of any Note is considered paid under
Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
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Section 2.09. Treasury Notes.
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver or consent, Notes owned
by the Company, or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company, shall
be considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes that the Trustee actually knows are so
owned shall be so disregarded.
Section 2.10. Temporary Notes
Until certificates representing Notes are ready for delivery, the
Company may prepare and the Trustee, upon receipt of an Authentication Order,
shall authenticate temporary Notes. Temporary Notes shall be substantially in
the form of certificated Notes but may have variations that the Company
considers appropriate for temporary Notes and as shall be reasonably acceptable
to the Trustee. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the
benefits of this Indenture.
Section 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee and no one else shall cancel all Notes surrendered for registration
of transfer, exchange, payment, replacement or cancellation and shall destroy
cancelled Notes (subject to the record retention requirements of the Exchange
Act). Certification of the destruction of all canceled Notes shall be delivered
to the Company. The Company may not issue new Notes to replace Notes that it
has paid or that have been delivered to the Trustee for cancellation.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee
in writing of the amount of defaulted interest proposed to be paid on each Note
and the date of the proposed payment. The Company shall fix or cause to be
fixed each such special record date and payment date, provided that no such
special record date shall be less than 10 days prior to the related payment date
for such defaulted interest. At least 15 days before the special record date,
the Company (or, upon the written request of the Company, the Trustee in the
name and at the expense of the Company) shall mail or cause to be mailed to
Holders a notice that states the special record date, the related payment date
and the amount of such interest to be paid.
Section 2.13. CUSIP Numbers.
The Company 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 that any such notice may state
that no representation is made as to the correctness of such
33
<PAGE>
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 the omission of such numbers. The Company will promptly notify
the Trustee of any change in the CUSIP numbers.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 30 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant to
which the redemption shall occur, (ii) the redemption date, (iii) the principal
amount of Notes to be redeemed, (iv) the redemption price and (v) the CUSIP
numbers of the Notes to be redeemed.
Section 3.02. Selection of Notes to Be Redeemed
If less than all of the Notes are to be redeemed or purchased in
an offer to purchase at any time, the Trustee shall select the Notes to be
redeemed or purchased among the Holders of the Notes in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot
or in accordance with any other method the Trustee considers fair and
appropriate. In the event of partial redemption by lot, the particular Notes to
be redeemed shall be selected, unless otherwise provided herein, not less than
30 nor more than 60 days prior to the redemption date by the Trustee from the
outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the
Notes selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
Section 3.03. Notice of Redemption
Subject to the provisions of Section 3.09 hereof, at least 30
days but not more than 60 days before a redemption date, the Company shall mail
or cause to be mailed, by first class mail, a notice of redemption to each
Holder whose Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the redemption date
upon surrender of such Note, a new Note or
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<PAGE>
Notes in principal amount equal to the unredeemed portion shall be issued upon
cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and after
the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed on the
Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
Section 3.04. Effect of Notice of Redemption
Once notice of redemption is mailed in accordance with Section
3.03 hereof, Notes called for redemption become irrevocably due and payable on
the redemption date at the redemption price. A notice of redemption may not be
conditional.
Section 3.05. Deposit of Redemption Price
One Business Day prior to the redemption date, the Company shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall promptly return to the Company any
money deposited with the Trustee or the Paying Agent by the Company in excess of
the amounts necessary to pay the redemption price of, and accrued interest on,
all Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is redeemed
on or after an interest record date but on or prior to the related interest
payment date, then any accrued and unpaid interest shall be paid to the Person
in whose name such Note was registered at the close of business on such record
date. If any Note called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the redemption
date until such principal is paid, and to the extent lawful on any interest not
paid on such unpaid principal, in each case at the rate provided in the Notes
and in Section 4.01 hereof.
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Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company
shall issue and, upon the Company's written request, the Trustee shall
authenticate for the Holder at the expense of the Company a new Note equal in
principal amount to the unredeemed portion of the Note surrendered.
Section 3.07. Optional Redemption.
The Notes will not be redeemable at the Company's option prior to
June 1, 2003. Thereafter, the Notes will be subject to redemption at any time at
the option of the Company, in whole or in part, upon not less than 30 nor more
than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest and
Liquidated Damages thereon to the applicable redemption date, if redeemed during
the twelve-month period beginning June 1 on of the years indicated below:
Year Percentage
- ---- ----------
2003................................................................ 105.625%
2004................................................................ 103.750%
2005................................................................ 101.875%
2006 and thereafter................................................. 100.000%
Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.
Section 3.08. Mandatory Redemption.
The Company shall not be required to make mandatory redemption
payments with respect to the Notes.
Section 3.09. Offer to Purchase by Application of Excess Proceeds.
In the event that, pursuant to Section 4.10 hereof, the Company
shall be required to commence an Asset Sale Offer, it shall follow the
procedures specified below.
The Asset Sale Offer shall remain open for a period of 20
Business Days following its commencement and no longer, except to the extent
that a longer period is required by applicable law (the "Offer Period"). No
later than five Business Days after the termination of the Offer Period (the
"Purchase Date"), the Company shall purchase the principal amount of Notes
required to be purchased pursuant to Section 4.10 hereof (the "Offer Amount")
or, if less than the Offer Amount has been tendered, all Notes tendered in
response to the Asset Sale Offer. Payment for any Notes so purchased shall be
made in the same manner as interest payments are made.
If the Purchase Date is on or after an interest record date and
on or before the related interest payment date, any accrued and unpaid interest
shall be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall
send, by first class mail, a notice to the Trustee and each of the Holders, with
a copy to the Trustee. The notice shall contain
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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
3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall
remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue
to accrue interest;
(d) that, unless the Company defaults in making such payment, any
Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrue
interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an
Asset Sale Offer may only elect to have all of such Note purchased and may not
elect to have only a portion of such Note purchased;
(f) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer by book-entry transfer, to the Company, a depositary, if appointed by
the Company, or a Paying Agent at the address specified in the notice at least
three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Company shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered (or transferred by book-entry transfer).
On or before 10:00 a.m. on the Purchase Date, the Company shall, to
the extent lawful, accept for payment, on a pro rata basis to the extent
necessary, the Offer Amount or portions thereof tendered pursuant to the Asset
Sale Offer, or if less than the Offer Amount has been tendered, all Notes
tendered, and shall deliver to the Trustee an Officers' Certificate stating that
such Notes or portions thereof were accepted for payment by the Company in
accordance with the terms of this Section 3.09. The Company, the Depositary or
the Paying Agent, as the case may be, shall promptly (but in any case not later
than five days after the Purchase Date) mail or deliver to each tendering Holder
an amount equal to the purchase price of the Notes tendered by such Holder and
accepted by the Company for purchase, and the Company shall promptly issue a new
Note, and the Trustee, upon written request from the
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Company shall authenticate and mail or deliver such new Note to such Holder, in
a principal amount equal to any unpurchased portion of the Note surrendered. Any
Note not so accepted shall be promptly mailed or delivered by the Company to the
Holder thereof. The Company shall publicly announce the results of the Asset
Sale Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made pursuant to the provisions
of Sections 3.01 through 3.06 hereof.
ARTICLE 4.
COVENANTS
Section 4.01. Payment of Notes.
The Company shall pay or cause to be paid the principal of,
premium, if any, and interest 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 Company or a Subsidiary thereof,
holds as of 10:00 a.m. Eastern Time on the due date money deposited by the
Company in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest and Liquidated Damages, if any,
then due. The Company shall pay all Liquidated Damages, if any, in the same
manner on the dates and in the amounts set forth in the Registration Rights
Agreement.
The Company shall pay interest (including post-petition interest
in any proceeding under any Bankruptcy Law) on overdue principal at the rate
equal to 1% per annum in excess of the then applicable interest rate on the
Notes to the extent lawful; it shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest and Liquidated Damages (without regard to any applicable grace period)
at the same rate to the extent lawful.
Section 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City
of New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Company shall
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with Section
2.03 hereof.
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Section 4.03. Reports.
(a) Whether or not required by the rules and regulations of the
SEC, so long as any Notes are outstanding and commencing with information
relating to the fiscal quarter ended July 31, 1998, the Company 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 Company were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report thereon
by the Company's certified independent accountants and (ii) all current reports
that would be required to be filed with the SEC on Form 8-K if the Company were
required to file such reports, in each case within the time periods specified in
the SEC's rules and regulations. In addition, following the consummation of the
Exchange Offer, whether or not required by the rules and regulations of the SEC,
the Company shall file a copy of all such information and reports with the SEC
for public availability within the time periods specified in the SEC's rules and
regulations (unless the SEC will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. The Company shall at all times comply with TIA (S) 314(a).
(b) For so long as any Notes remain outstanding the Company and
the Guarantors shall furnish to the Trustee and 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 4.04. Compliance Certificate.
(a) The Company and each Guarantor shall (to the extent that
such Guarantor is so required under the TIA) deliver to the Trustee within 90
days after the end of each fiscal year, an Officers' Certificate stating that a
review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Indenture, and further
stating, as to each such Officer signing such certificate, that to the best of
his or her knowledge the Company has kept, observed, performed and fulfilled
each and every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions of this
Indenture (or, if a Default or Event of Default shall have occurred, describing
all such Defaults or Events of Default of which he or she may have knowledge and
what action the Company is taking or proposes to take with respect thereto) and
that to the best of his or her knowledge no event has occurred and remains in
existence by reason of which payments on account of the principal of or
interest, if any, on the Notes is prohibited or if such event has occurred, a
description of the event and what action the Company is taking or proposes to
take with respect thereto. For purposes of this paragraph, such compliance shall
be determined without regard to any period of grace or requirement of notice
provided under this Indenture.
(b) So long as not contrary to the then current recommendations
of the American Institute of Certified Public Accountants, the year-end
financial statements delivered pursuant to Section 4.03(a) hereof shall be
accompanied by a written statement of the Company's independent public
accountants (who shall be a firm of established national reputation) that in
making the examination necessary for certification of such financial statements,
nothing has come to their attention that would lead them to believe that the
Company has violated any provisions of Article 4 or Article 5 hereof or, if any
such violation has occurred, specifying the nature and period of existence
thereof, it being
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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 Company shall, so long as any of the Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes to
take with respect thereto.
Section 4.05. Taxes.
The Company shall pay, and shall cause each of its Subsidiaries
to pay, prior to delinquency, all material taxes, assessments, and governmental
levies except such as are contested in good faith and by appropriate proceedings
or where the failure to effect such payment is not adverse in any material
respect to the Holders of the Notes.
Section 4.06. Stay, Extension and Usury Laws.
The Company and each of the Guarantors covenants (to the extent
that it may lawfully do so) that it shall not at any time insist upon, plead, or
in any manner whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law wherever enacted, now or at any time hereafter in force,
that may affect the covenants or the performance of this Indenture; and the
Company and each of the Guarantors (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and covenants
that it shall not, by resort to any such law, hinder, delay or impede the
execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law has been enacted.
Section 4.07. Restricted Payments.
The Company shall not, and shall not permit any of its
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
Subsidiaries' Equity Interests (including, without limitation, any payment in
connection with any merger or consolidation involving the Company or any of its
Subsidiaries) or to the direct or indirect holders of the Company's or any of
its 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 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 (other than any such Equity Interests owned by the Company or any
Subsidiary of the Company that is a Guarantor); (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, 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
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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 Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Subsidiaries after
the date of this Indenture (excluding Restricted Payments permitted by
clauses (ii), (iii), (iv), (vii) and (viii) of the next succeeding
paragraph), is less than the sum, without duplication, of (i) 50% of the
Consolidated Net Income of the Company for the period (taken as one
accounting period) from the beginning of the first fiscal quarter
commencing after the date of the Indenture to the end of the Company's most
recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such Consolidated
Net Income for such period is a deficit, less 100% of such deficit), plus
(ii) 100% of the aggregate net cash proceeds received by the Company since
the date of this Indenture as a contribution to its common equity capital
or from the issue or sale of Equity Interests of the Company (other than
Disqualified Stock) or from the issue or sale of Disqualified Stock or debt
securities of the Company that have been converted into such Equity
Interests (other than Equity Interests (or Disqualified Stock or
convertible debt securities) sold to a Subsidiary of the Company), plus
(iii) to the extent that any Restricted Investment that was made after the
date of this Indenture is sold for cash or otherwise liquidated or repaid
for cash, the lesser of (A) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any) and (B) the
initial amount of such Restricted Investment, plus (iv) $2.0 million.
The foregoing provisions shall not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of this
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any pari passu or subordinated Indebtedness or Equity Interests
of the Company in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Subsidiary of the Company) of,
other Equity Interests of the Company (other than any Disqualified Stock);
provided that the amount of any such net cash proceeds that are utilized for any
such redemption, repurchase, retirement, defeasance or other acquisition shall
be excluded from clause (c) (ii) of the preceding paragraph; (iii) the
defeasance, redemption, repurchase or other acquisition of pari passu or
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness; (iv) the payment of any dividend by a
Subsidiary of the Company to the holders of its common Equity Interests on a pro
rata basis; (v) the repurchase, redemption or other acquisition or retirement
for value of any Equity Interests of the Company or any Subsidiary of the
Company held by any member of the Company's (or any of its Subsidiaries')
management pursuant to any management equity subscription agreement or stock
option agreement; provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not exceed
$250,000 in any twelve-month period and no Default or Event of Default shall
have occurred and be continuing immediately after such transaction; (vi)
Permitted Payments; (vii) the Distribution and (viii) in the event the Company
is converted into an entity that is not subject to income taxation by a
government authority, the payment of dividends to reimburse holders of the
Company's equity interests for any income taxes owed and payable to such
governmental authority incurred by such holders solely as a result of their
status as holders of the Company's Equity Interests; provided that such amounts
shall not exceed the tax liability of the Company had it been subject to
corporate income taxation of such governmental authority for the corresponding
period; and provided further that any such payment shall be used by such holder
of the Company's Equity Interests to pay such taxes owed and payable.
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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
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any non-cash Restricted Payment shall be determined by the Board
of Directors whose resolution with respect thereto shall be delivered to the
Trustee, such determination to be based upon an opinion or appraisal issued by
an accounting, appraisal or investment banking firm of national standing if such
fair market value exceeds $1.0 million. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by this Section 4.07 were
computed, together with a copy of any fairness opinion or appraisal required by
this Indenture.
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries.
The Company shall not, and shall not permit any of its
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
Subsidiary to (i)(a) pay dividends or make any other distributions to the
Company or any of its 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 Subsidiaries, (ii) make
loans or advances to the Company or any of its Subsidiaries or (iii) transfer
any of its properties or assets to the Company or any of its Subsidiaries.
However, the foregoing restrictions shall not apply to encumbrances or
restrictions existing under or by reason of (a) the New 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, 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 New Credit
Facility as in effect on the date of this Indenture, (b) this Indenture and the
Notes, (c) applicable law, (d) any instrument governing Indebtedness or Capital
Stock of a Person acquired by the Company or any of its 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, (e)
customary non-assignment provisions in leases entered into in the ordinary
course of business and consistent with past practices, (f) 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, (g) any agreement for the sale of a Subsidiary that restricts
distributions by that Subsidiary pending its sale, (h) 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, (i) secured Indebtedness otherwise permitted to be incurred
pursuant to the provisions of Section 4.12 hereof that limits the right of the
debtor to dispose of the assets securing such Indebtedness, (j) provisions with
respect to the disposition or distribution of assets or property in joint
venture agreements and other similar agreements entered into in the ordinary
course of business, and (k) restrictions on cash or other deposits or net worth
imposed by customers under contracts entered into in the ordinary course of
business.
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Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt) and that the Company shall not issue any Disqualified Stock and shall not
permit any of its Subsidiaries to issue any shares of preferred stock; provided,
however, that the Company may incur Indebtedness (including Acquired Debt) or
issue shares of Disqualified Stock if the Fixed Charge Coverage Ratio for the
Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock is issued would
have been at least 2.0 to 1; 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 shall not
apply to the incurrence of any of the following items of Indebtedness
(collectively, "Permitted Debt"):
(i) the incurrence by the Company of Indebtedness and letters
of credit pursuant to Credit Facilities; provided that the aggregate principal
amount of all Indebtedness and letters of credit (with letters of credit being
deemed to have a principal amount equal to the maximum potential liability of
the Company and its Subsidiaries thereunder) outstanding under all Credit
Facilities after giving effect to such incurrence does not exceed the greater of
(x) $55.0 million less the aggregate amount of all Net Proceeds of Asset Sales
applied to repay Indebtedness under a Credit Facility and reduce lending
commitments with respect thereto pursuant to Section 4.10 hereof and (y) the
Borrowing Base as of the date of any such incurrence;
(ii) the incurrence by the Company and the Guarantors of the
Existing Indebtedness;
(iii) the incurrence by the Company and the Guarantors of up to
$75.0 million in aggregate principal amount of Initial Notes and the issuance of
the Exchange Notes;
(iv) the incurrence by the Company or any of its Subsidiaries of
additional Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case incurred for the purpose
of financing all or any part of the purchase price or cost of construction or
improvement of property, plant or equipment used in the business of the Company
or such Subsidiary, in an aggregate principal amount at any one time outstanding
under this clause (iv), including all Permitted Refinancing Indebtedness
incurred to refund, refinance or replace any Indebtedness incurred pursuant to
this clause (iv), not to exceed $3.0 million;
(v) the incurrence by the Company or any of its 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 (iii), (iv) or (v) of this paragraph;
(vi) the incurrence by the Company or any of its Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of this Indenture to be outstanding;
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(vii) the guarantee by the Company or any Guarantor of
Indebtedness of the Company or a Subsidiary of the Company that was permitted to
be incurred by another provision of this Section 4.09;
(viii) the incurrence by the Company or any of its Subsidiaries
of intercompany Indebtedness between or among the Company and any of its Wholly
Owned Subsidiaries (other than Receivables Subsidiaries) or any of the
Guarantors; 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 Wholly-Owned
Subsidiary thereof (other than a Receivables Subsidiary) or a Guarantor and (B)
any sale or other transfer of any such Indebtedness to a Person that is not
either the Company or a Wholly-Owned Subsidiary thereof (other than a
Receivables Subsidiary) or a Guarantor 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 (viii);
(ix) the incurrence by the Company or any of its Subsidiaries
of Indebtedness incurred in respect of performance, surety and similar bonds
provided by the Company or any of its Subsidiaries in the ordinary course of
business;
(x) the incurrence by the Company or any of its Subsidiaries
of Indebtedness in respect of letters of credit relating to workers'
compensation claims and self-insurance or similar requirements in the ordinary
course of business;
(xi) the incurrence of Indebtedness arising from agreements
providing for indemnification, adjustment of purchase price or similar
obligations, or from guarantees or letters of credit, surety bonds or
performance bonds securing any such obligations of the Company or any such
Subsidiary pursuant to such agreements, in each case incurred in connection with
the disposition of any business, assets or Subsidiary of the Company, other than
Guarantees of Indebtedness incurred by any Person acquiring all or any portion
of such business, assets or Subsidiary for the purpose of financing such
acquisition, provided that none of the foregoing results in Indebtedness
required to be reflected as indebtedness on the balance sheet of the Company, or
any such Subsidiary in accordance with GAAP and the maximum aggregate liability
in respect of all such Indebtedness shall at no time exceed 100% of the gross
proceeds actually received by the Company and its Subsidiaries in connection
with such disposition; and
(xii) the incurrence by the Company or any of its Subsidiaries
of additional Indebtedness in an aggregate principal amount (or accreted value,
as applicable) at any time outstanding, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any Indebtedness incurred
pursuant to this clause (xii), not to exceed $3.0 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 (xii) 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, but only
among clauses (i) through (xii) of the definition of Permitted Debt) such item
of Indebtedness in any manner that complies with this covenant. Accrual of
interest, accretion or amortization of original issue discount, the payment of
interest on any Indebtedness in the form of additional Indebtedness with the
same terms, and the payment of dividends on Disqualified Stock in the form of
additional shares of the same class of Disqualified Stock
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shall not be deemed to be an incurrence of Indebtedness or an issuance of
Disqualified Stock for purposes of this covenant; provided, in each such case,
that the amount thereof is included in Fixed Charges of the Company as accrued.
The Company shall not be deemed to be in breach of this covenant solely as the
result of fluctuations in currency exchange rates or as a result of changes in
accounting principles that become effective after the date of this Indenture.
Section 4.10. Asset Sales
The Company shall not, and shall not permit any of its
Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the
Subsidiary, as the case may be) receives consideration at the time of such Asset
Sale at least equal to the fair market value (evidenced by a resolution of the
Board of Directors set forth in an Officers' Certificate delivered to the
Trustee) of the assets or Equity Interests issued or sold or otherwise disposed
of and (ii) at least 80% of the consideration therefor received by the Company
or such Subsidiary is in the form of cash; provided that the amount of (x) any
liabilities (as shown on the Company's or such Subsidiary's most recent balance
sheet) of the Company or any 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 and either (1)
such assumption is evidenced by a customary novation agreement that releases the
Company or such Subsidiary from further liability or (2) all such liabilities
are paid in full within five days of such Asset Sale by the transferee of such
assets and (y) any securities, notes or other obligations received by the
Company or any such Subsidiary from such transferee that are contemporaneously
(subject to ordinary settlement periods) converted by the Company or such
Subsidiary into cash (to the extent of the cash received), shall be deemed to be
cash for purposes of this provision.
Within 180 days after the receipt of any Net Proceeds from an
Asset Sale, the Company may apply such Net Proceeds, at its option, (a) to repay
Senior Debt (and to correspondingly reduce lending commitments with respect
thereto in the case of Senior Debt that is term Indebtedness or revolving credit
Indebtedness and was incurred pursuant to a Credit Facility), (b) to the
acquisition of a majority of the assets of, or a majority of the Voting Stock
of, another Permitted Business, the making of a capital expenditure or the
acquisition of other long-term assets that are used or useful in a Permitted
Business or (c) reimburse the Company or its Subsidiaries for expenditures made,
and costs incurred to repair, rebuild, replace or restore property subject to
loss, damage or taking to the extent that Net Proceeds consist of insurance
proceeds received on account of such loss, damage or taking. Pending the final
application of any such Net Proceeds, the Company may temporarily reduce
revolving credit borrowings or otherwise invest such Net Proceeds in any manner
that is not prohibited by this Indenture. Any Net Proceeds from Asset Sales that
are not applied or invested as provided in the first sentence of this paragraph
shall be deemed to constitute "Excess Proceeds." When the aggregate amount of
Excess Proceeds exceeds $5.0 million, the Company shall be required to make an
offer to all Holders of Notes and all holders of other Indebtedness containing
provisions similar to those set forth in the Indenture with respect to offers to
purchase or redeem with the proceeds of sales of assets (an "Asset Sale Offer")
to purchase the maximum principal amount of Notes and such other Indebtedness
that may be purchased out of the Excess Proceeds, at an offer price in cash in
an amount equal to 100% of the principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of purchase, in
accordance with the procedures set forth in Section 3.09 hereof and such other
Indebtedness. To the extent that any Excess Proceeds remain after consummation
of an Asset Sale Offer, the Company may use such Excess Proceeds for any purpose
not otherwise prohibited by this Indenture. If the aggregate principal amount of
Notes and such other Indebtedness tendered into such Asset Sale Offer
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes and such
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other Indebtedness to be purchased on a pro rata basis. Upon completion of such
offer to purchase, the amount of Excess Proceeds shall be reset at zero.
Section 4.11. Transactions with Affiliates.
The Company shall not, and shall not permit any of its
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 Subsidiary than those that would have been obtained in a
comparable transaction by the Company or such Subsidiary with an unrelated
Person and (ii) the Company delivers to the Trustee (a) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $1.0 million, a resolution of the Board of
Directors set forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (i) above and that such Affiliate Transaction
has been approved by a majority of the disinterested members of the Board of
Directors and (b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $5.0
million, an opinion as to the fairness to the Holders of such Affiliate
Transaction from a financial point of view issued by an accounting, appraisal or
investment banking firm of national standing. Notwithstanding the foregoing, the
following items shall not be deemed to be Affiliate Transactions: (i) any
employment agreement or arrangement entered into by the Company or any of its
Subsidiaries in the ordinary course of business and consistent with the past
practice of the Company or such Subsidiary, (ii) transactions between or among
the Company and/or its Subsidiaries, (iii) payment of reasonable directors fees
to Persons who are not otherwise Affiliates of the Company, (iv) Restricted
Payments that are permitted by the provisions of Section 4.07 hereof, (v) the
Distribution, (vi) Permitted Payments, (vii) reasonable and customary
indemnification of any officer, director or employee of the Company or any of
its Subsidiaries in accordance with any applicable law, and (viii) the
conversion of the Company into an entity which is not subject to income taxation
by a governmental authority.
Section 4.12. Liens.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien securing Indebtedness or trade payables on any asset now owned or
hereafter acquired, or any income or profits therefrom or assign or convey any
right to receive income therefrom, except Permitted Liens.
Section 4.13. Sale and Leaseback Transactions.
The Company shall not, and shall not permit any of its
Subsidiaries to, enter into any sale and leaseback transaction; provided that
the Company may enter into a sale and leaseback transaction if (i) the Company
could have (a) incurred Indebtedness in an amount equal to the Attributable Debt
relating to such sale and leaseback transaction pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof and
(b) incurred a Lien to secure such Indebtedness pursuant to Section 4.12 hereof,
(ii) the gross cash proceeds of such sale and leaseback transaction are at least
equal to the fair market value (as determined in good faith by the Board of
Directors and set forth in an Officers' Certificate delivered to the Trustee) of
the property that is the subject of such sale and leaseback transaction and
(iii) the transfer of assets in such sale and leaseback
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transaction is permitted by, and the Company applies the proceeds of such
transaction in compliance with, Section 4.10 hereof.
Section 4.14. Corporate Existence.
Subject to Article 5 hereof, the Company shall do or cause to be
done all things necessary to preserve and keep in full force and effect (i) its
corporate existence, and the corporate, partnership or other existence of each
of its Subsidiaries, in accordance with the respective organizational documents
(as the same may be amended from time to time) of the Company or any such
Subsidiary and (ii) the rights (charter and statutory), licenses and franchises
of the Company and its Subsidiaries; provided, however, that the Company shall
not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Subsidiaries, if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries,
taken as a whole, and that the loss thereof is not adverse in any material
respect to the Holders of the Notes.
Section 4.15. Offer to Repurchase Upon Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder of
Notes shall have the right to require the Company to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of such Holder's Notes
pursuant to the offer described below (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of purchase (the "Change of Control Payment"). Within thirty (30) days following
any Change of Control, the Company shall mail a notice to the Trustee and 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
Company shall comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with the repurchase of the Notes as
a result of a Change of Control.
(b) On the Change of Control Payment Date, the Company shall, to
the extent lawful, (1) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee shall
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof. Prior to complying
with the provisions of this covenant, but in any event within 90 days following
a Change of Control, the Company 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
covenant. The Company shall publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date.
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(c) Notwithstanding anything to the contrary in this Section
4.15, the Company shall not be required to make a Change of Control Offer upon
the occurrence of a Change of Control if a third party makes the Change of
Control Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in this Section 4.15, and purchases all Notes validly
tendered and not withdrawn under such Change of Control Offer.
Section 4.16. No Senior Subordinated Debt.
(i) The Company shall not incur, create, issue, assume, guarantee
or otherwise become liable for any Indebtedness that is subordinate or junior in
right of payment to any Senior Debt and senior in any respect in right of
payment to the Notes, and (ii) no Guarantor shall incur, create, issue, assume,
guarantee or otherwise become liable for any Indebtedness that is subordinate or
junior in right of payment to any Guarantees of Senior Debt and senior in any
respect in right of payment to the Subsidiary Guarantees.
Section 4.17. Additional Subsidiary Guarantees.
If the Company or any of its Subsidiaries shall acquire or create
another Domestic Subsidiary after the date of this Indenture, or if any current
or future Subsidiary becomes a Domestic Subsidiary of the Company after the date
of this Indenture, then such newly acquired or created Subsidiary shall become a
Guarantor and execute a supplemental indenture and deliver an Opinion of
Counsel, in accordance with the terms of this Indenture; provided that this
provision shall not be applicable to a Subsidiary that has been properly
designated as a Receivables Subsidiary.
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 the
Indenture or the Notes unless such consideration is offered to be paid or is
paid to all Holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
ARTICLE 5.
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.
The Company shall not consolidate or merge with or into (whether
or not the Company is the surviving corporation), or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its properties
or assets in one or more related transactions, to another corporation, Person or
entity unless (i) the Company is the surviving corporation or the entity or the
Person formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia; (ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company) or the entity or Person to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made assumes all the obligations of the Company under the Notes
and the Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee; (iii)
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immediately after such transaction no Default or Event of Default exists; and
(iv) except in the case of a merger of the Company with or into a Wholly Owned
Subsidiary of the Company, the Company or the entity or Person formed by or
surviving any such consolidation or merger (if other than the Company), or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made (A) will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of the Company
immediately preceding the transaction and (B) will, at the time of such
transaction and after giving pro forma effect thereto as if such transaction had
occurred at the beginning of the applicable four-quarter period, 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 Section 4.09 hereof.
Section 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the assets of the Company in accordance with Section 5.01 hereof, the successor
corporation formed by such consolidation or into or with which the Company is
merged or to which such sale, assignment, transfer, lease, conveyance or other
disposition is made shall succeed to, and be substituted for (so that from and
after the date of such consolidation, merger, sale, lease, conveyance or other
disposition, the provisions of this Indenture referring to the "Company" shall
refer instead to the successor corporation and not to the Company), and may
exercise every right and power of the Company under this Indenture with the same
effect as if such successor Person had been named as the Company herein;
provided, however, that the predecessor Company shall not be relieved from the
obligation to pay the principal of and interest on the Notes except in the case
of a sale of all of the Company's assets that meets the requirements of Section
5.01 hereof.
ARTICLE 6.
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
"Event of Defaults" are:
(i) default for 30 days in the payment when due of interest on,
or Liquidated Damages with respect to, the Notes (whether or not prohibited by
Article 10 hereof);
(ii) default in payment when due of the principal of or premium,
if any, on the Notes (whether or not prohibited by Article 10 hereof);
(iii) failure by the Company or any of its Subsidiaries to comply
with Sections 4.07, 4.09, 4.10 or 4.15, hereof;
(iv) failure by the Company or any of its Subsidiaries for 60
days after notice to comply with any of its other agreements in this Indenture
or the Notes;
(v) default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Subsidiaries (or
the payment of which is guaranteed by the Company or any of its Subsidiaries)
whether such Indebtedness or guarantee now exists, or is created after the date
of the Indenture, which default (a) is caused by a failure to pay principal of
or premium, if any, or interest on
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such Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b) results in
the acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated, aggregates $5.0
million or more;
(vi) failure by the Company or any of its Subsidiaries to pay
final judgments aggregating in excess of $5.0 million, which judgments are not
paid, discharged or stayed for a period of 60 days;
(vii) except as permitted by this Indenture, any Subsidiary
Guarantee shall be held in any judicial proceeding to be unenforceable or
invalid or shall cease for any reason to be in full force and effect or any
Guarantor, or any Person acting on behalf of any Guarantor, shall deny or
disaffirm its obligations under its Subsidiary Guarantee;
(viii) the Company or any of its Subsidiaries:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief against it in an
involuntary case,
(c) consents to the appointment of a custodian of it or for all or
substantially all of its property,
(d) makes a general assignment for the benefit of its creditors, or
(e) generally is not paying its debts as they become due; or
(ix) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(a) is for relief against the Company or any of its Subsidiaries;
(b) appoints a custodian of the Company or any of its Subsidiaries or
for all or substantially all of the property of the Company or any of its
Subsidiaries; or
(c) orders the liquidation of the Company or any of its Subsidiaries;
and the order or decree remains unstayed and in effect for 60
consecutive days.
Section 6.02. Acceleration.
If any Event of Default occurs and is continuing, the Trustee or
the Holders of at least 25% in principal amount of the then outstanding Notes
may declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, if an Event of Default specified in clause (viii) or (ix) of Section
6.01 hereof occurs with respect to the Company, any Significant Subsidiary or
any group of Subsidiaries that, taken together, would constitute a Significant
Subsidiary, all outstanding Notes shall be due and payable immediately without
further action or notice. The Holders of a majority in aggregate principal
amount of the Notes then outstanding by written notice to the Trustee may on
behalf of the
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Holders rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default
(except nonpayment of principal, interest or premium that has become due solely
because of the acceleration) have been cured or waived.
If an Event of Default occurs on or after June 1, 2003 by reason
of any willful action (or inaction) taken (or not taken) by or on behalf of the
Company with the intention of avoiding payment of the premium that the Company
would have had to pay if the Company then had elected to redeem the Notes
pursuant to Section 3.07 hereof, then, upon acceleration of the Notes, an
equivalent premium shall also become and be immediately due and payable, to the
extent permitted by law, anything in this Indenture or in the Notes to the
contrary notwithstanding. If an Event of Default occurs prior to June 1, 2003 by
reason of any willful action (or inaction) taken (or not taken) by or on behalf
of the Company with the intention of avoiding the prohibition on redemption of
the Notes prior to June 1, 2003, then, upon acceleration of the Notes, an
additional premium shall also become and be immediately due and payable in an
amount, for each of the years beginning on June 1 of the years set forth below,
as set forth below (expressed as a percentage of the aggregate principal amount
to the date of payment that would otherwise be due but for the provisions of
this sentence):
YEAR PERCENTAGE
---- ----------
1998............................................... 115.000%
1999............................................... 113.125%
2000............................................... 111.250%
2001............................................... 109.375%
2002............................................... 107.500%
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal, premium, if
any, and interest 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 6.04. 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
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deemed to have been cured for every purpose of this Indenture; but no such
waiver shall extend to any subsequent or other Default or impair any right
consequent thereon.
Section 6.05. Control by Majority.
Holders of a majority in principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture that the Trustee determines may be unduly
prejudicial to the rights of other Holders of Notes or that may involve the
Trustee in personal liability.
Section 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this
Indenture or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee against
any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in
principal amount of the then outstanding Notes do not give the Trustee a
direction inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the
rights of another Holder of a Note or to obtain a preference or priority over
another Holder of a Note.
Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right
of any Holder of a Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(i) or (ii)
hereof occurs and is continuing, the Trustee is authorized to recover judgment
in its own name and as trustee of an express trust against the Company for the
whole amount of principal of, premium and Liquidated Damages, if any, and
interest remaining unpaid on the Notes and interest on overdue principal and, to
the extent lawful, interest and such further amount as shall be sufficient to
cover the costs and expenses of collection,
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including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall
be deemed to authorize the Trustee to authorize or consent to or accept or adopt
on behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article 6, it
shall pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due
under Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium and Liquidated Damages, if any, and interest,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Notes for principal, premium and Liquidated Damages, if
any, and interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any
payment to Holders of Notes pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require
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the filing by any party litigant in the suit of an undertaking to pay the costs
of the suit, and the court in its discretion may assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in the suit,
having due regard to the merits and good faith of the claims or defenses made by
the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a
suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders
of more than 10% in principal amount of the then outstanding Notes.
ARTICLE 7.
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section 7.01;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is subject to
paragraphs (a), (b), and (c) of this Section 7.01.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be under
no obligation to exercise any of its rights and powers under this Indenture at
the request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
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(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
Section 7.02. Rights of Trustee.
(a) The Trustee may conclusively rely upon any document believed
by it to be genuine and to have been signed or presented by the proper Person.
The Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel or both. The Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may
consult with counsel of its selection and the written advice of such counsel or
any Opinion of Counsel shall be full and complete authorization and protection
from liability in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within the
rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or direction
of any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with like
rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the Notes, it
shall not be accountable for the Company's use of the proceeds from the Notes or
any money paid to the Company or upon the Company's direction under any
provision of this Indenture, it shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee,
and it shall not be responsible for any statement or recital herein or any
statement in the Notes or any other document in connection with the sale of the
Notes or pursuant to this Indenture other than its certificate of
authentication.
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Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if
it is actually known to the Trustee, the Trustee shall mail to Holders of Notes
a notice of the Default or Event of Default within 90 days after it becomes
known to the Trustee. Except in the case of a Default or Event of Default in
payment of principal of, premium, if any, or interest on any Note, the Trustee
may withhold the notice if and so long as a committee of its Responsible
Officers in good faith determines that withholding the notice is in the
interests of the Holders of the Notes. Notwithstanding anything to the contrary
expressed in this Indenture, the Trustee shall not be deemed to have knowledge
of any Default or Event of Default hereunder, except in the case of an Event of
Default under Section 6.1(a) or (b) hereof (provided that the Trustee is the
Paying Agent), unless and until a Responsible Officer shall have actual
knowledge thereof or shall have received written notice, at its Principal
Corporate Trust Office as specified in Section 11.02 hereof, from the Company or
any Holder of Senior Notes that such a Default or an Event of Default has
occurred.
Section 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15 beginning with the May 15
following the date of this Indenture, and for so long as Notes remain
outstanding, the Trustee shall mail to the Holders of the Notes a brief report
dated as of such reporting date that complies with TIA (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 Company and filed with the SEC and each stock
exchange on which the Notes are listed in accordance with TIA (S) 313(d). The
Company shall promptly notify the Trustee when the Notes are listed on any stock
exchange.
Section 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time such
compensation for its acceptance of this Indenture and services hereunder as the
Company and the Trustee shall agree. The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The
Company shall reimburse the Trustee promptly upon request for all reasonable
disbursements, advances and expenses incurred or made by it in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee and its officers,
directors, shareholders, agents and employees (each an "Indemnified Party") for
and hold each Indemnified Party harmless against any and all losses, liabilities
or expenses incurred by it arising out of or in connection with the acceptance
or administration of its duties under this Indenture, including the costs and
expenses of enforcing this Indenture against the Company (including this Section
7.07) and defending itself against any claim (whether asserted by the Company or
any Holder or any other person) or liability in connection with the exercise or
performance of any of its powers or duties hereunder, except to the extent any
such loss, liability or expense may be attributable to its negligence or bad
faith. The Trustee and its officers, directors, shareholders, agents and
employees in its capacity as Paying Agent, Registrar, and Note Custodian and
Agent for services of notices and demands shall have the full benefit of the
foregoing
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indemnity. An Indemnified Party shall notify the Company promptly of any claim
for which it may seek indemnity. Failure by an Indemnified Party to so notify
the Company shall not relieve the Company of its obligations hereunder. The
Company shall defend the claim and an Indemnified Party shall cooperate in the
defense. An Indemnified Party may have separate counsel and the Company shall
pay the reasonable fees and expenses of such counsel. The Company need not pay
for any settlement made without its consent, which consent shall not be
unreasonably withheld.
The obligations of the Company under this Section 7.07 shall
survive the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section with
respect to compensation and indemnity, 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. The Trustee's
right to receive payment of any amounts under this Indenture shall not be
subordinated to any of the Indebtedness of the Company.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(viii) or (ix) 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 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section 7.08.
The Trustee may resign in writing at any time and be discharged
from the trust hereby created by so notifying the Company. The Holders of Notes
of a majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company in writing. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Trustee under any Bankruptcy
Law;
(c) a custodian or public officer takes charge of the Trustee or
its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holders of a majority in principal amount of the then outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
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If a successor Trustee does not take office within 60 days after
the retiring Trustee resigns or is removed, the retiring Trustee, the Company,
or the Holders of Notes of at least 10% in principal amount of the then
outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note who
has been a Holder of a Note for at least six months, fails to comply with
Section 7.10 hereof, such Holder of a Note may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, provided
all sums owing to the Trustee hereunder have been paid and subject to the Lien
provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee
pursuant to this Section 7.08, the Company's obligations under Section 7.07
hereof shall continue for the benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities and that has a combined capital and surplus of at
least $100.0 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.
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ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at the option of its Board of Directors
evidenced by a resolution set forth in an Officers' Certificate, at any time,
elect to have either Section 8.02 or 8.03 hereof applied to all outstanding
Notes upon compliance with the conditions set forth below in this Article 8.
Section 8.02. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.02, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to
have been discharged from its Obligations with respect to all outstanding Notes
on the date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all of its obligations
under such Notes and this Indenture (and the Trustee, on demand of and at the
expense of the Company, shall execute proper instruments acknowledging the
same), except for the following provisions which shall survive until otherwise
terminated or discharged hereunder: (a) the rights of Holders of outstanding
Notes to receive solely from the trust fund described in Section 8.04 hereof,
and as more fully set forth in such Section 8.04, payments in respect of the
principal of and premium, interest and Liquidated Damages, if any, on such Notes
when such payments are due, (b) the Company's obligations with respect to such
Notes under Article 2 and Section 4.02 hereof, (c) the rights, powers, trusts,
duties and immunities of the Trustee hereunder and the Company's obligations in
connection therewith and (d) this Article 8. Subject to compliance with this
Article 8, the Company may exercise its option under this Section 8.02
notwithstanding the prior exercise of its option under Section 8.03 hereof.
Section 8.03. Covenant Defeasance.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.03, the Company and each Guarantor shall,
subject to the satisfaction of the conditions set forth in Section 8.04 hereof,
be released from their respective obligations under the covenants contained in
Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17 and 4.18
hereof with respect to the outstanding Notes on and after the date the
conditions set forth in Section 8.04 are satisfied (hereinafter, "Covenant
Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the
purposes of any direction, waiver, consent or declaration or act of Holders (and
the consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that, with respect to the
outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section 6.01
hereof, but, except as specified above, the remainder of this Indenture and such
Notes shall be unaffected thereby. In addition, upon the Company's exercise
under
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Section 8.01 hereof of the option applicable to this Section 8.03, subject to
the satisfaction of the conditions set forth in Section 8.04 hereof, Sections
6.01(iii) through 6.01(vii) hereof shall not constitute Events of Default.
Section 8.04. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of
either Section 8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant
Defeasance:
(a) the Company must irrevocably deposit, with the Trustee, in
trust, for the benefit of the Holders, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest and
Liquidated Damages on the outstanding Notes on the stated maturity thereof or on
the applicable redemption date, as the case may be, and the Company must specify
whether the Notes are being defeased to maturity or to a particular redemption
date;
(b) in the case of Legal Defeasance, the Company must deliver to
the Trustee an Opinion of Counsel in the United States reasonably acceptable to
the Trustee confirming that the Company has received from, or there has been
published by, the Internal Revenue Service a ruling, or since the date of this
Indentures, 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 Covenant Defeasance, the Company must deliver
to the Trustee an Opinion of Counsel in the United States reasonably acceptable
to the Trustee confirming that the Holders of the outstanding Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such Covenant Defeasance, and such Holders 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 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;
(e) 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 this Indenture) to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(f) the Company must deliver to the Trustee an opinion of counsel
in the United States reasonably acceptable to the Trustee to the effect that
after the 91st day following the deposit, the
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trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights and
remedies generally;
(g) the Company must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent of
preferring the Holders of the Notes over other creditors of the Company, or with
the intent of defeating, hindering, delaying or defrauding creditors of the
Company or others; and
(h) the Company must deliver to the Trustee an Officers' Certificate
and an Opinion of Counsel in the United States reasonably acceptable to the
Trustee, each stating that all conditions precedent provided for or relating to
Legal Defeasance or Covenant Defeasance, as applicable, have been complied with.
Section 8.05. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.04 hereof or the principal
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or non-callable Government Securities held by it as
provided in Section 8.04 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 8.04(a) hereof), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
Section 8.06. Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, interest
or Liquidated Damages, if any, on any Note and remaining unclaimed for two years
after such principal, and premium, if any, or interest has become due and
payable shall be paid to the Company on its request or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Note shall
thereafter, as a secured creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in the New
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York Times (national edition) 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 Company.
Section 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; provided, however, that, if the Company makes any
payment of principal of, premium, if any, or interest on any Note following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.
Notwithstanding Section 9.02 hereof, the Company, the Guarantors and
the Trustee may amend or supplement this Indenture, the Notes or the Subsidiary
Guarantees without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes or to alter the provisions of Article 2 hereof (including the
related definitions) in a manner that does not materially adversely affect any
Holder;
(c) to provide for the assumption of the Company's or any Guarantor's
obligations to the Holders of the Notes by a successor to the Company or a
Guarantor pursuant to Article 5 hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights hereunder of any Holder of the Note;
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA;
(f) to provide for the issuance of Additional Notes in accordance with
the provisions set forth in this Indenture as of the date hereof; or
(g) to allow any Guarantor to execute a supplemental indenture and/or
a Subsidiary Guarantee with respect to the Notes.
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Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
indenture, and upon receipt by the Trustee of the documents described in Section
7.02 hereof, the Trustee shall join with the Company and the Guarantors in the
execution of any amended or supplemental indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.
Section 9.02. With Consent of Holders of Notes.
Except as provided below in this Section 9.02, the Company, the
Guarantors and the Trustee may amend or supplement this Indenture (including
Section 3.09, 4.10 and 4.15 hereof), the Notes or the Subsidiary Guarantees with
the consent of the Holders of at least a majority in principal amount Notes
(including Additional Notes, if any) then outstanding voting as a single class
(including consents obtained in connection with a tender offer or exchange offer
for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof,
any existing Default or Event of Default (other than a Default or Event of
Default in the payment of the principal of, premium, if any, or interest on the
Notes, except a payment default resulting from an acceleration that has been
rescinded) or compliance with any provision of this Indenture, the Notes or the
Subsidiary Guarantees may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including Additional
Notes, if any) voting as a single class (including consents obtained in
connection with a tender offer or exchange offer for, or purchase of, the
Notes). Without the consent of at least 75% in principal amount of the Notes
then outstanding (including consents obtained in connection with a tender offer
or exchange offer for, or purchase of, the Notes), no waiver or amendment to
this Indenture may make any change in the provisions of Article 10 hereof that
adversely affects the rights of any Holder of Notes. Section 2.08 hereof shall
determine which Notes are considered to be "outstanding" for purposes of this
Section 9.02.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.02 hereof, the Trustee shall
join with the Company in the execution of such amended or supplemental indenture
unless such amended or supplemental indenture directly affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise, in which case
the Trustee may in its discretion, but shall not be obligated to, enter into
such amended or supplemental indenture.
It shall not be necessary for the consent of the Holders of Notes
under this Section 9.02 to approve the particular form of any proposed amendment
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders of Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the
Holders of a majority in aggregate principal amount of the Notes (including
Additional Notes, if any) then outstanding voting as a single class may waive
compliance in a particular instance by the Company with any provision of this
Indenture or the Notes. However, without the consent of each Holder affected,
an amendment or waiver under this Section 9.02 may not (with respect to any
Notes held by a non-consenting Holder):
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(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, other than provisions relating to Sections 3.09, 4.10 or 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 or Liquidated Damages, if any, or interest on the Notes (except a
rescission of acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the then outstanding Notes (including Additional
Notes, if any) and a waiver of the payment default that resulted from such
acceleration;
(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive payments
of principal of or premium, 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 Section 3.09, 4.10 or 4.15 hereof;
(h) make any change in the foregoing amendment and waiver provisions;
or
(i) release any Guarantor from any of its obligations under its
Subsidiary Guarantee or this Indenture, except in accordance with the terms of
this Indenture.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall be
set forth in a amended or supplemental indenture that complies with the TIA as
then in effect.
Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
Section 9.05. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the
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Trustee shall, upon receipt of an Authentication Order, authenticate new Notes
that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
Section 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental indenture
authorized pursuant to this Article 9 if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Company may not sign an amendment or supplemental indenture until the Board
of Directors approves it. In executing any amended or supplemental indenture,
the Trustee shall be entitled to receive and (subject to Section 7.01 hereof)
shall be fully protected in relying upon 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 and that such amendment is the
legal, valid and binding obligation of the Company and any Guarantors,
enforceable against them in accordance with their terms, subject to customary
exceptions, and complies with the provisions hereof (including Section 9.03).
ARTICLE 10.
SUBORDINATION
Section 10.01. Agreement to Subordinate.
The Company agrees, and each Holder by accepting a Note agrees, that
the principal of and premium, interest and Liquidated Damages, if any, with
respect to the Notes are subordinated in right of payment, to the extent and in
the manner provided in this Article 10, to the prior payment in full of all
Senior Debt of the Company (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 10.02. Certain Definitions.
"Designated Senior Debt" means (i) any Indebtedness outstanding under
the New Credit Facility (ii) any other Senior Debt permitted under this
Indenture the principal amount of which is $10.0 million or more and that has
been designated by the Company as "Designated Senior Debt."
"Permitted Junior Securities" means Equity Interests in the Company or
any Guarantor or debt securities that 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 this Indenture.
"Representative" means the indenture trustee or other trustee, agent
or representative for any Senior Debt.
"Senior Debt" means (i) all Indebtedness outstanding under 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 or the Subsidiary Guarantees and (iii) all Obligations with
respect to the foregoing. Notwithstanding
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anything to the contrary in the foregoing, Senior Debt shall not include (w) any
liability for federal, state, local or other taxes owed or owing by the Company,
(x) any Indebtedness of the Company to any of its Subsidiaries or other
Affiliates, (y) any trade payables or (z) any Indebtedness that is incurred in
violation of this Indenture.
A "distribution" may consist of cash, securities or other property, by
set-off or otherwise.
Section 10.03. Liquidation; Dissolution; Bankruptcy.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, in
an assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities:
(1) holders of Senior Debt shall be entitled to receive payment in
full 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) before Holders of the Notes shall be entitled to receive
any payment with respect to the Notes (except that Holders may receive (i)
Permitted Junior Securities and (ii) payments and other distributions made from
any defeasance trust created pursuant to Article 8 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 (i) Permitted Junior Securities and
(ii) payments and other distributions made from any defeasance trust created
pursuant to Article 8 hereof), as their interests may appear.
Section 10.04. Default on Designated Senior Debt.
The Company may not make any payment or distribution to the Trustee or
any Holder in respect of Obligations with respect to the Notes and may not
acquire from the Trustee or any Holder any Notes for cash or property (other
than (a) Permitted Junior Securities and (b) payments and other distributions
made from any defeasance trust created pursuant to Article 8 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 or other Obligations 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, on Designated Senior Debt
occurs and is continuing that then permits holders of such Designated Senior
Debt to accelerate its maturity and the Trustee receives a written notice of
the default (a "Payment Blockage Notice") from a Person who may give it
pursuant to Section 10.12 hereof. If the Trustee receives any such Payment
Blockage Notice, no subsequent Payment Blockage Notice shall be effective for
purposes of this Section 10.04 unless and until (i) at least 360 days shall
have elapsed since the effectiveness of the immediately prior Payment Blockage
Notice and (ii) all scheduled payments of principal, premium and Liquidated
Damages, 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
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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 waived
for a period of not less than 90 days.
The Company may and shall resume payments on and distributions
in respect of the Notes and may acquire them upon the earlier of:
(1) the date upon which the default is cured or waived, or
(2) in the case of a default referred to in Section 10.04(ii)
hereof, 179 days pass after notice is received if the maturity of such
Designated Senior Debt has not been accelerated,
if this Article 10 otherwise permits the payment, distribution or acquisition at
the time of such payment or acquisition.
Section 10.05. Acceleration of Notes.
If payment of the Notes is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Debt of the
acceleration.
Section 10.06. 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 10.03 or 10.04 hereof, such payment shall be held by the Trustee or such
Holder, in trust for the benefit of, and shall be paid forthwith over and
delivered, upon written request, to the holders of Senior Debt as their
interests may appear or their Representative under the indenture or other
agreement (if any) pursuant to which such 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.
If any Holder or the Trustee is required by any court or
otherwise to deliver payments it received from the Company or Guarantor to a
holder of Senior Debt, any amount so paid to the extent theretofore discharged,
shall be reinstated in full force and effect.
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 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 gross negligence of the
Trustee.
Section 10.07. Notice by Company.
The Company shall promptly notify the Trustee and the Paying
Agent in writing of any facts known to the Company that would cause a payment of
any Obligations with respect to the Notes to
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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 10.08. 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 Company and Holders, a payment by the Company on the Notes.
Section 10.09. 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 Company and Holders of Notes, the
obligation of the Company, which is absolute and unconditional, to pay principal
of and interest and Liquidated Damages, if any, on the Notes in accordance with
their terms;
(2) affect the relative rights of Holders of Notes and creditors of
the Company other than their rights in relation to holders of Senior 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 Company fails because of this Article 10 to pay principal of or
interest on a Note on the due date, the failure shall nevertheless be a Default
or Event of Default.
Section 10.10. Subordination May Not Be Impaired by Company.
No right of any holder of Senior Debt to enforce the subordination of
the Indebtedness evidenced by the Notes shall be impaired by any act or failure
to act by the Company or any Holder or by the failure of the Company or any
Holder to comply with this Indenture.
Section 10.11. 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 Company referred to
in this Article 10, the Trustee and the Holders of Notes shall be entitled to
rely upon any order or decree made by any court of competent jurisdiction or
upon any certificate of such Representative or of the liquidating trustee or
agent or other Person making any distribution to the Trustee or to the Holders
of Notes for the purpose of ascertaining the Persons entitled to participate in
such distribution, the holders of the Senior Debt and
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other Indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article 10.
Section 10.12. Rights of Trustee and Paying Agent.
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Notes to violate this Article 10. Only the Company or a
Representative may give the notice. Nothing in this Article 10 shall impair the
claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior
Debt with the same rights it would have if it were not Trustee. Any Agent may
do the same with like rights.
Section 10.13. Authorization to Effect Subordination.
Each Holder of Notes, by the Holder's acceptance thereof, authorizes
and directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10, and appoints the Trustee to act as such Holder's attorney-in-fact
for any and all such purposes. If the Trustee does not file a proper proof of
claim or proof of debt in the form required in any proceeding referred to in
Section 6.09 hereof at least 30 days 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.
ARTICLE 11.
SUBSIDIARY GUARANTEES
Section 11.01. Subsidiary Guarantee.
Subject to this Article 11, each of the Guarantors hereby, jointly and
severally, unconditionally guarantees to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of this Indenture, the Notes or
the obligations of the Company hereunder or thereunder, that: (a) the principal
of and interest on the Notes will be promptly paid in full when due, whether at
maturity, by acceleration, redemption or otherwise, and interest on the overdue
principal of and interest on the Notes, if any, if lawful, and all other
obligations of the Company to the Holders or the Trustee hereunder or thereunder
will be promptly paid in full or performed, all in accordance with the terms
hereof and thereof; and (b) 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 Guarantors shall be jointly and severally
obligated to pay the same immediately. Each Guarantor agrees that this is a
guarantee of payment and not a guarantee of collection.
The Guarantors hereby agree that their obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Notes or this Indenture, the absence of any
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action to enforce the same, any waiver or consent by any Holder of the Notes
with respect to any provisions hereof or thereof, the recovery of any judgment
against the Company, any action to enforce the same or any other circumstance
which might otherwise constitute a legal or equitable discharge or defense of a
guarantor. Each Guarantor hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or bankruptcy
of the Company, any right to require a proceeding first against the Company,
protest, notice and all demands whatsoever and covenant that this Subsidiary
Guarantee shall not be discharged except by complete performance of the
obligations contained in the Notes and this Indenture.
If any Holder or the Trustee is required by any court or otherwise to
return to the Company, the Guarantors or any custodian, trustee, liquidator or
other similar official acting in relation to either the Company or the
Guarantors, any amount paid by either to the Trustee or such Holder, this
Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated
in full force and effect.
Each Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby. Each
Guarantor further agrees that, as between the Guarantors, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article 6 hereof
for the purposes of this Subsidiary Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such obligations as provided in Article 6 hereof, such
obligations (whether or not due and payable) shall forthwith become due and
payable by the Guarantors for the purpose of this Subsidiary Guarantee. The
Guarantors shall have the right to seek contribution from any non-paying
Guarantor so long as the exercise of such right does not impair the rights of
the Holders under the Subsidiary Guarantee.
Section 11.02. Subordination of Subsidiary Guarantee.
The Obligations of each Guarantor under its Subsidiary Guarantee
pursuant to this Article 11 shall be junior and subordinated to the Senior Debt
of such Guarantor on the same basis as the Notes are junior and subordinated to
Senior Debt of the Company. For the purposes of the foregoing sentence, the
Trustee and the Holders shall have the right to receive and/or retain payments
by any of the Guarantors only at such times as they may receive and/or retain
payments in respect of the Notes pursuant to this Indenture, including Article
10 hereof.
Section 11.03. Limitation on Guarantor Liability.
Each Guarantor, and by its acceptance of Notes, each Holder, hereby
confirms that it is the intention of all such parties that the Subsidiary
Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance
for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act or any similar federal or state law to the
extent applicable to any Subsidiary Guarantee. To effectuate the foregoing
intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree
that the obligations of such Guarantor under its Subsidiary Guarantee and this
Article 11 shall be limited to the maximum amount as will, after giving effect
to such maximum amount and all other contingent and fixed liabilities of such
Guarantor that are relevant under such laws, and after giving effect to any
collections from, rights to receive contribution from or payments made by or on
behalf of any other Guarantor in respect of the obligations of such other
Guarantor under this Article 11, result in the obligations of such Guarantor
under its Subsidiary Guarantee not constituting a fraudulent transfer or
conveyance.
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Section 11.04. Execution and Delivery of Subsidiary Guarantee.
To evidence its Subsidiary Guarantee set forth in Section 11.01,
each Guarantor hereby agrees that a notation of such Subsidiary Guarantee
substantially in the form included in Exhibit E shall be endorsed by an Officer
---------
of such Guarantor on each Note authenticated and delivered by the Trustee and
that this Indenture shall be executed on behalf of such Guarantor by an Officer
thereof.
Each Guarantor hereby agrees that its Subsidiary Guarantee set
forth in Section 11.01 shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of such Subsidiary Guarantee.
If an Officer whose signature is on this Indenture or on the
Subsidiary Guarantee no longer holds that office at the time the Trustee
authenticates the Note on which a Subsidiary Guarantee is endorsed, the
Subsidiary Guarantee shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Subsidiary Guarantee set
forth in this Indenture on behalf of the Guarantors.
In the event that the Company creates or acquires any other
Domestic Subsidiaries subsequent to the date of this Indenture, or if any
current or future Subsidiaries become Domestic Subsidiaries subsequent to the
date of this Indenture, if required by Section 4.17 hereof, the Company shall
cause such Subsidiaries to execute supplemental indentures to this Indenture in
accordance with Section 4.17 hereof, and this Article 11, to the extent
applicable.
Section 11.05. Guarantors May Consolidate, etc., on Certain Terms.
No Guarantor may consolidate with or merge with or into (whether
or not such Guarantor is the surviving Person) another corporation, Person or
entity whether or not affiliated with such Guarantor unless:
(a) subject to Section 11.06 hereof, the Person formed by or
surviving any such consolidation or merger (if other than such Guarantor)
assumes all the obligations of such Guarantor, pursuant to a supplemental
indenture in form and substance reasonably satisfactory to the Trustee, under
the Notes, this Indenture, the Registration Rights Agreement and the Subsidiary
Guarantee on the terms set forth herein or therein; and
(b) immediately after giving effect to such transaction, no
Default or Event of Default exists.
In case of any such consolidation, merger, sale or conveyance and
upon the assumption by the successor Person, by supplemental indenture, executed
and delivered to the Trustee and satisfactory in form to the Trustee, of the
Subsidiary Guarantee endorsed upon the Notes and the due and punctual
performance of all of the covenants and conditions of this Indenture to be
performed by the Guarantor, such successor Person shall succeed to and be
substituted for the Guarantor with the same effect as if it had been named
herein as a Guarantor. Such successor Person thereupon may cause to be signed
any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee. All the Subsidiary Guarantees so issued shall in
all respects have the same legal rank and benefit under this
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Indenture as the Subsidiary Guarantees theretofore and thereafter issued in
accordance with the terms of this Indenture as though all of such Subsidiary
Guarantees had been issued at the date of the execution hereof.
Notwithstanding clauses (a) and (b) above, nothing contained in
this Indenture or in any of the Notes shall prevent any consolidation or merger
of a Guarantor with or into the Company or another Guarantor, or shall prevent
any sale or conveyance of the property of a Guarantor as an entirety or
substantially as an entirety to the Company or another Guarantor.
Section 11.06. Releases Following Sale of Assets.
In the event of a sale or other disposition of all of the assets
of any Guarantor, by way of merger, consolidation or otherwise, or a sale or
other disposition of all of the capital stock of any Guarantor, then such
Guarantor (in the event of a sale or other disposition, by way of merger,
consolidation or otherwise, of all of the capital stock of such Guarantor) or
the corporation acquiring the property (in the event of a sale or other
disposition of all or substantially all of the assets of such Guarantor) will be
released and relieved of any obligations under its Subsidiary Guarantee;
provided that the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of this Indenture, including without
limitation Section 4.10 hereof. Upon delivery by the Company to the Trustee of
an Officers' Certificate and an Opinion of Counsel to the effect that such sale
or other disposition was made by the Company in accordance with the applicable
provisions of this Indenture, including without limitation Section 4.10 hereof,
the Trustee shall execute any documents reasonably required in order to evidence
the release of any Guarantor from its obligations under its Subsidiary
Guarantee.
Any Guarantor not released from its obligations under its
Subsidiary Guarantee shall remain liable for the full amount of principal of and
interest on the Notes and for the other obligations of any Guarantor under this
Indenture as provided in this Article 11.
ARTICLE 12.
SATISFACTION AND DISCHARGE
Section 12.01. Satisfaction and Discharge of Indenture.
This Indenture shall be discharged and shall cease to be of
further effect as to all Notes issued hereunder, when either
(a) all such Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust and
thereafter repaid to the Company) have been delivered to the Trustee for
cancellation; or
(b) (i) all such Notes not theretofore delivered to such Trustee
for cancellation have become due and payable by reason of
the making of a notice of redemption or otherwise or will
become due and payable within one year and the Company or a
Guarantor, has irrevocably deposited or caused to be
deposited with such Trustee as trust funds in trust an
amount of money sufficient to pay and discharge the entire
Indebtedness on such Notes not theretofore delivered to the
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Trustee for cancellation for principal, premium, accrued
interest and Liquidated Damages, if any, to the date of
maturity or redemption;
(ii) no Default or Event of Default with respect to this
Indenture or the Notes shall have occurred and be
continuing on the date of such deposit or shall occur as a
result of such deposit and such deposit will not result in
a breach or violation of, or constitute a default under,
any other instrument to which the Company or a Guarantor,
is a party or by which the Company or a Guarantor is bound;
(iii) the Company or a Guarantor has paid or caused to be paid
all sums payable by it under this Indenture; and
(iv) the Company has delivered irrevocable instructions to the
Trustee under this Indenture to apply the deposited money
toward the payment of such Notes at maturity or the
redemption date, as the case may be.
In addition, the Company must deliver an Officers' Certificate
and an Opinion of Counsel to the Trustee stating that all conditions precedent
to satisfaction and discharge have been satisfied.
Section 12.02. Application of Trust Money
Subject to the provisions of the last paragraph of Section 4.19
hereof, all money deposited with the Trustee pursuant to Section 12.01 hereof
shall be held in trust and applied by it, in accordance with the provisions of
the Notes and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as Paying Agent) as the Trustee may
determine, to Persons entitled thereto, of the principal (and premium, if any),
interest and Liquidated Damages, if any, for whose payment such money has been
deposited with the Trustee.
If the Trustee or Paying Agent is unable to apply any money or
Government Securities in accordance with Section 12.01 hereof by reason of any
legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Notes shall
be revived and reinstated as though such deposit had occurred pursuant to
Section 11.01 hereof; provided that if the Company has made any payment of
principal of, premium, if any, or interest on any Notes because of the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money or
Government Securities held by the Trustee or Paying Agent.
ARTICLE 13.
MISCELLANEOUS
Section 13.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts
with the duties imposed by TIA (S) 318(c), the imposed duties shall control.
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Section 13.02. Notices.
Any notice or communication by the Company, any Guarantor or the
Trustee to the others is duly given if in writing and delivered in Person or
mailed by first class mail (registered or certified, return receipt requested),
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address:
If to the Company and/or any Guarantor:
Coyne International Enterprises Corp.
140 Cortland Avenue
P.O. Box 4854
Syracuse, NY 13221
Telecopier No.: (315) 475-9978
Attention: Chief Financial Officer
With a copy to:
O'Hara, Hanlon, Knych & Pobedinsky, LLP
One Park Place
Syracuse, NY 13202
Telecopier No.: (315) 422-3943
Attention: Alex Pobedinsky, Esq.
If to the Trustee:
IBJ Schroder Bank & Trust Company
1 State Street Plaza
New York, New York 10004
Telecopier No.: (212) 858-2952
Attention: Corporate Finance Department
With a copy to:
Proskauer Rose LLP
1585 Broadway
New York, New York 10036
Attention: Sheldon Hirshon, Esq.
The Company, or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when 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.
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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.
If the Company mails a notice or communication to Holders, it
shall mail a copy to the Trustee and each Agent at the same time.
Section 13.03. 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
Company, the Trustee, the Registrar and anyone else shall have the protection of
TIA (S) 312(c).
Section 13.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 13.05 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 13.05 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
Section 13.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA (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 or they have made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether or not such covenant or
condition has been satisfied; and
75
<PAGE>
(d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been satisfied.
Section 13.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.
Section 13.07. No Personal Liability of Directors, Officers, Employees and
Shareholders.
No past, present or future director, officer, employee,
incorporator or shareholder of the Company or any Guarantor, as such, shall have
any liability for any obligations of the Company or such Guarantor under the
Notes, the Subsidiary Guarantees, this Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes.
Section 13.08. Governing Law.
THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF.
Section 13.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture,
loan or debt agreement of the Company 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 Company 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.
76
<PAGE>
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.
[Indenture signature page follows]
77
<PAGE>
[Indenture signature page]
Dated June 26, 1998 Coyne International Enterprises Corp.
By: /s/ Donald F. X. Keegan
------------------------------------
Name: Donald F. X. Keegan
Title: V.P.
Guarantors:
Blue Ridge Textile Manufacturing, Inc.
By: /s/ Donald F. X. Keegan
------------------------------------
Name: Donald F. X. Keegan
Title: V.P.
Clean Towel Service, Inc.
By: /s/ Donald F. X. Keegan
------------------------------------
Name: Donald F. X. Keegan
Title: V.P.
Ohio Garment Rental, Inc.
By: /s/ Donald F. X. Keegan
------------------------------------
Name: Donald F. X. Keegan
Title: V.P.
Midway-CTS Buffalo, Inc.
By: /s/ Donald F. X. Keegan
------------------------------------
Name: Donald F. X. Keegan
Title: V.P.
IBJ Schroder Bank & Trust Company,
as Trustee
By: /s/ Louis Perez
----------------------------------
Name: Louis Perez
Title: Assistant Vice President
<PAGE>
EXHIBIT A-1
(Face of Note)
================================================================================
CUSIP____________
11 1/4% [SERIES A] [SERIES B] SENIOR SUBORDINATED NOTES DUE 2008
No. _________ $ ___________
COYNE INTERNATIONAL ENTERPRISES CORP.
promises to pay to _____________________________________________________________
or registered assigns, the principal sum of ____________________________________
Dollars on June 1, 2008.
Interest Payment Dates: June 1 and December 1.
Record Dates: May 15 and November 15.
Coyne International Enterprises Corp.
By:__________________________________
Name:
Title:
By:__________________________________
Name:
Title:
This is one of the
[Global] Notes referred to in the
within-mentioned Indenture:
(SEAL)
[IBJ Schroder Bank & Trust Company,]
as Trustee
By:___________________________________ Dated: June 26, 1998
Name:
Title:
================================================================================
A-1-1
<PAGE>
(Back of Note)
__% [Series A] [Series B] Senior Subordinated Notes due 2008
[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]
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. Interest. Coyne International Enterprises Corp., a New York
corporation (the "Company"), promises to pay interest on the principal amount of
this Note at 11 1/4% per annum from June 26, 1998 until maturity and shall pay
the Liquidated Damages payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company shall pay interest and Liquidated
Damages semi-annually on June 1 and December 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 shall 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 December 1, 1998. The Company shall
pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1.0% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest shall be computed on the basis of
a 360-day year of twelve 30-day months.
2. Method of Payment. The Company shall pay interest on the Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the May 15 or November
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 with respect to defaulted interest.
The Notes shall be payable as to principal, premium and Liquidated Damages, if
any, and interest at the office or agency of the Company maintained for such
purpose within or without the City and State of New York, or, at the option of
the Company, payment of interest and Liquidated Damages may be made by check
mailed to the Holders at their addresses set forth in the register of Holders,
and provided that payment by wire transfer of immediately available funds shall
be required with respect to principal of and interest, premium and Liquidated
Damages on, all Global Notes and all other Notes the Holders of which shall have
provided wire transfer instructions to the Company or the Paying Agent. Such
payment shall be in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts.
3. Paying Agent and Registrar. Initially, [IBJ Schroder Bank &
Trust Company,] the Trustee under the Indenture, shall act as Paying Agent and
Registrar. The Company may
A-1-2
<PAGE>
change any Paying Agent or Registrar without notice to any Holder. The Company
or any of its Subsidiaries may act in any such capacity.
4. Indenture. The Company issued the Notes under an Indenture dated
as of June 26, 1998 ("Indenture") among the Company, the Guarantors and the
Trustee. The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code (S)(S) 77aaa-77bbbb) (the "TIA"). The Notes are subject
to all such terms, and Holders are referred to the Indenture and the TIA 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 Company
limited to $150.0 million in aggregate principal amount plus amounts, if any,
issued to pay Liquidated Damages on outstanding Notes as set forth in Paragraph
2 hereof.
5. Optional Redemption.
The Notes will not be redeemable at the Company's option prior to
June 1, 2003. Thereafter, the Notes will be subject to redemption at any time at
the option of the Company, in whole or in part, upon not less than 30 nor more
than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest and
Liquidated Damages thereon to the applicable redemption date, if redeemed during
the twelve-month period beginning on June 1 of the years indicated below:
Year Percentage
- ---- ----------
2003.............................................................. 105.625%
2004.............................................................. 103.750%
2005.............................................................. 101.875%
2006 and thereafter............................................... 100.000%
6. Mandatory Redemption.
Except as set forth in Paragraph 7 below, the Company shall not be
required to make mandatory redemption payments with respect to the Notes.
A-1-3
<PAGE>
7. Repurchase at Option of Holder.
(a) Upon the occurrence of a Change of Control, the Company shall
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 a purchase
price equal to 101% of the aggregate principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of
repurchase (the "Change of Control Payment"). Within 30 days following any
Change of Control, the Company shall mail a notice to each Holder setting forth
the procedures governing the Change of Control Offer as required by the
Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales, when
the aggregate amount of Excess Proceeds exceeds $5.0 million, the Company shall
be required to make an offer to all Holders of Notes and all holders of other
Indebtedness containing provisions similar to those set forth in the Indenture
with respect to offers to purchase or redeem with the proceeds of sales of
assets (an "Asset Sale Offer") to purchase the maximum principal amount of Notes
and such other Indebtedness that may be purchased out of the Excess Proceeds, at
an offer price in cash in an amount equal to 100% of the principal amount
thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any,
to the date of purchase, in accordance with the procedures set forth in the
Indenture and such other Indebtedness. To the extent that any Excess Proceeds
remain after consummation of an Asset Sale Offer, the Company may use such
Excess Proceeds for any purpose not otherwise prohibited by this Indenture. If
the aggregate principal amount of Notes and such other Indebtedness tendered
into such Asset Sale Offer surrendered by Holders thereof exceeds the amount of
Excess Proceeds, the Trustee shall select the Notes and such other Indebtedness
to be purchased on a pro rata basis. Upon completion of such offer to purchase,
the amount of Excess Proceeds shall be reset at zero. Holders of Notes that are
the subject of an offer to purchase will receive an Asset Sale Offer from the
Company 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 shall 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 shall cease to accrue on
Notes or portions thereof called for redemption.
9. Denominations, Transfer, Exchange. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
A-1-4
<PAGE>
10. Persons Deemed Owners. The registered Holder of a Note may be
treated as its owner for all purposes under the Indenture.
11. Amendment, Supplement and Waiver. Subject to certain exceptions,
the Indenture, the Notes or the Subsidiary Guarantees may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the then outstanding Notes (and Additional Notes, if any) voting as a
single class, and any existing default or compliance with any provision of the
Indenture, the Notes or the Subsidiary Guarantees may be waived with the consent
of the Holders of a majority in principal amount of the then outstanding Notes
(and Additional Notes, if any) voting as a single class. Without the consent of
any Holder of a Note, the Indenture, the Notes or the Subsidiary Guarantees or
may be amended or supplemented to cure any ambiguity, defect or inconsistency,
to provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Company's or the Guarantor's
obligations to Holders of the Notes in case of a merger or consolidation, to
make any change that would provide any additional rights or benefits to the
Holders of the Notes or that does not adversely affect the legal rights under
the Indenture of any such Holder, to comply with the requirements of the SEC in
order to effect or maintain the qualification of the Indenture under the TIA, to
provide for the issuance of Additional Notes in accordance with the limitations
set forth in the Indenture or to allow any Guarantor to execute a supplemental
indenture to the Indenture.
12. Defaults and Remedies.
Events of Default under the Indenture include: (i) default for 30 days
in the payment when due of interest on, or Liquidated Damages with respect to,
the Notes (whether or not prohibited by the subordination provisions of the
Indenture); (ii) default in payment when due of the principal of or premium, if
any, on the Notes (whether or not prohibited by the subordination provisions of
the Indenture); (iii) failure by the Company or any of its Subsidiaries to
comply with the provisions of Sections 4.07, 4.09, 4.10 and 4.15 of the
Indenture; (iv) failure by the Company or any of its Subsidiaries for 60 days
after notice to comply with any of its other agreements in the Indenture or the
Notes; (v) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any Indebtedness for
money borrowed by the Company or any of its Subsidiaries (or the payment of
which is guaranteed by the Company or any of its Subsidiaries) whether such
Indebtedness or guarantee now exists, or is created after the date of the
Indenture, which default (a) is caused by a failure to pay principal of or
premium, if any, or interest on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such default (a
"Payment Default") or (b) results in the acceleration of such Indebtedness prior
to its express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $5.0 million or more; (vi) failure by the Company or
any of its Subsidiaries to pay final judgments aggregating in excess of $5.0
million, which judgments are not paid, discharged or stayed for a period of 60
days; (vii) except as permitted by the Indenture, any Subsidiary Guarantee shall
be held in any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect or any Guarantor, or any Person
acting on behalf of any Guarantor, shall deny or disaffirm its obligations under
its Subsidiary Guarantee; and (viii) certain events of bankruptcy or insolvency
with respect to the Company or any of its Subsidiaries.
A-1-5
<PAGE>
(b) 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 become due and payable without further
action or notice. Holders may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. The 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
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 principal of, the Notes. The Company shall deliver to the
Trustee annually a statement regarding compliance with the Indenture, and the
Company, upon becoming aware of any Default or Event of Default, deliver to the
Trustee a statement specifying such Default or Event of Default.
13. Trustee Dealings with Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
14. No Recourse Against Others. A director, officer, employee,
incorporator or shareholder, of the Company or any Guarantor, as such, shall not
have any liability for any obligations of the Company or any Guarantor under the
Notes, any Subsidiary Guarantee or the Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder 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.
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 entirety), 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 Initial Notes shall have all the rights
set forth in the Registration Rights Agreement or, in the case of Additional
Notes, Holders of Restricted Global Notes and Restricted Definitive Notes shall
have the rights set forth in one or more registration rights agreements, if any,
between the Company and the other parties thereto, relating to rights given by
the Company to the purchasers of any Additional Notes.
18. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a
A-1-6
<PAGE>
convenience to Holders. No representation is made as to the accuracy of such
numbers either as printed on the Notes or as contained in any notice of
redemption and reliance may be placed only on the other identification numbers
placed thereon.
The Company shall 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:
Coyne International Enterprises Corp.
140 Cortland Avenue
P.O. Box 4854
Syracuse, NY 13221
Telecopier No.: (315) 475-9978
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 Company. 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 Company
pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
[_] Section 4.10 [_] Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $________
Date: __________________
Your Signature:___________________________________
(Sign exactly as your name appears on the 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:
<TABLE>
<CAPTION>
Principal Amount
Amount of decrease Amount of increase of this Global Note Signature of
in Principal in Principal following such authorized officer
Amount of this Amount of this decrease of Trustee or
Date of Exchange Global Note Global Note (or increase) Note Custodian
- ---------------- ------------------ ------------------ ------------------- -----------------
<S> <C> <C> <C> <C>
</TABLE>
________________________
/1/ Include only if Note is issued in Global Form.
A-1-10
<PAGE>
EXHIBIT A-2
(Face of Regulation S Temporary Global Note)
================================================================================
CUSIP _________
11 1/4% SERIES A SENIOR SUBORDINATED NOTES DUE 2008
No. _____________ $ __________
COYNE INTERNATIONAL ENTERPRISES CORP.
promises to pay to ___________________________________________________________
or registered assigns, the principal sum of __________________________________
Dollars on June 1, 2008.
Interest Payment Dates: June 1 and December 1.
Record Dates: May 15 and November 15.
Coyne International Enterprises Corp.
By:___________________________________
Name:
Title:
By:___________________________________
Name:
Title:
This is one of the
Global Notes referred to in the
within-mentioned Indenture:
(SEAL)
[IBJ Schroder Bank & Trust Company,]
as Trustee
By: ________________________ Dated: June 26, 1998
Name:
Title:
================================================================================
A-2-1
<PAGE>
(Back of Regulation S Temporary Global Note)
11 1/4% Series A Senior Subordinated Notes due 2008
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY
BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY
BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE
INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE
MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF
THE COMPANY.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED
OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
OR IN ACCORDANCE WITH AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT (SUBJECT TO THE DELIVERY OF SUCH EVIDENCE, IF ANY REQUIRED
UNDER THE INDENTURE PURSUANT TO WHICH THIS NOTE IS ISSUED) AND IN ACCORDANCE
WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER JURISDICTION. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER OR ANOTHER
EXEMPTION UNDER THE SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED HEREBY
AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY (1)(a) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d)
IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS), SUBJECT TO THE RECEIPT BY THE REGISTRAR OF A CERTIFICATION OF THE
TRANSFEROR AND AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH TRANSFER IS IN
COMPLIANCE WITH THE SECURITIES ACT, (2) TO THE COMPANY OR (3) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE 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 RESTRICTION SET FORTH IN (A) ABOVE.
A-2-2
<PAGE>
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.
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. Interest. Coyne International Enterprises Corp., a New York
corporation (the "Company"), promises to pay interest on the principal amount of
this Note at 11 1/4% per annum from June 26, 1998 until maturity and shall pay
the Liquidated Damages payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company shall pay interest and Liquidated
Damages semi-annually on June 1 and December 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 shall 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 December 1, 1998. The Company shall
pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1.0% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest shall 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 Company shall pay interest on the Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the May 15 or November
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 with respect to defaulted interest.
The Notes shall be payable as to principal, premium and Liquidated Damages, if
any, and interest at the office or agency of the Company maintained for such
purpose within or without the City and State of New York, or, at the option of
the Company, payment of interest and Liquidated Damages may be made by check
mailed to the Holders at their addresses set forth in the register of Holders,
and provided that payment by wire transfer of immediately available funds shall
be required with respect to principal of and interest, premium and Liquidated
Damages on, all Global Notes and all other Notes the Holders of which shall have
provided wire transfer instructions to the Company or the Paying Agent. Such
payment shall be in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts.
A-2-3
<PAGE>
3. Paying Agent and Registrar. Initially, [IBJ Schroder Bank &
Trust Company,] the Trustee under the Indenture, shall act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. Indenture. The Company issued the Notes under an Indenture dated
as of June 26, 1998 ("Indenture") among the Company, the Guarantors and the
Trustee. The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code (S)(S) 77aaa-77bbbb) (the "TIA"). The Notes are subject
to all such terms, and Holders are referred to the Indenture and the TIA 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 Company
limited to $150.0 million in aggregate principal amount plus amounts, if any,
issued to pay Liquidated Damages on outstanding Notes as set forth in Paragraph
2 hereof.
5. Optional Redemption.
The Notes will not be redeemable at the Company's option prior to
June 1, 2003. Thereafter, the Notes will be subject to redemption at any time at
the option of the Company, in whole or in part, upon not less than 30 nor more
than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest and
Liquidated Damages thereon to the applicable redemption date, if redeemed during
the twelve-month period beginning on June 1 of the years indicated below:
Year Percentage
- ---- ----------
2003................................................................ 105.625%
2004................................................................ 103.750%
2005................................................................ 101.875%
2006 and thereafter................................................. 100.000%
6. Mandatory Redemption.
Except as set forth in Paragraph 7 below, the Company shall not be
required to make mandatory redemption payments with respect to the Notes.
A-2-4
<PAGE>
7. Repurchase at Option of Holder.
(a) Upon the occurrence of a Change of Control, the Company shall
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 a purchase
price equal to 101% of the aggregate principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of
repurchase (the "Change of Control Payment"). Within 30 days following any
Change of Control, the Company shall mail a notice to each Holder setting forth
the procedures governing the Change of Control Offer as required by the
Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales, when
the aggregate amount of Excess Proceeds exceeds $5.0 million, the Company shall
be required to make an offer to all Holders of Notes and all holders of other
Indebtedness containing provisions similar to those set forth in the Indenture
with respect to offers to purchase or redeem with the proceeds of sales of
assets (an "Asset Sale Offer") to purchase the maximum principal amount of Notes
and such other Indebtedness that may be purchased out of the Excess Proceeds, at
an offer price in cash in an amount equal to 100% of the principal amount
thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any,
to the date of purchase, in accordance with the procedures set forth in the
Indenture and such other Indebtedness. To the extent that any Excess Proceeds
remain after consummation of an Asset Sale Offer, the Company may use such
Excess Proceeds for any purpose not otherwise prohibited by this Indenture. If
the aggregate principal amount of Notes and such other Indebtedness tendered
into such Asset Sale Offer surrendered by Holders thereof exceeds the amount of
Excess Proceeds, the Trustee shall select the Notes and such other Indebtedness
to be purchased on a pro rata basis. Upon completion of such offer to purchase,
the amount of Excess Proceeds shall be reset at zero. Holders of Notes that are
the subject of an offer to purchase will receive an Asset Sale Offer from the
Company 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 shall 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 shall cease to accrue on
Notes or portions thereof called for redemption.
9. Denominations, Transfer, Exchange. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
A-2-5
<PAGE>
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 under the Indenture.
11. Amendment, Supplement and Waiver. Subject to certain exceptions,
the Indenture, the Notes or the Subsidiary Guarantees may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the then outstanding Notes (and Additional Notes, if any) voting as a
single class, and any existing default or compliance with any provision of the
Indenture, the Notes or the Subsidiary Guarantees may be waived with the consent
of the Holders of a majority in principal amount of the then outstanding Notes
(and Additional Notes, if any) voting as a single class. Without the consent of
any Holder of a Note, the Indenture, the Notes or the Subsidiary Guarantees may
be amended or supplemented to cure any ambiguity, defect or inconsistency, to
provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Company's or the Guarantor's
obligations to Holders of the Notes in case of a merger or consolidation, to
make any change that would provide any additional rights or benefits to the
Holders of the Notes or that does not adversely affect the legal rights under
the Indenture of any such Holder, to comply with the requirements of the SEC in
order to effect or maintain the qualification of the Indenture under the TIA, to
provide for the issuance of Additional Notes in accordance with the limitations
set forth in the Indenture or to allow any Guarantor to execute a supplemental
indenture to the Indenture.
12. Defaults and Remedies.
Events of Default under the Indenture include: (i) default for 30 days
in the payment when due of interest on, or Liquidated Damages with respect to,
the Notes (whether or not prohibited by the subordination provisions of the
Indenture); (ii) default in payment when due of the principal of or premium, if
any, on the Notes (whether or not prohibited by the subordination provisions of
the Indenture); (iii) failure by the Company or any of its Subsidiaries to
comply with the provisions of Sections 4.07, 4.09, 4.10 and 4.15 of the
Indenture; (iv) failure by the Company or any of its Subsidiaries for 60 days
after notice to comply with any of its other agreements in the Indenture or the
Notes; (v) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any Indebtedness for
money borrowed by the Company or any of its Subsidiaries (or the payment of
which is guaranteed by the Company or any of its Subsidiaries) whether such
Indebtedness or guarantee now exists, or is created after the date of the
Indenture, which default (a) is caused by a failure to pay principal of or
premium, if any, or interest on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such default (a
"Payment Default") or (b) results in the acceleration of such Indebtedness prior
to its express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $5.0 million or more; (vi) failure by the Company or
any of its Subsidiaries to pay final judgments aggregating in excess of $5.0
million, which judgments are not paid, discharged or
A-2-6
<PAGE>
stayed for a period of 60 days; (vii) except as permitted by the Indenture, any
Subsidiary Guarantee shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force and
effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall
deny or disaffirm its obligations under its Subsidiary Guarantee; and (viii)
certain events of bankruptcy or insolvency with respect to the Company or any of
its Subsidiaries.
(b) 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 become due and payable without further
action or notice. Holders may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. The 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
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 principal of, the Notes. The Company shall deliver to the
Trustee annually a statement regarding compliance with the Indenture, and the
Company, upon becoming aware of any Default or Event of Default, deliver to the
Trustee a statement specifying such Default or Event of Default.
13. Trustee Dealings with Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
14. No Recourse Against Others. A director, officer, employee,
incorporator or shareholder, of the Company or any Guarantor, as such, shall not
have any liability for any obligations of the Company or any Guarantor under the
Notes, any Subsidiary Guarantee or the Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder 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.
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 entirety), 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).
A-2-7
<PAGE>
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 Initial Notes shall have all the rights
set forth in the Registration Rights Agreement 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 Companyand the other parties thereto, relating to rights given by
the Company to the purchasers of any Additional Notes.
18. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company shall 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:
Coyne International Enterprises Corp.
140 Cortland Avenue
P.O. Box 4854
Syracuse, NY 13221
Telecopier No.: (315) 475-9978
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 Company. 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 Company
pursuant to Section 4.10 or 4.15 of the Indenture, check the appropriate box
below:
[_] Section 4.10 [_] Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $___________
________________________________________________________________________________
Date:_____________
Your Signature:___________________________________
(Sign exactly as your name appears on the 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 decrease Amount of increase of this Global Note Signature of
in Principal in Principal following such authorized officer
Amount of this Amount of this decrease of Trustee or
Date of Exchange Global Note Global Note (or increase) Note Custodian
- ---------------- ------------------ ------------------ -------------------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
A-2-11
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Coyne International Enterprises Corp.
140 Cortland Avenue
P.O. Box 4854
Syracuse, NY 13221
Attention: Chief Financial Officer
[IBJ Schroder Bank & Trust Company
One State Street Plaza
New York, New York 10004]
Attention: _______________
Re: 11 1/4% Senior Subordinated Notes due 2008
------------------------------------------
Reference is hereby made to the Indenture, dated as of June 26, 1998
(the "Indenture"), among Coyne International Enterprises Corp., as issuer (the
"Company"), the Guarantors and [IBJ Schroder Bank & Trust Company,] 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
B-1
<PAGE>
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 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 Company or a subsidiary
thereof;
or
(c) [_] such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
(d) [_] such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration requirements of the
Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor
hereby further certifies that it has not engaged in any general solicitation
within the meaning of Regulation D under the Securities Act and the Transfer
complies with the transfer restrictions applicable to beneficial interests in a
Restricted Global Note or Restricted Definitive Notes and the requirements of
the exemption claimed, which certification is supported by (1) a certificate
executed by the Transferee in the form of Exhibit D to the Indenture and (2) if
---------
such Transfer is
B-2
<PAGE>
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.
(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.
B-3
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
Dated: __________________,_____ ______________________________
[Insert Name of Transferor]
By: __________________________
Name:
Title:
B-4
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [_] a beneficial interest in the:
(i) [_] 144A Global Note (CUSIP ________), or
(ii) [_] Regulation S Global Note (CUSIP ________), or
(iii) [_] IAI Global Note (CUSIP _______); or
(b) [_] a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [_] a beneficial interest in the:
(i) [_] 144A Global Note (CUSIP _______), or
(ii) [_] Regulation S Global Note (CUSIP _______), or
(iii) [_] IAI Global Note (CUSIP _______); or
(iv) [_] Unrestricted Global Note (CUSIP _______); or
(b) [_] a Restricted Definitive Note; or
(c) [_] an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-5
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Coyne International Enterprises Corp.
140 Cortland Avenue
P.O. Box 4854
Syracuse, NY 13221
Attention: Chief Financial Officer
[IBJ Schroder Bank & Trust Company
One State Street Plaza
New York, New York 10004
Attention: ______________]
Re: 11 1/4% Senior Subordinated Notes due 2008
------------------------------------------
(CUSIP ______________)
Reference is hereby made to the Indenture, dated as of June 26, 1998
(the "Indenture"), among Coyne International Enterprises Corp., as issuer (the
"Company"), the Guarantors and IBJ Schroder Bank & Trust Company, 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)
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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 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.
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(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.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
___________________________________
[Insert Name of Owner]
By:________________________________
Name:
Title:
Dated: __________, ____
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EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Coyne International Enterprises Corp.
140 Cortland Avenue
P.O. Box 4854
Syracuse, NY 13221
Attention: Chief Financial Officer
[IBJ Schroder Bank & Trust Company
One State Street Plaza
New York, New York 10004
Attention: ______________]
Re: 11 1/4% Senior Subordinated Notes due 2008
------------------------------------------
Reference is hereby made to the Indenture, dated as of June 26, 1998
(the "Indenture"), among Coyne International Enterprises Corp., as issuer (the
"Company"), the Guarantors and [IBJ Schroder Bank & Trust Company,] as trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
In connection with our proposed purchase of $____________ aggregate
principal amount of:
(a) [_] a beneficial interest in a Global Note, or
(b) [_] a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or any
interest therein is subject to certain restrictions and conditions set forth in
the Indenture and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Notes or any interest therein except in
compliance with, such restrictions and conditions and the United States
Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes and any interest therein
may not be offered or sold except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we are acting
as hereinafter stated, that if we should sell the Notes or any interest therein,
we will do so only (A) to the Company or any subsidiary thereof, (B) in
accordance with Rule 144A under the Securities Act to a "qualified institutional
buyer" (as defined therein), (c) to an institutional "accredited investor" (as
defined below) that, prior to such transfer, furnishes (or has furnished on its
behalf by a U.S. broker-dealer) to you and to the Company a signed letter
substantially in the form of this letter and, if such transfer is in respect of
a principal amount of Notes, at the time of transfer of less than $250,000,
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an Opinion of Counsel in form reasonably acceptable to the Company to the effect
that such transfer is in compliance with the Securities Act, (D) outside the
United States in accordance with Rule 904 of Regulation S under the Securities
Act, (E) pursuant to the provisions of Rule 144(k) under the Securities Act or
(F) pursuant to an effective registration statement under the Securities Act,
and we further agree to provide to any person purchasing the Definitive Note or
beneficial interest in a Global Note from us in a transaction meeting the
requirements of clauses (A) through (E) of this paragraph a notice advising such
purchaser that resales thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Notes or
beneficial interest therein, we will be required to furnish to you and the
Company such certifications, legal opinions and other information as you and the
Company may reasonably require to confirm that the proposed sale complies with
the foregoing restrictions. We further understand that the Notes purchased by
us will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or its investment.
