<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 21, 1998
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
GREAT LAKES ACQUISITION CORP.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 2990 76-0576974
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Classification Code Number) Identification
Organization) Number)
</TABLE>
--------------------------
551 FIFTH AVENUE
SUITE 3600
NEW YORK, NEW YORK 10176
(212) 370-5770
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
JAMES D. MCKENZIE
CHIEF EXECUTIVE OFFICER
(PRINCIPAL EXECUTIVE OFFICER)
551 FIFTH AVENUE
SUITE 3600
NEW YORK, NEW YORK 10176
(212) 370-5770
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
--------------------------
COPIES TO:
JEROME L. COBEN, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
300 SOUTH GRAND AVENUE
LOS ANGELES, CALIFORNIA 90071
(213) 687-5000
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
--------------------------
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>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
13 1/8% Series B Senior Discount Debentures
due 2009.................................. $56,600,000 100% $56,600,000 $16,697
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS 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.
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 21, 1998
PROSPECTUS
, 1998
OFFER FOR ALL OUTSTANDING
13 1/8% SENIOR DISCOUNT DEBENTURES DUE 2009 IN EXCHANGE FOR
13 1/8% SERIES B SENIOR DISCOUNT DEBENTURES DUE 2009 OF
[LOGO]
GREAT LAKES ACQUISITION CORP.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1998, UNLESS EXTENDED.
Great Lakes Acquistion Corp. ("Holdings") hereby offers the holders (the
"Holders") of its issued and outstanding 13 1/8% Senior Discount Debentures due
2009 (the "Old Debentures"), upon the terms and subject to the conditions set
forth in this prospectus (this "Prospectus") and the accompanying Letter of
Transmittal (the "Letter of Transmittal," which together with this Prospectus
constitutes the "Exchange Offer"), to exchange an aggregate principal amount at
maturity of up to $56,600,000 of its 13 1/8% Series B Senior Discount Debentures
due 2009 (the "New Debentures" and, together with the Old Debentures, the
"Debentures"), which have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), for a like principal amount at maturity of its
Old Debentures. The terms of the New Debentures are identical in all material
respects to the Old Debentures except (i) that the New Debentures have been
registered under the Securities Act, (ii) for certain transfer restrictions and
registration rights relating to the Old Debentures and (iii) that the New
Debentures will not contain certain provisions relating to Liquidated Damages
(as defined) to be paid to the Holders of Old Debentures under certain
circumstances relating to the timing of the Exchange Offer and other
registration requirements. Holdings issued $56,600,000 aggregate principal
amount of Old Debentures on May 22, 1998 pursuant to exemptions from, or
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws (the "Offering").
Great Lakes Carbon Corporation (the "Company"), a wholly owned subsidiary of
Holdings, is the surviving corporation of a merger (the "Merger") between the
Company and Great Lakes Merger Sub Corp. ("Merger Sub"), a wholly owned
subsidiary of Holdings, which was formed by American Industrial Partners Capital
Fund II, L.P. ("AIP"). Concurrent with the Exchange Offer, the Company will
offer (the "Company Exchange Offer") the holders of its issued and outstanding
10 1/4% Notes due 2008 (the "Old Notes") upon the terms and subject to the
conditions set forth in a prospectus and the accompanying Letter of Transmittal
to exchange an aggregate principal amount at maturity of up to $175,000,000 of
its 10 1/4% Series B Notes due 2008 (the "New Notes" and, together with the Old
Notes, the "Notes"), which have been registered under the Securities Act, for a
like principal amount at maturity of the Old Notes. All references to the Notes
herein shall include the Additional Notes (as defined).
The Debentures will mature on May 15, 2009. The issue price of the
Debentures represents a yield to maturity of 13 1/8% (computed on a semiannual
bond equivalent basis) calculated from May 22, 1998. The Debentures will accrete
at a rate of 13 1/8%, compounded semiannually, to an aggregate principal amount
at maturity of $56.6 million by May 15, 2003. Cash interest will not accrue on
the Debentures prior to May 15, 2003. Commencing May 15, 2003, cash interest on
the Debentures will be payable at a rate of 13 1/8% per annum semiannually in
arrears on each May 15 and November 15. For each Old Debenture accepted for
exchange, the Holder of such Old Debenture will receive a New Debenture having a
principal amount at maturity equal to that of the surrendered Old Debenture. The
New Debentures will accrete in value from May 22, 1998. Old Debentures accepted
for exchange will cease to accrete in value from and after the date of
consummation of the Exchange Offer. See "Description of the Debentures."
The Old Debentures are and the New Debentures will be redeemable at the
option of Holdings, in whole or in part, at any time on or after May 15, 2003,
in cash at the redemption prices set forth herein, plus accrued and unpaid
interest and Liquidated Damages, if any, to the redemption date. In addition, at
any time prior to May 15, 2001, Holdings may, at its option, on any one or more
occasions, redeem up to 35% of the aggregate principal amount at maturity of the
Debentures at a redemption price equal to 113.125% of the Accreted Value (as
defined herein) thereof and Liquidated Damages, if any, with the net proceeds of
one or more Equity Offerings (as defined herein); PROVIDED that at least 65% of
the aggregate principal amount at maturity of the New Debentures issued
hereunder together with the Old Debentures originally issued and not exchanged
in the Exchange Offer remain outstanding immediately after each such redemption.
Upon the occurrence of a Change of Control (as defined herein), each holder of
Debentures will have the right to require Holdings to repurchase Debentures at a
price in cash equal to 101% of the Accreted Value thereof plus Liquidated
Damages, if any, thereon in the case of any such purchase prior to May 15, 2003,
or 101% of the aggregate principal amount at maturity thereof, plus accrued and
unpaid interest and Liquidated Damages, if any, thereon to the date of
repurchase in the case of any such repurchase on or after May 15, 2003. See
"Risk Factors--Possible Inability to Repurchase Debentures upon Change of
Control," "Description of Debentures--Optional Redemption" and "--Repurchase at
the Option of Holders--Change of Control."
The Old Debentures are and the New Debentures will be senior obligations of
Holdings. The Old Debentures rank and the New Debentures will rank pari passu in
right of payment with all present and future Senior Indebtedness of Holdings and
senior in right of payment to all future subordinated Indebtedness (as defined)
of Holdings. The Old Debentures are and the New Debentures will be effectively
subordinated to all liabilities of Holdings' subsidiaries. As of March 31, 1998,
on a pro forma basis after giving effect to the Acquisition Transactions,
Holdings and its subsidiaries would have had outstanding approximately $339.5
million of Indebtedness (as defined) and Holdings' subsidiaries would have had
outstanding approximately $309.4 million of Indebtedness, including Indebtedness
under the Notes and the New Credit Agreement (as defined herein). Holdings
guaranteed (the "Loan Guaranty") the Company's obligations under the New Credit
Agreement. The Loan Guaranty is secured by a pledge of all of the capital stock
of the Company. See "Description of Other Indebtedness--New Credit Agreement."
Holdings does not intend to apply for listing of the Debentures on any
securities exchange or in any automated quotation system. The Debentures are
eligible for trading in the Private Offerings, Resales and Trading through
Automatic Linkages ("PORTAL") market of the National Association of Securities
Dealers, Inc. upon issuance.
SEE "RISK FACTORS," BEGINNING ON PAGE 16, FOR A DISCUSSION OF CERTAIN
MATTERS THAT SHOULD BE CONSIDERED BY HOLDERS PRIOR TO TENDERING THEIR OLD
DEBENTURES IN THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
THE DATE OF THIS PROSPECTUS IS , 1998
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
The New Debentures are being offered hereunder in order to satisfy certain
obligations of Holdings contained in the Registration Rights Agreement (as
defined). Based on interpretations by the staff of the Division of Corporation
Finance (the "Staff") of the Securities and Exchange Commission (the "SEC"), as
set forth in no-action letters issued to third parties, Holdings believes that
New Debentures issued pursuant to the Exchange Offer in exchange for Old
Debentures may be offered for resale, resold and otherwise transferred by
Holders thereof (other than any Holder which is an "affiliate" of Holdings
within the meaning of Rule 405 under the Securities Act), without compliance
with the registration and prospectus delivery requirements of the Securities
Act, provided that such New Debentures are acquired in the ordinary course of
such Holder's business and such Holder, other than a broker-dealer, has no
arrangement with any person to engage in a distribution of such New Debentures.
Holdings has not sought and does not intend to seek its own no-action letter in
connection with the Exchange Offer and there can be no assurance that the SEC
would make a similar determination with respect to the Exchange Offer. Each
Holder, other than a broker-dealer, must acknowledge that it is not engaged in,
and does not intend to engage in, a distribution of such New Debentures and has
no arrangement or understanding to participate in a distribution of New
Debentures. If any holder is an affiliate of Holdings and is engaged in or
intends to engage in or has any arrangement with any person to participate in
the distribution of the New Debentures to be acquired pursuant to the Exchange
Offer, then such Holder (i) could not rely on the applicable interpretations of
the Staff and (ii) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
Each broker-dealer that receives New Debentures for its own account pursuant to
the Exchange Offer must acknowledge that such Old Debentures were acquired by
such broker-dealer as a result of market-making activities or other trading
activities and that it will deliver a prospectus in connection with any resale
of such New Debentures. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of New Debentures received in
exchange for Old Debentures if such Old Debentures were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. Holdings has agreed that, for a period of 90 days after the
Expiration Date (as defined), it will make this prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
Holdings will not receive any proceeds from the Exchange Offer. Holdings
will pay all the expenses incident to the Exchange Offer. Tenders of Old
Debentures pursuant to the Exchange Offer may be withdrawn at any time prior to
the Expiration Date. If Holdings terminates the Exchange Offer and does not
accept for exchange any Old Debentures, Holdings will promptly return the Old
Debentures to the Holders thereof. See "The Exchange Offer."
There is no existing trading market for the New Debentures, and there can be
no assurance regarding the future development of a market for the New
Debentures. The Initial Purchaser (as defined) has advised Holdings that it
currently intends to make a market in the New Debentures. The Initial Purchaser
is not obligated to do so, however, and any market-making with respect to the
New Debentures may be discontinued at any time without notice. Holdings does not
intend to apply for listing or quotation of the New Debentures on any securities
exchange or stock market. In addition, to comply with the securities laws of
certain jurisdictions, it may be necessary to qualify, for sale or register,
thereunder the New Debentures prior to offering or selling such New Debentures.
Holdings has agreed, pursuant to the Registration Rights Agreement, subject to
certain limitations specified therein, to register or qualify the New Debentures
for offer or sale under all applicable state securities or Blue Sky laws before
the time the Registration Statement (of which this Prospectus forms a part) is
declared effective by the SEC.
2
<PAGE>
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL HOLDINGS ACCEPT TENDERS
FOR EXCHANGE FROM, HOLDERS OF OLD DEBENTURES IN ANY JURISDICTION IN WHICH THE
EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
The New Debentures will be available initially only in book-entry form.
Holdings expects that the New Debentures issued pursuant to the Exchange Offer
will be issued in the form of one or more Global Debentures (as defined) that
will be deposited with, or on behalf of, The Depository Trust Company ("DTC" or
the "Depositary") and registered in its name or in the name of Cede & Co., as
its nominee. Beneficial interests in the Global Debenture representing the New
Debentures will be shown on, and transfers thereof will be effected only
through, records maintained by the Depositary and its participants. So long as
DTC or its nominee is the registered owner or holder of the Global Debenture,
DTC or such nominee, as the case may be, will be considered the sole owner or
holder of the Debentures represented by such Global Debenture for all purposes
under the Indenture. Payments of the principal of, premium, if any, interest and
Liquidated Damages, if any, on, the Global Debenture will be made to DTC or its
nominee, as the case may be, as the registered owners thereof. None of Holdings,
the Trustee (as defined) or any Paying Agent (as defined) will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global
Debenture or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interest. After the initial issuance of such Global
Debenture, New Debentures in certificated form will be issued in exchange for
the Global Debenture only in accordance with the terms and upon the conditions
set forth in the Indenture. See "Description of Debentures--Book Entry; Delivery
and Form."
3
<PAGE>
AVAILABLE INFORMATION
Holdings has filed with the SEC a registration statement on Form S-4
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act with respect to the New
Debentures offered hereby. This Prospectus, which forms a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement and the exhibits thereto, certain parts of which are
omitted in accordance with the rules and regulations of the SEC. For further
information with respect to Holdings and the New Debentures offered hereby,
reference is made to the Registration Statement. Any statements made in this
Prospectus concerning the provisions of certain documents are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement filed with the SEC.
Upon consummation of the Exchange Offer, Holdings will become subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith will file reports and other
information with the SEC. The Registration Statement, and the reports and other
information filed by Holdings with the SEC in accordance with the Exchange Act
may be inspected, without charge, at the Public Reference Section of the SEC
located at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at the
following Regional Offices of the SEC: 7 World Trade Center, 13th Floor, New
York, New York 10048; and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of all or any portion of the material may be obtained from the
Public Reference Section of the SEC upon payment of the prescribed fees. The SEC
also maintains a site on the World Wide Web that contains reports, proxy and
information statements and other information at HTTP://WWW.SEC.GOV.
In the event that Holdings is not required to be subject to the reporting
requirements of the Exchange Act in the future, as required under the Indenture,
Holdings has agreed that, for so long as any of the Debentures remain
outstanding, it will file with the SEC (unless the SEC will not accept such a
filing) (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
Holdings 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 Holding's certified
independent accountants and (ii) all reports that would be required to be filed
with the SEC on Form 8-K if Holdings were required to file such reports. In
addition, for so long as any of the Debentures remain outstanding, Holdings has
agreed to make available to any prospective purchaser of the Debentures or
beneficial owner of the Debentures in connection with any sale thereof the
information required by Rule 144A(d)(4) under the Securities Act.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus, including the "Summary," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business"
sections, contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, which can be identified by the
use of forward-looking terminology, such as "may," "intend," "will," "expect,"
"anticipate," "estimate" or "continue" or the negative thereof or other
variations thereon or comparable terminology. In particular, any statements,
express or implied, concerning future operating results or the ability to
generate revenues, income or cash flow to service the Debentures, including the
Adjusted Credit Data presented under "Summary Consolidated Financial and Other
Data" and information regarding the new La Plata Kiln presented elsewhere
herein, are forward-looking statements. Although Holdings believes that the
expectations reflected in such forward-looking statements are reasonable, there
can be no assurance that such expectations will prove to have been correct. All
forward-looking statements are expressly qualified by such cautionary
statements.
4
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED HEREIN AND IS
QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE
DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND THE RELATED NOTES
THERETO INCLUDED ELSEWHERE IN THIS PROSPECTUS. HOLDINGS IS A NEWLY FORMED
HOLDING COMPANY, FORMED FOR THE PURPOSE OF CONSUMMATING THE ACQUISITION
TRANSACTIONS. FOLLOWING THE CONSUMMATION OF THE ACQUISITION TRANSACTIONS,
HOLDINGS BECAME THE 100% PARENT OF THE COMPANY. UNLESS THE CONTEXT REQUIRES
OTHERWISE, ALL REFERENCES HEREIN TO THE "COMPANY" OR "GLC" MEAN GREAT LAKES
CARBON CORPORATION, ITS WHOLLY OWNED SUBSIDIARIES AND COPETRO, S.A. ("COPETRO"),
WHICH IS 99.8% OWNED BY THE COMPANY, AND ITS AND THEIR PREDECESSORS (TO THE
EXTENT THAT SUCH PREDECESSORS' ACTIVITIES RELATED TO THE BUSINESS OF THE COMPANY
DESCRIBED HEREIN), COLLECTIVELY. UNLESS OTHERWISE INDICATED, ALL REFERENCES TO
"TONS" MEAN SHORT TONS OF 2,000 POUNDS. UNLESS OTHERWISE INDICATED, ALL
REFERENCES TO "WESTERN WORLD" MEANS ALL COUNTRIES EXCEPT CHINA, EASTERN EUROPEAN
COUNTRIES AND THOSE COUNTRIES WHICH FORMERLY COMPRISED THE SOVIET UNION.
THE COMPANY
The Company is the largest producer of calcined petroleum coke ("CPC") in
the world. Anode grade CPC is the principal raw material used in the production
of carbon anodes for use in aluminum smelting, and is used by every producer of
primary aluminum in the world. Anode grade CPC sales represented approximately
81.9% of the Company's total 1997 sales. The Company believes that it has
approximately a 23.1% market share of U.S. anode grade CPC sales and a 15.7%
market share of Western World anode grade CPC sales. The Company also sells
industrial grade CPC for use in the production of titanium dioxide, as a carbon
additive in the manufacture of steel and foundry products and for use in other
specialty materials and chemicals markets. The Company produces CPC at its three
facilities located in Port Arthur, Texas, Enid, Oklahoma and La Plata,
Argentina. The Company's annual CPC production capacity of 1.6 million tons,
including a 220,000 ton increase as a result of its completion of a new kiln at
its Argentine facility (the "New La Plata Kiln") in May 1998, is approximately
60% greater than that of its next largest competitor. During the twelve months
ended March 31, 1998, the Company sold 1.5 million tons of CPC, had net sales of
$238.6 million and had EBITDA (as defined) of $62.5 million. Assuming the New La
Plata Kiln had been completed on April 1, 1997 and operated at 70% capacity
(representing the amount of capacity currently pre-contracted to customers for
the balance of 1998), EBITDA would have been $69.0 million for the twelve months
ended March 31, 1998 (assuming margins consistent with the Company's actual
financial performance during the period). The Company does not anticipate
operating the New La Plata Kiln at full capacity until 1999. See "Disclosure
Regarding Forward-Looking Statements" and the footnotes to "Summary Consolidated
Financial and Other Data."
CPC is produced from raw petroleum coke ("RPC") utilizing a
high-temperature, rotary-kiln process developed by the Company in the 1930s. RPC
is a by-product of the petroleum refining process and typically represents an
insignificant portion of overall refinery revenues. The alternative use for RPC,
as a fuel source, generates a significantly lower value to refiners than the
value they receive in selling RPC for use in the production of CPC. As a result,
CPC producers are able to obtain lower purchase prices for RPC in times of
declining CPC prices, enabling CPC producers to earn a relatively stable profit
spread even in periods of CPC price declines.
Carbon anodes, which are manufactured utilizing anode grade CPC, are used by
every primary aluminum smelter in the world as a key component in aluminum
smelting pot lines. Carbon anodes act as conductors of electricity and as a
source of carbon in the electrolytic cell that reduces alumina to aluminum
metal. In this electrochemical aluminum smelting process, the carbon anodes, and
hence the CPC, are consumed.
There are no known economic substitutes for anode grade CPC in the
manufacture of carbon anodes, nor have there been since anode grade CPC replaced
coal for this application in the 1930s. The Company believes that approximately
0.4 pounds of anode grade CPC are consumed for every one pound of primary
5
<PAGE>
aluminum produced, and that such consumption ratio has been substantially
constant over the past ten years. Worldwide demand for anode grade CPC is
directly tied to the level of global production of primary aluminum.
Industrial grade CPC is used in the production of titanium dioxide, as a
carbon additive in the manufacture of steel and foundry products and for use in
other specialty materials and chemicals markets. Demand for industrial grade CPC
has grown largely due to the ongoing replacement by titanium dioxide producers
of the sulfate manufacturing process that does not utilize CPC with the
environmentally preferable chloride process that does utilize CPC. The Company's
participation in the industrial CPC sector diversifies its product offerings and
reduces its dependence on aluminum customers.
The Company believes that current anode grade CPC market fundamentals are
attractive. Western World primary aluminum production increased approximately
34.7% to 17.8 million tons in 1997 from 13.2 million tons in 1986, while anode
grade CPC production capacity did not increase significantly. Furthermore,
industry sources project continued strong growth in primary aluminum production
over the next several years. As a result, CPC industry operating rates are
currently at historically high levels. The Company has been operating at full
capacity since 1995 and believes that other major U.S. calciners are also
operating at or near full capacity.
The Company believes that the calcining industry will continue to operate at
or near full capacity, as anticipated capacity expansions in the anode grade CPC
market are expected to provide less additional capacity over the next several
years than required to meet aluminum demand projected by industry sources.
Further, the Company believes there are significant barriers to entry to the CPC
production industry. The Company estimates that a greenfield, minimum efficient
scale, stand-alone 200,000 ton calcining facility would, depending on location,
cost in excess of $50 million and take approximately three years to permit and
construct. Further impediments to the creation of new production capacity
include the difficulty in securing consistent sources of RPC supply and the
reluctance of aluminum smelters to change CPC supply sources.
The current high industry operating rates have led to anode grade CPC
pricing becoming less influenced by aluminum pricing than has been the case
historically. Instead, anode grade CPC pricing has become more influenced by the
demand generated from the volume of aluminum production. Accordingly, the
average price per ton realized by the Company for anode grade CPC increased by
over 60% from 1994 to 1997, while aluminum prices as quoted on the London Metal
Exchange increased only 9%.
The Company's management team is among the most experienced in the industry,
with an average tenure with the Company of over 22 years. James D. McKenzie, the
Company's Chief Executive Officer and President, has been with the Company for
over 27 years; A. Frank Baca, Senior Vice President of Operations and
Administration, 31 years; James W. Betts, Vice President of Raw Materials, 30
years; Robert C. Dickie, Vice President of Sales, 9 years; and Adele Robles,
Controller, 17 years. The address of the Company's principal executive offices
is 551 Fifth Avenue, Suite 3600, New York, New York 10176 and the telephone
number is (212) 370-5770.
BUSINESS STRATEGY
The Company's management team plans to sustain and build upon GLC's success
by focusing on the following strategic initiatives:
- MAINTAIN STRONG CUSTOMER RELATIONSHIPS--Over its 60-year history in CPC
production, the Company has forged customer relationships spanning several
decades with many of the world's largest aluminum producers, including
Aluminum Company of America ("Alcoa"), Alusaf Limited ("Alusaf") and
Alusuisse-Lonza Holding Ltd. ("Alusuisse"). The Company has developed and
expects to maintain these relationships by virtue of its industry
leadership position, its technical support and customer service and its
superior ability to produce anode grade CPC to customized
6
<PAGE>
specifications. Although CPC represents only 5% to 7% of an aluminum
smelter's total costs, the quality and consistency of CPC are critical to
a smelter. Through its comprehensive "Total Quality Management" program,
the Company was the first domestic calciner to attain ISO 9002
registration for its ability to meet internationally recognized quality
and process standards. All of the Company's facilities are ISO 9002
registered.
- MAINTAIN SUPERIOR ACCESS TO RAW MATERIALS--The Company's long history and
leading market position in CPC production has led to strong long-term
relationships with numerous RPC suppliers, including Exxon Corporation
("Exxon"), Conoco Inc. ("Conoco"), Chevron Corporation ("Chevron"), YPF
Sociedad Anonima ("YPF") and Marathon Oil Company ("Marathon"). The
Company's access to RPC supply from 18 refineries worldwide provides it
with a competitive advantage in cost-effectively blending various grades
of RPC to produce CPC to exact customer specifications.
- OPERATE DIVERSE, STATE-OF-THE-ART FACILITIES--The Company strives to
maintain geographically diverse, state-of-the-art production facilities
that provide a maximum level of operating flexibility. The Port Arthur,
Texas plant (680,000 tons per year) provides the Company with access to
RPC received by rail, barge or ship from the U.S. Gulf Coast and
international oil refiners and allows the Company to serve international
CPC markets. The Enid, Oklahoma plant (490,000 tons per year) is
strategically located to serve the domestic CPC markets and to access RPC
from refineries in the mid-continent region. The plant in La Plata,
Argentina (220,000 tons per year) provides the Company with access to high
quality RPC from a nearby oil refinery and also positions the Company well
to serve international CPC markets. The Company completed construction of
the New La Plata Kiln in May 1998, which doubled the facility's previous
production capacity.
- MAINTAIN STRONG PRESENCE IN INDUSTRIAL GRADE CPC--Since 1990, the Company
has pursued a strategy of diversifying its product mix by developing and
expanding its presence in the market for industrial grade CPC. GLC has
increased its net sales of industrial grade CPC by approximately 92.7%
since 1990 by focusing its industrial grade sales effort and investing in
value-added operations at its production facilities. Sales of industrial
grade CPC reduce the Company's dependence on aluminum customers.
- PURSUE SELECTIVE EXPANSION OPPORTUNITIES--The Company may explore
acquisition and expansion opportunities from time to time as warranted by
market conditions. Strong market conditions, together with an excellent
source of RPC supply, prompted the Company to expand its Argentinean
facility. The Company is currently evaluating several additional
opportunities in the petroleum coke industry.
ACQUISITION TRANSACTIONS
Pursuant to an Agreement and Plan of Merger dated as of April 21, 1998 (the
"Merger Agreement"), Holdings acquired all of the issued and outstanding capital
stock of the Company, through the merger of a wholly owned subsidiary of
Holdings into the Company. The aggregate consideration paid by AIP, its
affiliates and certain other individuals associated with AIP pursuant to the
Merger Agreement was approximately $376.9 million (the "Merger Consideration").
The Company was the surviving corporation in the Merger.
In order to finance the Merger, (i) AIP and affiliates of, and certain other
individuals associated with, AIP contributed $65.0 million and $330,000,
respectively to Holdings in exchange for common equity of Holdings (the "AIP
Equity Contribution"), (ii) Holdings contributed $92.4 million (the sum of $62.3
million of the AIP Equity Contribution and the proceeds from the Offering of
Debentures) to the equity of Holdings (the "Holdings Equity Contribution"),
(iii) the Company entered into a syndicated senior secured agreement (the "New
Credit Agreement") providing for term loan borrowings (the "Term Loan
Facilities") in an aggregate principal amount of approximately $111.0 million
and a revolving loan facility (the "Revolving Credit Facility") for borrowings
of up to $25.0 million, and borrowed all term loans
7
<PAGE>
available, and (iv) the Company issued and sold (the "Notes Offering" and
together with the Offering, the "Offerings") $175.0 million aggregate principal
amount of its Old Notes offered pursuant to an Offering Memorandum dated as of
May 18, 1998 (the "Notes Offering Memorandum").
In connection with the Merger, the Company commenced a tender offer (the
"Tender Offer") on April 24, 1998, for any and all of its outstanding $65.0
million aggregate principal amount of 10% Senior Secured Notes due 2006 (the
"10% Notes"). In addition, in connection with the Tender Offer, the Company
simultaneously solicited consents (the "Solicitation") from holders of the 10%
Notes to certain amendments to and waivers under the indenture (the "10%
Indenture") governing the 10% Notes and certain related collateral documents.
All of the outstanding 10% Notes were purchased by the Company pursuant to the
Tender Offer and Solicitation and such purchase was consummated concurrently
with the closing of the Offering. The aggregate consideration paid by the
Company in the Tender Offer and Solicitation was approximately $74.1 million
(including the amount paid to holders tendering 10% Notes in excess of the
principal amount being tendered (the "Tender Premium") of approximately $9.1
million, but excluding accrued interest.
As used herein, the term "Acquisition Transactions" means the Merger, the
AIP Equity Contribution, the Holdings Equity Contribution, the Company's
execution of and borrowings under the New Credit Agreement, the Offering, the
Notes Offering, the Tender Offer, the Solicitation and the execution of the
Supplemental Indenture.
AMERICAN INDUSTRIAL PARTNERS
AIP is a private investment fund headquartered in San Francisco and New York
with committed capital of approximately $800.0 million. AIP seeks to invest in
companies which hold either a protected competitive position or proprietary
capability, ideally combined with a leading market share. The firm does not seek
to play a role in daily management; rather, AIP seeks to provide its portfolio
companies with access to the management expertise of its operating partners, all
of whom are former Chief Executive Officers of Fortune 500 corporations, through
active board-level participation as well as on-call advice when desired.
Following the consummation of the Acquisition Transactions, AIP, its
affiliates and certain other individuals associated with AIP, contributed $65.3
million in equity to Holdings, and Theodore C. Rogers, a general partner of AIP
and former Chairman and Chief Executive Officer of NL Industries, Inc., became
the Company's Non-Executive Chairman of the Board. Although no specific
arrangements are in place, AIP intends to offer the Company's executive officers
the opportunity to own up to approximately 5.0% of Holdings' equity through a
combination of direct investments and option programs.
8
<PAGE>
THE EXCHANGE OFFER
On May 22, 1998, Holdings issued $56.6 million aggregate principal amount of
Old Debentures. The Old Debentures were sold pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws, in order to enable the Company to raise
funds on a more expeditious basis than necessarily would have been possible had
the initial sale been pursuant to an offering registered under the Securities
Act. Donaldson, Lufkin & Jenrette Securities Corporation (the "Initial
Purchaser"), as a condition to its purchase of the Old Debentures, requested
that Holdings agree to commence the Exchange Offer following the Offering.
<TABLE>
<S> <C>
Debentures Offered.................. Up to $56,600,000 aggregate principal amount of
Series B 13 1/8% Senior Discount Debentures due 2009.
The Exchange Offer.................. The New Debentures are being offered in exchange for
a like principal amount of the Old Debentures. Old
Debentures may be tendered only in integral multiples
of $1,000. The issuance of the New Debentures is
intended to satisfy the obligations of the Company
contained in the Registration Rights Agreement, dated
as of May 22, 1998 between Holdings and the Initial
Purchaser (the "Registration Rights Agreement"). For
procedures for tendering see--"The Exchange Offer."
Tenders, Expiration Date
Withdrawal........................ The Exchange Offer will expire at 5:00 p.m. New York
City time, on , 1998, or such later date
and time to which it is extended. Each Holder
tendering Old Debentures must acknowledge that such
Holder is not engaging in, nor does such Holder
intend to engage in, a distribution of the New
Debentures. The tender of Old Debentures pursuant to
the Exchange Offer may be withdrawn at any time prior
to the Expiration Date. Any Old Debenture not
accepted for exchange for any reason will be returned
without expense to the tendering Holder thereof as
promptly as practicable after the expiration or
termination of the Exchange Offer.
Conditions to Exchange Offer........ The Exchange Offer is not subject to any condition
other than that the Exchange Offer does not violate
any applicable law or regulation or interpretation of
the Staff.
Federal Income Tax Considerations... There will be no United States Federal income tax
consequences to Holders who exchange Old Debentures
for New Debentures pursuant to the Exchange Offer.
See "Certain United States Federal Income Tax
Considerations."
Exchange Agent...................... State Street Bank and Trust Company of California,
N.A. (the "Exchange Agent") is serving as exchange
agent in connection with the Exchange Offer.
Use of Proceeds..................... There will be no proceeds to Holdings from the
exchange pursuant to the Exchange Offer. See "Use of
Proceeds" and "Capitalization."
Shelf Registration Statement........ Under certain circumstances, certain holders of
Debentures (including holders of Old Debentures who
are not permitted to participate in the Exchange
Offer or holders who may not freely resell New
Debentures received in the Exchange Offer) may
require Holdings to file and cause to become
effective, a Shelf Registration Statement (as
defined), which would cover resales of Debentures by
such holders. See "Description of
Debentures--Registration Rights; Liquidated Damages."
</TABLE>
9
<PAGE>
CONSEQUENCES OF EXCHANGING OLD DEBENTURES
Holders of Old Debentures who do not exchange their Old Debentures for New
Debentures pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Old Debentures as set forth in the legend
thereon as a consequence of the issuance of the Old Debentures pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Old Debentures may not be offered or sold, unless registered under
the Securities Act, except pursuant to an exemption from, or in a transaction
not subject to, the Securities Act and applicable state securities laws. Subject
to certain limited exceptions, holders of Old Debentures who do not exchange
their Old Debentures for New Debentures in the Exchange Offer will no longer
have registration rights with respect to their Old Debentures. Holdings does not
currently anticipate that it will register the Old Debentures under the
Securities Act. See "Description of Debentures--Registration Rights; Liquidated
Damages." Based on interpretations by the Staff, as set forth in no-action
letters issued to third parties, Holdings believes that New Debentures issued
pursuant to the Exchange Offer in exchange for Old Debentures may be offered for
resale, resold or otherwise transferred by Holders thereof (other than any
Holder which is an "affiliate" of Holdings within the meaning of Rule 405 under
the Securities Act) without compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such New Debentures
are acquired in the ordinary course of such Holder's business and such Holder,
other than a broker-dealer, has no arrangement with any person to participate in
the distribution of such New Debentures. Holdings has not sought and does not
intend to seek its own no-action letter in connection with the Exchange Offer
and there can be no assurance that the SEC would make a similar determination
with respect to the Exchange Offer. Each Holder, other than a broker-dealer,
must acknowledge that it is not engaged in, and does not intend to engage in, a
distribution of such New Debentures and has no arrangement or understanding to
participate in a distribution of New Debentures. Each broker-dealer that
receives New Debentures for its own account in exchange for Old Debentures must
acknowledge that such Old Debentures were acquired by such broker-dealer as a
result of market-making activities or other trading activities and that it will
deliver this Prospectus in connection with any resale of such New Debentures.
See "Plan of Distribution." In addition, to comply with the securities laws of
certain jurisdictions, it may be necessary to qualify for sale or register
thereunder the New Debentures prior to offering or selling such New Debentures.
Holdings has agreed, pursuant to the Registration Rights Agreement, subject to
certain limitations specified therein, to register or qualify the New Debentures
for offer or sale under all applicable state securities or Blue Sky laws before
the time the Registration Statement (of which this Prospectus forms a part) is
declared effective by the SEC. See "The Exchange Offer--Consequences of
Exchanging Old Debentures" and "Description of Debentures-- Registration Rights;
Liquidated Damages."
SUMMARY DESCRIPTION OF THE NEW DEBENTURES
The terms of the New Debentures and the Old Debentures are identical in all
material respects, except (i) that the New Debentures have been registered under
the Securities Act, (ii) for certain transfer restrictions and registration
rights relating to the Old Debentures and (iii) that the New Debentures will not
contain certain provisions relating to Liquidated Damages to be paid to Holders
of Old Debentures under certain circumstances relating to the timing of the
Exchange Offer and to other registration requirements. See "Description of
Debentures--Registration Rights; Liquidated Damages." The New Debentures will
accrete in value from May 22, 1998. Old Debentures accepted for exchange will
cease to accrete in value from and after the date of consummation of the
Exchange Offer.
10
<PAGE>
<TABLE>
<S> <C>
Debentures Offered....................... Up to $56.6 million aggregate principal amount
at maturity of 13 1/8% Series B Senior Discount
Debentures due 2009.
Issuer................................... Great Lakes Acquisition Corp.
Maturity Date............................ May 15, 2009.
Yield and Interest....................... 13 1/8% (computed on a semiannual bond
equivalent basis), calculated from May 22, 1998.
The Old Debentures accrete and the New
Debentures will accrete at a rate of 13 1/8%,
compounded semiannually, to an aggregate
principal amount of $56.6 million by May 15,
2003. Cash interest will not accrue on the
Debentures prior to May 15, 2003. Commencing May
15, 2003, cash interest on the Debentures will
accrue and be payable, at a rate of 13 1/8% per
annum, semiannually in arrears on each May 15
and November 15.
Optional Redemption...................... The Old Debentures are and the New Debentures
will be redeemable at the option of Holdings, in
whole or in part, at any time on or after May
15, 2003 in cash at the redemption prices set
forth herein, plus accrued and unpaid interest
and Liquidated Damages, if any, thereon to the
redemption date. In addition, at any time prior
to May 15, 2001, Holdings may, at its option, on
any one or more occasions, redeem up to 35% of
the aggregate principal amount at maturity of
the Debentures originally issued at a redemption
price equal to 113.125% of the Accreted Value
thereof plus Liquidated Damages, if any, thereon
with the net cash proceeds of one or more Equity
Offerings; PROVIDED that at least 65% of the
original aggregate principal amount of the New
Debentures issued hereunder together with the
Old Debentures originally issued and not
exchanged in the Exchange Offer remains
outstanding immediately after each such
redemption.
Ranking.................................. The Old Debentures are and the New Debentures
will be senior obligations of Holdings. The Old
Debentures rank and the New Debentures will rank
pari passu in right of payment with all future
senior indebtedness of Holdings and senior in
right of payment to all future subordinated
indebtedness of Holdings. The Old Debentures are
and the New Debentures will be effectively
subordinated to all liabilities of Holdings'
subsidiaries. As of March 31, 1998, on a pro
forma basis after giving effect to the
Acquisition Transactions, Holdings and its
subsidiaries would have had approximately $339.5
million of Indebtedness (as defined herein)
outstanding and Holdings' subsidiaries would
have had approximately $309.4 million of
Indebtedness outstanding, including Indebtedness
under the Notes and the New Credit Agreement.
Change of Control........................ Upon a Change of Control (as defined), Holdings
is required to offer to purchase all of the
Debentures then outstanding at a price in cash
equal to 101% of the
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
Accreted Value thereof, plus Liquidated Damages,
if any, thereon in the case of any such purchase
prior to May 15, 2003, or 101% of the aggregate
principal amount at maturity thereof, plus
accrued and unpaid interest and Liquidated
Damages, if any, thereon in the case of any such
purchase on or after May 15, 2003. See
"Description of the Debentures--Repurchase at
the Option of Holders--Change of Control."
Limitation on Access to Subsidiary
Cash Flow.............................. Holdings does not have, and may not in the
future have, any assets other than common stock
of the Company (which will be pledged to secure
the Company's obligations under the New Credit
Agreement). As a result, Holdings' ability to
pay cash interest on the Debentures, and to
purchase Debentures upon the occurrence of a
Change of Control, will depend upon the receipt
of dividends and other distributions from its
direct and indirect subsidiaries. The New Credit
Agreement and the Notes restrict the Company's
ability to pay dividends and make other
distributions to Holdings, and without such
dividends or distributions, Holdings will likely
not have the financial resources to pay cash
interest on the Debentures, or to purchase
Debentures upon a Change of Control. In
addition, there can be no assurance that
Holdings' subsidiaries will have the resources
available to pay any such dividends or
distributions. Holdings' failure to pay cash
interest on the Debentures when due and payable,
or to make a Change of Control Offer when
required or to purchase Debentures when tendered
pursuant thereto, would constitute an Event of
Default (as defined herein) under the Indenture.
See "Description of Debentures--Principal,
Maturity and Interest," and "-- Repurchase at
Option of Holders--Change of Control."
Original Issue Discount.................. The Debentures have been issued at an original
issue discount for United States Federal income
tax purposes. Consequently, U.S. Holders will be
required to include amounts in gross income for
United States Federal income tax purposes in
advance of the receipt of cash attributable
thereto. See "Certain United States Federal
Income Tax Considerations."
Certain Covenants........................ The Indenture contains certain covenants that,
among other things, limit the ability of
Holdings and its Subsidiaries to: (i) pay
dividends or make certain other Restricted
Payments (as defined); (ii) incur additional
Indebtedness; (iii) encumber or sell assets;
(iv) enter into certain guarantees of
Indebtedness; (v) enter into transactions with
affiliates; and (vi) merge or consolidate with
any other entity or to transfer or lease all or
substantially all of their assets. In addition,
under certain circumstances, Holdings is
required to offer to purchase Debentures at a
price of 100% of the Accreted Value thereof,
plus Liquidated Damages, if any, thereon in the
case of any such purchase prior to May 15, 2003,
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
or of the principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages, if
any, to the date of purchase, in the case of any
purchase on or after May 15, 2003, with the
proceeds of certain Asset Sales (as defined).
See "Description of Debentures--Certain
Covenants." The term "Subsidiaries" does not
include references to "Unrestricted
Subsidiaries," as defined herein.
</TABLE>
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered by a Holder prior to tendering Old Debentures in the Exchange Offer.
13
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
The following table presents summary historical consolidated statement of
operations, balance sheet and other data of the Company as of and for the three
years ended December 31, 1997, which are derived from the Company's audited
consolidated financial statements audited by Ernst & Young LLP, which are
included elsewhere herein. The summary historical consolidated statement of
operations, balance sheet and other data of the Company as of and for the
three-month periods ended March 31, 1997 and March 31, 1998 and for the twelve
months ended March 31, 1998, are derived from the unaudited consolidated
financial statements of the Company, and in the opinion of management, include
all adjustments necessary for a fair presentation of the data for such periods.
The results for the three-month period ended March 31, 1998 are not necessarily
indicative of the results to be expected for the year ending December 31, 1998
or any future period. Holdings was formed in connection with the Acquisition
Transactions and did not exist during any of the periods for which the statement
of operations, balance sheet and other data are presented. Accordingly, such
data reflect the consolidated results of operations and financial position of
the Company. The pro forma balance sheet data of Holdings as of March 31, 1998
give effect to the Acquisition Transactions as if they had occurred on such
date. The financial data set forth below should be read in conjunction with "Use
of Proceeds," "Selected Historical Financial and Other Data," "Unaudited Pro
Forma Condensed Consolidated Financial Data," "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 herein.
<TABLE>
<CAPTION>
THE COMPANY
----------------------------------------------------------------------
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31, TWELVE MONTHS
------------------------------- --------------------- ENDED
1995 1996 1997 1997 1998 MARCH 31, 1998
--------- --------- --------- --------- ---------- --------------
(DOLLARS IN THOUSANDS, EXCEPT PER TON)
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales............................. $ 178,628 $ 242,744 $ 231,911 $ 55,395 $ 62,070 $ 238,586
Gross profit.......................... 36,440 66,373 59,521 13,159 16,387 62,749
Operating income...................... 26,753 51,052 41,011 8,774 13,703 45,940
Net income (loss)..................... 13,818 27,559 21,984 4,348 8,067 25,703
OTHER DATA:
EBITDA(1)............................. $ 36,514 $ 66,563 $ 59,182 $ 13,214 $ 16,528 $ 62,496
EBITDA margin......................... 20.4% 27.4% 25.5% 23.9% 26.6% 26.2%
Capital expenditures(2)............... $ 5,774 $ 6,371 $ 21,391 $ 3,651 $ 4,942 $ 22,682
Quantity of CPC sold (000 tons)....... 1,484 1,452 1,443 346 387 1,485
Net sales per ton of CPC sold......... $ 120.35 $ 167.21 $ 160.67 $ 160.31 $ 160.45 $ 160.70
Gross profit per ton of CPC sold...... 24.55 45.72 41.24 38.08 42.36 42.26
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
ADJUSTED CREDIT DATA OF HOLDINGS(3):
Adjusted EBITDA(4)................................................................................ $ 68,978
Adjusted interest expense(5)...................................................................... 33,804
Ratio of adjusted EBITDA to adjusted interest expense(4)(5)....................................... 2.0x
Ratio of adjusted debt to adjusted EBITDA(4)...................................................... 4.9x
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
----------------------
COMPANY HOLDINGS
ACTUAL PRO FORMA
--------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital........................................................................... $ 89,482 $ 40,463
Total assets.............................................................................. 190,519 499,389
Total debt................................................................................ 88,437 339,487
Stockholders' equity...................................................................... 60,506 65,330
</TABLE>
14
<PAGE>
- --------------------------
(1) EBITDA is defined as operating income before depreciation, amortization,
fees and expenses paid to Horsehead Industries, Inc. ("HII") and payments
pursuant to employment and consulting agreements which will be terminated
upon consummation of the Acquisition Transactions and AIP management fees.
EBITDA is not defined in the same manner as "Consolidated EBITDA" in the
Indenture or in the "Description of Debentures" herein. See "Description of
Debentures--Certain Definitions." EBITDA is not intended to represent cash
flow from operations as defined by GAAP (as defined) and should not be used
as an alternative to net income as an indicator of operating performance or
to cash flows as a measure of liquidity. EBITDA is included in the Offering
Memorandum as it is a basis upon which the Company assesses its financial
performance, and certain covenants in the Company's borrowing arrangements
will be tied to similar measures. EBITDA, as presented, represents a useful
measure of assessing the Company's ongoing operating activities without the
impact of financing activity and nonrecurring charges. While EBITDA is
frequently used as a measure of operations and the ability to meet debt
service requirements, it is not necessarily comparable to other similarly
titled captions of other companies due to potential inconsistencies in the
method of calculation.
(2) Capital expenditures include expenditures in connection with the New La
Plata Kiln of $13.4 million, $1.5 million, $4.0 million and $15.9 million
for the year ended December 31, 1997, the three months ended March 31, 1997
and 1998 and the twelve months ended March 31, 1998, respectively.
(3) The adjusted credit data for the twelve months ended March 31, 1998 give pro
forma effect to the Acquisition Transactions as if they had occurred on
April 1, 1997, and are further adjusted as described in the footnotes below.
The adjusted credit data constitutes "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. See
"Disclosure Regarding Forward-Looking Statements" and "Risk Factors."
(4) Adjusted EBITDA gives effect to the assumed sales of CPC to be produced by
the New La Plata Kiln, as if it had been operational commencing on April 1,
1997 and had operated at 70% of capacity (representing the amount of
capacity currently pre-contracted to customers for the remainder of 1998
(the "Contracted Capacity")) throughout the twelve months ended March 31,
1998. Based on the Company's average EBITDA per ton sold margin for the
twelve months ended March 31, 1998 of $42.09, the Contracted Capacity would
have resulted in an incremental $6.5 million of EBITDA. Information
regarding the New La Plata Kiln constitutes a "forward-looking statement"
within the meaning of the Private Securities Litigation Reform Act of 1995.
There can be no assurance that such adjusted EBITDA would have been
realized, or will be realized in the future. Actual results may differ
materially from the adjusted EBITDA data presented due to various risks,
including by way of example, actual EBITDA per ton sold may have been lower,
the Contracted Capacity may not have been sold and the New La Plata Kiln may
not have been able to produce CPC in enough quantity to satisfy the
Contracted Capacity. See "Disclosure Regarding Forward-Looking Statements"
and "Risk Factors."
(5) Adjusted interest expense gives pro forma effect to the Acquisition
Transactions as if they had occurred on April 1, 1997 and the $15.9 million
of indebtedness borrowed under the Copetro Credit Agreement in connection
with the New La Plata Kiln was incurred on April 1, 1997 and remained
outstanding throughout the twelve months ended March 31, 1998, giving rise
to the recognition of $1.6 million additional interest expense. See
"Description of Other Indebtedness--Copetro Credit Agreement." Adjusted
interest expense excludes amortization of financing fees.
15
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, HOLDERS
OF OLD DEBENTURES SHOULD CONSIDER CAREFULLY THE FOLLOWING FACTORS BEFORE
TENDERING THEIR OLD DEBENTURES IN THE EXCHANGE OFFER. THIS PROSPECTUS, INCLUDING
THE "SUMMARY," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS," AND "BUSINESS" SECTIONS, CONTAINS "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995, WHICH CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY, SUCH
AS "MAY," "INTEND," "WILL," "EXPECT," "ANTICIPATE," "ESTIMATE" OR "CONTINUE" OR
THE NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE TERMINOLOGY. IN
PARTICULAR, ANY STATEMENTS, EXPRESS OR IMPLIED, CONCERNING FUTURE OPERATING
RESULTS OR THE ABILITY TO GENERATE REVENUES, INCOME OR CASH FLOW TO SERVICE THE
DEBENTURES, INCLUDING THE ADJUSTED CREDIT DATA PRESENTED UNDER "SUMMARY
CONSOLIDATED FINANCIAL AND OTHER DATA," AND INFORMATION REGARDING THE NEW LA
PLATA KILN PRESENTED ELSEWHERE HEREIN, ARE FORWARD-LOOKING STATEMENTS. THE
MATTERS SET FORTH BELOW CONSTITUTE CAUTIONARY STATEMENTS IDENTIFYING IMPORTANT
FACTORS WITH RESPECT TO SUCH FORWARD-LOOKING STATEMENTS, INCLUDING CERTAIN RISKS
AND UNCERTAINTIES, THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THOSE IN SUCH FORWARD-LOOKING STATEMENTS.
LIMITATION ON ACCESS TO SUBSIDIARIES' CASH FLOW; HOLDING COMPANY STRUCTURE
Holdings is a holding company, and its ability to pay interest on the
Debentures is dependent upon the receipt of dividends from its direct and
indirect subsidiaries. Holdings does not have, and may not have in the future
any assets other than the common stock of the Company. The Company and its
subsidiaries are parties to the New Credit Agreement and an indenture governing
the Notes (the "Note Indenture"), each of which imposes substantial restrictions
on the Company's ability to pay dividends to Holdings, and any dividend payment
will be subject to the satisfaction of certain financial conditions set forth
therein. The ability of the Company and its subsidiaries to comply with such
conditions may be affected by events that are beyond its or Holdings' control.
The breach of any such condition could result in a default under the Note
Indenture and/or the New Credit Agreement, and in the event of any such default,
the holders of the Notes or the lenders under the New Credit Agreement could
elect to accelerate the maturity of all the Notes or the loans under the New
Credit Agreement. If the maturity of the Notes or the loans under the New Credit
Agreement were accelerated, all such outstanding debt would have to be paid in
full before the Company or its subsidiaries could distribute any assets or cash
to Holdings. There can be no assurance that the assets of Holdings would be
sufficient to meet its obligations under the Indenture. Future borrowings by the
Company can be expected to contain restrictions or prohibitions on the payment
of dividends by the Company and its subsidiaries to Holdings.
In addition, under Delaware law, a subsidiary of a company is permitted to
pay dividends on its capital stock only out of its surplus or, if it has no
surplus, out of its net profits for the year in which a dividend is declared or
for the immediately preceding fiscal year. Surplus is defined as the excess of a
company's total assets over the sum of its total liabilities plus the par value
of its outstanding capital stock. In order to pay a cash dividend, the Company
must have surplus or net profits equal to the full amount of the dividend at the
time the dividend is declared. In determining the Company's ability to pay
dividends, Delaware law permits the board of directors of the Company to revalue
its assets and liabilities from time to time to their fair market values in
order to create surplus.
Holdings cannot predict what the value of its subsidiaries' assets or the
amounts of their liabilities will be in the future. Accordingly, there can be no
assurance that Holdings' subsidiaries will be able to dividend any amounts to
Holdings in the future and, therefore that it will be able to pay its debt
service obligations on the Debentures.
Because Holdings is a holding company, the holders of the Debentures will be
structurally junior to all creditors of Holdings' subsidiaries. In the event of
insolvency, liquidation, reorganization, dissolution or other winding-up of
Holdings' subsidiaries, Holdings will not receive any funds required to pay to
creditors
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of the subsidiaries. As of March 31, 1998, on a pro forma basis after giving
effect to the Acquisition Transactions, the aggregate amount of indebtedness of
Holdings' subsidiaries was $309.4 million.
SUBSTANTIAL LEVERAGE
Holdings and the Company are highly leveraged. On March 31, 1998, after
giving pro forma effect to the Offerings and the other Acquisition Transactions,
Holdings had total indebtedness of approximately $339.5 million and the Company
would have had total indebtedness of approximately $309.4 million. Holdings, the
Company and the Company's Subsidiaries will be permitted to incur substantial
additional Indebtedness in the future. See "Capitalization" and "Description of
Debentures--Certain Covenants-- Incurrence of Indebtedness and Issuance of
Disqualified Stock."
Holdings' and 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, or to fund planned capital expenditures will depend on their
future performance, which, to a certain extent, will be subject to general
economic, financial, competitive, legislative, regulatory and other factors that
are beyond their control. Based upon the current level of operations and
anticipated cost savings and revenue growth, management believes that cash flow
from operations and available cash, together with available borrowings under the
New Credit Agreement, will be adequate to meet Holdings' and the Company's
future liquidity needs for at least the next several years. Holdings and the
Company may, however, need to refinance all or a portion of their indebtedness.
There can be no assurance that the Company's business will generate sufficient
cash flow from operations, or that anticipated revenue growth and operating
improvements will be realized in an amount sufficient to enable Holdings or the
Company to service their indebtedness or to fund their other liquidity needs.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
The degree to which Holdings and the Company are leveraged could have
important consequences to holders of the Debentures, including, but not limited
to: (i) making it more difficult for Holdings to satisfy its obligations with
respect to the Debentures, (ii) increasing Holdings' and the Company's
vulnerability to general adverse economic and industry conditions, (iii)
limiting Holdings' and the Company's ability to obtain additional financing to
fund future working capital, capital expenditures and other general corporate
requirements, (iv) requiring the dedication of a substantial portion of
Holdings' and the Company's cash flow from operations to the payment of
principal of, interest on, and Liquidated Damages, if any, on their
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 Holdings' and the Company's flexibility in
planning for, or reacting to, changes in its business and the industry, (vi)
placing Holdings and the Company at a competitive disadvantage relative to less
leveraged competitors and (vii) restricting the Company's ability to pay
dividends to Holdings so that Holdings can pay its debt service obligations on
the Debentures (which payments are scheduled to begin in 2003), the failure of
which may create an event of default under the Debentures, which, if not cured
or waived, could have a material adverse effect on Holdings and the Company.
ORIGINAL ISSUE DISCOUNT; LIMITATIONS ON HOLDERS' CLAIMS
The Debentures have been issued with original issue discount for United
States Federal income tax purposes. Consequently, U.S. Holders will be required
to include amounts in gross income for United States Federal income tax purposes
in advance of the receipt of cash attributable thereto. See "Certain United
States Federal Income Tax Considerations" for a more detailed discussion of the
United States Federal income tax consequences to the Holders of the Debentures
resulting from the purchase, ownership and disposition thereof.
Under the Indenture, in the event of an acceleration of the maturity of the
Debentures upon the occurrence of an Event of Default (as defined herein), the
holders of the Debentures may be entitled to
17
<PAGE>
recover only the amount which may be declared due and payable pursuant to the
Indenture, which will be less than the principal amount at maturity of the
Debentures. See "Description of Debentures -- Events of Default and Remedies."
If a bankruptcy case is commenced by or against Holdings under the
Bankruptcy Code (as defined herein), the claim of a holder of Debentures with
respect to the principal amount thereof may be limited to an amount equal to the
sum of (i) the issue price of the Debentures as set forth on the cover page
hereof and (ii) that portion of the original issue discount (as determined on
the basis of such issue price) which is not deemed to constitute "unmatured
interest" for purposes of the Bankruptcy Code. Accordingly, holders of the
Debentures under such circumstances may, even if sufficient funds are available,
receive a lesser amount than they would be entitled to under the express terms
of the Indenture. In addition, the same rules are used for the calculation of
original issue discount under federal income tax law and, accordingly, a holder
of Debentures might be required to recognize gain or loss in the event of a
distribution related to such a bankruptcy case.
RESTRICTIVE DEBT COVENANTS
The Indenture, the Note Indenture and the New Credit Agreement contain a
number of significant covenants that, among other things, restrict the ability
of Holdings and the Company and their subsidiaries to dispose of assets, incur
additional Indebtedness, prepay other Indebtedness (including the Debentures),
amend certain debt instruments (including the Indenture and the Note Indenture),
pay dividends, create liens on assets, enter into sale and leaseback
transactions, make investments, loans or advances, make acquisitions, engage in
mergers or consolidations, make capital expenditures, change the business
conducted by Holdings or its subsidiaries, or engage in certain transactions
with affiliates and certain other corporate activities. In addition, under the
New Credit Agreement, the Company is required to maintain specified financial
ratios and satisfy specified financial tests. See "Description of Debentures"
and "Description of Other Indebtedness--New Credit Agreement."
In addition, the Copetro Credit Agreement contains a number of covenants
which, among other things, require Copetro to maintain specified financial
ratios, and restricts the ability of Copetro to pay dividends to the Company,
dispose of assets, engage in mergers or consolidations and create liens on
assets. See "Description of Other Indebtedness--Copetro Credit Agreement."
Holdings' and the Company's ability to comply with such agreements may be
affected by events beyond its control, including prevailing economic, financial
and industry conditions. The breach of any of such covenants or restrictions
could result in a default under the Indenture, the New Credit Agreement or the
Note Indenture, which would permit the senior lenders, the holders of the Notes,
or the holders of the Debentures, or any of them, as the case may be, to declare
all amounts borrowed thereunder to be due and payable, together with accrued and
unpaid interest and, in the case of the Notes or the Debentures, Liquidated
Damages, if any, and the commitments of the senior lenders to make further
extensions of credit under the New Credit Agreement could be terminated. If the
Company were unable to repay its indebtedness to its senior lenders, such
lenders could proceed against the collateral securing such indebtedness, and
against Holdings under the Loan Guaranty as described under "Description of
Other Indebtedness--New Credit Agreement."
POSSIBLE INABILITY TO REPURCHASE DEBENTURES UPON CHANGE OF CONTROL
In the event of a Change of Control, Holdings is required to purchase all of
the Debentures then outstanding at the offer price specified therefor in the
Indenture. Holdings does not have, and may not in the future have, any assets
other than common stock of the Company (which is pledged to secure the Loan
Guaranty). As a result, Holdings' ability to repurchase all or any part of the
Debentures upon the occurrence of a Change of Control will depend upon the
receipt of dividends or other distributions from its direct and indirect
subsidiaries. The New Credit Agreement and the Note Indenture restrict the
Company
18
<PAGE>
from paying dividends and making any other distributions to Holdings. If
Holdings does not obtain dividends from the Company sufficient to permit the
repurchase of the Debentures or does not refinance such Indebtedness, Holdings
will likely not have the financial resources to purchase Debentures upon the
occurrence of a Change of Control. In any event, there can be no assurance that
Holdings' subsidiaries will have the resources available to pay such dividend or
make any such distribution. Furthermore, the New Credit Agreement provides that
certain change of control events will constitute a default thereunder, and the
Note Indenture provides that, in the event of a Change of Control, the Company
will be required to offer to repurchase the Notes at the price specified
therefor. Holdings' failure to make a Change of Control offer when required or
to purchase tendered Debentures when tendered would constitute an Event of
Default under the Indenture. See "Description of Debentures" and "Description of
Other Indebtedness."
RELIANCE ON THE ALUMINUM INDUSTRY
The Company's products are sold primarily to the worldwide aluminum
industry. The aluminum industry generally is cyclical in nature and experiences
fluctuations in production levels and significant fluctuations in profits based
on numerous factors. Historically, sales of the Company's products have been
adversely affected by weakness in the aluminum industry. Although the aluminum
industry has experienced growth on a long-term basis, there can be no assurance
that growth will continue or that conditions will remain favorable in the
aluminum industry as a whole, or for the Company's customers in particular. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business."
DEPENDENCE ON CERTAIN CUSTOMERS
For the year ended December 31, 1997, the Company's top five customers
represented approximately 62.2% of the Company's net sales. During such period,
the Company's two largest customers, Alcoa and Alusaf, which have been customers
for over 50 years and 20 years, respectively, accounted for 23.7% and 15.5%,
respectively, of the Company's net sales. In June 1998, Alcoa acquired Alumax
Inc., ("Alumax"), another long-standing customer of the Company, which accounted
for 6.4% of the net sales of the Company in 1997. The permanent loss of one or
more major customers could adversely affect the Company's operating results.
Although the Company expects to maintain its current relationships with its
major customers, there can be no assurance that a change will not occur.
DEPENDENCE ON RAW MATERIAL SUPPLY
The raw material used by the Company in the production of CPC is RPC, which
is a by-product of the petroleum refining industry. The Company purchases
approximately 46.1% of its RPC requirements from three petroleum refiners. The
Company believes that, under current conditions, RPC is available in sufficient
quantities and of adequate quality at current market prices. A substantial
increase in raw material prices or a substantial decrease in raw material supply
of sufficient quality could have a material adverse effect on the Company's
financial condition and results of operations. Historically, the price of anode
grade RPC has moved in relation to the price of anode grade CPC; however, there
can be no assurance that the Company will be in a position to pass any future
raw material price increases on to its customers. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Business."
COMPETITION
The CPC industry is highly competitive. Competition is based primarily on
price, product quality and access to raw material sources. Although the Company
believes that it is the world's largest supplier of CPC, several of the
Company's competitors are part of much larger companies and as such may have
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<PAGE>
greater resources than the Company. One of the Company's major competitors has
had access to RPC from its own petroleum refining operations for many years,
which could give such competitor a cost advantage. Although CPC industry
operating rates are currently at historically high levels, there can be no
assurance that the Company's current or future competitors will not increase
their operating capacity. Competitive factors could require price reductions or
increased spending that could materially adversely affect the Company's
financial condition and results of operations. See "Business."
ENVIRONMENTAL MATTERS
The Company's operations are subject to various federal, state, local and
foreign laws and regulations relating to the emission, release or discharge of
certain substances. While the Company believes that it is currently in material
compliance with all applicable laws and regulations, the Company has had
occasional exceedances of opacity emissions limitations at its Port Arthur,
Texas facility. In addition, some of the Company's facilities may be required to
obtain permits and comply with new standards applicable to air emissions to be
adopted by the United States Environmental Protection Agency (the "EPA") and
state environmental agencies over the next several years. There can be no
assurance that the Company will not incur significant costs to comply with
changes in existing laws and regulations. See "Business--Environmental Matters."
LABOR RELATIONS
Approximately one-third of the Company's employees are covered by collective
bargaining or similar agreements. The agreement covering 54 employees at the
Enid, Oklahoma facility expires in 2001. The agreement covering 28 employees of
Copetro may be subject to revision by the Argentine government. The Company has
not had any material work stoppages or strikes at Enid in more than 18 years and
has never had a work stoppage at Copetro. The Port Arthur plant is operated with
a nonunion workforce. The Company believes that it has satisfactory relations
with its employees. There can be no assurance, however, that new labor
agreements will be reached without work stoppage or strike or will be reached on
terms satisfactory to the Company. See "Business--Employees."
FRAUDULENT TRANSFER CONSIDERATIONS
Holdings' obligations under the Debentures may be subject to review under
state or federal fraudulent transfer laws in the event of the bankruptcy or the
financial difficulty of Holdings.
Under those laws, if a court, in a lawsuit by an unpaid creditor or
representative of creditors of Holdings, such as a trustee in bankruptcy or
Holdings as a chapter 11 debtor in possession, were to find that when Holdings
issued the Debentures, it (a) received less than fair consideration or
reasonably equivalent value therefor and (b) either (i) was or was rendered
insolvent, (ii) was engaged in a business or transaction for which its remaining
unencumbered assets constituted unreasonably small capital or (iii) intended to
incur or believed (or reasonably should have believed) that it would incur debts
beyond its ability to pay as such debts matured, the court could avoid the
Debentures and Holdings' obligations thereunder, or subordinate the Debentures
to all of Holdings' other obligations, and in either case direct the return of
any amounts paid thereunder to Holdings or to a fund for the benefit of its
creditors. It should be noted that a court could avoid the Debentures and
Holdings' obligations thereunder without regard to factors (a) and (b) above if
it found that Holdings issued the Debentures with actual intent to hinder,
delay, or defraud its creditors.
The measure of insolvency for purposes of the foregoing will vary depending
on the law of the jurisdiction being applied. Generally, however, an entity
would be considered insolvent if the sum of its debts (including contingent or
unliquidated debts) is greater than all of its property at a fair valuation or
if
20
<PAGE>
the present fair salable value of its assets is less than the amount that will
be required to pay its probable liability on its existing debts as they become
absolute and matured.
Holdings believes that the equity interest in the Company that it will
acquire in the Merger constitutes fair consideration and reasonably equivalent
value for its obligations under the Debentures. 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 Holdings' conclusions in this regard.
INTERNATIONAL RISKS
The Company has invested significant resources in Argentina and intends to
continue to make investments in Argentina and other foreign countries in the
future. Accordingly, Holdings and the Company may be subject to economic,
political or social instability or other developments not typical of investments
made in the United States. International operations are subject to risks in
addition to those discussed below, including the impact of foreign governmental
regulations, currency fluctuations, political uncertainties and differences in
business practices. There can be no assurance that Argentina or any other
country in which Holdings or the Company may acquire operations or conduct
business will not adopt regulations or take other actions that would have a
direct or indirect adverse impact on the business or market opportunities of
Holdings or the Company within such countries. While Argentina has been
relatively stable during the last several years, in the past Argentina has been
characterized by varying degrees of inflation, uneven growth rates, declining
investment rates, significant devaluations of Argentine currency, impositions of
exchange controls and political uncertainty. The Company currently does not have
political risk insurance with respect to its operations in Argentina and the
value of the Company's investment in its Argentine subsidiary could be adversely
affected by changes in government policy, such as the imposition of limitations
on foreign ownership of investment assets or the imposition of exchange
controls. In addition, there can be no assurance that future economic
developments in Argentina, over which neither Holdings nor the Company has
control, will not impair Holdings' financial condition, results of operations
and business prospects.
CONSEQUENCES OF FAILURE TO EXCHANGE OLD DEBENTURES
The Old Debentures have not been registered under the Securities Act or any
other securities laws of any jurisdiction and, therefore, may not be offered,
sold or otherwise transferred except in compliance with the registration
requirements of the Securities Act and any other applicable securities laws or
pursuant to exemptions from, or in transactions not subject to, those
requirements and, in each case, in compliance with certain other conditions and
restrictions. Holders of Old Debentures who do not exchange their Old Debentures
for New Debentures pursuant to the Exchange Offer will continue to be subject to
such restrictions on transfer of such Old Debentures as set forth in the legend
thereon. In addition, upon consummation of the Exchange Offer, Holders of Old
Debentures which remain outstanding will not be entitled to any rights to have
such Old Debentures registered under the Securities Act or to any similar rights
under the Registration Rights Agreement (subject to certain limited exceptions).
Holdings does not currently anticipate that it will register or qualify any Old
Debentures which remain outstanding after consummation of the Exchange Offer for
offer or sale in any jurisdiction (subject to limited exceptions, if
applicable). As a result of these factors, to the extent that Old Debentures are
not tendered and accepted in the Exchange Offer, a holder's ability to sell such
Old Debentures could be adversely affected.
The New Debentures and any Old Debentures which remain outstanding after
consummation of the Exchange Offer will vote together as a single class for
purposes of determining whether holders of the requisite percentage thereof have
taken certain actions or exercised certain rights under the Indenture.
Upon consummation of the Exchange Offer, holders of Old Debentures will not
be entitled to any Liquidated Damages or any further registration rights under
the Registration Rights Agreement, except
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<PAGE>
under limited circumstances. See "Description of Debentures--Registration
Rights; Liquidated Damages."
ABSENCE OF PUBLIC MARKET
The Old Debentures were issued to, and Holdings believes such securities are
currently owned by, a relatively small number of beneficial owners. The Old
Debentures have not been registered under the Securities Act and will be subject
to restrictions on transferability if they are not exchanged for the New
Debentures. Although the New Debentures may be resold or otherwise transferred
by the holders (who are not affiliates of Holdings) without compliance with the
registration requirements under the Securities Act, they will constitute a new
issue of securities with no established trading market. There can be no
assurance that such a market will develop. In addition, the New Debentures will
not be listed on any national securities exchange. The New Debentures may trade
at a discount from the initial offering price of the Old Debentures, depending
upon prevailing interest rates, the market for similar securities, Holdings'
operating results and other factors. Holdings has been advised by the Initial
Purchaser that it currently intends to make a market in the New Debentures, as
permitted by applicable laws and regulations; however, the Initial Purchaser is
not obligated to do so, and any such market-making activities may be
discontinued at any time without notice. In addition, such market-making
activity may be limited during the pendency of the Shelf Registration Statement
(as defined). Therefore, there can be no assurance that an active market for any
of the New Debentures will develop, either prior to or after Holdings'
performance of its obligations under the Registration Rights Agreement. If an
active public market does not develop, the market price and liquidity of the New
Debentures may be adversely affected.
If a public trading market develops for the New Debentures, future trading
prices will depend on many factors, including, among other things, prevailing
interest rates, the financial condition of Holdings, and the market for similar
securities. Depending on these and other factors, the New Debentures may trade
at a discount.
Historically, the market for non-investment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of such
securities. There can be no assurance that the market for the New Debentures
will not be subject to similar disruptions. Any such disruptions may have an
adverse effect on holders of the New Debentures.
Notwithstanding the registration of the New Debentures in the Exchange
Offer, holders who are "affiliates" (as defined under Rule 405 of the Securities
Act) of Holdings may publicly offer for sale or resell the New Debentures only
in compliance with the provisions of Rule 144 under the Securities Act.
Each broker-dealer that receives New Debentures for its own account in
exchange for Old Debentures, where such Old Debentures were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Debentures. See "Plan of Distribution."
EXCHANGE OFFER PROCEDURES
Subject to the conditions set forth under "The Exchange Offer--Conditions to
the Exchange Offer," delivery of New Debentures in exchange for Old Debentures
tendered and accepted for exchange pursuant to the Exchange Offer will be made
only after timely receipt by the Exchange Agent of (i) certificates for Old
Debentures or a book-entry confirmation of a book-entry transfer of Old
Debentures into the Exchange Agent's account at the DTC, including an Agent's
Message (as defined) if the tendering holder does not deliver a Letter of
Transmittal, (ii) a completed and signed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees, or, in the case of a
book-entry transfer, an Agent's Message in lieu of the Letter of Transmittal,
and (iii) any other documents required by the Letter of
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<PAGE>
Transmittal. Therefore, Holders of Old Debentures desiring to tender such Old
Debentures in exchange for New Debentures should allow sufficient time to ensure
timely delivery. Holdings is under a duty to give notification of defects or
irregularities with respect to the tenders of Old Debentures for exchange. Old
Debentures that are not tendered or that are tendered but not accepted by
Holdings for exchange will, following consummation of the Exchange Offer,
continue to be subject to the existing restrictions upon transfer thereof under
the Securities Act and, upon consummation of the Exchange Offer, certain
registration and other rights under the Registration Rights Agreement will
terminate.
Each broker-dealer that receives New Debentures for its own account in
exchange for Old Debentures, where such Old Debentures were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Debentures. See "Plan of Distribution."
PRINCIPAL STOCKHOLDER
Since the consummation of the Acquisition Transactions, AIP, its affiliates
and certain other individuals associated with AIP have been the only
stockholders of Holdings, which is the 100% parent of the Company, and AIP has
the ability to designate all of the directors of Holdings and the Company. See
"Management," "Acquisition Transactions" and "Description of Holdings Capital
Stock." AIP is therefore in a position to direct the management and affairs of
Holdings and the Company and may cause Holdings and the Company to enter into
transactions that could ultimately enhance stockholder value but may involve
risks to holders of the Debentures.
ACQUISITION TRANSACTIONS
Pursuant to the Merger Agreement, Holdings, a corporation formed by AIP,
acquired all of the issued and outstanding capital stock of the Company, through
the Merger of Merger Sub, a wholly owned subsidiary of Holdings, into the
Company. The aggregate consideration paid by AIP pursuant to the Merger
Agreement was approximately $376.9 million. The Company was the surviving
corporation in the Merger.
In order to finance the Merger, (i) AIP and affiliates of, and certain other
individuals associated with, AIP contributed the AIP Equity Contribution to
Holdings, (ii) Holdings issued and sold the Old Debentures and contributed the
Holdings Equity Contribution to the Company (iii) the Company entered into the
Term Loan Facilities providing for term loan borrowings in the aggregate
principal amount of approximately $111.0 million and the Revolving Credit
Facility for borrowings of up to $25.0 million under the New Credit Agreement,
and borrowed all term loans available, and (iv) the Company issued and sold
$175.0 million aggregate principal amount of the Notes pursuant to the Notes
Offering Memorandum.
In connection with the Merger, the Company commenced the Tender Offer on
April 24, 1998, for any and all of the 10% Notes and simultaneously conducted
the Solicitation of consents from holders of the 10% Notes to certain amendments
to and waivers under the 10% Indenture and certain related collateral documents.
All of the outstanding 10% Notes were purchased by the Company pursuant to the
Tender Offer and such purchase was consummated concurrently with the closing of
the Notes Offering. The aggregate consideration paid by the Company in the
Tender Offer and Solicitation was approximately $74.1 million (including the
amount paid to holders tendering 10% Notes in excess of the principal amount
being tendered (the "Tender Premium") of approximately $9.1 million but
excluding accrued interest).
Following consummation of the Tender Offer and Solicitation, the Company
submitted the 10% Notes for cancellation. Since such cancellation, the 10%
Indenture, as supplemented by the Supplemental Indenture, is of no further force
or effect.
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Consummation of the Merger was conditioned upon the consummation of the
Tender Offer and Solicitation, the execution of and borrowings by the Company
under the New Credit Facility, the consummation of the Notes Offering or
alternative financing and the Holdings Equity Contribution.
AMERICAN INDUSTRIAL PARTNERS
AIP is a private investment fund headquartered in San Francisco and New York
with committed capital of approximately $800.0 million. AIP seeks to invest in
companies which hold either a protected competitive position or proprietary
capability, ideally combined with a leading market share. The firm does not seek
to play a role in daily management; rather, AIP seeks to provide its portfolio
companies with access to the management expertise of its operating partners, all
of whom are former Chief Executive Officers of Fortune 500 corporations, through
active board-level participation as well as on-call advice when desired.
Following the consummation of the Acquisition Transactions, AIP and
affiliates of, and certain other individuals associated with, AIP contributed
$65.0 million and $330,000, respectively, in equity to Holdings, and Theodore C.
Rogers, a general partner of AIP and former Chairman and Chief Executive Officer
of NL Industries, Inc., became the Company's Non-Executive Chairman of the
Board. Although no specific arrangements are in place, following the
consummation of the Acquisition Transactions, AIP intends to offer the Company's
executive officers the opportunity to own up to approximately 5.0% of Holdings'
equity through a combination of direct investments and option programs.
USE OF PROCEEDS
Holdings will not receive any proceeds from the Exchange Offer.
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CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at March 31, 1998 and the consolidated capitalization of Holdings on a
pro forma basis to give effect to the Acquisition Transactions, including the
Offering. The following table should be read in conjunction with the "Unaudited
Pro Forma Condensed Consolidated Financial Data" and the related notes thereto
included elsewhere herein and the "Selected Historical Financial and Other Data"
and the related notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
-----------------------
COMPANY HOLDINGS
ACTUAL(A) PRO FORMA
---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Long-term debt (includes current portion):
Copetro Credit Agreement................................................................ $ 15,850 $ 15,850
10% Notes............................................................................... 65,000 --
Other existing indebtedness(b).......................................................... 7,587 7,587
Revolving Credit Facility(c)............................................................ -- --
Term Loan Facilities.................................................................... -- 111,000
Notes................................................................................... -- 175,000
Debentures.............................................................................. -- 30,050
---------- -----------
Total debt.............................................................................. 88,437 339,487
Stockholder's equity:
Total stockholders' equity.............................................................. 60,506 65,330
---------- -----------
Total capitalization.................................................................... $ 148,943 $ 404,817
---------- -----------
---------- -----------
</TABLE>
- ------------------------
(a) Holdings has been formed in connection with the Acquisition Transactions and
did not exist as of March 31, 1998. Accordingly, the actual data reflect the
consolidated capitalization of the Company as of such date.
(b) Includes various outstanding industrial revenue bonds, capitalized leases
and certain other miscellaneous indebtedness. In addition, the Company had
$15.0 million of available credit pursuant to a revolving credit facility
(the "Existing Credit Agreement") from which no funds were drawn as of March
31, 1998, which was terminated upon the consummation of the Acquisition
Transactions. As of March 31, 1998, approximately $3.4 million of letters of
credit were outstanding under the Existing Credit Agreement, and upon
Closing, such letters of credit were collateralized pursuant to a letter of
credit issued under the New Credit Agreement in connection with the
Acquisition Transactions. See "Description of Other Indebtedness--New Credit
Agreement."
(c) The Revolving Credit Facility under the New Credit Agreement provides for up
to $25.0 million of borrowing availability, subject to a borrowing base
limitation. See "Description of Other Indebtedness--New Credit Agreement."
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The following Unaudited Pro Forma Condensed Consolidated Financial Data have
been derived by the application of pro forma adjustments to the Company's
historical financial data included elsewhere herein. The pro forma condensed
consolidated statements of operations of Holdings for the year ended December
31, 1997 and the three months ended March 31, 1997 and March 31, 1998 give
effect to the Acquisition Transactions as if the Acquisition Transactions had
been consummated as of January 1, 1997. The pro forma consolidated balance sheet
data of Holdings give effect to the Acquisition Transactions as if the
Acquisition Transactions had been consummated as of March 31, 1998. The
adjustments are described in the accompanying notes. The Unaudited Pro Forma
Condensed Consolidated Financial Data do not purport to represent what Holdings'
results of operations or financial position actually would have been if the
Acquisition Transactions had been consummated on the dates indicated, or what
such results of operations or financial position will be for any future period
or date. The Unaudited Pro Forma Condensed Consolidated Financial Data should be
read in conjunction with the "Selected Historical Financial and Other Data" and
the related notes thereto and the Consolidated Financial Statements and related
notes thereto included elsewhere herein.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS DATA
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
----------------------
<S> <C> <C> <C> <C>
COMPANY
HISTORICAL COMPANY HOLDINGS PRO FORMA
----------- ----------- --------- -----------
(DOLLARS IN THOUSANDS)
Net sales............................................. $ 231,911 $ 231,911
Cost of goods sold.................................... 172,390 4,378(a) 176,768
----------- -----------
Gross profit.......................................... 59,521 55,143
Selling, general and administrative expenses.......... 18,510 (1,344)(b) 17,166
----------- -----------
Operating income................................ 41,011 37,977
Other income (expense):
Interest expense, net................................. (6,287) (24,056)(c) (4,346 (c) (34,689)
Other, net............................................ (49) (49)
----------- -----------
Income before income taxes............................ 34,675 3,239
Income tax expense.................................... 12,691 (8,077)(d) (1,591 (d) 3,023
----------- -----------
Net income.......................................... $ 21,984 $ 216
----------- -----------
----------- -----------
EBITDA(e)............................................. $ 59,182 $ 59,182
</TABLE>
26
<PAGE>
THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
----------------------
<S> <C> <C> <C> <C>
COMPANY
HISTORICAL COMPANY HOLDINGS PRO FORMA
----------- ----------- --------- -----------
(DOLLARS IN THOUSANDS)
Net sales............................................. $ 62,070 $ 62,070
Cost of goods sold.................................... 45,683 1,312(f) 46,995
----------- -----------
Gross profit.......................................... 16,387 15,075
Selling, general and administrative................... 2,684 1,164(g) 3,848
----------- ----------- -----------
Operating income................................ 13,703 11,227
Other income (expense):
Interest expense, net................................. (1,157) (6,368)(h) (1,188 (h) (8,713)
Other, net............................................ (72) (72)
----------- -----------
Income before income taxes............................ 12,474 2,442
Income tax expense.................................... 4,407 (2,681)(d) (420 (d) 1,306
----------- -----------
Net income.......................................... $ 8,067 $ 1,136
----------- -----------
----------- -----------
EBITDA(e)............................................. $ 16,528 $ 16,528
</TABLE>
THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
----------------------
<S> <C> <C> <C> <C>
COMPANY
HISTORICAL COMPANY HOLDINGS PRO FORMA
----------- ----------- --------- -----------
(DOLLARS IN THOUSANDS)
Net sales............................................. $ 55,395 $ 55,395
Cost of goods sold.................................... 42,236 1,197(i) 43,433
----------- -----------
Gross profit.......................................... 13,159 11,962
Selling, general and administrative................... 4,385 (336)(j) 4,049
----------- ----------- -----------
Operating income................................ 8,774 7,913
Other income (expense):
Interest expense, net................................. (1,867) (5,852)(k) (1,055 (k) (8,774)
Other, net............................................ (67) (67)
----------- -----------
Income (loss) before income taxes..................... 6,840 (928)
Income tax expense.................................... 2,492 (1,989)(d) (384 (d) 119
----------- -----------
Net income (loss)................................... $ 4,348 $ (1,047)
----------- -----------
----------- -----------
EBITDA(e)............................................. $ 13,214 $ 13,214
</TABLE>
27
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS DATA
(a) The increase in cost of goods sold relates to increased depreciation expense
of approximately $4.6 million resulting from the increase in fixed asset
value reflecting the allocation of a portion of the purchase price to the
write-up of fixed assets and an approximate $0.2 million decrease in
amortization expense resulting from the write-off of certain intangibles.
(b) Adjustments to selling, general and administrative expenses include the
following: (i) the elimination of approximately $6.4 million representing
the excess of fees and expenses paid to HII and compensation payments
pursuant to employment and consulting agreements which were terminated upon
consummation of the Acquisition Transactions over the amount of management
fees expected to be paid to AIP, (ii) an increase in amortization expense
for goodwill of approximately $4.6 million and for the non-compete agreement
of $0.4 million (assumes 40-year and 7-year amortization periods,
respectively).
(c) Adjustments to interest expense include the following: (i) the reduction of
approximately $0.3 million of existing financing fee amortization, (ii)
reduction of approximately $1.2 million of interest income, (iii) reduction
of approximately $0.1 million of expenses associated with the Existing
Credit Agreement for letters of credit and commitment fees, (iv) the
elimination of $6.5 million related to the 10% Notes, (v) the addition of
approximately $27.4 million related to the Notes and the New Credit
Agreement, (vi) approximately $0.2 million of incremental maintenance and
commitment fees and expenses on the New Credit Agreement, (vii) the increase
of approximately $2.4 million in amortization relating to financing fees and
other transaction costs (amortized over 6-10 years), and (viii) the increase
of approximately $4.1 million (compounded semiannually) related to the
Debentures offered hereby.
(d) Reflects the tax effect of the pro forma adjustments and the
non-deductibility of certain intangible asset amortization.
(e) EBITDA is defined as operating income before depreciation, amortization,
fees and expenses paid to HII, compensation payments pursuant to employment
and consulting agreements which were terminated upon consummation of the
Acquisition Transactions and AIP management fees. EBITDA is not defined in
the same manner as "Consolidated EBITDA" in the Indenture or in "Description
of Debentures" herein. See "Description of Debentures--Certain Definitions."
EBITDA is not intended to represent cash flow from operations as defined by
GAAP and should not be used as an alternative to net income as an indicator
of operating performance or to cash flows as a measure of liquidity. EBITDA
is included in the Prospectus as it is a basis upon which Holdings and the
Company assess their financial performance, and certain covenants in
Holdings' and the Company's borrowing arrangements will be tied to similar
measures. EBITDA, as presented, represents a useful measure of assessing
Holdings' and the Company's ongoing operating activities without the impact
of financing activity and nonrecurring charges. While EBITDA is frequently
used as a measure of operations and the ability to meet debt service
requirements, it is not necessarily comparable to other similarly titled
captions of other companies due to potential inconsistencies in the method
of calculation.
(f) The increase in cost of goods sold relates to increased depreciation expense
of approximately $1.3 million resulting from the increase in fixed asset
value reflecting the allocation of a portion of the purchase price to the
write-up of fixed assets and a decrease in amortization expense resulting
from the write-off of certain intangibles.
(g) Adjustments to selling, general and administrative expenses include the
following: (i) the elimination of approximately $0.1 million representing
the excess of fees and expenses paid to HII and compensation payments
pursuant to employment and consulting agreements which will be terminated
upon consummation of the Acquisition Transactions over the amount of
management fees expected to be paid to AIP and (ii) an increase in
amortization expense for goodwill of approximately $1.1 million
28
<PAGE>
and for the non-compete agreement of $0.1 million (assumes 40-year and
7-year amortization period, respectively).
(h) Adjustments to interest expense include the following: (i) the reduction of
approximately $0.1 million of existing financing fee amortization, (ii)
reduction of approximately $0.7 million of interest income, (iii) reduction
of expenses associated with the Existing Credit Agreement for letters of
credit and commitment fees, (iv) the elimination of $1.6 million related to
the 10% Notes, (v) the addition of approximately $6.8 million related to the
Notes and the New Credit Agreement, (vi) approximately $0.1 million of
incremental maintenance and commitment fees and expenses on the New Credit
Agreement, (vii) the increase of approximately $0.6 million in amortization
relating to financing fees and other transaction costs (amortized over 6 to
10 years), and (viii) the increase of approximately $1.1 million related to
the Debentures.
(i) The increase in cost of goods sold relates to increased depreciation expense
of approximately $1.2 million resulting from the increase in fixed asset
value reflecting the allocation of a portion of the purchase price to the
write-up of fixed assets and an approximate $0.1 million decrease in
amortization expense resulting from the write-off of certain intangibles.
(j) Adjustments to selling, general, and administrative expenses include the
following: (i) the elimination of approximately $1.6 million representing
the excess of fees and expenses paid to HHI and compensation payments
pursuant to employment and consulting agreements which were terminated upon
consummation of the Acquisition Transactions over the amount of management
fees expected to be paid to AIP and (ii) an increase in amortization expense
for goodwill of approximately $1.1 million and for the non-compete agreement
amortization of $0.1 million (assumes a 40-year and 7-year amortization
period, respectively).
(k) Adjustments to interest expense include the following: (i) the reduction of
approximately $0.1 million of existing financing fee amortization, (ii)
reduction of approximately $0.1 million of interest income, (iii) reduction
of expenses associated with the Existing Credit Agreement for letters of
credit and commitment fees, (iv) a reduction of $1.6 million related to the
10% Notes, (v) the addition of approximately $6.8 million of interest
expense on the Notes and the New Credit Agreement, (vi) incremental
maintenance and commitment fees and expenses of approximately $0.1 million
on the New Credit Agreement, (vii) the increase of approximately $0.6
million in amortization relating to financing fees and other transaction
costs (amortized over 6 to 10 years) and (viii) the increase of $1.0 million
related to the Debentures.
29
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET DATA
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
COMPANY -----------------------
HISTORICAL COMPANY HOLDINGS PRO FORMA
---------- ----------- ---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Cash........................................................ $ 53,865 (50,644)(a) $ 3,221(b)
Accounts receivable......................................... 33,566 33,566
Inventories................................................. 30,905 30,905
Prepaid items/other......................................... 5,127 5,127
---------- -----------
Total current assets.................................... 123,463 72,819
Net fixed assets............................................ 61,852 153,148(c) 215,000
Goodwill.................................................... 0 183,708(c) 183,708
Capitalized financing costs................................. 2,045 16,705(c) 3,000(c) 21,750
Other assets................................................ 3,159 2,953(d) 6,112
---------- -----------
Total assets............................................ $ 190,519 $ 499,389
---------- -----------
---------- -----------
LIABILITIES & EQUITY
Accounts payable............................................ $ 16,890 $ 16,890
Accruals.................................................... 10,378 (1,625)(a) 8,753
Taxes payable............................................... 5,286 5,286
Current portion of long-term debt........................... 1,427 1,427
---------- -----------
Total current liabilities............................... 33,981 32,356
Long-term debt.............................................. 87,010 221,000(a) 30,050(a) 338,060
Deferred income taxes....................................... 4,814 53,924(c) 58,738
Other long-term liabilities................................. 4,208 697(e) 4,905
Stockholders' equity........................................ 60,506 31,874(f) (27,050 (f) 65,330
---------- -----------
Total liabilities and stockholders' equity.............. $ 190,519 $ 499,389
---------- -----------
---------- -----------
</TABLE>
30
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET DATA
(a) The net effect on cash reflects the following (dollars in thousands):
<TABLE>
<S> <C>
TOTAL SOURCES:
Cash........................................................................................ $ 50,644
Borrowings under New Credit Agreement....................................................... 111,000
Notes....................................................................................... 175,000
Debentures.................................................................................. 30,050
AIP Equity Contribution..................................................................... 65,330
---------
$ 432,024
---------
---------
TOTAL USES:
Merger Consideration........................................................................ $ 331,292
Purchase of 10% Notes in the Tender Offer................................................... 65,000
Accrued interest on 10% Notes............................................................... 1,625
Tender premium.............................................................................. 9,107
Transaction fees............................................................................ 25,000
---------
$ 432,024
---------
---------
</TABLE>
(b) Reflects cash that was not be used to fund the Acquisition Transactions.
(c) The Merger has been accounted for as a purchase in accordance with
Accounting Principles Board Opinion No. 16. The purchase cost has been
preliminarily allocated to tangible assets and liabilities and identifiable
intangible assets based on management's estimates of fair market value at March
31, 1998. The excess of the purchase price over amounts allocated to the
tangible assets and liabilities and identifiable intangible assets will be
amortized over 40 years.
The purchase cost and (preliminary) allocation of the excess of cost over
the net book value of assets acquired is as follows (dollars in thousands):
<TABLE>
<S> <C>
Purchase cost pursuant to the Merger Agreement:
Enterprise value.......................................................................... $ 376,894
Less: assumed indebtedness................................................................ (23,437)
Less: existing indebtedness to be refinanced.............................................. (65,000)
Less: accrued interest on existing debt................................................... (1,923)
Less: tender premium...................................................................... (9,107)
Add: cash................................................................................. 53,865
---------
Merger Consideration........................................................................ 331,292
Transaction fees and expenses............................................................... 25,000
---------
Total purchase cost......................................................................... 356,292
Book value of net assets acquired......................................................... (60,506)
Tender premium............................................................................ 9,107
---------
Excess of purchase cost over the net book value of assets acquired (pre-allocations)...... $ 304,893
---------
---------
Allocated to:
Increase in value of property, plant and equipment........................................ $ 153,148
Recognize pension assets in excess of the projected benefit obligation.................... 457
Adjust accrued postretirement benefit cost to the projected postretirement benefit
obligation.............................................................................. (1,154)
Write-off of existing deferred debt issuance costs........................................ (2,045)
Write-off of other existing intangibles................................................... (47)
Increase in deferred taxes................................................................ (53,924)
Non-compete agreement..................................................................... 3,000
Deferred debt issuance costs.............................................................. 21,750
Goodwill.................................................................................. 183,708
---------
Total allocation............................................................................ $ 304,893
---------
---------
</TABLE>
31
<PAGE>
(d) Reflects the write-off of certain intangible assets and the
capitalization of $3.0 million relating to the non-compete agreement.
(e) Net adjustment of pension and postretirement benefit obligations to the
excess of the accumulated benefit obligation over the fair market value of plan
assets.
(f) Represents the net change in stockholders' equity as a result of the
Acquisition Transactions, including related financing and the application of the
proceeds thereof (dollars in thousands):
<TABLE>
<S> <C>
AIP Equity Contribution........................................................... $ 65,330
---------
Pro forma stockholders' equity.................................................... 65,330
Net book value of assets acquired................................................. (60,506)
---------
Pro forma adjustments to stockholders' equity..................................... $ 4,824
---------
---------
</TABLE>
32
<PAGE>
SELECTED HISTORICAL FINANCIAL AND OTHER DATA
The following table presents selected historical statement of operations,
balance sheet and other data of the Company as of and for the five years ended
December 31, 1997 which are derived from the Company's audited consolidated
financial statements. The selected historical statement of operations, balance
sheet and other data for the three-month periods ended March 31, 1997 and 1998
are derived from the unaudited consolidated financial statements of the Company
and, in the opinion of management, include all adjustments necessary for a fair
presentation of the data for such periods. The results for the three-month
period ended March 31, 1998 are not necessarily indicative of the results to be
expected for the year ended December 31, 1998 or any future period. The data 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 and the related notes thereto included
elsewhere herein.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- ----------------------
1993 1994 1995 1996 1997 1997 1998
--------- --------- --------- --------- --------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER TON) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................. $ 149,225 $ 130,797 $ 178,628 $ 242,744 $ 231,911 $ 55,395 $ 62,070
Cost of goods sold.................... 124,760 109,883 142,188 176,371 172,390 42,236 45,683
--------- --------- --------- --------- --------- ---------- ----------
Gross profit.......................... 24,465 20,914 36,440 66,373 59,521 13,159 16,387
Selling, general and administrative
expenses............................. 9,901 8,226 9,687 15,321 18,510 4,385 2,684
--------- --------- --------- --------- --------- ---------- ----------
Operating income...................... 14,564 12,688 26,753 51,052 41,011 8,774 13,703
Other income (expense):
Interest expense, net............... (1,440) (1,358) (1,127) (7,573) (6,287) (1,867) (1,157)
Asset utilization fee to parent..... (6,440) (6,133) (6,286) -- -- -- --
Other............................... (1,806) (5,142) 2,111 (772) (49) (67) (72)
--------- --------- --------- --------- --------- ---------- ----------
(9,686) (12,633) (5,302) (8,345) (6,336) (1,934) (1,229)
Income before income taxes............ 4,878 55 21,451 42,707 34,675 6,840 12,474
Income tax expense.................... 2,008 189 7,633 15,148 12,691 2,492 4,407
--------- --------- --------- --------- --------- ---------- ----------
Net income (loss)..................... $ 2,870 $ (134) $ 13,818 $ 27,559 $ 21,984 $ 4,348 $ 8,067
--------- --------- --------- --------- --------- ---------- ----------
--------- --------- --------- --------- --------- ---------- ----------
OTHER DATA:
EBITDA(1)............................. $ 23,958 $ 21,986 $ 36,514 $ 66,563 $ 59,182 $ 13,214 $ 16,528
EBITDA margin......................... 16.1% 16.8% 20.4% 27.4% 25.5% 23.9% 26.6%
Capital expenditures.................. $ 6,973 $ 5,986 $ 5,774 $ 6,371 $ 21,391 $ 3,651 $ 4,942
Cash interest expense(2).............. 1,796 1,572 1,310 7,964 8,172 1,968 2,138
Ratio of earnings to fixed
charges(3)........................... 2.7x 1.0x 10.2x 5.6x 4.6x 4.0x 6.0x
Quantity of CPC sold (in thousands of
tons)................................ 1,286 1,229 1,484 1,452 1,443 346 387
Net sales per ton of CPC sold......... $ 116.01 $ 106.40 $ 120.35 $ 167.21 $ 160.67 $ 160.31 $ 160.45
Gross profit per ton of CPC sold...... 19.02 17.01 24.55 45.72 41.24 38.08 42.36
BALANCE SHEET DATA (AT PERIOD END):
Working capital....................... $ 19,366 $ 15,828 $ 27,011 $ 56,818 $ 79,435 $ 89,482
Total assets.......................... 106,483 105,390 113,930 148,905 174,911 190,519
Total debt............................ 17,986 11,907 74,291 72,885 84,014 88,437
Stockholders' equity.................. 68,791 68,657 5,896 31,955 52,439 60,506
</TABLE>
- ------------------------------
(1) EBITDA is defined as operating income before depreciation, amortization,
fees and expenses paid to HII, compensation payments pursuant to employment
and consulting agreements which were terminated upon consummation of the
Acquisition Transactions and AIP management fees. EBITDA is not defined in
the same manner as "Consolidated EBITDA" in the Indenture or in "Description
of Debentures" herein. See "Description of Debentures--Certain Definitions."
EBITDA is not intended to represent cash flow from operations as defined by
GAAP and should not be used as an alternative to net income as an indicator
of operating performance or to cash flows as a measure of liquidity. EBITDA
is included in the Prospectus as it is a basis upon which Holdings and the
Company assess their financial performance, and certain covenants in
Holdings' and the Company's borrowing arrangements will be tied to similar
measures. EBITDA, as presented, represents a useful measure of assessing
Holdings' and the Company's ongoing operating activities without the impact
of financing activity and nonrecurring charges. While EBITDA is frequently
used as a measure of operations and the ability to meet debt service
requirements, it is not necessarily comparable to other similarly titled
captions of other companies due to potential inconsistencies in the method
of calculation.
(2) Cash interest expense excludes the amounts of interest charged to earnings
relating to a capitalized lease which has been sublet for a term coterminous
with the primary lease and for a rental amount in excess of the rent payable
on the primary lease and the amortization of debt issuance costs under the
10% Notes.
(3) Earnings used in computing the ratio of earnings to fixed charges consist of
earnings before income taxes and discontinued operations plus fixed charges.
Fixed charges consist of interest expense plus that portion of operating
lease rental expense which is representative of an interest factor.
33
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Company is the world's largest producer of CPC. The Company produces
anode grade CPC, which is an essential raw material for primary aluminum
production, and industrial grade CPC, which is used in a variety of specialty
metals and materials applications. Historically, the Company's profitability has
been primarily a function of its sales volumes of CPC, CPC pricing and the cost
of RPC, which constitutes the largest single component of the Company's cost of
goods sold.
The Company has benefitted from the consistent growth in primary aluminum
production since 1995. The growth in primary aluminum production, which is
projected by a variety of industry sources to continue through the next several
years, has led to increased demand for CPC which has substantially outpaced the
growth in CPC production capacity. As a result, the calcining industry is
operating at historically high operating rates; the Company has operated at full
capacity since 1995. The selling price per ton realized by the Company has
increased 33.5% from 1995 to 1997. Consequently, the Company's net sales have
increased by 29.8% from $178.6 million to $231.9 million over the same period.
The Company produces CPC from RPC, which is a by-product of the petroleum
refining process. RPC generally represents an immaterial proportion of total
refinery sales. Petroleum refiners can either sell the RPC for its fuel value at
a relatively low price or sell the RPC at a significantly higher price for use
in the calcining industry. As a result of these factors, the price of RPC has
not increased as rapidly as the price of CPC since 1995. Consequently, the
Company has been able to increase its gross profit per ton of CPC sold from
$24.55 in 1995 to $41.24 in 1997. Furthermore, historically the Company has been
able to obtain lower purchase prices for RPC in times of declining CPC prices,
enabling the Company to earn a relatively stable profit spread even in periods
of CPC price declines.
The following table sets forth for the periods shown, the Company's sales
volumes in tons, the average selling price per ton, and gross profit per ton
sold:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------- --------------------
1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Sales (thousands of tons).................................. 1,484 1,452 1,443 346 387
Average selling price per ton.............................. $ 120.35 $ 167.21 $ 160.67 $ 160.31 $ 160.45
Gross profit per ton sold.................................. 24.55 45.72 41.24 38.08 42.36
</TABLE>
The following table sets forth for the periods shown, net sales, cost of
goods sold, gross profit, selling general and administrative expense ("SG&A")
and EBITDA in million of dollars and as a percentage of net sales:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
---------------------------------------------------------------- ------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 1996 1997 1997 1998
-------------------- -------------------- -------------------- -------------------- --------------------
Net sales........ $ 178.6 100.0% $ 242.7 100.0% $ 231.9 100.0% $ 55.4 100.0% $ 62.1 100.0%
Cost of goods
sold........... 142.2 79.6 176.4 72.7 172.4 74.3 42.2 76.2 45.7 73.6
Gross profit..... 36.4 20.4 66.4 27.3 59.5 25.7 13.2 23.8 16.4 26.4
SG&A............. 9.7 5.4 15.3 6.3 18.5 8.0 4.4 7.9 2.7 4.3
EBITDA........... 36.5 20.4 66.6 27.4 59.2 25.5 13.2 23.9 16.5 26.6
</TABLE>
34
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
The Company's net sales for the three months ended March 31, 1998 increased
12.0% to $62.1 million from $55.4 million for the comparable 1997 period. Net
sales of anode grade CPC increased 17.9% to $52.5 million while net sales of
industrial grade CPC decreased 13.3% to $9.1 million.
The increase in anode grade CPC net sales was primarily the result of a
22.4% increase in sales volume to 316,529 tons. This increase in sales volume
was partially offset by a decline of 3.7% in average selling price. The increase
in anode grade sales volume was primarily the result of scheduling more customer
shipments of anode grade CPC in the 1998 period. The moderate decline in selling
price was a result of the continuation of the market stabilization after CPC
prices had increased substantially in 1996.
The decrease in industrial grade CPC net sales was the result of a 20.6%
decrease in sales volume to 64,997 tons which was partially offset by a 9.1%
increase in selling price. The decrease in sales volume was primarily the result
of the scheduling of greater anode grade CPC shipments in the 1998 period.
The Company's gross profit for the three months ended March 31, 1998
increased by 24.5% to $16.4 million from $13.2 million for the comparable 1997
period. The increase in gross profit was due to the increase in sales discussed
above which was partially offset by an increase in cost of goods. The higher
cost of sales was mainly the result of higher sales volume as the average cost
per ton decreased due mainly to lower raw material costs.
Operating income for the three months ended March 31, 1998 increased 56.2%
to $13.7 million from $8.8 million in the comparable 1997 period. The
improvement in operating income was due to the increase in gross profit
discussed above coupled with a decrease in selling, general and administrative
expenses. The decrease in selling, general and administrative expenses was
primarily the result of decreased compensation payments pursuant to employment
and consulting agreements which will be terminated upon consummation of the
Acquisition Transactions.
Income before income taxes for the three months ended March 31, 1998
increased 82.4% to $12.5 million from $6.8 million for the comparable 1997
period. The increase was attributable to the improved operating income discussed
above and a $0.7 million decrease in net interest expense primarily due to
increased interest income from larger cash balances in 1998. As a result of the
factors discussed above, net income for the three months ended March 31, 1998
increased to $8.1 million from $4.3 million in the comparable 1997 period.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
The Company's net sales for the year ended December 31, 1997 decreased 4.5%
to $231.9 million from $242.7 million in 1996. Net sales of anode grade CPC
decreased 4.8% to $189.9 million while net sales of industrial grade CPC
increased 4.2% to $40.2 million.
The decrease in anode grade CPC net sales was primarily the result of a 6.4%
decline in the average selling price per ton in 1997 from 1996. This decline in
average selling price was partially offset by an increase of 1.8% in sales
volume in 1997 to approximately 1.1 million tons. The moderate 1997 anode grade
CPC price decline was largely the result of a market stabilization after CPC
prices had increased substantially during 1996.
The increase in industrial grade CPC net sales was the result of an 8.3%
increase in the average selling price which was partially offset by a 3.8%
decrease in sales volume. These changes were primarily the result of increased
market prices across most product applications and a slight decrease in titanium
dioxide shipments.
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The Company's 1997 gross profit decreased 10.3% to $59.5 million, from $66.4
million in 1996. The decrease in gross profit was due to the reduction in sales
discussed above which was partially offset by a decrease in cost of goods sold.
The lower cost of goods sold was primarily the result of lower raw material
costs.
Operating income decreased 19.7% to $41.0 million in 1997 from $51.1 million
in 1996. The decline in operating income was due to the decrease in gross profit
discussed above and an increase in selling, general and administrative expenses.
The increase in selling, general and administrative expenses was primarily the
result of increased compensation payments pursuant to employment and consulting
agreements which were terminated upon consummation of the Acquisition
Transactions.
Income before income taxes decreased 18.8% to $34.7 million in 1997 from
$42.7 million in 1996. The reduction was attributable to the reduced operating
income discussed above, partially offset by a $2.0 million decrease in other
expense. This decrease was primarily a result of greater interest income from
greater cash balances in 1997. As a result of the factors discussed above, net
income for 1997 decreased 20.2% to $22.0 million from $27.6 million in 1996.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
The Company's net sales for the year ended December 31, 1996 increased 35.9%
to $242.7 million from $178.6 million in 1995. Net sales of anode grade CPC
increased 34.8% to $199.4 million in 1996, while net sales of industrial grade
CPC increased 40.0% to $38.6 million.
The increase in anode grade CPC net sales was primarily the result of higher
average selling prices which grew approximately 45.8% in 1996. The increase in
the average selling price for anode grade CPC was partially offset by a decrease
in selling volume of 7.5% to approximately 1.1 million tons. The higher prices
were the result of the attractive industry fundamentals experienced in 1996. The
lower sales volume of anode grade CPC was primarily attributable to the
unavailability of third-party produced CPC, which the Company had been able to
purchase for resale in 1995.
The increase in industrial grade CPC net sales was the result of a 22.5%
average price increase and a 14.4% increase in sales volume in 1996 compared to
1995. The increase in both industrial grade CPC selling prices and sales volume
was due to strong market conditions.
The Company's 1996 gross profit increased 82.1% to $66.4 million from $36.4
million in 1995. This increase in gross profit was due to the increase in sales
discussed above, partially offset by an increase in cost of sales. The higher
cost of goods sold was mainly the result of higher raw material costs.
Operating income increased 90.8% to $51.1 million in 1996 from $26.8 million
in 1995. The increase in operating income was due to the increase in gross
profit discussed above which was partially offset by an increase in selling,
general and administrative expenses. The increase in selling, general and
administrative expenses was primarily the result of increased compensation
payments pursuant to employment and consulting agreements which were terminated
upon consummation of the Acquisition Transactions.
Income before income taxes increased 99.1% to $42.7 million in 1996 from
$21.5 million in 1995 as a result of the improvement in operating income that
was partially offset by a $3.0 million increase in other expense. This increase
primarily resulted from a non-recurring income item in 1995. The increase in net
interest expense arising from the issuance of the 10% Notes in December 1995 was
offset by the reduction in the asset utilization fee to HII, under an agreement
which was terminated in December 1995. As a result of the factors discussed
above, net income for 1996 increased 99.4% to $27.6 million from $13.8 million
in 1995.
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LIQUIDITY AND CAPITAL RESOURCES
HISTORICAL
Historically, the Company's principal source of liquidity has been cash flow
from operations. In addition, since 1997 the Company's has supplemented its cash
flow with borrowings under the Copetro Credit Agreement to finance construction
of the New La Plata Kiln at the Company's La Plata, Argentina facility.
Net cash flow provided (used) by operating activities was $10.8 million and
$(8.2) million for the three months ended March 31, 1998 and 1997, respectively.
The increase in operating cash flow was a result of lower working capital
requirements in the 1998 period combined with an increase in net income. Net
cash flow provided by operating activities was $31.3 million, $27.7 million and
$17.2 million in 1997, 1996 and 1995, respectively. The Company's operating cash
flow improved in 1997 over 1996 primarily as a result of lower working capital
requirements offset in part by lower net income. The improvement in operating
cash flow in 1996 compared to 1995 was primarily the result of the increase in
net income experienced during 1996 which reflected the Company's substantially
improved financial performance in that period. This increase was partially
offset by higher working capital requirements which were necessary to support
the Company's higher sales volumes.
Capital expenditures were $4.9 million and $3.7 million for the three months
ended March 31, 1998 and 1997, respectively. The higher capital expenditures in
the 1998 period reflect the continued construction of the New La Plata Kiln.
Capital expenditures were $21.4 million, $6.4 million, and $5.8 million in 1997,
1996 and 1995, respectively. Of the increase in capital expenditures in 1997,
$13.4 million is attributable to the construction of the New La Plata Kiln and
$1.0 million was related to the construction of a new ship loader facility at
the Company's Port Arthur, Texas plant. Other capital expenditures in the period
1995 to 1997 were relatively constant, ranging from approximately $5.8 to $7.0
million. These expenditures generally related to the maintenance of the
Company's operating facilities, including kilns, increases in the Company's CPC
storage capability, and the expansion of the Company's crushing and screening
facilities used in the production of industrial grade CPC. The Company has
budgeted $15.0 million of capital expenditures in 1998 including 9.0 million to
complete the New La Plata Kiln.
The Company spent approximately $3.5 million on capital expenditures related
to pollution control facilities in 1997 and anticipates spending approximately
$3.5 million and $1.9 million for such facilities in 1998 and 1999,
respectively. Approximately half of the environmental expenditures in 1997 and
1998 will be in conjunction with the construction of the New La Plata Kiln.
The Company is financing the expansion of the Argentine facility with a
revolving credit facility (the "Copetro Credit Agreement") provided by Banca
Nazionale del Lavoro S.A. ("BNL"). The Copetro Credit Agreement is nonrecourse
to the Company, matures on June 30, 2002, and provides for a variable interest
rate of 9.75% at March 31, 1998. The Copetro Credit Agreement had a maximum
availability of $20.0 million prior to June 30, 1998. As of March 31, 1998,
$15.9 million of borrowings were outstanding and the remaining $4.1 million of
availability will not be borrowed. The Copetro Credit Agreement has remained in
place after the consummation of the Acquisition Transactions. The Copetro Credit
Agreement is secured by the property, plant and equipment of Copetro, including
the New La Plata Kiln. The Copetro Credit Agreement contains certain covenants
that require Copetro to maintain certain financial ratios and imposes certain
limitations on the payment of dividends to the Company. See "Description of
Other Indebtedness--Copetro Credit Agreement."
In December 1995, the Company issued $65.0 million of the 10% Notes. The
$62.5 million of net proceeds from such offering were used to pay a cash
dividend to HII in connection with the distribution of 100% of the Company's
common stock on a pro rata basis to the holders of the common stock of HII. The
10% Notes are secured by first priority liens on all material property and
equipment of the Company's not otherwise pledged and certain other assets of the
Company.
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In connection with the Merger, the Company commenced a Tender Offer on April
24, 1998, for any and all of the 10% Notes and simultaneously conducted the
Solicitation from holders of the 10% Notes to certain amendments to and waivers
under the 10% Indenture and certain related collateral documents. All of the
outstanding 10% Notes were purchased by the Company pursuant to the Tender Offer
and Solicitation and such purchase was consummated concurrently with the closing
of the Notes Offering. The aggregate consideration paid by Holdings in the
Tender Offer and Solicitation was approximately $74.1 million (including the
Tender Premium of approximately $9.1 million but excluding accrued interest).
Following consummation of the Tender Offer and Solicitation, the 10%
Indenture and the 10% Notes were terminated.
The Existing Credit Agreement provided for borrowings of up to $15.0
million, including a $10 million sublimit for letters of credit, which are
subject to borrowing base limitations. At March 31, 1998, the Company had no
borrowings under the facility and had outstanding letters of credit of $3.4
million. The Existing Credit Agreement was terminated upon the consummation of
the Acquisition Transactions and the $3.4 million in letters of credit were
transferred to the New Credit Agreement.
POST-MERGER
The Company's principal sources of liquidity are cash flow from operations,
supplemented by borrowings under the Revolving Credit Facility and $15.9 million
currently outstanding under the Copetro Credit Agreement. The Company's
additional liquidity sources include various industrial revenue bonds and other
miscellaneous debt.
In connection with the Merger, the Company issued the Old Notes in an
aggregate principal amount of $175.0 million, Holdings offered the Old
Debentures in an aggregate principal amount at maturity of $56.6 million and
Holdings and the Company entered into the Term Loan Facilities and the Revolving
Credit Facility under the New Credit Agreement. Each of the Term Loan Facilities
is a single tranche term facility. The Term A Loan Facility, the Term B Loan
Facility, and the Term C Loan Facility are in principal amounts of $50.0
million, $31.0 million and $30.0 million, respectively. The Revolving Credit
Facility will provide revolving loans in an aggregate amount of up to $25.0
million, subject to a borrowing base limitation. Upon consummation of the
Acquisition Transactions, the Company borrowed the full amount available under
each of the Term Loan Facilities and did not draw under the Revolving Credit
Facility. Proceeds from the issuance of the Old Notes and the Old Debentures,
initial borrowings under the New Credit Agreement and the AIP Equity
Contribution were used to finance the Acquisition Transactions, and fees and
expenses in connection therewith and including the Tender Offer.
Borrowings under the New Credit Agreement bear interest at a rate per annum
equal (at the Company's option) to a margin over either a base rate or LIBOR.
The Revolving Credit Facility, the Term A Loan Facility, the Term B Loan
Facility and the Term C Loan Facility will mature in five, six, seven and eight
years respectively. The Company's obligations under the New Credit Agreement are
guaranteed by Holdings and any future Subsidiaries of the Company other than
Foreign Subsidiaries, Finance Subsidiaries and Receivables Subsidiaries. The
guarantee of the New Credit Agreement by Holdings is secured by a pledge of all
of the capital stock of the Company. The New Credit Agreement and the guarantees
thereof are secured by a perfected first priority security interest in
substantially all assets of the Company and its future direct and indirect
subsidiaries except Foreign Subsidiaries and Receivables Subsidiaries. The New
Credit Agreement contains covenants and events of default customary for
facilities of this nature including substantial restrictions on the Company's
ability to make dividends or distributions or incur additional indebtedness. See
"Description of Other Indebtedness--New Credit Agreement."
The Old Notes were and the New Notes will be issued by the Company and
guaranteed by any future Subsidiaries other than Foreign Subsidiaries, Finance
Subsidiaries and Receivables Subsidiaries. The Notes will mature on May 15,
2008. Interest on the Old Notes is and on the New Notes will be payable in cash
semiannually, in arrears, on May 15 and November 15 of each year, commencing on
November 15, 1998.
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For interest payments due through May 15, 2003, the Company may, at its option,
make up to four semiannual payments through the issuance of Additional Notes in
an aggregate principal amount equal to the amount of the interest that would be
payable as if the rate per annum were equal to 11 3/4%. The Old Notes contain
and the New Notes will contain customary covenants and events of default,
including covenants that limit the ability of the Company and its Subsidiaries
to incur debt, pay dividends and make certain investments. See "Description of
Other Indebtedness--Notes."
The Debentures will mature on May 15, 2009. Cash interest will not accrue on
the Debentures prior to May 15, 2003. Thereafter, interest on the Debentures
will be payable semiannually in cash. The Company is restricted in its ability
to pay dividends to Holdings so that Holdings can pay its debt service
obligations on the Debentures (which payments are scheduled to begin in 2003),
the failure of which may create an event of default under the Holdings
Debentures, which, if not cured or waived, could have a material adverse effect
on the Company. See "Description of Debentures."
Holdings is a holding company, and its ability to pay interest on the
Debentures is dependent upon the receipt of dividends and other distributions
from its direct and indirect subsidiaries. Holdings does not have, and may not
in the future have, any assets other than the common stock of the Company (which
will be pledged to secure Holdings' obligations under the Loan Guaranty). The
Company and its Subsidiaries (other than Foreign Subsidiaries, Finance
Subsidiaries or Receivables Subsidiaries (as defined herein)) are parties to the
New Credit Agreement and the Note Indenture, each of which imposes substantial
restrictions on the Company's ability to pay dividends to Holdings. See "Risk
Factors -- Limitation on Access to Subsidiaries' Cash Flow; Holding Company
Structure" and "--Restrictive Debt Covenants."
Management believes that cash flow from operations and availability under
the Revolving Credit Facility will provide adequate funds for the Company's
foreseeable working capital needs, planned capital expenditures and debt service
obligations. The Company's ability to fund its operations and make planned
capital expenditures, to make scheduled debt payments, to refinance indebtedness
and to remain in compliance with all of the financial covenants under its debt
agreements depends on its future operating performance and cash flow, which in
turn, are subject to prevailing economic conditions and to financial, business
and other factors, some of which are beyond its control. See "Risk Factors."
YEAR 2000
The Company has conducted a preliminary evaluation of its Year 2000
compliance. Based on such evaluation the Company believes that Year 2000
compliance will not have a material adverse effect on the Company.
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD DEBENTURES
Upon the terms and conditions set forth in this Prospectus and in the
accompanying Letter of Transmittal (which together constitute the Exchange
Offer), Holdings will accept for exchange Old Debentures which are properly
tendered on or prior to the Expiration Date and not withdrawn as permitted
below. As used herein, the term "Expiration Date" means 5:00 p.m., New York City
time, on 1998.
As of the date of this Prospectus, $56,600,000 aggregate principal amount of
the Old Debentures is outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about the date hereof, to all Holders of
the Old Debentures known to Holdings. Holdings' obligation to accept Old
Debentures for exchange pursuant to the Exchange Offer is subject to certain
conditions as set forth under "--Certain Conditions to the Exchange Offer"
below. Any Old Debentures not accepted for exchange for any reason will be
returned without expense to the tendering Holder thereof as promptly as
practicable after the expiration or termination of the Exchange Offer.
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Old Debentures tendered in the Exchange Offer must be in denominations of
principal amount of $1,000 and any integral multiple thereof.
Holdings expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Debentures not theretofore
accepted for exchange, upon the failure of satisfaction of any of the conditions
of the Exchange Offer specified below under "--Certain Conditions to the
Exchange Offer." Holdings will give oral or written notice of any extension,
amendment, non-acceptance or termination to the Holders of the Debentures as
promptly as practicable, such notice in the case of any extension to be issued
by means of a press release or other public announcement no later than 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date.
PROCEDURES FOR TENDERING OLD DEBENTURES
The tender to Holdings of Old Debentures by a Holder thereof as set forth
below and the acceptance thereof by Holdings will constitute a binding agreement
between the tendering Holder and Holdings upon the terms and subject to the
conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal. Except as set forth below, a Holder who wishes to tender Old
Debentures for exchange pursuant to the Exchange Offer must transmit a properly
completed and duly executed Letter of Transmittal, including all other documents
required by such Letter of Transmittal or (in the case of a book-entry transfer)
an Agent's Message in lieu of such Letter of Transmittal, to the Exchange Agent
at the address set forth below under "Exchange Agent" on or prior to the
Expiration Date. In addition, either (i) certificates for such Old Debentures
must be received by the Exchange Agent along with the Letter of Transmittal, or
(ii) a timely confirmation of a book-entry transfer (a "Book-Entry
Confirmation") of such Old Debentures, if such procedure is available, into the
Exchange Agent's account at DTC (the "Book-Entry Transfer Facility") pursuant to
the procedure for book-entry transfer described below, must be received by the
Exchange Agent prior to the Expiration Date with the Letter of Transmittal or an
Agent's Message in lieu of such Letter of Transmittal, or (iii) the Holder must
comply with the guaranteed delivery procedures described below. 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 Letter of Transmittal and that Holdings may enforce such Letter of
Transmittal against such participant. THE METHOD OF DELIVERY OF OLD DEBENTURES,
LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND
RISK OF THE HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT
REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN
ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO
LETTERS OF TRANSMITTAL OR OLD DEBENTURES SHOULD BE SENT TO THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Old Debentures surrendered for exchange
pursuant thereto are tendered (i) by a Holder of the Old Debentures who has not
completed the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution (as defined below). In the event that signatures on a
Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantees must be by a firm which is a member
of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust company
having an office or correspondent in the United States (collectively, "Eligible
Institutions"). If Old Debentures are registered in the name of a person other
than a signer of the Letter of Transmittal, the Old Debentures surrendered for
exchange must be endorsed by, or be accompanied by a written instrument or
instruments of transfer or exchange, in satisfactory form as determined by
Holdings in its sole discretion, duly executed by the registered owner with the
signature thereon guaranteed by an Eligible Institution.
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All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Debentures tendered for exchange will be
determined by Holdings in its sole discretion, which determination shall be
final and binding. Holdings reserves the absolute right to reject any and all
tenders of any particular Old Debentures not properly tendered or to not accept
any particular Old Debentures which acceptance might, in the judgment of
Holdings or their counsel, be unlawful. Holdings also reserves the absolute
right to waive any defects or irregularities or conditions of the Exchange Offer
as to any particular Old Debentures either before or after the Expiration Date
(including the right to waive the ineligibility of any Holder who seeks to
tender Old Debentures in the Exchange Offer). The interpretation of the terms
and conditions of the Exchange Offer as to any particular Old Debenture either
before or after the Expiration Date (including the Letter of Transmittal and the
instructions thereto) by Holdings shall be final and binding on all parties.
Unless waived, any defects or irregularities in connection with tenders of Old
Debentures for exchange must be cured within such reasonable period of time as
Holdings shall determine. Neither Holdings, the Exchange Agent nor any other
person shall be under any duty to give notification of any defect or
irregularity with respect to any tender of Old Debentures for exchange, nor
shall any of them incur any liability for failure to give such notification.
If the Letter of Transmittal is signed by a person or persons other than the
registered Holder or Holders of Old Debentures, such Old Debentures must be
endorsed or accompanied by powers of attorney, in either case signed exactly as
the name or names of the registered Holder or Holders that appear on the Old
Debentures.
If the Letter of Transmittal or any Old Debentures or powers of attorneys
are signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
Holdings, proper evidence satisfactory to Holdings of their authority to so act
must be submitted with the Letter of Transmittal.
By tendering, each Holder will represent to Holdings that, among other
things, the New Debentures acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the person receiving such New
Debentures, whether or not such person is the Holder and that neither the Holder
nor such other person has any arrangement or understanding with any person to
participate in the distribution of the New Debentures. If any Holder or any such
other person is an "affiliate", as defined under Rule 405 of the Securities Act,
of Holdings and is engaged in or intends to engage in or has an arrangement or
understanding with any person to participate in a distribution of such New
Debentures to be acquired pursuant to the Exchange Offer, then such Holder or
any such other person (i) could not rely on the applicable interpretations of
the Staff and (ii) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
Each broker-dealer that receives New Debentures for its own account in exchange
for Old Debentures, where such Old Debentures were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver this Prospectus in connection
with any resale of such New Debentures. See "Plan of Distribution." The Letter
of Transmittal states that by so acknowledging and by delivering this
Prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
ACCEPTANCE OF OLD DEBENTURES FOR EXCHANGE; DELIVERY OF NEW DEBENTURES
Upon satisfaction of all of the conditions to the Exchange Offer, Holdings
will accept, promptly after the Expiration Date, all Old Debentures properly
tendered and will issue the New Debentures promptly after acceptance of the Old
Debentures. See "--Certain Conditions to the Exchange Offer" below. For purposes
of the Exchange Offer, Holdings shall be deemed to have accepted properly
tendered Old Debentures for exchange when, as and if Holdings has given oral
(promptly confirmed in writing) or written notice thereof to the Exchange Agent.
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For each Old Debenture accepted for exchange, the Holder of such Old
Debenture will receive a New Debenture having a principal amount equal to that
of the surrendered Old Debenture. The New Debentures will accrete in value from
May 22, 1998. Old Debentures accepted for exchange will cease to accrete in
value from and after the date of consummation of the Exchange Offer. Pursuant to
the Registration Rights Agreement, certain Liquidated Damages are required to be
paid to Holders of Old Debentures under certain circumstances relating to the
timing of the Exchange Offer and to other registration requirements contained
therein. Holders of Old Debentures, who tender such Old Debentures in the
Exchange Offer agree to waive any accrued but unpaid Liquidated Damages on such
Old Debentures. An amount equal to the amount of accrued and unpaid Liquidated
Damages on Old Debentures tendered in the Exchange Offer shall be payable, on
such first interest payment date, to registered holders of New Debentures, on
the record date for the first interest payment following the consummation of the
Exchange Offer.
In all cases, issuance of New Debentures for Old Debentures that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of (i) certificates for such Old Debentures
or a timely Book-Entry Confirmation of such Old Debentures into the Exchange
Agent's account at the Book-Entry Transfer Facility, (ii) a properly completed
and duly executed Letter of Transmittal or an Agent's Message in lieu thereof
and (iii) all other required documents. If any tendered Old Debentures are not
accepted for any reason set forth in the terms and conditions of the Exchange
Offer or if Old Debentures are submitted for a greater principal amount than the
Holder desires to exchange, such unaccepted or non-exchanged Old Debentures will
be returned without expense to the tendering Holder thereof (or, in the case of
Old Debentures tendered by book-entry transfer into the Exchange Agent's account
at the Book-Entry Transfer Facility pursuant to the book-entry procedures
described below, such non-exchanged Old Debentures will be credited to an
account maintained with such Book-Entry Transfer Facility) as promptly as
practicable after the expiration or termination of the Exchange Offer.
BOOK-ENTRY TRANSFERS
The Exchange Agent will make a request to establish an account with respect
to the Old Debentures at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus. Any
financial institution that is a participant in the Book-Entry Transfer Facility
systems must make book-entry delivery of Old Debentures by causing the
Book-Entry Transfer Facility to transfer such Old Debentures into the Exchange
Agent's accounts at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's Automated Tender Offer Program ("ATOP")
procedures for transfer. Such participant using ATOP should transmit its
acceptance to the Book-Entry Transfer Facility on or prior to the Expiration
Date or comply with the guaranteed delivery procedures described below. The
Book-Entry Transfer Facility will verify such acceptance, execute a book-entry
transfer of the tendered Old Debentures into the Exchange Agent's account at the
Book-Entry Transfer Facility and then send to the Exchange Agent confirmation of
such book-entry transfer, including an Agent's Message confirming that the
Book-Entry Transfer Facility has received an express acknowledgment from such
participant that such participant has received and agrees to be bound by the
Letter of Transmittal and that Holdings may enforce the Letter of Transmittal
against such participant. However, although delivery of Old Debentures may be
effected through book-entry transfer at the Book-Entry Transfer Facility, an
Agent's Message and any other required documents, must, in any case, be
transmitted to and received by the Exchange Agent at the address set forth below
under "--Exchange Agent" on or prior to the Expiration Date or the guaranteed
delivery procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
If a Holder of the Old Debentures desires to tender such Old Debentures and
the Old Debentures are not immediately available, or time will not permit such
Holders' Old Debentures or other required
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documents to reach the Exchange Agent before the Expiration Date, or the
procedure for book-entry transfer cannot be completed on a timely basis, a
tender may be effected if (i) the tender is made through an Eligible
Institution, (ii) prior to the Expiration Date, the Exchange Agent received from
such Eligible Institution a Notice of Guaranteed Delivery, substantially in the
form provided by Holdings (by telegram, telex, facsimile transmission, mail or
hand delivery), setting forth the name and address of the Holder of the Old
Debentures and the amount of Old Debentures tendered, stating that the tender is
being made thereby and guaranteeing that within five New York Stock Exchange
("NYSE") trading days after the date of execution of the Notice of Guaranteed
Delivery, the certificates for all physically tendered Old Debentures, in proper
form for transfer, or a Book-Entry Confirmation, as the case may be, together
with a properly completed and duly executed appropriate Letter of Transmittal
(or facsimile thereof or Agent's Message in lieu thereof) with any required
signature guarantees and any other documents required by the Letter of
Transmittal will be deposited by the Eligible Institution with the Exchange
Agent, and (iii) the certificates for all physically tendered Old Debentures, in
proper form for transfer, or a Book-Entry Confirmation, as the case may be,
together with a properly completed and duly executed appropriate Letter of
Transmittal (or facsimile thereof or Agent's Message in lieu thereof) with any
required signature guarantees and all other documents required by the Letter of
Transmittal, are received by the Exchange Agent within five NYSE trading days
after the date of execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Debentures may be withdrawn at any time prior to 5:00 p.m.,
New York City time, on the Expiration Date. For a withdrawal to be effective, a
written notice of withdrawal must be received by the Exchange Agent at one of
the addresses set forth below under "--Exchange Agent." Any such notice of
withdrawal must (i) specify the name of the person having tendered the Old
Debentures to be withdrawn (ii) identify the Old Debentures to be withdrawn
(including the principal amount of such Old Debentures), and (iii) if
certificates for Old Debentures have been transmitted, specify the name in which
such Old Debentures are registered, if different from that of the withdrawing
Holder. If certificates for Old Debentures have been delivered or otherwise
identified to the Exchange Agent, then, prior to the release of such
certificates the withdrawing Holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless such Holder is an
Eligible Institution. If Old Debentures have been tendered pursuant to the
procedure for book-entry transfer described above, any notice of withdrawal must
specify the name and number of the account at the Book-Entry Transfer Facility
to be credited with the withdrawn Old Debentures and otherwise comply with the
procedures of such facility. All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
Holdings, whose determination shall be final and binding on all parties. Any Old
Debentures so withdrawn will be deemed not to have been validly tendered for
exchange for purposes of the Exchange Offer. Any Old Debentures which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the Holder thereof without cost to such Holder (or, in the case of
Old Debentures tendered by book-entry transfer into the Exchange Agent's account
at the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described above, such Old Debentures will be credited to an account
maintained with such Book-Entry Transfer Facility for the Old Debentures), as
soon as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Debentures may be retendered by following
one of the procedures described under "--Procedures for Tendering Old
Debentures" above at any time on or prior to 5:00 p.m., New York City time, on
the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, Holdings shall
not be required to accept for exchange, or to issue New Debentures in exchange
for, any Old Debentures and may terminate or amend the Exchange Offer, if at any
time before the acceptance of such Old Debentures, the Exchange Offer violates
any applicable law or regulation or interpretation of the Staff.
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<PAGE>
The foregoing conditions are for the sole benefit of Holdings and may be
asserted by Holdings regardless of the circumstances giving rise to any such
condition or may be waived by Holdings in whole or in part at any time and from
time to time in its sole discretion. The failure by Holdings at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
In addition, Holdings will not accept for exchange any Old Debentures
tendered, and no New Debentures will be issued in exchange for any such Old
Debentures, if at such time any stop order shall be threatened or in effect with
respect to the Registration Statement of which this Prospectus constitutes a
part or the qualification of the Indenture under the Trust Indenture Act of
1939, as amended.
EXCHANGE AGENT
State Street Bank and Trust Company of California, N.A. has been appointed
as the Exchange Agent for the Exchange Offer. All executed Letters of
Transmittal should be directed to the Exchange Agent at the address set forth
below. Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
Delivery to: State Street Bank and Trust Company of California, N.A.,
As Exchange Agent
c/o State Street Bank and Trust Company
<TABLE>
<CAPTION>
BY HAND: BY MAIL:
<S> <C>
2 International Place 2 International Place
Boston, MA 02110 Boston, MA 02110
Attn: Kellie Mullen Attn: Kellie Mullen
BY OVERNIGHT COURIER: BY FACSIMILE:
2 International Place (617) 664-5290
Boston, MA 02110 Attn: Kellie Mullen
Attn: Kellie Mullen Telephone: (617) 664-5587
</TABLE>
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF SUCH LETTER OF TRANSMITTAL VIA FACSIMILE OTHER THAN AS
SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF
TRANSMITTAL.
FEES AND EXPENSES
Holdings will not make any payment to brokers, dealers, or others soliciting
acceptances of the Exchange Offer except for reimbursement of mailing expenses.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by Holdings and are estimated in the aggregate to be
approximately $300,000.
TRANSFER TAXES
Holders who tender their Old Debentures for exchange will be obligated to
pay any transfer taxes in connection with such exchange, as well as any other
sale or disposition of the Old Debentures. Holders who instruct Holdings to
register New Debentures in the name of, or request that Old Debentures not
tendered or not accepted in the Exchange Offer be returned to, a person other
than the registered tendering Holder will be responsible for the payment of any
applicable transfer tax thereon.
CONSEQUENCES OF NOT EXCHANGING OLD DEBENTURES
Holders of Old Debentures who do not exchange their Old Debentures for New
Debentures pursuant to the Exchange Offer will continue to be subject to the
provisions in the Indenture regarding transfer and
44
<PAGE>
exchange of the Old Debentures and the restrictions on transfer of such Old
Debentures as set forth in the legend thereon as a consequence of the issuance
of the Old Debentures pursuant to exemptions from, or in transactions not
subject to, the registration requirements of the Securities Act and applicable
state securities laws. In general, the Old Debentures may not be offered or
sold, unless registered under the Securities Act, except pursuant to an
exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. Holdings does not currently anticipate that it
will register any Old Debentures which remain outstanding after consummation of
the Exchange Offer under the Securities Act (subject to certain limited
exceptions, if applicable). To the extent that Old Debentures are not tendered
and accepted in the Exchange Offer, a holder's ability to sell such untendered
Old Debentures could be adversely affected.
Holders of the New Debentures and any Old Debentures which remain
outstanding after consummation of the Exchange Offer will vote together as a
single class for purposes of determining whether holders of the requisite
percentage thereof have taken certain actions or exercised certain rights under
the Indenture.
Upon consummation of the Exchange Offer, Holders of Old Debentures will not
be entitled to any Liquidated Damages or any further registration rights under
the Registration Rights Agreement, except under limited circumstances. See
"Description of Debentures--Registration Rights; Liquidated Damages."
CONSEQUENCES OF EXCHANGING OLD DEBENTURES
Based on interpretations by the Staff, as set forth in no-action letters
issued to third parties, Holdings believes that New Debentures issued pursuant
to the Exchange Offer in exchange for Old Debentures may be offered for resale,
resold or otherwise transferred by Holders thereof (other than any such Holder
which is an "affiliate" of Holdings within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such New Debentures 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 New Debentures. However, the SEC has not considered the Exchange Offer
in the context of a no-action letter and there can be no assurance that the
Staff would make a similar determination with respect to the Exchange Offer as
in such other circumstances. Each Holder, other than a broker-dealer, must
acknowledge that it is not engaged in, and does not intend to engage in, a
distribution of such New Debentures and has no arrangement or understanding to
participate in a distribution of New Debentures. If any Holder is an affiliate
of Holdings and is engaged in or intends to engage in or has any arrangement or
understanding with respect to the distribution of the New Debentures to be
acquired pursuant to the Exchange Offer, such Holder (i) could not rely on the
applicable interpretations of the Staff and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives New
Debentures for its own account in exchange for Old Debentures must acknowledge
that such Old Debentures were acquired by such broker-dealer as a result of
market-making activities or other trading activities and that it will deliver
this Prospectus in connection with any resale of such New Debentures. See "Plan
of Distribution." In addition, to comply with the securities laws of certain
jurisdictions (including any jurisdiction outside the United States), the New
Debentures may not be offered or sold unless they have been registered or
qualified for sale in such jurisdiction or an exemption from registration or
qualification is available and is complied with. Holdings has agreed, pursuant
to the Registration Rights Agreement, subject to certain limitations specified
therein, to register or qualify the New Debentures for offer or sale under all
applicable state or Blue Sky securities laws by the time the Registration
Statement (of which this Prospectus forms a part) is declared effective by the
SEC.
45
<PAGE>
BUSINESS
INTRODUCTION AND BACKGROUND
The Company is the largest producer of CPC in the world. Anode grade CPC is
the principal raw material used in the production of carbon anodes for use in
aluminum smelting, and is used by every producer of primary aluminum in the
world. Anode grade CPC sales represented approximately 81.9% of the Company's
total 1997 sales. The Company believes that it has approximately a 23.1% market
share of U.S. anode grade CPC sales and a 15.7% market share of Western World
anode grade CPC sales. The Company also sells industrial grade CPC for use in
the production of titanium dioxide, as a carbon additive in the manufacture of
steel and foundry products and for use in other specialty materials and
chemicals markets. The Company produces CPC at its three facilities located in
Port Arthur, Texas, Enid, Oklahoma and La Plata, Argentina. The Company's annual
CPC production capacity of 1.6 million tons, including a 220,000 ton increase as
a result of its completion of the New La Plata Kiln in May 1998, is
approximately 60% greater than that of its next largest competitor. During the
twelve months ended March 31, 1998, the Company sold 1.5 million tons of CPC,
had net sales of $238.6 million and had EBITDA of $62.5 million. Assuming the
New La Plata Kiln had been completed on April 1, 1997 and operated at 70%
capacity (representing the amount of capacity currently pre-contracted to
customers for the balance of 1998), EBITDA would have been $69.0 million for the
twelve months ended March 31, 1998 (assuming margins consistent with the
Company's actual financial performance during the period). The Company does not
anticipate operating the New La Plata Kiln at full capacity until 1999. See
"Disclosure Regarding Forward-Looking Statements" and the footnotes to "Summary
Consolidated Financial and Other Data."
CPC is produced from RPC utilizing a high-temperature, rotary-kiln process
developed by the Company in the 1930s. RPC is a by-product of the petroleum
refining process and typically represents an insignificant portion of overall
refinery revenues. The alternative use for RPC, as a fuel source, generates a
significantly lower value to refiners than the value they receive in selling RPC
for use in the production of CPC. As a result, CPC producers are able to obtain
lower purchase prices for RPC in times of declining CPC prices, enabling CPC
producers to earn a relatively stable profit spread even in periods of CPC price
declines.
Carbon anodes, which are manufactured utilizing anode grade CPC, are used by
every primary aluminum smelter in the world as a key component in aluminum
smelting pot lines. Carbon anodes act as conductors of electricity and as a
source of carbon in the electrolytic cell that reduces alumina to aluminum
metal. In this electrochemical aluminum smelting process, the carbon anodes, and
hence the CPC, are consumed.
There are no known economic substitutes for anode grade CPC in the
manufacture of carbon anodes, nor have there been since anode grade CPC replaced
coal for this application in the 1930s. The Company believes that approximately
0.4 pounds of anode grade CPC are consumed for every one pound of primary
aluminum produced, and that such consumption ratio has been substantially
constant over the past ten years. Worldwide demand for anode grade CPC is
directly tied to the level of global production of primary aluminum.
Industrial grade CPC is used in the production of titanium dioxide, as a
carbon additive in the manufacture of steel and foundry products and for use in
other specialty materials and chemicals markets. Demand for industrial grade CPC
has grown largely due to the ongoing replacement by titanium dioxide producers
of the sulfate manufacturing process that does not utilize CPC with the
environmentally preferable chloride process that does utilize CPC. The Company's
participation in the industrial CPC sector diversifies its product offerings and
reduces its dependence on aluminum customers.
The Company believes that current anode grade CPC market fundamentals are
attractive. Western World primary aluminum production increased approximately
34.7% to 17.8 million tons in 1997 from 13.2 million tons in 1986, while anode
grade CPC production capacity did not increase significantly.
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<PAGE>
Furthermore, industry sources project continued strong growth in primary
aluminum production over the next several years. As a result, CPC industry
operating rates are currently at historically high levels. The Company has been
operating at full capacity since 1995 and believes that other major U.S.
calciners are also operating at or near full capacity.
The Company believes that the calcining industry will continue to operate at
or near full capacity, as anticipated capacity expansions in the anode grade CPC
market are expected to provide less additional capacity over the next several
years than required to meet aluminum demand projected by industry sources.
Further, the Company believes there are significant barriers to entry to the CPC
production industry. The Company estimates that a greenfield, minimum efficient
scale, stand-alone 200,000 ton calcining facility would, depending on location,
cost in excess of $50 million and take approximately three years to permit and
construct. Further impediments to the creation of new production capacity
include the difficulty in securing consistent sources of RPC supply and the
reluctance of aluminum smelters to change CPC supply sources.
The current high industry operating rates have led to anode grade CPC
pricing becoming less influenced by aluminum pricing than has been the case
historically. Instead, anode grade CPC pricing has become more influenced by the
demand generated from the volume of aluminum production. Accordingly, the
average price per ton realized by the Company for anode grade CPC increased by
over 60% from 1994 to 1997, while aluminum prices as quoted on the London Metal
Exchange increased only 9%.
The Company's management team is among the most experienced in the industry,
with an average tenure with the Company of over 22 years. James D. McKenzie, the
Company's Chief Executive Officer and President, has been with the Company for
over 27 years; A. Frank Baca, Senior Vice President of Operations and
Administration, 31 years; James W. Betts, Vice President of Raw Materials, 30
years; Robert C. Dickie, Vice President of Sales, 9 years; and Adele Robles,
Controller, 17 years.
The Company was established in 1919 as Great Lakes Coal & Coke Co. During
the 1920s and 1930s the Company began to develop markets for RPC and pioneered
the first techniques in calcining petroleum coke for use in the aluminum
industry. In 1936, the Company began operation of the world's first commercial
calcining plant in Port Arthur, Texas. The Company has since maintained its
position as the largest producer of CPC. In 1985, the Company's predecessor,
also known as Great Lakes Carbon Corporation ("Old GLC"), was acquired by HII
from the descendants of Old GLC's founders. In 1992, the CPC operations of Old
GLC were reincorporated as the Company while 100% of the stock of Old GLC,
including its graphite operations, was sold by HII to Sigri GmbH. In 1995, the
net proceeds of the issuance and sale of the 10% Notes were distributed by the
Company as a dividend to HII, all indebtedness of HII owing to the Company was
cancelled and 100% of the common stock of the Company was distributed on a pro
rata basis to the holders of the common stock of HII. On May 22, 1998 the
Company was acquired by AIP in the Acquisition Transactions. The address of the
Company's principal executive office is 551 Fifth Avenue, Suite 3600, New York,
New York 10176 and the telephone number is (212) 370-5770.
BUSINESS STRATEGY
The Company's management team plans to sustain and build upon GLC's success
by focusing on the following strategic initiatives:
- MAINTAIN STRONG CUSTOMER RELATIONSHIPS--Over its 60-year history in CPC
production, the Company has forged customer relationships spanning several
decades with many of the world's largest aluminum producers, including
Alcoa, Alusaf and Alusuisse. The Company has developed and expects to
maintain these relationships by virtue of its industry leadership
position, its technical support and customer service and its superior
ability to produce anode grade CPC to customized specifications. Although
CPC represents only 5% to 7% of an aluminum smelter's total costs, the
quality and consistency of CPC are critical to a smelter. Through its
comprehensive "Total Quality Management" program, the Company was the
first domestic calciner to attain ISO 9002 registration
47
<PAGE>
for its ability to meet internationally recognized quality and process
standards. All of the Company's facilities are ISO 9002 registered.
- MAINTAIN SUPERIOR ACCESS TO RAW MATERIALS--The Company's long history and
leading market position in CPC production has led to strong long-term
relationships with numerous RPC suppliers, including Exxon, Conoco,
Chevron, YPF and Marathon. The Company's access to RPC supply from 18
refineries worldwide provides it with a competitive advantage in
cost-effectively blending various grades of RPC to produce CPC to exact
customer specifications.
- OPERATE DIVERSE, STATE-OF-THE-ART FACILITIES--The Company strives to
maintain geographically diverse, state-of-the-art production facilities
that provide a maximum level of operating flexibility. The Port Arthur,
Texas plant (680,000 tons per year) provides the Company with access to
RPC received by rail, barge or ship from the U.S. Gulf Coast and
international oil refiners and allows the Company to serve international
CPC markets. The Enid, Oklahoma plant (490,000 tons per year) is
strategically located to serve the domestic CPC markets and to access RPC
from refineries in the mid-continent region. The plant in La Plata,
Argentina (440,000 tons per year) provides the Company with access to high
quality RPC from a nearby oil refinery and also positions the Company well
to serve international CPC markets. The Company recently completed
construction of the New La Plata Kiln in May 1998, which increased the
facility's previous production capacity from 220,000 to 440,000 tons per
year.
- MAINTAIN STRONG PRESENCE IN INDUSTRIAL GRADE CPC--Since 1990, the Company
has pursued a strategy of diversifying its product mix by developing and
expanding its presence in the market for industrial grade CPC. GLC has
increased its net sales of industrial grade CPC by approximately 92.7%
since 1990 by focusing its industrial grade sales effort and investing in
value-added operations at its production facilities. Sales of industrial
grade CPC reduce the Company's dependence on aluminum customers.
- PURSUE SELECTIVE EXPANSION OPPORTUNITIES--The Company may explore
acquisition and expansion opportunities from time to time as warranted by
market conditions. Strong market conditions, together with an excellent
source of RPC supply, prompted the Company to expand its Argentinean
facility. The Company is currently evaluating several additional new
opportunities in the petroleum coke industry.
INDUSTRY OVERVIEW
CPC DEMAND
CPC is sold primarily to the aluminum industry as the principal raw material
used in the manufacture of carbon anodes. Carbon anode manufacturers, which are
predominantly captive operations of aluminum smelting companies, purchase anode
grade CPC, mix it with pitch binders, press the mixture into blocks and then
bake the mixture to form finished, hardened carbon anodes. The carbon anodes are
consumed in the electrochemical smelting process. Although CPC represents only
5% to 7% of an aluminum smelter's total costs, the quality of the anode grade
CPC, in terms of both its physical and chemical properties, has an effect on
carbon anode life, which is an important economic factor in aluminum production,
and on the amount of impurities in the finished aluminum metal.
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Western World production of primary aluminum, the implied demand for anode
grade CPC (calculated based on a constant 0.4 pounds of CPC per pound of
aluminum) and annual growth in production and implied demand are set forth in
the following table:
<TABLE>
<CAPTION>
IMPLIED ANODE GRADE ANNUAL GROWTH IN
CPC DEMAND(2) PRODUCTION AND
--------------------- IMPLIED DEMAND
PRIMARY ALUMINUM -------------------
PRODUCTION(1) (000 TONS)
------------------- (%)
(000 TONS)
<S> <C> <C> <C>
1986.............................. 13,217 5,287 0.0
1987.............................. 13,898 5,559 5.1
1988.............................. 14,882 5,953 7.1
1989.............................. 15,501 6,200 4.2
1990.............................. 15,637 6,255 0.9
1991.............................. 16,290 6,516 4.2
1992.............................. 16,273 6,509 (0.1)
1993.............................. 16,517 6,607 1.5
1994.............................. 15,847 6,339 (4.1)
1995.............................. 16,149 6,459 1.9
1996.............................. 17,035 6,814 5.5
1997.............................. 17,802 7,121 4.5
</TABLE>
- ------------------------
(1) Source: The Aluminum Association Incorporated.
(2) Calculated based on a constant 0.4 pounds of CPC per pound of aluminum.
Historically, worldwide production of primary aluminum has increased
commensurately with general economic growth, and demand for anode grade CPC has
increased accordingly. From 1986 to 1997, Western World primary aluminum
production increased by 4.6 million tons, or 34.7%, resulting in a 1.8 million
ton increase in demand for anode grade CPC to approximately 7.1 million tons.
The production of primary aluminum, and the resulting implied demand for anode
grade CPC, is geographically diverse, with less than 25% of Western World
aluminum production occurring in the United States.
The steady growth in primary aluminum production experienced an interruption
during the period from 1991 to 1994. Additions to Western World aluminum smelter
capacity in the early 1990s, slow economic growth in major aluminum consuming
countries during 1992 and 1993 and a significant decline in the consumption of
aluminum in the countries which comprised the former Soviet Union which resulted
in substantial exports of aluminum from such countries after 1990, caused an
oversupply of aluminum and a corresponding increase in primary aluminum
inventories in the Western World.
In early 1994, government officials from the European Union, the United
States, Canada, Norway, Australia and the Russian Federation met in a
multilateral conference to discuss the excess global supply of primary aluminum.
The participants ratified a trade agreement in the form of a Memorandum of
Understanding ("MOU"), which specified reductions in primary aluminum production
in the participating countries. Primarily as a result of these MOU reductions,
1994 Western World annual aluminum production was 15.8 million tons,
approximately 670,000 tons below 1993 production levels. Therefore, during 1994,
demand for anode grade CPC declined to 6.3 million tons. Since that time,
however, anode grade CPC demand has rebounded sharply growing at a compounded
annual rate of 4.0% to 7.1 million tons of demand in 1997.
CPC is also used in a number of other (non-aluminum) industrial
applications. This industrial grade CPC is used in the production of titanium
dioxide, as a recarburizer in the manufacture of steel and foundry products and
for use in other specialty materials and chemicals markets. The Company
estimates that these applications consumed approximately 2.0 million tons of CPC
in 1997.
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Titanium dioxide is a widely used brilliant white pigment, the primary
applications for which are in paints, plastics and paper. Demand for titanium
dioxide is dependent upon the construction and automotive markets. CPC is used
as an energy and carbon source in the production of titanium dioxide from
titanium-bearing ores using the chloride process. The primary factor increasing
the usage of CPC by the titanium dioxide industry is the continuing trend of
replacing the sulfate manufacturing process that does not utilize CPC with the
environmentally preferable chloride process that does utilize CPC. As a result
of this trend, the Company believes that demand for industrial grade CPC from
international titanium dioxide markets is growing.
Industrial grade CPC is also used as a recarburizer (carbon additive) in the
production of steel and foundry products. Demand for this use of CPC depends
upon steel production levels and this market is considered to be mature.
Industrial grade CPC is also used as a carbon source in certain chemical
processes and in the production of plastics.
CPC SUPPLY
CPC is sold in a world market. However, calcining and transportation
economics dictate that producers of CPC are most efficiently located near
petroleum refining operations, which are the source of RPC. As a by-product of
the oil refining process, RPC constitutes the solid fraction remaining after the
refinery has essentially removed all of the liquid petroleum products from the
crude oil. Many, but not all, oil refineries produce RPC. Sales of RPC do not
constitute a material portion of oil refiners' revenues.
CPC quality, which is extremely important to aluminum smelters, is dependent
upon the quality of the RPC utilized in the calcining process. The RPC produced
by different oil refineries covers a range of physical and chemical properties
depending upon both the types of crude oils being refined and the specific
process being employed by the refinery. Only a portion of the RPC produced by
the world's oil refineries is of suitable quality for producing anode grade or
industrial grade CPC, with anode grade requirements being generally more
stringent than industrial grade requirements. Most of the RPC that is not
suitable for calcining is sold at much lower prices strictly for its fuel value.
Because a substantial portion of worldwide petroleum refining capacity is
based domestically, the United States has a majority of worldwide CPC production
capacity. Domestic anode grade CPC production is sufficient to satisfy
approximately 50% of worldwide anode grade CPC demand. GLC, along with most
other domestic CPC producers, supplies CPC to primary aluminum producers both
domestically and internationally (including smelters in the countries which
comprised the former Soviet Union). Growth of Western World CPC production
capacity has been significantly slower than the growth in demand since 1986.
Since 1995, the Company has been operating at full capacity and believes that
its primary domestic competitors have been doing so as well.
Market pricing for anode grade CPC is based on a number of factors. Anode
grade CPC prices have been affected by worldwide aluminum production and
aluminum prices, as well as by the availability of anode grade RPC required to
produce CPC. Historically, anode grade CPC pricing followed aluminum pricing
with an approximate one-year lag. However, as a result of the current, higher
industry operating rates, anode grade CPC pricing has become less tied to
aluminum pricing and more impacted by the growth in volume of aluminum
production relative to CPC production capacity.
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MANUFACTURING OPERATIONS
As shown in the chart below, the Company operates rotary kilns to calcine
RPC into both anode grade and industrial grade CPC. The calcining process
essentially drives off moisture, impurities and volatile matter from the RPC at
high temperatures, resulting in a purer form of carbon in the form of CPC.
[LOGO]
Anode grade and industrial grade CPC are manufactured by the Company to
specific customer specifications. The Company purchases RPC from a number of
sources and has the capability to blend raw cokes specifically to meet a
customer's required chemical and physical properties. After blending, the RPC is
fed into the higher end of a rotating kiln, which is up to 12 feet in diameter
and up to 220 feet long. The coke in the kiln is tumbled by rotation and moves
down-kiln countercurrent to the heat produced by burning natural gas or oil at
the lower, firing end of the kiln. Kiln temperatures range from 2,200 to 2,500
degrees Fahrenheit. Typically, coke is retained in the kiln for approximately
one hour, with the resident time and heating rates critical to the production of
the proper quality CPC. The moisture, impurities and volatile matter in the coke
are driven off in the kiln. As the coke is discharged from the kiln, it drops
into a cooling chamber, where it is quenched with water, treated with dedusting
agents and carried by conveyor to silos to be kept in covered storage until
shipped to customers by truck, rail, barge or ship. In the case of certain
industrial grade products, the CPC is crushed and screened to meet proper sizing
requirements and packaged for shipment.
Since CPC quality is very important to end-users, the Company has invested
in laboratory facilities and has instituted Total Quality Management and
statistical process control procedures to ensure that its CPC meets customer
specifications. The Company was the first U.S. producer of calcined coke to
attain ISO 9002 registration, which is a rating determined by the International
Standards Organization with respect to the Company's ability to meet recognized
quality and process standards. All of the Company's facilities are ISO 9002
registered.
FACILITIES
The Company currently has the capacity to produce approximately 1.6 million
tons of CPC per year at its three facilities in Port Arthur, Texas, Enid,
Oklahoma and La Plata, Argentina, including the Company's recent expansion of
its capacity through the construction of the New La Plata Kiln. GLC's facilities
operate continuously, except during periods of downtime as part of the regular
maintenance program to
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extend kiln life or periodic upgrades to maintain state-of-the-art technology.
The Company also owns a distribution center in Pond Creek, Oklahoma.
The plant at Port Arthur has the capacity to produce 680,000 tons per year
of anode grade and industrial grade CPC. The Port Arthur plant commenced
operations in 1936, and the newest and largest of Port Arthur's four kilns was
installed in 1979. Automated crushing and screening facilities were added to the
plant in 1993 to enable the Company to serve export markets for industrial grade
CPC. Port Arthur is also the site of the Company's primary laboratory and
testing facility. Located on the U.S. Gulf Coast, the Port Arthur facility is
ideally located to receive raw petroleum coke from Gulf Coast and international
oil refiners and serves international anode and industrial grade CPC markets.
Port Arthur has substantial CPC storage capacity and the capability to both
receive RPC and ship CPC by truck, rail, barge or ship. The Company operates the
Port Arthur plant with a nonunion workforce.
The Company's Port Arthur plant site provides ample room to store a wide
range of RPC for blending to customer specifications. The 115-acre property on
which the plant is located is leased by the Company under a long-term lease,
which was originally executed in the 1930s and the most recent renewal of which
expires in January 2010. Under a waste heat recovery arrangement the Company
receives revenue from its delivery of flue gas from the Port Arthur kilns to a
waste heat recovery facility that is owned by a third party, which is accounted
for as a reduction of cost of goods sold.
The plant at Enid has the capacity to produce 490,000 tons per year of anode
grade and industrial grade CPC. Enid's three kilns were built in the late 1960s
and early 1970s. In 1992, the Company modernized and automated its crushing
facilities at Enid to more effectively serve the domestic industrial grade CPC
market. The Enid plant acquires its RPC primarily from mid-continent oil
refineries and essentially serves the domestic anode grade and industrial grade
CPC markets. The Enid plant has the capability to receive and ship material by
truck or rail and operates with a union workforce. The Enid plant is located on
320 acres of property owned by the Company.
The Company's La Plata facility, which is owned by Copetro, was constructed
in 1982 and had a single kiln with the capacity to produce 220,000 tons per year
of anode grade CPC. Copetro recently completed construction of the New La Plata
Kiln, with an annual capacity of 220,000 tons of anode grade CPC, at an
estimated cost of approximately $22 million. The Company anticipates that the
New La Plata Kiln, which was completed in May 1998, will double the capacity of
the La Plata facility. The plant is located on 30 acres of land at the port of
La Plata, which provides the capability to serve South American and
international anode grade CPC markets via truck or ship. The La Plata location
is less than two miles from an oil refinery operated by YPF, which produces a
high-quality RPC. Certain employees of Copetro are members of a
government-sponsored union.
PRODUCTS AND MARKETS
GLC manufactures and markets two basic grades of CPC products: anode grade
and industrial grade. In 1997, for the third year in a row, aluminum production
increased primarily due to restarts of capacity that was idled in 1993 and 1994
and also due to expansion of existing smelting capacity. As a result of the
strong demand for CPC, the Company operated at effective capacity in 1997.
The Company's sales volume and net sales by product grade for the three
years ended December 31, 1997 are set forth in the following table.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------------------- --------------------
1995 1996 1997 1997
-------------------- -------------------- -------------------- --------------------
SALES TONS SALES TONS SALES TONS SALES TONS
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Anode grade CPC.......................... $ 147.9 1.19 $ 199.4 1.10 $ 189.9 1.12 $ 44.5 0.26
Industrial grade CPC..................... 27.6 0.27 38.6 0.31 40.2 0.30 10.5 0.08
Non-CPC revenue.......................... 3.2 0.02 4.7 0.04 1.8 0.02 0.4 0.01
<CAPTION>
1998
--------------------
SALES TONS
--------- ---------
<S> <C> <C>
Anode grade CPC.......................... $ 52.5 0.32
Industrial grade CPC..................... 9.1 0.06
Non-CPC revenue.......................... 0.5 0.01
</TABLE>
52
<PAGE>
ANODE GRADE CPC
GLC produces anode grade CPC for the worldwide primary aluminum industry by
calcining suitable anode grade RPC. Anode grade CPC is the raw material for
carbon anodes required for aluminum smelting. Anode grade CPC is approximately
97% pure carbon; however, anode grade CPC varies based on the content of sulfur
and other trace elements in the finished product as well as on its physical
properties. GLC produces a full range of anode grade CPC tailored to the
specific needs of its aluminum company customers and believes that it has the
capability to produce anode grade CPC to meet the specifications of any of the
aluminum smelters in the world.
INDUSTRIAL GRADE CPC
GLC produces industrial grade CPC for sale both domestically and
internationally to the titanium dioxide, ferrous metals (steel and foundry),
specialty materials and chemical industries. Industrial grade CPC is used by
titanium dioxide producers as an energy and carbon source. It is used by the
ferrous metals industry as a recarburizer, which is an additive used to increase
the carbon content of steel mill and foundry products. Industrial grade CPC also
is used as a carbon source in a variety of chemical processes, including as an
additive in the production of plastic. Industrial grade CPC is generally similar
to anode grade CPC in its physical characteristics, but typically has higher
chemical impurities. In addition, industrial grade CPC is usually further
processed to meet sizing specifications and packaged for sale to end users in
smaller quantities than is anode grade CPC.
The Company has increased its net sales of industrial grade CPC by
approximately 92.7% since 1990. The Company has increased its market share by
focusing its sales efforts, increasing its sales staff and investing in
additional equipment at its production facilities.
FOREIGN OPERATIONS
The Company conducts significant foreign operations, primarily in South
America and particularly in Argentina. See Note 11 to the Consolidated Financial
Statements herein. Such operations are subject to certain risks. See "Risk
Factors--International Risks."
RAW MATERIALS AND SUPPLIERS
The Company purchases a range of RPC from a number of refineries with the
objective of using its blending capabilities to meet the specific quality
requirements of its customers at the lowest raw material cost. The Company
believes that there is sufficient supply of anode grade RPC available in the
world market to meet the needs of its operations.
RPC is typically purchased by the Company under contracts with a term of one
or more years, although the Company does make some spot purchases. Contracts
specify annual purchase quantities and quality specifications, and typically
provide for quarterly or semiannual price resetting based on either a previously
determined formula or a renegotiation. Generally, oil refineries supply RPC to
more than one calciner. The Company's La Plata facility has a long-term RPC
supply contract with YPF expiring in 2007. This contract currently provides the
Company with up to 550,000 tons per year of RPC, which amount includes a recent
increase of 250,000 upon the commencement of the operation of the New La Plata
Kiln.
MARKETING
The Company sells its CPC to end-users through its direct sales staff and
exclusive sales representatives. Substantially all sales are shipped directly to
end-users. GLC's domestic sales activity is organized by product grade, I.E.,
anode and industrial, with all selling activities handled by the Company's
direct sales staff. Internationally, GLC's direct sales staff is supplemented by
exclusive sales representatives based in the United Kingdom, Brazil, Australia
and Mexico. These representatives are involved in both anode grade and
industrial grade CPC sales.
53
<PAGE>
The Company typically sells anode grade CPC under contracts with a term of
one or more years, although a small percentage is sold on a spot basis. Under a
typical sales contract, which specifies overall annual quantity as well as
detailed quality specifications, prices are reset either quarterly or
semiannually based on either a previously determined formula or a renegotiation.
CPC is shipped by the Company in bulk quantities to its customers via truck,
railcar, barge or ship. Export shipments are often in large quantities and can
range up to 25,000 tons. Industrial grade CPC is generally sold to customers
under annual contracts or on a purchase order basis and is shipped in smaller
quantities in bulk or packaged to meet customer requirements.
In 1997, approximately 36.6% of the Company's net sales were to U.S.-based
customers and approximately 63.4% were to customers in international markets.
The Company's top five customers, each of which is a major worldwide aluminum
producer, represented approximately 62.2% of the Company's 1997 net sales.
During 1997, Alcoa and Alusaf accounted for 23.7% and 15.5%, respectively, of
the Company's net sales. Such producers have been significant customers of
Holdings for over 50 years and 20 years, respectively. In June 1998, Alcoa
acquired Alumax, another long-standing customer of the Company, which accounted
for 6.4% of the net sales of the Company in 1997.
COMPETITION
The Company is the largest producer of CPC in the world and competes with
domestic and foreign calciners in a worldwide market with respect to both anode
and industrial grade CPC sales. Marketing of CPC to both anode and industrial
grade customers is based primarily on price and quality. Worldwide demand for
anode grade CPC is tied directly to the global production of primary aluminum.
Sales of industrial grade CPC are dependent on the particular demands of the
titanium dioxide, steel and foundry, and certain chemical markets.
GLC is one of five major domestic calciners of anode grade CPC. Two
calciners, GLC and Calciner Industries Inc., are independent. The other
calciners are Atlantic Richfield Company, whose petroleum refining operations
provide its raw material supply, Reynolds Metals Co., which uses some of its CPC
for internal consumption, and Venture Coke Company ("Venco"), which is 50% owned
by Conoco. GLC believes that its domestic calcining capacity is the largest of
these five companies, and GLC is the only one of the five to have an
international production facility. Currently, GLC's U.S. operations sell
approximately 23.1% of the anode grade CPC sold in the United States.
The Company believes that it is among the largest domestic producers of
industrial grade CPC. The Company competes primarily with Venco (which through
Conoco is an affiliate of E.I. duPont de Nemours & Company, the world's largest
producer of titanium dioxide) for sales to the titanium dioxide market and with
Unocal, Inc. (which sells primarily through third parties) for sales to the
recarburizer market. GLC produces and markets CPC directly to the recarburizer
market, competing primarily with resellers of CPC.
EMPLOYEES
As of December 31, 1997, the Company employed 254 persons. The Company is a
party to collective bargaining agreements at two of its three facilities,
covering approximately one-third of its employees. The Company's collective
bargaining agreement with the International Association of Machinists and
Aerospace Workers covers hourly employees at the Enid, Oklahoma facility and
expires in 2001. Certain employees at the La Plata, Argentina facility are
covered by an annual labor contract with an Argentine government union. The Port
Arthur plant is operated with a nonunion workforce. Overall, the Company
believes that its relationship with its employees is satisfactory. However,
there can be no assurance that new labor agreements will be reached without a
strike.
ENVIRONMENTAL MATTERS
The Company's facilities and operations are subject to various federal,
state, local and foreign governmental laws and regulations with respect to the
protection of the environment, including regulations
54
<PAGE>
relating to air and water quality. The Company believes that it possesses all of
the permits required for the conduct of its operations and that it is currently
in material compliance with all relevant environmental regulations. The Company
spent approximately $3.5 million on capital expenditures related to pollution
control facilities in 1997 and anticipates spending approximately $3.5 million
and $1.9 million for such facilities in 1998 and 1999, respectively.
Approximately half of the environmental expenditures in 1997 and 1998 will be in
conjunction with the facility expansion at Copetro.
The Company's Port Arthur facility is currently operating under an Agreed
Final Judgment (the "Judgment") entered into on April 19, 1989 (as amended on
July 16, 1990, January 2, 1996 and October 1, 1996) between the Company and the
State of Texas. The Judgment specifies that the Company shall undertake certain
measures to enable the Company to comply with applicable particulate emission
limitations and enable the Company to monitor the opacity of its emissions. The
Judgment specifies stipulated penalties in the event that the Port Arthur
facility fails to meet the specified emission or opacity limits. The Company
believes that it is in material compliance with the Judgment. The Company has
had occasional exceedances of opacity limitations at the Port Arthur facility
and is reviewing its alternatives to maintain continuous compliance with such
limitations, the costs of which are not expected to have a material adverse
effect on the financial condition of the Company.
The Clean Air Act was amended in 1990. While the Company believes that its
facilities meet current regulatory standards applicable to air emissions, some
of its facilities will be required to comply with new standards for air
emissions to be adopted by the EPA and state environmental agencies over the
next several years. In addition, the amendments to the Clean Air Act will result
in revisions to state implementation plans, which may necessitate the
installation of additional controls for certain of the Company's emission
sources. At this time, the Company cannot estimate when new standards will be
imposed by the EPA or relevant state agencies or what control technologies or
changes in processes the Company may be required to install or undertake in
order to achieve compliance with any new requirements. Based on information
currently available to it, the Company believes that compliance with such
regulations will not have a material adverse effect on the financial position or
results of operations of the Company.
See also "--Legal Proceedings."
LEGAL PROCEEDINGS
Copetro is a party to a number of legal proceedings arising from alleged
emissions from its La Plata facility. The claims in these proceedings include
damages for personal injury, emotional distress and property damage. In two
proceedings, four plaintiffs obtained judgments for emotional distress and
property damages totaling $118,000 and applicable interest of approximately
$190,000, plus court costs. Two additional proceedings, involving 154 plaintiffs
from 55 families and arising out of the same general circumstances, are in the
early stages of discovery. In another case involving one plaintiff arising out
of the same general circumstances, a different court awarded property damages of
$5,000 plus applicable interest of approximately $6,000 plus court costs.
Copetro believes, on advice of counsel, that it has substantial defenses to
these allegations and is conducting vigorous defenses in all of these
proceedings, including appeal of the judgments entered to date. Although the
judgments in the first two proceedings described above have been affirmed by the
provincial appellate courts, Copetro has sought an appeal in Argentine federal
court for these matters. The Company's management, after discussion with legal
counsel, is of the opinion that the final disposition of these proceedings will
not have a material adverse effect on the financial condition of the Company.
The Company is a party to other legal proceedings which are in various
stages of resolution. Management, after discussion with legal counsel, is of the
opinion that the ultimate resolution of these matters will not have a material
adverse effect on the financial condition of the Company.
55
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name, age as of July 15, 1998 and
position of each person who is expected to serve as director or executive
officer of Holdings following the Acquisition Transactions.
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------------- --- --------------------------------------------------------------------
<S> <C> <C>
James D. McKenzie..................... 53 President and Chief Executive Officer, Director
A. Frank Baca......................... 54 Senior Vice President, Operations and Administration
Robert C. Dickie...................... 49 Vice President, Sales
James W. Betts........................ 60 Vice President, Raw Materials
Theodore C. Rogers.................... 63 Non-Executive Chairman of the Board, Director
W. Richard Bingham.................... 62 Director
Lawrence W. Ward, Jr.................. 45 Director
Kim A. Marvin......................... 36 Director
</TABLE>
Each of Holdings' directors and executive officers is elected annually and
holds office until his or her successor is elected and qualified.
Mr. McKenzie has served as President and Chief Executive Officer of Holdings
since the Acquisition and of the Company since June 1995. He served as Executive
Vice President of the Company and President of the Calcined Petroleum Coke
business of the Company and Old GLC from 1989 to June 1995. From 1971 to 1989,
he held a number of positions with Old GLC, including Vice President, General
Counsel.
Mr. Baca has been Senior Vice President, Operations and Administration of
Holdings since the Acquisition and of the Company since September 1995 and was
Vice President, Operations from 1991 to August 1995. Since joining Old GLC in
1967, he has held a number of operating positions, including Plant Manager of
the Port Arthur, Texas calcining facility.
Mr. Dickie has been Vice President, Sales of Holdings since the Acquisition
and of the Company since September 1995 and was Director of Sales from 1992 to
August 1995. He held the position of Plant Manager of the Enid, Oklahoma
calcining facility for Old GLC from 1989 to 1992. Prior to joining Old GLC in
1989, he spent 15 years with Alumax, holding various positions in aluminum
smelting operations.
Mr. Betts has been Vice President, Raw Materials of Holdings since the
Acquisition and of the Company since 1996. Since joining GLC in 1968, he has
held a variety of positions in the areas of sales and raw materials procurement.
Since 1992, he has been a director of Zoltek Companies, Inc.
Mr. Rogers is a Director, the Chairman of the Board and the Secretary of
American Industrial Partners Corporation. He co-founded AIP Management Co. and
has been a director and officer of AIP Management Co. since 1989. Mr. Rogers is
currently a director of Bucyrus International, Inc., Derby International, Easco
Corporation, RBX Corporation, Stanadyne Automotive Corp. and Sweetheart
Holdings, Inc.
Mr. Bingham is a Director, the President, the Treasurer and the Assistant
Secretary of American Industrial Partners Corporation. He co-founded AIP
Management Co. and has been a director and officer of AIP Management Co. since
1989. Mr. Bingham is also a director of Bucyrus International, Inc., Stanadyne
Automotive Corp., RBX Corporation, SF Holdings Inc. and Sweetheart Holdings,
Inc.
Mr. Ward has been an employee of American Industrial Partners Corporation
since 1992. From 1989 to 1992, he was Vice President and Chief Financial Officer
of Plantronics, Inc., a telecommunications
56
<PAGE>
equipment company. Mr. Ward is currently a director of Bucyrus International,
Inc., Easco Corporation, RBX Corporation, Stanadyne Automotive Corp. and
Sweetheart Holdings, Inc.
Mr. Marvin joined the San Francisco office of American Industrial Partners
in 1997 from the Mergers & Acquisitions Department of Goldman, Sachs & Co.,
where he was employed since 1994. Mr. Marvin is a director of Bucyrus
International Inc.
COMPENSATION OF DIRECTORS
Directors are not expected to receive compensation for their services as
directors.
COMPENSATION OF EXECUTIVE OFFICERS AND OTHER INFORMATION
The following table sets forth information concerning cash compensation paid
by the Company for each of the three years ended December 31, 1997 to the
Company's Chief Executive Officer and each of the three most highly compensated
executive officers of the Company. The Company does not have any noncash
compensation or stock appreciation rights plans.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------------- ALL OTHER
NAME AND POSITION YEAR SALARY BONUS(1) OTHER(2) COMPENSATION(3)
- ----------------------------------------------------- --------- ---------- ---------- --------- -----------------
<S> <C> <C> <C> <C> <C>
James D. McKenzie.................................... 1997 $ 250,008 $ 300,000 $ -- $ 4,750
President and Chief 1996 250,008 150,000 -- --
Executive Officer 1995 210,000 -- -- --
A. Frank Baca........................................ 1997 157,500 37,440 -- 4,725
Senior Vice President, 1996 150,000 17,524 7,134 --
Operations and 1995 120,936 8,686 320 --
Administration
Robert C. Dickie..................................... 1997 130,002 29,952 4,883 3,900
Vice President, Sales 1996 120,000 15,361 34,736 --
1995 106,008 7,893 25,263 --
James W. Betts....................................... 1997 112,500 26,208 33,817 3,375
Vice President, 1996 105,000 13,910 67,000 --
Raw Materials 1995 96,000 7,392 5,000 --
</TABLE>
- ------------------------
(1) The amounts shown in this column reflect payments under the Profit Sharing
Plan.