5. We are acquiring the Notes or beneficial interest therein
purchased by us for our own account or for one or more accounts (each of which
is an institutional "accredited investor") as to each of which we exercise sole
investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
__________________________________________
[Insert Name of Accredited Investor]
By:_______________________________
Name:
Title:
Dated: __________________, ____
D-2
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EXHIBIT E
FORM OF NOTATION OF SUBSIDIARY GUARANTEE ON NOTE
For value received, each Guarantor (which term includes any successor
Person under the Indenture) has, jointly and severally, unconditionally
guaranteed, to the extent set forth in the Indenture and subject to the
provisions in the Indenture dated as of June 26, 1998 (the "Indenture") among
Coyne International Enterprises Corp., the Guarantors signatories thereto and
[IBJ Schroder Bank & Trust Company,] as trustee (the "Trustee"), (a) the due and
punctual payment of the principal of, premium, if any, and interest on the Notes
(as defined in the Indenture), whether at maturity, by acceleration, redemption
or otherwise, the due and punctual payment of interest on overdue principal and
premium, and, to the extent permitted by law, interest, and the due and punctual
performance of all other obligations of the Company to the Holders or the
Trustee all in accordance with the terms of the Indenture and (b) in case of any
extension of time of payment or renewal of any Notes or any of such other
obligations, that the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. The obligations of the Guarantors to the
Holders of Notes and to the Trustee pursuant to the Subsidiary Guarantee and the
Indenture are expressly set forth in Article 11 of the Indenture and reference
is hereby made to the Indenture for the precise terms of the Subsidiary
Guarantee. Each Holder of a Note, by accepting the same, (a) agrees to and shall
be bound by such provisions, (b) authorizes the Trustee, on behalf of such
Holder, to make such action as may be necessary or appropriate to effectuate the
subordination as provided in the Indenture and (c) appoints the Trustee
attorney-in-fact of such Holder for such purpose; provided, however, that the
Indebtedness evidenced by this Subsidiary Guarantee shall cease to be so
subordinated and subject in right of payment upon any defeasance of this Note in
accordance with the provisions of the Indenture.
[Guarantor]
By:_____________________________
Name:
Title:
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EXHIBIT F
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture") dated as of
____________________, among _____________________ (the "Guaranteeing
Subsidiary"), a subsidiary of Coyne International Enterprises Corp. (or its
successor), a corporation organized under the laws of New York (the "Company"),
and [IBJ Schroder Bank & Trust Company,] as trustee under the indenture referred
to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture (the "Indenture"), dated as of June 26, 1998, providing for
the issuance of an aggregate principal amount at maturity of $150,000,000 of 11
1/4% 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 Company's Obligations under the Notes and the Indenture on
the terms and conditions set forth herein (the "Subsidiary Guarantee"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
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 Guarantors named in the Indenture, to jointly and
severally Guarantee to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors
and assigns, irrespective of the validity and enforceability of
the Indenture, the Notes or the obligations of the Company
hereunder or thereunder, that:
(i) the principal of and interest on the Notes will be promptly
paid in full when due, whether at maturity, by acceleration,
redemption or otherwise, and interest on the overdue
principal of and interest on the Notes, if any, if lawful,
and all other obligations of the Company to the Holders or
the Trustee hereunder or thereunder will be promptly paid in
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full or performed, all in accordance with the terms hereof
and thereof; and
(ii) in case of any extension of time of payment or renewal of
any Notes or any of such other obligations, that same will
be promptly paid in full when due or performed in accordance
with the terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise. Failing
payment when due of any amount so guaranteed or any
performance so guaranteed for whatever reason, the
Guarantors shall be jointly and severally obligated to pay
the same immediately.
(b) The obligations hereunder shall be unconditional, irrespective of
the validity, regularity or enforceability of the Notes or the
Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to
any provisions hereof or thereof, the recovery of any judgment
against the Company, any action to enforce the same or any other
circumstance which might otherwise constitute a legal or
equitable discharge or defense of a guarantor.
(c) The following is hereby waived: diligence presentment, demand of
payment, filing of claims with a court in the event of insolvency
or bankruptcy of the Company, any right to require a proceeding
first against the Company, protest, notice and all demands
whatsoever.
(d) This Subsidiary Guarantee shall not be discharged except by
complete performance of the obligations contained in the Notes
and the Indenture.
(e) If any Holder or the Trustee is required by any court or
otherwise to return to the Company, the Guarantors, or any
Custodian, Trustee, liquidator or other similar official acting
in relation to either the Company or the Guarantors, any amount
paid by either to the Trustee or such Holder, this Subsidiary
Guarantee, to the extent theretofore discharged, shall be
reinstated in full force and effect.
(f) The 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 Guarantors, on the one hand, and the Holders and
the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in
Article 6 of the Indenture for the purposes of this Subsidiary
Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the
obligations guaranteed hereby, and (y) in the event of any
declaration of acceleration of such obligations as provided in
Article 6 of the Indenture, such obligations (whether or not due
and payable) shall forthwith become due and payable by the
Guarantors for the purpose of this Subsidiary Guarantee.
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(h) The Guarantors shall have the right to seek contribution from any
non-paying Guarantor so long as the exercise of such right does
not impair the rights of the Holders under the Guarantee.
(i) The obligations hereunder shall be subject to the subordination
provisions of the Indenture.
3. Execution and Delivery. Each Guaranteeing Subsidiary agrees that
the Subsidiary Guarantees shall remain in full force and effect notwithstanding
any failure to endorse on each Note a notation of such Subsidiary Guarantee.
4. 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 Guarantor is the surviving Person) another
corporation, Person or entity whether or not affiliated with such
Guarantor unless:
(i) subject to Section 11.05 of the Indenture, the Person formed by
or surviving any such consolidation or merger (if other than a
Guarantor or the Company) unconditionally assumes all the
obligations of such Guarantor, pursuant to a supplemental
indenture in form and substance reasonably satisfactory to the
Trustee, under the Notes, the Indenture and the Subsidiary
Guarantee on the terms set forth herein or therein; and
(ii) immediately after giving effect to such transaction, no Default
or Event of Default exists.
(b) In case of any such consolidation, merger, sale or conveyance and upon
the assumption by the successor corporation, by supplemental
indenture, executed and delivered to the Trustee and satisfactory in
form to the Trustee, of the Subsidiary Guarantee endorsed upon the
Notes and the due and punctual performance of all of the covenants and
conditions of the Indenture to be performed by the Guarantor, such
successor corporation shall succeed to and be substituted for the
Guarantor with the same effect as if it had been named herein as a
Guarantor. Such successor corporation thereupon may cause to be
signed any or all of the Subsidiary Guarantees to be endorsed upon all
of the Notes issuable hereunder which theretofore shall not have been
signed by the Company and delivered to the Trustee. All the
Subsidiary Guarantees so issued shall in all respects have the same
legal rank and benefit under the Indenture as the Subsidiary
Guarantees theretofore and thereafter issued in accordance with the
terms of the Indenture as though all of such Subsidiary Guarantees had
been issued at the date of the execution hereof.
(c) Except as set forth in Articles 4 and 5 of the Indenture, and
notwithstanding clauses (a) and (b) above, nothing contained in the Indenture or
in any of the Notes shall prevent any consolidation or merger of a Guarantor
with or into the Company or another Guarantor, or shall prevent any sale or
conveyance of the property of a Guarantor as an entirety or substantially as an
entirety to the Company or another Guarantor.
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5. Releases.
(a) In the event of a sale or other disposition of all of the assets of
any Guarantor, by way of merger, consolidation or otherwise, or a sale
or other disposition of all to the capital stock of any Guarantor,
then such Guarantor (in the event of a sale or other disposition, by
way of merger, consolidation or otherwise, of all of the capital stock
of such Guarantor) or the corporation acquiring the property (in the
event of a sale or other disposition of all or substantially all of
the assets of such Guarantor) will be released and relieved of any
obligations under its Subsidiary Guarantee; provided that the Net
Proceeds of such sale or other disposition are applied in accordance
with the applicable provisions of the Indenture, including without
limitation Section 4.10 of the Indenture. Upon delivery by the Company
to the Trustee of an Officers' Certificate and an Opinion of Counsel
to the effect that such sale or other disposition was made by the
Company in accordance with the provisions of the Indenture, including
without limitation Section 4.10 of the Indenture, the Trustee shall
execute any documents reasonably required in order to evidence the
release of any Guarantor from its obligations under its Subsidiary
Guarantee.
(b) Any Guarantor not released from its obligations under its Subsidiary
Guarantee shall remain liable for the full amount of principal of and
interest on the Notes and for the other obligations of any Guarantor
under the Indenture as provided in Article 11 of the Indenture.
6. No Recourse Against Others. No past, present or future director,
officer, employee, incorporator, stockholder or agent of the Guaranteeing
Subsidiary, as such, shall have any liability for any obligations of the Company
or any Guaranteeing Subsidiary under the Notes, any Subsidiary Guarantees, the
Indenture or this Supplemental Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder of the
Notes by accepting a Note waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the Notes. Such
waiver may not be effective to waive liabilities under the federal securities
laws and it is the view of the Commission that such a waiver is against public
policy.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
8. Counterparts. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
9. Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction hereof.
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10. The Trustee. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Guaranteeing Subsidiary and the Company.
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:
[TRUSTEE]
as Trustee
By: ______________________________
Name:
Title:
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EXHIBIT 4.2
================================================================================
CUSIP 224062AA7
11 1/4% SERIES A SENIOR SUBORDINATED NOTES DUE 2008
No. 1 $75,000,000
COYNE INTERNATIONAL ENTERPRISES CORP.
promises to pay to Cede & Co.
or registered assigns, the principal sum of Seventy Five Million
Dollars on June 1, 2008.
Interest Payment Dates: June 1 and December 1.
Record Dates: May 15 and November 15.
COYNE INTERNATIONAL ENTERPRISES CORP.
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
This is one of the
Global Notes referred to in the
within-mentioned Indenture:
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
By: _________________________ Dated: June 26, 1998
Name:
Title:
================================================================================
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11 1/4% Series A Senior Subordinated Notes due 2008
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY
BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY
BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE
INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE
MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF
THE COMPANY.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED
OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
OR IN ACCORDANCE WITH AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT (SUBJECT TO THE DELIVERY OF SUCH EVIDENCE, IF ANY REQUIRED
UNDER THE INDENTURE PURSUANT TO WHICH THIS NOTE IS ISSUED) AND IN ACCORDANCE
WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER JURISDICTION. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER OR ANOTHER
EXEMPTION UNDER THE SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED HEREBY
AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY (1)(a) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d)
IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS), SUBJECT TO THE RECEIPT BY THE REGISTRAR OF A CERTIFICATION OF THE
TRANSFEROR AND AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH TRANSFER IS IN
COMPLIANCE WITH THE SECURITIES ACT, (2) TO THE COMPANY OR (3) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (B) THE
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HOLDER WILL AND EACH SUBSEQUENT HOLDER IS REQUIRED TO NOTIFY ANY PURCHASER FROM
IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTION SET FORTH IN (A)
ABOVE.
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. Interest. Coyne International Enterprises Corp., a New York
corporation (the "Company"), promises to pay interest on the principal amount of
this Note at 11 1/4% per annum from June 26, 1998 until maturity and shall pay
the Liquidated Damages payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company shall pay interest and Liquidated
Damages semi-annually on June 1 and December 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 shall 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 December 1, 1998. The Company shall
pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1.0% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest shall be computed on the basis of
a 360-day year of twelve 30-day months.
2. Method of Payment. The Company shall pay interest on the Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the May 15 or November
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 with respect to defaulted interest.
The Notes shall be payable as to principal, premium and Liquidated Damages, if
any, and interest at the office or agency of the Company maintained for such
purpose within or without the City and State of New York, or, at the option of
the Company, payment of interest and Liquidated Damages may be made by check
mailed to the Holders at their addresses set forth in the register of Holders,
and provided that payment by wire transfer of immediately available funds shall
be required with respect to principal of and interest, premium and Liquidated
Damages on, all Global Notes and all other Notes the Holders of which shall have
provided wire transfer instructions to the Company or the Paying Agent. Such
payment shall be in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts.
3. Paying Agent and Registrar. Initially, IBJ Schroder Bank & Trust
Company, the Trustee under the Indenture, shall act as Paying Agent and
Registrar. The
<PAGE>
Company may change any Paying Agent or Registrar without notice to any Holder.
The Company or any of its Subsidiaries may act in any such capacity.
4. Indenture. The Company issued the Notes under an Indenture dated
as of June 26, 1998 ("Indenture") among the Company, the Guarantors and the
Trustee. The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code (S)(S) 77aaa-77bbbb) (the "TIA"). The Notes are subject
to all such terms, and Holders are referred to the Indenture and the TIA 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 Company
limited to $150.0 million in aggregate principal amount plus amounts, if any,
issued to pay Liquidated Damages on outstanding Notes as set forth in Paragraph
2 hereof.
5. Optional Redemption.
The Notes will not be redeemable at the Company's option prior to
June 1, 2003. Thereafter, the Notes will be subject to redemption at any time at
the option of the Company, in whole or in part, upon not less than 30 nor more
than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest and
Liquidated Damages thereon to the applicable redemption date, if redeemed during
the twelve-month period beginning on June 1 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
- ---- ----------
<S> <C>
2003............................................................. 105.625%
2004............................................................. 103.750%
2005............................................................. 101.875%
2006 and thereafter.............................................. 100.000%
</TABLE>
6. Mandatory Redemption.
Except as set forth in Paragraph 7 below, the Company shall not be
required to make mandatory redemption payments with respect to the Notes.
7. Repurchase at Option of Holder.
(a) Upon the occurrence of a Change of Control, the Company shall
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 a purchase
price equal to 101% of the aggregate principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of
repurchase (the "Change of Control Payment"). Within 30 days following any
Change of Control, the Company shall mail a notice to each Holder setting forth
the procedures governing the Change of Control Offer as required by the
Indenture.
<PAGE>
(b) If the Company or a Subsidiary consummates any Asset Sales, when
the aggregate amount of Excess Proceeds exceeds $5.0 million, the Company shall
be required to make an offer to all Holders of Notes and all holders of other
Indebtedness containing provisions similar to those set forth in the Indenture
with respect to offers to purchase or redeem with the proceeds of sales of
assets (an "Asset Sale Offer") to purchase the maximum principal amount of Notes
and such other Indebtedness that may be purchased out of the Excess Proceeds, at
an offer price in cash in an amount equal to 100% of the principal amount
thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any,
to the date of purchase, in accordance with the procedures set forth in the
Indenture and such other Indebtedness. To the extent that any Excess Proceeds
remain after consummation of an Asset Sale Offer, the Company may use such
Excess Proceeds for any purpose not otherwise prohibited by this Indenture. If
the aggregate principal amount of Notes and such other Indebtedness tendered
into such Asset Sale Offer surrendered by Holders thereof exceeds the amount of
Excess Proceeds, the Trustee shall select the Notes and such other Indebtedness
to be purchased on a pro rata basis. Upon completion of such offer to purchase,
the amount of Excess Proceeds shall be reset at zero. Holders of Notes that are
the subject of an offer to purchase will receive an Asset Sale Offer from the
Company 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 shall 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 shall cease to accrue on
Notes or portions thereof called for redemption.
9. Denominations, Transfer, Exchange. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
10. Persons Deemed Owners. The registered Holder of a Note may be
treated as its owner for all purposes under the Indenture.
11. Amendment, Supplement and Waiver. Subject to certain exceptions,
the Indenture, the Notes or the Subsidiary Guarantees may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the then outstanding Notes (and Additional Notes, if any) voting as a
single class, and any existing default or compliance
<PAGE>
with any provision of the Indenture, the Notes or the Subsidiary Guarantees may
be waived with the consent of the Holders of a majority in principal amount of
the then outstanding Notes (and Additional Notes, if any) voting as a single
class. Without the consent of any Holder of a Note, the Indenture, the Notes or
the Subsidiary Guarantees or may be amended or supplemented to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Notes in
addition to or in place of certificated Notes, to provide for the assumption of
the Company's or the Guarantor's obligations to Holders of the Notes in case of
a merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of the Notes or that does not adversely affect
the legal rights under the Indenture of any such Holder, to comply with the
requirements of the SEC in order to effect or maintain the qualification of the
Indenture under the TIA, to provide for the issuance of Additional Notes in
accordance with the limitations set forth in the Indenture or to allow any
Guarantor to execute a supplemental indenture to the Indenture.
12. Defaults and Remedies.
(a) Events of Default under the Indenture include: (i) default for 30
days in the payment when due of interest on, or Liquidated Damages with respect
to, the Notes (whether or not prohibited by the subordination provisions of the
Indenture); (ii) default in payment when due of the principal of or premium, if
any, on the Notes (whether or not prohibited by the subordination provisions of
the Indenture); (iii) failure by the Company or any of its Subsidiaries to
comply with the provisions of Sections 4.07, 4.09, 4.10 and 4.15 of the
Indenture; (iv) failure by the Company or any of its Subsidiaries for 60 days
after notice to comply with any of its other agreements in the Indenture or the
Notes; (v) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any Indebtedness for
money borrowed by the Company or any of its Subsidiaries (or the payment of
which is guaranteed by the Company or any of its Subsidiaries) whether such
Indebtedness or guarantee now exists, or is created after the date of the
Indenture, which default (a) is caused by a failure to pay principal of or
premium, if any, or interest on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such default (a
"Payment Default") or (b) results in the acceleration of such Indebtedness prior
to its express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $5.0 million or more; (vi) failure by the Company or
any of its Subsidiaries to pay final judgments aggregating in excess of $5.0
million, which judgments are not paid, discharged or stayed for a period of 60
days; (vii) except as permitted by the Indenture, any Subsidiary Guarantee shall
be held in any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect or any Guarantor, or any Person
acting on behalf of any Guarantor, shall deny or disaffirm its obligations under
its Subsidiary Guarantee; and (viii) certain events of bankruptcy or insolvency
with respect to the Company or any of its Subsidiaries.
(b) 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 become due
<PAGE>
and payable without further action or notice. Holders may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The 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 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 principal of, the Notes. The Company shall deliver to
the Trustee annually a statement regarding compliance with the Indenture, and
the Company, upon becoming aware of any Default or Event of Default, deliver to
the Trustee a statement specifying such Default or Event of Default.
13. Trustee Dealings with Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
14. No Recourse Against Others. A director, officer, employee,
incorporator or shareholder, of the Company or any Guarantor, as such, shall not
have any liability for any obligations of the Company or any Guarantor under the
Notes, any Subsidiary Guarantee or the Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder 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.
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 entirety), 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 Initial Notes shall have all the rights
set forth in the Registration Rights Agreement or, in the case of Additional
Notes, Holders of Restricted Global Notes and Restricted Definitive Notes shall
have the rights set forth in one or more registration rights agreements, if any,
between the Company and the other parties thereto, relating to rights given by
the Company to the purchasers of any Additional Notes.
18. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such
<PAGE>
numbers either as printed on the Notes or as contained in any notice of
redemption and reliance may be placed only on the other identification numbers
placed thereon.
The Company shall 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:
Coyne International Enterprises Corp.
140 Cortland Avenue
P.O. Box 4854
Syracuse, NY 13221
Telecopier No.: (315) 475-9978
Attention: Chief Financial Officer
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
______
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
________________________________________________________________________________
Date: ________________
Your Signature:___________________________________
______
(Sign exactly as your name appears on the 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.
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
[_] Section 4.10 [_] Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $________
Date: ________________
Your Signature:___________________________________
______
(Sign exactly as your name appears on the 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.
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an interest
in another Global Note or for a Definitive Note, or exchanges of a part of
another Global Note or Definitive Note for an interest in this Global Note, have
been made:
<TABLE>
<CAPTION>
Principal Amount
Amount of decrease Amount of increase of this Global Note Signature of
in Principal in Principal following such authorized officer
Amount of this Amount of this decrease of Trustee or
Date of Exchange Global Note Global Note (or increase) Note Custodian
- ---------------- ------------------ ------------------ ------------------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
SUBSIDIARY GUARANTEE
For value received, each Guarantor (which term includes any successor
Person under the Indenture) has, jointly and severally, unconditionally
guaranteed, to the extent set forth in the Indenture and subject to the
provisions in the Indenture dated as of June 26, 1998 (the "Indenture") among
Coyne International Enterprises Corp., the Guarantors signatories thereto and
IBJ Schroder Bank & Trust Company, as trustee (the "Trustee"), (a) the due and
punctual payment of the principal of, premium, if any, and interest on the Notes
(as defined in the Indenture), whether at maturity, by acceleration, redemption
or otherwise, the due and punctual payment of interest on overdue principal and
premium, and, to the extent permitted by law, interest, and the due and punctual
performance of all other obligations of the Company to the Holders or the
Trustee all in accordance with the terms of the Indenture and (b) in case of any
extension of time of payment or renewal of any Notes or any of such other
obligations, that the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. The obligations of the Guarantors to the
Holders of Notes and to the Trustee pursuant to the Subsidiary Guarantee and the
Indenture are expressly set forth in Article 11 of the Indenture and reference
is hereby made to the Indenture for the precise terms of the Subsidiary
Guarantee. Each Holder of a Note, by accepting the same, (a) agrees to and shall
be bound by such provisions, (b) authorizes the Trustee, on behalf of such
Holder, to make such action as may be necessary or appropriate to effectuate the
subordination as provided in the Indenture and (c) appoints the Trustee
attorney-in-fact of such Holder for such purpose; provided, however, that the
Indebtedness evidenced by this Subsidiary Guarantee shall cease to be so
subordinated and subject in right of payment upon any defeasance of this Note in
accordance with the provisions of the Indenture.
<PAGE>
Blue Ridge Textile Manufacturing, Inc.
By:___________________________________
Name:
Title:
Clean Towel Service, Inc.
By:___________________________________
Name:
Title:
Ohio Garment Rental, Inc.
By:___________________________________
Name:
Title:
Midway-CTS Buffalo, Inc.
By:___________________________________
Name:
Title:
<PAGE>
[LETTERHEAD OF BLANK ROME COMISKY & McCAULEY LLP]
EXHIBIT 5.1
July 28, 1998
Coyne International Enterprises Corp.
140 Cortland Avenue
Syracuse, NY 13221
Re: Coyne International Enterprises Corp., Blue Ridge Textile
Manufacturing, Inc., Clean Towel Service, Inc.,
Ohio Garment Rental, Inc. and Midway-CTS Buffalo, Ltd.
Registration Statement on Form S-4
---------------------------------------------------------
Ladies and Gentlemen:
We have acted as securities counsel to Coyne International Enterprises
Corp., a New York corporation (the "Issuer"), Blue Ridge Textile Manufacturing,
Inc., a Georgia corporation ("Blue Ridge"), Clean Towel Service, Inc., a Georgia
corporation ("Clean Towel"), Ohio Garment Rental, Inc., an Ohio corporation
("Ohio Garment") and Midway-CTS Buffalo, Ltd., a New York corporation ("Midway,"
and together with Blue Ridge, Clean Towel, Ohio Garment and Midway, the
"Guarantors," and together with the Issuer, Blue Ridge, Clean Towel, Ohio
Garment and Midway, the "Registrants") in connection with the proposed
registration by the Registrants of up to $75,000,000 in aggregate principal
amount of the Issuer's 11 1/4% Series B Senior Subordinated Notes due 2008 (the
"Exchange Notes"), pursuant to a Registration Statement on Form S-4 filed with
the Securities and Exchange Commission, under the Securities Act of 1933, as
amended (the "Act") (such Registration Statement, as amended or supplemented, is
hereinafter referred to as the "Registration Statement"). The obligations of
the Issuer under the Exchange Notes will be guaranteed by the Guarantors (the
"Guarantees"). The Exchange Notes and the Guarantees are to be issued pursuant
to the Indenture (the "Indenture"), dated as of June 26, 1998, among the
Issuers, the Guarantors and IBJ Schroeder Bank & Trust Company, as Trustee, in
exchange for and in replacement of the Issuer's outstanding 11 1/4% Series A
Senior Subordinated Notes due 2008 (the " Initial Notes"), of which $75,000,000
in aggregate principal amount is outstanding. This opinion is being furnished
pursuant to the requirements of Item 601(b)(5) of Regulation S-K.
<PAGE>
Coyne International Enterprises Corp.
July 28, 1998
Page 2
In rendering this opinion, we have examined only the following documents:
(i) the Certificate of Incorporation, as amended, or the Articles of
Incorporation, as amended, as the case may be, of the Registrants; (ii) the By-
laws of the Registrants; (iii) minutes and records of the corporate proceedings
of the Registrants with respect to the issuance of the Exchange Notes and the
Guarantees, respectively; and (iv) the Registration Statement. We have not
performed any independent investigation other than the document examination
described. Our opinion is, therefore, qualified in all respects by the scope of
that document examination. We make no representation as to the sufficiency of
our investigation for your purposes. We have assumed and relied, as to questions
of fact and mixed questions of law and fact, on the truth, completeness,
authenticity and due authorization of all certificates, documents and records
examined and the genuineness of all signatures.
This opinion is limited to the laws of the Commonwealth of Pennsylvania and
no opinion is expressed as to the laws of any other jurisdiction. While the
Indenture provides that it will be governed by the substantive laws of the State
of New York, we have assumed for the purposes of this opinion that the Indenture
will be governed by the laws of the Commonwealth of Pennsylvania.
Based upon and subject to the assumptions, qualifications, assumptions and
limitations and the further limitations set forth below, we are of the opinion
that when (i) the Registration Statement becomes effective; (ii) the Board of
Directors and the appropriate officers of the Registrants have taken all
necessary action to fix and approve the terms of the Exchange Notes and the
Guarantees, respectively; (iii) the Indenture has been duly qualified under the
Trust Indenture Act of 1939, as amended; and (iv) the Exchange Notes and the
Guarantees have been duly executed and authenticated in accordance with the
provisions of the Indenture and duly delivered to the purchasers thereof in
exchange for the Initial Notes, the Exchange Notes and the Guarantees will be
binding obligations of the Registrants.
The opinions expressed herein are qualified in all respects by, and subject
to, the following: (a) no opinion is rendered as to the availability of
equitable remedies including, but not limited to, specific performance and
injunctive relief; (b) the effect of bankruptcy, insolvency, reorganization,
fraudulent conveyance, fraudulent transfer, preference, moratorium and other
similar laws or equitable principles affecting creditors' rights or remedies;
(c) the effect of equitable subordination or any other doctrine which may
subordinate claims under the Indenture or the Initial Notes; (d) general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing; (e) the effect of
applicable law and court decisions which may now or hereafter limit or render
unenforceable certain rights and remedies; and (f) the application of a standard
of "good faith" or "commercial reasonableness" to any decisions, actions or
conduct under the Indenture.
<PAGE>
Coyne International Enterprises Corp.
July 28, 1998
Page 3
This opinion is given as of the date hereof. We assume no obligation to
update or supplement this opinion to reflect any facts or circumstances which
may hereafter come to our attention or any changes in laws which may hereafter
occur.
This opinion is strictly limited to the matters stated herein and no other
or more extensive opinion is intended, implied or to be inferred beyond the
matters expressly stated herein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus, which is part of the Registration Statement.
Sincerely,
/s/ BLANK ROME COMISKY & McCAULEY LLP
<PAGE>
EXHIBIT 10.1
FINANCING AND SECURITY AGREEMENT
by and among
NATIONSBANK, N.A.
And
COYNE INTERNATIONAL ENTERPRISES CORP.
and its Subsidiaries
June 26, 1998
<PAGE>
<TABLE>
<S> <C>
AMENDED AND RESTATED i
FINANCING AND SECURITY AGREEMENT 1
RECITALS 1
ARTICLE I DEFINITIONS 2
SECTION 1.1 CERTAIN DEFINED TERMS. 22
SECTION 1.2 ACCOUNTING TERMS AND OTHER DEFINITIONAL PROVISIONS. 22
ARTICLE II THE CREDIT FACILITIES 22
SECTION 2.1 THE REVOLVING CREDIT FACILITY. 22
2.1.1 Revolving Credit Facility. 22
2.1.2 Procedure for Making Advances Under the Revolving Loan;
Lender Protection Loans. 23
2.1.3 Borrowing Base. 23
2.1.4 Borrowing Base Report. 24
2.1.5 Revolving Credit Note. 24
2.1.6 Mandatory Prepayments of Revolving Loan. 24
2.1.7 Optional Prepayments of Revolving Loan. 25
2.1.8 The Collateral Account. 25
2.1.9 Revolving Loan Account. 26
2.1.10 Revolving Credit Unused Line Fee. 26
2.1.11 Required Availability under the Revolving Credit Facility. 26
2.1.12 Right of Lender to Demand Payment and Terminate Revolving
Credit Facility. 27
SECTION 2.2 THE LETTER OF CREDIT FACILITY. 27
2.2.1 Letters of Credit. 27
2.2.2 Letter of Credit Fees. 28
2.2.3 Terms of Letters of Credit. 28
2.2.4 Procedure for Letters of Credit. 28
SECTION 2.3 THE ACQUISITION LOAN FACILITY 29
2.3.1 Acquisition Loan Facility. 29
2.3.2 Acquisition Note. 29
2.3.3 Payments of Acquisition Loan. 29
2.3.4 Optional Prepayments of Acquisition Loan. 29
2.3.5 Application of Acquisition Loan Partial Prepayments. 30
2.3.6 Acquisition Line Fee. 30
SECTION 2.4 THE CAPITAL EXPENDITURE LINE FACILITY. 30
2.4.1 Capital Expenditure Line Facility. 30
2.4.2 Procedure for Making Advances Under the Capital
Expenditure Line. 30
2.4.3 Capital Expenditure Line Note. 31
2.4.4 Payments of Capital Expenditure Line. 31
2.4.5 Optional Prepayments of Capital Expenditure Line. 32
2.4.6 Application of Capital Expenditure Line Partial
Prepayments. 32
SECTION 2.5 INTEREST 32
2.5.1 Applicable Interest Rates. 32
2.5.2 Selection of Interest Rates. 33
2.5.3 Inability to Determine Eurodollar Base Rate. 34
2.5.4 Indemnity. 35
2.5.5 Payment of Interest. 35
SECTION 2.6 GENERAL FINANCING PROVISIONS. 35
2.6.1 Borrowers' Representatives. 35
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
2.6.2 Use of Proceeds of the Loans. 37
2.6.3 Mandatory Prepayments. 37
2.6.4 Closing Fee. 37
2.6.5 Early Termination Fee. 37
2.6.6 Field Examination Fees. 38
2.6.7 Administration Fees. 38
2.6.8 Computation of Interest and Fees. 38
2.6.9 Payments. 38
2.6.10 Liens; Setoff. 38
2.6.11 Requirements of Law. 39
ARTICLE III THE COLLATERAL 39
SECTION 3.1 DEBT AND OBLIGATIONS SECURED. 39
SECTION 3.2 GRANT OF LIENS. 39
SECTION 3.3 COLLATERAL DISCLOSURE LIST. 40
SECTION 3.4 PERSONAL PROPERTY. 40
3.4.1 Securities, Chattel Paper, Promissory Notes, etc. 40
3.4.2 Patents, Copyrights and Other Property Requiring Additional
Steps to Perfect. 40
3.4.3 Record Searches. 40
SECTION 3.5 REAL PROPERTY. 41
SECTION 3.6 COSTS. 41
SECTION 3.7 RELEASE. 42
SECTION 3.8 INCONSISTENT PROVISIONS. 42
ARTICLE IV REPRESENTATIONS AND WARRANTIES 42
SECTION 4.1 REPRESENTATIONS AND WARRANTIES. 42
4.1.1 Subsidiaries. 42
4.1.2 Good Standing. 43
4.1.3 Power and Authority. 43
4.1.4 Binding Agreements. 43
4.1.5 No Conflicts. 43
4.1.6 No Defaults, Violations. 43
4.1.7 Compliance with Laws. 44
4.1.8 Margin Stock. 44
4.1.9 Investment Company Act; Margin Securities. 44
4.1.10 Litigation. 44
4.1.11 Financial Condition. 44
4.1.12 Full Disclosure. 45
4.1.13 Indebtedness for Borrowed Money. 45
4.1.14 Offering. 45
4.1.15 Taxes. 46
4.1.16 ERISA. 46
4.1.17 Title to Properties. 46
4.1.18 Patents, Trademarks, Etc. 47
4.1.19 Presence of Hazardous Materials or Hazardous Materials
Contamination. 47
4.1.20 Perfection and Priority of Collateral. 47
4.1.21 Places of Business and Location of Collateral. 47
4.1.22 Business Names and Addresses. 47
4.1.23 Equipment. 48
4.1.24 Inventory. 48
4.1.25 Accounts. 48
4.1.26 Compliance with Eligibility Standards. 48
4.1.27 Subordinated Debt. 48
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4.1.28 Year 2000. 49
SECTION 4.2 SURVIVAL. 49
ARTICLE V CONDITIONS PRECEDENT 49
SECTION 5.1 CONDITIONS TO THE INITIAL ADVANCE. 49
5.1.1 Good Standing etc. 49
5.1.2 Corporate Proceedings of the Borrowers. 49
5.1.3 Consents, Licenses, Approvals, Etc. 50
5.1.4 Notes. 50
5.1.5 Financing Documents and Collateral. 50
5.1.6 Recordings and Filings. 50
5.1.7 Opinion of Borrowers' Counsel. 50
5.1.8 Other Documents, Etc. 51
5.1.9 Payment of Fees. 51
5.1.10 Additional Matters. 51
5.1.11 Other Financing Documents. 51
5.1.12 Insurance Certificate. 51
5.1.13 Field Examination. 51
5.1.14 'Proforma Balance Sheet and Projections. 51
5.1.15 Senior Subordinated Notes. 51
SECTION 5.2 CONDITIONS TO ALL EXTENSIONS OF CREDIT. 52
5.2.1 Compliance. 52
5.2.2 Borrowing Base. 52
5.2.3 Default. 52
5.2.4 Representations and Warranties. 52
5.2.5 Adverse Change. 52
5.2.6 Legal Matters. 52
ARTICLE VI COVENANTS OF THE BORROWERS 53
SECTION 6.1 AFFIRMATIVE COVENANTS. 53
6.1.1 Financial Statements. 53
6.1.2 Reports to SEC and to Stockholders. 54
6.1.3 Recordkeeping, Rights of Inspection, Field Examination,
Etc. 55
6.1.4 Corporate Existence. 55
6.1.5 Compliance with Laws. 55
6.1.6 Preservation of Properties. 56
6.1.7 Line of Business. 56
6.1.8 Insurance. 56
6.1.9 Taxes. 56
6.1.10 ERISA. 57
6.1.11 Notification of Events of Default and Adverse
6.1.12 Hazardous Materials; Contamination. 58
6.1.13 Disclosure of Significant Transactions. 59
6.1.14 Environmental Staff. 59
6.1.15 EBITDA. 59
6.1.16 Fixed Charge Coverage Ratio. 60
6.1.17 Leverage Ratio. 60
6.1.18 Capital Expenditures. 61
6.1.19 Collection of Receivables. 61
6.1.20 Assignments of Receivables. 62
6.1.21 Government Accounts. 62
6.1.22 Notice of Returned Goods, etc. 62
6.1.23 Inventory. 62
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6.1.24 Insurance With Respect to Equipment and Inventory. 63
6.1.25 Maintenance of the Collateral. 63
6.1.26 Equipment. 63
6.1.27 Defense of Title and Further Assurances. 64
6.1.28 Business Names; Locations. 64
6.1.29 Subsequent Opinion of Counsel as to Recording Requirements. 65
6.1.30 Use of Premises and Equipment. 65
6.1.31 Protection of Collateral. 65
6.1.32 Landlord's Waivers. 65
6.1.33 Funds Transfer Services. 65
6.1.34 Year 2000 Compliance. 66
SECTION 6.2 NEGATIVE COVENANTS. 66
6.2.1 Merger, Acquisition or Sale of Assets. 67
6.2.2 Subsidiaries. 67
6.2.3 Issuance of Stock. 68
6.2.4 Purchase or Redemption of Securities, Dividend
Restrictions. 68
6.2.5 Indebtedness. 68
6.2.6 Subordinated Indebtedness. 69
6.2.7 Investments, Loans and Other Transactions. 69
6.2.8 Stock of Subsidiaries. 69
6.2.9 Liens. 69
6.2.10 Transactions with Affiliates. 70
6.2.11 Other Businesses. 70
6.2.12 ERISA Compliance. 70
6.2.13 Prohibition on Hazardous Materials. 70
6.2.14 Method of Accounting; Fiscal Year. 71
6.2.15 Compensation. 71
6.2.16 Transfer of Collateral. 71
ARTICLE VII DEFAULT AND RIGHTS AND REMEDIES 71
SECTION 7.1 EVENTS OF DEFAULT. 71
7.1.1 Failure to Pay. 71
7.1.2 Breach of Representations and Warranties . 71
7.1.3 Failure to Comply with Covenants. 72
7.1.4 Default Under Other Financing Documents or Obligations. 72
7.1.5 Receiver; Bankruptcy. 72
7.1.6 Involuntary Bankruptcy, etc. 72
7.1.7 Judgment. 73
7.1.8 Execution; Attachment. 73
7.1.9 Default Under Other Borrowings. 73
7.1.10 Material Adverse Change. 73
7.1.11 Change in Ownership. 73
7.1.12 Liquidation, Termination, Dissolution, Change in
Management, etc. 73
SECTION 7.2 REMEDIES. 74
7.2.1 Acceleration. 74
7.2.2 Further Advances. 74
7.2.3 Uniform Commercial Code. 74
7.2.4 Specific Rights With Regard to Collateral. 75
7.2.5 Application of Proceeds. 76
7.2.6 Performance by Lender. 77
7.2.7 Other Remedies. 77
ARTICLE VIII MISCELLANEOUS 77
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SECTION 8.1 NOTICES. 77
SECTION 8.2 AMENDMENTS; WAIVERS. 78
SECTION 8.3 CUMULATIVE REMEDIES. 79
SECTION 8.4 SEVERABILITY. 80
SECTION 8.5 ASSIGNMENTS BY LENDER. 80
SECTION 8.6 SUCCESSORS AND ASSIGNS. 81
SECTION 8.7 CONTINUING AGREEMENTS. 81
SECTION 8.8 ENFORCEMENT COSTS. 81
SECTION 8.9 APPLICABLE LAW; JURISDICTION. 81
8.9.1 Governing Law. 81
8.9.2 Jurisdiction. 82
8.9.3 Agent for Service. 82
8.9.4 Service of Process. 82
SECTION 8.10 DUPLICATE ORIGINALS AND COUNTERPARTS. 83
SECTION 8.11 HEADINGS. 83
SECTION 8.12 NO AGENCY. 83
SECTION 8.13 DATE OF PAYMENT. 83
SECTION 8.14 ENTIRE AGREEMENT. 83
SECTION 8.15 WAIVER OF TRIAL BY JURY. 83
SECTION 8.16 LIABILITY OF THE LENDER. 84
SECTION 8.17 CONFIDENTIALITY. 84
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AMENDED AND RESTATED
FINANCING AND SECURITY AGREEMENT
--------------------------------
THIS AMENDED AND RESTATED FINANCING AND SECURITY AGREEMENT (this
"Agreement") is made this 26th day of June, 1998, by and among COYNE
INTERNATIONAL ENTERPRISES CORP., a corporation organized under the laws of the
State of New York ("Coyne") which is the successor by merger to COYNE TEXTILE
SERVICES, INC., a corporation organized under the laws of the State of
Connecticut, CARTER'S DUST-TEX SERVICES, INC., a corporation organized under the
laws of the State of Tennessee, LONDON LAUNDRY AND DRY CLEANING, INC., a
corporation organized under the laws of the State of Kentucky, and CENTRAL
UNIFORM SERVICE, INC., a corporation organized under the laws of the State of
New Jersey (the foregoing corporations, other than Coyne collectively, the
"Merged Subsidiaries,") BLUE RIDGE TEXTILE MANUFACTURING, INC., a corporation
organized under the laws of the State of Georgia, OHIO GARMENT RENTAL, INC., a
corporation organized under the laws of the State of Ohio, MIDWAY-CTS BUFFALO,
LTD., a corporation organized under the laws of the State of New York, and CLEAN
TOWEL SERVICE, INC., a corporation organized under the laws of the State of
Georgia ("Clean Towel"), jointly and severally (each of the foregoing
corporations, individually, a "Borrower"; and collectively, the "Borrowers"),
and NATIONSBANK, N.A., a national banking association (the "Lender").
RECITALS
--------
A. Coyne, the Merged Companies and the other Borrowers (except Clean
Towel) and the Lender are parties to a Financing and Security Agreement dated
October 7, 1994 (the same, as amended, modified, substituted, extended, and
renewed from time to time, the "Original Financing Agreement"). The Financing
Agreement provides for some of the agreements between the Borrowers (except
Clean Towel) and the Lender with respect to the "Loans" (as defined in the
Original Financing Agreement), including a revolving credit facility in an
amount not to exceed $13,000,000 and two term loan facilities in an original
amount not to exceed $25,000,000 in the aggregate.
B. In connection with the sale of senior subordinated debt by Coyne, the
Borrowers have requested that the Lender agree to recast the credit facilities
to consist of a revolving credit facility in the maximum principal amount of
$25,000,000, including a letter of credit facility in the amount of $3,000,000,
an acquisition facility in the maximum principal amount of $10,000,000, and a
capital expenditure facility in the maximum principal amount of $10,000,000 to
be used by the Borrowers for the Permitted Uses described in this Agreement.
The Borrowers also requested that the Lender secure the recast credit facilities
with the "Accounts," Inventory" and the other security described in Article III
below, and release all other Collateral contemplated by the Original Financing
Agreement.
C. The Lender is willing to make the recast credit facilities available
to the Borrowers and release such other Collateral upon the terms and subject to
the conditions set forth in this Agreement.
<PAGE>
ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms.
----------------------
As used in this Agreement, the terms defined in the Preamble and Recitals
hereto shall have the respective meanings specified therein, and the following
terms shall have the following meanings:
"Account" individually and "Accounts" collectively mean all presently
existing or hereafter acquired or created accounts, accounts receivable,
contract rights, notes, drafts, instruments, acceptances, chattel paper, leases
and writings evidencing a monetary obligation or a security interest in or a
lease of goods, all rights to receive the payment of money or other
consideration under present or future contracts (including, without limitation,
all rights to receive payments under presently existing or hereafter acquired or
created letters of credit), or by virtue of merchandise sold or leased, services
rendered, loans and advances made or other considerations given, by or set forth
in or arising out of any present or future chattel paper, note, draft, lease,
acceptance, writing, bond, insurance policy (excluding life insurance policies),
instrument, document or general intangible, and all extensions and renewals of
any thereof, all rights under or arising out of present or future contracts,
agreements or general interest in merchandise which gave rise to any or all of
the foregoing, including all goods, all claims or causes of action now existing
or hereafter arising in connection with or under any agreement or document or by
operation of law or otherwise, all collateral security of any kind (including
real property mortgages) and letters of credit given by any person with respect
to any of the foregoing, all books and records in whatever media (paper,
electronic or otherwise) recorded or stored, with respect to any or all of the
foregoing and all equipment and general intangibles necessary or beneficial
desirable to retain, access and/or process the information contained in those
books and records, and all proceeds (cash and non-cash) of the foregoing.
"Acquisition Loan" has the meaning described in Section 2.3.1.
"Acquisition Loan Amortization Date" means June 1, 1999.
"Acquisition Loan Facility" means the facility described in Section 2.3
(The Acquisition Loan Facility) of this Agreement.
"Acquisition Loan Installment Payment Schedule" has the meaning set forth
in Section 2.3.3.
"Acquisition Loan Maturity Date" means the earlier of (a) November 1, 2003,
or (b) the Revolving Credit Termination Date.
"Acquisition Loan Optional Prepayment" has the meaning set forth in Section
2.3.4.
"Acquisition Note" has the meaning described in Section 2.3.2.
"Account Debtor" means any Person who is obligated on a Receivable and
"Account Debtors" mean all Persons who are obligated on the Receivables.
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"Administration Fee" and " Administration Fees" have the meanings described
in Section 2.6.7 (Administration Fees).
"Affiliate" means, with respect to any designated Person, any other Person,
(a) directly or indirectly controlling, directly or indirectly controlled by, or
under direct or indirect common control with the Person designated, (b) directly
or indirectly owning or holding five percent (5%) or more of any equity interest
in such designated Person, or (c) five percent (5%) or more of whose stock or
other equity interest is directly or indirectly owned or held by such designated
Person. For purposes of this definition, the term "control" (including with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with") means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through ownership of voting securities or other equity interests or by
contract or otherwise.
"Agreement" means this Amended and Restated Financing and Security
Agreement and all amendments, modifications and supplements hereto which may
from time to time become effective in accordance with the provisions of Section
8.2.
"Applicable Interest Rate" means (a) the Eurodollar Rate or (b) the Base
Rate.
"Applicable Margin" means the applicable rate per annum added, as set forth
in Section 2.5.1 (Applicable Interest Rates), to the Eurodollar Base Rate or the
Prime Rate.
"Assets" means at any date all assets that, in accordance with GAAP
consistently applied, should be classified as assets on a consolidated balance
sheet of the Borrowers and their Subsidiaries.
"Bankruptcy Code" means the United States Bankruptcy Code, as amended from
time to time.
"Base Rate" means the sum of (a) the Applicable Margin plus (b) the Prime
----
Rate.
"Base Rate Loan" means any Loan for which interest is to be computed with
reference to the Base Rate.
"Borrowing Base" has the meaning described in Section 2.1.3 (Borrowing
Base).
"Borrowing Base Deficiency" has the meaning described in Section 2.1.3
(Borrowing Base).
"Borrowing Base Report" has the meaning described in Section 2.1.4
(Borrowing Base Report).
"Business Day" means any day other than a Saturday, Sunday or other day on
which commercial banks in the State are authorized or required to close.
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"Capital Expenditure" means an expenditure for Fixed or Capital Assets,
determined in accordance with GAAP consistently applied to the Borrowers. The
term also includes the cash payments under a Capital Lease.
"Capital Expenditure Line" has the meaning described in Section 2.4.1
(Capital Expenditure Line Facility).
"Capital Expenditure Line Advance Period" means the period of time from the
Closing Date to May 1, 2003.
"Capital Expenditure Line Amortization Date" means June 1, 2000.
"Capital Expenditure Line Commitment" and "Capital Expenditure Line
Commitments" have the meanings described in Section 2.4.1 (Capital Expenditure
Line Facility).
"Capital Expenditure Line Committed Amount" has the meaning described in
Section 2.4.1 (Capital Expenditure Line Facility).
"Capital Expenditure Line Facility" means the facility established by the
Lender pursuant to Section 2.4.1 (Capital Expenditure Line Facility).
"Capital Expenditure Line Installment Payment Schedule" has the meaning
described in Section 2.4.4 (Payments of Capital Expenditure Line).
"Capital Expenditure Line Maturity Date" means the earlier of (a) November
1, 2003, or (b) the Revolving Credit Termination Date.
"Capital Expenditure Line Note" has the meaning described in Section 2.4.3
(Capital Expenditure Line Note).
"Capital Expenditure Line Notice" has the meaning described in Section
2.4.2.
"Capital Expenditure Line Optional Prepayment" and "Capital Expenditure
Line Optional Prepayments" have the meanings described in Section 2.1.7
(Optional Payments of Capital Expenditure Line).
"Capital Lease" means any lease of real or personal property, for which the
related Lease Obligations have been or should be, in accordance with GAAP
consistently applied, capitalized on the balance sheet.
"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.
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"Cash Equivalents" means (a) securities with maturities of one year or less
from the date of acquisition issued or fully guaranteed or insured by the United
States Government or any agency thereof, (b) certificates of deposit with
maturities of one (1) year or less from the date of acquisition of, or money
market accounts maintained with, the Lender or any other domestic commercial
bank having capital and surplus in excess of One Hundred Million Dollars
($100,000,000.00) or such other domestic financial institutions or domestic
brokerage houses to the extent disclosed to, and approved by, the Lender and (c)
commercial paper of a domestic issuer rated at least either A-1 by Standard &
Poor's Corporation or P-1 by Moody's Investors Service, Inc. with maturities of
six (6) months or less from the date of acquisition.
"Chattel Paper" means a writing or writings which evidence both a monetary
obligation and a security interest in or lease of specific goods; any returned,
rejected or repossessed goods covered by any such writing or writings and all
proceeds (in any form including, without limitation, accounts, contract rights,
documents, chattel paper, instruments and general intangibles) of such returned,
rejected or repossessed goods; and all proceeds (cash and non-cash) of the
foregoing.
"Closing Date" means the Business Day, in any event not later than June 30,
1998, on which the Lender shall be satisfied that the conditions precedent set
forth in Section 5.1 (Condition to Initial Advance) have been fulfilled.
"Closing Fee" has the meaning described in Section 2.6.4 (Closing Fee).
"Collateral" means all property of the Borrowers subject from time to time
to the Liens of this Agreement, the Security Documents and the other Financing
Documents, together with any and all cash and non-cash proceeds and products
thereof.
"Collateral Account" has the meaning described in Section 2.1.8 (Collateral
Account).
"Collateral Disclosure List" means the "Collateral Disclosure List"
furnished in connection with the Original Financing Agreement as the same may
have been modified prior to the date of this Agreement, the Lender and the
Borrowers hereby agreeing that information contained in the Offering Memorandum
shall be deemed to have so modified the same.
"Commitment" means the Revolving Credit Commitment, the Acquisition Loan or
the Capital Expenditure Line Commitment, as the case may be.
"Committed Amount" means the Revolving Loan Committed Amount, the
Acquisition Loan Committed Amount, or the Capital Expenditure Line Committed
Amount, as the case may be, and "Committed Amounts" means collectively the
Revolving Loan Committed Amount, the Acquisition Loan Committed Amount, and the
Capital Expenditure Line Committed Amount.
"Commonly Controlled Entity" means an entity, whether or not incorporated,
which is under common control with any of the Borrowers within the meaning of
Section 414(b) or (c) of the Internal Revenue Code.
"Consolidated Net Income" means, for any period, the net income (or net
loss) of the Borrowers for such period, after all expenses, taxes and other
proper charges, determined in
5
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accordance with GAAP and after eliminating (i) all intercompany items, (ii) all
earnings attributable to equity interests in Persons that are not Borrowers
unless actually received by the Borrowers, (iii) all income arising from the
forgiveness, adjustment or negotiated settlement of any Indebtedness, (iv) any
extraordinary items of income or expense and (v) any increase or decrease of
income arising from any change in the method of accounting for any item from
that employed in the preparation of the financial statements.
"Copyrights" means and includes, in each case whether now existing or
hereafter arising, all of each Borrower's rights, title and interest in and to
(a) all copyrights, rights and interests in copyrights, works protectable by
copyright, copyright registrations copyright applications, and all renewals of
any of the foregoing, (b) all income, royalties, damages and payments now or
hereafter due and/or payable under any of the foregoing, including, without
limitation, damages or payments for past, current or future infringements of any
of the foregoing, (c) the right to sue for past, present and future
infringements of any of the foregoing, and (d) all rights corresponding to any
of the foregoing throughout the world.
"Credit Facility" means the Revolving Credit Facility, the Acquisition Loan
Facility and the Capital Expenditure Line Facility and "Credit Facilities"
means collectively the Revolving Credit Facility, the Acquisition Loan Facility
and the Capital Expenditure Line Facility and any and all other credit
facilities now or hereafter extended under or secured by this Agreement.
"Credit Facility" means the Revolving Credit Facility, the Acquisition Loan
Facility and the Loan Facility and "Credit Facilities" means collectively the
Revolving Credit Facility, the Acquisition Loan Facility and the Loan Facility
and any and all other credit facilities now or hereafter extended under or
secured by this Agreement.
"Default" means an event which, with the giving of notice or lapse of time,
or both, would constitute an Event of Default under the provisions of this
Agreement.
"Documents" means all documents of title, whether now existing or
hereafter acquired or created, and all proceeds (cash and non-cash of the
foregoing).
"Early Termination Fee" has the meaning described in Section 2.6.6 (Early
Termination Fee).
"EBITDA" means for any period, the Consolidated Net Income of the Borrowers
for such period after all expenses except depreciation, interest, amortization
and taxes.
"Eligible Inventory" means Inventory which the Lender, in its good faith
discretion determines to meet all of the following requirements:
(a) except for rental Inventory located at the Borrowers' rental
customers in the ordinary course of business, such Inventory is owned by the
Borrower, is stored at a location listed on Schedule 5 to the Collateral
Disclosure List, is subject to the security interest, which is perfected by
filing as to such Inventory, and is subject to no other Lien whatsoever other
than a Permitted Lien,
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(b) such Inventory consists of finished goods and not work-in-
process or supplies,
(c) such Inventory is in good condition and meets all standards
imposed by any governmental agency, or department or division thereof, having
regulatory authority over such goods, their use or sale,
(d) such Inventory is currently either usable or salable, at
prices approximating at least cost, in the normal course of the Borrower's
business and is not slow moving or stale,
(e) such Inventory is not obsolete or returned or repossessed or
used goods taken in trade,
(f) except for rental Inventory located at the Borrower's rental
customers in the ordinary course of business, such Inventory is located within
the United States at one of the locations set forth in the most recent schedule
of Inventory,
(g) such Inventory is in the possession and control of the
Borrower and not any third party (other than the Borrowers' rental customers in
the ordinary course of business) or if the Inventory is held by a third party
bailee and a negotiable instrument has not been issued with respect to it (i) a
financing statement which names the third party bailee as the debtor/bailee,
names the Borrower as the secured party/bailor, names the Lender as assignee of
the secured party/bailor and contains a description of such Inventory acceptable
to the Lender and otherwise in compliance with the requirements of Section 9-
304(3) of the UCC has been filed in the appropriate filing office and (ii) such
other steps as the Lender may reasonably require in order to establish and
preserve the priority of the Security Interest against secured creditors of the
third party bailee or the Borrower shall have been taken,
(h) unless the Borrower is in compliance with Section 6.1.32 of
this Agreement, if such Inventory is located in a public warehouse or other
facility leased by the Borrower (other than leased terminals in which the
Borrower has goods in transit to Account Debtor), the lessor has delivered to
the Lender, on behalf of the Lenders, a waiver and consent in form and substance
satisfactory to the Lender, and
(i) such Inventory is not determined by the Lender, on behalf of
the Lenders, in its good faith discretion to be ineligible for any other reason.
"Eligible Receivable" means a Receivable that consists of the unpaid
portion of the obligation stated on the invoice issued to an Account Debtor with
respect to Inventory sold and shipped to or services performed for such Account
Debtor in the ordinary course of business, net of any credits or rebates owed by
the Borrower to the Account Debtor and net of any commissions payable by the
Borrower to third parties and that the Lender, in its good faith discretion
determines to meet all of the following requirements:
(a) such Receivable is owned by the Borrower and represents
a complete bona fide transaction which requires no further act under
any
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<PAGE>
circumstances on the part of the Borrower to make such Receivable
payable by the Account Debtor,
(b) the due date for such Receivable shall not be more than
59 days from the date of the shipment of the goods the sale of which
gave rise to such Receivable (or the date of performance of services
for Receivables arising from the performance of services),
(c) no more than 89 days have elapsed from the date of the
original invoice,
(d) the goods the sale of which gave rise to such
Receivable were shipped or delivered to the Account Debtor on an
absolute sale basis and not on a bill and hold sale basis, a
consignment sale basis, a guaranteed sale basis, a sale or return
basis, or on the basis of any other similar understanding and no
material part of such goods has been returned or rejected,
(e) such Receivable is not evidenced by Chattel Paper or an
instrument of any kind unless such chattel paper or instrument has
been collaterally assigned to the Lender, for the benefit of itself as
agent and the Lenders, pursuant to an assignment in form and substance
satisfactory to the Lender and is in the possession of the Lender,
(f) the Account Debtor with respect to such Receivable is
not insolvent or the subject of any bankruptcy or insolvency
proceedings of any kind or of any other proceeding or action,
threatened or pending, which might, in the Lender's sole judgment,
have a materially adverse effect on such Account Debtor, and is not,
in the reasonable discretion of the Lender, deemed ineligible for
credit or other reasons,
(g) such Receivable is not owing by an Account Debtor
having 50% or more in face value of its then-existing accounts owing
to the Borrower past due more than 60 days from the due date of the
original invoice,
(h) such Receivable is not owing by an Account Debtor whose
then-existing accounts owing to the Borrower exceed in face amount 15%
of the Borrower's total Eligible Receivables unless the Borrowers have
notified the Lender of the same and the Lender has consented in
writing to inclusion of such Receivables,
(i) if such Receivable arises from the performance of
services, such services have been fully rendered and do not relate to
any warranty claim or obligation,
(j) such Receivable is not owing by an Account Debtor for
whom goods and/or services were furnished, or to whom inventories are
sent, outside of the United States, (for this purpose, the
Commonwealth of Puerto Rico shall be considered located within the
United States of America) unless such
8
<PAGE>
Receivable is backed by a letter of credit in form and substance
satisfactory to the Lender, issued or confirmed by a bank organized
under the laws of the United States of America or a state thereof,
(k) such Receivable is a valid, legally enforceable
obligation of the Account Debtor with respect thereto and is not
subject to any present or contingent (and no facts exist which are the
basis for any future) offset, deduction or counterclaim, dispute or
other defense on the part of such Account Debtor,
(l) such Receivable is subject to the security interest,
which is perfected as to such Receivable, and is subject to no other
Lien whatsoever other than a Permitted Lien,
(m) such Receivable is evidenced by an invoice or other
documentation in form acceptable to the Lender,
(n) unless the Borrower is in compliance with the
provisions of Section 6.1.21, the Receivable is not subject to the
Assignment of Claims Act of 1940, as amended from time to time, or any
Applicable Law now or hereafter existing similar in effect thereto, or
to any other prohibition (under Applicable Law, by contract or
otherwise) against its assignment or requiring notice of or consent to
such assignment, unless all such required notices have been given, all
such required consents have been received and all other procedures
have been complied with such that such Receivable shall have been duly
and validly assigned to the Lender, for the benefit of the Lenders,
(o) the goods giving rise to such Receivable were not, at
the time of the sale thereof, subject to any Lien, except the security
interest and Permitted Liens,
(p) the Borrower is not in breach of any express or implied
representation or warranty with respect to the goods the sale of which
gave rise to such Receivable nor in material breach of any
representation or warranty, covenant or other agreement contained in
the Loan Documents with respect to such Receivable,
(q) such Receivable does not arise out of any transaction
with any Subsidiary, Affiliate, creditor, tenant, or lessor of the
Borrower, or to the extent the Lender in good faith determines that
the Lender's reserves against the Borrowing Base to cover Receivables
from suppliers is inadequate, any transaction with a supplier (the
Lender hereby advising the Borrowers that the Lender currently
believes that a reserve equal to three percent (3%) of the Borrowers'
Receivables shall be adequate),
(r) the Borrower is not the beneficiary of any letter of
credit, nor has any bond or other undertaking by a guarantor or surety
been obtained, supporting such Receivable and the Account Debtor's
obligations in respect thereof,
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<PAGE>
(s) such Receivable does not arise out of finance or
similar charges by the Borrower or other fees for the time value of
money,
(t) the Account Debtor with respect to such Receivable is
not located in New Jersey or any other state denying creditors access
to its courts in the absence of qualification to transact business in
such state or the filing of a Notice of Business Activities Report or
other similar filing, unless the Borrower has either qualified as a
foreign corporation authorized to transact business in such state or
has filed a Notice of Business Activities Report or similar filing
with the applicable state agency for the then current year, and
(u) neither the Account Debtor with respect to such
Receivable, nor such Receivable, is determined by the Lender in its
good faith discretion to be ineligible for any other reason.
"Enforcement Costs" means all reasonable expenses, charges, costs and fees
whatsoever (including, without limitation, reasonable attorney's fees and
expenses) of any nature whatsoever paid or incurred by or on behalf of the
Lender in connection with (a) any or all of the Obligations, this Agreement
and/or any of the other Financing Documents, (b) the creation, perfection,
collection, maintenance, preservation, defense, protection, realization upon,
disposition, sale or enforcement of all or any part of the Collateral, this
Agreement or any of the other Financing Documents, including, without
limitation, those costs and expenses more specifically enumerated in Section 3.6
(Costs) and/or Section 8.8 (Enforcement Costs), and (c) the monitoring,
administration, processing and/or servicing of any or all of the Obligations,
the Financing Documents, and/or the Collateral.
"Equipment" means all equipment, machinery, computers, chattels, tools,
parts, machine tools, furniture, furnishings, fixtures and supplies of every
nature, presently existing or hereafter acquired or created and wherever
located, whether or not the same shall be deemed to be affixed to real property,
together with all accessions, additions, fittings, accessories, special tools,
and improvements thereto and substitutions therefor and all parts and equipment
which may be attached to or which are necessary or beneficial for the operation,
use and/or disposition of such personal property, all licenses, warranties,
franchises and general intangibles related thereto or necessary or beneficial
for the operation, use and/or disposition of the same, together with all
Accounts, Chattel Paper, Instruments and other consideration received by the
Borrower on account of the sale, lease or other disposition of all or any part
of the foregoing, and together with all rights under or arising out of present
or future Documents and contracts relating to the foregoing and all proceeds
(cash and non-cash) of the foregoing.
"Equity Interests" means Capital Stock (as defined in this definition) 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).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
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"Eurodollar Base Rate" means for any Interest Period with respect to any
Eurodollar Loan, the per annum interest rate rounded upward, if necessary, to
the nearest 1/100 of 1%, appearing on Telerate Page 3750 (or any successor page)
as the London interbank offered rate for deposits in Dollars at or about 11:00
a.m. (London time) on the date that is two (2) Eurodollar Business Days prior to
the first day of such Interest Period for a term comparable to such Interest
Period. If for any reason such rate is not available, the term "Eurodollar
Rate" shall mean, for any Eurodollar Loan for any Interest Period therefor, the
rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
appearing on Reuters Screen LIBO Page as the London interbank offered rate for
deposits in Dollars at approximately 11:00 a.m. (London time) two (2) Eurodollar
Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period; provided, however, if more than one rate is
-------- -------
specified on Reuters Screen LIBO Page, the applicable rate shall be the
arithmetic mean of all such rates (rounded upwards, if necessary, to the nearest
1/100 of 1%).
"Eurodollar Business Day" means any Business Day on which dealings in
United States Dollar deposits are carried out on the London interbank market and
on which commercial banks are open for domestic and international business
(including dealings in Dollar deposits) in London, England.
"Eurodollar Loan" means any Loan for which interest is to be computed with
reference to the Eurodollar Rate.
"Eurodollar Rate" means for any Interest Period with respect to any
Eurodollar Loan, (a) the Applicable Margin, plus (b) the per annum rate of
----
interest calculated pursuant to the following formula:
Eurodollar Base Rate
--------------------------
1.00 - Reserve Percentage
"Excess Cash Flow" means for any annual period of determination thereof, an
amount equal to the Borrowers' EBITDA minus the Borrowers' Fixed Charges.
-----
"Event of Default" has the meaning described in Article 7.
"Facilities" means the collective reference to the loan and other credit
facilities now or hereafter provided to the Borrowers by the Lender whether
under this Agreement or otherwise.
"Fees" means the collective reference to each fee payable to the Lender
under the terms of this Agreement or under the terms of any of the other
Financing Documents, including, without limitation, the following: the Revolving
Credit Unused Line Fees, Closing Fee, Early Termination Fee, Origination Fee,
Administration Fee, and Field Examination Fees.
"Field Examination Fee" and "Field Examination Fees" have the meanings
described in Section 2.6.6 (Field Examination Fees).
"Financing Documents" means at any time collectively this Agreement, the
Notes, the Security Documents, and any other instrument, agreement or document
previously, simultaneously or hereafter executed and delivered by the Borrowers
and/or any other Person,
11
<PAGE>
singly or jointly with another Person or Persons, evidencing, securing,
guarantying or in connection with this Agreement, any Note, any of the Security
Documents, any of the Facilities, and/or any of the Obligations.
"Fixed Charge Coverage Ratio" means for the period of any determination
thereof the ratio of (a) EBITDA to (b) Fixed Charges.
"Fixed Charges" means for any period of determination thereof, the
scheduled or required payments (including, without limitation, principal and
interest) made in cash on all Indebtedness for Borrowed Money of the Borrower
and its Subsidiaries, plus Permitted Payments plus Capital Expenditures made in
cash (and Permitted Acquisitions to the extent not included in Capital
Expenditures) of the Borrower and its Subsidiaries, plus cash payments of Taxes.
"Fixed or Capital Assets" of a Person at any date means all assets which
would, in accordance with GAAP consistently applied, be classified on the
balance sheet of such Person as property, plant or equipment at such date.
"Funded Debt" means Indebtedness for Borrowed Money minus any obligation
-----
under a employee stock ownership plan or other similar employee benefit plan.
"GAAP" means generally accepted accounting principles in the United States of
America in effect from time to time.
"General Intangibles" means all general intangibles of every nature,
whether presently existing or hereafter acquired or created, and without
implying any limitation of the foregoing, further means all books and records,
claims (including without limitation all claims for income tax and other
refunds), choses in action, claims, causes of action in tort or equity, contract
rights, judgments, customer lists, Patents, Trademarks, licensing agreements,
rights in intellectual property, goodwill (including goodwill of the Borrowers'
business symbolized by and associated with any and all trademarks, trademark
licenses, copyrights and/or service marks), royalty payments, licenses,
contractual rights, rights as lessee under any lease of real or personal
property, literary rights, Copyrights, service names, service marks, logos,
trade secrets, amounts received as an award in or settlement of a suit in
damages, deposit accounts, interests in joint ventures or general or limited
partnerships, rights in applications for any of the foregoing, books and records
in whatever media (paper, electronic or otherwise) recorded or stored, with
respect to any or all of the foregoing and all equipment and general intangibles
necessary or beneficial desirable to retain, access and/or process the
information contained in those books and records, and all proceeds (cash and
non-cash) of the foregoing.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government
and any department, agency or instrumentality thereof.
"Hazardous Materials" means (a) any "hazardous waste" as defined by the
Resource Conservation and Recovery Act of 1976, as amended from time to time,
and regulations promulgated thereunder; (b) any "hazardous substance" as defined
by the Comprehensive
12
<PAGE>
Environmental Response, Compensation and Liability Act of 1980, as amended from
time to time, and regulations promulgated thereunder; (c) any substance the
presence of which on any property now or hereafter owned or acquired by the
Borrowers is prohibited by any Law similar to those set forth in this
definition; and (d) any other substance which by Law requires special handling
in its collection, storage, treatment or disposal.
"Hazardous Materials Contamination" means the contamination (whether
presently existing or occurring after the date of this Agreement) by Hazardous
Materials of any property owned, operated or controlled by the Borrowers or for
which the Borrowers have responsibility, including, without limitation,
improvements, facilities, soil, ground water, air or other elements on, or of,
any property now or hereafter owned or acquired by the Borrowers, and any other
contamination by Hazardous Materials for which the Borrowers are, or are claimed
to be, responsible.
"Indebtedness" of a Person means at any date the total liabilities of such
Person at such time determined in accordance with GAAP consistently applied.
"Indebtedness for Borrowed Money" of a Person means at any time the sum at
such time of (a) indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services, (b) any obligations of such
Person in respect of letters of credit, banker's or other acceptances or similar
obligations issued or created for the account of such Person, (c) Lease
Obligations of such Person with respect to Capital Leases, (d) all liabilities
secured by any Lien on any property owned by such Person, to the extent attached
to such Person's interest in such property, even though such Person has not
assumed or become personally liable for the payment thereof, (e) obligations of
third parties which are being guarantied or indemnified against by such Person
or which are secured by the property of such Person; and (f) any obligation of
such Person under a employee stock ownership plan or other similar employee
benefit plan; but excluding trade and other accounts payable in the ordinary
course of business in accordance with customary trade terms and which are not
overdue (as determined in accordance with the Borrowers' past practices) or
which are being disputed in good faith by such Person and for which adequate
reserves are being provided on the books of such Person in accordance with GAAP.
"Indenture" means that certain Indenture dated as of June 26, 1998 (as
amended, supplemented or otherwise modified from time to time), between Coyne,
the Trustee and, as guarantors, the Borrowers.
"Interest Period" means as to any Eurodollar Loan, the period commencing on
and including the date such Eurodollar Loan is made (or on the effective date of
the Borrowers' election to convert any Base Rate Loan to a Eurodollar Loan in
accordance with the provisions of this Agreement) and ending on and including
the day which is one month, two months or three months thereafter, as selected
by the Borrowers in accordance with the provisions of this Agreement, and
thereafter, each period commencing on the last day of the then preceding
Interest Period for such Eurodollar Loan and ending on and including the day
which is one month, two months or three months thereafter, as selected by the
Borrowers in accordance with the provisions of this Agreement; provided, however
that:
13
<PAGE>
(a) the first day of any Interest Period shall be a Eurodollar
Business Day;
(b) if any Interest Period would end on a day that shall not be
a Eurodollar Business Day, such Interest Period shall be extended to the
next succeeding Eurodollar Business Day unless such next succeeding
Eurodollar Business Day would fall in the next calendar month, in which
case, such Interest Period shall end on the next preceding Eurodollar
Business Day; and
(c) no Interest Period shall extend beyond the Revolving Credit
Expiration Date, or in the case of Interest Periods with respect to the
Acquisition Loan, the Acquisition Loan Maturity Date, or in the case of
Interest Periods with respect to the Capital Expenditure Line, the Capital
Expenditure Line Maturity Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
from time to time, and the Income Tax Regulations issued and proposed to be
issued thereunder.
"Instrument" means a negotiable instrument (as defined under Article 3 of
the Uniform Commercial Code), a "certificated security" (as defined under
Article 8 of the Uniform Commercial Code), or any other writing which evidences
a right to payment of money and is not itself a security agreement or lease and
is of a type which is in the ordinary course of business transferred by delivery
with any necessary endorsement.
"Inventory" means all inventory of the Borrowers and all right, title and
interest of the Borrowers in and to all of its now owned and hereafter acquired
goods, merchandise and other personal property furnished under any contract of
service or intended for sale or lease, including, without limitation, all raw
materials, work-in-progress, finished goods and materials and supplies of any
kind, nature or description which are used or consumed in the Borrowers'
business or are or might be used in connection with the manufacture, packing,
shipping, advertising, selling or finishing of such goods, merchandise and other
licenses, warranties, franchises, general intangibles, personal property and all
documents of title or documents relating to the same and all proceeds (cash and
non-cash) of the foregoing.
"Item of Payment" means each check, draft, cash, money, instrument, item,
and other remittance in payment or on account of payment of the Receivables or
otherwise with respect to any Collateral, including, without limitation, cash
proceeds of any returned, rejected or repossessed goods, the sale or lease of
which gave rise to a Receivable, and other proceeds of Collateral; and "Items of
Payment" means the collective reference to all of the foregoing.
"Laws" means all ordinances, statutes, rules, regulations, orders,
injunctions, writs, or decrees of any Governmental Authority or political
subdivision or agency thereof, or any court or similar entity established by any
thereof.
"Lease Obligations" of a Person means at any date the rental commitments of
such Person for such period under leases for real and/or personal property (net
of rent from subleases thereof, but including taxes, insurance, maintenance and
similar expenses which the lessee is obligated to pay under the terms of said
leases, except to the extent that such taxes, insurance,
14
<PAGE>
maintenance and similar expenses are payable by sublessees), including rental
commitments under Capital Leases.
"Letter of Credit" and "Letters of Credit" shall have the meanings
described in Section 2.5.1 hereof.
"Letter of Credit Agreement" means the collective reference to each letter
of credit application and agreement substantially in the form of the Lender's
then standard form of application for letter of credit or such other form as may
be approved by the Lender, executed and delivered by any one or more of the
Borrowers in connection with the issuance of a Letter of Credit, as the same may
from time to time be amended, restated, supplemented or modified and "Letter of
Credit Agreements" means all of the foregoing in effect at any time and from
time to time.
"Letter of Credit Documents" means any and all drafts under or purporting
to be under a Letter of Credit, any Letter of Credit Agreement, and any other
instrument, document or agreement executed and/or delivered by any one or more
of the Borrowers or any other Person under, pursuant to or in connection with a
Letter of Credit or any Letter of Credit Agreement.
"Letter of Credit Facility" means the facility established by the Lender
pursuant to Section 2.2 (Letter of Credit Facility) of this Agreement.
"Letter of Credit Fee" and "Letter of Credit Fees" have the meanings
described in Section 2.2.2 hereof.
"Letter of Credit Obligations" means all Obligations of any one or more of
the Borrowers with respect to the Letters of Credit and the Letter of Credit
Agreements.
"Liabilities" means at any date all liabilities that in accordance with
GAAP consistently applied should be classified as liabilities on a consolidated
balance sheet of the Borrowers and their Subsidiaries.
"Lien" means any mortgage, deed of trust, deed to secure debt, grant,
pledge, security interest, assignment, encumbrance, judgment, lien,
hypothecation, claim or charge of any kind, whether perfected or unperfected,
avoidable or unavoidable, including, without limitation, any conditional sale or
other title retention agreement, any lease in the nature thereof, and the filing
of or agreement to give any financing statement under the Uniform Commercial
Code of any jurisdiction, excluding the precautionary filing of any financing
statement by any lessor in a true lease transaction, by any bailor in a true
bailment transaction or by any consignor in a true consignment transaction under
the Uniform Commercial Code of any jurisdiction or the agreement to give any
financing statement by any lessee in a true lease transaction, by any bailee in
a true bailment transaction or by any consignee in a true consignment
transaction.
"Loan" means each of the Revolving Loan, the Acquisition Loan or the
Capital Expenditure Loan, as the case may be, and "Loans" means the collective
reference to the Revolving Loan, the Acquisition Loan and the Capital
Expenditure Loan.
"Loan Notice" has the meaning described in Section 2.1.2 (Procedure for
Making Advances).
15
<PAGE>
"Lockbox" has the meaning described in Section 2.1.8 (The Collateral
Account).
"Mandatory Prepayment" and "Mandatory Prepayments" have the meaning set
forth in Section 2.6.3.
"Mortgage" means the collective reference to each Security Document
covering real property and required by Section 3.5 (Real Property).
"Multiemployer Plan" means a Plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"Note" means the Revolving Credit Note, the Acquisition Note or the Capital
Expenditure Line Note, as the case may be, and "Notes" means collectively the
Revolving Credit Note, the Acquisition Note and the Capital Expenditure Line
Note, and any other promissory note which may from time to time evidence the
Obligations.
"Obligations" means all present and future indebtedness, duties,
obligations, and liabilities, whether now existing or contemplated or hereafter
arising, of the Borrowers to the Lender under, arising pursuant to, in
connection with and/or on account of the provisions of this Agreement, each
Note, each Security Document, and any of the other Financing Documents, the
Loans, and any of the Credit Facilities including, without limitation, the
principal of, and interest on, each Note, late charges, the Fees, Enforcement
Costs, and prepayment penalties (if any), letter of credit fees or fees charged
with respect to any guaranty of any letter of credit; also means all other
present and future indebtedness, liabilities and obligations, whether now
existing or contemplated or hereafter arising, of the Borrowers to the Lender of
any nature whatsoever regardless of whether such debts, obligations and
liabilities be direct, indirect, primary, secondary, joint, several, joint and
several, fixed or contingent; and also means any and all renewals, extensions
substitutions, amendments, restatements and rearrangements of any such debts,
obligations and liabilities.
"Offering Memorandum" means Coyne's Offering Memorandum dated June 23,
1998, pursuant to which the Senior Subordinated Notes are offered.
"Offering Transaction" means the sale of the Senior Subordinated Notes as
described in the Offering Memorandum.
"Outstanding Letter of Credit Obligations" has the meaning described in
Section 2.2.3 hereof.
"Patents" means and includes, in each case whether now existing or
hereafter arising, all of each Borrower's rights, title and interest in and to
(a) any and all patents and patent applications, (b) any and all inventions and
improvements described and claimed in such patents and patent applications, (c)
reissues, divisions, continuations, renewals, extensions and continuations-in-
part of any patents and patent applications, (d) income, royalties, damages,
claims and payments now or hereafter due and/or payable under and with respect
to any patents or patent applications, including, without limitation, damages
and payments for past and future infringements, (e) rights to sue for past,
present and future infringements of patents, and (f) all rights corresponding to
any of the foregoing throughout the world.
16
<PAGE>
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Acquisitions" means the acquisition or purchase of, or
investment in, any Person, any operating division or unit of any Person, or the
stock or assets of any Person, engaged substantially in the industrial laundry
business; provided, however that (i) the aggregate purchase price of, investment
in, and/or expenditures (and the timing thereof) relating to, any given
acquisition, purchase, or investment cannot itself exceed Three Million Five
Hundred Thousand Dollars ($3,500,000) in any fiscal year; which purchase price
shall be based on reasonable purchase price multiples, (ii) such acquisition,
purchase or investment cannot otherwise constitute or give rise to a Default or
an Event of Default; (iii) the Borrowers have furnished financial projections in
form and content reasonably acceptable to the Lender which give effect to such
acquisition, purchase or investment and which indicate that such acquisition,
purchase and/or investment could not or would not cause a Default or Event of
Default and has and will generate sufficient cash flow to cover any related
advance under the Acquisition Loan, use of the Revolving Loan and other
obligations as they become due; (iv) if such acquisition, purchase or investment
(A) is a stock or other securities acquisition, purchase or investment, the
Person so acquired, purchased or invested in becomes a Borrower hereunder or is
merged into Coyne and, except as permitted by the Lender, all of its assets are
subjected to the Lien of this Agreement and other Security Documents, all in
form and substance satisfactory to the Lender and its counsel, subject only to
Permitted Liens and in conformance with the provisions of this Agreement
generally, or (B) is an asset acquisition, purchase or investment, the assets
are subjected to the Lien of this Agreement and other Security Documents, all in
form and substance satisfactory to the Lender and its counsel, subject only to
Permitted Liens and in conformance with the provisions of this Agreement
generally; (v) if a Phase I environmental assessment of any real property to be
acquired or purchased by any of the Borrowers or owned by any Person to be
acquired or purchased by any of the Borrowers or owned by any Person in which
any of the Borrowers intend to make an investment, has been performed by a
reputable and recognized environmental consulting firm acceptable to the Lender
and has revealed no material Hazardous Materials Contamination or material
violations of any Environmental Laws, as reasonably determined by the Lender;
and (vi) the acquisition, purchase, or investment must otherwise be satisfactory
to the Lender in all other respects.
"Permitted Liens" means: (a) Liens for Taxes which are not delinquent or
which the Lender has determined in the exercise of its good faith discretion (i)
are being diligently contested in good faith and by appropriate proceedings,
(ii) the Borrower affected has the financial ability to pay, with all penalties
and interest, at all times without materially and adversely affecting the
Borrower, and (iii) are not, and will not be with appropriate filing, the giving
of notice and/or the passage of time, entitled to priority over any Lien of the
Lender; (b) deposits or pledges to secure obligations under workers'
compensation, social security or similar laws, or under unemployment insurance
in the ordinary course of business; (c) Liens in favor of the Lender; (d)
judgment Liens to the extent the entry of such judgment does not constitute a
Default or an Event of Default under the terms of this Agreement or result in
the sale of, or levy of execution on, any of the Collateral; (e) a purchase
money security interest in, or Capital Leases of, any Equipment hereafter
acquired attaching at the time of such acquisition, provided, however, that (i)
the indebtedness secured by any such security interest so created, assumed or
existing shall not exceed 100% of the cost of the Equipment covered thereby to
the entity selling and/or financing the purchase of the same, and (ii) each such
security interest shall attach only to the Equipment so acquired, and (iii) the
acquisition to which any security interest relates shall
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<PAGE>
not result in a Default or Event of Default under any other provision of this
Agreement; and (f) such other Liens, if any, as are set forth on Schedule 4.1.20
attached hereto and made a part hereof.
"Permitted Payments" means payments to repurchase Equity Interests of Coyne
in order to satisfy certain estate planning obligations of the estate of J.
Stanley Coyne, which payments shall not exceed $1.0 million in each of the
second, third, fourth, fifth and sixth calendar years following the death of J.
Stanley Coyne and $2.25 million in each of the seventh, eighth, ninth and tenth
calendar years following the death of J. Stanley Coyne, plus an additional
amount of $2.0 million in the calendar year 2003; provided that no such payment
shall be made prior to the death of J. Stanley Coyne; and provided further, that
the maximum amount of Permitted Payments in a specified calendar year following
the death of J. Stanley Coyne shall be increased by an amount equal to the
difference between the maximum amount of Permitted Payments that could have been
made by Coyne in each of the prior specified calendar years following the death
of J. Stanley Coyne and the actual amount of Permitted Payments made by Coyne in
each of such prior specified calendar years following the death of J. Stanley
Coyne.
"Permitted Senior Subordinated Note Purchases" means the collective
reference to each purchase by Coyne of Senior Subordinated Notes provided,
however that (i) the aggregate purchase price of all such purchases (net of cash
proceeds received on resales of the same) cannot exceed Five Million Dollars
($5,000,000) in the aggregate unless the Lender has given its prior written
consent to such excess, (ii) such purchase cannot otherwise constitute or give
rise to a Default or an Event of Default and shall not be made at any time when
a Default or Event of Default exists; and (iii) the Borrowers have furnished
financial projections in form and content reasonably acceptable to the Lender
which give effect to such purchase and which indicate that such purchase could
not or would not cause a Default or Event of Default.
"Permitted Uses" means (a) with respect to the Revolving Loan, the payment
of expenses incurred in the ordinary course of the business of each of the
Borrowers, and (b) with respect to the Capital Expenditure Loan, purchases
described in Section 2.4.2, and (c) with respect to the Acquisition Loan,
Permitted Acquisitions.
"Person" means and includes an individual, a corporation, a partnership, a
joint venture, a limited liability company, a trust, an unincorporated
association, a government or political subdivision or agency thereof or any
other organization or entity.
"Plan" means any pension plan which is covered by Title IV of ERISA and in
respect of which any of the Borrowers or a Commonly Controlled Entity is an
"employer" as defined in Section 3 of ERISA.
"Post-Default Rate" means (a) with respect to principal of, and interest
on, the Capital Expenditure Line the applicable rate in effect from time to time
under the Capital Expenditure Line Note, plus two percent (2%) per annum, (b)
with respect to principal of, and interest on the Acquisition Loan, the
applicable rate in effect from time to time under the Acquisition Note, plus two
percent (2%) per annum and (c) with respect to all other Obligations, the
applicable rate in effect from time to time under the Revolving Note, plus two
percent (2%) per annum.
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<PAGE>
"Prepayment" means a Revolving Loan Mandatory Prepayment, a Revolving Loan
Optional Prepayment, a Mandatory Prepayment, an Acquisition Loan Optional
Prepayment or a Capital Expenditure Loan Optional Prepayment, as the case may
be, and "Prepayments" mean collectively Revolving Loan Mandatory Prepayments,
Revolving Loan Optional Prepayments, Mandatory Prepayments, Acquisition Loan
Optional Prepayments or and Capital Expenditure Loan Optional Prepayments.
"Prime Rate" means the floating and fluctuating per annum prime rate of
interest of the Lender, as established and declared by the Lender at any time or
from time to time. The Prime Rate does not necessarily represent the lowest rate
of interest charged by the Lender to borrowers.
"Receivable" means one of the Borrowers' now owned and hereafter owned,
acquired or created Accounts, Chattel Paper, General Intangibles and Instruments
and "Receivables" means all of the Borrowers' now or hereafter owned, acquired
or created Accounts, Chattel Paper, General Intangibles and Instruments, and all
cash and non-cash proceeds and products thereof.
"Reportable Event" means any of the events set forth in Section 4043(b) of
ERISA or the regulations thereunder.
"Reserve Percentage" means, at any time, the then current maximum rate for
which reserves (including any basic, special, supplemental, marginal and
emergency reserves) are required to be maintained by member banks of the Federal
Reserve System under Regulation D of the Board of Governors of the Federal
Reserve System against "Eurocurrency liabilities", as that term is defined in
Regulation D. Without limiting the effect of the foregoing, the Reserve
Percentage shall reflect any other reserves required to be maintained by such
member banks with respect to (i) any category of liabilities which includes
deposits by reference to which the Eurodollar Rate is to be determined, or (ii)
any category of extensions of credit or other assets which include Eurodollar
Loans. The Eurodollar Rate shall be adjusted automatically on and as of the
effective date of any change in the Reserve Percentage.
"Responsible Officer" means the chief executive officers of the Borrowers
or the presidents of the Borrowers or, with respect to financial matters, the
chief financial officers of the Borrowers.
"Revolving Credit Commitment" means the agreement of the Lender relating to
the making of the Revolving Loan and advances thereunder subject to and in
accordance with the provisions of this Agreement.
"Revolving Credit Commitment Period" means the period of time from the
Closing Date to the Business Day preceding the Revolving Credit Termination
Date.
"Revolving Credit Committed Amount" has the meaning described in Section
2.1.1 (Revolving Credit Facility).
"Revolving Credit Expiration Date" means November 1, 2003, extending
automatically for successive periods of one (1) year each (but in no event later
than November 1, 2008) unless the Lender in the exercise of its sole and
absolute discretion, or Coyne in the exercise of its sole
19
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and absolute discretion, has notified the other, no later than August 31 of any
year after September 1, 2002, of its intention to terminate the Revolving Credit
Facility as of the next September 1.
"Revolving Credit Facility" means the facility established by the Lender
pursuant to Section 2.1 (Revolving Credit Facility) of this Agreement.
"Revolving Credit Note" has the meaning described in Section 2.1.5
(Revolving Credit Note).
"Revolving Credit Termination Date" means the earlier of (a) the Revolving
Credit Expiration Date, or (b) the date on which the Revolving Credit Commitment
is terminated pursuant to Section 7.2.
"Revolving Credit Unused Line Fee" and "Revolving Credit Unused Line Fees"
have the meanings described in Section 2.1.10 (Revolving Credit Unused Line
Fee).
"Revolving Credit Loans" means the loans made to the Borrower pursuant
under the Revolving Credit Facility.
"Revolving Loan Account" has the meaning described in Section 2.1.9
(Revolving Loan Account).
"Revolving Loan Mandatory Prepayment" and "Revolving Loan Mandatory
Prepayments" have the meanings described in Section 2.1.6 (Mandatory Prepayments
of Revolving Loan).
"Revolving Loan Optional Prepayment" and "Revolving Loan Optional
Prepayments" have the meanings described in Section 2.1.7 (Optional Prepayments
of Revolving Loan).
"Securities" means the collective reference to each and every certificated
or uncertificated security which constitutes a "security" under the provisions
of Title 8 of the Uniform Commercial Code, and all proceeds (cash and non-cash)
of the foregoing.
"Security Documents" means collectively any assignment, pledge agreement,
security agreement, mortgage, deed of trust, deed to secure debt, financing
statement and any similar instrument, document or agreement under or pursuant to
which a Lien is now or hereafter granted to, or for the benefit of, the Lender
on any real or personal property to secure all or any portion of the
Obligations, all as the same may from time to time be amended, restated,
supplemented or otherwise modified, including, without limitation, this
Agreement.
"Security Procedures" means the rules, policies and procedures adopted and
implemented by the Lender and its Affiliates at any time and from time to time
with respect to security procedures and measures relating to electronic funds
transfers, all as the same may be amended, restated, supplemented, terminated,
or otherwise modified at any time and from time to time by the Agent in its sole
and absolute discretion.
20
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"Senior Subordinated Notes" means any and all 11-1/4% Senior Subordinated
Notes due 2008 to be issued from time to time under the Indenture, in the
principal amount of $75,000,000.
"Senior Subordinated Notes Documents" means, collectively, the Indenture
and the Senior Subordinated Notes.
"State" means the State of Maryland.
"Subordinated Indebtedness" means (a) the Senior Subordinated Notes and (b)
all other Indebtedness incurred at any time by the Borrowers, the repayment of
which is subordinated to the Obligations by a written agreement in form and
substance satisfactory to the Lender in its sole and absolute discretion.
"Subordination Agreement" means that certain Subordination agreement by and
among Capital Resource Partners, the Borrowers and the Lender, as the same may
be from time to time amended, restated, supplemented or modified.
"Subsidiary" means any corporation the majority of the voting shares of
which at the time are owned directly by any of the Borrowers and/or by one or
more Subsidiaries of any of the Borrowers.
"Taxes" means all taxes and assessments whether general or special,
ordinary or extraordinary, or foreseen or unforeseen, of every character
(including all penalties or interest thereon), which at any time may be
assessed, levied, confirmed or imposed by any Governmental Authority on the
Borrowers or any of their properties or assets or any part thereof or in respect
of any of their franchises, businesses, income or profits.
"Trademarks" means and includes in each case whether now existing or
hereafter arising, all of each Borrower's rights, title and interest in and to
(a) any and all trademarks (including service marks), trade names and trade
styles, and applications for registration thereof and the goodwill of the
business symbolized by any of the foregoing, (b) any and all licenses of
trademarks, service marks, trade names and/or trade styles, whether as licensor
or licensee, (c) any renewals of any and all trademarks, service marks, trade
names, trade styles and/or licenses of any of the foregoing, (d) income,
royalties, damages and payments now or hereafter due and/or payable with respect
thereto, including, without limitation, damages, claims, and payments for past,
present and future infringements thereof, (e) rights to sue for past, present
and future infringements of any of the foregoing, including the right to settle
suits involving claims and demands for royalties owing, and (f) all rights
corresponding to any of the foregoing throughout the world.
"Trustee" means IBJ Schroder Bank and Trust Company, and its successor and
assigns as Trustee under the Indenture.
"Uniform Commercial Code" means, unless otherwise provided in this
Agreement, the Uniform Commercial Code as adopted by and in effect from time to
time in the State.
"Wholly Owned Subsidiary" means any domestic United States corporation all
the shares of stock of all classes of which (other than directors' qualifying
shares) at the time are owned
21
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directly or indirectly by any of the Borrowers and/or by one or more Wholly
Owned Subsidiaries of any of the Borrowers.
"Wire Transfer Procedures" means the rules, policies and procedures adopted
and implemented by the Lender and its Affiliates at any time and from time to
time with respect to electronic funds transfers, including, without limitation,
the Security Procedures, all as the same may be amended, restated, supplemented,
terminated or otherwise modified at any time and from time to time by the Agent
in its sole and absolute discretion.
"Year 2000 Problem" has the meaning set forth in Section 4.1.28.
Section 1.2 Accounting Terms and Other Definitional Provisions.
--------------------------------------------------
Unless otherwise defined herein, as used in this Agreement and in any
certificate, report or other document made or delivered pursuant hereto,
accounting terms not otherwise defined herein, and accounting terms only partly
defined herein, to the extent not defined, shall have the respective meanings
given to them under GAAP. Unless otherwise defined herein, all terms used herein
which are defined by the Uniform Commercial Code shall have the same meanings as
assigned to them by the Uniform Commercial Code unless and to the extent varied
by this Agreement. The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and article,
section, subsection, schedule and exhibit references are references to articles,
sections or subsections of, or schedules or exhibits to, as the case may be,
this Agreement unless otherwise specified. As used herein, the singular number
shall include the plural, the plural the singular and the use of the masculine,
feminine or neuter gender shall include all genders, as the context may require.
Without implying any limitation on the foregoing, any reference to the
"Borrowers" in provision of this Agreement or any of the other Financing
Documents shall be deemed to refer to each and any one or more of the Borrowers,
jointly and severally. Reference to any one or more of the Financing Documents
shall mean the same as the foregoing may from time to time be amended, restated,
substituted, extended, renewed, supplemented or otherwise modified.
ARTICLE II
THE CREDIT FACILITIES
Section 2.1 The Revolving Credit Facility.
-----------------------------
2.1.1 Revolving Credit Facility.
-------------------------
Subject to and upon the provisions of this Agreement, the
Lender establishes a revolving credit facility in favor of the Borrowers. The
aggregate of all advances under the Revolving Credit Facility are sometimes
referred to in this Agreement collectively as the "Revolving Loan".
The principal amount of Twenty-five Million Dollars
($25,000,000) is the "Revolving Credit Committed Amount".
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<PAGE>
During the Revolving Credit Commitment Period, the Lender
agrees to make advances under the Revolving Loan requested by the Borrowers from
time to time provided that after giving effect to the Borrowers' request, the
outstanding principal balance of the Revolving Loan would not exceed the lesser
of (a) the Revolving Credit Committed Amount minus the Outstanding Letter of
Credit Obligations, or (b) the most current Borrowing Base.
2.1.2 Procedure for Making Advances Under the Revolving Loan;
-------------------------------------------------------
Lender Protection Loans.