(2) The amounts shown in this column reflect the Company's payment of relocation
allowances and income tax reimbursement with respect to such relocation
allowances.
(3) The amounts shown in this column reflect the Company's contribution to the
named executive officer's 401(k) account.
PROFIT SHARING PLAN. The Company's practice has been to maintain a
profit-sharing plan which is established annually. Under the current plan, each
eligible employee receives profit-sharing distributions based on The Company's
achievement of profitability targets established each year by the Board of
Directors.
SAVINGS PLANS. The Company currently sponsors two Savings Plans for
employees. One Savings Plan is for salaried employees and one Savings Plan is
for employees covered by the collective bargaining agreement at the Enid plant.
Each of the Savings Plans is qualified under Section 401(k) of the Internal
Revenue Code and provides that employees may make contributions to an account in
the employee's name of up to 15% of gross base wages. The Company makes
contributions to both of the Savings Plans of up to 50% of each employee's
contribution, but not greater than 3% of such employee's salary.
RETIREMENT PLANS. The Company currently maintains three retirement plans
for the benefit of its employees. One plan is for the benefit of hourly
employees, one is for the benefit of salaried employees (the "Salaried Plan")
and one is a nonqualified supplemental plan for the benefit of Mr. McKenzie (the
57
<PAGE>
"SERP"). Each of the plans provides eligible employees with certain benefits at
retirement based on the employee's years of service and, in the case of the
Salaried Plan and the SERP, such employee's average salary. For purposes of the
foregoing, an employee's average salary is equal to the highest salary earned in
three out of the previous ten years or the average of all years of service, if
less than three.
The following table shows the estimated annual straight-life annuity benefit
payable under the Salaried Plan and the SERP to the executives who participate
in such plans, with the specified remuneration and specified years of service
upon retirement at age 65, after giving effect to adjustments for Social
Security benefits. Mr. McKenzie is the only participant in the SERP and the
benefit payable to him upon retirement at age 65 is determined based upon his
full salary and years of service. The benefit payable upon retirement at age 65
to each of the other named executive officers is determined based upon each such
executive's salary (limited by the limitations imposed by Section 401(a)(17) of
the Internal Revenue Code of 1986, as amended (the "Code"), currently $160,000)
and years of service.
<TABLE>
<CAPTION>
YEARS OF SERVICE
-----------------------------------------------------
REMUNERATION 15 20 25 30 35
- ----------------------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$100,000........................... $ 23,229 $ 30,972 $ 38,715 $ 48,458 $ 54,201
$150,000........................... 36,354 48,472 60,590 72,708 84,826
$200,000........................... 49,479 65,972 82,465 98,958 115,451
$250,000........................... 62,604 83,472 104,304 125,208 146,076
</TABLE>
The compensation of participants used to calculate the retirement benefit
consists solely of annual base salary as disclosed in the Summary Compensation
Table. For the four individuals named above, the 1997 compensation used to
calculate the remuneration and the number of years of credited service are as
follows: Mr. McKenzie, $250,000, 26 years; Mr. Baca, $157,500, 26 years; Mr.
Dickie, $130,000, 8.5 years; and Mr. Betts, $112,500, 26 years.
LIMITATION ON DIRECTOR'S LIABILITY
Holdings has adopted provisions in its Certificate of Incorporation and
Bylaws which limit the liability of its directors and provide for
indemnification of its officers and directors to the fullest extent permitted
under Delaware law. Under Holdings' Certificate of Incorporation, and as
permitted under the Delaware General Corporation Law, directors are not liable
to Holdings or its stockholders for monetary damages arising from a breach of
their fiduciary duty of care as directors. Such provision does not, however,
affect liability for any breach of a director's duty of loyalty to Holdings or
its stockholders for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law, under Section 174 of
the Delaware General Corporation Law or for any transaction from which a
director derives an improper personal benefit. Such provision would have no
effect on the availability of equitable remedies, such as an injunction, for
breach of fiduciary duty. Further, it is the position of the SEC that such
limitation of liability in no way limits the liability of Holdings or its
directors for violations of, or otherwise relieves the Holdings or the directors
from the necessity of complying with, the federal securities laws.
58
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
At the close of the Acquisition Transactions, AIP was paid a fee of $5.0
million and reimbursed for out-of-pocket expenses in connection with the
negotiation of the Acquisition Transactions and for providing certain investment
banking services to the Company, including the arrangement and negotiation of
the terms of the New Credit Agreement and the arrangement and negotiation of the
terms of the Old Notes and the Old Debentures, and for other financial advisory
and management consulting services. In connection with the Acquisition
Transactions, affiliates of, and certain other individuals associated with, AIP
contributed $330,000 to Holdings in exchange for common equity of Holdings.
AIP expects to provide substantial ongoing financial and management services
to the Company utilizing the extensive operating and financial experience of
AIP's principals. AIP will receive an annual fee of $1.9 million for providing
general management, financial and other corporate advisory services to the
Company, payable semiannually 45 days after the scheduled interest payment date
for the Debentures, and will be reimbursed for out-of-pocket expenses. The fees
will be paid to AIP pursuant to a management services agreement among AIP and
the Company and will be subordinated in right of payment to the Debentures.
SECURITY OWNERSHIP
Immediately following the consummation of the Acquisition Transactions, AIP,
its affiliates and certain other individuals associated with AIP were the only
holders of record of the common stock of Holdings, par value $.01 per share
("Holdings Common Stock"). The following table sets forth certain information
regarding beneficial ownership of Holdings Common Stock immediately following
the closing of the Acquisition Transactions by (i) each person who is known by
Holdings to be the beneficial owner of more than 5% of Holdings Common Stock,
(ii) each of Holdings' directors and the named executive officers set forth in
the table under "Management--Compensation of Executive Officers and Other
Information" and (iii) all directors and executive officers as a group. Except
as indicated below, the address for each person listed below is One Maritime
Plaza, Suite 2525, San Francisco, CA 94111.
<TABLE>
<CAPTION>
NAME NUMBER(1) PERCENTAGE(2)
- --------------------------------------------------------------------------------------- ----------- ---------------
<S> <C> <C>
American Industrial Partners Capital Fund II, L.P.(3).................................. 65,000 99.5%
W. Richard Bingham(3).................................................................. 65,000 99.5%
Theodore C. Rogers(3).................................................................. 65,000 99.5%
All directors and executive officers as a group (8 persons)............................ 65,000 99.5%
</TABLE>
- ------------------------
(1) Beneficial ownership is determined in accordance with Rule 13d-3 under the
Exchange Act. No options to purchase Holdings Common Stock are currently
outstanding. The persons named in this table have sole voting and investment
power with respect to all shares of Holdings Common Stock shown as
beneficially owned by them, subject to community property laws where
applicable and except as indicated in the other footnotes to this table.
(2) Based upon 65,330 shares of Holdings Common Stock outstanding following
consummation of the Acquisition Transactions.
(3) Messrs. Bingham and Rogers share investment and voting power with respect to
the securities owned by AIP, but each disclaims beneficial ownership of any
shares of Holdings Common Stock. The business address of Mr. Rogers is 551
Fifth Avenue, Suite 3800, New York, NY 10176.
59
<PAGE>
DESCRIPTION OF HOLDINGS CAPITAL STOCK
Holdings' authorized capital stock consists of 92,000 shares of common
stock, par value $.01 per share. All of the issued and outstanding shares of
Holdings' capital stock are fully paid and nonassessable. There are no
outstanding options, warrants or other rights to purchase any of the Holdings'
capital stock. Holders of shares of Holdings' capital stock are entitled to one
vote per share on all matters to be voted on by stockholders. The holders of
shares of Holdings' capital stock are entitled to receive such dividends, if
any, as may be declared from time to time by the Board of Directors in its
discretion from funds legally available therefor, and upon liquidation or
dissolution are entitled to receive all assets available for distribution to the
stockholders. Since consummation of the Acquisition Transactions, AIP, its
affiliates and certain other individuals associated with AIP are the only
stockholders of Holdings and AIP has the ability to designate all of the
directors of Holdings.
60
<PAGE>
DESCRIPTION OF DEBENTURES
GENERAL
The New Debentures will be issued pursuant to the Indenture (the
"Indenture") between Holdings and State Street Bank and Trust Company of
California, N.A., as trustee (the "Trustee"), dated as of May 22, 1998, a copy
of which has been filed as an exhibit to the Registration Statement of which
this Prospectus forms a part. The terms of the Debentures include those stated
in the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (the "TIA"). The Debentures are subject to all such terms,
and Holders of Debentures are referred to the Indenture and the TIA for a
statement thereof. The following summary of certain provisions of the Indenture
does not purport to be complete and is subject to, and qualified in its entirety
by reference to the Indenture, including the definitions therein of certain
terms used below. Copies of the Indenture and the 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 SUMMARY, THE TERMS "HOLDINGS" AND "COMPANY" REFER ONLY
TO GREAT LAKES ACQUISITION CORP. AND NOT TO ANY OF ITS SUBSIDIARIES.
The New Debentures are identical in all material respects to the terms of
the Old Debentures except (i) that the New Debentures have been registered under
the Securities Act, (ii) for certain transfer restrictions and registration
rights relating to the Old Debentures and (iii) that the New Debentures will not
contain certain provisions relating to Liquidated Damages to be paid to the
Holders of Old Debentures under certain circumstances relating to the timing of
the Exchange Offer and to other registration requirements described below under
"--Registration Rights; Liquidated Damages." The Trustee will authenticate and
deliver New Debentures for original issue only in exchange for a like principal
amount of Old Debentures. Any Old Debentures that remain outstanding after the
consummation of the Exchange Offer, together with the New Debentures, will be
treated as a single class of securities under the Indenture.
The Old Debentures are and the New Debentures will be general unsecured
obligations of the Company and pari passu in right of payment to all current and
future unsubordinated Indebtedness of the Company and senior in right of payment
to all subordinated Indebtedness of the Company. The operations of the Company
are conducted entirely through its Subsidiaries and, therefore, the Company is
entirely dependent upon the cash flow of its Subsidiaries to meet its
obligations, including its obligations under the Debentures. See "Risk
Factors--Limitation on Access to Cash Flow of Subsidiaries; Holding Company
Structure." The New Credit Agreement and the Notes restrict GLC from paying any
dividends or making any other distributions to the Company. The Old Debentures
are and the New Debentures will be effectively subordinated to all Indebtedness
and other liabilities of GLC and its Subsidiaries (including, without
limitation, to GLC's obligations under the New Credit Agreement and the Notes).
Any right of the Company to receive assets of any of its Subsidiaries upon such
Subsidiary's liquidation or reorganization (and the consequent right of holders
of the Debentures to participate in those assets) will be effectively
subordinated to the claims of that Subsidiary's creditors except to the extent
that the Company itself is recognized as a creditor of such Subsidiary, in which
case the claims of the Company would still be subordinate to the claims of such
creditors who hold security in the assets of such Subsidiary and to the claims
of such creditors who hold Indebtedness of such Subsidiary senior to that held
by the Company. As of March 31, 1998, on a pro forma basis giving effect to the
Acquisition Transactions, the Company and its Subsidiaries would have had
Indebtedness of approximately $339.5 million and the Company's Subsidiaries
would have had outstanding approximately $309.4 million of Indebtedness,
including Indebtedness under the Notes, the New Credit Agreement and the Copetro
Credit Agreement. The Indenture permits the incurrence of certain additional
Indebtedness of the Company and the Company's Subsidiaries in the future. See
"--Certain Covenants--Incurrence of Indebtedness and Issuance of Disqualified
Stock."
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As of the Issue Date, none of the Company Subsidiaries will be Unrestricted
Subsidiaries. However, under certain circumstances, the Company will be able to
designate current or future Subsidiaries as Unrestricted Subsidiaries.
Unrestricted Subsidiaries will not be subject to many of the restrictive
covenants set forth in the Indenture.
PRINCIPAL, MATURITY AND INTEREST
Old Debentures in an aggregate principal amount at maturity of $56.6 million
were issued in the Offering generating gross proceeds to Holdings of
approximately $30.1 million. The Debentures will mature on May 15, 2009. The Old
Debentures were and the New Debentures will be issued at a substantial discount
from their aggregate principal amount at maturity. Until May 15, 2003, no cash
interest will accrue or be payable on the Debentures, but the Accreted Value
will increase (representing amortization of original issue discount) between the
date of original issuance and May 15, 2003, on a semi-annual bond equivalent
basis using a 360-day year comprised of twelve 30-day months, such that the
Accreted Value shall be equal to the full principal amount at maturity of the
Debentures on May 15, 2003. The Accreted Value shall cease to increase as of May
15, 2003. Beginning on May 15, 2003, interest on the Debentures will accrue at
the rate of 13 1/8% per annum and will be payable semiannually in arrears on May
15 and November 15, commencing on November 15, 2003, to holders of record on the
immediately preceding May 1 and November 1, respectively. Interest on the
Debentures will accrue from the most recent date to which interest has been paid
or, if no interest has been paid, from May 15, 2003. Interest will be computed
on the basis of a 360-day year comprised of twelve 30-day months. Principal,
premium, if any, and interest and Liquidated Damages, if any, on the Debentures
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 principal, premium, interest, and Liquidated Damages may be made by
check mailed to the Holders of Debentures at their respective addresses set
forth in the register of Holders of Debentures; provided that all payments of
principal, premium, interest and Liquidated Damages with respect to Debentures
represented by one or more permanent Global Debentures will be required to be
made by wire transfer of immediately available funds to the accounts of DTC or
any successor thereto. 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 Debentures will be issued in denominations of $1,000 and
integral multiples thereof. Old Debentures accepted for exchange will cease to
accrete in value from and after the date of consummation of the Exchange Offer.
OPTIONAL REDEMPTION
The Old Debentures are and the New Debentures will be subject to redemption
at any time on or after May 15, 2003 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, if any, thereon to the
applicable redemption date, if redeemed during the 12-month period commencing
May 15th of the years set forth below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---------------------------------------------------------------------------------- -----------
<S> <C>
2003.............................................................................. 106.563%
2004.............................................................................. 104.375%
2005.............................................................................. 102.188%
2006 and thereafter............................................................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time or from time to time on or prior
to May 15, 2001, the Company may redeem up to 35% of the aggregate principal
amount of Debentures originally issued under the Indenture at a redemption price
of 113.125% of the Accreted Value thereof, and Liquidated Damages thereon, if
any, to the redemption date, with the Net Cash Proceeds of one or more Equity
Offerings; PROVIDED that at least 65% of the aggregate principal amount at
maturity of New Debentures issued
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hereunder together with the Old Debentures originally issued and not exchanged
in the Exchange Offer remain outstanding immediately after the occurrence of
such redemption; and PROVIDED, FURTHER, that such redemption shall occur within
90 days of the date of the closing of such Equity Offering.
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Debentures.
SELECTION AND NOTICE
If less than all of the Debentures are to be redeemed at any time, selection
of Debentures for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Debentures are listed, or, if the Debentures are not so listed, on a pro rata
basis, by lot or by such method as the Trustee will deem fair and appropriate;
PROVIDED that no Debentures of $1,000 or less will be redeemed in part. Notices
of redemption will be mailed by first class mail at least 30 but not more than
60 days before the redemption date to each Holder of Debentures to be redeemed
at its registered address. If any Debenture is to be redeemed in part only, the
notice of redemption that relates to such Debenture will state the portion of
the principal amount thereof to be redeemed. A new Debenture in principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Debenture. Debentures called for
redemption become due on the date fixed for redemption. On and after the
redemption date the Accreted Value ceases to increase and the interest ceases to
accrue on Debentures or portions of them called for redemption.
CERTAIN COVENANTS
CHANGE OF CONTROL
The Indenture provides that upon the occurrence of a Change of Control, the
Company is required to offer to purchase all Debentures then outstanding
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, if any, thereon to the date
of purchase, or in the case of repurchases of Debentures prior to May 15, 2003,
at a purchase price equal to 101% of the Accreted Value thereof as of the date
of repurchase (the "Change of Control Payment"). Within 35 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 Debentures 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 Debentures as a result of a Change of Control. To the
extent the provisions of any such securities laws or regulations conflict with
the provisions of this covenant, compliance by the Company with such laws, rules
and regulations shall not in and of itself cause a breach of its obligations
under this covenant.
The Change of Control Offer will remain open for a period not to exceed 60
days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Change of Control Offer
Period"). No later than five Business Days after the termination of the Change
of Control Offer Period (the "Change of Control Purchase Date"), the Company
will purchase all Debentures tendered in response to the Change of Control
Offer. Payment for any Debentures so purchased will be made in the same manner
as interest payments are made.
If the Change of Control Purchase Date is on or after an interest record
date and on or before the related interest payment date, any accrued and unpaid
interest will be paid to the Person in whose name a Debenture is registered at
the close of business on such record date, and no additional interest will be
payable to Holders who tender Debentures pursuant to the Change of Control
Offer.
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On the Change of Control Purchase Date, the Company will, to the extent
lawful, (1) accept for payment all Debentures 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
Debentures or portions thereof so tendered and (3) deliver or cause to be
delivered to the Trustee the Debentures so accepted together with an Officers'
Certificate stating the aggregate principal amount of Debentures or portions
thereof being purchased by the Company. The Paying Agent will promptly mail to
each Holder of Debentures so tendered the Change of Control Payment for such
Debentures, and the Trustee will promptly authenticate and mail (or cause to be
transferred by book entry) to each Holder a new Debenture equal in principal
amount to any unpurchased portion of the Debentures surrendered, if any;
PROVIDED that each such new Debenture will be in a principal amount of $1,000 or
an integral multiple thereof.
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 Debentures to require that the Company
repurchase or redeem the Debentures in the event of a takeover, recapitalization
or similar transaction.
The Change of Control purchase feature of the Debentures may make more
difficult or discourage a takeover of the Company and, thus, the removal of
incumbent management.
The phrase "all or substantially all" of the assets of the Company will
likely be interpreted under applicable state law and will be dependent upon
particular facts and circumstances. As a result, there may be a degree of
uncertainty in ascertaining whether a sale or transfer of "all or substantially
all" of the assets of the Company has occurred. In addition, no assurances can
be given that the Company will be able to acquire Debentures tendered upon the
occurrence of a Change of Control.
The New Credit Agreement and the Notes restrict the Company's Subsidiaries
from paying any dividends or making any other distributions to the Company. If
the Company is unable to obtain dividends from its Subsidiaries sufficient to
permit the repurchase of the Debentures or does not refinance such Indebtedness,
the Company will likely not have the financial resources to purchase Debentures.
In any event, there can be no assurance that the Company's Subsidiaries will
have the resources available to pay any such dividend or make any such
distribution. The Company's failure to make a Change of Control Offer when
required or to purchase tendered Debentures when tendered would constitute an
Event of Default under the Indenture. See "Risk Factors--Substantial Leverage;
Liquidity; Stockholders' Deficit" and "--Limitation on Access to Cash Flow of
Subsidiaries; Holding Company Structure."
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes a Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set for
forth in the Indenture applicable to a Change of Control Offer made by the
Company and purchases all Debentures validly tendered and not withdrawn under
such Change of Control Offer.
ASSET SALES
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, engage in an Asset Sale in excess of $1.0 million 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 of the
assets or Equity Interests sold or otherwise disposed of, and in the case of a
lease of assets, a lease providing for rent and other conditions which are no
less favorable to the Company (or the Subsidiary, as the case may be) in any
material respect than the then prevailing market conditions (in each case as set
forth in an Officers' Certificate delivered to the Trustee), (ii) at least 75%
of the consideration therefor received by the Company or such Subsidiary is in
the form of cash or Cash Equivalents; PROVIDED that the amount of (x) any
liabilities (as shown on the Company or such Subsidiary's most recent balance
sheet or in the notes thereto, excluding contingent liabilities and trade
payables) of the Company or any Subsidiary (other than
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liabilities that are by their terms subordinated to, or PARI PASSU with, the
Debentures) that are assumed by the transferee of any such assets and (y) any
notes or other obligations received by the Company or any such Subsidiary from
such transferee that are promptly, but in no event more than 30 days after
receipt, converted by the Company or such Subsidiary into cash (to the extent of
the cash received), will be deemed to be cash for purposes of this provision and
the receipt of such cash shall be treated as cash received from an Asset Sale
for which such Debentures or obligations were received.
The Company or any of its Subsidiaries may apply the Net Proceeds from each
Asset Sale, at its option, within 415 days after the consummation of such Asset
Sale, (a) to permanently reduce any Indebtedness (and in the case of any
revolving indebtedness to correspondingly permanently reduce commitments with
respect thereto) of the Company or a Subsidiary of the Company, or (b) for the
acquisition of another business or the acquisition of other property or assets,
in each case, in the same or a Related Business or (c) for any combination of
the foregoing. Pending the final application of any such Net Proceeds, the
Company may temporarily reduce Indebtedness of a Subsidiary of the Company 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
Debentures (an "Asset Sale Offer") and to holders of other Indebtedness of the
Company outstanding ranking on a PARI PASSU basis with the Debentures with
provisions requiring the Company to make an offer (or otherwise redeem or
prepay) with proceeds from the asset sales, pro rata in proportion to the
respective principal amounts (or accreted values in the case of Indebtedness
issued with an original issue discount) of the Debentures and such other
Indebtedness then outstanding, to purchase (or otherwise redeem or prepay) the
maximum principal amount (or Accreted Value, as applicable) of Debentures and
such other Indebtedness, if any, that may be purchased (or redeemed or prepaid)
out of the Excess Proceeds, at an offer price in cash in an amount equal to 100%
of the principal amount (or Accreted Value, if the date of repurchase is prior
to May 15, 2003) thereof plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of purchase, in accordance with the
procedures set forth in the Indenture. If the aggregate principal amount (or
Accreted Value, as applicable) of Debentures and such Indebtedness surrendered
by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall
select the Debentures and such 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.
The term "Asset Sale," as defined in the Indenture, excludes certain sales
and other dispositions of assets. See "--Certain Definitions." As a result, the
Company and its Subsidiaries will be permitted to sell certain assets without
compliance with the foregoing covenant.
The Asset Sale Offer will remain open for a period not to exceed 30 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Asset Sale Offer Period"). No
later than five Business Days after the termination of the Asset Sale Offer
Period (the "Asset Sale Purchase Date"), the Company will purchase the principal
amount of Debentures required to be purchased pursuant to this covenant (the
"Asset Sale Offer Amount") or, if less than the Asset Sale Offer Amount has been
tendered, all Debentures tendered in response to the Asset Sale Offer. Payment
for any Debentures so purchased will be made in the same manner as interest
payments are made. 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 were applicable in connection with the
repurchase of the Debentures as a result of an Asset Sale Offer. To the extent
the provisions of any such securities laws or regulations conflict with the
provisions of this covenant, compliance by the Company with such laws, rules and
regulations shall not in and of itself cause a breach of its obligations under
this covenant.
If the Asset Sale Purchase Date is on or after an interest record date and
on or before the related interest payment date, any accrued and unpaid interest
will be paid to the Person in whose name a
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Debenture is registered at the close of business on such record date, and no
additional interest will be payable to Holders who tender Debentures pursuant to
the Asset Sale Offer.
On or before the Asset Sale Purchase Date, the Company will, to the extent
lawful, accept for payment, on a PRO RATA basis to the extent necessary, the
Asset Sale Offer Amount of Debentures or portions thereof tendered pursuant to
the Asset Sale Offer, or if less than the Asset Sale Offer Amount has been
tendered, all Debentures tendered, and will deliver to the Trustee an Officers'
Certificate stating that such Debentures or portions thereof were accepted for
payment by the Company in accordance with the terms of this covenant. The
Company, the Depositary or the Paying Agent, as the case may be, will promptly
(but in any case not later than five Business Days after the Asset Sale Purchase
Date) mail or deliver to each tendering Holder an amount equal to the purchase
price of the Debentures tendered by such Holder and accepted by the Company for
purchase, and the Company will promptly issue a new Debenture, and the Trustee,
upon delivery of an Officers' Certificate from the Company, will authenticate
and mail or deliver such new Debenture to such Holder, in a principal amount at
maturity equal to any unpurchased portion of the Debenture surrendered. Any
Debenture not so accepted will be promptly mailed or delivered by the Company to
the Holder thereof.
The New Credit Agreement and the Notes restrict the ability of GLC to pay
dividends or make other distributions to the Company. If the Company is unable
to obtain dividends from GLC sufficient to permit the repurchase of the
Debentures or does not refinance such Indebtedness, the Company will likely not
have the financial resources to purchase Debentures. In any event, there can be
no assurance that the Company's Subsidiaries will have the resources available
to pay any such dividend or make any such distribution. The Company's failure to
make an Asset Sale Offer when required or to purchase tendered Debentures when
tendered would constitute an Event of Default under the Indenture. See "Risk
Factors--Substantial Leverage" and "--Limitation on Access to Subsidiaries' Cash
Flow; Holding Company Structure."
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 distribution on account of the Company's or any of its Subsidiaries'
Equity Interests (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company or GLC or dividends or
distributions payable to the Company or any Subsidiary); (ii) purchase, redeem
or otherwise acquire or retire for value any Equity Interests of the Company or
its Subsidiaries 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 and
other than pursuant to the Acquisition Transactions); (iii) make any principal
payment on, or purchase, redeem, defease or otherwise acquire or retire for
value any Indebtedness that is contractually subordinated to the Debentures (and
other than Debentures), except for any scheduled repayment (including any
sinking fund or similar payment) or at final maturity thereof; or (iv) make any
Restricted Investment (all such payments and other actions set forth in clauses
(i) through (iv) above, unless a Permitted Investment, 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 will have occurred and be continuing
or would occur as a consequence thereof;
(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
entitled "Incurrence of Indebtedness and Issuance of Disqualified Stock";
and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Subsidiaries after the Issue
Date (excluding Restricted Payments permitted by
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clauses (ii), (iii), (iv), (v) and (vi) of the next succeeding paragraph),
is less than the sum of (i) $7.5 million, plus (ii) 50% of the Consolidated
Net Income (adjusted to exclude any amounts that are otherwise included in
this clause (c) to the extent there would be, and to avoid, any duplication
in the crediting of any such amounts) of the Company for the period (taken
as one accounting period) from the beginning of the first fiscal quarter
commencing after the Issue Date to the end of the Company's most recently
ended fiscal quarter for which internal financial statements are available
at the time of such Restricted Payment (or, if such Consolidated Net Income
for such period is a deficit, less 100% of such deficit), plus (iii) to the
extent not included in the amount described in clause (ii) above, 100% of
the aggregate Net Cash Proceeds received after the Issue Date by the Company
from the issue or sale of, or from capital contributions in respect of,
Equity Interests of the Company or of debt securities of the Company or any
Subsidiary that have been converted into, or cancelled in exchange for,
Equity Interests of the Company (other than Equity Interests (or convertible
debt securities) sold to a Subsidiary of the Company and other than
Disqualified Stock or debt securities that have been converted into
Disqualified Stock), plus (iv) 100% of any dividends or other distributions
received by the Company or a Subsidiary of the Company after the Issue Date
from an Unrestricted Subsidiary of the Company, plus (v) 100% of the cash
proceeds (or Cash Equivalents) realized upon the sale of any Unrestricted
Subsidiary (less the amount of any reserve established for purchase price
adjustments and less the maximum amount of any indemnification or similar
contingent obligation for the benefit of the purchaser, any of its
Affiliates or any other third party in such sale, in each case as adjusted
for any permanent reduction in any such amount on or after the date of such
sale, other than by virtue of a payment made to such Person) following the
Issue Date, plus (vi) to the extent that any Restricted Investment that was
made after the Issue Date is sold for cash (or Cash Equivalents) or
otherwise liquidated or repaid for cash (or Cash Equivalents), the amount of
cash proceeds (or Cash Equivalents) received with respect to such Restricted
Investment plus (vii) upon the redesignation of an Unrestricted Subsidiary
as a Subsidiary, the lesser of (x) the fair market value of such Subsidiary
or (y) the aggregate amount of all Investments made in such Subsidiary
subsequent to the Issue Date by the Company and its Subsidiaries.
The foregoing provisions do not prohibit, if and to the extent any of the
following would otherwise constitute a Restricted Payment, (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) if no Default or Event of Default shall have occurred and be
continuing (and shall not have been waived) or shall occur as a consequence
thereof, the payment by the Company of a management fee to AIP in an amount not
to exceed $1.85 million in any fiscal year and the reimbursement by the Company
of AIP's reasonable out-of-pocket expenses incurred in connection with the
rendering of management services to or on behalf of the Company; PROVIDED,
HOWEVER, that no such fees may be paid, and no such expenses may be reimbursed,
unless the obligation of the Company to pay such management fee has been
subordinated to the payment of all Obligations with respect to the Debentures;
(iii) the making of any Restricted Investment in exchange for, or out of the
proceeds of, the substantially concurrent sale (other than to a Subsidiary of
the Company) of, or from substantially concurrent additional capital
contributions in respect of, Equity Interests of the Company (other than
Disqualified Stock); PROVIDED, that any Net Cash Proceeds that are utilized for
any such Restricted Investment will be excluded from clause (c)(iii) of the
preceding paragraph; (iv) the redemption, repurchase, retirement or other
acquisition of any Equity Interests of the Company in exchange for, or out of
the proceeds of, the substantially concurrent sale (other than to a Subsidiary
of the Company) of, or from substantially concurrent capital contributions in
respect of, other Equity Interests of the Company (other than any Disqualified
Stock); PROVIDED that any Net Cash Proceeds that are utilized for any such
redemption, repurchase, retirement or other acquisition, will be excluded from
clause (c)(iii) of the preceding paragraph; (v) the defeasance, redemption or
repurchase of, or the making of a principal payment on, or the acquisition or
retirement for value of, subordinated Indebtedness in exchange for or with the
net cash proceeds from an incurrence of Permitted Refinancing Indebtedness or
the substantially concurrent sale (other than to a Subsidiary of the Company)
of, or from substantially concurrent capital contributions in
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respect of, Equity Interests of the Company (other than Disqualified Stock);
PROVIDED, that any net cash proceeds that are utilized for any such defeasance,
redemption or repurchase will be excluded from clause (c)(iii) of the preceding
paragraph; (vi) 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 agreement or stock option agreement or
upon the death, disability or termination of employment of such member; PROVIDED
that the aggregate price paid for all such repurchased, redeemed, acquired or
retired Equity Interests will not exceed $5.0 million in the aggregate (net of
the Net Cash Proceeds received by the Company or its Subsidiaries from
subsequent reissuances of such Equity Interests to new members of such
management), and no Default or Event of Default will have occurred and be
continuing immediately after such transaction; (vii) the acquisition by a
Receivables Subsidiary in connection with a Qualified Receivables Transaction of
Equity Interests of a trust or other Person established by such Receivables
Subsidiary to effect such Qualified Receivables Transaction; (viii) pro rata
dividends and other distributions on the Equity Interests of any Subsidiary of
the Company by such Subsidiary; and (ix) payments in lieu of fractional shares
in an amount not to exceed $50,000 in the aggregate.
The Board of Directors may designate any Subsidiary to be an Unrestricted
Subsidiary if such designation would not cause a Default or Event of Default.
For purposes of making such determination, all outstanding Investments by the
Company and its Subsidiaries (except to the extent repaid in cash or Cash
Equivalents) in the Subsidiary so designated will be deemed to be Restricted
Payments at the time of such designation and will reduce the amount available
for Restricted Payments under the first paragraph of this covenant. All such
outstanding Investments will be deemed to constitute Investments in an amount
equal to the greatest of (x) the net book value of such Investments at the time
of such designation, (y) the fair market value of such Investments at the time
of such designation and (z) the original fair market value of such Investments
at the time they were made. Such designation will only be permitted if such
Restricted Payment would be permitted at such time and if such Subsidiary
otherwise meets the definition of an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash or Cash Equivalents)
will be the fair market value (as and to the extent set forth in an Officers'
Certificate delivered to the Trustee pursuant to the next sentence) on the date
of the Restricted Payment of the asset(s) proposed to be transferred by the
Company or such Subsidiary, as the case may be, pursuant to the Restricted
Payment. Not later than five Business Days' following the date of making any
Restricted Payment in excess of $1,000,000, the Company will 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 covenant were computed, which calculations may be based upon the Company's
latest available financial statements.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED 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 Indebtedness) and the Company will not issue or otherwise incur any
Disqualified Stock and will not permit any of its Subsidiaries to issue or
otherwise incur any shares of Disqualified Stock; PROVIDED, HOWEVER, that the
Company and its Subsidiaries may incur Indebtedness (including Acquired
Indebtedness) or issue or otherwise incur shares of Disqualified Stock and
Foreign Subsidiaries may incur Indebtedness (including Acquired Indebtedness)
if: (i) 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 or incurred would have been at least 1.75
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 or incurred, as the case may be, at the
beginning of such four-quarter period; and (ii) no Default or Event of Default
will have occurred and be continuing or would occur as a
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consequence thereof; PROVIDED, that no Guarantee may be incurred pursuant to
this paragraph unless the guaranteed Indebtedness is incurred by the Company or
a Subsidiary pursuant to this paragraph; and PROVIDED FURTHER, that all
Indebtedness incurred by Foreign Subsidiaries pursuant to this paragraph must be
secured and must not be subordinated in right of payment to any other
Indebtedness.
The foregoing provisions will not apply to:
(i) the incurrence by GLC or any Subsidiaries thereof of Senior Term
Debt (and Guarantees thereof by the Company or its Subsidiaries); PROVIDED
that the aggregate principal amount of all Senior Term Debt outstanding
under this clause (i) after giving effect to such incurrence does not exceed
$120.0 million less the aggregate amount of all Net Proceeds of Asset Sales
applied to repay Senior Term Debt pursuant to the covenant described above
under the caption "--Asset Sales";
(ii) the incurrence by GLC or any Subsidiaries thereof of Senior
Revolving Debt (and Guarantees thereof by the Company or its Subsidiaries)
and reimbursement obligations in respect of letters of credit in an
aggregate principal amount at any time outstanding under this clause (ii)
(with letters of credit obligations being deemed to have a principal amount
equal to the maximum potential liability of GLC and its Subsidiaries (and
Guarantees thereof by the Company or its Subsidiaries) not to exceed an
amount equal to the greater of (a) $25.0 million, less the aggregate amount
of all Net Proceeds of Asset Sales applied to permanently reduce the
outstanding amount or, as applicable, the commitments with respect to such
Indebtedness pursuant to the covenant described above under the caption
"--Asset Sales," and (b) an amount equal to the Borrowing Base;
(iii) the incurrence by the Company and its Subsidiaries of the Existing
Indebtedness (including any Permitted Refinancing Indebtedness incurred to
refinance, retire, renew, defease, refund or otherwise replace such
Indebtedness);
(iv) the incurrence by (a) the Company of Indebtedness represented by
(x) the Debentures issued as of the Issue Date and (y) the Exchange
Debentures; and (b) GLC and its Subsidiaries of Indebtedness represented by
the Notes and any Guarantee thereof and by Additional Notes (and any
Guarantees thereof) issued in lieu of interest for up to four seminannual
interest payments on the Notes as set forth in the Note Indenture.
(v) the incurrence by the Company or any of its Subsidiaries of
Indebtedness represented by Capital Lease Obligations, Mortgage Financings
or Purchase Money Obligations, in each case incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvement of property used in the business or a Related Business of the
Company or such Subsidiary, in an aggregate principal amount not to exceed
$10.0 million at any time outstanding under this clause (v) (including any
Permitted Refinancing Indebtedness incurred to refinance, retire, renew,
defease, refund or otherwise replace any such Indebtedness);
(vi) 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 extend, refinance, renew, replace, defease or refund,
Indebtedness that was permitted by the Indenture to be incurred or was
outstanding on the Issue Date, after giving effect to the Acquisition
Transactions;
(vii) the incurrence by the Company or any of its Subsidiaries of
intercompany Indebtedness between or among the Company and any of its
Subsidiaries or between or among any of its Subsidiaries; PROVIDED, HOWEVER,
that (x) 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 Subsidiary of the Company and (y) any sale or other transfer of
any such Indebtedness to a Person that is not either the Company or a
Subsidiary of the Company will be deemed, in each case, to constitute an
incurrence of such Indebtedness by the Company or such Subsidiary, as the
case may be;
(viii) the incurrence by the Company or any of its Subsidiaries of Hedging
Obligations that are incurred for the purpose of fixing or hedging (a)
interest rate risk with respect to any floating rate
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Indebtedness that is permitted by the Indenture to be incurred or (b)
currency risk (to the extent incurred in the ordinary course of business and
not for purposes of speculation);
(ix) the incurrence by the Company or any of its Subsidiaries of
Indebtedness (in addition to Indebtedness permitted by any other clause of
this covenant) in an aggregate principal amount at any time outstanding
under this clause (ix) not to exceed the sum of $30.0 million (including
Permitted Refinancing Indebtedness incurred to refinance, retire, renew,
defease, refund or otherwise replace any such Indebtedness); provided that
such Indebtedness may, but need not, be incurred under the New Credit
Agreement;
(x) Indebtedness incurred by the Company or any of its Subsidiaries
arising from agreements providing for indemnification, adjustment of
purchase price or similar obligations, or from guarantees of letters of
credit, bankers' acceptances, surety bonds or performance bonds securing the
performance of the Company or any of its Subsidiaries to any Person
acquiring all or a portion of such business or assets of the Company or a
Subsidiary of the Company for the purpose of financing such acquisition, in
a principal amount not to exceed 25% of the gross proceeds (with proceeds
other than cash or Cash Equivalents being valued at the fair market value
thereof as determined by the Company in good faith) actually received by the
Company or any of its Subsidiaries in connection with such disposition;
(xi) the incurrence by a Receivables Subsidiary of Indebtedness in a
Qualified Receivables Transaction that is without recourse to the Company or
to any other Subsidiary of the Company or their assets (other than such
Receivables Subsidiary and its assets and, as to the Company or any
Subsidiary of the Company, other than pursuant to representations,
warranties, covenants and indemnities customary for such transactions) and
is not guaranteed by any such Person;
(xii) the incurrence by Foreign Subsidiaries of Indebtedness (in addition
to Indebtedness permitted by any other provision of this covenant) in an
aggregate amount not to exceed $25.0 million at any time outstanding under
this clause (xii) (including any Permitted Refinancing Indebtedness incurred
to refinance, retire, renew, defease, refund or otherwise replace any such
Indebtedness);
(xiii) Indebtedness in respect of performance bonds, bankers' acceptances,
letters of credit and surety or appeal bonds entered into by the Company and
its Subsidiaries in the ordinary course of their business;
(xiv) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently (except in
the case of daylight overdrafts) drawn against insufficient funds in the
ordinary course of business; and
(xv) Finance Subsidiary Indebtedness.
Notwithstanding any other provision of this covenant, a Guarantee of
Indebtedness permitted by the terms of the Indenture at the time such
Indebtedness was incurred or at the time the guarantor thereof became a
Subsidiary of the Company will not constitute a separate incurrence, or amount
outstanding, of Indebtedness. Upon each incurrence of Indebtedness by the
Company or any of its Subsidiaries, the Company may designate pursuant to which
provision of this covenant such Indebtedness is being incurred and such
Indebtedness shall not be deemed to have been incurred or outstanding under any
other provision of this covenant, except as stated otherwise in the foregoing
provision.
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Indebtedness or Disqualified Stock of any Person which is outstanding at the
time such Person becomes a Subsidiary of the Company (including upon designation
of any subsidiary or other person as a Subsidiary) or is merged with or into or
consolidated with the Company or a Subsidiary of the Company shall be deemed to
have been incurred at the time such Person becomes a Subsidiary of the Company
or is merged with or consolidated with the Company or a Subsidiary of the
Company, as applicable.
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 on any asset now owned or hereafter acquired, or any income or
profits therefrom or assign or convey any right to receive income therefrom,
except Permitted Liens, unless the Notes or the Debentures are secured by such
Lien on an equal and ratable basis.
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 consensual 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, except for such encumbrances or restrictions existing
under or by reason of (a) Existing Indebtedness as in effect on the Issue Date,
and any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof, PROVIDED that
such amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are no more restrictive, taken as a
whole, with respect to such dividend and other payment restrictions than those
contained in the applicable Existing Indebtedness as in effect on the Issue
Date, (b) the New Credit Agreement as in effect as of the Issue Date, and any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof, PROVIDED that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings are no more restrictive, taken as a whole, with
respect to such dividend and other payment restrictions than those contained in
the New Credit Agreement as in effect on the Issue Date, (c) the Note Indenture
as in effect as of the Issue Date, and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof, PROVIDED that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings are no more restrictive, taken as a whole, with respect to such
dividend and other payment restrictions than those contained in the Note
Indenture as in effect on the Issue Date, (d) the Indenture and the Debentures
and the Note Indenture and the Notes or any Indebtedness ranking on a PARI PASSU
basis with the Debentures or the Notes as the case may be, PROVIDED such
restrictions are no more restrictive, taken as a whole, than those contained in
the Indenture or the Note Indenture as the case may be, (e) applicable law, (f)
any instrument governing Acquired 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 Acquired 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, (g) by reason of customary non-assignment provisions in leases and
licenses entered into in the ordinary course of business, (h) Purchase Money
Obligations, Mortgage Financings or Capital Lease 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, (i)
agreements relating to the financing of the acquisition of real or tangible
personal property acquired on or after the Issue Date, PROVIDED, that such
encumbrance or restriction relates only to the property which is acquired
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and in the case of any encumbrance or restriction that constitutes a Lien, such
Lien constitutes a Permitted Lien, (j) Indebtedness or other contractual
requirements of a Receivables Subsidiary in connection with a Qualified
Receivables Transaction, PROVIDED that such restrictions apply only to such
Receivables Subsidiary, (k) any restriction or encumbrance contained in
contracts for sale of assets permitted by the Indenture in respect of the assets
being sold pursuant to such contract, (l) Indebtedness permitted to be incurred
under the Indenture and incurred on or after the Issue Date, PROVIDED, that such
encumbrances or restrictions in such Indebtedness are no more onerous, taken as
a whole, than the restrictions contained in the New Credit Agreement on the
Issue Date, or as the New Credit Agreement may be amended, modified, restated,
renewed, increased, supplemented, refunded, replaced or refinanced as set forth
in clause (b) above, (m) restrictions contained in Indebtedness of Foreign
Subsidiaries incurred under the covenant entitled "Incurrence of Indebtedness
and Issuance of Disqualified Stock", (n) Permitted Refinancing Indebtedness,
PROVIDED that the restrictions contained in the agreements governing such
Permitted Refinancing Indebtedness are no more restrictive than those contained
in the agreements governing the Indebtedness being refinanced, (o) restrictions
with respect to the Company or a Subsidiary of the Company imposed pursuant to a
binding agreement entered into for the sale or disposition of Equity Interests
or assets of such Person permitted pursuant to the Indenture or (p) agreements
relating to Permitted Liens or Indebtedness related thereto; provided that such
encumbrance or restriction relates only to the property subject to such
Permitted Lien.
TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, 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 any 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 entered into after the Issue Date involving
aggregate consideration in excess of $5.0 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 (if any) of the
Board of Directors and (b) with respect to any Affiliate Transaction involving
aggregate consideration in excess of $10.0 million, an opinion as to the
fairness to the Company or such Subsidiary of such Affiliate Transaction from a
financial point of view issued by an investment banking firm of national
standing or, in the event such transaction is of a type that investment bankers
do not generally render fairness opinions, a valuation or appraisal firm of
national reputation; PROVIDED that the following will not be deemed to be
Affiliate Transactions: (w) the provision of administrative or management
services by the Company or GLC or any of their respective officers to any of the
Company's Subsidiaries in the ordinary course of business, (x) any employment
agreement entered into by the Company or any of its Subsidiaries in the ordinary
course of business, (y) transactions between or among the Company and/or its
Subsidiaries or transactions between a Receivables Subsidiary or a Finance
Subsidiary and any Person in which the Receivables Subsidiary or Finance
Subsidiary has an Investment and (z) transactions permitted by the covenant
entitled "Restricted Payments." In addition, none of the Acquisition
Transactions or the transactions contemplated thereby shall be deemed to be
Affiliate Transactions.
LINE OF BUSINESS
The Indenture provides that neither the Company nor any of its Subsidiaries
will directly or indirectly engage to any substantial extent in any line or
lines of business activity other than that which, in the reasonable good faith
judgment of the Board of Directors of the Company, is a Related Business.
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REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the SEC, so long as any Debentures are outstanding beginning with
the year ended December 31, 1998, the Company will furnish to the Trustee and
all Holders of Debentures (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, as applicable, 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; PROVIDED that the
foregoing shall not require the Company to furnish separate financial results of
its Subsidiaries. In addition, whether or not required by the rules and
regulations of the SEC, the Company will 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. In addition, the Company has agreed that,
for so long as any Debentures remain outstanding, it will furnish to the
Trustee, 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.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indenture provides that the Company will not, in a single transaction or
series of related transactions, 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 will have been made (such surviving corporation or transferee
Person, the "Surviving Entity") is a corporation organized or existing under the
laws of the United States, any state thereof or the District of Columbia; (ii)
the Surviving Entity assumes all the obligations of the Company under the
Debentures 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; (iv) 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 will have been made 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 entitled "Limitation on
Indebtedness and Issuance of Disqualified Stock"; and (v) the Company will have
delivered to the Trustee an Officers' Certificate stating that such
consolidation, merger, sale, assignment, transfer, lease, conveyance or
disposition and such supplemental indenture, if any, comply with this Indenture
and that such supplemental indenture is enforceable.
Upon the occurrence of any transaction described in the immediately
preceding paragraph in which the Company is not the continuing corporation, the
successor corporation formed by such a consolidation or into which the Company
is merged or to which such transfer is made will succeed to, and be substituted
for, and may exercise every right and power of, the Company under the Indenture
and the Debentures with the same effect as if such successor corporation had
been named as the Company therein.
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 Debentures;
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(ii) default in payment when due, upon redemption or otherwise, of the principal
of or premium, if any, on the Debentures; (iii) failure by the Company to make
or consummate a Change of Control Offer or Asset Sale Offer in accordance with
the provisions described under the captions "--Change of Control" and "--Asset
Sales"; (iv) the failure by the Company or any of its Subsidiaries for 30 days
after notice to comply with the provisions described under the captions
"--Restricted Payments" and "--Incurrence of Indebtedness and Issuance of
Disqualified Stock"; (v) 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 Debentures; (vi) default under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Company or any of its Subsidiaries 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 Issue
Date, which default (a) is caused by a failure to pay principal upon final
stated maturity of such Indebtedness following the expiration of any grace
period provided in such Indebtedness or (b) results in the acceleration of such
Indebtedness prior to its final stated 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 default in the payment of
principal upon final stated maturity which has not been cured and is continuing
following the expiration of any applicable grace period or the maturity of which
has been so accelerated and has not been satisfied, aggregates $7.5 million or
more; (vii) failure by the Company or any of its Significant Subsidiaries to pay
final judgments aggregating in excess of $7.5 million, which judgments are not
paid, discharged or stayed for a period of 60 days; and (viii) certain events of
bankruptcy or insolvency with respect to the Company or any of its Significant
Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in aggregate principal amount of the then outstanding Debentures
may declare all the Debentures to be due and payable immediately by notice in
writing to the Company (an "Acceleration Notice"). Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency with respect to the Company, all outstanding Debentures
will become due and payable without further action or notice. Upon any
acceleration of maturity of the Debentures, all principal of and accrued
interest and Liquidated Damages, if any, on (if on or after May 15, 2003) or
Accreted Value of and Liquidated Damages, if any, on (if prior to May 15, 2003)
the Debentures shall be due and payable immediately. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Debentures may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders of the Debentures 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 event of a declaration of acceleration because an
Event of Default set forth in clause (vi) above has occurred and is continuing,
such declaration of acceleration shall be automatically rescinded and annulled
if the default triggering such Event of Default shall be remedied or cured by
the Company or relevant Subsidiary or waived by the holders of the relevant
Indebtedness within 60 days after the declaration of acceleration with respect
thereto.
The Holders of a majority in aggregate principal amount of the Debentures
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Debentures waive any existing Default or Event of Default and its
consequences under the Indenture or the Debentures, except a continuing Default
or Event of Default in the payment of interest on, or the principal of, the
Debentures.
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 past, present or future director, officer, employee, incorporator or
stockholder of the Company or its Subsidiaries, as such, will have any liability
for any obligations of the Company under the Debentures,
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the Indenture and 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 Debentures by accepting a Debenture waives and releases all such liability.
The waiver and release are part of the consideration for issuance of the
Debentures. Such waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the SEC that such a waiver is
against public policy.
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 Debentures ("Legal
Defeasance"), except for (i) the rights of Holders of outstanding Debentures to
receive payments in respect of the principal of, premium, if any, and interest
and Liquidated Damages, if any, on such Debentures when such payments are due
from the trust referred to below, (ii) the Company's obligations with respect to
the Debentures concerning issuing temporary Debentures, registration of
Debentures, mutilated, destroyed, lost or stolen Debentures 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 in the Indenture ("Covenant Defeasance") and
thereafter any omission to comply with such obligations will not constitute a
Default or Event of Default with respect to the Debentures. In the event
Covenant Defeasance occurs, certain events (not including non-payment, and,
solely for a period of 91 days following the deposit referred to in clause (i)
of the next paragraph, bankruptcy, receivership, rehabilitation and insolvency
events) described under "Events of Default" will no longer constitute an Event
of Default with respect to the Debentures.
Legal Defeasance and Covenant Defeasance will be deemed to occur on the date
of the deposit referred to in clause (i) of this paragraph, so long as the other
conditions thereto referred to in this paragraph are satisfied as of such date.
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 Debentures, 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 amount at maturity of or Accreted Value (as applicable) of,
premium, if any, and interest and Liquidated Damages on the outstanding
Debentures on the stated maturity or on the applicable redemption date, as the
case may be, and the Company must specify whether the Debentures are being
defeased to maturity or to a particular redemption date; (ii) in the case of
Legal Defeasance, the Company will 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 Issue Date, 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 will confirm that, the Holders
of the outstanding Debentures 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 will have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that the Holders of the outstanding
Debentures 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 will 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); (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
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party or by which the Company or any of its Subsidiaries is bound; (vi) 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
Debentures over the other creditors of the Company with the intent of defeating,
hindering, delaying or defrauding creditors of the Company or others; and (vii)
the Company must deliver to the Trustee an Officers' Certificate 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 Debentures 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 Debenture selected for redemption. Also, the Company is not required to
transfer or exchange any Debenture for a period of 15 days before a selection of
Debentures to be redeemed.
The registered Holder of a Debenture 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 Debentures may be amended or supplemented with the consent of the Holders of
a majority in principal amount at maturity of the Debentures then outstanding
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, Debentures), and any existing default
or compliance with any provision of the Indenture or the Debentures may be
waived with the consent of the Holders of a majority in principal amount at
maturity of the then outstanding Debentures (including, without limitation,
consents obtained in connection with a purchase of, or tender offer or exchange
offer for, Debentures). In connection with any amendment, supplement or waiver
under the Indenture, the Company may, but shall not be obligated to, offer to
any Holder who consents to such amendment, supplement or waiver, or to all
Holders, consideration for such Holder's consent to such amendment, supplement
or waiver.
Without the consent of each Holder affected (it being understood that the
covenants described above under the captions "--Change of Control" or "--Asset
Sales" may be amended as provided in the immediately preceding paragraph), an
amendment or waiver may not (with respect to any Notes held by a nonconsenting
Holder): (i) reduce the principal amount of Debentures whose Holders must
consent to an amendment, supplement or waiver of the Indenture or Debentures,
(ii) reduce the principal of or change the fixed final stated maturity of any
Debenture or alter the provisions with respect to the redemption of the
Debentures at the option of the Company or amend or modify the calculation of
the Accreted Value so as to reduce the amount of the Accreted Value of the
Debentures, (iii) reduce the rate of or change the time for payment of interest
on any Debenture, (iv) waive a past Default or past Event of Default in the
payment of principal of or premium, if any, or interest on the Debentures
(except a rescission of acceleration of the Debentures by the Holders of a
majority in aggregate principal amount at maturity of the Debentures and a
waiver of the payment default that resulted from such acceleration), (v) make
any Debenture payable in money other than that stated in the Debentures, (vi)
except as otherwise provided in this paragraph, make any change in the
provisions of the Indenture or Debentures relating to waivers of past Defaults
or Events of Defaults or the rights of Holders of Debentures to receive payments
of principal of or premium, if any, or interest on the Debentures or (vii) make
any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of
Debentures, the Company and the Trustee may amend or supplement the Indenture or
the Debentures to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Debentures in addition to or in place of certificated Debentures,
to provide for the assumption of the Company's obligations to Holders of
Debentures in the case of
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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 Debentures or that does not adversely affect the legal rights
under the Indenture of any such Holder, to comply with the procedures of the
Depositary, Euroclear or Cedel or the Trustee with respect to the provisions of
the Indenture and the Debentures relating to transfers and exchanges of
Debentures or beneficial interests therein or to comply with requirements of the
SEC in order to effect or maintain the qualification of the Indenture under the
TIA.
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 SEC for permission to continue or
resign.
The Holders of a majority in principal amount at maturity of the then
outstanding Debentures 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 will occur (which will 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 Debentures, unless such Holder will 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
the Registration Rights Agreement without charge by writing to the Company at
551 Fifth Avenue, Suite 3600, New York, New York 10176, Attention: Corporate
Secretary.
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.
"ACCRETED VALUE" means, as of any date of determination prior to May 15,
2003, with respect to any Debenture, the sum of (a) the initial offering price
(which shall be calculated by discounting the aggregate principal amount at
maturity of such Debenture at a rate of 13 1/8% per annum, compounded
semi-annually on each May 15 and November 15, from May 15, 2003 to the date of
issuance) of such Debenture and (b) the portion of the excess of the principal
amount at maturity of such Debenture over such initial offering price which
shall have been accreted thereon through such date, such amount to be so
accreted on a daily basis at a rate of 13 1/8% per annum of the initial offering
price of such Debenture, compounded semi-annually on each May 15 and November
15, from the date of issuance of the Debentures through the date of
determination, computed on the basis of a 360-day year of twelve 30-day months.
The Accreted Value on and after May 15, 2003 shall cease to accrue and shall
constitute 100% of the principal amount at maturity thereof.
"ACQUIRED INDEBTEDNESS" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a 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.
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"AFFILIATE" means, with respect to any specified 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" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, will 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 securities of a Person
will be deemed to be control. Notwithstanding the foregoing, (a) the limited
partners of AIP Capital Funds will not be deemed to be Affiliates of AIP Capital
Funds or AIP solely by reason of their investment in AIP Capital Funds and (b)
no Person (other than the Company or any Subsidiary of the Company) in whom a
Receivables Subsidiary makes an Investment in connection with a Qualified
Receivables Transaction will be deemed to be an Affiliate of the Company or any
of its Subsidiaries solely by reason of such Investment.
"AIP" means American Industrial Partners, a Delaware general partnership.
"AIP CAPITAL FUNDS" means American Industrial Partners Capital Fund, L.P., a
Delaware limited partnership, and American Industrial Partners Capital Fund II,
L.P., a Delaware limited partnership.
"ASSET SALE" means (i) the sale, lease, conveyance or other disposition that
does not constitute a Restricted Payment or an Investment by such Person of any
of its non-cash assets (including, without limitation, by way of a sale and
leaseback and including the issuance, sale or other transfer of any of the
Capital Stock of any Subsidiary of such Person) other than to the Company or to
any of its Subsidiaries; and (ii) the issuance of Equity Interests in any
Subsidiaries or the sale of any Equity Interests in any Subsidiaries, in each
case, in one or a series of related transactions, PROVIDED, that notwithstanding
the foregoing, the term "Asset Sale" will not include: (a) the sale, lease,
conveyance, disposition or other transfer of all or substantially all of the
assets of the Company, as permitted pursuant to the covenant entitled "Merger,
Consolidation or Sale of Assets"; (b) the sale or lease of equipment, inventory,
accounts receivable or other assets in the ordinary course of business and to
the extent that such sales or leases are not part of the a sale of the business
(unless such sale of such business would not be an Asset Sale) in which such
equipment was used or in which such inventory or accounts receivable arose; (c)
a transfer of assets by the Company to a Subsidiary of the Company or by a
Subsidiary of the Company to the Company or another Subsidiary of the Company;
(d) an issuance of Equity Interests by a Subsidiary of the Company to the
Company or to another Subsidiary of the Company; (e) the surrender or waiver of
contract rights or the settlement, release or surrender of contract, tort or
other claims of any kind; (f) the grant in the ordinary course of business of
any license of patents, trademarks, registrations therefor and other similar
intellectual property; (g) Permitted Investments or Permitted Liens; (h) sales
of accounts receivable and related assets of the type specified in the
definition of "Qualified Receivables Transaction" to a Receivables Subsidiary
for the fair market value thereof, including cash in an amount at least equal to
75% of the book value thereof as determined in accordance with GAAP; (i)
transfers of accounts receivable and related assets of the type specified in the
definition of "Qualified Receivables Transaction" (or a fractional undivided
interest therein) by a Receivables Subsidiary in a Qualified Receivables
Transaction; and (j) the sale or disposal of damaged, worn out or other obsolete
personal property, inventory or equipment in the ordinary course of business so
long as such property is no longer necessary for the proper conduct of the
business of the Company or such Subsidiary, as applicable. For the purposes of
clause (h), notes received in exchange for the transfer of accounts receivable
and related assets will be deemed cash if the Receivables Subsidiary or other
payor is required to repay said notes as soon as practicable from available cash
collections less amounts required to be established as reserves pursuant to
contractual agreements with entities that are not Affiliates of the Company
entered into as part of a Qualified Receivables Transaction.
"BOARD OF DIRECTORS" means the Board of Directors of the Company, or any
authorized committee of the Board of Directors.
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"BORROWING BASE" means, as of any date, an amount equal to the sum of (a)
75% of the face amount of all accounts receivable owned by the Company and its
Subsidiaries as of such date that are not more than 90 days past due, and (b)
50% of the book value of all inventory owned by the Company and its Subsidiaries
as of such date, minus (c) the aggregate amount of trade payables of the Company
and its Subsidiaries outstanding 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 or trade
payables as of a specific date, the Company may utilize the most recent
available information for purposes of calculating the Borrowing Base.
"BUSINESS DAY" means any day other than a Legal Holiday.
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership 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 (a) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (PROVIDED that the full faith and credit of the United
States is pledged in support thereof) having maturities not more than twelve
months from the date of acquisition, (b) U.S. dollar denominated (or foreign
currency fully hedged) time deposits, certificates of deposit, Eurodollar time
deposits or Eurodollar certificates of deposit of (i) any domestic commercial
bank of recognized standing having capital and surplus in excess of $100.0
million or (ii) any bank whose short-term commercial paper rating from S&P is at
least A-1 or the equivalent thereof or from Moody's is at least P-1 or the
equivalent thereof (any such bank being an "Approved Lender"), in each case with
maturities of not more than twelve months from the date of acquisition, (c)
commercial paper and variable or fixed rate notes issued by any Approved Lender
(or by the parent company thereof) or any variable rate notes issued by, or
guaranteed by, any domestic corporation rated A-2 (or the equivalent thereof) or
better by S&P or P-2 (or the equivalent thereof) or better by Moody's and
maturing within twelve months of the date of acquisition, (d) repurchase
agreements with a bank or trust company or recognized securities dealer having
capital and surplus in excess of $100.0 million for direct obligations issued by
or fully guaranteed by the United States of America in which the Company will
have a perfected first priority security interest (subject to no other Liens)
and having, on the date of purchase thereof, a fair market value of at least
100% of the amount of repurchase obligations, (e) interests in money market
mutual funds which invest solely in assets or securities of the type described
in subparagraphs (a), (b), (c) or (d) hereof and (f) in the case of any Foreign
Subsidiary: (i) direct obligations of the sovereign nation (or any agency
thereof) in which such Foreign Subsidiary is organized and is conducting
business or in obligations fully and unconditionally guaranteed by such
sovereign nation (or any agency thereof), (ii) investments of the type and
maturity described in clauses (a) through (e) above of foreign obligors, which
investments or obligors (or the direct or indirect parents of such obligors)
have ratings described in such clauses or equivalent ratings from comparable
foreign rating agencies or (iii) investments of the type and maturity described
in clauses (a) through (e) above of foreign obligors (or the direct or indirect
parents of such obligors), which investments or obligors (or the direct or
indirect parents of such obligors) are not rated as provided in such clauses or
in clause (ii) above but which are, in the reasonable judgment of the Company,
comparable in investment quality to such investments and obligors (or the direct
or indirect parent of such obligors).
"CHANGE OF CONTROL" means such time as (i) prior to the initial public
offering by the Company or any direct or indirect parent of the Company of its
common stock (other than a public offering pursuant to a
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registration statement on Form S-8), AIP, AIP Capital Funds or any of their
respective Affiliates (collectively, the "Initial Investors") cease to be,
directly or indirectly, the beneficial owners, in the aggregate, of a majority
of the voting power of the voting Capital Stock of the Company or (ii) after the
initial public offering by the Company or any direct or indirect parent of the
Company of its common stock (other than a public offering pursuant to a
registration statement on Form S-8), (A) any Schedule 13D, Form 13F or Schedule
13G under the Exchange Act, or any amendment to such Schedule or Form, is
received by the Company which indicates that, or the Company otherwise becomes
aware that, a "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act) other than the Initial Investors or their Related
Parties (as defined below) has become, directly or indirectly, the "beneficial
owner," by way of merger, consolidation or otherwise, of 35% or more of the
voting power of the voting Capital Stock of the Company and (B) such person or
group has become, directly or indirectly, the beneficial owner of a greater
percentage of the voting Capital Stock of the Company than beneficially owned by
the Initial Investors or their Related Parties, or (iii) the sale, lease or
transfer of all or substantially all of the assets of the Company to any person
or group (other than to GLC or a Subsidiary of GLC or to the Initial Investors
or their Related Parties), or (iv) during any period of two consecutive calendar
years, individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any new directors whose election by the
Board of Directors of the Company or whose nomination for election by the
stockholders of the Company was approved by a vote of a majority of the
directors then still in office who either were directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the directors of the
Company, then in office. "Related Party" with respect to any Initial Investor
means (A) any controlling stockholder, 80% (or more) owned Subsidiary, or
spouse, or immediate family member (in the case of any individual) of such
Initial Investor or (B) 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 Initial Investor
and/or such other persons referred to in the immediately preceding clause (A).
"CONSOLIDATED EBITDA" means, with respect to the Company and its
Subsidiaries for any period, the sum of, without duplication, (i) the
Consolidated Net Income for such period, plus (ii) the Fixed Charges for such
period, plus (iii) provision for taxes based on income or profits for such
period (to the extent such income or profits were included in computing
Consolidated Net Income for such period), plus (iv) consolidated depreciation,
amortization and other non-cash charges of the Company and its Subsidiaries
required to be reflected as expenses on the books and records of the Company,
minus (v) cash payments with respect to any non-recurring, non-cash charges
previously added back pursuant to clause (iv), and (vi) excluding the impact of
foreign currency translations. Notwithstanding the foregoing, the provision for
taxes based on the income or profits of, and the depreciation and amortization
and other non-cash charges of, a Subsidiary of a Person will be added to
Consolidated Net Income to compute Consolidated EBITDA only to the extent (and
in the same proportion) that the Net Income of such Subsidiary was included in
calculating the Consolidated Net Income of such Person.
"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 will be included only
to the extent of the amount of dividends or distributions paid in cash to the
referent Person or a Subsidiary, (ii) the Net Income of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition will be excluded, (iii) the cumulative effect of a change in
accounting principles will be excluded, (iv) the Net Income of, or any dividends
or other distributions from, any Unrestricted Subsidiary, to the extent
otherwise included, shall be excluded, except to the extent cash or Cash
Equivalents are distributed to the Company or one of its Subsidiaries in a
transaction that does not relate to the liquidation of such Unrestricted
Subsidiary and (v) all other extraordinary gains and extraordinary losses will
be excluded.
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"COPETRO CREDIT AGREEMENT" means the credit agreement, dated as of February
4, 1997, between Copetro S.A., Banca Nazionale del Lavoro S.A. and the other
lenders party thereto, as amended, restated, supplemented or otherwise modified
from time to time.
"DEFAULT" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"DEPOSITARY" means, with respect to the Debentures issuable or issued in
whole or in part in global form, the Person specified in the Indenture as the
Depositary with respect to the Debentures, until a successor will have been
appointed and become such Depositary pursuant to the applicable provision of the
Indenture, and, thereafter, "Depositary" will mean or include such successor.
"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), or upon the happening of any event (other than customary change
of control or asset sale provisions), matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or is redeemable at the
option of the Holder thereof, in whole or in part, prior to the final stated
maturity of the Debentures.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EQUITY OFFERING" means an underwritten public offering pursuant to a
registration statement filed with the SEC in accordance with the Securities Act
of (i) Equity Interests (other than Disqualified Stock) of the Company or (ii)
Equity Interests (other than Disqualified Stock) of the Company's parent or
indirect parent to the extent that the cash proceeds therefrom are contributed
to the equity capital of the Company or are used to purchase Equity Interests
(other than Disqualified Stock) of the Company.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE DEBENTURES" means the securities substantially similar to the
Debentures, issued pursuant to an Exchange Offer.
"EXCHANGE OFFER" means an offer that may be made by the Company pursuant to
the Registration Rights Agreement to exchange Debentures for Exchange
Debentures.
"EXISTING INDEBTEDNESS" means the Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the New Credit Agreement) in
existence on the Issue Date or incurred subsequent to the Issue Date pursuant to
commitments under the Copetro Credit Agreement as in effect on the Issue Date,
until such amounts are repaid.
"FINANCE SUBSIDIARY" means any Subsidiary of the Company (other than a
Subsidiary Guarantor or a Foreign Subsidiary) organized for the sole purpose of
issuing Capital Stock or other securities and loaning the proceeds thereof to
the Company or a Subsidiary and which engages in no other transactions except
those incidental thereto.
"FINANCE SUBSIDIARY INDEBTEDNESS" means Indebtedness of or Disqualified
Stock issued by a Finance Subsidiary which Indebtedness or Disqualified Stock
does not have a final stated maturity and is not mandatorily redeemable or
redeemable at the option of the holder thereof (other than pursuant to customary
change of control or asset sale provisions), in whole or in part, prior to the
final stated maturity of the Notes.
"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 original issue discount, non-cash interest payments,
the interest component of any deferred payment obligations, the interest
component of all payments associated with Capital Lease Obligations,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging
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Obligations), and (ii) the consolidated interest expense 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) all cash dividend payments on any series of preferred stock of such Person
payable to a party other than the Company or a Subsidiary of the Company.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated EBITDA of such Person and its Subsidiaries
for such period to the Fixed Charges of such Person and its Subsidiaries for
such period. In the event that the Company or any of its Subsidiaries incurs,
issues, assumes, retires, Guarantees, defeases or redeems any Indebtedness
(other than revolving credit borrowings) or preferred stock subsequent to the
commencement of the four-quarter reference period for which the Fixed Charge
Coverage Ratio is being calculated but on or 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 will be calculated
giving pro forma effect to such incurrence, issuance, assumption, retirement,
Guarantee, defeasance or redemption of Indebtedness or preferred stock, as if
the same had occurred at the beginning of the applicable four-quarter reference
period. 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 will be deemed to have
occurred on the first day of the four-quarter reference period, and (ii) the
Consolidated EBITDA attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of on or prior to
the Calculation Date, will be excluded, and (iii) the Fixed Charges attributable
to discontinued operations, as determined in accordance with GAAP, and
operations or businesses disposed of on or prior to the Calculation Date, will
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.
"FOREIGN SUBSIDIARIES" means (i) Copetro S.A., an Argentine corporation, and
Great Lakes International Sales Corp., a Barbados corporation, and (ii) any
Subsidiary organized and incorporated in a jurisdiction outside of the United
States.
"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 Issue Date. All ratios and computations
based on GAAP contained in the Indenture shall be computed in conformity with
GAAP applied on a consistent basis, except that calculations made for purposes
of determining compliance with the terms of the covenants and with other
provisions of the Indenture shall be made without giving effect to depreciation,
amortization or other expenses recorded as a result of the application of
purchase accounting in accordance with Accounting Principles Board Opinion Nos.
16 and 17.
"GLC" means Great Lakes Carbon Corporation, a Delaware corporation.
"GOVERNMENT SECURITIES" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
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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 other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates and (ii) currency swap or protection agreements and other agreements or
arrangements designed to protect such Person against fluctuations in currency
exchange rates.
"HOLDER" means a Person in whose name a Debenture is registered on the
Registrar's books.
"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 bankers' 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 indebtedness (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 such Indebtedness of any other Person; provided
that any indebtedness which has been defeased in accordance with GAAP or
defeased pursuant to the deposit of cash or Government Securities (in an amount
sufficient to satisfy all such indebtedness obligations at maturity or
redemption, as applicable, and all payments of interest and premium, if any) in
a trust or account created or pledged for the sole benefit of the holders of
such indebtedness, and subject to no other Liens, and the other applicable terms
of the instrument governing such indebtedness, shall not constitute
"Indebtedness."
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the form of direct or indirect
loans (including guarantees of Indebtedness or other obligations but excluding
guarantees of Indebtedness of the Company or any of its Subsidiaries), 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 and all other items that are or would be classified as investments on
a balance sheet prepared in accordance with GAAP; PROVIDED that an acquisition
of assets, Equity Interests or other securities by the Company or GLC for
consideration consisting of common equity securities of the Company or GLC or
any direct or indirect parent of the Company will not be deemed to be an
Investment.
"ISSUE DATE" means the date of first issuance of the Debentures under the
Indenture.
"JOINT VENTURES" means joint ventures entered into by the Company or any of
its Subsidiaries for the primary purpose of operating a Related Business.
"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 will accrue for
the intervening period.
"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
of a security agreement, any option or other agreement to grant or give a
security interest in and, except in connection with any Qualified Receivables
Transaction, 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 liquidated damages then owing pursuant to the
Registration Rights Agreement.
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"MOODY'S" means Moody's Investors Service, Inc.
"MORTGAGE FINANCINGS" means any mortgage, deed of trust or other instrument
creating a lien on an estate in fee simple or a leasehold estate in a property,
secured by a note or other evidence of an obligor's indebtedness under such
mortgage, deed of trust or other instrument.
"NET CASH PROCEEDS" means the aggregate amount of cash and Cash Equivalents
received by the Company or GLC or any direct or indirect parent of the Company
in the case of a sale or equity contribution in respect of Equity Interests
(other than Disqualified Stock) plus, in the case of an issuance of Equity
Interests (other than Disqualified Stock) upon any exercise, exchange or
conversion of securities (including options, warrants, rights and convertible or
exchangeable debt) of the Company or GLC or any direct or indirect parent of the
Company that were issued for cash after the Issue Date, the amount of cash
originally received by the Company or GLC or any direct or indirect parent of
the Company upon the issuance of such securities (including options, warrants,
rights and convertible or exchangeable debt) less the sum of all payments, fees,
commissions, and customary and reasonable expenses (including, without
limitation, the fees and expenses of legal counsel and investment banking fees
and expenses) incurred in connection with such sale or equity contribution in
respect of Equity Interests (other than Disqualified Stock).
"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 or nonrecurring gain (but not loss), together with any
related provision for taxes on such extraordinary or nonrecurring gain (but not
loss).
"NET PROCEEDS" means the aggregate cash proceeds and Cash Equivalents
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 the Debentures or Indebtedness under
the New Credit Agreement) secured by a Lien on the asset or assets that were the
subject of such Asset Sale, any reserve for adjustment in respect of the sale
price of such asset or assets or liabilities associated with such Asset Sale and
retained by the Company or such Subsidiary established in accordance with GAAP,
all distributions and other payments required to be made to minority interest
holders in Subsidiaries or other parties to any Joint Ventures as a result of
such Asset Sale and all Purchase Money Obligations (and Permitted Refinancing
Indebtedness thereof) assumed by the purchaser in connection with such Asset
Sale.
"NEW CREDIT AGREEMENT" means that certain Credit Agreement, dated as of the
Issue Date, by and among the Company, GLC, Bankers Trust Company, as syndication
and administrative agent, DLJ Capital Funding, Inc., as documentation agent,
Bank of America National Trust and Savings Association, as co-agent, and the
lenders parties thereto, including any related notes, guarantees, collateral
documents, instruments and agreements (including, without limitation, agreements
with respect to Hedging Obligations with lenders party to the New Credit
Agreement or their Affiliates) executed in connection therewith, and in each
case as amended, supplemented, modified, renewed, refunded, replaced, restated
or refinanced from time to time, including any agreement restructuring or adding
the Company or Subsidiaries of GLC as additional borrowers or guarantors
thereunder and whether by the same or any other agent, lender or group of
lenders.
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"NON-RECOURSE INDEBTEDNESS" means Indebtedness (i) as to which neither the
Company nor any of its Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OFFERING" means the Offering of the Debentures by the Company.
"OFFICER" means, with respect to any Person, the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the
Secretary, any Assistant Secretary or any Vice-President of such Person.
"PERMITTED INVESTMENTS" means (a) any Investments in the Company or in a
Subsidiary of the Company that is engaged in one or more Related Businesses; (b)
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 in
connection with a Qualified Receivables Transaction PROVIDED, that the foregoing
Investment is in the form of a note or other instrument that the Receivables
Subsidiary or other Person is required to repay as soon as practicable from
available cash collections less amounts required to be established as reserves
pursuant to contractual agreements with entities that are not Affiliates of the
Company entered into as part of a Qualified Receivables Transaction; (c) any
Investments in Cash Equivalents; (d) Investments 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 that is engaged in one or more
Related Businesses 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 engaged in
one or more Related Businesses; (e) Investments 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 entitled "Limitation on Asset Sales"; (f)
Investments outstanding as of the Issue Date; (g) Investments in the form of
promissory notes of members of the Company's management in consideration of the
purchase by such members of Equity Interests (other than Disqualified Stock) in
the Company or GLC; (h) Investments which constitute Existing Indebtedness of
the Company of any of its Subsidiaries; (i) accounts receivable, endorsements
for collection or deposits arising in the ordinary course of business; (j) other
Investments in any Person that do not exceed $10.0 million at any time
outstanding under and pursuant to this clause (j), without giving effect to
changes in the value of such Investment occurring after the date of such
Investment, but giving effect to all dividends, distributions, principal,
interest and other payments received in respect of such Investments in cash or
Cash Equivalents; (k) Investments in Foreign Subsidiaries or Joint Ventures that
do not exceed $35.0 million at any time outstanding under and pursuant to this
clause (k) without giving effect to changes in the value of such Investment
occurring after the date of such Investment, but giving effect to all dividends,
distributions, principal, interest and other payments received in respect of
such Investments in cash or Cash Equivalents; (l) Investments constituting
Indebtedness owed by one Foreign Subsidiary to one or more other Foreign
Subsidiaries or Investments by a Foreign Subsidiary in one or more other Foreign
Subsidiaries; (m) Investments constituting Indebtedness permitted under clause
(vii) of the covenant described above under the caption "--Incurrence of
Indebtedness and Issuance of Disqualified Stock"; and (n) capital stock,
obligations or other securities received in settlement of debts created in the
ordinary course of business and owing to the Company or any of its Subsidiaries.
"PERMITTED LIENS" means (i) Liens securing the New Credit Agreement and
other Indebtedness of GLC or its Subsidiaries and Permitted Refinancing
Indebtedness related thereto; (ii) Liens in favor of the
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Company or any Subsidiary of the Company; (iii) Liens on property of a Person
existing at the time such Person is merged into or consolidated with or acquired
by the Company or any Subsidiary of the Company in accordance with the
provisions of the Indenture; PROVIDED that such Liens were in existence prior to
the contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with the
Company; (iv) Liens on property existing at the time of acquisition thereof by
the Company or any Subsidiary of the Company, PROVIDED that such Liens were in
existence prior to the contemplation of such acquisition; (v) Liens to secure
the performance of statutory obligations, surety or appeal bonds, performance
bonds or other obligations of a like nature incurred in the ordinary course of
business; (vi) Liens existing on the Issue Date and Liens securing any Permitted
Refinancing Indebtedness incurred to refinance any Indebtedness secured by such
Liens; (vii) Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded, PROVIDED that any
reserve or other appropriate provision as will be required in conformity with
GAAP will have been made therefor; (viii) Liens incurred in the ordinary course
of business of the Company or any Subsidiary of the Company with respect to
obligations that do not exceed $5.0 million at any one time outstanding and that
(a) are not incurred in connection with the borrowing of money or the obtaining
of advances or credit (other than trade credit in the ordinary course of
business) and (b) do not in the aggregate materially detract from the value of
the property or materially impair the use thereof in the operation of business
by the Company or such Subsidiary; (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; (x) easements,
rights-of-way, restrictions, minor defects or irregularities in title and other
similar charges or encumbrances not interfering in any material respect with the
business of the Company or any of its Subsidiaries; (xi) Purchase Money Liens
(including extensions and renewals thereof and Liens securing any Permitted
Refinancing Indebtedness incurred in respect of the applicable Purchase Money
Obligations); (xii) Liens securing reimbursement obligations with respect to
letters of credit and banker's acceptances which encumber only documents and
other property relating to such letters of credit and the products and proceeds
thereof; (xiii) judgment and attachment Liens not giving rise to an Event of
Default; (xiv) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual or warranty requirements; (xv) Liens
arising out of consignment or similar arrangements for the sale of goods; (xvi)
any interest or title of a lessor in property subject to any Capital Lease
Obligation or operating lease; (xvii) Liens arising from filing Uniform
Commercial Code financing statements regarding leases; (xviii) Liens on assets
of the Company or its Subsidiaries with respect to Acquired Indebtedness (and
Permitted Refinancing Indebtedness with respect thereto) provided that such
Liens were not created in contemplation of or in connection with such
acquisition; (xix) Liens on assets of the Company or a Receivables Subsidiary
incurred in connection with a Qualified Receivables Transaction; (xx) Liens
securing Indebtedness of any Foreign Subsidiary; (xxi) Liens securing the Notes,
the Debentures and any other obligations ranking PARI PASSU with the Notes or
the Debentures, as the case may be; and (xxii) Liens securing Permitted
Refinancing Indebtedness incurred to refinance any Indebtedness that was
previously subject to a Lien secured in a manner no more adverse, taken as a
whole, to the Holders of the Debentures than the Liens securing such refinanced
Indebtedness.
"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; PROVIDED that: (i) the
principal amount (or accreted value, if issued with an original issue discount)
of such Permitted Refinancing Indebtedness does not exceed the principal amount
(or accreted value, if issued with an original issue discount) of the
Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded
(plus the amount of reasonable expenses incurred in connection therewith, the
accrued or unpaid interest thereon and any premium owed in connection
therewith); (ii) such Permitted Refinancing Indebtedness has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to Maturity
of the
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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
Debentures, such Permitted Refinancing Indebtedness is subordinated in right of
payment to, the Debentures on terms at least as favorable, taken as a whole, to
the Holders of Debentures as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded
and the final maturity date of such Permitted Refinancing Indebtedness is later
than the final maturity date of 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, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization or government or agency or political subdivision thereof (including
any subdivision or ongoing business of any such entity or substantially all of
the assets of any such entity, subdivision or business).
"PURCHASE MONEY LIEN" means a Lien granted on an asset or property to secure
a Purchase Money Obligation permitted to be incurred under the Indenture and
incurred solely to finance the purchase (or lease), or the cost of construction
or improvement, of such asset or property; PROVIDED, HOWEVER, that such Lien
encumbers only such asset or property and is granted within 180 days of such
acquisition.
"PURCHASE MONEY OBLIGATIONS" of any Person means any obligations of such
Person to any seller or any other Person incurred or assumed to finance the
purchase (or lease), or the cost of construction or improvement, of real or
personal property to be used in the business of such Person or any of its
Subsidiaries in an amount that is not more than 100% of the cost, or fair market
value, as appropriate, of such property, and incurred within 180 days after the
date of such acquisition (excluding accounts payable to trade creditors incurred
in the ordinary course of business).
"QUALIFIED RECEIVABLES TRANSACTION" means any transaction or series of
transactions that may be entered into by the Company or any of its Subsidiaries
pursuant to which the Company or any of its Subsidiaries may sell, convey or
otherwise transfer to (i) a Receivables Subsidiary (in the case of a transfer by
the Company or any of its Subsidiaries) and (ii) any other Person (in the case
of a transfer by a Receivables Subsidiary), or may grant a security interest in,
any accounts receivable (whether now existing or arising in the future) of the
Company or any of its Subsidiaries, and any assets related thereto including,
without limitation, all collateral securing such accounts receivable, all
contracts and all guarantees or other obligations in respect of such accounts
receivable, proceeds of such accounts receivable and other assets which 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 Subsidiary of the Company which engages in
no activities other than in connection with the financing of accounts receivable
and which 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 Subsidiary of the Company (excluding guarantees of Obligations
(other than the principal of, and interest on, Indebtedness) pursuant to
representations, warranties, covenants and indemnities entered into in the
ordinary course of business in connection with a Qualified Receivables
Transaction), (ii) is recourse to or obligates the Company or any Subsidiary of
the Company in any way other than pursuant to representations, warranties,
covenants and indemnities entered into in the ordinary course of business in
connection with a Qualified Receivables Transaction or (iii) subjects any
property or asset of the Company or any Subsidiary of the Company (other than
accounts receivable), directly or indirectly, contingently or otherwise, to the
satisfaction thereof, other than pursuant to representations, warranties,
covenants and indemnities entered into in the ordinary course of business in
connection with a Qualified Receivables Transaction, (b) with which neither the
Company nor any Subsidiary of the Company has any material
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contract, agreement, arrangement or understanding other than on terms no less
favorable to the Company or such Subsidiary than those that might be obtained at
the time from Persons who are not Affiliates of the Company, other than fees
payable in the ordinary course of business in connection with servicing accounts
receivable and (c) with which neither the Company nor any Subsidiary of the
Company has any obligation to maintain or preserve such Subsidiary's financial
condition or cause such Subsidiary to achieve certain levels of operating
results. Any such designation by the Board of Directors of the Company will 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 that such designation
complied with the foregoing conditions.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement,
dated as of the Issue Date, 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.
"RELATED BUSINESS" means the business conducted by the Company and its
Subsidiaries as of the Issue Date and any and all businesses that in the good
faith judgment of the Board of Directors of the Company are related businesses,
including reasonable extensions or expansions thereof.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SENIOR REVOLVING DEBT" means revolving Indebtedness under the New Credit
Agreement as such agreement may be restated, further amended, supplemented or
otherwise modified, renewed, refunded, replaced or refinanced, in whole or in
part, from time to time.
"SENIOR TERM DEBT" means term Indebtedness under the New Credit Agreement as
such agreement may be restated, further amended, supplemented or otherwise
modified, renewed, refunded, replaced or refinanced, in whole or in part, from
time to time.
"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 Exchange Act, as such Regulation is in effect on the date
hereof.
"SUBSIDIARY" means, with respect to any Person, 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).
Unrestricted Subsidiaries will not be included in the definition of Subsidiary
for any purposes of the Indenture (except, as the context may otherwise require,
for purposes of the definition of "Unrestricted Subsidiary.")
"S&P" means Standard & Poor's Financial Information Services.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. SectionSection
77aaa-77bbbb) as in effect on the date on which the Indenture is qualified under
the TIA.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution;
but only to the extent that such Subsidiary: (a) has no Indebtedness other than
Non-Recourse Indebtedness; (b) is not party to any agreement, contract,
arrangement or understanding with the Company or any Subsidiary of the Company
unless the terms of any such agreement, contract, arrangement or understanding
are no less favorable to the Company or such Subsidiary than those that might be
obtained at the time from Persons who are not Affiliates of the Company; (c) is
a Person with respect to which neither the Company nor any of its Subsidiaries
has any obligation (x) to subscribe for additional Equity Interests or (y) to
maintain or
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preserve such Person's financial condition or to cause such Person to achieve
any specified levels of operating results; and (d) has not guaranteed or
otherwise directly or indirectly provided credit support for any Indebtedness of
the Company or any of its Subsidiaries. Any such designation by the Board of
Directors will be evidenced to the Trustee by filing with the Trustee a
certified copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing conditions and was permitted by the covenant entitled "Restricted
Payments" hereof. If, at any time, any Unrestricted Subsidiary would fail to
meet the foregoing requirements as an Unrestricted Subsidiary, it will
thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture
and any Indebtedness of such Subsidiary will be deemed to be incurred by a
Subsidiary of the Company as of such date (and, if such Indebtedness is not
permitted to be incurred as of such date under the covenant entitled "Incurrence
of Indebtedness and Issuance of Disqualified Stock" hereof, the Company will be
in default of such covenant). The Board of Directors of the Company may at any
time designate any Unrestricted Subsidiary to be a Subsidiary; PROVIDED that
such designation will be deemed to be an incurrence of Indebtedness by a
Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation will only be permitted if (i) such Indebtedness
is permitted under the covenant entitled "Limitation on Indebtedness and
Issuance of Disqualified Stock" hereof, and (ii) no Default or Event of Default
would be in existence following such designation.
"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.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The following 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 reference to, all provisions of the Registration Rights
Agreement, a copy of which is filed as an exhibit to the Registration Statement
of which this Prospectus forms a part.
Holdings and the Initial Purchaser entered into the Registration Rights
Agreement on May 22, 1998 (the "Closing Date"). Pursuant to the Registration
Rights Agreement, Holdings agreed to file with the SEC this Exchange Offer
Registration Statement with respect to the Exchange Debentures. Upon the
effectiveness of the Exchange Offer Registration Statement, Holdings will offer
to the Holders of Transfer Restricted Securities (as defined below) pursuant to
the Exchange Offer who are able to make certain representations the opportunity
to exchange their Transfer Restricted Securities for Exchange Debentures. If (i)
Holdings 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 SEC policy or (ii) any Holder of Transfer
Restricted Securities notifies Holdings prior to the 20th day following
consummation of the Exchange Offer that (a) it is prohibited by law or SEC
policy from participating in the Exchange Offer or (b) that it may not resell
the New Debentures 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 Old Debentures acquired directly from
Holdings or an affiliate of Holdings, Holdings will file with the SEC a Shelf
Registration Statement to cover resales of the Old Debentures by the Holders
thereof who satisfy certain conditions relating to the provision of information
in connection with the Shelf Registration Statement. Holdings will use its
reasonable best efforts to cause the Registration Statement of which this
Prospectus forms a part to be declared effective as promptly as reasonably
practicable by the SEC. For purposes of the foregoing, "Transfer Restricted
Securities" means each Old Debenture until the earliest to occur of (i) the date
on which such Old Debenture is exchanged in the Exchange Offer for a New
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Debenture which is entitled to be resold to the public by the Holder thereof
without complying with the prospectus delivery requirements of the Securities
Act (other than as a result of the Holder's Status as an Affiliate of the
Company), (ii) the date on which such Old Debenture has been disposed of in
accordance with a Shelf Registration Statement (and the purchasers thereof have
been issued Debentures that do not bear the Private Placement legend set forth
in the Indenture), or (iv) the date on which such Old Debenture is distributed
to the public pursuant to Rule 144 under the Securities Act or may be sold under
Rule 144(k) under the Securities Act (and purchasers thereof have been issued
Debentures that do not bear the Private Placement Legend set forth in the
Indenture and each New Debenture until the date on which such New Debenture is
disposed of by a Broker-Dealer pursuant to the "Plan of Distribution"
contemplated by the Registration Statement of which this Prospectus forms a part
(including the delivery of this Prospectus).
The Registration Rights Agreement provides that (i) Holdings will file this
Exchange Offer Registration Statement with the SEC on or prior to 60 days after
the Closing Date, (ii) Holdings will use its reasonable best efforts to have
this Exchange Offer Registration Statement declared effective by the SEC on or
prior to 135 days after the Closing Date, (iii) unless the Exchange Offer would
not be permitted by applicable law or SEC policy, Holdings will commence the
Exchange Offer and use its reasonable 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 SEC, New Debentures in exchange for all Old
Debentures tendered prior thereto in the Exchange Offer and (iv) if obligated to
file the Shelf Registration Statement, Holdings will use its reasonable best
efforts to file the Shelf Registration Statement with the SEC on or prior to 30
days after such filing obligation arises and to cause the Shelf Registration to
be declared effective by the SEC on or prior to 90 days after such obligation
arises. If (a) Holdings 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 SEC on or prior to the date specified for such effectiveness
(the "Effectiveness Deadline"), (c) Holdings fails to consummate the Exchange
Offer within 30 business days of the Effectiveness Deadline 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 Holdings will pay Liquidated Damages to each
Holder of Transfer Restricted Securities affected thereby, 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 in
principal amount of Transfer Restricted Securities held by such Holder for each
week that the Registration Default continues. The amount of the Liquidated
Damages will increase by an additional $.05 per week per $1,000 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 $.25 per week per $1,000 in principal amount of Transfer
Restricted Securities. All accrued Liquidated Damages will be paid by Holdings
to the Global Debenture Holder by wire transfer of immediately available funds
or by federal funds check and to Holders of Certificated Debentures by wire
transfer to the accounts specified by them or by mailing checks to their
registered addresses if no such accounts have been specified. Holdings shall not
be required to pay Liquidated Damages for more than one Registration Default at
any given time. Following the cure of all Registration Defaults, the accrual of
Liquidated Damages will cease.
Holders of Old Debentures are required to make certain representations to
Holdings (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and are required to deliver information to be
used in connection with the Shelf Registration Statement within the time periods
set forth in the Registration Rights Agreement in order to have their Old
Debentures included in the Shelf Registration Statement and benefit from the
provisions regarding Liquidated Damages set forth above.
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BOOK-ENTRY, DELIVERY AND FORM
The New Debentures initially will be in the form of one or more registered,
global notes without interest coupons (collectively, the "Global Debentures").
The Global Debentures will be deposited on the date on which the Exchange Offer
is consummated with the Trustee, as custodian for DTC, in New York, New York.
Except as set forth below, the Global Debentures 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 Debentures may not be
exchanged for Debentures in certificated form except in the limited
circumstances described below. See "--Exchange of Book-Entry Debentures for
Certificated Debentures."
Initially, the Trustee will act as Paying Agent and Registrar. The
Debentures may be presented for registration of transfer and exchange at the
offices of the Registrar.
DEPOSITARY PROCEDURES
The following description of the operations and procedures of DTC, Euroclear
and Cedel are provided solely as a matter of convenience. These operations and
procedures are solely within the control of the respective settlement systems
and are subject to changes by them from time to time. Holdings takes no
responsibility for these operations and procedures and urges investors to
contact the system or their participants directly to discuss these matters.
DTC has advised Holdings 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 Purchaser), 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 Holdings that, pursuant to procedures established by
it, (i) upon deposit of the Global Debentures, DTC will credit the accounts of
Participants designated by the Initial Purchasers with portions of the principal
amount of the Global Debentures and (ii) ownership of such interests in the
Global Debentures will be shown on, and the transfer of ownership thereof will
be effected only through, records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants (with respect
to other owners of beneficial interest in the Global Debentures).
Investors in the Global Debentures may hold their interests therein directly
through DTC, if they are Participants in such system, or indirectly through
organizations (including Euroclear and Cedel) which are Participants in such
system. All interests in a Global Debenture, including those held through
Euroclear or Cedel, may be subject to the procedures and requirements of DTC.
Those interests held through Euroclear or Cedel may also be subject to the
procedures and requirements of such systems. 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 Debenture 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 Debenture 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.
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EXCEPT AS DESCRIBED BELOW, OWNERS OF INTEREST IN THE GLOBAL DEBENTURES WILL
NOT HAVE DEBENTURES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL
DELIVERY OF DEBENTURES 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 Debenture 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, Holdings and the
Trustee will treat the persons in whose names the Debentures, including the
Global Debentures, are registered as the owners thereof for the purpose of
receiving such payments and for any and all other purposes whatsoever.
Consequently, neither Holdings, the Trustee nor any agent of Holdings 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
Debentures, 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 Debentures or (ii) any other matter relating
to the actions and practices of DTC or any of its Participants or Indirect
Participants. DTC has advised Holdings that its current practice, upon receipt
of any payment in respect of securities such as the Debentures (including
principal and interest), is to credit the accounts of the relevant Participants
with the payment on the payment date, in amounts proportionate to their
respective holdings in the principal amount of beneficial interest in the
relevant security as shown on the records of DTC unless DTC has reason to
believe it will not receive payment on such payment date. Payments by the
Participants and the Indirect Participants to the beneficial owners of
Debentures 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 Holdings. Neither Holdings
nor the Trustee will be liable for any delay by DTC or any of its Participants
in identifying the beneficial owners of the Debentures, and Holdings and the
Trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.
Except for trades involving only Euroclear and Cedel participants, interest
in the Global Debentures 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."
Subject to the transfer restrictions set forth under "Notice to Investors,"
transfers between Participants in DTC will be effected in accordance with DTC's
procedures, and will be settled in same day funds, and transfers between
participants in Euroclear and Cedel will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the
Debentures described herein, cross-market transfers between the Participants in
DTC, on the one hand, and Euroclear or Cedel participants, on the other hand,
will be effected through DTC in accordance with DTC's rules on behalf of
Euroclear or Cedel, as the case may be, by its respective depositary; however,
such cross-market transactions will require delivery of instructions to
Euroclear or Cedel, as the case may be, by the counterparty in such system in
accordance with the rules and procedures and within the established deadlines
(Brussels time) of such system. Euroclear or Cedel, as the case may be, will, if
the transaction meets its settlement requirements, deliver instructions to its
respective depositary to take action to effect final settlement on its behalf by
delivering or receiving interests in the relevant Global Debenture in DTC, and
making or receiving payment in accordance with normal procedures for same-day
funds settlement applicable to DTC. Euroclear participants and Cedel
participants may not deliver instructions directly to the depositories for
Euroclear or Cedel.
DTC has advised Holdings that it will take any action permitted to be taken
by a Holder of Debentures only at the direction of one or more Participants to
whose account DTC has credited the interests in the Global Debentures and only
in respect of such portion of the aggregate principal amount of
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the Debentures as to which such Participant or Participants has or have given
such direction. However, if there is an Event of Default under the Debentures,
DTC reserves the right to exchange the Global Debentures for Debentures in
certificated form, and to distribute such Debentures to its Participants.
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures to
facilitate transfers of interests in the Global Debentures and in the Rule 144A
Global Debentures among Participants in DTC, Euroclear and Cedel, they are under
no obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. Neither Holdings nor the Trustee nor
any of their respective agents will have any responsibility for the performance
by DTC, Euroclear or Cedel or their respective participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
EXCHANGE OF BOOK-ENTRY DEBENTURES FOR CERTIFICATED DEBENTURES
A Global Debenture is exchangeable for definitive New Debentures in
certificated form ("Certificated Debentures") if (i) DTC (x) notifies Holdings
that it is unwilling or unable to continue as depositary for the Global
Debentures and Holdings thereupon fails to appoint a successor depositary within
120 days thereafter or (y) has ceased to be a clearing agency registered under
the Exchange Act, (ii) Holdings, at its option, notifies the Trustee in writing
that it elects to cause the issuance of the Certificated Debentures or (iii)
upon the request of the Trustee or holders of a majority of the aggregate
principal amount of outstanding Debentures if there shall have occurred and be
continuing a Default or Event of Default with respect to the Debentures. In
addition, beneficial interests in a Global Debenture may be exchanged for
Certificated Debentures upon request but only in accordance with the procedures
specified in the Indenture. In all cases, Certificated Debentures delivered in
exchange for any Global Debenture or beneficial interests therein will be
registered with the Company in the names, and issued in any approved
denominations, requested by or on behalf of the depositary (in accordance with
its customary procedures).
SAME DAY SETTLEMENT AND PAYMENT The Indenture requires that payments in
respect of the Debentures represented by the Global Debentures (including
principal, premium, if any, interest and Liquidated Damages, if any) be made by
wire transfer of immediately available funds to the accounts specified by the
Global Debenture Holder. With respect to Certificated Debentures, Holdings will
make all payments of principal, premium, if any, interest and Liquidated
Damages, if any, by wire transfer of immediately available funds to the accounts
specified by the Holders thereof or, if no such account is specified, by mailing
a check to each such Holder's registered address. The Debentures represented by
the Global Debentures 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 Debentures will, therefore,
be required by the Depositary to be settled in immediately available funds.
Holdings expects that secondary trading in any Certificated Debentures will also
be settled in immediately available funds.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a Global Debenture 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 Holdings that
cash received in Euroclear or Cedel as a result of sales of interests in a
Global Debenture by or through a Euroclear or Cedel participant to a Participant
in DTC will be received with value on the settlement date of DTC but will be
available in the relevant Euroclear or Cedel cash account only as of the
business day for Euroclear or Cedel following DTC's settlement date.
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DESCRIPTION OF OTHER INDEBTEDNESS
NEW CREDIT AGREEMENT
On May 22, 1998, as a part of the consummation of the Acquisition
Transactions, the Company entered into the New Credit Agreement among Holdings,
the several lenders from time to time parties thereto (collectively, the
"Lenders"), Bankers Trust Company, as syndication agent and as administrative
agent (the "Administrative Agent"), DLJ Capital Funding, Inc., as documentation
agent, and Bank of America National Trust and Savings Association ("Bank of
America NT&SA"), as co-agent. The following is a summary description of the
principal terms of the New Credit Agreement and the other loan documents related
thereto. The description set forth below does not purport to be complete and is
qualified in its entirety by reference to certain agreements setting forth the
principal terms and conditions of the New Credit Agreement, a copy of which is
filed as an exhibit to the Registration Statement of which this Prospctus forms
a part. The Company obligations under the New Credit Agreement constitute Senior
Indebtedness and Designated Senior Indebtedness with respect to the Debentures.
The Company borrowed $111.0 million of Term Loan Facilities on the Closing
Date to partially finance the Acquisition Transactions and to pay certain fees
and expenses related thereto. The New Credit Agreement also provides for a
Revolving Credit Facility that may be utilized to fund the Company's working
capital requirements, including issuance of stand-by and trade letters of
credit, and for other general corporate purposes.
The Term A Loan Facility is a single tranche term facility of approximately
$50.0 million that has a maturity of May 31, 2004, and is expected to amortize
over a six-year period, with annual principal payments ranging from $0.5 million
to $12.5 million. The Term B Loan Facility is a single tranche term facility of
approximately $31.0 million that has a maturity of May 31, 2005. The Term C Loan
Facility is a single tranche term facility of approximately $30.0 million that
has a maturity of May 31, 2006. The Term B and C Loan Facilities are each
expected to amortize at a rate of approximately $0.3 million per year, with the
remainder due in the final year of each such facility. Loans and letters of
credit under the Revolving Credit Facility will be available at any time during
its five-year term (which expires on May 31, 2003) subject to the fulfillment of
customary conditions precedent, including the absence of a default under the New
Credit Agreement. The full amount under each of the Term Loan Facilities is
currently outstanding.
SECURITY; GUARANTY. The Company's obligations under the New Credit
Agreement are guaranteed by Holdings. The New Credit Agreement is secured by a
perfected first priority security interest in substantially all of the assets of
the Company including: (i) all real property owned by the Company; (ii) all
accounts receivable, inventory and intangibles; and (iii) 65% of the capital
stock of the Foreign Subsidiaries. The guaranty by Holdings is secured by a
pledge of all of the capital stock of the Company.
INTEREST, MATURITY. Borrowings under the New Credit Agreement bear interest
at a rate per annum equal (at the Company's option) to: (i) the Administrative
Agent's reserve-adjusted LIBO rate ("LIBOR") or (ii) an alternate base rate
equal to the highest of the Administrative Agent's prime rate, plus an
applicable margin. Initially, the applicable margin for the Term A Loan Facility
and the Revolving Credit Facility is 2.25% per annum for LIBOR loans and 1.25%
per annum for alternate base rate loans; the applicable margin for the Term B
Loan Facility is 2.75% per annum for LIBOR loans and 1.75% per annum for
alternate base rate loans; and the applicable margin for the Term C Loan
Facility is 3.00% per annum for LIBOR loans and 2.00% per annum for alternate
base rate loans. After the first six months following the closing date, such
margins will be subject to reduction based on the Company's leverage ratio.
FEES. The Company is required to pay the Lenders, on a quarterly basis, a
commitment fee on the undrawn portion of the Revolving Credit Facility at a rate
equal to 0.50% per annum. The Company is also obligated to pay (i) a per annum
letter of credit fee on the aggregate amount of outstanding letters of
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credit; (ii) a fronting bank fee for the letter of credit issuing bank; and
(iii) customary agent, arrangement and other similar fees.
COVENANTS. The New Credit Agreement contains a number of covenants that,
among other things, restrict the ability of Holdings, the Company and its
subsidiaries to dispose of assets, incur additional indebtedness, prepay other
indebtedness or amend certain debt instruments (including the Indenture), pay
dividends, create liens on assets, enter into sale and leaseback transactions,
make investments, loans or advances, make acquisitions, engage in mergers or
consolidations, make capital expenditures, change the business conducted by the
Company or its subsidiaries or engage in certain transactions with affiliates
and otherwise restrict certain corporate activities. In addition, under the New
Credit Agreement, the Company is required to maintain specified financial ratios
and satisfy specified financial tests, including leverage ratios and interest
coverage tests. The New Credit Agreement permits the Company to make dividends
to Holdings for the purposes of paying interest owed on the Debentures (after
the fifth anniversary of the Issue Date) so long as (i) no default or event of
default under the New Credit Agreement has occurred and is continuing and (ii)
before and after giving effect to such payment, the Consolidated Fixed Charge
Coverage Ratio (as defined in the New Credit Agreement) shall be equal to or
greater than 1.0:1.0. See "Risk Factors--Restrictive Debt Covenants."
EVENTS OF DEFAULT. The New Credit Agreement contains customary events of
default, including nonpayment of principal, interest or fees, material
inaccuracy of representations and warranties, violation of covenants,
cross-default to certain other indebtedness, certain events of bankruptcy and
insolvency, material judgments against the Company and its subsidiaries,
invalidity of any guarantee or security interest and a change of control of the
Company in certain circumstances as set forth therein.
COPETRO CREDIT AGREEMENT
The Copetro Credit Agreement, dated as of February 4, 1997, among Copetro,
the financial institutions parties thereto and BNL, as agent, provided for
borrowings by Copetro, prior to June 30, 1998 of up to $20.0 million, $16.0
million of such funds to be used by Copetro in order to finance the expansion of
plant facilities and $4.0 million to be used for working capital. Approximately
$15.9 million is currently outstanding under the Copetro Credit Agreement and
the remaining $4.1 million available prior to June 30, 1998 will not be
borrowed. The Copetro Credit Agreement, which is nonrecourse to the Company,
will remain in effect after the consummation of the Acquisition Transactions.
The following is a summary description of the principal terms of the Copetro
Credit Agreement and other loan documents related thereto. The description set
forth below does not purport to be complete and is qualified in its entirety by
reference to certain agreements setting forth the principal terms and conditions
of the Copetro Credit Agreement, which are available upon request from the
Company. Copetro's obligations under the Copetro Credit Agreement will
constitute Senior Indebtedness of Copetro. Borrowings under the Copetro Credit
Agreement will be repaid in seven consecutive semiannual installments beginning
on June 30, 1999. The Copetro Credit Agreement imposes a prepayment penalty
equal to 1.0% per annum of the amount prepaid, calculated from the date of the
prepayment until the maturity date of the loan.
SECURITY. Copetro's obligations under the Copetro Credit Agreement are
secured by a first priority pledge in favor of BNL of Copetro's fixed assets.
Until September 30, 1998, Copetro must maintain a ratio of the assessed value of
pledged assets to the unpaid loan amount of at least 82%.Thereafter, such ratio
must be maintained at 120%. The Copetro Credit Agreement provides for the
release of pledged assets or the pledging of new property or other guarantees,
as the case may be, in order to maintain such ratio.
INTEREST, MATURITY. Borrowings under the Copetro Credit Agreement bear
interest at a rate per annum equal to LIBOR plus 4.0%, payable semiannually. The
final maturity date of the Copetro Credit Agreement is June 30, 2002.
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COVENANTS. Under the Copetro Credit Agreement, (i) any change in control of
the ownership of Copetro requires prior written approval of BNL; (ii) any
payment of cash dividends from Copetro is prohibited if Copetro is in default as
a result of non-compliance with specified financial ratios as set forth below,
or if such declaration or payment could result in future noncompliance with the
financial ratios; and (iii) the Company will not collect any fee or other
royalty payments from Copetro in connection with technical and commercial
assistance, if a payment default thereunder has occurred and is continuing.
Copetro is required to maintain the following financial ratios: (i) the
ratio of current assets over current liabilities must be greater than 1.5 to 1;
(ii) the ratio of long-term liabilities over net worth cannot exceed 1 to 1; and
(iii) the ratio of total liabilities to net worth cannot exceed 1.2 to 1. The
Copetro Credit Agreement contains covenants which, among other things, limit
Copetro's ability to dispose of assets, engage in mergers or consolidations and
create liens on assets.
EVENTS OF DEFAULT. The Copetro Credit Agreement contains customary events
of default, including nonpayment of principal, interest or fees, material
inaccuracy of representations and warranties, violation of covenants,
cross-acceleration to other obligations of Copetro, certain events of bankruptcy
and insolvency, material judgments against Copetro and a change of control of
Copetro in certain circumstances as set forth therein. Following an event of
default, interest (and interest on interest) accrues at a penalty rate 50% in
excess of the rate otherwise applicable.
NOTES
The Old Notes generated gross proceeds to the Company of approximately
$175.0 million (before deducting discounts and commissions). The Company is
currently conducting the Notes Exchange Offer to exchange New Notes for the Old
Notes from the holders thereof. The Old Notes were and the New Notes will be
issued under an Indenture dated as of May 22, 1998 (the "Note Indenture")
between the Company and the Trustee. The Old Notes are and the New Notes will be
senior subordinated unsecured general obligations of the Company will bear
interest at a rate of 10 1/4% per annum and payable in arrears on May 15 and
November 15 of each year, commencing November 15, 1998. For interest payments
due through May 15, 2003, the Company may, at its option, make up to four
semiannual interest payments through the issuance of Additional Notes (as
defined in the Note Indenture) in an aggregate principal amount equal to the
amount of the interest that would be payable if the rate per annum were equal to
11 3/4% (provided, that incremental amounts of less than $1,000 shall be payable
in cash). The maximum aggregate principal amount of Additional Notes that the
Company may issue is $50.0 million, plus the principal amount of Additional
Notes required to make the interest payments described in the preceding
sentence.
In the future, the Notes will be unconditionally guaranteed on a senior
subordinated basis by the Subsidiary Guarantors, which will consist of all
future Subsidiaries of the Company other than Foreign Subsidiaries, Finance
Subsidiaries and Receivables Subsidiaries (as defined in the Note Indenture).
The Subsidiary Guarantees may be released under certain circumstances.
The Old Notes are and the New Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after May 15, 2003, in cash at
the redemption prices set forth below, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the date of redemption if redeemed during
the 12-month period commencing on May 15th of the years set forth below.
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- ---------------------------------------------------------------------------- ----------------
<S> <C>
2003........................................................................ 105.125%
2004........................................................................ 103.417%
2005........................................................................ 101.708%
2006 and thereafter......................................................... 100.000%
</TABLE>
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Notwithstanding the foregoing, at any time on or prior to May 15, 2001, the
Company may use the net proceeds of one or more Equity Offerings (as defined
therein) to redeem up to 35% of the Notes issued under the Note Indenture at a
redemption price equal to 110.250% of the aggregate principal amount thereof
plus accrued and unpaid interest and Liquidated Damages if any, thereon to the
redemption date; PROVIDED that at least $100.0 million aggregate principal
amount at maturity of the New Notes together with the Old Notes originally
issued and not exchanged in the Exchange Offer remains outstanding immediately
after each such redemption.
In the event of a Change of Control (as defined in the Note Indenture), each
holder of Notes has the right to require the repurchase of such holder's Notes
at a purchase price equal to 101% of the principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages, if any, thereon to the purchase
date.
The Note Indenture contains covenants that, among other things, limit the
ability of the Company to enter into certain mergers or consolidations or incur
certain liens and of the Company and its subsidiaries to incur additional
indebtedness, pay dividends, redeem capital stock or make certain other
restricted payments and engage in certain transactions with affiliates. Under
the Note Indenture, the Company may not make dividends to Holdings to pay
interest owed on the Debentures at any time that a default or event of default
under the Note Indenture has occurred and is continuing. Under certain
circumstances, the Company will be required to make an offer to purchase the
Notes at a price equal to 100% of the principal amount thereof, plus accrued
interest to the date of purchase with the proceeds of certain asset sales. The
Note Indenture will contain certain events of defaults customary for securities
of this nature, which will include the failure to pay interest and principal,
the failure to comply with certain covenants in the Notes or the Note Indenture,
an acceleration under certain indebtedness, the imposition of certain final
judgments or warrants of attachment and certain events occurring under
bankruptcy laws. See "Risk Factors--Limitation on Access to Subsidiaries' Cash
Flow; Holding Company Structure.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain United States Federal income tax
considerations associated with the exchange of Old Debentures for New Debentures
and the ownership and disposition of the Debentures. This discussion is based
upon existing United States Federal income tax law, which is subject to change,
possibly retroactively. This discussion does not describe all relevant aspects
of United States Federal income taxation that may be important to particular
Holders in light of their individual investment circumstances or certain types
of Holders subject to special tax rules (E.G., financial institutions, insurance
companies, broker-dealers, tax-exempt organizations or, except to the extent
discussed below, Non-U.S. Holders (as defined below)) or to persons that hold or
will hold the Debentures as part of a straddle, hedging, or synthetic security
transaction, all of whom may be subject to tax rules that differ significantly
from those described below. In addition, this discussion does not describe any
foreign, state or local tax considerations. This summary addresses tax
consequences only to current Holders of the Debentures and assumes that such
Holders hold their Debentures as "capital assets" (generally, property held for
investment) for United States Federal income tax purposes. Current Holders of
the Debentures are urged to consult their tax advisors concerning the particular
tax consequences of the exchange of Old Debentures for New Debentures and the
ownership and disposition of the Debentures, including the applicability and
effect of any United States Federal, state, local and foreign income and other
tax laws.
For purposes of this discussion, a "U.S. Holder" is a beneficial owner of a
Debenture who is (i) an individual citizen or resident of the United States,
(ii) a corporation, partnership or other entity created or organized in or under
the laws of the United States or of any political subdivision thereof, (iii) an
estate that is subject to United States Federal income taxation without regard
to the source of its income, or (iv) a trust whose administration is subject to
the primary supervision of a United States court and which has one or more
United States persons who have the authority to control all substantial
decisions of the trust. For purposes of this discussion, a "Non-U.S. Holder" is
any holder who is not a U.S. Holder.
U.S. HOLDERS AND NON-U.S. HOLDERS
There will be no United States Federal income tax consequences to a U.S.
Holder or Non-U.S. Holder exchanging an Old Debenture for a New Debenture
pursuant to the Exchange Offer and such Holder will have the same adjusted basis
and holding period in the New Debenture as it had in the Old Debenture
immediately before the exchange.
U.S. HOLDERS
ORIGINAL ISSUE DISCOUNT
Because the Debentures do not provide for the payment of interest in cash
until May 15, 2003, the Debentures have been issued with original issue discount
for United States Federal income tax purposes. Consequently, subject to
adjustment under the acquisition premium rules discussed below, U.S. Holders
will be required to include original issue discount in ordinary income over the
period that they hold the Debentures on the basis of a constant yield method
described below. In general, under the original issue discount rules, U.S.
Holders will be required to include original issue discount in ordinary income
during the intial five year period during which the Debentures are outstanding
in advance of the receipt of cash attributable thereto. Thereafter, the amount
of original issue discount required to be included in income during a complete
taxable year by U.S. Holders should be equal to the amount of scheduled interest
payments made during such year.
The initial amount of original issue discount on the Debentures will be
equal to the excess of (i) the sum of the principal amount due at maturity plus
all scheduled interest payments over (ii) the issue price of the Debentures. The
amount of original issue discount to be included in income will be determined
using a constant yield method, which will result in a greater portion of such
discount being included in income in the later part of the term of the
Debentures. Any amount of discount included in income will increase a Holder's
tax basis in the Debentures and any payments of interest in cash will decrease
such Holder's tax basis in the Debentures.
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Holdings will report annually to the Internal Revenue Service and to record
U.S. Holders information with respect to the amount of original issue discount
accruing during the calendar year.
REDEMPTION, SALE OR EXCHANGE OF DEBENTURES
A U.S. Holder will recognize capital gain or loss upon the sale, redemption
or other disposition of a Debenture in an amount equal to the difference between
the amount realized from such disposition and his adjusted tax basis in the
Debenture. Net capital gain (I.E., generally, capital gain in excess of capital
loss) recognized by an individual upon the disposition of a Debenture that has
been held for (i) more than 18 months will generally be subject to tax at a rate
not to exceed 20%, (ii) more than 12 months but not more than 18 months will be
subject to tax at a rate not to exceed 28%, and (iii) 12 months or less will be
subject to tax at ordinary income tax rates. Pursuant to the Internal Revenue
Service Restructuring and Reform Act of 1998 passed by Congress, but awaiting
the President's signature, the minimum holding period to qualify for the 20%
rate of tax imposed upon net capital gain would, if the act were enacted into
law, be reduced from 18 months to 12 months. In addition, any net capital gain
recognized by a corporation upon the disposition of a Debenture will be subject
to tax at ordinary income tax rates.
MARKET DISCOUNT AND ACQUISITION PREMIUM
U.S. Holders, other than original purchasers of the Old Debentures in the
original offering, should be aware that the sale of the New Debentures may be
affected by the market discount and acquisition premium provisions of the Code.
MARKET DISCOUNT RULES. The market discount rules generally provide that if
a U.S. Holder of a Debenture purchased the Debenture, subsequent to the original
offering, at a "market discount" (i.e., at an amount less than the adjusted
issue price of the Debenture as determined on the date of such purchase) in
excess of a statutorily-defined DE MINIMIS amount, and thereafter recognizes
gain upon a disposition (including a partial redemption) of the New Debenture
received in exchange for an Old Debenture, the lesser of such gain or the
portion of the market discount that accrued while the Old Debenture and New
Debenture were held by such U.S. Holder will be treated as ordinary interest
income at the time of disposition. The rules also provide that a U.S. Holder who
acquires a Debenture at a market discount may be required to defer a portion of
any interest expense that may otherwise be deductible on any indebtedness
incurred or maintained to purchase or carry such Debenture until the U.S. Holder
disposes of such Debenture in a taxable transaction. If a holder of such a
Debenture elects to include market discount in income currently, both of the
foregoing rules would not apply.
ACQUISITION PREMIUM RULES. The acquisition premium rules generally provide
that if a U.S. Holder of a Debenture purchased the Debenture, subsequent to the
original offering, at an acquisition premium (i.e., at an amount greater than
the adjusted issue price of the Debenture as determined on the date of such
purchase), the amount of original issue discount that the U.S. Holder includes
in gross income is reduced to reflect such acquisition premium. Acquisition
premium is allocated on a pro rata basis to each accrual of original issue
discount reducing original issue discount by a constant fraction, the numerator
of which is the excess of the adjusted basis of the Debenture over its adjusted
issue price and the denominator of which is the excess of the sum of all amounts
payable on the Debenture after the purchase date over its adjusted issue price.
APPLICATION OF AHYDO RULES
The Debentures will constitute "applicable high yield discount obligations"
("AHYDOs"), for United States Federal income tax purposes, if the yield to
maturity of such Debentures exceeds the sum of the "applicable Federal rate" in
effect at the time of their issuance (the "AFR") plus five percentage points. If
the Debentures are AHYDOs, Holdings will not be entitled to claim a deduction
for original issue discount that accrues with respect to such Debentures for
United States Federal income tax purposes, until amounts attributable to such
original issue discount are paid in cash. In addition, to the extent that the
yield to maturity of the Debentures exceeds the sum of the AFR plus six
percentage points (the "Excess Yield"),
99
<PAGE>
any deduction claimed by Holdings that is attributable to such Excess Yield will
be disallowed. Subject to otherwise applicable limitations, U.S. Holders that
are corporations will be entitled to a dividends received deduction (generally
at a 70% rate) with respect to any disqualified portion of the accrued original
discount to the extent that Holdings has sufficient current or accumulated
earnings and profits. If the disqualified portion exceeds Holdings' current and
accumulated earnings and profits, the excess will continue to be subject to tax
as ordinary original issue discount income in accordance with the original issue
discount rules described above.
NON-U.S. HOLDERS
Under present United States Federal income and estate tax law, assuming
certain certification requirements are satisfied (which include identification
of the beneficial owner of the instrument), and subject to the discussion of
backup withholding below:
(a) payments of interest on the Debentures to any Non-U.S. Holder generally
will not be subject to United States Federal income or withholding tax,
provided that (1) the Non-U.S. Holder does not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock of Holdings entitled to vote, (2) the Non-U.S. Holder
is not a controlled foreign corporation that is related to Holdings
through stock ownership, and (3) such interest payments are not
effectively connected with the conduct of a United States trade or
business of the Non.U.S. Holder;
(b) a Non-U.S. Holder generally will not be subject to the United States
Federal income tax on gain realized on the sale, exchange or other
disposition of the Debenture, unless (1) such Non-U.S. Holder is an
individual who is present in the United States for 183 days or more
during the taxable year and certain other requirements are met or (2)
the gain is effectively connected with the conduct of a United States
trade or business of the Non-U.S. Holder; and
(c) if interest on the Debentures is exempt from withholding of United
States Federal income tax under the rules described above, the
Debentures will not be included in the estate of a deceased Non-U.S.
Holder for United States Federal estate tax purposes.
The certification referred to above may be made on an Internal Revenue
Service Form W-8 or substantially similar substitute form.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to payments of
principal and interest on a Debenture, and the proceeds of the sale of a
Debenture before maturity within the United States (and, under certain
circumstances, outside of the United States) to, and to the accrual of original
issue discount with respect to, non-corporate Holders. A Holder of a Debenture
may be subject to backup withholding at the rate of 31% with respect to interest
paid on the Debenture and proceeds from the sale, exchange, redemption or
retirement of the Debenture, unless such Holder (a) is a corporation or comes
within certain other exempt categories, and, when required, demonstrates such
fact, (b) provides a correct taxpayer identification number, certifies as to no
loss of exemption from backup withholding and otherwise complies with applicable
requirements of the backup withholding rules or (c) in the case of a Non-U.S.
Holder, such Holder certifies as to its status as a Non-U.S. Holder on an
Internal Revenue Service Form W-8 or substantially similar substitute form. A
U.S. Holder who does not provide Holdings with the holder's correct taxpayer
identification number may be subject to penalties imposed by the Internal
Revenue Service.
Amounts withheld under the backup withholding rules may be credited against
a Holder's tax liability, and a Holder may obtain a refund or any excess amounts
withheld under the backup withholding rules by filing the appropriate claim for
refund with the Internal Revenue Service.
100
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Debentures for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver this Prospectus in
connection with any resale of such New Debentures. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Debentures received in exchange for Old
Debentures where such Old Debentures were acquired as a result of market-making
activities or other trading activities. Until , 1998, all dealers
effecting transactions in the New Debentures may be required to deliver this
Prospectus. Holdings has agreed that, for a period of 90 days after the
Expiration Date, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale.
Holdings will not receive any proceeds from any sale of New Debentures by
broker-dealers. New Debentures received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Debentures 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
broker-dealer or the purchaser of any such New Debentures. Any broker-dealer
that resells New Debentures 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 New Debentures may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit on any such resale of New
Debentures and any commission or concessions received by any such person 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
this Prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 90 days after the Expiration Date, Holdings will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in the Letter
of Transmittal. Holdings has agreed to pay all expenses in connection with the
Exchange Offer and to reimburse the Initial Purchasers for the reasonable fees
and expenses of counsel for the Holders of the Debentures. Each Holder will pay
all expenses of its counsel other than as described in the preceding sentence,
transfer taxes, if any, and any commissions or concessions of any brokers or
dealers. Holdings has agreed in the Registration Rights Agreement to indemnify
the Holders of the Debentures (including any broker-dealer) against certain
liabilities, including liabilities under the Securities Act.
In addition, to comply with the securities laws of certain jurisdictions,
the New Debentures may not be offered or sold unless they have been registered
or qualified for offer and sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with. Holdings has
agreed, pursuant to the Registration Rights Agreement, subject to certain
limitations specified therein, to register or qualify the New Debentures for
offer or sale under all applicable state securities or Blue Sky laws by the time
the Registration Statement (of which this Prospectus forms a part) is declared
effective by the SEC.
101
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the New Debentures offered hereby will
be passed upon for Holdings by Skadden, Arps, Slate, Meagher & Flom LLP, Los
Angeles, California.
EXPERTS
The consolidated financial statements of the Company at December 31, 1996
and 1997, and for each of the three years in the period ended December 31, 1997,
appearing in this Prospectus have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon appearing elsewhere herein, and
are included in reliance upon such reports given upon the authority of such firm
as experts in accounting and auditing.
102
<PAGE>
INDEX TO FINANCIAL STATEMENTS
GREAT LAKES ACQUISITION CORPORATION
<TABLE>
<S> <C>
Report of Independent Auditors....................................................... F-2
Balance Sheet as of March 31, 1998................................................... F-3
Notes to Balance Sheet............................................................... F-4
</TABLE>
GREAT LAKES CARBON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Auditors....................................................... F-5
Consolidated Balance Sheets as of December 31, 1996 and 1997......................... F-6
Consolidated Statements of Operations for the years ended December 31, 1995, 1996,
1997............................................................................... F-7
Consolidated Statements of Stockholders' Equity for the years ended December 31,
1995, 1996 and 1997................................................................ F-8
Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1996 and
1997............................................................................... F-9
Notes to Consolidated Financial Statements........................................... F-10
Condensed Consolidated Balance Sheet as of March 31, 1998 (unaudited)................ F-19
Condensed Consolidated Statements of Operations for the Three Months Ended March 31,
1997 and 1998 (unaudited).......................................................... F-20
Condensed Consolidated Statement of Stockholders' Equity for the Three Months Ended
March 31, 1998 (unaudited)......................................................... F-21
Condensed Consolidated Statement of Cash Flows for the Three Months Ended March 31,
1998 (unaudited)................................................................... F-22
Notes to Condensed Consolidated Financial Statements (unaudited)..................... F-23
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Great Lakes Acquisition Corp.
We have audited the accompanying balance sheet of Great Lakes Acquisition
Corp. (the "Company") as of March 31, 1998. This financial statement is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Great Lakes Acquisition Corp. at
March 31, 1998, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
July 20, 1998
F-2
<PAGE>
GREAT LAKES ACQUISITION CORP.
BALANCE SHEET
MARCH 31, 1998
<TABLE>
<S> <C>
ASSETS
Subscription receivable............................................................. $ 10
---
---
STOCKHOLDERS' EQUITY
Common stock, par value $.01; authorized--92,000 shares; issued and outstanding--100
shares............................................................................ $ 1
Additional paid-in capital.......................................................... 9
---
$ 10
---
---
</TABLE>
See accompanying notes.
F-3
<PAGE>
GREAT LAKES ACQUISITION CORP.
NOTE TO BALANCE SHEET
MARCH 31, 1998
1. ORGANIZATION
Great Lakes Acquisition Corp., (the "Company") was incorporated under the
laws of the State of Delaware on March 31, 1998. The Company is a 99.49% owned
subsidiary of American Industrial Capital Fund II, L.P.
2. SUBSEQUENT EVENTS
On May 18, 1998, the Company canceled its previously issued shares of common
stock and issued 65,000 shares of its common stock for approximately
$65,000,000. On May 22, 1998, the Company issued 330 shares of its common stock
for approximately $330,000.
On May 22, 1998, the Company acquired all of the issued and outstanding
common stock of Great Lakes Carbon Corporation for approximately $376,894,000.
The acquisition will be accounted for as a purchase.
F-4
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Great Lakes Carbon Corporation
We have audited the accompanying consolidated balance sheets of Great Lakes
Carbon Corporation and subsidiaries as of December 31, 1996 and 1997, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our 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 Great Lakes
Carbon Corporation and subsidiaries at December 31, 1996 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
February 13, 1998
F-5
<PAGE>
GREAT LAKES CARBON CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1997
---------- ----------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................................... $ 24,097 $ 43,596
Accounts receivable--net of allowance for doubtful accounts of $600 in 1996 and 1997.... 28,934 29,908
Inventories............................................................................. 39,872 32,455
Other current assets.................................................................... 2,958 4,349
---------- ----------
Total current assets...................................................................... 95,861 110,308
Property, plant and equipment, net........................................................ 47,530 59,165
Other assets.............................................................................. 5,514 5,438
---------- ----------
Total assets.............................................................................. $ 148,905 $ 174,911
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................................................ $ 22,222 $ 13,601
Accrued expenses........................................................................ 11,592 14,057
Income taxes payable.................................................................... 3,840 1,796
Current portion of long-term debt....................................................... 1,389 1,419
---------- ----------
Total current liabilities................................................................. 39,043 30,873
Long-term debt, less current portion...................................................... 71,496 82,595
Other long-term liabilities............................................................... 3,857 4,190
Deferred taxes............................................................................ 2,554 4,814
Stockholders' equity:
Common Stock, par value $0.01 per share, 100,000 shares authorized and outstanding...... 1 1
Additional paid-in capital.............................................................. 5,509 5,509
---------- ----------
Retained earnings....................................................................... 26,445 46,929
---------- ----------
Total stockholders' equity................................................................ 31,955 52,439
---------- ----------
Total liabilities and stockholders' equity................................................ $ 148,905 $ 174,911
---------- ----------
---------- ----------
</TABLE>
See accompanying notes.
F-6
<PAGE>
GREAT LAKES CARBON CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1995 1996 1997
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales.................................................................... $ 178,628 $ 242,744 $ 231,911
Cost of goods sold........................................................... 142,188 176,371 172,390
---------- ---------- ----------
Gross profit................................................................. 36,440 66,373 59,521
Selling, general and administrative expenses................................. 9,687 15,321 18,510
---------- ---------- ----------
Operating income............................................................. 26,753 51,052 41,011
Other income (expense):
Interest expense, net........................................................ (1,127) (7,573) (6,287)
Asset utilization fee to parent.............................................. (6,286) -- --
Other, net................................................................... 2,111 (772) (49)
---------- ---------- ----------
(5,302) (8,345) (6,336)
---------- ---------- ----------
Income before income taxes................................................... 21,451 42,707 34,675
Income tax expense........................................................... 7,633 15,148 12,691
---------- ---------- ----------
Net income................................................................... $ 13,818 $ 27,559 $ 21,984
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See accompanying notes.
F-7
<PAGE>
GREAT LAKES CARBON CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
PAID-IN RETAINED STOCKHOLDERS'
COMMON STOCK CAPITAL EARNINGS EQUITY
------------- ----------- ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at January 1, 1995....................................... $ 1 $ 53,637 $ 15,019 $ 68,657
Net income..................................................... -- -- 13,818 13,818
Distributions.................................................. -- (48,128) (28,451) (76,579)
--
----------- ---------- ------------
Balance at December 31, 1995..................................... $ 1 $ 5,509 $ 386 $ 5,896
Net income..................................................... -- -- 27,559 27,559
Dividends...................................................... -- -- (1,500) (1,500)
--
----------- ---------- ------------
Balance at December 31, 1996..................................... $ 1 $ 5,509 $ 26,445 $ 31,955
Net income..................................................... -- -- $ 21,984 $ 21,984
Dividends...................................................... -- -- (1,500) (1,500)
--
----------- ---------- ------------
Balance at December 31, 1997..................................... $ 1 $ 5,509 $ 46,929 $ 52,439
--
--
----------- ---------- ------------
----------- ---------- ------------
</TABLE>
See accompanying notes.
F-8
<PAGE>
GREAT LAKES CARBON CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1995 1996 1997
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.................................................................... $ 13,818 $ 27,559 $ 21,984
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization........................................... 8,420 9,551 10,220
Deferred taxes.......................................................... 4,181 462 2,260
Changes in operating assets and liabilities:
Accounts receivable................................................... (8,418) (6,851) (974)
Inventories........................................................... (7,167) (13,701) 7,417
Other current assets.................................................. 621 306 (1,391)
Income taxes payable.................................................. 3,523 743 (2,044)
Accounts payable and accrued expenses................................. 4,103 8,158 (6,156)
Other, net............................................................ (1,846) 1,495 (55)
---------- ---------- ----------
Net cash provided by operating activities..................................... 17,235 27,722 31,261
INVESTING ACTIVITIES
Capital expenditures.......................................................... (5,774) (6,371) (21,391)
---------- ---------- ----------
Net cash used in investing activities......................................... (5,774) (6,371) (21,391)
FINANCING ACTIVITIES
Repayments of long-term debt................................................ (2,616) (1,406) (1,389)
Additions to long-term debt................................................. 65,000 -- 12,518
Transfers to parent......................................................... (68,503) -- --
Dividends................................................................... -- (1,500) (1,500)
---------- ---------- ----------
Net cash provided by (used in) financing activities........................... (6,119) (2,906) 9,629
Increase in cash and cash equivalents......................................... 5,342 18,445 19,499
Cash and cash equivalents at beginning of year................................ 310 5,652 24,097
---------- ---------- ----------
Cash and cash equivalents at end of year...................................... $ 5,652 $ 24,097 $ 43,596
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See accompanying notes.
F-9
<PAGE>
GREAT LAKES CARBON CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
Great Lakes Carbon Corporation (the "Company") is a producer of calcined
coke principally for customers in the aluminum industry. The consolidated
financial statements include the accounts of the Company and its subsidiaries.
Significant intercompany accounts have been eliminated in consolidation.
On December 20, 1995, the Company, formerly a wholly-owned subsidiary of
Horsehead Industries, Inc. ("Horsehead"), sold $65,000,000 of 10% Senior Secured
Notes due 2006. Immediately upon the completion of the sale, the net proceeds
therefrom were distributed by the Company as a cash dividend to Horsehead, all
indebtedness of Horsehead owing to the Company was canceled and 100% of the
common stock of the Company was distributed by Horsehead on a pro rata basis to
the holders of the common stock of Horsehead.
Through December 20, 1995 a monthly asset utilization fee was charged by
Horsehead equal to 1% of the Company's net assets, adjusted for intercompany
balances and tax assets and liabilities. A portion of this fee ($1,400,000 in
1995) is included in selling, general and administrative expenses, as it
represents estimates of various ongoing management services provided to the
Company by Horsehead. The balance is included in other income (expense).
Management believes that the allocation method is reasonable and that, after
giving affect to such allocation, selling, general and administrative expenses
in 1995 approximate what the costs would have been for the Company if it had
operated as an unaffiliated entity.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts and disclosures reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
CASH EQUIVALENTS
Investments with maturities of less than 90 days when purchased are
considered the equivalent of cash.
INVENTORIES
Inventories are stated at the lower of cost (principally average cost
method) or market.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated on the basis of cost. Enhancements
are capitalized and depreciated over the period benefited. The provision for
depreciation is determined by the straight-line method over the estimated useful
lives of the related assets.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" effective January 1, 1996, which requires impairment
losses to be recorded on long-lived assets used in operations
F-10
<PAGE>
GREAT LAKES CARBON CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
when indicators of impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the assets' carrying
amount. The adoption did not have an effect on the financial condition of the
Company.
SIGNIFICANT CUSTOMERS
The Company had one customer which represented 15.1% of net sales in 1995,
two customers which represented 22% and 15.3% of net sales in 1996 and 23.7% and
15.5% of net sales in 1997.
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
1996 1997
--------- ----------
(IN THOUSANDS)
<S> <C> <C>
Raw materials.......................................................... $ 26,377 $ 18,483
Finished goods......................................................... 8,534 7,821
Supplies and spare parts............................................... 4,961 6,151
--------- ----------
$ 39,872 $ 32,455
--------- ----------
--------- ----------
</TABLE>
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
1996 1997
--------- ----------
(IN THOUSANDS)
<S> <C> <C>
Land and improvements.................................................. $ 2,449 $ 2,718
Buildings.............................................................. 8,835 9,193
Machinery, equipment and other......................................... 110,955 116,786
Construction in progress............................................... 2,175 16,866
--------- ----------
124,414 145,563
Accumulated depreciation............................................... (76,884) (86,398)
--------- ----------
$ 47,530 $ 59,165
--------- ----------
--------- ----------
</TABLE>
4. ACCRUED EXPENSES
Accrued expenses included interest payable of $3,370,000 and $3,467,000 at
December 31, 1996 and 1997, respectively.
F-11
<PAGE>
GREAT LAKES CARBON CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
5. LONG-TERM DEBT
Long-term debt and capital lease obligations consist of the following:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
10% Senior Secured Notes due January 1, 2006............................ $ 65,000 $ 65,000
Various pollution control and industrial revenue bonds bearing interest
at rates from 6.75% to 7.125% due in varying amounts at various dates
through 2002.......................................................... 5,919 4,834
Facility expansion credit line bearing interest at LIBOR plus 4% (9.9%
at December 31, 1997) due in varying amounts semi-annually from June
1999 through June 2002................................................ -- 11,850
Capital lease obligations, bearing interest of 9.3%..................... 1,966 1,662
Other................................................................... -- 668
--------- ---------
72,885 84,014
Current portion......................................................... (1,389) (1,419)
--------- ---------
$ 71,496 $ 82,595
--------- ---------
--------- ---------
</TABLE>
The Senior Secured Notes are secured by essentially all property, plant and
equipment not otherwise pledged and certain other assets of the Company. At the
option of the Company, the Senior Secured Notes may be redeemed, in whole or in
part, commencing January 1, 2001 at various redemption prices ranging from 105%
in 2001 to par in 2004 and beyond. The Senior Secured Notes indenture imposes
limitations on restricted payments, including dividends.
The pollution control and industrial development revenue bonds were issued
by various state and local governmental authorities. Under agreements with these
authorities, the Company has either leased (with nominal value purchase options)
or purchased on an installment basis the facilities constructed with the funds
financed. The Company has the option of redeeming the bonds in whole or in part
at par.
The facility expansion credit line provides for credit of up to $20,000,000
for use in connection with a major facility expansion at the Company's La Plata,
Argentina plant operated by its wholly-owned subsidiary, Copetro S.A.
("Copetro"). The loan is secured by the property, plant and equipment of Copetro
including, upon completion, the assets constructed with funds financed. The
agreement requires that Copetro satisfy certain financial ratios and imposes
limitations on the payment of dividends.
The Company's revolving credit agreement, which is in effect until December
1998, provides for borrowings, subject to borrowing base limitations, of up to
$15,000,000 (with a $10,000,000 sublimit for letters of credit). The agreement
is secured by substantially all domestic accounts receivable and inventory of
the Company and requires that the Company satisfy certain financial ratios. At
December 31, 1996 and 1997, there were no borrowings under this credit agreement
and outstanding letters of credit were $6,153,000 and $3,420,000, respectively.
The fair market value of the Company's long-term debt obligations
approximated $77,400,000 and $89,000,000 at December 31, 1996 and 1997,
respectively.
F-12
<PAGE>
GREAT LAKES CARBON CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
5. LONG-TERM DEBT (CONTINUED)
Maturities of long-term debt for the succeeding five years and thereafter
are as follows:
<TABLE>
<CAPTION>
LONG-TERM CAPITAL
DEBT LEASES TOTAL
----------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
1998......................................................... $ 1,085 $ 334 $ 1,419
1999......................................................... 3,568 367 3,935
2000......................................................... 4,768 403 5,171
2001......................................................... 4,906 442 5,348
2002......................................................... 2,869 116 2,985
Thereafter................................................... 65,156 -- 65,156
----------- --------- ---------
$ 82,352 $ 1,662 $ 84,014
----------- --------- ---------
----------- --------- ---------
</TABLE>
Interest paid amounted to $1,223,000, $4,989,000 and $7,773,000 for the
years ended December 31, 1995, 1996 and 1997 respectively.
The Company capitalized interest on construction in progress of $808,000 for
the year ended December 31, 1997.
6. LEASES
The Company's leases various production equipment under capital leases, some
of which contain renewal options and/or options to purchase. Amortization under
capital leases is included in depreciation expense.
Future minimum payments as of December 31, 1997, by year and in the
aggregate, under capital leases and noncancelable operating leases with initial
or remaining terms of one year or more consist of the following:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
1998..................................................................... $ 615 $ 1,622
1999..................................................................... 615 892
2000..................................................................... 615 857
2001..................................................................... 615 648
2002..................................................................... 154 633
Thereafter............................................................... -- 2,085
--------- -----------
Total minimum lease payments............................................. 2,614 $ 6,737
-----------
-----------
Amounts representing interest............................................ (952)
---------
Present value of net minimum lease payments.............................. $ 1,662
---------
---------
</TABLE>
Rental expense for all operating leases was $2,691,000, $2,685,000, and
$2,770,000 for the years ended December 31, 1995, 1996 and 1997, respectively.
F-13
<PAGE>
GREAT LAKES CARBON CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
7. PENSION PLAN
The Company has various defined benefit retirement plans which cover
substantially all employees. Benefits are based upon the number of years of
service and the employee's compensation under varying formulas. The funding
policy is generally to contribute at least the minimum amount that is acceptable
under federal law. Contributions are intended to provide not only for benefits
attributed to service to date, but also for those expected to be earned in the
future. As of December 31, 1997, the assets of the plan were invested
principally in listed stocks, bonds, money market certificates and cash.
Pension expense for the plans related to the Company included the following:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost...................................................... $ 481 $ 545 $ 501
Interest cost..................................................... 411 483 571
Actual return on assets........................................... (905) (889) (1,595)
Net amortization and deferral..................................... 541 498 1,010
--------- --------- ---------
$ 528 $ 637 $ 487
--------- --------- ---------
--------- --------- ---------
</TABLE>
The following table sets forth the plans' funded status and amounts
recognized in the Company's balance sheets:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation.............................................. $ (5,310) $ (6,781)
--------- ---------
--------- ---------
Accumulated benefit obligation......................................... $ (5,673) $ (7,146)
--------- ---------
--------- ---------
Projected benefit obligation........................................... $ (7,041) $ (8,538)
Plan assets, at fair value............................................... 6,763 9,003
--------- ---------
Projected benefit obligation less than (in excess of) plan assets........ (278) 465
Unrecognized net gain.................................................... (45) (542)
Prior service cost....................................................... (9) 80
--------- ---------
Pension asset (liability) recognized in the balance sheet................ $ (332) $ 3
--------- ---------
--------- ---------
</TABLE>
The expected long-term rate of return on plan assets was 9% for 1995, 1996
and 1997. The weighted average discount rate and weighted average rate of
increase in future compensation levels used were 7.25% and 4.25% for 1995, 8%
and 5% for 1996, and 7.5% and 5% for 1997.
8. POSTRETIREMENT OBLIGATIONS
The Company provides certain health care and life insurance benefits to all
full time employees who satisfy certain eligibility requirements and reach
retirement age while employed by the Company. The Company does not fund these
benefits and accrues for the related cost generally over the employees' service
period.
F-14
<PAGE>
GREAT LAKES CARBON CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
8. POSTRETIREMENT OBLIGATIONS (CONTINUED)
Net periodic postretirement benefit cost includes the following components:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost.......................................................... $ 196 $ 198 $ 204
Interest cost......................................................... 175 184 223
Amortization of transition obligation................................. 68 68 68
--------- --------- ---------
Net periodic postretirement benefit liability......................... $ 439 $ 450 $ 495
--------- --------- ---------
--------- --------- ---------
</TABLE>
Postretirement benefit obligations at December 31, 1996 and 1997 were as
follows:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Accumulated Postretirement Benefit Obligation (APBO):
Retirees............................................................... $ (544) $ (653)
Active fully-eligible.................................................. (1,106) (1,459)
Other active........................................................... (1,145) (1,265)
--------- ---------
Total APBO............................................................... (2,795) (3,377)
Unrecognized net loss.................................................... 50 267
Unrecognized transition obligation....................................... 1,088 1,020
--------- ---------
Accrued postretirement benefit liability................................. $ (1,657) $ (2,090)
--------- ---------
--------- ---------
</TABLE>
The health care cost trend used in determining the APBO was 6.31% grading
down to 5.0% in three years. That assumption may have a significant effect on
the amounts reported. To illustrate, increasing the assumed trend by 1% for all
years would increase the APBO as of December 31, 1997 by $478,000 and the
service and interest cost components of net periodic postretirement benefit cost
for the year then ended by $71,000.
Assumptions used to develop net periodic postretirement benefit cost and the
actuarial present value of accumulated benefit obligations include the weighted
average rate of increase in future compensation levels and the weighted average
discount rate of 5% and 7.25% for 1995, 5% and 8% for 1996, and 5% and 7.5% for
1997.
9. OTHER INCOME (EXPENSE)
Other income (expense) consists of the following:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Department of Energy refund........................................ $ 2,390 $ -- $ --
Other.............................................................. (279) (772) (49)
--------- --------- ---------
$ 2,111 $ (772) $ (49)
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-15
<PAGE>
GREAT LAKES CARBON CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
10. INCOME TAXES
The Company was included in the consolidated federal income tax return of
Horsehead through December 20, 1995. Income taxes have been provided in the
Company's 1995 statements of operations as if the Company was a separate taxable
entity. Components of the Company's deferred tax liabilities and assets are as
follows:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Book over tax depreciable basis.......................................... $ 3,601 $ 4,460
Other--net............................................................... 605 2,315
--------- ---------
Total deferred tax liabilities............................................. 4,206 6,775
Deferred tax assets:
Accrued liabilities...................................................... 1,333 1,571
Other--net............................................................... 319 390
--------- ---------
Total deferred tax assets.................................................. 1,652 1,961
--------- ---------
Net deferred tax liability................................................. $ 2,554 $ 4,814
--------- ---------
--------- ---------
</TABLE>
The differences between tax expense computed at the statutory federal income
tax rate and actual tax expense are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Tax expense at statutory rates applied to pretax earnings..... $ 7,508 $ 14,947 $ 12,143
State income tax, net of federal tax effects.................. 428 1,029 1,020
Tax exempt earnings........................................... (371) (480) (938)
Effects of foreign operations................................. 45 (657) (91)
Other......................................................... 23 309 557
--------- --------- ---------
$ 7,633 $ 15,148 $ 12,691
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-16
<PAGE>
GREAT LAKES CARBON CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
10. INCOME TAXES (CONTINUED)
Income taxes consist of the following:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal..................................................... $ 1,934 $ 9,252 $ 7,229
State....................................................... 240 1,465 1,481
Foreign..................................................... 1,278 3,969 2,852
--------- --------- ---------
3,452 14,686 11,562
Deferred:
Federal..................................................... 3,763 564 1,001
State....................................................... 418 118 88
Foreign..................................................... -- (220) 40
--------- --------- ---------
4,181 462 1,129
--------- --------- ---------
Total......................................................... $ 7,633 $ 15,148 $ 12,691
--------- --------- ---------
--------- --------- ---------
</TABLE>
Income taxes paid were approximately $161,000, $13,723,000 and $12,485,000
in 1995, 1996 and 1997, respectively.
U.S. income taxes have not been provided on the undistributed earnings of
Copetro ($23,415,000 as of December 31, 1997) because such earnings are expected
to be reinvested. Upon distribution of those earnings, the Company would be
subject to U.S. income taxes (subject to an adjustment for foreign tax credits
and withholding taxes, if any).
Income before income taxes attributable to domestic operations (which
included results from export sales) was $16,356,000, $30,601,000 and $25,723,000
for the years ended December 31, 1995, 1996 and 1997, respectively, while income
before income taxes attributable to foreign operations was $5,095,000,
$12,106,000, $8,952,000 for the years ended December 31, 1995, 1996 and 1997,
respectively.
F-17
<PAGE>
GREAT LAKES CARBON CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
11. OPERATIONS BY GEOGRAPHIC AREA
The following is a summary of the Company's operations by geographic area:
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales:
United States.......................................... $ 146,819 $ 197,296 $ 189,730
Foreign................................................ 31,809 45,448 42,181
---------- ---------- ----------
$ 178,628 $ 242,744 $ 231,911
---------- ---------- ----------
---------- ---------- ----------
Operating income:
United States.......................................... $ 21,841 $ 38,266 $ 32,358
Foreign................................................ 4,912 12,786 8,653
---------- ---------- ----------
$ 26,753 $ 51,052 $ 41,011
---------- ---------- ----------
---------- ---------- ----------
Assets:
United States.......................................... $ 90,153 $ 114,864 $ 125,448
Foreign................................................ 23,777 34,041 49,463
---------- ---------- ----------
$ 113,930 $ 148,905 $ 174,911
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Exports of U.S. produced products were approximately $87,287,000,
$111,482,000 and $104,826,000 for the years ended December 31, 1995, 1996 and
1997, respectively. Export sales as a percentage of United States net sales
represented 25.6%, 23.0% and 22.9% to Western Europe in 1995, 1996 and 1997,
respectively, 11.1%, 18.8% and 18.9% to Africa in 1995, 1996 and 1997,
respectively. The Company's foreign operations are conducted principally in
South America.
12. LITIGATION AND CONTINGENCIES
The Company is a party to several proceedings which are in various stages of
resolution. Management of the Company, after discussion with legal counsel, is
of the opinion that the ultimate resolution of these matters will not have a
material effect upon the financial condition of the Company.
F-18
<PAGE>
GREAT LAKES CARBON CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
MARCH 31, 1998
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash............................................................................ $ 53,865
Accounts receivable, net........................................................ 33,566
Inventories..................................................................... 30,905
Prepaid expenses and other current assets....................................... 5,127
---------
Total current assets.............................................................. 123,463
Property, plant and equipment, net................................................ 61,852
Other assets...................................................................... 5,204
---------
$ 190,519
---------
---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................................ $ 16,890
Accrued expenses................................................................ 10,378
Income taxes payable............................................................ 5,286
Current portion of long-term debt............................................... 1,427
---------
Total current liabilities......................................................... 33,981
Long-term debt, less current portion.............................................. 87,010
Other long-term liabilities....................................................... 4,208
Deferred taxes.................................................................... 4,814
Stockholders' equity:
Common stock, par value; $0.01 per share, 100,000 shares authorized and
outstanding................................................................... 1
Additional paid-in capital...................................................... 5,509
Retained earnings............................................................... 54,996
---------
60,506
---------
$ 190,519
---------
---------
</TABLE>
See notes to condensed consolidated financial statements.
F-19
<PAGE>
GREAT LAKES CARBON CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
--------------------
<S> <C> <C>
1997 1998
--------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Net sales................................................................................... $ 55,395 $ 62,070
Cost of goods sold.......................................................................... 42,236 45,683
--------- ---------
Gross profit................................................................................ 13,159 16,387
Selling, general and administrative expenses................................................ 4,385 2,684
--------- ---------
Operating income............................................................................ 8,774 13,703
Other income (expense):
Interest, net............................................................................. (1,867) (1,157)
Other, net................................................................................ (67) (72)
--------- ---------
(1,934) (1,229)
--------- ---------
Income before income taxes.................................................................. 6,840 12,474
Provision for income taxes.................................................................. 2,492 4,407
--------- ---------
Net income.................................................................................. $ 4,348 $ 8,067
--------- ---------
--------- ---------
</TABLE>
See notes to condensed consolidated financial statements.
F-20
<PAGE>
GREAT LAKES CARBON CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED STOCKHOLDERS'
STOCK CAPITAL EARNINGS EQUITY
----------- ----------- --------- ------------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Balance at December 31, 1997...................................... $ 1 $ 5,509 $ 46,929 $ 52,439
Net income...................................................... -- -- 8,067 8,067
Dividends....................................................... -- -- -- --
----- ----------- --------- ------------
Balance at March 31, 1998......................................... $ 1 $ 5,509 $ 54,996 $ 60,506
----- ----------- --------- ------------
----- ----------- --------- ------------
</TABLE>
See notes to condensed consolidated financial statements.
F-21
<PAGE>
GREAT LAKES CARBON CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
--------------------
<S> <C> <C>
1997 1998
--------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Net cash provided by (used in) operating activities.......................................... $ (8,208) $ 10,788
Net cash used in investing activities........................................................ (3,651) (4,942)
Financing activities
Repayment of long-term debt.................................................................. (90) (97)
Additions to long-term debt.................................................................. -- 4,520
Dividends.................................................................................... (375) --
--------- ---------
Net cash provided by (used in) financing activities.......................................... (465) 4,423
Increase (decrease) in cash.................................................................. (12,324) 10,269
Cash at beginning of period.................................................................. 24,097 43,596
--------- ---------
Cash at end of period........................................................................ $ 11,773 $ 53,865
--------- ---------
--------- ---------
</TABLE>
See notes to condensed consolidated financial statements.
F-22
<PAGE>
GREAT LAKES CARBON CORPORATION
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1998
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with Article 10 of Regulation S-X and, therefore, do not
include all information and footnotes necessary for a fair presentation of
financial position, results of operations, and cash flows in conformity with
generally accepted accounting principles. The information furnished reflects all
adjustments (consisting of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair summary of the results of
operations.
2. INVENTORIES
Inventories are as follows:
<TABLE>
<CAPTION>
MARCH
31, 1998
-------------
<S> <C>
(IN
THOUSANDS)
Raw materials.................................................................. $ 20,524
Finished goods................................................................. 4,327
Supplies and spare parts....................................................... 6,054
-------------
$ 30,905
-------------
-------------
</TABLE>
3. ACCRUED EXPENSES
Accrued expenses included interest payable of $1,923,000 at March 31, 1998.
4. SUBSEQUENT EVENTS
On April 22, 1998, the Company issued a press release announcing that the
Company had entered into an agreement with an affiliate of American Industrial
Partners providing for the acquisition (by merger) of the Company by a company
organized by American Industrial Partners. The foregoing is qualified in its
entirety by reference to such press release, which was filed with the Company's
report on Form 8-K on April 23, 1998.
F-23
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY HOLDINGS OR THE INITIAL PURCHASER. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY ANY
OF THE DEBENTURES OFFERED HEREBY, TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION
IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF HOLDINGS OR THE COMPANY SINCE SUCH DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 5
Risk Factors.............................................................. 16
Acquisition Transactions.................................................. 23
Use of Proceeds........................................................... 24
Capitalization............................................................ 25
Unaudited Pro Forma Condensed Consolidated Financial Data................. 26
Selected Historical Financial and Other Data.............................. 33
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 34
The Exchange Offer........................................................ 39
Business.................................................................. 46
Management................................................................ 56
Certain Relationships and Related Transactions............................ 59
Security Ownership........................................................ 59
Description of Holdings Capital Stock..................................... 60
Description of Debentures................................................. 61
Description of Other Indebtedness......................................... 94
Certain United States Federal Income Tax Considerations................... 98
Plan of Distribution...................................................... 101
Legal Matters............................................................. 102
Experts................................................................... 102
Index to Financial Statements............................................. F-1
</TABLE>
$56,600,000
[LOGO]
GREAT LAKES ACQUISITION CORP.
13 1/8% SERIES B SENIOR DISCOUNT
DEBENTURES DUE 2009
---------------------
PROSPECTUS
---------------------
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware (the
"Delaware Corporation Law") empowers a Delaware corporation to indemnify any
person who is, or is threatened to be made, a party to any threatened, pending
or completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation) by reason of the fact that such person is or was an officer,
director, employee or agent of such corporation, or is or was serving at the
request of such corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding, provided that such person acted in good faith
and in a manner such person 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 such person's conduct was
unlawful. A Delaware corporation also has the power 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
judgment in its favor by reason of the fact that the person 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 attorney's fees) actually and reasonably incurred by
the person in connection with the defense or settlement of such action or suit
if the person acted in good faith and in a manner the person reasonably believed
to be in or not opposed to the best interests of the corporation and 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 to the corporation
unless and only to the extent that the Court of Chancery or 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 of Chancery or such other court shall deem proper. To the extent
that a present or former director or officer has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to above, or
in defense of any claim, issue or matter therein, the Company must indemnify
such person against expenses actually and reasonably incurred by such person in
connection therewith.
Article Sixth, Section 4 of the Certificate of Incorporation of Holdings, as
amended, a copy of which is filed as Exhibit 3.1 to the Registration Statement,
provides for indemnification of the officers and directors of the Company, to
the fullest extent permitted by applicable law.
Pursuant to Section 102(b)(7) of the Delaware Corporation Law, Article
Fifth, Section 6, of the Certificate of Incorporation of the Company, as
amended, no director of the Company shall be personally liable to the Company or
its shareholders for monetary damages for any breach of fiduciary duty as a
director; provided, however, that such clause shall not apply to any liability
of a director (1) for any breach of the Director's duty of loyalty to the
Company or its stockholders, (2) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of the law, (3)
pursuant to Section 174 of the Delaware Corporation Act, or (4) for any
transaction from which the director derived an improper personal benefit.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
1.1 Purchase Agreement dated May 18, 1998, between Great Lakes Acquisition Corp. ("Holdings") and
Donaldson, Lufkin & Jenrette Securities Corporation (the "Initial Purchaser").
3.1 Certificate of Incorporation of Holdings.
3.2 By-Laws of Holdings
4.1 Indenture, dated as of May 22, 1998, between Holdings and State Street Bank and Trust Company of
California, N.A. (formerly First Trust National Association), as Trustee, relating to the 13 1/8%
Series B Senior Discount Debentures due 2009 of Holdings (the "New Debentures") and the 13 1/8%
Senior Discount Debentures due 2009 of Holdings (the "Old Debentures").
4.2 Form of New Debenture (included in Exhibit 4.1).
4.3 Registration Rights Agreement, dated as of May 22, 1998, between Holdings and the Initial Purchaser.
*5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP, counsel to Holdings.
10.1 Credit Agreement among Great Lakes Acquisition Corp., Great Lakes Carbon Corporation, various banks,
Bank of America NT&SA as co-agent, DLJ Capital Funding, Inc. as Documentation Agent and Bankers
Trust Company, as Syndication Agent and as Administrative Agent dated as of May 22, 1998.
10.2 Lease Agreement between Great Lakes Carbon Corporation (the "Company") and Rice-Carden Corporation
(as successor to Kansas City Southern Industries, Inc.), as amended (Incorporated herein by
reference to Exhibit 10.3 to the Company's Registration Statement on Form S-1 (File No. 33-98522)).
**10.3 Calcined Coke Supply Agreement between the Company and Aluminum Company of America.
**10.4 Green Anode Coke Sales Agreement between the Company and Conoco Inc.
10.5 Petroleum Coke Sales Agreement between Copetro S.A. and YPF S.A. (Incorporated herein by reference to
Exhibit 10.7 to the Company's Registration Statement on Form S-1 (File No. 33-98522)).
**10.6 Amendment No. 1 to the Petroleum Coke Sales Agreement between Copetro S.A. and YPF S.A.
**10.7 Coke Supply Agreement between the Company and Exxon Company, U.S.A.
12.1 Statement regarding the computation of ratio of earnings to fixed charges for Holdings.
21.1 Subsidiaries of Holdings.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP, counsel to the Company (included in Exhibit
5.1).
24.1 Power of Attorney (included in signature page).
25.1 Statement of Eligibility and Qualification on Form T-1 of State Street Bank and Trust Company of
California, N.A., as Trustee under the Indenture relating to the New Notes.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter of Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
99.4 Form of Letter to Clients.
99.5 Form of Exchange Agent Agreement.
99.6 Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
</TABLE>
- ------------------------
* To be filed by amendment.
** To be filed in connection with an appreciation for confidential treatment
pursuant to Rule 406 under the Securities Act.
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(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 and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the SEC pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20
percent change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
Registration Statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the Offering.
(b) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other
II-3
<PAGE>
than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant
to Item 4, 10(b), 11 or 13 of this form, within one business day of receipt
of such request, and to send the incorporated documents by first class mail
or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration
statement through the date of responding to the request.
(d) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Company has duly caused this Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized in the City of Los Angeles, State
of California, on the day of 1998.
<TABLE>
<S> <C>
GREAT LAKES ACQUISITION CORP.
By: /s/ JAMES D. MCKENZIE
------------------------------------------
James D. McKenzie
CHIEF EXECUTIVE OFFICER AND PRESIDENT
</TABLE>
POWER OF ATTORNEY
KNOW ALL THOSE BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints James D. McKenzie, his true and lawful attorney
in fact, each with full power of substitution and revocation, for him and in his
name, place and stead, in any and all capacities (including his capacity as a
director and/or officer of Great Lakes Acquisition Corp.) to sign any and all
amendments (including post-effective amendments) to this Registration Statement,
and any registration statement relating to the same offering as this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) under the Securities Act of 1933, and to file the same with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto each such attorney in fact and agent, full
power and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as such person might
or could do in person, hereby ratifying and confirming all that said attorneys
in fact and agents or any of them, or their or his substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ JAMES D. MCKENZIE
- ------------------------------ President, Chief Executive July 21, 1998
James D. McKenzie Officer and Director
/s/ A. FRANK BACA Senior Vice President,
- ------------------------------ Operations and July 21, 1998
A. Frank Baca Administration
/s/ ROBERT C. DICKIE
- ------------------------------ Vice President, Sales July 21, 1998
Robert C. Dickie
/s/ JAMES W. BETTS
- ------------------------------ Vice President, Raw July 21, 1998
James W. Betts Materials
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ THEODORE C. ROGERS
- ------------------------------ Non-Executive Chairman of July 21, 1998
Theodore C. Rogers the Board, Director
/s/ RICHARD W. BINGHAM
- ------------------------------ Director July 21, 1998
Richard W. Bingham
/s/ LAWRENCE W. WARD, JR.
- ------------------------------ Director July 21, 1998
Lawrence W. Ward, Jr.
/s/ KIM A. MARVIN
- ------------------------------ Director July 21, 1998
Kim A. Marvin
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
1.1 Purchase Agreement dated May 18, 1998, between Great Lakes Acquisition Corp. ("Holdings") and
Donaldson, Lufkin & Jenrette Securities Corporation (the "Initial Purchaser").
3.1 Certificate of Incorporation of Holdings.
3.2 By-Laws of Holdings
4.1 Indenture, dated as of May 22, 1998, between Holdings and State Street Bank and Trust Company of
California, N.A. (formerly First Trust National Association), as Trustee, relating to the 13 1/8%
Series B Senior Discount Debentures due 2009 of Holdings (the "New Debentures") and the 13 1/8%
Senior Discount Debentures due 2009 of Holdings (the "Old Debentures").
4.2 Form of New Debenture (included in Exhibit 4.1).
4.3 Registration Rights Agreement, dated as of May 22, 1998, between Holdings and the Initial Purchaser.
*5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP, counsel to Holdings.
10.1 Credit Agreement among Great Lakes Acquisition Corp., Great Lakes Carbon Corporation, various banks,
Bank of America NT&SA as co-agent, DLJ Capital Funding, Inc. as Documentation Agent and Bankers
Trust Company, as Syndication Agent and as Administrative Agent dated as of May 22, 1998.
10.2 Lease Agreement between Great Lakes Carbon Corporation (the "Company") and Rice-Carden Corporation
(as successor to Kansas City Southern Industries, Inc.), as amended (Incorporated herein by
reference to Exhibit 10.3 to the Company's Registration Statement on Form S-1 (File No. 33-98522)).
**10.3 Calcined Coke Supply Agreement between the Company and Aluminum Company of America.
**10.4 Green Anode Coke Sales Agreement between the Company and Conoco Inc.
10.5 Petroleum Coke Sales Agreement between Copetro S.A. and YPF S.A. (Incorporated herein by reference to
Exhibit 10.7 to the Company's Registration Statement on Form S-1 (File No. 33-98522)).
**10.6 Amendment No. 1 to the Petroleum Coke Sales Agreement between Copetro S.A. and YPF S.A.
**10.7 Coke Supply Agreement between the Company and Exxon Company, U.S.A.
12.1 Statement regarding the computation of ratio of earnings to fixed charges for Holdings.
21.1 Subsidiaries of Holdings.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP, counsel to the Company (included in Exhibit
5.1).
24.1 Power of Attorney (included in signature page).
25.1 Statement of Eligibility and Qualification on Form T-1 of State Street Bank and Trust Company of
California, N.A., as Trustee under the Indenture relating to the New Notes.
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter of Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
99.4 Form of Letter to Clients.
99.5 Form of Exchange Agent Agreement.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
99.6 Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
</TABLE>
- ------------------------
* To be filed by amendment.
** To be filed in connection with an appreciation for confidential treatment
pursuant to Rule 406 under the Securities Act.
<PAGE>
Exhibit 1.1
$56,600,000
Aggregate Principal Amount at Maturity of
13 1/8% Series A Senior Discount Debentures due 2009
of Great Lakes Acquisition Corp.
PURCHASE AGREEMENT
May 18, 1998
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
277 Park Avenue
New York, New York 10172
Dear Sirs:
Great Lakes Acquisition Corp., a Delaware corporation
(the "COMPANY"), proposes to issue and sell to Donaldson, Lufkin & Jenrette
Securities Corporation (the "INITIAL PURCHASER") an aggregate of $56,600,000
in principal amount at maturity of its 13 1/8% Series A Senior Discount
Debentures due 2009 (the "SERIES A DEBENTURES"), subject to the terms and
conditions set forth herein. The Series A Debentures are to be issued
pursuant to the provisions of an indenture (the "INDENTURE"), to be dated as
of the Closing Date (as defined below), among the Company and State Street
Bank and Trust Company of California, N.A., as trustee (the "TRUSTEE"). The
Series A Debentures and the Series B Debentures (as defined below) issuable
in exchange therefor are collectively referred to herein as the "DEBENTURES."
Pursuant to the terms of an Agreement and Plan of Merger
(the "MERGER AGREEMENT") dated as of April 21, 1998, between the Company and
Great Lakes Carbon Corporation, a Delaware corporation ("GLCC"), a wholly
owned subsidiary of the Company will merge (the "MERGER") with and into GLCC.
Upon consummation of the Merger, GLCC will continue as the surviving
corporation and will be a wholly owned subsidiary of the Company. In
connection with the Merger, American Industrial Partners Capital Fund II,
L.P. ("AIP") will contribute $65.0 million to the Company in exchange for
common equity of the Company (the "AIP EQUITY CONTRIBUTION"), (ii) the
Company will contribute $92.0 million to the equity of GLCC (the "HOLDINGS
EQUITY CONTRIBUTION"), (iii) GLCC and the Company will enter into a
syndicated senior secured credit agreement (the "NEW CREDIT AGREEMENT")
providing for term loan borrowings in an aggregate principal amount of
approximately $111.0 million and a revolving loan facility for borrowings of
up to $25.0 million, and will borrow all term loans available, and (iv) GLCC
will issue and sell (the "NOTES OFFERING") $175.0 million aggregate principal
amount of its 10 1/4% Senior Subordinated Notes due 2008 (the "NOTES").
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<PAGE>
In connection with the Merger, GLCC will purchase (the
"TENDER OFFER") all $65.0 million aggregate principal amount of its
outstanding 10% Senior Secured Notes due 2006 (the "EXISTING NOTES") and has
solicited (the "SOLICITATION") consents to certain amendments to, and waivers
under, the indenture governing the Existing Notes and certain related
collateral documents (the "PROPOSED AMENDMENTS"). As of May 8, 1998, all of
the Existing Notes had been tendered and the requisite consents had been
received pursuant to the Solicitation and a supplemental indenture giving
effect to the Proposed Amendments (the "SUPPLEMENTAL INDENTURE") was executed
and will become effective upon consummation of the Tender Offer. The Tender
Offer will be consummated concurrently with the Merger, the Notes Offering
and the offering of the Series A Debentures.
The Merger, the AIP Equity Contribution, the Holdings
Equity Contribution, the offering of the Series A Debentures, the execution
of and initial borrowings under the New Credit Agreement, the Notes Offering,
the Tender Offer, the Solicitation and execution of the Supplemental
Indenture are referred to collectively herein as the "ACQUISITION
TRANSACTIONS."
1. OFFERING MEMORANDUM. The Series A Debentures will
be offered and sold to the Initial Purchaser pursuant to one or more
exemptions from the registration requirements under the Securities Act of
1933, as amended (the "ACT"). The Company has prepared a preliminary
offering memorandum, dated May 5, 1998 (the "PRELIMINARY OFFERING
MEMORANDUM"), and a final offering memorandum, dated May 18, 1998 (the
"OFFERING MEMORANDUM"), relating to the Series A Debentures.
Upon original issuance thereof, and until such time as
the same is no longer required pursuant to the Indenture, the Series A
Debentures (and all securities issued in exchange therefor, in substitution
thereof or upon conversion thereof) shall bear the following legend:
"THIS DEBENTURE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND, ACCORDINGLY,
MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS,
EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF
OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER: (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE ACT)(A "QIB"), (B) IT HAS ACQUIRED THIS DEBENTURE IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE ACT OR
(C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE ACT (AN "IAI"),
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS
DEBENTURE EXCEPT (A) TO THE ISSUER OR ANY OF ITS SUBSIDIARIES, (B) TO
A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING
THE REQUIREMENTS OF RULE 903 OR 904 OF THE ACT, (D) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE ACT, (E) TO AN IAI
THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED
2
<PAGE>
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
TRANSFER OF THIS DEBENTURE (THE FORM OF WHICH CAN BE OBTAINED FROM THE
TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL
AMOUNT OF DEBENTURES LESS THAN $250,000, AN OPINION OF COUNSEL
ACCEPTABLE TO THE ISSUER THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT (AND, IF REQUESTED, BASED UPON AN OPINION OF
COUNSEL ACCEPTABLE TO THE ISSUER) OR (G) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO
EACH PERSON TO WHOM THIS DEBENTURE OR AN INTEREST HEREIN IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS
USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE
THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE ACT.
THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO
REGISTER ANY TRANSFER OF THIS DEBENTURE IN VIOLATION OF THE
FOREGOING."
2. AGREEMENTS TO SELL AND PURCHASE. On the basis of
the representations, warranties and covenants contained in this Agreement,
and subject to the terms and conditions contained herein, the Company agrees
to issue and sell to the Initial Purchaser, and the Initial Purchaser agrees
to purchase from the Company, $56,600,000 aggregate principal amount at
maturity of Series A Debentures at a purchase price equal to 51.499% of the
principal amount at maturity thereof (the "PURCHASE PRICE").
3. TERMS OF OFFERING. The Initial Purchaser has
advised the Company that the Initial Purchaser will make offers (the "EXEMPT
RESALES") of the Series A Debentures purchased hereunder on the terms set
forth in the Offering Memorandum, as amended or supplemented, solely to (i)
persons whom the Initial Purchaser reasonably believes to be "qualified
institutional buyers" as defined in Rule 144A under the Act ("QIBS"), and
(ii) to persons permitted to purchase the Series A Debentures in offshore
transactions in reliance upon Regulation S under the Act (each, a "REGULATION
S PURCHASER") (such persons specified in clauses (i) and (ii) being referred
to herein as the "ELIGIBLE PURCHASERS"). The Initial Purchaser will offer the
Series A Debentures to Eligible Purchasers initially at a price equal to
53.092% of the principal amount at maturity thereof. Such price may be
changed at any time without notice.
Holders (including subsequent transferees) of the Series
A Debentures will have the registration rights set forth in the registration
rights agreement (the "REGISTRATION RIGHTS AGREEMENT"), to be dated the
Closing Date, in substantially the form of Exhibit A hereto, for so long as
such Series A Debentures constitute "TRANSFER RESTRICTED SECURITIES" (as
defined in the Registration Rights Agreement). Pursuant to the Registration
Rights Agreement, the Company will agree to file with the Securities and
Exchange Commission (the "COMMISSION") under the circumstances set forth
therein, (i) a registration statement under the Act (the "EXCHANGE OFFER
REGISTRATION STATEMENT") relating to the Company's 13 1/8% Series B Senior
Subordinated Debentures due 2009 (the "SERIES B DEBENTURES"), to be offered
in exchange for the Series A Debentures (such offer to exchange being
referred to as the
3
<PAGE>
"EXCHANGE OFFER") and (ii) a shelf registration statement pursuant to Rule
415 under the Act (the "SHELF REGISTRATION STATEMENT" and, together with the
Exchange Offer Registration Statement, the "REGISTRATION STATEMENTS")
relating to the resale by certain holders of the Series A Debentures and to
use its best efforts to cause such Registration Statements to be declared and
remain effective and usable for the periods specified in the Registration
Rights Agreement and to consummate the Exchange Offer. This Agreement, the
Indenture, the Debentures, the Registration Rights Agreement, the Merger
Agreement and the New Credit Facility are hereinafter sometimes referred to
collectively as the "OPERATIVE DOCUMENTS."