-----------------------
The Borrowers may borrow under the Revolving Credit
Commitment on any Business Day. Advances under the Revolving Loan shall be
deposited to the demand deposit account of Coyne with the Lender or shall be
otherwise applied as directed by the Borrowers, which direction the Lender may
require to be in writing. No later than 10:00 a.m. (Baltimore time) on the date
of the requested borrowing, the Borrowers shall give the Lender oral or written
notice (a "Loan Notice") of the amount and (if requested by the Lender) the
purpose of the requested borrowing. Any oral Loan Notice shall be confirmed in
writing by the Borrowers within three (3) Business Days after the making of the
requested Revolving Loan. In addition, the Borrowers hereby irrevocably
authorize the Lender at any time and from time to time, without further request
from or notice to the Borrowers, to make advances under the Revolving Loan which
the Lender, in its good faith discretion, deems necessary or appropriate to
protect the Lender's interests under this Agreement, including, without
limitation, advances under the Revolving Loan made to cover debit balances in
the Revolving Loan Account, principal of, and/or interest on, the Loan, the
Obligations, and/or Enforcement Costs, prior to, on, or after the termination of
other advances under this Agreement, regardless of whether the outstanding
principal amount of the Revolving Loan which the Lender may make hereunder
exceeds the Revolving Credit Committed Amount.
2.1.3 Borrowing Base.
--------------
As used in this Agreement, the term "Borrowing Base" means at
any time, an amount equal to the aggregate of (a) eighty-five percent (85%) of
the amount of Eligible Receivables, plus (b) the lesser of (i) the sum of fifty
percent (50%) of the amount of Eligible Inventory consisting of new merchandise
plus twenty-five percent (25%) of the amount of Eligible Inventory consisting of
- ----
in-service inventory, or (ii) Twelve Million Five Hundred Thousand Dollars
($12,500,000).
The Borrowing Base shall be computed based on the Borrowing
Base Report most recently delivered to and accepted by the Lender in its good
faith discretion. In the event the Borrowers fail to furnish a Borrowing Base
Report required by Section 2.1.4 below, or in the event the Lender in good faith
determines that a Borrowing Base Report is no longer accurate, the Lender may,
in its sole and absolute discretion exercised from time to time and without
limiting its other rights and remedies under this Agreement, suspend the making
of or limit advances under the Revolving Loan. The Borrowing Base shall be
subject to reduction by amounts credited to the Collateral Account since the
date of the most recent Borrowing Base Report and by the amount of any
Receivable or any Inventory which was included in the Borrowing Base but which
the Lender determines fails to meet the respective criteria applicable from time
to time for Eligible Receivables or Eligible Inventory.
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<PAGE>
If at any time the total of the aggregate principal amount of
the Revolving Loan, the Outstanding Letter of Credit Obligations exceed the
Borrowing Base, a borrowing base deficiency ("Borrowing Base Deficiency") shall
exist. Each time a Borrowing Base Deficiency exists, the Borrowers at the sole
and absolute discretion of the Lender exercised from time to time shall pay the
Borrowing Base Deficiency ON DEMAND to the Lender from time to time.
2.1.4 Borrowing Base Report.
---------------------
The Borrowers will furnish to the Lender no less frequently
than monthly and no later than the 10th day of each month and at such other
times as may be requested by the Lender a report of the Borrowing Base (each a
"Borrowing Base Report"; collectively, the "Borrowing Base Reports") in the form
required from time to time by the Lender, appropriately completed and duly
signed. The Borrowing Base Report shall contain the amount and payments on the
Receivables, the value of Inventory, and the calculations of the Borrowing Base,
all in such detail, and accompanied by such supporting and other information, as
the Lender may from time to time request. Upon the Lender's request and upon the
creation of any Receivables, or at such intervals as the Lender may require, the
Borrowers will provide the Lender with: (a) copies of Account Debtor invoices;
(b) evidence of shipment or delivery; and (c) such further schedules, documents
and/or information regarding the Receivables and the Inventory as the Lender may
reasonably require. The items to be provided under this subsection shall be in
form satisfactory to the Lender, and certified as true and correct by a
Responsible Officer, and delivered to the Lender from time to time solely for
the Lender's convenience in maintaining records of the Collateral. The
Borrowers' failure to deliver any of such items to the Lender shall not affect,
terminate, modify, or otherwise limit the Lender's security interests in the
Collateral.
2.1.5 Revolving Credit Note.
----------------------
The obligation of the Borrowers to pay the Revolving Loan
with interest shall be evidenced by a promissory note (as from time to time
extended, amended, restated, supplemented or otherwise modified, the "Revolving
Credit Note") substantially in the form of EXHIBIT "A-1" attached hereto and
made a part hereof, with appropriate insertions. The Revolving Credit Note shall
be dated as of the Closing Date, shall be payable to the order of the Lender at
the times provided in the Revolving Credit Note, and shall be in the principal
amount of the Revolving Credit Committed Amount. The Borrowers acknowledge and
agree that, if outstanding principal balance of the Revolving Loan outstanding
from time to time exceeds the face amount of the Revolving Credit Note, the
excess shall bear interest at the rates provided from time to time for advances
under Revolving Loan evidenced by the Revolving Credit Note and shall be
payable, with accrued interest, ON DEMAND. The Revolving Credit Note shall not
operate as a novation of any of the Obligations or nullify, discharge, or
release any such Obligations or the continuing contractual relationship of the
parties hereto in accordance with the provisions of this Agreement.
2.1.6 Mandatory Prepayments of Revolving Loan.
---------------------------------------
The Borrowers shall make the mandatory prepayments (each a
"Revolving Loan Mandatory Prepayment" and collectively, the "Revolving Loan
Mandatory Prepayments") of the Revolving Loan at any time and from time to time
in such amounts requested by the
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<PAGE>
Lender pursuant to Section 2.1.3 (Borrowing Base) and/or Section 2.1.11(c)
(Required Availability under the Revolving Credit Facility) of this Agreement in
order to cover any Borrowing Base Deficiency.
2.1.7 Optional Prepayments of Revolving Loan.
--------------------------------------
Subject to the limitations and fees of Section 2.6.5 below,
the Borrowers may, at their option, at any time and from time to time prepay
(each a "Revolving Loan Optional Prepayment" and collectively the "Revolving
Loan Optional Prepayments") the Revolving Loan, in whole or in part without
premium or penalty.
2.1.8 The Collateral Account.
----------------------
The Borrowers will deposit, or cause to be deposited, all
Items of Payment to a bank account designated by the Lender and, if the Lender
so elects (provided that such election may only be made at any time following
either (i) an Event of Default or (ii) a time when the aggregate outstanding
principal amount of the Revolving Loan plus the Outstanding Letter of Credit
----
Obligations exceeds the Borrowing Base minus Two Million Five Hundred Thousand
-----
Dollars ($2,500,000)) from which the Lender alone has power of access and
withdrawal (the "Collateral Account"). Each deposit shall be made not later than
the next Business Day after the date of receipt of the Items of Payment. The
Items of Payment shall be deposited in precisely the form received, except for
the endorsements of the Borrowers where necessary to permit the collection of
any such Items of Payment, which endorsement the Borrowers hereby agree to make.
In the event the Borrowers fail to do so, the Borrowers hereby authorize the
Lender to make the endorsement in the name of the Borrowers. Prior to such a
deposit, the Borrowers will not commingle any Items of Payment with any of the
Borrowers' other funds or property, but will hold them separate and apart in
trust and for the account of the Lender.
In addition, if so directed by the Lender after an Event of
Default, the Borrowers shall direct the mailing of all Items of Payment from the
Borrowers' Account Debtors to a post-office box designated by the Lender, or to
such other additional or replacement post-office boxes pursuant to the request
of the Lender from time to time (collectively, the "Lockbox"). The Lender shall
have unrestricted and exclusive access to the Lockbox.
Upon obtaining Items of Payment, the Lender is authorized to
inspect all Items of Payment, endorse all Items of Payment in the name of the
Borrowers, and deposit such Items of Payment in the Collateral Account. The
Lender reserves the right, exercised in its sole and absolute discretion from
time to time, to provide to the Collateral Account credit prior to final
collection of an Item of Payment and to disallow credit for any uncollected Item
of Payment which is unsatisfactory to the Lender. In the event Items of Payment
are returned to the Lender for any reason whatsoever, the Lender may, in the
exercise of its discretion from time to time, forward such Items of Payment a
second time. Any returned Items of Payment shall be charged back to the
Collateral Account, the Revolving Loan Account, or other account, as
appropriate.
The Lender will apply the whole or any part of the collected
funds credited to the Collateral Account against the Revolving Loan (or with
respect to Items for
25
<PAGE>
Payments which are not proceeds of accounts or inventory or after a Default,
against any of the Obligations) or credit such collected funds to the depository
account of the Borrowers with the Lender, the application to take place as of
the Business Day after the date of crediting and the order and method of such
application to be in the sole discretion of the Lender.
2.1.9 Revolving Loan Account.
----------------------
The Lender will establish and maintain a loan account on its
books (the "Revolving Loan Account") to which the Lender will (a) debit (i) the
-----
principal amount of each Revolving Loan made by the Lender hereunder as of the
date made, (ii) the amount of any interest accrued on the Revolving Loan as and
when due, and (iii) any other amounts due and payable by the Borrowers to the
Lender from time to time under the provisions of this Agreement in connection
with the Revolving Loan, including, without limitation, Enforcement Costs, Fees,
late charges, and service, collection and audit fees, as and when due and
payable, and (b) credit all payments made by the Borrowers to the Lender on
------
account of the Revolving Loan as of the date made including, without limitation,
funds credited to the Revolving Loan Account from the Collateral Account. The
Lender may debit the Revolving Loan Account for the amount of any Item of
Payment which is returned to the Lender unpaid. All credit entries to the
Revolving Loan Account are conditional and shall be readjusted as of the date
made if final and indefeasible payment is not received by the Lender in cash or
solvent credits. The Borrowers hereby promise to pay to the order of the Lender,
on demand, an amount equal to the excess, if any, of all debit entries over all
credit entries recorded in the Revolving Loan Account under the provisions of
this Agreement. Any and all periodic or other statements or reconciliations, and
the information contained in those statements or reconciliations, of the
Revolving Loan Account shall be presumed conclusively to be correct and shall
constitute an account stated between the Lender and the Borrowers unless the
Lender receives specific written objection thereto from the Borrowers within
thirty (30) Business Days after such statement or reconciliation shall have been
sent by the Lender.
2.1.10 Revolving Credit Unused Line Fee.
--------------------------------
The Borrowers shall pay to the Lender a monthly revolving
credit facility fee (collectively, the "Revolving Credit Unused Line Fees" and
individually, a "Revolving Credit Unused Line Fee") in an amount equal to (i)
three-eighths percent (3/8%) per annum times the positive difference up to and
-----
including $15,000,000, if any, between the average daily unused and undisbursed
portion of the Revolving Credit Committed Amount in effect from time to time
during each calendar month and (ii) one-quarter percent (1/4%) per annum times
-----
such positive difference in excess of $15,000,000. The accrued and unpaid
portion of the Revolving Credit Unused Line Fee shall be paid by the Borrowers
to the Lender on the first day of the next calendar month, commencing on the
first such date following the date hereof, and on the Revolving Credit
Termination Date.
2.1.11 Required Availability under the Revolving Credit
------------------------------------------------
Facility.
- --------
(a) On the Closing Date, the Revolving Loan plus the
----
Outstanding Letter of Credit Obligations shall not exceed the Borrowing Base
minus the Permitted Uses required to be made on the Closing Date minus the costs
- ----- -----
relating to the closing of this
26
<PAGE>
Agreement (including, without limitation, applicable Fees, recording costs,
recording taxes, and the fees and expenses of the Borrowers' and the Lender's
professionals) minus Five Million Dollars ($5,000,000).
-----
(b) After the Closing Date, the Borrowers shall not
at any time permit the aggregate outstanding principal amount of the Revolving
Loan plus the Outstanding Letter of Credit Obligations to exceed the Borrowing
----
Base minus One Million Dollars ($1,000,000).
-----
(c) If so required by the Lender, the Borrowers shall
make a Revolving Loan Mandatory Prepayment pursuant to the provisions of Section
2.1.6 to the extent necessary to achieve compliance with this Section.
2.1.12 Right of Lender to Demand Payment and Terminate
-----------------------------------------------
Revolving Credit Facility.
- -------------------------
Notwithstanding any of the provisions of this Agreement, the
Revolving Credit Note or any of the other Financing Documents, during the
continuance of an Event of Default, the Lender may at any time, in its sole and
absolute discretion, demand payment of the Revolving Loan in whole or in part
and/or terminate, suspend or limit the Revolving Credit Commitment. Upon
termination of the Revolving Credit Facility, the outstanding principal balance
under the Revolving Loan, and any accrued and unpaid interest thereon, shall be
immediately due and payable, and the Lender shall not make any further advances
under the Revolving Loan, unless it elects to do so in the exercise of its sole
and absolute discretion.
Section 2.2 The Letter of Credit Facility.
-----------------------------
2.2.1 Letters of Credit.
-----------------
Subject to and upon the provisions of this Agreement, and as
a part of the Revolving Credit Commitment, the Borrowers may, upon the prior
approval of the Lender, obtain standby and documentary letters of credit (as the
same may from time to time be amended, supplemented or otherwise modified, each
a "Letter of Credit" and collectively the "Letters of Credit") from the Lender
from time to time from the Closing Date until the Business Day preceding the
Revolving Credit Termination Date. The Borrowers will not be entitled to obtain
a Letter of Credit hereunder unless (a) after giving effect to the request, the
outstanding principal balance of the Revolving Loan and of the Letter of Credit
Obligations would not exceed the lesser of (i) the Revolving Credit Committed
Amount, or (ii) the most current Borrowing Base and (b) the sum of the aggregate
face amount of the then outstanding Letters of Credit (including the face amount
of the requested Letter of Credit, but excluding, only up to $500,000, the
stated amount of the Letter of Credit for the benefit of the Borrowers'
workmen's compensation insurance carrier) does not exceed Three Million Dollars
($3,000,000).
2.2.2 Letter of Credit Fees.
---------------------
Prior to or simultaneously with the opening of each Letter of
Credit, the Borrowers shall pay to the Lender, a letter of credit fee (each a
"Letter of Credit Fee" and
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<PAGE>
collectively the "Letter of Credit Fees") in an amount equal to two percent (2%)
per annum of the amount of the Letter of Credit. Such Letter of Credit Fees
shall be paid upon the opening of the Letter of Credit and upon each anniversary
thereof, if any. In addition, the Borrowers shall pay to the Lender any and all
additional issuance, negotiation, processing, transfer or other fees to the
extent and as and when required by the provisions of any Letter of Credit
Agreement; such additional fees are included in and a part of the "Fees" payable
by the Borrowers under the provisions of this Agreement.
2.2.3 Terms of Letters of Credit.
--------------------------
Each Letter of Credit shall (a) be opened pursuant to a
Letter of Credit Agreement, and (b) expire on a date not later than the Business
Day preceding the Revolving Credit Expiration Date; provided, however, if any
Letter of Credit does have an expiration date later than the Business Day
preceding the Revolving Credit Termination Date, as of the Business Day
preceding the Revolving Credit Termination Date an advance of the Revolving Loan
Credit Facility shall be made by the Lender in the face amount of such Letter of
Credit (or Letters of Credit) and the proceeds thereof shall be deposited in an
account titled in the name of the Lender as trustee for the Borrowers. The
proceeds of the trustee account referred to in the immediately preceding
sentence shall be held as collateral for the Letter of Credit (or Letters of
Credit) and in the event of a draw under the Letter of Credit (or Letters of
Credit), used to pay any such draw. The aggregate face amount of all Letters of
Credit at any one time outstanding and issued by the Lender pursuant to the
provisions of this Agreement, plus the amount of any unpaid Letter of Credit
Fees accrued or scheduled to accrue thereon, and less the aggregate amount of
all drafts issued under or purporting to have been issued under such Letters of
Credit that have been paid by the Lender, is herein called the "Outstanding
Letter of Credit Obligations".
2.2.4 Procedure for Letters of Credit.
-------------------------------
The Borrowers shall give the Lender written notice at least
three (3) Business Days prior to the date on which a Letter of Credit is
requested to be opened of their request for a Letter of Credit. Such notice
shall be accompanied by a duly executed and delivered Letter of Credit
Agreement. Upon receipt of the Letter of Credit Agreement and the Letter of
Credit Fee, the Lender shall process such Letter of Credit Agreement in
accordance with its customary procedures and open such Letter of Credit on the
Business Day specified in such notice.
Upon the payment and performance of all Obligations of the
Borrowers and all obligations and liabilities of each other Person, other than
the Lender, under this Agreement and all other Financing Documents, the
termination and/or expiration of the Commitments and Outstanding Letter of
Credit Obligations, upon the Borrowers' request and at the Borrowers' sole cost
and expense, the Lender shall release and/or terminate any Financing Document
but only if and provided that there is no commitment or obligation (whether or
not conditional) of the Lender to re-advance amounts which would be secured
thereby.
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Section 2.3 The Acquisition Loan Facility
-----------------------------
2.3.1 Acquisition Loan Facility.
-------------------------
Subject to and upon the provisions of this Agreement, the
Lender establishes an acquisition loan facility in the maximum principal amount
of Ten Million Dollars ($10,000,000) ("Acquisition Loan Committed Amount") in
favor of the Borrowers. The aggregate of all advances under the Acquisition Loan
Facility are sometimes referred to in this Agreement collectively as the
"Acquisition Loan". The obligation of the Lender to make advances under the
Acquisition Loan is herein called its "Acquisition Loan Commitment".
2.3.2 Acquisition Note.
----------------
The obligation of the Borrowers to pay the Acquisition Loan
with interest shall be evidenced by a promissory note (as from time to time
extended, amended, restated, supplemented or otherwise modified, the
"Acquisition Note") substantially in the form of EXHIBIT "A-2" attached hereto
and made a part hereof with appropriate insertions. The Borrowers acknowledge
and agree that, if the outstanding principal balance of the Acquisition Loan
outstanding from time to time exceeds the aggregate face amount of the
Acquisition Loan Note, the excess shall bear interest at the rates provided from
time to time for the Acquisition Loan evidenced by the Acquisition Loan Note and
shall be payable, with accrued interest, ON DEMAND. The Acquisition Loan Note
shall not operate as a novation of any of the Obligations or nullify, discharge,
or release any such Obligations or the continuing contractual relationship of
the parties hereto in accordance with the provisions of this Agreement. The
Acquisition Loan shall mature, and the entire unpaid principal balance and
accrued and unpaid interest thereon shall be due and payable on the Acquisition
Loan Maturity Date.
2.3.3 Payments of Acquisition Loan.
----------------------------
The Acquisition Loan shall be repayable in installment
payments of principal quarterly on the first day of each June, September,
December and March commencing June 1, 1999 in an amount equal to 1/12th of the
amount of the Acquisition Loan outstanding on May 31, 1999 plus an amount equal
to 1/12th of the aggregate of all advances under the Acquisition Loan on or
after June 1, 1999. At the time of each advance under the Acquisition Loan on or
after June 1, 1999, the Borrowers shall furnish a "Acquisition Loan Installment
Payment Schedule" substantially in the form of EXHIBIT "A-3" attached hereto and
-------------
made a part hereof, with appropriate insertions, which shall set forth aggregate
installment payments due thereafter on all Acquisition Loan advances. The
Acquisition Loan Installment Payment Schedules shall not operate as a novation
of any of the Obligations or nullify, discharge, or release any such Obligations
or the continuing contractual relationship of the parties hereto in accordance
with the provisions of this Agreement.
2.3.4 Optional Prepayments of Acquisition Loan.
----------------------------------------
The Borrowers may, at their option, at any time and from time to time prepay
(each a "Acquisition Loan Optional Prepayment" and collectively the "Acquisition
Loan Optional Prepayments") the Acquisition Loan, in whole or in part without
premium or penalty. The amount to be so prepaid, together with interest accrued
thereon to date of prepayment if the
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amount is intended as a prepayment of the Acquisition Loan in whole, shall be
paid by the Borrowers to the Lender on the date specified for such prepayment.
Amounts prepaid may not be reborrowed.
2.3.5 Application of Acquisition Loan Partial Prepayments.
---------------------------------------------------
Before the Acquisition Loan Amortization Date, each partial Acquisition Loan
Optional Prepayments shall be applied first to all accrued and unpaid interest
on the principal of the Acquisition Loan Note, and then to the outstanding
principal balance. On or after the Acquisition Loan Amortization Date, partial
Acquisition Loan Optional Prepayments shall be in an amount not less than the
aggregate amount of the next principal installment under the Acquisition Loan
Note and shall be applied first to all accrued and unpaid interest on the
principal of the Acquisition Loan Note, and then to the balloon payment due at
maturity and to the principal installment payments in the inverse order of
maturity.
2.3.6 Acquisition Line Fee.
--------------------
The Borrowers shall pay to the Lender as a condition
precedent to each advance under the Acquisition Loan a fee (the "Acquisition
Loan Fee") in the amount of three-quarters of one percent (3/4%), which shall be
deemed to be fully earned and non-refundable upon payment.
Section 2.4 The Capital Expenditure Line Facility.
-------------------------------------
2.4.1 Capital Expenditure Line Facility.
---------------------------------
Subject to and upon the provisions of this Agreement, the
Lender establishes a capital expenditure line facility in the maximum principal
amount of Twenty Million Dollars ($20,000,000) ("Capital Expenditure Line
Committed Amount") in favor of the Borrowers. The aggregate of all advances
under the Capital Expenditure Line Facility are sometimes referred to in this
Agreement collectively as the "Capital Expenditure Line". The obligation of the
Lender to make advances under the Capital Expenditure Line is herein called its
"Capital Expenditure Line Commitment".
During the Capital Expenditure Line Advance Period, the
Borrowers may request advances under the Capital Expenditure Line Facility in
accordance with the provisions of this Agreement; provided that after giving
effect to the Borrowers' request (a) the outstanding principal balance of the
Capital Expenditure Line would not exceed the Capital Expenditure Line
Commitment; and (b) the aggregate of all advances under the Capital Expenditure
Line would not exceed the Capital Expenditure Line Committed Amount.
Amounts repaid on the Capital Expenditure Line may not be
reborrowed.
2.4.2 Procedure for Making Advances Under the Capital
-----------------------------------------------
Expenditure Line.
----------------
The Borrowers may borrow under the Capital Expenditure Line
Facility on any Business Day. The Borrowers shall give the Lender written notice
(a "Capital
30
<PAGE>
Expenditure Line Notice") at least five (5) Business Days prior to the date on
which the Borrowers desire an advance under the Capital Expenditure Line. Each
Capital Expenditure Line Notice shall be accompanied by (a) a contract of sale,
purchase order or invoice, in form and substance reasonably satisfactory to the
Lender, which accurately and completely describes the Equipment purchased after
the Closing Date which is the subject of the requested advance and the purchase
price therefor, expressly identifying and excluding the costs of delivery,
installation, taxes, and other "soft" costs, and (b) evidence reasonably
satisfactory to the Lender indicating that such Equipment have been delivered to
and accepted by the applicable Borrower. Each Capital Expenditure Line Notice
shall also be accompanied by such other information, certificates,
confirmations, and other items as the Lender may reasonably require to determine
the value and the delivery of the subject Equipment and compliance with the
other terms of this Agreement. The amount to be advanced with respect to a
Capital Expenditure Line Notice shall not exceed the lesser of (a) the amount
requested by the Borrowers or (b) the purchase price (excluding the costs of
delivery, installation, taxes, and other "soft" costs) of the Equipment times
-----
(i) 100% for advances aggregating up to and including $4,000,000 in any year,
and (ii) 80% for advances in excess of $4,000,000 in any year. Each advance
under the Capital Expenditure Line shall be not less than $250,000.
2.4.3 Capital Expenditure Line Note.
------------------------------
The obligation of the Borrowers to pay the Capital Expenditure Line
with interest shall be evidenced by a promissory note (as from time to time
extended, amended, restated, supplemented or otherwise modified, the "Capital
Expenditure Line Note") substantially in the form of EXHIBIT "A-4" attached
-------------
hereto and made a part hereof, with appropriate insertions. The Borrowers
acknowledge and agree that, if the outstanding principal balance of the Capital
Expenditure Line outstanding from time to time exceeds the aggregate face amount
of the Capital Expenditure Line Note, the excess shall bear interest at the
rates provided from time to time for the Capital Expenditure Line evidenced by
the Capital Expenditure Line Note and shall be payable, with accrued interest,
ON DEMAND. The Capital Expenditure Line Note shall not operate as a novation of
any of the Obligations or nullify, discharge, or release any such Obligations or
the continuing contractual relationship of the parties hereto in accordance with
the provisions of this Agreement. The Capital Expenditure Line shall mature,
and the entire unpaid principal balance and accrued and unpaid interest thereon
shall be due and payable on the Capital Expenditure Line Maturity Date.
2.4.4 Payments of Capital Expenditure Line.
-------------------------------------
The Capital Expenditure Line shall be repayable in installment
payments of principal quarterly (on the first day of each June, September,
December and March commencing June 1, 2000) in an amount equal to 1/20th of the
amount of the Capital Expenditure Line outstanding on May 31, 2000, plus amount
equal to 1/20th of the aggregate of all advances under the Capital Expenditure
Line on or after June 1, 2000. At the time of each advance under the Capital
Expenditure Line on or after June 1, 2000, the Borrowers shall furnish a
"Capital Expenditure Line Installment Payment Schedule" substantially in the
form of EXHIBIT "A-5" attached hereto and made a part hereof, with appropriate
-------------
insertions, which shall set forth aggregate installment payments due thereafter
on all Capital Expenditure Line advances. The Capital Expenditure Line
Installment Payment Schedules shall not operate as a
31
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novation of any of the Obligations or nullify, discharge, or release any such
Obligations or the continuing contractual relationship of the parties hereto in
accordance with the provisions of this Agreement or the Capital Expenditure Line
Note.
2.4.5 Optional Prepayments of Capital Expenditure Line.
-------------------------------------------------
The Borrowers may, at their option, at any time and from time to time
prepay (each a "Capital Expenditure Line Optional Prepayment" and collectively
the "Capital Expenditure Line Optional Prepayments") the Capital Expenditure
Line, in whole or in part without premium or penalty. The amount to be so
prepaid, together with interest accrued thereon to date of prepayment if the
amount is intended as a prepayment of the Capital Expenditure Line in whole,
shall be paid by the Borrowers to the Lender on the date specified for such
prepayment.
2.4.6 Application of Capital Expenditure Line Partial Prepayments.
------------------------------------------------------------
Before the Capital Expenditure Line Amortization Date, partial Capital
Expenditure Line Loan Optional Prepayments shall be applied first to all accrued
and unpaid interest on the principal of the Capital Expenditure Line Note, and
then to the outstanding principal balance. On or after the Capital Expenditure
Line Amortization Date, partial Capital Expenditure Line Loan Optional
Prepayments shall be in an amount not less than the aggregate amount of the next
principal installment under the Capital Expenditure Line Note and shall be
applied first to all accrued and unpaid interest on the principal of the Capital
Expenditure Line Note, and then to the balloon payment due at maturity and to
the principal installment payments in the inverse order of maturity.
Section 2.5 Interest
--------
2.5.1 Applicable Interest Rates.
--------------------------
(a) Each Loan shall bear interest until maturity (whether by
acceleration, declaration, extension or otherwise) at either the Base Rate or
the Eurodollar Rate, as selected and specified by the Borrowers in an Interest
Rate Election Notice furnished to the Lender in accordance with the provisions
of Section 2.5.2(e), or as otherwise determined in accordance with the
provisions of this Section 2.5, and as may be adjusted from time to time in
accordance with the provisions of Section 2.5.3 (Inability to Determine
Eurodollar Base Rate).
(b) Notwithstanding the foregoing, following the occurrence
and during the continuance of an Event of Default, at the option of the Lender,
all Loans and all other Obligations shall bear interest at the Post-Default
Rate.
(c) The Applicable Margin for (i) Eurodollar Loans and (ii)
Base Rate Loans shall be as set forth on Schedule 2.5.1.
--------------
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2.5.2 Selection of Interest Rates.
----------------------------
(a) The Borrowers may select the initial Applicable Interest
Rate or Applicable Interest Rates to be charged on the Loans.
(b) From time to time after the date of this Agreement as
provided in this Section, by a proper and timely Interest Rate Election Notice
furnished to the Lender in accordance with the provisions of Section 2.5.2(e),
the Borrowers may select an initial Applicable Interest Rate or Applicable
Interest Rates for any Loans or may convert the Applicable Interest Rate and,
when applicable, the Interest Period, for any existing Loan to any other
Applicable Interest Rate or, when applicable, any other Interest Period.
(c) The Borrowers' selection of an Applicable Interest Rate
and/or an Interest Period, the Borrowers' election to convert an Applicable
Interest Rate and/or an Interest Period to another Applicable Interest Rate or
Interest Period, and any other adjustments in an interest rate are subject to
the following limitations:
(i) the Borrowers shall not at any time select or
change to an Interest Period that extends beyond the Revolving Credit
Expiration Date in the case of the Revolving Loan or in the case of
Interest Periods with respect to the Acquisition Loan, the Acquisition Loan
Maturity Date, or in the case of Interest Periods with respect to the
Capital Expenditure Line, the Capital Expenditure Line Maturity Date;
(ii) except as otherwise provided in Section 2.5.4
(Indemnity), no change from the Eurodollar Rate to the Base Rate shall
become effective on a day other than a Business Day and on a day which is
the last day of the then current Interest Period, no change of an Interest
Period shall become effective on a day other than the last day of the then
current Interest Period, and no change from the Base Rate to the Eurodollar
Rate shall become effective on a day other than a day which is a Eurodollar
Business Day;
(iii) any Applicable Interest Rate change for any Loan
to be effective on a date on which any principal payment on account of such
Loan is scheduled to be paid shall be made only after such payment shall
have been made;
(iv) no more than three (3) different Eurodollar Rates
may be outstanding at any time and from time to time with respect to the
Revolving Loan;
(v) only one (1) Eurodollar Rate may be outstanding at
any time and from time to time with respect to the Acquisition Loan;
(vi) only one (1) Eurodollar Rate may be outstanding at
any time and from time to time with respect to the Capital Expenditure
Line;
(vii) the first day of each Interest Period shall be a
Eurodollar Business Day;
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<PAGE>
(viii) as of the effective date of a selection, there
shall not exist an Event of Default; and
(ix) the minimum principal amount of a Eurodollar Loan
shall be Five Hundred Thousand Dollars ($500,000).
(d) If a request for an advance under the Loans is not
accompanied by an Interest Rate Election Notice or does not otherwise include a
selection of an Applicable Interest Rate and, if applicable, an Interest Period,
or if, after having made a selection of an Applicable Interest Rate and, if
applicable, an Interest Period, the Borrowers fail or are not otherwise entitled
under the provisions of this Agreement to continue such Applicable Interest Rate
or Interest Period, the Borrowers shall be deemed to have selected the Base Rate
as the Applicable Interest Rate until such time as the Borrowers have selected a
different Applicable Interest Rate and specified an Interest Period in
accordance with, and subject to, the provisions of this Section.
(e) The Lenders will not be obligated to make Loans, to
convert the Applicable Interest Rate on Loans to another Applicable Interest
Rate, or to change Interest Periods, unless the Lender shall have received an
irrevocable written or telephonic notice (an "Interest Rate Election Notice")
from the Borrowers specifying the following information:
(i) the amount to be borrowed or converted;
(ii) a selection of the Base Rate or the Eurodollar
Rate;
(iii) the length of the Interest Period if the
Applicable Interest Rate selected is the Eurodollar Rate; and
(iv) the requested date on which such election is to
be effective.
Any telephonic notice must be confirmed in writing within three (3) Business
Days. Each Interest Rate Election Notice must be received by the Lender not
later than 10:00 a.m. (Baltimore City time) on the Business Day of any requested
borrowing or conversion in the case of a selection of the Base Rate and not
later than 10:00 a.m. (Baltimore City time) on the third Business Day before the
effective date of any requested borrowing or conversion in the case of a
selection of the Eurodollar Rate.
2.5.3 Inability to Determine Eurodollar Base Rate.
--------------------------------------------
In the event that (a) the Lender shall have determined that, by reason of
circumstances affecting the London interbank eurodollar market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Base Rate for any
requested Interest Period with respect to a Loan the Borrowers have requested to
be made as or to be converted to a Eurodollar Loan or (b) the Lender shall
determine that the Eurodollar Base Rate for any requested Interest Period with
respect to a Loan the Borrowers have requested to be made as or to be converted
to a Eurodollar Loan does not adequately and fairly reflect the cost to the
Lenders of funding or converting such Loan, the Lender shall give telephonic or
written notice of such determination to the Borrowers
34
<PAGE>
at least one (1) day prior to the proposed date for funding or converting such
Loan. If such notice is given, any request for a Eurodollar Loan shall be made
as or converted to a Base Rate Loan. Until such notice has been withdrawn by the
Lender, the Borrowers will not request that any Loan be made as or converted to
a Eurodollar Loan.
2.5.4 Indemnity.
----------
The Borrowers agree to indemnify and reimburse the Lender
and the Lenders and to hold the Lender and the Lenders harmless from any loss,
cost (including administrative costs) or expense which any one or more of the
Lender or the Lenders may sustain or incur as a consequence of (a) a default by
the Borrowers in payment when due of the principal amount of or interest on any
Eurodollar Loan, (b) the failure of the Borrowers to make, or convert the
Applicable Interest Rate of, a Loan after the Borrowers has given a Loan Notice
or an Interest Rate Election Notice, (c) the failure of the Borrowers to make
any prepayment of a Eurodollar Loan after the Borrowers have given notice of
such intention to make such a prepayment, and/or (d) the making by the Borrowers
of a prepayment of a Eurodollar Loan on a day which is not the last day of the
Interest Period for such Eurodollar Loan, including, without limitation, any
such loss or expense arising from the reemployment of funds obtained by the
Lenders to maintain any Eurodollar Loan or from fees payable to terminate the
deposits from which such funds were obtained.
2.5.5 Payment of Interest.
--------------------
Unpaid and accrued interest shall be paid monthly, in
arrears, on the first day of each calendar month, commencing on the first such
date after the date of this Agreement, and on the first day of each calendar
month thereafter, and at maturity (whether by acceleration, declaration,
extension or otherwise). In addition:(i) any and all unpaid and accrued interest
on any Base Rate Loan converted to a Eurodollar Loan or prepaid shall be paid
immediately upon such conversion and/or prepayment, as appropriate; and (ii)
unpaid and accrued interest on any Eurodollar Loan shall be paid on the last
Business Day of each Interest Period for such Eurodollar Loan and at maturity
(whether by acceleration, declaration, extension or otherwise); provided,
however that any and all unpaid and accrued interest on any Eurodollar Loan
prepaid prior to expiration of the then current Interest Period for such
Eurodollar Loan shall be paid immediately upon prepayment.
Section 2.6 General Financing Provisions.
-----------------------------
2.6.1 Borrowers' Representatives.
---------------------------
(a) The Borrowers hereby represent and warrant to
the Lender that each of the Borrowers will derive benefits, directly and
indirectly, from each Loan, both in their separate capacity and as a member
of the integrated group to which each of the Borrowers belong, because the
successful operation of the integrated group is dependent upon the
continued successful performance of the functions of the integrated group
as a whole. The Borrowers in the discretion of their respective managements
are to agree among themselves as to the allocation of the benefits the
proceeds of Loans, and the purposes for which such benefits and proceeds
will be used so long as any such allocation or purpose is not in violation
of this Agreement.
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<PAGE>
(b) For administrative convenience, Coyne is hereby
irrevocably appointed by each of the Borrowers as agent for each of the
Borrowers for the purpose of requesting Loans, receiving the proceeds of Loans,
and disbursing the proceeds of Loans as between the Borrowers. By reason
thereof, Coyne is hereby irrevocably appointed by each of the Borrowers as the
attorney-in-fact of each of the Borrowers with power and authority through its
duly authorized officer or officers to (i) endorse any check (if any) for the
proceeds of any Loan for and on behalf of each of the Borrowers and in the name
of each of the Borrowers and (ii) instruct the Lender to credit the proceeds of
any Loan directly to an account of any of the Borrowers which shall evidence the
making of such Loan and shall constitute the acknowledgement by each of the
Borrowers of the receipt of the proceeds of such Loan. All actions taken by
Coyne in connection with the Loans and the Financing Documents shall be
conclusively presumed to be the joint and several actions of the Borrowers even
though Coyne may act from time to time in its name alone.
(c) Each of the Borrowers hereby irrevocably
authorizes the Lender to make Loans to any or all of the Borrowers pursuant to
the provisions of this Agreement upon the written, oral or telephone request of
any one of the Persons who is from time to time a Responsible Officer of a
Borrower under the provisions of the most recent "Certificate" of corporate
resolutions of the Borrowers on file with the Lender and also upon the written,
oral or telephone request of any one of the Persons who is from time to time a
Responsible Officer of Coyne under the provisions of the most recent
"Certificate" of corporate resolutions and/or incumbency for Coyne on file with
the Lender.
(d) The Lender assumes no responsibility or liability
for any errors, mistakes, and/or discrepancies, except those involving the
Lender's gross negligence or willful misconduct in the oral, telephonic, written
or other transmissions of any instructions, orders, requests and confirmations
between the Lender and the Borrowers in connection with the Credit Facilities,
any Loan or any other transaction in connection with the provisions of this
Agreement.
(e) Without implying any limitation on the joint and
several nature of the Obligations, the Lender agrees that, notwithstanding any
other provision of this Agreement, the Borrowers may create reasonable inter-
company indebtedness between or among the Borrowers with respect to the
allocation of the benefits and proceeds of the advances under this Agreement.
The Borrowers agree among themselves, and the Lender consents to that agreement,
that each Borrower shall have rights of contribution from all of the other
Borrowers to the extent the Borrower incurs Obligations in excess of the
proceeds of the Loans received by, or allocated to purposes for the direct
benefit of, the Borrower. All such indebtedness and rights shall be, and is
hereby agreed by the Borrowers to be, subordinate in priority and payment to the
indefeasible repayment in full of the Obligations, and, unless the Lender agrees
in writing otherwise, shall not be exercised or repaid in whole or in part until
all of the Obligations have been satisfied. The Borrowers agree that all of such
indebtedness and rights are part of the Collateral of a Borrower who is the
creditor and secures the Obligations. Each Borrower hereby waives all rights of
counterclaim, recoupment and offset between or among themselves arising on
account of that indebtedness and otherwise. Each Borrower shall not evidence
that indebtedness or rights by note or other instrument, and shall not secure
that indebtedness with
36
<PAGE>
any mortgages, security interests or otherwise, even though any such instrument
and security shall be part of the Collateral.
2.6.2 Use of Proceeds of the Loans.
-----------------------------
The proceeds of each advance under the Loans shall be used by the
Borrowers for Permitted Uses, and for no other purposes except as may otherwise
be agreed by the Lender in writing. The Borrowers shall use the proceeds of the
Loans promptly.
2.6.3 Mandatory Prepayments.
----------------------
Provided there are amounts outstanding under the Acquisition Loan
and/or the Capital Expenditure Line, the Borrowers shall make annual mandatory
prepayments (each a "Mandatory Prepayment" and collectively the "Mandatory
Prepayments") in an amount equal to the lesser of $2,000,000 or 35% of Excess
Cash Flow and shall be payable on the date the Borrowers furnish to the Lender
the annual financial statements referred to in Section 6.1.1(a) of this
Agreement. If, however, the Borrowers fail to furnish such financial statements
in any given calendar year as and when required, the Borrowers shall be required
to pay the Mandatory Prepayment payable during such calendar year on the date
which is ninety (90) days after the close of the Borrowers' then preceding
fiscal year. The Borrowers shall pay to the Lender on the date of each
Mandatory Prepayment accrued interest to such date on the amount prepaid. Each
partial Mandatory Prepayment shall be applied to the balloon payment due at
maturity on the Capital Expenditure Line, then to principal against the
principal installments on the Capital Expenditure Line in the inverse order of
their maturity, then to the balloon payment due at maturity on the Acquisition
Loan, and then to principal against the principal installments on the
Acquisition Loan in the inverse order of their maturity.
2.6.4 Closing Fee.
------------
The Borrowers shall pay to the Lender at the time this Agreement is
executed a loan closing fee (the "Closing Fee") in the amount of Seventy-five
Thousand Dollars ($75,000), which fee has been fully earned and is non-
refundable.
2.6.5 Early Termination Fee.
----------------------
In the event of the termination by, or on behalf of, the Borrowers, of
the Commitments (unless that termination is (i) at a time when the Borrowers'
interest rate has been directly increased under Section 2.6.11, or (ii) is at
that time accompanied by the repayment of all Obligations from the proceeds of
the sale of substantially all of the Assets of the Borrowers or from an initial
public offering of the common stock of one or more of the Borrowers or (iii) is
the result of the application of the Borrowers' Excess Cash Flow, and not from
the proceeds of loans or other debt, or (iv) a replacement credit facility
extended by a Person other than the Lender and/or its Affiliates and which
provides interest rates, economic terms and/or other pricing more favorable than
that provided under this Agreement, which pricing Lender has declined to match)
the Borrowers shall pay a fee (the "Early Termination Fee") in the amount of Two
Hundred Sixty-two Thousand Five Hundred Dollars ($262,500).
37
<PAGE>
2.6.6 Field Examination Fees.
-----------------------
The Borrowers shall pay to the Lender an annual field examination fee
in the amount of $12,000 (collectively, the "Field Examination Fees" and
individually a "Field Examination Fee"), which Field Examination Fees shall be
payable in Three Thousand Dollar ($3,000.00) installments on the first day of
each October, January, April and September hereafter and continuing until the
last such date prior to which all Obligations arising out of, or under, the
Credit Facilities then outstanding have been paid in full.
2.6.7 Administration Fees.
--------------------
The Borrowers shall pay to the Lender an administration fee in the
amount of $5,000 (collectively, the "Administration Fees" and individually a
"Administration Fee"), which Administration Fees shall be payable in One
Thousand Two Hundred Fifty Dollar ($1,250.00) installments on the first day of
each October, January, April and September hereafter and continuing until the
last such date prior to which all Obligations arising out of, or under, the
Credit Facilities then outstanding have been paid in full.
2.6.8 Computation of Interest and Fees.
---------------------------------
All applicable Fees and interest shall be calculated on the basis of a
year of 360 days for the actual number of days elapsed. Any change in the
interest rate on any of the Obligations resulting from a change in the Base Rate
shall become effective as of the opening of business on the day on which such
change in the Base Rate is announced.
2.6.9 Payments.
---------
All payments of the Obligations, including, without limitation,
principal, interest, Prepayments, and Fees, shall be paid by the Borrowers
without setoff, recoupment or counterclaim to the Lender at the Lender's office
specified in the promissory note evidencing the Obligations in immediately
available funds not later than 12:00 noon, Baltimore, Maryland time on the due
date of such payment. Alternatively, at its sole discretion, the Lender may
charge any deposit account of the Borrowers at the Lender or any affiliate
thereof with all or any part of any amount due hereunder to the extent that the
Borrowers have not otherwise tendered payment to the Lender. All payments shall
be applied first to any unpaid Fees, second to any and all accrued and unpaid
late charges and Enforcement Costs, third to any and all accrued and unpaid
interest on the Obligations, and then to principal, all in such order and manner
as shall be determined by the Lender in its sole and absolute discretion.
2.6.10 Liens; Setoff.
--------------
The Borrowers hereby grant to the Lender a continuing Lien for all of
the Obligations of the Borrowers upon any and all monies, securities, and other
property of the Borrowers and the proceeds thereof, now or hereafter held or
received by or in transit to, the Lender from or for the Borrowers, and also
upon any and all deposit accounts (general or special) and credits of the
Borrowers, if any, with the Lender or any affiliate of the Lender, at any time
existing, excluding any deposit accounts held by the Borrowers in the capacity
as trustee for Persons who are not Affiliates of the Borrowers. Without
implying any limitation on
38
<PAGE>
any other rights the Lender may have under the Financing Documents or applicable
Laws, during the continuance of an Event of Default, the Lender is hereby
authorized by the Borrowers at any time and from time to time, without notice to
the Borrowers, to set off, appropriate and apply any or all items hereinabove
referred to against all Obligations then outstanding, all in such order and
manner as shall be determined by the Lender in its sole and absolute discretion.
2.6.11 Requirements of Law.
--------------------
In the event that the Lender shall have determined in good faith that
(a) the adoption of any Laws regarding capital adequacy, or (b) any change
therein or in the interpretation or application thereof or (c) compliance by the
Lender or any corporation controlling the Lender with any request or directive
regarding capital adequacy (whether or not having the force of law) from any
central bank or Governmental Authority, does or shall have the effect of
reducing the rate of return on the Lender's or such corporation's capital as a
consequence of its obligations hereunder to a level below that which the Lender
or such corporation would have achieved but for such adoption, change or
compliance (taking into consideration the Lender's or such corporation's
policies with respect to capital adequacy) by an amount deemed by the Lender to
be material, then from time to time, after submission by the Lender to the
Borrowers of a written request therefor and a statement of the basis for such
determination, the Borrowers shall pay to the Lender such additional amount or
amounts in order to compensate for such reduction.
ARTICLE III
THE COLLATERAL
Section 3.1 Debt and Obligations Secured.
-----------------------------
All property and Liens assigned, pledged or otherwise granted under or in
connection with this Agreement (including, without limitation, those under
Section 3.2 (Grant of Liens) below) or any of the Financing Documents shall
secure (a) the payment of all of the Obligations, and (b) the performance,
compliance with and observance by the Borrowers of the provisions of this
Agreement and all of the other Financing Documents or otherwise under the
Obligations.
Section 3.2 Grant of Liens.
---------------
Each of the Borrowers hereby assigns, pledges and grants to the Lender, and
agrees that the Lender shall have a perfected and continuing security interest
in, and Lien on, (a) all of the Borrower's Accounts, and Inventory whether now
owned or existing or hereafter acquired or arising, (b) all returned, rejected
or repossessed goods, the sale or lease of which shall have given or shall give
rise to an Account, (c) all Chattel Paper, Documents, Instruments, Equipment,
Securities, and General Intangibles relating to a Permitted Acquisition and/or
an advance under the Capital Expenditure Line, (d) all insurance policies
relating to the foregoing, (e) all books and records in whatever media (paper,
electronic or otherwise) recorded or stored, with respect to the foregoing and
all equipment and general intangibles necessary or beneficial to retain, access
and/or process the information contained in those books and records, and (f) all
cash and non-cash proceeds and products of the foregoing. Each of the Borrowers
further agrees that the Lender shall have in respect to the foregoing all of the
rights and remedies of a secured party
39
<PAGE>
under the Uniform Commercial Code as well as those provided in this Agreement,
under each of the other Financing Documents and under applicable Laws.
Section 3.3 Collateral Disclosure List.
---------------------------
Promptly after demand by the Lender, the Borrowers shall furnish to the
Lender an update of the information contained in the Collateral Disclosure List
at any time and from time to time as may be requested by the Lender.
Section 3.4 Personal Property.
------------------
With respect to the Collateral:
3.4.1 Securities, Chattel Paper, Promissory Notes, etc.
-------------------------------------------------
(a) Within ten (10) days of each acquisition of any
letters of credit, Securities, Chattel Paper, or Instruments, included among the
Collateral, the Borrowers shall deliver the originals to the Lender and shall
execute and deliver to the Lender separate pledges, assignments and security
agreements in form and content acceptable to the Lender, which pledges,
assignments and security agreements shall assign, pledge and grant a Lien to the
Lender on all such letters of credit, Securities, Chattel Paper, and
Instruments. All letters of credit, Securities, Chattel Paper, and Instruments
shall be delivered to the Lender endorsed and/or assigned as required by any
pledge, assignment and security agreement and/or as the Lender may require and,
if applicable, shall be accompanied by blank irrevocable and unconditional stock
or bond powers and/or notices as the Lender may require. The Lender may in its
sole and absolute discretion from time to time require that the Borrowers
deliver immediately all Documents to the Lender.
3.4.2 Patents, Copyrights and Other Property Requiring
------------------------------------------------
Additional Steps to Perfect.
----------------------------
On the Closing Date and without implying any limitation on the
scope of Section 3.2 above, the Borrowers shall execute and deliver all
Financing Documents and take all actions requested by the Lender in order to
perfect a first priority assignment of patents, copyrights, tradenames,
tradestyles, customer lists or any other type or kind of intellectual property
included among the Collateral.
3.4.3 Record Searches.
----------------
As of the Closing Date and thereafter at the time any Financing
Document is executed and delivered by the Borrowers pursuant to this Section,
the Lender shall have received, in form and substance satisfactory to the
Lender, such Lien or record searches with respect to the Borrowers and/or any
other Person, as appropriate, and the property covered by such Financing
Document showing that the Lien of such Financing Document will be a perfected
first priority Lien on the property covered by such Financing Document subject
only to Permitted Liens and other existing Liens expressly disclosed in the
Offering Memorandum or to such other matters as the Lender may approve.
40
<PAGE>
Section 3.5 Real Property.
--------------
With respect to real property acquired as part of a Permitted Acquisition,
the Borrowers shall at the time of the acquisition thereof, grant a Lien
covering such real property to the Lender under the provisions of a mortgage,
deed of trust or other document, as appropriate. Each Financing Document to be
executed and delivered pursuant hereto shall:
(a) be in form and substance satisfactory to the Lender;
(b) create a first priority Lien in such real property in
favor of the Lender subject only to Permitted Liens, zoning ordinances, and
such other matters as the Lender may approve;
(c) be accompanied by a current appraisal of the fair market
value of the subject real property prepared by appraisers satisfactory to
the Lender;
(d) except as set forth in subsection (c) above be
accompanied by a current survey satisfactory in all respects to the Lender
of the subject real property, prepared by a registered land surveyor or
engineer satisfactory to the Lender;
(e) be accompanied by evidence satisfactory to the Lender
regarding the current and past pollution control practices at such real
property in connection with the discharge, emission, handling, disposal or
existence of Hazardous Materials, which may include, at the Lender's
request, an environmental audit of such real property prepared by a person
or firm acceptable to the Lender;
(f) be accompanied by a mortgagee's title insurance policy
or marked-up unconditional commitment or binder for such insurance in form
and substance satisfactory to the Lender and issued by a title insurance
company satisfactory to the Lender; and
(g) upon request of the Lender, be accompanied by a signed
opinion of counsel, in form and substance satisfactory to the Lender, and
from counsel, satisfactory to the Lender, licensed to practice in the state
where the subject real property is located.
Section 3.6 Costs.
------
The Borrowers agree to pay, as part of the Enforcement Costs and to the
fullest extent permitted by applicable Laws, on demand all costs, fees and
expenses incurred by the Lender in connection with the taking, perfection,
preservation, protection and/or release of a Lien on the Collateral, including,
without limitation:
(a) customary fees and expenses incurred in preparing
Financing Documents from time to time (including, without limitation,
reasonable attorneys'
41
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fees incurred in connection with preparing the Financing Documents, other
than Financing Documents, including, without limitation, this Agreement,
prepared for the Closing Date);
(b) all filing and/or recording taxes or fees;
(c) all title insurance premiums and costs;
(d) all costs of Lien and record searches; reasonable
attorneys' fees in connection with all legal opinions required (other than
Financing Documents, including, without limitation, this Agreement,
prepared for the Closing Date);
(e) appraisal and/or survey costs; and
(f) all related costs, fees and expenses.
Section 3.7 Release.
--------
Upon the payment and performance of all Obligations of the Borrowers and
all obligations and liabilities of each other Person, other than the Lender,
under this Agreement and all other Financing Documents, the termination and/or
expiration of the Commitments, upon the Borrowers' request and at the Borrowers'
sole cost and expense, the Lender shall release and/or terminate any Financing
Document but only if and provided that there is no commitment or obligation
(whether or not conditional) of the Lender to re-advance amounts which would be
secured thereby.
Section 3.8 Inconsistent Provisions.
------------------------
In the event that the provisions of any Financing Document directly
conflict with any provision of this Agreement, the provision of this Agreement
governs.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties.
-------------------------------
Each of the Borrowers represents and warrants to the Lender and shall be
deemed to represent and warrant at the time of each request for an advance under
the Loans under the terms of this Agreement and again at the time of the making
of any advance under the Loans, as follows:
4.1.1 Subsidiaries.
-------------
The Borrower has the Subsidiaries listed on the Collateral Disclosure
List attached hereto and made a part hereof and no others. Each of the
Borrower's Subsidiaries is a Wholly Owned Subsidiary except as shown on the
Collateral Disclosure List, which correctly indicates the nature and amount of
the Borrower's ownership interests therein.
42
<PAGE>
4.1.2 Good Standing.
--------------
The Borrower and its Subsidiaries (a) is a corporation duly organized,
existing and in good standing under the laws of the jurisdiction of its
incorporation, (b) has the corporate power to own its property and to carry on
its business as now being conducted, and (c) is duly qualified to do business
and is in good standing in each jurisdiction in which the character of the
properties owned by it therein or in which the transaction of its business makes
such qualification necessary.
4.1.3 Power and Authority.
--------------------
The Borrower has full corporate power and authority to execute and
deliver this Agreement and the other Financing Documents to which it is a party,
to make the borrowings under this Agreement, and to incur and perform the
Obligations whether under this Agreement, the other Financing Documents or
otherwise, all of which have been duly authorized by all proper and necessary
corporate action. No consent or approval of shareholders or any creditors of
the Borrower, and no consent, approval, filing or registration with or notice to
any Governmental Authority on the part of the Borrower, is required as a
condition to the execution, delivery, validity or enforceability of this
Agreement or the other Financing Documents or the performance by the Borrower of
the Obligations.
4.1.4 Binding Agreements.
-------------------
This Agreement and the other Financing Documents executed and
delivered by the Borrower have been properly executed and delivered and
constitute the valid and legally binding obligations of the Borrower and are
fully enforceable against the Borrower in accordance with their respective
terms.
4.1.5 No Conflicts.
-------------
Neither the execution, delivery and performance of the terms of this
Agreement or of any of the other Financing Documents executed and delivered by
the Borrower nor the consummation of the transactions contemplated by this
Agreement will conflict with, violate or be prevented by (a) the Borrower's
charter or bylaws, (b) any existing mortgage, indenture, contract or agreement
binding on the Borrower or affecting its property, or (c) any Laws.
4.1.6 No Defaults, Violations.
------------------------
(a) No Default or Event of Default has occurred and is
continuing.
(b) Except as set forth in Schedule 4.1.6 neither the Borrower
--------------
nor any of its Subsidiaries is in default under or with respect to any
obligation under any existing mortgage, indenture, contract or agreement binding
on it or affecting its property in any respect which could be materially adverse
to the business, operations, property or financial condition of the Borrower, or
which could materially adversely affect the ability of the Borrower to perform
its obligations under this Agreement or the other Financing Documents, to which
the Borrower is a party.
43
<PAGE>
4.1.7 Compliance with Laws.
---------------------
Neither the Borrower nor any of its Subsidiaries is in violation of
any applicable Laws (including, without limitation, any Laws relating to
employment practices, to environmental, occupational and health standards and
controls) or order, writ, injunction, decree or demand of any court, arbitrator,
or any Governmental Authority affecting the Borrower or any of its properties,
the violation of which, considered in the aggregate, could materially adversely
affect the business, operations or properties of the Borrower and/or its
Subsidiaries.
4.1.8 Margin Stock.
-------------
None of the proceeds of the Loans will be used, directly or
indirectly, by the Borrower or any Subsidiary for the purpose of purchasing or
carrying, or for the purpose of reducing or retiring any indebtedness which was
originally incurred to purchase or carry, any "margin security" within the
meaning of Regulation G (12 CFR Part 207), or "margin stock" within the meaning
of Regulation U (12 CFR Part 221), of the Board of Governors of the Federal
Reserve System or for any other purpose which might make the transactions
contemplated in this Agreement a "purpose credit" within the meaning of said
Regulation G or Regulation U, or cause this Agreement to violate any other
regulation of the Board of Governors of the Federal Reserve System or the
Securities Exchange Act of 1934 or the Small Business Investment Act of 1958, as
amended, or any rules or regulations promulgated under any of such statutes.
4.1.9 Investment Company Act; Margin Securities.
------------------------------------------
Neither the Borrower nor any of its Subsidiaries is an investment
company within the meaning of the Investment Company Act of 1940, as amended,
nor is it, directly or indirectly, controlled by or acting on behalf of any
Person which is an investment company within the meaning of said Act. Neither
the Borrower nor any of its Subsidiaries is engaged principally, or as one of
its important activities, in the business of extending credit for the purpose of
purchasing or carrying "margin security" within the meaning of Regulation G (12
CFR Part 207), or "margin stock" within the meaning of Regulation U (12 CFR Part
221), of the Board of Governors of the Federal Reserve System.
4.1.10 Litigation.
-----------
There are no proceedings, actions or investigations pending or, so far
as the Borrower knows, threatened before or by any court, arbitrator any
Governmental Authority which, in any one case or in the aggregate, if determined
adversely to the interests of the Borrower or any Subsidiary, would have a
material adverse effect on the business, properties, condition (financial or
otherwise) or operations, present or prospective, of the Borrower.
4.1.11 Financial Condition.
--------------------
The consolidated financial statements of the Borrower dated April 30,
1998, are complete and correct and fairly present the financial position of the
Borrower and its Subsidiaries and the results of their operations and
transactions in their surplus accounts as of the date and for the period
referred to and have been prepared in accordance with GAAP applied on a
consistent basis throughout the period involved. There are no liabilities,
direct or indirect,
44
<PAGE>
fixed or contingent, of the Borrower or its Subsidiaries as of the date of such
financial statements which are not reflected therein or in the schedule thereto.
There has been no adverse change in the financial condition or operations of the
Borrower or its Subsidiaries since the date of such financial statements and to
the Borrower's knowledge no such adverse change is pending or threatened.
Neither the Borrower nor any Subsidiary has guaranteed the obligations of, or
made any investment in or advances to, any Person, except as disclosed in such
financial statements and except for the guaranty of the Senior Subordinated
Notes by the Borrowers other than Coyne. The representations and warranties
contained in this Section shall also cover financial statements furnished from
time to time to the Lender pursuant to Section 6.1.1 (Financial Statements) of
this Agreement.
4.1.12 Full Disclosure.
----------------
The financial statements referred to in Section 4.1.11 (Financial
Condition) of this Agreement, the Financing Documents (including, without
limitation, this Agreement), and the statements, reports or certificates
furnished by the Borrower in connection with the Financing Documents (a) do not
contain any untrue statement of a material fact and (b) when taken in their
entirety, do not omit any material fact necessary to make the statements
contained therein not misleading. There is no fact known to the Borrower which
the Borrower has not disclosed to the Lender in writing prior to the date of
this Agreement with respect to the transactions contemplated by the Financing
Documents which materially and adversely affects or in the future could, in the
reasonable opinion of the Borrower materially adversely affect the condition,
financial or otherwise, results of operations, business, or assets of the
Borrower or of any Subsidiary.
4.1.13 Indebtedness for Borrowed Money.
--------------------------------
Except for the Obligations, the obligations under the Senior
Subordinated Notes, the Indenture and the Senior Subordinated Notes Documents
and except as set forth in Schedule 4.1.13 attached to and made a part of this
---------------
Agreement, the Borrower has no Indebtedness for Borrowed Money. The Lender has
received photocopies of all promissory notes (including, without limitation, the
"Global Note," as that term is defined in the Indenture) evidencing any
Indebtedness for Borrowed Money set forth in Schedule 4.1.13 and a copy of the
---------------
Indenture which contains the guaranty of the Senior Subordinated Notes by the
Borrowers other than Coyne, together with together with any and all
subordination agreements, other agreements, documents, or instruments securing,
evidencing, guarantying or otherwise executed and delivered in connection with
such Indebtedness for Borrowed Money.
4.1.14 Offering.
---------
The Lender has received true and correct photocopies of the Offering
Memorandum, and each of the Senior Subordinated Notes Documents, executed,
delivered and/or furnished on or before the Closing Date in connection with the
transactions contemplated by the Senior Subordinated Notes Documents. Neither
the Offering Memorandum nor any of the Senior Subordinated Notes Documents has
been modified, changed, supplemented, canceled, amended or otherwise altered or
affected, except as otherwise disclosed to the Lender in writing on or before
the Closing Date. The Offering Transaction has been effected, closed and
consummated
45
<PAGE>
pursuant to, and in accordance with, the terms and conditions of the Offering
Memorandum and all applicable Laws.
4.1.15 Taxes.
------
Each Borrower and its Subsidiaries has filed all returns, reports and
forms for Taxes which, to the knowledge of the Borrower, are required to be
filed, with inadvertent exceptions relating to Taxes of less than $100,000 in
the aggregate, and has paid all Taxes as shown on such returns or on any
assessment received by it, to the extent that such Taxes have become due, unless
and to the extent only that such Taxes, assessments and governmental charges are
currently contested in good faith and by appropriate proceedings by the
Borrower, such Taxes are not the subject of any Liens other than Permitted
Liens, and adequate reserves therefor have been established as required under
GAAP. All tax liabilities of the Borrower were as of the date of audited
financial statements referred to in Section 4.1.11 (Financial Condition) above,
and are now, adequately provided for on the books of the Borrower or its
subsidiaries, as appropriate. No tax liability has been asserted by the Internal
Revenue Service or any state or local authority against the Borrower for taxes
in excess of those already paid, with inadvertent exceptions relating to Taxes
of less than $100,000 in the aggregate.
4.1.16 ERISA.
------
With respect to any "pension plan" as defined in SECTION 3(2) of
ERISA, which plan is now or previously has been maintained or contributed to by
the Borrower and/or by any commonly controlled entity: (a) no "accumulated
funding deficiency" as defined in Code (S)412 or ERISA (S)302 has occurred,
whether or not that accumulated funding deficiency has been waived; (b) no
Reportable Event has occurred; (c) no termination of any plan subject to Title
IV of ERISA has occurred; (d) neither the Borrower nor any commonly controlled
entity (as defined under ERISA) has incurred a "complete withdrawal" within the
meaning of ERISA (S)4203 from any multiemployer plan; (e) neither the Borrower
nor any commonly controlled entity has incurred a "partial withdrawal" within
the meaning of ERISA (S)4205 with respect to any multiemployer plan; (f) no
Multiemployer Plan to which the Borrower or any commonly controlled entity has
an obligation to contribute is in "reorganization" within the meaning of ERISA
(S)4241 nor has notice been received by the Borrower or any commonly controlled
entity that such a multiemployer plan will be placed in "reorganization".
4.1.17 Title to Properties.
--------------------
The Borrower has good and marketable title to all of its properties,
including, without limitation, the Collateral and the properties and assets
reflected in the balance sheets described in Section 4.1.11 (Financial
Condition) above. The Borrower has legal, enforceable and uncontested rights to
use freely such property and assets. All of such properties, including, without
limitation, the Collateral which were purchased, were purchased for fair
consideration and reasonably equivalent value in the ordinary course of business
of both the seller and the Borrower and not, by way of example only, as part of
a bulk sale.
46
<PAGE>
4.1.18 Patents, Trademarks, Etc.
-------------------------
Each of the Borrowers and its Subsidiaries owns, possesses, or has the
right to use all necessary patents, patent rights, licenses, trademarks,
trademark rights, trade names, trade name rights, logos, copyrights, permits and
franchises to own its properties conduct its business as now conducted, without
known conflict with the rights of any other Person. Any and all obligations to
pay royalties or other charges with respect to such properties and assets are
properly reflected on the financial statements described in Section 4.1.11
(Financial Condition) above.
4.1.19 Presence of Hazardous Materials or Hazardous Materials
------------------------------------------------------
Contamination.
--------------
To the best of the Borrower's knowledge and except as set forth in
Schedule 4.1.19 to this Agreement, (a) no Hazardous Materials are located on any
- ---------------
real property covered by a Mortgage; and (b) no real property covered by a
Mortgage has ever been used as a manufacturing, storage, or dump site for
Hazardous Materials nor is affected by Hazardous Materials Contamination at any
other property.
4.1.20 Perfection and Priority of Collateral.
--------------------------------------
The Lender has, or upon execution and recording of this Agreement and
the Security Documents will have, and will continue to have as security for the
Obligations, a valid and perfected Lien on and security interest in all
Collateral, free of all other Liens, claims and rights of third parties
whatsoever except Permitted Liens.
4.1.21 Places of Business and Location of Collateral.
----------------------------------------------
The information contained in the Collateral Disclosure List is
complete and correct. The Collateral Disclosure List completely and accurately
identifies the address of (a) the Borrower's chief executive office, (b) any and
each other place of business of the Borrower, (c) the location of all books and
records pertaining to the Collateral, and (d) each location, other than the
foregoing, where any of the Collateral is located. The proper and only places to
file financing statements with respect to the Collateral within the meaning of
the Uniform Commercial Code are the filing offices for those jurisdictions in
which the Borrower maintains a place of business as identified on the Collateral
Disclosure List.
4.1.22 Business Names and Addresses.
-----------------------------
In the twelve years preceding the date hereof, the Borrower has not
changed its name, identity or corporate structure, has not conducted business
under any name other than its current name, and has not conducted its business
in any jurisdiction other than those disclosed on the Collateral Disclosure
List.
47
<PAGE>
4.1.23 Equipment.
----------
All Equipment is personalty and is not and will not be affixed to real
estate in such manner as to become a fixture or part of such real estate. No
equipment is held by the Borrower on a sale on approval basis.
4.1.24 Inventory.
----------
The Inventory of the Borrower is (a) of good and merchantable quality,
(b) not stored with a bailee, warehouseman, carrier, or similar party, (c) not
on consignment, sale on approval, or sale or return, and (d) located at the
places of business set forth on the Collateral Disclosure List. No goods
offered for sale by, or in the possession or control of, the Borrower are
consigned to or held on sale or return terms by the Borrower.
4.1.25 Accounts.
---------
With respect to all Accounts and to the best of the Borrower's
knowledge (a) they are genuine, and in all respects what they purport to be, and
are not evidenced by a judgment, an Instrument, or Chattel Paper (unless such
judgment has been assigned and such Instrument or Chattel Paper has been
endorsed and delivered to the Lender); (b) they represent bona fide transactions
completed in accordance with the terms and provisions contained in the invoices,
purchase orders and other contracts relating thereto, and the underlying
transaction therefor is in accordance with all applicable Laws; (c) the amounts
shown on the Borrower's books and records, with respect thereto are actually and
absolutely owing to the Borrower and are not contingent or subject to reduction
for any reason other than regular discounts, credits or adjustments allowed by
the Borrower in the ordinary course of its business; (d) no payments have been
or shall be made thereon except payments turned over to the Lender by the
Borrower; (e) all Account Debtors thereon have the capacity to contract; and (f)
the goods sold, leased or transferred or the services furnished giving rise
thereto are not subject to any Liens except the security interest granted to the
Lender by this Agreement and Permitted Liens.
4.1.26 Compliance with Eligibility Standards.
--------------------------------------
Each Account and all Inventory included in the calculation of the
Borrowing Base does and will at all times meet and comply with all of the
standards for Eligible Receivables and Eligible Inventory.
4.1.27 Subordinated Debt.
------------------
None of the Subordinated Debt Loan Documents has been amended,
supplemented, restated or otherwise modified except as otherwise disclosed to
the Lender in writing on or before the Closing Date. In addition, there does
not exist any default or any event which upon notice or lapse of time or both
would constitute a default under the terms of any of the Subordinated Debt Loan
Documents.
48
<PAGE>
4.1.28 Year 2000.
----------
Each Borrower has (a) initiated a review and assessment of all areas
within its and each of its Subsidiaries' businesses and operations (including
those affected by suppliers, vendors and customers) that could be adversely
affected by the "Year 2000 Problem" (that is, the risk that computer
applications used by such Borrower or any of its Subsidiaries (or suppliers,
vendors and customers) may be unable to recognize and perform properly date-
sensitive functions involving certain dates prior to and any date after December
31, 1999), (b) developed a plan and timeline for addressing the Year 2000
Problem on a timely basis, and (c) to date, implemented that plan in accordance
with that timetable. Based on the foregoing, each Borrower believes that all
computer applications (including those of its suppliers, vendors and customers)
that are material to its or any of its Subsidiaries' business and operations are
reasonably expected on a timely basis to be able to perform properly date-
sensitive functions for all dates before and after January 1, 2000 (that is, be
`Year 2000 compliant"), except to the extent that a failure to do so could not
reasonably expected to have a material adverse effect on the business,
properties, condition (financial or otherwise) or operations, present or
prospective, of the Borrower.
Section 4.2 Survival.
---------
All representations and warranties contained in or made under or in
connection with this Agreement and the other Financing Documents shall survive
the Closing Date, the making of any advance under the Loans and extension of
credit made hereunder, and the incurring of any other Obligations.
ARTICLE V
CONDITIONS PRECEDENT
Section 5.1 Conditions to the Initial Advance.
----------------------------------
The making of the initial advance under the Loans is subject to the
fulfillment of the following conditions precedent in a manner satisfactory to
the Lender on or before the Closing Date:
5.1.1 Good Standing etc.
------------------
The Lender shall have received a certificate of good standing for the
Borrowers certified by the Secretary of State, or other appropriate Governmental
Authority, of the state of incorporation for the Borrowers.
5.1.2 Corporate Proceedings of the Borrowers.
---------------------------------------
The Lender shall have received a certificate dated as of the Closing
Date by the Secretaries or Assistant Secretaries of the Borrowers covering:
(a) true and complete copies of the Borrowers' corporate
charter, bylaws, and all amendments thereto;
49
<PAGE>
(b) true and complete copies of the resolutions of its Board
of Directors authorizing (i) the execution, delivery and performance of the
Financing Documents, (ii) the borrowings by the Borrowers hereunder, and
(iii) the granting of the Liens contemplated by this Agreement and the
Financing Documents to which the Borrowers are parties; and
(c) the incumbency, authority and signatures of the officers
of the Borrowers authorized to sign this Agreement and the other Financing
Documents to which any one or more of the Borrowers are parties.
5.1.3 Consents, Licenses, Approvals, Etc.
-----------------------------------
The Lender shall have received copies of all consents, licenses and
approvals, required in connection with the execution, delivery, performance,
validity and enforceability of the Financing Documents, and such consents,
licenses and approvals shall be in full force and effect.
5.1.4 Notes.
------
The Lender shall have received the Acquisition Loan Note, the Capital
Expenditure Line Note, and the Revolving Credit Note each, conforming to the
requirements hereof and executed by a Responsible Officer of each of the
Borrowers and attested by a duly authorized representative of each of the
Borrowers.
5.1.5 Financing Documents and Collateral.
-----------------------------------
Each of the Borrowers shall have executed and delivered the Financing
Documents to be executed by it, and shall have delivered original Chattel Paper,
Instruments, Securities, and related collateral and all opinions, title
insurance, and other documents contemplated by Article 3 hereof, all the
foregoing to be in form and substance satisfactory to the Lender.
5.1.6 Recordings and Filings.
-----------------------
The Borrowers shall have: (a) executed and delivered all Financing
Documents (including, without limitation, UCC-1 and UCC-3 statements) required
to be filed, registered or recorded in order to create, in favor of the Lender,
a perfected Lien in the Collateral (subject only to the Permitted Liens) in form
and in sufficient number for filing, registration, and recording in each office
in each jurisdiction in which such filings, registrations and recordations are
required, and (b) delivered such evidence as the Lender may deem satisfactory
that all necessary filing fees and all recording and other similar fees, and all
Taxes and other expenses related to such filings, registrations and recordings
will be or have been paid in full.
5.1.7 Opinion of Borrowers' Counsel.
------------------------------
The Lender shall have received the favorable opinion of counsel for
the Borrowers addressed to the Lender in form satisfactory to the Lender.
50
<PAGE>
5.1.8 Other Documents, Etc.
--------------------
The Lender shall have received such other certificates, opinions,
documents and instruments confirmatory of or otherwise relating to the
transactions contemplated hereby as may have been reasonably requested by the
Lender.
5.1.9 Payment of Fees.
---------------
The Lender shall have received payment of any Fees due on or
before the Closing Date.
5.1.10 Additional Matters.
------------------
All other documents and legal matters in connection with the
transactions contemplated by this Agreement and the other Financing Documents
shall be satisfactory in form and substance to the Lender and its counsel.
5.1.11 Other Financing Documents.
-------------------------
In addition to the Financing Documents to be delivered by the
Borrowers, the Lender shall have received the Financing Documents duly executed
and delivered by Persons other than the Borrowers.
5.1.12 Insurance Certificate.
---------------------
The Lender shall have received an insurance certificate in accordance
with the provisions of 6.1.8 (Insurance) and Section 6.1.24 (Insurance With
Respect to Equipment and Inventory) of this Agreement.
5.1.13 Field Examination.
-----------------
The Lender shall have completed a field examination of the Borrowers'
business, operations and income, the results of which audit shall be in all
respects acceptable to the Lender in its sole and absolute discretion.
5.1.14 'Proforma Balance Sheet and Projections.
---------------------------------------
The Lender shall have received and approved the Borrowers' proforma
balance sheet and proforma financial projections, which proforma balance sheet
and proforma financial projections must be in form and content acceptable to the
Lender in its sole and absolute discretion.
5.1.15 Senior Subordinated Notes.
-------------------------
The Lender shall have received a certificate signed by a Responsible
Officer of Coyne, certifying to the Lender that Coyne (a) has received the
proceeds of sale of the Senior Subordinated Notes, in accordance with, and
pursuant to, the terms and conditions of the Senior Subordinated Note Documents,
and have applied the same to such purposes as has been
51
<PAGE>
previously disclosed to, and approved by, the Lender, and (b) has delivered to
the Lender a true and correct photocopy of all Senior Subordinated Note
Documents.
Section 5.2 Conditions to all Extensions of Credit.
--------------------------------------
The making of all advances under the Loans is subject to the fulfillment of
the following conditions precedent in a manner satisfactory to the Lender:
5.2.1 Compliance.
----------
The Borrowers shall have complied and shall then be in
compliance with all terms, covenants, conditions and provisions of this
Agreement and the other Financing Documents which are binding upon them.
5.2.2 Borrowing Base.
--------------
The Borrowers shall have furnished all Borrowing Base Reports
required by Section 2.1.4 (Borrowing Base Report) of this Agreement, there shall
exist no Borrowing Base Deficiency, and as evidence thereof, the Borrowers shall
have furnished to the Lender such reports, schedules, certificates, records and
other papers as may be requested by the Lender.
5.2.3 Default.
-------
There shall exist no Event of Default or Default hereunder.
5.2.4 Representations and Warranties.
------------------------------
The representations and warranties of the Borrowers contained
among the provisions of this Agreement shall be true and with the same effect as
though such representations and warranties had been made at the time of the
making of each of advance under the Loans, except that the representation and
warranty pertaining to balance sheets, financial statements and other financial
condition information or data shall refer to the latest balance sheets,
financial statements, and financial condition information and data furnished to
the Lender pursuant to the provisions of this Agreement.
5.2.5 Adverse Change.
--------------
No adverse change shall have occurred in the financial
condition of the Borrowers which would, in the good faith judgment of the
Lender, materially impair the ability of the Borrowers to pay or perform any of
the Obligations.
5.2.6 Legal Matters.
-------------
All legal documents incident to each advance under the Loans
shall be reasonably satisfactory to counsel for the Lender.
52
<PAGE>
ARTICLE VI
COVENANTS OF THE BORROWERS
Section 6.1 Affirmative Covenants.
---------------------
So long as any of the Obligations (the Commitments therefor) shall be
outstanding hereunder, the Borrowers agree with the Lender as follows:
6.1.1 Financial Statements.
--------------------
The Borrowers shall furnish to the Lender:
(a) Annual Statements and Certificates. The Borrowers
----------------------------------
shall furnish to the Lender as soon as available, but in no event more than
ninety (90) days after the close of the Borrowers' fiscal years, (i) a copy of
the annual financial statement in reasonable detail satisfactory to the Lender
relating to the Borrowers and their Subsidiaries, prepared in accordance with
GAAP and examined and certified by independent certified public accountants
satisfactory to the Lender, which financial statement shall include a
consolidated (and consolidating, if the Lender requests with respect to
operating Borrowers) balance sheet of the Borrowers and their Subsidiaries as of
the end of such fiscal year and consolidated (and consolidating, if the Lender
requests with respect to operating Borrowers) statements of income, cash flows
and changes in shareholders equity of the Borrowers and their Subsidiaries for
such fiscal year, and (ii) a detailed computation of each financial covenant in
this Agreement which is applicable for the period reported, and a cash flow
projection report, each prepared by a Responsible Officer of the Borrowers in a
format acceptable to the Lender and (iii) a management letter in the form
prepared by the independent certified public accountants, provided, however,
that such management letter shall, if not then available, shall be furnished to
the Lender as soon as available, but in no event more than forty-five (45) days
after the Borrowers' annual financial statements are furnished to the Lender.
(b) Annual Opinion of Accountant. The Borrowers
----------------------------
shall furnish to the Lender as soon as available, but in no event more than
ninety (90) days after the close of the Borrowers' fiscal years, a letter or
opinion of the accountant who examined and certified the annual financial
statement relating to the Borrowers and their Subsidiaries stating whether
anything in such accountant's examination has revealed the occurrence of a
Default or an Event of Default hereunder, and, if so, stating the facts with
respect thereto.
(c) Monthly Statements and Certificates. The
-----------------------------------
Borrowers shall furnish to the Lender as soon as available, but in no event more
than thirty (30) days after the close of each month, consolidated (and
consolidating, if the Lender requests with respect to operating Borrowers)
balance sheets of the Borrowers and their subsidiaries as of the close of such
period, consolidated (and consolidating, if the Lender requests with respect to
operating Borrowers) cash flows and changes in shareholders equity statements
for such period, projected cash flow on a month to month basis and projected
income statements, and a detailed computation of each financial covenant in this
Agreement which is applicable for the period reported, all as prepared and
certified by a Responsible Officer of Coyne and accompanied by a certificate of
a Responsible Officer of each of the Borrowers stating whether any event has
53
<PAGE>
occurred which constitutes a Default or an Event of Default hereunder, and, if
so, stating the facts with respect thereto, and further to include:
(i) a summary aging schedule of all Receivables by
Account Debtor, to be accompanied by such detailed supporting information,
as the Lender may from time to time reasonably request;
(ii) a detailed aging of all accounts payable by
supplier, in such detail, and accompanied by such supporting information,
as the Lender may from time to time reasonably request;
(iii) a listing of all Inventory by category and
location, in such detail, and accompanied by such supporting information as
the Lender may from time to time reasonably request; and
(iv) such other information as the Lender may
reasonably request.
(d) Annual Budget and Projections. The Borrowers shall
-----------------------------
furnish to the Lender as soon as available, but in no event later than the 14th
day before the end of each fiscal year:
(i) a consolidated (and consolidating, if the Lender
requests) budget and pro forma financial statements on a month-to-month
basis for the following fiscal year, and
(ii) five year projections.
(e) Additional Reports and Information. The Borrowers shall
----------------------------------
furnish to the Lender promptly, such additional information, reports or
statements as the Lender may from time to time reasonably request.
(f) Certain Information Furnished to Trustee. The Borrowers
----------------------------------------
will furnish to the Lender, at the same time sent to the Trustee, at least one
(l) copy of all financial statements, reports, and other information sent by the
Borrowers to the holders of the Senior Subordinated Notes and the Trustee
pursuant to Section 4.03 and 4.04 of the Indenture as in effect on the Closing
Date.
6.1.2 Reports to SEC and to Stockholders.
----------------------------------
The Borrowers will furnish to the Lender, promptly upon the filing
or making thereof, at least one (l) copy of all financial statements, reports,
notices and proxy statements sent by the Borrowers to their stockholders, and of
all regular and other reports filed by the Borrowers with any securities
exchange or with the Securities and Exchange Commission.
54
<PAGE>
6.1.3 Recordkeeping, Rights of Inspection, Field Examination,
------------------------------------------------------
Etc.
- ---
(a) The Borrowers shall, and shall cause each of their
Subsidiaries to, maintain (i) a standard system of accounting in accordance with
GAAP, and (ii) proper books of record and account in which full, true and
correct entries are made of all dealings and transactions in relation to its
properties, business and activities.
(b) The Borrowers shall, and shall cause each of their
Subsidiaries to, permit authorized, representatives of the Lender to visit and
inspect the properties and the properties of the Borrowers and their
Subsidiaries, to review, audit, check and inspect the Collateral at any time
with or without notice, to review, audit, ch eck and inspect the Borrowers'
other books of record at any time with or without notice and to make abstracts
and photocopies thereof, and to discuss the affairs, finances and accounts of
the Borrowers and their Subsidiaries, with the officers, directors, employees
and other authorized representatives of the Borrowers and their Subsidiaries and
their respective accountants, all at such times during normal business hours and
other reasonable times and as often as the Lender may reasonably request.
(c) The Borrowers hereby irrevocably authorize and direct
all accountants and auditors employed by the Borrowers and their Subsidiaries at
any time prior to the repayment in full of the Obligations to exhibit and
deliver to the Lender copies of any and all of the financial statements, trial
balances, management letters, or other accounting records of any nature of the
Borrowers and their Subsidiaries in the accountant's or auditor's possession,
and to disclose to the Lender any information they may have concerning the
financial status and business operations of the Borrowers' and its Subsidiaries.
Further, the Borrowers hereby authorize all Governmental Authorities to furnish
to the Lender copies of reports or examinations relating to the Borrowers and
their Subsidiaries, whether made by the Borrowers or otherwise.
(d) Any and all costs and expenses incurred by, or on
behalf of, the Lender in connection with the conduct of any of the foregoing
shall be part of the Enforcement Costs and shall be payable to the Lender upon
demand. The Borrowers acknowledge and agree that such expenses may include, but
shall not be limited to, any and all out-of-pocket costs and expenses of the
Lender's employees and agents in, and when, travelling to the Borrowers'
facilities.
6.1.4 Corporate Existence.
-------------------
Each of the Borrowers shall maintain, and cause each of its
Subsidiaries to maintain, its corporate existence in good standing in the
jurisdiction in which it is incorporated and in each other jurisdiction where it
is required to register or qualify to do business if the failure to do so in
such other jurisdiction might have a material adverse effect on the ability of
the Borrower to perform the Obligations, on the conduct of the Borrower's
operations, on the Borrower's financial condition, or on the value of, or the
ability of the Lender to realize upon, the Collateral.
6.1.5 Compliance with Laws.
--------------------
Each of the Borrowers shall comply, and cause each of its
Subsidiaries to comply, with all applicable Laws and observe the valid
requirements of Governmental
55
<PAGE>
Authorities, the noncompliance with or the nonobservance of which might have a
material adverse effect on the ability of the Borrower to perform the
Obligations, on the conduct of the Borrower's operations, on the Borrower's
financial condition, or on the value of, or the ability of the Lender to realize
upon, the Collateral.
6.1.6 Preservation of Properties.
---------------------------
Each of the Borrowers will, and will cause each of its
Subsidiaries to, at all times (a) maintain, preserve, protect and keep its
properties, whether owned or leased, in good operating condition, working order
and repair (ordinary wear and tear excepted), and from time to time will make
all proper repairs, maintenance, replacements, additions and improvements
thereto needed to maintain such properties in good operating condition, working
order and repair, and (b) do or cause to be done all things necessary to
preserve and to keep in full force and effect its material franchises, leases of
real and personal property, trade names, patents, trademarks and permits which
are necessary for the orderly continuance of its business.
6.1.7 Line of Business.
-----------------
The Borrowers will continue to engage substantially only in the
industrial laundry business.
6.1.8 Insurance.
----------
Each of the Borrowers will, and will cause each of its
Subsidiaries to, at all times maintain with A-rated insurance companies such
insurance as is required by applicable Laws and such other insurance, in such
amounts, of such types and against such risks, hazards, liabilities, casualties
and contingencies as are usually insured against in the same geographic areas by
business entities engaged in the same or similar business. Without limiting the
generality of the foregoing, each of the Borrowers will, and will cause each of
its Subsidiaries to, keep adequately insured all of its property against loss or
damage resulting from fire or other risks insured against by extended coverage
and maintain public liability insurance against claims for personal injury,
death or property damage occurring upon, in or about any properties occupied or
controlled by it, or arising in any manner out of the businesses carried on by
it, all in such amounts not less than the Lender shall reasonably determine from
time to time. Each of the Borrowers shall deliver to the Lender on the Closing
Date (and thereafter on each date there is a material change in the insurance
coverage) a certificate of a Responsible Officer of the Borrower containing a
detailed list of the insurance then in effect and stating the names of the
insurance companies, the types, the amounts and rates of the insurance, dates of
the expiration thereof and the properties and risks covered thereby. Within
thirty (30) days after notice in writing from the Lender, the Borrowers will
obtain such additional insurance as the Lender may reasonably request.
6.1.9 Taxes.
-----
Except to the extent that the validity or amount thereof is being
contested in good faith and by appropriate proceedings, the Borrowers will, and
will cause each of their Subsidiaries to, pay and discharge all Taxes prior to
the date when any interest or penalty would accrue for the nonpayment thereof,
except that, with respect to Taxes which do not exceed
56
<PAGE>
$100,000 in the aggregate, the Borrowers will not be in violation of this
Section if the Taxes are paid by the Borrowers not later than thirty (30) days
after they have actual knowledge that the Taxes are due. The Borrowers shall
furnish to the Lender at such times as the Lender may require proof satisfactory
to the Lender of the making of payments or deposits required by applicable Laws
including, without limitation, payments or deposits with respect to amounts
withheld by the Borrowers from wages and salaries of employees and amounts
contributed by the Borrowers on account of federal and other income or wage
taxes and amounts due under the Federal Insurance Contributions Act, as amended.
6.1.10 ERISA.
-----
The Borrowers will, and will cause each of their Subsidiaries and
Affiliates to, comply with the funding requirements of ERISA with respect to
employee pension benefit plans for its respective employees. The Borrowers will
not permit with respect to any employee benefit plan or plans covered by Title
IV of ERISA (a) any prohibited transaction or transactions under ERISA or the
Internal Revenue Code, which results, or may result, in any material liability
of the Borrowers and their Subsidiaries and Affiliates, or (b) any Reportable
Event if, upon termination of the plan or plans with respect to which one or
more such Reportable Events shall have occurred, there is or would be any
material liability of the Borrowers and their Subsidiaries and Affiliates to the
PBGC. Upon the Lender's request, the Borrowers will deliver to the Lender a
copy of the most recent actuarial report, financial statements and annual report
completed with respect to any "defined benefit plan", as defined in ERISA.
6.1.11 Notification of Events of Default and Adverse
---------------------------------------------
Developments.
- ------------
The Borrowers shall promptly notify the Lender upon obtaining
knowledge of the occurrence of:
(a) any Event of Default;
(b) any Default;
(c) any litigation instituted or threatened against the
Borrowers or their Subsidiaries and of the entry of any judgment or Lien
against any of the assets or properties of the Borrowers or any Subsidiary
where the claims against any Borrower or Subsidiary exceed One Hundred
Thousand Dollars ($100,000) and are not covered by insurance;
(d) any event, development or circumstance whereby the financial
statements furnished hereunder fail in any material respect to present
fairly, in accordance with GAAP, the financial condition and operational
results of any of the Borrowers or any of their Subsidiaries;
(e) any judicial, administrative or arbitral proceeding pending
against any of the Borrowers or any of their Subsidiaries and any judicial
or administrative proceeding known by any of the Borrowers to be threatened
57
<PAGE>
against it or any of their Subsidiaries which, if adversely decided, could
materially adversely affect its financial condition or operations (present
or prospective);
(f) the receipt by any of the Borrowers or any
Subsidiary of any notice, claim or demand from any Governmental Authority
which alleges that any of the Borrowers or any Subsidiary is in violation
of or has failed to comply with any of the terms of (i) the Occupational
Safety and Health Act and related regulations, or environmental Laws
including, without limitation, the Environmental Protection Act or other
Laws related to handling and disposal of Hazardous Materials, or (ii) any
other applicable Laws regulating a Borrower's operation and business, the
noncompliance with or the nonobservance of which (A) is claimed or alleged
by the Governmental Authority, or believed by senior management of the
Borrowers, to involve liability in excess of $10,000 or (B) may result in a
material adverse effect on the ability of the Borrower or any Subsidiary to
perform the Obligations, on the conduct of the Borrower's operations, on
the Borrower's financial condition, or on the value of, or the ability of
the Lender to realize upon, the Collateral; and
(g) any other development in the business or affairs
of any of the Borrowers and any of their Subsidiaries which may be materially
adverse;
in each case describing in detail satisfactory to the Lender the nature thereof
and the action the Borrowers propose to take with respect thereto.
6.1.12 Hazardous Materials; Contamination.
----------------------------------
The Borrowers agree to:
(a) give notice to the Lender immediately upon the
Borrowers' acquiring knowledge of the presence of any Hazardous Materials
on any property owned or controlled by the Borrowers or for which the
Borrowers are responsible (provided that such notice shall not be required
for Hazardous Materials placed or stored on such property in accordance
with applicable Laws in the ordinary course (including, without limitation,
quantity) of the Borrowers' line of business expressly described in this
Agreement) or of any Hazardous Materials Contamination with a full
description thereof;
(b) promptly comply with any Laws requiring the
removal, treatment or disposal of Hazardous Materials or Hazardous
Materials Contamination and provide the Lender with satisfactory evidence
of such compliance;' and
(c) as part of the Obligations, defend, indemnify and
hold harmless the Lender and its agents, employees, trustees, successors
and assigns from any and all claims which may now or in the future (whether
before or after the termination of this Agreement) be asserted as a result
of the presence of any Hazardous Materials on any property owned or
controlled by the Borrowers for which the Borrowers are responsible for any
Hazardous Materials Contamination.
58
<PAGE>
The Borrowers acknowledge and agree that this indemnification shall survive
the termination of this Agreement and the Commitments and the payment and
performance of all of the other Obligations.
6.1.13 Disclosure of Significant Transactions.
--------------------------------------
The Borrowers shall deliver to the Lender a written notice describing
in detail each transaction by it involving the purchase, sale, lease, or other
acquisition or loss or casualty to or disposition of an interest in Fixed or
Capital Assets which exceeds Two Hundred Fifty Thousand Dollars ($250,000.00),
said notices to be delivered to the Lender within thirty (30) days of the
occurrence of each such transaction.
6.1.14 Environmental Staff.
-------------------
The Borrowers shall at all times maintain a staff of qualified
environmental engineers sufficient in number to monitor the Borrowers compliance
with all Laws relating to Hazardous Materials and other environmental matters.