4. DELIVERY AND PAYMENT.
(a) Delivery of, and payment of the Purchase Price for, the
Series A Debentures shall be made at the offices of Skadden, Arps, Slate,
Meagher & Flom LLP, 919 Third Avenue, New York, New York 10022 or such other
location as may be mutually acceptable. Such delivery and payment shall be
made at 9:00 a.m. New York City time, on May 22, 1998 or at such other time
on the same date or such other date as shall be agreed upon by the Initial
Purchaser and the Company in writing. The time and date of such delivery and
the payment for the Series A Debentures are herein called the "CLOSING DATE."
(b) One or more of the Series A Debentures in definitive
global form, registered in the name of Cede & Co., as nominee of the
Depository Trust Company ("DTC"), having an aggregate principal amount
corresponding to the aggregate principal amount of the Series A Debentures
(collectively, the "GLOBAL DEBENTURE"), shall be delivered by the Company to
the Initial Purchaser (or as the Initial Purchaser directs) in each case with
any transfer taxes thereon duly paid by the Company against payment by the
Initial Purchaser of the Purchase Price thereof by wire transfer in same day
funds to the order of the Company. The Global Debenture shall be made
available to the Initial Purchaser for inspection not later than 9:30 a.m.,
New York City time, on the business day immediately preceding the Closing
Date.
5. AGREEMENTS OF THE COMPANY. The Company hereby agrees with the
Initial Purchaser as follows:
(a) To advise the Initial Purchaser promptly and, if
requested by the Initial Purchaser, to confirm such advice in writing, (i) of
the issuance by any state securities commission of any stop order suspending
the qualification or exemption from qualification of any Series A Debentures
for offering or sale in any jurisdiction designated by the Initial Purchaser
pursuant to Section 5(e) hereof, or the initiation of any proceeding by any
state securities commission or any other federal or state regulatory
authority for such purpose and (ii) of the happening of any event during the
period referred to in Section 5(c) below that makes any statement of a
material fact made in the Preliminary Offering Memorandum or the Offering
Memorandum untrue or that requires any additions to or changes in the
Preliminary Offering Memorandum or the Offering Memorandum in order to make
the statements therein not misleading. The Company shall use its best
efforts to prevent the issuance of any stop order or order suspending the
qualification or exemption of any Series A Debentures under any state
securities or Blue Sky laws and, if at any time any state securities
commission or other federal or state regulatory authority shall issue an
order suspending the qualification or exemption of any Series A Debentures
under any state securities or Blue Sky laws, the Company shall use its best
efforts to obtain the withdrawal or lifting of such order at the earliest
possible time.
4
<PAGE>
(b) To furnish the Initial Purchaser and those persons
identified by the Initial Purchaser to the Company as many copies of the
Preliminary Offering Memorandum and the Offering Memorandum, and any
amendments or supplements thereto, as the Initial Purchaser may reasonably
request for the time period specified in Section 5(c). Subject to the
Initial Purchaser's compliance with its representations and warranties and
agreements set forth in Section 7 hereof, the Company consents to the use of
the Preliminary Offering Memorandum and the Offering Memorandum, and any
amendments and supplements thereto required pursuant hereto, by the Initial
Purchaser in connection with Exempt Resales.
(c) During such period as in the opinion of counsel for the
Initial Purchaser an Offering Memorandum is required by law to be delivered
in connection with Exempt Resales by the Initial Purchaser and in connection
with market-making activities of the Initial Purchaser for so long as any
Series A Debentures are outstanding, (i) not to make any amendment or
supplement to the Offering Memorandum of which the Initial Purchaser shall
not previously have been advised or to which the Initial Purchaser shall
reasonably object after being so advised and (ii) to prepare promptly upon
the Initial Purchaser's reasonable request, any amendment or supplement to
the Offering Memorandum which may be necessary or advisable in connection
with such Exempt Resales or such market-making activities.
(d) If, during the period referred to in Section 5(c)
above, any event shall occur or condition shall exist as a result of which,
in the opinion of counsel to the Initial Purchaser, it becomes necessary to
amend or supplement the Offering Memorandum in order to make the statements
therein, in the light of the circumstances when such Offering Memorandum is
delivered to an Eligible Purchaser, not misleading, or if, in the opinion of
counsel to the Initial Purchaser, it is necessary to amend or supplement the
Offering Memorandum to comply with any applicable law, forthwith to prepare
an appropriate amendment or supplement to such Offering Memorandum so that
the statements therein, as so amended or supplemented, will not, in the light
of the circumstances when it is so delivered, be misleading, or so that such
Offering Memorandum will comply with applicable law, and to furnish to the
Initial Purchaser and such other persons as the Initial Purchaser may
designate such number of copies thereof as the Initial Purchaser may
reasonably request.
(e) Prior to the sale of all Series A Debentures pursuant
to Exempt Resales as contemplated hereby, to cooperate with the Initial
Purchaser and counsel to the Initial Purchaser in connection with the
registration or qualification of the Series A Debentures for offer and sale
to the Initial Purchaser and pursuant to Exempt Resales under the securities
or Blue Sky laws of such United States jurisdictions as the Initial Purchaser
may request and to continue such registration or qualification in effect so
long as required for Exempt Resales and to file such consents to service of
process or other documents as may be necessary in order to effect such
registration or qualification; PROVIDED, HOWEVER, that neither the Company
nor any of its subsidiaries shall be required in connection therewith to
qualify as a foreign corporation in any jurisdiction in which it is not now
so qualified or to take any action that would subject it to general consent
to service of process or taxation other than as to matters and transactions
relating to the Preliminary Offering Memorandum, the Offering Memorandum or
Exempt Resales, in any jurisdiction in which it is not now so subject.
(f) So long as the Debentures are outstanding, (i) to mail
and make generally available as soon as practicable after the end of each
fiscal year to the record holders of the Debentures a financial report of the
Company and its subsidiaries on a consolidated basis (and a similar financial
report of all unconsolidated subsidiaries, if any), all such financial
reports to include a
5
<PAGE>
consolidated balance sheet, a consolidated statement of operations, a
consolidated statement of cash flows and a consolidated statement of
stockholders' equity as of the end of and for such fiscal year, together with
comparable information as of the end of and for the preceding year, certified
by the Company's independent public accountants and (ii) to mail and make
generally available as soon as practicable after the end of each quarterly
period (except for the last quarterly period of each fiscal year) to such
holders, a consolidated balance sheet, a consolidated statement of operations
and a consolidated statement of cash flows (and similar financial reports of
all unconsolidated subsidiaries, if any) as of the end of and for such
period, and for the period from the beginning of such year to the close of
such quarterly period, together with comparable information for the
corresponding periods of the preceding year.
(g) So long as the Debentures are outstanding, to furnish
to the Initial Purchaser as soon as available copies of all reports or other
communications furnished by the Company to its security holders or furnished
to or filed with the Commission or any national securities exchange on which
any class of securities of the Company is listed and such other publicly
available information concerning the Company and/or its subsidiaries
published, issued, created or filed by the Company or its subsidiaries as the
Initial Purchaser may reasonably request.
(h) So long as any of the Series A Debentures remain
outstanding and during any period in which the Company is not subject to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), to make available to any holder of Series A Debentures in
connection with any sale thereof and any prospective purchaser of such Series
A Debentures from such holder, the information ("RULE 144A INFORMATION")
required by Rule 144A(d)(4) under the Act.
(i) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or cause to
be paid all expenses incident to the performance of the obligations of the
Company under this Agreement, including: (i) the fees, disbursements and
expenses of counsel to the Company and accountants of the Company in
connection with the sale and delivery of the Series A Debentures to the
Initial Purchaser and pursuant to Exempt Resales, and all other fees and
expenses in connection with the preparation, printing, filing and
distribution of the Preliminary Offering Memorandum, the Offering Memorandum
and all amendments and supplements to any of the foregoing (including
financial statements), including the mailing and delivering of copies thereof
to the Initial Purchaser and persons designated by it in the quantities
specified herein, (ii) all costs and expenses related to the transfer and
delivery of the Series A Debentures to the Initial Purchaser and pursuant to
Exempt Resales, including any transfer or other taxes payable thereon, (iii)
all costs of printing or producing this Agreement, the other Operative
Documents and any other agreements or documents in connection with the
offering, purchase, sale or delivery of the Series A Debentures, (iv) all
expenses in connection with the registration or qualification of the Series A
Debentures for offer and sale under the securities or Blue Sky laws of the
several states and all costs of printing or producing any preliminary and
supplemental Blue Sky memoranda in connection therewith (including the filing
fees and fees and disbursements of counsel for the Initial Purchaser in
connection with such registration or qualification and memoranda relating
thereto), (v) the cost of printing certificates representing the Series A
Debentures, (vi) all expenses and listing fees in connection with the
application for quotation of the Series A Debentures in the National
Association of Securities Dealers, Inc. ("NASD") Automated Quotation
System--PORTAL ("PORTAL"), (vii) the fees and expenses of the Trustee and the
Trustee's counsel in connection with the Indenture and the Debentures, (viii)
the costs and charges of any transfer agent, registrar and/or depositary
(including DTC), (ix) any fees charged by rating agencies for the rating of
the Debentures, (x) all costs and expenses of the Exchange Offer and any
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Registration Statement, as set forth in the Registration Rights Agreement,
and (xi) and all other costs and expenses incident to the performance of the
obligations of the Company hereunder for which provision is not otherwise
made in this Section.
(j) To use its best efforts to effect the inclusion of the
Series A Debentures in PORTAL and to maintain the listing of the Series A
Debentures on PORTAL for so long as the Series A Debentures are outstanding.
(k) To obtain the approval of DTC for "book-entry" transfer
of the Debentures, and to comply with all of its agreements set forth in the
representation letter of the Company to DTC relating to the approval of the
Debentures by DTC for "book-entry" transfer.
(l) During the period beginning on the date hereof and
continuing to and including the Closing Date, not to offer, sell, contract to
sell or otherwise transfer or dispose of any debt securities of the Company or
any warrants, rights or options to purchase or otherwise acquire debt securities
of the Company substantially similar to the Debentures (other than (i) the
Debentures, (ii) borrowings under the New Credit Agreement, and (iii) commercial
paper issued in the ordinary course of business), without the prior written
consent of the Initial Purchaser which shall not be unreasonably withheld.
(m) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act) that
would be integrated with the sale of the Series A Debentures to the Initial
Purchaser or pursuant to Exempt Resales in a manner that would require the
registration of any such sale of the Series A Debentures under the Act.
(n) Not to voluntarily claim, and to actively resist any
attempts to claim, the benefit of any usury laws against the holders of any
Debentures.
(o) To cause the Exchange Offer to be made in the appropriate
form to permit Series B Debentures registered pursuant to the Act to be offered
in exchange for the Series A Debentures and to comply with all applicable
federal and state securities laws in connection with the Exchange Offer.
(p) To comply with all of its agreements set forth in the
Registration Rights Agreement.
(q) To use its best efforts to do and perform all things
required or necessary to be done and performed under this Agreement by it prior
to the Closing Date and to satisfy all conditions precedent to the delivery of
the Series A Debentures.
6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. As of
the date hereof, of the Company represents and warrants to, and agrees with, the
Initial Purchaser that:
(a) The Preliminary Offering Memorandum and the Offering
Memorandum do not, and any supplement or amendment to them will not, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, except that the
representations and warranties contained in this paragraph (a) shall not apply
to statements in or
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omissions from the Preliminary Offering Memorandum or the Offering Memorandum
(or any supplement or amendment thereto) based upon information relating to
the Initial Purchaser furnished to the Company in writing by the Initial
Purchaser expressly for use therein. No stop order preventing the use of the
Preliminary Offering Memorandum or the Offering Memorandum, or any amendment
or supplement thereto, or any order asserting that any of the transactions
contemplated by this Agreement are subject to the registration requirements
of the Act, has been issued.
(b) Each of the Company, GLCC and their respective
subsidiaries has been duly incorporated, is validly existing as a corporation in
good standing under the laws of its jurisdiction of incorporation and has the
corporate power and authority to carry on its business as described in the
Preliminary Offering Memorandum and the Offering Memorandum and to own, lease
and operate its properties, and each is duly qualified and is in good standing
as a foreign corporation authorized to do business in each jurisdiction in which
the nature of its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not (x) have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Company and its subsidiaries, taken as a whole,
(y) adversely affect the Company's ability to issue the Debentures or (z)
adversely affect the validity of this Agreement or any other Operative Document
or otherwise adversely affect the Company's ability to consummate any of the
Acquisition Transactions (any of the events set forth in clauses (x), (y) or
(z), a "MATERIAL ADVERSE EFFECT").
(c) All outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid, non-assessable
and not subject to any preemptive or similar rights; all of such shares are
owned by AIP (except certain shares representing less than 1.0% of the issued
and outstanding shares of the Company which are owned by affiliates and other
individuals associated with AIP) free and clear of any security interest, claim,
lien, encumbrance or adverse interest of any nature (each, a "LIEN"). Upon
consummation of the Merger, all outstanding shares of capital stock of GLCC will
have been duly authorized and validly issued and will be fully paid,
non-assessable and not subject to any preemptive or similar rights and will be
owned by the Company free and clear of any Lien, except that the Company will
guarantee GLCC's obligations under the New Credit Agreement and such guarantee
will be secured by a pledge of all of the capital stock of GLCC.
(d) The entities listed on Schedule A hereto are the only
subsidiaries, direct or indirect, of the Company or GLCC, and GLCC owns a
minority interest in India Carbon, Ltd., an Indian corporation. All of the
outstanding shares of capital stock of each of the Company's and GLCC's
respective subsidiaries have been duly authorized and validly issued and are
fully paid and non-assessable, and are, or upon consummation of the Merger will
be, owned by the Company directly or indirectly through one or more subsidiaries
(except an approximate 0.2% interest in Copetro, S.A., an Argentine corporation)
free and clear of any Lien, other than the pledge of such shares to secure the
obligations of GLCC under the New Credit Agreement; provided, however, that the
Company makes no representation in this paragraph as to the outstanding capital
stock of GLCC prior to the effectiveness of the Merger.
(e) This Agreement has been duly authorized, executed and
delivered by the Company.
(f) The Indenture has been duly authorized by the Company,
and, on the Closing Date, will have been validly executed and delivered by the
Company. When the Indenture has
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been validly executed and delivered by the Company, and assuming the due
authorization, execution and delivery of the Indenture by the Trustee, the
Indenture will be a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except to the extent
enforcement thereof may be limited by (x) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (y) general principles of equity
(regardless of whether enforceability is considered in law or at equity). On
the Closing Date, the Indenture will conform in all material respects to the
requirements of the Trust Indenture Act of 1939, as amended (the "TIA" or
"TRUST INDENTURE ACT"), and the rules and regulations of the Commission
applicable to an indenture which is qualified thereunder.
(g) The Series A Debentures have been duly authorized by the
Company and, on the Closing Date, will have been validly executed and delivered
by the Company. When the Series A Debentures have been issued, executed and
authenticated in accordance with the provisions of the Indenture and delivered
to and paid for by the Initial Purchaser in accordance with the terms of this
Agreement, the Series A Debentures will be entitled to the benefits of the
Indenture and will be valid and binding obligations of the Company, enforceable
in accordance with their terms except to the extent enforcement thereof may be
limited by (x) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally
and (y) general principles of equity (regardless of whether enforceability is
considered in law or at equity). On the Closing Date, the Series A Debentures
will conform in all material respects as to legal matters to the description
thereof contained in the Offering Memorandum.
(h) On the Closing Date, the Series B Debentures will have
been duly authorized by the Company. When the Series B Debentures are issued,
executed and authenticated in accordance with the terms of the Exchange Offer
and the Indenture, the Series B Debentures will be entitled to the benefits of
the Indenture and will be the valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, except to the
extent enforcement thereof may be limited by (x) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (y) general principles of equity
(regardless of whether enforceability is considered in law or at equity).
(i) The Registration Rights Agreement has been duly
authorized by the Company and, on the Closing Date, will have been duly executed
and delivered by the Company. When the Registration Rights Agreement has been
duly executed and delivered by the Company, assuming the due authorization,
execution and delivery of the Registration Rights Agreement by the Initial
Purchasers, the Registration Rights Agreement will be a valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms except to the extent enforcement thereof may be limited by (x) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (y) general principles of
equity (regardless of whether enforceability is considered in law or at equity),
and any rights to indemnity or contribution thereunder may be limited by federal
and state securities laws and public policy considerations. On the Closing
Date, the Registration Rights Agreement will conform in all material respects as
to legal matters to the description thereof in the Offering Memorandum.
(j) The Merger Agreement has been duly authorized, executed
and delivered by the Company and constitutes a valid and binding agreement of
the Company in accordance with its terms, except to the extent enforcement
thereof may be limited by (x) bankruptcy, insolvency,
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reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (y) general principles of equity
(regardless of whether enforceability is considered in law or at equity). The
Company has delivered to the Initial Purchaser true and correct copies of the
Merger Agreement and all documents and agreements related thereto, including
all amendments, alterations, modifications or waivers thereto and all
exhibits and schedules thereto.
(k) The New Credit Agreement has been duly authorized by the
Company and, on the Closing Date, will have been validly executed and delivered
by the Company. When the New Credit Agreement has been duly executed and
delivered by the Company, assuming the due authorization, execution and delivery
of the New Credit Agreement by the parties thereto (other than the Company), the
New Credit Agreement will be a valid and binding agreement of the Company
enforceable against the Company in accordance with its terms except to the
extent enforcement thereof may be limited by (x) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (y) general principles of equity
(regardless of whether enforceability is considered in law or at equity). On the
Closing Date, the New Credit Agreement will conform in all material respects as
to legal matters to the description thereof in the Offering Memorandum.
(l) Neither the Company nor any of its subsidiaries is in
violation of its respective charter, by-laws or other organizational documents
or in default in the performance of any obligation, agreement, covenant or
condition contained in any indenture, loan agreement, mortgage, lease or other
agreement or instrument that is material to the Company and its subsidiaries,
taken as a whole, to which the Company or any of its subsidiaries is a party or
by which the Company or any of its subsidiaries or their respective property is
bound.
(m) The execution, delivery and performance of this Agreement
and the other Operative Documents by the Company, compliance by the Company with
all provisions hereof and thereof and the consummation of the transactions
contemplated hereby and thereby will not (i) require any consent, approval,
authorization or other order of, or qualification with, any court or
governmental body or agency (except such as may be required under the securities
or Blue Sky laws of the various states or as have been obtained), (ii) conflict
with or constitute a breach of any of the terms or provisions of, or a default
under, the charter, by-laws or other organizational documents of the Company or
any indenture, loan agreement, mortgage, lease or other agreement or instrument
to which the Company is a party or by which the Company or its property is
bound, (ii) conflict with or constitute a breach of any of the terms or
provisions of, or a default under, the charter, by-laws or other organizational
documents of GLCC or any of its subsidiaries or any indenture, loan agreement,
mortgage, lease or other agreement or instrument listed on Schedule 2.10 of the
Merger Agreement that is material to GLCC and its subsidiaries, taken as a
whole, to which GLCC or any of its subsidiaries is a party or by which GLCC or
any of its subsidiaries or their respective property is bound, (iv) violate or
conflict with any applicable law or any rule, regulation, judgment, order or
decree of any court or any governmental body or agency having jurisdiction over
GLCC or any of its subsidiaries or their respective property, (v) result in the
imposition or creation of (or the obligation to create or impose) a Lien under,
any agreement or instrument to which the Company, GLCC or any of its
subsidiaries is a party or by which the Company, GLCC or any of its subsidiaries
or their respective property is bound, or (vi) result in the termination,
suspension or revocation of any Authorization (as defined below) of the Company,
GLCC or any of its subsidiaries or result in any other impairment of the rights
of the holder of any such Authorization.
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(n) Except as described in the Preliminary Offering
Memorandum and the Offering Memorandum, there are no legal or governmental
proceedings pending to which the Company, GLCC or any of its subsidiaries is a
party or to which any of their respective property is subject, or, to the
Company's knowledge, threatened to which the Company, GLCC or any of its
subsidiaries could be a party or to which any of their respective property could
be subject, which might result, singly or in the aggregate, in a Material
Adverse Effect.
(o) Except as described in the Preliminary Offering
Memorandum and the Offering Memorandum, neither the Company, GLCC nor any of its
subsidiaries has violated any foreign, federal, state or local law or regulation
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("ENVIRONMENTAL LAWS"), any provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or any provisions of the Foreign
Corrupt Practices Act or the rules and regulations promulgated thereunder,
except for such violations which, singly or in the aggregate, would not have a
Material Adverse Effect.
(p) Except as described in the Preliminary Offering
Memorandum and the Offering Memorandum, there are no costs or liabilities
associated with Environmental Laws (including, without limitation, any capital
or operating expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or any Authorization, any related constraints
on operating activities and any potential liabilities to third parties) which
would, singly or in the aggregate, have a Material Adverse Effect.
(q) Except as described in the Preliminary Offering
Memorandum and the Offering Memorandum, each of the Company, GLCC and its
subsidiaries has such permits, licenses, consents, exemptions, franchises,
authorizations and other approvals (each, an "AUTHORIZATION") of, and has made
all filings with and notices to, all governmental or regulatory authorities and
self-regulatory organizations and all courts and other tribunals, including
without limitation, under any applicable Environmental Laws, as are necessary to
own, lease, license and operate its respective properties and to conduct its
business, except where the failure to have any such Authorization or to make any
such filing or notice would not, singly or in the aggregate, have a Material
Adverse Effect. Each such Authorization is valid and in full force and effect
and each of the Company, GLCC and its subsidiaries is in compliance with all the
terms and conditions thereof and with the rules and regulations of the
authorities and governing bodies having jurisdiction with respect thereto; and
no event has occurred (including, without limitation, the receipt of any notice
from any authority or governing body) which allows or, after notice or lapse of
time or both, would allow, revocation, suspension or termination of any such
Authorization or results or, after notice or lapse of time or both, would result
in any other impairment of the rights of the holder of any such Authorization;
and such Authorizations contain no restrictions that are burdensome to the
Company, GLCC or any of its subsidiaries; except where such failure to be valid
and in full force and effect or to be in compliance, the occurrence of any such
event or the presence of any such restriction would not, singly or in the
aggregate, have a Material Adverse Effect.
(r) Ernst & Young LLP, the accountants that have certified
the financial statements included in the Preliminary Offering Memorandum and the
Offering Memorandum, are independent public accountants with respect to the
Company, GLCC and its subsidiaries, as required by the Act and the Exchange Act.
The historical financial statements, together with related notes, set forth in
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the Preliminary Offering Memorandum and the Offering Memorandum comply as to
form in all material respects with the requirements applicable to registration
statements on Form S-1 under the Act.
(s) The historical financial statements, together with
related notes forming part of the Offering Memorandum (and any amendment or
supplement thereto), present fairly in all material respects the consolidated
financial position, results of operations and changes in financial position of
GLCC and its subsidiaries on the basis stated in the Offering Memorandum at the
respective dates or for the respective periods to which they apply; such
statements and related notes have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved, except as disclosed therein; and the other financial information
regarding the Company or GLCC set forth in the Offering Memorandum (and any
amendment or supplement thereto) is, in all material respects, accurately
presented and prepared on a basis consistent with such financial statements and
the books and records of the Company or GLCC, as applicable.
(t) The pro forma financial statements included in the
Preliminary Offering Memorandum and the Offering Memorandum have been prepared
on a basis consistent with the historical financial statements of GLCC and its
subsidiaries and give effect to assumptions used in the preparation thereof on a
reasonable basis and in good faith and on such basis present fairly the
historical and proposed transactions contemplated by the Preliminary Offering
Memorandum and the Offering Memorandum; and such pro forma financial statements
comply as to form in all material respects with the requirements of Rule 11-02
of Regulation S-X under the Act. The other pro forma financial information
included in the Offering Memorandum is, in all material respects, fairly
presented and prepared on a basis consistent with the pro forma financial
statements, provided that the Company makes no representation as to whether the
Adjusted Credit Data presented in the Offering Memorandum under the caption
"Summary Consolidated Financial and Other Data" complies with Rule 11-02 of
Regulation S-X under the Act.
(u) Neither the Company nor GLCC is and, after giving effect
to the offering and sale of the Series A Debentures and the application of the
net proceeds thereof as described in the Offering Memorandum, will not be, an
"investment company," as such term is defined in the Investment Company Act of
1940, as amended.
(v) Except for the Registration Rights Agreement, there are
no contracts, agreements or understandings between the Company and any person
granting such person the right to require the Company to file a registration
statement under the Act with respect to any securities of the Company or to
require the Company to include such securities with the Debentures registered
pursuant to any Registration Statement.
(w) The issuance or sale of the Series A Debentures, and the
use of proceeds therefrom as described in the Preliminary Offering Memorandum
and the Offering Memorandum will not violate Regulation T (12 C.F.R. Part 220),
Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of the
Board of Governors of the Federal Reserve System.
(x) No "nationally recognized statistical rating
organization" as such term is defined for purposes of Rule 436(g)(2) under the
Act (i) has imposed (or has informed the Company that it is considering
imposing) any condition (financial or otherwise) on the Company's retaining any
rating assigned to the Company, or any securities of the Company or (ii) has
indicated to the Company that it is
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considering (a) the downgrading, suspension, or withdrawal of, or any review
for a possible change that does not indicate the direction of the possible
change in, any rating so assigned or (b) any change in the outlook for any
rating of the Company or any securities of the Company.
(y) Since the respective dates as of which information is
given in the Offering Memorandum other than as set forth in the Offering
Memorandum (exclusive of any amendments or supplements thereto subsequent to the
date of this Agreement), (i) there has not occurred any material adverse change
or any development involving a prospective material adverse change in the
condition, financial or otherwise, or the earnings, business, management or
operations of the Company and its subsidiaries, taken as a whole, (ii) there has
not been any material adverse change or any development involving a prospective
material adverse change in the capital stock or in the long-term debt of the
Company or any of its subsidiaries and (iii) neither the Company nor any of its
subsidiaries has incurred any material liability or obligation, direct or
contingent except in the ordinary course of business.
(z) 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) under the Act.
(aa) When the Series A Debentures are issued and delivered
pursuant to this Agreement, the Series A Debentures will not be of the same
class (within the meaning of Rule 144A under the Act) as any security of the
Company that is listed on a national securities exchange registered under
Section 6 of the Exchange Act or that is quoted in a United States automated
inter-dealer quotation system.
(bb) No form of general solicitation or general advertising
(each as defined in Regulation D under the Act) was used by the Company or any
of its representatives (other than the Initial Purchaser, as to whom the Company
makes no representation) in connection with the offer and sale of the Series A
Debentures contemplated hereby, including, but not limited to, articles, notices
or other communications published in any newspaper, magazine, or similar medium
or broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising. No
securities of the same class as the Series A Debentures have been issued and
sold by the Company within the six-month period immediately prior to the date
hereof.
(cc) Prior to the effectiveness of any Registration Statement,
the Indenture is not required to be qualified under the TIA.
(dd) None of the Company nor any of its affiliates or any
person acting on its or their behalf (other than the Initial Purchaser, as to
whom the Company makes no representation) has engaged or will engage in any
directed selling efforts within the meaning of Regulation S under the Act
("REGULATION S") with respect to the Series A Debentures.
(ee) All Series A Debentures offered and sold in reliance on
Regulation S by the Company and its affiliates and all persons acting on their
behalf (other than the Initial Purchasers, as to whom the Company makes no
representation) have been and will be offered and sold only in offshore
transactions.
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(ff) The Company and its affiliates and all persons acting on
their behalf (other than the Initial Purchaser, as to whom the Company makes no
representation) have complied with and will comply with the offering
restrictions requirements of Regulation S in connection with the offering of the
Series A Debentures outside the United States and, in connection therewith, the
Offering Memorandum will contain the disclosure required by Rule 902(h).
(gg) GLCC is a "reporting issuer," as defined in Rule 902
under the Act.
(hh) The sale of the Series A Debentures pursuant to
Regulation S is not part of a plan or scheme to evade the registration
provisions of the Act.
(ii) No registration under the Act of the Series A Debentures
is required for the sale of the Series A Debentures to the Initial Purchaser as
contemplated hereby or for the Exempt Resales assuming the accuracy of the
Initial Purchaser's representations and warranties and agreements set forth in
Section 7 hereof.
(jj) Neither the Company, GLCC nor any of its subsidiaries
intends to or believes that it will incur debts beyond its ability to pay as
such debts mature. Immediately before and after giving effect to the issuance
of the Debentures and consummation of the Acquisition Transactions, (i) the
present fair saleable value of the assets of the Company, GLCC and its
subsidiaries, on a consolidated basis, will exceed the amount that will be
required to pay their probable liability on their existing debts and other
liabilities (including contingent liabilities) as they become absolute and
matured, and (ii) the assets of each of the Company, GLCC and its subsidiaries
will not constitute unreasonably small capital to carry out their businesses as
now or as anticipated to be conducted.
(kk) The Company, GLCC and its subsidiaries have good and
marketable title to all real property and good and marketable title to all
personal property owned by them which is material to the business of the
Company, GLCC and its subsidiaries, in each case free and clear of all Liens and
defects, except such as are described in the Preliminary Offering Memorandum and
the Offering Memorandum and such as would not have a Material Adverse Effect;
and any real property and buildings held under lease by the Company, GLCC and
its subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as would not have a Material Adverse Effect and except as
described in the Preliminary Offering Memorandum and the Offering Memorandum.
(ll) The Company, GLCC and each of its subsidiaries own or
possess, or can acquire on reasonable terms, all patents, patent rights,
licenses, inventions, copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information, systems
or procedures), trademarks, service marks and trade names ("INTELLECTUAL
PROPERTY") currently employed by them in connection with the business now
operated by them except where the failure to own or possess or otherwise be able
to acquire such intellectual property would not, singly or in the aggregate,
have a Material Adverse Effect; and neither the Company, GLCC nor any of its
subsidiaries has received any notice of infringement of or conflict with
asserted rights of others with respect to any of such intellectual property
which, singly or in the aggregate, if the subject of any unfavorable decision,
ruling or finding, would have a Material Adverse Effect.
(mm) GLCC is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in
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which it is engaged; and GLCC (i) has not received notice from any insurer or
agent of such insurer that substantial capital improvements or other material
expenditures will have to be made in order to continue such insurance or (ii)
has no reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers at a cost that would not have a Material
Adverse Effect.
(nn) Except as described in the Offering Memorandum, no
relationship, direct or indirect, exists between or among the Company, GLCC or
any of its subsidiaries on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Company, GLCC or any of its
subsidiaries on the other hand, which would be required by the Act to be
described in the Offering Memorandum if the Offering Memorandum were a
prospectus included in a registration statement on Form S-1 filed with the
Commission.
(oo) There is no (i) significant unfair labor practice
complaint, grievance or arbitration proceeding pending or, to the knowledge of
the Company, threatened against GLCC or any of its subsidiaries before the
National Labor Relations Board or any state or local labor relations board, (ii)
strike, labor dispute, slowdown or stoppage pending or, to the knowledge of the
Company, threatened against GLCC or any of its subsidiaries or (iii) union
representation question existing with respect to the employees of GLCC or any of
its subsidiaries who are not currently covered by a collective bargaining
agreement, except in the case of clauses (i), (ii) and (iii) for such actions
which, singly or in the aggregate, would not have a Material Adverse Effect.
(pp) GLCC and each of its subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles or any other criteria applicable to such statements and to
maintain asset accountability; (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 the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(qq) All material tax returns required to be filed by GLCC and
each of its subsidiaries in any jurisdiction have been filed, taking into
account all applicable extensions, other than those filings being contested in
good faith, and all material taxes, including withholding taxes, penalties and
interest, assessments, fees and other charges due and payable pursuant to such
returns or pursuant to any assessment received by GLCC or any of its
subsidiaries have been paid, other than those being contested in good faith and
for which adequate reserves have been provided.
(rr) No action has been taken and no law, statute, rule or
regulation or order has been enacted, adopted or issued by any governmental
agency or body which prevents the execution, delivery and performance of any of
the Operative Documents or the issuance of the Series A Debentures, or suspends
the sale of the Series A Debentures in any jurisdiction referred to in
Section 5(e); and no injunction, restraining order or other order or relief of
any nature by a federal or state court or other tribunal of competent
jurisdiction has been issued with respect to the Company or any of its
subsidiaries which would prevent or suspend the issuance or sale of the Series A
Debentures in any jurisdiction referred to in Section 5(e).
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(ss) Each certificate signed by any officer of the Company or
any of its subsidiaries and delivered to the Initial Purchaser or counsel for
the Initial Purchaser in connection with the transactions contemplated hereby
shall be deemed to be a representation and warranty by the Company or such
subsidiary to the Initial Purchaser as to the matters covered thereby.
The Company acknowledges that the Initial Purchaser and, for purposes
of the opinions to be delivered to the Initial Purchaser pursuant to Section 9
hereof, counsel to the Company and counsel to the Initial Purchaser will rely
upon the accuracy and truth of the foregoing representations and hereby consents
to such reliance.
7. INITIAL PURCHASER'S REPRESENTATIONS AND WARRANTIES. The Initial
Purchaser represents and warrants to the Company and agrees that:
(a) The Initial Purchaser is either a QIB or an institutional
"accredited investor", as defined in Rule 501(a)(1), (2), (3), or (7) under the
Act (an "ACCREDITED INSTITUTION"), in either case, with such knowledge and
experience in financial and business matters as is necessary in order to
evaluate the merits and risks of an investment in the Series A Debentures.
(b) The Initial Purchaser (A) is not acquiring the Series A
Debentures with a view to any distribution thereof or with any present intention
of offering or selling any of the Series A Debentures in a transaction that
would violate the Act or the securities laws of any state of the United States
or any other applicable jurisdiction and (B) will be reoffering and reselling
the Series A Debentures only to (x) QIBs in reliance on the exemption from the
registration requirements of the Act provided by Rule 144A and (y) in offshore
transactions in reliance upon Regulation S under the Act.
(c) The Initial Purchaser agrees that no form of general
solicitation or general advertising (each within the meaning of Regulation D
under the Act) has been or will be used by the Initial Purchaser or any of its
representatives in connection with the offer and sale of the Series A Debentures
pursuant hereto, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising.
(d) The Initial Purchaser agrees that, in connection with
Exempt Resales, the Initial Purchaser will solicit offers to buy the Series A
Debentures only from, and will offer to sell the Series A Debentures only to,
Eligible Purchasers. The Initial Purchaser further agrees that it will offer to
sell the Series A Debentures only to, and will solicit offers to buy the Series
A Debentures only from (A) Eligible Purchasers that the Initial Purchaser
reasonably believes are QIBs and (B) Regulation S Purchasers, in each case, that
agree that (x) the Series A Debentures purchased by them may be resold, pledged
or otherwise transferred within the time period referred to under Rule 144(k)
(taking into account the provisions of Rule 144(d) under the Act, if applicable)
under the Act, as in effect on the date of the transfer of such Series A
Debentures, only (I) to the Company or any of its subsidiaries, (II) to a person
whom the seller reasonably believes is a QIB purchasing for its own account or
for the account of a QIB in a transaction meeting the requirements of Rule 144A
under the Act, (III) in an offshore transaction (as defined in Rule 902 under
the Act) meeting the requirements of Rule 904 of the Act, (IV) in a transaction
meeting the requirements of Rule 144 under the Act, (V) to an Accredited
Institution that, prior to such transfer, furnishes the Trustee a signed letter
containing certain representations and agreements relating to the registration
of transfer of such Series A Debenture (the form of which is available from the
Trustee)
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and, if such transfer is in respect of an aggregate principal amount of
Series A Debentures less than $250,000, an opinion of counsel acceptable to
the Company that such transfer is in compliance with the Act, (VI) in
accordance with another exemption from the registration requirements of the
Act (and, if requested, based upon an opinion of counsel acceptable to the
Company) or (VII) pursuant to an effective registration statement and, in
each case, in accordance with the applicable securities laws of any state of
the United States or any other applicable jurisdiction and (y) they will
deliver to each person to whom such Series A Debentures or an interest
therein is transferred a notice substantially to the effect of the foregoing.
(e) The Initial Purchaser and its affiliates or any person
acting on its or their behalf have not engaged or will not engage in any
directed selling efforts within the meaning of Regulation S with respect to the
Series A Debentures.
(f) The Series A Debentures offered and sold by the Initial
Purchaser pursuant hereto in reliance on Regulation S have been and will be
offered and sold only in offshore transactions.
(g) The sale of the Series A Debentures offered and sold by
the Initial Purchaser pursuant hereto in reliance on Regulation S is not part of
a plan or scheme to evade the registration provisions of the Act.
(h) The Initial Purchaser agrees that it has not offered or
sold and will not offer or sell the Series A Debentures 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 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 Series A Debentures pursuant hereto and the
Closing Date, other than in accordance with Regulation S of the Act or another
exemption from the registration requirements of the Act. The Initial Purchaser
agrees that, during such 40-day restricted period, it will not cause any
advertisement with respect to the Series A Debentures (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 Series A
Debentures, except such advertisements as are permitted by and include the
statements required by Regulation S.
(i) The Initial Purchaser agrees that, at or prior to
confirmation of a sale of Series A Debentures by it to any distributor, dealer
or person receiving a selling concession, fee or other remuneration during
40-day restricted period referred to in Rule 903(c)(2) under the 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 Series A Debentures 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 Series A
Debentures covered
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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."
(j) Such Initial Purchaser agrees that the Series A
Debentures 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(c)(3) of the Act and only upon certification of beneficial ownership of
such Series A Debentures by non-U.S. persons or U.S. persons who purchased such
Series A Debentures in transactions that were exempt from the registration
requirements of the Act.
The Initial Purchaser acknowledges that the Company and, for
purposes of the opinions to be delivered to the Initial Purchaser pursuant to
Section 9 hereof, counsel to the Company and counsel to the Initial Purchaser
will rely upon the accuracy and truth of the foregoing representations and the
Initial Purchaser hereby consents to such reliance.
8. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless the
Initial Purchaser, its directors, its officers and each person, if any, who
controls the Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages, liabilities and judgments (including, without limitation, any legal or
other expenses incurred in connection with investigating or defending any
matter, including any action, that could give rise to any such losses, claims,
damages, liabilities or judgments) caused by any untrue statement or alleged
untrue statement of a material fact contained in the Offering Memorandum (or any
amendment or supplement thereto), the Preliminary Offering Memorandum or any
Rule 144A Information provided by the Company to any holder or prospective
purchaser of Series A Debentures pursuant to Section 5(h) or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or judgments are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information that the Initial Purchaser provides in writing
to the Company relating to the Initial Purchaser; provided, however, that the
foregoing indemnity agreement with respect to any Preliminary Offering
Memorandum shall not inure to the benefit of the Initial Purchaser if the
Initial Purchaser failed to deliver a Final Offering Memorandum (as then amended
or supplemented, provided by the Company to the Initial Purchaser in the
requisite quantity and on a timely basis to permit proper delivery on or prior
to the Closing Date) to the person asserting any losses, claims, damages and
liabilities and judgments caused by any untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Offering Memorandum,
or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, if such material misstatement or omission or alleged material
misstatement or omission was cured in the Final Offering Memorandum.
(b) The Initial Purchaser agrees to indemnify and hold
harmless the Company, and its directors and officers and each person, if any,
who controls (within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act) the Company, to the same extent as the foregoing indemnity from
the Company to the Initial Purchaser but only with reference to the information
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that the Initial Purchaser provided to the Company in writing expressly relating
to the Initial Purchaser for use in the Preliminary Offering Memorandum or the
Offering Memorandum.
(c) In case any action shall be commenced involving any
person in respect of which indemnity may be sought pursuant to Section 8(a) or
8(b) (the "INDEMNIFIED PARTY"), the indemnified party shall promptly notify the
person against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in
writing and the indemnifying party shall assume the defense of such action,
including the employment of counsel reasonably satisfactory to the indemnified
party and the payment of all fees and expenses of such counsel, as incurred
(except that in the case of any action in respect of which indemnity may be
sought pursuant to both Sections 8(a) and 8(b), the Initial Purchaser shall not
be required to assume the defense of such action pursuant to this Section 8(c),
but may employ separate counsel and participate in the defense thereof, but the
fees and expenses of such counsel, except as provided below, shall be at the
expense of the Initial Purchaser). Any indemnified party shall have the right
to employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
the indemnified party unless (i) the employment of such counsel shall have been
specifically authorized in writing by the indemnifying party, (ii) the
indemnifying party shall have failed to assume the defense of such action or
employ counsel reasonably satisfactory to the indemnified party or (iii) the
named parties to any such action (including any impleaded parties) include both
the indemnified party and the indemnifying party, and the indemnified party
shall have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party (in which case the indemnifying party shall
not have the right to assume the defense of such action on behalf of the
indemnified party). In any such case, the indemnifying party shall not, in
connection with any one action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for all indemnified parties
and all such fees and expenses shall be reimbursed as they are incurred. Such
firm shall be designated in writing by Donaldson, Lufkin & Jenrette Securities
Corporation, in the case of the parties indemnified pursuant to Section 8(a),
and by the Company, in the case of parties indemnified pursuant to Section 8(b).
The indemnifying party shall indemnify and hold harmless the indemnified party
from and against any and all losses, claims, damages, liabilities and judgments
by reason of any settlement of any action (i) effected with its written consent
or (ii) effected without its written consent if the settlement is entered into
more than twenty business days after the indemnifying party shall have received
a request from the indemnified party for reimbursement for the fees and expenses
of counsel (in any case where such fees and expenses are at the expense of the
indemnifying party) and, prior to the date of such settlement, the indemnifying
party shall have failed to comply with such reimbursement request. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement or compromise of, or consent to the entry of
judgment with respect to, any pending or threatened action in respect of which
the indemnified party is or could have been a party and indemnity or
contribution may be or could have been sought hereunder by the indemnified
party, unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability on claims that
are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) To the extent the indemnification provided for in this
Section 8 is unavailable to an indemnified party or insufficient in respect of
any losses, claims, damages, liabilities or judgments referred to therein, then
each indemnifying party, in lieu of indemnifying such indemnified
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party, shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages, liabilities and judgments
(i) in such proportion as is appropriate to reflect the relative benefits
received by the Company, on the one hand, and the Initial Purchaser, on the
other hand, from the offering of the Series A Debentures or (ii) if the
allocation provided by clause 8(d)(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 8(d)(i) above but also the relative fault of
the Company, on the one hand, and the Initial Purchaser, on the other hand,
in connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative benefits received by the Company, on
the one hand, and the Initial Purchaser, on the other hand, shall be deemed
to be in the same proportion as the total net proceeds from the offering of
the Series A Debentures (after underwriting discounts and commissions, but
before deducting expenses) received by the Company, and the total discounts
and commissions received by the Initial Purchaser bear to the total price to
investors of the Series A Debentures, in each case as set forth in the table
on the cover page of the Offering Memorandum. The relative fault of the
Company, on the one hand, and the Initial Purchaser, on the other hand, shall
be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company, on the one hand, or the Initial Purchaser, but only with reference
to the information that the Initial Purchaser furnished, on the other hand,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and the Initial Purchaser agree that it would not be
just and equitable if contribution pursuant to this Section 8(d) were determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, liabilities or judgments referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses incurred by such
indemnified party in connection with investigating or defending any matter,
including any action, that could have given rise to such losses, claims,
damages, liabilities or judgments. Notwithstanding the provisions of this
Section 8, the Initial Purchaser shall not be required to contribute any amount
in excess of the amount by which the total discounts and commissions received by
the Initial Purchaser exceeds the amount of any damages which the Initial
Purchaser has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(e) The remedies provided for in this Section 8 are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
9. CONDITIONS OF THE INITIAL PURCHASER'S OBLIGATIONS. The
obligations of the Initial Purchaser to purchase the Series A Debentures under
this Agreement are subject to the satisfaction of each of the following
conditions:
(a) All the representations and warranties of the Company
contained in this Agreement shall be true and correct on the Closing Date with
the same force and effect as if made on and as of the Closing Date.
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(b) On or after the date hereof, (i) there shall not have
occurred any downgrading, suspension or withdrawal of, nor shall any notice have
been given of any potential or intended downgrading, suspension or withdrawal
of, or of any review (or of any potential or intended review) for a possible
change that does not indicate the direction of the possible change in, any
rating of the Company or any securities of the Company (including, without
limitation, the placing of any of the foregoing ratings on credit watch with
negative or developing implications or under review with an uncertain direction)
by any "nationally recognized statistical rating organization" as such term is
defined for purposes of Rule 436(g)(2) under the Act, (ii) there shall not have
occurred any change, nor shall any notice have been given of any potential or
intended change, in the outlook for any rating of the Company or any securities
of the Company by any such rating organization and (iii) no such rating
organization shall have given notice that it has assigned (or is considering
assigning) a lower rating to the Debentures than that on which the Debentures
were marketed.
(c) Since the respective dates as of which information is
given in the Offering Memorandum other than as set forth in the Offering
Memorandum (exclusive of any amendments or supplements thereto subsequent to the
date of this Agreement), (i) there shall not have occurred any change or any
development involving a prospective change in the condition, financial or
otherwise, or the earnings, business, management or operations of the Company
and its subsidiaries, taken as a whole, (ii) there shall not have been any
change or any development involving a prospective change in the capital stock or
in the long-term debt of the Company or any of its subsidiaries and (iii)
neither the Company nor any of its subsidiaries shall have incurred any
liability or obligation, direct or contingent, the effect of which, in any such
case described in clause 9(c)(i), 9(c)(ii) or 9(c)(iii), in your judgment, is
material and adverse and, in your judgment, makes it impracticable to market the
Series A Debentures on the terms and in the manner contemplated in the Offering
Memorandum.
(d) You shall have received on the Closing Date a certificate
dated the Closing Date, signed by the President or a Vice President of the
Company, confirming the matters set forth in Sections 6(y), 9(a) and 9(b) and
stating that the Company has complied with all the agreements and satisfied all
of the conditions herein contained and required to be complied with or satisfied
on or prior to the Closing Date.
(e) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Initial Purchaser), dated the Closing
Date, of Skadden, Arps, Slate, Meagher & Flom, LLP, counsel for the Company, to
the effect that:
(i) the Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation and has the corporate power and corporate
authority to carry on its business and to own, lease and operate its
properties, in both cases as described in the Offering Memorandum;
(ii) all the outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid,
non-assessable and not subject to any preemptive or similar rights;
(iii) the issuance and sale of the Series A Debentures
have been duly authorized by requisite corporate action on the part of the
Company, and when executed and authenticated in accordance with the terms
of the Indenture and delivered to and paid for the
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Initial Purchasers in accordance with the terms of this Agreement, will
be valid and binding obligations of the Company enforceable against the
Company in accordance with their terms, except (a) to the extent
enforcement thereof may be limited by (x) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (y) general principles
of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity) and (b) the waiver contained in Section
4.06 of the Indenture may be deemed unenforceable;
(iv) the Indenture has been duly authorized, executed
and delivered by the Company and, assuming the due authorization, execution
and delivery by the Trustee, is a valid and binding obligation of the
Company enforceable against the Company in accordance with its terms,
except (a) to the extent enforcement thereof may be limited by (x)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights generally and (y)
general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity) and (b) the waiver
contained in Section 4.06 of the Indenture may be deemed unenforceable;
(v) this Agreement has been duly authorized, executed
and delivered by the Company;
(vi) the Registration Rights Agreement has been duly
authorized, executed and delivered by the Company and, assuming the due
authorization, execution and delivery by the Initial Purchasers, is a valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms except (a) to the extent enforcement thereof may
be limited by (x) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally and (y) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity); (b) any
rights to indemnity or contribution thereunder may be limited by federal
and state securities laws and public policy considerations; and (c) such
counsel need express no opinion with respect to Section 5 of the
Registration Rights Agreement;
(vii) the Series B Debentures have been duly authorized
by requisite corporate action on the part of the Company;
(viii) the statements under the captions
"Summary--Acquisition Transactions," "Acquisition Transactions,"
"Description of Holdings Capital Stock," "Description of Debentures,"
"Description of Other Indebtedness," and "Plan of Distribution" in the
Offering Memorandum, insofar as they purport to constitute a summary of the
provisions of the documents described therein, fairly summarize the
provisions of such documents purported to be described. The statements
under the caption "Certain United States Federal Income Tax Considerations"
fairly summarize the matters addressed therein in all material respects;
(ix) the execution and delivery of this Agreement and
the other Operative Documents by the Company and the Company's performance
of its obligations under each of the Operative Documents to which it is a
party in accordance with its terms do not (i) require any consent,
approval, authorization of, or filing, recordation or registration with,
any court or governmental body or agency (except such as may be required
under the securities or
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Blue Sky laws of the various states or that has been obtained prior to the
Closing Date), (ii) conflict with the charter or by-laws of the Company or
constitute a violation of or a default under the agreements listed in a
schedule attached to such opinion, (iii) contravene any law of the State
of New York, which in the experience of such counsel, is normally
applicable to transactions of the type contemplated by this Agreement and
the other Operative Documents and are not the subject of a specific
opinion herein referring expressly to a particular law or laws or (iv)
cause the creation of any security interest or Lien (other than the
Liens contemplated by the Operative Documents) under any agreement or
instrument listed in a schedule to such opinion to which the Company or any
of its subsidiaries is a party or by which the Company or any of its
subsidiaries or their respective property is bound. Such counsel need
express no opinion, however, as to whether execution, delivery or
performance by the Company of its obligations under each of the Operative
Documents in accordance with its terms will constitute a violation of or a
default under any covenant, restriction or provision with respect to
financial ratios or tests or any aspect of the financial condition or
results of operations of the Company;
(x) to such counsel's knowledge, other than as set
forth in the Offering Memorandum, there are no legal or governmental
proceedings in the United States pending or threatened to which the Company
or any of its subsidiaries is a party or to which any of their respective
property is subject, which might result, singly or in the aggregate, in a
Material Adverse Effect;
(xi) the Company is not and, after giving effect to the
offering and sale of the Series A Debentures and the application of the net
proceeds thereof as described in the Offering Memorandum, will not be
required to be registered as, and is not registered as, an "investment
company" as such term is defined in the Investment Company Act of 1940, as
amended;
(xii) to the best of such counsel's knowledge, there are
no contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Act with respect to any securities of the
Company or to require the Company to include such securities with the Notes
registered pursuant to any Registration Statement;
(xiii) the Indenture is in such form that would not
preclude qualification under the TIA and the rules and regulations of the
Commission applicable to an indenture which is qualified thereunder.
Assuming (i) the accuracy of the representations and warranties of the
Company set forth in Sections 6(u), (aa), (bb), (dd), (ee), (ff), (gg) and
(hh) of this Agreement and of the Initial Purchasers in Section 7 of this
Agreement, and (ii) the due performance by the Company and the due
performance by the Initial Purchasers of the covenants and agreements set
forth in this Agreement, it is not necessary in connection with the offer,
sale and delivery of the Series A Debentures to the Initial Purchasers in
the manner contemplated by this Agreement or in connection with the Exempt
Resales to qualify the Indenture under the TIA; and
(xiv) assuming (i) the accuracy of the representations
and warranties of the Company set forth in Sections 6(u), (aa), (bb), (dd),
(ee), (ff), (gg) and (hh) of this Agreement and of the Initial Purchasers
in Section 7 of this Agreement, (ii) the due performance
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by the Company and the due performance by the Initial Purchasers of the
covenants and agreements set forth in this Agreement, (iii) compliance by
the Initial Purchasers with the offering and transfer procedures and
restrictions described in the Offering Memorandum, (iv) the accuracy of
the representations and warranties made in accordance with this Agreement
and the Offering Memorandum by purchasers to whom the Initial Purchasers
initially resell Series A Debentures and (v) that purchasers to whom the
Initial Purchasers initially resell Series A Debentures receive a copy of
the Offering Memorandum prior to such sale, the offer, sale and delivery of
the Series A Debentures to the Initial Purchasers in the manner
contemplated by this Agreement and the Offering Memorandum and the initial
resale of the Series A Debentures by the Initial Purchasers in the manner
contemplated in the Offering Memorandum and this Agreement, do not require
registration under the Securities Act of 1933, as amended, it being
understood that such counsel need express no opinion as to any subsequent
resale of any Series A Debenture.
In addition, such counsel shall state that it has participated in
conferences with officers and other representatives of the Company,
representatives of the independent accountants of the Company, and the Initial
Purchasers and the Initial Purchasers' counsel at which the contents of the
Offering Memorandum and related matters were discussed and, although such
counsel need not pass upon, and shall not assume any responsibility for, the
accuracy, completeness or fairness of the statements contained in the Offering
Memorandum and need make no independent check or verification thereof, on the
basis of the foregoing, no facts have come to such counsel's attention that have
led such counsel to believe that the Offering Memorandum, as of its date and as
of 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 light of the circumstances under which they were made,
not misleading, except that such counsel need express no opinion or belief with
respect to the financial statements, and other financial and statistical data
included therein or excluded therefrom.
The opinion of counsel for the Company described in Section 9(e)
above shall be rendered to you at the request of the Company and shall so state
therein.
(f) The Initial Purchaser shall have received on the Closing
Date an opinion, dated the Closing Date, of Latham & Watkins, counsel for the
Initial Purchaser, in form and substance reasonably satisfactory to the Initial
Purchaser.
(g) The Initial Purchaser shall have received, at the time
this Agreement is executed and at the Closing Date, letters dated the date
hereof or the Closing Date, as the case may be, in form and substance
satisfactory to the Initial Purchaser from Ernst & Young LLP, independent public
accountants, containing the information and statements of the type ordinarily
included in accountants' "comfort letters" to the Initial Purchaser with respect
to the financial statements and certain financial information contained in the
Offering Memorandum.
(h) The Series A Debentures shall have been approved by the
NASD for trading and duly listed in PORTAL.
(i) The Company and the Trustee shall have executed the
Indenture and the Initial Purchaser shall have received an original copy
thereof, duly executed by the Company and the Trustee.
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(j) The Company shall have executed the Registration Rights
Agreement and the Initial Purchaser shall have received an original copy
thereof, duly executed by the Company.
(k) On the Closing Date, the certificate of merger relating
to the Merger shall have been filed with the Secretary of State of the State of
Delaware, and Merger Sub shall have merged with and into the Company, with the
Company as the surviving corporation.
(l) The New Credit Agreement shall have been executed by the
parties thereto and, on the Closing Date, the closing under the New Credit
Agreement (including, without limitation, the borrowing of all term loans
thereunder) shall have been consummated, and the Initial Purchasers shall have
received counterparts, conformed as executed, of the New Credit Agreement and
any and all other ancillary documents related thereto.
(m) The Notes Offering shall have been consummated.
(n) The Tender Offer and Solicitation shall have been
consummated and the Supplemental Indenture shall be in full force and effect.
(o) The Initial Purchaser shall have received on the Closing
Date an opinion addressed to it, dated the Closing Date, of Valuation Research,
with respect to the solvency of the Company.
(p) The Company shall not have failed on or prior to the
Closing Date to perform or comply with any of the agreements herein contained
and required to be performed or complied with by it on or prior to the Closing
Date.
10. EFFECTIVENESS OF AGREEMENT AND TERMINATION. This Agreement shall
become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time on or prior to the
Closing Date by the Initial Purchaser by written notice to the Company if any of
the following has occurred: (i) any outbreak or escalation of hostilities or
other national or international calamity or crisis or change in economic
conditions or in the financial markets of the United States or elsewhere that,
in the Initial Purchaser's judgment, is material and adverse and, in the Initial
Purchaser's judgment, makes it impracticable to market the Series A Debentures
on the terms and in the manner contemplated in the Offering Memorandum, (ii) the
suspension or material limitation of trading in securities or other instruments
on the New York Stock Exchange, the American Stock Exchange, the Chicago Board
of Options Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade
or the Nasdaq National Market or limitation on prices for securities or other
instruments on any such exchange or the Nasdaq National Market, (iii) the
suspension of trading of any securities of the Company or any Guarantor on any
exchange or in the over-the-counter market, (iv) the enactment, publication,
decree or other promulgation of any federal or state statute, regulation, rule
or order of any court or other governmental authority which in your opinion
materially and adversely affects, or will materially and adversely affect, the
business, prospects, financial condition or results of operations of the Company
and its subsidiaries, taken as a whole, (v) the declaration of a banking
moratorium by either federal or New York State authorities or (vi) the taking of
any action by any federal, state or local government or agency in respect of its
monetary or
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fiscal affairs which in your opinion has a material adverse effect on the
financial markets in the United States.
11. MISCELLANEOUS. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (i) if to the Company, to Great Lakes
Acquisition Corp., c/o American Industrial Partners, One Maritime Plaza, Suite
2525, San Francisco, California, 94111, Attention: Lawrence W. Ward, and (ii) if
to the Initial Purchaser, to Donaldson, Lufkin & Jenrette Securities
Corporation, 277 Park Avenue, New York, New York 10172, Attention: Syndicate
Department, or in any case to such other address as the person to be notified
may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company and the Initial Purchaser set
forth in or made pursuant to this Agreement shall remain operative and in full
force and effect, and will survive delivery of and payment for the Series A
Debentures, regardless of (i) any investigation, or statement as to the results
thereof, made by or on behalf of the Initial Purchaser, the officers or
directors of the Initial Purchaser, any person controlling the Initial
Purchaser, the Company, the officers or directors of the Company, or any person
controlling the Company, (ii) acceptance of the Series A Debentures and payment
for them hereunder and (iii) termination of this Agreement.
If for any reason the Series A Debentures are not delivered by or on
behalf of the Company as provided herein (other than as a result of any
termination of this Agreement pursuant to Section 10), the Company agrees to
reimburse the Initial Purchaser for all out-of-pocket expenses (including the
fees and disbursements of counsel) incurred by them. Notwithstanding any
termination of this Agreement, the Company shall be liable for all expenses
which it has agreed to pay pursuant to Section 5(i) hereof. The Company also
agrees to reimburse the Initial Purchaser and its officers, directors and each
person, if any, who controls the Initial Purchaser within the meaning of Section
15 of the Act or Section 20 of the Exchange Act for any and all fees and
expenses (including without limitation the fees and expenses of counsel)
incurred by them in connection with enforcing their rights under this Agreement
(including without limitation its rights under Section 8).
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, the Initial
Purchaser, the Initial Purchaser's directors and officers, any controlling
persons referred to herein, the directors of the Company and their respective
successors and assigns, all as and to the extent provided in this Agreement, and
no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include a purchaser of
any of the Series A Debentures from the Initial Purchaser merely because of such
purchase.
This Agreement shall be governed and construed in accordance with the
laws of the State of New York (including, without limitation, Section 5-1401 of
the New York General Obligations Law).
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
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Please confirm that the foregoing correctly sets forth
the agreement among Great Lakes Acquisition Corp. and the Initial Purchaser.
Very truly yours,
GREAT LAKES ACQUISITION CORP.
By: /s/ LAWRENCE WARD
------------------------------------
Name: Lawrence Ward
Title: President
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ MICHAEL HOOKS
-------------------------------------
Name: Michael Hooks
Title: Managing Director
S-1
<PAGE>
SCHEDULE A
SUBSIDIARIES
Subsidiaries of the Company:
Great Lakes Merger Sub Corp., a Delaware corporation
Subsidiaries of GLCC:
Copetro, S.A., an Argentine corporation
Great Lakes International Sales Corp., a Barbados corporation
A-1
<PAGE>
EXHIBIT A
FORM OF REGISTRATION RIGHTS AGREEMENT
Filed herewith as Exhibit 4.3.
<PAGE>
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
GREAT LAKES ACQUISITION CORP.
FIRST: The name of the Corporation is Great Lakes Acquisition Corp.
(hereinafter the "Corporation").
SECOND: The address of the registered office of the Corporation in
the State of Delaware is 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at that address is The
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware as set forth in Title 8 of the Delaware
Code (the "GCL").
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is 92,000 shares of Common Stock, each having a
par value of one penny ($.01).
FIFTH: The name and mailing address of the Sole Incorporator is as
follows:
CHOOSE ONE: Lynn Buckley
P.O. Box 636
Wilmington, DE 19899
SIXTH: The following provisions are inserted for the management of
the business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(1) The business and affairs of the Corporation shall be managed
by or under the direction of the Board of Directors.
(2) The directors shall have concurrent power with the
stockholders to make, alter,
<PAGE>
amend, change, add to or repeal the By-Laws of the Corporation.
(3) The number of directors of the Corporation shall be as from
time to time fixed by, or in the manner provided in, the By-Laws of
the Corporation. Election of directors need not be by written ballot
unless the By-Laws so provide.
(4) No director shall be personally liable to the Corporation or
any of its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) pursuant
to Section 174 of the GCL or (iv) for any transaction from which the
director derived an improper personal benefit. Any repeal or
modification of this Article SIXTH by the stockholders of the
Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or
modification with respect to acts or omissions occurring prior to such
repeal or modification.
(5) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby
empowered to exercise all such powers and do all such acts and things
as may be exercised or done by the Corporation, subject, nevertheless,
to the provisions of the GCL, this Certificate of Incorporation, and
any By-Laws adopted by the stockholders; provided, however, that no
By-Laws hereafter adopted by the stockholders shall invalidate any
prior act of the directors which would have been valid if such By-Laws
had not been adopted.
SEVENTH: Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws may provide. The books of the Corporation may
be kept
2
<PAGE>
(subject to any provision contained in the GCL) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the Corporation.
EIGHTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
I, THE UNDERSIGNED, being the Sole Incorporator hereinbefore named,
for the purpose of forming a corporation pursuant to the GCL, do make this
Certificate, hereby declaring and certifying that this is my act and deed and
the facts herein stated are true, and accordingly have hereunto set my hand this
31st day of March, 1998.
/s/ Lynn Buckley
___________________________
Lynn Buckley
Sole Incorporator
3
<PAGE>
Exhibit 3.2
BY-LAWS
OF
GREAT LAKES ACQUISITION CORP.
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the
Corporation shall be in the City of Willmington, County of New Castle, State of
Delaware.
SECTION 2. OTHER OFFICES. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware as shall be designated
from time to time by the Board of Directors.
SECTION 2. ANNUAL MEETINGS. The Annual Meetings of Stockholders for
the election of directors shall be held on such date and at such time as shall
be designated from time to time by the Board of Directors. Any other proper
business may be transacted at the Annual Meeting of Stockholders.
SECTION 3. SPECIAL MEETINGS. Unless otherwise required by law or by
the certificate of incorporation of the Corporation, as amended and restated
from time to
<PAGE>
time (the "Certificate of Incorporation"), Special Meetings of Stockholders,
for any purpose or purposes, may be called by either (i) the Chairman, if
there be one, or (ii) the President, (iii) any Vice President, if there be
one, (iv) the Secretary or (v) any Assistant Secretary, if there be one, and
shall be called by any such officer at the request in writing of (i) the
Board of Directors, (ii) a committee of the Board of Directors that has been
duly designated by the Board of Directors and whose powers and authority
include the power to call such meetings or (iii) stockholders owning a
majority of the capital stock of the Corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting. At a Special Meeting of Stockholders, only such business
shall be conducted as shall be specified in the notice of meeting (or any
supplement thereto).
SECTION 4. NOTICE. Whenever stockholders are required or permitted
to take any action at a meeting, a written notice of the meeting shall be given
which shall state the place, date and hour of the meeting, and, in the case of a
special meeting, the purpose or purposes for which the meeting is called.
Unless otherwise required by law, the written notice of any meeting shall be
given not less than ten nor more than sixty days before the date of the meeting
to each stockholder entitled to vote at such meeting.
SECTION 5. ADJOURNMENTS. Any meeting of the stockholders may be
adjourned from time to time to reconvene at the same or some other place, and
notice need not be given of any such adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken. At the
adjourned meeting, the Corporation may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than
thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 6. QUORUM. Unless otherwise required by law or the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
2
<PAGE>
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. A quorum, once established, shall
not be broken by the withdrawal of enough votes to leave less than a quorum.
If, however, such quorum shall not be present or represented at any meeting of
the stockholders, the stockholders entitled to vote thereat, present in person
or represented by proxy, shall have power to adjourn the meeting from time to
time, in the manner provided in Section 5, until a quorum shall be present or
represented.
SECTION 7. VOTING. Unless otherwise required by law, the Certificate
of Incorporation or these By-laws, any question brought before any meeting of
stockholders, other than the election of directors, shall be decided by the vote
of the holders of a majority of the total number of votes of the capital stock
represented and entitled to vote thereat, voting as a single class. Unless
otherwise provided in the Certificate of Incorporation, and subject to Section 5
of Article V hereof, each stockholder represented at a meeting of stockholders
shall be entitled to cast one vote for each share of the capital stock entitled
to vote thereat held by such stockholder. Such votes may be cast in person or
by proxy but no proxy shall be voted on or after three years from its date,
unless such proxy provides for a longer period. The Board of Directors, in its
discretion, or the officer of the Corporation presiding at a meeting of
stockholders, in such officer's discretion, may require that any votes cast at
such meeting shall be cast by written ballot.
SECTION 8. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Unless
otherwise provided in the Certificate of Incorporation, any action required or
permitted to be taken at any Annual or Special Meeting of Stockholders of the
Corporation, may be taken without a meeting, without prior notice and without a
vote, if a consent or consents in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and voted
and shall be delivered to the Corporation by delivery to its registered office
in the State of Delaware, its principal place of business, or an officer or
3
<PAGE>
agent of the corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Delivery made to the Corporation's
registered office shall be by hand or by certified or registered mail, return
receipt requested. Every written consent shall bear the date of signature of
each stockholder who signs the consent and no written consent shall be effective
to take the corporate action referred to therein unless, within sixty days of
the earliest dated consent delivered in the manner required by this Section 8 to
the Corporation, written consents signed by a sufficient number of holders to
take action are delivered to the Corporation by delivery to its registered
office in the state of Delaware, its principal place of business, or an officer
or agent of the Corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing and who, if the
action had been taken at a meeting, would have been entitled to notice of the
meeting if the record date for such meeting had been the date that written
consents signed by a sufficient number of holders to take the action were
delivered to the Corporation as provided above in this section.
SECTION 9. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting either at a place within the city where the meeting is to be held, which
place shall be specified in the notice of the meeting, or, if not so specified,
at the place where the meeting is to be held. The list shall also be produced
and kept at the time and place of the meeting during the whole time thereof, and
may be inspected by any stockholder of the Corporation who is present.
4
<PAGE>
SECTION 10. STOCK LEDGER. The stock ledger of the Corporation shall
be the only evidence as to who are the stockholders entitled to examine the
stock ledger, the list required by Section 9 of this Article II or the books of
the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
SECTION 11. CONDUCT OF MEETINGS. The Board of Directors of the
Corporation may adopt by resolution such rules and regulations for the conduct
of the meeting of the stockholders as it shall deem appropriate. Except to the
extent inconsistent with such rules and regulations as adopted by the Board of
Directors, the chairman of any meeting of the stockholders shall have the right
and authority to prescribe such rules, regulations and procedures and to do all
such acts as, in the judgment of such chairman, are appropriate for the proper
conduct of the meeting. Such rules, regulations or procedures, whether adopted
by the Board of Directors or prescribed by the chairman of the meeting, may
include, without limitation, the following: (i) the establishment of an agenda
or order of business for the meeting; (ii) the determination of when the polls
shall open and close for any given matter to be voted on at the meeting; (iii)
rules and procedures for maintaining order at the meeting and the safety of
those present; (iv) limitations on attendance at or participation in the meeting
to stockholders of record of the corporation, their duly authorized and
constituted proxies or such other persons as the chairman of the meeting shall
determine; (v) restrictions on entry to the meeting after the time fixed for the
commencement thereof; and (vi) limitations on the time allotted to questions or
comments by participants.
5
<PAGE>
ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND ELECTION OF DIRECTORS. The Board of
Directors shall consist of not less than one nor more than fifteen members,
the exact number of which shall initially be fixed by the Incorporator and
thereafter from time to time by the Board of Directors. Except as provided
in Section 2 of this Article III, directors shall be elected by a plurality
of the votes cast at the Annual Meetings of Stockholders and each director so
elected shall hold office until the next Annual Meeting of Stockholders and
until such director's successor is duly elected and qualified, or until such
director's earlier death, resignation or removal. Any director may resign at
any time upon written notice to the Corporation. Directors need not be
stockholders.
SECTION 2. VACANCIES. Unless otherwise required by law or the
Certificate of Incorporation, vacancies arising through death, resignation,
removal, an increase in the number of directors or otherwise may be filled only
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and the directors so chosen shall hold office until
the next annual election and until their successors are duly elected and
qualified, or until their earlier death, resignation or removal.
SECTION 3. DUTIES AND POWERS. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of Directors
which may exercise all such powers of the Corporation and do all such lawful
acts and things as are not by statute or by the Certificate of Incorporation or
by these By-Laws required to be exercised or done by the stockholders.
SECTION 4. MEETINGS. The Board of Directors may hold meetings, both
regular and special, either within or without the State of Delaware. Regular
meetings of the Board of Directors may be held without notice at such time and
at such place as may from time to time be determined by the Board of Directors.
Special meetings of the Board of Directors may be called by the Chairman, if
there be one, the President, or by any
6
<PAGE>
director. Notice thereof stating the place, date and hour of the meeting
shall be given to each director either by mail not less than forty-eight (48)
hours before the date of the meeting, by telephone or telegram on twenty-four
(24) hours' notice, or on such shorter notice as the person or persons
calling such meeting may deem necessary or appropriate in the circumstances.
SECTION 5. QUORUM. Except as otherwise required by law or the
Certificate of Incorporation, at all meetings of the Board of Directors, a
majority of the entire Board of Directors shall constitute a quorum for the
transaction of business and 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. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting of the time and
place of the adjourned meeting, until a quorum shall be present.
SECTION 6. ACTIONS BY WRITTEN CONSENT. Unless otherwise provided in
the Certificate of Incorporation, or these By-Laws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all the members of the
Board of Directors or committee, as the case may be, consent thereto in writing,
and the writing or writings are filed with the minutes of proceedings of the
Board of Directors or committee.
SECTION 7. MEETINGS BY MEANS OF CONFERENCE TELEPHONE. Unless
otherwise provided in the Certificate of Incorporation, members of the Board of
Directors of the Corporation, or any committee thereof, may participate in a
meeting of the Board of Directors or such committee by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to this Section 7 shall constitute presence in person at such meeting.
SECTION 8. COMMITTEES. The Board of Directors may designate one or
more committees, each committee to consist of one or more of the directors of
the Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may
7
<PAGE>
replace any absent or disqualified member at any meeting of any such
committee. In the absence or disqualification of a member of a committee,
and in the absence of a designation by the Board of Directors of an alternate
member to replace the absent or disqualified member, the member or members
thereof present at any meeting and not disqualified from voting, whether or
not such member or members constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place
of any absent or disqualified member. Any committee, to the extent permitted
by law and provided in the resolution establishing such committee, shall have
and may exercise all the powers and authority of the Board of Directors in
the management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it. Each committee shall keep regular minutes and report to the
Board of Directors when required.
SECTION 9. COMPENSATION. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director, payable in cash or securities. No such payment shall
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees may
be allowed like compensation for attending committee meetings.
SECTION 10. INTERESTED DIRECTORS. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers or have a financial interest, shall be void or voidable solely for this
reason, or solely because the director or officer is present at or participates
in the meeting of the Board of Directors or committee thereof which authorizes
the contract or transaction, or solely because the director or officer's vote is
counted for such purpose if (i) the material facts as to the director or
officer's relationship or interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or the committee, and the Board
of Directors or committee in
8
<PAGE>
good faith authorizes the contract or transaction by the affirmative votes of
a majority of the disinterested directors, even though the disinterested
directors be less than a quorum; or (ii) the material facts as to the
director or officer's relationship or interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good
faith by vote of the stockholders; or (iii) the contract or transaction is
fair as to the Corporation as of the time it is authorized, approved or
ratified by the Board of Directors, a committee thereof or the stockholders.
Common or interested directors may be counted in determining the presence of
a quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
ARTICLE IV
OFFICERS
SECTION 1. GENERAL. The officers of the Corporation shall be chosen
by the Board of Directors and shall be a President, a Secretary and a Treasurer.
The Board of Directors, in its discretion, also may choose a Chairman of the
Board of Directors (who must be a director) and one or more Vice Presidents,
Assistant Secretaries, Assistant Treasurers and other officers. Any number of
offices may be held by the same person, unless otherwise prohibited by law or
the Certificate of Incorporation. The officers of the Corporation need not be
stockholders of the Corporation nor, except in the case of the Chairman of the
Board of Directors, need such officers be directors of the Corporation.
SECTION 2. ELECTION. The Board of Directors, at its first meeting
held after each Annual Meeting of Stockholders (or action by written consent of
stockholders in lieu of the Annual Meeting of Stockholders), shall elect the
officers of the Corporation who shall hold their offices for such terms and
shall exercise such powers and perform such duties as shall be determined from
time to time by the Board of Directors; and all officers of the Corporation
shall hold office until their successors are chosen and qualified, or until
their earlier death, resignation or removal. Any officer
9
<PAGE>
elected by the Board of Directors may be removed at any time by the
affirmative vote of the Board of Directors. Any vacancy occurring in any
office of the Corporation shall be filled by the Board of Directors. The
salaries of all officers of the Corporation shall be fixed by the Board of
Directors.
SECTION 3. VOTING SECURITIES OWNED BY THE CORPORATION. Powers of
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by the President or any Vice President or any
other officer authorized to do so by the Board of Directors and any such officer
may, in the name of and on behalf of the Corporation, take all such action as
any such officer may deem advisable to vote in person or by proxy at any meeting
of security holders of any corporation in which the Corporation may own
securities and at any such meeting shall possess and may exercise any and all
rights and power incident to the ownership of such securities and which, as the
owner thereof, the Corporation might have exercised and possessed if present.
The Board of Directors may, by resolution, from time to time confer like powers
upon any other person or persons.
SECTION 4. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the
Board of Directors, if there be one, shall preside at all meetings of the
stockholders and of the Board of Directors. The Chairman of the Board of
Directors shall be the Chief Executive Officer of the Corporation, unless the
Board of Directors designates the President as the Chief Executive Officer, and,
except where by law the signature of the President is required, the Chairman of
the Board of Directors shall possess the same power as the President to sign all
contracts, certificates and other instruments of the Corporation which may be
authorized by the Board of Directors. During the absence or disability of the
President, the Chairman of the Board of Directors shall exercise all the powers
and discharge all the duties of the President. The Chairman of the Board of
Directors shall also perform such other duties and may exercise such other
powers as may from time to time be assigned by these By-Laws or by the Board of
Directors.
10
<PAGE>
SECTION 5. PRESIDENT. The President shall, subject to the control of
the Board of Directors and, if there be one, the Chairman of the Board of
Directors, have general supervision of the business of the Corporation and shall
see that all orders and resolutions of the Board of Directors are carried into
effect. The President shall execute all bonds, mortgages, contracts and other
instruments of the Corporation requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise signed
and executed and except that the other officers of the Corporation may sign and
execute documents when so authorized by these By-Laws, the Board of Directors or
the President. In the absence or disability of the Chairman of the Board of
Directors, or if there be none, the President shall preside at all meetings of
the stockholders and the Board of Directors. If there be no Chairman of the
Board of Directors, or if the Board of Directors shall otherwise designate, the
President shall be the Chief Executive Officer of the Corporation. The
President shall also perform such other duties and may exercise such other
powers as may from time to time be assigned to such officer by these By-Laws or
by the Board of Directors.
SECTION 6. VICE PRESIDENTS. At the request of the President or in
the President's absence or in the event of the President's inability or refusal
to act (and if there be no Chairman of the Board of Directors), the Vice
President, or the Vice Presidents if there is more than one (in the order
designated by the Board of Directors), shall perform the duties of the
President, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the President. Each Vice President shall perform such
other duties and have such other powers as the Board of Directors from time to
time may prescribe. If there be no Chairman of the Board of Directors and no
Vice President, the Board of Directors shall designate the officer of the
Corporation who, in the absence of the President or in the event of the
inability or refusal of the President to act, shall perform the duties of the
President, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the President.
SECTION 7. SECRETARY. The Secretary shall attend all meetings of the
Board of Directors and all meetings of stockholders and record all the
proceedings
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thereat in a book or books to be kept for that purpose; the Secretary shall
also perform like duties for committees of the Board of Directors when
required. The Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors,
and shall perform such other duties as may be prescribed by the Board of
Directors, the Chairman of the Board of Directors or the President, under
whose supervision the Secretary shall be. If the Secretary shall be unable
or shall refuse to cause to be given notice of all meetings of the
stockholders and special meetings of the Board of Directors, and if there be
no Assistant Secretary, then either the Board of Directors or the President
may choose another officer to cause such notice to be given. The Secretary
shall have custody of the seal of the Corporation and the Secretary or any
Assistant Secretary, if there be one, shall have authority to affix the same
to any instrument requiring it and when so affixed, it may be attested by the
signature of the Secretary or by the signature of any such Assistant
Secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the Corporation and to attest to the affixing by
such officer's signature. The Secretary shall see that all books, reports,
statements, certificates and other documents and records required by law to
be kept or filed are properly kept or filed, as the case may be.
SECTION 8. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all transactions as Treasurer and of the financial condition of the Corporation.
If required by the Board of Directors, the Treasurer shall give the Corporation
a bond in such sum and with such surety or sureties as shall be satisfactory to
the Board of Directors for the faithful performance of the duties of the office
of the Treasurer and for the restoration to
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the Corporation, in case of the Treasurer's death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property
of whatever kind in the Treasurer's possession or under the Treasurer's
control belonging to the Corporation.
SECTION 9. ASSISTANT SECRETARIES. Assistant Secretaries, if there be
any, shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President, any Vice President,
if there be one, or the Secretary, and in the absence of the Secretary or in the
event of the Secretary's disability or refusal to act, shall perform the duties
of the Secretary, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the Secretary.
SECTION 10. ASSISTANT TREASURERS. Assistant Treasurers, if there be
any, shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President, any Vice President,
if there be one, or the Treasurer, and in the absence of the Treasurer or in the
event of the Treasurer's disability or refusal to act, shall perform the duties
of the Treasurer, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the Treasurer. If required by the Board of
Directors, an Assistant Treasurer shall give the Corporation a bond in such sum
and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of the office of Assistant
Treasurer and for the restoration to the Corporation, in case of the Assistant
Treasurer's death, resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in the Assistant
Treasurer's possession or under the Assistant Treasurer's control belonging to
the Corporation.
SECTION 11. OTHER OFFICERS. Such other officers as the Board of
Directors may choose shall perform such duties and have such powers as from time
to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and powers.
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ARTICLE V
STOCK
SECTION 1. FORM OF CERTIFICATES. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation (i) by the Chairman of the Board of Directors, the President or a
Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Corporation, certifying the number of
shares owned by such stockholder in the Corporation.
SECTION 2. SIGNATURES. Any or all of the signatures on a certificate
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if such person were such officer, transfer agent or registrar at the date of
issue.
SECTION 3. LOST CERTIFICATES. The Board of Directors may direct a
new certificate to be issued in place of any certificate theretofore issued by
the Corporation alleged to have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the person claiming the certificate of stock to
be lost, stolen or destroyed. When authorizing such issue of a new certificate,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or the owner's legal representative, to advertise the same in such
manner as the Board of Directors shall require and/or to give the Corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed or the issuance of such new certificate.
SECTION 4. TRANSFERS. Stock of the Corporation shall be transferable
in the manner prescribed by law and in these By-Laws. Transfers of stock shall
be made on the books of the Corporation only by the person named in the
certificate or by such person's attorney
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lawfully constituted in writing and upon the surrender of the certificate
therefor, which shall be cancelled before a new certificate shall be issued.
No transfer of stock shall be valid as against the Corporation for any
purpose until it shall have been entered in the stock records of the
Corporation by an entry showing from and to whom transferred.
SECTION 5. RECORD DATE.
(a) In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the board of directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which record date shall not be more
than sixty nor less than ten days before the date of such meeting. If no record
date is fixed by the Board of Directors, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held. A determination of stockholders
of record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; providing, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
(b) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which record date shall not be more than ten days after the date
upon which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the Board of Directors is
required by law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
Corporation by delivery to its registered office in this State, its principal
place of business, or an officer or agent of the Corporation
15
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having custody of the book in which proceedings of meetings of stockholders
are recorded. Delivery made to a corporation's registered office shall be by
hand or by certified or registered mail, return receipt requested. If no
record date has been fixed by the Board of Directors and prior action by the
Board of Directors is required by law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolutions taking such prior action.
(c) In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or
allotment of any rights or the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose
of any other lawful action, the Board of Directors may fix a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted, and which record date shall be not more than
sixty days prior to such action. If no record date is fixed, the record date
for determining stockholders for any such purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto.
SECTION 6. RECORD OWNERS. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any 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 required by
law.
ARTICLE VI
NOTICES
SECTION 1. NOTICES. Whenever written notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee
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or stockholder, at such person's address as it appears on the records of the
Corporation, with postage thereon prepaid, and such notice shall be deemed to
be given at the time when the same shall be deposited in the United States
mail. Written notice may also be given personally or by telegram, telex or
cable.
SECTION 2. WAIVERS OF NOTICE. Whenever any notice is required by
law, the Certificate of Incorporation or these By-Laws, to be given to any
director, member of a committee or stockholder, a waiver thereof in writing,
signed, by the person or persons entitled to said notice, whether before or
after the time stated therein, shall be deemed equivalent thereto. Attendance
of a person at a meeting, present in person or represented by proxy, shall
constitute a waiver of notice of such meeting, except where the person attends
the meeting for the express purpose of objecting at the beginning of the meeting
to the transaction of any business because the meeting is not lawfully called or
convened.
ARTICLE VII
GENERAL PROVISIONS
SECTION 1. DIVIDENDS. Dividends upon the capital stock of the
Corporation, subject to the requirements of the DGCL and the provisions of the
Certificate of Incorporation, if any, may be declared by the Board of Directors
at any regular or special meeting of the Board of Directors (or any action by
written consent in lieu thereof in accordance with Section 6 of Article III
hereof), and may be paid in cash, in property, or in shares of the Corporation's
capital stock. Before payment of any dividend, there may be set aside out of
any funds of the Corporation available for dividends such sum or sums as the
Board of Directors from time to time, in its absolute discretion, deems proper
as a reserve or reserves to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the Corporation, or for any proper
purpose, and the Board of Directors may modify or abolish any such reserve.
SECTION 2. DISBURSEMENTS. All checks or demands for money and notes
of the Corporation shall be signed by such officer or officers or such other
person
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or persons as the Board of Directors may from time to time designate.
SECTION 3. FISCAL YEAR. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
SECTION 4. CORPORATE SEAL. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
SECTION 1. POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS
OTHER THAN THOSE BY OR IN THE RIGHT OF THE CORPORATION. Subject to Section 3
of this Article VIII, the Corporation shall 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 such person is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at
the request of the Corporation as a director or officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding if such person
acted in good faith and in a manner such person 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 such
person's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which such person
reasonably believed to be in or
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not opposed to the best interests of the Corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that such
person's conduct was unlawful.
SECTION 2. POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS BY OR
IN THE RIGHT OF THE CORPORATION. Subject to Section 3 of this Article VIII, the
Corporation shall 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 judgment in its favor by reason of the
fact that such person is or was a director or officer of the Corporation, or is
or was a director or officer of the Corporation serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection with the defense or settlement of such action or suit
if such person acted in good faith and in a manner such person 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 to the
Corporation unless and only to the extent that the Court of Chancery or 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 indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
SECTION 3. AUTHORIZATION OF INDEMNIFICATION. Any indemnification
under this Article VIII (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director or officer is proper in the circumstances
because such person has met the applicable standard of conduct set forth in
Section 1 or Section 2 of this Article VIII, as the case may be. Such
determination shall be made, with respect to a person who is a director or
officer at the time of such determination, (i) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even though
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less than a quorum, or (ii) by a committee of such directors designated by a
majority vote of such directors, even though less than a quorum, or (iii) if
there are no such directors, or if such directors so direct, by independent
legal counsel in a written opinion or (iv) by the stockholders. Such
determination shall be made, with respect to former directors and officers, by
any person or persons having the authority to act on the matter on behalf of the
Corporation. To the extent, however, that a present or former director or
officer of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding described above, or in defense of any
claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection therewith, without the necessity of authorization in the
specific case.
SECTION 4. GOOD FAITH DEFINED. For purposes of any determination
under Section 3 of this Article VIII, a person shall be deemed to have acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the Corporation, or, with respect to any
criminal action or proceeding, to have had no reasonable cause to believe such
person's conduct was unlawful, if such person's action is based on the records
or books of account of the Corporation or another enterprise, or on information
supplied to such person by the officers of the Corporation or another enterprise
in the course of their duties, or on the advice of legal counsel for the
Corporation or another enterprise or on information or records given or reports
made to the Corporation or another enterprise by an independent certified public
accountant or by an appraiser or other expert selected with reasonable care by
the Corporation or another enterprise. The term "another enterprise" as used in
this Section 4 shall mean any other corporation or any partnership, joint
venture, trust, employee benefit plan or other enterprise of which such person
is or was serving at the request of the Corporation as a director, officer,
employee or agent. The provisions of this Section 4 shall not be deemed to be
exclusive or to limit in any way the circumstances in which a person may be
deemed to have met the applicable standard of conduct set forth in Section 1 or
2 of this Article VIII, as the case may be.
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SECTION 5. INDEMNIFICATION BY A COURT. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article VIII, and
notwithstanding the absence of any determination thereunder, any director or
officer may apply to the Court of Chancery in the State of Delaware for
indemnification to the extent otherwise permissible under Sections 1 and 2 of
this Article VIII. The basis of such indemnification by a court shall be a
determination by such court that indemnification of the director or officer is
proper in the circumstances because such person has met the applicable standards
of conduct set forth in Section 1 or 2 of this Article VIII, as the case may be.
Neither a contrary determination in the specific case under Section 3 of this
Article VIII nor the absence of any determination thereunder shall be a defense
to such application or create a presumption that the director or officer seeking
indemnification has not met any applicable standard of conduct. Notice of any
application for indemnification pursuant to this Section 5 shall be given to the
Corporation promptly upon the filing of such application. If successful, in
whole or in part, the director or officer seeking indemnification shall also be
entitled to be paid the expense of prosecuting such application.
SECTION 6. EXPENSES PAYABLE IN ADVANCE. Expenses incurred by a
director or officer in defending any civil, criminal, administrative or
investigative action, suit or proceeding shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that such person is not entitled to
be indemnified by the Corporation as authorized in this Article VIII.
SECTION 7. NONEXCLUSIVITY OF INDEMNIFICATION AND ADVANCEMENT OF
EXPENSES. The indemnification and advancement of expenses provided by or
granted pursuant to this Article VIII shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under the Certificate of Incorporation, any By-Law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in such
person's official capacity and as to action in another capacity while holding
such office, it being the policy of the Corporation that
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indemnification of the persons specified in Sections 1 and 2 of this Article
VIII shall be made to the fullest extent permitted by law. The provisions of
this Article VIII shall not be deemed to preclude the indemnification of any
person who is not specified in Section 1 or 2 of this Article VIII but whom
the Corporation has the power or obligation to indemnify under the provisions
of the General Corporation Law of the State of Delaware, or otherwise.
SECTION 8. INSURANCE. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise against any liability asserted against such person and incurred
by such person in any such capacity, or arising out of such person's status as
such, whether or not the Corporation would have the power or the obligation to
indemnify such person against such liability under the provisions of this
Article VIII.
SECTION 9. CERTAIN DEFINITIONS. For purposes of this Article VIII,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors or officers, so that any person who is or was a director or officer of
such constituent corporation, or is or was a director or officer of such
constituent corporation serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, shall stand in
the same position under the provisions of this Article VIII with respect to the
resulting or surviving corporation as such person would have with respect to
such constituent corporation if its separate existence had continued. For
purposes of this Article VIII, references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of
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the Corporation which imposes duties on, or involves services by, such
director or officer with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner such person reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interests of the Corporation"
as referred to in this Article VIII.
SECTION 10. SURVIVAL OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES.
The indemnification and advancement of expenses provided by, or granted pursuant
to, this Article VIII shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director or officer and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
SECTION 11. LIMITATION ON INDEMNIFICATION. Notwithstanding anything
contained in this Article VIII to the contrary, except for proceedings to
enforce rights to indemnification (which shall be governed by Section 5 hereof),
the Corporation shall not be obligated to indemnify any director or officer in
connection with a proceeding (or part thereof) initiated by such person unless
such proceeding (or part thereof) was authorized or consented to by the Board of
Directors of the Corporation.
SECTION 12. INDEMNIFICATION OF EMPLOYEES AND AGENTS. The Corporation
may, to the extent authorized from time to time by the Board of Directors,
provide rights to indemnification and to the advancement of expenses to
employees and agents of the Corporation similar to those conferred in this
Article VIII to directors and officers of the Corporation.
ARTICLE IX
AMENDMENTS
SECTION 1. AMENDMENTS. These By-Laws may be altered, amended or
repealed, in whole or in part, or new By-Laws may be adopted by the stockholders
or by the Board of Directors, provided, however, that notice of
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such alteration, amendment, repeal or adoption of new By-Laws be contained in
the notice of such meeting of stockholders or Board of Directors as the case
may be. All such amendments must be approved by either the holders of a
majority of the outstanding capital stock entitled to vote thereon or by a
majority of the entire Board of Directors then in office.
SECTION 2. ENTIRE BOARD OF DIRECTORS. As used in this Article IX and
in these By-Laws generally, the term "entire Board of Directors" means the total
number of directors which the Corporation would have if there were no vacancies.
* * *
Adopted as of:____________________________________________________
Last Amended as of:_______________________________
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GREAT LAKES ACQUISITION CORP.
AS ISSUER
13-1/8% SENIOR DISCOUNT DEBENTURES DUE 2009
_____________
INDENTURE
DATED AS OF MAY 22, 1998
_____________
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A.
TRUSTEE
<PAGE>
TABLE OF CONTENTS
PAGE
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ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Other Definitions . . . . . . . . . . . . . . . . . . . . .25
Section 1.03. Incorporation by Reference of Trust
Indenture Act. . . . . . . . . . . . . . . . . . . . . . .25
Section 1.04. Rules of Construction . . . . . . . . . . . . . . . . . . .26
ARTICLE 2. THE DEBENTURES
Section 2.01. Form and Dating . . . . . . . . . . . . . . . . . . . . . .26
Section 2.02. Execution and Authentication. . . . . . . . . . . . . . . .27
Section 2.03. Registrar and Paying Agent. . . . . . . . . . . . . . . . .28
Section 2.04. Paying Agent to Hold Money in Trust . . . . . . . . . . . .28
Section 2.05. Holder Lists. . . . . . . . . . . . . . . . . . . . . . . .29
Section 2.06. Transfer and Exchange . . . . . . . . . . . . . . . . . . .29
Section 2.07. Replacement Debentures. . . . . . . . . . . . . . . . . . .42
Section 2.08. Outstanding Debentures. . . . . . . . . . . . . . . . . . .43
Section 2.09. Treasury Debentures. . . . . . . . . . . . . . . . . . . .43
Section 2.10. Temporary Debentures . . . . . . . . . . . . . . . . . . .43
Section 2.11. Cancellation. . . . . . . . . . . . . . . . . . . . . . . .44
Section 2.12. Defaulted Interest. . . . . . . . . . . . . . . . . . . . .44
ARTICLE 3. REDEMPTION
Section 3.01. Notices to Trustee. . . . . . . . . . . . . . . . . . . . .45
Section 3.02. Selection of Debentures to Be Redeemed. . . . . . . . . . .45
Section 3.03. Notice of Redemption. . . . . . . . . . . . . . . . . . . .45
Section 3.04. Effect of Notice of Redemption. . . . . . . . . . . . . . .46
Section 3.05. Deposit of Redemption Price . . . . . . . . . . . . . . . .47
Section 3.06. Debentures Redeemed in Part . . . . . . . . . . . . . . . .47
Section 3.07. Optional Redemption . . . . . . . . . . . . . . . . . . . .47
Section 3.08. No Mandatory Redemption . . . . . . . . . . . . . . . . . .48
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ARTICLE 4. COVENANTS
Section 4.01. Payment of Debentures . . . . . . . . . . . . . . . . . . .48
Section 4.02. Maintenance of Office or Agency . . . . . . . . . . . . . .49
Section 4.03. SEC Reports and Reports to Holders. . . . . . . . . . . . .49
Section 4.04. Compliance Certificate. . . . . . . . . . . . . . . . . . .50
Section 4.05. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .50
Section 4.06. Stay, Extension and Usury Laws. . . . . . . . . . . . . . .50
Section 4.07. Limitation on Indebtedness and Issuance of
Disqualified Stock . . . . . . . . . . . . . . . . . . . .51
Section 4.08. Limitation on Liens . . . . . . . . . . . . . . . . . . . .54
Section 4.09. Limitation on Restricted Payments . . . . . . . . . . . . .54
Section 4.10. Limitation on Dividend and Other Payment
Restrictions Affecting Subsidiaries. . . . . . . . . . . .58
Section 4.11. Limitation on Lines of Business . . . . . . . . . . . . . .59
Section 4.12. Limitation on Transactions with Affiliates. . . . . . . . .60
Section 4.13. Limitation on Asset Sales . . . . . . . . . . . . . . . . .60
Section 4.14. Repurchase of Debentures upon a Change of Control . . . . .64
ARTICLE 5. SUCCESSORS
Section 5.01. Merger, Consolidation or Sale of Assets . . . . . . . . . .64
Section 5.02. Successor Corporation Substituted . . . . . . . . . . . . .65
ARTICLE 6. DEFAULTS AND REMEDIES
Section 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . .65
Section 6.02. Acceleration. . . . . . . . . . . . . . . . . . . . . . . .67
Section 6.03. Other Remedies. . . . . . . . . . . . . . . . . . . . . . .67
Section 6.04. Waiver of Past Defaults . . . . . . . . . . . . . . . . . .68
Section 6.05. Control by Majority . . . . . . . . . . . . . . . . . . . .68
Section 6.06. Limitation on Suits . . . . . . . . . . . . . . . . . . . .68
Section 6.07. Rights of Holders of Debentures to
Receive Payment. . . . . . . . . . . . . . . . . . . . . .69
Section 6.08. Collection Suit by Trustee. . . . . . . . . . . . . . . . .69
Section 6.09. Trustee May File Proofs of Claim. . . . . . . . . . . . . .70
Section 6.10. Priorities. . . . . . . . . . . . . . . . . . . . . . . . .70
Section 6.11. Undertaking for Costs . . . . . . . . . . . . . . . . . . .71
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ARTICLE 7. TRUSTEE
Section 7.01. Duties of Trustee . . . . . . . . . . . . . . . . . . . . .71
Section 7.02. Rights of Trustee . . . . . . . . . . . . . . . . . . . . .72
Section 7.03. Individual Rights of Trustee. . . . . . . . . . . . . . . .74
Section 7.04. Trustee's Disclaimer. . . . . . . . . . . . . . . . . . . .74
Section 7.05. Notice of Defaults. . . . . . . . . . . . . . . . . . . . .74
Section 7.06. Reports by Trustee to Holders of the Debentures . . . . . .74
Section 7.07. Compensation and Indemnity. . . . . . . . . . . . . . . . .75
Section 7.08. Replacement of Trustee. . . . . . . . . . . . . . . . . . .76
Section 7.09. Successor Trustee by Merger, etc. . . . . . . . . . . . . .77
Section 7.10. Eligibility; Disqualification . . . . . . . . . . . . . . .77
Section 7.11. Preferential Collection of Claims
Against Company. . . . . . . . . . . . . . . . . . . . . .77
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or
Covenant Defeasance. . . . . . . . . . . . . . . . . . . .78
Section 8.02. Legal Defeasance and Discharge. . . . . . . . . . . . . . .78
Section 8.03. Covenant Defeasance . . . . . . . . . . . . . . . . . . . .78
Section 8.04. Conditions to Legal or Covenant Defeasance. . . . . . . . .79
Section 8.05. Deposited Money and Government Securities to be
Held in Trust; Other Miscellaneous Provisions. . . . . . .80
Section 8.06. Repayment to Company. . . . . . . . . . . . . . . . . . . .81
Section 8.07. Reinstatement . . . . . . . . . . . . . . . . . . . . . . .81
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Debentures. . . . . . . . . .82
Section 9.02. With Consent of Holders of Debentures . . . . . . . . . . .83
Section 9.03. Compliance with Trust Indenture Act . . . . . . . . . . . .85
Section 9.04. Revocation and Effect of Consents . . . . . . . . . . . . .85
Section 9.05. Notation on or Exchange of Debentures . . . . . . . . . . .85
Section 9.06. Trustee to Sign Amendments, etc.. . . . . . . . . . . . . .85
ARTICLE 10. MISCELLANEOUS
Section 10.01. Trust Indenture Act Controls . . . . . . . . . . . . . . .86
Section 10.02. Notices. . . . . . . . . . . . . . . . . . . . . . . . . .86
Section 10.03. Communication by Holders of Debentures with Other
Holders of Debentures . . . . . . . . . . . . . . . . . .87
Section 10.04. Certificate and Opinion as to Conditions Precedent . . . .87
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Section 10.05. Statements Required in Certificate or Opinion. . . . . . .88
Section 10.06. Rules by Trustee and Agents. . . . . . . . . . . . . . . .88
Section 10.07. No Personal Liability of Directors, Officers,
Employees and Stockholders. . . . . . . . . . . . . . . .88
Section 10.08. Governing Law. . . . . . . . . . . . . . . . . . . . . . .89
Section 10.09. No Adverse Interpretation of Other Agreements. . . . . . .89
Section 10.10. Successors . . . . . . . . . . . . . . . . . . . . . . . .89
Section 10.11. Severability . . . . . . . . . . . . . . . . . . . . . . .89
Section 10.12. Counterpart Originals. . . . . . . . . . . . . . . . . . .89
Section 10.13. Table of Contents, Headings, Etc.. . . . . . . . . . . . .89
EXHIBITS
EXHIBIT A FORM OF DEBENTURE
EXHIBIT B FORM OF CERTIFICATE OF TRANSFER
EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE
EXHIBIT D FORM OF CERTIFICATE FROM ACQUIRING
INSTITUTIONAL ACCREDITED INVESTOR
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INDENTURE, dated as of May 22, 1998, among Great Lakes Acquisition
Corp., a Delaware corporation (the "Company"), and State Street Bank and Trust
Company of California, N.A., as trustee (the "Trustee").
Each party agrees as follows for the benefit of each other and for the
equal and ratable benefit of the Holders of the 13-1/8% Series A Senior Discount
Debentures due 2009 (the "Series A Debentures") and the 13-1/8% Series B Senior
Discount Debentures due 2009 (the "Series B Debentures" and, together with the
Series A Debentures, the "Debentures"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS
"144A GLOBAL DEBENTURE" means a global debenture in the form of
Exhibit A hereto bearing the Global Debenture 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 Debentures sold in reliance on Rule 144A.
"ACCRETED VALUE" means, as of any date of determination prior to May
15, 2003, with respect to any Debenture, the sum of (a) the initial offering
price (which shall be calculated by discounting the aggregate principal amount
at maturity of such Debenture at a rate of 13-1/8% per annum, compounded
semi-annually on each May 15 and November 15, from May 15, 2003 to the date of
issuance) of such Debenture and (b) the portion of the excess of the principal
amount at maturity of such Debenture over such initial offering price which
shall have been accreted thereon through such date, such amount to be so
accreted on a daily basis at a rate of 13-1/8% per annum of the initial
offering price of such Debenture, compounded semi-annually on each May 15 and
November 15, from the date of issuance of the Debentures through the date of
determination, computed on the basis of a 360-day year of twelve 30-day months.
The Accreted Value on and after May 15, 2003 shall cease to accrue and shall
constitute 100% of the principal amount at maturity thereof.
"ACCRUED BANKRUPTCY INTEREST" means, with respect to any Indebtedness,
all interest accruing thereon after the filing of a petition by or against the
Company or any of its Subsidiaries under any Bankruptcy Law, in accordance with
<PAGE>
and at the rate (including any rate applicable upon any default or event of
default, to the extent lawful) specified in the documents evidencing or
governing such Indebtedness, whether or not the claim for such interest is
allowed as a claim after such filing in any proceeding under such Bankruptcy
Law.
"ACQUIRED INDEBTEDNESS" means, with respect to any specified Person,
(i) Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a 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.
"ACQUISITION TRANSACTIONS" means the transactions contemplated by (i)
the Merger Agreement, (ii) GLC's Offer to Purchase and Consent Solicitation
Statement dated April 24, 1998 with respect to GLC's offer to purchase any and
all of its outstanding 10% Senior Secured Notes due 2006, (iii) the execution
of, and initial borrowings under, the New Credit Agreement, (iv) the execution
of this Indenture and the issuance of the Series A Debentures hereunder on the
Issue Date, and (v) the execution of the Note Indenture and the issuance of
Senior Subordinated Notes thereunder on the Issue Date.
"AFFILIATE" means, with respect to any specified 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" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as used with
respect to any Person, will 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
securities of a Person will be deemed to be control. Notwithstanding the
foregoing, (a) the limited partners of AIP Capital Funds will not be deemed to
be Affiliates of AIP Capital Funds or AIP solely by reason of their investment
in AIP Capital Funds and (b) no Person (other than the Company or any Subsidiary
of the Company) in whom a Receivables Subsidiary makes an Investment in
connection with a Qualified Receivables Transaction will be deemed to be an
Affiliate of the Company or any of its Subsidiaries solely by reason of such
Investment.
"AGENT" means any Registrar, Paying Agent or co-registrar.
"AIP" means American Industrial Partners, a Delaware general
partnership.
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"AIP CAPITAL FUNDS" means American Industrial Partners Capital Fund,
L.P., a Delaware limited partnership, and American Industrial Partners Capital
Fund II, L.P., a Delaware limited partnership.
"APPLICABLE PROCEDURES" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Debenture, 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 that does not constitute a Restricted Payment or an Investment by
such Person of any of its non-cash assets (including, without limitation, by
way of a sale and leaseback and including the issuance, sale or other
transfer of any of the Capital Stock of any Subsidiary of such Person) other
than to the Company or to any of its Subsidiaries; and (ii) the issuance of
Equity Interests in any Subsidiaries or the sale of any Equity Interests in
any Subsidiaries, in each case, in one or a series of related transactions,
PROVIDED, that notwithstanding the foregoing, the term "Asset Sale" will not
include: (a) the sale, lease, conveyance, disposition or other transfer of
all or substantially all of the assets of the Company, as permitted pursuant
to Section 5.01; (b) the sale or lease of equipment, inventory, accounts
receivable or other assets in the ordinary course of business and to the
extent that such sales or leases are not part of a sale of the business
(unless such sale of such business would not be an Asset Sale) in which such
equipment was used or in which such inventory or accounts receivable arose;
(c) a transfer of assets by the Company to a Subsidiary of the Company or by
a Subsidiary of the Company to the Company or another Subsidiary of the
Company; (d) an issuance of Equity Interests by a Subsidiary of the Company
to the Company or to another Subsidiary of the Company; (e) the surrender or
waiver of contract rights or the settlement, release or surrender of
contract, tort or other claims of any kind; (f) the grant in the ordinary
course of business of any license of patents, trademarks, registrations
therefor and other similar intellectual property; (g) Permitted Investments
or Permitted Liens; (h) sales of accounts receivable and related assets of
the type specified in the definition of "Qualified Receivables Transaction"
to a Receivables Subsidiary for the fair market value thereof, including cash
in an amount at least equal to 75% of the book value thereof as determined in
accordance with GAAP; (i) transfers of accounts receivable and related assets
of the type specified in the definition of "Qualified Receivables
Transaction" (or a fractional undivided interest therein) by a Receivables
Subsidiary in a Qualified Receivables Transaction; and (j) the sale or
disposal of damaged, worn out or other obsolete personal property, inventory
or equipment in the ordinary course of business so long as such property is
no longer necessary for the proper conduct of the business of the Company or
such Subsidiary, as applicable. For the purposes of clause (h), notes
received in exchange for the transfer of accounts receivable and related
assets will be deemed cash if the Receivables Subsidiary or other payor is
required to repay said notes as soon as
3
<PAGE>
practicable from available cash collections less amounts required to be
established as reserves pursuant to contractual agreements with entities that
are not Affiliates of the Company entered into as part of a Qualified
Receivables Transaction.
"BOARD OF DIRECTORS" means the Board of Directors of the Company, or
any authorized committee of the Board of Directors.
"BOARD RESOLUTION" means a resolution duly adopted by the Board of
Directors.
"BORROWING BASE" means, as of any date, an amount equal to the sum of
(a) 75% of the face amount of all accounts receivable owned by the Company and
its Subsidiaries as of such date that are not more than 90 days past due, and
(b) 50% of the book value of all inventory owned by the Company and its
Subsidiaries as of such date, minus (c) the aggregate amount of trade payables
of the Company and its Subsidiaries outstanding 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 or trade payables as of a specific date, the Company may utilize the
most recent available information for purposes of calculating the Borrowing
Base.
"BROKER-DEALER" means any broker-dealer that receives Exchange
Debentures for its own account in the Exchange Offer in exchange for Debentures
that were acquired by such broker-dealer as a result of market-making or other
trading activities.
"BUSINESS DAY" means any day other than a Legal Holiday.
"CAPITAL LEASE OBLIGATION" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership, partnership
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 (a) securities issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the
United States is pledged in support thereof) having maturities not more than
twelve months from the date of acquisition,
4
<PAGE>
(b) U.S. dollar denominated (or foreign currency fully hedged) time deposits,
certificates of deposit, Eurodollar time deposits or Eurodollar certificates
of deposit of (i) any domestic commercial bank of recognized standing having
capital and surplus in excess of $100,000,000 or (ii) any bank whose
short-term commercial paper rating from S&P is at least A-1 or the equivalent
thereof or from Moody's is at least P-1 or the equivalent thereof (any such
bank being an "Approved Lender"), in each case with maturities of not more
than twelve months from the date of acquisition, (c) commercial paper and
variable or fixed rate notes issued by any Approved Lender (or by the parent
company thereof) or any variable rate notes issued by, or guaranteed by, any
domestic corporation rated A-2 (or the equivalent thereof) or better by S&P
or P-2 (or the equivalent thereof) or better by Moody's and maturing within
twelve months of the date of acquisition, (d) repurchase agreements with a
bank or trust company or recognized securities dealer having capital and
surplus in excess of $100,000,000 for direct obligations issued by or fully
guaranteed by the United States of America in which the Company will have a
perfected first priority security interest (subject to no other Liens) and
having, on the date of purchase thereof, a fair market value of at least 100%
of the amount of repurchase obligations, (e) interests in money market mutual
funds which invest solely in assets or securities of the type described in
subparagraphs (a), (b), (c) or (d) hereof and (f) in the case of any Foreign
Subsidiary: (i) direct obligations of the sovereign nation (or any agency
thereof) in which such Foreign Subsidiary is organized and is conducting
business or in obligations fully and unconditionally guaranteed by such
sovereign nation (or any agency thereof), (ii) investments of the type and
maturity described in clauses (a) through (e) above of foreign obligors,
which investments or obligors (or the direct or indirect parents of such
obligors) have ratings described in such clauses or equivalent ratings from
comparable foreign rating agencies or (iii) investments of the type and
maturity described in clauses (a) through (e) above of foreign obligors (or
the direct or indirect parents of such obligors), which investments or
obligors (or the direct or indirect parents of such obligors) are not rated
as provided in such clauses or in clause (ii) above but which are, in the
reasonable judgment of the Company, comparable in investment quality to such
investments and obligors (or the direct or indirect parent of such obligors).
"CEDEL" means Cedel Bank, S.A., or its successors.
"CHANGE OF CONTROL" means such time as (i) prior to the initial public
offering by the Company or any direct or indirect parent of the Company of its
common stock (other than a public offering pursuant to a registration statement
on Form S-8), AIP, AIP Capital Funds or any of their respective Affiliates
(collectively, the "Initial Investors") cease to be, directly or indirectly, the
beneficial owners, in the aggregate, of a majority of the voting power of the
voting Capital Stock of the Company or (ii) after the initial public offering by
the Company or any direct or indirect parent of the Company of its common stock
(other than a public offering pursuant to a registration
5
<PAGE>
statement on Form S-8), (A) any Schedule 13D, Form 13F or Schedule 13G under
the Exchange Act, or any amendment to such Schedule or Form, is received by
the Company which indicates that, or the Company otherwise becomes aware
that, a "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act) other than the Initial Investors or their
Related Parties (as defined below) has become, directly or indirectly, the
"beneficial owner," by way of merger, consolidation or otherwise, of 35% or
more of the voting power of the voting Capital Stock of the Company and (B)
such person or group has become, directly or indirectly, the beneficial owner
of a greater percentage of the voting Capital Stock of the Company than
beneficially owned by the Initial Investors or their Related Parties, or
(iii) the sale, lease or transfer of all or substantially all of the assets
of the Company to any person or group (other than to GLC or a Subsidiary of
GLC or to the Initial Investors or their Related Parties), or (iv) during any
period of two consecutive calendar years, individuals who at the beginning of
such period constituted the Board of Directors of the Company (together with
any new directors whose election by the Board of Directors of the Company or
whose nomination for election by the stockholders of the Company was approved
by a vote of a majority of the directors then still in office who either were
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the directors of the Company, then in office. "Related Party"
with respect to any Initial Investor means (A) any controlling stockholder,
80% (or more) owned Subsidiary, or spouse, or immediate family member (in the
case of any individual) of such Initial Investor or (B) 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 Initial Investor and/or such other persons
referred to in the immediately preceding clause (A).
"CONSOLIDATED EBITDA" means, with respect to the Company and its
Subsidiaries for any period, the sum of, without duplication, (i) the
Consolidated Net Income for such period, plus (ii) the Fixed Charges for such
period, plus (iii) provision for taxes based on income or profits for such
period (to the extent such income or profits were included in computing
Consolidated Net Income for such period), plus (iv) consolidated depreciation,
amortization and other non-cash charges of the Company and its Subsidiaries
required to be reflected as expenses on the books and records of the Company,
minus (v) cash payments with respect to any non-recurring, non-cash charges
previously added back pursuant to clause (iv), and (vi) excluding the impact of
foreign currency translations. Notwithstanding the foregoing, the provision for
taxes based on the income or profits of, and the depreciation and amortization
and other non-cash charges of, a Subsidiary of a Person will be added to
Consolidated Net Income to compute Consolidated EBITDA only to the extent (and
in the same proportion) that the Net Income of such Subsidiary was included in
calculating the Consolidated Net Income of such Person.
6
<PAGE>
"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 will be
included only to the extent of the amount of dividends or distributions paid in
cash to the referent Person or a Subsidiary, (ii) the Net Income of any Person
acquired in a pooling of interests transaction for any period prior to the date
of such acquisition will be excluded, (iii) the cumulative effect of a change in
accounting principles will be excluded, (iv) the Net Income of, or any dividends
or other distributions from, any Unrestricted Subsidiary, to the extent
otherwise included, shall be excluded, except to the extent cash or Cash
Equivalents are distributed to the Company or one of its Subsidiaries in a
transaction that does not relate to the liquidation of such Unrestricted
Subsidiary and (v) all other extraordinary gains and extraordinary losses will
be excluded.
"COPETRO CREDIT AGREEMENT" means the credit agreement, dated as of
February 4, 1997, between Copetro S.A., Banca Nazionale del Lavoro S.A. and the
other lenders party thereto, as amended, restated, supplemented or otherwise
modified from time to time.
"CORPORATE TRUST OFFICE" shall be at the address of the Trustee
specified in Section 10.02 hereof or such other address as to which the Trustee
may give notice to the Company.
"DEBENTURES CUSTODIAN" means the Trustee, as custodian with respect to
the Debentures in global form, or any successor entity thereto.
"DEFAULT" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"DEFINITIVE DEBENTURE" means a certificated Debenture registered in
the name of the Holder thereof and issued in accordance with Section 2.06
hereof, in the form of Exhibit A hereto except that such Debenture shall not
bear the Global Debenture Legend and shall not have the "Schedule of Exchanges
of Interests in the Global Debenture" attached thereto.
"DEPOSITARY" means, with respect to the Debentures 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 Debentures, until a successor will have
been appointed and become such pursuant to the applicable provisions of this
Indenture, and thereafter "Depositary" will mean or include such successor.
7
<PAGE>
"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), or upon the happening of any event (other than customary change
of control or asset sale provisions), matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or is redeemable at the
option of the Holder thereof, in whole or in part, prior to the final stated
maturity of the Debentures.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EQUITY OFFERING" means an underwritten public offering pursuant to a
registration statement filed with the SEC in accordance with the Securities Act
of (i) Equity Interests (other than Disqualified Stock) of the Company or
(ii) Equity Interests (other than Disqualified Stock) of the Company's parent or
indirect parent to the extent that the cash proceeds therefrom are contributed
to the equity capital of the Company or are used to purchase Equity Interests
(other than Disqualified Stock) of the Company.
"EUROCLEAR" means Morgan Guaranty Trust Company of New York, Brussels
office, or its successor, as operator of the Euroclear system.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE DEBENTURES" means Series B Debentures issued pursuant to an
Exchange Offer.
"EXCHANGE OFFER" means an offer that may be made by the Company
pursuant to the Registration Rights Agreement to exchange Exchange Debentures
for Series A Debentures.
"EXCHANGE OFFER REGISTRATION STATEMENT" shall have the meaning set
forth in the Registration Rights Agreement.
"EXISTING INDEBTEDNESS" means the Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the New Credit Agreement) in
existence on the Issue Date, or incurred subsequent to the Issue Date pursuant
to commitments under the Copetro Credit Agreement in effect on the Issue Date,
until such amounts are repaid.
"FAIR MARKET VALUE" means the price that would be paid in an
arm's-length transaction between an informed and willing seller under no
compulsion to sell
8
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and an informed and willing buyer under no compulsion to buy, as determined
in good faith by the Company.
"FINANCE SUBSIDIARY" means any Subsidiary of the Company (other than a
Subsidiary Guarantor or a Foreign Subsidiary) organized for the sole purpose of
issuing Capital Stock or other securities and loaning the proceeds thereof to
the Company or a Subsidiary Guarantor and which engages in no other transactions
except those incidental thereto.
"FINANCE SUBSIDIARY INDEBTEDNESS" means Indebtedness of, or
Disqualified Stock issued by, a Finance Subsidiary which Indebtedness or
Disqualified Stock does not have a final stated maturity and is not mandatorily
redeemable or redeemable at the option of the holder thereof, in whole or in
part, (other than pursuant to customary change of control or asset sale
provisions) prior to the final stated maturity of the Senior Subordinated Notes.
"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 original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations), and (ii) the consolidated interest expense 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) all cash dividend payments on any series of preferred
stock of such Person payable to a party other than the Company or a Subsidiary
of the Company.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated EBITDA of such Person and its Subsidiaries
for such period to the Fixed Charges of such Person and its Subsidiaries for
such period. In the event that the Company or any of its Subsidiaries incurs,
issues, assumes, retires, Guarantees, defeases or redeems any Indebtedness
(other than revolving credit borrowings) or preferred stock subsequent to the
commencement of the four-quarter reference period for which the Fixed Charge
Coverage Ratio is being calculated but on or 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 will be calculated
giving pro forma effect to such incurrence, issuance, assumption, retirement,
Guarantee, defeasance or redemption of Indebtedness or preferred stock, as if
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the same had occurred at the beginning of the applicable four-quarter reference
period. 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 will be deemed to have
occurred on the first day of the four-quarter reference period, and (ii) the
Consolidated EBITDA attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of on or prior to
the Calculation Date, will be excluded, and (iii) the Fixed Charges attributable
to discontinued operations, as determined in accordance with GAAP, and
operations or businesses disposed of on or prior to the Calculation Date, will
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.
"FOREIGN SUBSIDIARIES" means (i) Copetro S.A., an Argentine
corporation, and Great Lakes International Sales Corp., a Barbados corporation,
and (ii) any Subsidiary organized and incorporated in a jurisdiction outside of
the United States.
"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 Issue Date. All ratios and computations
based on GAAP contained in this Indenture shall be computed in conformity with
GAAP applied on a consistent basis, except that calculations made for purposes
of determining compliance with the terms of the covenants and with other
provisions of this Indenture shall be made without giving effect to
depreciation, amortization or other expenses recorded as a result of the
application of purchase accounting in accordance with Accounting Principles
Board Opinion Nos. 16 and 17.
"GLC" means Great Lakes Carbon Corporation, a Delaware corporation.
"GLOBAL DEBENTURES" means, individually and collectively, each of the
Restricted Global Debentures and the Unrestricted Global Debentures, in the form
of Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
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"GLOBAL DEBENTURE LEGEND" means the legend set forth in Section
2.06(g)(ii), which is required to be placed on all Global Debentures issued
under this Indenture.
"GOVERNMENT SECURITIES" means direct obligations of, or obligations
fully guaranteed by, the United States of America for the payment of which
guarantee or obligations the full faith and credit of the United States of
America is pledged.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"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 other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates and (ii) currency swap or protection agreements and other agreements or
arrangements designed to protect such Person against fluctuations in currency
exchange rates.
"HOLDER" means a Person in whose name a Debenture is registered on the
Registrar's books.
"INCUR" means, with respect to any Indebtedness, to incur, create,
issue, assume, Guarantee or otherwise become liable for or with respect to, or
become responsible for, the payment of, contingently or otherwise, such
Indebtedness, including an "Incurrence" of Acquired Indebtedness; PROVIDED that
neither the accrual of interest nor the accretion of original issue discount
shall be considered an Incurrence of Indebtedness.
"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 indebtedness (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 such
Indebtedness of any other Person; PROVIDED
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that any indebtedness which has been defeased in accordance with GAAP or
defeased pursuant to the deposit of cash or Government Securities (in an
amount sufficient to satisfy all such indebtedness obligations at maturity or
redemption, as applicable, and all payments of interest and premium, if any,
thereon) in a trust or account created or pledged for the sole benefit of the
holders of such indebtedness, and subject to no other Liens, and the other
applicable terms of the instrument governing such indebtedness, shall not
constitute "Indebtedness."
"INDENTURE" means this Indenture, as amended or supplemented from time
to time.
"INITIAL PURCHASERS" mean the initial purchasers of the Series A
Debentures under the Purchase Agreement, dated May 18, 1998, with respect to the
Series A Debentures.
"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 is not also a QIB.
"INVESTMENT" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the form of direct or
indirect loans (including guarantees of Indebtedness or other obligations but
excluding guarantees of Indebtedness of the Company or any of its Subsidiaries),
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 and all other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP;
PROVIDED that an acquisition of assets, Equity Interests or other securities by
the Company or GLC for consideration consisting of common equity securities of
the Company or GLC or any direct or indirect parent of the Company will not be
deemed to be an Investment.
"ISSUE DATE" means the date of first issuance of Debentures under this
Indenture.
"JOINT VENTURES" means joint ventures entered into by the Company or
any of its Subsidiaries for the primary purpose of operating a Related Business.
"LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which
banking institutions in the City of New York, or the city in which the
principal corporate trust office of the Trustee is located, 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
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payment, payment may be made at that place on the next succeeding day that is
not a Legal Holiday, and no interest shall accrue 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 Debentures 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 of a security agreement, any option or other agreement to grant or
give a security interest in and, except in connection with any Qualified
Receivables Transaction, 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 Liquidated Damages then owing pursuant
to the Registration Rights Agreement.
"MERGER AGREEMENT" means that certain Agreement and Plan of Merger
dated as of April 21, 1998 by and between the Company and GLC.
"MOODY'S" means Moody's Investors Service, Inc. and its successors.
"MORTGAGE FINANCINGS" means any mortgage, deed of trust or other
instrument creating a lien on an estate in fee simple or a leasehold estate in a
property, secured by a note or other evidence of an obligor's indebtedness under
such mortgage, deed of trust or other instrument.
"NET CASH PROCEEDS" means the aggregate amount of cash and Cash
Equivalents received by the Company or GLC, or any direct or indirect parent
of the Company, in the case of a sale or equity contribution in respect of
Equity Interests (other than Disqualified Stock) plus, in the case of an
issuance of Equity Interests (other than Disqualified Stock) upon any
exercise, exchange or conversion of securities (including options, warrants,
rights and convertible or exchangeable debt) of the Company or GLC or any
direct or indirect parent of the Company that were issued for cash after the
Issue Date, the amount of cash originally received by the Company or GLC or
any direct or indirect parent of the Company upon the issuance of such
securities (including options, warrants, rights and convertible or
exchangeable debt) less the sum of all payments, fees, commissions, and
customary and reasonable expenses (including, without limitation, the fees
and expenses of legal counsel and investment banking fees and expenses)
incurred
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in connection with such sale or equity contribution in respect of Equity
Interests (other than Disqualified Stock).
"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 or nonrecurring gain (but not loss), together with any
related provision for taxes on such extraordinary or nonrecurring gain (but not
loss).
"NET PROCEEDS" means the aggregate cash proceeds and Cash Equivalents
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 the Debentures or Indebtedness under
the New Credit Agreement) secured by a Lien on the asset or assets that were the
subject of such Asset Sale, any reserve for adjustment in respect of the sale
price of such asset or assets or liabilities associated with such Asset Sale and
retained by the Company or such Subsidiary established in accordance with GAAP,
all distributions and other payments required to be made to minority interest
holders in Subsidiaries or other parties to any Joint Ventures as a result of
such Asset Sale and all Purchase Money Obligations (and Permitted Refinancing
Indebtedness thereof) assumed by the purchaser in connection with such Asset
Sale.
"NEW CREDIT AGREEMENT" means that certain Credit Agreement, dated as
of the Issue Date, by and among the Company, GLC, Bankers Trust Company, as
syndication and administrative agent, DLJ Capital Funding, Inc., as
documentation agent, Bank of America National Trust and Savings Association, as
co-agent, and the lenders parties thereto, including any related notes,
guarantees, collateral documents, instruments and agreements (including, without
limitation, agreements with respect to Hedging Obligations with lenders party to
the New Credit Agreement or their Affiliates) executed in connection therewith,
and in each case as amended, supplemented, modified, renewed, refunded,
replaced, restated or refinanced from time to time, including any agreement
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<PAGE>
restructuring or adding the Company or Subsidiaries of GLC as additional
borrowers or guarantors thereunder and whether by the same or any other agent,
lender or group of lenders.
"NON-RECOURSE INDEBTEDNESS" means Indebtedness (i) as to which neither
the Company nor any of its Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity.
"NOTE INDENTURE" means the indenture governing GLC's Senior
Subordinated Notes.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages or other liabilities payable under the
documentation governing any Indebtedness.
"OFFER TO PURCHASE" means an offer to purchase Debentures by the
Company from the Holders commenced by mailing a notice to the Trustee and
each Holder stating: (i) the Section of this Indenture pursuant to which the
offer is being made and that all Debentures validly tendered will be accepted
for payment on a PRO RATA basis; (ii) the purchase price and the date of
purchase (which shall be a Business Day no later than five Business Days
following the termination of the Offer to Purchase) (the "Payment Date");
(iii) that the Offer to Purchase shall remain open for a period not to exceed
60 days following its commencement, except to the extent a longer period is
required by applicable law, (iv) that any Debenture not tendered will
continue to accrue interest pursuant to its terms; (v) that, unless the
Company defaults in the payment of the purchase price, any Debenture accepted
for payment pursuant to the Offer to Purchase shall cease to accrue interest
and the Accreted Value thereof will cease to increase on and after the
Payment Date; (vi) that Holders electing to have a Debenture purchased
pursuant to the Offer to Purchase will be required to surrender the
Debenture, together with the form entitled "Option of the Holder to Elect
Purchase" on the reverse side of the Debenture completed, to the Paying Agent
at the address specified in the notice prior to the close of business on the
Business Day immediately preceding the Payment Date; (vii) that Holders will
be entitled to withdraw their election if the Paying Agent receives, not
later than the close of business on the third Business Day immediately
preceding the Payment Date, a telegram, facsimile transmission or letter
setting forth the name of such Holder, the principal amount of Debentures
delivered for purchase and a statement that
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<PAGE>
such Holder is withdrawing his election to have such Debentures purchased;
and (viii) that Holders whose Debentures are being purchased only in part
will be issued new Debentures equal in principal amount to the unpurchased
portion of the Debentures surrendered; PROVIDED that each Debenture purchased
and each new Debenture issued shall be in a principal amount of $1,000 or
integral multiples thereof. On the Payment Date, the Company shall (i)
accept for payment on a PRO RATA basis Debentures or portions thereof
tendered pursuant to an Offer to Purchase; (ii) deposit with the Paying Agent
money sufficient to pay the purchase price of all Debentures or portions
thereof so accepted; and (iii) deliver, or cause to be delivered, to the
Trustee all Debentures or portions thereof so accepted together with an
Officers' Certificate specifying the Debentures or portions thereof accepted
for payment by the Company. The Paying Agent shall promptly mail to the
Holders of Debentures so accepted payment in an amount equal to the purchase
price, and the Trustee shall promptly authenticate and mail to such Holders a
new Debenture equal in principal amount to any unpurchased portion of the
Debenture surrendered; PROVIDED that each Debenture purchased and each new
Debenture issued shall be in a principal amount of $1,000 or integral
multiples thereof. The Company will publicly announce the results of an Offer
to Purchase as soon as practicable after the Payment Date. The Trustee shall
act as the Paying Agent for an Offer to Purchase. The Company will comply
with 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 the event that the Company is required to repurchase
Debentures pursuant to an Offer to Purchase. To the extent that the
provisions of any securities laws or regulations conflict with the provisions
for such Offer to Purchase, the Company will comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations with respect to such Offer to Purchase by virtue thereof.
"OFFERING" means the offering of the Series A Debentures by the
Company.
"OFFICER" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary, any Assistant Secretary or any Vice President of such
Person.
"OFFICERS' CERTIFICATE" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Sections 10.04 and 10.05 hereof.
"OPINION OF COUNSEL" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Sections
10.04 and
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10.05 hereof. The counsel may be an employee of or counsel to the Company or
any Subsidiary of the Company.
"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 INVESTMENTS" means (a) any Investments in the Company or in
a Subsidiary of the Company that is engaged in one or more Related Businesses;
(b) 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 in connection with a Qualified Receivables Transaction PROVIDED,
that the foregoing Investment is in the form of a note or other instrument that
the Receivables Subsidiary or other Person is required to repay as soon as
practicable from available cash collections less amounts required to be
established as reserves pursuant to contractual agreements with entities that
are not Affiliates of the Company entered into as part of a Qualified
Receivables Transaction; (c) any Investments in Cash Equivalents;
(d) Investments 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 that is engaged in one or more Related Businesses 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 engaged in one or more Related Businesses;
(e) Investments made as a result of the receipt of non-cash consideration from
an Asset Sale that was made pursuant to and in compliance with Section 4.13;
(f) Investments outstanding as of the Issue Date; (g) Investments in the form of
promissory notes of members of the Company's or GLC's management in
consideration of the purchase by such members of Equity Interests (other than
Disqualified Stock) in the Company or GLC; (h) Investments which constitute
Existing Indebtedness of the Company of any of its Subsidiaries; (i) accounts
receivable, endorsements for collection or deposits arising in the ordinary
course of business; (j) other Investments in any Person that do not exceed
$10,000,000 at any time outstanding under and pursuant to this clause (j),
without giving effect to changes in the value of such Investment occurring after
the date of such Investment, but giving effect to all dividends, distributions,
principal, interest and other payments received in respect of such Investments
in cash or Cash Equivalents; (k) Investments in Foreign Subsidiaries or Joint
Ventures that do not exceed $35,000,000 in the aggregate at any time outstanding
under and pursuant to this clause (k), without giving effect to changes in the
value of such Investment occurring after the date of such Investment, but giving
effect to all dividends, distributions, principal, interest and other payments
received in respect of such Investments in cash or Cash Equivalents;
(l) Investments constituting Indebtedness owed by one Foreign Subsidiary to one
or more other Foreign Subsidiaries or Investments by a Foreign Subsidiary in one
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or more other Foreign Subsidiaries; (m) Investments constituting Indebtedness
permitted under clause (vii) of Section 4.07; and (n) capital stock, obligations
or other securities received in settlement of debts created in the ordinary
course of business and owing to the Company or any of its Subsidiaries.
"PERMITTED LIENS" means (i) Liens securing the New Credit Agreement
and other Indebtedness of GLC or its Subsidiaries and Permitted Refinancing
Indebtedness related thereto; (ii) Liens in favor of the Company or any
Subsidiary of the Company; (iii) Liens on property of a Person existing at
the time such Person is merged into or consolidated with or acquired by the
Company or any Subsidiary of the Company in accordance with the provisions of
this Indenture; PROVIDED that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not extend to any assets
other than those of the Person merged into or consolidated with the Company;
(iv) Liens on property existing at the time of acquisition thereof by the
Company or any Subsidiary of the Company, provided that such Liens were in
existence prior to the contemplation of such acquisition; (v) Liens to secure
the performance of statutory obligations, surety or appeal bonds, performance
bonds or other obligations of a like nature incurred in the ordinary course
of business; (vi) Liens existing on the Issue Date and Liens securing any
Permitted Refinancing Indebtedness incurred to refinance any Indebtedness
secured by such Liens; (vii) Liens for taxes, assessments or governmental
charges or claims that are not yet delinquent or that are being contested in
good faith by appropriate proceedings promptly instituted and diligently
concluded, provided that any reserve or other appropriate provision as will
be required in conformity with GAAP will have been made therefor; (viii)
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
$5,000,000 at any one time outstanding and that (a) are not incurred in
connection with the borrowing of money or the obtaining of advances or credit
(other than trade credit in the ordinary course of business) and (b) do not
in the aggregate materially detract from the value of the property or
materially impair the use thereof in the operation of business by the Company
or such Subsidiary; (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; (x) easements, rights-of-way,
restrictions, minor defects or irregularities in title and other similar
charges or encumbrances not interfering in any material respect with the
business of the Company or any of its Subsidiaries; (xi) Purchase Money Liens
(including extensions and renewals thereof and Liens securing any Permitted
Refinancing Indebtedness incurred in respect of the applicable Purchase Money
Obligations); (xii) Liens securing reimbursement obligations with respect to
letters of credit and bankers' acceptances which encumber only documents and
other property relating to such letters of credit and the products and
proceeds thereof; (xiii) judgment and attachment Liens not giving rise to an
Event of Default; (xiv) Liens encumbering deposits made to secure obligations
arising from
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statutory, regulatory, contractual or warranty requirements; (xv) Liens
arising out of consignment or similar arrangements for the sale of goods;
(xvi) any interest or title of a lessor in property subject to any Capital Lease
Obligation or operating lease; (xvii) Liens arising from filing Uniform
Commercial Code financing statements regarding leases; (xviii) Liens on assets
of the Company or its Subsidiaries with respect to Acquired Indebtedness (and
Permitted Refinancing Indebtedness with respect thereto) provided that such
Liens were not created in contemplation of or in connection with such
acquisition; (xix) Liens on assets of the Company or a Receivables Subsidiary
incurred in connection with a Qualified Receivables Transaction; (xx) Liens
securing Indebtedness of any Foreign Subsidiary; (xxi) Liens securing the Senior
Subordinated Notes and any other obligations ranking PARI PASSU with the Senior
Subordinated Notes; (xxii) Liens securing the Debentures and any other
obligations ranking PARI PASSU with the Debentures, and (xxiii) Liens securing
Permitted Refinancing Indebtedness incurred to refinance any Indebtedness that
was previously secured by a Lien, in a manner no more adverse, taken as a whole,
to the Holders of the Debentures than the Liens securing such refinanced
Indebtedness.
"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; PROVIDED that: (i) the
principal amount (or accreted value, if issued with an original issue discount)
of such Permitted Refinancing Indebtedness does not exceed the principal amount
(or accreted value, if issued with an original issue discount) of the
Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded
(plus the amount of reasonable expenses incurred in connection therewith, the
accrued or unpaid interest thereon and any premium owed in connection
therewith); (ii) such Permitted Refinancing Indebtedness 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
Debentures, such Permitted Refinancing Indebtedness is subordinated in right of
payment to, the Debentures on terms at least as favorable, taken as a whole, to
the Holders of Debentures as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded
and the final maturity date of such Permitted Refinancing Indebtedness is later
than the final maturity date of 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.
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"PERSON" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or agency or political subdivision
thereof (including any subdivision or ongoing business of any such entity or
substantially all of the assets of any such entity, subdivision or business).
"PREFERRED STOCK" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of such Person's preferred or preference stock,
whether outstanding on the Issue Date or issued thereafter, including, without
limitation, all series and classes of such preferred or preference stock.
"PRIVATE PLACEMENT LEGEND" means the legend set forth in Section
2.06(g)(i) to be placed on all Debentures issued under this Indenture except
where otherwise permitted by the provisions of this Indenture.
"PURCHASE MONEY LIEN" means a Lien granted on an asset or property to
secure a Purchase Money Obligation permitted to be incurred under this Indenture
and incurred solely to finance the purchase (or lease), or the cost of
construction or improvement, of such asset or property; PROVIDED, HOWEVER, that
such Lien encumbers only such asset or property and is granted within 180 days
of such acquisition.
"PURCHASE MONEY OBLIGATIONS" of any Person means any obligations of
such Person to any seller or any other Person incurred or assumed to finance the
purchase (or lease), or the cost of construction or improvement, of real or
personal property to be used in the business of such Person or any of its
Subsidiaries in an amount that is not more than 100% of the cost, or fair market
value, as appropriate, of such property, and incurred within 180 days after the
date of such acquisition (excluding accounts payable to trade creditors incurred
in the ordinary course of business).
"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 of its Subsidiaries
pursuant to which the Company or any of its Subsidiaries may sell, convey or
otherwise transfer to (i) a Receivables Subsidiary (in the case of a transfer by
the Company or any of its Subsidiaries) and (ii) any other Person (in the case
of a transfer by a Receivables Subsidiary), or may grant a security interest in,
any accounts receivable (whether now existing or arising in the future) of the
Company or any of its Subsidiaries, and any assets related thereto including,
without limitation, all collateral securing such accounts receivable, all
contracts and all guarantees or other obligations in respect of such accounts
receivable, proceeds of such accounts receivable and other assets which are
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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 Subsidiary of the Company which
engages in no activities other than in connection with the financing of accounts
receivable and which 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 Subsidiary of the Company (excluding guarantees of
Obligations (other than the principal of, and interest on, Indebtedness)
pursuant to representations, warranties, covenants and indemnities entered into
in the ordinary course of business in connection with a Qualified Receivables
Transaction), (ii) is recourse to or obligates the Company or any Subsidiary of
the Company in any way other than pursuant to representations, warranties,
covenants and indemnities entered into in the ordinary course of business in
connection with a Qualified Receivables Transaction or (iii) subjects any
property or asset of the Company or any Subsidiary of the Company (other than
accounts receivable), directly or indirectly, contingently or otherwise, to the
satisfaction thereof, other than pursuant to representations, warranties,
covenants and indemnities entered into in the ordinary course of business in
connection with a Qualified Receivables Transaction, (b) with which neither the
Company nor any Subsidiary of the Company has any material contract, agreement,
arrangement or understanding other than on terms no less favorable to the
Company or such Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Company, other than fees payable in the
ordinary course of business in connection with servicing accounts receivable and
(c) with which neither the Company nor any Subsidiary of the Company has any
obligation to maintain or preserve such Subsidiary's financial condition or
cause such Subsidiary to achieve certain levels of operating results. Any such
designation by the Board of Directors of the Company will 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 that such designation complied with the
foregoing conditions.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of the Issue Date, by and among the Company and the Initial
Purchasers, as such agreement may be amended, modified or supplemented from time
to time.
"REGULATION S" means Regulation S promulgated under the Securities
Act, as it may be amended from time to time, and any successor provision
thereto.
"REGULATION S GLOBAL DEBENTURE" means a permanent global Debenture in
the form of Exhibit A hereto bearing the Global Debenture Legend and the Private
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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 Debentures initially sold in reliance on
Rule 903 of Regulation S.
"RELATED BUSINESS" means the business conducted by the Company and its
Subsidiaries as of the Issue Date and any and all businesses that in the good
faith judgment of the Board of Directors of the Company are related businesses,
including reasonable extensions or expansions thereof.
"RESTRICTED DEFINITIVE DEBENTURE" means a Definitive Debenture bearing
the Private Placement Legend.
"RESTRICTED GLOBAL DEBENTURE" means a Global Debenture 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 144A" means Rule 144A promulgated under the Securities Act, as
it may be amended from time to time, and any successor provision thereto.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SENIOR REVOLVING DEBT" means revolving Indebtedness under the New
Credit Agreement as such agreement may be restated, further amended,
supplemented or otherwise modified, renewed, refunded, replaced or refinanced,
in whole or in part, from time to time.
"SENIOR SUBORDINATED NOTES" means the 101/4% Senior Subordinated Notes
due 2008 of GLC.
"SENIOR TERM DEBT" means term Indebtedness under the New Credit
Agreement as such agreement may be restated, further amended, supplemented or
otherwise modified, renewed, refunded, replaced or refinanced, in whole or in
part, from time to time.
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"SHELF REGISTRATION STATEMENT" shall have the meaning set forth 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 Exchange Act, as such Regulation is in effect on the
date hereof.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, and its successors.
"STATED MATURITY" means, (i) with respect to any debt security, the
date specified in such debt security as the fixed date on which the final
installment of principal of such debt security is due and payable and (ii) with
respect to any scheduled installment of principal of or interest on any debt
security, the date specified in such debt security as the fixed date on which
such installment is due and payable.
"SUBSIDIARY" means, with respect to any Person, 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). Unrestricted Subsidiaries will not be included in the definition of
Subsidiary for any purposes of this Indenture (except, as the context may
otherwise require, for purposes of the definition of "Unrestricted Subsidiary.")
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
"TRANSFER RESTRICTED DEBENTURES" means securities that bear, or that
are required to bear, the Private Placement Legend.
"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 DEBENTURE" means one or more Definitive
Debentures that do not bear and are not required to bear the Private Placement
Legend.
"UNRESTRICTED GLOBAL DEBENTURE" means a permanent global Debenture
in the form of Exhibit A attached hereto that bears the Global Debenture
Legend and that has the "Schedule of Exchanges of Interests in the Global
Debenture" attached thereto,
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and that is deposited with or on behalf of and registered in the name of the
Depositary, representing a series of Debentures that do not bear the Private
Placement Legend.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary that is designated
by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution; but only to the extent that such Subsidiary: (a) has no Indebtedness
other than Non-Recourse Indebtedness; (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any Subsidiary of the
Company unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such Subsidiary than those
that might be obtained at the time from Persons who are not Affiliates of the
Company; (c) is a Person with respect to which neither the Company nor any of
its Subsidiaries has any obligation (x) to subscribe for additional Equity
Interests or (y) to maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating results; and
(d) has not guaranteed or otherwise directly or indirectly provided credit
support for any Indebtedness of the Company or any of its Subsidiaries. Any such
designation by the Board of Directors will be evidenced to the Trustee by filing
with the Trustee a certified copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions and was permitted by Section 4.07 hereof.
If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it will thereafter cease to be an
Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of
such Subsidiary will be deemed to be incurred by a Subsidiary of the Company as
of such date (and, if such Indebtedness is not permitted to be incurred as of
such date under Section 4.07 hereof, the Company will be in default of such
covenant). The Board of Directors of the Company may at any time designate any
Unrestricted Subsidiary to be a Subsidiary; PROVIDED that such designation will
be deemed to be an incurrence of Indebtedness by a Subsidiary of the Company of
any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation will only be permitted if (i) such Indebtedness is permitted under
Section 4.07 hereof, and (ii) no Default or Event of Default would be in
existence following such designation.
"U.S. PERSON" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"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
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one-twelfth) that will elapse between such date and the making of such
payment, by (ii) the then outstanding principal amount of such Indebtedness.
SECTION 1.02. OTHER DEFINITIONS
Defined in
Term Section
"Affiliate Transaction" 4.12
"Authentication Order" 2.02
"Bankruptcy Law" 6.01
"Company Obligations" 4.01
"Covenant Defeasance" 8.03
"Custodian" 6.01
"DTC" 2.03
"Legal Defeasance" 8.02
"Paying Agent" 2.03
"Payment Date" 1.01
"Registrar" 2.03
"Restricted Payments" 4.09
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"INDENTURE SECURITIES" means the Debentures;
"INDENTURE SECURITY HOLDER" means a Holder of a Debenture;
"INDENTURE TO BE QUALIFIED" means this Indenture;
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee;
"OBLIGOR" on the Debentures means the Company and any successor
obligor upon the Debentures.
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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 and
the Exchange Act shall be deemed to include substitute, replacement of
successor sections or rules adopted by the SEC from time to time.
ARTICLE 2.
THE DEBENTURES
SECTION 2.01. FORM AND DATING
(a) GENERAL. The Debentures and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A hereto. The
Debentures may have notations, legends or endorsements required by law, stock
exchange rule or usage. Each Debenture shall be dated the date of its
authentication. The Debentures shall be in denominations of $1,000 and integral
multiples thereof.
The terms and provisions contained in the Debentures shall
constitute, and are hereby expressly made, a part of this Indenture and the
Company, the Subsidiary 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
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provision of any Debenture conflicts with the express provisions of this
Indenture, the provisions of this Indenture shall govern and be controlling.
(b) GLOBAL DEBENTURES. Debentures issued in global form shall be
substantially in the form of Exhibit A attached hereto (including the Global
Debenture Legend thereon and the "Schedule of Exchanges of Interests in the
Global Debenture" attached thereto). Debentures issued in definitive form shall
be substantially in the form of Exhibit A attached hereto (but without the
Global Debenture Legend thereon and without the "Schedule of Exchanges of
Interests in the Global Debenture" attached thereto). Each Global Debenture
shall represent such of the outstanding Debentures as shall be specified therein
and each shall provide that it shall represent the aggregate principal amount of
outstanding Debentures from time to time endorsed thereon and that the aggregate
principal amount of outstanding Debentures represented thereby may from time to
time be reduced or increased, as appropriate, to reflect exchanges and
redemptions. Any endorsement of a Global Debenture to reflect the amount of any
increase or decrease in the aggregate principal amount of outstanding Debentures
represented thereby shall be made by the Trustee or the Debentures Custodian, at
the direction of the Trustee, in accordance with instructions given by the
Holder thereof as required by Section 2.06 hereof.
(c) EUROCLEAR AND CEDEL PROCEDURES APPLICABLE. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in the Regulation S Global Debentures that are held by
Participants through Euroclear or Cedel Bank.
SECTION 2.02. EXECUTION AND AUTHENTICATION
An Officer shall sign the Debentures for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the
Debentures and may be in facsimile form. If an Officer whose signature is on
a Debenture no longer holds that office at the time a Debenture is
authenticated, the Debenture shall nevertheless be valid. A Debenture shall
not be valid until authenticated by the manual signature of the Trustee. The
signature shall be conclusive evidence that the Debenture has been
authenticated under this Indenture. The Trustee shall, upon a written order
of the Company signed by an Officer (an "Authentication Order"), authenticate
Debentures for original issue up to the aggregate principal amount at
maturity stated in such Authentication Order, which shall not exceed
$56,600,000. The aggregate principal amount of Debentures 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 Debentures. An authenticating agent may
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authenticate Debentures 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 Debentures may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Debentures may be presented for payment ("Paying Agent").
The Registrar shall keep a register of the Debentures 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 Debentures. The Company initially appoints the
Trustee to act as the Registrar and Paying Agent and to act as Debentures
Custodian with respect to the Global Debentures.
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 Debentures,
and will notify the Trustee of any default by the Company in making any such
payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or a
Subsidiary) shall have no further liability for the money. If the Company or a
Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust
fund for the benefit of the Holders all money held by it as Paying Agent. Upon
any bankruptcy or reorganization proceedings relating to the Company, the
Trustee shall serve as Paying Agent for the Debentures.
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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 Section 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
Debentures and the Company shall otherwise comply with TIA Section 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE
(a) TRANSFER AND EXCHANGE OF GLOBAL DEBENTURES. A Global Debenture
may not be transferred as a whole except by the Depositary to a nominee of the
Depositary, by a nominee of the Depositary to the Depositary or to another
nominee of the Depositary, or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary. All Global
Debentures will be exchanged by the Company for Definitive Debentures if (i) the
Company delivers to the Trustee notice from the Depositary that it is unwilling
or unable to continue to act as Depositary or that it is no longer a clearing
agency registered under the Exchange Act and, in either case, a successor
Depositary is not appointed by the Company within 120 days after the date of
such notice from the Depositary, (ii) the Company in its sole discretion
determines that the Global Debentures (in whole but not in part) should be
exchanged for Definitive Debentures and delivers a written notice to such effect
to the Trustee or (iii) upon request of the Trustee or Holders of a majority of
the aggregate principal amount at maturity of outstanding Debentures if there
shall have occurred and be continuing a Default or Event of Default with respect
to the Debentures. Upon the occurrence of any of the preceding events in (i),
(ii) or (iii) above, Definitive Debentures shall be issued in such names as the
Depositary shall instruct the Trustee. Global Debentures also may be exchanged
or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof.
Every Debenture authenticated and delivered in exchange for, or in lieu of, a
Global Debenture 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 Debenture. A Global Debenture may not be exchanged
for another Debenture other than as provided in this Section 2.06(a), however,
beneficial interests in a Global Debenture may be transferred and exchanged as
provided in Section 2.06(b), (c) or (f) hereof.
(b) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN THE GLOBAL
DEBENTURES. The transfer and exchange of beneficial interests in the Global
Debentures shall be effected through the Depositary, in accordance with the
provisions of this Indenture and the Applicable Procedures. Beneficial
interests in the Restricted Global
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Debentures 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 Debentures 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
DEBENTURE. Beneficial interests in any Restricted Global Debenture may be
transferred to Persons who take delivery thereof in the form of a beneficial
interest in the same Restricted Global Debenture 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 Regulation S Global Debenture may not be made to a U.S. Person
or for the account or benefit of a U.S. Person (other than a Initial Purchaser).
Beneficial interests in any Unrestricted Global Debenture may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in an
Unrestricted Global Debenture. 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 DEBENTURES. In connection with all transfers and exchanges of
beneficial interests that are not subject to Section 2.06(b)(i) above, the
transferor of such beneficial interest must deliver to the Registrar either (A)
(1) an 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
Debenture 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) an 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 Debenture
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 Debenture shall be registered
to effect the transfer or exchange referred to in (B)(1) above. 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 Debentures. Upon satisfaction of all of the
requirements for transfer or exchange of beneficial interests in Global
Debentures contained in this Indenture and the Debentures or otherwise
applicable under the Securities Act, the Trustee shall adjust the principal
amount of the relevant Global Debenture(s) pursuant to Section 2.06(h) hereof.
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(iii) TRANSFER OF BENEFICIAL INTERESTS TO ANOTHER RESTRICTED
GLOBAL DEBENTURE. A beneficial interest in any Restricted Global Debenture may
be transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Debenture 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 Debenture, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
certifications in item (1) thereof; and
(B) if the transferee will take delivery in the form
of a beneficial interest in the Regulation S Global Debenture, then the
transferor must deliver a certificate in the form of Exhibit B hereto, including
the certifications in item (2) thereof.
(iv) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL DEBENTURE FOR BENEFICIAL INTERESTS IN THE UNRESTRICTED GLOBAL
DEBENTURE. A beneficial interest in any Restricted Global Debenture may be
exchanged by any holder thereof for a beneficial interest in an Unrestricted
Global Debenture or transferred to a Person who takes delivery thereof in the
form of a beneficial interest in an Unrestricted Global Debenture if the
exchange or transfer complies with the requirements of Section 2.06(b)(ii) above
and:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights Agreement and the
holder of the beneficial interest to be transferred, in the case of an exchange,
or the transferee, in the case of a transfer, certifies in the applicable Letter
of Transmittal that it is not (1) a Broker-Dealer, (2) a Person participating in
the distribution of the Exchange Debentures 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 Debenture
proposes to exchange such beneficial interest for a beneficial interest in an
Unrestricted Global Debenture, a certificate from such holder in the form of
Exhibit C hereto, including the certifications
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in item (1)(a) thereof; or (2) if the holder of such beneficial interest in a
Restricted Global Debenture proposes to transfer such beneficial interest to
a Person who shall take delivery thereof in the form of a beneficial interest
in an Unrestricted Global Debenture, 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), an Opinion of
Counsel in form reasonably acceptable to the Registrar and 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.
If any such transfer is effected pursuant to subparagraph (B) or (D)
above at a time when an Unrestricted Global Debenture 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 Debentures 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
Debenture cannot be exchanged for, or transferred to Persons who take delivery
thereof in the form of, a beneficial interest in a Restricted Global Debenture.
(c) TRANSFER OR EXCHANGE OF BENEFICIAL INTERESTS FOR DEFINITIVE
DEBENTURES.
(i) BENEFICIAL INTERESTS IN RESTRICTED GLOBAL DEBENTURES TO
RESTRICTED DEFINITIVE DEBENTURES. If any holder of a beneficial interest in a
Restricted Global Debenture proposes to exchange such beneficial interest for a
Restricted Definitive Debenture or to transfer such beneficial interest to a
Person who takes delivery thereof in the form of a Restricted Definitive
Debenture, then, upon receipt by the Registrar of the following documentation:
(A) if the holder of such beneficial interest in a
Restricted Global Debenture proposes to exchange such beneficial interest for a
Restricted Definitive Debenture, a certificate from such holder in the form of
Exhibit C hereto, including the certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred
to a QIB in accordance with Rule 144A under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications in item
(1) thereof;
(C) if such beneficial interest is being
transferred to a Non-U.S. Person in an offshore transaction in accordance
with Rule 903 or Rule 904
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under the Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred
pursuant to an exemption from the registration requirements of the Securities
Act in accordance with Rule 144 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in item
(3)(a) thereof;
(E) if such beneficial interest is being transferred
to an Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those listed in
subparagraphs (B) through (D) above, a certificate to the effect set forth in
Exhibit B hereto, including the certifications, certificates and Opinion of
Counsel required by item (3) thereof, if applicable;
(F) if such beneficial interest is being transferred
to the Company or any of its Subsidiaries, a certificate to the effect set forth
in Exhibit B hereto, including the certifications in item (3)(b) thereof; or
(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
Restricted Global Debenture to be reduced accordingly pursuant to Section
2.06(h) hereof, and the Company shall execute and, upon receipt of an
Authentication Order pursuant to Section 2.02, the Trustee shall authenticate
and deliver to the Person designated in the instructions a Restricted Definitive
Debenture in the appropriate principal amount. Any Restricted Definitive
Debenture issued in exchange for a beneficial interest in a Restricted Global
Debenture pursuant to this Section 2.06(c) shall be registered in such name or
names and in such authorized denomination or denominations as the holder of such
beneficial interest shall instruct the Registrar through instructions from the
Depositary and the Participant or Indirect Participant. The Trustee shall
deliver such Restricted Definitive Debentures to the Persons in whose names such
Debentures are so registered. Any Restricted Definitive Debenture issued in
exchange for a beneficial interest in a Restricted Global Debenture 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) BENEFICIAL INTERESTS IN RESTRICTED GLOBAL DEBENTURES TO
UNRESTRICTED DEFINITIVE DEBENTURES. A holder of a beneficial interest in a
Restricted Global Debenture may exchange such beneficial interest for an
Unrestricted Definitive
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Debenture or may transfer such beneficial interest to a Person who takes
delivery thereof in the form of an Unrestricted Definitive Debenture 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 Debentures 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 Debenture proposes to
exchange such beneficial interest for a Definitive Debenture 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 Debenture proposes
to transfer such beneficial interest to a Person who shall take delivery thereof
in the form of a Definitive Debenture 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), an Opinion of Counsel in form reasonably
acceptable to the Registrar and 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) BENEFICIAL INTERESTS IN UNRESTRICTED GLOBAL DEBENTURES
TO UNRESTRICTED DEFINITIVE DEBENTURES. If any holder of a beneficial
interest in an Unrestricted Global Debenture proposes to exchange such
beneficial interest for an Unrestricted Definitive Debenture or to transfer
such beneficial interest to a Person who takes delivery thereof in the form
of an Unrestricted Definitive Debenture, 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 Unrestricted Global
Debenture to be reduced accordingly pursuant to Section 2.06(h) hereof, and
the Company shall execute and, upon receipt of an Authentication Order
pursuant to Section 2.02, the Trustee shall authenticate and deliver to the
Person designated in the instructions an
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Unrestricted Definitive Debenture in the appropriate principal amount. Any
Unrestricted Definitive Debenture 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 Unrestricted Definitive Debentures to the
Persons in whose names such Debentures are so registered. Any Unrestricted
Definitive Debenture 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 DEBENTURES FOR BENEFICIAL
INTERESTS.
(i) RESTRICTED DEFINITIVE DEBENTURES TO BENEFICIAL INTERESTS
IN RESTRICTED GLOBAL DEBENTURES. If any Holder of a Restricted Definitive
Debenture proposes to exchange such Debenture for a beneficial interest in a
Restricted Global Debenture or to transfer such Restricted Definitive Debentures
to a Person who takes delivery thereof in the form of a beneficial interest in a
Restricted Global Debenture, then, upon receipt by the Registrar of the
following documentation:
(A) if the Holder of such Restricted Definitive
Debenture proposes to exchange such Debenture for a beneficial interest in a
Restricted Global Debenture, a certificate from such Holder in the form of
Exhibit C hereto, including the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Debenture is being
transferred to a QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (1) thereof; or
(C) if such Restricted Definitive Debenture is being
transferred to a Non-U.S. Person in an offshore transaction in accordance with
Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (2) thereof,
the Trustee shall cancel the Restricted Definitive Debenture, increase or cause
to be increased the aggregate principal amount of, in the case of clause (A)
above, the appropriate Restricted Global Debenture, in the case of clause (B)
above, the 144A Global Debenture, and in the case of clause (C) above, the
Regulation S Global Debenture.
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(ii) RESTRICTED DEFINITIVE DEBENTURES TO BENEFICIAL INTERESTS
IN UNRESTRICTED GLOBAL DEBENTURES. A Holder of a Restricted Definitive
Debenture may exchange such Debenture for a beneficial interest in an
Unrestricted Global Debenture or transfer such Restricted Definitive Debenture
to a Person who takes delivery thereof in the form of a beneficial interest in
an Unrestricted Global Debenture 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
Debentures 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 Restricted Definitive Debentures proposes to exchange such
Debentures for a beneficial interest in the Unrestricted Global Debenture, 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 Restricted
Definitive Debentures proposes to transfer such Debentures to a Person who shall
take delivery thereof in the form of a beneficial interest in the Unrestricted
Global Debenture, 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), an Opinion of Counsel in form reasonably
acceptable to the Registrar and 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. Upon
satisfaction of the conditions of any of the subparagraphs in this
Section 2.06(d)(ii), the Trustee shall cancel the Restricted Definitive
Debentures so transferred or exchanged and increase or cause to be increased the
aggregate principal amount of the Unrestricted Global Debenture.
(iii) UNRESTRICTED DEFINITIVE DEBENTURES TO BENEFICIAL
INTERESTS IN UNRESTRICTED GLOBAL DEBENTURES. A Holder of an Unrestricted
Definitive Debenture may exchange such Debenture for a beneficial interest in
an Unrestricted Global Debenture or transfer such Definitive Debentures to a
Person who takes delivery thereof in the form of a beneficial interest in an
Unrestricted Global Debenture at any
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time. Upon receipt of a request for such an exchange or transfer, the
Trustee shall cancel the applicable Unrestricted Definitive Debenture and
increase or cause to be increased the aggregate principal amount of one of
the Unrestricted Global Debentures. If any such exchange or transfer from a
Definitive Debenture to a beneficial interest is effected pursuant to
subparagraphs (ii)(B), (ii)(D) or (iii) above at a time when an Unrestricted
Global Debenture 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 Debentures in
an aggregate principal amount equal to the principal amount of Definitive
Debentures so transferred.
(e) TRANSFER AND EXCHANGE OF DEFINITIVE DEBENTURES FOR DEFINITIVE
DEBENTURES. Upon request by a Holder of Definitive Debentures and such Holder's
compliance with the provisions of this Section 2.06(e), the Registrar shall
register the transfer or exchange of Definitive Debentures. Prior to such
registration of transfer or exchange, the requesting Holder shall present or
surrender to the Registrar the Definitive Debentures duly endorsed or
accompanied by a written instruction of transfer in form satisfactory to the
Registrar duly executed by such Holder or by its 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 DEBENTURES TO RESTRICTED DEFINITIVE
DEBENTURES. Any Restricted Definitive Debenture may be transferred to and
registered in the name of Persons who take delivery thereof in the form of a
Restricted Definitive Debenture if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A
under the Securities Act, then the transferor must deliver a certificate in the
form of Exhibit B hereto, including the certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903
or Rule 904, then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (2) thereof; and
(C) if the transfer will be made pursuant to any other
exemption from the registration requirements of the Securities Act, then the
transferor must deliver a certificate in the form of Exhibit B hereto, including
the certifications, certificates and Opinion of Counsel required by item (3)
thereof, if applicable.
(ii) RESTRICTED DEFINITIVE DEBENTURES TO UNRESTRICTED
DEFINITIVE DEBENTURES. Any Restricted Definitive Debenture may be exchanged
by the
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Holder thereof for an Unrestricted Definitive Debenture or transferred to a
Person or Persons who take delivery thereof in the form of an Unrestricted
Definitive Debenture 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
Debentures 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 Debentures proposes to exchange such
Debentures for an Unrestricted Definitive Debenture, 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 Debentures
proposes to transfer such Debentures to a Person who shall take delivery thereof
in the form of an Unrestricted Definitive Debenture, 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), an Opinion
of Counsel in form reasonably acceptable to the Registrar and 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 DEBENTURES TO UNRESTRICTED
DEFINITIVE DEBENTURES. A Holder of Unrestricted Definitive Debentures may
transfer such Debentures to a Person who takes delivery thereof in the form of
an Unrestricted Definitive Debenture. Upon receipt of a request to register
such a transfer, the Registrar shall register the Unrestricted Definitive
Debentures pursuant to the instructions from the Holder thereof.
(f) EXCHANGE OFFER. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Company shall issue
and, upon receipt of an Authentication Order in accordance with Section 2.02,
the Trustee shall authenticate (i) one or more Unrestricted Global Debentures
in an aggregate principal amount equal to the sum of (A) the principal amount
of the beneficial interests in the
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Restricted Global Debentures tendered for acceptance by Persons that certify
in the applicable Letters of Transmittal that (x) they are not
Broker-Dealers, (y) they are not participating in a distribution of the
Exchange Debentures and (z) they are not affiliates (as defined in Rule 144)
of the Company, and accepted for exchange in the Exchange Offer and (B) the
principal amount of Definitive Debentures exchanged or transferred for
beneficial interests in Unrestricted Global Debentures in connection with the
Exchange Offer pursuant to Section 2.06(d)(ii) and (ii) Definitive Debentures
in an aggregate principal amount equal to the principal amount of the
Restricted Definitive Debentures accepted for exchange in the Exchange Offer
(other than Definitive Debentures described in clause (i)(B) immediately
above). Concurrently with the issuance of such Debentures, the Trustee shall
cause the aggregate principal amount of the applicable Restricted Global
Debentures to be reduced accordingly, and the Company shall execute and, upon
receipt of an Authentication Order pursuant to Section 2.02, the Trustee
shall authenticate and deliver to the Persons designated by the Holders of
Definitive Debentures so accepted Definitive Debentures in the appropriate
principal amount.
(g) LEGENDS. The following legends shall appear on the face of all
Global Debentures and Definitive Debentures 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 Debenture and each Definitive Debenture (and all Debentures issued
in exchange therefor or substitution thereof) shall bear the legend in
substantially the following form:
THIS DEBENTURE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND, ACCORDINGLY,
MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS,
EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR
OF A BENEFICIAL INTEREST HEREIN, THE HOLDER: (1) REPRESENTS THAT (I) IT
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
ACT)(A "QIB"), (II) IT HAS ACQUIRED THIS DEBENTURE IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE ACT OR (III) IT IS
AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) OF REGULATION D UNDER THE ACT (AN "IAI"), (2) AGREES
THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS DEBENTURE
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EXCEPT (I) TO THE ISSUER OR ANY OF ITS SUBSIDIARIES, (II) TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (III) IN AN OFFSHORE TRANSACTION MEETING THE
REQUIREMENTS OF RULE 903 OR 904 OF THE ACT, (IV) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE ACT, (V) TO AN IAI THAT,
PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS
DEBENTURE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF
SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF
DEBENTURES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE
ISSUER THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE ACT, (VI) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER)
OR (VII) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH
CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (3) AGREES
THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS DEBENTURE OR AN
INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND
"UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF
REGULATION S UNDER THE ACT. THE INDENTURE CONTAINS A PROVISION
REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS
DEBENTURE IN VIOLATION OF THE FOREGOING.
(B) Notwithstanding the foregoing, any Global
Debenture or Definitive Debenture 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 Debentures issued in exchange therefor or substitution thereof)
shall not bear the Private Placement Legend.
(ii) GLOBAL DEBENTURE LEGEND. To the extent required by the
Depositary, each Global Debenture shall bear a legend in substantially the
following form:
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THIS GLOBAL DEBENTURE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS DEBENTURE) 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 2.06 OF THE
INDENTURE, (II) THIS GLOBAL DEBENTURE MAY BE EXCHANGED IN WHOLE BUT NOT IN
PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL
DEBENTURE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO
SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL DEBENTURE MAY BE
TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE
ISSUER.
(h) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL DEBENTURES. At such
time as all beneficial interests in a particular Global Debenture have been
exchanged for Definitive Debentures or a particular Global Debenture has been
redeemed, repurchased or cancelled in whole and not in part, each such Global
Debenture shall be returned to or retained and cancelled by the Trustee in
accordance with Section 2.11 hereof. At any time prior to such cancellation, if
any beneficial interest in a Global Debenture is exchanged for or transferred to
a Person who will take delivery thereof in the form of a beneficial interest in
another Global Debenture or for Definitive Debentures, the principal amount of
Debentures represented by such Global Debenture shall be reduced accordingly and
an endorsement shall be made on such Global Debenture 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
Debenture, such other Global Debenture shall be increased accordingly and an
endorsement shall be made on such Global Debenture 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 Debentures and
Definitive Debentures upon receipt of an Authentication Order.
(ii) No service charge shall be made to a holder of a
beneficial interest in a Global Debenture or to a Holder of a Definitive
Debenture 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
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therewith (other than any such transfer taxes or similar governmental charge
payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 4.13 and
4.14 hereof).
(iii) The Registrar shall not be required to register the
transfer of or exchange any Debenture selected for redemption in whole or in
part, except the unredeemed portion of any Debenture being redeemed in part.
(iv) All Global Debentures and Definitive Debentures issued
upon any registration of transfer or exchange of Global Debentures or Definitive
Debentures shall be the valid obligations of the Company, evidencing the same
Indebtedness, and entitled to the same benefits under this Indenture, as the
Global Debentures or Definitive Debentures 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 Debentures during a period beginning
at the opening of business 15 days before the day of any selection of Debentures
for redemption under Section 3.02 hereof and ending at the close of business on
the day of selection, (B) to register the transfer of or to exchange any
Debenture so selected for redemption in whole or in part, except the unredeemed
portion of any Debenture being redeemed in part or (C) to register the transfer
of or to exchange a Debenture between a record date and the next succeeding
interest payment date.
(vi) Prior to due presentment for the registration of a
transfer of any Debenture, the Trustee, any Agent and the Company may deem and
treat the Person in whose name any Debenture is registered as the absolute owner
of such Debenture for the purpose of receiving payment of principal of and
interest on such Debentures 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 Debentures and
Definitive Debentures 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 DEBENTURES
If any mutilated Debenture is surrendered to the Trustee or the
Company and the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Debenture, the Company shall issue and the
Trustee, upon receipt of an Authentication
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Order, shall authenticate a replacement Debenture 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 Debenture is replaced. The Company may charge for its expenses
in replacing a Debenture. Every replacement Debenture 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 Debentures duly
issued hereunder.
SECTION 2.08. OUTSTANDING DEBENTURES
The Debentures outstanding at any time are all the Debentures
authenticated by the Trustee except for those cancelled by it, those delivered
to it for cancellation, those reductions in the interest in a Global Debenture
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 Debenture does not cease to be outstanding because the Company or
an Affiliate of the Company holds the Debenture. If a Debenture is replaced
pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee
receives proof satisfactory to it that the replaced Debenture is held by a bona
fide purchaser. If the principal amount of any Debenture 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 the maturity date,
money sufficient to pay Debentures payable on that date, then on and after that
date such Debentures shall be deemed to be no longer outstanding and shall cease
to accrue interest.
SECTION 2.09. TREASURY DEBENTURES
In determining whether the Holders of the required principal amount of
Debentures have concurred in any direction, waiver or consent, Debentures 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 Debentures that the Trustee knows are so
owned shall be so disregarded.
SECTION 2.10. TEMPORARY DEBENTURES
Until certificates representing Debentures are ready for delivery,
the Company may prepare and the Trustee, upon receipt of an Authentication
Order, shall authenticate temporary Debentures. Temporary Debentures shall
be substantially in the
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form of certificated Debentures but may have variations that the Company
considers appropriate for temporary Debentures and as shall be reasonably
acceptable to the Trustee. Without unreasonable delay, the Company shall
prepare and the Trustee shall authenticate definitive Debentures in exchange
for temporary Debentures. Holders of temporary Debentures shall be entitled
to all of the benefits of this Indenture.
SECTION 2.11. CANCELLATION
The Company at any time may deliver Debentures to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Debentures surrendered to them for registration of transfer, exchange or
payment. The Trustee and no one else shall cancel all Debentures surrendered
for registration of transfer, exchange, payment, replacement or cancellation and
shall destroy cancelled Debentures (subject to the record retention requirement
of the Exchange Act). Certification of the destruction of all cancelled
Debentures shall be delivered to the Company. The Company may not issue new
Debentures to replace Debentures 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 Debentures, 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 Debentures 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 Debenture 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.
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ARTICLE 3.
REDEMPTION
SECTION 3.01. NOTICES TO TRUSTEE
If the Company elects to redeem Debentures pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 45 days (unless a shorter period is acceptable to the Trustee) 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 Debentures to be
redeemed and (iv) the redemption price.
SECTION 3.02. SELECTION OF DEBENTURES TO BE REDEEMED
If less than all of the Debentures are to be redeemed at any time, the
Trustee shall select the Debentures to be redeemed among the Holders of the
Debentures in compliance with the requirements of the principal national
securities exchange, if any, on which the Debentures are listed or, if the
Debentures 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 Debentures 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
Debentures not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the
Debentures selected for redemption and, in the case of any Debenture selected
for partial redemption, the principal amount thereof to be redeemed. Debentures
and portions of Debentures selected shall be in amounts of $1,000 or integral
multiples of $1,000; except that if all of the Debentures of a Holder are to be
redeemed, the entire outstanding amount of Debentures held by such Holder, even
if not an integral multiple of $1,000, shall be redeemed. Except as provided in
the preceding sentence, provisions of this Indenture that apply to Debentures
called for redemption also apply to portions of Debentures called for
redemption.
SECTION 3.03. NOTICE OF REDEMPTION
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 Debentures are to be redeemed at its registered
address.
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The notice shall identify the Debentures to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price;
(c) if any Debenture is being redeemed in part, the portion of the
principal amount at maturity of such Debenture to be redeemed and that, after
the redemption date upon surrender of such Debenture, a new Debenture or
Debentures in principal amount at maturity equal to the unredeemed portion shall
be issued upon cancellation of the original Debenture;
(d) the name and address of the Paying Agent;
(e) that Debentures 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 Debentures called for redemption ceases to accrue and
Accreted Value ceases to increase on and after the redemption date;
(g) the paragraph of the Debentures and/or Section of this Indenture
pursuant to which the Debentures 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 Debentures.