6.1.15 EBITDA.
------
The Borrowers will maintain, tested commencing October 31, 1998 as of the
last day of each of the Borrowers' fiscal quarters for the four (4) quarter
period ending on such date, EBITDA of not less than the following:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Quarters EBITDA
- ----------------------------------------------------------------------
<S> <C>
October 31, 1998 $13,100,000
- ----------------------------------------------------------------------
October 31, 1999 through and including July $15,200,000
31, 2000
- ----------------------------------------------------------------------
October 31, 2000 through and including July $17,500,000
31, 2001
- ----------------------------------------------------------------------
October 31, 2001 through and including July $19,400,000
31, 2002
- ----------------------------------------------------------------------
October 31, 2002 through and including July $21,300,000
31, 2003
- ----------------------------------------------------------------------
October 31, 2003 and thereafter(applicable $23,000,000
if the Revolving Credit Termination Date
has not sooner occurred)
- ----------------------------------------------------------------------
</TABLE>
59
<PAGE>
6.1.16 Fixed Charge Coverage Ratio.
------------------------------
The Borrowers will maintain, tested commencing October 31, 1998 as of the
last day of each of the Borrowers' fiscal quarters for the four (4) quarter
period ending on such date, a Fixed Charge Coverage Ratio of not less than the
following:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Quarters Ratio
- ----------------------------------------------------------------------
<S> <C>
October 31, 1998 through and including July 1.00 to 1.0
31, 1999
- ----------------------------------------------------------------------
October 31, 1999 through and including July 1.15 to 1.0
31, 2000
- ----------------------------------------------------------------------
October 31, 2000 through and including July 1.20 to 1.0
31, 2001
- ----------------------------------------------------------------------
October 31, 2001 through and thereafter 1.25 to 1.0
- ----------------------------------------------------------------------
</TABLE>
6.1.17 Leverage Ratio.
--------------
The Borrowers will maintain, tested commencing October 31, 1998 as of
the last day of each of the Borrowers' fiscal quarters for the four (4) quarter
period ending on such date, a ratio of Funded Debt to EBITDA so that it is not
more than the following:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Quarters Ratio
- ----------------------------------------------------------------------
<S> <C>
October 31, 1998 through and including July 6.25 to 1.0
31, 1999
- ----------------------------------------------------------------------
October 31, 1999 through and including July 5.40 to 1.0
31, 2000
- ----------------------------------------------------------------------
October 31, 2000 through and including July 4.70 to 1.0
31, 2001
- ----------------------------------------------------------------------
October 31, 2001 through and including July 4.20 to 1.0
31, 2002
- ----------------------------------------------------------------------
October 31, 2002 through and including July 3.90 to 1.0
31, 2003
- ----------------------------------------------------------------------
October 31, 2003 and thereafter(applicable 3.75 to 1.0
if the Revolving Credit Termination Date
has not sooner occurred)
- ----------------------------------------------------------------------
</TABLE>
60
<PAGE>
6.1.18 Capital Expenditures.
---------------------
The Borrowers will not, and will not permit any Subsidiary to,
directly or indirectly (by way of the acquisition of the securities of a Person
or otherwise), make any Capital Expenditures in the aggregate for the Borrowers
and their Subsidiaries (taken as a whole) exceeding the following in the
applicable fiscal quarters in each of the following fiscal years for the year to
date:
<TABLE>
<CAPTION>
Fiscal Year Capital Expenditures
-----------------------------------------------------------------
<S> <C>
1998 $6,800,000
-----------------------------------------------------------------
1999 $5,000,000
-----------------------------------------------------------------
2000 $5,000,000
-----------------------------------------------------------------
2001 $5,500,000
-----------------------------------------------------------------
2002 and any $5,750,000
applicable time thereafter
-----------------------------------------------------------------
</TABLE>
6.1.19 Collection of Receivables.
--------------------------
Until such time that the Lender shall notify the Borrowers of the
revocation of such privilege, each of the Borrowers and each of the Subsidiaries
shall at its own expense have the privilege for the account of, and in trust
for, the Lender of collecting its Receivables and receiving in respect thereto
all Items of Payment and shall otherwise completely service all of the
Receivables including (a) the billing, posting and maintaining of complete
records applicable thereto, (b) the taking of such action with respect to the
Receivables as the Lender may request or in the absence of such request, as each
of the Borrowers and each of the Subsidiaries may deem advisable; and (c) the
granting, in the ordinary course of business, to any Account Debtor, any rebate,
refund or adjustment to which the Account Debtor may be lawfully entitled, and
may accept, in connection therewith, the return of goods, the sale or lease of
which shall have given rise to a Receivable and may take such other actions
relating to the settling of any Account Debtor's claim as may be commercially
reasonable. The Lender may, at its option, at any time or from time to time
after and during the continuance of an Event of Default hereunder, revoke the
collection privilege given in this Agreement to any one or more of the Borrowers
and the Subsidiaries by either giving notice of its assignment of, and lien on
the Collateral to the Account Debtors or giving notice of such revocation to the
Borrowers. The Lender shall not have any duty to, and the Borrowers hereby
release the Lender from all claims of loss or damage caused by the delay or
failure to collect or enforce any of the Receivables or to preserve any rights
against any other party with an interest in the Collateral. The Lender shall be
entitled at any time and from time to time to confirm and verify Receivables.
61
<PAGE>
6.1.20 Assignments of Receivables.
---------------------------
The Borrowers will promptly, upon request, execute and deliver to the
Lender written assignments, in form and content acceptable to the Lender, of
specific Receivables or groups of Receivables; provided, however, the Lien
and/or security interest granted to the Lender under this Agreement shall not be
limited in any way to or by the inclusion or exclusion of Receivables within
such assignments. Receivables so assigned shall secure payment of the
Obligations and are not sold to the Lender whether or not any assignment
thereof, which is separate from this Agreement, is in form absolute. The
Borrower agrees that neither any assignment to the Lender nor any other
provision contained in this Agreement or any of the other Financing Documents
shall impose on the Lender any obligation or liability of the Borrower with
respect to that which is assigned and the Borrower hereby agrees to indemnify
the Lender and hold the Lender harmless from any and all claims, actions, suits,
losses, damages, costs, expenses, fees, obligations and liabilities which may be
incurred by or imposed upon the Lender by virtue of the assignment of and Lien
on the Borrower's rights, title and interest in, to, and under the Collateral.
6.1.21 Government Accounts.
--------------------
The Borrowers will immediately notify the Lender if any of the
Receivables, in any amount alone or in the aggregate of more than $500,000 arise
out of contracts with the United States or with any other Governmental
Authority, and execute any instruments and take any steps required by the Lender
in order that all moneys due and to become due under such contracts shall be
assigned to the Lender and notice thereof given to the Governmental Authority
under the Federal Assignment of Claims Act or any other applicable Laws.
6.1.22 Notice of Returned Goods, etc.
------------------------------
The Borrowers will promptly notify, and will cause the Subsidiaries to
promptly notify, the Lender of the return, rejection or repossession of any
goods sold or delivered in respect of any Receivables (other than goods returned
in the ordinary course of the Borrowers' rental business), and of any claims
made in regard thereto to the extent that the aggregate purchase price of any
such goods in any given calendar month exceeds in the aggregate One Hundred
Thousand Dollars ($100,000.00) for such month.
6.1.23 Inventory.
----------
With respect to the Inventory, the Borrowers and the Subsidiaries
will: (a) as soon as possible upon demand by the Lender from time to time,
prepare and deliver to the Lender designations of Inventory specifying the
Borrowers' and Subsidiaries' cost of Inventory, the retail price thereof, and
such other matters and information relating to the Inventory as the Lender may
reasonably request; (b) keep correct and accurate records itemizing and
describing the kind, type, quality and quantity of Inventory, the Borrowers' and
Subsidiaries' cost therefor and the selling price thereof, all of which records
shall be available to the officers, employees or agents of the Lender upon
demand for inspection and copying thereof; (c) not store any of its Inventory
with a bailee, warehouseman or similar Person without the Lender's prior written
62
<PAGE>
consent, which consent may be conditioned on, among other things, delivery by
the bailee, warehouseman or similar Person to the Lender of warehouse receipts,
in form acceptable to the Lender, in the name of the Lender evidencing the
storage of Inventory and the Lender's interests therein; and (d) permit the
Lender and its agents or representatives to inspect and examine the Inventory
and to check and test the same as to quality, quantity, value and condition at
any time or times hereafter during the Borrowers' and Subsidiaries' usual
business hours or at other reasonable times. The Borrowers shall be permitted to
sell Inventory in the ordinary course of their business until the occurrence of
a Default.
6.1.24 Insurance With Respect to Equipment and Inventory.
--------------------------------------------------
The Borrowers will (a) maintain and cause each of their Subsidiaries
to maintain hazard insurance with fire and extended coverage and naming the
Lender as an additional insured with loss payable to the Lender as its
respective interest may appear on the Equipment and Inventory in an amount at
least equal to the lesser amount of the outstanding principal amount of the
Obligations or the fair market value of the Equipment and Inventory (but in any
event sufficient to avoid any co-insurance obligations) and with a specific
endorsement to each such insurance policy pursuant to which the insurer agrees
to give the Lender at least thirty (30) days written notice before any
alteration or cancellation of such insurance policy and that no act or default
of the Borrowers shall affect the right of the Lender to recover under such
policy in the event of loss or damage; (b) file, and cause each of their
Subsidiaries to file, with the Lender, upon its request, a detailed list of the
insurance then in effect and stating the names of the insurance companies, the
amounts and rates of the insurance, dates of the expiration thereof and the
properties and risks covered thereby; and, within thirty (30) days after notice
in writing from the Lender; and (c) obtain, and cause each of their Subsidiaries
to obtain, such additional insurance as the Lender may reasonably request.
6.1.25 Maintenance of the Collateral.
------------------------------
The Borrowers will maintain the Collateral in good working order,
saving and excepting ordinary wear and tear, and will not permit anything to be
done to the Collateral which may materially impair the value thereof. The
Lender, or an agent designated by the Lender, shall be permitted to enter the
premises of the Borrowers and their Subsidiaries and examine, audit and inspect
the Collateral at any reasonable time and from time to time without notice. The
Lender agrees to act in a commercially reasonable manner when inspecting the
premises of the Borrowers and their Subsidiaries and when examining, auditing
and/or inspecting the Collateral. The Lender shall not have any duty to, and
the Borrowers hereby release the Lender from all claims of loss or damage caused
by the delay or failure to collect or enforce any of the Receivables or to,
preserve any rights against any other party with an interest in the Collateral.
6.1.26 Equipment.
----------
The Borrowers shall (a) maintain all Equipment as personalty, (b) not
affix any Equipment to any real estate in such manner as to become a fixture or
part of such real estate, which is not covered by a Mortgage and (c) shall hold
no Equipment on a sale on approval basis. The Borrowers hereby declare their
intent that, notwithstanding the means of
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attachment, no goods of the Borrowers hereafter attached to any realty are
intended to be deemed a fixture, which declaration shall be irrevocable, without
the Lender's consent, until all of the Obligations have been paid in full and
all of the Commitments have been terminated.
6.1.27 Defense of Title and Further Assurances.
---------------------------------------
At their expense, the Borrowers will defend the title to the
Collateral (and any part thereof), and will immediately execute, acknowledge and
deliver any financing statement, renewal, affidavit, deed, assignment,
continuation statement, security agreement, certificate or other document which
the Lender may require in order to perfect, preserve, maintain, continue,
protect and/or extend the Lien granted to the Lender under this Agreement, under
any of the other Financing Documents and the first priority of that Lien subject
only to the Permitted Liens. The Borrowers will from time to time do whatever
the Lender may require by way of obtaining, executing, delivering, and/or filing
financing statements, landlords' or mortgagees' waivers, notices of assignment
and other notices and amendments and renewals thereof and the Borrowers will
take any and all steps and observe such formalities as the Lender may require,
in order to create and maintain a valid Lien upon, pledge of, or paramount
security interest in, the Collateral, subject to the Permitted Liens. The
Borrowers shall pay to the Lender on demand all taxes, reasonable costs and
expenses incurred by the Lender in connection with the preparation, execution,
recording and filing of any such document or instrument. To the extent that the
proceeds of any of the Accounts or Receivables of the Borrowers are expected to
become subject to the control of, or in the possession of, a party other than
the Borrowers or the Lender, the Borrowers shall cause all such parties to
execute and deliver on the Closing Date security documents, financing statements
or other documents as requested by the Lender and as may be necessary to
evidence and/or perfect the security interest of the Lender in those proceeds.
The Borrowers agree that a copy of a fully executed security agreement and/or
financing statement shall be sufficient to satisfy for all purposes the
requirements of a financing statement as set forth in Article 9 of the
applicable Uniform Commercial Code. Each of the Borrowers hereby irrevocably
appoints the Lender as the Borrower's attorney-in-fact, with power of
substitution, in the name of the Lender or in the name of the Borrower or
otherwise, for the use and benefit of the Lender for itself and/or the Lenders,
but at the cost and expense of the Borrower and without notice to the Borrower
to execute and deliver any and all of the instruments and other documents and
take any action which the Lender may require pursuant the foregoing provisions
of this Section.
6.1.28 Business Names; Locations.
--------------------------
Each Borrower will notify and cause each of the Subsidiaries to notify
the Lender not less than thirty (30) days prior to (a) any change in the name
under which the Borrower or the applicable Subsidiary conducts its business,
(b) any change of the location of the chief executive office of the Borrower or
the applicable Subsidiary, and (c) the opening of any new place of business or
the closing of any existing place of business, and any change in the location of
the places where the Collateral, or any part thereof, or the books and records,
or any part thereof, are kept.
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6.1.29 Subsequent Opinion of Counsel as to Recording Requirements.
-----------------------------------------------------------
In the event that any of the Borrowers or any Subsidiary shall
transfer its principal place of business or the office where it keeps its
records pertaining to the Collateral, the Borrowers will provide to the Lender a
subsequent opinion of counsel as to the filing, recording and other requirements
with which the Borrowers and the Subsidiaries have complied to maintain the Lien
and security interest in favor of the Lender in the Collateral.
6.1.30 Use of Premises and Equipment.
------------------------------
The Borrowers agree that until the Obligations are fully paid and this
Agreement has been terminated, the Lender (a) after and during the continuance
of a Default or an Event of Default, may use any of the Borrowers' owned or
leased lifts, hoists, trucks and other facilities or equipment for handling or
removing the Collateral; and (b) shall have, and is hereby granted, a right of
ingress and egress to the places where the Collateral is located, and may
proceed over and through any of the Borrowers' owned or leased property.
6.1.31 Protection of Collateral.
-------------------------
The Borrowers agree that the Lender may at any time take such steps as
the Lender deems reasonably necessary to protect the Lender's interest in, and
to preserve the Collateral. The Borrowers agree to cooperate fully with the
Lender's efforts to preserve the Collateral and will take such actions to
preserve the Collateral as the Lender may reasonably direct. All of the
Lender's expenses of preserving the Collateral, including any reasonable
expenses relating to the compensation and bonding of a custodian, shall part of
the Enforcement Costs.
6.1.32 Landlord's Waivers.
-------------------
The Borrowers shall use its best efforts to obtain a landlord's waiver
from each landlord of each and every business premise leased by the Borrowers
and on which any of the Collateral is or may hereafter be located, which
landlords' waivers must be reasonably acceptable to the Lender and its counsel
in their sole and absolute discretion.
6.1.33 Funds Transfer Services.
------------------------
(a) Each Borrower acknowledges that the Lender has made
available to the Borrowers Wire Transfer Procedures a copy of which is attached
to this Agreement as EXHIBIT B and which include a description of security
procedures regarding funds transfers executed by the Lender or an Affiliate bank
at the request of the Borrowers (the "Security Procedures"). The Borrowers and
the Lender agree that the Security Procedures are commercially reasonable. Each
Borrower further acknowledges that the full scope of the Security Procedures
which the Lender or such Affiliate bank offers and strongly recommends for funds
transfers is available only if the Borrowers communicate directly with the
Lender or such Affiliate bank as applicable in accordance with said procedures.
If a Borrower attempts to communicate by any other method or otherwise not in
accordance with the Security Procedures, the Lender or such Affiliate bank, as
applicable, shall not be required to execute such instructions, but if the
Lender or such Affiliate bank, as applicable, does so, the Borrowers will
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be deemed to have refused the Security Procedures that the Lender or such
Affiliate bank as applicable offers and strongly recommends, and the Borrowers
will be bound by any funds transfer, whether or not authorized, which is issued
in any Borrower's name and accepted by the Lender or such Affiliate bank, as
applicable, in good faith. The Lender or such Affiliate bank, as applicable, may
modify Wire Transfer Procedures including, without limitation, the Security
Procedures at such time or times and in such manner as the Lender or such
Affiliate bank, as applicable, in its sole discretion, deems appropriate to meet
prevailing standards of good banking practice. By continuing to use the Lender's
or such Affiliate bank's, as applicable, wire transfer services after receipt of
any modification of the Wire Transfer Procedures including, without limitation,
the Security Procedures, each Borrower agrees that the Security Procedures, as
modified, are likewise commercially reasonable. Each Borrower further agrees to
establish and maintain procedures to safeguard the Security Procedures and any
information related thereto. Neither the Lender nor any Affiliate of the Lender
is responsible for detecting any error in payment order sent by any Borrower to
the Lender or any of the Lenders.
(b) The Lender or such Affiliate bank, as applicable, will
generally use the Fedwire funds transfer system for domestic funds transfers,
and the funds transfer system operated by the Society for Worldwide
International Financial Telecommunication (SWIFT) for international funds
transfers. International funds transfers may also be initiated through the
Clearing House InterBank Payment System (CHIPs) or international cable. However,
the Lender or such Affiliate bank, as applicable, may use any means and routes
that the Lender or such Affiliate bank, as applicable, in its sole discretion,
may consider suitable for the transmission of funds. Each payment order, or
cancellation thereof, carried out through a funds transfer system or a
clearinghouse will be governed by all applicable funds transfer system rules and
clearing house rules and clearing arrangements, whether or not the Lender or
such Affiliate bank, as applicable, is a member of the system, clearinghouse or
arrangement and each Borrower acknowledges that the Lender's or such Affiliate
bank's, as applicable, right to reverse, adjust, stop payment or delay posting
of an executed payment order is subject to the laws, regulations, rules,
circulars and arrangements described herein.
6.1.34 Year 2000 Compliance.
---------------------
Each Borrower will promptly notify the Lender in the event such Borrower
discovers or determines that any computer application (including those of its
suppliers, vendors and customers) that is material to its or any of its
Subsidiaries' business and operations will not be Year 2000 compliant, except to
the extent that such failure could not reasonably be expected to have a material
adverse effect on the business, properties, condition (financial or otherwise)
or operations, present or prospective, of the Borrower.
Section 6.2 Negative Covenants.
-------------------
So long as any of the Obligations (or Commitments therefor) shall be
outstanding hereunder, the Borrowers agree with the Lender as follows:
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6.2.1 Merger, Acquisition or Sale of Assets.
--------------------------------------
The Borrowers will not enter into any merger or consolidation or
amalgamation, windup or dissolve themselves (or suffer any liquidation or
dissolution) or acquire all or substantially all the assets of any Person,
(other than by Permitted Acquisitions) or sell, lease or otherwise dispose of
any of their assets except prior to a Default or Event of Default:
(a) Inventory disposed of, by rental contract or otherwise, in
the ordinary course of business, and
(b) Equipment which is part of the Collateral and which has
become worn out or obsolete, is the subject of a casualty, or is no longer
necessary for the uninterrupted operation of the Borrower's business at its
then current level, provided:
(i) at the time of, or prior to, such removal, any such
Equipment is replaced with other Equipment which is subject to a Lien
perfected by fling in favor of the Lender and free from other Liens
and has a value at least equal to that of the replaced Equipment, or
(ii) such Equipment is sold or disposed of for scrap or at
fair market value for cash and the cash proceeds (net of reasonable
expenses of sale or disposition) received are paid over immediately to
the Lender to be applied to the Obligations in such order as the
Lender may elect with respect to the Capital Expenditure Line (if the
Equipment was related to an advance under the Capital Expenditure
Line) or to Acquisition Loan (if the Equipment was related to an
advance under the Acquisition Loan), provided, however, in the event
the proceeds of such sale or disposition which are received by the
Lender for application to the applicable Loan are not sufficient to
pay in full an amount equal to the aggregate of the quarterly
installment payments of principal remaining with respect to the
advance under the Capital Expenditure Line for such Equipment or, the
fair market value of the Equipment (without giving effect to any
casualty) then there shall be immediately due owing and the Borrowers
shall pay to the Lender the amount of such deficiency for application
to the applicable Loan.
Where the fair market value of Equipment (excluding motor
vehicles) disposed exceeds $500,000 in any fiscal year, the Borrowers shall make
a Mandatory Prepayment in the amount of the excess, such payment shall be at the
time the Borrowers annual financial statements for that fiscal year are
forwarded to the Lender. Any consent of the Lender to the disposition of any
assets may be conditioned on a specified use of the proceeds of disposition.
6.2.2 Subsidiaries.
-------------
The Borrowers will not create or acquire any Subsidiaries other than
the Subsidiaries identified on the Collateral Disclosure List, other than by
Perm Acquisitions.
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6.2.3 Issuance of Stock.
------------------
The Borrowers will not issue, or grant any option or right to
purchase, any of their capital stock which results, or could result in, a
violation of Section 7.1.11 or Section 7.1.12 of this Agreement.
6.2.4 Purchase or Redemption of Securities, Dividend Restrictions.
------------------------------------------------------------
The Borrowers will not purchase, redeem or otherwise acquire any
shares of their capital stock or warrants now or hereafter outstanding, declare
or pay any dividends thereon (other than stock dividends), apply any of their
property or assets to the purchase, redemption or other retirement of, set apart
any sum for the payment of any dividends on, or for the purchase, redemption
(other than the Permitted Payments), or other retirement of, make any
distribution by reduction of capital or otherwise in respect of, any shares of
any class of capital stock of the Borrowers, or any warrants, permit any
Subsidiary to purchase or acquire any shares of any class of capital stock of,
or warrants issued by, the Borrowers, make any distribution to stockholders or
set aside any funds for any such purpose, and, except for Permitted Senior
Subordinated Note Purchases, not prepay, purchase or redeem any Indebtedness for
Borrowed Money other than the Obligations; provided, however, that nothing in
this Section shall prevent payments on the Subordinated Debt permitted by the
Subordination Agreement.
6.2.5 Indebtedness.
-------------
The Borrowers will not, and will not permit any Subsidiary to, create,
incur, assume or suffer to exist any Indebtedness for Borrowed Money, or permit
any Subsidiary so to do, except:
(a) the Obligations;
(b) operating leases
(c) current accounts payable arising in the ordinary course;
(d) Indebtedness secured by Permitted Liens (provided,
however, that in the case of each Permitted Lien for Equipment purchase
money related to Permitted Acquisitions, the Lender shall have previously
declined to provide such financing on identical terms);
(e) Subordinated Indebtedness;
(f) the guaranty of the Senior Subordinated Notes by the
Borrowers (other than Coyne); and
(g) Indebtedness of the Borrowers existing on the date
hereof and reflected on the financial statements furnished pursuant to
Section 4.1.11 (Financial Condition); and Indebtedness represented by the
Senior Subordinated Notes.
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6.2.6 Subordinated Indebtedness.
--------------------------
The Borrowers will not, and will not permit any Subsidiary to make any
payment on the Subordinated Indebtedness except as required by the terms thereof
(without regard to any amendment thereto which has not been approved by the
Lender.
6.2.7 Investments, Loans and Other Transactions.
------------------------------------------
Except as otherwise provided below and except for Permitted Senior
Subordinated Note Purchases, the Borrowers will not, and will not permit any of
their Subsidiaries to, (a) make, assume, acquire or continue to hold any
investment in any real property (unless used in connection with their business
and treated as a Fixed or Capital Asset of the Borrowers or the Subsidiary) or
any Person (other than by Permitted Acquisition), whether by stock purchase,
capital contribution, acquisition of indebtedness of such Person or otherwise
(including, without limitation, investments in any joint venture or
partnership), (b) guaranty or otherwise become contingently liable for the
indebtedness or obligations of any Person, or (c) make any loans or otherwise
extend credit to any Person, except:
(i) any advance to an officer of the Borrowers or of
any Subsidiary for travel or other business expenses in the ordinary course
of business, provided that the aggregate amount of all such advances by the
Borrowers and their Subsidiaries (taken as a whole) outstanding at any time
shall not exceed One Hundred Fifty Thousand Dollars ($150,000);
(ii) the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
business;
(iii) any investment in Cash Equivalents, which are
pledged to the Lender as collateral and security for the Obligations;
(iv) trade credit extended to customers in the
ordinary course of business; and
(v) except as set forth in Schedule 6.2.7 of this
--------------
Agreement.
6.2.8 Stock of Subsidiaries.
------------------------
The Borrowers will not sell or otherwise dispose of any shares of
capital stock of any Subsidiary (except in connection with a merger or
consolidation of a Wholly Owned Subsidiary into the Borrowers or another Wholly
Owned Subsidiary or with the dissolution of any Subsidiary) or permit any
Subsidiary to issue any additional shares of its capital stock except pro rata
--- ----
to its stockholders.
6.2.9 Liens.
------
The Borrowers (a) will not create, incur, assume or suffer to exist
any Lien upon any of their properties or assets, whether now owned or hereafter
acquired, or permit any
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Subsidiary so to do, except for Liens securing the Obligations and Permitted
Liens, (b) will not allow or suffer to exist any Permitted Liens, other than
purchase money security interests in and Capital Leases of Equipment, to be
superior to Liens securing the Obligations and other Permitted Liens, and (c)
will not allow or suffer to exist the failure of any Lien described in the
Security Documents to attach to, and/or remain at all times perfected on, any of
the property described in the Security Documents.
6.2.10 Transactions with Affiliates.
-----------------------------
The Borrowers and their Subsidiaries will not enter into or
participate in any transaction with any Affiliate other than in a manner and on
terms which are in the ordinary course of business, are commercially reasonable
and arm's length basis and which do not otherwise violate the provisions of the
Financing Documents, except that Coyne may, after notice to the Lender,
institute a stock option plan in favor of Thomas M. Coyne and may make Permitted
Payments and may engage in those "Certain Transactions with Members of the Coyne
Family" described on page 36 of the Offering memorandum.
6.2.11 Other Businesses.
-----------------
The Borrowers and their Subsidiaries will not engage directly or
indirectly in any business other than their current line of business described
elsewhere in this Agreement.
6.2.12 ERISA Compliance.
-----------------
Neither the Borrowers nor any Commonly Controlled Entity shall: (a)
engage in or permit any "prohibited transaction" (as defined in ERISA); (b)
cause any "accumulated funding deficiency" as defined in ERISA and/or the
Internal Revenue Code; (c) terminate any pension plan in a manner which could
result in the imposition of a lien on the property of the Borrowers pursuant to
ERISA; (d) terminate or consent to the termination of any Multiemployer Plan or
incur a complete or partial withdrawal with respect to any Multiemployer Plan
which termination or withdrawal, either in any case or in the aggregate, might
result in any material adverse change in the business, prospects, condition,
affairs or operations of a Borrower or in any of its properties or assets, or in
any material impairment of the right or ability of a Borrower to carry on its
operations as now conducted or proposed to be conducted or in any material
liability on the part of a Borrower or on the value of, or the ability of the
Lender to realize upon, the Collateral.
6.2.13 Prohibition on Hazardous Materials.
-----------------------------------
The Borrowers shall not place, manufacture or store or permit to be
placed, manufactured or stored any Hazardous Materials on any property owned or
controlled by the Borrowers or for which the Borrowers are responsible other
than Hazardous Materials placed or stored on such property in accordance with
applicable Laws in the ordinary course (including, without limitation, quantity)
of the Borrowers' business expressly described in this Agreement.
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6.2.14 Method of Accounting; Fiscal Year.
----------------------------------
Without the prior written consent of the Lender, the Borrowers shall
not change the method of accounting employed in the preparation of the financial
statements furnished prior to the date of this Agreement to the Lender, unless
required to conform to GAAP and on the condition that the Borrowers' accountants
shall furnish such information as the Lender may request to reconcile the
changes with the Borrowers' prior financial statements. The Borrowers shall not
change their fiscal year from a year ending October 31.
6.2.15 Compensation.
-------------
Neither any of the Borrowers nor any of their Subsidiaries will pay
any bonuses, fees, compensation, commissions, salaries, drawing accounts, or
other payments (cash and non-cash), whether direct or indirect, to any
stockholders of the Borrowers or their Subsidiaries, or any Affiliate of the
Borrowers or their Subsidiaries, other than reasonable compensation for actual
services rendered by stockholders in their capacity as officers or employees of
the Borrowers and the payments described in Section 6.2.10.
6.2.16 Transfer of Collateral.
-----------------------
The Borrowers and the Subsidiaries will not transfer, or permit the
transfer, to another location of any of the Collateral or the books and records
related to any of the Collateral.
ARTICLE VII
DEFAULT AND RIGHTS AND REMEDIES
Section 7.1 Events of Default.
------------------
The occurrence of any one or more of the following events shall constitute
an "Event of Default" under the provisions of this Agreement:
7.1.1 Failure to Pay.
---------------
The failure of the Borrowers to pay any of the Obligations as
and when due and payable in accordance with the provisions of this Agreement,
the Notes and/or any of the other Financing Documents.
7.1.2 Breach of Representations and Warranties .
------------------------------------------
Any representation or warranty made in this Agreement or in
any report, statement, schedule, certificate, opinion (including any opinion of
counsel for the Borrowers), financial statement or other document furnished in
connection with this Agreement, any of the other Financing Documents, or the
Obligations, shall prove to have been false or misleading when made (or, if
applicable, when reaffirmed) in any material respect.
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7.1.3 Failure to Comply with Covenants.
---------------------------------
The failure of the Borrowers to perform, observe or comply
with any covenant, condition or agreement contained in this Agreement and, (i)
only with respect to a failure under Section 6.1.1, such failure continues
uncured for a period of five (5) days, or (ii) only with respect to a failure
under Sections 6.1.3(a), 6.1.4, 6.1.5 or 6.1.25, if the Borrowers after
discovering such failure, fail to diligently and continuously pursue the cure of
such failure, or (iii) only with respect to a failure under Section 6.1.9 which
does not relate to Taxes due or claimed to be due in excess of $100,000 in the
aggregate, if the Borrowers after discovering such failure, fail to diligently
and continuously pursue the cure of such failure, or such failure continues
uncured thirty (30) days after discovery.
7.1.4 Default Under Other Financing Documents or Obligations.
-------------------------------------------------------
A default shall occur under any of the other Financing
Documents or under any other Obligations, and such default is not cured within
any applicable grace period provided therein.
7.1.5 Receiver; Bankruptcy.
---------------------
Any Borrower or any Subsidiary shall (a) apply for or consent
to the appointment of a receiver, trustee or liquidator of itself or any of its
property, (b) admit in writing its inability to pay its debts as they mature,
(c) make a general assignment for the benefit of creditors, (d) be adjudicated a
bankrupt or insolvent, (e) file a voluntary petition in bankruptcy or a petition
or an answer seeking or consenting to reorganization or an arrangement with
creditors or to take advantage of any bankruptcy, reorganization, insolvency,
readjustment of debt, dissolution or liquidation law or statute, or an answer
admitting the material allegations of a petition filed against it in any
proceeding under any such law, or take corporate action for the purposes of
effecting any of the foregoing, or (f) by any act indicate its consent to,
approval of or acquiescence in any such proceeding or the appointment of any
receiver of or trustee for any of its property, or suffer any such receivership,
trusteeship or proceeding to continue undischarged for a period of sixty (60)
days, or (g) by any act indicate its consent to, approval of or acquiescence in
any order, judgment or decree by any court of competent jurisdiction or any
Governmental Authority enjoining or otherwise prohibiting the operation of a
material portion of the Borrower's or any Subsidiary's business or the use or
disposition of a material portion of the Borrower's or any Subsidiary's assets.
7.1.6 Involuntary Bankruptcy, etc.
----------------------------
(a) An order for relief shall be entered in any involuntary
case brought against any Borrower or any Subsidiary under the Bankruptcy Code,
or (b) any such case shall be commenced against any Borrower or any Subsidiary
and shall not be dismissed within sixty (60) days after the filing of the
petition, or (c) an order, judgment or decree under any other Law is entered by
any court of competent jurisdiction or by any other Governmental Authority on
the application of a Governmental Authority or of a Person other than any
Borrower or any Subsidiary (i) adjudicating any Borrower, or any Subsidiary
bankrupt or insolvent, or (ii) appointing a receiver, trustee or liquidator of
any Borrower or of any Subsidiary, or of a material portion of the Borrower's or
any Subsidiary's assets, or (iii) enjoining, prohibiting or otherwise limiting
the operation of a material portion of the Borrower's or any Subsidiary's
business or the use or disposition of a material
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portion of the Borrower's or any Subsidiary's assets, and such order, judgment
or decree continues unstayed and in effect for a period of thirty (30) days from
the date entered.
7.1.7 Judgment.
---------
Unless adequately insured in the opinion of the Lender, the
entry of a final judgment for the payment of money involving more than $100,000
against any Borrower or any Subsidiary, and the failure by such Borrower or such
Subsidiary to discharge the same, or cause it to be discharged, within thirty
(30) days from the date of the order, decree or process under which or pursuant
to which such judgment was entered, or to secure a stay of execution pending
appeal of such judgment.
7.1.8 Execution; Attachment.
----------------------
Any execution or attachment shall be levied against the
Collateral, or any part thereof, and such execution or attachment shall not be
set aside, discharged, bonded over or stayed within thirty (30) days after the
same shall have been levied or, if later, within thirty (30) days after the
Borrower learns of such levy, but in no event later than the Business Day prior
to the date on which Collateral which is the subject of the attachment or levy
may be the sale of sale or other disposition on account of such levy or
attachment.
7.1.9 Default Under Other Borrowings.
-------------------------------
Default shall be made with respect to any Indebtedness for
Borrowed Money (other than the Loans) if the effect of such default is to
accelerate the maturity of such evidence of the Indebtedness for Borrowed Money
or to permit the holder or obligee thereof or other party thereto to cause any
indebtedness to become due prior to its stated maturity.
7.1.10 Material Adverse Change.
------------------------
If the Lender in its reasonable discretion determines that a
material adverse change has occurred in the financial condition of the
Borrowers.
7.1.11 Change in Ownership.
--------------------
Any change in the ownership of the Borrowers other than Coyne.
7.1.12 Liquidation, Termination, Dissolution, Change in
------------------------------------------------
Management, etc.
----------------
(a) If the Borrowers shall liquidate, dissolve or terminate
its existence or shall suspend or terminate a substantial portion of its
business operations or if Thomas M. Coyne is no longer actively involved in
the management of Coyne.
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(b) If there shall occur any change in the ownership or
control of Coyne with the effect that Thomas M. Coyne (or a trust in which
Thomas M. Coyne is a trustee and, as trustee, has the same powers as those
set forth in the J. Stanley Coyne Irrevocable Inter Vivos Trust dated
September 3, 1994) is not entitled by vote of securities which Thomas M.
Coyne owns (or through such trust controls) (i) to authorize the taking of
any and all corporate actions (including, without limitation, extraordinary
corporate actions such as mergers and dissolutions), and (ii) to elect the
number of directors of the Board of Coyne necessary to authorize the taking
of all such corporate actions, all without the vote or consent of the
holders of any other securities of Coyne.
Section 7.2 Remedies.
---------
Upon the occurrence of any Event of Default, the Lender may at any time
thereafter exercise any one or more of the following rights, powers or remedies:
7.2.1 Acceleration.
-------------
The Lender may declare the Obligations to be immediately due
and payable, notwithstanding anything contained in this Agreement or in any of
the other Financing Documents to the contrary, without presentment, demand,
protest, notice of protest or of dishonor, or other notice of any kind, all of
which the Borrowers hereby waive. THE OCCURRENCE OR NON-OCCURRENCE OF A DEFAULT
OR AN EVENT OF DEFAULT UNDER THIS AGREEMENT OR UNDER ANY OF THE OTHER FINANCING
DOCUMENTS SHALL IN NO WAY AFFECT OR CONDITION THE LENDER'S RIGHT TO IMMEDIATE
PAYMENT AT ANY TIME OF ANY OF THE OBLIGATIONS WHICH ARE PAYABLE ON DEMAND
REGARDLESS OF WHETHER OR NOT A DEFAULT OR AN EVENT OF DEFAULT HAS OCCURRED.
7.2.2 Further Advances.
-----------------
The Lender may from time to time without notice to the
Borrowers suspend, terminate or limit any further loans or other extensions of
credit under this Agreement and under any of the other Financing Documents.
Further, upon the occurrence of an Event of Default or Default specified in
Sections 7.1.5 (Receiver; Bankruptcy) or 7.1.6 (Involuntary Bankruptcy, etc.)
above, the Revolving Credit Commitment and any agreement in any of the Financing
Documents to provide additional credit shall immediately and automatically
terminate and the unpaid principal amount of the Notes (with accrued interest
thereon) and all other Obligations then outstanding, shall immediately become
due and payable without further action of any kind and without presentment,
demand, protest or notice of any kind, all of which are hereby expressly waived
by the Borrowers.
7.2.3 Uniform Commercial Code.
------------------------
The Lender shall have all of the rights and remedies of a
secured party under the applicable Uniform Commercial Code and other applicable
Laws. Upon demand by the Lender, the Borrowers shall assemble the Collateral and
make it available to the Lender, at a place designated by the Lender. The Lender
or its agents may without notice from time to time
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enter upon the Borrowers' premises to take possession of the Collateral, to
remove it, to render it unusable, to process it or otherwise prepare it for
sale, or to sell or otherwise dispose of it.
Any written notice of the sale, disposition or other intended action
by the Lender with respect to the Collateral which is sent by regular mail,
postage prepaid, to the Borrowers at the address set forth in ARTICLE 8 of this
Agreement, or such other address of the Borrowers which may from time to time be
shown on the Lender's records, at least ten (10) days prior to such sale,
disposition or other action, shall constitute commercially reasonable notice to
the Borrowers. The Lender may alternatively or additionally give such notice in
any other commercially reasonable manner. Nothing in this Agreement shall
require the Lender to give any notice not required by applicable Laws.
If any consent, approval, or authorization of any state, municipal or
other governmental department, agency or authority or of any person, or any
person, corporation, partnership or other entity having any interest therein,
should be necessary to effectuate any sale or other disposition of the
Collateral, the Borrowers agree to execute all such applications and other
instruments, and to take all other action, as may be required in connection with
securing any such consent, approval or authorization.
The Borrowers recognize that the Lender may be unable to effect a
public sale of all or a part of the Collateral consisting of Securities by
reason of certain prohibitions contained in the Securities Act of 1933, as
amended, and other applicable federal and state Laws. The Lender may,
therefore, in its discretion, take such steps as it may deem appropriate to
comply with such Laws and may, for example, at any sale of the Collateral
consisting of securities restrict the prospective bidders or purchasers as to
their number, nature of business and investment intention, including, without
limitation, a requirement that the Persons making such purchases represent and
agree to the satisfaction of the Lender that they are purchasing such securities
for their account, for investment, and not with a view to the distribution or
resale of any thereof. The Borrowers covenant and agree to do or cause to be
done promptly all such acts and things as the Lender may request from time to
time and as may be necessary to offer and/or sell the securities or any part
thereof in a manner which is valid and binding and in conformance with all
applicable Laws. Upon any such sale or disposition, the Lender shall have the
right to deliver, assign and transfer to the purchaser thereof the Collateral
consisting of securities so sold.
7.2.4 Specific Rights With Regard to Collateral.
------------------------------------------
In addition to all other rights and remedies provided hereunder or as
shall exist at law or in equity from time to time, the Lender may (but shall be
under no obligation to), without notice to the Borrowers, and each Borrower
hereby irrevocably appoints the Lender as the Borrower's attorney-in-fact, with
power of substitution, in the name of the Lender or in the name of the Borrower
or otherwise, for the use and benefit of the Lender, but at the cost and expense
of the Borrowers and without notice to the Borrowers:
(a) request any account debtor obligated on any of the Accounts
to make payments thereon directly to the Lender, with the Lender taking
control of the cash and non-cash proceeds thereof;
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<PAGE>
(b) compromise, extend or renew any of the Collateral or deal
with the same as it may deem advisable;
(c) make exchanges, substitutions or surrenders of all or any
part of the Collateral;
(d) copy, transcribe, or remove from any place of business of
the Borrowers or any Subsidiary all books, records, ledger sheets,
correspondence, invoices and documents, relating to or evidencing any of
the Collateral or without cost or expense to the Lender, make such use of
the Borrowers' or any Subsidiary's place(s) of business as may be
reasonably necessary to administer, control and collect the Collateral;
(e) repair, alter or supply goods if necessary to fulfill in
whole or in part the purchase order of any account debtor;
(f) demand, collect, receipt for and give renewals, extensions,
discharges and releases of any of the Collateral;
(g) institute and prosecute legal and equitable proceedings to
enforce collection of, or realize upon, any of the Collateral;
(h) settle, renew, extend, compromise, compound, exchange or
adjust claims in respect of any of the Collateral or any legal proceedings
brought in respect thereof;
(i) endorse or sign the name of the Borrowers upon any items of
payment, certificates of title, instruments, securities, stock powers,
documents, documents of title, financing statements, assignments, notices,
or other writing relating to or part of the Collateral and on any Proof of
Claim in Bankruptcy against an account debtor;
(j) notify the Post Office authorities to change the address
for the delivery of mail to the Borrowers to such address or Post Office
Box as the Lender may designate and receive and open all mail addressed to
the Borrowers; and (k) take any other action necessary or beneficial to
realize upon or dispose of the Collateral or to carry out the terms of this
Agreement.
7.2.5 Application of Proceeds.
------------------------
Any proceeds of sale or other disposition of the Collateral will be
applied by the Lender to the payment of the Enforcement Costs, and any balance
of such proceeds will be applied by the Lender to the payment of the balance of
the Obligations in such order and manner of application as the Lender may from
time to time in its sole and absolute discretion determine. If the sale or other
disposition of the Collateral fails to fully satisfy the Obligations, the
Borrowers shall remain liable to the Lender for any deficiency.
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7.2.6 Performance by Lender.
----------------------
If the Borrowers shall fail to pay the Obligations or otherwise
fail to perform, observe or comply with any of the conditions, covenants, terms,
stipulations or agreements contained in this Agreement or any of the other
Financing Documents, the Lender without notice to or demand upon the Borrowers
and without waiving or releasing any of the Obligations or any Default or Event
of Default, may (but shall be under no obligation to) at any time thereafter
make such payment or perform such act for the account and at the expense of the
Borrowers, and may enter upon the premises of the Borrowers for that purpose and
take all such action thereon as the Lender may consider necessary or appropriate
for such purpose and each Borrower hereby irrevocably appoints the Lender as the
Borrower's attorney-in-fact to do so, with power of substitution, in the name of
the Lender or in the name of the Borrower or otherwise, for the use and benefit
of the Lender, but at the cost and expense of the Borrowers and without notice
to the Borrowers. All sums so paid or advanced by the Lender together with
interest thereon from the date of payment, advance or incurring until paid in
full at the Post-Default Rate and all costs and expenses, shall be deemed part
of the Enforcement Costs, shall be paid by the Borrowers to the Lender on
demand, and shall constitute and become a part of the Obligations.
7.2.7 Other Remedies.
---------------
The Lender may from time to time proceed to protect or enforce
its rights by an action or actions at law or in equity or by any other
appropriate proceeding, whether for the specific performance of any of the
covenants contained in this Agreement or in any of the other Financing
Documents, or for an injunction against the violation of any of the terms of
this Agreement or any of the other Financing Documents, or in aid of the
exercise or execution of any right, remedy or power granted in this Agreement,
the Financing Documents, and/or applicable Laws. The Lender is authorized to
offset and apply to all or any part of the Obligations all moneys, credits and
other property of any nature whatsoever of the Borrowers now or at any time
hereafter in the possession of, in transit to or from, under the control or
custody of, or on deposit with, the Lender.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Notices.
--------
All notices, requests and demands to or upon the parties to this Agreement
shall be in writing and shall be deemed to have been given or made when
delivered by hand on a Business Day, or two (2) days after the date when
deposited in the mail, postage prepaid by registered or certified mail, return
receipt requested, or when sent by overnight courier, on the Business Day next
following the day on which the notice is delivered to such overnight courier,
addressed as follows:
Borrowers: Coyne International Enterprises
Corp.
140 Cortland Avenue
Syracuse, New York 13202
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Attention: Donald F. X. Keegan
Chief Financial Officer
with a copy to:
O'Hara, Hanlon, Knych & Pobedinsky, LLP
One Park Place
Syracuse, New York 13202
Attention: Alexander Pobedinsky, Esq.
Lender: NationsBank, N.A.
100 South Charles Street
Baltimore, Maryland 21201
Attention: Stephen V. Rieger
with a copy to:
Frederick W. Runge, Jr., Esquire
Miles & Stockbridge P.C.
10 Light Street
Baltimore, Maryland 21202
By written notice, each party to this Agreement may change the address to
which notice is given to that party, provided that such changed notice shall
include a street address to which notices may be delivered by overnight courier
in the ordinary course on any Business Day.
Section 8.2 Amendments; Waivers.
--------------------
This Agreement and the other Financing Documents may not be amended,
modified, or changed in any respect except by an agreement in writing signed by
the Lender and the Borrowers. No waiver of any provision of this Agreement or of
any of the other Financing Documents, nor consent to any departure by the
Borrowers therefrom, shall in any event be effective unless the same shall be in
writing. No course of dealing between the Borrowers and the Lender and no act or
failure to act from time to time on the part of the Lender shall constitute a
waiver, amendment or modification of any provision of this Agreement or any of
the other Financing Documents or any right or remedy under this Agreement, under
any of the other Financing Documents or under applicable Laws.
Without implying any limitation on the foregoing:
(a) Any waiver or consent shall be effective only in the
specific instance, for the terms and purpose for which given, subject to such
conditions as the Lender may specify in any such instrument.
(b) No waiver of any Default or Event of Default shall extend
to any subsequent or other Default or Event of Default, or impair any right
consequent thereto.
(c) No notice to or demand on the Borrowers in any case shall
entitle the Borrowers to any other or further notice or demand in the same,
similar or other circumstance.
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(d) No failure or delay by the Lender to insist upon the
strict performance of any term, condition, covenant or agreement of this
Agreement or of any of the other Financing Documents, or to exercise any right,
power or remedy consequent upon a breach thereof, shall constitute a waiver,
amendment or modification of any such term, condition, covenant or agreement or
of any such breach or preclude the Lender from exercising any such right, power
or remedy at any time or times.
(e) By accepting payment after the due date of any amount
payable under this Agreement or under any of the other Financing Documents, the
Lender shall not be deemed to waive the right either to require prompt payment
when due of all other amounts payable under this Agreement or under any of the
other Financing Documents, or to declare a default for failure to effect such
prompt payment of any such other amount.
Section 8.3 Cumulative Remedies.
--------------------
The rights, powers and remedies provided in this Agreement and in the other
Financing Documents are cumulative, may be exercised concurrently or separately,
may be exercised from time to time and in such order as the Lender shall
determine and are in addition to, and not exclusive of, rights, powers and
remedies provided by existing or future applicable Laws. In order to entitle
the Lender to exercise any remedy reserved to it in this Agreement, it shall not
be necessary to give any notice, other than such notice as may be expressly
required in this Agreement. Without limiting the generality of the foregoing,
the Lender may:
(a) proceed against any one or more of the Borrowers, with or
without proceeding against any one or more of the other Borrowers or any
other Person who may be liable for all or any part of the Obligations;
(b) proceed against any one or more of the Borrowers with or
without proceeding under any of the other Financing Documents or against
any Collateral or other collateral and security for all or any part of the
Obligations;
(c) without reducing or impairing the obligation of the
Borrowers and without notice, release or compromise with any Borrower,
guarantor or other Person liable for all or any part of the Obligations
under the Financing Documents or otherwise;
(d) without reducing or impairing the obligations of the
Borrowers and without notice thereof: (i) fail to perfect the Lien in any
or all Collateral or to release any or all the Collateral or to accept
substitute Collateral, (ii) approve the making of advances under the
Revolving Loan under this Agreement, (iii) waive any provision of this
Agreement or the other Financing Documents, (iv) exercise or fail to
exercise rights of set-off or other rights, or (v) accept partial payments
or extend from time to time the maturity of all or any part of the
Obligations.
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Section 8.4 Severability.
-------------
In case one or more provisions, or part thereof, contained in this
Agreement or in the other Financing Documents shall be invalid, illegal or
unenforceable in any respect under any Law, then without need for any further
agreement, notice or action:
(a) the validity, legality and enforceability of the remaining
provisions shall remain effective and binding on the parties thereto and
shall not be affected or impaired thereby;
(b) the obligation to be fulfilled shall be reduced to the
limit of such validity;
(c) if such provision or part thereof pertains to repayment of
the Obligations, then, at the sole and absolute discretion of the Lender,
all of the Obligations of any one or more of the Borrowers to the Lender
shall become immediately due and payable; and
(d) if affected provision or part thereof does not pertain to
repayment of the Obligations, but operates or would prospectively operate
to invalidate this Agreement in whole or in part, then such provision or
part thereof only shall be void, and the remainder of this Agreement shall
remain operative and in full force and effect.
Section 8.5 Assignments by Lender.
----------------------
The Lender may, without notice to, or consent of, the Borrowers, sell,
assign or transfer to or participate with any Person or Persons all or any part
of the Obligations, and each such Person or Persons shall have the right to
enforce the provisions of this Agreement and any of the other Financing
Documents as fully as the Lender, provided that the Lender shall continue to
have the unimpaired right to enforce the provisions of this Agreement and any of
the other Financing Documents as to so much of the Obligations that the Lender
has not sold, assigned or transferred. In connection with the foregoing, the
Lender shall have the right to disclose to any such actual or potential
purchaser, assignee, transferee or participant all financial records,
information, reports, financial statements and documents obtained in connection
with this Agreement and any of the other Financing Documents or otherwise.
In the event of an assignment by the Lender, the Borrowers and the Lender's
assignee shall execute and deliver a written assignment agreement in a form
acceptable to the Lender, which shall set forth the respective rights and
obligations of the Lender and its assignee and shall constitute an amendment to
this Agreement to the extent necessary to reflect such assignment. Upon the
request of the Lender made in accordance with this Section, the Borrowers shall
issue new Notes to the Lender and its assignee reflecting such assignment, in
exchange for the Notes held by the Lender, and shall execute such additional
documents as the Lender may require to reflect the respective interests of the
Lender and its assignee in the Financing Documents and the Collateral.
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Section 8.6 Successors and Assigns.
----------------------
This Agreement and all other Financing Documents shall be binding upon and
inure to the benefit of the Borrowers and the Lender and their respective
successors and assigns, except that the Borrowers shall not have the right to
assign their rights hereunder or any interest herein without the prior written
consent of the Lender.
Section 8.7 Continuing Agreements.
---------------------
All covenants, agreements, representations and warranties made by the
Borrowers in this Agreement, in any of the other Financing Documents, and in any
certificate delivered pursuant hereto or thereto shall survive the making by the
Lender of the Loans and the execution and delivery of the Notes, shall be
binding upon the Borrowers regardless of how long before or after the date
hereof any of the Obligations were or are incurred, and shall continue in full
force and effect so long as any of the Obligations are outstanding and unpaid.
From time to time upon the Lender's request, and as a condition of the release
of any one or more of the Security Documents, the Borrowers and other Persons
obligated with respect to the Obligations shall provide the Lender with such
acknowledgments and agreements as the Lender may require to the effect that
there exists no defenses, rights of setoff or recoupment, claims, counterclaims,
actions or causes of action of any kind or nature whatsoever against the Lender,
its agents and others, or to the extent there are, the same are waived and
released.
Section 8.8 Enforcement Costs.
-----------------
The Borrowers agree to pay to the Lender on demand all reasonable
Enforcement Costs, together with interest thereon from the date incurred or
advanced until paid in full at a per annum rate of interest equal at all times
to the Post-Default Rate. Enforcement Costs shall be immediately due and payable
at the time advanced or incurred, whichever is earlier. Without implying any
limitation on the foregoing, the Borrowers agree, as part of the Enforcement
Costs, to pay upon demand any and all stamp and other Taxes and fees payable or
determined to be payable in connection with the execution and delivery of this
Agreement and the other Financing Documents and to save the Lender harmless from
and against any and all liabilities with respect to or resulting from any delay
in paying or omission to pay any Taxes or fees referred to in this Section. The
provisions of this Section shall survive the execution and delivery of this
Agreement, the repayment of the other Obligations and shall survive the
termination of this Agreement.
Section 8.9 Applicable Law; Jurisdiction.
----------------------------
8.9.1 Governing Law.
-------------
As a material inducement to the Lender to enter into this
Agreement, the Borrowers acknowledge and agree that the Financing Documents,
including, this Agreement, shall be governed by the Laws of the State, as if
each of the Financing Documents and this Agreement had each been executed,
delivered, administered and performed solely within the State even though for
the convenience and at the request of the Borrowers, one or more of the
Financing Documents may be executed elsewhere. The Lender acknowledges, however,
that
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remedies under certain of the Financing Documents which relate to property
outside the State may be subject to the laws of the state in which the property
is located.
8.9.2 Jurisdiction.
-------------
Each of the Borrowers irrevocably submits to the jurisdiction of any
state or federal court sitting in the State over any suit, action or proceeding
arising out of or relating to this Agreement or any of the other Financing
Documents. Each of the Borrowers irrevocably waives, to the fullest extent
permitted by law, any objection that it may now or hereafter have to the laying
of the venue of any such suit, action or proceeding brought in any such court
and any claim that any such suit, action or proceeding brought in any such court
has been brought in an inconvenient forum. Final judgment in any such suit,
action or proceeding brought in any such court shall be conclusive and binding
upon the applicable Borrower and may be enforced in any court in which the
Borrower is subject to jurisdiction, by a suit upon such judgment, provided that
service of process is effected upon the applicable Borrower in one of the
manners specified in this Section or as otherwise permitted by applicable Laws.
8.9.3 Agent for Service.
------------------
Each of the Borrowers hereby irrevocably designates and appoints CT
Corporation System, 300 East Lombard Street, Baltimore, Maryland 21202, as the
Borrower's authorized agent to receive on the Borrower's behalf service of any
and all process that may be served in any suit, action or proceeding of the
nature referred to in this Section in any state or federal court sitting in the
State. If such agent shall cease so to act, each Borrower shall irrevocably
designate and appoint without delay another such agent in the State satisfactory
to the Lender and shall promptly deliver to the Lender evidence in writing of
such other agent's acceptance of such appointment and its agreement that such
appointment shall be irrevocable.
8.9.4 Service of Process.
-------------------
Each of the Borrowers hereby consents to process being served in any
suit, action or proceeding of the nature referred to in this Section by (i) the
mailing of a copy thereof by registered or certified mail, postage prepaid,
return receipt requested, to the Borrower at the address designated for notice
in or pursuant to Section 8.1 hereof, and (ii) serving a copy thereof upon the
agent, if any, designated and appointed by the Borrowers as the Borrower's agent
for service of process by or pursuant to this Section. Each of the Borrowers
irrevocably agrees that such service (i) shall be deemed in every respect
effective service of process upon the Borrowers in any such suit, action or
proceeding, and (ii) shall, to the fullest extent permitted by law, be taken and
held to be valid personal service upon the Borrowers. Nothing in this Section
shall affect the right of the Lender to serve process in any manner otherwise
permitted by law or limit the right of the Lender otherwise to bring proceedings
against any one or more of the Borrowers in the courts of any jurisdiction or
jurisdictions.
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Section 8.10 Duplicate Originals and Counterparts.
------------------------------------
This Agreement may be executed in any number of duplicate originals or
counterparts, each of such duplicate originals or counterparts shall be deemed
to be an original and all taken together shall constitute but one and the same
instrument.
Section 8.11 Headings.
--------
The headings in this Agreement are included herein for convenience only,
shall not constitute a part of this Agreement for any other purpose, and shall
not be deemed to affect the meaning or construction of any of the provisions
hereof.
Section 8.12 No Agency.
---------
Nothing herein contained shall be construed to constitute the Borrowers as
the Lender's agent for any purpose whatsoever or to permit the Borrowers to
pledge any of the Lender's credit. The Lender shall not be responsible nor
liable for any shortage, discrepancy, damage, loss or destruction of any part of
the Collateral wherever the same may be located and regardless of the cause
thereof. The Lender shall not, by anything herein or in any of the Financing
Documents or otherwise, assume any of the Borrowers' obligations under any
contract or agreement assigned to the Lender, and the Lender shall not be
responsible in any way for the performance by the Borrowers of any of the terms
and conditions thereof.
Section 8.13 Date of Payment.
---------------
Should the principal of or interest on the Notes become due and payable on
other than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day and in the case of principal, interest shall be payable
thereon at the rate per annum specified in the Notes during such extension.
Section 8.14 Entire Agreement.
----------------
This Agreement is intended by the Lender and the Borrowers to be a
complete, exclusive and final expression of the agreements contained herein.
Neither the Lender nor the Borrowers shall hereafter have any rights under any
prior agreements pertaining to the matters addressed by this Agreement but shall
look solely to this Agreement for definition and determination of all of their
respective rights, liabilities and responsibilities under this Agreement.
Section 8.15 Waiver of Trial by Jury.
-----------------------
THE BORROWERS AND THE LENDER HEREBY JOINTLY AND SEVERALLY WAIVE TRIAL BY
JURY IN ANY ACTION OR PROCEEDING TO WHICH THE BORROWERS AND THE LENDER MAY BE
PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO (A) THIS AGREEMENT, (B) ANY
OF THE FINANCING DOCUMENTS, OR (C) THE COLLATERAL. THIS WAIVER CONSTITUTES A
WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL
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PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE
NOT PARTIES TO THIS AGREEMENT.
This waiver is knowingly, willingly and voluntarily made by the Borrowers
and the Lender, and the Borrowers and the Lender hereby represent that no
representations of fact or opinion have been made by any individual to induce
this waiver of trial by jury or to in any way modify or nullify its effect. The
Borrowers and the Lender further represent that they have been represented in
the signing of this Agreement and in the making of this waiver by independent
legal counsel, selected of their own free will, and that they have had the
opportunity to discuss this waiver with counsel.
Section 8.16 Liability of the Lender.
-----------------------
The Borrowers hereby agree that the Lender shall not be chargeable for any
negligence, mistake, act or omission, except the gross negligence or willful
misconduct, of any accountant, examiner, agency or attorney employed by the
Lender in making examinations, investigations or collections, or otherwise in
perfecting, maintaining, protecting or realizing upon any lien or security
interest or any other interest in the Collateral or other security for the
Obligations.
By inspecting the Collateral or any other properties of the Borrowers or by
accepting or approving anything required to be observed, performed or fulfilled
by the Borrowers or to be given to the Lender pursuant to this Agreement or any
of the other Financing Documents, the Lender shall not be deemed to have
warranted or represented the condition, sufficiency, legality, effectiveness or
legal effect of the same, and such acceptance or approval shall not constitute
any warranty or representation with respect thereto by the Lender.
Section 8.17 Confidentiality.
---------------
The Lender agrees to take reasonable precautions to maintain the
confidentiality of information designated in writing as confidential and
provided to it by any Borrower in connection with this Agreement; provided,
--------
however, that the Lender may disclose such information (i) at the request of any
- -------
bank regulatory authority or other Governmental Authority or in connection with
an examination of such Lender by any such Governmental Authority, (ii) pursuant
to subpoena or other court process, (iii) to the extent the Lender is required
(or believes in good faith that it is required) to do so in accordance with any
applicable Law, (iv) to the Lender's independent auditors and other professional
advisors, (v) in connection with the enforcement of any of its rights under or
under applicable Laws in connection with any Financing Document or any of the
Obligations, (vi) in connection with credit inquiries from the Borrower's trade
creditors, and (vii) to any actual or potential participant, assignee or other
transferee, so long as, in the case of this clause (vii), such actual or
potential participant, assignee or transferee agrees to comply with the
provisions of this Section.
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IN WITNESS WHEREOF, each of the parties hereto have executed and delivered
this Agreement under their respective seals as of the day and year first written
above.
WITNESS OR ATTEST: NATIONSBANK, N.A.
/s/ Carole Furner By: /s/ Stephen V. Rieger (Seal)
- --------------------------- -----------------------------------
Stephen V. Rieger
Vice President
WITNESS OR ATTEST: COYNE INTERNATIONAL ENTERPRISES CORP.
OHIO GARMENT RENTAL, INC.
BLUE RIDGE TEXTILE
MANUFACTURING, INC.
MIDWAY-CTS BUFFALO, LTD.
CLEAN TOWEL SERVICE, INC.
/s/ Thomas E. Krebbecks By: /s/ Donald F. X. Keegan (Seal)
- --------------------------- ----------------------------------
Donald F. X. Keegan
Vice President and Chief Financial
Officer for each
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LIST OF EXHIBITS*
A-1. Revolving Credit Note
A-2. Acquisition Note
A-3. Acquisition Loan Installment Payment Schedule
A-4. Capital Expenditure Line Note
A-5 Capital Expenditure Line Installment Payment Schedule
B. Wire Transfer Procedures
* Exhibits A-1, A-2 and A-4 of this Agreement are filed as Exhibits 10.2,
10.4 and 10.3, respectively of this Registration Statement. Exhibit B has been
omitted.
<PAGE>
Exhibit A-3 to Financing And Security Agreement
-----------------------------------------------
ACQUISITION LOAN INSTALLMENT PAYMENT SCHEDULE
---------------------------------------------
THIS ACQUISITION LOAN INSTALLMENT PAYMENT SCHEDULE is furnished as of
______________, ______, by COYNE INTERNATIONAL ENTERPRISES CORP., a corporation
organized under the laws of the State of New York ("Coyne"), to NATIONSBANK,
N.A., a national banking association (the "Lender"), pursuant to Section 2.3.3
of the Amended and Restated Financing and Security Agreement dated June __, 1998
(as amended, modified, restated, substituted, extended and renewed at any time
and from time to time, the "Financing Agreement"), by and among Coyne, the
parties identified as the "Borrowers" in the Financing Agreement, and the
Lender.
I, ______________________, hereby certify that I am the __________________
of Coyne and am a Responsible Officer (as that term is defined in the Financing
Agreement) authorized to certify to the Lender on behalf of the Borrowers as
follows:
1. This Schedule is given to induce the Lenders to make an advance to
_________________________ in the amount of $___________________ under the
Acquisition Loan (as that term is defined in the Financing Agreement).
2. Immediately after the advance described in paragraph 1, the aggregate
outstanding principal balance of the Acquisition Loan shall be
$___________________.
3. The aggregate of all installment payments of principal due and payable
after the advance described in paragraph 1 on all Acquisition Loan advances
shall be $_____________ quarterly commencing _______________, _______ and on the
first day of each June, September, December and March after the date of such
advance.
IN WITNESS WHEREOF, Coyne has executed and delivered this Acquisition Loan
Payment Schedule on behalf of the Borrowers under seal as of the day and year
first written above.
WITNESS: COYNE INTERNATIONAL ENTERPRISES CORP.
________________________ By:____________________________(Seal)
Thomas M. Coyne
President
<PAGE>
Exhibit A-5 to Financing And Security Agreement
-----------------------------------------------
CAPITAL EXPENDITURE LINE INSTALLMENT PAYMENT SCHEDULE
THIS CAPITAL EXPENDITURE LINE INSTALLMENT PAYMENT SCHEDULE is furnished as
of ______________, 200_, by COYNE INTERNATIONAL ENTERPRISES CORP., a corporation
organized under the laws of the State of New York ("Coyne"), to NATIONSBANK,
N.A., a national banking association (the "Lender"), pursuant to Section 2.4.4
of the Amended and Restated Financing and Security Agreement dated June __, 1998
(as amended, modified, restated, substituted, extended and renewed at any time
and from time to time, the "Financing Agreement"), by and among Coyne, the
parties identified as the "Borrowers" in the Financing Agreement and the Lender.
I, ______________________, hereby certify that I am the __________________
of Coyne and am a Responsible Officer (as that term is defined in the Financing
Agreement) authorized to certify to the Lender on behalf of the Borrowers as
follows:
1. This Schedule is given to induce the Lenders to make an advance to
_________________________ in the amount of $___________________ under the
Capital Expenditure Line (as that term is defined in the Financing Agreement).
2. Immediately after the advance described in paragraph 1, the aggregate
outstanding principal balance of the Capital Expenditure Line shall be
$___________________.
3. The aggregate of all installment payments of principal due and payable
after the advance described in paragraph 1 on all Capital Expenditure Line
advances shall be $_____________ quarterly commencing _______________, _______
and on the first day of each June, September, December and March after the date
of such advance.
IN WITNESS WHEREOF, Coyne has executed and delivered this Capital
Expenditure Line Payment Schedule on behalf of the Borrowers under seal as of
the day and year first written above.
WITNESS: COYNE INTERNATIONAL ENTERPRISES CORP.
________________________ By:____________________________(Seal)
Thomas M. Coyne
President
<PAGE>
LIST OF SCHEDULES*
Schedule 2.5.1 Applicable Interest Rate Provisions
--------------
Schedule 4.1.6 Defaults
--------------
Schedule 4.1.10 Litigation
---------------
Schedule 4.1.13 Other Indebtedness for Borrowed Money
---------------
Schedule 4.1.19 Hazardous Materials
---------------
Schedule 4.1.20 Other Permitted Liens
---------------
* Schedules 4.1.6, 4.1.10, 4.1.13, 4.1.19 and 4.1.20 have been omitted. Upon
request, the Company will provide such Schedules to the Commission.
<PAGE>
SCHEDULE 2.5.1 APPLICABLE INTEREST RATE PROVISIONS
--------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Applicable Applicable Margin
Margin for for Base Rate Loans
Credit Facility Eurodollar Loans (basis points)
(basis points)
- -------------------------------------------------------------------------
<S> <C> <C>
Revolving Loan 225 37.5
- -------------------------------------------------------------------------
apital Expenditure Line 250 62.5
- -------------------------------------------------------------------------
Acquisition Loan 250 62.5
- -------------------------------------------------------------------------
</TABLE>
2
<PAGE>
EXHIBIT 10.2
REVOLVING CREDIT NOTE
---------------------
$25,000,000 Baltimore, Maryland
June 26, 1998
FOR VALUE RECEIVED, COYNE INTERNATIONAL ENTERPRISES CORP., a corporation
organized under the laws of the State of New York, BLUE RIDGE TEXTILE
MANUFACTURING, INC., a corporation organized under the laws of the State of
Georgia, OHIO GARMENT RENTAL, INC., a corporation organized under the laws of
the State of Ohio, MIDWAY-CTS BUFFALO, LTD., a corporation organized under the
laws of the State of New York, and CLEAN TOWEL SERVICE, INC., a corporation
organized under the laws of the State of Georgia (each of the foregoing
corporations, a "Borrower" and collectively, the "Borrowers"), jointly and
severally, promise to pay to the order of NATIONSBANK, N.A., a national banking
association (the "Lender") TWENTY-FIVE MILLION DOLLARS ($25,000,000) (the
"Principal Sum"), or so much thereof as has been or may be advanced or
readvanced to or for the account of the Borrowers pursuant to the terms and
conditions of the Financing Agreement (as hereinafter defined), together with
interest thereon at the rate or rates hereinafter provided, in accordance with
the following:
1. Interest.
--------
Commencing as of the date hereof and continuing until repayment in full of
all sums due hereunder, the unpaid Principal Sum shall bear interest at the
Applicable Interest Rate or the Post-Default Rate in effect from time to time
for the Revolving Loan. The Applicable Interest Rate shall be determined in the
manner provided in the Financing Agreement.
2. Payments and Maturity.
---------------------
The unpaid Principal Sum, together with interest thereon at the rate or
rates provided above, shall be payable as follows:
(a) Interest only on the unpaid Principal Sum shall be due and
payable at the times provided in Section 2.5.5 of the Financing Agreement; and
(b) Unless sooner paid, the unpaid Principal Sum, together with
interest accrued and unpaid thereon, shall be due and payable in full on the
Revolving Credit Expiration Date.
The fact that the balance hereunder may be reduced to zero from time to
time pursuant to the Financing Agreement will not affect the continuing validity
of this Note or the Financing Agreement, and the balance may be increased to the
Principal Sum after any such reduction to zero.
3. Default Interest.
----------------
During the continuation of an Event of Default (as hereinafter defined),
the unpaid Principal Sum shall bear interest thereafter at the Post-Default Rate
until such Event of Default is cured.
<PAGE>
4. Late Charges.
------------
If the Borrowers shall fail to make any payment under the terms of this
Note within ten (10) days after the date such payment is due, the Borrowers
shall pay to the Lender on demand a late charge equal to five percent (5%) of
such payment.
5. Application and Place of Payments.
---------------------------------
All payments made on account of this Note shall be applied first to the
payment of any prepayment fee then due hereunder, second to the payment of
accrued and unpaid interest then due hereunder, and the remainder, if any, shall
be applied to the unpaid Principal Sum, with application first made to all
principal installments then due hereunder, next to the outstanding principal
balance due and owing at maturity and thereafter to the principal payments due
in the inverse order of maturities. All payments on account of this Note shall
be paid in lawful money of the United States of America in immediately available
funds during regular business hours of the Lender at its principal office in
Baltimore, Maryland or at such other times and places as the Lender may at any
time and from time to time designate in writing to the Borrowers.
6. Prepayment.
----------
The Borrowers may prepay (and reborrow) the Principal Sum at the times and
in the manner provided in the Financing Agreement.
7. Financing Agreement and Other Financing Documents.
-------------------------------------------------
This Note is the "Revolving Credit Note" described in a Financing and
Security Agreement of even date herewith by and between the Borrowers and the
Lender (as amended, modified, restated, substituted, extended and renewed at any
time and from time to time, the "Financing Agreement"). All terms used in this
Note which are not otherwise defined herein shall have the meanings set forth in
the Financing Agreement. The indebtedness evidenced by this Note is included
within the meaning of the term "Obligations" as defined in the Financing
Agreement. The term "Financing Documents" as used in this Note shall mean
collectively this Note, the Financing Agreement and any other instrument,
agreement, or document previously, simultaneously, or hereafter executed and
delivered by the Borrowers and/or any other person, singularly or jointly with
any other person, evidencing, securing, guaranteeing, or in connection with the
Principal Sum, this Note and/or the Financing Agreement.
8. Security.
--------
This Note is secured as provided in the Financing Agreement.
9. Events of Default.
-----------------
The occurrence of any one or more of the following events shall constitute
an event of default (individually, an "Event of Default" and collectively, the
"Events of Default") under the terms of this Note:
(a) The failure of the Borrowers to pay to the Lender when due any
and all amounts payable by the Borrowers to the Lender under the terms of this
Note; or
-2-
<PAGE>
(b) The occurrence of an Event of Default under the Financing
Agreement.
10. Remedies.
--------
Upon the occurrence of an Event of Default, at the option of the Lender,
all amounts payable by the Borrowers to the Lender under the terms of this Note
shall immediately become due and payable by the Borrowers to the Lender without
notice to the Borrowers or any other person, and the Lender shall have all of
the rights, powers, and remedies available under the terms of this Note, any of
the other Financing Documents and all applicable laws. The Borrowers and all
endorsers, guarantors, and other parties who may now or in the future be
primarily or secondarily liable for the payment of the indebtedness evidenced by
this Note hereby severally waive presentment, protest and demand, notice of
protest, notice of demand and of dishonor and non-payment of this Note and
expressly agree that this Note or any payment hereunder may be extended from
time to time without in any way affecting the liability of the Borrowers,
guarantors and endorsers.
11. Expenses.
--------
The Borrowers, jointly and severally, promise to pay to the Lender on
demand by the Lender all costs and expenses incurred by the Lender in connection
with the collection and enforcement of this Note, including, without limitation,
reasonable attorneys' fees and expenses and all court costs.
12. Notices.
-------
Any notice, request, or demand to or upon the Borrowers or the Lender shall
be deemed to have been properly given or made when delivered in accordance with
Section 8.1 of the Financing Agreement.
13. Miscellaneous.
-------------
Each right, power, and remedy of the Lender as provided for in this Note or
any of the other Financing Documents, or now or hereafter existing under any
applicable law or otherwise shall be cumulative and concurrent and shall be in
addition to every other right, power, or remedy provided for in this Note or any
of the other Financing Documents or now or hereafter existing under any
applicable law, and the exercise or beginning of the exercise by the Lender of
any one or more of such rights, powers, or remedies shall not preclude the
simultaneous or later exercise by the Lender of any or all such other rights,
powers, or remedies. No failure or delay by the Lender to insist upon the
strict performance of any term, condition, covenant, or agreement of this Note
or any of the other Financing Documents, or to exercise any right, power, or
remedy consequent upon a breach thereof, shall constitute a waiver of any such
term, condition, covenant, or agreement or of any such breach, or preclude the
Lender from exercising any such right, power, or remedy at a later time or
times. By accepting payment after the due date of any amount payable under the
terms of this Note, the Lender shall not be deemed to waive the right either to
require prompt payment when due of all other amounts payable under the terms of
this Note or to declare an Event of Default for the failure to effect such
prompt payment of any such other amount. No course of dealing or conduct shall
be effective to amend, modify, waive, release, or change any provisions of this
Note.
-3-
<PAGE>
14. Partial Invalidity.
------------------
In the event any provision of this Note (or any part of any provision) is
held by a court of competent jurisdiction to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision (or remaining part of the affected
provision) of this Note; but this Note shall be construed as if such invalid,
illegal, or unenforceable provision (or part thereof) had not been contained in
this Note, but only to the extent it is invalid, illegal, or unenforceable.
15. Captions.
--------
The captions herein set forth are for convenience only and shall not be
deemed to define, limit, or describe the scope or intent of this Note.
16. Applicable Law.
--------------
The Borrowers acknowledge and agrees that this Note shall be governed by
the laws of the State of Maryland, even though for the convenience and at the
request of the Borrowers, this Note may be executed elsewhere.
17. Consent to Jurisdiction.
-----------------------
Each Borrower irrevocably submits to the jurisdiction of any state or
federal court sitting in the State of Maryland over any suit, action, or
proceeding arising out of or relating to this Note or any of the other Financing
Documents. Each Borrower irrevocably waives, to the fullest extent permitted by
law, any objection that such Borrower may now or hereafter have to the laying of
venue of any such suit, action, or proceeding brought in any such court and any
claim that any such suit, action, or proceeding brought in any such court has
been brought in an inconvenient forum. Final judgment in any such suit, action,
or proceeding brought in any such court shall be conclusive and binding upon
such Borrower and may be enforced in any court in which such Borrower is subject
to jurisdiction by a suit upon such judgment, provided that service of process
is effected upon such Borrower as provided in this Note or as otherwise
permitted by applicable law.
18. Service of Process.
------------------
Each Borrower hereby irrevocably designates and appoints CT Corporation
System, 300 East Lombard Street, Baltimore, Maryland, 21202, as such Borrower's
authorized agent to receive on such Borrower's behalf service of any and all
process that may be served in any suit, action, or proceeding instituted in
connection with this Note in any state or federal court sitting in the State of
Maryland. If such agent shall cease so to act, such Borrower shall irrevocably
designate and appoint without delay another such agent in the State of Maryland
satisfactory to the Lender and shall promptly deliver to the Lender evidence in
writing of such agent's acceptance of such appointment and its agreement that
such appointment shall be irrevocable.
Each Borrower hereby consents to process being served in any suit, action,
or proceeding instituted in connection with this Note by (a) the mailing of a
copy thereof by certified mail, postage prepaid, return receipt requested, to
such Borrower and (b) serving a copy thereof upon CT Corporation System, the
agent hereinabove designated and appointed by such Borrower as such Borrower's
agent for service of process. Each Borrower irrevocably agrees that such
service shall be
-4-
<PAGE>
deemed in every respect effective service of process upon such Borrower in any
such suit, action or proceeding, and shall, to the fullest extent permitted by
law, be taken and held to be valid personal service upon such Borrower. Nothing
in this Section shall affect the right of the Lender to serve process in any
manner otherwise permitted by law or limit the right of the Lender otherwise to
bring proceedings against such Borrower in the courts of any jurisdiction or
jurisdictions.
19. WAIVER OF TRIAL BY JURY.
-----------------------
EACH OF THE BORROWERS HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO WHICH THE BORROWERS, OR EITHER OF THEM, AND THE LENDER MAY BE
PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO (A) THIS NOTE OR (B) THE
FINANCING DOCUMENTS. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A
WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR
PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS NOTE.
THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY THE BORROWERS,
AND THE BORROWERS HEREBY REPRESENT THAT NO REPRESENTATIONS OF FACT OR OPINION
HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN
ANY WAY MODIFY OR NULLIFY ITS EFFECT. THE BORROWERS FURTHER REPRESENT THAT THEY
HAVE BEEN REPRESENTED IN THE SIGNING OF THIS NOTE AND IN THE MAKING OF THIS
WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT
HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.
IN WITNESS WHEREOF, the Borrowers have caused this Note to be executed
under seal by its duly authorized partners/officers as of the date first written
above.
WITNESS OR ATTEST: COYNE INTERNATIONAL ENTERPRISES CORP.
OHIO GARMENT RENTAL, INC.
BLUE RIDGE TEXTILE
MANUFACTURING, INC.
MIDWAY-CTS BUFFALO, LTD.
CLEAN TOWEL SERVICE, INC.
____________________________ By: /s/ Donald F. X. Keegan (Seal)
------------------------
Donald F. X. Keegan
Vice President and Chief Financial
Officer for each
-5-
<PAGE>
EXHIBIT 10.3
CAPITAL EXPENDITURE LINE NOTE
-----------------------------
$10,000,000 Baltimore, Maryland
June 26, 1998
FOR VALUE RECEIVED, COYNE INTERNATIONAL ENTERPRISES CORP., a corporation
organized under the laws of the State of New York, BLUE RIDGE TEXTILE
MANUFACTURING, INC., a corporation organized under the laws of the State of
Georgia, OHIO GARMENT RENTAL, INC., a corporation organized under the laws of
the State of Ohio, MIDWAY-CTS BUFFALO, LTD., a corporation organized under the
laws of the State of New York, and CLEAN TOWEL SERVICE, INC., a corporation
organized under the laws of the State of Georgia (each of the foregoing
corporations, a "Borrower" and collectively, the "Borrowers"), jointly and
severally, promise to pay to the order of NATIONSBANK, N.A., a national banking
association (the "Lender"), the principal sum of TEN MILLION DOLLARS
($10,000,000) (the "Principal Sum"), or so much thereof as has been or may be
advanced or readvanced under the Capital Expenditure Line, to or for the account
of the Borrowers pursuant to the terms and conditions of the Financing Agreement
(as hereinafter defined), together with interest thereon at the rate or rates
hereinafter provided, in accordance with the following:
1. Interest.
--------
Commencing as of the date hereof and continuing until repayment in full of
all sums due hereunder, the unpaid Principal Sum shall bear interest at the
Applicable Interest Rate or the Post-Default Rate in effect from time to time
for the Capital Expenditure Line. The Applicable Interest Rate shall be
determined in the manner provided in the Financing Agreement.
2. Payments and Maturity.
---------------------
The unpaid Principal Sum, together with interest thereon at the rate or
rates provided above, shall be payable as follows:
(a) Interest only on the unpaid Principal Sum shall be due and
payable at the times provided in Section 2.5.5 of the Financing Agreement; and
(b) The Borrowers shall pay installments of principal in accordance
with the Capital Expenditure Line Installment Payment Schedule at the times and
in the manner set forth in Section 2.4.4 of the Financing Agreement; and
(c) Unless sooner paid, the unpaid Principal Sum, together with
interest accrued and unpaid thereon, shall be due and payable in full on the
earlier of the Capital Expenditure Line Maturity Date or the Revolving Credit
Termination Date.
The fact that the balance hereunder may be reduced to zero from time to
time pursuant to the Financing Agreement will not affect the continuing validity
of this Note or the Financing Agreement, and the balance may be increased to the
Principal Sum after any such reduction to zero.
<PAGE>
3. Default Interest.
----------------
During the continuation of an Event of Default, the unpaid Principal Sum
shall bear interest at the Post-Default Rate until such Event of Default is
cured.
4. Late Charges.
If the Borrowers shall fail to make any payment under the terms of this
Note within ten (10) days after the date such payment is due, the Borrowers
shall pay to the Lender on demand a late charge equal to five percent (5%) of
such payment.
5. Application and Place of Payments.
---------------------------------
All payments made on account of this Note shall be applied in the manner
provided in the Financing Agreement. All payments on account of this Note shall
be paid in lawful money of the United States of America in immediately available
funds during regular business hours of the Lender at its principal office in
Baltimore, Maryland or at such other times and places as the Lender may at any
time and from time to time designate in writing to the Borrower.
6. Prepayment.
----------
The Borrowers may prepay the Principal Sum at the times and in the manner
provided in the Financing Agreement.
7. Financing Agreement and Other Financing Documents.
-------------------------------------------------
This Note is the "Capital Expenditure Line Note" described in a Financing
and Security Agreement of even date herewith by and between the Lender and the
Borrowers (as amended, modified, restated, substituted, extended and renewed at
any time and from time to time, the "Financing Agreement"). All terms used in
this Note which are not otherwise defined herein shall have the meaning set
forth in the Financing Agreement. The indebtedness evidenced by this Note is
included within the meaning of the term "Obligations" as defined in the
Financing Agreement. The term "Financing Documents" as used in this Note shall
mean collectively this Note, the Financing Agreement and any other instrument,
agreement, or document previously, simultaneously, or hereafter executed and
delivered by the Borrowers and/or any other person, singularly or jointly with
any other person, evidencing, securing, guaranteeing, or in connection with the
Principal Sum, this Note and/or the Financing Agreement.
8. Security.
--------
This Note is secured as provided in the Financing Agreement.
9. Events of Default.
-----------------
The occurrence of any one or more of the following events shall constitute
an event of default (individually, an "Event of Default" and collectively, the
"Events of Default") under the terms of this Note:
-2-
<PAGE>
(a) The failure of the Borrowers to pay to the Lender when due any and
all amounts payable by the Borrowers to the Lender under the terms of this Note;
or
(b) The occurrence of an Event of Default under the Financing
Agreement.
1. Remedies.
--------
Upon the occurrence of an Event of Default, at the option of the Lender,
all amounts payable by the Borrowers to the Lender under the terms of this Note
shall immediately become due and payable by the Borrowers to the Lender without
notice to the Borrowers or any other person, and the Lender shall have all of
the rights, powers, and remedies available under the terms of this Note, any of
the other Financing Documents and all applicable laws. The Borrowers and all
endorsers, guarantors, and other parties who may now or in the future be
primarily or secondarily liable for the payment of the indebtedness evidenced by
this Note hereby severally waive presentment, protest and demand, notice of
protest, notice of demand and of dishonor and non-payment of this Note and
expressly agree that this Note or any payment hereunder may be extended from
time to time without in any way affecting the liability of the Borrowers,
guarantors and endorsers.
2. Expenses.
--------
The Borrowers, jointly and severally, promise to pay to the Lender on
demand by the Lender all costs and expenses incurred by the Lender in connection
with the collection and enforcement of this Note, including, without limitation,
reasonable attorneys' fees and expenses and all court costs.
3. Notices.
-------
Any notice, request, or demand to or upon the Borrowers or the Lender shall
be deemed to have been properly given or made when delivered in accordance with
Section 8.1 of the Financing Agreement.
4. Miscellaneous.
-------------
Each right, power, and remedy of the Lender as provided for in this Note or
any of the other Financing Documents, or now or hereafter existing under any
applicable law or otherwise shall be cumulative and concurrent and shall be in
addition to every other right, power, or remedy provided for in this Note or any
of the other Financing Documents or now or hereafter existing under any
applicable law, and the exercise or beginning of the exercise by the Lender of
any one or more of such rights, powers, or remedies shall not preclude the
simultaneous or later exercise by the Lender of any or all such other rights,
powers, or remedies. No failure or delay by the Lender to insist upon the strict
performance of any term, condition, covenant, or agreement of this Note or any
of the other Financing Documents, or to exercise any right, power, or remedy
consequent upon a breach thereof, shall constitute a waiver of any such term,
condition, covenant, or agreement or of any such breach, or preclude the Lender
from exercising any such right, power, or remedy at a later time or times. By
accepting payment after the due date of any amount payable under the terms of
this Note, the Lender shall not be deemed to waive the right either to require
prompt payment when due of all other amounts payable under
-3-
<PAGE>
the terms of this Note or to declare an Event of Default for the failure to
effect such prompt payment of any such other amount. No course of dealing or
conduct shall be effective to amend, modify, waive, release, or change any
provisions of this Note.
5. Partial Invalidity.
------------------
In the event any provision of this Note (or any part of any provision) is
held by a court of competent jurisdiction to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision (or remaining part of the affected
provision) of this Note; but this Note shall be construed as if such invalid,
illegal, or unenforceable provision (or part thereof) had not been contained in
this Note, but only to the extent it is invalid, illegal, or unenforceable.
6. Captions.
--------
The captions herein set forth are for convenience only and shall not be
deemed to define, limit, or describe the scope or intent of this Note.
7. Applicable Law.
--------------
The Borrowers acknowledge and agrees that this Note shall be governed by
the laws of the State of Maryland, even though for the convenience and at the
request of the Borrowers, this Note may be executed elsewhere.
8. Consent to Jurisdiction.
-----------------------
Each Borrower irrevocably submits to the jurisdiction of any state or
federal court sitting in the State of Maryland over any suit, action, or
proceeding arising out of or relating to this Note or any of the other Financing
Documents. Each Borrower irrevocably waives, to the fullest extent permitted by
law, any objection that such Borrower may now or hereafter have to the laying of
venue of any such suit, action, or proceeding brought in any such court and any
claim that any such suit, action, or proceeding brought in any such court has
been brought in an inconvenient forum. Final judgment in any such suit, action,
or proceeding brought in any such court shall be conclusive and binding upon
such Borrower and may be enforced in any court in which such Borrower is subject
to jurisdiction by a suit upon such judgment, provided that service of process
is effected upon such Borrower as provided in this Note or as otherwise
permitted by applicable law.
9. Service of Process.
------------------
Each Borrower hereby irrevocably designates and appoints CT Corporation
System, 300 East Lombard Street, Baltimore, Maryland, 21202, as such Borrower's
authorized agent to receive on such Borrower's behalf service of any and all
process that may be served in any suit, action, or proceeding instituted in
connection with this Note in any state or federal court sitting in the State of
Maryland. If such agent shall cease so to act, such Borrower shall irrevocably
designate and appoint without delay another such agent in the State of Maryland
satisfactory to the Lender and shall promptly deliver to the Lender evidence in
writing of such agent's acceptance of such appointment and its agreement that
such appointment shall be irrevocable.
-4-
<PAGE>
Each Borrower hereby consents to process being served in any suit, action,
or proceeding instituted in connection with this Note by (a) the mailing of a
copy thereof by certified mail, postage prepaid, return receipt requested, to
such Borrower and (b) serving a copy thereof upon CT Corporation System, the
agent hereinabove designated and appointed by such Borrower as such Borrower's
agent for service of process. Each Borrower irrevocably agrees that such
service shall be deemed in every respect effective service of process upon such
Borrower in any such suit, action or proceeding, and shall, to the fullest
extent permitted by law, be taken and held to be valid personal service upon
such Borrower. Nothing in this Section shall affect the right of the Lender to
serve process in any manner otherwise permitted by law or limit the right of the
Lender otherwise to bring proceedings against such Borrower in the courts of any
jurisdiction or jurisdictions.
10. WAIVER OF TRIAL BY JURY.
-----------------------
EACH OF THE BORROWERS HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO WHICH THE BORROWERS, OR EITHER OF THEM, AND THE LENDER MAY BE
PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO (A) THIS NOTE OR (B) THE
FINANCING DOCUMENTS. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A
WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR
PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS NOTE.
THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY THE BORROWERS,
AND THE BORROWERS HEREBY REPRESENT THAT NO REPRESENTATIONS OF FACT OR OPINION
HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN
ANY WAY MODIFY OR NULLIFY ITS EFFECT. THE BORROWERS FURTHER REPRESENT THAT THEY
HAVE BEEN REPRESENTED IN THE SIGNING OF THIS NOTE AND IN THE MAKING OF THIS
WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT
HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.
WITNESS OR ATTEST: COYNE INTERNATIONAL ENTERPRISES CORP.
OHIO GARMENT RENTAL, INC.
BLUE RIDGE TEXTILE
MANUFACTURING, INC.
MIDWAY-CTS BUFFALO, LTD.
CLEAN TOWEL SERVICE, INC.
____________________________ By: /s/ Donald F. X. Keegan (Seal)
------------------------
Donald F. X. Keegan
Vice President and Chief Financial
Officer for each
-5-
<PAGE>
EXHIBIT 10.4
ACQUISITION LOAN NOTE
---------------------
$10,000,000 Baltimore, Maryland
June 26, 1998
FOR VALUE RECEIVED, COYNE INTERNATIONAL ENTERPRISES CORP., a corporation
organized under the laws of the State of New York, BLUE RIDGE TEXTILE
MANUFACTURING, INC., a corporation organized under the laws of the State of
Georgia, OHIO GARMENT RENTAL, INC., a corporation organized under the laws of
the State of Ohio, MIDWAY-CTS BUFFALO, LTD., a corporation organized under the
laws of the State of New York, and CLEAN TOWEL SERVICE, INC., a corporation
organized under the laws of the State of Georgia (each of the foregoing
corporations, a "Borrower" and collectively, the "Borrowers"), jointly and
severally, promise to pay to the order of NATIONSBANK, N.A., a national banking
association (the "Lender"), the principal sum of TEN MILLION DOLLARS
($10,000,000) (the "Principal Sum"), or so much thereof as has been or may be
advanced or readvanced under the Acquisition Loan, to or for the account of the
Borrowers pursuant to the terms and conditions of the Financing Agreement (as
hereinafter defined), together with interest thereon at the rate or rates
hereinafter provided, in accordance with the following:
1. Interest.
--------
Commencing as of the date hereof and continuing until repayment in full of
all sums due hereunder, the unpaid Principal Sum shall bear interest at the
Applicable Interest Rate or the Post-Default Rate in effect from time to time
for the Acquisition Loan. The Applicable Interest Rate shall be determined in
the manner provided in the Financing Agreement.
2. Payments and Maturity.
---------------------
The unpaid Principal Sum, together with interest thereon at the rate or
rates provided above, shall be payable as follows:
(a) Interest only on the unpaid Principal Sum shall be due and
payable at the times provided in Section 2.5.5 of the Financing Agreement; and
(b) The Borrowers shall pay installments of principal in accordance
with the Acquisition Loan Installment Payment Schedule at the times and in the
manner set forth in Section 2.3.3 of the Financing Agreement; and
(c) Unless sooner paid, the unpaid Principal Sum, together with
interest accrued and unpaid thereon, shall be due and payable in full on the
earlier of the Acquisition Loan Maturity Date or the Revolving Credit
Termination Date.
The fact that the balance hereunder may be reduced to zero from time to
time pursuant to the Financing Agreement will not affect the continuing validity
of this Note or the Financing Agreement, and the balance may be increased to the
Principal Sum after any such reduction to zero.
<PAGE>
3. Default Interest.
----------------
During the continuation of an Event of Default, the unpaid Principal Sum
shall bear interest at the Post-Default Rate until such Event of Default is
cured.
4. Late Charges.
If the Borrowers shall fail to make any payment under the terms of this
Note within ten (10) days after the date such payment is due, the Borrowers
shall pay to the Lender on demand a late charge equal to five percent (5%) of
such payment.
5. Application and Place of Payments.
---------------------------------
All payments made on account of this Note shall be applied in the manner
provided in the Financing Agreement. All payments on account of this Note shall
be paid in lawful money of the United States of America in immediately available
funds during regular business hours of the Lender at its principal office in
Baltimore, Maryland or at such other times and places as the Lender may at any
time and from time to time designate in writing to the Borrower.
6. Prepayment.
----------
The Borrowers may prepay (and reborrow) the Principal Sum at the times and
in the manner provided in the Financing Agreement.
7. Financing Agreement and Other Financing Documents.
-------------------------------------------------
This Note is the "Acquisition Loan Note" described in a Financing and
Security Agreement of even date herewith by and between the Lender and the
Borrowers (as amended, modified, restated, substituted, extended and renewed at
any time and from time to time, the "Financing Agreement"). All terms used in
this Note which are not otherwise defined herein shall have the meaning set
forth in the Financing Agreement. The indebtedness evidenced by this Note is
included within the meaning of the term "Obligations" as defined in the
Financing Agreement. The term "Financing Documents" as used in this Note shall
mean collectively this Note, the Financing Agreement and any other instrument,
agreement, or document previously, simultaneously, or hereafter executed and
delivered by the Borrowers and/or any other person, singularly or jointly with
any other person, evidencing, securing, guaranteeing, or in connection with the
Principal Sum, this Note and/or the Financing Agreement.
8. Security.
--------
This Note is secured as provided in the Financing Agreement.
9. Events of Default.
-----------------
The occurrence of any one or more of the following events shall constitute
an event of default (individually, an "Event of Default" and collectively, the
"Events of Default") under the terms of this Note:
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<PAGE>
(a) The failure of the Borrowers to pay to the Lender when due any
and all amounts payable by the Borrowers to the Lender under the terms of this
Note; or
(b) The occurrence of an Event of Default under the Financing
Agreement.
1. Remedies.
--------
Upon the occurrence of an Event of Default, at the option of the Lender,
all amounts payable by the Borrowers to the Lender under the terms of this Note
shall immediately become due and payable by the Borrowers to the Lender without
notice to the Borrowers or any other person, and the Lender shall have all of
the rights, powers, and remedies available under the terms of this Note, any of
the other Financing Documents and all applicable laws. The Borrowers and all
endorsers, guarantors, and other parties who may now or in the future be
primarily or secondarily liable for the payment of the indebtedness evidenced by
this Note hereby severally waive presentment, protest and demand, notice of
protest, notice of demand and of dishonor and non-payment of this Note and
expressly agree that this Note or any payment hereunder may be extended from
time to time without in any way affecting the liability of the Borrowers,
guarantors and endorsers.
2. Expenses.
--------
The Borrowers, jointly and severally, promise to pay to the Lender on
demand by the Lender all costs and expenses incurred by the Lender in connection
with the collection and enforcement of this Note, including, without limitation,
reasonable attorneys' fees and expenses and all court costs.
3. Notices.
-------
Any notice, request, or demand to or upon the Borrowers or the Lender shall
be deemed to have been properly given or made when delivered in accordance with
Section 8.1 of the Financing Agreement.
4. Miscellaneous.
-------------
Each right, power, and remedy of the Lender as provided for in this Note or
any of the other Financing Documents, or now or hereafter existing under any
applicable law or otherwise shall be cumulative and concurrent and shall be in
addition to every other right, power, or remedy provided for in this Note or any
of the other Financing Documents or now or hereafter existing under any
applicable law, and the exercise or beginning of the exercise by the Lender of
any one or more of such rights, powers, or remedies shall not preclude the
simultaneous or later exercise by the Lender of any or all such other rights,
powers, or remedies. No failure or delay by the Lender to insist upon the strict
performance of any term, condition, covenant, or agreement of this Note or any
of the other Financing Documents, or to exercise any right, power, or remedy
consequent upon a breach thereof, shall constitute a waiver of any such term,
condition, covenant, or agreement or of any such breach, or preclude the Lender
from exercising any such right, power, or remedy at a later time or times. By
accepting payment after the due date of any amount payable under the terms of
this Note, the Lender shall not be deemed to waive the right either to require
prompt payment when due of all other amounts payable under
-3-
<PAGE>
the terms of this Note or to declare an Event of Default for the failure to
effect such prompt payment of any such other amount. No course of dealing or
conduct shall be effective to amend, modify, waive, release, or change any
provisions of this Note.
5. Partial Invalidity.
------------------
In the event any provision of this Note (or any part of any provision) is
held by a court of competent jurisdiction to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision (or remaining part of the affected
provision) of this Note; but this Note shall be construed as if such invalid,
illegal, or unenforceable provision (or part thereof) had not been contained in
this Note, but only to the extent it is invalid, illegal, or unenforceable.
6. Captions.
--------
The captions herein set forth are for convenience only and shall not be
deemed to define, limit, or describe the scope or intent of this Note.
7. Applicable Law.
--------------
The Borrowers acknowledge and agrees that this Note shall be governed by
the laws of the State of Maryland, even though for the convenience and at the
request of the Borrowers, this Note may be executed elsewhere.
8. Consent to Jurisdiction.
-----------------------
Each Borrower irrevocably submits to the jurisdiction of any state or
federal court sitting in the State of Maryland over any suit, action, or
proceeding arising out of or relating to this Note or any of the other Financing
Documents. Each Borrower irrevocably waives, to the fullest extent permitted by
law, any objection that such Borrower may now or hereafter have to the laying of
venue of any such suit, action, or proceeding brought in any such court and any
claim that any such suit, action, or proceeding brought in any such court has
been brought in an inconvenient forum. Final judgment in any such suit, action,
or proceeding brought in any such court shall be conclusive and binding upon
such Borrower and may be enforced in any court in which such Borrower is subject
to jurisdiction by a suit upon such judgment, provided that service of process
is effected upon such Borrower as provided in this Note or as otherwise
permitted by applicable law.
9. Service of Process.
------------------
Each Borrower hereby irrevocably designates and appoints CT Corporation
System, 300 East Lombard Street, Baltimore, Maryland, 21202, as such Borrower's
authorized agent to receive on such Borrower's behalf service of any and all
process that may be served in any suit, action, or proceeding instituted in
connection with this Note in any state or federal court sitting in the State of
Maryland. If such agent shall cease so to act, such Borrower shall irrevocably
designate and appoint without delay another such agent in the State of Maryland
satisfactory to the Lender and shall promptly deliver to the Lender evidence in
writing of such agent's acceptance of such appointment and its agreement that
such appointment shall be irrevocable.
-4-
<PAGE>
Each Borrower hereby consents to process being served in any suit, action,
or proceeding instituted in connection with this Note by (a) the mailing of a
copy thereof by certified mail, postage prepaid, return receipt requested, to
such Borrower and (b) serving a copy thereof upon CT Corporation System, the
agent hereinabove designated and appointed by such Borrower as such Borrower's
agent for service of process. Each Borrower irrevocably agrees that such
service shall be deemed in every respect effective service of process upon such
Borrower in any such suit, action or proceeding, and shall, to the fullest
extent permitted by law, be taken and held to be valid personal service upon
such Borrower. Nothing in this Section shall affect the right of the Lender to
serve process in any manner otherwise permitted by law or limit the right of the
Lender otherwise to bring proceedings against such Borrower in the courts of any
jurisdiction or jurisdictions.
10. WAIVER OF TRIAL BY JURY.
-----------------------
EACH OF THE BORROWERS HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO WHICH THE BORROWERS, OR EITHER OF THEM, AND THE LENDER MAY BE
PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO (A) THIS NOTE OR (B) THE
FINANCING DOCUMENTS. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A
WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR
PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS NOTE.
THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY THE BORROWERS,
AND THE BORROWERS HEREBY REPRESENT THAT NO REPRESENTATIONS OF FACT OR OPINION
HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN
ANY WAY MODIFY OR NULLIFY ITS EFFECT. THE BORROWERS FURTHER REPRESENT THAT THEY
HAVE BEEN REPRESENTED IN THE SIGNING OF THIS NOTE AND IN THE MAKING OF THIS
WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT
HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.
WITNESS OR ATTEST: COYNE INTERNATIONAL ENTERPRISES CORP.
OHIO GARMENT RENTAL, INC.
BLUE RIDGE TEXTILE MANUFACTURING, INC.
MIDWAY-CTS BUFFALO, LTD.
CLEAN TOWEL SERVICE, INC.
____________________________ By: /s/ Donald F. X. Keegan
------------------------------ (Seal)
Donald F. X. Keegan
Vice President and Chief Financial
Officer for each
-5-
<PAGE>
EXHIBIT 10.5
________________________________________________________________________________
________________________________________________________________________________
ERIE COUNTY INDUSTRIAL
DEVELOPMENT AGENCY
AND
MIDWAY-CTS BUFFALO, LTD.
____________________
LEASE AGREEMENT
____________________
Dated as of December 1, 1994
$2,600,000.00
Erie County Industrial Development Agency
Industrial Development Revenue Bond
(1994 Midway-CTS Buffalo Project)
________________________________________________________________________________
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE I INTRODUCTORY STATEMENTS................................................ 1
Section 1.1. Lease Agreement Terms Defined.......................... 1
Section 1.2. Construction of Words.................................. 1
Section 1.3. Nature and Functions of the Agency..................... 1
Section 1.4. Economic Development Purpose........................... 2
Section 1.5. Agency Resolutions Authorizing this Lease Agreement.... 2
Section 1.6. No Industry Relocation or Abandonment.................. 2
Section 1.7. Agency Bond Financing.................................. 2
Section 1.8. Limitation and Liability of the Agency, the State and
the County............................................. 3
Section 1.9. Representations and Warranties of the Lessee........... 3
Section 1.10. Inducement to Bondholder............................... 5
Section 1.11. Agency Litigation...................................... 5
Section 1.12. Prohibition Against Retail Sales....................... 6
ARTICLE II ISSUANCE OF BOND; CONVEYANCE OF PROPERTY; PROJECT COSTS, PERFORMANCE
AND COMPLETION......................................................... 6
Section 2.1. Issuance of Bond; Use of Proceeds...................... 6
Section 2.2. Conveyance of Property to the Agency................... 6
Section 2.3. Title Insurance........................................ 7
Section 2.4. Identification of Facility Equipment................... 7
Section 2.5. Responsibilities for Project Performance............... 7
Section 2.6. Payment and Disbursement of Project Costs.............. 8
Section 2.7. Expenses Chargeable to the Lessee...................... 8
Section 2.8. Completion of the Project; Status...................... 9
Section 2.9. Limitation on Sales Tax Exemption...................... 9
ARTICLE III LEASE OF FACILITY AND RENTAL PROVISIONS................................ 10
Section 3.1. Lease of the Facility; Duration........................ 10
Section 3.2. Occupation and Use of the Facility..................... 10
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<TABLE>
<S> <C>
Section 3.3. Rental Provisions...................................... 11
Section 3.4. Obligations of Lessee Unconditional.................... 12
Section 3.5. Assignment of Agency Rights............................ 12
Section 3.6. Grant of Security Interest to the Agency............... 12
Section 3.7. Assignment of Sublease................................. 13
ARTICLE IV MAINTENANCE, TAXES AND CHARGES, INSURANCE AND INDEMNITY................ 14
Section 4.1. Maintenance, Alterations, Improvements................. 14
Section 4.2. Taxes, Assessments and Charges......................... 16
Section 4.3. Insurance.............................................. 17
Section 4.4. Indemnity.............................................. 20
Section 4.5. Advances by Agency or Bondholder....................... 21
ARTICLE V DAMAGE TO AND CONDEMNATION OF THE FACILITY AND STATUS OF THE
PROJECT................................................................ 22
Section 5.1. Damage, Destruction and Condemnation................... 22
Section 5.2. No Warranty of Condition or Suitability................ 24
Section 5.3. Depreciation........................................... 25
Section 5.4. Assignment and Sublease................................ 25
Section 5.5. Maintain Existence..................................... 27
ARTICLE VI MISCELLANEOUS COVENANTS................................................ 27
Section 6.1. Payment of Bondholder's Compensation and Expenses...... 27
Section 6.2. Financial Statements................................... 27
Section 6.3. Certificate of Compliance.............................. 27
Section 6.4. Furnishing of Information.............................. 28
Section 6.5. Right to Cure Agency Defaults.......................... 28
Section 6.6. Retention of Title to the Facility; Grant of Easement;
or Other Interest...................................... 28
Section 6.7. Discharge of Liens..................................... 29
Section 6.8. Further Assurances..................................... 30
Section 6.9. Recording and Filing................................... 31
Section 6.10. Notice of Default Under Sublease....................... 31
Section 6.11. Equal Employment Opportunities......................... 32
</TABLE>
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<TABLE>
<S> <C>
ARTICLE VII EVENTS OF DEFAULT AND REMEDIES........................................ 32
Section 7.1. Events of Default..................................... 32
Section 7.2. Remedies on Default................................... 34
Section 7.3. Waivers............................................... 36
Section 7.4. Effect on Discontinuance of Proceedings............... 37
Section 7.5. Agreement to Pay Attorneys' Fees and Expenses......... 37
ARTICLE VIII REDEMPTION OF BOND; OBLIGATION TO PURCHASE UPON TERMINATION OF LEASE.. 37
Section 8.1. Redemption of the Bond in Whole....................... 37
Section 8.2. Payments Required for Redemption in Whole............. 37
Section 8.3. Obligation to Purchase the Facility................... 38
Section 8.4. Conveyance on Purchase................................ 38
Section 8.5. Amounts Remaining on Deposit with the Bondholder upon
Payment of the Bond................................... 39
ARTICLE IX MISCELLANEOUS......................................................... 39
Section 9.1. Force Majeure......................................... 39
Section 9.2. Notices............................................... 40
Section 9.3. Binding Effect........................................ 41
Section 9.4. Severability.......................................... 41
Section 9.5. Amendments............................................ 41
Section 9.6. Execution of Counterparts............................. 41
Section 9.7. Net Lease............................................. 41
Section 9.8. Applicable Law........................................ 41
Section 9.9. Waiver of Trial by Jury............................... 41
Section 9.10. Priority of Rights of Bondholder...................... 42
APPENDIX A Definitions........................................... A-1
APPENDIX B Description of Facility Equipment..................... B-1
APPENDIX C Description of Facility Realty........................ C-1
APPENDIX D Description of Project................................ D-1
</TABLE>
iii
<PAGE>
LEASE AGREEMENT
---------------
THIS LEASE AGREEMENT dated as of December 1, 1994, by and between the
ERIE COUNTY INDUSTRIAL DEVELOPMENT AGENCY (the "Agency") and MIDWAY-CTS BUFFALO,
LTD. (the "Lessee") for the lease by the Agency of certain property to the
Lessee. The Agency and the Lessee each accepts or agrees to the following
statements or terms.
ARTICLE I
INTRODUCTORY STATEMENTS
-----------------------
Section 1.1. Lease Agreement Terms Defined. Unless the context
-----------------------------
otherwise indicates, terms used in this Lease Agreement shall have the meanings
set forth in Appendix A attached hereto.
Section 1.2. Construction of Words. In this Lease Agreement, unless
---------------------
the context requires otherwise:
(1) Words of the masculine gender mean and include correlative words
of the feminine and neuter genders and words importing the singular number mean
and include the plural number and vice versa.
(2) Headings of articles and sections and the table of contents are
solely for convenience of reference and do not constitute a part of this Lease
Agreement or affect its meaning or effect.
(3) Wherever under this Lease Agreement any document, notice or other
communication is to be delivered to the Agency and some other Person, the
provision shall be construed as requiring a separate delivery, notice or
communication to the Agency in its own behalf.
(4) Words not otherwise defined herein shall have the meanings
commonly ascribed to them unless the context otherwise requires.
Section 1.3. Nature and Functions of the Agency. The Agency is a
----------------------------------
corporate governmental agency, constituting a public benefit Corporation of the
State of New York. The Agency represents that it has been properly organized and
exists as such. It has a principal place of business at 424 Main Street,
Buffalo, New York. It has
1
<PAGE>
been authorized by New York laws (defined in the Lease Agreement as the "Act")
to promote, attract, encourage and develop economically sound commerce and
industry for the purpose of preventing unemployment and economic deterioration.
The Agency may acquire, construct, reconstruct, lease, improve, maintain, equip
or furnish and dispose of real property interests and industrial and commercial
facilities. The Agency may exercise appropriate financing powers, including the
issuance of bonds or other obligations and the securing of such obligations by
the granting of mortgages and indentures of mortgage.
Section 1.4. Economic Development Purpose. The Lessee represents
----------------------------
that the Project from which this Lease Agreement arises is within the definition
of a "project" under the Act. The Project is necessary to provide employment in
the County to benefit the economy of the County. To that end, following
negotiations, the Agency, by the Inducement Resolution, has induced the Lessee
to commence the Project for the purpose of providing employment within the
County. The Lessee represents that it has been so induced. The Lessee also
represents that the Agency's financing of part of the costs of the Project and
this Lease Agreement and any Sublease are reasonably necessary to provide that
inducement; and the Agency has so determined, based on that and other
representations and warranties of the Lessee and any other statements of, or
information provided by, the Lessee.
Section 1.5. Agency Resolutions Authorizing this Lease Agreement.
---------------------------------------------------
The Agency represents that it has the necessary corporate authority and has, by
proper and authorized resolutions, acknowledged its inducement to the Lessee to
participate in the Project, and authorized the Project, the granting of this
Lease Agreement, and the issuance and sale of its Industrial Development Revenue
Bond to finance the Project.
Section 1.6. No Industry Relocation or Abandonment. The Lessee
-------------------------------------
represents that the completion of the Project will not result in the removal of
a facility or plant of the Lessee, the Sublessee or of any other occupant of the
Project from one area of the State to another area of the State or in the
abandonment of one or more plants or facilities of the Lessee, the Sublessee or
other occupant of the Project located within the State, in violation of the Act.
Section 1.7. Agency Bond Financing. In order to provide funds for
---------------------
the Project, the Agency will issue and sell its Industrial Development Revenue
Bond (1994 Midway-CTS Buffalo Project), in the total principal amount of
$2,600,000.00. This will be done under the Mortgage Agreement and the Building
Loan Contract. The Agency represents that the Bond will mature, bear interest,
be redeemable, and be
2
<PAGE>
subject to other provisions set forth in the Bond.
Section 1.8. Limitation on Liability of the Agency, the State and
----------------------------------------------------
the County.
- ----------
(1) The liability of the Agency to the Lessee under this Lease
Agreement and to the Bondholder shall be enforceable only out of, and limited
to, the Agency's interest under this Lease Agreement and the security interest
created by the Mortgage Agreement. There shall be no other recourse against the
Agency, its members, directors, officers, agents, servants and employees and
persons under the Agency's control or supervision, past, present or future, or
against any of the property now or hereafter owned by it or them.
(2) All obligations of the Agency under this Lease Agreement shall be
deemed to be the obligations of the Agency, and not of any member, director,
officer, servant, employee or agent of the Agency or person under the Agency's
control or supervision, past, present or future, in his individual capacity. No
recourse shall be had against any such persons, or against any natural person
executing the Bond, for any claim against the Agency arising under this Lease
Agreement or any Sublease, including, without limitation, any claim for the
payment of the principal of, redemption premium, if any, or interest on the
Bond.
(3) Any obligation the Agency may incur for the payment of money in
the performance of this Lease Agreement shall not create a debt of the State or
of the County, and neither the State nor the County shall be liable on any
obligation so incurred. Any such obligation shall be payable solely out of any
rents or other proceeds or funds derived from this Lease Agreement.
Section 1.9. Representations and Warranties of the Lessee. The
--------------------------------------------
Lessee makes the following representations and warranties, among others made
elsewhere in this Lease Agreement.
(1) The Lessee (a) is a corporation duly organized, validly existing
and in good standing under the laws of the State of New York, (b) has the power
and authority to own its property and assets and to carry out its present
business, and (c) by all requisite action, execute and perform this Lease
Agreement.
(2) The Lessee is not in violation of any provision of its
certificate of incorporation, bylaws, or any other agreement governing its
affairs.
3
<PAGE>
(3) The Lessee is qualified to do business in every jurisdiction in
which such qualification is necessary.
(4) The Sublessee is a corporation duly organized, validly existing
and in good standing under the laws of the State.
(5) The Sublessee is not in violation of any provision of its
certificate of incorporation or by-laws.
(6) The Sublessee is authorized to (a) own its assets, (b) carry on
the business now being conducted by it, and (c) by all requisite corporate and
shareholder action, execute and perform the Sublease Agreement.
(7) The Sublessee is qualified to do business in every jurisdiction
in which such qualification is necessary.
(8) This Lease Agreement and the design, acquisition, construction,
equipping and operation of the Facility will not (a) violate (i) any law,
government regulation or order or court order, (ii) the Lessee's certificate of
incorporation, its bylaws or any other agreement governing its affairs or (iii)
any agreement binding the Lessee or its property; or (b) result in the
imposition of any charge or encumbrance other than Permitted Encumbrances.
(9) This Lease Agreement constitutes the legal, valid and binding
obligation of the Lessee, enforceable against the Lessee in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency and other similar laws affecting creditors rights generally.
(10) There is no proceeding or investigation before or by any federal,
state or local court or body pending or, to the knowledge of the Lessee,
threatened against or affecting the Lessee or the Sublessee; nor to the
knowledge of the Lessee is there any basis for such proceeding or investigation
from which an unfavorable decision, ruling or finding would, in any way,
adversely affect this Lease Agreement, the transactions contemplated by this
Lease Agreement or any other agreement entered into in connection with the
Project, or the financial condition of the Lessee or the Sublessee.
(11) No expense for supervision by an officer, director or employee of
the Lessee or the Sublessee and no expense for work done by any such officer,
director
4
<PAGE>
or employee in connection with the Project is or will be paid from the Net
Proceeds of the sale of the Bond, except to the extent any such officer,
director or employee was specially employed or designated by the Lessee for such
particular purpose, the expenses do not exceed the actual cost thereof and are
treated on the books of the Lessee or the Sublessee as a capital expenditure in
conformity with generally accepted accounting principles applied on a consistent
basis.
(12) The total cost of the Project being funded with the Bond is at
least equal to the principal amount of the Bond, which represents only a portion
of the total cost to the Lessee. The Lessee will pay or cause to be paid all
costs of the Project not paid from the proceeds of the sale of the Bond, as
provided in Section 2.7 of this Lease Agreement. Any costs incurred with respect
to that part of the Project paid from the proceeds of the sale of the Bond shall
be treated on the books of the Lessee as capital expenditures in conformity with
generally accepted accounting principles applied on a consistent basis. No part
of the proceeds of the Bond will be used to finance inventory or for working
capital.
(13) The property included in the Facility is either property of the
character subject to the allowance for depreciation under applicable tax laws or
land.
(14) Work of the Project has been commenced by the Lessee on behalf of
the Agency in accordance with the Inducement Resolution.
(15) To the best of Lessee's knowledge, the activities of the Lessee,
and the activities of any past and present owner or operator of the Facility,
have not resulted and will not result in any (a) release or threatened release
of Hazardous Substances on, from, or under the Facility other than in accordance
with applicable law, (b) use, generation, storage, disposal or discharge of
Hazardous Substances on or from the Facility other than in accordance with
applicable law, (c) transportation of any Hazardous Substances to or from the
Facility other than in accordance with applicable law, or (d) violation of any
federal, state or local laws, ordinances, or regulations relating to Hazardous
Substances.
Section 1.10. Inducement to Bondholder. Since one of the purposes of
------------------------
this Lease Agreement is to induce the Bondholder to purchase the Bond, all
representations and obligations of the Agency and the Lessee are declared to be
for the benefit of the Bondholder.
Section 1.11. Agency Litigation. The Agency represents that (a) there
-----------------
is
5
<PAGE>
no litigation or governmental proceeding pending or, to the knowledge of the
Agency, threatened, to restrain or enjoin the entry into this Lease Agreement,
the PILOT Agreement, the Bond or the Mortgage Agreement, or in any manner
questioning the proceedings or authority under which this Lease Agreement is
authorized; (b) the corporate existence of the Agency is not being contested;
and (c) the right of the Agency to acquire and hold or to grant security
interests in or mortgage liens on the Facility is not being contested.
Section 1.12. Prohibition Against Retail Sales. The Lessee
--------------------------------
represents, warrants and covenants that no portion of the Facility will be
utilized for the making of retail sales to customers who personally visit the
Facility. For purposes of this Section 1.12, retail sales shall mean: (i) sales
by a registered vendor under Article 28 of the Tax Law of the State of New York
primarily engaged in the retail sale of tangible personal property, as defined
in Section 1101(b)(4)(i) of the Tax Law of the State of New York; or (ii) sales
of a service to such customers.
ARTICLE II
ISSUANCE OF BOND: CONVEYANCE OF PROPERTY:
----------------------------------------
PROJECT COSTS, PERFORMANCE AND COMPLETION
-----------------------------------------
Section 2.1. Issuance of Bond: Use of Proceeds. The Agency shall
---------------------------------
deliver the Bond as authorized by the Bond Resolution and pursuant to the
Mortgage Agreement. The proceeds of sale of the Bond shall be disbursed by the
Bondholder and applied to the payment of the Project Costs in accordance with
the provisions of this Lease Agreement, the Mortgage Agreement and the Building
Loan Contract.
Section 2.2. Conveyance of Property to the Agency.
------------------------------------
(1) The Lessee shall convey or cause to be conveyed to the Agency
good and marketable title to the Facility. To evidence the conveyance, the
Lessee shall execute and deliver or cause to be executed and delivered to the
Agency one or more deeds and, as appropriate, one or more bills of sale or other
instruments.
(2) Title to every item of property thereafter acquired by the Lessee
and intended to be made part of the Facility in connection with the Project
shall vest in the Agency immediately upon delivery to the Lessee, or
installation, or incorporation into the Facility Realty, or payment for the
item, whichever shall occur first. The Lessee shall execute, deliver and record
or file all instruments necessary to so
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vest title in the Agency.
(3) Each conveyance made under this Section shall be free of all
claims and encumbrances other than Permitted Encumbrances, and the Lessee shall
take all action necessary to protect such title against claims of any third
Persons. The Lessee shall also cause each such item to be subjected to the lien
and security interest of the Bondholder.
Section 2.3 Title Insurance.
---------------
(1) Prior to the delivery of the Bond to the original purchaser or
purchasers, the Lessee will obtain from the Title Company (a) fee title
insurance in an amount not less than $2,600,000.00 insuring the Agency's title
to the Facility Realty against loss as a result of defects in the title of the
Agency; (b) mortgagee title insurance in form and substance satisfactory to the
Bondholder and in an amount not less than $2,600,000.00 insuring the
Bondholder's interest under the Mortgage Agreement as holder of a mortgage lien
on the Facility Realty, in each case subject only to Permitted Encumbrances; and
(c) a current survey of the site of the Facility Realty certified to the Agency,
and the Bondholder and the Title Company.
(2) Any proceeds of the fee title insurance shall be deposited with
the Bondholder. If requested by the Agency within thirty (30) days from the date
the proceeds shall have been so deposited, the proceeds shall be applied to
remedy the defect in title. If such request is not made, the proceeds shall be
applied as provided in the Mortgage Agreement.
(3) Any proceeds of the mortgagee title insurance against loss as a
result of defects affecting the Bondholder's interest as holder of a mortgage
lien on the Facility Realty shall be paid to the Bondholder and shall be applied
as provided in the Mortgage Agreement.
Section 2.4. Identification of Facility Equipment. All Facility
------------------------------------
Equipment is identified in the Description of Facility Equipment in Appendix B
attached hereto.
Section 2.5 Responsibilities for Project Performance.
----------------------------------------
(1) The Agency appoints the Lessee its agent for the sole purpose of
carrying out the Project in the name of the Agency, and the Lessee shall serve
in that
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capacity, and as such agent:
(a) The Lessee may make, or arrange for making, all purchases of
materials and equipment necessary for completion of the Project.
(b) The Lessee shall replace or arrange for the replacement of
any and all tangible personal property that becomes obsolete.
(c) The Lessee shall make or be responsible for making all
necessary repairs to the Project.
(2) The Lessee shall be responsible for design and completion of the
Project and shall appoint the Facility Supervisor to supervise and complete the
Project.
(3) The design and quality of the Project, as described in the Plans
and Specifications shall not be changed without the written consent of the
Agency and the Bondholder.
(4) The Lessee shall comply with all manufacturer's instructions and
warranty requirements relating to the Facility and shall secure all warranties
for the benefit of the Agency and the Bondholder.
(5) The Lessee, upon notifying the Agency, shall take such action as
may be necessary to ensure that the contractors and suppliers for the Project
fulfill their obligations related to the Project. The Lessee may take such
action in the name of the Agency if the Agency so consents in writing. The costs
of such action shall be Project Costs; any recoveries shall be deposited with
the Bondholder.
(6) All necessary permits and approvals for the Project or for
Facility operation shall be obtained by the Lessee at its own expense.
Section 2.6. Payment and Disbursement of Project Costs. The Project
-----------------------------------------
Costs shall be paid as provided in the Mortgage Agreement and the Building Loan
Contract or as otherwise provided in this Lease Agreement.
Section 2.7. Expenses Chargeable to the Lessee. The Lessee shall
---------------------------------
pay all expenses or other costs incurred in connection with the Project
including, but not limited to:
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(1) All charges incurred in connection with the preparation,
delivery, filing, recording (if required) or effectuation of any instruments of
conveyance or transfer required by this Lease Agreement or by the Mortgage
Agreement;
(2) Any closing costs or costs relating to issuance of the Bond other
than those in Paragraph (1) above;
(3) All lawful claims which might or could if unpaid become a lien or
charge on the Facility,
(4) All pre-closing and post-closing taxes, assessments or other
governmental or utility charges or impositions relating to the Facility;
(5) The Agency's administrative fee;
(6) Any reasonable legal fees or expenses incurred by the Agency or
the Bondholder in connection with the foregoing items of cost; and
(7) Any other costs incurred by the Agency in constructing or
otherwise carrying out the Project.
Section 2.8. Completion of the Project: Status.
---------------------------------
(1) The Lessee shall complete the Project on or before the Project
Completion Date.
(2) If requested by the Agency or the Bondholder, or as provided in
the Mortgage Agreement, the Lessee or the Sublessee shall prepare and submit to
either or both a certificate or certificates containing such information
relating to the status of completion of the Project as shall be sought in such
request.
Section 2.9. Limitation on Sales Tax Exemption.
---------------------------------
(1) Any exemption from Sales Taxes resulting from or occasioned by
Agency involvement with the Project shall be limited to purchases of Exempt
Property by or for the Lessee as agent for the Agency, it being the intent of
the parties that no operating expenses of the Lessee and no purchases of
equipment or other personal property (other than Exempt Property) shall be
subject to an exemption from Sales Taxes because of Agency involvement with the
Project. Nothing herein shall be
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construed as a representation by the Agency that any property included within
the definition of Exempt Property is, in fact, exempt from Sales Taxes.
(2) The Lessee shall annually file, and shall cause any operator of
the Project to annually file, a statement with the New York State Department of
Taxation and Finance, on a form and in a manner as is prescribed by the
Commissioner of the New York State Department of Taxation and Finance, of the
value of all sales and use tax exemptions claimed by the Lessee or agents of the
I emcee or any operators of the Project, including, but not limited to,
consultants or subcontractors of such agents or Project operators, under the
authority granted pursuant to this Lease Agreement. Should the Lessee fail to
comply with the foregoing requirement, the Lessee shall immediately cease to be
the agent for the Agency in connection the Project (such Agency relationship
being deemed to be immediately revoked) and shall cease to be an operator of the
Project without any further action of the parties, and the Agency shall be
authorized to immediately reconvey the Facility to the Lessee pursuant to
Section 7.2(6) of this Lease Agreement.
ARTICLE III
LEASE OF FACILITY AND RENTAL PROVISIONS
---------------------------------------
Section 3.1. Lease of the Facility. Duration.
--------------------------------
(1) The Agency hereby leases the Facility to the Lessee, and the
Lessee hereby accepts the lease, subject to the terms and conditions of this
Lease Agreement.
(2) The term of the lease shall commence on the date of execution and
delivery of this Lease Agreement and expire on the Lease Expiration Date.
Section 3.2. Occupation and Use of the Facility.
-----------------------------------
(1) During the term of this Lease Agreement, the Lessee shall be
entitled to physical possession and control of the Facility, and shall be liable
at all times for all risk, loss and damage with respect to the Facility.
(2) The Lessee shall continue to operate the Facility, or cause it to
be operated, at all times during the term of this Lease Agreement after
completion of the Facility, except, as appropriate and for such period as may be
necessary, in the case of an event described in Section 5.1. Such operation
shall be solely for the purpose
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described on Appendix D and in accordance with the provisions of the Act. If the
Lessee ceases to operate the Facility for the purposes described herein for any
reason other than an event described in Section 5.1, the Lessee shall,
commencing with the tax fiscal year next following such cessation of or change
in operations, make payments in lieu of taxes on the Facility to all applicable
taxing authorities in such amounts as would be payable as Real Estate Taxes
levied on the Facility if the Facility were owned by the Lessee. Such payments
shall be in addition to any other rights or remedies of the Agency under this
Lease Agreement. For the purpose of this Lease Agreement, the Lessee shall be
deemed to have ceased to operate the Facility for the purposes described herein
if it (a) materially alters the use of the Facility, in the Agency's judgment,
except as permitted hereunder, (b) closes the Facility other than for routine
maintenance, observance of national holidays or regularly scheduled seasonal
closings, or by reason of an event described in Section 9.1 of this Lease
Agreement, or (c) reduces the operations of the Facility to such an extent that,
in the Agency's judgment, the economic benefit to be derived from the Project in
accordance with Section 1.4 of this Lease Agreement has been substantially
impaired. Any of the foregoing notwithstanding, the Lessee may use the Facility
for some purpose other than that described on Appendix D with the prior written
consent of the Agency and the Bondholder, which consent may be withheld in the
Agency's or the Bondholder's absolute discretion, and provided further that such
proposed use constitutes a qualified "project" in accordance with Agency policy
and as defined under the Act.
(3) In using the Facility or causing it to be used, the Lessee shall,
at its own expense, ensure compliance with all applicable laws, ordinances,
regulations, orders, permits or judicial decisions, whether foreseen or
unforeseen, ordinary or extraordinary. Notwithstanding the foregoing, the
Lessee may in good faith contest the validity or applicability of any such
requirement. In that event, the Lessee may fail to comply with the contested
requirement during the period of contest and any appeal, unless the Agency or
the Bondholder shall notify the Lessee that by failure to comply with the
requirement the Facility may be subject to loss or forfeiture, in which event
the Lessee shall promptly take action satisfactory to the Agency or the
Bondholder. The Lessee shall not use the Facility or permit it to be used in
such a way as to constitute a nuisance or violate the terms of any insurance
policy relating to the Facility.
(4) The Agency shall not take any action, other than pursuant to
Article VII, to interfere with the quiet and peaceable possession of the
Facility during the term of this Lease Agreement.
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(5) The Agency and Bondholder shall have such rights to enter and
inspect the Facility, at all reasonable times, as either shall deem necessary to
exercise its or their rights under this Lease Agreement and the Mortgage
Agreement.
Section 3.3. Rental Provisions.
-----------------
(1) The Lessee shall pay or cause to be paid rents directly to the
Bondholder, as follows: The rents shall be paid, in immediately available funds,
in amounts necessary to meet (a) all obligations under this Lease Agreement, the
Bond, the Building Loan Contract and the Mortgage Agreement for payment of
installments of principal or Redemption Price, and interest, and (b) the
Lessee's obligations to pay all other fees or expenses under this Lease
Agreement, the Bond and the Mortgage Agreement, which fees and expenses shall be
deemed to constitute rents. Each payment shall be made on the due date for the
installment or other obligation or within any applicable grace period as
provided in the Mortgage Agreement. The required payments and their disposition
shall be in accordance with applicable provisions of the Bond and Mortgage
Agreement. Such rental payments shall be made until the principal and interest
on the Bond and other such obligations shall have been fully paid.
(2) The Lessee may prepay rents at such times and on the terms and
conditions provided in the Bond.
Section 3.4. Obligations of Lessee Unconditional. The obligations of
-----------------------------------
the Lessee under this Lease Agreement to make rental or any other payments, or
to maintain the Facility in accordance with Section 4.1 of this Lease Agreement,
shall be absolute and unconditional. The Lessee shall meet such obligations,
irrespective of any defense or any rights of setoff, recoupment, suspension,
reduction or counterclaim by reason of any default of the Lessee, the Agency or
the Bondholder under this Lease Agreement, the Mortgage Agreement or any other
agreement, or for any other reason. The defenses or other rights referred to
here shall include, without limitation, those arising out of any of the
following circumstances: a default, act or omission of any contractor engaged
for the Project or any supplier or manufacturer of Facility Equipment or
fixtures constituting part of the Facility Realty; an act constituting an
eviction or constructive eviction; failure of title; failure of consideration;
commercial frustration of purpose; any change in law, a failure to complete the
Project; and any destruction or condemnation of, or damage to or impairment of
the use of, the entire or any part of the Facility. The Lessee waives all
rights now or hereafter conferred by statute or otherwise to quit, terminate,
cancel or surrender this Lease Agreement or
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any obligation of the Lessee under this Lease Agreement or the Facility or any
part thereof except as provided in this Lease Agreement or to any abatement,
suspension, deferment, diminution or reduction in the rentals or other payments
hereunder.
Section 3.5. Assignment of Agency Rights. Pursuant to the Mortgage
---------------------------
Agreement, the Agency will grant a lien on and security interest in the Facility
and pledge and assign to the Bondholder as security for the Bond all the
Agency's right, title and interest (except for the Agency's Reserved Rights) in
this Lease Agreement and in any Sublease, including all rental and other
payments. This Lease Agreement shall be subject and subordinate to the Mortgage
Agreement and to such lien, security interest, pledge and assignment. The Lessee
hereby consents to such lien, security interest, pledge and assignment.
Section 3.6. Grant of Security Interest to the Agency. The Lessee
----------------------------------------
hereby grants to the Agency a present security interest in and to all the
fixtures constituting part of the Facility Realty, and in any Sublease and
substitutions, replacements and proceeds from the sale thereof, to secure the
Lessee's performance and payment of all its obligations and covenants in this
Lease Agreement. In the event that the Lessee breaches its covenants contained
in Section 4.1(4) of this Lease Agreement with respect to the removal of any
part of the Facility, then the Agency's security interest in the removed
property shall continue until such Section 4.1(4) shall have been complied with,
anything to the contrary contained herein notwithstanding. The Lessee shall
execute and deliver to the Agency and the Bondholder a financing statement or
statements (including fixture filings if appropriate) in accordance with the
Uniform Commercial Code in form and substance satisfactory to the Agency and to
the Bondholder as the assignee of the Agency's security interest herein and
under the Mortgage Agreement.
Section 3.7. Assignment of Sublease.
----------------------
(1) The Lessee hereby assigns to the Agency all the Lessee's right,
title and interest in and to any Sublease, including all sublease rentals,
revenues and receipts therefrom, and the right to enforce all of the Lessee's
rights and remedies thereunder. The Lessee hereby empowers the Agency and the
Bondholder, and their respective agents or attorneys, to collect, sue for,
settle, compromise and give acquittances for all of the rents that may become
due under any Sublease (to the extent set forth in this Lease Agreement and the
Mortgage Agreement) and avail themselves of and pursue all remedies for the
enforcement of any Sublease and the Lessee's rights in and under any Sublease as
the Lessee might have pursued but for this assignment. Notwithstanding
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<PAGE>
anything herein to the contrary, the Agency and the Bondholder agree not to
exercise any of the rights granted pursuant to this paragraph so long as no
Event of Default (as defined in this Lease Agreement and any other Security
Document) shall have occurred under this Lease Agreement or any other Security
Document.
(2) The Lessee shall not terminate or amend any Sublease or any of
its terms, or grant any concessions in connection therewith, either orally or in
writing, or accept a surrender thereof, without the prior written consent of the
Agency and the Bondholder. The Lessee shall furnish or cause to be furnished to
the Agency and the Bondholder a copy of any such termination, amendment or
concessions of any Sublease in substantially final form prior to the execution
thereof. Any attempted termination or amendment of any Sublease without such
written consent shall be null and void.
(3) In the exercise of the powers granted by this Section, no
liability shall be asserted or enforced against the Agency or the Bondholder,
all such liability being hereby expressly waived and released by the Lessee.
Neither the Agency nor the Bondholder shall be obligated to perform or discharge
any obligation, duty or liability under any Sublease, or under or by reason of
this assignment, and the Lessee shall and does hereby agree to indemnify the
Agency and the Bondholder for and to hold them harmless of and from any and all
liability, loss or damage which either may or might incur under any Sublease or
under or by reason of this assignment and of and from any and all claims and
demands whatsoever which may be asserted against either or both by reason of any
alleged obligations or undertakings on their part to perform or discharge any of
the terms, covenants or agreements contained in any Sublease. Should the Agency
or the Bondholder incur any such liability, loss or damage under any Sublease or
by reason of this assignment, or in the defense of any such claims or demands,
the amount thereof, including costs, expenses and reasonable attorneys' fees,
shall be secured hereby, and the Lessee shall reimburse the Agency and the
Bondholder therefor immediately upon demand. This assignment shall include any
extensions and renewals of any Sublease and reference herein to any Sublease
shall be construed as including any such extensions and renewals.
ARTICLE IV
MAINTENANCE, TAXES AND CHARGES,
------------------------------
INSURANCE AND INDEMNITY
-----------------------
Section 4.1. Maintenance, Alterations, Improvements.
--------------------------------------
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(1) The Lessee shall maintain the Facility in good and safe operating
condition, ordinary wear and tear excepted. The Lessee shall make all repairs
and replacements to the Facility necessary for that purpose, and to protect the
security for the Bond. The Agency shall be under no obligation to replace,
service, test, adjust, erect, maintain or effect replacements, renewals or
repairs of the Facility, to effect the replacement of any inadequate, obsolete,
worn-out or unsuitable parts of the Facility, or to furnish any utilities or
services for the Facility or Project, and the Lessee hereby agrees to assume
full responsibility therefor.
(2) After Project Completion, the Lessee shall make no structural
additions, modifications and improvements to the Facility without the prior
written consent of the Agency, which may be conditioned upon, among other
things, an increase in any administrative fee charged by the Agency in
connection with the Project and an increase in payments to be made under the
PILOT Agreement in an amount equal to the Real Estate Taxes which would be
payable by the Lessee on account of such additions, modifications and
improvements if the Facility were owned by the Lessee. Any of the foregoing
notwithstanding, no consent shall be required under this paragraph (2) for the
repair, replacement, rebuilding or restoration of the Facility after damage,
destruction or condemnation pursuant to Section 5.1 of this Lease Agreement
(except as required thereunder or pursuant to any other Security Document ) or
in connection with minor modifications or alterations to the Facility which do
not affect the value of the Facility, except as may be required under any other
Security Document. Any additions, modifications, improvements or alterations
performed by Lessee in accordance with this paragraph (2) shall be made at the
sole expense of the Lessee, shall become a part of the Facility and shall be
subject to Paragraph (4) of this Section. Further, the provisions of Section
2.5(7) of this Lease Agreement shall apply to any additions, modifications or
improvements to the Facility, made in accordance with this paragraph (2) or
otherwise.
(3) Subject to Paragraph (4) of this section, the Lessee may (a)
install, at the site of the Project, equipment or other personal property in
addition to the Facility Equipment, without conveying title to the Agency, and
(b) thereafter remove such equipment or property, without the consent of the
Agency or the Bondholder; provided, however, that the Lessee shall pay for the
cost of the repair of any damage to the Facility as the result of such removal.
After Project Completion, no equipment shall be added to Appendix B (Description
of Facility Equipment). If the Agency shall consent to any addition of
equipment to Appendix B. such consent may be conditioned upon, among other
things, an increase in any administrative fee charged by the Agency in
connection with the Project.
15
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(4) Except as otherwise provided in this Paragraph (4), any action
taken by the Lessee under this section shall be subject to the following:
(a) With the exception of the removal of the additional property
mentioned in Paragraph (3) of this section, the Lessee may not remove any part
of the Facility without the prior written consent of the Agency and the
Bondholder, and subject to the furnishing of such security as the Agency and
Bondholder may reasonably require in order to protect their interests.
(b) The Lessee shall not take any action or fail to take any
action which would cause the Project not to constitute a qualified "project"
under the Act.
(c) The Lessee shall not take any action which would impair the
usefulness, structural integrity or operating efficiency of the Facility.
(d) The Lessee shall not permit the creation of any Lien on the
Facility other than Permitted Encumbrances.
(5) The Lessee shall operate the Facility in compliance with local
zoning and planning regulations.
Section 4.2. Taxes. Assessments and Charges.
-------------------------------
(1) The Lessee shall pay, as they may respectively become due: (a)
all taxes, special assessments and governmental charges of any kind which may at
any time be lawfully assessed or levied against or with respect to the Facility
or rentals of the Facility, including, without limitation, any sales or use
taxes imposed with respect to the Project or any part thereof, or the rental of
the Facility, and any taxes levied upon or with respect to the income or
revenues of the Agency from the Project; (b) all utility and other charges
incurred or imposed with respect to the Project or any aspect thereof; and (c)
all assessments and charges of any kind lawfully imposed lay any governmental
body.
(2) After giving written notice to the Agency and the Bondholder, the
Lessee may in good faith contest any such taxes, assessments and other charges
or any denial of an exemption from Real Estate Taxes (as provided for in
Paragraph (3) below), so long as (a) the overall operating efficiency of the
Project is not impaired; (b) neither the Facility nor any part of or interest in
it would be in any danger of being
16
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sold, forfeited or lost; (c) neither the Lessee, the Agency nor the Bondholder
would be in any danger of any civil or criminal liability, other than normal
accrual of interest, for failure to pay such taxes, assessments or charges; and
(d) the lien of the Mortgage Agreement is not impaired in any way. In the event
of any such contest, the Lessee may permit the taxes, assessments or other
charges so contested to remain unpaid during the period of such contest and any
appeal therefrom.
(3) The foregoing notwithstanding, subject to the completion and
filing of the Application for Tax Exemption by the Taxable Status Date and the
approval of the Application for Tax Exemption by the Assessor, the Project shall
be exempt from Real Estate Taxes commencing with the 1995-96 tax fiscal year of
the City. The Lessee shall provide the Agency with all information required to
complete the Application for Tax Exemption and shall provide such additional
information and take such actions as are required by the Assessor in order to
process and approve the Application for Tax Exemption. Upon the granting of the
exemption, the Lessee shall make payments in lieu of real property taxes in
accordance with the PILOT Agreement. In the event the Application for Tax
Exemption is denied for any reason, the Lessee shall pay all Real Estate Taxes
levied upon the Project as they become due. The Lessee waives any claim or cause
of action against the Agency, and releases the Agency from any liability to the
Lessee, arising from the denial of an exemption from Real Estate Taxes except to
the extent that such denial results solely from the failure of the Agency to
file the Application for Tax Exemption with the Assessor by the Taxable Status
Date.
Section 4.3. Insurance.
---------
(1) At all times throughout the term of this Lease Agreement, the
Lessee shall maintain and comply with the terms of insurance, with insurers
licensed to do business in the State and acceptable to the Agency and the
Bondholder and generally recognized as being responsible, against such risks,
loss, damage and liability and for such amounts as are customarily insured
against by other enterprises of lilts size and type as that of the Lessee or any
Sublessee, including, without limitation:
(a) Extended coverage casualty insurance, with endorsements
containing New York standard mortgagee and loss payee clauses, in an amount not
less than the greater of (i) 80% of the actual replacement cost of the Facility,
or (ii) the principal amount of the Bond. The actual replacement cost shall be
determined by a qualified insurance appraiser selected by the Lessee and
approved by the Agency and the Bondholder, at the Lessee's expense.
17
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(b) During any period of construction or reconstruction of the
Facility, such casualty coverage shall be in the form of a Builders' All Risk
Insurance policy written on "100% builders' risk completed value, non-reporting
form" including coverage for "completion and/or premises occupancy," and
property damage insurance. Such insurance shall include coverage for removal of
debris, insuring the Facility against loss or damage by fire, lightning,
vandalism, malicious mischief and other casualties, with extended coverage
endorsements covering perils of windstorm, hail, explosion, aircraft, vehicles
and smoke. Such insurance shall be in an amount sufficient to prevent the
Lessee, the Agency or the Bondholder from becoming a co-insurer of any loss
under the insurance policies, but in any event in amounts equal to not less than
the greater of (i) the actual replacement cost of the Facility as determined by
a qualified insurance appraiser selected by the Lessee and approved by the
Agency and the Bondholder, at the Lessee's expense; and (ii) the principal
amount of the Bond.
(c) To the extent not covered by the public liability insurance
referred to in subparagraph (1)(d) of this Section, Owners and Contractors
Protective Liability Insurance for the benefit of the Lessee, the Agency and the
Bondholder in a minimum amount of S5,000,000.00 aggregate coverage for personal
injury and property damage.
(d) Public liability insurance protecting the Lessee, the Agency
and the Bondholder against losses from liabilities imposed by law or assumed in
any written contract (including the contractual liability assumed by the Lessee
under Section 4.4) and arising from injury or death of a person or persons or
damage to the property of others, naming the Agency and the Bondholder as
additional insured parties. Such insurance shall be in a minimum amount of
$5,000,000.00 aggregate coverage, and may be effected under overall blanket or
excess coverage policies of the Lessee; provided, however, that at least
$1,000,000.00 is effected by a comprehensive liability insurance policy. Such
policies shall not contain any provisions for a deductible amount.
(e) Boiler and machine property damage insurance in respect of
any steam and pressure boilers and similar apparatus located on the Facility
Realty from risks normally insured against under boiler and machinery policies
and in amounts and with deductibles customarily obtained for similar business
enterprises and in each case approved by the Agency and the Bondholder.
(f) Workers' compensation insurance and other employee benefits
insurance which the Lessee or the Agency is required by law to provide.
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(g) Flood insurance, if the Facility is located in an area
identified as a flood hazard area by the Federal Emergency Management Agency,
naming the Agency and the Bondholder as additional insured parties. If the
Facility is not located in such an area, the Lessee shall deliver to the
Bondholder on the date hereof a letter from the appropriate municipalities so
certifying.
(h) Business interruption insurance or loss of rental insurance.
(i) Such other or additional insurance in such amounts and
against such other insurable hazards as the Agency or the Bondholder from time
to time may require.
(2) All policies evidencing the insurance required by this section
shall provide that:
(a) the Lessee, the Sublessee, the Agency and the Bondholder be
designated as insureds or additional insureds as their respective interests may
appear, except with respect to workers' compensation insurance and business
interruption/loss of rental insurance;
(b) all insurance proceeds with respect to loss or damage to the
Facility be made payable to the Bondholder,
(c) at least thirty (30) days' written notice be given to the
Lessee, the Agency and the Bondholder of the proposed nonrenewal, cancellation,
lapse, reduction of benefits or material change in coverage thereof;
(d) in relation to the respective interests of the Agency and
the Bondholder, the insurance shall not be invalidated by any action or inaction
of the Lessee, the Sublessee or any other Person;
(e) the insurance shall be primary insurance without any right
of contribution from any other insurance carried by the Agency or the
Bondholder;
(f) the insurer waives any right of subrogation against any
Person insured under such policy, and waives any right to any setoff or
counterclaim or any other deduction, whether by attachment or otherwise, in
respect of any liability of any Person insured under the policy, and
19
<PAGE>
(g) contain such other provisions, including amounts of
insurance coverage, as any owner or operator, in the prudent management of
similar facilities, would require in its insurance policies, or as may be
reasonably requested by the Agency or the Bondholder.
(3) At the time of execution and delivery of this Lease Agreement,
the Lessee shall deliver to the Agency and the Bondholder duplicate originals of
insurance certificates containing evidence of compliance with the requirements
of this section. For the same purpose, if requested by the Agency or the
Bondholder, the Lessee shall deliver to the Agency or Bondholder duplicates of
the insurance policies at the time of such execution and delivery or within such
different times as may be requested. Prior to the expiration of any policy of
insurance required by this section, the Lessee shall furnish to the Agency and
the Bondholder evidence that the policy has been renewed or replaced or is no
longer required by this Lease Agreement, and shall deliver to the Agency or the
Bondholder duplicates of such renewal or replacement policies as either may
request.
(4) The Net Proceeds of the insurance required by Paragraph (1) of
this section shall be paid to the Bondholder and applied toward extinguishment
or satisfaction of the liability with respect to which such insurance is
written, and applied in accordance with Section 5.1 of this Lease Agreement.
(5) The Lessee shall, at its own expense, make all proofs of loss and
take all other steps necessary or reasonably requested by the Agency or the
Bondholder to collect from insurers for any loss covered by any insurance
required to be obtained by this section. The Lessee shall not do any act, or
suffer or permit any act to be done, whereby any insurance required by this
section would or might be suspended or impaired.
(6) THE AGENCY AND THE BONDHOLDER DO NOT IN ANY WAY REPRESENT THAT
THE INSURANCE SPECIFIED HEREIN, WHETHER IN SCOPE OF COVERAGE OR LIMITS OF
COVERAGE, IS ADEQUATE OR SUFFICIENT TO PROTECT THE BUSINESS OR INTERESTS OF THE
LESSEE OR ANY SUBLESSEE.
Section 4.4. Indemnity.
---------
(1) The Lessee shall at all times protect and hold the Agency and
Bondholder harmless of, from and against any claims (whether in tort, contract
or
20
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otherwise), demands, expenses and liabilities for losses, damage, injury and
liability of every nature and however caused, and taxes (of any kind and by
whomsoever imposed), other than, with respect to the Agency, losses arising from
the gross negligence or willful misconduct of the Agency, or, with respect to
the Bondholder, the gross negligence or willful misconduct of the Bondholder,
arising during the term of this Lease Agreement upon or about the Facility or
resulting from, arising out of, or in any way connected with (a) the financing
of the costs of the Project and the marketing, issuance and sale of the Bond for
such purpose; (b) the planning, design, acquisition, site preparation,
construction, renovation, equipping, installation or completion of the Facility
or any part thereof or the effecting of any work done in or about the Facility
including, but not limited to any failure or alleged failure by the Lessee to
comply with the provisions of Section 2.5(7) of this Lease Agreement; (c) any
defects (whether latent or patent) in the Facility, including any defects in the
Agency's title thereto and environmental conditions, whether or not caused by
hazardous wastes on or about the site of the Facility, (d) the maintenance,
repair, replacement, restoration, rebuilding, use, occupancy, ownership,
leasing, subletting or operation of the Facility or any portion thereof; or (e)
this Lease Agreement, the Mortgage Agreement or any other document or instrument
delivered in connection therewith or the enforcement of any of the provisions
thereof or the transactions contemplated thereby.
(2) The Agency and the Bondholder shall not be liable for any damage
or injury to the person or property of the Lessee or any Sublessee or to their
respective (if applicable) directors, officers, employees, agents or servants or
persons under the control or supervision of the Lessee, any Sublessee or to any
other Person who may be about the Facility, due to any act or negligence of any
Person other than, with respect to the Agency, the gross negligence or willful
misconduct of the Agency, or, with respect to the Bondholder, the gross
negligence or willful misconduct of the Bondholder.
(3) The Lessee releases the Agency and the Bondholder from, and
agrees that the Agency and the Bondholder shall not be liable for, and shall
indemnify and hold the Agency and the Bondholder harmless against any expense,
loss, damage, injury or liability incurred because of any lawsuit commenced as a
result of action taken by the Agency or by the Bondholder with respect to any of
the matters set forth in Paragraphs (1) and (2) of this section or taken by
either at the direction of the Lessee and in good faith with respect to any of
such makers.
(4) The Agency shall promptly notify the Lessee and the Bondholder
21
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in writing of any claim or action brought against the Agency, in which indemnity
may be sought against the Lessee pursuant to Paragraph (1) of this section. Such
notice shall be given in sufficient time to allow the Lessee to defend or
participate in such claim or action but the failure to give such notice in
sufficient time shall not constitute a defense in any action by the Agency or
Bondholder to enforce the indemnity provisions of this section, nor in any way
impair the obligations of the Lessee under this section.
(5) The indemnifications and protections set forth in this section
shall be extended, with respect to the Agency, to its members, directors,
officers, employees, agents and servants and persons under the Agency's control
or supervision, and with respect to the Bondholder, to any of its directors,
officers, employees, agents and servants and persons under the Bondholder's
control or supervision.
(6) To effectuate the purposes of this section, the Lessee will
provide for and insure, in the public liability policies required in Section
4.3, not only its own liability in respect of the matters mentioned in Section
4.3 but also the liability pursuant to this section.
(7) Anything to the contrary in this Lease Agreement notwithstanding,
the covenants of the Lessee in this section shall remain in full force and
effect after the termination of this Lease Agreement until the later of (a) the
expiration of the period stated in the applicable statute of limitations during
which a claim or cause of action may be brought or (b) payment in full or the
satisfaction of such claim or cause of action and of all expenses and charges
incurred by the Agency or the Bondholder relating to the enforcement of the
provisions herein specified.
(8) For the purposes of this section, neither the Lessee nor any
Sublessee shall be deemed an employee, agent or servant of the Agency or a
person under the Agency's control or supervision.
Section 4.5. Advances by Agency or Bondholder. In the event the
--------------------------------
Lessee fails to make any payment or observe any obligation under this Lease
Agreement, the Agency or the Bondholder, after first notifying the Lessee of any
such failure, may, without waiving any of its rights under this Lease Agreement,
make such payment or otherwise cure such failure. The Lessee shall reimburse the
Agency or the Bondholder, as the case may be, for any amount paid under this
section, together with interest thereon from the date of payment at a per annum
rate that shall on each day be equal to the higher of (a) the rate in effect
such day as set forth in the Bond; and (b)
22
<PAGE>
two percent (2%) in excess of the rate in effect such day as the rate announced
by the Bondholder as its prime rate, or such lesser rate as shall be the maximum
allowed by law. Any remedy available to the Agency or the Bondholder under this
Lease Agreement to collect rentals or other payments shall also be available to
collect amounts advanced under this section.
ARTICLE V
DAMAGE TO AND CONDEMNATION OF THE
---------------------------------
FACILITY AND STATUS OF THE PROJECT
----------------------------------
Section 5.1. Damage, Destruction and Condemnation.
------------------------------------
(1) The Lessee shall continue to pay the rent and any other sums it
is required to pay under this Lease Agreement if (a) the Facility shall have
been destroyed or damaged by fire or other casualty, in whole or in part; or (b)
title to, or the temporary use of, the Facility or any part thereof shall have
been taken under the exercise of the power of eminent domain by a Person acting
under governmental authority.
(2) Within twenty (20) days after such damage, destruction or
condemnation the Lessee shall give written notice to the Agency and the
Bondholder of such occurrence, and whether or not Lessee intends to replace,
rebuild, repair or restore the Facility. Notwithstanding anything contained
herein to the contrary, the Agency shall be under no obligation to rebuild,
repair, replace or restore the Facility.
(3) Promptly after such occurrence the Lessee shall either (a)
commence rebuilding, repairing, replacing or restoring the Facility to a
condition substantially equal to that existing prior to such damage, destruction
or condemnation, with such modifications and improvements as may be deemed
necessary or desirable by the Lessee, subject to any approvals or restrictions
contained in the Mortgage Agreement and complete such rebuilding, repairing,
restoring and replacing within a reasonable time thereafter, or (b) cause the
Agency to redeem the Bond Outstanding in whole and purchase the Facility
pursuant to Article VIII of this Lease Agreement.
(4) The Net Proceeds derived from any such occurrence shall be
payable to, deposited with and disbursed by the Bondholder in accordance with
provisions of the Mortgage Agreement, except as otherwise provided in Paragraph
(5) of this section. Any rebuilding, repair, replacement or restoration of the
Facility by
23
<PAGE>
the Lessee shall be solely at its own expense (except to the extent paid from
the Net Proceeds pursuant to the Mortgage Agreement), and regardless of whether
the Net Proceeds derived from the occurrence shall be sufficient to pay the cost
thereof. All such rebuilding, repairs, replacements or restorations shall:
(a) automatically be deemed a part of the Facility and owned by
the Agency and be subject to this Lease Agreement and the lien and security
interest of the Mortgage Agreement;
(b) be in accordance with plans and specifications and cost
estimates approved in writing by the Bondholder (which approvals shall not be
unreasonably withheld);
(c) not change the nature of the Facility as a qualified
"project" as defined in and as contemplated by the Act; and
(d) be effected with due diligence in a good and workmanlike
manner, in compliance with all applicable legal requirements and be promptly and
fully paid for by the Lessee in accordance with the terms of the applicable
contract(s) therefor. Further, the provisions of Section 2.5(7) of this Lease
Agreement shall apply to any such rebuilding, repair, replacement or restoration
of the Facility.
(5) The Lessee is not required to rebuild, repair, replace or restore
the Facility, and the Net Proceeds of the insurance and condemnation award shall
not be so applied if: (a) the Lessee causes the Agency to redeem the Bond
Outstanding in whole and purchases the Facility pursuant to Article VIII of this
Lease Agreement; or (b) an Event of Default shall have occurred and be
continuing. In either case the total amount of Net Proceeds shall be paid to the
Bondholder, which shall apply the Net Proceeds to redemption of the Bond
Outstanding in whole if the Lessee so elects, or apply the Net Proceeds in
accordance with Section 7.2 of this Lease Agreement in respect of the Event of
Default.
(6) If the Lessee elects to rebuild, repair, replace or restore the
Facility, and if on completion of the work there shall be excess Net Proceeds,
such excess shall be deposited with the Bondholder and applied as provided in
the Mortgage Agreement.
(7) If the principal of and interest on the Bond and all fees and
expenses of the Agency and the Bondholder shall have been paid in full, all such
Net
24
<PAGE>
Proceeds shall be paid to the Lessee.
(8) The Agency, the Bondholder and the Lessee shall cooperate and
consult with each other in all matters pertaining to the settlement,
compromising, arbitration or adjustment of any claim or demand on account of any
event described in Paragraph (1) of this section, and the settlement,
compromising, arbitration or adjustment of any such claim or demand shall be
subject:
(a) in the case of all such settlements, compromises,
arbitrations or adjustments of less than S50,000.00 to the approval of the
Lessee (such approval not to be unreasonably withheld), and
(b) in the case of all such settlements, compromises,
arbitrations or adjustments of S50,000.00 or more, to the approval of the Lessee
and the Bondholder (such approvals not to be unreasonably withheld).
(9) If all or substantially all of the Facility shall be taken or
condemned, or if the taking or condemnation renders the Facility unsuitable for
use by the Lessee and any Sublessee as contemplated hereby, and the Lessee does
not exercise its option to purchase the Facility pursuant to Article VIII
hereof, the amount of the Net Proceeds so recovered shall be applied and treated
as though the Lessee had exercised such option to purchase and shall be
transferred from the Renewal Fund and paid over to the Bondholder for redemption
of the Bond in accordance with the Mortgage Agreement, and the Lessee shall
thereupon pay to the Bondholder the Principal Amount of the Bond and interest
accruing thereon, and pay the expenses of redemption, the fees and expenses of
the Agency and the Bondholder, together with all other amounts due under the
Mortgage Agreement and under this Lease Agreement. Thereupon, this Lease of the
Facility shall be terminated (subject to the survival of those obligations of
the Lessee referred to in Section 8.4 hereof).
(10) The Lessee hereby waives the provisions of Section 227 of the New
York Real Property Law or any law of like import now or hereafter in effect.
Section 5.2. NO WARRANTY OF CONDITION OR SUITABILITY. THE AGENCY HAS
---------------------------------------
MADE AND MAKES NO REPRESENTATION OR WARRANTY WHATSOEVER, EITHER EXPRESS OR
IMPLIED, WITH RESPECT TO THE MERCHANTABILITY, CONDITION, FITNESS, DESIGN,
OPERATION OR WORKMANSHIP OF ANY PART OF THE FACILITY, ITS FITNESS FOR ANY
PARTICULAR PURPOSE, THE QUALITY OR CAPACITY
25
<PAGE>
OF THE MATERIALS IN THE FACILITY, OR THE SUITABILITY OF THE FACILITY FOR THE
PURPOSES OR NEEDS OF THE LESSEE OR ANY SUBLESSEE OR THE EXTENT TO WHICH PROCEEDS
DERIVED FROM THE SALE OF THE BOND WILL BE SUFFICIENT TO PAY THE COST OF
COMPLETION OF THE PROJECT. THE LESSEE ACKNOWLEDGES THAT THE AGENCY IS NOT THE
MANUFACTURER OF THE FACILITY EQUIPMENT NOR THE MANUFACTURER'S AGENT NOR A DEALER
THEREIN. THE LESSEE IS SATISFIED THAT THE FACILITY IS SUITABLE AND FIT FOR ITS
PURPOSES OR THE PURPOSES OF ANY SUBLESSEE. THE AGENCY SHALL NOT BE LIABLE IN ANY
MANNER WHATSOEVER TO THE LESSEE OR ANY OTHER PERSON FOR ANY LOSS, DAMAGE OR
EXPENSE OF ANY KIND OR NATURE CAUSED, DIRECTLY OR INDIRECTLY, BY THE PROPERTY OF
THE FACILITY OR THE USE OR MAINTENANCE THEREOF OR THE FAILURE OF OPERATION
THEREOF, OR THE REPAIR, SERVICE OR ADJUSTMENT THEREOF, OR BY ANY DELAY OR
FAILURE TO PROVIDE ANY SUCH MAINTENANCE, REPAIRS, SERVICE OR ADJUSTMENT, OR BY
ANY INTERRUPTION OF SERVICE OR LOSS OF USE THEREOF OR FOR ANY LOSS OF BUSINESS
HOWSOEVER CAUSED.
Section 5.3. Depreciation. As between the parties to this Lease
------------
Agreement, the Lessee shall be entitled to all depreciation or recovery
deductions with respect to any depreciable property in the Facility pursuant to
applicable tax laws. The Agency makes no warranty to the Lessee as to such
entitlement.
Section 5.4. Assignment and Sublease.
-----------------------
(1) The Lessee shall not sublet all or any portion of the Facility or
assign this Lease Agreement in whole or in part without the prior written
consent of the Bondholder and the Agency, which consents may be withheld by the
Bondholder or the Agency in their absolute discretion. The Agency and the
Bondholder hereby consent to the sublease of the Facility to Coyne International
Enterprises Corp. pursuant to a Sublease Agreement dated of even date herewith.
Any consent by the Agency to any such assignment or subletting may be
conditioned upon, among other things, the payment of a fee in accordance with
the then existing Agency procedures or policies. Any attempted subletting or
assignment without such written consent shall be null and void. Any permitted
sublease or assignment, copies of which shall be delivered by the Lessee to the
Agency and the Bondholder, shall meet the following requirements:
26
<PAGE>
(a) No sublease or assignment shall relieve the Lessee from
primary liability for any of its obligations under this Lease Agreement.
(b) The assignee shall assume to the satisfaction of the
Bondholder and the Agency, the obligations of the Lessee to the extent assigned.
The sublease or assignment shall not impair such obligations, and shall not
confer on the sublessee or assignee any rights against the Agency or Bondholder
other than those conferred on the Lessee by this Lease Agreement.
(c) The Project shall continue to constitute a "project" as such
term is defined in the Act.
(d) Any Sublease shall be subordinate to this Lease Agreement
and the Mortgage Agreement.
(2) Notwithstanding the provisions of Paragraph (1) of this section,
the Agency or the Bondholder may, in writing, waive with respect to it the
requirement of prior consent to, and delivery of copies of, any Sublease or
category of Subleases.
(3) As of the purported effective date of any sublease or assignment,
the Lessee at its own expense shall furnish the Bondholder with an Opinion of
Counsel to the effect that the anticipated use of the Facility will continue to
qualify the Project as a "project" as such term is defined in the Act.
(4) Any consent by the Agency or the Bondholder as applicable to any
act of assignment, transfer or sublease shall be held to apply only to the
specific transaction thereby authorized. Such consent shall not be construed as
a waiver of the duty of the Lessee, or the successors or assigns of the Lessee,
to obtain from the Agency and the Bondholder, as applicable, consent to any
other or subsequent assignment, transfer or sublease, or as modifying or
limiting the rights of the Agency or the Bondholder as applicable under the
foregoing covenant by the Lessee.
(5) If this Lease Agreement be assigned, the Agency may, and is
hereby empowered to, collect rent from the assignee. If the Project or any part
thereof be sublet or occupied by any person or corporation other than the
Lessee, the Agency, in the event of the Lessee's default in the payment of rent
may, and is hereby empowered to, collect rent from the under tenant or occupant
during the continuance of such default. In either of such events, the Agency may
apply the net amount
27
<PAGE>
received by it to the rent herein provided, and no such collection shall be
deemed a waiver of the covenant herein against assignment, transfer or sublease
of this Lease Agreement, or constitute the acceptance of the under-tenant or
occupant as tenant, or a release of the Lessee from the further performance of
the covenants herein contained on the part of the Lessee.
Section 5.5. Maintain Existence. During the term of this Lease
------------------
Agreement, the Lessee shall maintain its existence, shall not dissolve or
otherwise dispose of all or substantially all of its assets, and shall not
consolidate with or merge into another entity or permit one or more other
entities to consolidate with or merge into it, except as follows: The Lessee
may, without violating the covenants in this Section, consolidate with or merge
into another entity, permit one or more other entities to consolidate with or
merge into it, or sell or otherwise transfer to another entity all or
substantially all of its assets as an entirety and thereafter dissolve, provided
that the surviving, resulting or transferee entity, as the case may be, (a)
assumes in writing all the obligations of the Lessee under this Lease Agreement;
(b) is, and continues to be, organized in or qualified to do business in the
State; (c) has a net worth immediately after such transaction at least equal to
that of the Lessee immediately prior thereto; (d) pays to the Agency a fee in
accordance with the then existing Agency procedures and policies; and (e)
certifies to the Agency and the Bondholder that the status of the Project, as a
"project" under the Act, will not be adversely affected.
ARTICLE VI
MISCELLANEOUS COVENANTS
-----------------------
Section 6.1. Payment of Bondholder's Compensation and Expenses. The
-------------------------------------------------
Lessee shall pay all reasonable actual out-of-pocket expenses (including counsel
fees) reasonably incurred by the Bondholder in the performance of its duties or
enforcement of its rights under this Lease Agreement, the Mortgage Agreement and
any other document relating to the Bond.
Section 6.2. Financial Statements. The Lessee shall prepare and
--------------------
deliver to the Bondholder and, upon request, to the Agency, financial statements
as required by the Lessee Guaranty.
Section 6.3. Certificate of Compliance. The Lessee shall deliver to
-------------------------
the Agency and to the Bondholder with each delivery required by Section 6.2
hereof, a
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<PAGE>
certificate of an Authorized Representative of the Lessee as to whether, as of
the end of the preceding Fiscal Year of the Lessee, and at all times during such
Fiscal Year, the Lessee was in compliance with all the provisions in this Lease
Agreement or in any other Security Document to which it is a party, and if such
Authorized Representative has obtained knowledge of any such noncompliance, he
shall disclose in such certificate such noncompliance and any action taken or
proposed to be taken by the Lessee with respect thereto.
Section 6.4. Furnishing of Information. The Lessee shall furnish
-------------------------
promptly to the Agency such information, in such form and supported by such
certifications, as the Agency or the Bondholder shall reasonably request,
relating to the Lessee, any Sublessee (including but not limited to, a schedule
listing any existing Sublease and Sublessee, along with such information
regarding such Subleases and Sublessees as the Agency or the Bondholder may
request), the Project, the Facility, the finances of the Lessee, and employment
by the Lessee and any Sublessee (past, present and future).
Section 6.5. Right to Cure Agent Defaults. If as special agent of
----------------------------
the Agency, the Lessee receives any notice of non-performance by the Agency of
any of the Agency obligations under this Lease Agreement or the Mortgage
Agreement, the Lessee may perform the obligation, with full power of
substitution.
Section 6.6. Retention of Title to the Facility; Grant of Easements;
-------------------------------------------------------
or Other Interest.
- -----------------
(1) Except as otherwise provided in Sections 3.5 or 7.2 or in this
Section, the Agency shall not assign, encumber (other than Permitted
Encumbrances), convey or otherwise dispose of all or any part of the Facility
during the term of this Lease Agreement without the prior written consent of the
Lessee and the Bondholder.
(2) So long as no Event of Default exists, and if the use or
operation of the Facility or the status of the Project as a "project" under the
Act would not be adversely affected, at the written request of the Lessee, and
with the prior written consent of the Bondholder, which consent may be withheld
by the Bondholder in its sole discretion, the Agency shall grant to the Lessee
or any Person designated by it any of the following interests in or parts of the
Facility Realty:
(a) Such leases, rights-of-way, easements, party wall
agreements, permits or licenses as shall be necessary or convenient for the use
of the
29
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Facility.
(b) Any of the Agency's right, title and interest in and to any
unimproved part of the Facility Realty.
(c) Any areas improved for use for parking, loading or access
ways, subject to the following conditions: The Lessee shall substitute
facilities substantially equivalent in function, value and location to the
facilities granted, and cause the substitute facilities to be added to the
Facility Realty subject to the terms of this Lease Agreement and the Mortgage
Agreement. However, the Bondholder may waive these conditions if it is satisfied
that the facilities are surplus and not required for the operation of the
Facility.
(3) Upon the granting of a request under Paragraph (2) of this
section, the Agency shall, at the sole expense of the Lessee, prepare, execute
and deliver any instruments necessary to release the interest or area from the
leasehold estate created by this Lease Agreement; and request the Bondholder to
execute and deliver, at the sole expense of the Lessee, any instruments
necessary or appropriate to release such interest from the lien of the Mortgage
Agreement. If the grant requires the conveyance of title in fee simple, it shall
be subject to any liens, easements, encumbrances and reservations (a) to which
the title was subject at the time of recording of this Lease Agreement, (b)
created at the request of, by the act of, or consented to by the Lessee, (c)
resulting from the failure of the Lessee to observe any provisions of this Lease
Agreement, (d) Permitted Encumbrances (other than the lien of this Lease
Agreement and the Mortgage Agreement), and (e) for taxes, assessments or other
governmental charges not then delinquent.
(4) No release referred to in this Section 6.6 shall be effected
unless the following is deposited with the Bondholder:
(a) With respect to any grant made under Paragraph (2) of this
section, such certification as the Bondholder may require that the portion of
the Facility Realty is not needed for the operation of the Facility, will not
adversely affect its use or operation, or the status of the Project as a
"project" under the Act, and will not destroy the means of ingress thereto or
egress therefrom.
(b) Any consideration received from the grant of an interest
under subparagraph (a) of Paragraph (2) of this section.
30
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(c) With respect to any interest granted under subparagraphs (b) or
(c) of Paragraph (2) of this section, an amount of cash equal to the greatest of
(i) the original cost of the portion released, (ii) the fair market value of
such portion, or (iii) if such portion is sold, the amount received by the
Lessee upon the sale. Such costs and values shall be determined by qualified
appraisers satisfactory to the Agency and the Bondholder.
(5) No conveyance or release effected under this section shall
entitle the Lessee to any abatement or diminution of rents or other payments the
Lessee is required to make under this Lease Agreement.
Section 6.7. Discharge of Liens. If any Lien other than Permitted
------------------
Encumbrances is asserted against the Facility or the interest of the Agency, the
Lessee or any Sublessee therein, or against any of the rentals or other amounts
paid under this Lease Agreement, the Lessee will promptly give written notice
thereof to the Agency and the Bondholder and cause such Lien to be fully
discharged and released within thirty (30) days after its assertion. However,
the Lessee may contest any such Lien in good faith, provided that in the course
of any proceedings for that purpose the Lessee shall take measures necessary to
protect the interests of the Agency and Bondholder. Such measures shall include
the furnishing of such security as the Bondholder may reasonably request, and
any other measures that may be reasonably requested by the Agency or the
Bondholder. In that event, the Lessee may permit the items so contested to
remain undischarged and unsatisfied during the period of contest and any appeal.
If any such Lien shall be reduced to final judgment, and such judgment or other
process issued for the enforcement thereof is not promptly stayed, or if so
stayed and the stay thereafter expires, the Lessee shall forthwith pay and
discharge the judgment.
Section 6.8. Further Assurances.
------------------
(1) The Lessee shall cooperate with the Agency and Bondholder for the
purpose of protecting their respective interests in the Facility, this Lease
Agreement and the rentals and other sums due under this Lease Agreement,
including without limitation the execution of all Uniform Commercial Code
financing statements requested by the Agency or the Bondholder.
(2) The Agency and the Bondholder are authorized if permitted by
applicable law to file one or more Uniform Commercial Code financing statements
31
<PAGE>
disclosing any security interest in the Facility, this Lease Agreement and any
Sublease and the rentals and other sums due under this Lease Agreement and any
Sublease, without the signature of the Lessee or signed by the Agency or the
Bondholder as attorney-in-fact for the Lessee.
(3) The Lessee shall pay all costs of filing any financing,
continuation or termination statements with respect to the Facility and this
Lease Agreement.
(4) The Lessee shall execute and deliver to the Agency or the
Bondholder upon written request such other instruments, conveyances, transfers
and assurances as the Agency or the Bondholder deems reasonably necessary or
advisable for the implementation, correction, confirmation or perfection of this
Lease Agreement, and any rights of the Agency or the Bondholder under this Lease
Agreement, any Sublease or the Mortgage Agreement.
(5) The Lessee shall comply with the provisions of the Mortgage
Agreement that affects the Lessee and agrees that the Bondholder shall have the
power, authority, rights and protections provided it in the Mortgage Agreement.
Section 6.9. Recording and Filing.
--------------------
(1) The Lessee shall cause this Lease Agreement as originally
executed or a memorandum thereof as the Bondholder shall determine, to be
recorded subsequent to the recordation of the Mortgage Agreement by the Title
Company, in such office as may be provided by applicable law.
(2) The Lessee shall cause the security interest of the Agency
created by this Lease Agreement and the assignment of such security interest to
the Bondholder to be perfected by the filing by the Title Company of financing
statements which fully comply with the New York State Uniform Commercial Code -
Secured Transactions in the Office of the Secretary of State of the State in the
City of Albany, New York, and in the appropriate office of the Clerk of the
County in the City of Buffalo, New York.
(3) The Lessee shall file or cause to be filed all necessary
continuation statements (and additional financing statements) within the time
prescribed by the New York State Uniform Commercial Code- Secured Transactions
32
<PAGE>
in order to continue (or attach or perfect) the security interest created by
this Lease Agreement, to the end that the rights of the Agency and the
Bondholder in the Facility shall be fully preserved as against creditors or
purchasers for value from the Agency or the Lessee.
(4) Upon request of the Bondholder or Agency, the Lessee shall
furnish the Agency and the Bondholder with an Opinion of Counsel, addressed to
the Agency and the Bondholder, as required in the provisions of the Mortgage
Agreement relating to recording and filing; and shall perform all other acts
(including the payment of all costs) necessary to enable the Agency and
Bondholder to comply with such recording and filing provisions.
Section 6.10. Notice of Default Under Sublease. The Lessee shall
--------------------------------
promptly deliver to the Agency and the Bondholder copies of any notices of
default given by the Lessee to the Sublessee or received by the Lessee from the
Sublessee under any Sublease.
Section 6.11. Equal Employment Opportunities.
-------------------------------
(1) The Lessee shall insure that all employees and applicants for
employment with regard to the Project are afforded equal employment
opportunities without discrimination.
(2) Except as is otherwise provided by collective bargaining
contracts or agreements, new employment opportunities created as a result of the
Project (whether by the Lessee, the Sublessee or any other occupant of the
Facility) shall be listed by the Lessee, any Sublessee (or, if applicable, by
such other occupant) with the New York State Department of Labor Community
Services Division, and with the administrative entity of the service delivery
area created by the Federal Job Training Partnership Act (P.L No. 97300) in
which the Project is located. Except as is otherwise provided by collective
bargaining contracts or agreements, the Lessee agrees, and shall cause the
Sublessee and any other occupant of the Facility to agree, where practicable, to
first consider persons eligible to participate in the Federal Job Training
Partnership (P.L. No. 97-300) programs who shall be referred by administrative
entities of service delivery areas created pursuant to such act or by the
Community Services Division of the New York State Department of Labor for such
new employment opportunities.
33
<PAGE>
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
------------------------------
Section 7.1. Events of Default. Any one or more of the following
-----------------
events shall constitute an "Event of Default" under this Lease Agreement:
(1) The Lessee: (a) fails to pay any rent sufficient for payment of
any installment of principal, Redemption Price or interest on the Bond when due,
and such failure continues for ten (10) calendar days from the due date thereof,
(b) fails to pay any amount sufficient to pay any rent under Section 3.3 of this
Lease Agreement (other than principal, Redemption Price or interest on the Bond
as provided in subparagraph (a) of this Paragraph) that has become due and
payable and the continuance of such failure for ten (10) calendar days from the
due date thereof, (c) fails to pay any amount owing to the Agency under the
terms of this Lease Agreement or otherwise, and such failure shall continue for
ten (10) days following written demand therefor by the Agency, (d) causes or
permits the nonrenewal, cancellation, reduction of benefits or material change
in coverage of insurance policies without simultaneously, in the case of
nonrenewal or cancellation, substituting insurance policies that comply with
Section 4.3 of this Lease Agreement, or (e) fails to continuously operate the
Facility, or cause the Facility to be operated, in accordance with Section
3.2(2) of this Lease Agreement.
(2) Other than as provided in Paragraph (1) of this section or in
Section 9.1, the default of the Lessee in observing any provision of this Lease
Agreement and failure to cure such default within thirty (30) days from the time
the Lessee receives written notice from the Agency or the Bondholder specifying
the nature of such default, or (a) if by reason of its nature the failure or
default can be remedied, but not within such thirty (30) day period, the Lessee
fails to proceed with reasonable diligence after receipt of such notice to cure
the default, or (b) if the Lessee fails to continue with reasonable diligence
its efforts to cure the default; provided, however, that in no event shall the
Lessee have more than one (1) additional thirty (30) day period to cure such
default.
(3) The Lessee, the Sublessee or the Individual Guarantor (a) applies
for or consents to the appointment of or the taking of possession by a receiver,
custodian, trustee or liquidator of itself or of any of its assets, (b) admits
in writing its inability, or is generally unable, to pay its debts as such debts
become due, (c) makes
34
<PAGE>
a general assignment for the benefit of its creditors, (d) commences a voluntary
case under the Federal Bankruptcy Code (as now or hereafter in effect), (e)
files a petition or other request seeking to take advantage of any other law
relating to bankruptcy, insolvency, reorganization, winding-up, or composition
or adjustment of debts, or (f) takes any action for the purpose of effecting any
of the foregoing.
(4) A proceeding or case is commenced without the application or
consent of the Lessee, the Sublessee or the Individual Guarantor in any court of
competent jurisdiction, seeking (a) liquidation, reorganization, arrangement,
adjustment of debts, adjudication as a bankrupt, dissolution, winding-up, or
relief as a debtor, (b) the appointment of a trustee, receiver, custodian,
liquidator or the like of the Lessee, the Sublessee or the Individual Guarantor
or of any of its assets, or (c) similar relief under any law relating to
bankruptcy, insolvency, reorganization, winding-up or composition or adjustment
of debts, and such proceeding or case continues undismissed, or an order,
judgment or decree approving or ordering any of the foregoing is entered and
continues unstayed and in effect, for a period of thirty (30) days.
(5) If any certificate, statement, representation, warranty or
financial statement furnished by or on behalf of the Lessee, the Sublessee or
the Individual Guarantor proves to have been false or misleading in any material
respect at the time as of which the facts therein set forth were made, or to
have omitted any substantial or unliquidated liability or claim against the
Lessee, the Sublessee or the Individual Guarantor.
(6) There is a default in respect of any evidence of indebtedness for
money borrowed from the Bondholder by the Lessee, the Individual Guarantor or
any Sublessee (or with respect to the performance of any obligations incurred in
connection with any such indebtedness for money borrowed) where the effect of
such default is to accelerate the maturity of such indebtedness or to permit the
holders thereof (or a trustee on behalf of such holders) to cause such
indebtedness to become due prior to its stated maturity, or any such
indebtedness is not paid as and when due and payable.
(7) Final judgment of money in excess of an aggregate uninsured
liabilities of $100,000.00 shall be rendered against the Lessee, the Individual
Guarantor or any Sublessee and the judgment shall remain undischarged for a
period of thirty (30) consecutive days during which execution is not effectively
stayed.
35
<PAGE>
(8) The occurrence of an "Event of Default" under the Mortgage
Agreement, the Guaranty, the PILOT Agreement or any other Security Document.
(9) If any party to the Agency Compliance Agreement shall fail to
satisfy any of his, its or their respective obligations thereunder.
Section 7.2. Remedies on Default.
-------------------
(1) Upon the occurrence and during the continuation of an Event of
Default specified in Paragraphs (3) or (4) of Section 7.1, the total unpaid
amount of the rent required to be paid pursuant to Section 3.3 shall be
immediately due and payable without any notice or demand of any kind.
(2) Upon the occurrence and during the continuation of an Event of
Default, the Bondholder, or the Agency with the prior written consent of the
Bondholder, may:
(a) declare the total unpaid principal amount of the rent
required to be paid under Section 3.3 during the remainder of the term of this
Lease Agreement to be immediately due and payable; and
(b) (i) re-enter and take possession of the Facility without
terminating this Lease Agreement, or (ii) terminate the lease term and all
rights of the Lessee under this Lease Agreement, and exclude the Lessee from
possession of the Facility, holding the Lessee liable for the amount, if any, by
which the aggregate of the rents and other amounts payable by the Lessee under
this Lease Agreement exceeds the aggregate of the rents and other amounts
received under the new lease.
(3) Upon the exercise of its rights under subparagraph (2)(b) of this
section, the Agency or the Bondholder may sublet the Facility or any part of it,
for the account of the Lessee, for such rental terms, to such Persons and for
such period or periods as it may determine. The Agency and the Bondholder shall
not be required to do any act or exercise any diligence to mitigate the damages
to the Lessee. The Lessee shall be liable for the amount by which the aggregate
of the rents payable by the Lessee under Section 3.3, together with the expenses
of subleasing and collection, exceed the aggregate of the rents and other
amounts received from such subletting. Any excess rentals from such subletting
shall be credited to any rental due or to become due by the Lessee.
36
<PAGE>
(4) Upon the occurrence of and during the continuation of any Event
of Default, the Bondholder may:
(a) exercise all or any of the rights and remedies of a secured
party under the New York Uniform Commercial Code;
(b) take any action permitted under the Mortgage Agreement with
respect to any Event of Default under the Mortgage Agreement; and
(c) take whatever action at law or in equity as may appear
necessary or desirable to collect the rent then due and thereafter to become
due, or to enforce performance or observance of any obligations of the Lessee
under this Lease Agreement.
(5) In addition to any other rights or remedies granted by this
section to the Agency, the Agency may enforce any of the Agency's Reserved
Rights without the consent of the Bondholder. The Agency may enforce any such
rights, without the consent of the Bondholder, by an action for damages,
injunction or specific performance, or by exercising a right of re-entry or
termination of the Lease Agreement as provided in Paragraphs (2)(b) and (3) of
this section, or a right of reconveyance under Paragraph (6) of this section, or
by any other appropriate remedies accorded lessors generally by law.
(6) The Agency, upon declaring an Event of Default under the Agency's
Reserved Rights and upon five (5) Business Days prior written notice to the
Bondholder, may convey the Facility to the Lessee, subject to the lien of the
Mortgage Agreement, and the Lessee hereby unconditionally agrees to accept such
conveyance as follows:
(a) Such conveyance shall be by quit-claim deed and/or bill of
sale (with no express or implied warranties by the Agency) and shall not
constitute a merger of the fee and leasehold interests.
(b) The Lessee hereby designates the Agency as its attorney-in-
fact for the purpose of causing a deed of such conveyance, together with any
other documents in connection therewith, to be recorded, and to take such other
and further actions reasonably necessary to complete the conveyance of the
Facility to the Lessee.
37
<PAGE>
(7) Any sums payable to the Agency or the Bondholder as a consequence
of any action taken pursuant to this Section shall be paid to the Agency or to
the Bondholder and applied as provided in the Mortgage Agreement or this Lease
Agreement, or both, with respect to the particular right being enforced.
(8) No action taken under this Section 7.2 shall, except as expressly
provided herein, relieve the Lessee from its obligations under this Lease
Agreement, all of which shall survive such action.
Section 7.3. Waivers.
--------
(1) The rights and remedies of the Agency or the Bondholder under
this Lease Agreement shall be cumulative and shall not exclude any other rights
and remedies of the Agency or the Bondholder allowed by law or equity with
respect to any default under this Lease Agreement. Failure by the Agency or the
Bondholder to insist upon the strict performance of any of the Lessee's
obligations or to exercise any rights or remedies upon default by the Lessee
shall not be considered a waiver or relinquishment for the future of (a) the
right to insist upon and to enforce by any appropriate legal or equitable remedy
the Lessee's strict compliance with its obligations, or (b) the right to
exercise any such rights or remedies, including the right to recover possession
of the Facility, if such Lessee default be continued or repeated.
(2) In the event any covenant or provision of this Lease Agreement
should be breached by either party and thereafter waived by the other party,
such waiver shall be limited to the particular breach so waived and shall not be
deemed to waive any other breach of this Lease Agreement.
(3) No waiver shall be binding unless it is in writing and signed by
the party making the waiver.
(4) To the extent permitted by applicable law, the Lessee hereby
waives the benefit and advantage of any valuation, inquisition, stay,
appraisement, extension or redemption laws now existing or which may hereafter
exist which, but for this provision, might be applicable to any sale or
reletting made under the judgment, order or decree of any court or under the
powers of sale and reletting conferred by this Lease Agreement or otherwise.
38
<PAGE>
Section 7.4. Effect on Discontinuance of Proceedings. In case any
---------------------------------------
proceeding taken by the Agency or the Bondholder on account of any Event of
Default under this Lease Agreement or under the Mortgage Agreement shall have
been discontinued or abandoned for any reason or shall have been determined
adversely to the Agency or the Bondholder, then, and in every such case, the
Agency and the Bondholder shall be restored, respectively, to their former
positions and rights thereunder, and all rights, remedies, powers and duties of
the Agency or the Bondholder continue as in effect prior to the commencement of
such proceedings.
Section 7.5. Agreement to Pay Attorneys' Fees and Expenses. If the
---------------------------------------------
Agency or Bondholder employs attorneys or incurs other expenses for the
collection of rentals or other sums payable under this Lease Agreement, or for
the enforcement of performance or observance of any obligation or agreement of
the Lessee, the Lessee, on demand therefor, pay to the Agency and the Bondholder
the reasonable fees and expenses of such attorneys and such other expenses so
incurred.
ARTICLE VIII
REDEMPTION OF BOND:
-------------------
OBLIGATION TO PURCHASE UPON
---------------------------
TERMINATION OF THE LEASE
------------------------
Section 8.1. Redemption of the Bond in Whole. The Lessee may cause
-------------------------------
the Agency to redeem the Bond Outstanding in whole, and if provided in the Bond,
in part, upon such terms as are provided in the Bond, Section 4.02 of the
Mortgage Agreement and in Section 8.2 hereof.
Section 8.2. Payments Required for Redemption in Whole. In the event
-----------------------------------------
of the Redemption of the Bond in whole, the Lessee shall make the following
payments:
(1) To the Bondholder, an amount certified by the Bondholder which,
when added to the total amount held by the Bondholder for the account of the
Agency and available for such purpose, is sufficient to pay in full the
Redemption Price.
(2) To the Agency, an amount certified by the Agency to be sufficient
to pay all unpaid fees and expenses of the Agency incurred under this Lease
Agreement and the Mortgage Agreement.
39
<PAGE>
(3) To the Bondholder, an amount certified by the Bondholder to be
sufficient to pay all unpaid fees and expenses of the Bondholder incurred under
this Lease Agreement, the Mortgage Agreement and any other Security Document.
Section 8.3. Obligation to Purchase the Facility.
-----------------------------------
(1) Except as otherwise provided in Paragraph (2) of this section,
upon termination or expiration of the lease term, the Lessee shall purchase the
Facility from the Agency for the purchase price of One ($1.00) Dollar, together
with all fees, charges, expenses and other amounts required to be paid under
this Lease Agreement. The Lessee shall purchase the Facility by giving written
notice to the Agency and to the Bondholder fixing the date of closing for such
purchase, which shall be on or about the date on which the lease is to be
terminated. This Lease Agreement and the lease shall thereupon terminate, with
the exception of the provisions of Sections 4.4, 7.2 and 9.9, which shall
survive any termination thereof.
(2) The obligation of the Lessee in Paragraph (1) of this section to
purchase the Facility shall either be deferred or shall not apply if the Agency
and the Lessee agree to extend or renew the lease granted by this Lease
Agreement, or enter into a new lease with the Lessee or any other lessee, for
purposes of the Agency under the Act.