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, Debentures called for redemption become irrevocably due and payable on
the redemption date at the redemption price. A notice of redemption may not be
conditional.
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SECTION 3.05. DEPOSIT OF REDEMPTION PRICE
On the Business Day immediately prior to the redemption date, the
Company shall deposit with the Trustee or with the Paying Agent immediately
available funds sufficient to pay the redemption price of and accrued interest
on all Debentures 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 Debentures 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 Debentures or the portions of Debentures called for redemption. If a
Debenture 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 Debenture was registered at the close of
business on such record date. If any Debenture 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 Debentures and in Section 4.01 hereof.
SECTION 3.06. DEBENTURES REDEEMED IN PART
Upon surrender of a Debenture that is redeemed in part, the Company
shall issue and, upon receipt of an Authentication Order, the Trustee shall
authenticate for the Holder at the expense of the Company a new Debenture equal
in principal amount to the unredeemed portion of the Debenture surrendered.
SECTION 3.07. OPTIONAL REDEMPTION
The Debentures will be redeemable, at the Company's option, in whole
or in part, at any time or from time to time, on or after May 15, 2003 and prior
to maturity, upon not less than 30 nor more than 60 days' prior notice mailed by
first class mail to each Holder's last registered address, at the following
redemption prices (expressed in percentages of principal amount), plus accrued
and unpaid interest and Liquidated Damages, if any, to the redemption date, if
redeemed during the 12-month period commencing May 15, of the years set forth
below:
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YEAR PERCENTAGE
2003 . . . . . . . . . . . . . . . . . . . . . 106.563%
2004 . . . . . . . . . . . . . . . . . . . . . 104.375%
2005 . . . . . . . . . . . . . . . . . . . . . 102.188%
2006 and thereafter . . . . . . . . . . . . . . 100.000%
In addition, at any time or from time to time on or prior to May 15,
2001, the Company may redeem up to 35% of the principal amount at maturity of
the Debentures at a redemption price (expressed as a percentage of Accreted
Value) of 113.125%, plus accrued and unpaid interest and Liquidated Damages, if
any, to the redemption date with the Net Cash Proceeds of one or more Equity
Offerings; PROVIDED that at least 65% of the aggregate principal amount at
maturity of Debentures remains outstanding after the occurrence of each such
redemption; and PROVIDED FURTHER, that such redemption occurs within 90 days of
the date of the closing of such Equity Offering.
SECTION 3.08. NO MANDATORY REDEMPTION
The Company shall not be required to make mandatory redemption
payments with respect to the Debentures.
ARTICLE 4.
COVENANTS
SECTION 4.01. PAYMENT OF DEBENTURES
The Company shall pay or cause to be paid the principal of, premium,
if any, and interest on the Debentures on the dates and in the manner provided
in the Debentures. Principal, premium, if any, and interest shall be considered
paid on the date due if the Paying Agent, if other than the Company or a
Subsidiary thereof, holds as of 12:00 noon Eastern time on the due date money
deposited by the Company in immediately available funds and designated for and
sufficient to pay all principal, premium, if any, and interest then due. The
Company shall pay all Liquidated Damages, if any, in the same manner on the
dates and in the amounts set forth in the Registration Rights Agreement. The
Company's Obligations under the Debentures, this Indenture and the Registration
Rights Agreement are referred to herein as the "Company Obligations."
The Company shall pay interest (including Accrued Bankruptcy Interest
in any proceeding under any Bankruptcy Law) on overdue principal at the then
applicable interest rate on the Debentures to the extent lawful; it shall pay
interest (including Accrued Bankruptcy 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.
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SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY
The Company shall maintain an office or agency (which may be an office
of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where
Debentures may be surrendered for registration of transfer or for exchange and
where notices and demands to or upon the Company in respect of the Debentures
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.
The Company may also from time to time designate one or more other
offices or agencies where the Debentures may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations. 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 as one such
office or agency of the Company in accordance with Section 2.03 hereof.
SECTION 4.03. SEC REPORTS AND REPORTS TO HOLDERS
Whether or not required by the rules and regulations of the SEC, so
long as any Debentures are outstanding, beginning with the year ending December
31, 1998, the Company shall furnish to the Holders of Debentures and the Trustee
(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; PROVIDED
that the foregoing shall not require the Company to furnish separate financial
results of its Subsidiaries. In addition, whether or not required by the rules
and regulations of the SEC, the Company will file a copy of all such information
and reports with the SEC for public availability (unless the SEC will not accept
such a filing) and make such information available to securities analysts and
prospective investors upon request. In addition, for so long as any Debentures
remain outstanding, the Company shall furnish to the Holders and to securities
analysts and prospective investors, upon their request, the information required
to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
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SECTION 4.04. COMPLIANCE CERTIFICATE
(a) The Company shall deliver to the Trustee, within 105 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 and its Subsidiaries have kept, observed,
performed and fulfilled their obligations under this Indenture, and further
stating, as to each such Officer signing such certificate, that to the best of
his or her knowledge the Company and its Subsidiaries are not in default in the
performance or observance of any of the terms, provisions and conditions of this
Indenture (or, if a Default or Event of Default shall have occurred and be
continuing, 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 Debentures is prohibited or if such
event has occurred, a description of the event and what action the Company is
taking or proposes to take with respect thereto.
(b) The Company shall, so long as any of the Debentures are
outstanding, deliver to the Trustee, within five Business Days of 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 would not have a material adverse
effect on the ability of the Company to satisfy its obligations under the
Debentures and this Indenture.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS
The Company 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 (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
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Trustee, but shall suffer and permit the execution of every such power as
though no such law has been enacted.
SECTION 4.07. LIMITATION ON INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED STOCK
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, incur any Indebtedness (including Acquired
Indebtedness) and the Company shall not issue or otherwise incur any
Disqualified Stock and shall not permit any of its Subsidiaries to issue or
otherwise incur any shares of Disqualified Stock; PROVIDED, HOWEVER, that the
Company and its Subsidiaries may incur Indebtedness (including Acquired
Indebtedness) or issue or otherwise incur shares of Disqualified Stock and
Foreign Subsidiaries may incur Indebtedness (including Acquired Indebtedness)
if: (i) 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 or incurred would have been at least 1.75
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 or incurred, as the case may be, at the
beginning of such four-quarter period; and (ii) no Default or Event of Default
will have occurred and be continuing or would occur as a consequence thereof;
PROVIDED, that no Guarantee may be incurred pursuant to this paragraph unless
the guaranteed Indebtedness is incurred by the Company or a Subsidiary pursuant
to this paragraph; and PROVIDED FURTHER, that all Indebtedness incurred by
Foreign Subsidiaries pursuant to this paragraph must be secured and must not be
subordinated in right of payment to any other Indebtedness.
The foregoing provisions will not apply to:
(i) the incurrence by GLC or any Subsidiaries thereof of
Senior Term Debt (and Guarantees thereof by the Company or its Subsidiaries);
PROVIDED that the aggregate principal amount of all Senior Term Debt outstanding
under this clause (i) after giving effect to such incurrence does not exceed
$120,000,000 less the aggregate amount of all Net Proceeds of Asset Sales
applied to repay Senior Term Debt pursuant to Section 4.13 hereof;
(ii) the incurrence by GLC or any Subsidiaries thereof of
Senior Revolving Debt (and Guarantees thereof by the Company or its
Subsidiaries) and reimbursement obligations in respect of letters of credit
in an aggregate principal amount at any time outstanding under this clause
(ii) (with letters of credit obligations being deemed to have a principal
amount equal to the maximum potential liability of GLC and its Subsidiaries
(and Guarantees thereof by the Company or its Subsidiaries) not to
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exceed an amount equal to the greater of (a) $25,000,000, less the aggregate
amount of all Net Proceeds of Asset Sales applied to permanently reduce the
outstanding amount or, as applicable, the commitments with respect to such
Indebtedness pursuant to Section 4.13 hereof and (b) an amount equal to the
Borrowing Base;
(iii) the incurrence by the Company and its Subsidiaries of the
Existing Indebtedness (including any Permitted Refinancing Indebtedness incurred
to refinance, retire, renew, defease, refund or otherwise replace such
Indebtedness);
(iv) the incurrence by (a) the Company of Indebtedness
represented by (x) the Debentures issued as of the Issue Date, and (y) the
Exchange Debentures; and (b) GLC and its Subsidiaries of Indebtedness
represented by the Senior Subordinated Notes and any Guarantee thereof and by
Additional Notes (as defined in the Note Indenture) (and any Guarantees thereof)
issued in lieu of interest for up to four seminannual interest payments on the
Senior Subordinated Notes as set forth in the Note Indenture;
(v) the incurrence by the Company or any of its Subsidiaries
of Indebtedness represented by Capital Lease Obligations, Mortgage Financings or
Purchase Money Obligations, in each case incurred for the purpose of financing
all or any part of the purchase price or cost of construction or improvement of
property used in the business or a Related Business of the Company or such
Subsidiary, in an aggregate principal amount not to exceed $10,000,000 at any
time outstanding under this clause (v) (including any Permitted Refinancing
Indebtedness incurred to refinance, retire, renew, defease, refund or otherwise
replace any such Indebtedness);
(vi) 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 extend, refinance, renew, replace, defease or refund,
Indebtedness that was permitted by this Indenture to be incurred or was
outstanding on the Issue Date after giving effect to the Acquisition
Transactions;
(vii) the incurrence by the Company or any of its Subsidiaries
of intercompany Indebtedness between or among the Company and any of its
Subsidiaries or between or among any of its Subsidiaries; PROVIDED, HOWEVER,
that (x) 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
Subsidiary of the Company and (y) any sale or other transfer of any such
Indebtedness to a Person that is not either the Company or a Subsidiary of the
Company will be deemed, in each case, to constitute an incurrence of such
Indebtedness by the Company or such Subsidiary, as the case may be;
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(viii) the incurrence by the Company or any of its Subsidiaries
of Hedging Obligations that are incurred for the purpose of fixing or hedging
(a) interest rate risk with respect to any floating rate Indebtedness that is
permitted by this Indenture to be incurred or (b) currency risk (to the extent
incurred in the ordinary course of business and not for purposes of
speculation);
(ix) the incurrence by the Company or any of its Subsidiaries
of Indebtedness (in addition to Indebtedness permitted by any other clause of
this covenant) in an aggregate principal amount at any time outstanding under
this clause (ix) not to exceed the sum of $30,000,000 (including Permitted
Refinancing Indebtedness incurred to refinance, retire, renew, defease, refund
or otherwise replace any such Indebtedness); PROVIDED that such Indebtedness
may, but need not, be incurred under the New Credit Agreement;
(x) Indebtedness incurred by the Company or any of its
Subsidiaries arising from agreements providing for indemnification, adjustment
of purchase price or similar obligations, or from guarantees of letters of
credit, bankers' acceptances, surety bonds or performance bonds securing the
performance of the Company or any of its Subsidiaries to any Person acquiring
all or a portion of such business or assets of the Company or a Subsidiary of
the Company for the purpose of financing such acquisition, in a principal amount
not to exceed 25% of the gross proceeds (with proceeds other than cash or Cash
Equivalents being valued at the fair market value thereof as determined by the
Company in good faith) actually received by the Company or any of its
Subsidiaries in connection with such disposition;
(xi) the incurrence by a Receivables Subsidiary of
Indebtedness in a Qualified Receivables Transaction that is without recourse to
the Company or to any other Subsidiary of the Company or their assets (other
than such Receivables Subsidiary and its assets and, as to the Company or any
Subsidiary of the Company, other than pursuant to representations, warranties,
covenants and indemnities customary for such transactions) and is not guaranteed
by any such Person;
(xii) the incurrence by Foreign Subsidiaries of Indebtedness
(in addition to Indebtedness permitted by any other provision of this covenant)
in an aggregate amount not to exceed $25,000,000 at any time outstanding under
this clause (xii) (including any Permitted Refinancing Indebtedness incurred to
refinance, retire, renew, defease, refund or otherwise replace any such
Indebtedness);
(xiii) Indebtedness in respect of performance bonds, bankers'
acceptances, letters of credit and surety or appeal bonds entered into by the
Company and its Subsidiaries in the ordinary course of their business;
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(xiv) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient funds in
the ordinary course of business; and
(xv) Finance Subsidiary Indebtedness.
Notwithstanding any other provision of this Section 4.07, a Guarantee
of Indebtedness permitted by the terms of this Indenture at the time such
Indebtedness was incurred or at the time the guarantor thereof became a
Subsidiary of the Company will not constitute a separate incurrence, or amount
outstanding, of Indebtedness. Upon each incurrence of Indebtedness by the
Company or any of its Subsidiaries, the Company shall designate pursuant to
which provision of this Section 4.07 such Indebtedness is being incurred and
such Indebtedness shall not be deemed to have been incurred or outstanding under
any other provision of this Section 4.07, except as stated otherwise in the
foregoing provision.
Indebtedness or Disqualified Stock of any Person which is outstanding
at the time such Person becomes a Subsidiary of the Company (including upon
designation of any subsidiary or other person as a Subsidiary) or is merged with
or into or consolidated with the Company or a Subsidiary of the Company shall be
deemed to have been incurred at the time such Person becomes a Subsidiary of the
Company or is merged with or consolidated with the Company or a Subsidiary of
the Company, as applicable.
SECTION 4.08. LIMITATION ON 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 on
any asset now owned or hereafter acquired, or any income or profits therefrom or
assign or convey any right to receive income therefrom, except Permitted Liens,
unless the Senior Subordinated Notes or the Debentures are secured by such Lien
on an equal and ratable basis.
SECTION 4.09. LIMITATION ON 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
distribution on account of the Company's or any of its Subsidiaries' Equity
Interests (other than dividends or distributions payable in Equity Interests
(other than Disqualified Stock) of the Company or GLC or dividends or
distributions payable to the Company or any Subsidiary); (ii) purchase,
redeem or otherwise acquire or retire for value any Equity Interests of the
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Company or its Subsidiaries 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 and other than pursuant to the Acquisition Transactions);
(iii) make any principal payment on, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is contractually
subordinated to the Debentures (and other than Debentures), except for any
scheduled repayment (including any sinking fund or similar payment) or at
final maturity thereof; or (iv) make any Restricted Investment (all such
payments and other actions set forth in clauses (i) through (iv), unless a
Permitted Investment, 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 will have occurred and be
continuing or would occur as a consequence thereof;
(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 Section 4.07; and
(c) such Restricted Payment, together with the aggregate of all
other Restricted Payments made by the Company and its Subsidiaries after the
Issue Date (excluding Restricted Payments permitted by clauses (ii), (iii),
(iv), (v) and (vi) of the next succeeding paragraph), is less than the sum of
(i) $7,500,000, plus (ii) 50% of the Consolidated Net Income (adjusted to
exclude any amounts that are otherwise included in this clause (c) to the
extent there would be, and to avoid, any duplication in the crediting of any
such amounts) of the Company for the period (taken as one accounting period)
from the beginning of the first fiscal quarter commencing after the Issue
Date to the end of the Company's most recently ended fiscal quarter for which
internal financial statements are available at the time of such Restricted
Payment (or, if such Consolidated Net Income for such period is a deficit,
less 100% of such deficit), plus (iii) to the extent not included in the
amount described in clause (ii) above, 100% of the aggregate Net Cash
Proceeds received after the Issue Date by the Company from the issue or sale
of, or from capital contributions in respect of, Equity Interests of the
Company or of debt securities of the Company or any Subsidiary that have been
converted into, or cancelled in exchange for, Equity Interests of the Company
(other than Equity Interests (or convertible debt securities) sold to a
Subsidiary of the Company and other than Disqualified Stock or debt
securities that have been converted into Disqualified Stock), plus (iv) 100%
of any dividends or other distributions received by the Company or a
Subsidiary of the Company after the Issue Date from an Unrestricted
Subsidiary of the Company, plus (v) 100% of the cash proceeds (or Cash
Equivalents) realized upon the
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sale of any Unrestricted Subsidiary (less the amount of any reserve
established for purchase price adjustments and less the maximum amount of any
indemnification or similar contingent obligation for the benefit of the
purchaser, any of its Affiliates or any other third party in such sale, in
each case as adjusted for any permanent reduction in any such amount on or
after the date of such sale, other than by virtue of a payment made to such
Person) following the Issue Date, plus (vi) to the extent that any Restricted
Investment that was made after the Issue Date is sold for cash (or Cash
Equivalents) or otherwise liquidated or repaid for cash (or Cash
Equivalents), the amount of cash proceeds (or Cash Equivalents) received with
respect to such Restricted Investment plus (vii) upon the redesignation of an
Unrestricted Subsidiary as a Subsidiary, the lesser of (x) the fair market
value of such Subsidiary or (y) the aggregate amount of all Investments made
in such Subsidiary subsequent to the Issue Date by the Company and its
Subsidiaries.
The foregoing provisions will not prohibit, if and to the extent
any of the following would otherwise constitute a Restricted Payment, (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) if no Default or Event of Default shall
have occurred and be continuing (and shall not have been waived) or shall
occur as a consequence thereof, the payment by the Company of a management
fee to AIP in an amount not to exceed $1,850,000 in any fiscal year and the
reimbursement by the Company of AIP's reasonable out-of-pocket expenses
incurred in connection with the rendering of management services to or on
behalf of the Company; PROVIDED, HOWEVER, that no such fees may be paid, and
no such expenses may be reimbursed, unless the obligation of the Company to
pay such management fee has been subordinated to the payment of all
Obligations with respect to the Debentures; (iii) the making of any
Restricted Investment in exchange for, or out of the proceeds of, the
substantially concurrent sale (other than to a Subsidiary of the Company) of,
or from substantially concurrent additional capital contributions in respect
of, Equity Interests of the Company (other than Disqualified Stock);
PROVIDED, that any Net Cash Proceeds that are utilized for any such
Restricted Investment will be excluded from clause (c)(iii) of the preceding
paragraph; (iv) the redemption, repurchase, retirement or other acquisition
of any Equity Interests of the Company in exchange for, or out of the
proceeds of, the substantially concurrent sale (other than to a Subsidiary of
the Company) of, or from substantially concurrent capital contributions in
respect of, other Equity Interests of the Company (other than any
Disqualified Stock); PROVIDED that any Net Cash Proceeds that are utilized
for any such redemption, repurchase, retirement or other acquisition, will be
excluded from clause (c)(iii) of the preceding paragraph; (v) the defeasance,
redemption or repurchase of, or the making of a principal payment on, or the
acquisition or retirement for value of, subordinated Indebtedness in exchange
for or with the net cash proceeds from an incurrence of Permitted Refinancing
Indebtedness or the substantially
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concurrent sale (other than to a Subsidiary of the Company) of, or from
substantially concurrent capital contributions in respect of, Equity
Interests of the Company (other than Disqualified Stock); PROVIDED, that any
net cash proceeds that are utilized for any such defeasance, redemption or
repurchase will be excluded from clause (c)(iii) of the preceding paragraph;
(vi) 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 agreement or stock option agreement or upon the
death, disability or termination of employment of such member; PROVIDED that
the aggregate price paid for all such repurchased, redeemed, acquired or
retired Equity Interests will not exceed $50,000 in the aggregate (net of the
Net Cash Proceeds received by the Company or its Subsidiaries from subsequent
reissuances of such Equity Interests to new members of such management), and
no Default or Event of Default will have occurred and be continuing
immediately after such transaction; (vii) the acquisition by a Receivables
Subsidiary in connection with a Qualified Receivables Transaction of Equity
Interests of a trust or other Person established by such Receivables
Subsidiary to effect such Qualified Receivables Transaction; (viii) PRO RATA
dividends and other distributions on the Equity Interests of any Subsidiary
of the Company by such Subsidiary; and (ix) payments in lieu of fractional
shares in an amount not to exceed $50,000 in the aggregate.
The Board of Directors may designate any Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default or Event
of Default. For purposes of making such determination, all outstanding
Investments by the Company and its Subsidiaries (except to the extent repaid in
cash or Cash Equivalents) in the Subsidiary so designated will be deemed to be
Restricted Payments at the time of such designation and will reduce the amount
available for Restricted Payments under the first paragraph of this Section
4.09. All such outstanding Investments shall be deemed to constitute Investments
in an amount equal to the greatest of (x) the net book value of such Investments
at the time of such designation, (y) the fair market value of such Investments
at the time of such designation and (z) the original fair market value of such
Investments at the time they were made. Such designation shall only be permitted
if such Restricted Payment would be permitted at such time and if such
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
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The amount of all Restricted Payments (other than cash or Cash
Equivalents) shall be the fair market value (as and to the extent set forth in
an Officers' Certificate delivered to the Trustee pursuant to the next sentence)
on the date of the Restricted Payment of the asset(s) proposed to be transferred
by the Company or such Subsidiary, as the case may be, pursuant to the
Restricted Payment. Not later than five Business Days following the date of
making any Restricted Payment in excess of $1,000,000, 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 were computed, which calculations may be based upon the Company's
latest available financial statements.
SECTION 4.10. LIMITATION ON 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 consensual 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, except for such encumbrances or restrictions existing under or by
reason of (a) Existing Indebtedness as in effect on the Issue Date, and any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings are no more restrictive, taken as a whole, with
respect to such dividend and other payment restrictions than those contained in
the applicable Existing Indebtedness as in effect on the Issue Date, (b) the New
Credit Agreement as in effect as of the Issue Date, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings are no more restrictive, taken as a whole, with
respect to such dividend and other payment restrictions than those contained in
the New Credit Agreement as in effect on the Issue Date, (c) the Note Indenture
as in effect as of the Issue Date, and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof, provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings are no more restrictive, taken as a whole, with respect to such
dividend and other payment restrictions than those contained in the Note
Indenture as in effect on the Issue Date, (d) this Indenture and the
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Debentures or any Indebtedness ranking on a PARI PASSU basis with the
Debentures, provided such restrictions are no more restrictive, taken as a
whole, than those contained in this Indenture, (e) applicable law, (f) any
instrument governing Acquired 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 Acquired 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, (g) by reason of customary non-assignment provisions
in leases and licenses entered into in the ordinary course of business, (h)
Purchase Money Obligations, Mortgage Financings or Capital Lease 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, (i) agreements relating to the financing of the acquisition of real
or tangible personal property acquired on or after the Issue Date, PROVIDED,
that such encumbrance or restriction relates only to the property which is
acquired and in the case of any encumbrance or restriction that constitutes a
Lien, such Lien constitutes a Permitted Lien, (j) Indebtedness or other
contractual requirements of a Receivables Subsidiary in connection with a
Qualified Receivables Transaction, provided that such restrictions apply only
to such Receivables Subsidiary, (k) any restriction or encumbrance contained
in contracts for sale of assets permitted by this Indenture in respect of the
assets being sold pursuant to such contract, (l) Indebtedness permitted to be
incurred under Section 4.07 hereof and incurred on or after the Issue Date,
PROVIDED, that such encumbrances or restrictions in such Indebtedness are no
more onerous, taken as a whole, than the restrictions contained in the New
Credit Agreement on the Issue Date, or as the New Credit Agreement may be
amended, modified, restated, renewed, increased, supplemented, refunded,
replaced or refinanced as set forth in clause (b) above, (m) restrictions
contained in Indebtedness of Foreign Subsidiaries incurred under Section
4.07, (n) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing Indebtedness
are no more restrictive than those contained in the agreements governing the
Indebtedness being refinanced, (o) restrictions with respect to the Company
or a Subsidiary of the Company imposed pursuant to a binding agreement
entered into for the sale or disposition of Equity Interests or assets of
such Person permitted pursuant to this Indenture, or (p) agreements relating
to Permitted Liens or Indebtedness related thereto; PROVIDED that such
encumbrance or restriction relates only to the property subject to such
Permitted Lien.
SECTION 4.11. LIMITATION ON LINES OF BUSINESS
Neither the Company nor any of its Subsidiaries shall directly or
indirectly engage to any substantial extent in any line or lines of business
activity other
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than that which, in the reasonable good faith judgment of the Board of
Directors of the Company, is a Related Business.
SECTION 4.12. LIMITATION ON TRANSACTIONS WITH AFFILIATES
The Company shall not, and shall not permit any of its Subsidiaries
to, 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 any
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 entered into after the Issue Date involving aggregate
consideration in excess of $5,000,000, 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 (if any) of the Board of
Directors and (b) with respect to any Affiliate Transaction involving aggregate
consideration in excess of $10,000,000, an opinion as to the fairness to the
Company or such Subsidiary of such Affiliate Transaction from a financial point
of view issued by an investment banking firm of national standing or, in the
event such transaction is of a type that investment bankers do not generally
render fairness opinions, a valuation or appraisal firm of national reputation;
PROVIDED that the following will not be deemed to be Affiliate Transactions:
(w) the provision of administrative or management services by the Company or any
of its officers to any of its Subsidiaries in the ordinary course of business,
(x) any employment agreement entered into by the Company or any of its
Subsidiaries in the ordinary course of business, (y) transactions between or
among the Company and/or its Subsidiaries or transactions between a Receivables
Subsidiary or a Finance Subsidiary and any Person in which the Receivables
Subsidiary or Finance Subsidiary has an Investment and (z) transactions
permitted by Section 4.09. In addition, none of the Acquisition Transactions
shall be deemed to be Affiliate Transactions.
SECTION 4.13. LIMITATION ON ASSET SALES
The Company shall not, and shall not permit any of its Subsidiaries
to, engage in an Asset Sale in excess of $1,000,000 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 of the assets or
Equity Interests sold or otherwise disposed of, and in the case of a lease of
assets, a lease providing for rent and other conditions which are no less
favorable to the Company (or the Subsidiary, as the case may be) in any
material respect than the then prevailing market conditions (in each case
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as set forth in an Officers' Certificate delivered to the Trustee), (ii) at
least 75% of the consideration therefor received by the Company or such
Subsidiary is in the form of cash or Cash Equivalents; PROVIDED that the
amount of (x) any liabilities (as shown on the Company's or such Subsidiary's
most recent balance sheet or in the notes thereto, excluding contingent
liabilities and trade payables) of the Company or any Subsidiary (other than
liabilities that are by their terms subordinated to, or PARI PASSU with, the
Debentures) that are assumed by the transferee of any such assets and (y) any
notes or other obligations received by the Company or any such Subsidiary
from such transferee that are promptly, but in no event more than 30 days
after receipt, converted by the Company or such Subsidiary into cash (to the
extent of the cash received), will be deemed to be cash for purposes of this
provision and the receipt of such cash shall be treated as cash received from
an Asset Sale for which such Debentures or obligations were received.
The Company or any of its Subsidiaries may apply the Net Proceeds
from each Asset Sale, at its option, within 415 days after the consummation
of such Asset Sale, (a) to permanently reduce any Indebtedness (and in the
case of any revolving indebtedness to correspondingly permanently reduce
commitments with respect thereto) of the Company or a Subsidiary of the
Company, or (b) for the acquisition of another business or the acquisition of
other property or assets, in each case, in the same or a Related Business or
(c) for any combination of the foregoing. Pending the final application of
any such Net Proceeds, the Company may temporarily reduce Indebtedness of a
Subsidiary of the Company or otherwise invest such Net Proceeds in any manner
that is not prohibited by this Indenture. Any Net Proceeds from Asset Sales
that are not applied or invested as provided in the first sentence of this
paragraph will be deemed to constitute "Excess Proceeds." When the aggregate
amount of Excess Proceeds exceeds $5,000,000, the Company will be required to
make an offer to all Holders of Debentures (an "Asset Sale Offer") and to
holders of other Indebtedness of the Company outstanding ranking on a PARI
PASSU basis with the Debentures with provisions requiring the Company to make
an offer (or otherwise redeem or prepay) with proceeds from the Asset Sales,
PRO RATA in proportion to the respective principal amounts (or accreted
values in the case of Indebtedness issued with an original issue discount) of
the Debentures and such other Indebtedness then outstanding, to purchase (or
otherwise redeem or prepay) the maximum principal amount (or Accreted Value,
as applicable) of Debentures and such other Indebtedness, if any, that may be
purchased (or redeemed or prepaid) out of the Excess Proceeds, at an offer
price in cash in an amount equal to 100% of the principal amount (or Accreted
Value, if the date of repurchase is prior to May 15, 2003) thereof plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the
date of purchase, in accordance with the procedures set forth in this
Section. If the aggregate principal amount (or Accreted Value, as
applicable) of Debentures and such Indebtedness surrendered by Holders
thereof exceeds the amount of Excess Proceeds, the
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Trustee shall select the Debentures and such 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.
The Asset Sale Offer will remain open for a period not to exceed 30
Business Days following its commencement and no longer, except to the extent
that a longer period is required by applicable law (the "Asset Sale Offer
Period"). No later than five Business Days after the termination of the Asset
Sale Offer Period (the "Asset Sale Purchase Date"), the Company will purchase
the principal amount of Debentures required to be purchased pursuant to this
covenant (the "Asset Sale Offer Amount") or, if less than the Asset Sale Offer
Amount has been tendered, all Debentures tendered in response to the Asset Sale
Offer. Payment for any Debentures so purchased will be made in the same manner
as interest payments are made. 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 were applicable in connection
with the repurchase of the Debentures as a result of an Asset Sale Offer. To the
extent the provisions of any such securities laws or regulations conflict with
the provisions of this covenant, compliance by the Company with such laws, rules
and regulations shall not in and of itself cause a breach of its obligations
under this covenant.
If the Asset Sale Purchase Date is on or after an interest record date
and on or before the related interest payment date, any accrued and unpaid
interest will be paid to the Person in whose name a Debenture is registered at
the close of business on such record date, and no additional interest will be
payable to Holders who tender Debentures 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. The
notice shall contain all instructions and materials necessary to enable such
Holders to tender Debentures 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 covenant
and the length of time the Asset Sale Offer shall remain open;
(b) the Asset Sale Offer Amount, the purchase price and the Asset
Sale Purchase Date;
(c) that any Debenture not tendered or accepted for payment shall
continue to accrete or accrue interest;
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(d) that, unless the Company defaults in making such payment, any
Debenture accepted for payment pursuant to the Asset Sale Offer shall cease to
accrete or accrue interest after the Asset Sale Purchase Date;
(e) that Holders electing to have a Debenture purchased pursuant to
any Asset Sale Offer shall be required to surrender the Debenture, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Debenture
completed, or transfer the Debenture 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 Asset Sale Purchase Date;
(f) 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 Debenture the Holder delivered for purchase and a statement that
such Holder is withdrawing his election to have such Debenture purchased;
(g) that, if the aggregate principal amount (or Accreted Value, if
the date of repurchase is prior to May 15, 2003) of Debentures surrendered by
Holders exceeds the Asset Sale Offer Amount, the Trustee shall select the
Debentures to be purchased on a PRO RATA basis (with such adjustments as may be
deemed appropriate by the Trustee so that only Debentures in denominations of
$1,000, or integral multiples thereof, shall be purchased); and
(h) that Holders whose Debentures were purchased only in part shall
be issued new Debentures equal in principal amount to the unpurchased portion of
the Debentures surrendered (or transferred by book-entry transfer).
On or before the Asset Sale Purchase Date, the Company will, to the
extent lawful, accept for payment, on a PRO RATA basis to the extent
necessary, the Asset Sale Offer Amount of Debentures or portions thereof
tendered pursuant to the Asset Sale Offer, or if less than the Asset Sale
Offer Amount has been tendered, all Debentures tendered, and will deliver to
the Trustee an Officers' Certificate stating that such Debentures or portions
thereof were accepted for payment by the Company in accordance with the terms
of this covenant. The Company, the Depositary or the Paying Agent, as the
case may be, will promptly (but in any case not later than five Business Days
after the Asset Sale Purchase Date) mail or deliver to each tendering Holder
an amount equal to the purchase price of the Debentures tendered by such
Holder and accepted by the Company for purchase, and the Company will
promptly issue a new Debenture, and the Trustee, upon delivery of an
Officers' Certificate from the Company, will authenticate and mail or deliver
such new Debenture to such Holder, in a principal
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amount at maturity equal to any unpurchased portion of the Debenture
surrendered. Any Debenture not so accepted will be promptly mailed or
delivered by the Company to the Holder thereof.
SECTION 4.14. REPURCHASE OF DEBENTURES UPON A CHANGE OF CONTROL
The Company must commence, within 35 days of the occurrence of a
Change of Control, and consummate an Offer to Purchase for all Debentures then
outstanding, at a purchase price equal to 101% of the principal amount (or
Accreted Value, if the date of repurchase is prior to May 15, 2003) thereof,
plus accrued interest (if any) to the Payment Date.
The Company will not be required to make an Offer to Purchase pursuant
to this covenant if a third party makes an Offer to Purchase in compliance with
this covenant and repurchases all Debentures validly tendered and not withdrawn
under such Offer to Purchase.
ARTICLE 5.
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION OR SALE OF ASSETS
The Company shall not, in a single transaction or series of related
transactions, 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 (the "Surviving Entity") is a
corporation organized or existing under the laws of the United States, any
state thereof or the District of Columbia; (ii) the Surviving Entity assumes
all the obligations of the Company under the Debentures and this Indenture
pursuant to a supplemental indenture in a form reasonably satisfactory to the
Trustee; (iii) immediately after such transaction no Default or Event of
Default exists; (iv) the Surviving Entity shall, 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; and (v) the Company shall have delivered to the Trustee an Officers'
Certificate addressed to the Trustee stating that such consolidation, merger,
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sale, assignment, transfer, lease, conveyance or disposition and such
supplemental indenture, if any, comply with this Indenture and that such
supplemental indenture is enforceable.
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 of the Company shall not be relieved from the obligation to pay
the principal of and interest on the Debentures.
ARTICLE 6.
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT
Each of the following constitutes an Event of Default:
(a) default in the payment of interest on, or Liquidated Damages with
respect to, any Debenture when the same becomes due and payable, and such
default continues for a period of 30 days;
(b) default in the payment of principal of or premium, if any, on any
Debenture when the same becomes due and payable;
(c) the Company fails to make or consummate an Asset Sale Offer in
accordance with Section 4.13 or an Offer to Purchase in accordance with Section
4.14;
(d) the failure by the Company for 30 days after written notice by
the Trustee or the Holders of 25% or more in aggregate principal amount at
maturity of the Debentures to comply with Section 4.07 or Section 4.09;
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(e) the Company defaults in the performance of or breaches any other
covenant or agreement of the Company in this Indenture or the Debentures and
such default or breach continues for a period of 60 days after written notice by
the Trustee or the Holders of 25% or more in aggregate principal amount at
maturity of the Debentures;
(f) 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 Issue Date,
which default (A) is caused by a failure to pay principal upon final stated
maturity of such Indebtedness following the expiration of any grace period
provided in such Indebtedness or (B) results in the acceleration of such
Indebtedness prior to its final stated 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 default in the payment of
principal upon final stated maturity which has not been cured and is continuing
following the expiration of any applicable grace period or the maturity of which
has been so accelerated and has not been satisfied, aggregates $7,500,000 or
more;
(g) any final judgment or order for the payment of money shall be
rendered against the Company or any Significant Subsidiary in excess of
$7,500,000 in the aggregate for all such final judgments or orders against all
such Persons and shall not be paid or discharged, and there shall be any period
of 60 consecutive days following entry of the final judgment or order that
causes the aggregate amount for all such final judgments or orders outstanding
and not paid or discharged against all such Persons to exceed $7,500,000;
(h) a court having jurisdiction in the premises enters a decree or
order for (A) relief in respect of the Company or any Significant Subsidiary in
an involuntary case under any applicable Bankruptcy Law now or hereafter in
effect, (B) appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or any Significant Subsidiary or
for all or substantially all of the property and assets of the Company or any
Significant Subsidiary or (C) the winding up or liquidation of the affairs of
the Company or any Significant Subsidiary and, in each case, such decree or
order shall remain unstayed and in effect for a period of 60 consecutive days;
or
(i) the Company or any Significant Subsidiary (A) commences a
voluntary case under any applicable Bankruptcy Law now or hereafter in
effect, or consents to the entry of an order for relief in an involuntary
case under any such law, (B) consents to the appointment of or taking
possession by a receiver, liquidator, assignee,
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custodian, trustee, sequestrator or similar official of the Company or any
Significant Subsidiary or for all or substantially all of the property and
assets of the Company or any Significant Subsidiary or (C) effects any
general assignment for the benefit of creditors.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
SECTION 6.02. ACCELERATION
If an Event of Default (other than an Event of Default specified in
clause (h) or (i) of Section 6.01 that occurs with respect to the Company)
occurs and is continuing under this Indenture, the Trustee or the Holders of at
least 25% in aggregate principal amount at maturity of the Debentures, then
outstanding, by written notice to the Company (and to the Trustee if such notice
is given by the Holders), may, and the Trustee at the request of such Holders
shall, declare the principal of (if on or after May 15, 2003, or Accreted Value
thereof if prior to May 15, 2003), premium, if any, and accrued interest
(including Liquidated Damages) on the Debentures to be immediately due and
payable. Upon a declaration of acceleration, such principal of, premium, if
any, and accrued interest shall be immediately due and payable; PROVIDED that
such acceleration shall automatically be rescinded and annulled without any
further action required on the part of the Holders in the event that any and all
Events of Default specified in the acceleration notice under this Indenture
shall have been cured, waived or otherwise remedied as provided in this
Indenture. In the event of a declaration of acceleration because an Event of
Default set forth in clause (f) above has occurred and is continuing, such
declaration of acceleration shall be automatically rescinded and annulled if the
default triggering such Event of Default pursuant to clause (f) shall be
remedied or cured by the Company or the relevant Subsidiary or waived by the
holders of the relevant Indebtedness within 60 days after the declaration of
acceleration with respect thereto. If an Event of Default specified in clause
(h) or (i) above occurs with respect to the Company, the principal of (if on or
after May 15, 2003, or Accreted Value thereof if prior to May 15, 2003),
premium, if any, and accrued interest on the Debentures then outstanding shall
IPSO FACTO become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any Holder.
SECTION 6.03. OTHER REMEDIES
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal, premium, if
any, and interest on the Debentures or to enforce the performance of any
provision of the Debentures or this Indenture.
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The Trustee may maintain a proceeding even if it does not possess any
of the Debentures or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Debenture 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
The Holders of at least a majority in principal amount at maturity of
the outstanding Debentures by written notice to the Company and to the Trustee,
may waive all past defaults and rescind and annul a declaration of acceleration
and its consequences if (i) all existing Events of Default, other than the
nonpayment of the principal of, premium, if any, and interest on the Debentures
that have become due solely by such declaration of acceleration, have been cured
or waived and (ii) the rescission would not conflict with any judgment or decree
of a court of competent jurisdiction. Upon any such waiver, such Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured for every purpose of this Indenture; but no such waiver shall
extend to any subsequent or other Default or impair any right consequent
thereon.
SECTION 6.05. CONTROL BY MAJORITY
Holders of at least a majority in aggregate principal amount at
maturity of the then outstanding Debentures 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 in good faith may be unduly prejudicial to the
rights of other Holders of Debentures not joining in the giving of such
direction or that may involve the Trustee in personal liability and the Trustee
may take any other action it deems proper that is not inconsistent with any such
direction received from Holders of the Debentures.
SECTION 6.06. LIMITATION ON SUITS
A Holder of a Debenture may pursue a remedy with respect to this
Indenture or the Debentures only if:
(a) the Holder of a Debenture gives to the Trustee written notice of
a continuing Event of Default;
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(b) the Holders of at least 25% in aggregate principal amount at
maturity of the then outstanding Debentures make a written request to the
Trustee to pursue the remedy;
(c) such Holder of a Debenture or Holders of Debentures offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee against
any costs, 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 at maturity of the then outstanding Debentures do not give the Trustee a
direction inconsistent with the request.
A Holder of a Debenture may not use this Indenture to prejudice the
rights of another Holder of a Debenture or to obtain a preference or priority
over another Holder of a Debenture.
SECTION 6.07. RIGHTS OF HOLDERS OF DEBENTURES TO RECEIVE PAYMENT
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Debenture to receive payment of the principal of, premium and
Liquidated Damages, if any, and interest on the Debenture, on or after the
respective due dates expressed in the Debenture (including in connection with an
offer to purchase), or to bring suit for the enforcement of any such payment on
or after such respective dates, shall not be impaired or affected without the
consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE
If an Event of Default specified in Section 6.01(a) or (b) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name and
as trustee of an express trust against the Company for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Debentures and interest on overdue principal and, to the extent
lawful, interest and such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
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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 Debentures allowed in any judicial proceedings relative to the
Company (or any other obligor upon the Debentures), 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 Debentures
or the rights of any Holder, or to authorize the Trustee to vote in respect of
the claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
FIRST: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
SECOND: to Holders of Debentures for amounts due and unpaid on the
Debentures for principal and Liquidated Damages, if any, and interest, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Debentures for principal, premium and Liquidated Damages, if any,
and interest, respectively; and
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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 Debentures pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Debenture pursuant to Section 6.07 hereof, or a suit by Holders of more than 10%
in principal amount at maturity of the then outstanding Debentures.
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
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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 (c) does not limit the effect of paragraph
(b) of this Section;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by an 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 Sections
7.01 and 7.02.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be under
no obligation to exercise any of its rights and powers under this Indenture at
the request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE
(a) In connection with the Trustee's rights and duties under this
Indenture, 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 under this
Indenture, 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
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on such Officers' Certificate or Opinion of Counsel. The Trustee may consult
with counsel and the written advice of such counsel or any Opinion of Counsel
shall be full and complete authorization and protection from liability in
respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
(g) Except with respect to Section 4.01 hereof, the Trustee shall
have no duty to inquire as to the performance of the Company's covenants in
Article 4 hereof. In addition, the Trustee shall not be deemed to have
knowledge of any Default or Event of Default except (i) any Event of Default
occurring pursuant to Sections 6.01(a), 6.01(b) and 4.01 or (ii) any Default or
Event of Default of which the Trustee shall have received written notification
or obtained actual knowledge.
(h) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document, but the Trustee
may, in its discretion, make such further inquiry or investigation into such
facts or matters as it may see fit and if the Trustee shall determine to make
such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company personally or by agent or attorney.
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SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE
The Trustee in its individual or any other capacity may become the
owner or pledgee of Debentures 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 (as defined in the TIA) 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 Debentures, it shall not
be accountable for the Company's use of the proceeds from the Debentures 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
Debentures or any other document in connection with the sale of the Debentures
or pursuant to this Indenture other than its certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders of Debentures in the
manner and to the extent provided by Section 313(c) of the TIA a notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment of principal of, premium, if any, or
interest on any Debenture, the Trustee may withhold the notice if and so long as
a committee of its Officers in good faith determines that withholding the notice
is in the interests of the Holders of the Debentures.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE DEBENTURES
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, and for so long as Debentures remain outstanding,
the Trustee shall mail to the Holders of the Debentures a brief report dated as
of such reporting date that complies with TIA Section 313(a) (but if no event
described in TIA Section 313(a) has occurred within the 12 months preceding the
reporting date, no report need be transmitted). The Trustee also shall comply
with TIA Section 313(b)(2). The Trustee shall also transmit by mail all
reports as required by TIA Section 313(c).
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A copy of each such report at the time of its mailing to the Holders
of Debentures shall be mailed to the Company and filed with the SEC and each
stock exchange on which the Debentures are listed in accordance with TIA Section
313(d). The Company shall promptly notify the Trustee when the Debentures are
listed on any stock exchange.
SECTION 7.07. COMPENSATION AND INDEMNITY
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses
shall include the reasonable compensation, disbursements and expenses of the
Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses (including reasonable attorneys' fees) 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, bad faith or willful misconduct.
The Trustee shall notify the Company promptly of any claim for which it may seek
indemnity. Failure by the Trustee to so notify the Company shall not relieve
the Company of its obligations hereunder. The Company shall defend the claim
and the Trustee shall cooperate in the defense. The Trustee may have separate
counsel and the Company shall pay the reasonable fees and expenses of such
counsel. The Company need not pay for any settlement made without its consent,
which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive
the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien prior to the Debentures on all money or property held
or collected by the Trustee, except that held in trust to pay principal and
interest on particular Debentures. Such Lien shall survive the satisfaction and
discharge of this Indenture.
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When the Trustee incurs expenses or renders services after an Event of
Default specified in Sections 6.01(h) or 6.01(i) 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 Section 313(b)(2)
to the extent applicable.
SECTION 7.08. REPLACEMENT OF TRUSTEE
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. The Holders of Debentures
of a majority in principal amount at maturity of the then outstanding Debentures
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 at maturity of the then outstanding Debentures
may appoint a successor Trustee to replace the successor Trustee appointed by
the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Debentures of at least 10% in principal amount at maturity of the
then outstanding Debentures may petition any court of competent jurisdiction for
the appointment of a successor Trustee.
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If the Trustee, after written request by any Holder of a Debenture who
has been a Holder of a Debenture for at least six months, fails to comply with
Section 7.10, such Holder of a Debenture 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 Debentures. 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
(or a member of a bank holding company) 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 (or the
bank holding company of which it is a member has) a combined capital and surplus
of at least $50,000,000 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 Section 310(a)(1), (2) and (5). The Trustee is subject to
TIA Section 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY
The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated 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 be applied to all outstanding Debentures 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 Debentures 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 Debentures, which shall thereafter be deemed to be "outstanding"
only for the purposes of Section 8.05 hereof and the other Sections of this
Indenture referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Debentures 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 Debentures to receive solely from the trust fund described in
Section 8.04 hereof, and as more fully set forth in such Section, payments in
respect of the principal of, premium, if any, and interest and Liquidated
Damages, if any, on such Debentures when such payments are due, (b) the
Company's obligations with respect to such Debentures 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, subject to the satisfaction of the
conditions set forth in Section 8.04 hereof, the Company be released from its
obligations under Sections 4.03, 4.04, 4.05, 4.07, 4.08, 4.09, 4.10, 4.11,
4.12, 4.13 and 4.14 hereof, in each case on and after the date the conditions
set forth below are satisfied (hereinafter, "Covenant Defeasance"), and the
Debentures shall thereafter be deemed not "outstanding" for the
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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 Debentures shall not be deemed outstanding for
accounting purposes). For this purpose, Covenant Defeasance means that, with
respect to the outstanding Debentures, 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 Debentures shall be unaffected
thereby. In addition, upon the Company's exercise under Section 8.01 hereof
of the option applicable to this Section 8.03 hereof, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, (x) Sections
6.01(c) through 6.01(g) hereof shall not constitute Events of Default and (y)
Sections 6.01(h) and 6.01(i) shall not constitute Events of Default as of the
91st day following the occurrence of Covenant Defeasance.
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 Debentures:
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 United States dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium and Liquidated Damages, if any,
and interest on the outstanding Debentures on the stated date for payment
thereof or on the applicable redemption date, as the case may be, and the
Company must specify whether the Debentures are being defeased to maturity or to
a particular redemption date;
(b) in the case of an election under Section 8.02 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming that (A) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (B) since the date of this Indenture, there has
been a change in the applicable federal income tax law, in either case to the
effect that, and based thereon such Opinion of Counsel shall confirm that,
the Holders of the outstanding Debentures will not recognize income, gain or
loss for federal income tax purposes as a result of such Legal Defeasance and
will be
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subject to federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Legal Defeasance had not
occurred;
(c) in the case of an election under Section 8.03 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Debentures will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be subject
to federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the incurrence of Indebtedness all or a portion of the proceeds
of which will be used to defease the Debentures pursuant to this Article 8
concurrently with such incurrence);
(e) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, any material agreement
or instrument (other than this Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound;
(f) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Company; and
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that all conditions precedent provided for or relating to
the Legal Defeasance or the Covenant Defeasance have been complied with.
Legal Defeasance and Covenant Defeasance shall be deemed to occur on
the date of the deposit required under Section 8.04(a), so long as all of the
other conditions set forth in Section 8.04 are satisfied as of such date.
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 Debentures shall be held in trust and applied by the Trustee,
in accordance with the provisions of such Debentures and this
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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 Debentures 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.
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, if any,
Liquidated Damages or interest on any Debenture and remaining unclaimed for two
years after such principal, and premium, if any, Liquidated Damages, if any, or
interest has become due and payable shall be paid to the Company on its request
or (if then held by the Company) shall be discharged from such trust; and the
Holder of such Debenture shall thereafter, as a creditor, look only to the
Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease; PROVIDED, HOWEVER, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in the New York Times and The
Wall Street Journal (national edition), notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such notification or publication, any unclaimed balance of such
money then remaining 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
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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
Debentures 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 Debenture following the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such Debentures 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 DEBENTURES
Notwithstanding Section 9.02 of this Indenture, the Company and the
Trustee may amend or supplement this Indenture or the Debentures without the
consent of any Holder of a Debenture:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Debentures in addition to or in
place of certificated Debentures;
(c) to provide for the assumption of the Company's obligations to the
Holders of the Debentures in the case of a merger or consolidation pursuant to
Article 5 hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Debentures or that does not adversely affect the
legal rights hereunder of any Holder of the Debenture;
(e) to comply with the provisions of the Depositary, Euroclear or
Cedel or the Trustee with respect to the provisions of this Indenture or the
Debentures relating to transfers and exchanges of Debentures or beneficial
interests therein; or
(f) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA.
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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 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 adversely affects its own
rights, duties or immunities under this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF DEBENTURES
Except as provided below in this Section 9.02, the Company and the
Trustee may amend or supplement this Indenture (including Sections 4.13 and 4.14
hereof), and the Debentures with the consent of the Holders of a majority in
aggregate principal amount of the Debentures then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, the Debentures), 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 Debentures, except a payment default resulting from an
acceleration that has been rescinded) or compliance with any provision of this
Indenture or the Debentures may be waived with the consent of the Holders of a
majority in aggregate principal amount of the then outstanding Debentures
(including consents obtained in connection with a purchase of, or tender offer
or exchange offer for, the Debentures).
In connection with any amendment, supplement or waiver under this
Article 9, the Company may, but shall not be obligated to, offer to any Holder
who consents to such amendment, supplement or waiver, or to all Holders,
consideration for such Holder's consent to such amendment, supplement or waiver.
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 Debentures 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 adversely
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.
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It shall not be necessary for the consent of the Holders of Debentures
under this Section 9.02 to approve the particular form of any proposed amendment
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Debentures 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 Debentures then outstanding may
waive compliance in a particular instance by the Company with any provision of
this Indenture or the Debentures. However, without the consent of each Holder
affected (it being understood that Sections 4.13 and 4.14 hereof may be amended
in accordance with the first paragraph of this Section 9.02), an amendment or
waiver may not (with respect to any Debentures held by a non-consenting Holder):
(a) reduce the principal amount of Debentures whose Holders must
consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the final stated maturity of
any Debenture or alter or waive any of the provisions with respect to the
redemption of the Debentures under Section 3.07;
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Debenture;
(d) waive a past Default or past Event of Default in the payment of
principal of or premium, if any, or interest on the Debentures (except a
rescission of acceleration of the Debentures by the Holders of a majority in
aggregate principal amount of the then outstanding Debentures and a waiver of
the payment default that resulted from such acceleration);
(e) make any Debenture payable in money other than that stated in the
Debentures;
(f) except as otherwise provided in this fifth paragraph of Section
9.02 (including clauses (a) through (g) hereof), make any change in the
provisions of this Indenture, the Debentures relating to waivers of past
Defaults or Events of Default or the rights of Holders of Debentures to receive
payments of principal of, premium or Liquidated Damages, if any, or interest on
the Debentures; or
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(g) make any change in the foregoing amendment and waiver provisions.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT
Every amendment or supplement to this Indenture or the Debentures
shall be set forth in an 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 (as
determined by the Company), a consent to it by a Holder of a Debenture is a
continuing consent by the Holder of a Debenture and every subsequent Holder of a
Debenture or portion of a Debenture that evidences the same Indebtedness as the
consenting Holder's Debenture, even if notation of the consent is not made on
any Debenture. However, any such Holder of a Debenture or subsequent Holder of
a Debenture may revoke the consent as to its Debenture if the Trustee receives
written notice of revocation before the date the waiver, supplement or amendment
becomes effective (as determined by the Company). 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 DEBENTURES
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Debenture thereafter authenticated. The Company in
exchange for all Debentures may issue and the Trustee shall authenticate new
Debentures that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Debenture
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.
In executing any amended or supplemental indenture, the Trustee shall be
entitled to receive indemnity reasonably satisfactory to it and to receive and
(subject to Section 7.01) shall be fully protected in relying upon, an 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.
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ARTICLE 10.
MISCELLANEOUS
SECTION 10.01. TRUST INDENTURE ACT CONTROLS
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by the TIA, the imposed duties shall control.
SECTION 10.02. NOTICES
Any notice or communication by the Company or the Trustee to the
others is duly given if in writing and delivered in Person or mailed by first
class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address:
If to the Company:
Great Lakes Acquisition Corp.
4 Greenspoint Plaza, Suite 2200
16945 Northchase Drive
Houston, Texas 77060
Telephone No.: (281) 775-4700
Telecopier No.: (281) 775-4722
Attention: President
If to the Trustee:
State Street Bank and Trust Company of California, N.A.
633 West Fifth Street, 12th Floor
Los Angeles, California 90071
Telephone No.: (213) 362-7369
Telecopier No.: (213) 362-7357
Attention: Corporate Trust Department
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; when answered back, if telexed; when receipt
acknowledged, if telecopied;
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and the next Business Day after timely delivery to the courier, if sent by
overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA Section 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 10.03. COMMUNICATION BY HOLDERS OF DEBENTURES WITH OTHER HOLDERS
OF DEBENTURES
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Debentures.
The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).
SECTION 10.04. 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 10.05 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 10.05 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
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SECTION 10.05. 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 Section 314(a)(4)) shall comply with the provisions of
TIA Section 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has been
satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied; PROVIDED, HOWEVER, that with
respect to matters of fact, an Opinion of Counsel may rely on an Officers'
Certificate or certificate of public officials.
SECTION 10.06. 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 10.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS
No past, present or future director, officer, employee, incorporator
or stockholder of the Company, as such, shall have any liability for any
Obligations of the Company under the Debentures or this Indenture or for any
claim based on, in respect of, or by reason of, such Obligations or their
creation. Each Holder by accepting a Debenture waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Debentures.
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SECTION 10.08. GOVERNING LAW
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE AND THE DEBENTURES.
SECTION 10.09. 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 10.10. SUCCESSORS
All agreements of the Company in this Indenture and the Debentures
shall bind its successors. All agreements of the Trustee in this Indenture
shall bind its successors.
SECTION 10.11. SEVERABILITY
In case any provision in this Indenture or in the Debentures 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 10.12. COUNTERPART ORIGINALS
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 10.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not to
be considered a part of this Indenture and shall in no way modify or restrict
any of the terms or provisions hereof.
[SIGNATURES ON FOLLOWING PAGE]
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SIGNATURES
Dated as of May 22, 1998 GREAT LAKES ACQUISITION CORP.
By: /s/ JAMES MCKENZIE
--------------------------------
Name: James McKenzie
Title: President and CEO
Attest:
/s/ ADELE ROBLES
-------------------------------- (SEAL)
Name: Adele Robles
Title: Corporate Secretary
Dated as of May 22, 1998 STATE STREET BANK AND TRUST
COMPANY OF CALIFORNIA, N.A.
By: /s/ SCOTT EMMONS
--------------------------------
Name: Scott Emmons
Title: Assistant Vice President
S-1
<PAGE>
EXHIBIT A
(Face of Debenture)
CUSIP No:[ (144A)]
[ (Reg. S)]
[ (ISIN)]
FOR PURPOSES OF SECTIONS 1272 ET SEQ. OF THE INTERNAL REVENUE CODE OF 1986,
AS AMENDED, (i) WITH RESPECT TO EACH $1,000 OF PRINCIPAL AMOUNT DUE AT
MATURITY, THE ISSUE PRICE OF THIS SECURITY IS $530.92 AND THE AMOUNT
OF ORIGINAL ISSUE DISCOUNT IS $1,256.58, (ii) THE ISSUE DATE IS
MAY 22, 1998, AND (iii) THE YIELD TO MATURITY IS 13.125%.
13-1/8% [Series A] [Series B] Senior Subordinated Debentures due 2009
No. $
-----------
GREAT LAKES ACQUISITION CORP.
promises to pay to or registered assigns,
-------------------------
the principal sum of Dollars on May 15, 2009
------------------------
Interest Payment Dates: May 15 and November 15
Record Dates: May 1 and November 1
Dated: GREAT LAKES ACQUISITION CORP.
By:
----------------------------------------
Name:
Title:
(SEAL)
A-1
<PAGE>
Certificate of Authentication:
This is one of the [Global] Debentures
referred to in the within-mentioned Indenture:
State Street Bank and Trust Company of California, N.A.
By:
-------------------------------------------
Authorized Signatory
Dated:
A-2
<PAGE>
(Back of Debenture)
13-1/8% [Series A] [Series B] Senior Subordinated Debentures due 2009
[THIS GLOBAL DEBENTURE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS DEBENTURE) 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 2.06 OF THE INDENTURE, (II) THIS GLOBAL
DEBENTURE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a)
OF THE INDENTURE, (III) THIS GLOBAL DEBENTURE MAY BE DELIVERED TO THE TRUSTEE
FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL
DEBENTURE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN
CONSENT OF THE ISSUER.]
[UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR DEBENTURES IN
DEFINITIVE FORM, THIS DEBENTURE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO
THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW
YORK) ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE
OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.](1.)
[THIS DEBENTURE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE
- --------------------
(1.) To be included only on Global Debentures deposited with DTC as
Depositary.
A-3
<PAGE>
TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF,
U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION
HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER: (1) REPRESENTS THAT
(I) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
ACT)(A "QIB"), (II) IT HAS ACQUIRED THIS DEBENTURE IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATION S UNDER THE ACT OR (III) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF
REGULATION D UNDER THE ACT (AN "IAI"), (2) AGREES THAT IT WILL NOT RESELL OR
OTHERWISE TRANSFER THIS DEBENTURE EXCEPT (I) TO THE ISSUER OR ANY OF ITS
SUBSIDIARIES, (II) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (III) IN AN OFFSHORE TRANSACTION MEETING
THE REQUIREMENTS OF RULE 903 OR 904 OF THE ACT, (IV) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144 UNDER THE ACT, (V) TO AN IAI THAT, PRIOR TO SUCH
TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS DEBENTURE (THE
FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN
RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF DEBENTURES LESS THAN $250,000, AN
OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER THAT SUCH TRANSFER IS IN COMPLIANCE
WITH THE ACT, (VI) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE
ISSUER) OR (VII) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH
CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THIS DEBENTURE OR AN INTEREST HEREIN IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN,
THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO
THEM BY RULE 902 OF REGULATION S UNDER THE ACT. THE INDENTURE CONTAINS A
PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS
DEBENTURE IN VIOLATION OF THE FOREGOING.]
A-4
<PAGE>
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. INTEREST. Great Lakes Acquisition Corp., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Debenture
at 13-1/8% per annum from May 15, 2003 until maturity and shall pay the
Liquidated Damages, if any, payable pursuant to Section 5 of the Registration
Rights Agreement referred to below. The Company will pay interest and
Liquidated Damages, if any, semi-annually on May 15 and November 15 of each
year, or if any such day is not a Business Day, on the next succeeding Business
Day (each an "Interest Payment Date"). Until May 15, 2003, no cash interest
will accrue or be payable on this Debenture, but the Accreted Value will
increase between May 22, 1998 and May 15, 2003, on a semi-annual bond equivalent
basis using a 360-day year comprised of twelve 30-day months, such that the
Accreted Value shall be equal to the full principal amount at maturity of this
Debenture on May 15, 2003. The Accreted Value shall cease to increase as of May
15, 2003. Beginning on May 15, 2003, interest on the Debentures will accrue from
the most recent date to which interest has been paid or, if no interest has been
paid, from May 15, 2003; PROVIDED that if there is no existing Default in the
payment of interest, and if after May 15, 2003 this Debenture is authenticated
between a record date referred to on the face hereof and the next succeeding
Interest Payment Date, interest shall accrue from such next succeeding Interest
Payment Date; PROVIDED, FURTHER, that the first Interest Payment Date shall be
November 15, 2003. The Company shall pay interest (including Accrued Bankruptcy
Interest in any proceeding under any Bankruptcy Law) on overdue principal and
premium, if any, from time to time on demand at the rate then in effect; it
shall pay interest (including Accrued Bankruptcy Interest in any proceeding
under any Bankruptcy Law) on overdue installments of interest and Liquidated
Damages (without regard to any applicable grace periods) from time to time on
demand at the same rate to the extent lawful. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Debentures
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Debentures at the close of business on the May 1 or
November 1 next preceding the Interest Payment Date, even if such Debentures are
cancelled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture (as defined below) with
respect to defaulted interest; provided that the first Interest Payment Date
shall be November 15, 2003. The Debentures will be payable as to principal,
premium, interest and Liquidated Damages at the office or agency of the Company
maintained for such purpose, 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
A-5
<PAGE>
by wire transfer of immediately available funds to an account within the United
States of America will be required with respect to principal of and interest,
premium and Liquidated Damages on all Global Debentures. 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, State Street Bank and Trust
Company of California, N.A., the Trustee under the Indenture, will act as Paying
Agent and Registrar. The Company may change any Paying Agent or Registrar
without notice to any Holder. The Company or any of its Subsidiaries may act in
any such capacity.
4. INDENTURE. The Company issued the Debentures under an Indenture dated
as of May 22, 1998 ("Indenture") among the Company and the Trustee. The terms
of the Debentures 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 Sections 77aaa-77bbbb). The Debentures are subject to all such
terms, and Holders are referred to the Indenture and such Act for a statement of
such terms. The Debentures are obligations of the Company limited to $56.6
million in aggregate principal amount at maturity.
5. OPTIONAL REDEMPTION. The Debentures will be redeemable, at the
Company's option, in whole or in part, at any time or from time to time, on or
after May 15, 2003 and prior to maturity, upon not less than 30 nor more than 60
days' prior notice mailed by first class mail to each Holder's last registered
address, at the following redemption prices (expressed in percentages of
principal amount), plus accrued and unpaid interest and Liquidated Damages, if
any, to the redemption date, if redeemed during the 12-month period commencing
May 15, of the years set forth below:
YEAR PERCENTAGE
2003 . . . . . . . . . . . . . . . . . . . . . 106.563%
2004 . . . . . . . . . . . . . . . . . . . . . 104.375%
2005 . . . . . . . . . . . . . . . . . . . . . 102.188%
2006 and thereafter . . . . . . . . . . . . . . 100.000%
In addition, at any time prior to May 15, 2001, the Company may redeem up
to 35% of the principal amount of the Debentures with the proceeds of one or
more Equity Offerings, at any time or from time to time in part, at a redemption
price (expressed as a percentage of Accreted Value) of 113.125%, plus accrued
and unpaid interest and Liquidated Damages, if any, to the redemption date;
PROVIDED that at least 65% in aggregate principal amount of Debentures remains
outstanding after each such redemption; and PROVIDED FURTHER, that such
redemption occurs within 90 days of the date of the closing of each such Equity
Offering.
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<PAGE>
6. MANDATORY REDEMPTION. The Company shall not be required to make
mandatory redemption payments with respect to the Debentures.
7. OFFERS TO PURCHASE.
(a) CHANGE OF CONTROL. The Company must commence, within 35 days of
the occurrence of a Change of Control, and consummate an Offer to Purchase for
all Debentures then outstanding, at a purchase price equal to 101% of the
principal amount (or Accreted Value, if the date of repurchase is prior to May
15, 2003) thereof, plus accrued interest (if any) to the Payment Date.
(b) ASSET SALE. The Company shall not, and shall not permit any of
its Subsidiaries to, engage in an Asset Sale in excess of $1,000,000 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 of the
assets or Equity Interests sold or otherwise disposed of, and in the case of a
lease of assets, a lease providing for rent and other conditions which are no
less favorable to the Company (or the Subsidiary, as the case may be) in any
material respect than the then prevailing market conditions (in each case as set
forth in an Officers' Certificate delivered to the Trustee), (ii) at least 75%
of the consideration therefor received by the Company or such Subsidiary is in
the form of cash or Cash Equivalents; PROVIDED that the amount of (x) any
liabilities (as shown on the Company's or such Subsidiary's most recent balance
sheet or in the notes thereto, excluding contingent liabilities and trade
payables) of the Company or any Subsidiary (other than liabilities that are by
their terms subordinated to, or PARI PASSU with, the Debentures) that are
assumed by the transferee of any such assets and (y) any notes or other
obligations received by the Company or any such Subsidiary from such transferee
that are promptly, but in no event more than 30 days after receipt, converted by
the Company or such Subsidiary into cash (to the extent of the cash received),
will be deemed to be cash for purposes of this provision and the receipt of such
cash shall be treated as cash received from an Asset Sale for which such
Debentures or obligations were received.
The Company or any of its Subsidiaries may apply the Net Proceeds
from each Asset Sale, at its option, within 415 days after the consummation
of such Asset Sale, (a) to permanently reduce any Indebtedness (and in the
case of any revolving indebtedness to correspondingly permanently reduce
commitments with respect thereto) of the Company or a Subsidiary of the
Company, or (b) for the acquisition of another business or the acquisition of
other property or assets, in each case, in the same or a Related Business or
(c) for any combination of the foregoing. Pending the final application of
any such Net Proceeds, the Company may temporarily reduce
A-7
<PAGE>
Indebtedness of a Subsidiary of the Company 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 $5,000,000,
the Company will be required to make an offer to all Holders of Debentures
(an "Asset Sale Offer") and to holders of other Indebtedness of the Company
outstanding ranking on a PARI PASSU basis with the Debentures with provisions
requiring the Company to make an offer (or otherwise redeem or prepay) with
proceeds from the Asset Sales, PRO RATA in proportion to the respective
principal amounts (or accreted values in the case of Indebtedness issued with
an original issue discount) of the Debentures and such other Indebtedness
then outstanding, to purchase (or otherwise redeem or prepay) the maximum
principal amount (or Accreted Value, as applicable) of Debentures and such
other Indebtedness, if any, that may be purchased (or redeemed or prepaid)
out of the Excess Proceeds, at an offer price in cash in an amount equal to
100% of the principal amount (or Accreted Value, if the date of repurchase is
prior to May 15, 2003) thereof plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the date of purchase, in accordance
with the procedures set forth in the Indenture. If the aggregate principal
amount (or Accreted Value, as applicable) of Debentures and such Indebtedness
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Debentures and such 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.
8. DENOMINATIONS, TRANSFER, EXCHANGE. The Debentures are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Debentures may be registered and Debentures 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 Debenture or portion of a Debenture
selected for redemption, except for the unredeemed portion of any Debenture
being redeemed in part. Also, it need not exchange or register the transfer of
any Debentures for a period of 15 days before a selection of Debentures to be
redeemed or during the period between a record date and the corresponding
Interest Payment Date.
9. PERSONS DEEMED OWNERS. The registered Holder of a Debenture may be
treated as its owner for all purposes.
10. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture or the Debentures may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the then
outstanding Debentures, and
A-8
<PAGE>
any existing Default or compliance with any provision of the Indenture or the
Debentures may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Debentures. Without the consent of
any Holder of a Debenture, the Indenture or the Debentures may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Debentures in addition to or in place of certificated
Debentures, to provide for the assumption of the Company's obligations to
Holders of the Debentures in case of a merger or consolidation, to make any
change that would provide any additional rights or benefits to the Holders of
the Debentures or that does not adversely affect the legal rights under the
Indenture of any such Holder, to comply with the provisions of the
Depositary, Euroclear or Cedel or the Trustee with respect to the provisions
of this Indenture or the Debentures relating to transfers and exchanges of
Debentures or beneficial interests therein, or to comply with the
requirements of the SEC in order to effect or maintain the qualification of
the Indenture under the TIA.
11. DEFAULTS AND REMEDIES. The Indenture provides that each of the
following constitutes an Event of Default: (a) default in the payment of
principal of (or premium, if any, on) any Note when the same becomes due and
payable at maturity, upon acceleration, redemption or otherwise; (b) default
in the payment of interest on, or Liquidated Damages with respect to, any
Note when the same becomes due and payable, and such default continues for a
period of 30 days; (c) the failure to make or consummate an Asset Sale Offer
in accordance with the provisions of Section 4.13 (Limitation on Asset Sales)
or an Offer to Purchase in accordance with Section 4.14 (Change of Control)
of the Indenture; (d) the Company or any of its Subsidiaries defaults in the
performance of or breaches Section 4.07 (Limitation on Incurrence of
Indebtedness and Issuance of Disqualified Stock) or Section 4.09 (Limitation
on Restricted Payments) and such default or breach continues for a period of
30 days after written notice by the Trustee or the Holders of 25% or more in
aggregate principal amount at maturity of the Debentures; (e) the Company or
any of its Subsidiaries defaults in the performance of or breaches any other
covenant or agreement of the Company or any Subsidiary in the Indenture or
under the Debentures (other than a default specified in clause (a), (b), (c)
or (d) above) and such default or breach continues for a period of 60 days
after written notice by the Trustee or the Holders of 25% or more in
aggregate principal amount at maturity of the Debentures; (f) there occurs
any 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 Issue Date,
which default (I) is caused by a failure to pay principal of such
Indebtedness at final stated maturity following the expiration of any grace
period provided in such Indebtedness or (II) results in the acceleration of
such Indebtedness prior to its final
A-9
<PAGE>
stated 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 default in the payment of principal
upon final stated maturity which has not been cured and is continuing
following the expiration of any applicable grace period or the maturity of
which has been so accelerated and has not been satisfied, aggregates
$7,500,000 or more; (g) any final judgment or order for the payment of money
shall be rendered against the Company or any Significant Subsidiary in excess
of $7,500,000 in the aggregate for all such final judgments or orders against
all such Persons and shall not be paid or discharged, and there shall be any
period of 60 days following entry of the final judgment or order that causes
the aggregate amount for all such final judgments or orders outstanding and
not paid or discharged against all such Persons to exceed $7,500,000; (h) a
court having jurisdiction in the premises enters a decree or order for (A)
relief in respect of the Company or any Significant Subsidiary in an
involuntary case under any applicable Bankruptcy Law now or hereafter in
effect, (B) appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official of the Company or any Significant
Subsidiary or for all or substantially all of the property and assets of the
Company or any Significant Subsidiary or (C) the winding up or liquidation of
the affairs of the Company or any Significant Subsidiary and, in each case,
such decree or order shall remain unstayed and in effect for a period of 60
consecutive days; or (i) the Company or any Significant Subsidiary (A)
commences a voluntary case under any applicable Bankruptcy Law now or
hereafter in effect, or consents to the entry of an order for relief in an
involuntary case under any such law, (B) consents to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or any Significant Subsidiary
or for all or substantially all of the property and assets of the Company or
any Significant Subsidiary or (C) effects any general assignment for the
benefit of creditors.
12. 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.
13. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Debentures 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 Debenture waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Debentures.
14. AUTHENTICATION. This Debenture shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
A-10
<PAGE>
15. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
16. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED DEBENTURES. In
addition to the rights provided to Holders of Debentures under the Indenture,
Holders of Transferred Restricted Debentures shall have all the rights set forth
in the Registration Rights Agreement dated as of the date of the Indenture,
among the Company and the Initial Purchasers (the "Registration Rights
Agreement").
17. 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 Debentures 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 Debentures
or as contained in any notice of redemption and reliance may be placed only on
the other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Great Lakes Acquisition Corp.
4 Greenspoint Plaza, Suite 2200
16945 Northchase Drive
Houston, Texas 77060
Attention: President
Telephone No.: (281) 775-4700
A-11
<PAGE>
ASSIGNMENT FORM
To assign this Debenture, fill in the form below: (I) or (we) assign and
transfer this Debenture 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 Debenture 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 Debenture)
Signature Guarantee.
A-12
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Debenture purchased by the Company
pursuant to Section 4.13 or 4.14 of the Indenture, check the box below:
/ / Section 4.13 / / Section 4.14
If you want to elect to have only part of the Debenture purchased by the Company
pursuant to Section 4.13 or Section 4.14 of the Indenture, state the amount you
elect to have purchased: $
---------------
Date: Your Signature:
-------------------- -------------------------------
(Sign exactly as your name appears on the
Debenture)
Tax Identification No.:
--------------------
Signature Guarantee.
A-13
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS
IN THE GLOBAL DEBENTURE*
The following exchanges of a part of this Global Debenture for an interest
in another Global Debentures or for a Definitive Debenture, or exchanges of a
part of another Global Debenture or Definitive Debenture for an interest in this
Global Debenture, have been made:
<TABLE>
<CAPTION>
Principal Amount of Signature of
Amount of decrease in Amount of increase in this Global Debenture authorized officer of
Principal Amount of Principal Amount of following such decrease Trustee or Debenture
Date of Exchange this Global Debenture this Global Debenture (or increase) Custodian
---------------- --------------------- --------------------- ----------------------- ---------------------
<S> <C> <C> <C> <C>
</TABLE>
- --------------------------------
* This should be included only if the Debenture is issued in global form.
A-14
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Great Lakes Acquisition Corp.
4 Greenspoint Plaza, Suite 2200
16945 Northchase Drive
Houston, Texas 77060
Attention: President
State Street Bank and Trust Company of California, N.A.
633 West Fifth Street, 12th Floor
Los Angeles, California 90071
Attention: Corporate Trust Group
Re: 13-1/8% Senior Subordinated Debentures due 2009
Dear Sirs:
Reference is hereby made to the Indenture, dated as of May 22, 1998 (the
"Indenture"), among Great Lakes Acquisition Corp., as issuer (the "Company"),
and State Street Bank and Trust Company of California, N.A., 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 Debenture[s] or interest in such Debenture[s] specified in Annex A
hereto, in the principal amount at maturity of $ in such Debenture[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 DEBENTURE OR A DEFINITIVE DEBENTURE 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 Debenture is being transferred to
a Person that the Transferor reasonably believed and believes is purchasing
the beneficial interest or Definitive Debenture 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"
B-1
<PAGE>
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 Debenture will be subject to the restrictions
on transfer enumerated in the Private Placement Legend printed on the 144A
Global Debenture and/or the Definitive Debenture and in the Indenture and the
Securities Act.
2. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
REGULATION S GLOBAL DEBENTURE OR A DEFINITIVE DEBENTURE PURSUANT TO REGULATION
S. The Transfer is being effected pursuant to and in accordance with Rule 903
or Rule 904 under the Securities Act and, accordingly, the Transferor hereby
further certifies that (i) the Transfer is not being made to a person in the
United States and (x) at the time the buy order was originated, the Transferee
was outside the United States or such Transferor and any Person acting on its
behalf reasonably believed and believes that the Transferee was outside the
United States or (y) the transaction was executed in, on or through the
facilities 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 a Initial
Purchaser) and the interest transferred will be held immediately thereafter
through Euroclear or Cedel. Upon consummation of the proposed transfer in
accordance with the terms of the Indenture, the transferred beneficial interest
or Definitive Debenture will be subject to the restrictions on Transfer
enumerated in the Private Placement Legend printed on the Regulation S Global
Debenture and/or the Definitive Debenture and in the Indenture and the
Securities Act.
3. / / CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN A DEFINITIVE DEBENTURE 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 Debentures and Restricted Definitive Debentures 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-2
<PAGE>
(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 Debenture or Restricted Definitive Debentures and the
requirements of the exemption claimed, which certification is supported by (1) a
certificate executed by the Transferee in a form of Exhibit D to the Indenture
and (2) if such Transfer is in respect of a principal amount of Debentures 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 and provided to the Company, which has confirmed its
acceptability), 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 Definitive Debenture will be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Definitive Debentures and in the Indenture and the Securities Act.
4. / / Check if Transferee will take delivery of a beneficial interest in an
Unrestricted Global Debenture or of an Unrestricted Definitive Debenture.
(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
Debenture will no longer be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the Restricted Global Debentures, on
Restricted Definitive Debentures and in the Indenture.
B-3
<PAGE>
(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 Debenture will no longer be subject to the restrictions
on transfer enumerated in the Private Placement Legend printed on the Restricted
Global Debentures, on Restricted Definitive Debentures 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 Debenture will not be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Restricted
Global Debentures or Restricted Definitive Debentures and in the Indenture.
This certificate and the statements contained herein are made for your benefit
and the benefit of the Company.
--------------------------------
[Insert Name of Transferor]
By:
-----------------------------
Name:
Title:
Dated:
----------------------
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 Debenture (CUSIP ), or
(b) / / a Restricted Definitive Debenture.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) / / a beneficial interest in the:
(i) / / 144A Global Debenture (CUSIP ), or
(ii) / / Regulation S Global Debenture (CUSIP ), or
(iii) / / Unrestricted Global Debenture (CUSIP ); or
(b) / / a Restricted Definitive Debenture; or
(c) / / an Unrestricted Definitive Debenture,
in accordance with the terms of the Indenture.
B-5
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Great Lakes Acquisition Corp.
4 Greenspoint Plaza, Suite 2200
16945 Northchase Drive
Houston, Texas 77060
Attention: President
State Street Bank and Trust Company of California, N.A.
633 West Fifth Street, 12th Floor
Los Angeles, California 90071
Attention: Corporate Trust Group
Re: 13-1/8% SENIOR SUBORDINATED DEBENTURES DUE 2009
Dear Sirs:
Reference is hereby made to the Indenture, dated as of May 22, 1998
(the "Indenture"), between Great Lakes Acquisition Corp., as issuer (the
"Company"), and State Street Bank and Trust Company of California, N.A., 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
------------------
Debenture[s] or interest in such Debenture[s] specified herein, in the principal
amount at maturity of $ in such Debenture[s] or interests (the
-------------
"Exchange"). In connection with the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE DEBENTURES OR BENEFICIAL INTERESTS
IN A RESTRICTED GLOBAL DEBENTURE FOR UNRESTRICTED DEFINITIVE DEBENTURES OR
BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL DEBENTURE.
(a) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL DEBENTURE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL
DEBENTURE. In connection with the Exchange of the Owner's beneficial
interest in a Restricted Global Debenture for a beneficial interest in an
Unrestricted Global Debenture 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 Debentures and
C-1
<PAGE>
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 Debenture 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 DEBENTURE TO UNRESTRICTED DEFINITIVE DEBENTURE. In connection
with the Exchange of the Owner's beneficial interest in a Restricted Global
Debenture for an Unrestricted Definitive Debenture, the Owner hereby certifies
(i) the Definitive Debenture 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 Debentures 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 Debenture 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 DEBENTURE TO
BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL DEBENTURE. In connection with the
Owner's Exchange of a Restricted Definitive Debenture for a beneficial interest
in an Unrestricted Global Debenture, 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 Debentures 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 DEBENTURE TO
UNRESTRICTED DEFINITIVE DEBENTURE. In connection with the Owner's Exchange of a
Restricted Definitive Debenture for an Unrestricted Definitive Debenture, the
Owner hereby certifies (i) the Unrestricted Definitive Debenture 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 Debentures 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
C-2
<PAGE>
Debenture is being acquired in compliance with any applicable blue sky
securities laws of any State of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE DEBENTURES OR BENEFICIAL INTERESTS
IN RESTRICTED GLOBAL DEBENTURES FOR RESTRICTED DEFINITIVE DEBENTURES OR
BENEFICIAL INTERESTS IN RESTRICTED GLOBAL DEBENTURES
(a) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL DEBENTURE TO RESTRICTED DEFINITIVE DEBENTURE. In connection
with the Exchange of the Owner's beneficial interest in a Restricted Global
Debenture for a Restricted Definitive Debenture with an equal principal amount,
the Owner hereby certifies that the Restricted Definitive Debenture 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 Debenture issued will continue to be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Restricted
Definitive Debenture and in the Indenture and the Securities Act.
(b) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE DEBENTURE TO
BENEFICIAL INTEREST IN A RESTRICTED GLOBAL DEBENTURE. In connection with the
Exchange of the Owner's Restricted Definitive Debenture for a beneficial
interest in the: [CHECK ONE] / / 144A Global Debenture or / / Regulation S
Global Debenture 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 Debentures 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 Debenture and in the Indenture and the Securities Act.
C-3
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
- -------------------------------
[Insert Name of Owner]
By:
----------------------------
Name:
Title:
Dated:
-----------------------
C-4
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE FROM ACQUIRING
INSTITUTIONAL ACCREDITED INVESTOR
Great Lakes Acquisition Corp.
4 Greenspoint Plaza, Suite 2200
16945 Northchase Drive
Houston, Texas 77060
Attention: President
State Street Bank and Trust Company of California, N.A.
633 West Fifth Street, 12th Floor
Los Angeles, California 90071
Attention: Corporate Trust Group
Re: 13-1/8% SENIOR SUBORDINATED DEBENTURES DUE 2009
Dear Sirs:
Reference is hereby made to the Indenture, dated as of May 22, 1998
(the "Indenture"), between Great Lakes Acquisition Corp., as issuer (the
"Company"), and State Street Bank and Trust Company of California, N.A., 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 at maturity of: (a) a beneficial interest in a Global
Debenture, or (b) a Definitive Debenture, we confirm that:
1. We understand that any subsequent transfer of the Debentures 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 Debentures 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 Debentures have not been
registered under the Securities Act, and that the Debentures 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
Debentures or any interest therein, we will do so only
D-1
<PAGE>
(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 the proposed transfer is in
respect of an aggregate principal amount at maturity of Debentures of less
than $250,000, an Opinion of Counsel in form reasonably acceptable to the
Company to the effect that such transfer is in compliance with the Securities
Act, (D) outside the United States in accordance with Rule 904 of Regulation
S under the Securities Act, (E) pursuant to the provisions of Rule 144 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 Debenture 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 Debentures 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 Debentures purchased
by us will bear a legend to the foregoing effect. We further understand that
any subsequent transfer by us of the Debentures or beneficial interest therein
acquired by us must be effected through one of the Initial Purchasers.
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 Debentures, 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 Debentures 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.
- -------------------------------------------
D-2
<PAGE>
[Insert Name of Accredited Investor]
By: ------------------------------------
Name:
Title:
Dated: ,
- -------------------------------- -----
D-3
<PAGE>
EXHIBIT 4.3
REGISTRATION RIGHTS AGREEMENT
DATED AS OF MAY 22, 1998
BY AND BETWEEN
GREAT LAKES ACQUISITION CORP.
AND
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made and
entered into as of May 22, 1998 by and between Great Lakes Acquisition Corp., a
Delaware corporation (the "COMPANY"), and Donaldson, Lufkin & Jenrette
Securities Corporation (the "INITIAL PURCHASER"), which has agreed to purchase
the Company's 13-1/8% Series A Senior Discount Debentures due 2009 (the "SERIES
A DEBENTURES") pursuant to the Purchase Agreement dated as of May 18, 1998 (the
"PURCHASE AGREEMENT"), by and between the Company and the Initial Purchaser.
In order to induce the Initial Purchaser to purchase the Series A
Debentures, the Company has agreed to provide the registration rights set forth
in this Agreement. The execution and delivery of this Agreement is a condition
to the obligations of the Initial Purchaser set forth in Section 2 of the
Purchase Agreement. Capitalized terms used herein and not otherwise defined
shall have the meaning assigned to them in the Indenture, dated May 22, 1998,
between the Company and State Street Bank and Trust Company of California, N.A.,
as Trustee, relating to the Series A Debentures and the Series B Debentures (the
"INDENTURE").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS.
As used in this Agreement, the following capitalized terms shall have
the following meanings:
ACT: The Securities Act of 1933, as amended.
AFFILIATE: As defined in Rule 144 of the Act.
BROKER-DEALER: Any broker or dealer registered under the Exchange
Act.
CLOSING DATE: The date of this Agreement.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of all of the following events:
(i) the filing and effectiveness under the Act of the Exchange Offer
Registration Statement relating to the Series B Debentures to be issued in the
Exchange Offer, (ii) the maintenance of such Registration Statement effective
and the keeping of the Exchange Offer open for a period not less than the period
required pursuant to Section 3(b) hereof, and (iii) the delivery by the Company
to the Registrar under the Indenture of Series B Debentures in the same
aggregate principal amount as the aggregate principal amount of Series A
Debentures tendered by Holders thereof pursuant to the Exchange Offer.
CONSUMMATION DEADLINE: As defined in Section 3(b) hereof.
EFFECTIVENESS DEADLINE: As defined in Section 3(a) and 4(a) hereof.