Section 8.4. Conveyance on Purchase. At the closing of the purchase
----------------------
of the Facility pursuant to this Article, the Agency shall, upon receipt of the
purchase price, deliver all necessary documents for the following purposes:
(1) To convey to the Lessee (by quit-claim deed and/or bill of sale,
with no express or implied warranties by the Agency) title to the Facility being
purchased, as the Facility exists, subject only to the following: (i) any Liens
to which title was subject when conveyed to the Agency; (ii) any Liens created
at the request of the Lessee, to the creation of which the Lessee consented or
in the creation of which the Lessee acquiesced; (iii) any Permitted
Encumbrances; and (iv) any Liens resulting from the failure of the Lessee to
observe any of its agreements contained in this Lease Agreement or arising out
of an Event of Default;
(2) To release and convey to the Lessee all the Agency's rights and
interest in and to any rights of action (other than under Sections 3.3, 4.4,
7.5, 8.2 and 9.9, and under the PILOT Agreement) or any Net Proceeds of
insurance or
40
<PAGE>
condemnation awards with respect to the Facility; and
(3) To deliver to the Bondholder such instruments as the Bondholder
may require for the discharge and release of any security interest or Lien of
any nature held by the Bondholder.
Section 8.5. Amounts Remaining on Deposit with the Bondholder upon
-----------------------------------------------------
Payment of the Bond. After payment in full of the Bond and the interest thereon
- -------------------
and of all fees, charges, expenses and other amounts required to be paid under
this Lease Agreement and the PILOT Agreement, any amounts on deposit with the
Bondholder for the account of the Agency and the Lessee under this Lease
Agreement shall belong to and be paid to the Lessee by the Bondholder as an
overpayment of rent.
ARTICLE IX
MISCELLANEOUS
-------------
Section 9.1. Enforce Majeure.
---------------
(1) Subject to the provisions of Paragraphs (2), (3) and (4) of this
section, and except as otherwise expressly provided in this Lease Agreement if
by reason of force majeure the Lessee or the Agency, as the case may be (herein
referred to as the "defaulting party"), is unable in whole or in part to carry
out its obligations under this Lease Agreement, the defaulting party shall not
be deemed in default during the continuance of such inability. The term "force
majeure" as used herein shall mean any of the following: acts of God; strikes,
lockouts or other industrial disturbances; acts of public enemies; orders of any
kind of the government of the United States or of the State or any of their
departments, agencies or officials, or any civil or military authority;
insurrections; riots; epidemics; landslides; lightning; earthquake; fire;
tornadoes; storms; floods, washouts; drought; restraint of government; civil
disturbances; explosions; partial or entire failure of utilities or other
suppliers of energy, or any other similar cause or event not reasonably within
the control of the defaulting party.
(2) Promptly after the occurrence of the event of force majeure, the
defaulting party shall give written notice of the event to the other party and
to the Bondholder, containing full particulars of the event.
41
<PAGE>
(3) The obligations referred to in Paragraph (1) of this section
shall not include the Lessee's obligations to pay rents and make other required
payments and to comply with the provisions of Sections 4.3 and 4.4.
(4) The defaulting party shall take such steps, within a reasonable
time, as may be within its reasonable control, to mitigate the cause or causes
preventing it from carrying out its obligations under this Lease Agreement, and
to remove the effects of the event of force majeure; provided that the
settlement of strikes, lockouts and other industrial disturbances shall be
entirely within the discretion of the defaulting party, which shall not be
required to make settlement of strikes, lockouts and other industrial
disturbances by acceding to the demands of the opposing party or parties when
such course is in the judgment of the defaulting party unfavorable to it.
Section 9.2. Notices.
-------
(1) All notices, certificates and other communications under this
Lease Agreement shall be in writing and shall be sufficiently given and deemed
given (a) if delivered by mail, on the second day following the day on which
mailed by certified mail, postage prepaid and return receipt requested, and if
delivered in any other manner, when delivered, (b) and addressed as follows:
To the Agency, at the Agency's Notification Address;
To the Lessee, at the Lessee's Notification Address;
To the Sublessee, at the Sublessee's Notification Address;
To the Bondholder, at the Bondholder's Notification Address.
(2) A duplicate of each such notice, certificate or other written
communication given by any of the above Persons shall be given to each of the
others. Any such Person to whom notice may be given may, by notice given in the
manner here provided, designate any further or different addresses to which
subsequent notices, certificates and other communications shall be sent.
Section 9.3. Binding Effect. This Lease Agreement shall inure to the
--------------
benefit of and shall be binding upon the parties and their successors and
assigns,
42
<PAGE>
subject however, to the provisions of Section 5.5.
Section 9.4. Severability. In the event any provision of this Lease
------------
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, such holding shall not invalidate or render unenforceable any
other provision hereof.
Section 9.5. Amendments. This Lease Agreement may be amended only
----------
with the concurring written consent of the Agency, the Lessee and the
Bondholder.
Section 9.6. Execution of Counterparts. This Lease Agreement may be
-------------------------
executed in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument. Counterpart No. 1 shall
be marked to designate it as the original and shall be retained by the
Bondholder.
Section 9.7. Net Lease. It is the intent of the parties that the
---------
lease be a "net lease" and that all the rent be available for debt service on
the Bond, and this Lease Agreement shall be construed to effect such intent.
Section 9.8. Applicable Law. This Lease Agreement shall be governed
--------------
by, and construed in accordance with, the applicable laws of the State.
Section 9.9. WAIVER OF TRIAL BY JURY. THE PARTIES HEREBY EXPRESSLY
-----------------------
WAIVE ALL RIGHTS TO TRIAL BY JURY ON ANY CAUSE OF ACTION DIRECTLY OR INDIRECTLY
INVOLVING THE TERMS, COVENANTS OR CONDITIONS OF THIS AGREEMENT OR THE FACILITY,
OR ANY MATTERS ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT.
Section 9.10. Priority of Rights of Bondholder. The rights and
--------------------------------
privileges of the Lessee set forth in this Lease Agreement are specifically made
subject and subordinate to the Mortgage Agreement and to the rights and
privileges of the Bondholder under the Mortgage Agreement. So long as not
otherwise provided in the Mortgage Agreement, the Agency shall be suffered and
permitted to possess, use and enjoy the Facility and appurtenances in order to
carry out its obligations under this Lease Agreement.
43
<PAGE>
IN WITNESS WHEREOF, the Agency and the Lessee have caused this Lease
Agreement to be executed by their authorized representatives, all as of the date
first above written.
ERIE COUNTY INDUSTRIAL
DEVELOPMENT AGENCY
By /s/ David W. Kerchoff
--------------------------------------
David W. Kerchoff, Assistant Treasurer
MIDWAY-CTS BUFFALO, LTD.
By /s/ Raymond T. Ryan
--------------------------------------
Raymond T. Ryan, Vice-President
44
<PAGE>
STATE OF NEW YORK )
) SS.:
COUNTY OF ERIE )
On the 14 day of December 1994, before me personally came DAVID W.
KERCHOFF, to me known, who being by me duly sworn, did depose and say that he is
an Assistant Treasurer of the ERIE COUNTY INDUSTRIAL DEVELOPMENT AGENCY, the
agency described in and which executed the above instrument; and that he signed
his name thereto by authority of the Board of Directors of said agency.
/s/ John C. Garas
-----------------------------
John C. Garas
Notary Public, State of New York
Qualified in Erie County
My Commission Expires 7/14/96
STATE OF NEW YORK )
) SS.:
COUNTY OF ERIE )
On the 14 day of December, 1994, before me personally appeared
RAYMOND T. RYAN, to me known and being by me duly sworn did depose and say that
he resides at 5516 West Lake Road, Manlius, New York; that he is the Vice-
President of MIDWAY-CTS BUFFALO, LTD., a New York corporation; the Corporation
described in and which executed the foregoing instrument; and that he signed his
name thereto by order of the Board of Directors of said Corporation.
/s/ John C. Garas
-----------------------------
John C. Garas
Notary Public, State of New York
Qualified in Erie County
My Commission Expires 7/14/96
45
<PAGE>
A-1
APPENDIX A
DEFINITIONS
Acquisition means the acquisition and construction of the Facility.
-----------
Act means, collectively, the New York State Industrial Development
---
Agency Act (Title 1 of Article 18-A of the General Municipal Law), as amended,
and Chapter 293 of the 1970 Laws of New York, as amended.
Affiliate means, with respect to any Person, 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"
when used with respect to any specified Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
Agency means the Erie County Industrial Development Agency, a
------
corporate governmental agency constituting a body corporate and politic and a
public benefit corporation of the State, duly organized and existing under the
laws of the State, and any body, board, authority, agency or other governmental
agency or instrumentality which shall hereafter succeed to the powers, duties,
obligations and functions thereof.
Agency Compliance Agreement shall mean the Environmental Compliance
---------------------------
and Indemnification Agreement dated as of December 1, 1994 from the Lessee and
the Individual Guarantors to the Agency, as amended or supplemented.
Agency's Notification Address shall mean Suite 300, Liberty Building,
-----------------------------
424 Main Street, Buffalo, New York 14202; Attention: Executive Director.
Agency's Reserved Rights means:
------------------------
(1) the right of the Agency in its own behalf to receive all opinions
of counsel, reports, financial statements, certificates, insurance policies or
insurance binders or certificates, or other notices or communications required
to be delivered to the Agency under the Lease Agreement;
<PAGE>
A-2
(2) the right of the Agency to grant or withhold any consents or
approvals required of the Agency under the Lease Agreement;
(3) the right of the Agency to enforce in its own behalf the
obligation of the Lessee to complete the Project;
(4) the right of the Agency to exercise in its own behalf its rights
under Section 2.3 of the Lease Agreement with respect to the proceeds of fee
title insurance;
(5) the right of the Agency to enforce or otherwise exercise in its
own behalf all agreements of the Lessee with respect to ensuring that the
Facility shall always constitute a qualified "project" as defined in and as
contemplated by the Act;
(6) the right of the Agency to amend with the Lessee the provisions
of the PILOT Agreement, and the right of the Agency to enforce its remedies
thereunder;
(7) the right of the Agency in its own behalf (or on behalf of the
appropriate taxing authorities) to enforce, receive amounts payable under or
otherwise exercise its rights under Sections 1.12, 2.5(3), (4), (5) and (7),
2.7, 2.8, 2.9, 3.2(2), (3) and (5), 3.7, 4.1(2), (4)(a) and (5), 4.2, 4.3, 4.4,
4.5, 5.1(4), 5.4, 5.5, 6.3, 6.4, 6.7, 6.11, 7.2(2), (3), (5), (6) and (7), 7.4,
7.5, 9.5 and 9.9 of the Lease Agreement;
(8) the right of the Agency in its own behalf to declare an Event of
Default under Section 7.1 of the Lease Agreement, or with respect to any of the
Agency's Reserved Rights; and
(9) the right of the Agency as to any of the above, exercisable with
respect to any Sublessee.
Application for Tax Exemption shall mean the Industrial Development
-----------------------------
Agencies Application for Real Property Tax Exemption required under Section 412-
a of the New York Real Property Tax Law.
Approved Facility means a commercial facility under the Act.
-----------------
Architect means William Scott Architect, P.C.
---------
<PAGE>
A-3
Architect's Agreement means the Agreement between the Lessee and the
---------------------
Architect with respect to the provision of architectural services for the
Facility, as amended or supplemented.
Assessor shall mean the assessor for the City.
--------
Authorized Representative means (1) in the case of the Agency, its
-------------------------
Chairman, Vice Chairman, Treasurer, Secretary, Assistant Secretary, Assistant
Treasurer or Executive Director; (2) in the case of the Lessee or the Sublessee,
its President, its Chairman of the Board of Directors, any Vice President,
Treasurer, Secretary, Assistant Treasurer or Assistant Secretary; and (3) in the
case of the Agency, the Lessee or any Sublessee, any officer or employee
authorized by it to perform specific acts or to discharge specific duties or to
execute and deliver a certain document.
Bond means the Erie County Industrial Development Agency Industrial
----
Development Revenue Bond (1994 Midway-CTS Buffalo Project).
Bondholder means Key Bank of New York and any other holder or holders
----------
of the Bond.
Bondholder's Notification Address means Key Center, 50 Fountain Plaza,
---------------------------------
Buffalo, New York 14202-2299.
Bond Principal Amount means $2,600,000.00 or so much thereof as shall
---------------------
be advanced pursuant to the Building Loan Contract.
Bond Resolution means the resolution of the Agency adopted on October
---------------
12, 1994 authorizing, among other things, the issuance of the Bond.
Building Loan Contract means the Building Loan Contract dated as of
----------------------
December 1, 1994, between the Bondholder and the Lessee, as amended or
supplemented.
Business Day means any day other than a Saturday, Sunday or other day
------------
on which banks located in Buffalo, New York are authorized or required to be
closed.
City shall mean City of Buffalo, New York.
----
<PAGE>
A-4
Closing Date means the date of issuance and delivery of the Bond.
------------
Collateral Lease Assignment means the Collateral Lease Assignment
---------------------------
dated as of December 1, 1994, between the Lessee and the Bondholder, as amended
or supplemented.
Conditional Assignment means the Assignment of Construction Contract
----------------------
dated as of December 1, 1994, from the Lessee to the Bondholder, as amended or
supplemented.
Construction Contract means the agreement between the Lessee and the
---------------------
General Contractor with respect to the construction of the Facility, as amended
or supplemented.
Construction Cost means the total amount to be paid by the Lessee to
-----------------
the General Contractor under the Construction Contract for all work, labor or
services to be performed and all materials, supplies or fixtures to be furnished
in connection with the construction of the Facility.
Construction Period means the period beginning on the earlier of (a)
-------------------
the date of the commencement of the construction and the equipping of the
Facility or (b) the Closing Date, and ending on the Project Completion Date.
County means the County of Erie, New York.
------
Designated Representative means any person designated by the Lessee in
-------------------------
writing.
Event of Default has the meaning specified in Section 7.1 of the Lease
----------------
Agreement, Section 8.01 of the Mortgage Agreement and Section 9 of the Building
Loan Contract.
Exempt Property shall mean only tangible personal property conveyed to
---------------
or acquired by the Agency in accordance with Section 2.2 of the Lease Agreement
which is acquired on or before the Project Completion Date for incorporation in
the Facility or for use in connection with the Facility.
Facility means, collectively, the Facility Realty and Facility
--------
Equipment.
<PAGE>
A-5
Facility Address means the 4.74+/- acre parcel located at 175 James E.
----------------
Casey Drive, New Buffalo Industrial Park, Buffalo, New York, all as more
particularly described in Appendix C attached hereto and made a part hereof.
Facility Equipment means:
------------------
(1) the machinery, equipment and other tangible personal property, if
any, acquired in whole or in part with the proceeds of the Bonds, or otherwise
acquired and transferred to the Agency for incorporation in the Facility, which
property is more particularly described in Appendix B attached to the Lease
Agreement and the Mortgage Agreement; provided that items having the legal
effect of "fixtures" shall not be included in the Facility Equipment but shall
be included in Facility Realty to the extent noted below in the definition of
Facility Realty;
(2) all repairs, replacements, renewals, additions and proceeds of or
for such property, and all other tangible personal property acquired pursuant to
Section 2.2 of the Lease Agreement.
Facility Realty means.
---------------
(1) the land described in the Description of Facility Realty in
Appendix C attached to the Lease Agreement and the Mortgage Agreement;
(2) all interests in such land regarded as real property interests,
and all other rights in such land;
(3) all structures (including but not limited to buildings and
foundations), and related facilities other than items included in Facility
Equipment;
(4) fixtures (other than trade fixtures);
(5) other improvements now Gr at any time made or situated on such
land; and
(6) all repairs, replacements or additions to such property.
Facility Realty shall not include any interest in real property released under
Section 6.6 of the Lease Agreement.
<PAGE>
A-6
Facility Supervisor means The Midway Construction Co., Ltd. or any
-------------------
other designated representative of the Lessee acceptable to the Bondholder.
Final Approvals means issuance of the Certificate of Substantial
---------------
Completion by the Architect and a permanent and unconditional certificate (or
certificates) of the occupancy for the completed Facility by the Governmental
Authorities or such other certificates or evidence of completion issued by the
Governmental Authorities and acceptable to the Bondholder.
Final Lien Waivers means final Lien waivers from the General
------------------
Contractor and any Subcontractor.
Financial Statements means the financial statements required to be
--------------------
delivered by the Lessee as set forth in the Lessee Guaranty Agreement.
Fiscal Year means, with respect to the Lessee, the period ending
-----------
October 31.
General Contractor means The Midway Construction Co., Ltd., a
------------------
corporation organized and existing under the laws of the State, with offices at
5200 San Felipe, Houston, Texas 77056.
Governmental Authority or Governmental Authorities means any
---------------------- ------------------------
governmental authority or other person having jurisdiction over the acquisition,
construction, equipping, ownership, leasing, operation and/or maintenance of the
Facility, including, but not limited to, the County and the City.
Governmental Obligations means direct obligations of or guaranteed by
------------------------
the United States of America.
Guaranty means collectively, the Lessee Guaranty and the Individual
--------
Guaranty.
Hazardous Substances Indemnity Agreement means the Hazardous
----------------------------------------
Substances Indemnity Agreement dated as of December 1, 1994 from the Lessee and
others to the Bondholder, as amended or supplemented.
Independent Engineer means a Person (not an employee of the Agency,
--------------------
<PAGE>
A-7
the Lessee or any Affiliate thereof) registered and qualified to practice
engineering or architecture under the Laws of the State and selected by the
Bondholder but compensated by the Lessee.
Individual Guarantor means J. Stanley Coyne and Thomas M. Coyne.
--------------------
Individual Guarantor's Notification Address means 140 Cortland Avenue,
-------------------------------------------
Syracuse, New York 13221.
Individual Guaranty means the Individual Guaranty Agreement, dated
-------------------
as of December 1, 1994, from the Individual Guarantor to the Bondholder, as
amended or supplemented.
Inducement Resolution means the resolution of the Agency adopted on
---------------------
September 15, 1993, authorizing the Acquisition of the Facility and undertaking
to permit the issuance of its industrial development revenue bond to finance
such Acquisition and thereupon to lease the Facility to the Lessee for sublease
to the Sublessee.
Institutional Investor means a commercial bank, savings bank, savings
----------------------
and loan association, trust company, insurance company or municipal bond fund or
unit trust.
Issue Date means, with respect to the Bond, the date of the initial
----------
delivery of the Bond, as stated by the Agency thereon to be the Issue Date.
Lease Agreement means the Lease Agreement, dated as of December 1,
---------------
1994, between the Agency and the Lessee, as amended or supplemented.
Lease Expiration Date means December 31, 2010, or such earlier date as
---------------------
this Lease Agreement may be terminated.
Lessee means Midway-CTS Buffalo, Ltd., a New York Corporation.
------
Lessee Guaranty means the Lessee Guarantee Agreement dated as of
---------------
December 1, 1994, from the Lessee to the Bondholder as amended or supplemented.
Lessee's Notification Address means 140 Cortland Avenue, Syracuse,
-----------------------------
<PAGE>
A-8
New York 13221, Attn: President.
Lien means any interest in personal or real property securing an
----
obligation owed to a Person whether such interest is based on the common law,
statute or contract. The term "Lien" includes reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases and other similar title exceptions and encumbrances affecting real
property.
Lien Law means the Lien Law of the State.
--------
Mechanic's Lien means any Lien filed pursuant to the provisions of the
---------------
Lien Law against the Facility or against monies on deposit in the Renewal Fund
by reason of nonpayment or alleged nonpayment, in whole or in part, of the cost
of any work, labor or services performed or any materials, supplies or equipment
furnished in connection with the construction, the renovation or the equipping
of the Facility.
Mortgage Agreement means the Mortgage Agreement dated as of November
------------------
1, 1994, between the Agency and the Bondholder, as amended or supplemented.
Net Proceeds means so much of the gross proceeds with respect to which
------------
that term is used as remain after payment of all expenses, costs and taxes
(including attorneys' fees) incurred in obtaining such gross proceeds.
Obligor means, collectively, the Agency under the Mortgage Agreement,
-------
the Lessee or the Agency under the Lease Agreement, the Lessee under the Lessee
Guaranty, the Sublessee under the Sublease Agreement and the Individual
Guarantor under the Individual Guaranty.
Opinion of Counsel means a written opinion of counsel who may (except
------------------
as otherwise expressly provided in the Lease Agreement or the Mortgage
Agreement) be counsel for the Lessee, the Agency or the Bondholder, as the
context may indicate, and who shall be acceptable to the party entitled to
receive such opinion.
Outstanding means, when used with reference to a Bond or Bonds, as of
-----------
any particular date, all Bonds authenticated and delivered under the Mortgage
Agreement, except:
<PAGE>
A-9
(1) a Bond canceled because of payment or redemption prior to
maturity or surrendered for cancellation; or
(2) a Bond in exchange for or in lieu of which another Bond shall
have been delivered under the Mortgage Agreement; or
(3) any portion of a Bond for the payment or redemption of which
monies or other assets have been held by the Bondholder.
Permitted Encumbrances means, as of any particular tine:
----------------------
(1) the Lease Agreement, any Sublease and the Mortgage Agreement, and
any mortgage lien, security interest or other encumbrance in favor of the
Bondholder;
(2) liens for real estate taxes, assessments, levies and other
governmental charges, the payment of which is not in default;
(3) user rights of others in, and restrictions on the Lessee's use
of, the Facility, and other encumbrances or irregularities (including agreements
with any railroad to service a railroad siding), (a) as normally exist with
respect to property similar in character to the Facility, and (b) as included in
the title insurance policies provided in Section 2.3 of the Lease Agreement;
(4) any mechanic's, workmen's, repairmen's, materialmen's,
contractor's; warehousemen's, carriers', suppliers' or vendors' lien, if payment
is not yet due, to the extent permitted by Section 6.7 of the Lease Agreement;
and
(5) such minor defects, irregularities, encumbrances, easements,
rights-of-way and clouds on title as normally exist with respect to property
similar in character to the Facility and as do not, in the Opinion of Counsel,
either singly or in the aggregate, materially impair the property affected
thereby for the purpose for which it was acquired and held by the Agency under
the Lease Agreement.
Person means any individual, corporation, partnership, joint venture,
------
association, joint stock company, trust, unincorporated organization, government
or government agency.
<PAGE>
A-10
PILOT Agreement means the Agreement for Payment in Lieu of Real Estate
---------------
Taxes, dated as of December 1, 1994, between the Agency and the Lessee, as
amended or supplemented.
Plans and Specifications means the plans and specifications prepared
------------------------
for the Project by or on behalf of the Lessee, as amended from time to time by
or on behalf of the Lessee to reflect any remodeling of the Facility or
substitutions, additions, modifications and improvements to the Facility made by
the Lessee in compliance with the Lease Agreement, said plans and specifications
being duly certified by an Authorized Representative of the Lessee and filed in
the principal office of the Bondholder, available to the Agency and approved by
each of the Lessee, the Bondholder and any Sublessee.
Project means the acquisition, construction, renovation, installation,
-------
equipping or operation of the Facility more particularly described in the
Description of Project in the Appendices attached to the Lease Agreement.
Project Completion means the date that the last of the following
------------------
events shall occur:
(i) the satisfactory completion of the Project in accordance with the
terms of the Plans and Specifications, as determined by the Bondholder and the
Independent Engineer; and
(ii) issuance of the Final Approvals.
Project Completion Date means not later than April 20, 1995.
-----------------------
Project Costs means:
-------------
(1) all costs of engineering and architectural services with respect
to the Facility, including the cost of test borings, surveys, estimates, plans
and specifications and for supervising construction, as well as for the
performance of all other duties required by or consequent upon the proper
construction of, and the making of alterations, renovations, additions and
improvements in connection with, the completion of the Facility;
(2) all costs paid or incurred for labor, materials, services,
supplies,
<PAGE>
A-11
machinery, fixtures and other expenses and to contractors, suppliers,
builders and materialmen in connection with the completion of the Facility;
(3) all costs of contract bonds and of insurance that may be required
or necessary during the period of Facility construction;
(4) all costs of title insurance as provided in Section 2.3 of the
Lease Agreement;
(5) all costs in connection with the acquisition of the Facility
Realty;
(6) the payment of legal and financial fees and expenses, and all
other costs and expenses incurred by or for the account of the Agency in
connection with the preparation, authorization, sale and issuance of the Bond,
and the preparation and execution of the Lease Agreement, the Mortgage Agreement
and all other documents in connection therewith;
(7) the interest due and payable on the Bond from the date of
issuance to the date of completion of the Facility;
(8) all costs which the Lessee shall be required to pay, under the
terms of any contract or contracts, for the completion of the Facility,
including any amounts required to reimburse the Lessee for advances made for any
item otherwise constituting a Project Cost or for any other costs incurred and
for work done which are properly chargeable to the Facility; and
(9) all other costs and expenses relating to the completion of the
Facility.
Public Purpose means the inducement of the Lessee to proceed with the
--------------
Facility and to expand its operations in the County for the purposes set forth
in Section 1.4 of the Lease Agreement.
Qualified Investments means:
---------------------
(i) Government obligations;
(ii) Negotiable certificates of deposit issued by any bank, trust
<PAGE>
A-12
company or national banking association which is a member of the Federal Reserve
System;
(iii) Commercial or Finance Paper of any Person rated at least P-1
or A-1 by Moody's Investors Services, Inc. or Standard & Poor's Corporation;
(iv) Money market instruments; or
(v) any other investment mutually agreeable to the Lessee, the
Bondholder or the corporate trustee, if any.
Real Estate Taxes shall mean all general levy real estate taxes levied
-----------------
against the Project by the City, County and School District.
Redemption Price means, with respect to any Bond, the principal amount
----------------
plus the applicable premium, if any, payable upon the redemption of the Bond.
Renewal Fund means the Fund established by Section 5.02 of the
------------
Mortgage Agreement.
Required Approvals means all site plan, zoning, land use, subdivision,
------------------
environmental, building, sewer hook up, curb cut and other permits, approvals,
consents or variances that are required by Governmental Authorities in
connection with the construction, the renovation and the equipping of the
Facility.
Sales Taxes shall mean any tax(es)imposed by Article 28 of the New
-----------
York Tax Law, as the same may be amended from time to time.
School District shall mean City of Buffalo Public School District.
---------------
Security Documents means, collectively and severally, the Lease
------------------
Agreement, the Mortgage Agreement, the Building Loan Contract, any Sublease, the
Collateral Lease Assignment, the Conditional Assignment, the Compliance
Agreement and the Guaranty.
SEORA Act means the Environmental Quality Review Act of the State and
---------
the regulations thereunder.
<PAGE>
A-13
State means the State of New York.
-----
Subcontract means any contract, subcontract or purchase order or
-----------
materials contract, in form and substance satisfactory to the Bondholder,
between the General Contractor and any Subcontractor for the performance of
certain work, labor or services or for the furnishing of certain materials,
supplies or equipment in connection with the Project.
Subcontractor means any person who has agreed to perform certain work,
-------------
labor or services or to furnish certain materials, supplies or equipment in
connection with the construction, the renovation or the equipping of the
Facility under a Subcontract.
Sublease means the Sublessee Agreement, dated as of November 1, 1994,
--------
between the Lessee and the Sublessee, as amended on supplemented.
Sublessee means Coyne International Enterprises Corp.
---------
Sublessee's Notification Address means 140 Cortland Avenue, Syracuse,
--------------------------------
New York 13221.
Surveyor means TVGA Engineering, Surveying, P.C.
--------
Taxable Status Date shall mean December 1, 1995.
-------------------
Title Company means Monroe Title Insurance Corp.
-------------
Title Policy means, collectively, (i) the mortgagee title insurance
------------
policy issued by the Title Company to the Bondholder insuring that the Mortgage
Agreement constitutes a good and valid first Lien on the Facility, free and
clear of all other liens, except for Permitted Encumbrances, and (ii) the fee
title insurance policy issued by the Title Company to the Agency insuring the
Agency's title to the Facility Realty against loss as a result of defects in the
title of the Agency, except for Permitted Encumbrances, and containing such
pending disbursement provisions, affirmative insurance and reinsurance or
coinsurance agreements as shall be required by the Bondholder, the Agency or
their respective counsel.
<PAGE>
APPENDIX B
Description of Facility Equipment
---------------------------------
NONE
<PAGE>
APPENDIX C
----------
Description of Facility Realty
------------------------------
ALL THAT TRACT OR PARCEL OF LAND, situate in the City of Buffalo, County of
Erie and State of New York, being part of Lots Nos. 149 and 150, Township 10,
Range 7 of the Buffalo Creek Reservation and also being a part of Parcel 5 as
shown on a map entitled "New Buffalo Industrial Park" filed in the Erie County
Clerk's Office under Cover No. 2532, bounded and described as follows:
BEGINNING at a point in the east line of James E. Casey Drive (66 feet
wide) distant 815.01 feet northerly from the north line of Dingens Street (66
feet wide) as measured along said east line of James E. Casey Drive; thence
northerly along the east line of said James E. Casey Drive, 362.00 feet to a
point; thence easterly at an interior angle of 90 (degrees) 27 (feet) 12
(inches) and parallel with the north line of Dingens Street, 570.31 feet to a
point; thence southerly and parallel with the east line of said James E. Casey
Drive, 362.00 feet to a point; thence westerly on a line parallel with the north
line of Dingens Street, 570.31 feet to the point or place of beginning.
<PAGE>
APPENDIX D
----------
Description of Project
----------------------
The acquisition and construction of a 69,265+/- square foot facility for
manufacturing and warehousing purposes, and the acquisition of machinery and
equipment for manufacturing and warehousing purposes and the lease of the
Project to the Lessee for sublease to the Sublessee, such project to be located
at a 4.74+/- acre parcel at 175 James E. Carey Drive, New Buffalo Industrial
Park, Buffalo, New York.
At no time shall any portion of the Facility be utilized for the making of
retail sales to customers who personally visit the Facility, in contravention of
Section 1.12 of this Lease Agreement.
<PAGE>
EXHIBIT 10.6
THIS BOND HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF WITHOUT REGISTRATION UNDER
SAID ACT OR EXEMPTION THEREFROM
THIS BOND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF EXCEPT TO AN INSTITUTIONAL
INVESTOR OR TO SUCH OTHER PERSON AS MAY BE
PERMITTED UPON THE TERMS AND CONDITIONS SET
FORTH IN THE MORTGAGE AGREEMENT
REFERRED TO IN THIS BOND
ERIE COUNTY INDUSTRIAL
DEVELOPMENT AGENCY
INDUSTRIAL DEVELOPMENT REVENUE BOND
(1994 MIDWAY-CTS BUFFALO PROJECT)
No. R-1 $2,600,000.00
The Erie County Industrial Development Agency, a corporate governmental
agency constituting a body corporate and politic and a public benefit
corporation of the State of New York, duly organized and existing under the laws
of the State of New York (the "Agency"), for value received, hereby promises to
pay as hereinafter provided to Key Bank of New York (the "Bondholder") or
registered assigns, solely from the lease rentals derived from or in connection
with the Facility hereinafter referred to as provided in the Mortgage Agreement
(the "Mortgage Agreement") dated as of December 1, 1994 between the Agency and
the Bondholder the principal amount of TWO MILLION SIX HUNDRED THOUSAND AND
00/100 DOLLARS ($2,600,000.00) (or so much thereof as shall have been advanced
under this Bond pursuant to the terms of the Building Loan Contract (the
"Building Loan Contract") dated as of December 1, 1994 between the Bondholder
and Midway-CTS Buffalo, Ltd. (the "Lessee") and the Mortgage Agreement) (the
"Bond Principal Amount"), with interest on the unpaid portion of the Bond
Principal Amount from the date of this Bond until the Bond Principal Amount is
paid in full, in the manner following:
<PAGE>
A. Interest.
--------
1. Interest on the unpaid principal balance of this Bond shall be due and
payable on January 1, 1995 and on the first day of each month
thereafter until the entire principal balance of this Bond is paid in
full.
2. From and including the Issue Date to and until the earlier of
completion of the Facility or October 1, 1995 (the "Conversion Date")
interest, calculated on the basis of a 360 day year for the actual
number of days elapsed, shall accrue until receipt of payment by the
Bondholder, on the unpaid principal amount of the Bond at the rate of
interest designated and announced by the Bondholder from time to time
as its Base Rate and used internally by the Bondholder to calculate
the interest payable to it under notes or other agreements providing
for interest based on its Base Rate (the "Base Rate") plus one percent
(1%). The Base Rate is not necessarily the lowest rate granted by the
Bondholder who may extend credit at interest rates both above and
below the Base Rate. Each change in the Base Rate shall effect a
simultaneous and corresponding change in the rate of interest.
3. Commencing on the Conversion Date and for five years thereafter,
interest, calculated on the basis of a 360-day year consisting of
twelve (12) thirty (30) days months, shall accrue on the outstanding
principal amount of this Bond at a fixed rate equal to 300 basis
points over the average weekly yield on United States Treasury
obligations adjusted to a constant maturity of five years as published
by Federal Reserve Board in Statistical Release H.15 (519) (the "Five
Year Treasury Rate") as the "week ending" rate for the week nearest
preceding the Conversion Date, rounded up to the next highest one
quarter of one percent (.25%). If for any reason the Federal Reserve
should cease publication of the preceding rate, the interest payable
shall be determined by reference to the most nearly equivalent
published rate as determined by the Bondholder.
4. Commencing on the five year anniversary of the Conversion Date (the
"interest Adjustment Date") and for five years thereafter, interest
shall accrue on the outstanding principal amount of this Bond at a
fixed rate equal to 300 basis points over the Five Year Treasury Rate
as the "week ending" rate of the week nearest preceding the Interest
Adjustment Date rounded up to the next highest one quarter of one
percent (.25%). If for any reason the Federal Reserve should cease
publication of the preceding rate, the interest payable shall be
determined by reference to the most nearly equivalent published rate
as determined by the Bondholder.
5. At no time shall the rate of interest payable hereunder exceed the
maximum rate permitted by applicable law.
2
<PAGE>
6. After maturity, whether by acceleration or otherwise, interest shall
continue to accrue and be payable as provided above until payment in
full of the unpaid principal balance of the Bond.
B. Principal
---------
1. Commencing on the first day of the first month following the
Conversion Date and continuing on the first day of each successive
month thereafter for one hundred twenty (120) months, the principal on
the Bond shall be repaid in monthly installments of principal and
interest each in an amount sufficient to amortize the principal
balance then outstanding over a twenty (20) year term at the interest
rate then in effect.
2. The Bondholder will adjust the payment schedule on the first day of
the first month following the Interest Adjustment Date to an amount
which would amortize the principal balance then outstanding over the
residue of the twenty (20) year amortization term at the interest rate
then in effect.
3. On the first day of the one hundred twentieth (120th) month following
the month in which the Conversion Date shall occur, there shall be one
final installment of the entire outstanding principal balance together
with accrued interest and all other sums payable hereunder.
Each installment payment of principal and interest shall be applied first
to accrued interest and the balance to principal.
Anything herein or in said Indenture to the contrary notwithstanding, the
obligations of the Agency hereunder and under said Indenture shall be subject to
the limitation that payments of interest or other amounts hereon shall not be
required to the extent that receipt of any such payment by a holder of this Bond
would be contrary to the provisions of law applicable to such holder of this
Bond which would limit the maximum rate of interest which may be charged or
collected by such holder of this Bond.
If any payment of any sum due hereunder shall not be received by Bondholder
on or before the due date thereof, the Agency shall pay to the Bondholder on
demand a late payment charge in an amount equal to five percent (5%) of the
overdue payment. For purposes of this paragraph, a payment will be overdue after
12:00 Noon on the day such payment is due.
The Agency hereby makes, constitutes and appoints the Lessee as its true
and lawful attorney-in-fact to (i) receive disbursements under the Building Loan
Contract, (ii) select all interest rate options under this Bond, (iii) exercise
any option to redeem this Bond in whole or in part
3
<PAGE>
according to the terms hereof, and (iv) make, execute and deliver all
instruments necessary or helpful to accomplish any of the foregoing powers. It
is acknowledged that the Lessee has an interest in the subject matter of the
foregoing powers and it is agreed that the Lessee is hereby irrevocably vested
with the powers granted herein and the Agency does hereby forever renounce all
right to revoke this power of attorney or any of the powers conferred upon the
Lessee hereby or to appoint any other person to execute any of the said powers,
and the Agency also renounces all right on its own part to perform any of the
acts personally which the Lessee is authorized herein to perform.
Anything herein or in the Mortgage Agreement to the contrary
notwithstanding, the obligations of the Agency hereunder and under the Mortgage
Agreement shall be subject to the limitation that payments of interest or other
amounts hereon shall not be required to the extent that receipt of any such
payment by a holder of this Bond would be contrary to the provisions of law
applicable to such holder of this Bond which would limit the maximum rate of
interest which may be charged or collected by such holder of this Bond.
The principal of, redemption premium, if any, and interest on this Bond are
payable in any coin or currency of the United States of America which, at the
respective times of payment, is legal tender for the payment of public and
private debts, at the principal office of the holder of this Bond or at such
other address as may be specified by the holder in writing to the Agency and the
Lessee. If any payment of principal, redemption premium, if any, or interest
required to be made on this Bond becomes due and payable on a day which is not a
Business Day (as defined in the Mortgage Agreement), then such payment shall be
made on the next succeeding Business Day, with the same force and effect as if
made on the interest payment date, the date of maturity or the date fixed for
redemption, except that interest shall continue to accrue on the unpaid
principal.
This Bond constitutes the entire issue of bonds designated as the "Erie
County Industrial Development Agency, Industrial Development Revenue Bond (1994
Midway-CTS Buffalo Project) (hereinafter called the "Bond") issued in the
aggregate principal amount of $2,600,000.00 as a single, fully registered bond
in the denomination of $2,600,000.00 under and pursuant to and in full
compliance with the Constitution and laws of the State of New York, particularly
the New York State Industrial Development Agency Act (constituting Title 1 of
Article 18-A of the General Municipal Law, Chapter 24 of the Consolidated Laws
of New York), as amended, and Chapter 293 of the 1970 Laws of New York, as
amended (collectively, the "Act") and under and pursuant to a resolution adopted
by members of the Agency on October 12, 1994 authorizing the issuance of this
Bond, and under and pursuant to the Mortgage Agreement made and entered into by
and between the Agency and the Bondholder, for the purpose of financing the cost
of the acquisition, construction and installation of a 69,265 +/-square foot
manufacturing facility to be located on a 4.74 +/- acre parcel at 175 James E.
Casey Drive in the New Buffalo Industrial Park, Buffalo, New York (the
"Facility") under and pursuant to a Lease Agreement dated as of December 1, 1994
(hereinafter together with any amendments thereof and any subsequent lease of
the Facility called the "Lease Agreement") for sublease to Coyne International
Enterprises Corp. (the "Sublessee") (hereinafter together with any amendments
thereof and any subsequent sublease of the Facility called the "Sublease
Agreement"). The Lease Agreement requires the payment of rentals sufficient to
provide
4
<PAGE>
for the payment of the principal of, including any applicable redemption
premiums, and interest on this Bond as the same become due. Copies of the
Mortgage Agreement, the Lease Agreement, the Sublease Agreement and each other
Security Document (as such term is defined in the Mortgage Agreement) are on
file at the office of the Agency in Buffalo, New York and reference is made to
the Mortgage Agreement, the Lease Agreement, the Sublease Agreement and each
other Security Document for the provisions relating, among other things, to the
terms and security of this Bond, the charging and collection of rentals for the
Facility, the custody and application of the proceeds of this Bond, the rights
and remedies of the Bondholder, and the rights, duties and obligations of the
Agency, the Lessee, and the Bondholder.
This Bond is a special obligation of the Agency, payable as to principal,
redemption premium, if any, and interest solely from and secured by a pledge of
certain of the lease rentals derived from or in connection with the Facility,
including monies received under the Lease Agreement which are required to be set
apart and transferred to certain special funds, or to the "Erie County
Industrial Development Agency (1994 Midway-CTS Buffalo Project) Renewal Fund"
(subject to disbursements from said special funds or Renewal Fund in accordance
with the provisions of the Lease Agreement and the Mortgage Agreement)
established under the Lease Agreement and the Mortgage Agreement. The payment of
the principal of, redemption premium, if any, and the interest on this Bond has
been guaranteed by: (a) the Lessee pursuant to a Lessee Guaranty; and (b)
jointly and severally by J. Stanley Coyne and Thomas M. Coyne (collectively the
"Individual Guarantors") pursuant to an Individual Guaranty dated as of December
1, 1994. This Bond is further secured by a pledge and assignment of
substantially all of the Agency's right, title and interest in and to the Lease
Agreement other than the Agency's Reserved Rights, by the lien on and security
interest in the Facility of the Mortgage Agreement and by an assignment of
certain subleases with respect to the Facility pursuant to a Collateral Lease
Assignment dated as of December 1, 1994 to the Bondholder. This Bond shall never
constitute a debt of the State of New York nor of the County of Erie and neither
the State of New York nor the County of Erie shall be liable thereon, nor shall
this Bond be payable out of any funds of the Agency other than those pledged
therefor.
In certain events, on the conditions, in the manner and with the effect set
forth in the Mortgage Agreement, the principal of this Bond may be declared and
may become due and payable (or may become due and payable without declaration)
before the stated maturities thereof, together with accrued interest thereon.
Modifications or alterations of the Mortgage Agreement, or of any mortgage
supplemental thereto, may be made only to the extent and in the circumstances
permitted by the Mortgage Agreement.
This Bond is transferrable, as provided in the Mortgage Agreement, only
upon the registrations books of the Agency kept for such purpose in the office
of the Agency as Bond Registrar, upon presentation hereof at such office by the
registered owner or his duly authorized attorney in fact accompanied with a
written instrument of transfer in the form appearing on this Bond and duly
executed by the registered owner or his duly authorized attorney in fact and the
notation
5
<PAGE>
of such registration endorsed hereon and on such registration books by the
Agency as Bond Registrar. The Agency may deem and treat the person in whose name
this Bond is registered as the absolute owner hereof for the purpose of
receiving payment of, or on account of, the principal of, redemption premium, if
any, and the interest on this Bond, and for all other purposes.
This Bond is issuable in the form of a single, fully registered bond in the
denomination of $2,600,000.000 and may not be exchanged for multiple bonds.
In all cases in which the privilege of transferring this Bond is exercised,
the Agency may make a charge sufficient to reimburse it for any expenses and any
tax, fee or other governmental charge required to be paid by the Agency in
connection therewith, which expenses and charge or charges shall be paid by the
person requesting such transfer.
This Bond and any interest herein may be transferred only (i) to an
Institutional Investor (as defined in the Mortgage Agreement) provided that the
Bondholder shall have executed a written assignment of all of its right, title
and interest in and to the Mortgage Agreement to the transferee of this Bond,
and such transferee shall have executed and delivered to the Agency a Receipt
and Affirmation of Bond Purchaser in form acceptable to the Agency and its
counsel, or (ii) to a person not an Institutional Investor provided that prior
to such transfer the Agency shall have entered into an indenture of mortgage and
trust with a corporate trustee reasonably acceptable to the Agency and the
proposed new bondholder, the Bondholder shall have executed a written assignment
of all of its right, title and interest in and to the Mortgage Agreement to such
corporate trustee, and the transferee shall have executed and delivered to the
Agency a Receipt and Affirmation of Bond Purchaser in form acceptable to the
Agency and its counsel. In either case, the Agency may require as a condition to
such transfer, that this Bond be registered under the Securities Act of 1933, as
amended, or the securities laws of any state, or that the indenture of mortgage
and trust be qualified under the Trust Indenture Act of 1939, as amended, or
that the Agency receive an Opinion of Counsel to the effect that no such
registration or qualification is required. The Agency shall not be required to
register any transfer of this Bond without compliance with the provisions of
this paragraph.
This Bond is subject to redemption prior to maturity, at the option of the
Agency, at the request of the Lessee, which option shall be exercised from
payments being made by the Lessee pursuant to the Lease Agreement, upon not less
than thirty (30) days prior written notice, as a whole or in part, at any time,
upon notice or waiver of notice as provided in the Mortgage Agreement, at the
Redemption Prices (expressed as percentages of the amount prepaid) set forth
below (collectively, the "Redemption Price"), in each case together with
interest accrued thereon to the date of redemption:
<TABLE>
<CAPTION>
Redemption Occurring During Redemption Price
--------------------------- ----------------
<S> <C>
Year 1 or Year 6 105%
Year 2 or Year 7 104%
Year 3 or Year 8 103%
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Year 4 or Year 9 102%
Year 5 or Year 10 101%
</TABLE>
As used herein, the term "Year" shall mean a period of 365 (or 366, if
applicable) days commencing on the Conversion Date.
Notwithstanding the above, the Bond may be redeemed in whole or in part
without penalty at any time prior to the Conversion Date; during the last sixty
(60) days prior to maturity or prior to any Adjustment Date; or during any
period of time when Bondholder is obligated to make advances under the Building
Loan Contract.
This Bond is subject to mandatory redemption prior to maturity, to the
extent of (i) excess proceeds of this Bond remaining after the completion of the
Facility, (ii) excess proceeds of title insurance, property insurance or
condemnation awards remaining after the application thereof toward the
restoration of the Facility in accordance with the terms of the Lease Agreement,
or (iii) certain amounts so required to be applied pursuant to the Mortgage
Agreement, as a whole or in part on any interest payment date, upon notice of
waiver of notice as provided in the Mortgage Agreement, at the Redemption Price
of one hundred percent (100%) of the unpaid principal amount of this Bond to be
redeemed, together with interest accrued thereon to the date of redemption.
If this Bond is redeemed in part, the principal amount of the Redemption
Price to be redeemed shall be applied to the installments of principal due
hereon in inverse order of their due dates in the manner provided in the
Mortgage Agreement.
In the event the maturity date of this Bond is accelerated following an
Event of Default, any tender of payment of the amount necessary to satisfy the
entire indebtedness made after such default shall be expressly deemed an evasion
of the prepayment premium and shall be deemed a voluntary prepayment. In such a
case, to the extent permitted by law, the Bondholder shall be entitled to the
amount necessary to satisfy the entire indebtedness plus the applicable
prepayment premium that would have been payable if the prepayment were made
voluntarily.
Notice of redemption of this Bond or any portion thereof shall be given by
certified or registered mail, postage prepaid, not less than thirty (30)
business days prior to the redemption date, to the Bondholder at the address of
the Bondholder as the same shall appear on the registration books of the Agency
kept for that purpose at the principal office of the Agency as Bond Registrar,
all in the manner and upon the terms and conditions set forth in the Mortgage
Agreement; provided, however, that any defect in such notice shall not affect
the validity of any proceeding for the redemption of this Bond with respect to
which proper mailing was effected. Notice of redemption need not be given if
such registered owner waives notice thereof in writing. If notice of redemption
shall have been given, or such waiver filed as aforesaid, the principal amount
to be redeemed shall become due and payable on the redemption date. This Bond or
principal portion thereof so called for redemption will cease to bear interest
after the redemption date, provided that notice has been given or waived as
provided herein and in the Mortgage Agreement, and further provided that funds
7
<PAGE>
sufficient for redemption are paid to the Bondholder on the redemption date.
It is hereby certified, recited and declared that all conditions, acts and
things required by law and the Mortgage Agreement to exist, to have happened and
to have been performed precedent to and in the issuance of this Bond, exist,
have happened and have been performed, and that the issuance of this Bond and
the issue of which it forms a part are within every debt and other limit
prescribed by the laws of the State of New York.
Neither the members, directors, officers or agents of the Agency nor any
person executing this Bond shall be liable personally or be subject to any
personal liability or accountability by reason of the issuance hereof.
Unless the context requires otherwise, all terms used in this Bond that are
defined in the Mortgage Agreement shall have the meanings set forth therein.
IN WITNESS WHEREOF, the Erie County Industrial Development Agency has
caused this Bond to be executed in its name by the manual signature of its
Treasurer or Assistant Treasurer and its corporate seal to be affixed,
impressed, imprinted or otherwise reproduced hereon, and attested by the manual
or facsimile signature of its Secretary or Assistant Secretary, all as of
December 1, 1994. The issue date of this Bond is December 14, 1994.
ERIE COUNTY INDUSTRIAL
DEVELOPMENT AGENCY
(SEAL) By /s/ David W. Kerchoff
-------------------------------
David W. Kerchoff,
Assistant Treasurer
ATTEST:
/s/ John C. Garas
________________________
John C. Garas,
Assistant Secretary
8
<PAGE>
ASSIGNMENT
----------
For value received, the undersigned hereby sells, assigns and transfers
unto [PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF TRANSFEREE] the within Bond,
and all rights thereunder, and hereby irrevocably constitutes and appoints
______________________________________________ Attorney to transfer the within
Bond on the books kept for registration thereof, with full power of substitution
in the premises.
Dated:_____________________
NOTICE: The signature to this assignment must correspond with the name of the
registered holder as it appears upon the face of the within Bond in every
particular, without alteration or enlargement or any change whatever.
REGISTRATION
Date of In Whose Name
Registration Registered Bond Registrar
------------ ------------- --------------
_______________________ _______________________ _________________________
_______________________ _______________________ _________________________
_______________________ _______________________ _________________________
_______________________ _______________________ _________________________
ADVANCES
Amount of Total
Date of Advances Advance Advances to Date
---------------- ------- ----------------
_______________________ _______________________ _________________________
_______________________ _______________________ _________________________
_______________________ _______________________ _________________________
_______________________ _______________________ _________________________
_______________________ _______________________ _________________________
_______________________ _______________________ _________________________
_______________________ _______________________ _________________________
_______________________ _______________________ _________________________
_______________________ _______________________ _________________________
_______________________ _______________________ _________________________
9
<PAGE>
EXHIBIT 10.7
LESSEE GUARANTY AGREEMENT
THIS LESSEE GUARANTY AGREEMENT made and entered into as of December 1, 1994
(the "Lessee Guaranty"), from MIDWAY-CTS BUFFALO, LTD., a New York corporation
(the "Lessee"), having its principal office located c/o Coyne International
Enterprises Corp., 140 Cortland Avenue, Syracuse, New York 13221, to KEY BANK OF
NEW YORK, a domestic corporation formed under the laws of the State of New York
(together with any subsequent holder of the Bond referred to below, the
"Bondholder"), having its principal office at 50 Fountain Plaza, Buffalo, New
York 14202.
W I T N E S S E T H:
WHEREAS, the Erie County Industrial Development agency, a corporate
governmental agency constituting a body corporate and politic and public benefit
corporation duly organized and existing under the laws of the State of New York
and established pursuant to the Act hereinafter mentioned by Chapter 293 of the
1970 Laws of New York, as amended (the "Agency"), intends to issue its
Industrial Development Revenue Bond (1994 Midway-CTS Buffalo, Ltd. Project) in
the aggregate principal amount not to exceed $2,600,000 (the "Bond"); and
WHEREAS, the Bond are to be issued pursuant to the New York State
Industrial Development Agency Act, being Title 1 of Article 18-A of the General
Municipal Law of the State of New York, constituting Chapter 24 of the
Consolidated Laws of the State of New York, as amended, a resolution of the
Agency adopted on August 11, 1993, September 15, 1993 and October 12, 1994, and
under and pursuant to a Mortgage Agreement dated as of December 1, 1994, between
the Agency and the Bondholder (the "Mortgage Agreement"); and
WHEREAS, the proceeds derived from the issuance of the Bond are to be
advanced to the Lessee pursuant to a certain Building Loan Contract dated as of
December 1, 1994 by and between the Lessee and the Bondholder (the "Building
Loan Contract"), and such proceeds are to be used to finance a portion of the
cost of the acquisition and construction of a commercial facility within the
City of Buffalo consisting of the acquisition of a parcel of land consisting of
approximately 4.7 acres and the construction of an approximately 69,265 square
foot building thereon, all for sublease to tenants (the "Facility"), which
Facility is to be leased to the Lessee pursuant to a Lease Agreement dated as of
December 1, 1994 between the Agency and the Lessee (the "Lease Agreement"); and
WHEREAS, unless otherwise defined herein, capitalized terms shall have the
meaning ascribed in the Mortgage Agreement; and
WHEREAS, the Lessee is desirous that the Agency issue, sell and deliver the
Bond and apply the proceeds as aforesaid and enter into the Lease Agreement with
the Lessee and is willing to enter into this Lessee Guaranty in order to
enhance the marketability of the Bond and thereby achieve interest cost and
other savings to the Lessee as an inducement to the purchase of the Bond by all
who shall at any time become the Bondholder.
<PAGE>
NOW, THEREFORE, in consideration of the premises, and for other good and
valuable consideration received, the Lessee does hereby represent, warrant,
covenant and agree with the Bondholder as follows:
ARTICLE I
REPRESENTATIONS AND WARRANTIES OF THE LESSEE
Section 1.1. Lessee Representations and Warranties. The Lessee represents
-------------------------------------
and warrants that:
(a) The Lessee (1) is a corporation duly organized, validly existing
and in good standing under the laws of the state of its incorporation, without
limitation on the duration of its existence, (2) has the corporate power and
authority to own its properties and assets and to carry on its business as now
being conducted, (3) is duly qualified to do business in the State of New York,
and (4) has the corporate power and authority to execute, enter into, deliver
and perform this Lessee Guaranty as required hereunder.
(b) The Lessee has the corporate power and authority to execute,
deliver and perform this Lessee Guaranty as required hereunder and to guarantee
the payment of the principal of, redemption premium, if any, and interest on the
Bond pursuant to the provisions hereof and this Lessee Guaranty is the legal,
valid and binding obligation of the Lessee enforceable in accordance with its
terms.
(c) The execution, delivery and performance of this Lessee Guaranty
by the Lessee, including the performance of the obligations to guarantee the
payment of the Bond by the Lessee and the borrowing evidenced thereby, and all
other actions contemplated by this Lessee Guaranty (1) have been duly authorized
by all requisite corporate action by the Lessee, (2) will not violate (i) any
provision of law, any order of any court or other agency of government or any
governmental rule or regulation, the Certificate of Incorporation or By-laws of
the Lessee, or (ii) any provision of any indenture, agreement or other
instrument to which the Lessee or any of its properties or assets are bound, and
(3) will not be in conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any such indenture, agreement
or other instrument, will not accelerate any debt or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of the Lessee other than as permitted by the terms
of this Lessee Guaranty, the Mortgage Agreement and the Lease Agreement.
(d) The assumption by the Lessee of its obligations hereunder will
result in a direct financial benefit to the Lessee.
(e) No registration with or consent or approval of, or other action
by, any Federal, state or other governmental authority or regulatory body in the
United States is required as of the Closing Date in connection with the
execution, delivery and performance of this Lessee Guaranty,
2
<PAGE>
or if so required, such registration has been made or such consent or approval
given or such other appropriate action taken and the same is in full force and
effect, and notice as to the nature of such has heretofore been given to the
Bondholder.
(f) Since the Last Financial Statement Date there has been no
material adverse change in the business, properties or financial condition of
the Lessee.
(g) The Lessee has good and marketable title to all of its real and
personal properties and tangible assets, and the real and personal properties
and tangible assets reflected on the financial statements referred to in the
Lease Agreement and this Lessee Guaranty (except for such real and personal
properties and tangible assets as have been disposed of since the dates of such
financial statements because no longer used or useful in the conduct of its
business or as have been disposed of in the ordinary course of business), and
all such real and personal properties and tangible assets are free and clear of
mortgage, pledges, liens, charges and other encumbrances of any nature
whatsoever, except such as are not expressly prohibited by the terms hereof.
(h) There are no actions, suits or proceedings (whether or not
purportedly on behalf of the Lessee) at law or in equity or by or before any
Federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, now pending or
threatened against or affecting it, which involve any of the transactions herein
contemplated or the possibility which, if adversely determined, would materially
impair the right of the Lessee to carry on its business substantially as now
conducted or would materially adversely affect the financial condition of the
Lease.
(i) The Lessee has filed or caused to be filed all Federal, state and
local tax returns that are required to be filed and has paid or caused to be
paid all taxes required in connection with such returns or pursuant to any
assessment received by it, to the extent that such taxes have become due, except
for any tax or assessment the validity of which is being contested in good faith
by appropriate proceedings, and the Lessee has set aside on its books adequate
reserves with respect to any such tax or assessment so contested.
(j) The Lessee is not (i) a party to any agreement, indenture, lease
or instrument, or (ii) subject to any charter or other corporate restriction or
any judgment, order, writ, injunction, decree, rule or regulation which
materially adversely affects its business, properties, assets, operations or
financial condition.
(k) The Lessee is not in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
agreement or instrument to which it is a party and which materially affects its
business, properties or assets, operations or financial condition.
(l) The Lessee enjoys peaceful and undisturbed possession in all
respects under all leases as to which it is a lessee and all such leases are
valid and subsisting and in full force and
3
<PAGE>
effect on the date hereof.
(m) The Lessee is in compliance in all material respects with the
applicable provisions of ERISA and the regulations and published interpretations
thereunder. No Reportable Event has occurred with respect to any Plan (as
defined in ERISA) administered by the Lessee.
(n) The financial statements furnished to the Bondholder fairly
present the financial condition and the results of operations of the Lessee as
of the dates and for the periods indicated therein and the balance sheets
furnished to the Bondholder show all known material liabilities, direct or
contingent, of the Lessee as of the respective dates thereof. Each financial
statement referred to in this paragraph was prepared in accordance with
generally accepted accounting principles applied on a consistent basis.
(o) The Lessee agrees to furnish Bondholder within ninety (90) days
from the end of each fiscal year a consolidated financial statement for Coyne
International Enterprises Corp. inclusive of the Lessee, which shall include a
balance sheet, statement of operations and reconciliation of surplus for each
fiscal year; to furnish Bondholder within ninety (90) days from the end of each
fiscal year a financial statement. All of the aforesaid shall be prepared in
accordance with generally accepted accounting practices by accountants
satisfactory to Bondholder.
ARTICLE II
AGREEMENT TO GUARANTEE
Section 2.1. Obligations Guaranteed. (a) The Lessee hereby
----------------------
unconditionally guarantees to the Bondholder (1) the full and prompt payment of
the principal of the Bond and the indebtedness represented thereby, and the
redemption premium, if any, on the Bond when and as the same shall become due
and payable, whether at the stated maturity thereof, by acceleration, call for
redemption or otherwise; (2) the full and prompt payment of interest on the Bond
when and as the same shall become due and payable; (3) the full and prompt
payment of an amount equal to each and all of the rental payments and other sums
when and as the same shall become due, required to be paid by the Lessee under
the terms of the Lease Agreement; and (4) the full and prompt performance and
observance by the Lessee of all of the obligations, covenants and agreements
required to be performed and observed by the Lessee under the terms of the Lease
Agreement, the Building Loan Contract and the other Security Documents. The
Lessee hereby irrevocably and unconditionally agrees that upon any default by
the Agency in the payment, when due, of any principal of, any redemption premium
on, or any interest on the Bond, the Lessee will promptly pay the same. The
Lessee further hereby irrevocably and unconditionally agrees that (i) upon any
default by the Lessee in the rental payments and other sums, when due and
payable, under the Lease Agreement the Lessee will promptly pay the same, and
(ii) upon any default by the Lessee in any of the obligations, covenants and
agreements required to be performed and observed by the Lessee under the Lease
Agreement, the Building Loan Contract and the other Security Documents, the
Lessee will effect the observance of such obligations, covenants and agreements.
All payments by the Lessee shall be paid in lawful money of the United States of
America. Each and every default (x) in the payment of the
4
<PAGE>
principal of, redemption premium, if any, or interest on the Bond, (y) in the
payments of the rental payments and other sums required to be paid by the Lessee
under the terms of the Lease Agreement, or (z) in the prompt performance and
observance by the Lessee of all of the obligations, covenants and agreements
required to be performed and observed by the Lessee under the terms of the Lease
Agreement, the Building Loan Contract and the other Security Documents, shall
give rise to a separate cause of action hereunder, and separate suits may be
brought hereunder as each cause of actions arises.
(b) The Lessee further agrees that this Lessee Guaranty constitutes
an absolute, unconditional, present and continuing guarantee of payment and not
of collection, and waives any right to require that any resort be had by the
Bondholder to (1) any security held by or for the benefit of the Bondholder for
payment of the principal of, redemption premium, if any, or interest on the
Bond, (2) the Bondholder's rights against any other person, or (3) any other
right or remedy available to the Bondholder by contract, applicable law or
otherwise. The obligations of the Lessee under this Lessee Guaranty are direct,
unconditional and completely independent of the obligations of any other person
of entity, and a separate cause of action or separate causes of action may be
brought and prosecuted against the Lessee without the necessity of joining the
Agency or any other party or previously proceeding with or exhausting any other
remedy against any other person who might have become liable for the
indebtedness or of realizing upon any security held by or for the benefit of the
Bondholder.
Section 2.2. Obligations Unconditional. The obligations of the Lessee
-------------------------
under this Lessee Guaranty shall be absolute and unconditional, and shall remain
in full force and effect until the entire principal of, redemption premium, if
any, and interest on the Bond and all payments, obligations, covenants and
agreements of the Lessee under the Lease Agreement, the Building Loan Contract
and other Security Documents, shall have been paid in full or provided for, and
all costs, Bondholder's fees and commissions and expenses, if any, referred to
in Section 2.5 hereof shall have been paid in full, and, to the extent permitted
by law, such obligations shall not be affected, modified, released, or impaired
by any state of facts or the happening from time to time of any event, including
without limitation, any of the following whether or not with notice to, or the
consent of the Lessee:
(a) the invalidity, irregularity, illegality or unenforceability of,
or any defect in, any of the Security Documents, the Bond or any collateral
security for any thereof;
(b) any present or future law or order of any government (de jure or
-- ----
de facto) or of any agency thereof purporting to reduce, amend or otherwise
- -- -----
affect the Bond or any other obligation of the Agency, the Lessee, or any other
obligor or to vary any terms of payment;
(c) any claim of immunity on behalf of the Agency, the Lessee or any
other obligor or with respect to any property of the Agency or the Lessee or any
other obligor;
(d) the compromise, settlement, release, extension, indulgence,
change, modification or termination of any or all of the obligations, covenants
or agreements of any obligor
5
<PAGE>
under any of the Security Documents;
(e) the failure to give notice to any obligor under any of the
Security Documents of the occurrence of any default or Event of Default under
the terms and provisions of any of the Security Documents (except as may be
specifically provided in any such Security Document);
(f) the actual or purported assignment, subleasing or mortgaging of
all or any part of the interest of the Agency in the Lease Agreement or the
Facility or any failure of title with respect to the Agency's interest in the
Facility;
(g) the actual or purported assignment, subleasing or mortgaging of
all or any part of the interest of any obligor under any of the Security
Documents;
(h) the actual or purported assignment, subleasing or mortgaging of
all or any of the obligations, covenants and agreement contained in this Lessee
Guaranty or in any other Security Document;
(i) the waiver of the payment, performance or observance by any
obligor under any of the Security Documents of any of the obligations,
conditions, covenants or agreements of any or all of them contained in any such
Security Document;
(j) the receipt and acceptance by the Bondholder or the Agency of
notes, checks or other instruments for the payment of money made by any obligor
under any of the Security Documents and any extensions and renewals thereof;
(k) the extension of the time for payment of the principal of,
redemption premium, if any, or interest on the Bond or any other amounts that
are due or may become due under any of the Security Documents or of the time for
performance of any other obligations, covenants or agreements under or arising
out of the Bond or any of the Security Documents or any extension or renewal
thereof;
(l) the modification or amendment (whether material or otherwise) of
any duty, obligation, covenant or agreement set forth in the Bond or in any of
the Security Documents;
(m) the taking of or the omission to take any action referred to in
the Bond or in any of the Security Documents;
(n) any failure, omission, delay or lack on the part of the Agency,
the Bondholder or any other person to enforce, assert or exercise any right,
power or remedy conferred on the Agency, the Bondholder or such other person in
this Lessee Guaranty or in any of the Security Documents or any other act or
acts on the part of the Agency or the Bondholder;
(o) the voluntary or involuntary liquidation, dissolution, merger,
consolidation,
6
<PAGE>
sale or other disposition of all or substantially all the assets, marshaling of
assets and liabilities, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition with creditors or
readjustment of, or other similar proceedings affecting the Lessee, the Agency,
or any other obligor under any of the Security Documents or any or all of the
assets of any of them, or any allegation or contest of the validity of this
Lessee Guaranty or any other Security Document in any such proceeding; it is
specifically understood, consented and agreed to that this Lessee Guaranty shall
remain and continue in full force and effect and shall be enforceable against
the Lessee to the same extent and with the same force and effect as if such
proceedings had not been instituted; and it is the intent and purpose of this
Lessee Guaranty that the Lessee shall and does hereby waive all rights and
benefits which might accrue to the Lessee by reason of any such proceedings;
(p) to the extent permitted by law, the release or discharge of the
Lessee from the performance or observance of any obligation, covenant or
agreement contained in this Lessee Guaranty by operation of law;
(q) the default or failure of the Lessee fully to perform any of its
obligations set forth in this Lessee Guaranty;
(r) any release or impairment of the security pledged under the
Mortgage Agreement or under any other Security Document;
(s) the release, substitution or replacement in accordance with the
terms of the Lease Agreement of any property subject thereto or any delivery,
repossession, surrender or destruction of such property, in whole or in part;
(t) any limitation on the liability or obligations of the Bondholder,
the Agency, or the Lessee or any other obligor under any of the Security
Documents, or any termination, cancellation, frustration, invalidity or
unenforceability, in whole or in part, of the Lease Agreement, the Building Loan
Contract, the Mortgage Agreement or any other Security Document or any term
thereof, or the Bond;
(u) any failure of the Agency or the Bondholder to mitigate damages
resulting from any default by any Obligor under any of the Security Documents;
(v) the merger or consolidation of any corporate obligor under any of
the Security Documents into or with any other person, or any sale, lease or
transfer of any or all of the assets of any such obligor to any person;
(w) any other circumstances which might otherwise constitute a legal
or equitable discharge or defense of a surety or a guarantor; or
(x) any other occurrence whatsoever, whether similar or dissimilar to
the
7
<PAGE>
foregoing.
Section 2.3. No Waiver or Set-Off. No act or commission or omission of
--------------------
any kind or at any time upon the part of the Agency or the Bondholder, or their
successors and assigns, in respect of any matter whatsoever shall in any way
impair the rights of the Bondholder to enforce any right, power or benefit under
this Lessee Guaranty and no set-off, counterclaim, reduction, or diminution of
any obligation, or any defense of any kind or nature (other than performance by
the Lessee of its obligations hereunder), which the Lessee, or any other obligor
under any of the Security Documents has or may have against the Agency or the
Bondholder or any assignee or successor thereof shall be available hereunder to
the Lessee.
Section 2.4 Events of Default. An "Event of Default" shall exist if any
-----------------
of the following occurs and is continuing:
(a) The Lessee defaults in any guarantee referred to in Section 2.1
hereof or in any agreement contained in Section 2.8 hereof;
(b) The Lessee fails to observe and perform any covenant, condition
or agreement of this Lessee Guaranty and continuance of such failure for more
than thirty (30) days after written notice (which shall be deemed given when set
by registered or certified mailing) of such failure has been given to the Lessee
by the Bondholder;
(c) Any warranty, representation or other statement by or on behalf
of the Lessee contained in this Lessee Guaranty is false, misleading or
incorrect in any material respect as of the date made;
(d) The Lessee shall (i) apply for or consent to the appointment of
or the taking of possession by a receiver, liquidator, custodian or trustee of
itself or of all or a substantial part of its property, (ii) admit in writing
its inability to pay its debts as such debts become due, (iii) make general
assignment for the benefit of its creditors, (iv) commence a voluntary case
under the Federal Bankruptcy Code (as now or thereafter in effect), (v) file a
petition seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, winding up, or composition or adjustment of debts,
(vi) fail to controvert in a timely or appropriate manner, or acquiesce in
writing to, any petition filed against it in an involuntary case under such
Bankruptcy Code, or (vii) take any action for the purpose of effecting any of
the foregoing;
(e) A proceeding or case shall be commenced, without the application
or consent of the Lessee in any court of competent jurisdiction, seeking (i)
liquidation, reorganization, dissolution, winding-up or composition or
adjustment of debts, (ii) the appointment of a trustee, receiver, liquidator,
custodian or the like of the Lessee or of all or any substantial part of its
assets, or (iii) similar relief under any law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of debts or
any order for relief against the Lessee shall be entered in an involuntary case
under such Bankruptcy Code.
8
<PAGE>
(f) Final judgment for the payment of money in excess of an aggregate
uninsured liabilities of $100,000 shall be rendered against the Lessee and the
same shall remain undischarged for a period of thirty (30) consecutive days
during which execution shall not be effectively stayed;
(g) There shall be a default in respect of any evidence of
indebtedness for money borrowed by the Lessee (or with respect to the
performance of any obligations of the Lessee incurred in connection with any
indebtedness for money borrowed) where the effect of such default is to
accelerate the maturity of such indebtedness or to permit the holders thereof
(or a trustee on behalf of such holders) to cause such indebtedness to become
due prior to its stated maturity, or any such indebtedness shall not be paid as
and when due and payable; or
(h) An Event of Default under the Mortgage Agreement, the Building
Loan Contract or under any other Security Document shall occur and be
continuing.
Upon an Event of Default the Bondholder shall have the right to proceed
first and directly against the Lessee under this Lessee Guaranty without
proceeding against or exhausting any other remedies which it may have and
without proceeding against or exhausting any other remedies which it may have
and without resorting to any security held by the Bondholder or by any obligor
under any of the Security Documents. All moneys recovered by the Bondholder
pursuant to this Lessee Guaranty shall be used and applied in accordance with
Section 8.04 of the Mortgage Agreement.
Section 2.5. Waiver of Notice; Expenses. The Lessee hereby expressly
--------------------------
waives notice from the Bondholder of its acceptance and reliance on this Lessee
Guaranty or of any action taken or omitted in reliance hereon. The Lessee
further expressly waives diligence, presentment, demand for payment, protest,
any requirement that any right or power be exhausted or any action be taken
against the Agency or the Lessee or against any collateral security for the
Bond. The Lessee agrees to pay all costs, Bondholder's fees and commissions and
expenses (including all court costs and reasonable attorneys' fees) which may be
incurred by the Bondholder in enforcing or attempting to enforce this Lessee
Guaranty following any default on the part of any Lessee hereunder, whether the
same shall be enforced by suit or otherwise.
Section 2.6. Dissolution or Merger of Lessee; Restrictions on Lessee. The
-------------------------------------------------------
Lessee covenants that it will (i) maintain its corporation existence, (ii)
continue to be a corporation subject to service of process in the State of New
York and either organized under the laws of the State of New York, or organized
under the laws of any state of the United States and duly qualified to do
business as a foreign corporation in the State of New York, (iii) not liquidate,
wind-up or dissolve or otherwise dispose of all or substantially all of its
property, business or assets remaining after the execution and delivery of this
Lessee Guaranty, and (iv) not consolidate with or merge into another entity or
permit one or more entities to consolidate with or merge into it. The Lessee
may, however, without violating the foregoing, consolidate with or merge into
another entity, or permit one or more entities to consolidate with or merger
into it, or sell or otherwise transfer all or substantially all of its property,
business or assets to another such entity (and thereafter liquidate, wind-up or
dissolve or not, as the Lessee may elect) if (i) the Lessee is the surviving,
resulting or transferee entity, as the
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case may be, or (ii) in the event that the Lessee is not the surviving,
resulting or transferee entity, as the case may be, such entity is controlled by
Coyne International Enterprises Corp. and (A) is a solvent entity subject to
service of process in the State of New York and either organized under the laws
of the State of New York, or organized under the laws of any other state of the
United States and duly qualified to do business as a foreign corporation in the
State of New York, (B) assumes in writing all of the obligations of the Lessee
contained in this Lessee Guaranty and all other Security Documents (as defined
in the Lease Agreement) to which the Lessee shall be a party and in the opinion
of counsel who is acceptable to the Bondholder, (x) such entity shall be bound
by all of the terms applicable to the Lessee of this Lessee Guaranty and all
other Security Documents to which the predecessor Lessee entity shall have been
a party, and (y) such action does not legally impair the security interest
afforded by the Security Documents for the Bondholder, and (C) has a net worth
(as determined in accordance with generally accepted accounting principles and
certified by an independent public accountant) after the merger, consolidation,
sale or transfer at least equal to that of the Lessee entity immediately prior
to such merger, consolidation, sale or transfer. The Lessee further covenants
and agrees that it is and will continue to be duly qualified to do business in
the State of New York and that any entity succeeding to the rights of the Lessee
under this Lessee Guaranty shall be and continue to be duly qualified to do
business in the State of New York.
Section 2.7. Benefit and Enforcement. This Lessee Guaranty is entered
-----------------------
into by the Lessee for the benefit of the Agency and the Bondholder, all of whom
shall be entitled in the same manner as set forth in the Mortgage Agreement to
enforce performance and observance of this Lessee Guaranty to the same extent as
if they were parties signatory hereto.
Section 2.8. Survival of Guarantee Obligation. If the Bondholder receives
--------------------------------
any payment on account of the liability guaranteed hereunder, which payment or
any part thereof is subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be transferred or repaid to a
trustee, receiver, assignee for the benefit of creditors or any other party
under any bankruptcy act or code, state or Federal law or common law or
equitable doctrine, then to the extent of any sum not finally retained by the
Bondholder, this Lessee Guaranty shall remain in full force and effect until the
Lessee shall have made payment to the Bondholder of such sum, which payment
shall be due on demand.
ARTICLE III
NOTICE OF SERVICE OF PROCESS, PLEADINGS AND OTHER PAPERS
Section 3.1. Service of Process. The Lessee represents that it is subject
------------------
to service of process in the State of New York and covenants that it will remain
so subject so long as the Bond is outstanding. If for any reason the Lessee
should cease to be so subject to service of process in the State of New York,
the Lessee hereby designates and appoints, without power of revocation, the law
firm of O'Hara & Hanlon, 9 Albany Street, Cazenovia, New York 13035 (the
"Agent") as the agent of the Lessee upon whom may be served all process,
pleadings, notices or other papers which may be served upon the Lessee as a
result of any of its obligations under this Lessee Guaranty.
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Section 3.2. Notices. Any notice required to be sent to the Lessee, or
-------
any notice including process, pleadings or other papers served upon the
foregoing Agent shall at the same time be sent by registered or certified mail,
postage prepaid, to the Lessee at the address set forth above or to such other
address as may be furnished by the Lessee to the Bondholder in writing.
Section 3.3. Consent to Jurisdiction. The Lessee irrevocably and
-----------------------
unconditionally (a) agrees that any suit, action or other legal proceeding
arising out of this Lessee Guaranty may be brought in the courts of record of
the State of New York in Erie County or the courts of the United States, Western
District of New York; (b) consents to the jurisdiction of each such court in any
such suit, action or proceeding; and (c) waives any objection which it may have
to the laying of venue of any such suit, action or proceeding in any of such
courts. For such time as any portion of the Bond shall be unpaid in whole, or
in part, the Agent shall accept and acknowledge in the Lessee's behalf service
of any and all process in any such suit, action or proceeding brought in any
such court. The Lessee agrees and consents that any such service of process
upon such Agent and written notice of such service to the Lessee in the manner
set forth in Section 3.2 hereof shall be taken and held to be valid personal
service upon the Lessee whether or not the Lessee shall then be doing, or at any
time shall have done, business within the State of New York and that any such
service of process shall be of the same force and validity as if service were
made upon it according to the laws governing the validity and requirements of
such service in the State of New York and waives all claim of error by reason of
any such service. Such Agent shall not have any power or authority to enter any
appearance or to file any pleadings in connection with any suit, action or other
legal proceedings against the Lessee or to conduct the defense of any such suit,
action or any other legal proceeding except as expressly authorized by the
Lessee.
ARTICLE IV
MISCELLANEOUS
Section 4.1. Lessee Guaranty to Become Effective. The obligations of the
-----------------------------------
Lessee hereunder shall arise absolutely and unconditionally when the Bond shall
have been issued, sold and delivered by the Agency.
Section 4.2. Remedies Not Exclusive. No remedy herein conferred upon or
----------------------
reserved to the Bondholder is intended to be exclusive of any other available
remedy or remedies, but each and every such remedy shall be cumulative and shall
be in addition to every other remedy given under this Lessee Guaranty or now or
hereafter existing at law or in equity. No delay or omission to exercise any
right or power accruing upon any Event of Default, default, omission or failure
of performance hereunder shall impair any such right or power or shall be
construed to be a waiver thereof, but any such right and power may be exercised
from time to time and as often as may be deemed expedient. In order to entitle
the Bondholder to exercise any remedy reserved to it in this Lessee Guaranty, it
shall not be necessary to give any notice, other than such notice as may be
expressly provided in this Lessee Guaranty. In the event any provision contained
in this Lessee Guaranty should be breached by any party and thereafter duly
waived by the other party so empowered to act, such waiver shall be limited to
the particular breach so waived and shall not be
11
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deemed to waive any other breach hereunder. No waiver, amendment, release or
modification of this Lessee Guaranty shall be established by conduct, custom or
course of dealing, but solely by an instrument in writing duly executed by the
parties thereunto duly authorized by this Lessee Guaranty.
Section 4.3. Entire Agreement; Counterparts. This Lessee Guaranty
------------------------------
constitutes the entire agreement, and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof and may be executed simultaneously in several counter-
parts, each of which shall be deemed an original and all of which together shall
constitute one and the same instrument.
Section 4.4. Severability. The invalidity or unenforceability of any one
------------
or more phrases, sentences, clauses or sections in this Lessee Guaranty
contained, shall not affect the validity or enforceability of the remaining
portions of this Lessee Guaranty, or any part thereof.
Section 4.5. Release upon Repayment of Bond. Upon payment of the Bond and
------------------------------
the indebtedness represented thereby pursuant to and in accordance with the
Mortgage Agreement and the payment and satisfaction of all payments,
obligations, covenants and agreements of the Lessee under the Lease Agreement,
the Building Loan Contract and the other Security Documents, and, if applicable,
upon payment of the costs, fees, commissions and expenses required by Section
2.5 hereof, the Bondholder shall release in writing the Lessee from its
obligations hereunder except as provided in 2.8 hereof.
Section 4.6. Applicable Law. This Lessee Guaranty shall be governed by
--------------
and construed in accordance with the laws of the State of New York.
Section 4.7. Successors and Assigns. This Lessee Guaranty shall be
----------------------
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
Section 4.8. Date of Lessee Guaranty for Reference Purposes Only. The
---------------------------------------------------
date of this Lessee Guaranty shall be for reference purposes only.
IN WITNESS WHEREOF, the Lessee has executed this Lessee Guaranty as of the
year and day first above written.
Midway-CTS Buffalo, Ltd.
By: /s/ Raymond T. Ryan
-----------------------------------
Vice President
12
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STATE OF NEW YORK )
) SS.:
COUNTY OF ERIE )
On this 14th day of December, 1994 before me personally came Raymond T.
Ryan to me known and known to me to be the individual described in and who
executed the foregoing instrument, and who, being by me duly sworn, did depose
and say that he resides in Manlius, New York; that he is the Vice President of
Midway-CTS Buffalo, Ltd., a New York corporation and he executed the foregoing
instrument and that he signed his name thereto by order of the board of
directors of said corporation.
/s/ Alexander Pobedinsky
------------------------------------
Alexander Pobedinsky
Notary Public, State of New York No. 5010409
Qualified in Onondago County
Commission Expires
March 29, 1995
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<PAGE>
EXHIBIT 10.8
EXECUTION COPY
COYNE INTERNATIONAL ENTERPRISES CORP.,
AS ISSUER
BLUE RIDGE TEXTILE MANUFACTURING, INC.,
CLEAN TOWEL SERVICE, INC.,
OHIO GARMENT RENTAL, INC. AND
MIDWAY-CTS BUFFALO, INC.,
AS SUBSIDIARY GUARANTORS
$75,000,000
11 1/4% SENIOR SUBORDINATED SECURITIES DUE 2008
PURCHASE AGREEMENT
DATED JUNE 23, 1998
NATIONSBANC MONTGOMERY SECURITIES LLC
FIRST UNION CAPITAL MARKETS, A DIVISION OF WHEAT FIRST SECURITIES, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION 1. REPRESENTATIONS AND WARRANTIES..................................................... 2
No Registration Required.................................................................... 2
No Integration of Offerings or General Solicitation......................................... 3
Eligibility for Resale under Rule 144A...................................................... 3
The Offering Memorandum..................................................................... 3
The Purchase Agreement...................................................................... 3
The Registration Rights Agreement and the DTC Agreement..................................... 4
Authorization of the Securities and the Exchange Securities................................. 4
Authorization of the Indenture.............................................................. 5
Description of the Securities and the Indenture............................................. 5
No Material Adverse Change.................................................................. 5
Independent Accountants..................................................................... 5
Preparation of the Financial Statements..................................................... 5
Incorporation and Good Standing of the Company and its Subsidiaries......................... 6
Capitalization and Other Capital Stock Matters.............................................. 6
Non-Contravention of Existing Instruments; No Further Authorizations or Approvals Required.. 6
No Material Actions or Proceedings.......................................................... 7
Intellectual Property Rights................................................................ 7
All Necessary Permits, etc.................................................................. 8
Title to Properties......................................................................... 8
Tax Law Compliance.......................................................................... 8
Company and Each Subsidiary Guarantor Not an 'Investment Company.'.......................... 8
Insurance................................................................................... 9
No Price Stabilization or Manipulation...................................................... 9
Company's Accounting System................................................................. 9
Compliance with Environmental Laws.......................................................... 9
Periodic Review of Costs of Environmental Compliance........................................ 10
ERISA Compliance............................................................................ 10
Solvency.................................................................................... 11
No Default in Indebtedness.................................................................. 11
Related Party Transactions.................................................................. 11
Industry Statistics......................................................................... 11
Credit Documents............................................................................ 11
Note and Warrant Repurchase Agreement....................................................... 11
Compliance with Regulation S................................................................ 12
Form of Regulation S Notes.................................................................. 12
SECTION 2. PURCHASE, SALE AND DELIVERY OF NOTES.............................................. 12
The Securities.............................................................................. 12
The Closing Date............................................................................ 12
Delivery of the Notes....................................................................... 13
Delivery of Offering Memorandum to the Initial Purchasers................................... 13
Initial Purchasers as Qualified Institutional Buyers........................................ 13
SECTION 3. ADDITIONAL COVENANTS.............................................................. 13
Initial Purchasers' Review of Proposed Amendments and Supplements........................... 13
Amendments and Supplements to the Offering Memorandum and Other Securities Act Matters...... 13
Copies of the Offering Memorandum........................................................... 14
Blue Sky Compliance......................................................................... 14
Use of Proceeds............................................................................. 14
Ratings of the Notes........................................................................ 14
</TABLE>
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<TABLE>
<S> <C>
The Depositary.............................................................................. 15
Additional Issuer Information............................................................... 15
Agreement Not To Offer or Sell Additional Notes............................................. 15
Future Reports to the Initial Purchasers.................................................... 15
Registration Rights Agreement............................................................... 15
No Integration.............................................................................. 15
Restriction on Repurchases.................................................................. 16
Legended Notes.............................................................................. 16
PORTAL...................................................................................... 16
Form D...................................................................................... 16
Due Diligence............................................................................... 16
SECTION 4. PAYMENT OF EXPENSES................................................................ 17
SECTION 5. CONDITIONS OF THE OBLIGATIONS OF THE INITIAL PURCHASERS............................ 17
Accountants' Comfort Letter................................................................. 17
No Material Adverse Change or Ratings Agency Change......................................... 17
Opinion of Counsel for the Company and the Subsidiary Guarantors............................ 18
Opinion of General Counsel for the Company and the Subsidiary Guarantors.................... 22
Opinion of Counsel for the Initial Purchasers............................................... 22
Officers' Certificate....................................................................... 23
Bring-down Comfort Letter................................................................... 23
PORTAL Listing.............................................................................. 23
Registration Rights Agreement............................................................... 23
Redemption of Notes and Warrants............................................................ 23
Additional Documents........................................................................ 23
SECTION 6. REIMBURSEMENT OF INITIAL PURCHASERS' EXPENSES...................................... 24
SECTION 7. OFFER, SALE AND RESALE PROCEDURES.................................................. 24
Offers and Sales only to Qualified Institutional Buyers or Regulation S Investors.......... 24
No General Solicitation..................................................................... 24
Purchases by Non-Bank Fiduciaries........................................................... 24
Restrictions on Transfer.................................................................... 24
Delivery of Offering Memorandum............................................................. 25
SECTION 8. INDEMNIFICATION.................................................................... 25
Indemnification of the Initial Purchasers................................................... 25
Indemnification of the Company and the Subsidiary Guarantors................................ 27
Notifications and Other Indemnification Procedures.......................................... 27
Settlements................................................................................. 28
SECTION 9. CONTRIBUTION....................................................................... 28
SECTION 10.TERMINATION OF THIS AGREEMENT...................................................... 30
SECTION 11.REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY................................ 30
SECTION 12.NOTICES............................................................................ 30
SECTION 13.SUCCESSORS......................................................................... 31
SECTION 14.PARTIAL UNENFORCEABILITY........................................................... 31
SECTION 15.GOVERNING LAW PROVISIONS........................................................... 31
Consent to Jurisdiction..................................................................... 31
Waiver of Immunity.......................................................................... 32
</TABLE>
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<TABLE>
<S> <C>
SECTION 16. DEFAULT OF ONE OR MORE OF THE SEVERAL INITIAL PURCHASERS.......................... 32
SECTION 17. GENERAL PROVISIONS................................................................ 32
SCHEDULE A .................................................................................. 1
ANNEX I .................................................................................. 1
</TABLE>
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PURCHASE AGREEMENT
June 23, 1998
NATIONSBANC MONTGOMERY SECURITIES LLC
FIRST UNION CAPITAL MARKETS, a division of Wheat First Securities, Inc.
As Initial Purchasers
c/o NATIONSBANC MONTGOMERY SECURITIES LLC
100 North Tryon Street, 7th Floor
Charlotte, NC 28255
Ladies and Gentlemen:
INTRODUCTORY. Coyne International Enterprises Corp., a New York
corporation (the "Company"), proposes to issue and sell to the several Initial
Purchasers named in Schedule A (the "Initial Purchasers"), acting severally and
----------
not jointly, the respective amounts set forth in such Schedule A of an
----------
$75,000,000 aggregate principal amount of the Company's 11 1/4% Senior
Subordinated Notes due 2008 (the "Notes"). The Company's obligations under the
Notes, including the payment of principal of, premium and Liquidated Damages (as
defined in the Indenture), if any, and interest on the Notes will be
unconditionally guaranteed (the "Subsidiary Guarantees" and collectively with
the Notes, the "Securities") by Blue Ridge Textile Manufacturing, Inc., a
Georgia corporation, Clean Towel Service, Inc., a Georgia corporation, Ohio
Garment Rental, Inc., an Ohio corporation and Midway-CTS Buffalo, Ltd., a New
York corporation, and their respective successors and assigns (together with any
future subsidiary of the Company, each a "Subsidiary Guarantor" and
collectively, the "Subsidiary Guarantors"). NationsBanc Montgomery Securities
LLC and First Union Capital Markets, a division of Wheat First Securities, Inc.
have agreed to act as the several Initial Purchasers in connection with the
offering and sale of the Securities.
The Securities will be issued pursuant to an indenture dated as of
June 26, 1998 (the "Indenture") among the Company, the Subsidiary Guarantors and
IBJ Schroder Bank & Trust Company, as trustee (the "Trustee"). Securities issued
in book-entry form will be issued in the name of Cede & Co., as nominee of The
Depositary Trust Company (the "Depositary") pursuant to a DTC Agreement, to be
dated as of the Closing Date (as defined in Section 2) (the "DTC Agreement"),
among the Company, the Subsidiary Guarantors, the Trustee and the Depositary.
The holders of the Securities will be entitled to the benefits of a
registration rights agreement to be dated as of June 26, 1998 (the "Registration
Rights Agreement," attached hereto as Exhibit "A"), among the Company, the
Subsidiary Guarantors and the Initial Purchasers, pursuant to which the Company
will agree to file, within 45 days of the Closing Date, a registration statement
with the Securities and Exchange Commission (the "Commission")
1
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registering the Exchange Notes and the Exchange Subsidiary Guarantees (each as
defined in the Registration Rights Agreement and together, the "Exchange
Securities") under the Securities Act of 1933, as amended (the "Securities Act,"
which term, as used herein, includes the rules and regulations of the Commission
promulgated thereunder).
The Company and the Subsidiary Guarantors understand that the Initial
Purchasers propose to make an offering of the Securities on the terms and in the
manner set forth herein and in the Offering Memorandum (as defined below) and
agree that the Initial Purchasers may resell, subject to the conditions set
forth herein, all or a portion of the Securities to purchasers (the "Subsequent
Purchasers") at any time after the date of this Agreement. The Securities are to
be offered and sold to or through the Initial Purchasers without being
registered with the Commission under the Securities Act, in reliance upon
exemptions therefrom. The terms of the Securities and the Indenture will require
that investors that acquire Securities expressly agree that Securities may only
be resold or otherwise transferred, after the date hereof, if such Securities
are registered for sale under the Securities Act or if an exemption from the
registration requirements of the Securities Act is available (including the
exemptions afforded by Rule 144A ("Rule 144A") or Regulation S ("Regulation S")
thereunder).
The Company and the Subsidiary Guarantors have prepared and delivered
to each Initial Purchaser copies of an Offering Memorandum "subject to
completion" dated May 29, 1998 (the "Preliminary Offering Memorandum") and have
prepared and will deliver to each Initial Purchaser, on the date hereof or the
next succeeding day, copies of the Offering Memorandum dated June 23, 1998
describing the terms of the Securities, each for use by such Initial Purchaser
in connection with its solicitation of offers to purchase the Securities. As
used herein, the "Offering Memorandum" shall mean, with respect to any date or
time referred to herein, the Offering Memorandum of the Company and the
Subsidiary Guarantors dated June 23, 1998, including amendments or supplements
thereto and any exhibits thereto, in the most recent form that has been prepared
and delivered by the Company and the Subsidiary Guarantors to the Initial
Purchasers in connection with their solicitation of offers to purchase
Securities. Further, any reference to the Preliminary Offering Memorandum or the
Offering Memorandum shall be deemed to refer to and include any Additional
Issuer Information (as defined in Section 3(f)) furnished by the Company or the
Subsidiary Guarantors prior to the completion of the distribution of the
Securities.
The Company and each Subsidiary Guarantor hereby jointly and severally
confirm their agreements with the Initial Purchasers as follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES. The Company and each
Subsidiary Guarantor hereby jointly and severally represent, warrant and
covenant to each Initial Purchaser as follows:
(a) No Registration Required. Subject to compliance by the Initial
Purchasers with the representations and warranties set forth in Section
2(e) hereof and with the procedures set forth in Section 7 hereof, it is
not necessary in connection with the offer, sale and delivery of the
Securities to the Initial Purchasers and to each Subsequent Purchaser in
the manner contemplated by this Agreement and the Offering Memorandum to
register the Securities under the Securities Act or, until such time as the
Exchange Securities are issued, pursuant to an effective registration
statement, to qualify the Indenture under the Trust Indenture Act of 1939
(the "Trust Indenture Act", which term, as used herein, includes the rules
and regulations of the Commission promulgated thereunder).
2
<PAGE>
(b) No Integration of Offerings or General Solicitation. The Company
and the Subsidiary Guarantors have not, directly or indirectly, solicited
any offer to buy or offered to sell, and will not, directly or indirectly,
solicit any offer to buy or offer to sell, in the United States or to any
United States citizen or resident, any security which is or would be
integrated with the sale of the Securities in a manner that would require
the Securities to be registered under the Securities Act. None of the
Company, the Subsidiary Guarantors, their affiliates (as such term is
defined in Rule 501(b) under the Securities Act (each, an "Affiliate"), or
any person acting on their behalf (other than the Initial Purchasers, as to
whom the Company and the Subsidiary Guarantors make no representation or
warranty) has engaged or will engage, in connection with the offering of
the Securities, in any form of general solicitation or general advertising
within the meaning of Rule 502(c) under the Securities Act. With respect to
those Securities sold in reliance upon Regulation S, (i) none of the
Company, the Subsidiary Guarantors, their Affiliates or any person acting
on their behalf (other than the Initial Purchasers, as to whom the Company
and the Subsidiary Guarantors make no representation or warranty) has
engaged or will engage in any directed selling efforts within the meaning
of Regulation S and (ii) each of the Company and their Affiliates and any
person acting on their behalf (other than the Initial Purchasers, as to
whom the Company and the Subsidiary Guarantors make no representation or
warranty) has complied and will comply with the offering restrictions set
forth in Regulation S.
(c) Eligibility for Resale under Rule 144A. Subject to compliance by
the Initial Purchasers with the representations and warranties set forth in
Section 2(e) hereof and with the procedures set forth in Section 7 hereof,
the Securities are eligible for resale pursuant to Rule 144A and will not
be, at the Closing Date, of the same class as securities listed on a
national securities exchange registered under Section 6 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") or quoted in a U.S.
automated interdealer quotation system.
(d) The Offering Memorandum. The Offering Memorandum does not, and
at the Closing Date will not, include an untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided that this representation, warranty and
agreement shall not apply to statements in or omissions from the Offering
Memorandum made in reliance upon and in conformity with information
furnished to the Company in writing by any Initial Purchaser through
NationsBanc Montgomery Securities LLC expressly for use in the Offering
Memorandum. Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, contains all the information specified in, and
meeting the requirements of, Rule 144A(d)(4). The Company and the
Subsidiary Guarantors have not distributed and will not distribute, prior
to the later of the Closing Date and the completion of the Initial
Purchasers' distribution of the Securities, any offering material in
connection with the offering and sale of the Securities other than a
Preliminary Offering Memorandum or the Offering Memorandum.
(e) The Purchase Agreement. This Agreement has been duly authorized,
executed and delivered by, and is a valid and binding agreement of, the
Company and the Subsidiary Guarantors, enforceable in accordance with its
terms, except as rights to indemnification and contribution hereunder may
be limited by applicable law or public policy and except as the enforcement
hereof may be limited by bankruptcy, insolvency,
3
<PAGE>
reorganization, moratorium or other similar laws relating to or affecting
the rights and remedies of creditors or by general equitable principles.
(f) The Registration Rights Agreement and the DTC Agreement. At the
Closing Date, each of the Registration Rights Agreement and the DTC
Agreement will be duly authorized, executed and delivered by, and will be a
valid and binding agreement of, the Company and the Subsidiary Guarantors,
enforceable in accordance with its terms, except as rights to
indemnification and contribution may be limited by applicable law or public
policy and except as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting the rights and remedies of creditors or by general equitable
principles.
(g) Authorization of the Securities and the Exchange Securities. (i)
The Notes to be purchased by the Initial Purchasers from the Company are in
the form contemplated by the Indenture, have been duly authorized for
issuance and sale pursuant to this Agreement and the Indenture and, at the
Closing Date, will have been duly executed by the Company and, when
authenticated in the manner provided for in the Indenture and delivered
against payment of the purchase price therefor, will constitute valid and
binding agreements of the Company, enforceable in accordance with their
terms, except as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting the rights and remedies of creditors or by general equitable
principles and will be entitled to the benefits of the Indenture; (ii) the
Exchange Notes have been duly and validly authorized for issuance by the
Company, and when issued and authenticated in accordance with the terms of
the Indenture, the Registration Rights Agreement and the Exchange Offer (as
defined in the Registration Rights Agreement), will constitute valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms, except as the enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium, or similar
laws relating to or affecting enforcement of the rights and remedies of
creditors or by general principles of equity and will be entitled to the
benefits of the Indenture; (iii) the Subsidiary Guarantees are in the form
contemplated by the Indenture, have been duly authorized for issuance and
sale pursuant to this Agreement and the Indenture and, at the Closing Date,
will have been duly executed by each of the Subsidiary Guarantors and, when
authenticated in the manner provided for in the Indenture and delivered
against payment of the purchase price for the Securities, will constitute
valid and binding agreements of the Subsidiary Guarantors, enforceable in
accordance with their terms, except as the enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the rights and remedies of creditors
or by general equitable principles and will be entitled to the benefits of
the Indenture; and (iv) the Exchange Subsidiary Guarantees have been duly
authorized for issuance and exchange pursuant to the Indenture, the
Registration Rights Agreement and the Exchange Offer and, when duly
executed by each of the Subsidiary Guarantors and authenticated in the
manner provided for in the Indenture and delivered in exchange for the
Subsidiary Guarantees, will constitute valid and binding agreements of the
Subsidiary Guarantors, enforceable in accordance with their terms, except
as the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
the rights and remedies of creditors or by general equitable principles and
will be entitled to the benefits of the Indenture.
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<PAGE>
(h) Authorization of the Indenture. The Indenture has been duly
authorized by the Company and the Subsidiary Guarantors and, at the Closing
Date, will have been duly executed and delivered by the Company and the
Subsidiary Guarantors and will constitute a valid and binding agreement of
the Company and the Subsidiary Guarantors, enforceable against the Company
and the Subsidiary Guarantors in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
the rights and remedies of creditors or by general equitable principles.
(i) Description of the Securities and the Indenture. The Securities,
the Exchange Securities and the Indenture will conform in all material
respects to the respective statements relating thereto contained in the
Offering Memorandum and will be in the respective forms previously
delivered to the Initial Purchasers.
(j) No Material Adverse Change. Except as otherwise disclosed in the
Offering Memorandum, subsequent to the respective dates as of which
information is given in the Offering Memorandum: (i) there has been no
material adverse change, or any development that could reasonably be
expected to result in a material adverse change, in the condition,
financial or otherwise, or in the earnings, business, operations or
prospects, whether or not arising from transactions in the ordinary course
of business, of the Company and its subsidiaries, considered as one entity
(any such change is called a "Material Adverse Change"); (ii) the Company
and its subsidiaries, considered as one entity, have not incurred any
material liability or obligation, indirect, direct or contingent, not in
the ordinary course of business nor entered into any material transaction
or agreement not in the ordinary course of business; and (iii) there has
been no dividend or distribution of any kind declared, paid or made by the
Company or, except for dividends paid to the Company or other subsidiaries,
any of its subsidiaries on any class of capital stock or repurchase or
redemption by the Company or any of its subsidiaries of any class of
capital stock.
(k) Independent Accountants. Coopers & Lybrand, L.L.P., who have
expressed their opinion with respect to the financial statements (which
term as used in this Agreement includes the related Securities thereto)
filed with the Commission included in the Offering Memorandum are
independent public or certified public accountants within the meaning of
Regulation S-X under the Securities Act and the Exchange Act.
(l) Preparation of the Financial Statements. The financial
statements, (including the notes thereto) included in the Offering
Memorandum present fairly in all material respects the consolidated
financial position of the Company and its subsidiaries as of and at the
dates indicated and the results of their operations and cash flows for the
periods specified. Such financial statements have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis throughout the periods involved, except as may be
expressly stated in the related Securities thereto. The financial data set
forth in the Offering Memorandum under the captions "Summary--Summary
Unaudited As Adjusted Financial Information," "Summary--Summary Financial
Information," "Selected Financial and Operating Data" and "Capitalization"
fairly present in all material respects the information set forth therein
on a basis consistent with that of the audited financial statements
contained in the Offering Memorandum. The Company's ratios of earnings to
fixed charges set forth in the Offering Memorandum under the captions
"Summary--Summary Financial Information"
5
<PAGE>
and "Selected Financial and Operating Data" have been calculated in
compliance with Item 503(d) of Regulation S-K under the Securities Act.
(m) Incorporation and Good Standing of the Company and its
Subsidiaries. Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation and has corporate
power and authority to own, lease and operate its properties and to conduct
its business as described in the Offering Memorandum and to enter into and
perform its obligations under each of this Agreement, the Registration
Rights Agreement, the DTC Agreement, the Securities, the Exchange
Securities, the Indenture, the Credit Agreement, dated as of June 26, 1998,
among the Company, certain of its subsidiaries and NationsBank, N.A. (the
"Credit Agreement") and all documents and instruments ancillary to the
Credit Agreement (together with the Credit Agreement, the "Credit
Documents") and that certain letter agreement, dated as of June 23, 1998,
between the Company and Capital Resource Lenders II, LP and Exeter Venture
Lenders, LP (the "Note and Warrant Repurchase Agreement"). Each of the
Company and its subsidiaries is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which
such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except for such
jurisdictions where the failure to so qualify or to be in good standing
would not, individually or in the aggregate, result in a Material Adverse
Change. All of the issued and outstanding capital stock of each subsidiary
has been duly authorized and validly issued, is fully paid and
nonassessable and is owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge,
lien, encumbrance or claim. The Company does not own or control, directly
or indirectly, any corporation, association or other entity other than the
Subsidiary Guarantors.
(n) Capitalization and Other Capital Stock Matters. At April 30,
1998, on a consolidated basis, after giving pro forma effect to the
issuance and sale of the Securities pursuant hereto, initial borrowings
under the Credit Documents and the application of the proceeds therefrom
(in each case as described in the Offering Memorandum), the Company would
have an authorized and outstanding capitalization as set forth in the
Offering Memorandum under the caption "Capitalization". The Company's
capital stock conforms in all material respects to the description thereof
set forth in the Offering Memorandum. All of the outstanding shares of the
Company's capital stock have been duly authorized and validly issued, are
fully paid and nonassessable and have been issued in compliance with
federal and state securities laws. None of the outstanding shares of the
Company's capital stock were issued in violation of any preemptive rights,
rights of first refusal or other similar rights to subscribe for or
purchase securities of the Company or the Subsidiary Guarantors. There are
no authorized or outstanding options, warrants, preemptive rights, rights
of first refusal or other rights to purchase, or equity or debt securities
convertible into or exchangeable or exercisable for, any capital stock of
the Company or any of its subsidiaries other than those accurately
described in the Offering Memorandum.
(o) Non-Contravention of Existing Instruments; No Further
Authorizations or Approvals Required. Neither the Company nor any of its
subsidiaries is in violation of its charter or by-laws or is in default
(or, with the giving of notice or lapse of time, would be in default)
("Default") under any indenture, mortgage, loan or credit agreement, note,
contract, franchise, lease or other instrument to which the Company or any
of its subsidiaries is a party or by which it or any of them may be bound,
or to which any of the
6
<PAGE>
property or assets of the Company or any of its subsidiaries is subject
(each, an "Existing Instrument"), except for such Defaults as would not,
individually or in the aggregate, result in a Material Adverse Change. The
Company's and its subsidiaries' execution, delivery and performance of this
Agreement, the Registration Rights Agreement, the DTC Agreement, the
Indenture, the Credit Documents and the Note and Warrant Repurchase
Agreement and the issuance and delivery of the Securities or the Exchange
Securities, and consummation of the transactions contemplated hereby and
thereby (i) have been duly authorized by all necessary corporate action and
will not result in any violation of the provisions of the charter or by-
laws of the Company or any subsidiary, (ii) after giving effect to the
application of the proceeds from sale of the Notes as described in the
Offering Memorandum will not conflict with or constitute a breach of, or
Default or a Debt Repayment Triggering Event (as defined below) under, or
result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any of its subsidiaries
pursuant to, or require the consent of any other party to, any Existing
Instrument, except for such conflicts, breaches, Defaults, Debt Repayment
Triggering Events, liens, charges or encumbrances as would not,
individually or in the aggregate, result in a Material Adverse Change and
(iii) will not result in any violation of any law, administrative
regulation or administrative or court decree applicable to the Company or
any subsidiary. No consent, approval, authorization or other order of, or
registration or filing with, any court or other governmental or regulatory
authority or agency, is required for the Company's or its subsidiaries'
execution, delivery and performance of this Agreement, the Registration
Rights Agreement, the DTC Agreement, the Indenture, the Credit Documents or
the Note and Warrant Repurchase Agreement or the issuance and delivery of
the Securities or the Exchange Securities, or consummation of the
transactions contemplated hereby and thereby, except such as have been
obtained or made by the Company and its subsidiaries and are in full force
and effect under the applicable state securities or blue sky laws, and with
respect to the Registration Rights Agreement, the Securities Act and
applicable state securities or blue sky laws. As used herein, a "Debt
Repayment Triggering Event" means any event or condition which gives, or
with the giving of notice or lapse of time would give, the holder of any
note, debenture or other evidence of indebtedness (or any person acting on
such holder's behalf) the right to require the repurchase, redemption or
repayment of all or a portion of such indebtedness by the Company or any of
its subsidiaries.
(p) No Material Actions or Proceedings. There are no legal or
governmental actions, suits or proceedings pending or, to the best of the
Company's and the Subsidiary Guarantors' collective knowledge, threatened
(i) against or affecting the Company or any of its subsidiaries, (ii) which
has as the subject thereof any officer or director of, or property owned or
leased by, the Company or any of its subsidiaries or (iii) relating to
environmental or discrimination matters, where in any such case (A) there
is a reasonable possibility that such action, suit or proceeding might be
determined adversely to the Company or such subsidiary and (B) any such
action, suit or proceeding, if so determined adversely, would reasonably be
expected to result in a Material Adverse Change or adversely affect the
consummation of the transactions contemplated by this Agreement. No
material labor dispute with the employees of the Company or any of its
subsidiaries exists or, to the best of the Company's and the Subsidiary
Guarantors' collective knowledge, is threatened or imminent.
(q) Intellectual Property Rights. The Company and its subsidiaries
own or possess sufficient trademarks, trade names, patent rights,
copyrights, licenses, approvals,
7
<PAGE>
trade secrets and other similar rights (collectively, "Intellectual
Property Rights") reasonably necessary to conduct their businesses as now
conducted; and the expected expiration of any of such Intellectual Property
Rights would not result in a Material Adverse Change. Neither the Company
nor any of its subsidiaries has received any notice of infringement or
conflict with asserted Intellectual Property Rights of others, which
infringement or conflict, if the subject of an unfavorable decision, would
result in a Material Adverse Change.
(r) All Necessary Permits, etc. The Company and each subsidiary
possess such valid and current material certificates, authorizations or
permits issued by the appropriate state, federal or foreign regulatory
agencies or bodies necessary to conduct their respective businesses, and
neither the Company nor any subsidiary has received any notice of
proceedings relating to the revocation or modification of, or non-
compliance with, any such certificate, authorization or permit which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, could result in a Material Adverse Change.
(s) Title to Properties. The Company and each of its subsidiaries
has good and marketable title to all the properties and assets reflected as
owned in the financial statements referred to in Section 1(l) above (or
elsewhere in the Offering Memorandum), in each case free and clear of any
security interests, mortgages, liens, encumbrances, equities, claims and
other defects, except such (i) as are reflected in the Offering Memorandum
(including the financial statements and notes thereto included therein) or
(ii) as do not materially and adversely affect the value of such property
and do not materially interfere with the use made or proposed to be made of
such property by the Company or such subsidiary. The real property,
improvements, equipment and personal property held under lease by the
Company or any subsidiary are held under valid and enforceable leases, with
such exceptions as are not material and do not materially interfere with
the use made or proposed to be made of such real property, improvements,
equipment or personal property by the Company or such subsidiary.
(t) Tax Law Compliance. The Company and its subsidiaries have filed
all necessary federal, state and foreign income and franchise tax returns
or have properly requested extensions thereof and have paid all taxes
required to be paid by any of them and, if due and payable, any related or
similar assessment, fine or penalty levied against any of them (except such
as are being contested in good faith and by appropriate proceedings and
have been properly reserved for in accordance with GAAP). The Company has
made adequate charges, accruals and reserves in the applicable financial
statements referred to in Section 1(l) above in respect of all federal,
state and foreign income and franchise taxes for all periods as to which
the tax liability of the Company or any of its subsidiaries has not been
finally determined.
(u) Company and Each Subsidiary Guarantor Not an "Investment
Company."`' The Company and the Subsidiary Guarantors have been advised of
the rules and requirements under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). Neither the Company nor any of the
Subsidiary Guarantors is, and after receipt of payment for the Securities,
initial borrowings under the Credit Documents and the application of the
proceeds therefrom (in each case as described in the Offering Memorandum)
will not be, an "investment company" within the meaning of the Investment
Company Act and will conduct its business in a manner so that it will not
become subject to the Investment Company Act.
8
<PAGE>
(v) Insurance. Each of the Company and its subsidiaries are insured
by recognized, financially sound institutions with policies in such amounts
and with such deductibles and covering such risks as are generally deemed
adequate and customary for their businesses including, but not limited to,
policies covering real and personal property owned or leased by the Company
and its subsidiaries against theft, damage, destruction and acts of
vandalism. The Company has no reason to believe that it or any subsidiary
will not be able (i) to renew its existing insurance coverage as and when
such policies expire or (ii) to obtain comparable coverage from similar
institutions as may be necessary or appropriate to conduct its business as
now conducted and at a cost that would not result in a Material Adverse
Change. Neither of the Company nor any subsidiary has been denied any
insurance coverage which it has sought or for which it has applied.
(w) No Price Stabilization or Manipulation. Except as may be
permitted by applicable federal or state securities laws, neither the
Company nor any of the Subsidiary Guarantors has taken and will not take,
directly or indirectly, any action designed to or that might be reasonably
expected to cause or result in stabilization or manipulation of the price
of any security of the Company or any of the Subsidiary Guarantors to
facilitate the sale or resale of the Securities.
(x) Company's Accounting System. The Company maintains a system of
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(y) Compliance with Environmental Laws. Except as would not,
individually or in the aggregate, result in a Material Adverse Change (i)
neither the Company nor any of its subsidiaries is in violation of any
federal, state, local or foreign law or regulation relating to pollution or
protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or wildlife, including without limitation, laws and
regulations relating to emissions, discharges, releases or threatened
releases of chemicals, pollutants, contaminants, wastes, toxic substances,
hazardous substances, petroleum and petroleum products (collectively,
"Materials of Environmental Concern"), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern (collectively,
"Environmental Laws"), which violation includes, but is not limited to,
noncompliance with any permits or other governmental authorizations
required for the operation of the business of the Company or its
subsidiaries under applicable Environmental Laws, or noncompliance with the
terms and conditions thereof, nor has the Company or any of its
subsidiaries received since January 1, 1995 any written communication,
whether from a governmental authority, citizens group, employee or
otherwise, that alleges that the Company or any of its subsidiaries is in
violation of any Environmental Law; (ii) there is no claim, action or cause
of action filed with a court or governmental authority, no investigation
with respect to which the Company or any of its subsidiaries has received
written notice, and no written notice by any person or entity alleging
potential liability for investigatory costs,
9
<PAGE>
cleanup costs, governmental responses costs, natural resources damages,
property damages, personal injuries, attorneys' fees or penalties arising
out of, based on or resulting from the presence, or release into the
environment, of any Material of Environmental Concern at any location
owned, leased or operated by the Company or any of its subsidiaries, now or
since January 1, 1995 (collectively, "Environmental Claims"), pending or,
to the best of the Company's and the Subsidiary Guarantors' collective
knowledge, threatened against the Company or any of its subsidiaries or any
person or entity whose liability for any Environmental Claim the Company or
any of its subsidiaries has retained or assumed either contractually or by
operation of law; and (iii) to the best of the Company's and the Subsidiary
Guarantors' collective knowledge, there are no past or present actions,
activities, circumstances, conditions, events or incidents, including,
without limitation, the release, emission, discharge, presence or disposal
of any Material of Environmental Concern, that reasonably could result in a
violation of any Environmental Law or form the basis of a potential
Environmental Claim against the Company or any of its subsidiaries or
against any person or entity whose liability for any Environmental Claim
the Company or any of its subsidiaries has retained or assumed either
contractually or by operation of law.
(z) Periodic Review of Costs of Environmental Compliance. In the
ordinary course of its business, the Company conducts a periodic review of
the effect of Environmental Laws on the business, operations and properties
of the Company and its subsidiaries, in the course of which it identifies
and evaluates associated costs and liabilities (including, without
limitation, any capital or operating expenditures required for clean-up,
closure of properties or compliance with Environmental Laws or any permit,
license or approval, any related constraints on operating activities and
any potential liabilities to third parties). On the basis of such review
and the amount of its established reserves, the Company has reasonably
concluded that such associated costs and liabilities would not,
individually or in the aggregate, result in a Material Adverse Change.
(aa) ERISA Compliance. The Company and its subsidiaries and any
"employee benefit plan" (as defined under the Employee Retirement Income
Security Act of 1974, as amended, and the regulations and published
interpretations thereunder (collectively, "ERISA")) established or
maintained by the Company, its subsidiaries or their "ERISA Affiliates" (as
defined below) are in compliance in all material respects with ERISA.
"ERISA Affiliate" means, with respect to the Company or a subsidiary, any
member of any group of organizations described in Sections 414(b), (c), (m)
or (o) of the Internal Revenue Code of 1986, as amended, and the
regulations and published interpretations thereunder (the "Code") of which
the Company or such subsidiary is a member. No "reportable event" (as
defined under ERISA) has occurred or is reasonably expected to occur with
respect to any "employee benefit plan" established or maintained by the
Company, its subsidiaries or any of their ERISA Affiliates which could
reasonably be expected to result in a Material Adverse Change. No "employee
benefit plan" established or maintained by the Company, its subsidiaries or
any of their ERISA Affiliates, if such "employee benefit plan" were
terminated, would have any "amount of unfunded benefit liabilities" (as
defined under ERISA) which could reasonably be expected to result in a
Material Adverse Change. Neither the Company, its subsidiaries nor any of
their ERISA Affiliates has incurred or reasonably expects to incur any
liability which could reasonably be expected to result in a Material
Adverse Change under (i) Title IV of ERISA with respect to termination of,
or withdrawal from, any "employee benefit plan" or (ii) Sections 412, 4971,
4975 or 4980B of the Code. Each "employee
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<PAGE>
benefit plan" or (ii) Sections 412, 4971, 4975 or 4980B of the Code. Each
"employee benefit plan" established or maintained by the Company, its
subsidiaries or any of their ERISA Affiliates that is intended to be
qualified under Section 401(a) of the Code is so qualified and nothing has
occurred, whether by action or failure to act, which would cause the loss
of such qualification. The forgoing representations and warranties shall be
deemed to have been made to the best of the Company's knowledge to the
extent such representations and warranties apply to any "multiemployer
plan" (as defined in ERISA or the Code) to which the Company, its
subsidiaries or any of their ERISA affiliates contribute or have
obligations to contribute.
(bb) Solvency. The Company and the Subsidiary Guarantors are, and
immediately after the Closing Date on a consolidated basis, will be,
Solvent. As used herein, the term "Solvent" means, with respect to the
Company and the Subsidiary Guarantors on a particular date, that on such
date (i) the fair market value of the assets of the Company and the
Subsidiary Guarantors on a consolidated basis is greater than the total
amount of respective liabilities (including contingent liabilities) of the
Company and the Subsidiary Guarantors on a consolidated basis, (ii) the
present fair salable value of the assets of the Company and the Subsidiary
Guarantors on a consolidated basis is greater than the amount that will be
required to pay the respective probable liabilities of the Company and the
Subsidiary Guarantors on their debts on a consolidated basis as they become
absolute and matured, (iii) the Company and the Subsidiary Guarantors are
able to realize upon their respective assets and pay their debts and other
liabilities on a consolidated basis, including contingent obligations on a
consolidated basis, as they mature and (iv) the Company and the Subsidiary
Guarantors do not have unreasonably small capital on a consolidated basis.
(cc) No Default in Indebtedness. No event of default exists under any
contract, indenture, mortgage, loan agreement, note, lease or other
agreement or instrument constituting Indebtedness (as defined in the
Indenture) except for such events of default as could not, individually or
in the aggregate, be reasonably expected to result in a Material Adverse
Change.
(dd) Related Party Transactions. There are no business relationships
or related-party transactions involving the Company or any subsidiary or
any other person that would be required to be described in the Offering
Memorandum were it a prospectus to be filed as a part of a Registration
Statement on Form S-1 under the Securities Act, which have not been
described as would have been so required.
(ee) Industry Statistics. The market-related and customer-related data
and estimates included in the Offering Memorandum are based on or derived
from sources which the Company and the Subsidiary Guarantors believe to be
reliable and accurate.
(ff) Credit Documents. The Credit Documents have been duly and validly
authorized by the Company and its subsidiaries party thereto and, when duly
executed and delivered by the Company and its subsidiaries party thereto,
will be the valid and legally binding obligation of the Company and its
subsidiaries party thereto, enforceable in accordance with their terms,
except as the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
the rights and remedies of creditors or by general equitable principles.
(gg) Note and Warrant Repurchase Agreement. The Note and Warrant
Repurchase Agreement has been duly and validly authorized by the Company
and,
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<PAGE>
when duly executed and delivered by the Company, will be the valid and
legally binding obligation of the Company, enforceable in accordance with
its terms, except as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting the rights and remedies of creditors or by general equitable
principles.
(hh) Compliance with Regulation S. The Company, the Subsidiary
Guarantors and their respective affiliates and all persons acting on their
behalf (other than the Initial Purchasers, as to whom the Company and the
Subsidiary Guarantors make no representation) have complied with and will
comply with the offering restrictions requirements of Regulation S in
connection with the offering of the Securities outside the United States
and, in connection therewith, the Offering Memorandum contains the
disclosure required by Rule 902(g).
(ii) Form of Regulation S Securities. The Securities sold in reliance
on Regulation S will be represented upon issuance by a temporary global
security that may not be exchanged for definitive securities until the
expiration of the 40-day restricted period referred to in Rule 903(b)(3) of
the Securities Act and only upon certification of beneficial ownership of
such Securities by non-U.S. persons or U.S. persons who purchased such
Securities in transactions that were exempt from the registration
requirements of the Securities Act.
Any certificate signed by an officer of the Company or any Subsidiary
Guarantor and delivered to the Initial Purchasers or to counsel for the
Initial Purchasers shall be deemed to be a representation and warranty by
the Company or such Subsidiary Guarantor to each Initial Purchaser as to
the matters set forth therein.
SECTION 2. PURCHASE, SALE AND DELIVERY OF THE SECURITIES .
(a) The Securities. The Company and the Subsidiary Guarantors jointly
and severally agree to issue and sell to the several Initial Purchasers,
severally and not jointly, all of the Securities upon the terms herein set
forth. On the basis of the representations, warranties and agreements
herein contained, and upon the terms but subject to the conditions herein
set forth, the Initial Purchasers agree, severally and not jointly, to
purchase from the Company and the Subsidiary Guarantors the aggregate
principal amount of Securities set forth opposite their names on Schedule
--------
A, at a discounted purchase price of 2.75% of the principal amount thereof
-
payable on the Closing Date.
(b) The Closing Date. Delivery of certificates for the Securities in
definitive form to be purchased by the Initial Purchasers and payment
therefor shall be made at the offices of NationsBanc Montgomery Securities
LLC, 100 North Tryon Street, Charlotte, North Carolina (or such other place
as may be agreed to by the Company and the Initial Purchasers) at 9:00 a.m.
Charlotte time, on June 26, 1998 or such other time and date not later than
12:30 p.m., Charlotte time, on July 1, 1998 as the Initial Purchasers shall
designate by notice to the Company (the time and date of such closing are
called the "Closing Date"). Delivery of all closing documents shall be
made at the offices of Latham & Watkins, 885 Third Avenue, New York, NY on
the Closing Date. The Company and the Subsidiary Guarantors hereby
acknowledge that circumstances under which the Initial Purchasers may
provide notice to postpone the Closing Date as originally scheduled
include, but are in no way limited to, any determination by the Company or
the Initial Purchasers to recirculate to investors copies of an amended or
supplemented
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<PAGE>
Offering Memorandum or a delay as contemplated by the provisions of Section
16 of this Agreement.
(c) Delivery of the Securities. The Company and the Subsidiary
Guarantors shall deliver, or cause to be delivered, to NationsBanc
Montgomery Securities LLC for the accounts of the several Initial
Purchasers certificates for the Securities at the Closing Date against the
irrevocable release of a wire transfer of immediately available (federal,
same-day) funds for the amount of the purchase price therefor. The
certificates for the Securities shall be in such denominations ($1,000 or
integral multiples thereof) and registered in the name of Cede & Co., as
nominee of the Depositary, pursuant to the DTC Agreement and shall be made
available for inspection on the business day preceding the Closing Date at
a location in New York City as the Initial Purchasers may designate. Time
shall be of the essence, and delivery at the time and place specified in
this Agreement is a further condition to the obligations of the Initial
Purchasers.
(d) Delivery of Offering Memorandum to the Initial Purchasers. Not
later than 6:00 p.m. on the next succeeding business day following the date
of this Agreement, the Company shall deliver or cause to be delivered
copies of the Offering Memorandum in such quantities and at such places as
the Initial Purchasers shall reasonably request.
(e) Initial Purchasers as Qualified Institutional Buyers. Each
Initial Purchaser severally and not jointly represents and warrants to, and
agrees with, the Company and the Subsidiary Guarantors that it is a
"qualified institutional buyer" within the meaning of Rule 144A (a
"Qualified Institutional Buyer") and an "accredited investor" within the
meaning of Rule 501(a) under the Securities Act (an "Accredited Investor").
SECTION 3. ADDITIONAL COVENANTS. The Company and each Subsidiary
Guarantor jointly and severally further covenant and agree with each Initial
Purchaser as follows:
(a) Initial Purchasers' Review of Proposed Amendments and
Supplements'. Prior to amending or supplementing the Offering Memorandum,
the Company shall furnish to the Initial Purchasers for review a copy of
each such proposed amendment or supplement, and the Company shall not
effect any such proposed amendment or supplement to which the Initial
Purchasers reasonably object.
(b) Amendments and Supplements to the Offering Memorandum and Other
Securities Act Matters. If, prior to the completion of the placement of the
Securities by the Initial Purchasers with the Subsequent Purchasers (as
evidenced by a notice in writing from the Initial Purchasers to the
Company), any event shall occur or condition exist as a result of which it
is necessary, in the opinion of counsel for the Initial Purchasers, to
amend or supplement the Offering Memorandum in order to make the statements
therein, in the light of the circumstances when the Offering Memorandum is
delivered to a purchaser, not misleading, or if in the opinion of counsel
for the Initial Purchasers it is otherwise necessary to amend or supplement
the Offering Memorandum to comply with law, the Company and the Subsidiary
Guarantors jointly and severally agree to promptly prepare (subject to
Section 3(a) hereof) and furnish (at their own expense) to the Initial
Purchasers, amendments or supplements to the Offering Memorandum so that
the statements in the Offering Memorandum as so amended or supplemented
will not, in the light of the circumstances when the Offering Memorandum is
delivered to a purchaser, be misleading or so that the Offering Memorandum,
as amended or supplemented, will comply with law.
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Following the consummation of the Exchange Offer or the effectiveness
of an applicable shelf registration statement and for so long as the
Securities and the Exchange Securities are outstanding if, in the opinion
of counsel to the Initial Purchasers, the Initial Purchasers or any of
their affiliates (as such term is defined in the rules and regulations
under the Securities Act) are required to deliver a prospectus in
connection with sales of, or market-making activities with respect to, such
securities, (A) to periodically amend the applicable registration statement
so that the information contained therein complies with the requirements of
Section 10(a) of the Securities Act, (B) to amend the applicable
registration statement or supplement the related prospectus or the
documents incorporated therein when necessary to reflect any material
changes in the information provided therein so that the registration
statement and the prospectus will not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances existing as of
the date the prospectus is so delivered, not misleading and (C) to provide
the Initial Purchasers with copies of each amendment or supplement filed
and such other documents as the Initial Purchasers may reasonably request.
The Company and each Subsidiary Guarantor hereby expressly acknowledge
that the indemnification and contribution provisions of Sections 8 and 9
hereof are specifically applicable and relate to each offering memorandum,
registration statement, prospectus, amendment or supplement referred to in
this Section 3(b).
(c) Copies of the Offering Memorandum. The Company agrees to furnish
the Initial Purchasers, without charge, as many copies of the Offering
Memorandum and any amendments and supplements thereto as they shall have
reasonably requested.
(d) Blue Sky Compliance. The Company and each Subsidiary Guarantor
shall cooperate with the Initial Purchasers and counsel for the Initial
Purchasers to qualify or register the Securities for sale under (or obtain
exemptions from the application of) state securities or blue sky laws of
those jurisdictions designated by the Initial Purchasers, shall comply with
such laws and shall continue such qualifications, registrations and
exemptions in effect so long as required for the distribution of the
Securities. Neither the Company nor any Subsidiary Guarantor shall be
required to qualify as a foreign corporation or to take any action that
would subject it to general service of process in any such jurisdiction
where it is not presently qualified or where it would be subject to
taxation as a foreign corporation. The Company will advise the Initial
Purchasers promptly of the suspension of the qualification or registration
of (or any such exemption relating to) the Securities for offering, sale or
trading in any jurisdiction or any initiation or threat of any proceeding
for any such purpose, and in the event of the issuance of any order
suspending such qualification, registration or exemption, the Company and
each Subsidiary Guarantor shall use their respective best efforts to obtain
the withdrawal thereof at the earliest possible moment.
(e) Use of Proceeds. The Company shall apply the net proceeds from
the sale of the Securities sold by it in the manner described under the
caption "Use of Proceeds" in the Offering Memorandum.
(f) Ratings of the Securities. The Company and each Subsidiary
Guarantor shall take all reasonable action necessary to enable Standard &
Poor's Ratings Group, a division of McGraw Hill, Inc. ("S&P"), and Moody's
Investors Service, Inc. ("Moody's") to provide their respective credit
ratings of the Securities.
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(g) The Depositary. The Company and each Subsidiary Guarantor will
cooperate with the Initial Purchasers and use their best efforts to permit
the Securities to be eligible for clearance and settlement through the
facilities of the Depositary.
(h) Additional Issuer Information. At any time when the Company and
the Subsidiary Guarantors are not subject to Section 13 or 15(d) of the
Exchange Act, and for so long as any Securities outstanding constitute
Transfer Restricted Securities as defined in the Registration Rights
Agreement, for the benefit of holders and beneficial owners from time to
time of Securities, the Company and the Subsidiary Guarantors shall
furnish, at their expense, upon request, to holders and beneficial owners
of Securities and prospective purchasers of Securities information
("Additional Issuer Information") satisfying the requirements of subsection
(d)(4) of Rule 144A.
(i) Agreement Not To Offer or Sell Additional Securities During the
period of 180 days following the date of the Offering Memorandum, the
Company will not, without the prior written consent of NationsBanc
Montgomery Securities LLC (which consent may be withheld at the sole
discretion of NationsBanc Montgomery Securities LLC), directly or
indirectly, sell, offer, contract or grant any option to sell, pledge,
transfer or establish an open "put equivalent position" within the meaning
of Rule 16a-1(h) under the Exchange Act, or otherwise dispose of or
transfer, or announce the offering of, or file any registration statement
under the Securities Act in respect of, any debt securities of the Company
or securities exchangeable for or convertible into debt securities of the
Company (other than as contemplated by this Agreement or the Offering
Memorandum and to register the Exchange Securities).
(j) Future Reports to the Initial Purchasers. During the period of
five years hereafter the Company will furnish to NationsBanc Montgomery
Securities LLC at 100 North Tryon Street, 7th Floor, Charlotte, NC 28255
Attention: Scott Holmes, and to First Union Capital Markets, 301 South
College Street, TW-10, Charlotte, NC 28288 Attention: Rick Fogg (i) as soon
as practicable after the end of each fiscal year, copies of any annual
report delivered to the holders of any of the Issuer's securities (an
"Annual Report") of the Company containing the consolidated balance sheet
of the Company and its subsidiaries as of the close of such fiscal year and
statements of income, stockholders' equity and cash flows for the year then
ended and the opinion thereon of the Company's independent public or
certified public accountants; (ii) as soon as practicable after the filing
thereof, copies of any proxy statement, Annual Report on Form 10-K,
Quarterly Report on Form 10-Q, Current Report on Form 8-K or other report
filed by the Company or any Subsidiary Guarantor with the Commission, the
NASD or any securities exchange; and (iii) as soon as available, copies of
any report or communication of the Company or any Subsidiary Guarantors
mailed generally to holders of their respective capital stock or debt
securities (including the holders of the Securities or Exchange
Securities).
(k) Registration Rights Agreement. The Company and the Subsidiary
Guarantors shall comply with all provisions and obligations of, and shall
cause the Exchange Offer to be made in the appropriate form as contemplated
by, the Registration Rights Agreement, and shall comply with all applicable
federal and state securities laws in connection with the Exchange Offer.
(l) No Integration. Each of the Company and the Subsidiary Guarantors
agrees that it will not and will cause its Affiliates not to make any offer
or sale of securities of the Company of any class if, as a result of the
doctrine of "integration"
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referred to in Rule 502 under the Securities Act, such offer or sale would
render invalid (for the purpose of (i) the sale of the Securities by the
Company and the Subsidiary Guarantors to the Initial Purchasers, (ii) the
resale of the Securities by the Initial Purchasers to Subsequent Purchasers
or (iii) the resale of the Securities by such Subsequent Purchasers to
others) the exemption from the registration requirements of the Securities
Act provided by Section 4(2) thereof or by Rule 144A or by Regulation S
thereunder or otherwise.
(m) Restriction on Repurchases. Until the expiration of two years
after the original issuance of the Securities, the Company and the
Subsidiary Guarantors will not, and will cause their respective Affiliates
not to, purchase or agree to purchase or otherwise acquire any Securities
which are "restricted securities" (as such term is defined under Rule
144(a)(3) under the Securities Act), whether as beneficial owner or
otherwise (except as agent acting as a securities broker on behalf of and
for the account of customers in the ordinary course of business in
unsolicited broker's transactions) unless, immediately upon any such
purchase, the Company or any Subsidiary Guarantor or any Affiliate shall
submit such Securities to the Trustee for cancellation.
(n) Legended Securities. Each certificate for a Security will bear
the legend contained in "Notice to Investors" in the Offering Memorandum
for the time period and upon the other terms stated in the Offering
Memorandum.
(o) PORTAL. The Company and the Subsidiary Guarantors will use their
best efforts to cause the Securities to be eligible for the National
Association of Securities Dealers, Inc. PORTAL market (the "PORTAL
market").
(p) Form D. If required under Rule 503 of the Securities Act, the
Company and the Subsidiary Guarantors will file with the Commission, not
later than 15 days after the Closing Date, five copies of a notice on Form
D under the Securities Act (one of which will be manually signed by a
person duly authorized by the Company); will otherwise comply with the
requirements of Rule 503 under the Securities Act; and will furnish
promptly to the Initial Purchasers evidence of each such required timely
filing (including a copy thereof).
(q) Due Diligence. In connection with the original distribution of
the Securities, the Company and each of the Subsidiary Guarantors agree
that, prior to any offer or resale of the Securities by the Initial
Purchasers, the Initial Purchasers and counsel for the Initial Purchasers
shall have the right to make reasonable inquiries into the business of the
Company and its subsidiaries. The Company and each of the Subsidiary
Guarantors also agree to provide answers to each prospective Subsequent
Purchaser of Securities who so requests concerning the Company and its
subsidiaries (to the extent that such information is available or can be
acquired and made available to prospective Subsequent Purchasers without
unreasonable effort or expense and to the extent the provision thereof is
not prohibited by applicable law) and the terms and conditions of the
offering of the Securities, as provided in the Offering Memorandum.
NationsBanc Montgomery Securities LLC, on behalf of the Initial
Purchasers, may, in its sole discretion, waive in writing the performance by the
Company or any Subsidiary Guarantor of any one or more of the foregoing
covenants or extend the time for their performance.
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SECTION 4. PAYMENT OF EXPENSES. The Company and the Subsidiary
Guarantors jointly and severally agree to pay all costs, fees and expenses
incurred in connection with the performance of their obligations hereunder and
in connection with the transactions contemplated hereby, including without
limitation (i) all expenses incident to the issuance and delivery of the
Securities (including all printing and engraving costs), (ii) all necessary
issue, transfer and other stamp taxes in connection with the issuance and sale
of the Securities to the Initial Purchasers, (iii) all fees and expenses of the
Company's and the Subsidiary Guarantors' counsel, independent public or
certified public accountants and other advisors, (iv) all costs and expenses
incurred in connection with the preparation, printing, filing, shipping and
distribution of each preliminary Offering Memorandum and the Offering Memorandum
(including financial statements and exhibits), and all amendments and
supplements thereto, this Agreement, the Registration Rights Agreement, the
Indenture, the DTC Agreement, the Securities and the Exchange Securities, (v)
all filing fees, attorneys' fees and expenses incurred by the Company or the
Subsidiary Guarantors or the Initial Purchasers (attorney's fees of the Initial
Purchasers shall be $7,500) in connection with qualifying or registering (or
obtaining exemptions from the qualification or registration of) all or any part
of the Securities for offer and sale under the state securities or blue sky laws
and, if requested by the Initial Purchasers, preparing and printing a "Blue Sky
Survey" or memorandum, and any supplements thereto, advising the Initial
Purchasers of such qualifications, registrations and exemptions, (vi) the fees
and expenses of the Trustee, including the fees and disbursements of counsel for
the Trustee in connection with the Indenture, the Securities and the Exchange
Securities, (vii) any fees payable in connection with the rating of the
Securities or the Exchange Securities with any ratings agencies and the listing
of the Securities with the PORTAL market, (viii) all fees and expenses
(including reasonable fees and expenses of counsel) of the Company and the
Subsidiary Guarantors in connection with approval of the Securities by DTC for
"book-entry" transfer, and (ix) the performance by the Company and the
Subsidiary Guarantors of their other obligations under this Agreement. Except
as provided in this Section 4, Section 6, Section 8 and Section 9 hereof, the
Initial Purchasers shall pay their own expenses, including the fees and
disbursements of their counsel.
SECTION 5. CONDITIONS OF THE OBLIGATIONS OF THE INITIAL PURCHASERS. The
obligations of the several Initial Purchasers to purchase and pay for the
Securities as provided herein on the Closing Date shall be subject to the
accuracy of the representations and warranties on the part of the Company and
the Subsidiary Guarantors set forth in Section 1 hereof as of the date hereof
and as of the Closing Date as though then made and to the timely performance by
the Company and the Subsidiary Guarantors of their covenants and other
obligations hereunder, and to each of the following additional conditions:
(a) Accountants' Comfort Letter. On the date hereof, the Initial
Purchasers shall have received from Coopers & Lybrand, L.L.P., independent
public or certified public accountants for the Company, a letter dated the
date hereof addressed to the Initial Purchasers, in form and substance
satisfactory to the Initial Purchasers, containing statements and
information of the type ordinarily included in accountant's "comfort
letters" to Initial Purchasers, delivered according to Statement of
Auditing Standards Nos. 72 and 76 (or any successor bulletins), with
respect to the audited and unaudited financial statements and certain
financial information contained in the Registration Statement and the
Offering Memorandum.
(b) No Material Adverse Change or Ratings Agency Change. For the
period from and after the date of this Agreement and prior to the Closing
Date:
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(i) in the judgment of the Initial Purchasers there shall not
have occurred any Material Adverse Change; and
(ii) there shall not have occurred any downgrading, nor shall any
notice have been given of any intended or potential downgrading or of any
review for a possible change that does not indicate the direction of the
possible change, in the rating accorded any securities of the Company or
any of its subsidiaries by any "nationally recognized statistical rating
organization" as such term is defined for purposes of Rule 436(g)(2) under
the Securities Act.
(c) Opinion of Counsel for the Company and the Subsidiary Guarantors.
On the Closing Date the Initial Purchasers shall have received the
favorable opinion of Blank Rome Comisky & McCauley LLP, counsel for the
Company and the Subsidiary Guarantors, dated as of such Closing Date, in
form and substance satisfactory to you, to the effect that:
(i) each of the Company and the Subsidiary Guarantors has been
organized and is validly subsisting as a corporation under the laws of the
jurisdiction of its incorporation;
(ii) each of the Company and the Subsidiary Guarantors has
corporate power and authority to own, lease and operate its respective
properties and to conduct its respective business as described in the
Offering Memorandum and to enter into and perform its respective
obligations under the Purchase Agreement, the Registration Rights
Agreement, the Indenture, the Credit Documents, the Note and Warrant
Repurchase Agreement, the Securities, the Exchange Securities and the DTC
Agreement;
(iii) all of the issued and outstanding capital stock of each of
the Subsidiary Guarantors has been duly authorized and validly issued, is
fully paid and non-assessable and is owned by the Company, directly or
through the other Subsidiary Guarantors, free and clear of any adverse
claim as defined in Section 8-102(a)(1) of the Pennsylvania Commercial
Code;
(iv) the authorized, issued and outstanding capital stock of the
Company conforms in all material respects to the descriptions thereof set
forth in the Offering Memorandum. All of the outstanding shares of capital
stock of the Company have been duly authorized and validly issued, are
fully paid and nonassessable and, to such counsel's knowledge, have been
issued in compliance in all material respects with the registration and
qualification requirements, or exceptions therefrom, of federal and state
securities laws;
(v) the Purchase Agreement has been duly authorized, executed
and delivered by the Company and the Subsidiary Guarantors;
(vi) each of the Registration Rights Agreement and the DTC
Agreement has been duly authorized, executed and delivered by, and is a
valid and binding agreement of, the Company and the Subsidiary Guarantors,
enforceable in accordance with its terms, except as rights to
indemnification or contribution may be limited by applicable law or public
policy or except as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance
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or other similar laws relating to or affecting the rights and remedies of
creditors or by general equitable principles;
(vii) the Indenture has been duly authorized, executed and
delivered by the Company and the Subsidiary Guarantors and (assuming the
due authorization, execution and delivery thereof by the Trustee)
constitutes a valid and binding agreement of the Company and the Subsidiary
Guarantors, enforceable against the Company and the Subsidiary Guarantors
in accordance with its terms, except as rights to indemnification or
contribution may be limited by applicable law or public policy or except as
the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws
relating to or affecting the rights and remedies of creditors or by general
principles of equity;
(viii) the Notes are in the form contemplated by the Indenture,
have been duly authorized by all necessary corporate action on behalf of
the Company for issuance and sale pursuant to this Agreement and the
Indenture and, when executed by the Company and authenticated by the
Trustee in the manner provided in the Indenture (assuming the due
authorization, execution and delivery of the Indenture by the Trustee) and
delivered against payment of the purchase price therefor, will constitute
valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms, except as rights to indemnification
or contribution may be limited by applicable law or public policy or except
as the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws relating
to or affecting enforcement of the rights and remedies of creditors or by
general principles of equity and will be entitled to the benefits of the
Indenture;
(ix) the Exchange Notes have been duly authorized for issuance
by all necessary corporate action on behalf of the Company, and when issued
and authenticated in accordance with the terms of the Indenture, the
Registration Rights Agreement and the Exchange Offer, will constitute valid
and binding obligations of the Company, enforceable against the Company in
accordance with their terms, except as rights to indemnification or
contribution may be limited by applicable law or public policy or except as
the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws relating
to or affecting enforcement of the rights and remedies of creditors or by
general principles of equity and will be entitled to the benefits of the
Indenture;
(x) the Subsidiary Guarantees are in the form contemplated by
the Indenture, have been duly authorized for execution and delivery
pursuant to this Agreement and the Indenture and have been duly executed by
each of the Subsidiary Guarantors and, when authenticated in the manner
provided for in the Indenture and delivered against payment of the purchase
price for the Securities, will constitute valid and binding agreements of
the Subsidiary Guarantors, enforceable in accordance with their terms,
except as rights to indemnification or contribution may be limited by
applicable law or public policy or except as the enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws relating to or affecting the rights and
remedies of creditors or by general equitable principles and will be
entitled to the benefits of the Indenture;
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(xi) the Exchange Subsidiary Guarantees have been duly
authorized for issuance and exchange pursuant to the Registration Rights
Agreement, the Exchange Offer and the Indenture and, when duly executed by
each of the Subsidiary Guarantors and authenticated in the manner provided
for in the Indenture and delivered in exchange for the Subsidiary
Guarantees, will constitute valid and binding agreements of the Subsidiary
Guarantors, enforceable in accordance with their terms, except as rights to
indemnification or contribution may be limited by applicable law or public
policy or except as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other
similar laws relating to or affecting the rights and remedies of creditors
or by general equitable principles and will be entitled to the benefits of
the Indenture;
(xii) the Securities and the Indenture conform in all material
respects to the descriptions thereof contained in the Offering Memorandum;
(xiii) the statements in the Offering Memorandum under the
captions "Description of Notes," "Principal Shareholders," "Description of
Other Indebtedness," "Certain Relationships and Related Transactions" and
"Certain United States Federal Tax Considerations for Non-United States
Holders" insofar as such statements constitute matters of law, summaries of
legal matters, charter or by-law provisions, documents or legal
proceedings, or legal conclusions, have been reviewed by such counsel and
are accurate and complete, in all material respects, with respect to the
matters referred to therein;
(xiv) no consent, approval, authorization or other order of, or
registration or filing with, any court or other governmental authority or
agency, is required for the Company's or the Subsidiary Guarantors
execution, delivery and performance of the Purchase Agreement, the
Registration Rights Agreement, the DTC Agreement, the Credit Documents, the
Note and Warrant Repurchase Agreement, the Securities, the Exchange
Securities or the Indenture, or consummation of the transactions
contemplated thereby and by the Offering Memorandum, except as required
under (i) federal securities law (in the case of the Registration Rights
Agreement), (ii) applicable state securities or blue sky laws or (iii) the
filing of mortgages, financing statements or other documents required to
perfect security interests required under the Credit Documents;
(xv) the execution and delivery of the Purchase Agreement, the
Registration Rights Agreement, the DTC Agreement, the Credit Documents, the
Note and Warrant Repurchase Agreement, the Securities, the Exchange
Securities and the Indenture by the Company and the Subsidiary Guarantors
and the performance by the Company and the Subsidiary Guarantors of their
respective obligations thereunder (including the application of the
proceeds from the Offering and initial borrowings under the Credit
Documents, in each case, as described in the Offering Memorandum) (i) have
been duly authorized by all necessary corporate action on the part of the
Company and the Subsidiary Guarantors; (ii) will not result in any
violation of the provisions of the charter or by-laws of the Company or any
subsidiary; (iii) will not constitute a breach of, or Default or a Debt
Repayment Triggering Event, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or
any of its subsidiaries under the Credit Documents or to the knowledge of
such counsel, any other material Existing Instrument; or (iv) to the
knowledge of such counsel, will not
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result in any violation of any law, administrative regulation or
administrative or court decree applicable to the Company or any subsidiary;
(xvi) the Company and the Subsidiary Guarantors are not, and after
receipt of payment for the Securities (assuming application of the proceeds
from the sale of the Notes as set forth in the Offering Memorandum under
the heading "Use of Proceeds") will not be, an "investment company" within
the meaning of the Investment Company Act;
(xvii) based on the representations, warranties, covenants and
agreements of the Company, the Subsidiary Guarantors and the Initial
Purchasers set forth in this Purchase Agreement, no registration of the
Securities under the Securities Act, and no qualification of an indenture
under the Trust Indenture Act with respect thereto, is required for in
connection with the purchase of the Securities by the Initial Purchasers or
the initial resale of the Securities by the Initial Purchasers to Qualified
Institutional Buyers or non-U.S. persons in the manner contemplated by this
Agreement and the Offering Memorandum other than any registration or
qualification that may be required in connection with the Registration
Rights Agreement. Such counsel need express no opinion, however, as to when
or under what circumstances any Securities initially sold by the Initial
Purchasers may be reoffered or resold; and
(xviii) each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, and each amendment or supplement thereto, as of
its date (except for the financial statements and notes thereto and other
financial and statistical data included in the Offering Memorandum, as to
which no opinion need be expressed), contained all of the information
required under Rule 144A(d) of the Securities Act.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company and the
Subsidiary Guarantors, representatives of the independent public or certified
public accountants for the Company and the Subsidiary Guarantors and with
representatives of the Initial Purchasers at which the contents of the Offering
Memorandum, and any supplements or amendments thereto, and related matters were
discussed and, although such counsel has not undertaken to determine
independently, is not passing upon and does not assume any responsibility for
the accuracy, completeness or fairness of the statements contained in the
Offering Memorandum (other than as expressly specified above), and any
supplements or amendments thereto, on the basis of the foregoing, nothing has
come to their attention which would lead them to believe that either the
Offering Memorandum, as of its date or at the Closing Date, contained or
contains an untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading (it being
understood that such counsel need express no belief as to the financial
statements or the notes thereto or other financial and statistical data,
included in the Offering Memorandum or any amendments or supplements thereto).
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the federal law
of the United States, to the extent they deem proper and specified in such
opinion, upon the opinion (which shall be dated the Closing Date, shall be
satisfactory in form and substance to the Initial Purchasers, shall expressly
state that the Initial Purchasers may rely on such opinion as if it were
addressed to them and shall be furnished to the Initial Purchasers) of other
counsel of good standing whom they believe to be
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reliable and who are satisfactory to counsel for the Initial Purchasers;
provided, however, that such counsel shall further state that they believe that
they and the Initial Purchasers are justified in relying upon such opinion of
other counsel, and (B) as to matters of fact, to the extent they deem proper, on
certificates of responsible officers of the Company and public officials.
(d) Opinion of General Counsel for the Company and the Subsidiary
Guarantors. On the Closing Date the Initial Purchasers shall have received
the favorable opinion of O'Hara, Hanlon, Knych & Pobedinsky, LLP, general
counsel for the Company and the Subsidiary Guarantors, dated as of such
Closing Date, in form and substance satisfactory to you, to the effect
that:
(i) each of the Company and the Subsidiary Guarantors is (i) in
good standing under the laws of its jurisdiction of incorporation and (ii)
duly qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except for such jurisdictions where the failure to so qualify or
to be in good standing would not, individually or in the aggregate, result
in a Material Adverse Change;
(ii) to the best knowledge of such counsel, neither the Company
nor any subsidiary is in violation of its charter or by-laws or any law,
administrative regulation or administrative or court decree applicable to
the Company or any subsidiary or is in Default in the performance or
observance of any obligation, agreement, covenant or condition contained in
any material Existing Instrument, except in each such case for such
violations or Defaults as would not, individually or in the aggregate,
result in a Material Adverse Change;
(iii) each of the Credit Documents and the Note and Warrant
Repurchase Agreement has been duly authorized, executed and delivered by,
and is a valid and binding agreement of, the Company and each of the
Subsidiary Guarantors party thereto, enforceable in accordance with its
terms, except as rights to indemnification or contribution may be limited
by applicable law or public policy or except as the enforcement thereof may
be limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws relating to or affecting the
rights and remedies of creditors or by general equitable principles;
In rendering such opinion, such counsel may rely as to matters
involving the application of laws of any jurisdiction other than the General
Corporation Law of the State of Delaware, the laws of the State of New York or
the federal law of the United States, to the extent they deem proper and
specified in such opinion, upon the opinion (which shall be dated the Closing
Date, shall be satisfactory in form and substance to the Initial Purchasers,
shall expressly state that the Initial Purchasers may rely on such opinion as if
it were addressed to them and shall be furnished to the Initial Purchasers) of
other counsel of good standing whom they believe to be reliable and who are
satisfactory to counsel for the Initial Purchasers; provided, however, that such
counsel shall further state that they believe that they and the Initial
Purchasers are justified in relying upon such opinion of other counsel.
(e) Opinion of Counsel for the Initial Purchasers. On the Closing
Date the Initial Purchasers shall have received the favorable opinion of
Latham & Watkins, counsel for
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the Initial Purchasers, dated as of such Closing Date, with respect to such
matters as may be reasonably requested by the Initial Purchasers.
(f) Officers' Certificate. On the Closing Date the Initial
Purchasers shall have received a written certificate executed by the
Chairman of the Board, Chief Executive Officer or President of the Company
and the Chief Financial Officer or Chief Accounting Officer of the Company,
dated as of the Closing Date, to the effect set forth in subsection
(b)(ii) of this Section 5, and further to the effect that:
(i) for the period from and after the date of this Agreement
and prior to the Closing Date there has not occurred any Material Adverse
Change;
(ii) the representations, warranties and covenants of the
Company and the Subsidiary Guarantors set forth in Section 1 of this
Agreement are true and correct with the same force and effect as though
expressly made on and as of the Closing Date; and
(iii) the Company and the Subsidiary Guarantors have complied
with all the agreements and satisfied all the conditions on their
respective part to be performed or satisfied at or prior to the Closing
Date.
(g) Bring-down Comfort Letter. On the Closing Date the Initial
Purchasers shall have received from Coopers & Lybrand, L.L.P., independent
public or certified public accountants for the Company, a letter dated such
date, in form and substance satisfactory to the Initial Purchasers, to the
effect that they reaffirm the statements made in the letter furnished by
them pursuant to subsection (a) of this Section 5, except that the
specified date referred to therein for the carrying out of procedures shall
be no more than three business days prior to the Closing Date.
(h) PORTAL Listing. At the Closing Date the Securities shall have
been designated for trading on the PORTAL market.
(i) Registration Rights Agreement. The Company and the Subsidiary
Guarantors shall have entered into the Registration Rights Agreement and
the Initial Purchasers shall have received executed counterparts thereof.
(j) Redemption of Notes and Warrants. Concurrently with the Closing,
the Company shall redeem the outstanding notes and warrants from Capital
Resource Partners II, LP and Exeter Venture Lenders, LP as described in the
Offering Memorandum under the caption "Use of Proceeds."
(k) Additional Documents. On or before the Closing Date, the Initial
Purchasers and counsel for the Initial Purchasers shall have received such
information, documents and opinions as they may reasonably require for the
purposes of enabling them to pass upon the issuance and sale of the
Securities as contemplated herein, or in order to evidence the accuracy of
any of the representations and warranties, or the satisfaction of any of
the conditions or agreements, herein contained.
If any condition specified in this Section 5 is not satisfied when and
as required to be satisfied, this Agreement may be terminated by the Initial
Purchasers by notice to the Company at any time on or prior to the Closing Date,
which termination shall be without liability
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on the part of any party to any other party, except that Section 4, Section 6,
Section 8 and Section 9 shall at all times be effective and shall survive such
termination.
SECTION 6. REIMBURSEMENT OF INITIAL PURCHASERS' EXPENSES. If the sale to
the Initial Purchasers of the Securities on the Closing Date is not consummated
because of any refusal, inability or failure on the part of the Company or any
Subsidiary Guarantor to perform any agreement herein or to comply with any
provision hereof (except such refusal, inability or failure that is due to the
breach of any material term or condition of this Agreement by the Initial
Purchasers), the Company and the Subsidiary Guarantors jointly and severally
agree to reimburse the Initial Purchasers (or such Initial Purchasers as have
terminated this Agreement with respect to themselves), severally, upon demand
for all out-of-pocket expenses that shall have been reasonably incurred by the
Initial Purchasers in connection with the proposed purchase and the offering and
sale of the Securities, including but not limited to fees and disbursements of
counsel, printing expenses, travel expenses, postage, facsimile and telephone
charges.
SECTION 7. OFFER, SALE AND RESALE PROCEDURES. Each of the Initial
Purchasers, on the one hand, and the Company and each of the Subsidiary
Guarantors, on the other hand, hereby establish and agree to observe the
following procedures in connection with the offer and sale of the Securities:
(i) Offers and Sales only to Qualified Institutional Buyers or
Regulation S Investors. Offers and sales of the Securities will be
made only by the Initial Purchasers or Affiliates thereof qualified to
do so in the jurisdictions in which such offers or sales are made.
Each such offer or sale shall only be made (A) to persons whom the
offeror or seller reasonably believes to be qualified institutional
buyers (as defined in Rule 144A under the Securities Act) or (B) non-
U.S. persons outside the United States to whom the offeror or seller
reasonably believes offers and sales of the Securities may be made in
reliance upon Regulation S under the Securities Act, upon the terms
and conditions set forth in Annex I hereto, which Annex I is hereby
------- -------
expressly made a part hereof.
(ii) No General Solicitation. The Securities will be offered by
approaching prospective Subsequent Purchasers on an individual basis.
No general solicitation or general advertising (within the meaning of
Rule 502(c) under the Securities Act) will be used in the United
States in connection with the offering of the Securities.
(iii) Purchases by Non-Bank Fiduciaries. In the case of a non-
bank Subsequent Purchaser of Securities acting as a fiduciary for one
or more third parties, in connection with an offer and sale to such
purchaser pursuant to clause (i) above, each third party shall, in the
judgment of the applicable Initial Purchaser, be an Institutional
Accredited Investor or a Qualified Institutional Buyer or a non-U.S.
person outside the United States.
(iv) Restrictions on Transfer. Upon original issuance by the
Company, and until such time as the same is no longer required under
the applicable requirements of the Securities Act, the Securities (and
all securities issued in exchange therefor or in substitution thereof,
other than the Exchange Securities) shall bear the following legend:
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"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT OR IN ACCORDANCE WITH AN APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
(SUBJECT TO THE DELIVERY OF SUCH EVIDENCE, IF ANY REQUIRED UNDER THE
INDENTURE PURSUANT TO WHICH THIS NOTE IS ISSUED) AND IN ACCORDANCE
WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY OTHER JURISDICTION. EACH PURCHASER OF THE SECURITY EVIDENCED
HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A THEREUNDER OR ANOTHER EXEMPTION UNDER THE
SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES
FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY (1)(a) TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE
THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE
COMPANY SO REQUESTS), SUBJECT TO THE RECEIPT BY THE REGISTRAR OF A
CERTIFICATION OF THE TRANSFEROR AND AN OPINION OF COUNSEL TO THE
EFFECT THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT,
(2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE 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 RESTRICTION SET FORTH IN (A)
ABOVE."
(v) Delivery of Offering Memorandum. Each Initial Purchaser will
deliver to each purchaser of the Securities from such Initial
Purchaser, in connection with its original distribution of the
Securities, a copy of the Offering Memorandum, as amended and
supplemented at the date of such delivery.
SECTION 8. INDEMNIFICATION.
(a) Indemnification of the Initial Purchasers. The Company and the
Subsidiary Guarantors jointly and severally agree to indemnify and hold
harmless each Initial Purchaser, its officers and employees, and each
person, if any, who controls any Initial Purchaser within the meaning of
the Securities Act and the Exchange Act against any
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loss, claim, damage, liability or expense, as incurred, to which such
Initial Purchaser or such officer, employee or controlling person may
become subject, under the Securities Act, the Exchange Act or other federal
or state statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected
with the written consent of the Company), insofar as such loss, claim,
damage, liability or expense (or actions in respect thereof as contemplated
below) arises out of or is based (i) upon any untrue statement or alleged
untrue statement of a material fact contained in the Preliminary Offering
Memorandum or the Offering Memorandum (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; or (ii) in whole
or in part upon any inaccuracy in the representations and warranties of the
Company or any Subsidiary Guarantor contained herein; or (iii) in whole or
in part upon any failure of the Company or any Subsidiary Guarantor to
perform any of their collective obligations hereunder or under law; or (iv)
any act or failure to act or any alleged act or failure to act by any
Initial Purchaser in connection with, or relating in any manner to, the
offering contemplated hereby, and which is included as part of or referred
to in any loss, claim, damage, liability or action arising out of or based
upon any matter covered by clause (i) above, provided that the Company and
the Subsidiary Guarantors shall not be liable under this clause (iv) to the
extent that a court of competent jurisdiction shall have determined by a
final judgment that such loss, claim, damage, liability or action resulted
directly from any such acts or failures to act undertaken or omitted to be
taken by such Initial Purchaser through its gross negligence or willful
misconduct; and to reimburse each Initial Purchaser and each such
controlling person for any and all reasonable expenses (including the
reasonable fees and disbursements of counsel chosen by NationsBanc
Montgomery Securities LLC to the extent provided for in Section 8(c)) as
such expenses are reasonably incurred by such Initial Purchaser or such
controlling person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action; provided, however, that the foregoing indemnity agreement shall not
apply to any loss, claim, damage, liability or expense to the extent, but
only to the extent, arising out of or based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in reliance
upon and in conformity with written information furnished to the Company by
the Initial Purchasers expressly for use in any Preliminary Offering
Memorandum or the Offering Memorandum (or any amendment or supplement
thereto); and provided, further, that with respect to any Preliminary
Offering Memorandum, the foregoing indemnity agreement shall not inure to
the benefit of any Initial Purchaser from whom the person asserting any
loss, claim, damage, liability or expense purchased Securities, or any
person controlling such Initial Purchaser, if copies of the Offering
Memorandum were timely delivered to the Initial Purchaser pursuant to
Section 2 and a copy of the Offering Memorandum (as then amended or
supplemented if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of such Initial
Purchaser to such person, if required by law so to have been delivered, at
or prior to the written confirmation of the sale of the Securities to such
person, and if the Offering Memorandum (as so amended or supplemented)
would have cured the defect giving rise to such loss, claim, damage,
liability or expense. The indemnity agreement set forth in this Section
8(a) shall be in addition to any liabilities that the Company and the
Subsidiary Guarantors may otherwise have.
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(b) Indemnification of the Company and the Subsidiary Guarantors.
Each Initial Purchaser agrees, severally and not jointly, to indemnify and
hold harmless the Company and the Subsidiary Guarantors and each of their
directors and each person, if any, who controls the Company or any
Subsidiary Guarantor within the meaning of the Securities Act or the
Exchange Act, against any loss, claim, damage, liability or expense, as
incurred, to which the Company or any Subsidiary Guarantor or any such
director, or controlling person may become subject, under the Securities
Act, the Exchange Act, or other federal or state statutory law or
regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of such
Initial Purchaser), insofar as such loss, claim, damage, liability or
expense (or actions in respect thereof as contemplated below) arises out of
or is based upon any untrue or alleged untrue statement of a material fact
contained in any Preliminary Offering Memorandum or the Offering Memorandum
(or any amendment or supplement thereto), or arises out of or is based upon
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged
omission was made in any Preliminary Offering Memorandum or the Offering
Memorandum (or any amendment or supplement thereto), in reliance upon and
in conformity with written information furnished to the Company by the
Initial Purchasers expressly for use therein; and to reimburse the Company,
the Subsidiary Guarantors, or any such director or controlling person for
any legal and other expenses reasonably incurred by the Company and the
Subsidiary Guarantors, or any such director or controlling person in
connection with investigating, defending, settling, compromising or paying
any such loss, claim, damage, liability, expense or action. The Company
and the Subsidiary Guarantors hereby acknowledge that the only information
that the Initial Purchasers have furnished to the Company expressly for use
in any Preliminary Offering Memorandum or the Offering Memorandum (or any
amendment or supplement thereto) are the statements set forth (A) as the
last paragraph on page (iii) of the Offering Memorandum concerning
stabilization by the Initial Purchasers and (B) in the third, fifth and
sixth paragraphs under the caption "Plan of Distribution" in the Offering
Memorandum; and the Initial Purchasers confirm that such statements are
correct. The indemnity agreement set forth in this Section 8(b) shall be in
addition to any liabilities that each Initial Purchaser may otherwise have.
(c) Notifications and Other Indemnification Procedures. Promptly
after receipt by an indemnified party under this Section 8 of notice of the
commencement of any action, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement
thereof, but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any indemnified party
for contribution or otherwise than under the indemnity agreement contained
in this Section 8 or to the extent it is not prejudiced as a proximate
result of such failure. In case any such action is brought against any
indemnified party and such indemnified party seeks or intends to seek
indemnity from an indemnifying party and provides notice to an indemnified
party, the indemnifying party will be entitled to participate in and, to
the extent that it shall elect, jointly with all other indemnifying parties
similarly notified, by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party,
to assume the defense thereof with counsel reasonably satisfactory to such
indemnified party; provided, however, if the defendants in any such
27
<PAGE>
action include both the indemnified party and the indemnifying party and
the indemnified party shall have reasonably concluded that a conflict may
arise between the positions of the indemnifying party and the indemnified
party in conducting the defense of any such action or that there may be
legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party,
the indemnified party or parties shall have the right to select separate
counsel to assume such legal defenses and to otherwise participate in the
defense of such action on behalf of such indemnified party or parties. Upon
receipt of notice from the indemnifying party to such indemnified party of
such indemnifying party's election so to assume the defense of such action
and approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this Section 8 for any
legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof unless (i) the indemnified party shall
have employed separate counsel in accordance with the proviso to the next
preceding sentence (it being understood, however, that the indemnifying
party shall not be liable for the expenses of more than one separate
counsel (together with one local counsel), approved by the indemnifying
party (NationsBanc Montgomery Securities LLC for the Initial Purchasers in
the case of Section 8(b) and Section 9), representing the indemnified
parties who are parties to such action) or (ii) the indemnifying party
shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of
commencement of the action, in each of which cases the fees and expenses of
counsel shall be at the expense of the indemnifying party.
(d) Settlements. The indemnifying party under this Section 8 shall
not be liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party against any loss, claim, damage, liability or expense by
reason of such settlement or judgment. Notwithstanding the foregoing
sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses
of counsel as contemplated by Section 8(c) hereof, the indemnifying party
agrees that it shall be liable for any settlement of any proceeding
effected without its written consent if (i) such settlement is entered into
more than 60 days after receipt by such indemnifying party of the aforesaid
request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement. No indemnifying party shall, without the prior written consent
of the indemnified party, effect any settlement, compromise or consent to
the entry of judgment in any pending or threatened action, suit or
proceeding in respect of which any indemnified party is or could have been
a party and indemnity was or could have been sought hereunder by such
indemnified party, unless such settlement, compromise or consent includes
an unconditional release of such indemnified party from all liability on
claims that are the subject matter of such action, suit or proceeding.
SECTION 9. CONTRIBUTION. If the indemnification provided for in
Section 8 required by its terms but is for any reason held to be unavailable to
or otherwise insufficient to hold harmless an indemnified party in respect of
any losses, claims, damages, liabilities or expenses referred to therein other
than by reason of the limitations or exceptions set forth in Section 8, then
each indemnifying party shall contribute to the aggregate amount paid or payable
by such indemnified party, as incurred, as a result of any losses, claims,
damages, liabilities or expenses referred to therein (i) in such proportion as
is appropriate to reflect the relative benefits
28
<PAGE>
received by the Company and the Subsidiary Guarantors, on the one hand, and the
Initial Purchasers, on the other hand, from the offering of the Securities
pursuant to this Agreement or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company and the Subsidiary Guarantors, on the one
hand, and the Initial Purchasers, on the other hand, in connection with the
statements or omissions or inaccuracies in the representations and warranties
herein which resulted in such losses, claims, damages, liabilities or expenses,
as well as any other relevant equitable considerations. The relative benefits
received by the Company and the Subsidiary Guarantors on the one hand, and the
Initial Purchasers, on the other hand, in connection with the offering of the
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (net of discounts to the Initial
Purchasers but before deducting expenses) received by the Company and the
Subsidiary Guarantors, and the total discount received by the Initial Purchasers
bear to the aggregate initial offering price of the Securities. The relative
fault of the Company and the Subsidiary Guarantors, on the one hand, and the
Initial Purchasers, on the other hand, shall be determined by reference to,
among other things, whether any such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact or any
such inaccurate or alleged inaccurate representation or warranty relates to
information supplied by the Company and the Subsidiary Guarantors, on the one
hand, or the Initial Purchasers, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 8(c), any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The provisions set forth in
Section 8(c) with respect to notice of commencement of any action shall apply if
a claim for contribution is to be made under this Section 9; provided, however,
that no additional notice shall be required with respect to any action for which
notice has been given under Section 8(c) for purposes of indemnification.
The Company, the Subsidiary Guarantors and the Initial Purchasers
agree that it would not be just and equitable if contribution pursuant to this
Section 9 were determined by pro rata allocation (even if the Initial Purchasers
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to in this Section 9.
Notwithstanding the provisions of this Section 9, no Initial Purchaser
shall be required to contribute any amount in excess of the discount received by
such Initial Purchaser in connection with the Securities distributed by it. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Initial
Purchasers' obligations to contribute pursuant to this Section 9 are several,
and not joint, in proportion to their respective commitments as set forth
opposite their names in Schedule A. For purposes of this Section 9, each
----------
officer and employee of an Initial Purchaser and each person, if any, who
controls an Initial Purchaser within the meaning of the Securities Act and the
Exchange Act shall have the same rights to contribution as such Initial
Purchaser, and each director of the Company or any Subsidiary Guarantor, and
each person, if any, who controls the Company or any Subsidiary Guarantor with
the meaning of the Securities Act and the Exchange Act shall have the same
rights to contribution as the Company and the Subsidiary Guarantors.
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SECTION 10. TERMINATION OF THIS AGREEMENT. Prior to the Closing Date,
this Agreement may be terminated by the Initial Purchasers by notice given to
the Company if at any time (i) trading in securities generally on either the
Nasdaq Stock Market or the New York Stock Exchange shall have been suspended or
limited, or minimum or maximum prices shall have been generally established on
any of such stock exchanges by the Commission or the NASD; (ii) a general
banking moratorium shall have been declared by any of federal or New York
authorities; (iii) there shall have occurred any outbreak or escalation of
national or international hostilities or any crisis or calamity, or any change
in the United States or international financial markets, or any substantial
change or development involving a prospective substantial change in United
States' or international political, financial or economic conditions, as in the
judgment of the Initial Purchasers is material and adverse and makes it
impracticable to market the Securities in the manner and on the terms described
in the Offering Memorandum or to enforce contracts for the sale of securities;
(iv) in the judgment of the Initial Purchasers there shall have occurred any
Material Adverse Change; or (v) the Company or any of the Subsidiary Guarantors
shall have sustained a loss by strike, fire, flood, earthquake, accident or
other calamity of such character as in the judgment of the Initial Purchasers
may interfere materially with the conduct of the business and operations of the
Company or the Subsidiary Guarantors regardless of whether or not such loss
shall have been insured. Any termination pursuant to this Section 10 shall be
without liability on the part of (a) the Company or the Subsidiary Guarantors to
any Initial Purchaser, except that the Company and the Subsidiary Guarantors
shall be obligated, jointly and severally, to reimburse the expenses of the
Initial Purchasers pursuant to Sections 4 and 6 hereof, (b) any Initial
Purchaser to the Company or any of the Subsidiary Guarantors, or (c) of any
party hereto to any other party except that the provisions of Section 8 and
Section 9 shall at all times be effective and shall survive such termination.
SECTION 11. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY. The
respective indemnities, agreements, representations, warranties and other
statements of the Company and the Subsidiary Guarantors, of their officers and
of the several Initial Purchasers set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any investigation
made by or on behalf of any Initial Purchaser or the Company or any Subsidiary
Guarantor or any of its or their partners, officers or directors or any
controlling person, as the case may be, and will survive delivery of and payment
for the Securities sold hereunder and any termination of this Agreement until
such time as all of the Securities have been fully paid or redeemed by the
Company.
SECTION 12. NOTICES. All communications hereunder shall be in writing and
shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Initial Purchasers:
NationsBanc Montgomery Securities LLC
100 North Tryon Street
7th Floor
Charlotte, NC 28255
Facsimile: 704-386-3270
Attention: Scott Holmes
with a copy to:
Latham & Watkins
885 Third Avenue
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New York, NY 10022
Attention: Kirk Davenport, Esq.
If to the Company or any Subsidiary Guarantors:
Coyne International Enterprises Corp.
140 Cortland Avenue
P. O. Box 4854
Syracuse, NY 13221
Facsimile: 315-475-9978
Attention: Chief Financial Officer
with a copy to:
O'Hara, Hanlon, Knych & Pobedinsky, LLP
One Park Place
Syracuse, NY 13202
Facsimile: 315-422-3943
Attention: Alexander Pobedinsky, Esq.
Any party hereto may change the address for receipt of communications by giving
written notice to the others.
SECTION 13. SUCCESSORS. This Agreement will inure to the benefit of and
be binding upon the parties hereto, including any substitute Initial Purchasers
pursuant to Section 16 hereof, and to the benefit of the employees, officers and
directors and controlling persons referred to in Section 8 and Section 9, and in
each case their respective successors, and no other person will have any right
or obligation hereunder. The term "successors" shall not include any purchaser
of the Securities as such from any of the Initial Purchasers merely by reason of
such purchase.
SECTION 14. PARTIAL UNENFORCEABILITY. The invalidity or unenforceability
of any Section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other Section, paragraph or provision hereof.
If any Section, paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, there shall be deemed to be made such
minor changes (and only such minor changes) as are necessary to make it valid
and enforceable.
SECTION 15. GOVERNING LAW PROVISIONS.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED IN SUCH STATE.
(a) Consent to Jurisdiction. Any legal suit, action or proceeding arising
out of or based upon this Agreement or the transactions contemplated hereby
("Related Proceedings") may be instituted in the federal courts of the United
States of America located in the City and County of New York or the courts of
the State of New York in each case located in the City and County of New York
(collectively, the "Specified Courts"), and each party irrevocably submits to
the exclusive jurisdiction (except for proceedings instituted in regard to the
enforcement of a judgment of any such court (a "Related Judgment"), as to which
such jurisdiction is non-exclusive) of such courts in any such suit, action or
proceeding. Service of any process, summons,
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notice or document by mail to such party's address set forth above shall be
effective service of process for any suit, action or other proceeding brought in
any such court. The parties irrevocably and unconditionally waive any objection
to the laying of venue of any suit, action or other proceeding in the Specified
Courts and irrevocably and unconditionally waive and agree not to plead or claim
in any such court that any such suit, action or other proceeding brought in any
such court has been brought in an inconvenient forum.
(b) Waiver of Immunity. With respect to any Related Proceeding, each party
irrevocably waives, to the fullest extent permitted by applicable law, all
immunity (whether on the basis of sovereignty or otherwise) from jurisdiction,
service of process, attachment (both before and after judgment) and execution to
which it might otherwise be entitled in the Specified Courts, and with respect
to any Related Judgment, each party waives any such immunity in the Specified
Courts or any other court of competent jurisdiction, and will not raise or claim
or cause to be pleaded any such immunity at or in respect of any such Related
Proceeding or Related Judgment.
SECTION 16. DEFAULT OF ONE OR MORE OF THE SEVERAL INITIAL PURCHASERS. If
any one or more of the several Initial Purchasers shall fail or refuse to
purchase Securities that it or they have agreed to purchase hereunder on the
Closing Date, and the aggregate number of Securities which such defaulting
Initial Purchaser or Initial Purchasers agreed but failed or refused to purchase
does not exceed 10% of the aggregate number of the Securities to be purchased on
such date, the other Initial Purchasers shall be obligated, severally, in the
proportions that the number of Securities set forth opposite their respective
names on Schedule A bears to the aggregate number of Securities set forth
----------
opposite the names of all such non-defaulting Initial Purchasers, or in such
other proportions as may be specified by the Initial Purchasers with the consent
of the non-defaulting Initial Purchasers, to purchase the Securities which such
defaulting Initial Purchaser or Initial Purchasers agreed but failed or refused
to purchase on such date. If any one or more of the Initial Purchasers shall
fail or refuse to purchase Securities and the aggregate number of Securities
with respect to which such default occurs exceeds 10% of the aggregate number of
Securities to be purchased on the Closing Date, and arrangements satisfactory to
the Initial Purchasers and the Company for the purchase of such Securities are
not made within 48 hours after such default, this Agreement shall terminate
without liability of any party to any other party except that the provisions of
Section 4, Section 6, Section 8 and Section 9 shall at all times be effective
and shall survive such termination. In any such case either the Initial
Purchasers or the Company shall have the right to postpone the Closing Date, as
the case may be, but in no event for longer than seven days in order that the
required changes, if any, to the Offering Memorandum or any other documents or
arrangements may be effected.
As used in this Agreement, the term "Initial Purchaser" shall be
deemed to include any person substituted for a defaulting Initial Purchaser
under this Section 10. Any action taken under this Section 16 shall not relieve
any defaulting Initial Purchaser from liability in respect of any default of
such Initial Purchaser under this Agreement.
SECTION 17. GENERAL PROVISIONS. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may be executed in
two or more counterparts, each one of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement may not be amended or modified unless in writing by all of the
parties hereto, and no condition herein (express or implied) may be waived
unless waived in writing by each party whom the condition is meant to benefit.
The Table of Contents and the section headings herein
32
<PAGE>
are for the convenience of the parties only and shall not affect the
construction or interpretation of this Agreement.
Each of the parties hereto acknowledges that it is a sophisticated
business person who was adequately represented by counsel during negotiations
regarding the provisions hereof, including, without limitation, the
indemnification provisions of Section 8 and the contribution provisions of
Section 9, and is fully informed regarding said provisions. Each of the parties
hereto further acknowledges that the provisions of Sections 8 and 9 hereto
fairly allocate the risks in light of the ability of the parties to investigate
the Company and the Subsidiary Guarantors, their affairs and their respective
businesses in order to assure that adequate disclosure has been made in the
Registration Statement, any preliminary Offering Memorandum and the Offering
Memorandum (and any amendments and supplements thereto), as required by the
Securities Act and the Exchange Act.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to the Company the enclosed copies hereof,
whereupon this instrument, along with all counterparts hereof, shall become a
binding agreement in accordance with its terms.
33
<PAGE>
Very truly yours,
COYNE INTERNATIONAL ENTERPRISES CORP.
By: /s/ Donald F. X. Keegan
-----------------------------------
Name: Donald F. X. Keegan
Title: V.P
BLUE RIDGE TEXTILE MANUFACTURING, INC., AS
GUARANTOR
By: /s/ Donald F. X. Keegan
-----------------------------------
Name: Donald F. X. Keegan
Title: V.P
OHIO GARMENT RENTAL, INC., AS GUARANTOR
By: /s/ Donald F. X. Keegan
-----------------------------------
Name: Donald F. X. Keegan
Title: V.P
MIDWAY-CTS BUFFALO, LTD, AS GUARANTOR
By: /s/ Donald F. X. Keegan
-----------------------------------
Name: Donald F. X. Keegan
Title: V.P
CLEAN TOWEL SERVICE, INC., AS GUARANTOR
By: /s/ Donald F. X. Keegan
-----------------------------------
Name: Donald F. X. Keegan
Title: V.P
S-1
<PAGE>
The foregoing Purchase Agreement is hereby confirmed and accepted by
the Initial Purchasers as of the date first above written.
NATIONSBANC MONTGOMERY SECURITIES LLC
FIRST UNION CAPITAL MARKETS, A DIVISION OF WHEAT FIRST SECURITIES, INC.
As the several Initial Purchasers
By NATIONSBANC MONTGOMERY SECURITIES LLC
By: /s/ J. Scott Holmes
--------------------------------
Name: J. Scott Holmes
Title: Principal
S-2
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL AMOUNT
INITIAL PURCHASERS OF SECURITIES TO BE
PURCHASED
<S> <C>
NationsBanc Montgomery Securities LLC........... $56,250,000
First Union Capital Markets, a division of Wheat
First Securities, Inc.......................... 18,750,000
Total........................................ $75,000,000
</TABLE>
A-1
<PAGE>
ANNEX I
Resale Pursuant to Regulation S.
Each Initial Purchaser understands that:
(a) Such Initial Purchaser agrees that it has not offered or sold and
will not offer or sell the Securities in the United States or to, or for
the benefit or account of, a U.S. Person (other than a distributor), in
each case, as defined in Rule 902 under the Securities Act (i) as part of
its distribution at any time and (ii) otherwise until 40 days after the
later of the commencement of the offering of the Securities pursuant hereto
and the Closing Date, other than in accordance with Regulation S of the
Securities Act or another exemption from the registration requirements of
the Securities Act. Such Initial Purchaser agrees that, during such 40-day
restricted period, it will not cause any advertisement with respect to the
Securities (including any "tombstone" advertisement) to be published in any
newspaper or periodical or posted in any public place and will not issue
any circular relating to the Securities, except such advertisements as are
permitted by and include the statements required by Regulation S.
(b) Such Initial Purchaser agrees that, at or prior to confirmation
of a sale of Securities by it to any distributor, dealer or person
receiving a selling concession, fee or other remuneration during the 40-day
restricted period referred to in Rule 903(b)(3) under the Securities Act,
it will send to such distributor, dealer or person receiving a selling
concession, fee or other remuneration a confirmation or notice to
substantially the following effect:
"The Securities covered hereby have not been registered under the U.S.
Securities Act of 1933, as amended (the "Securities Act"), and may not
be offered and sold within the United States or to, or for the account
or benefit of, U.S. persons (i) as part of your distribution at any
time or (ii) otherwise until 40 days after the later of the
commencement of the Offering and the Closing Date, except in either
case in accordance with Regulation S under the Securities Act (or Rule
144A or to Accredited Institutions in transactions that are exempt
from the registration requirements of the Securities Act), and in
connection with any subsequent sale by you of the Securities covered
hereby in reliance on Regulation S during the period referred to above
to any distributor, dealer or person receiving a selling concession,
fee or other remuneration, you must deliver a notice to substantially
the foregoing effect. Terms used above have the meanings assigned to
them in Regulation S."
(c) Such Initial Purchaser agrees that the Securities offered and
sold in reliance on Regulation S will be represented upon issuance by a
global security that may not be exchanged for definitive securities until
the expiration of the 40-day restricted period referred to in Rule
903(b)(3) of the Securities Act and only upon certification of beneficial
ownership of such Securities by non-U.S. persons or U.S. persons who
purchased such Securities in transactions that were exempt from the
registration requirements of the Securities Act.
Annex I-1
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of June 26, 1998, by and among Coyne International Enterprises
Corp., a New York corporation (the "Company"), Blue Ridge Textile Manufacturing,
Inc., a Georgia corporation, Clean Towel Service, Inc., a Georgia corporation,
Ohio Garment Rental, Inc., an Ohio corporation and Midway-CTS Buffalo, Ltd., a
New York corporation (the "Guarantors") and NationsBanc Montgomery Securities
LLC and First Union Capital Markets, a division of Wheat First Securities, Inc.
(the "Initial Purchasers"), each of whom has severally agreed to purchase the
Company's Series A 11 1/4% Senior Subordinated Notes due 2008 (together with the
guarantees thereof by the Guarantors, the "Initial Notes") pursuant to the
-------------
Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated as of
June 23, 1998 (the "Purchase Agreement"), by and among the Company, the
------------------
Guarantors and the Initial Purchasers (i) for your benefit and for the benefit
of each other Initial Purchaser and (ii) for the benefit of the holders from
time to time of the Notes (including you and each other Initial Purchaser). In
order to induce the Initial Purchasers to purchase the Initial Notes, the
Company and the Guarantors have agreed to provide the registration rights set
forth in this Agreement. The execution and delivery of this Agreement is a
condition to the obligations of the Initial Purchasers set forth in Section 5(h)
of the Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
Broker-Dealer: Any broker or dealer registered under the Exchange
-------------
Act.
Closing Date: The date of this Agreement.
------------
Commission: The Securities and Exchange Commission.
----------
Consummate: A Registered Exchange Offer shall be deemed
----------
"Consummated" for purposes of this Agreement upon the occurrence of (i) the
filing and effectiveness under the Securities Act of the Exchange Offer
Registration Statement relating to the Exchange Notes to be issued in the
Exchange Offer, (ii) the maintenance of such Registration Statement
continuously effective and the keeping of the Exchange Offer open for a
period not less than the minimum period required pursuant to Section 3(b)
hereof, and (iii) the delivery by the Company and the Guarantors to the
Registrar under the Indenture of Exchange Notes in the same aggregate
principal amount as the aggregate principal amount of Initial Notes that
were tendered by Holders thereof pursuant to the Exchange Offer.
<PAGE>
Damages Payment Date: With respect to the Notes, each Interest
--------------------
Payment Date.
Effectiveness Target Date: As defined in Section 5.
-------------------------
Exchange Act: The Securities Exchange Act of 1934, as amended.
------------
Exchange Notes: The Series B 11 1/4% Senior Subordinated Notes due
--------------
2008 together with the guarantee thereof by the Guarantors to be issued
under the Indenture to Holders in exchange for Transfer Restricted
Securities pursuant to this Agreement.
Exchange Offer: The registration by the Company and the Guarantors
--------------
under the Securities Act of the Exchange Notes pursuant to a Registration
Statement pursuant to which the Company and the Guarantors offer the
Holders of all outstanding Transfer Restricted Securities the opportunity
to exchange all such outstanding Transfer Restricted Securities held by
such Holders for Exchange Notes in an aggregate principal amount equal to
the aggregate principal amount of the Transfer Restricted Securities
tendered in such exchange offer by such Holders.
Exchange Offer Registration Statement: The Registration Statement
-------------------------------------
relating to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers
--------------
propose to sell the Initial Notes to certain "qualified institutional
buyers," as such term is defined in Rule 144A under the Securities Act and
pursuant to offers and sales that occur outside the United States within
the meaning of Regulation S under the Securities Act.
Holders: As defined in Section 2(b) hereof.
-------
Indemnified Holder: As defined in Section 8(a) hereof.
------------------
Indenture: The Indenture, dated as of June 26, 1998, among the
---------
Company, the Guarantors and IBJ Schroder Bank & Trust Company, as trustee
(the "Trustee"), pursuant to which the Notes are to be issued, as such
-------
Indenture is amended or supplemented from time to time in accordance with
the terms thereof.
Initial Notes: The Series A 11 1/4% Senior Subordinated Notes due
-------------
2008 together with the guarantees thereof by the Guarantors issued under
the Indenture pursuant to the Purchase Agreement.
Initial Placement: The issuance and sale by the Company and the
-----------------
Guarantors of the Initial Notes to the Initial Purchasers pursuant to the
Purchase Agreement.
Initial Purchasers: As defined in the preamble hereto.
------------------
Interest Payment Date: As defined in the Indenture and the Notes.
---------------------
2
<PAGE>
Liquidated Damages Payment Date: With respect to the Initial Notes,
-------------------------------
each Interest Payment Date.
NASD: National Association of Securities Dealers, Inc.
----
Notes: The Initial Notes and the Exchange Notes.
-----
Person: An individual, partnership, corporation, trust or
------
unincorporated organization, or a government or agency or political
subdivision thereof.
Prospectus: The prospectus included in a Registration Statement, as
----------
amended or supplemented by any prospectus supplement and by all other
amendments thereto, including post-effective amendments, and all material
incorporated by reference into such Prospectus.
Purchase Agreement: The Purchase Agreement, dated as of June 23,
------------------
1998, among the Company, the Guarantors and the Initial Purchasers, as such
Purchase Agreement is amended or supplemented from time to time in
accordance with the terms thereof.
Record Holder: With respect to any Damages Payment Date relating to
-------------
the Notes, each Person who is a Holder of Notes on the record date with
respect to the Interest Payment Date on which such Damages Payment Date
shall occur.
Registration Default: As defined in Section 5 hereof.
--------------------
Registration Statement: Any registration statement of the Company
----------------------
and the Guarantors relating to (a) an offering of Exchange Notes pursuant
to an Exchange Offer or (b) the registration for resale of Transfer
Restricted Securities pursuant to the Shelf Registration Statement, which
is filed pursuant to the provisions of this Agreement, in each case,
including the Prospectus included therein, all amendments and supplements
thereto (including post-effective amendments) and all exhibits and material
incorporated by reference therein.
Securities Act: The Securities Act of 1933, as amended.
--------------
Shelf Filing Deadline: As defined in Section 4 hereof.
---------------------
Shelf Registration Statement: As defined in Section 4 hereof.
----------------------------
Transfer Restricted Securities: Each Note, until the earliest to
------------------------------
occur of (a) the date on which such Note is exchanged in the Exchange Offer
and entitled to be resold to the public by the Holder thereof without
complying with the prospectus delivery requirements of the Securities Act,
(b) the date on which such Note has been effectively registered under the
Securities Act and disposed of in accordance with a Shelf Registration
Statement and (c) the date on which such Note is distributed to the public
pursuant to Rule 144 under the Securities Act or by a Broker-Dealer
pursuant to the
3
<PAGE>
"Plan of Distribution" contemplated by the Exchange Offer Registration
Statement (including delivery of the Prospectus contained therein).
Trust Indenture Act: The Trust Indenture Act of 1939 (15 U.S.C.
-------------------
Section 77aaa-77bbbb) as in effect on the date of the Indenture.
Underwritten Registration or Underwritten Offering: A registration
------------------------- ---------------------
in which securities of the Company are sold to an underwriter for
reoffering to the public.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The securities entitled to the
------------------------------
benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is deemed to be a
-----------------------------------------
holder of Transfer Restricted Securities (each, a "Holder") whenever such Person
------
owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permissible under applicable
law or Commission policy (after the procedures set forth in Section 6(a)(i)
below have been complied with), the Company and the Guarantors shall (i) cause
to be filed with the Commission as soon as practicable after the Closing Date,
but in no event later than 45 days after the Closing Date, a Registration
Statement under the Securities Act relating to the Exchange Notes and the
Exchange Offer, (ii) use their best efforts to cause such Registration Statement
to become effective at the earliest possible time, but in no event later than
135 days after the Closing Date, (iii) in connection with the foregoing, file
(A) all pre-effective amendments to such Registration Statement as may be
necessary in order to cause such Registration Statement to become effective, (B)
if applicable, a post-effective amendment to such Registration Statement
pursuant to Rule 430A under the Securities Act and (C) cause all necessary
filings in connection with the registration and qualification of the Exchange
Notes to be made under the Blue Sky laws of such jurisdictions as are necessary
to permit Consummation of the Exchange Offer; provided, however, that neither
the Company nor the Guarantors shall be required to register or qualify as a
foreign corporation where it is not now so qualified or to take any action that
would subject it to service of process in suits or taxation, other than as to
matters and transactions relating to the Registration Statement, in any
jurisdiction where it is not now so subject, and (iv) upon the effectiveness of
such Registration Statement, commence the Exchange Offer. The Exchange Offer
shall be on the appropriate form permitting registration of the Exchange Notes
to be offered in exchange for the Transfer Restricted Securities and to permit
resales of Notes held by Broker-Dealers as contemplated by Section 3(c) below.
(b) The Company and the Guarantors shall cause the Exchange Offer
Registration Statement to be effective continuously and shall keep the Exchange
Offer open for a period of not less than the minimum period required under
applicable federal and state securities laws to Consummate the Exchange Offer;
provided, however, that in no event shall such period be less than
4
<PAGE>
30 days after the date notice of the Exchange Offer is mailed to the Holders.
The Company shall cause the Exchange Offer to comply with all applicable federal
and state securities laws. No securities other than the Notes shall be included
in the Exchange Offer Registration Statement. The Company and the Guarantors
shall use their best efforts to cause the Exchange Offer to be Consummated on
the earliest practicable date after the Exchange Offer Registration Statement
has become effective, but in no event later than 30 Business Days thereafter.
(c) The Company and the Guarantors shall indicate in a "Plan of
Distribution" section contained in the Prospectus forming a part of the Exchange
Offer Registration Statement that any Broker-Dealer who holds Initial Notes that
are Transfer Restricted Securities and that were acquired for its own account as
a result of market-making activities or other trading activities (other than
Transfer Restricted Securities acquired directly from the Company), may exchange
such Initial Notes pursuant to the Exchange Offer; however, such Broker-Dealer
may be deemed to be an "underwriter" within the meaning of the Securities Act
and must, therefore, deliver a prospectus meeting the requirements of the
Securities Act in connection with any resales of the Exchange Notes received by
such Broker-Dealer in the Exchange Offer, which prospectus delivery requirement
may be satisfied by the delivery by such Broker-Dealer of the Prospectus
contained in the Exchange Offer Registration Statement. Such "Plan of
Distribution" section shall also contain all other information with respect to
such resales by Broker-Dealers that the Commission may require in order to
permit such resales pursuant thereto, but such "Plan of Distribution" shall not
name any such Broker-Dealer or disclose the amount of Notes held by any such
Broker-Dealer except to the extent required by the Commission as a result of a
change in policy after the date of this Agreement.
Neither the Company nor the Guarantors shall have a duty to amend or
supplement the Prospectus contained in the Exchange Offer Registration Statement
unless the Company shall have received written notice from any Broker-Dealer
(each such Broker-Dealer so notifying the Company, a "Notifying Broker-Dealer")
-----------------------
of its prospectus delivery requirement under the Act within fifteen (15)
business days following the Consummation of the Exchange Offer; provided, that
the Company shall prominently disclose such notice requirement in the Exchange
Offer Registration Statement and in the letter of transmittal related thereto.
In the event that the Company shall have received timely notice, the Company and
the Guarantors shall use their best efforts to keep the Exchange Offer
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Section 6(c) below to the extent necessary to
ensure that it is available for resales of Notes acquired by Broker-Dealers for
their own accounts as a result of market-making activities or other trading
activities, and to ensure that it conforms with the requirements of this
Agreement, the Securities Act and the policies, rules and regulations of the
Commission as announced from time to time, for a period ending on the earlier of
(i) 180 days from the date on which the Exchange Offer Registration Statement is
declared effective and (ii) the date on which a Broker-Dealer is no longer
required to deliver a prospectus in connection with market-making or other
trading activities, provided that, following the 30th day after the Consummation
of the Exchange Offer, the Company shall not be required to amend or supplement
the Exchange Offer Registration Statement if (i) in the judgment of the
Company's board of Directors exercised reasonably and in good faith the use of
the Exchange Offer Registration Statement and the disclosure required to be made
therein would materially interfere with a valid business purpose of the Company
or the Guarantors and (ii) the Company delivers a notice to such effect to such
Broker-Dealers setting forth the period of time (the "Prospectus Delivery Delay
-------------------------
Period") (which
- ------
5
<PAGE>
shall not be greater than 60 days) for which the Company's obligation to so
amend or supplement the Exchange Offer Registration Statement will be suspended;
and provided further that if the Company receives written notice from all
Notifying Broker-Dealers that they no longer have a prospectus delivery
requirement under the Act, the Company's obligation to keep the Exchange Offer
Registration Statement continuously effective, supplemented and amended during
such period shall terminate. Notwithstanding the foregoing, there shall not be
more than one Prospectus Delivery Delay Period declared in any one calendar
year. The Company shall use its reasonable efforts to minimize the length of any
Prospectus Delivery Delay Period and shall promptly notify such Broker-Dealers
upon the termination thereof.
The Company shall provide sufficient copies of the latest version of
such Prospectus to Broker-Dealers promptly upon request at any time during such
180-day (or shorter as provided in the foregoing sentence) period in order to
facilitate such resales.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Company and the Guarantors are not
------------------
required to file an Exchange Offer Registration Statement or to consummate the
Exchange Offer because the Exchange Offer is not permitted by applicable law or
Commission policy (after the procedures set forth in Section 6(a)(i) below have
been complied with), or (ii) any Holder of Transfer Restricted Securities shall
notify the Company within 20 business days of the Consummation of the Exchange
Offer (A) that such Holder is prohibited by applicable law or Commission policy
from participating in the Exchange Offer, or (B) such Holder may not resell the
Exchange Notes acquired by it in the Exchange Offer to the public without
delivering a prospectus and that the Prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales by such
Holder, or (C) such Holder is a Broker-Dealer and holds Initial Notes acquired
directly from the Company or one of its affiliates, then, upon such Holder's
request, the Company and the Guarantors shall
(x) cause to be filed a shelf registration statement pursuant to Rule
415 under the Securities Act, which may be an amendment to the Exchange
Offer Registration Statement (in either event, the "Shelf Registration
------------------
Statement") on or prior to the earliest to occur of (1) the 30th day after
---------
the date on which the Company determines that it is not required to file
the Exchange Offer Registration Statement, and (2) the 30th day after the
date on which the Company receives notice from a Holder of Transfer
Restricted Securities as contemplated by clause (ii) above (such earliest
date being the "Shelf Filing Deadline"), which Shelf Registration Statement
---------------------
shall provide for resales of all Transfer Restricted Securities the Holders
of which shall have provided the information required pursuant to Section
4(b) hereof; and
(y) use their best efforts to cause such Shelf Registration Statement
to be declared effective by the Commission on or before the 90th day after
the Shelf Filing Deadline.
The Company and the Guarantors shall use their best efforts to keep such Shelf
Registration Statement continuously effective, supplemented and amended as
required by the provisions of
6
<PAGE>
Sections 6(b) and (c) hereof to the extent necessary to ensure that it is
available for resales of Notes by the Holders of Transfer Restricted Securities
entitled to the benefit of this Section 4(a), and to ensure that it conforms
with the requirements of this Agreement, the Securities Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of at least two years following the effective date of such Shelf
Registration Statement.
If in the judgment of the Company's Board of Directors exercised reasonably and
in good faith the use of the Shelf Registration Statement and the disclosure
required to be made therein would materially interfere with a valid business
purpose of the Company or the Guarantors, the Company may deliver a notice to
such effect to the Holders, and upon receipt of such notice, the Holders shall
cease distribution of the Notes under a Shelf Registration Statement for the
period of time (the "Shelf Delay Period") set forth in such notice (which shall
------------------
not be greater than 60 days). Notwithstanding the foregoing, there shall not be
more than one Shelf Delay Period declared in any one calendar year. The Company
shall use its reasonable efforts to minimize the length of any Shelf Delay
Period and shall promptly notify the Holders upon the termination thereof.
(b) Provision by Holders of Certain Information in Connection with the
------------------------------------------------------------------
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
- ----------------------------
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 business days after receipt of a request
therefor, such information as the Company may reasonably request for use in
connection with any Shelf Registration Statement or Prospectus or preliminary
Prospectus included therein. No Holder of Transfer Restricted Securities shall
be entitled to Liquidated Damages pursuant to Section 5 hereof unless and until
such Holder shall have used its best efforts to provide all such reasonably
requested information. Each Holder as to which any Shelf Registration Statement
is being effected agrees to furnish promptly to the Company all information
required to be disclosed in order to make the information previously furnished
to the Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any of the Registration Statements required by this Agreement
is not filed with the Commission on or prior to the date specified for such
filing in this Agreement, (ii) any of such Registration Statements has not been
declared effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement (the "Effectiveness Target Date"), (iii) the
-------------------------
Exchange Offer has not been Consummated within 30 business days after the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (iv) any Registration Statement required by this Agreement is filed
and declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded immediately by a post-
effective amendment to such Registration Statement that cures such failure and
that is itself immediately declared effective (each such event referred to in
clauses (i) through (iv), a "Registration Default"), the Company and each of the
--------------------
Guarantors hereby jointly and severally agree to pay liquidated damages to each
Holder of Transfer Restricted Securities with respect to the first 90-day period
immediately following the occurrence of such Registration Default, in an amount
equal to $.05 per week per $1,000 principal amount of Transfer Restricted
Securities held by such Holder for each week or portion thereof that the
Registration Default continues. The amount of the liquidated
7
<PAGE>
damages shall increase by an additional $.05 per week per $1,000 in principal
amount of Transfer Restricted Securities with respect to each subsequent 90-day
period until all Registration Defaults have been cured, up to a maximum amount
of liquidated damages of $.30 per week per $1,000 principal amount of Transfer
Restricted Securities. All accrued liquidated damages shall be paid to Record
Holders by the Company by wire transfer of immediately available funds or by
federal funds check on each Damages Payment Date, as provided in the Indenture.
Following the cure of all Registration Defaults relating to any particular
Transfer Restricted Securities, the accrual of liquidated damages with respect
to such Transfer Restricted Securities will cease.
All obligations of the Company and the Guarantors set forth in the
preceding paragraph that are outstanding with respect to any Transfer Restricted
Security at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such obligations with respect to such Note
shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
-------------------------------------
Exchange Offer, the Company and the Guarantors shall comply with all of the
provisions of Section 6(c) below, shall use their best efforts to effect such
exchange to permit the sale of Transfer Restricted Securities being sold in
accordance with the intended method or methods of distribution thereof, and
shall comply with all of the following provisions:
(i) If in the reasonable opinion of counsel to the Company there is a
question as to whether the Exchange Offer is permitted by applicable law, the
Company and the Guarantors hereby agree to seek a no-action letter or other
favorable decision from the Commission allowing the Company and the Guarantors
to Consummate an Exchange Offer for such Initial Notes. The Company and each
Guarantor hereby agree to pursue the issuance of such a decision to the
Commission staff level but shall not be required to take commercially
unreasonable action to effect a change of Commission policy. The Company and
each Guarantor hereby agree, however, to (A) participate in telephonic
conferences with the Commission, (B) deliver to the Commission staff an analysis
prepared by counsel to the Company setting forth the legal bases, if any, upon
which such counsel has concluded that such an Exchange Offer should be permitted
and (C) diligently pursue a favorable resolution by the Commission staff of such
submission.
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer Restricted
Securities shall furnish, upon the request of the Company, prior to the
Consummation thereof, a written representation to the Company (which may be
contained in the letter of transmittal contemplated by the Exchange Offer
Registration Statement) to the effect that (A) it is not an affiliate of the
Company, (B) it is not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any person to participate in, a distribution
of the Exchange Notes to be issued in the Exchange Offer and (C) it is acquiring
the Exchange Notes in its ordinary course of business. In addition, all such
Holders of Transfer Restricted Securities shall otherwise cooperate in the
Company's preparations for the Exchange Offer. Each Holder hereby acknowledges
and agrees that any Broker-Dealer and any such Holder using the Exchange Offer
to participate in a distribution of the securities to be acquired in the
Exchange Offer (1) could not under Commission policy as in effect on the date of
8
<PAGE>
this Agreement rely on the position of the Commission enunciated in Morgan
------
Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings
- --------------------- ----------------------
Corporation (available May 13, 1988), as interpreted in the Commission's letter
- -----------
to Shearman & Sterling dated July 2, 1993, and similar no-action letters (which
may include any no-action letter obtained pursuant to clause (i) above), and (2)
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction and that 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 if the resales are of Exchange
Notes obtained by such Holder in exchange for Initial Notes acquired by such
Holder directly from the Company.
(b) Shelf Registration Statement. In connection with the Shelf
----------------------------
Registration Statement, the Company and the Guarantors shall comply with all the
provisions of Section 6(c) below and shall use their best efforts to effect such
registration to permit the sale of the Transfer Restricted Securities being sold
in accordance with the intended method or methods of distribution thereof, and
pursuant thereto the Company will as expeditiously as possible prepare and file
with the Commission a Registration Statement relating to the registration on any
appropriate form under the Securities Act, which form shall be available for the
sale of the Transfer Restricted Securities in accordance with the intended
method or methods of distribution thereof.
(c) General Provisions. In connection with any Registration Statement and
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any Prospectus required by this Agreement to permit the sale or resale of
Transfer Restricted Securities (including, without limitation, any Registration
Statement and the related Prospectus required to permit resales of Notes by
Broker-Dealers), the Company and the Guarantors shall:
(i) use their best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements
(including, if required by the Securities Act or any regulation thereunder,
financial statements of the Guarantors) for the period specified in Section 3 or
4 of this Agreement, as applicable; upon the occurrence of any event that would
cause any such Registration Statement or the Prospectus contained therein (A) to
contain a material misstatement or omission or (B) not to be effective and
usable for resale of Transfer Restricted Securities during the period required
by this Agreement, the Company and the Guarantors shall file promptly an
appropriate amendment to such Registration Statement, in the case of clause (A),
correcting any such misstatement or omission, and, in the case of either clause
(A) or (B), use their best efforts to cause such amendment to be declared
effective and such Registration Statement and the related Prospectus to become
usable for their intended purpose(s) as soon as practicable thereafter;
(ii) prepare and file with the Commission such amendments and post-
effective amendments to the Registration Statement as may be necessary to keep
the Registration Statement effective for the applicable period set forth in
Section 3 or 4 hereof, as applicable, or such shorter period as will terminate
when all Transfer Restricted Securities covered by such Registration Statement
have been sold; cause the Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424
under the Securities Act, and to comply fully with the applicable provisions of
Rules 424 and 430A under the Securities Act in a timely manner; and comply with
the provisions of the Securities Act with respect to the disposition
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of all securities covered by such Registration Statement during the applicable
period in accordance with the intended method or methods of distribution by the
sellers thereof set forth in such Registration Statement or supplement to the
Prospectus;
(iii) advise the underwriter(s), if any, and selling Holders promptly
and, if requested by such Persons, to confirm such advice in writing, (A) when
the Prospectus or any Prospectus supplement or post-effective amendment has been
filed, and, with respect to any Registration Statement or any post-effective
amendment thereto, when the same has become effective, (B) of any request by the
Commission for amendments to the Registration Statement or amendments or
supplements to the Prospectus or for additional information relating thereto,
(C) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement under the Securities Act or of the
suspension by any state securities commission of the qualification of the
Transfer Restricted Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for any of the preceding purposes, (D) of the
existence of any fact or the happening of any event that makes any statement of
a material fact made in the Registration Statement, the Prospectus, any
amendment or supplement thereto, or any document incorporated by reference
therein untrue, or that requires the making of any additions to or changes in
the Registration Statement or the Prospectus in order to make the statements
therein not misleading. If at any time the Commission shall issue any stop
order suspending the effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the Transfer
Restricted Securities under state securities or Blue Sky laws, the Company and
the Guarantors shall use their best efforts to obtain the withdrawal or lifting
of such order at the earliest possible time;
(iv) furnish without charge to each of the Initial Purchasers, each
selling Holder named in any Registration Statement, and each of the
underwriter(s), if any, before filing with the Commission, copies of any
Registration Statement or any Prospectus included therein or any amendments or
supplements to any such Registration Statement or Prospectus (including all
documents incorporated by reference after the initial filing of such
Registration Statement), which documents will be subject to the review of such
Holders and underwriter(s) in connection with such sale, if any, for a period of
at least five business days, and the Company and the Guarantors will not file
any such Registration Statement or Prospectus or any amendment or supplement to
any such Registration Statement or Prospectus (including all such documents
incorporated by reference) to which a selling Holder of Transfer Restricted
Securities covered by such Registration Statement or the underwriter(s), if any,
shall reasonably object in writing within five business days after the receipt
thereof (such objection to be deemed timely made upon confirmation of telecopy
transmission of such objection within such period). The objection of a selling
Holder or underwriter, if any, shall be deemed to be reasonable if such
Registration Statement, amendment, Prospectus or supplement, as applicable, as
proposed to be filed, contains a material misstatement or omission;
(v) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus, provide
copies of such document to the Initial Purchasers, each selling Holder named in
any Registration Statement, and to the underwriter(s), if any, make the
Company's and the Guarantors' representatives available for discussion of such
document and other customary due diligence matters, and include such information
in such
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document prior to the filing thereof as such selling Holders or underwriter(s),
if any, reasonably may request;
(vi) make available at reasonable times for inspection by the
selling Holders, any managing underwriter participating in any disposition
pursuant to such Registration Statement and any attorney or accountant retained
by such a selling Holder or any of the underwriter(s), all financial and other
records, pertinent corporate documents and properties of the Company and the
Guarantors and cause the Company's and the Guarantors' officers, directors and
employees to supply all information reasonably requested by any such Holder,
underwriter, attorney or accountant in connection with such Registration
Statement subsequent to the filing thereof and prior to its effectiveness;
(vii) if requested by any selling Holders or the underwriter(s), if
any, promptly incorporate in any Registration Statement or Prospectus, pursuant
to a supplement or post-effective amendment if necessary, such information as
such selling Holders and underwriter(s), if any, may reasonably request to have
included therein, including, without limitation, information relating to the
"Plan of Distribution" of the Transfer Restricted Securities, information with
respect to the principal amount of Transfer Restricted Securities being sold to
such underwriter(s), the purchase price being paid therefor and any other terms
of the offering of the Transfer Restricted Securities to be sold in such
offering; and make all required filings of such Prospectus supplement or post-
effective amendment as soon as practicable after the Company and/or any of the
Guarantors is notified of the matters to be incorporated in such Prospectus
supplement or post-effective amendment;
(viii) cause the Transfer Restricted Securities covered by the
Registration Statement to be rated with the appropriate rating agencies, if so
requested by the Holders of a majority in aggregate principal amount of Notes
covered thereby or the underwriter(s), if any;
(ix) furnish to each selling Holder and each of the underwriter(s),
if any, without charge, at least one copy of the Registration Statement, as
first filed with the Commission, and of each amendment thereto, including
financial statements and schedules, all documents incorporated by reference
therein and all exhibits (including exhibits incorporated therein by reference);
(x) deliver to each selling Holder and each of the underwriter(s),
if any, without charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such Persons
reasonably may request; the Company and the Guarantors hereby consent to the use
of the Prospectus and any amendment or supplement thereto by each of the selling
Holders and each of the underwriter(s), if any, in connection with the offering
and the sale of the Transfer Restricted Securities covered by the Prospectus or
any amendment or supplement thereto;
(xi) enter into such agreements (including an underwriting
agreement), and make such representations and warranties, and take all such
other actions in connection therewith in order to expedite or facilitate the
disposition of the Transfer Restricted Securities pursuant to any Registration
Statement contemplated by this Agreement, all to such extent as may be requested
by any Initial Purchaser or by any Holder of Transfer Restricted Securities or
underwriter in
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connection with any sale or resale pursuant to any Registration Statement
contemplated by this Agreement; and whether or not an underwriting agreement is
entered into and whether or not the registration is an Underwritten
Registration, the Company and the Guarantors shall:
(A) furnish to each Initial Purchaser, each selling Holder and each
underwriter, if any, in such substance and scope as they may request and as
are customarily made by issuers to underwriters in primary underwritten
offerings, upon the date of the Consummation of the Exchange Offer and, if
applicable, the effectiveness of the Shelf Registration Statement:
(1) a certificate, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf Registration
Statement, as the case may be, signed by (y) the President or any Vice
President and (z) a principal financial or accounting officer of the
Company and each of the Guarantors, confirming, as of the date
thereof, the matters set forth in paragraphs (i) and (iii) of Section
5 (f) of the Purchase Agreement and such other matters as such parties
may reasonably request;
(2) an opinion or opinions, dated the date of Consummation of
the Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, of counsel for the Company
and the Guarantors, covering the matters set forth in paragraphs (c)
and (d) of Section 5 of the Purchase Agreement and such other matters
as such parties may reasonably request, and in any event including a
statement to the effect that such counsel has participated in
conferences with officers and other representatives of the Company and
the Guarantors, representatives of the independent public accountants
for the Company and the Guarantors, the Initial Purchasers'
representatives and the Initial Purchasers' counsel in connection with
the preparation of such Registration Statement and the related
Prospectus and, although such counsel has not undertaken to determine
independently, is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the
statements contained therein, such counsel advises that, on the basis
of the foregoing (relying as to materiality upon facts provided to
such counsel by officers and other representatives of the Company and
the Guarantors and without independent check or verification), no
facts came to such counsel's attention that caused such counsel to
believe that the applicable Registration Statement, at the time such
Registration Statement or any post-effective amendment thereto became
effective, and, in the case of the Exchange Offer Registration
Statement, as of the date of Consummation, contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or that the Prospectus contained in such
Registration Statement as of its date and, in the case of the opinion
dated the date of Consummation of the Exchange Offer, as of the date
of Consummation, contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. Without limiting the foregoing, such
counsel may state further that such counsel assumes no responsibility
for, and has not independently verified, the accuracy, completeness or
fairness of the financial statements, notes and
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schedules and other financial and statistical data included in any
Registration Statement contemplated by this Agreement or the related
Prospectus; and
(3) a customary comfort letter, dated as of the date of
Consummation of the Exchange Offer or the date of effectiveness of the
Shelf Registration Statement, as the case may be, from the independent
accountants for the Company and the Guarantors, in the customary form
and covering matters of the type customarily covered in comfort
letters by underwriters in connection with primary underwritten
offerings, and affirming the matters set forth in the comfort letters
delivered pursuant to Section 5(a) of the Purchase Agreement, without
exception;
(B) set forth in full or incorporate by reference in the underwriting
agreement, if any, the indemnification provisions and procedures of Section
8 hereof with respect to all parties to be indemnified pursuant to said
Section; and
(C) deliver such other documents and certificates as may be
reasonably requested by such parties to evidence compliance with clause (A)
above and with any customary conditions contained in the underwriting
agreement or other agreement entered into by the Company or the Guarantors
pursuant to this clause (xi), if any.
If at any time the representations and warranties of the Company and
the Guarantors contemplated in clause (A)(1) above cease to be true and correct,
the Company or the Guarantors shall so advise the Initial Purchasers and the
underwriter(s), if any, and each selling Holder promptly and, if requested by
such Persons, shall confirm such advice in writing;
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders, the underwriter(s), if any, and
their respective counsel in connection with the registration and qualification
of the Transfer Restricted Securities under the securities or Blue Sky laws of
such jurisdictions as the selling Holders or underwriter(s) may request and do
any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Transfer Restricted Securities covered
by the Shelf Registration Statement; provided, however, that neither the Company
nor the Guarantors shall be required to register or qualify as a foreign
corporation where it is not then so qualified or to take any action that would
subject it to the service of process in suits or to taxation, other than as to
matters and transactions relating to the Registration Statement, in any
jurisdiction where it is not then so subject;
(xiii) shall issue, upon the request of any Holder of Initial Notes
covered by the Shelf Registration Statement, Exchange Notes, having an aggregate
principal amount equal to the aggregate principal amount of Initial Notes
surrendered to the Company by such Holder in exchange therefor or being sold by
such Holder; such Exchange Notes to be registered in the name of such Holder or
in the name of the purchaser(s) of such Notes, as the case may be; in return,
the Initial Notes held by such Holder shall be surrendered to the Company for
cancellation;
(xiv) cooperate with the selling Holders and the underwriter(s), if
any, to facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and enable such Transfer Restricted Securities to be in
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such denominations and registered in such names as the Holders or the
underwriter(s), if any, may request at least two business days prior to any sale
of Transfer Restricted Securities made by such underwriter(s);
(xv) use their best efforts to cause the Transfer Restricted
Securities covered by the Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable the seller or sellers thereof or the underwriter(s), if any, to
consummate the disposition of such Transfer Restricted Securities, subject to
the proviso contained in clause (xii) above;
(xvi) if any fact or event contemplated by clause (c)(iii)(D) above
shall exist or have occurred, prepare a supplement or post-effective amendment
to the Registration Statement or related Prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of Transfer Restricted Securities, the Prospectus
will not contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading;
(xvii) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of the Registration Statement and provide the
Trustee under the Indenture with printed certificates for the Transfer
Restricted Securities which are in a form eligible for deposit with the
Depository Trust Company;
(xviii) cooperate and assist in any filings required to be made with
the NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter") that is required
to be retained in accordance with the rules and regulations of the NASD, and use
their reasonable best efforts to cause such Registration Statement to become
effective and approved by such governmental agencies or authorities as may be
necessary to enable the Holders selling Transfer Restricted Securities to
consummate the disposition of such Transfer Restricted Securities;
(xix) otherwise use their best efforts to comply with all applicable
rules and regulations of the Commission, and make generally available to their
security holders, as soon as practicable, a consolidated earnings statement
meeting the requirements of Rule 158 (which need not be audited) for the twelve-
month period (A) commencing at the end of any fiscal quarter in which Transfer
Restricted Securities are sold to underwriters in a firm or best efforts
Underwritten Offering or (B) if not sold to underwriters in such an offering,
beginning with the first month of the Company's first fiscal quarter commencing
after the effective date of the Registration Statement;
(xx) cause the Indenture to be qualified under the Trust Indenture
Act not later than the effective date of the first Registration Statement
required by this Agreement, and, in connection therewith, cooperate with the
Trustee and the Holders of Notes to effect such changes to the Indenture as may
be required for such Indenture to be so qualified in accordance with the terms
of the Trust Indenture Act; and to execute and use their best efforts to cause
the Trustee to execute, all documents that may be required to effect such
changes and all other forms and documents required to be filed with the
Commission to enable such Indenture to be so qualified in a timely manner;
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(xxi) cause all Transfer Restricted Securities covered by the
Registration Statement to be listed on each securities exchange on which similar
securities issued by the Company or the Guarantors are then listed if requested
by the Holders of a majority in aggregate principal amount of Initial Notes or
the managing underwriter(s), if any; and
(xxii) provide promptly to each Holder upon request each document
filed with the Commission pursuant to the requirements of Section 13 and Section
15 of the Exchange Act.
Each Holder agrees by acquisition of a Transfer Restricted Security
that, upon receipt of any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith
discontinue disposition of Transfer Restricted Securities pursuant to the
applicable Registration Statement until such Holder's receipt of the copies of
the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof,
or until it is advised in writing (the "Advice") by the Company that the use of
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the Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus. If so
directed by the Company, each Holder will deliver to the Company (at the
Company's and the Guarantors' expense) all copies, other than permanent file
copies then in such Holder's possession, of the Prospectus covering such
Transfer Restricted Securities that was current at the time of receipt of such
notice. In the event the Company shall give any such notice, the time period
regarding the effectiveness of such Registration Statement set forth in Section
3 or 4 hereof, as applicable, shall be extended by the number of days during the
period from and including the date of the giving of such notice pursuant to
Section 6(c)(iii)(D) hereof to and including the date when each selling Holder
covered by such Registration Statement shall have received the copies of the
supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof or
shall have received the Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's or the Guarantors' performance
of or compliance with this Agreement will be borne by the Company and/or the
Guarantors, regardless of whether a Registration Statement becomes effective,
including without limitation: (i) all registration and filing fees and expenses
(including filings made by any Initial Purchaser or Holder with the NASD (and,
if applicable, the fees and expenses of any "qualified independent underwriter"
and its counsel that may be required by the rules and regulations of the NASD));
(ii) all fees and expenses of compliance with federal securities and state Blue
Sky or securities laws; (iii) all expenses of printing (including printing
certificates for the Exchange Notes to be issued in the Exchange Offer and
printing of Prospectuses), messenger and delivery services and telephone; (iv)
all fees and disbursements of counsel for the Company, the Guarantors and,
subject to Section 7(b) below, the Holders of Transfer Restricted Securities;
(v) all application and filing fees in connection with listing the Exchange
Notes on a national securities exchange or automated quotation system pursuant
to the requirements thereof; and (vi) all fees and disbursements of independent
certified public accountants of the Company and the Guarantors (including the
expenses of any special audit and comfort letters required by or incident to
such performance).
The Company and the Guarantors will, in any event, bear their internal
expenses (including, without limitation, all salaries and expenses of their
respective officers and employees
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performing legal or accounting duties), the expenses of any annual audit and the
fees and expenses of any Person, including special experts, retained by the
Company and the Guarantors.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company and the Guarantors
will reimburse the Initial Purchasers and the Holders of Transfer Restricted
Securities being tendered in the Exchange Offer and/or resold pursuant to the
"Plan of Distribution" contained in the Exchange Offer Registration Statement or
registered pursuant to the Shelf Registration Statement, as applicable, for the
reasonable fees and disbursements of not more than one counsel, who shall be
Latham & Watkins or such other counsel as may be chosen by the Holders of a
majority in principal amount of the Transfer Restricted Securities for whose
benefit such Registration Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) The Company and the Guarantors jointly and severally agree to
indemnify and hold harmless each Holder, its officers and employees, and
each person, if any, who controls any Holder within the meaning of the
Securities Act and the Exchange Act against any loss, claim, damage,
liability or expense, as incurred, to which such Holder or such officer,
employee or controlling person may become subject, under the Securities
Act, the Exchange Act or other federal or state statutory law or
regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Company), insofar as such loss, claim, damage, liability or expense (or
actions in respect thereof as contemplated below) arises out of or is based
upon any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement or Prospectus (or any amendment or
supplement or exhibit thereto), or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading and to reimburse each Holder and each such controlling person
for any and all reasonable expenses (including the reasonable fees and
disbursements of counsel to the extent provided for in Section 8(c)) as
such expenses are reasonably incurred by such Holder or such controlling
person in connection with investigating, defending, settling, compromising
or paying any such loss, claim, damage, liability, expense or action;
provided, however, that the foregoing indemnity agreement shall not apply
to any loss, claim, damage, liability or expense to the extent, but only to
the extent, arising out of or based upon any untrue statement or alleged
untrue statement or omission or alleged omission made in reliance upon and
in conformity with written information furnished to the Company by any
Holder expressly for use in any Registration Statement or Prospectus (or
any amendment or supplement or exhibit thereto); and provided, further,
that with respect to any Registration Statement or Prospectus, the
foregoing indemnity agreement shall not inure to the benefit of any Holder
from whom the person asserting any loss, claim, damage, liability or
expense purchased Notes, or any person controlling such Holder, if copies
of the Prospectus were timely delivered to the Holder and a copy of the
Prospectus (as then amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) was not sent or given by
or on behalf of such Holder to such person, if required by law so to have
been delivered, at or prior to the written confirmation of the sale of the
Notes
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to such person, and if the Prospectus (as so amended or supplemented) would
have cured the defect giving rise to such loss, claim, damage, liability or
expense. The indemnity agreement set forth in this Section 8(a) shall be in
addition to any liabilities that the Company and the Guarantors may
otherwise have.
(b) Each Holder agrees, severally and not jointly, to indemnify and
hold harmless the Company and the Guarantors and each of their respective
directors and officers who sign a Registration Statement and each person,
if any, who controls the Company or any Subsidiary Guarantor within the
meaning of the Securities Act or the Exchange Act, against any loss, claim,
damage, liability or expense, as incurred, to which the Company or any
Guarantor or any such director, officer or controlling person may become
subject, under the Securities Act, the Exchange Act, or other federal or
state statutory law or regulation, or at common law or otherwise (including
in settlement of any litigation, if such settlement is effected with the
written consent of such Holder), insofar as such loss, claim, damage,
liability or expense (or actions in respect thereof as contemplated below)
arises out of or is based upon any untrue or alleged untrue statement of a
material fact contained in any Registration Statement or Prospectus (or any
amendment or supplement or exhibit thereto), or arises out of or is based
upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in any Registration Statement or Prospectus (or any
amendment or supplement or exhibit thereto), in reliance upon and in
conformity with written information furnished to the Company by the Holders
expressly for use therein; and to reimburse the Company, the Guarantors, or
any such director or controlling person for any legal and other expenses
reasonably incurred by the Company and the Guarantors, or any such director
or controlling person in connection with investigating, defending,
settling, compromising or paying any such loss, claim, damage, liability,
expense or action. The indemnity agreement set forth in this Section 8(b)
shall be in addition to any liabilities that each Holder may otherwise
have.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against an indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof, but the omission so to notify the indemnifying party
will not relieve it from any liability which it may have to any indemnified
party for contribution or otherwise than under the indemnity agreement
contained in this Section 8 or to the extent it is not prejudiced as a
proximate result of such failure. In case any such action is brought
against any indemnified party and such indemnified party seeks or intends
to seek indemnity from an indemnifying party and provides notice to an
indemnified party, the indemnifying party will be entitled to participate
in and, to the extent that it shall elect, jointly with all other
indemnifying parties similarly notified, by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party; provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably
concluded that a conflict may arise
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between the positions of the indemnifying party and the indemnified party
in conducting the defense of any such action or that there may be legal
defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party,
the indemnified party or parties shall have the right to select separate
counsel to assume such legal defenses and to otherwise participate in the
defense of such action on behalf of such indemnified party or parties. Upon
receipt of notice from the indemnifying party to such indemnified party of
such indemnifying party's election so to assume the defense of such action
and approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this Section 8 for any
legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof unless (i) the indemnified party shall
have employed separate counsel in accordance with the proviso to the next
preceding sentence (it being understood, however, that the indemnifying
party shall not be liable for the expenses of more than one separate
counsel (together with one local counsel), approved by the indemnifying
party, representing the indemnified parties who are parties to such action)
or (ii) the indemnifying party shall not have employed counsel satisfactory
to the indemnified party to represent the indemnified party within a
reasonable time after notice of commencement of the action, in each of
which cases the fees and expenses of counsel shall be at the expense of the
indemnifying party.
(d) If the indemnification provided for in this Section 8 is required
by its terms but is for any reason held to be unavailable to or otherwise
insufficient to hold harmless an indemnified party in respect of any
losses, claims, damages, liabilities or expenses referred to therein other
than by reason of the limitations or exceptions set forth in this Section
8, then each indemnifying party shall contribute to the aggregate amount
paid or payable by such indemnified party, as incurred, as a result of any
losses, claims, damages, liabilities or expenses referred to therein (i) in
such proportion as is appropriate to reflect the relative benefits received
by the Company and the Guarantors, on the one hand, and the Holders, on the
other hand, from any Exchange Offer or offering of the Notes pursuant to
this Agreement or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company and the Guarantors, on the one hand,
and the Holders, on the other hand, in connection with the statements or
omissions or inaccuracies in the representations and warranties herein
which resulted in such losses, claims, damages, liabilities or expenses, as
well as any other relevant equitable considerations. The relative benefits
received by the Company and the Guarantors on the one hand, and the
Holders, on the other hand, in connection with any Exchange Offer or
offering of the Notes pursuant to this Agreement shall be deemed to be in
the same respective proportions as the total net proceeds from any offering
of the Notes pursuant to this Agreement (before deducting expenses)
received by the Company and the Guarantors, and the total proceeds received
by the Holders bear to the aggregate offering price of the Notes. The
relative fault of the Company and the Guarantors, on the one hand, and the
Holders, on the other hand, shall be determined by reference to, among
other things, whether any such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact or
any such inaccurate or alleged inaccurate representation or warranty
relates to information supplied by the Company and the
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Guarantors, on the one hand, or the Holders, on the other hand, and the
parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 8(c), any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The provisions set forth in
Section 8(c) with respect to notice of commencement of any action shall apply if
a claim for contribution is to be made under this Section 8(d); provided,
however, that no additional notice shall be required with respect to any action
for which notice has been given under Section 8(c) for purposes of
indemnification.
The Company, the Guarantors and the Holders agree that it would not be
just and equitable if contribution pursuant to this Section 8(d) were determined
by pro rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in this Section 8(d).
Notwithstanding the provisions of this Section 8(d), no Holder shall
be required to contribute any amount in excess of the proceeds received by such
Holder upon the sale of the Notes. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Holders' obligations to contribute pursuant to
this Section 8(d) are several, and not joint, in proportion to their respective
Holdings of Notes. For purposes of this Section 8(d), each officer and employee
of a Holder, and each person, if any, who controls a Holder within the meaning
of the Securities Act and the Exchange Act shall have the same rights to
contribution as such Holder, and each director and officer of the Company or any
Guarantor, and each person, if any, who controls the Company or any Guarantor
with the meaning of the Securities Act and the Exchange Act shall have the same
rights to contribution as the Company and the Guarantors.
SECTION 9. RULE 144A
The Company and the Guarantors each hereby agree with each Holder, for
so long as any Transfer Restricted Securities remain outstanding, to make
available to any Holder or beneficial owner of Transfer Restricted Securities in
connection with any sale thereof and any prospective purchaser of such Transfer
Restricted Securities from such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Securities Act in order to permit resales
of such Transfer Restricted Securities pursuant to Rule 144A.
SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in any
19
<PAGE>
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all reasonable questionnaires,
powers of attorney, indemnities, underwriting agreements, lock-up letters and
other documents required under the terms of such underwriting arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering; provided, that such investment bankers and managers must be
reasonably satisfactory to the Company.
SECTION 12. MISCELLANEOUS
(a) Remedies. The Company and the Guarantors each hereby agree that
--------
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Agreement and hereby agree to
waive the defense in any action for specific performance that a remedy at law
would be adequate.
(b) No Inconsistent Agreements. The Company and the Guarantors will not
--------------------------
on or after the date of this Agreement enter into any agreement with respect to
its securities that is inconsistent with the rights granted to the Holders in
this Agreement or otherwise conflicts with the provisions hereof. Neither the
Company nor any of the Guarantors has entered into any agreement granting any
registration rights with respect to its securities to any Person. The rights
granted to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Company's securities
under any agreement in effect on the date hereof.
(c) Adjustments Affecting the Notes. The Company and the Guarantors will
-------------------------------
not take any action, or permit any change to occur, with respect to the Notes
that would materially and adversely affect the ability of the Holders to
Consummate any Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not be
----------------------
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless the Company has obtained the
written consent of Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof that relates exclusively to the
rights of Holders whose securities are being tendered pursuant to the Exchange
Offer and that does not affect directly or indirectly the rights of other
Holders whose securities are not being tendered pursuant to such Exchange Offer
may be given by the Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities being tendered or registered;
20
<PAGE>
(e) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company or a Guarantor:
Coyne International Enterprises Corp.
140 Cortland Avenue
P.O. Box 4854
Syracuse, NY 13221
Telecopier No.: (315) 475-9978
Attention: Chief Financial Officer
With a copy to:
O'Hara, Hanlon, Knych & Pobedinsky, LLP
One Park Place
Syracuse, NY 13202
Telecopier No.: (315)-422-3943
Attention: Alex Pobedinsky
and
21
<PAGE>
Blank Rome Comisky & McCauley, LLP
One Logan Square
Philadelphia, PA 19103
Telecopier No.: (215) 569-5555
Attention: Fred Lipman
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next business day, if timely delivered to an air courier guaranteeing overnight
delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders of Transfer Restricted Securities; provided, however, that this
Agreement shall not inure to the benefit of or be binding upon a successor or
assign of a Holder unless and to the extent such successor or assign acquired
Transfer Restricted Securities from such Holder.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(I) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement together with the other Operative
----------------
Documents (as defined in the Purchase Agreement) is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company and the
Guarantors with respect to the Transfer Restricted Securities. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
22
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
COYNE INTERNATIONAL ENTERPRISES CORP.
By: /s/ Donald F. X. Keegan
-----------------------------------------
Name: Donald F. X. Keegan
Title: V.P
BLUE RIDGE TEXTILE MANUFACTURING ,INC., as
Guarantor
By: /s/ Donald F. X. Keegan
-----------------------------------------
Name: Donald F. X. Keegan
Title: V.P
CLEAN TOWEL SERVICE, INC., as Guarantor
By: /s/ Donald F. X. Keegan
-----------------------------------------
Name: Donald F. X. Keegan
Title: V.P
MIDWAY-CTS BUFFALO, LTD., as Guarantor
By: /s/ Donald F. X. Keegan
-----------------------------------------
Name: Donald F. X. Keegan
Title: V.P
OHIO GARMENT RENTAL, INC., as Guarantor
By: /s/ Donald F. X. Keegan
-----------------------------------------
Name: Donald F. X. Keegan
Title: V.P
S-1
<PAGE>
The foregoing Registration Rights Agreement is hereby
confirmed and accepted as of the date first above written.
NATIONSBANC MONTGOMERY SECURITIES LLC
FIRST UNION CAPITAL MARKETS
BY: NATIONSBANC MONTGOMERY SECURITIES LLC
By: /s/ J. Scott Holmes
------------------------------
J. Scott Holmes
Principal
S-2
<PAGE>
PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, J. Stanley Coyne, residing at 989
James Street, Syracuse, New York 13203 (the "Maker"), promises to pay to the
order of Coyne International Enterprises Corp, a New York corporation having an
office and principal place of business at 140 Cortland Avenue, Syracuse, New
York (the "Holder"), the principal sum of One Million One Hundred Ten Thousand
Dollars ($1,110,000.00) in lawful money of the United States, with interest
thereon at the applicable Federal rate under Section 1274(d), compounded
annually pursuant to Reg. 1.7872-3(b) of the Internal Revenue Code of 1986 and
regulations thereunder, from September 1, 1994 until the debt is paid in full.
Principal and interest payments are deferred during the lifetime of the
Maker. The Maker may pre-pay principal and/or accrued interest in full or in
part at any time. Payments shall be made to the Holder at the Holder's address
shown above or at such other place as may be designated in writing by the
Holder.
The entire unpaid balance due hereunder shall be payable in full six (6)
months after the date of death of the Maker.
The Maker waives presentment, protest, demand for payment and notice of
default, dishonor, or nonpayment.
This instrument cannot be modified or terminated orally. This Promissory
Note is secured by a second mortgage on certain real property of the Maker
located in Nantucket, Massachusetts, dated the same day as this Promissory Note.
IN WITNESS WHEREOF, the Maker has executed this instrument on September 27,
1994 at Syracuse, New York.
/s/ J. Stanley Coyne
----------------------------------
J. Stanley Coyne
STATE OF NEW YORK )
COUNTY OF ONONDAGA ) ss.:
On this 27 day of September, 1994, before me personally came J. Stanley
Coyne to me known to be the individual described in and who executed the
foregoing instrument, and acknowledged that he executed the same.
/s/ Linda M. Selley
----------------------------------
Notary Public
<PAGE>
MORTGAGE DEED
J. STANLEY COYNE, of 989 James Street, Syracuse, NY 13203, for
consideration paid, grant to COYNE INTERNATIONAL ENTERPRISES CORP., a New York
corporation having an address of 140 Cortland Avenue, Syracuse, NY, with
MORTGAGE COVENANTS, to secure the payment of ONE MILLION ONE HUNDRED TEN
THOUSAND AND NO/100 ($1,110,000.00) DOLLARS as provided in a promissory note of
even date herewith, the land together with the structures thereon situate at 8
Winter Street, Nantucket Town and County, Massachusetts, bounded and described
as follows:
NORTHERLY by Liberty Street, 55.26 feet;
EASTERLY by Winter Street, 57.74 feet;
SOUTHERLY by land now or formerly of Millie
Williams, 67.10 feet; and
WESTERLY by land now or formerly of Lucille
Sanguinetti, 64.60 feet.
Containing 3,747 square feet, more or less, and being shown on plan of
"Land of Rita Prentice Davis, dated March 24, 1962" drawn by Josiah S. Barrett,
Engineer, recorded in April, 1962.
Subject to a prior mortgage to Nantucket Bank dated February 17, 1993 in
Book 408, Page 262 at the Nantucket Registry of Deeds.
For Grantor's title see Deed recorded at Book 217, Page 114 at said
Registry.
Mortgagor covenants and agrees with the mortgagee that in the event the
mortgaged premises or any part thereof becomes vested in anyone other than the
mortgagor without the prior written consent of the mortgagee, the whole sum of
principal and interest due under the note secured hereby shall become
immediately due and payable at the option of the mortgagee.
This mortgage is upon the STATUTORY CONDITION for any breach of which or
any conditions of this mortgage or the note secured hereby, the mortgagee shall
have the STATUTORY POWER OF SALE.
WITNESS my hand and seal this 27th day of September, 1994.
/s/ J. Stanley Coyne
----------------------------------
J. Stanley Coyne
<PAGE>
STATE OF NEW YORK
, ss September 27, 1994
Then personally appeared the above-named J. Stanley Coyne and acknowledged
the foregoing instrument to be his correct free act and deed, before me
/s/ Linda M. Seeley
----------------------------------
Notary Public
My Commission Expires:
June 10, 1995
<PAGE>
PROMISSORY NOTE
---------------
$1,285,161.57 Syracuse, New York
August 3, 1995
FOR VALUE RECEIVED, J. Stanley Coyne ("Maker") hereby promises to pay
to the order of OnBank & Trust Co., as Trustee ("Holder"), or it successors or
assigns, the principal sum of ONE MILLION TWO HUNDRED EIGHTY-FIVE THOUSAND ONE
HUNDRED SIXTY-ONE AND 57/100 DOLLARS ($1,285,161.57), with interest from the
date hereof at the rate of ten percent (10%) per annum. Principal and all
accrued interest shall be paid eight years from the date hereof when this Note
shall become due and payable in full.
The principal amount due each Trust is shown on Exhibit A.
This Promissory Note is given in payment for certain shares of Coyne
International Enterprises Corp. ("CTS") pursuant to a Stock Purchase Agreement
between Maker and Holder dated October 7, 1994. Maker agrees that if the
transactions under said Agreement do not qualify for installment sales treatment
under the Internal Revenue Code, or if income taxes are otherwise due prior to
the payment date of this Note, Maker will, within thirty days after written
demand from Holder, prepay a sufficient amount of interest on this Note to
enable Holder to pay the income tax which shall be due.
All payments shall be made to Holder at its offices at 101 South
Salina Street, Syracuse, NY 13202 or at such other address as shall hereafter be
designated by the Holder in writing.
Maker has pledged certain shares in Coyne International Enterprises
Corp. purchased from Holder as collateral security for payment of this Note,
pursuant to a Pledge and Security Agreement of even date.
This note shall be governed by the laws of the State of New York in
all respects, including matters of construction, validity and performance.
/s/ J. Stanley Coyne
-----------------------------------
J. Stanley Coyne
<PAGE>
INDEMNIFICATION AGREEMENT
-------------------------
August 3, 1995
OnBank & Trust Co.
101 South Salina Street
Syracuse, New York 13202
Gentlemen:
This Indemnification Agreement is being furnished to you to satisfy
the requirement contained in paragraph 7 of the Stock Purchase Agreement between
us dated October 7, 1994. In consideration of your agreement to enter into the
Stock Purchase Agreement, I hereby agree to indemnify, defend, and hold you
harmless against any claims, actions, damages, losses, costs or expenses which
may arise from or relate to my purchase of certain shares of stock of Coyne
International Enterprises Corp. pursuant to the Stock Purchase Agreement,
including the amount of any deductibles under your E&O insurance policy, which
may arise from or relate to the Stock Purchase Agreement or my purchase of the
stock of Coyne International Enterprises Corp. pursuant to this Agreement. My
obligations under this Indemnification Agreement shall be binding upon me, my
estate, and my successors and assigns. Further, in order to secure my
indemnification obligation, I am providing you with the attached Guaranty of my
obligations by Coyne International Enterprises Corp.
Very truly yours,
/s/ J. Stanley Coyne
J. Stanley Coyne
<PAGE>
GUARANTY
For value received, receipt of which is acknowledged, COYNE
INTERNATIONAL ENTERPRISES CORP. hereby guarantees full payment and performance
of all obligations of J. Stanley Coyne under the foregoing Indemnification
Agreement. This is a guarantee of payment and not of collection and it is
absolute, unconditional, and irrevocable.
COYNE INTERNATIONAL
ENTERPRISES CORP.
By:/s/ Thomas M. Coyne
---------------------------------
Thomas M. Coyne,
President
STATE OF NEW YORK )
) ss.:
COUNTY OF ONONDAGA )
On this 13 day of June, 1995, before me personally came Thomas M. Coyne to
me known, who, being duly sworn, did depose and say that he resides in
Skaneateles, New York, that he is the President of Coyne International
Enterprises Corp., the corporation described in and which executed the above
instrument, and that he signed his name thereto by order of the Board of
Directors of said corporation.
/s/ Linda M. Selley
-----------------------------
Notary Public
<PAGE>
Exhibit 12.1
COYNE INTERNATIONAL ENTERPRISES CORP.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(dollars in thousands)
<TABLE>
<CAPTION>
Six Months
Year Ended October 31, Ended April 30,
---------------------------------------------------- -------------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before income taxes,
extraordinary item and cumulative
effect of change in accounting
principles $ 2,563 $ (224) $ 1,341 $ 1,393 $ 4,077 $ 1,662 $(15,673)
-------- -------- -------- -------- -------- -------- --------
Fixed charges:
Interest on loans and notes $ 4,451 $ 5,292 $ 5,706 $ 6,198 $ 6,130 $ 3,118 $ 3,107
Amortization of debt issuance costs
and original issue discount $ 208 $ 224 $ 548 $ 588 $ 585 $ 292 $ 288
Interest component of rental expense $ 1,172 $ 1,268 $ 1,311 $ 883 $ 825 $ 423 $ 393
-------- -------- -------- -------- -------- -------- --------
Total fixed charges included in earnings $ 5,831 $ 6,784 $ 7,565 $ 7,669 $ 7,540 $ 3,833 $ 3,788
Capitalized interest $ 128 $ 97
-------- -------- -------- -------- -------- -------- --------
Total fixed charges $ 5,831 $ 6,784 $ 7,693 $ 7,766 $ 7,540 $ 3,833 $ 3,788
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes,
extraordinary item, cumulative
effect of change in accounting
principles and fixed charges $ 8,394 $ 6,560 $ 8,906 $ 9,062 $ 11,617 $ 5,495 $(11,885)
-------- -------- -------- -------- -------- -------- --------
Ratio of earnings to fixed charges 1.440 -- 1.158 1.167 1.541 1.434 --
======== ======== ======== ======== ======== ======== ========
Deficiency of earnings to fixed charges -- $ (224) $ -- $ -- $ -- $ -- $(15,673)
======== ======== ======== ======== ======== ======== ========
</TABLE>
<PAGE>
EXHIBIT 21.1
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
JURISDICTION
PARENT SUBSIDIARY OF INCORPORATION
- -------------------------- ---------------------------------------- -------------------------
<S> <C> <C>
Coyne International Blue Ridge Textile Manufacturing, Inc. Georgia
Enterprises Corp. ("CTS")
CTS Clean Towel Service, Inc. Georgia
CTS Ohio Garment Rental, Inc. Ohio
CTS Midway-CTS Buffalo, Ltd. New York
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 (File No.
333- ) of our report dated December 19, 1997, on our audits of the
financial statements and financial statement schedules of Coyne International
Enterprises Corp. We also consent to the references to our firm under the
caption "Experts".
Pricewaterhouse Coopers LLP
Syracuse, New York
July 30, 1998
Report of Independent Accounts
Board of Directors
Coyne International Enterprises Corp.
In connection with our audits of the consolidated financial statements of Coyne
International Enterprises Corp. and Subsidiaries as of October 31, 1997 and
1996, and for each of the three years in the period ended December 31, 1997,
which financial statements are included in the Prospectus, we have also audited
the financial statement schedule listed in Item 21 herein.
In our opinion, this financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, present fairly, in all
material respects, the information required to be included therein.
Pricewaterhouse Coopers LLP
Syracuse, New York
December 19, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF COYNE INTERNATIONAL ENTERPRISE CORP. AND
SUBSIDIARIES FOR THE SIX MONTHS ENDED APRIL 30, 1998 AND FOR THE YEAR ENDED
OCTOBER 31, 1997.
</LEGEND>
<CIK> 0001066242
<NAME> COYNE INTERNATIONAL ENTERPRISES CORP
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> OCT-25-1997 OCT-31-1998
<PERIOD-START> OCT-27-1996 OCT-26-1998
<PERIOD-END> OCT-25-1997 APR-25-1998
<CASH> 1,272,192 570,298
<SECURITIES> 0 0
<RECEIVABLES> 11,957,651 13,372,682
<ALLOWANCES> 0 0
<INVENTORY> 5,131,861 6,452,940
<CURRENT-ASSETS> 42,651,331 48,131,791
<PP&E> 83,136,900 87,561,170
<DEPRECIATION> 41,336,952 44,917,979
<TOTAL-ASSETS> 102,620,744 110,116,239
<CURRENT-LIABILITIES> 35,881,661 42,704,625
<BONDS> 58,557,183 58,815,691
0 0
4,806,200 4,806,200
<COMMON> 769 769
<OTHER-SE> 5,090,093 (10,820,583)
<TOTAL-LIABILITY-AND-EQUITY> 102,620,744 110,116,239
<SALES> 8,263,079 5,012,343
<TOTAL-REVENUES> 122,934,763 67,028,209
<CGS> 5,801,679 3,742,506
<TOTAL-COSTS> 112,142,961 62,049,364
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 6,715,224 20,652,521
<INCOME-PRETAX> 4,076,578 (15,673,676)
<INCOME-TAX> 2,025,000 237,000
<INCOME-CONTINUING> 2,051,578 (15,910,676)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,051,578 (15,910,676)
<EPS-PRIMARY> 0.0 0.0
<EPS-DILUTED> 0.0 0.0
</TABLE>
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
11 1/4% SERIES A SENIOR SUBORDINATED NOTES DUE 2008
OF
COYNE INTERNATIONAL ENTERPRISES CORP.
PURSUANT TO THE PROSPECTUS DATED , 1998
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON____________, 1998
UNLESS EXTENDED
- --------------------------------------------------------------------------------
To: IBJ Schroder Bank & Trust Company, The Exchange Agent
- --------------------------------------------------------------------------------
By registered or certified mail: By Facsimile: (212) 858-2611
IBJ Schroder Bank & Trust Company
P.O. Box 84
Bowling Green Station
New York, NY 10274-0084 Confirm by telephone: (212) 858-2103
Attn: Reorganization Department
By Overnight Courier or hand delivery
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Attn: Securities Processing Window, Subcellar 1(SC-1)
- --------------------------------------------------------------------------------
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF THIS INSTRUMENT VIA A FACSIMILE TRANSMISSION TO A NUMBER
OTHER THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE PROSPECTUS (AS DEFINED BELOW) AND THE INSTRUCTIONS ACCOMPANYING THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL
IS COMPLETED.
The undersigned acknowledges receipt of the Prospectus, dated , 1998
(the "Prospectus") of Coyne International Enterprises Corp., Blue Ridge Textile
Manufacturing, Inc., Clean Towel Service, Inc., Ohio Garment Rental, Inc., and
Midway-CTS Buffalo, Ltd. (collectively, the "Company") and this Letter of
Transmittal (the "Letter of Transmittal"), which together describe the Company's
offer (the "Exchange Offer") to exchange $1,000 principal amount of its 11 1/4%
Series B Senior Subordinated Notes due 2008 (the "Exchange Notes"), which have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to a Registration Statement, for each $1,000 principal amount of
its outstanding 11 1/4% Series A Senior Subordinated Notes due 2008 (the
"Initial Notes"), of which $75,000,000 principal amount is outstanding. The term
"Expiration Date" shall mean 5:00 p.m., New York City time, on , 1998, unless
the Company, in its sole discretion, extends the Exchange Offer, in which case
the term shall mean the latest date and time to which the Exchange Offer is
extended. The term "Holder" with respect to the Exchange Offer means any person
in whose name Initial Notes are registered on the books of the Company or any
other person who has obtained a properly completed bond power from the
registered holder. Capitalized terms used but not defined herein have the
respective meanings set forth in the Prospectus.
<PAGE>
This Letter of Transmittal is to be used by holders of Initial Notes if (i)
certificates representing the Initial Notes are to be physically delivered to
the Exchange Agent herewith, (ii) tender of the Notes is to be made by book
entry transfer to the Exchange Agent's account at The Depository Trust Company
(the "Book-Entry Transfer Facility") pursuant to the procedures set forth in the
Prospectus under the caption "The Exchange Offer--Procedures for Tendering" by
any financial institution that is a participant in the Book-Entry Transfer
Facility and whose name appears on a security position listing as the owner of
Notes (such participants acting on behalf of holders, are referred to herein,
together with such holders, as "Authorized Holders") or (iii) tender of the
Initial Notes is to be made according to the guaranteed delivery procedures
described in the Prospectus under the caption "The Exchange Offer -- Guaranteed
Deliver Procedures." See Instruction 2. Delivery of documents to the Book-
Entry Transfer Facility does not constitute delivery to the Exchange Agent.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Initial Notes must
complete this letter in its entirety.
[_] CHECK HERE IF INITIAL NOTES TENDERED PURSUANT TO THE EXCHANGE OFFER ARE
ENCLOSED HEREWITH.
[_] CHECK HERE IF TENDERED INITIAL 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 THE FOLLOWING:
Name of Tendering Institution:__________________________________________________
Account Number:_________________________________________________________________
Transaction Code Number:________________________________________________________
Principal Amount of Tendered Initial Notes:_____________________________________
If Holders desire to tender Initial Notes pursuant to the Exchange Offer
and (i) time will not permit this Letter of Transmittal, certificates
representing Initial Notes or other required document to reach the Exchange
Agent prior to the Expiration Date, or (ii) the procedures for book-entry
transfer cannot be completed prior to the Expiration Date, such Holders may
effect a tender of such Initial Notes in accordance with the guaranteed delivery
procedures set forth in the prospectus under the caption "The Exchange Offer--
Guaranteed Delivery Procedures." See Instruction 2 below.
2
<PAGE>
[_] CHECK HERE IF TENDERED INITIAL NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING (SEE INSTRUCTION 2):
Name of Registered or Acting Holder(s):_________________________________________
Window Ticket No. (if any):_____________________________________________________
Date of Execution of Notice of Guaranteed Delivery:_____________________________
Name of Eligible Institution
that Guaranteed Delivery:_______________________________________________________
If Delivered by Book-Entry Transfer,
the Account Number:_____________________________________________________________
Transaction Code Number:________________________________________________________
[_] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
PLEASE NOTE: THE COMPANY HAS AGREED THAT, FOR A PERIOD ENDING ON THE EARLIER OF:
(1) 180 DAYS FROM THE DATE ON WHICH THE EXCHANGE OFFER REGISTRATION STATEMENT IS
DEEMED EFFECTIVE OR (2) THE DATE ON WHICH A PARTICIPATING BROKER-DEALER IS NO
LONGER REQUIRED TO DELIVER A PROSPECTUS IN CONNECTION WITH MARKET MAKING OR
OTHER TRADING ACTIVITIES, IT WILL MAKE COPIES OF THE PROSPECTUS AVAILABLE TO ANY
PARTICIPATING BROKER-DEALER FOR USE IN CONNECTION WITH RESALES OF THE EXCHANGE
NOTES; PROVIDED, HOWEVER, THAT THE COMPANY HAS NO OBLIGATION TO AMEND OR
SUPPLEMENT THE PROSPECTUS UNLESS IT HAS RECEIVED WRITTEN NOTICE FROM A
PARTICIPATING BROKER-DEALER OF ITS PROSPECTUS DELIVERY REQUIREMENTS UNDER THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, WITHIN FIFTEEN BUSINESS DAYS
FOLLOWING CONSUMMATION OF THE EXCHANGE OFFER.
Name:___________________________________________________________________________
Address:________________________________________________________________________
Attention:______________________________________________________________________
3
<PAGE>
List below the Initial Notes to which this Letter of Transmittal relates.
If the space provided below is inadequate, the certificate numbers and principal
amount of Initial Notes should be listed on a separate signed schedule affixed
hereto.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOXES
BOX 1
DESCRIPTION OF 11 1/4% SERIES A SENIOR SUBORDINATED NOTES DUE 2008
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
AGGREGATE
PRINCIPAL PRINCIPAL AMOUNT
NAME(S) AND ADDRESS(ES OF AMOUNT TENDERED (MUST BE
REGISTERED HOLDER(S) CERTIFICATE REPRESENTED BY AN INTEGRAL
(PLEASE FILL IN, IF BLANK) NUMBER(S)* CERTIFICATE(S) MULTIPLE OF $1,000)**
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
TOTAL
- -------------------------------------------------------------------------------------------------------
* Need not be completed by Holders tendering by book-entry transfer.
** Unless indicated in the column labeled "Principal Amount Tendered," any
tendering Holder of 11 1/4% Series A Senior Subordinated Notes due 2008
will be deemed to have tendered the entire aggregate principal amount
represented by the column labeled "Aggregate Principal Amount Represented
by Certificate(s)." If the space provided above is inadequate, list the
certificate numbers and principal amounts on a separate signed schedule and
affix the list to this Letter of Transmittal.
- -------------------------------------------------------------------------------------------------------
</TABLE>
The minimum permitted tender is $1,000 in principal amount of 11 1/4% Series A
Senior Subordinated Notes due 2008. All other tenders must be in integral
multiples of $1,000.
4
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
BOX 2 BOX 3
SPECIAL REGISTRATION SPECIAL DELIVERY
INSTRUCTIONS INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7) (SEE INSTRUCTIONS 5, 6 AND 7)
<S> <C>
To be completed ONLY if certificates for To be completed ONLY if certificates for
Initial Notes in a principal amount not Initial Notes in a principal amount not
tendered, or Exchange Notes issued in tendered, or Exchange Notes issued in
exchange for Initial Notes accepted for exchange for Initial Notes accepted for
exchange, are to be issued in the name of exchange, are to be sent to someone other
someone other than the undersigned. than the undersigned, or to the undersigned
at an address other than that shown above.
Name____________________________________ Name__________________________________________
(Please Print) (Please Print)
Address_________________________________ Address_______________________________________
(Include Zip Code) Include Zip Code)
(Tax Identification or Social Security (Tax Identification or Social Security
Number) Number)
- ---------------------------------------------------------------------------------------------
</TABLE>
BOX 4
BROKER-DEALER STATUS
[_] Check this box if the Beneficial Owner of the Initial Notes is a
Participating Broker-Dealer and such Participating Broker-Dealer acquired
the Initial Notes for its own account as a result of market-making
activities or other trading activities. IF THIS BOX IS CHECKED, PLEASE SEND
A COPY OF THIS LETTER OF TRANSMITTAL TO DONALD F.X. KEEGAN, CHIEF FINANCIAL
OFFICER OF THE COMPANY, VIA FACSIMILE: (315) 475-9978. THE TENDER OF
INITIAL NOTES VIA AGENT'S MESSAGE WILL NOT CONSTITUTE NOTICE TO THE COMPANY
OF A HOLDER'S STATUS AS A PARTICIPATING BROKER-DEALER. PARTICIPATING
BROKER-DEALERS DESIRING TO PROVIDE SUCH NOTICE MUST STILL DO SO IN WRITING
WITHIN FIFTEEN BUSINESS DAYS FOLLOWING THE CONSUMMATION OF THE EXCHANGE
OFFER.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to Coyne International Enterprises Corp., Blue Ridge Textile
Manufacturing, Inc., Clean Towel Service, Inc., Ohio Garment Rental, Inc., and
Midway-CTS Buffalo, Ltd. (collectively, the "Company"), the principal amount of
Initial Notes indicated above.
Subject to and effective upon the acceptance for exchange of the principal
amount of Initial Notes tendered in accordance with this Letter of Transmittal,
the undersigned exchange, assigns and transfers to,
5
<PAGE>
or upon the order of, the Company all right, title and interest in and to the
Initial Notes tendered hereby. The undersigned hereby irrevocably constitutes
and appoints the Exchange Agent its agent and attorney-in-fact (with full
knowledge that the Exchange Agent also acts as the agent of the Company in
connection with its Exchange Offer) with respect to the tendered Initial Notes
with the full power of substitution to (i) present such Initial Notes and all
evidences of transfer and authenticity to, or transfer ownership of, such
Initial Notes on the account books maintained by the Book-Entry Transfer
Facility to, or upon, the order of, the Company, (ii) deliver certificates for
such Initial Notes to the Company and deliver all accompanying evidences of
transfer and authenticity to, or upon the order of, the Company, (iii) present
such Initial Notes for transfer on the books of the Company and receive all
benefits and otherwise exercise all rights of beneficial ownership of such
Initial Notes and (iv) otherwise to cause such Initial Notes to be exchanged,
assigned and transferred, all in accordance with the terms of the Exchange
Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign and transfer the Initial
Notes tendered hereby and that the Company will acquire good, valid and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and not subject to any adverse claims, when the same are
acquired by the Company. The undersigned hereby further represents that any
Exchange Notes acquired in exchange for Initial Notes tendered hereby will have
been acquired in the ordinary course of business of the person receiving such
Exchange Notes, whether or not such person is the undersigned, that neither the
undersigned nor an other such person has any arrangement or understanding with
any person to participate in the distribution of such Exchange Notes and that
neither the undersigned nor any such other person is an "affiliate," as defined
in Rule 405 under the Securities Act of 1933, as amended, of the Company. In
addition, the undersigned and any such other person acknowledge that (a) any
person participating in the Exchange Offer for the purpose of distributing the
Exchange Notes must, in the absence of an exemption therefrom, comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale of the Exchange Notes and cannot rely on the
position of the Staff of the Securities and Exchange Commission enunciated in
no-action letters and (b) failure to comply with such requirements in such
instance could result in the undersigned or such person incurring liability
under the Securities Act for which the undersigned or such person is not
indemnified by the Company. If the undersigned is not a broker-dealer, the
undersigned represents that it is not engaged in and does not intend to engage
in, a distribution of Exchange Notes. If the undersigned is a broker-dealer
that will receive Exchange Notes for its own account in exchange for Initial
Notes that were acquired as a result of market-making activities or other
trading activities, it acknowledges that it will deliver a Prospectus in
connection with any resale of such Exchange Notes, however, by so acknowledging
and by delivering a Prospectus, the undersigned will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. Unless
otherwise notified in accordance with the instructions set forth herein in Box 4
under "Broker-Dealer Status," the Company will assume that the undersigned is
not a participating Broker-Dealer.
The undersigned agrees that it shall, upon request, execute and deliver any
additional documents deemed by the Exchange Agent or the Company to be necessary
or desirable to complete the exchange, assignment and transfer of the Notes
tendered hereby.
The undersigned further agrees that acceptance of any and all validly
tendered Initial Notes by the Company and the issuance of Exchange Notes in
exchange shall constitute performance in full by the Company of its obligations
under the Registration Rights Agreement (as defined in the Prospectus) and that
the Company shall have no further obligations or liabilities thereunder.
6
<PAGE>
The Exchange Offer is subject to certain conditions as set forth in the
Prospectus under the caption "Exchange Offer--Conditions." The undersigned
recognizes that as a result of these conditions (which may be waived, in whole
or in part, by the Company), as more particularly set forth in the Prospectus,
the Company may not be required to exchange any of the Initial Notes tendered
hereby and, in such event, the Initial Notes not exchanged will be returned to
the undersigned at the address shown above. Subject to compliance with
securities laws, the Company also expressly reserves the right, in its sole
discretion, to (i) extend or terminate the Exchange Offer and (ii) to amend the
Exchange Offer in any respect and at any time or from time to time until the
Existing Notes are accepted for exchange. The Company may terminate the
Exchange Offer, in its sole discretion, regardless of whether any of the events
set forth in the Offer to Exchange under "Exchange Offer--Conditions" shall have
occurred or shall have been determined by the Company to have occurred.
The undersigned understands that there is no assurance that the Exchange
Offer will be consummated or, if consummated, that the Company will determine to
consummate the Exchange Offer on [ ], 1998. The
undersigned understands that although the Expiration Date currently is scheduled
to occur on [ ], 1998, the Company reserves the right, in its
sole discretion, to extend the Expiration Date or terminate the Exchange Offer
for any reason.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Initial Notes when, as and if the Company has given
oral or written notice thereof to the Exchange Agent.
If any Initial Notes tendered herewith are not accepted for exchange
pursuant to the Exchange Offer for any reason, certificates for any such
unaccepted Initial Notes will be returned, without expense, to the undersigned
at the address shown below or to a different address as may be indicated herein
in Box 3 under "Special Delivery Instructions" as promptly as practicable after
the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representative, successors and assigns.
The undersigned understands that tenders of Initial Notes pursuant to the
procedures described under the caption "The Exchange Offer--Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer, subject only to withdrawal of
such tenders on the terms set forth in the prospectus under the caption "The
Exchange Offer--Withdrawal of Tenders."
Unless otherwise indicated in Box 2 under "Special Registration
Instructions," please issue the certificates (or electronic transfers)
representing the Exchange Notes issued in exchange for the Initial Notes
accepted for exchange and any certificates (or electronic transfers) for Initial
Notes not tendered or not exchanged, in the name(s) of the undersigned.
Similarly, unless otherwise indicated in Box 3 under "Special Delivery
Instructions," please send the certificates, if any, representing the Exchange
Notes issued in exchange for the Initial Notes accepted for exchange and any
certificates for the Initial Notes not tendered or not exchanged (and
accompanying documents, as appropriate) to the undersigned at the address shown
below in the undersigned's signature(s). In the event that both "Special
Registration Instructions" and "Special Delivery Instructions" are completed,
please issue the certificates representing the Exchange Notes issued in exchange
for the Initial Notes accepted for exchange in the name(s) of, and return any
certificates for Initial Notes not tendered or not exchanged to, the person(s)
so indicated. The undersigned
7
<PAGE>
understandings that the Company has no obligation pursuant to the "Special
Registration Instructions" and "Special Delivery Instructions" to transfer any
Initial Notes from the name of the registered Holder(s) thereof if the Company
does not accept for exchange any of the Initial Notes so tendered.
Holders who wish to tender their Initial Notes and (i) whose Initial Notes
are not immediately available or (ii) who cannot deliver the Initial Notes, this
letter of Transmittal or any other documents required hereby to the Exchange
Agent prior to the Expiration Date, may tender their Initial Notes according to
the guaranteed delivery procedures set forth in the prospectus under the caption
"The Exchange Offer--Guaranteed Delivery Procedures." See Instruction 2
regarding the completion of this Letter of Transmittal printed below.
The below lines must be signed by the registered holder(s) exactly as their
name(s) appear(s) on the Initial Notes or by a participant in the Book-Entry
Transfer Facility, exactly as such participant's name appears on a security
position listing as the owner of the Initial Notes, or by person(s) authorized
to become registered holder(s) by a properly completed bond power from the
registered holder(s), a copy of which must be transmitted with this Letter of
Transmittal. If Initial Notes to which this letter of Transmittal relate are
held of record by two or more joint holders, then all such holders must sign
this Letter of Transmittal.
PLEASE SIGN HERE WHETHER OR NOT
INITIAL NOTES ARE BEING PHYSICALLY TENDERED HEREBY
X
- - ____________________________ __________________________
Date
X
- - ____________________________ __________________________
Date
Area code and telephone number:____________
If signature is by a trustee, executor, administrator, guardian, attorney-in-
fact, officer or corporation or other person acting in a fiduciary or
representative capacity, then such person must (i) set forth his or her full
title below and (ii) submit evidence satisfactory to the Company of such
person's authority so to act. See Instruction 5 regarding the completion of
this Letter of Transmittal printed below.
Name(s):________________________________________________________________________
(Please Print)
Capacity:_______________________________________________________________________
Address:________________________________________________________________________
(Include Zip Code)
8
<PAGE>
MEDALLION SIGNATURE GUARANTEE
(If required by Instruction 5)
Certain Signatures must be Guaranteed by an Eligible Institution
Signature(s) Guaranteed by an Eligible Institution:_____________________________
(Authorized Signature)
________________________________________________________________________________
(Growing Your Business Book)
________________________________________________________________________________
(Name of Firm)
________________________________________________________________________________
(Address, Include Zip Code)
________________________________________________________________________________
(Area Code and Telephone Number)
Dated:__________________________________________________________________________
9
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES FOR INITIAL NOTES
OR BOOK-ENTRY CONFIRMATIONS. Certificates representing the tendered Initial
Notes (or a confirmation of book-entry transfer into the Exchange Agent's
account with the Book-Entry Transfer Facility for tendered Initial Notes
transferred electronically), as well as a properly completed and duly executed
copy of this Letter of Transmittal (or facsimile thereof), or (in the case of a
book-entry transfer) an Agent's Message (as defined below) in lieu of this
letter of Transmittal, a Substitute Form W-9 (or facsimile thereof) and any
other documents required by this Letter of Transmittal must be received by the
Exchange Agent at its address set forth herein prior to the Expiration Date.
The tender of Initial Notes via Agent's Message will not constitute notice to
the Company of a holder's status as a Participating Broker-Dealer.
Participating Broker-Dealers desiring to provide such notice must still do so in
writing within fifteen business days following the consummation of the Exchange
Offer.
THE METHOD OF DELIVERY OF CERTIFICATES FOR INITIAL NOTES AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND SOLE RISK OF THE TENDERING HOLDER AND
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 HOLDER MAY
WISH TO USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY.
Neither the Company nor the Exchange agent is under an obligation to notify
any tendering holder of the Company's acceptance of tendered Initial Notes prior
to the completion of the Exchange Offer. The term "Agent's Message" means a
message, transmitted by the Book-Entry Transfer Facility to and received by the
Exchange Agent and forming a part of a book-entry confirmation, which states
that the Book-Entry Transfer Facility has received an express acknowledgment
from the tendering participant, which acknowledgment states that such
participant has received and agrees to be bound by the terms of this Letter of
Transmittal against such participant.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Initial
Notes but whose Initial Notes are not immediately available or who cannot
deliver their certificates for Initial Notes (or comply with the procedures for
book-entry transfer prior to the Expiration Date), the Letter of Transmittal (or
Agent's Message) and any other documents required by the Letter of Transmittal
to the Exchange Agent prior to the Expiration Date must tender their Initial
Notes according to the guaranteed delivery procedures set forth below. Pursuant
to such procedures:
(i) such tender must be made by or through a firm which is a member of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., or a commercial bank or trust company having an
office or correspondent in the United States (an "Eligible Institution");
(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 facsimile transmission, mail, or
hand delivery) setting forth the name and address of the holder, the
10
<PAGE>
certificate number or numbers of the tendered Initial Notes, and the principal
amount of tendered Initial Notes and stating that the tender is being made
thereby and guaranteeing that, within three New York Stock Exchange trading
days after the Expiration Date, the Letter of Transmittal (or facsimile
thereof) or Agent's Message, together with the tendered Initial Notes (or a
confirmation of book-entry transfer into the Exchange Agent's account with the
Book-Entry Transfer Facility for Initial Notes transferred electronically) 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 (or
Agent's Message) and certificates representing the tendered Initial Notes in
proper form for transfer (or a confirmation of book-entry transfer into the
Exchange Agent's account with the Book-Entry Transfer Facility for Initial
Notes transferred electronically), and any other documents required by the
Letter of Transmittal 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 Initial Notes pursuant to the guaranteed
delivery procedures described above must ensure that the Exchange Agent receives
the Notice of Guaranteed Delivery relating to such Initial Notes prior to 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 a Holder
who attempted to use the guaranteed delivery procedure.
3. TENDER BY HOLDER. Only a holder of Initial Notes may tender such Initial
Notes in the Exchange Offer. Any beneficial owner of Initial Notes who is not
the registered holder and who wishes to tender should arrange with such holder
to execute and deliver this Letter of Transmittal on such owner's behalf or
must, prior to completing and executing this Letter of Transmittal and
delivering such Initial Notes, either make appropriate arrangements to register
ownership of the Initial Notes in such owner's name or obtain a properly
completed bond power from the registered holder.
4. PARTIAL TENDERS. Tenders of Initial Notes will be accepted only in
integral multiples of $1,000 in principal amount. If less than the entire
principal amount of Initial Notes is tendered, the tendering holder should fill
in the principal amount tendered in the column labeled "Aggregate Principal
Amount Tendered" of the box entitled "Description of Notes" (Box 1) above. The
entire principal amount of Initial Notes delivered to the Exchange agent will be
deemed to have been tendered unless otherwise indicated. If the entire
principal amount of Initial Notes is not tendered, Initial Notes for the
principal amount of Initial Notes not tendered and Exchange Notes exchanged for
any Initial Notes tendered will be sent to the holder at his or her registered
address (or transferred to the account of the Book-Entry Facility designated
above), unless a different address (or account) 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;
MEDALLION GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by
the registered holder(s) of the Initial Notes tendered herewith, the signatures
must correspond with the name(s) as written on the face of the tendered Initial
Notes without alteration, enlargement, or any change whatsoever. If this Letter
of Transmittal is signed by a participant in the Book-Entry Transfer Facility,
the signature must correspond with the name as it appears on the security
position listing as the owner of the Initial Notes.
11
<PAGE>
If any of the tendered Initial Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any tendered
Initial Notes are held in different names on several Initial Notes, it will be
necessary to complete, sign, and submit as many separate copies of the Letter of
Transmittal documents as there are names in which tendered Initial Notes are
held.
If this Letter of Transmittal is signed by the registered holder or Acting
Holder, and Exchange Notes are to be issued and any untendered or unaccepted
principal amount of Initial Notes are to be reissued or returned to the
registered holder or Acting Holder, then, the registered holder or Acting Holder
need not and should not endorse any tendered Initial Notes nor provide a
separate bond power. In any other case (including if this Letter of Transmittal
is not signed by the Acting Holder), the registered holder or Acting Holder must
either properly endorse the Initial Notes tendered or transmit a properly
completed separate bond power with this Letter of Transmittal (in either case,
executed exactly as the name(s) of the registered holder(s) appear(s) on such
Initial Notes, and, with respect to a participant in the Book-Entry Transfer
Facility whose name appears on a security position listing as the owner of
Initial Notes, exactly as the name(s) of the participant(s) appear(s) on such
security position listings), with the signature(s) on the endorsement or bond
power guaranteed by an Eligible Institution unless such certificates or bond
powers are signed by an Eligible Institution.
If this Letter of Transmittal or any Initial 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 evidence satisfactory to the
Company of their authority to so act must be submitted with this Letter of
Transmittal.
No Medallion signature guarantee is required if (i) this Letter of Transmittal
is signed by the registered holder(s) of the Initial Notes tendered herewith (or
by a participant in the Book-Entry Transfer Facility whose name appears on a
security position listing as the owner of the tendered Initial Notes) and the
issuance of Exchange Notes (and an Initial Notes not tendered or not accepted)
are to be issued directly to such registered holder(s) (or, if signed by a
participant in the Book-Entry Transfer Facility, any Exchange Notes or Initial
Notes not tendered or not accepted are to be deposited to such participant's
account at such Book-Entry Transfer Facility) and neither the "Special Delivery
instructions" (Box 3) nor the "Special Registration Instructions" (Box 2) has
been completed, or (ii) such Initial Notes are tendered for the account of an
Eligible Institution. In all other cases, all signatures on this Letter of
Transmittal must be guaranteed by an Eligible Institution.
6. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in the applicable box, the name and address (or account at the Book-
Entry Transfer Facility) in which the Exchange Notes and/or substitute Initial
Notes for principal amounts not tendered or not accepted for exchange are to be
sent (or deposited), if different from the name and address or account of the
person signing this Letter of Transmittal. In the case of issuance in a
different name, the employer identification number or social security number of
the person named must also be indicated and the indicated and the tendering
holders should complete the applicable box.
If no such instructions are given, the Exchange Notes (and any Initial Notes
not tendered or not accepted) will be issued in the name of and sent to the
Acting Holder of the Initial Notes or deposited at such Acting Holders' account
at the Book-Entry Transfer Facility.
12
<PAGE>
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the sale and transfer of Initial Notes to it or its order pursuant
to the Exchange Offer. If, however, a transfer tax is imposed for any reason
other than the transfer and sale of Initial Notes to the Company or its order
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 from taxes therefrom is not submitted with this Letter of
Transmittal, the amount of 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 Initial Notes listed in this Letter of
Transmittal.
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a holder
of any Initial Notes which are accepted for exchange must provide the Company
(as payor) with its correct taxpayer identification number ("TIN"), which, in
the case of a holder who is an individual, is his or her social security number.
If the Company is not provided with the correct TIN, the Holder may be subject
to a $50 penalty imposed by Internal Revenue Service. (If withholding results
in an over-payment of taxes, a refund may be obtained.) Certain holders
(including, among other, 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 tendering holder 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 a 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 Initial Notes are registered in more than one name or are not in the name
of the actual owner, see the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for information on which TIN to
report.
The Company reserves the right in its sole discretion to take whatever steps
are necessary to comply with the Company's obligation regarding backup
withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form, eligibility
(including time of receipt), and acceptance of tendered Initial Notes will be
determined by the Company, in its sole discretion, which determination will be
final and binding. The Company reserves the right to reject any and all Initial
Notes not validly tendered or any Initial Notes, the Company's acceptance of
which may, in the opinion of the Company or its counsel, be unlawful. The
Company also reserves the right to waive any conditions of the Exchange Offer or
defects or irregularities in tenders of Initial Notes as to any ineligibility of
any holder who seeks to tender Initial Notes in the Exchange Offer (includes
this Letter of Transmittal and the instructions hereto) by the Company shall be
final and binding on all parties. Unless waived, any defects or irregularities
in connection with tenders of Initial Notes must be cured within such time as
the Company shall determine. Neither the Company nor the Exchange Agent shall
be under any duty to give notification of defects or irregularities with respect
to tenders of Initial Notes, and shall not incur any liability for failure to
give such notification.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to amend,
waive, or modify specified conditions in the Exchange Offer in the case of any
tendered Initial Notes.
13
<PAGE>
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or
contingent tender of Initial Notes on transmittal of this Letter of Transmittal
will be accepted.
12. MUTILATED, LOST, STOLEN, OR DESTROYED INITIAL NOTES. Any tendering
holder whose Initial Notes have been mutilated, lost, stolen, or destroyed
should contact the Exchange Agent at the address indicated above for further
instruction.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance and requests for additional copies of the Prospectus may be directed
to the Exchange Agent at the address set forth above. Holders may also contact
their broker, dealer, commercial bank, trust company, or other nominee for
assistance concerning the Exchange Offer.
14. ACCEPTANCE OF TENDERED INITIAL NOTES AND ISSUANCE OF EXCHANGE NOTES;
RETURN OF INITIAL NOTES. Subject to the terms and conditions of the Exchange
Offer, the Company will accept for exchange all validly tendered Initial Notes
as soon as practicable thereafter. For purposes of the Exchange Offer, the
Company shall be deemed to have accepted tendered Initial Notes when, as and if
the Company has given written and oral notice thereof to the Exchange agent. If
any tendered Initial Notes are not exchanged pursuant to the Exchange Offer for
any reason, such unexchanged Initial Notes will be returned, without expense, to
the undersigned at the address shown above (or credited to the undersigned's
account at the Book-Entry Transfer Facility designated above) or at a different
address as may be indicated under "Special Delivery Instructions."
15. WITHDRAWAL. Tenders may be withdrawn only pursuit to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offer--Withdrawal of Tenders."
14
<PAGE>
PAYOR'S NAME: COYNE INTERNATIONAL ENTERPRISES CORP.
____________________________________________________________
Name (if joint names, list first and circle the name of the
person or entity whose number you enter in Part I below. See
instructions if your name has changed.)
____________________________________________________________
Address
____________________________________________________________
City, State and ZIP Code
SUBSTITUTE
FORM W-9 ____________________________________________________________
DEPARTMENT OF List account number(s) here (optional)
THE TREASURY
INTERNAL ____________________________________________________________
REVENUE SERVICE
PAYER'S REQUEST
FOR Part 1 - PLEASE PROVIDE YOUR Social Security Number
TAXPAYER TAXPAYER IDENTIFICATION or TIN
IDENTIFICATION NUMBER ("TIN") IN THE BOX AT
NUMBER (TIN) RIGHT AND CERTIFY BY STATING
AND DATING BELOW
____________________________________________________________
Part 2 - Check the box if you are NOT subject to backup
withholding under the provisions of section 3408(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 of dividends or (2)
the Internal Revenue Service has notified you that you are
no longer subject to backup withholding. [_]
____________________________________________________________
SIGNATURE DATE Awaiting TIN [_]
CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I CERTIFY
THAT THE INFORMATION PROVIDED ON THE FORM IS TRUE, CORRECT
AND COMPLETE.
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
15
<PAGE>
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
COYNE INTERNATIONAL ENTERPRISES CORP.
11 1/4% SERIES A SENIOR SUBORDINATED NOTES DUE 2008
This form must be used by a holder of a 11 1/4% Series A Senior
Subordinated Notes due 2008 (the "Initial Notes") of Coyne International
Enterprises Corp. (the "Company"), who wishes to tender Initial Notes to the
Exchange Agent pursuant to the guaranteed delivery procedures described in "The
Exchange Offer--Guaranteed Delivery Procedures" of the Prospectus, dated
__________ (the "Prospectus"), and in Instruction 2 to the related Letter of
Transmittal. Any holder who wishes to tender Initial 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 not defined herein have the meanings ascribed to them
in the Prospectus or the Letter of Transmittal.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
_____________, UNLESS EXTENDED (THE "EXPIRATION DATE").
To: IBJ Schroder Bank & Trust Company
(the "Exchange Agent")
By Registered or Certified Mail:
[Address]
Attn:
By Overnight Courier:
IBJ Schroder Bank & Trust Company
[Address]
Attn:
By Hand:
IBJ Schroder Bank & Trust Company
[Address]
Attn:
By Facsimile:
( )
Attn:
Confirm by telephone: ( )
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE,
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
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.
<PAGE>
LADIES AND GENTLEMEN:
The undersigned hereby tenders to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Initial Notes set forth below pursuant to the guaranteed delivery procedures set
forth in the Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Initial Notes listed below:
CERTIFICATE NUMBER(S) (IF KNOWN) OF INITIAL AGGREGATE PRINCIPAL
NOTES OR ACCOUNT NUMBER AT THE BOOK-ENTRY AMOUNT PRESENTED
FACILITY
_______________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
PLEASE SIGN AND COMPLETE
Signatures of Registered Holder(s) Date: , 1998
or Address:________________________________
Authorized Signatory:_________________ ________________________________________
______________________________________ Area Code and Telephone No.:____________
______________________________________
Name of Registered Holder(s):_________
______________________________________
______________________________________
This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly
as their name(s) appear on certificates for Initial Notes or on a security
position listing as the owner of Initial 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.
<PAGE>
Please print name(s) and address(es)
Name(s):________________________________________________________________________
- --------------------------------------------------------------------------------
Capacity:_______________________________________________________________________
Address(es):____________________________________________________________________
- --------------------------------------------------------------------------------
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 Initial Notes tendered hereby in
proper form for transfer (or confirmation of the book-entry transfer of such
Initial Notes into the Exchange Agent's account at Book-Entry Transfer Facility
described in the Prospectus 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:____________________________ _________________________________
Authorized Signature
Address:_________________________________
_________________________________________
Area Code and Telephone No.:_____________
Name:____________________________
Title:___________________________
Date:______________________, 1997
DO NOT SEND INITIAL NOTES WITH THIS FORM. ACTUAL SURRENDER OF INITIAL NOTES
MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF
TRANSMITTAL.
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
<PAGE>
is signed by the registered holder(s) of the Initial Notes referred to herein,
the signature must correspond with the name(s) written on the face of the
Initial 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 Initial Notes, the signature must correspond with the name shown on the
security position listing as the owner of the Initial Notes.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Initial 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 Initial Notes or signed as the name of the participant shown on
the Book-Entry Transfer Facility security position listing.
If this Notice of Guarantee 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 Company of such person authority to so act.
3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus may be
directed to the Exchange Agent at the address set forth above. Holders may also
contact their broker, dealer, commercial bank, trust company, or other nominee
for assistance concerning the Exchange Offer.
<PAGE>
INSTRUCTIONS TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER
OF
COYNE INTERNATIONAL ENTERPRISES CORP.
11 1/4% SERIES A SENIOR SUBORDINATED NOTES DUE 2008
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus, dated
__________ (the "Prospectus"), of Coyne International Enterprises Corp., Blue
Ridge Textile Manufacturing, Inc., Clean Towel Service, Inc., Ohio Garment
Rental, Inc., and Midway-CTS Buffalo, Ltd. (collectively, the "Company"), and
the accompanying Letter of Transmittal (the "Letter of Transmittal"), that
together constitute the Company's offer (the "Exchange Offer"). Capitalized
terms used but not defined herein have the meanings ascribed to them in the
Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to the action to be taken by you relating to the
Exchange Offer with respect to the 11 1/4% Series A Senior Subordinated Notes
due 2008 (the "Initial Notes") held by you for the account of the undersigned.
The aggregate face amount of the Initial Notes held by you for the account
of the undersigned is (FILL IN AMOUNT):
$_______________ of the 11 1/4% Series A Senior Subordinated Notes due 2008.
With respect to the Exchange Offer, the undersigned hereby instructs you (CHECK
APPROPRIATE BOX):
[__] TO TENDER the following Initial Notes held by you for the account of the
undersigned (INSERT PRINCIPAL AMOUNT OF INITIAL NOTES TO BE TENDERED, IF
ANY): $
[__] NOT TO TENDER any Initial Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Initial 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 intend to 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 prospects 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 Prospectus 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 the Company; (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 Prospectus or the
Letter of Transmittal to effect the valid tender of such Initial Notes.
<PAGE>
[__] Check this box if the Beneficial Owner of the Initial Notes is a
Participating Broker-Dealer and such Participating Broker-Dealer acquired
the Initial Notes for its own account as a result of market-making
activities or other trading activities. IF THIS BOX IS CHECKED, PLEASE
SEND A COPY OF THESE INSTRUCTIONS TO DONALD F.X. KEEGAN, CHIEF FINANCIAL
OFFICER OF THE COMPANY, VIA FACSIMILE: (315) 475-9978. THE TENDER OF
INITIAL NOTES VIA AGENT'S MESSAGE WILL NOT CONSTITUTE NOTICE TO THE COMPANY
OF A HOLDER'S STATUS AS A PARTICIPATING BROKER-DEALER. PARTICIPATING
BROKER-DEALERS DESIRING TO PROVIDE SUCH NOTICE MUST STILL DO SO IN WRITING
WITHIN FIFTEEN BUSINESS DAYS FOLLOWING THE CONSUMMATION OF THE EXCHANGE
OFFER.
SIGN HERE
Name of beneficial owner(s):____________________________________________________
Signature(s):___________________________________________________________________
Name (please print):____________________________________________________________
Address:________________________________________________________________________
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Telephone number:_______________________________________________________________
Taxpayer Identification or Social Security Number:______________________________
Date:___________________________________________________________________________