1
<PAGE>
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXCHANGE OFFER: The exchange and issuance by the Company of a
principal amount of Series B Debentures (which shall be registered pursuant to
the Exchange Offer Registration Statement) equal to the outstanding principal
amount of Series A Debentures that are tendered by Holders in connection with
such exchange and issuance.
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
EXEMPT RESALES: The transactions in which the Initial Purchaser
proposes to sell the Series A Debentures to (i) certain "qualified institutional
buyers," as such term is defined in Rule 144A under the Act and (ii) pursuant to
Regulation S under the Act.
FILING DEADLINE: As defined in Sections 3(a) and 4(a) hereof.
HOLDER: As defined in Section 2(b) hereof.
INITIAL PURCHASER: As defined in the preamble hereto.
INTEREST PAYMENT DATE: As defined in the Indenture and the
Debentures.
NASD: National Association of Securities Dealers, Inc.
PERSON: An individual, partnership, corporation, limited liability
company, joint venture, association, trust or other organization, whether or not
a legal entity, or a government or agency or political subdivision thereof.
PROSPECTUS: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
RECOMMENCEMENT DATE: As defined in Section 6(d) hereof.
REGISTRATION DEFAULT: As defined in Section 5 hereof.
REGISTRATION STATEMENT: Any registration statement of the Company
relating to (a) an offering of Series B Debentures 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.
REGULATION S: Regulation S promulgated under the Act.
RULE 144: Rule 144 promulgated under the Act.
2
<PAGE>
SERIES A DEBENTURES: As defined in the preamble hereto.
SERIES B DEBENTURES: The Company's 13-1/8% Series B Senior Discount
Debentures due 2009 to be issued pursuant to the Indenture: (i) in the Exchange
Offer or (ii) as contemplated by Section 4 hereof.
SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof.
SUSPENSION NOTICE: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
TRANSFER RESTRICTED SECURITIES: Each Series A Debenture, until the
earliest to occur of (a) the date on which such Series A Debenture is exchanged
in the Exchange Offer for a Series B Debenture which is entitled to be resold to
the public by the Holder thereof without complying with the prospectus delivery
requirements of the Act (other than as a result of the Holder's status as an
Affiliate of the Company), (b) the date on which such Series A Debenture has
been disposed of in accordance with a Shelf Registration Statement (and the
purchasers thereof have been issued Debentures that do not bear the Private
Placement Legend set forth in the Indenture), or (c) the date on which such
Series A Debenture is distributed to the public pursuant to Rule 144 under the
Act or may be sold under Rule 144(k) under the Act (and purchasers thereof have
been issued Debentures that do not bear the Private Placement Legend set forth
in the Indenture) and each Series B Debenture until the date on which such
Series B Debenture is disposed of by a Broker-Dealer pursuant to the "Plan of
Distribution" contemplated by the Exchange Offer Registration Statement
(including the delivery of the Prospectus contained therein).
SECTION 2. HOLDERS.
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 permitted by applicable
federal law (after the procedures set forth in Section 6(a)(i) below have been
complied with), the Company shall (i) cause the Exchange Offer Registration
Statement to be filed with the Commission as soon as practicable after the
Closing Date, but in no event later than 60 days after the Closing Date (such
60th day being the "FILING DEADLINE"), (ii) use its reasonable best efforts to
cause such Exchange Offer Registration Statement to become effective at the
earliest possible time, but in no event later than 135 days after the Closing
Date (such 135th day being the "EFFECTIVENESS DEADLINE"), (iii) in connection
with the foregoing, (A) file all pre-effective amendments to such Exchange Offer
Registration Statement as may be necessary in order to cause it to become
effective, (B) file, if applicable, a post-effective amendment to such Exchange
Offer Registration Statement pursuant to Rule 430A under the Act and (C) cause
all necessary filings, if any, in connection with the registration and
qualification of the Series B Debentures to be made under the Blue Sky laws of
such United States jurisdictions as are necessary to permit Consummation of the
Exchange Offer, PROVIDED, HOWEVER, that the Company shall not be required in
connection therewith to register or qualify as a foreign corporation in any
jurisdiction where it is not now
3
<PAGE>
so registered or qualified or to take any action that would subject it to
service of process in suits or to taxation, other than as to matters and
transactions relating to the Exchange Offer Registration Statement, in any
jurisdiction where it is not now so subject, and (iv) upon the effectiveness
of such Exchange Offer Registration Statement, commence and Consummate the
Exchange Offer. The Exchange Offer shall be on the appropriate form
permitting (i) registration of the Series B Debentures to be offered in
exchange for the Series A Debentures that are Transfer Restricted Securities
and (ii) resales of Series B Debentures by Broker-Dealers that tendered into
the Exchange Offer Series A Debentures that such Broker-Dealer acquired for
its own account as a result of market making activities or other trading
activities (other than Series A Debentures acquired directly from the Company
or any of its Affiliates) as contemplated by Section 3(c) below.
(b) The Company shall use its reasonable best efforts to cause the
Exchange Offer Registration Statement to be effective continuously, and shall
keep the Exchange Offer open for a period of not less than the minimum period
required under applicable federal and state securities laws to Consummate the
Exchange Offer; PROVIDED, HOWEVER, that in no event shall such period be less
than 20 Business Days. The Company shall cause the Exchange Offer to comply
with all applicable federal and state securities laws. No securities other than
the Series B Debentures (and guarantees thereof, if any) shall be included in
the Exchange Offer Registration Statement. The Company shall use its reasonable
best efforts to cause the Exchange Offer to be Consummated on or prior to 30
Business Days after the Exchange Offer Registration Statement has become
effective (such 30th Business Day being the "CONSUMMATION DEADLINE").
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Broker-Dealer who holds Transfer Restricted Securities that
were acquired for the account of such Broker-Dealer as a result of market-making
activities or other trading activities (other than Series A Debentures acquired
directly from the Company or any Affiliate of the Company), may exchange such
Transfer Restricted Securities pursuant to the Exchange Offer. Such "Plan of
Distribution" section shall also contain all other information with respect to
such sales by such Broker-Dealers that the Commission may require in order to
permit such sales pursuant thereto, but such "Plan of Distribution" shall not
name any such Broker-Dealer or disclose the amount of Transfer Restricted
Securities held by any such Broker-Dealer, except to the extent required by the
Commission as a result of a change in policy, rules or regulations after the
date of this Agreement.
Because such Broker-Dealer may be deemed to be an "underwriter" within
the meaning of the Act and must, therefore, deliver a prospectus meeting the
requirements of the Act in connection with its initial sale of any Series B
Debentures received by such Broker-Dealer in the Exchange Offer, the Company
shall permit the use of the Prospectus contained in the Exchange Offer
Registration Statement by such Broker-Dealer to satisfy such prospectus delivery
requirement. To the extent necessary to ensure that the prospectus contained in
the Exchange Offer Registration Statement is available for sales of Series B
Debentures by Broker-Dealers, the Company agrees to use its reasonable best
efforts to keep the Exchange Offer Registration Statement continuously
effective, supplemented, amended and current as required by and subject to the
provisions of Section 6(a) and (c) hereof and in conformity with the
requirements of this Agreement, the Act and the policies, rules and regulations
of the Commission as announced from time to time, for a period of one year from
the Consummation Deadline or such shorter period as will terminate when all
Transfer Restricted Securities covered by such Registration Statement
4
<PAGE>
have been sold pursuant thereto. The Company shall provide sufficient copies
of the latest version of such Prospectus to such Broker-Dealers, promptly
upon request, and in no event later than one day after such request, at any
time during such period.
Section 4. SHELF REGISTRATION.
(a) SHELF REGISTRATION. If (i) the Exchange Offer is not permitted
by applicable law (after the Company has complied with the procedures set forth
in Section 6(a)(i) below) or (ii) if any Holder of Transfer Restricted
Securities shall notify the Company prior to the 20th day following the
Consummation of the Exchange Offer that (A) such Holder was prohibited by law or
Commission policy from participating in the Exchange Offer or (B) such Holder
may not resell the Series B Debentures acquired by it in the Exchange Offer to
the public without delivering a prospectus and the Prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resales by such Holder or (C) such Holder is a Broker-Dealer and holds Series A
Debentures acquired directly from the Company or any of its Affiliates, then the
Company shall:
(x) use its best efforts to cause to be filed, on or prior to 30
days after the earlier of (i) the date on which the Company determines that the
Exchange Offer Registration Statement cannot be filed as a result of clause
(a)(i) above and (ii) the date on which the Company receives the notice
specified in clause (a)(ii) above, (such earlier date, the "FILING DEADLINE"), a
shelf registration statement pursuant to Rule 415 under the Act (which may be an
amendment to the Exchange Offer Registration Statement (the "SHELF REGISTRATION
STATEMENT")), relating to all Transfer Restricted Securities, and
(y) use its best efforts to cause such Shelf Registration
Statement to become effective on or prior to 90 days after the obligation to
file such Shelf Registration Statement arises (such 90th day the "EFFECTIVENESS
DEADLINE").
If, after the Company has filed an Exchange Offer Registration
Statement that satisfies the requirements of Section 3(a) above, the Company is
required to file and make effective a Shelf Registration Statement solely
because the Exchange Offer is not permitted under applicable federal law (i.e.,
clause (a)(i) above), then the filing of the Exchange Offer Registration
Statement shall be deemed to satisfy the requirements of clause (x) above;
PROVIDED that, in such event, the Company shall remain obligated to meet the
Effectiveness Deadline set forth in clause (y).
To the extent necessary to ensure that the Shelf Registration
Statement is available for sales of Transfer Restricted Securities by the
Holders thereof entitled to the benefit of this Section 4(a) and the other
securities required to be registered therein pursuant to Section 6(b)(ii)
hereof, the Company shall use its best efforts to keep any Shelf Registration
Statement required by this Section 4(a) continuously effective, supplemented,
amended and current as required by and subject to the provisions of Sections
6(b) and (c) hereof and in conformity with the requirements of this Agreement,
the Act and the policies, rules and regulations of the Commission as announced
from time to time, for a period of at least two years (as extended pursuant to
Section 6(c)(i)) following the Closing Date, or such shorter period as will
terminate when all Transfer Restricted Securities covered by such Shelf
Registration Statement have been sold pursuant thereto.
5
<PAGE>
(b) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION WITH
THE SHELF REGISTRATION STATEMENT. No Holder of Transfer Restricted Securities
may include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, the
information specified in Item 507 or 508 of Regulation S-K, as applicable, of
the Act for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein or prospectus supplement
thereto. No Holder of Transfer Restricted Securities shall be entitled to
liquidated damages pursuant to Section 5 hereof unless and until such Holder
shall have provided all such information. Each selling Holder agrees to
promptly furnish additional information required to be disclosed in order to
make the information previously furnished to the Company by such Holder not
materially misleading.
SECTION 5. LIQUIDATED DAMAGES.
If (i) any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the applicable Filing Deadline, (ii)
any such Registration Statement has not been declared effective by the
Commission on or prior to the applicable Effectiveness Deadline, (iii) the
Exchange Offer has not been Consummated on or prior to the Consummation Deadline
(except in the situation described in Section 4(a)(i) above when Section
4(a)(x)(i) has been satisfied) 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
within two Business Days by a post-effective amendment to such Registration
Statement (or a new Registration Statement) that cures such failure and that is
itself declared effective within five Business Days of filing such
post-effective amendment to such Registration Statement (each such event
referred to in clauses (i) through (iv), a "REGISTRATION DEFAULT"), then the
Company hereby agrees to pay to each Holder of Transfer Restricted Securities
affected thereby liquidated damages in an amount equal to $.05 per week per
$1,000 in principal amount of Transfer Restricted Securities held by such Holder
for each week or portion thereof that the Registration Default continues for the
first 90-day period immediately following the occurrence of such Registration
Default. The amount of the liquidated damages shall increase by an additional
$.05 per week per $1,000 in principal amount of Transfer Restricted Securities
with respect to each subsequent 90-day period until all Registration Defaults
have been cured, up to a maximum amount of liquidated damages of $.25 per week
per $1,000 in principal amount of Transfer Restricted Securities; PROVIDED that
the Company shall in no event be required to pay liquidated damages for more
than one Registration Default at any given time. Notwithstanding anything to
the contrary set forth herein, (1) upon filing of the Exchange Offer
Registration Statement (and/or, if applicable, the Shelf Registration
Statement), in the case of (i) above, (2) upon the effectiveness of the Exchange
Offer Registration Statement (and/or, if applicable, the Shelf Registration
Statement), in the case of (ii) above, (3) upon Consummation of the Exchange
Offer, in the case of (iii) above, or (4) upon the filing of a post-effective
amendment to the Registration Statement or an additional Registration Statement
that causes the Exchange Offer Registration Statement (and/or, if applicable,
the Shelf Registration Statement) to again be declared effective or made usable
in the case of (iv) above, the liquidated damages payable with respect to the
Transfer Restricted Securities as a result of such clause (i), (ii), (iii) or
(iv), as applicable, shall cease.
All accrued liquidated damages shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Indenture, on
each Interest Payment Date, as more
6
<PAGE>
fully set forth in the Indenture and the Debentures. Notwithstanding the
fact that any securities for which liquidated damages are due cease to be
Transfer Restricted Securities, all obligations of the Company to pay
liquidated damages with respect to securities shall survive until such time
as such obligations with respect to such securities shall have been satisfied
in full.
Section 6. REGISTRATION PROCEDURES.
(a) EXCHANGE OFFER REGISTRATION STATEMENT. In connection with the
Exchange Offer, the Company shall (x) comply with all applicable provisions of
Section 6(c) below, (y) use its best efforts to effect such exchange and to
permit the resale of Series B Debentures by any Broker-Dealer that tendered in
the Exchange Offer Series A Debentures that such Broker-Dealer acquired for its
own account as a result of its market making activities or other trading
activities (other than Series A Debentures acquired directly from the Company or
any of its Affiliates) being sold in accordance with the intended method or
methods of distribution thereof, and (z) comply with all of the following
provisions:
(i) If, following the date hereof there has been announced a
change in Commission policy with respect to exchange offers such as the
Exchange Offer, that in the reasonable opinion of counsel to the Company
raises a substantial question as to whether the Exchange Offer is permitted
by applicable federal law, the Company hereby agrees to seek a no-action
letter or other favorable decision from the Commission allowing the Company
to Consummate an Exchange Offer for such Transfer Restricted Securities.
The Company hereby agrees to pursue the issuance of such a decision to the
Commission staff level. In connection with the foregoing, the Company
hereby agrees to take all such other actions as may be requested by the
Commission or otherwise required in connection with the issuance of such
decision, including without limitation (A) participating in telephonic
conferences with the Commission, (B) delivering to the Commission staff an
analysis prepared by counsel to the Company setting forth the legal bases,
if any, upon which such counsel has concluded that such an Exchange Offer
should be permitted and (C) diligently pursuing a resolution (which need
not be favorable) by the Commission staff. Notwithstanding the foregoing,
the Company shall not be required to take commercially unreasonable action
to comply with the requests of the Commission referred to in the previous
sentence in order to secure a favorable resolution.
(ii) As a condition to its participation in the Exchange
Offer, each Holder of Transfer Restricted Securities (including, without
limitation, any Holder who is a Broker Dealer) shall furnish, upon the
request of the Company, prior to the Consummation of the Exchange Offer, a
written representation to the Company (which may be contained in the letter
of transmittal contemplated by the Exchange Offer Registration Statement)
to the effect that (A) it is not an Affiliate of the Company, (B) it is not
engaged in, and does not intend to engage in, and has no arrangement or
understanding with any person to participate in, a distribution of the
Series B Debentures to be issued in the Exchange Offer and (C) it is
acquiring the Series B Debentures in its ordinary course of business. As a
condition to its participation in the Exchange Offer each Holder using the
Exchange Offer to participate in a distribution of the Series B Debentures
shall acknowledge and agree that, if the resales are of Series B Debentures
obtained by such Holder in exchange for Series A Debentures acquired
directly from the Company or an Affiliate thereof, it (1) could not, under
Commission policy as in effect on the date of this Agreement, rely on the
position of the Commission enunciated in MORGAN STANLEY AND CO., INC.
(available June 5, 1991)
7
<PAGE>
and EXXON CAPITAL HOLDINGS CORPORATION (available May 13, 1988), as
interpreted in the Commission's letter to SHEARMAN & STERLING dated
July 2, 1993, and similar no-action letters (including, if applicable,
any no-action letter obtained pursuant to clause (i) above), and
(2) must comply with the registration and prospectus delivery
requirements of the Act in connection with a secondary resale transaction
and that such a secondary resale transaction must be covered by an
effective registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation S-K.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company shall provide a supplemental letter to the
Commission (A) stating that the Company is registering the Exchange Offer
in reliance on the position of the Commission enunciated in EXXON CAPITAL
HOLDINGS CORPORATION (available May 13, 1988), MORGAN STANLEY AND CO., INC.
(available June 5, 1991) as interpreted in the Commission's letter to
SHEARMAN & STERLING dated July 2, 1993, and, if applicable, any no-action
letter obtained pursuant to clause (i) above, (B) including a
representation that the Company has not entered into any arrangement or
understanding with any Person to distribute the Series B Debentures to be
received in the Exchange Offer and that, to the best of the Company's
information and belief, each Holder participating in the Exchange Offer is
acquiring the Series B Debentures in its ordinary course of business and
has no arrangement or understanding with any Person to participate in the
distribution of the Series B Debentures received in the Exchange Offer and
(C) any other undertaking or representation required by the Commission as
set forth in any no-action letter obtained pursuant to clause (i) above, if
applicable.
(b) SHELF REGISTRATION STATEMENT. In connection with the Shelf
Registration Statement, the Company shall a)(i) comply with all the provisions
of Section 6(c) below and use its best efforts to effect such registration to
permit the sale of the Transfer Restricted Securities being sold in accordance
with the intended method or methods of distribution thereof (as indicated in the
information furnished to the Company pursuant to Section 4(b) hereof), and
pursuant thereto the Company will prepare and file with the Commission a
Registration Statement relating to the registration on any appropriate form
under the Act, which form shall be available for the sale of the Transfer
Restricted Securities in accordance with the intended method or methods of
distribution thereof within the time periods and otherwise in accordance with
the provisions hereof, and
(ii) issue, upon the request of any Holder or purchaser of Series A
Debentures covered by any Shelf Registration Statement contemplated by this
Agreement, Series B Debentures having an aggregate principal amount equal to the
aggregate principal amount of Series A Debentures sold pursuant to the Shelf
Registration Statement and surrendered to the Company for cancellation; the
Company shall register Series B Debentures on the Shelf Registration Statement
for this purpose and issue the Series B Debentures to the purchaser(s) of
securities subject to the Shelf Registration Statement in the names as such
purchaser(s) shall designate.
(c) GENERAL PROVISIONS. In connection with any Registration
Statement and any related Prospectus required by this Agreement, the Company
shall:
(i) use its best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements for
the period specified in Section 3 or 4 of
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this Agreement, as applicable. Upon the occurrence of any event that would
cause any such Registration Statement or the Prospectus contained therein
(A) to contain an untrue statement of material fact or omit to state any
material fact necessary to make the statements therein not misleading or
(B) not to be effective and usable for resale of Transfer Restricted
Securities during the period required by this Agreement, the Company shall
file promptly an appropriate amendment to such Registration Statement or
supplement such Prospectus, as applicable, curing such defect, and, if
Commission review is required, use its best efforts to cause such
amendment to be declared effective as soon as practicable.
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the applicable Registration Statement as may
be necessary to keep such Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, as the case may be;
cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under
the Act, and to comply fully with Rules 424, 430A and 462, as applicable,
under the Act in a timely manner; and comply with the provisions of the Act
with respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the sellers thereof set forth
in such Registration Statement or supplement to the Prospectus;
(iii) advise each Holder promptly and, if requested by such
Holder, confirm such advice in writing, (A) when the Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and, with
respect to any applicable Registration Statement or any post-effective
amendment thereto, when the same has become effective, (B) of any request
by the Commission for amendments to the Registration Statement or
amendments or supplements to the Prospectus or for additional information
relating thereto, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement under the Act or
of the suspension by any state securities commission of the qualification
of the Transfer Restricted Securities for offering or sale in any
jurisdiction, or the initiation of any proceeding for any of the preceding
purposes, (D) of the existence of any fact or the happening of any event
that makes any statement of a material fact made in the Registration
Statement, the Prospectus, any amendment or supplement thereto or any
document incorporated by reference therein untrue, or that requires the
making of any additions to or changes in the Registration Statement in
order to make the statements therein not misleading, or that requires the
making of any additions to or changes in the Prospectus in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading. If at any time the Commission shall issue any
stop order suspending the effectiveness of the Registration Statement, or
any state securities commission or other regulatory authority shall issue
an order suspending the qualification or exemption from qualification of
the Transfer Restricted Securities under state securities or Blue Sky laws,
the Company shall use its best efforts to obtain the withdrawal or lifting
of such order at the earliest possible time;
(iv) subject to Section 6(c)(i), if any fact or event
contemplated by Section 6(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
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<PAGE>
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, in the
light of the circumstances under which they were made, not misleading;
(v) furnish to each Holder in connection with such exchange
or sale, if any, before filing with the Commission, copies of any
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 and
comment of such Holders in connection with such sale, if any, for a period
of at least five Business Days, and the Company 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 such Holders shall reasonably object
within five Business Days after the receipt thereof. A Holder shall be
deemed to have reasonably objected to such filing if such Registration
Statement, amendment, Prospectus or supplement, as applicable, as proposed
to be filed, contains an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not
misleading or fails to comply with the applicable requirements of the Act;
(vi) promptly prior to the filing of any document that is to
be incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to each Holder in connection with such
exchange or sale, if any, make the Company's representatives available for
discussion of such document and other customary due diligence matters, and
include such information in such document prior to the filing thereof as
such Holders may reasonably request;
(vii) make available, at reasonable times, for inspection by
each Holder and any attorney or accountant retained by such Holders, all
financial and other records, pertinent corporate documents of the Company
and cause the Company's officers, directors and employees to supply all
information reasonably requested by any such Holder, attorney or accountant
in connection with such Registration Statement or any post-effective
amendment thereto subsequent to the filing thereof and prior to its
effectiveness;
(viii) if requested by any Holders in connection with such
exchange or sale, promptly include in any Registration Statement or
Prospectus, pursuant to a supplement or post-effective amendment if
necessary, such information as such Holders may reasonably request to have
included therein, including, without limitation, information relating to
the "Plan of Distribution" of the Transfer Restricted Securities; and make
all required filings of such Prospectus supplement or post-effective
amendment as soon as practicable after the Company is notified of the
matters to be included in such Prospectus supplement or post-effective
amendment;
(ix) furnish to each Holder in connection with such exchange
or sale, without charge, at least one copy of the Registration Statement,
as first filed with the Commission, and of each amendment thereto,
including all documents incorporated by reference therein and all exhibits
(including exhibits incorporated therein by reference);
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(x) deliver to each Holder without charge, as many copies of
the Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such Persons reasonably may request; the Company
hereby consents to the use (in accordance with law) of the Prospectus and
any amendment or supplement thereto by each selling Holder in connection
with the offering and the sale of the Transfer Restricted Securities
covered by the Prospectus or any amendment or supplement thereto;
(xi) upon the request of any Holder, enter into such
agreements (including underwriting agreements) and make such
representations and warranties and take all such other actions in
connection therewith in order to expedite or facilitate the disposition of
the Transfer Restricted Securities pursuant to any applicable Registration
Statement contemplated by this Agreement as may be reasonably requested by
any Holder in connection with any sale or resale pursuant to any applicable
Registration Statement. In such connection, the Company shall:
(A) upon request of any Holder, furnish (or in the
case of paragraphs (2) and (3), use its best efforts to cause to be
furnished) to each Holder, upon Consummation of the Exchange Offer or
upon the effectiveness of the Shelf Registration Statement, as the
case may be;
(1) a certificate, dated such date, signed on
behalf of the Company by (x) the President or any Vice President
and (y) a principal financial or accounting officer of the
Company, confirming, as of the date thereof, the matters set
forth in Sections 6(y), 9(a) and 9(b) of the Purchase Agreement
and such other similar matters as such Holders may reasonably
request;
(2) an opinion, dated such date, of counsel
for the Company covering, to the extent relevant at such time,
matters similar to those set forth in paragraph (e) of Section 9
of the Purchase Agreement and such other matter as such Holder
may reasonably request, and in any event including a statement to
the effect that such counsel has participated in conferences with
officers and other representatives of the Company,
representatives of the independent public accountants for the
Company and have considered the matters required to be stated
therein and the statements contained therein, although such
counsel has not independently verified the accuracy, completeness
or fairness of such statements; and that such counsel advises
that, on the basis of the foregoing (relying as to materiality to
the extent such counsel deems appropriate upon the statements of
officers and other representatives of the Company) 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 of the Exchange Offer,
contained an untrue statement of a material fact or omitted to
state a material fact required to
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<PAGE>
be stated therein or necessary to make the statements therein
not misleading, or that the Prospectus contained in such
Registration Statement as of its date and, in the case of the
opinion dated the date of Consummation of the Exchange Offer,
as of the date of Consummation, contained an untrue statement
of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading. Without limiting the foregoing, such counsel may
state further that such counsel assumes no responsibility for,
and has not independently verified, the accuracy, completeness
or fairness of the financial statements, notes and schedules
and other financial and statistical data included in any
Registration Statement contemplated by this Agreement or the
related Prospectus; and
(3) a customary comfort letter, dated such
date, from the Company's independent accountants, in the
customary form and covering matters of the type customarily
covered in comfort letters to underwriters in connection with
underwritten offerings, and affirming the matters set forth in
the comfort letters delivered pursuant to Section 9(g) of the
Purchase Agreement in form and substance reasonably satisfactory
to the Holders; and
(B) deliver such other documents and certificates as
may be reasonably requested by the selling Holders to evidence
compliance with the matters covered in clause (A) above and with any
customary conditions contained in any agreement entered into by the
Company pursuant to this clause (xi);
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders and their counsel in
connection with the registration and qualification of the Transfer
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders may request and do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Transfer Restricted Securities covered by the
applicable Registration Statement; PROVIDED, HOWEVER, that the Company
shall not be required to register or qualify as a foreign corporation where
it is not now so qualified or to take any action that would subject it to
the service of process in suits or to taxation, other than as to matters
and transactions relating to the Registration Statement, in any
jurisdiction where it is not now so subject;
(xiii) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Transfer Restricted
Securities to be sold and not bearing any restrictive legends; and to
register such Transfer Restricted Securities in such denominations and such
names as the selling Holders may request at least two Business Days prior
to such sale of Transfer Restricted Securities;
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<PAGE>
(xiv) use its best efforts to cause the disposition of the
Transfer Restricted Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof to
consummate the disposition of such Transfer Restricted Securities, subject
to the proviso contained in clause (xii) above;
(xv) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of a Registration Statement
covering such Transfer Restricted Securities and provide the Trustee under
the Indenture with printed certificates for the Transfer Restricted
Securities which are in a form eligible for deposit with the Depository
Trust Company;
(xvi) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders with regard to any applicable
Registration Statement, as soon as practicable, a consolidated earnings
statement meeting the requirements of Rule 158 (which need not be audited)
covering a twelve-month period beginning after the effective date of the
Registration Statement (as such term is defined in paragraph (c) of Rule
158 under the Act);
(xvii) cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement required
by this Agreement and, in connection therewith, cooperate with the Trustee
and the Holders to effect such changes to the Indenture as may be required
for such Indenture to be so qualified in accordance with the terms of the
TIA; and execute and use its best efforts to cause the Trustee to execute,
all documents that may be required to effect such changes and all other
forms and documents required to be filed with the Commission to enable such
Indenture to be so qualified in a timely manner; and
(xviii) until the disposition of all Transfer Restricted
Securities held by any Holder, provide promptly to such Holder, upon
request, each document filed with the Commission pursuant to the
requirements of Section 13 or Section 15(d) of the Exchange Act.
(d) RESTRICTIONS ON HOLDERS. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(iii)(C) or any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof (in each case, a
"SUSPENSION NOTICE"), such Holder will forthwith discontinue disposition of
Transfer Restricted Securities pursuant to the applicable Registration Statement
until (i) such Holder has received copies of the supplemented or amended
Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such Holder is
advised in writing by the Company that the use of the Prospectus may be resumed,
and has received copies of any additional or supplemental filings that are
incorporated by reference in the Prospectus (in each case, the "RECOMMENCEMENT
DATE"). Each Holder receiving a Suspension Notice hereby agrees that it will
either (i) destroy any Prospectuses, other than permanent file copies, then in
such Holder's possession which have been replaced by the Company with more
recently dated Prospectuses or (ii) deliver to the Company (at the Company's
expense) all copies, other than permanent file copies, then in such Holder's
possession of the Prospectus covering such Transfer Restricted Securities that
was current at the time of receipt of the Suspension Notice. The time period
regarding the effectiveness of such Registration Statement set forth in Section
3 or 4 hereof, as applicable, shall be extended by a number of
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days equal to the number of days in the period from and including the date of
delivery of the Suspension Notice to the Recommencement Date.
SECTION 7. REGISTRATION EXPENSES.
(a) All expenses incident to the Company's performance of or
compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses; (ii) all fees
and expenses of compliance with federal securities and state Blue Sky or
securities laws; (iii) all expenses of printing (including printing certificates
for the Series B Debentures and printing of Prospectuses), (iv) reasonable
messenger, delivery service and telephone charges; (v) all fees and
disbursements of counsel for the Company, and, in accordance with Section 7(b)
below, the Holders of Transfer Restricted Securities; (vi) all application and
filing fees in connection with listing Debentures on a national securities
exchange or automated quotation system pursuant to the requirements hereof, in
the event the Debentures are so listed; and (vii) all fees and disbursements of
independent certified public accountants of the Company (including the expenses
of any special audit and comfort letters required by or incident to such
performance).
The Company will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit and the
fees and expenses of any Person, including special experts, retained by the
Company.
(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 will reimburse the
Initial Purchaser and the Holders of Transfer Restricted Securities who are
tendering Series A Debentures into in the Exchange Offer and/or selling or
reselling Series A Debentures or Series B Debentures pursuant to the "Plan of
Distribution" contained in the Exchange Offer Registration Statement or the
Shelf Registration Statement, as applicable, for the reasonable fees and
disbursements of not more than one counsel, who shall be Latham & Watkins,
unless another firm shall be chosen by the Holders of a majority in principal
amount of the Transfer Restricted Securities for whose benefit such Registration
Statement is being prepared.
SECTION 8. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each Holder,
its directors, officers and each Person, if any, who controls such Holder
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act),
from and against any and all losses, claims, damages, liabilities, judgments,
(including without limitation, any legal or other expenses incurred in
connection with investigating or defending any matter, including any action that
could give rise to any such losses,
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<PAGE>
claims, damages, liabilities or judgments) caused by any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement, preliminary prospectus or Prospectus (or any amendment or
supplement thereto) provided by the Company to any Holder or any prospective
purchaser of Series B Debentures or registered Series A Debentures, or caused
by any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, except insofar
as such losses, claims, damages, liabilities or judgments are caused by an
untrue statement or omission or alleged untrue statement or omission that is
based upon information relating to any of the Holders furnished in writing to
the Company by any of the Holders.
(b) Each Holder of Transfer Restricted Securities agrees, severally
and not jointly, to indemnify and hold harmless the Company, and its directors
and officers, and each person, if any, who controls (within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act) the Company, to the
same extent as the foregoing indemnity from the Company set forth in section (a)
above, but only with reference to information relating to such Holder furnished
in writing to the Company by such Holder expressly for use in any Registration
Statement. In no event shall any Holder, its directors, officers or any Person
who controls such Holder be liable or responsible for any amount in excess of
the amount by which the total amount received by such Holder with respect to its
sale of Transfer Restricted Securities pursuant to a Registration Statement
exceeds (i) the amount paid by such Holder for such Transfer Restricted
Securities and (ii) the amount of any damages that such Holder, its directors,
officers or any Person who controls such Holder has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PERSON") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), a Holder shall not be required to assume the
defense of such action pursuant to this Section 8(c), but may employ separate
counsel and participate in the defense thereof, but the fees and expenses of
such counsel, except as provided below, shall be at the expense of the Holder).
Any indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the indemnified party unless (i) the
employment of such counsel shall have been specifically authorized in writing by
the indemnifying party, (ii) the indemnifying party shall have failed to assume
the defense of such action or employ counsel reasonably satisfactory to the
indemnified party or (iii) the named parties to any such action (including any
impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party). In any such case, the indemnifying party
shall not, in connection with any one action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all indemnified parties and all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by a majority of
the Holders, in the case of the parties indemnified pursuant to Section 8(a),
and by the Company, in the case of parties indemnified pursuant to Section 8(b).
The indemnifying party shall indemnify and hold harmless the indemnified party
from and against any and all losses, claims, damages, liabilities and judgments
or by reason of any settlement of any action (i) effected with its written
consent or (ii) effected without its written consent if the settlement is
entered into more than twenty business days after the indemnifying party shall
have received a request
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<PAGE>
from the indemnified party for reimbursement for the fees and expenses of
counsel (in any case where such fees and expenses are at the expense of the
indemnifying party) and, prior to the date of such settlement, the
indemnifying party shall have failed to comply with such reimbursement
request. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement or compromise of, or consent to
the entry of judgment with respect to, any pending or threatened action in
respect of which the indemnified party is or could have been a party and
indemnity or contribution may be or could have been sought hereunder by the
indemnified party, unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all liability
on claims that are or could have been the subject matter of such action and
(ii) does not include a statement as to or an admission of fault, culpability
or a failure to act, by or on behalf of the indemnified party.
(d) To the extent that the indemnification provided for in this
Section 8 is unavailable to an indemnified party in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or judgments (i) in such proportion
as is appropriate to reflect the relative benefits received by the Company, on
the one hand, and the Holders, on the other hand, from their sale of Transfer
Restricted Securities or (ii) if the allocation provided by clause 8(d)(i) is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause 8(d)(i) above but also the
relative fault of the Company, on the one hand, and of the Holder, on the other
hand, in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative fault of the Company, on the one hand,
and of the Holder, on the other hand, shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company, on the one hand, or by the Holder, on the
other hand, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount
paid or payable by a party as a result of the losses, claims, damages,
liabilities and judgments referred to above shall be deemed to include, subject
to the limitations set forth in 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 Company and each Holder agree that it would not be just and
equitable if contribution pursuant to this Section 8(d) were determined by pro
rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any matter, including any
action that could have given rise to such losses, claims, damages, liabilities
or judgments. Notwithstanding the provisions of this Section 8, no Holder, its
directors, its officers or any Person, if any, who controls such Holder shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the total received by such Holder with respect to the sale of Transfer
Restricted Securities pursuant to a Registration Statement exceeds (i) the
amount paid by such Holder for such Transfer Restricted Securities and (ii) the
amount of any damages which such Holder has otherwise been required to pay by
reason of such untrue or alleged untrue
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statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Holders' obligations to contribute
pursuant to this Section 8(c) are several in proportion to the respective
principal amount of Transfer Restricted Securities held by each Holder
hereunder and not joint.
SECTION 9. RULE 144A AND RULE 144.
The Company agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding and during any period in which the
Company (i) is not subject to Section 13 or 15(d) of the Exchange Act, to make
available, upon request of any Holder, to such Holder or beneficial owner of
Transfer Restricted Securities in connection with any sale thereof and any
prospective purchaser of such Transfer Restricted Securities designated by such
Holder or beneficial owner, the information required by Rule 144A(d)(4) under
the Act in order to permit resales of such Transfer Restricted Securities
pursuant to Rule 144A, and (ii) is subject to Section 13 or 15 (d) of the
Exchange Act, to make all filings required thereby in a timely manner in order
to permit resales of such Transfer Restricted Securities pursuant to Rule 144.
SECTION 10. MISCELLANEOUS.
(a) REMEDIES. The Company acknowledge and agree that any failure by
the Company to comply with its obligations under Sections 3 and 4 hereof may
result in material irreparable injury to the Initial Purchaser or the Holders
for which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of any such
failure, the Initial Purchaser or any Holder may obtain such relief as may be
required to specifically enforce the Company's obligations under Sections 3 and
4 hereof. The Company further 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 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. The Company has
not previously entered into any agreement that grants 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) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to or departures
from the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 10(c)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities (excluding Transfer Restricted Securities held by the
Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent
to departure from the provisions hereof that relates exclusively to the rights
of Holders whose Transfer Restricted Securities are being tendered pursuant to
the Exchange Offer, and that does not affect directly or indirectly the rights
of other Holders whose Transfer Restricted Securities are not being
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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 pursuant to such Exchange Offer.
(d) THIRD PARTY BENEFICIARY. The Holders shall be third party
beneficiaries of the agreements made hereunder between the Company, on the one
hand, and the Initial Purchaser, on the other hand, and shall have the right to
enforce such agreements directly to the extent they may deem such enforcement
necessary or advisable to protect its rights or the rights of Holders hereunder.
(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
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:
Great Lakes Acquisition Corp.
4 Greenspoint Plaza, Suite 2200
16945 Northchase Drive
Houston, Texas 77060
Telephone No.: (281) 775-4700
Telecopier No.: (281) 775-4722
Attention: President
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders; PROVIDED, that nothing herein shall be deemed to permit any
assignment, transfer or other disposition of Transfer Restricted Securities in
violation of the terms hereof or of the Purchase Agreement or the Indenture. If
any transferee of any Holder shall acquire Transfer Restricted Securities in any
manner, whether by operation of law or otherwise, such Transfer Restricted
Securities shall be held subject to all of the terms of this Agreement, and by
taking and holding such Transfer Restricted Securities such Person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement, including the restrictions on resale set
forth in this Agreement and, if applicable, the Purchase Agreement, and such
Person shall be entitled to receive the benefits hereof.
18
<PAGE>
(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, INCLUDING, WITHOUT
LIMITATION, SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
(j) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(k) ENTIRE AGREEMENT. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein,
with respect to the registration rights granted by the Company with respect to
the Transfer Restricted Securities. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
[signature page follows]
19
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
GREAT LAKES ACQUISITION CORP.
By: /s/ JAMES MCKENZIE
-------------------------------
Name: James McKenzie
Title: President and CEO
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ MICHAEL HOOKS
- ---------------------------------
Name: Michael Hooks
Title: Managing Director
S-1
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
among
GREAT LAKES ACQUISITION CORP.,
GREAT LAKES CARBON CORPORATION,
VARIOUS BANKS,
BANK OF AMERICA NT&SA, as CO-AGENT,
DLJ CAPITAL FUNDING, INC., as DOCUMENTATION AGENT
and
BANKERS TRUST COMPANY,
as SYNDICATION AGENT
and
as ADMINISTRATIVE AGENT
----- -------------- -----
Dated as of May 22, 1998
------------ -----------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
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1.01 The Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.02 Minimum Amount of Each Borrowing. . . . . . . . . . . . . . . . . . . . .4
1.03 Notice of Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . .4
1.04 Disbursement of Funds . . . . . . . . . . . . . . . . . . . . . . . . . .5
1.05 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
1.06 Conversions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
1.07 Pro Rata Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . .7
1.08 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
1.09 Interest Periods. . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
1.10 Increased Costs, Illegality, etc. . . . . . . . . . . . . . . . . . . . 10
1.11 Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.12 Change of Lending Office. . . . . . . . . . . . . . . . . . . . . . . . 12
1.13 Replacement of Banks. . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2. Letters of Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.01 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.02 Letter of Credit Requests . . . . . . . . . . . . . . . . . . . . . . . 15
2.03 Letter of Credit Participations . . . . . . . . . . . . . . . . . . . . 15
2.04 Agreement to Repay Letter of Credit Drawings. . . . . . . . . . . . . . 17
2.05 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3. Commitment Commission; Fees; Reductions of Commitment. . . . . . . . . 19
3.01 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.02 Voluntary Termination and Reduction of Commitments. . . . . . . . . . . 20
3.03 Mandatory Reduction of Commitments. . . . . . . . . . . . . . . . . . . 20
SECTION 4. Prepayments; Payments; Taxes . . . . . . . . . . . . . . . . . . . . . 21
4.01 Voluntary Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.02 Mandatory Repayments and Commitment Reductions. . . . . . . . . . . . . 22
4.03 Method and Place of Payment . . . . . . . . . . . . . . . . . . . . . . 31
4.04 Net Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 5. Conditions Precedent to Credit Events on the Initial Borrowing
Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.01 Execution of Agreement; Notes . . . . . . . . . . . . . . . . . . . . . 33
5.02 Fees, etc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.03 Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.04 Corporate Documents; Proceedings; etc.. . . . . . . . . . . . . . . . . 34
5.05 Shareholders' Agreements; Management Agreements; Tax Sharing
Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
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5.06 Consummation of the Transaction . . . . . . . . . . . . . . . . . . . . 34
5.07 Pledge Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.08 Security Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.09 Mortgages; Title Insurance; etc.. . . . . . . . . . . . . . . . . . . . 37
5.10 Adverse Change, etc.. . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.11 Solvency Letter; Insurance. . . . . . . . . . . . . . . . . . . . . . . 38
5.12 Pro Forma Balance Sheet; Projections. . . . . . . . . . . . . . . . . . 39
SECTION 6. Conditions Precedent to All Credit Events. . . . . . . . . . . . . . . 39
6.01 No Default; Representations and Warranties. . . . . . . . . . . . . . . 39
6.02 Notice of Borrowing; Letter of Credit Request . . . . . . . . . . . . . 39
SECTION 7. Representations, Warranties and Agreements . . . . . . . . . . . . . . 40
7.01 Corporate Status. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.02 Corporate Power and Authority . . . . . . . . . . . . . . . . . . . . . 40
7.03 No Violation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.04 Governmental Approvals. . . . . . . . . . . . . . . . . . . . . . . . . 41
7.05 Financial Statements; Financial Condition; Undisclosed
Liabilities; Projections; etc.. . . . . . . . . . . . . . . . . . . . 41
7.06 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.07 True and Complete Disclosure. . . . . . . . . . . . . . . . . . . . . . 42
7.08 Use of Proceeds; Margin Regulations . . . . . . . . . . . . . . . . . . 42
7.09 Tax Returns and Payments. . . . . . . . . . . . . . . . . . . . . . . . 43
7.10 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.11 The Security Documents. . . . . . . . . . . . . . . . . . . . . . . . . 44
7.12 Representations and Warranties in Documents . . . . . . . . . . . . . . 44
7.13 Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.14 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.15 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.16 Compliance with Statutes, etc.. . . . . . . . . . . . . . . . . . . . . 45
7.17 Investment Company Act. . . . . . . . . . . . . . . . . . . . . . . . . 45
7.18 Public Utility Holding Company Act. . . . . . . . . . . . . . . . . . . 45
7.19 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.20 Patents, Licenses, Franchises and Formulas. . . . . . . . . . . . . . . 46
7.21 Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.22 Special Purpose Corporation . . . . . . . . . . . . . . . . . . . . . . 46
7.23 Senior Subordinated Notes and Holdings Debentures . . . . . . . . . . . 46
SECTION 8. Affirmative Covenants. . . . . . . . . . . . . . . . . . . . . . . . . 47
8.01 Information Covenants . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.02 Books, Records and Inspections. . . . . . . . . . . . . . . . . . . . . 49
8.03 Maintenance of Property; Insurance. . . . . . . . . . . . . . . . . . . 49
8.04 Corporate Franchises. . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.05 Compliance with Statutes, etc.. . . . . . . . . . . . . . . . . . . . . 50
</TABLE>
(ii)
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8.06 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.07 End of Fiscal Years; Fiscal Quarters. . . . . . . . . . . . . . . . . . 51
8.08 Performance of Obligations. . . . . . . . . . . . . . . . . . . . . . . 51
8.09 Payment of Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.10 Maintenance of Separateness . . . . . . . . . . . . . . . . . . . . . . 52
8.11 Additional Security; Further Assurances . . . . . . . . . . . . . . . . 52
SECTION 9. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.01 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.02 Consolidation, Merger, Purchase or Sale of Assets, etc. . . . . . . . . 57
9.03 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
9.04 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
9.05 Advances, Investments and Loans . . . . . . . . . . . . . . . . . . . . 61
9.06 Transactions with Affiliates. . . . . . . . . . . . . . . . . . . . . . 63
9.07 Capital Expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.08 Adjusted Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . 65
9.09 Interest Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . 66
9.10 Limitation on Modifications of Certificate of Incorporation,
By-Laws and Certain Other Agreements; Limitations of Prepayments
and Modifications of Indebtedness; etc. . . . . . . . . . . . . . . . 67
9.11 Limitation on Certain Restrictions on Subsidiaries. . . . . . . . . . . 67
9.12 Limitation on Issuance of Capital Stock . . . . . . . . . . . . . . . . 67
9.13 Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
9.14 Limitation on Creation of Subsidiaries. . . . . . . . . . . . . . . . . 68
9.15 No Other Designated Senior Indebtedness . . . . . . . . . . . . . . . . 68
SECTION 10. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . 68
10.01 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
10.02 Representations, etc.. . . . . . . . . . . . . . . . . . . . . . . . . 68
10.03 Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
10.04 Default Under Other Agreements . . . . . . . . . . . . . . . . . . . . 69
10.05 Bankruptcy, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
10.06 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
10.07 Security Documents . . . . . . . . . . . . . . . . . . . . . . . . . . 70
10.08 Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
10.09 Judgments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
10.10 Change of Control. . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 11. Definitions and Accounting Terms. . . . . . . . . . . . . . . . . . . 71
11.01 Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 12. The Administrative Agent. . . . . . . . . . . . . . . . . . . . . . . 96
12.01 Appointment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
12.02 Nature of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
</TABLE>
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12.03 Lack of Reliance on the Administrative Agent . . . . . . . . . . . . . 97
12.04 Certain Rights of the Administrative Agent . . . . . . . . . . . . . . 97
12.05 Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
12.06 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
12.07 The Administrative Agent in Its Individual Capacity. . . . . . . . . . 98
12.08 Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
12.09 Resignation by the Administrative Agent. . . . . . . . . . . . . . . . 98
SECTION 13. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
13.01 Payment of Expenses, etc.. . . . . . . . . . . . . . . . . . . . . . . 99
13.02 Right of Setoff; Collateral Matters. . . . . . . . . . . . . . . . . .100
13.03 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .101
13.04 Benefit of Agreement . . . . . . . . . . . . . . . . . . . . . . . . .101
13.05 No Waiver; Remedies Cumulative . . . . . . . . . . . . . . . . . . . .103
13.06 Payments Pro Rata. . . . . . . . . . . . . . . . . . . . . . . . . . .103
13.07 Calculations; Computations . . . . . . . . . . . . . . . . . . . . . .104
13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE;
WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . . .104
13.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . .105
13.10 Effectiveness. . . . . . . . . . . . . . . . . . . . . . . . . . . . .105
13.11 Headings Descriptive . . . . . . . . . . . . . . . . . . . . . . . . .105
13.12 Amendment or Waiver; etc.. . . . . . . . . . . . . . . . . . . . . . .105
13.13 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .106
13.14 Domicile of Loans. . . . . . . . . . . . . . . . . . . . . . . . . . .107
13.15 Limitation on Additional Amounts, etc. . . . . . . . . . . . . . . . .107
13.16 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . .107
13.17 Registry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .108
SECTION 14. Holdings Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . .108
14.01 The Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . .108
14.02 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .109
14.03 Nature of Liability. . . . . . . . . . . . . . . . . . . . . . . . . .109
14.04 Independent Obligation . . . . . . . . . . . . . . . . . . . . . . . .109
14.05 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . .109
14.06 Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .110
14.07 Subordination. . . . . . . . . . . . . . . . . . . . . . . . . . . . .110
14.08 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .111
14.09 Nature of Liability. . . . . . . . . . . . . . . . . . . . . . . . . .112
</TABLE>
(iv)
<PAGE>
SCHEDULE I Commitments
SCHEDULE II Tax Matters
SCHEDULE III Real Property
SCHEDULE IV Insurance
SCHEDULE V Existing Liens
SCHEDULE VI Existing Indebtedness
EXHIBIT A Notice of Borrowing
EXHIBIT B-1 A Term Note
EXHIBIT B-2 B Term Note
EXHIBIT B-3 C Term Note
EXHIBIT B-4 Revolving Note
EXHIBIT B-5 Swingline Note
EXHIBIT C Letter of Credit Request
EXHIBIT D Section 4.04(b)(ii) Certificate
EXHIBIT E Opinion of Skadden, Arps, Slate, Meagher & Flom LLP,
Special Counsel to the Credit Parties
EXHIBIT F Officers' Certificate
EXHIBIT G Pledge Agreement
EXHIBIT H Security Agreement
EXHIBIT I Mortgage
EXHIBIT J Subsidiary Guaranty
EXHIBIT K Assignment and Assumption Agreement
(v)
<PAGE>
CREDIT AGREEMENT, dated as of May 22, 1998, among GREAT LAKES
ACQUISITION CORP., a Delaware corporation ("Holdings"), GREAT LAKES CARBON
CORPORATION, a Delaware corporation (the "Borrower"), the Banks party hereto
from time to time, BANK OF AMERICA NT&SA, as Co-Agent, DLJ CAPITAL FUNDING,
INC., as Documentation Agent, and BANKERS TRUST COMPANY, as Syndication Agent
and as Administrative Agent (all capitalized terms used herein and defined in
Section 11 are used herein as therein defined).
W I T N E S S E T H :
WHEREAS, subject to and upon the terms and conditions herein set
forth, the Banks are willing to make available to the Borrower the respective
credit facilities provided for herein;
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit.
1.01 THE COMMITMENTS. (a) Subject to and upon the terms and
conditions set forth herein, each Bank with an A Term Loan Commitment severally
agrees to make, on the Initial Borrowing Date, a term loan (each, an "A Term
Loan" and collectively, the "A Term Loans") to the Borrower, which A Term Loans
(i) shall, at the option of the Borrower, be made and initially maintained as
Base Rate Loans or Eurodollar Loans (subject to the option to convert such A
Term Loans pursuant to Section 1.06) and (ii) shall be made by each Bank in that
aggregate principal amount as is equal to the A Term Loan Commitment of such
Bank on such date. Once repaid, A Term Loans borrowed hereunder may not be
reborrowed.
(b) Subject to and upon the terms and conditions set forth herein,
each Bank with a B Term Loan Commitment severally agrees to make, on the Initial
Borrowing Date, a term loan (each, a "B Term Loan" and collectively, the "B Term
Loans") to the Borrower, which B Term Loans (i) shall, at the option of the
Borrower, be made and initially maintained as Base Rate Loans or Eurodollar
Loans (subject to the option to convert such B Term Loans pursuant to Section
1.06) and (ii) shall be made by each Bank in that aggregate principal amount as
is equal to the B Term Loan Commitment of such Bank on such date. Once repaid,
B Term Loans incurred hereunder may not be reborrowed.
(c) Subject to and upon the terms and conditions set forth herein,
each Bank with a C Term Loan Commitment severally agrees to make, on the Initial
Borrowing Date, a term loan (each a "C Term Loan" and collectively, the "C Term
Loans" and, together with the A Term Loans and the B Term Loans, the "Term
Loans") to the Borrower, which C Term Loans (i) shall, at the option of the
Borrower, be made and initially maintained as Base Rate Loans or Eurodollar
Loans (subject to the option to convert such C Term Loans pursuant to Section
1.06) and (ii) shall be made by each Bank in that aggregate principal amount as
is equal to the C Term Loan Commitment of such Bank on such date. Once repaid, C
Term Loans incurred hereunder may not be reborrowed.
-1-
<PAGE>
(d) Subject to and upon the terms and conditions set forth herein,
each Bank with a Revolving Loan Commitment severally agrees, at any time and
from time to time on and after the Initial Borrowing Date and prior to the
Revolving Loan Maturity Date, to make a revolving loan or revolving loans (each,
a "Revolving Loan" and collectively, the "Revolving Loans") to the Borrower,
which Revolving Loans (i) shall, at the option of the Borrower, be Base Rate
Loans or Eurodollar Loans, PROVIDED, that except as otherwise specifically
provided in Section 1.10(b), all Revolving Loans comprising the same Borrowing
shall at all times be of the same Type, (ii) may be repaid and reborrowed in
accordance with the provisions hereof, (iii) shall not exceed for any Bank at
any time outstanding that aggregate principal amount which when added to the
product of (x) such Bank's Adjusted Percentage and (y) the sum of (I) the
aggregate amount of all Letter of Credit Outstandings (exclusive of Unpaid
Drawings which are repaid with the proceeds of, and simultaneously with the
incurrence of, the respective incurrence of Revolving Loans) at such time and
(II) the aggregate principal amount of all Swingline Loans (exclusive of
Swingline Loans which are repaid with the proceeds of, and simultaneously with
the incurrence of, Revolving Loans) then outstanding, equals the Revolving Loan
Commitment of such Bank at such time and (iv) shall not exceed for all Banks at
any time outstanding the sum of (I) the aggregate principal amount which, when
added to the amount of all Letter of Credit Outstandings (exclusive of Unpaid
Drawings which are repaid with the proceeds of, and simultaneously with the
incurrence of, Revolving Loans) at such time and (II) the aggregate principal
amount of all Swingline Loans (exclusive of Swingline Loans which are repaid
with the proceeds of, and simultaneously with the incurrence of, the respective
incurrence of Revolving Loans) then outstanding, equals the Total Revolving Loan
Commitment at such time.
(e) Subject to and upon the terms and conditions set forth herein,
the Swingline Bank agrees to make at any time and from time to time after the
Initial Borrowing Date and prior to the Swingline Expiry Date, a loan or loans
(each a "Swingline Loan," and collectively, the "Swingline Loans") to the
Borrower, which Swingline Loans:
(i) shall be made and maintained as Base Rate Loans;
(ii) may be repaid and reborrowed in accordance with the provisions
hereof;
(iii) shall not exceed in aggregate principal amount at any time
outstanding, when combined with (x) the aggregate principal amount of all
Revolving Loans then outstanding and (y) the amount of all Letter of Credit
Outstandings at such time, an amount equal to the Adjusted Total Revolving
Loan Commitment at such time (after giving effect to any reductions to the
Total Revolving Loan Commitment on such date); and
(iv) shall not exceed in aggregate principal amount at any time
outstanding the Maximum Swingline Amount.
The Swingline Bank shall not be obligated to make any Swingline Loans at a time
when a Bank Default exists unless the Swingline Bank has entered into
arrangements satisfactory to it to eliminate the Swingline Bank's risk with
respect to the Bank which is subject of such Bank Default, including by cash
collateralizing such Bank's Percentage of the outstanding Swingline Loans.
Notwithstanding anything to the contrary contained in this Section 1.01(e), the
Swingline
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Bank shall not make any Swingline Loan after receiving a written notice from the
Borrower or the Required Banks stating that a Default or an Event of Default
exists and is continuing until such time as the Swingline Bank shall have
received written notice of (i) rescission of such notice from the party or
parties originally delivering such notice, (ii) the waiver of such Default or
Event of Default or (iii) the Administrative Agent in good faith believes that
such Default or Event of Default has ceased to exist.
(f) On any Business Day, the Swingline Bank may, in its sole
discretion, give notice to the Banks with Revolving Loan Commitments that its
outstanding Swingline Loans shall be funded with a Borrowing of Revolving
Loans (provided that such notice shall be deemed to have been automatically
given upon the occurrence of a Default or an Event of Default under Section
10.05 or upon the exercise of any of the remedies provided in the last
paragraph of Section 10), in which case a Borrowing of Revolving Loans
constituting Base Rate Loans (each such Borrowing, a "Mandatory Borrowing")
shall be made on the immediately succeeding Business Day from all Banks with
a Revolving Loan Commitment (without giving effect to any termination and/or
reductions thereto pursuant to the last paragraph of Section 10) pro rata on
the basis of their respective Adjusted Percentages (determined before giving
effect to any termination of the Revolving Loan Commitments pursuant to the
last paragraph of Section 10) and the proceeds thereof shall be applied
directly to the Swingline Bank to repay the Swingline Bank for such
outstanding Swingline Loans. Each such Bank hereby irrevocably agrees to
make Revolving Loans upon one Business Day's notice pursuant to each
Mandatory Borrowing in the amount and in the manner specified in the
preceding sentence and on the date specified in writing by the Swingline Bank
(i) notwithstanding that the amount of the Mandatory Borrowing may not comply
with the minimum amount for Borrowings otherwise required hereunder, (ii)
whether any conditions specified in Section 5 or 6 are then satisfied, (iii)
whether a Default or an Event of Default then exists, (iv) notwithstanding
the date of such Mandatory Borrowing and (v) notwithstanding the amount of
the Total Revolving Loan Commitment at such time. In the event that any
Mandatory Borrowing cannot for any reason be made on the date otherwise
required above (including, without limitation, as a result of the
commencement of a proceeding under the Bankruptcy Code with respect to the
Borrower), then each such Bank with a Revolving Loan Commitment hereby agrees
that it shall forthwith purchase (as of the date the Mandatory Borrowing
would otherwise have occurred, but adjusted for any payments received from
the Borrower on or after such date and prior to such purchase) from the
Swingline Bank such participations in the outstanding Swingline Loans as
shall be necessary to cause such Banks to share in such Swingline Loans
ratably based upon their respective Adjusted Percentages (determined before
giving effect to any termination of the Revolving Loan Commitments pursuant
to the last paragraph of Section 10); provided, that (x) all interest payable
on the Swingline Loans shall be for the account of the Swingline Bank until
the date as of which the respective participation is required to be purchased
and, to the extent attributable to the purchased participation shall be
payable to the participant from and after such date and (y) at the time any
purchase of participations pursuant to this sentence is actually made, the
purchasing Bank shall be required to pay the Swingline Bank interest on the
principal amount of participation purchased for each day from and including
the day upon which the Mandatory Borrowing would otherwise have occurred to
but excluding the date of payment for such participation, at the rate
otherwise applicable to Revolving Loans maintained as Base Rate Loans
hereunder for each day thereafter.
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1.02 MINIMUM AMOUNT OF EACH BORROWING. The aggregate principal
amount of each Borrowing of Term Loans shall not be less than $2,000,000 and, if
greater, shall be in an integral multiple of $500,000. The aggregate principal
amount of each Borrowing of Revolving Loans shall be not less than $1,000,000
($500,000 in the case of Base Rate Loans) and, if greater, shall be in an
integral multiple of $250,000 ($100,000 in the case of Base Rate Loans) or, if
less, the then remaining Total Revolving Loan Commitment provided that Mandatory
Borrowings shall be in the amounts required by Section 1.01(f). The aggregate
principal amount of each Borrowing of Swingline Loans shall not be less than
$50,000. More than one Borrowing may occur on the same date, but at no time
shall there be outstanding more than ten Borrowings of Eurodollar Loans.
1.03 NOTICE OF BORROWING. (a) Whenever the Borrower desires to make
a Borrowing hereunder (excluding Borrowings of Swingline Loans and Mandatory
Borrowings), it shall give the Administrative Agent at its Notice Office at
least one Business Day's prior written (or telephonic promptly confirmed in
writing) notice of each Base Rate Loan and at least three Business Days' prior
written (or telephonic promptly confirmed in writing) notice of each Eurodollar
Loan to be made hereunder, PROVIDED that any such notice shall be deemed to have
been given on a certain day only if given before 11:00 A.M. (New York time) in
the case of Eurodollar Loans, or 12:00 Noon (New York time) in the case of a
Borrowing of Base Rate Loans on such day. Each such written notice or written
confirmation of telephonic notice (each a "Notice of Borrowing") shall be given
by the Borrower in the form of Exhibit A, appropriately completed to specify the
aggregate principal amount of the Loans to be made pursuant to such Borrowing,
the date of such Borrowing (which shall be a Business Day), whether the Loans
being made pursuant to such Borrowing shall constitute A Term Loans, B Term
Loans, C Term Loans or Revolving Loans and whether the Loans being made pursuant
to such Borrowing are to be initially maintained as Base Rate Loans or
Eurodollar Loans and, if Eurodollar Loans, the initial Interest Period to be
applicable thereto. The Administrative Agent shall promptly give each Bank
which is required to make Loans of the Tranche specified in the respective
Notice of Borrowing, notice of such proposed Borrowing, of such Bank's
proportionate share thereof and of the other matters required by the immediately
preceding sentence to be specified in the Notice of Borrowing.
(b) (i) Whenever the Borrower desires to make a Borrowing of
Swingline Loans hereunder, it shall give the Swingline Bank, not later than 1:00
p.m. (New York time) on the date that a Swingline Loan is to be made, written
notice (or telephonic notice confirmed in writing) of each Swingline Loan to be
made hereunder. Each such notice shall specify in each case (a) the date of
Borrowing (which shall be a Business Day) and (b) the aggregate principal amount
of Swingline Loans to be made pursuant to such Borrowing.
(ii) Mandatory Borrowings shall be made upon the notice specified in
Section 1.01(f), with the Borrower irrevocably agreeing, by its incurrence of
any Swingline Loan, to the making of the Mandatory Borrowings as set forth in
Section 1.01(f).
(c) Without in any way limiting the obligation of the Borrower to
confirm in writing any telephonic notice of any Borrowing of Loans, the
Administrative Agent or the Swingline Bank, as the case may be, may act without
liability upon the basis of telephonic notice
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of such Borrowing, believed by the Administrative Agent or the Swingline Bank,
as the case may be, in good faith to be from an Authorized Officer of the
Borrower prior to receipt of written confirmation. In each such case, the
Borrower hereby waives the right to dispute the Administrative Agent's and the
Swingline Bank's record of the terms of such telephonic notice of such Borrowing
of Loans.
1.04 DISBURSEMENT OF FUNDS. Except as otherwise specifically
provided in the second succeeding sentence, no later than 12:00 Noon (New York
time) on the date specified in each Notice of Borrowing (or (x) in the case of
Swingline Loans, no later than the close of business on the date specified
pursuant to Section 1.03(b)(i) or (y) in case of Mandatory Borrowings, not later
than 12:00 Noon (New York time) on the date specified in Section 1.01(f)), each
Bank with a Commitment of the respective Tranche will make available its pro
rata portion of each such Borrowing requested to be made on such date (or in the
case of Swingline Loans, the Swingline Bank shall make available the full amount
thereof). All such amounts shall be made available in Dollars and in
immediately available funds at the Payment Office of the Administrative Agent,
and the Administrative Agent will make available to the Borrower at the Payment
Office the aggregate of the amounts so made available by the Banks (prior to
1:00 P.M. on such day, to the extent of funds actually received by the
Administrative Agent prior to 12:00 Noon on such day). Unless the
Administrative Agent shall have been notified by any Bank prior to the date of
Borrowing that such Bank does not intend to make available to the Administrative
Agent such Bank's portion of any Borrowing to be made on such date, the
Administrative Agent may assume that such Bank has made such amount available to
the Administrative Agent on such date of Borrowing and the Administrative Agent
may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. If such corresponding amount is not in fact made
available to the Administrative Agent by such Bank, the Administrative Agent
shall be entitled to recover such corresponding amount on demand from such Bank.
If such Bank does not pay such corresponding amount forthwith upon the
Administrative Agent's demand therefor, the Administrative Agent shall promptly
notify the Borrower and the Borrower shall immediately pay such corresponding
amount to the Administrative Agent. The Administrative Agent shall also be
entitled to recover on demand from such Bank or the Borrower, as the case may
be, interest on such corresponding amount in respect of each day from the date
such corresponding amount was made available by the Administrative Agent to the
Borrower until the date such corresponding amount is recovered by the
Administrative Agent, at a rate per annum equal to (i) if recovered from such
Bank, at the overnight Federal Funds Rate and (ii) if recovered from the
Borrower, the rate of interest applicable to the respective Borrowing, as
determined pursuant to Section 1.08. Nothing in this Section 1.04 shall be
deemed to relieve any Bank from its obligation to make Loans hereunder or to
prejudice any rights which the Borrower may have against any Bank as a result of
any failure by such Bank to make Loans hereunder.
1.05 NOTES. (a) The Borrower's obligation to pay the principal of,
and interest on, the Loans made by each Bank shall be evidenced (i) if A Term
Loans, by a promissory note duly executed and delivered by the Borrower
substantially in the form of Exhibit B-1 with blanks appropriately completed in
conformity herewith (each, an "A Term Note" and collectively, the "A Term
Notes"), (ii) if B Term Loans, by a promissory note duly executed and delivered
by the Borrower substantially in the form of Exhibit B-2 with blanks
appropriately completed in conformity herewith (each, a "B Term Note" and
collectively, the "B Term Notes"), (iii) if C
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Term Loans, by a promissory note duly executed and delivered by the Borrower
substantially in the form of Exhibit B-3 with blanks appropriately completed in
conformity herewith (each a "C Term Note" and collectively, the "C Term Notes"
and, together with the A Term Notes and the B Term Notes, the "Term Notes"),
(iv) if Revolving Loans, by a promissory note duly executed and delivered by the
Borrower substantially in the form of Exhibit B-4, with blanks appropriately
completed in conformity herewith (each, a "Revolving Note" and collectively, the
"Revolving Notes") and (v) if Swingline Loans, by a promissory note duly
executed and delivered by the Borrower substantially in the form of Exhibit B-5,
with blanks appropriately completed in conformity herewith (each, a "Swingline
Note" and collectively, the "Swingline Notes").
(b) The A Term Note issued to each Bank shall (i) be executed by the
Borrower, (ii) be payable to the order of such Bank and be dated the Initial
Borrowing Date, (iii) be in a stated principal amount equal to the respective A
Term Loan made by such Bank on the Initial Borrowing Date and be payable in the
principal amount of A Term Loans evidenced thereby, (iv) mature on the A Term
Maturity Date, (v) bear interest as provided in the appropriate clause of
Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case
may be, evidenced thereby, (vi) be subject to mandatory repayment as provided in
Section 4.02(A) and (vii) be entitled to the benefits of this Agreement and the
other Credit Documents.
(c) The B Term Note issued to each Bank shall (i) be executed by the
Borrower, (ii) be payable to the order of such Bank and be dated the Initial
Borrowing Date, (iii) be in a stated principal amount equal to the respective B
Term Loan made by such Bank on the Initial Borrowing Date and be payable in the
principal amount of B Term Loans evidenced thereby, (iv) mature on the B Term
Maturity Date, (v) bear interest as provided in the appropriate clause of
Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case
may be, evidenced thereby, (vi) be subject to mandatory repayment as provided in
Section 4.02(A) and (vii) be entitled to the benefits of this Agreement and the
other Credit Documents.
(d) The C Term Note issued to each Bank shall (i) be executed by the
Borrower, (ii) be payable to the order of such Bank and be dated the Initial
Borrowing Date, (iii) be in a stated principal amount equal to the respective C
Term Loan made by such Bank on the Initial Borrowing Date and be payable in the
principal amount of C Term Loans evidenced thereby, (iv) mature on the C Term
Maturity Date, (v) bear interest as provided in the appropriate clause of
Section 1.08 in respect of Base Rate Loans and Eurodollar Loans, as the case may
be, evidenced thereby, (vi) be subject to mandatory repayment as provided in
Section 4.02(A) and (vii) be entitled to the benefits of this Agreement and the
other Credit Documents.
(e) The Revolving Note issued to each Bank shall (i) be executed by
the Borrower, (ii) be payable to the order of such Bank and be dated the Initial
Borrowing Date, (iii) be in a stated principal amount equal to the Revolving
Loan Commitment of such Bank and be payable in the principal amount of the
Revolving Loans evidenced thereby, (iv) mature on the Revolving Loan Maturity
Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in
respect of the Base Rate Loans and Eurodollar Loans, as the case may be,
evidenced thereby, (vi) be subject to mandatory repayment as provided in Section
4.02(A) and (vii) be entitled to the benefits of this Agreement and the other
Credit Documents.
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(f) The Swingline Note issued to the Swingline Bank shall (i) be
executed by the Borrower, (ii) be payable to the order of the Swingline Bank and
be dated the Initial Borrowing Date, (iii) be in a stated principal amount equal
to the Maximum Swingline Amount and be payable in the principal amount of the
outstanding Swingline Loans evidenced thereby from time to time, (iv) mature on
the Swingline Expiry Date, (v) bear interest as provided in the appropriate
clause of Section 1.08 in respect of the Base Rate Loans evidenced thereby, (vi)
be subject to voluntary repayment as provided in Section 4.01 and mandatory
repayment as provided in Section 4.02(A) and (vii) be entitled to the benefits
of this Agreement and the other Credit Documents.
(g) Each Bank will note on its internal records the amount of each
Loan made by it and each payment in respect thereof and will prior to any
transfer of any of its Notes endorse on the reverse side thereof the outstanding
principal amount of Loans evidenced thereby. Failure to make any such notation
or any error in any such notation or endorsement shall not affect the Borrower's
obligations in respect of such Loans.
1.06 CONVERSIONS. The Borrower shall have the option to convert on
any Business Day, all or a portion equal to at least (w) in the case of a
conversion of A Term Loans, $5,000,000 (and, if greater, in an integral multiple
of $500,000), (x) in the case of a conversion of B Term Loans, $5,000,000 (and,
if greater, in an integral multiple of $500,000), (y) in the case of a
conversion of C Term Loans, $5,000,000 (and, if greater, in an integral multiple
of $500,000) and (z) in the case of a conversion of Revolving Loans, $1,000,000
(and, if greater, in an integral multiple of $250,000), of the outstanding
principal amount of Loans made pursuant to one or more Borrowings (so long as of
the same Tranche) of one or more Types of Loans into a Borrowing (of the same
Tranche) of another Type of Loan (other than Swingline Loans which may not be
converted pursuant to this Section 1.06), PROVIDED that (i) Eurodollar Loans
converted into Base Rate Loans on any day other than the last day of an Interest
Period applicable to the Loans being converted shall be accompanied by costs set
forth in Section 1.11 and no partial conversion of Eurodollar Loans shall reduce
the outstanding principal amount of such Eurodollar Loans made pursuant to a
single Borrowing to less than (w) in the case of A Term Loans, $5,000,000, and
(x) in the case of B Term Loans, $5,000,000, (y) in the case of C Term Loans,
$5,000,000 and (z) in the case of Revolving Loans, $1,000,000, (ii) Base Rate
Loans may only be converted into Eurodollar Loans if no Default or Event of
Default is in existence on the date of the conversion and (iii) no conversion
pursuant to this Section 1.06 shall result in a greater number of Eurodollar
Loans than is permitted under Section 1.02. Each such conversion shall be
effected by the Borrower by giving the Administrative Agent at its Notice Office
prior to 12:00 Noon (New York time) at least three Business Days' (in the case
of a conversion of Base Rate Loans into Eurodollar Loans) and at least one
Business Day (in the case of a conversion of Eurodollar Loans into Base Rate
Loans) prior notice (each a "Notice of Conversion") specifying the Loans to be
so converted, the Borrowing or Borrowings pursuant to which such Loans were made
and, if to be converted into Eurodollar Loans, the Interest Period to be
initially applicable thereto. The Administrative Agent shall give each Bank
prompt notice of any such proposed conversion affecting any of its Loans.
1.07 PRO RATA BORROWINGS. All Borrowings of A Term Loans, B Term
Loans, C Term Loans and Revolving Loans under this Agreement shall be incurred
from the Banks PRO RATA on the basis of their A Term Loan Commitments, B Term
Loan Commitments, C Term Loan
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Commitments or Revolving Loan Commitments, as the case may be; provided that all
Borrowings of Revolving Loans made pursuant to a Mandatory Borrowing shall be
incurred by the Borrower from the Banks with Revolving Loan Commitments pro rata
on the basis of their Adjusted Percentages. It is understood that no Bank shall
be responsible for any default by any other Bank of its obligation to make Loans
hereunder and that each Bank shall be obligated to make the Loans provided to be
made by it hereunder, regardless of the failure of any other Bank to make its
Loans hereunder.
1.08 INTEREST. (a) The Borrower agrees to pay interest in respect
of the unpaid principal amount of each Base Rate Loan from the date the proceeds
thereof are made available to the Borrower until the earlier of (i) the maturity
(whether by acceleration, optional or mandatory or otherwise) of such Base Rate
Loan and (ii) the conversion of such Base Rate Loan to a Eurodollar Loan
pursuant to Section 1.06, at a rate per annum which shall be equal to the sum of
the Applicable Margin plus the Base Rate in effect from time to time.
(b) The Borrower agrees to pay interest in respect of the unpaid
principal amount of each Eurodollar Loan from the date the proceeds thereof are
made available to the Borrower until the earlier of (i) the maturity (whether by
acceleration, optional or mandatory or otherwise) of such Eurodollar Loan and
(ii) the conversion of such Eurodollar Loan to a Base Rate Loan pursuant to
Section 1.06, 1.09 or 1.10, as applicable, at a rate per annum which shall,
during each Interest Period applicable thereto, be equal to the sum of the
Applicable Margin plus the Eurodollar Rate for such Interest Period.
(c) Overdue principal and, to the extent permitted by law, overdue
interest in respect of each Loan and any other overdue amount payable hereunder
shall, in each case, bear interest at a rate per annum equal to the greater of
(x) 2% per annum in excess of the rate otherwise applicable to Base Rate Loans
of the respective Tranche of Loans from time to time and (y) the rate which is
2% in excess of the rate then borne by such Loans, in each case with such
interest to be payable on demand.
(d) Accrued (and theretofore unpaid) interest shall be payable (i) in
respect of each Base Rate Loan, quarterly in arrears on each Quarterly Payment
Date, (ii) in respect of each Eurodollar Loan, on the last day of each Interest
Period applicable thereto and, in the case of an Interest Period in excess of
three months, on each date occurring at three month intervals after the first
day of such Interest Period and (iii) in respect of each Term Loan, on any
repayment or prepayment (on the amount repaid or prepaid), and in respect of any
Loan at maturity (whether by acceleration or otherwise) and, after such
maturity, on demand.
(e) Upon each Interest Determination Date, the Administrative Agent
shall determine the Eurodollar Rate for each Interest Period applicable to
Eurodollar Loans and shall promptly notify the Borrower and the Banks thereof.
Each such determination shall, absent manifest error, be final and conclusive
and binding on all parties hereto.
1.09 INTEREST PERIODS. At the time it gives any Notice of Borrowing
or Notice of Conversion in respect of the making of, or conversion into, any
Eurodollar Loan (in the case of the initial Interest Period applicable thereto)
or on the third Business Day prior to the expiration
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of an Interest Period applicable to such Eurodollar Loan (in the case of any
subsequent Interest Period), the Borrower shall have the right to elect, by
giving the Administrative Agent notice thereof, the interest period (each an
"Interest Period") applicable to such Eurodollar Loan, which Interest Period
shall, at the option of the Borrower, be a one, two, three or six-month period,
provided that:
(i) all Eurodollar Loans comprising a Borrowing shall at all times
have the same Interest Period;
(ii) the initial Interest Period for any Eurodollar Loan shall
commence on the date of Borrowing of such Eurodollar Loan (including the
date of any conversion thereto from a Loan of a different Type) and each
Interest Period occurring thereafter in respect of such Eurodollar Loan
shall commence on the day on which the next preceding Interest Period
applicable thereto expires;
(iii) if any Interest Period relating to a Eurodollar Loan begins on
a day for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period, such Interest Period shall end on
the last Business Day of such calendar month;
(iv) if any Interest Period would otherwise expire on a day which
is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; PROVIDED, HOWEVER, that if any Interest Period for
a Eurodollar Loan would otherwise expire on a day which is not a Business
Day but is a day of the month after which no further Business Day occurs in
such month, such Interest Period shall expire on the next preceding
Business Day;
(v) no Interest Period may be selected at any time when a Default
or Event of Default is then in existence;
(vi) no Interest Period in respect of any Borrowing of A Term Loans
shall be selected which extends beyond the A Term Maturity Date;
(vii) no Interest Period in respect of any Borrowing of B Term Loans
shall be selected which extends beyond the B Term Maturity Date;
(viii) no Interest Period in respect of any Borrowing of C Term Loans
shall be selected which extends beyond the C Term Maturity Date;
(ix) no Interest Period in respect of any Borrowing of Revolving
Loans shall be selected which extends beyond the Revolving Loan Maturity
Date; and
(x) no Interest Period in respect of any Borrowing of any Tranche
of Term Loans shall be selected which extends beyond any date upon which a
mandatory repayment of such Tranche of Term Loans will be required to be made
under Section 4.02(A)(b), (c) or (d) if, after giving effect to the selection of
such Interest Period, the aggregate principal amount of Term Loans of such
Tranche which have Interest Periods which will expire after such date will be in
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excess of the aggregate principal amount of Term Loans then outstanding less the
aggregate amount of such required repayment.
If upon the expiration of any Interest Period applicable to a
Borrowing of Eurodollar Loans, the Borrower has failed to elect, or is not
permitted to elect, a new Interest Period to be applicable to such Eurodollar
Loans as provided above, the Borrower shall be deemed to have elected to convert
such Eurodollar Loans into Base Rate Loans effective as of the expiration date
of such current Interest Period.
1.10 INCREASED COSTS, ILLEGALITY, ETC. (a) In the event that any
Bank shall have determined (which determination shall, absent manifest error, be
final and conclusive and binding upon all parties hereto but, with respect to
clause (i) below, may be made only by the Administrative Agent):
(i) on any Interest Determination Date that, by reason of any
changes arising after the date of this Agreement affecting the interbank
Eurodollar market, adequate and fair means do not exist for ascertaining
the applicable interest rate on the basis provided for in the definition of
Eurodollar Rate; or
(ii) at any time, that such Bank shall incur increased costs or
reductions in the amounts received or receivable hereunder with respect to
any Eurodollar Loan because of (x) any change since the date of this
Agreement in any applicable law or governmental rule, regulation, order,
guideline or request (whether or not having the force of law) or in the
interpretation or administration thereof and including the introduction of
any new law or governmental rule, regulation, order, guideline or request,
such as, for example, but not limited to: (A) a change in the basis of
taxation of payment to any Bank of the principal of or interest on such
Eurodollar Loan or any other amounts payable hereunder (except for changes
in the rate of tax on, or determined by reference to, the net income or
profits of such Bank, or any franchise tax based on the net income or
profits of such Bank, in either case pursuant to the laws of the United
States of America or the jurisdiction in which it is organized or in which
its principal office or applicable lending office is located or any
subdivision thereof or therein), but without duplication of any amounts
payable in respect of Taxes pursuant to Section 4.04(a), or (B) a change in
official reserve requirements, but, in all events, excluding reserves
required under Regulation D to the extent included in the computation of
the Eurodollar Rate and/or (y) other circumstances since the date of this
Agreement affecting such Bank or the interbank Eurodollar market; or
(iii) at any time, that the making or continuance of any Eurodollar
Loan has been made (x) unlawful by any law or governmental rule, regulation
or order, (y) impossible by compliance by any Bank in good faith with any
governmental request (whether or not having force of law) or (z)
impracticable as a result of a contingency occurring after the date of this
Agreement which materially and adversely affects the interbank Eurodollar
market;
then, and in any such event, such Bank (or the Administrative Agent, in the case
of clause (i) above) shall promptly give notice (by telephone confirmed in
writing) to the Borrower and, except
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in the case of clause (i) above, to the Administrative Agent of such
determination (which notice the Administrative Agent shall promptly transmit to
each of the other Banks). Thereafter (x) in the case of clause (i) above,
Eurodollar Loans shall no longer be available until such time as the
Administrative Agent notifies the Borrower and the Banks that the circumstances
giving rise to such notice by the Administrative Agent no longer exist, and any
Notice of Borrowing or Notice of Conversion given by the Borrower with respect
to Eurodollar Loans which have not yet been incurred (including by way of
conversion) shall be deemed rescinded by the Borrower, (y) in the case of clause
(ii) above, the Borrower shall, subject to the provisions of Section 13.15 (to
the extent applicable), pay to such Bank, upon written demand therefor, such
additional amounts (in the form of an increased rate of, or a different method
of calculating, interest or otherwise as such Bank in its sole discretion shall
determine) as shall be required to compensate such Bank for such increased costs
or reductions in amounts received or receivable hereunder (a written notice as
to the additional amounts owed to such Bank, showing the basis for the
calculation thereof, submitted to the Borrower by such Bank in good faith shall,
absent manifest error, be final and conclusive and binding on all the parties
hereto) and (z) in the case of clause (iii) above, the Borrower shall take one
of the actions specified in Section 1.10(b) as promptly as possible and, in any
event, within the time period required by law. Each of the Administrative Agent
and each Bank agrees that if it gives notice to the Borrower of any of the
events described in clause (i) or (iii) above, it shall promptly notify the
Borrower and, in the case of any such Bank, the Administrative Agent, if such
event ceases to exist. If any such event described in clause (iii) above ceases
to exist as to a Bank, the obligations of such Bank to make Eurodollar Loans and
to convert Base Rate Loans into Eurodollar Loans on the terms and conditions
contained herein shall be reinstated.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may (and
in the case of a Eurodollar Loan affected by the circumstances described in
Section 1.10(a)(iii) shall) either (x) if the affected Eurodollar Loan is then
being made initially or pursuant to a conversion, cancel the respective
Borrowing by giving the Administrative Agent telephonic notice (confirmed in
writing) on the same date that the Borrower was notified by the affected Bank or
the Administrative Agent pursuant to Section 1.10(a)(ii) or (iii) or (y) if the
affected Eurodollar Loan is then outstanding, upon at least three Business Days'
written notice to the Administrative Agent, require the affected Bank to convert
such Eurodollar Loan into a Base Rate Loan, PROVIDED that, if more than one Bank
is affected at any time, then all affected Banks must be treated the same
pursuant to this Section 1.10(b).
(c) If at any time after the date of this Agreement any Bank
determines that the introduction of or any change in any applicable law or
governmental rule, regulation, order, guideline, directive or request (whether
or not having the force of law) concerning capital adequacy, or any change in
interpretation or administration thereof by any governmental authority, central
bank or comparable agency, will have the effect of increasing the amount of
capital required or expected to be maintained by such Bank or any corporation
controlling such Bank based on the existence of such Bank's Commitments
hereunder or its obligations hereunder, then the Borrower shall, subject to the
provisions of Section 13.15 (to the extent applicable), pay to such Bank, upon
its written demand therefor, such additional amounts as shall be required to
compensate such Bank or such other corporation for the increased cost to such
Bank or such
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other corporation or the reduction in the rate of return to such Bank or such
other corporation as a result of such increase of capital. In determining
such additional amounts, each Bank will act reasonably and in good faith and
will use averaging and attribution methods which are reasonable, PROVIDED
that such Bank's reasonable good faith determination of compensation owing
under this Section 1.10(c) shall, absent manifest error, be final and conclusive
and binding on all the parties hereto. Each Bank, upon determining that any
additional amounts will be payable pursuant to this Section 1.10(c), will give
prompt written notice thereof to the Borrower, which notice shall show the basis
for calculation of such additional amounts.
1.11 COMPENSATION. The Borrower shall, subject to the provisions of
Section 13.15 (to the extent applicable), compensate each Bank, upon its written
request (which request shall set forth the basis for requesting such
compensation), for all reasonable losses, expenses and liabilities (including,
without limitation, any loss, expense or liability incurred by reason of the
liquidation or reemployment of deposits or other funds required by such Bank to
fund its Eurodollar Loans but excluding any loss of anticipated profit) which
such Bank may sustain: (i) if for any reason (other than a default by such Bank
or the Administrative Agent) a Borrowing of, or conversion from or into,
Eurodollar Loans does not occur on a date specified therefor in a Notice of
Borrowing or Notice of Conversion (whether or not withdrawn by the Borrower or
deemed withdrawn pursuant to Section 1.10(a) or (b)); (ii) if any repayment
(including any repayment made pursuant to Section 4.02(A) or as a result of an
acceleration of the Loans pursuant to Section 10) or conversion of any of its
Eurodollar Loans occurs on a date which is not the last day of an Interest
Period with respect thereto; (iii) if any prepayment of any of its Eurodollar
Loans is not made on any date specified in a notice of prepayment given by the
Borrower; or (iv) as a consequence of (x) any other default by the Borrower to
repay its Loans when required by the terms of this Agreement or any Note held by
such Bank or (y) any election made pursuant to Section 1.10(b).
1.12 CHANGE OF LENDING OFFICE. Each Bank agrees that upon the
occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or
(iii), Section 1.10(c), Section 2.05 or Section 4.04 with respect to such Bank,
it will, if requested by the Borrower, use reasonable efforts (subject to
overall policy considerations of such Bank) to designate another lending office
for any Loans affected by such event, PROVIDED that such designation is made on
such terms that such Bank and its lending office suffer no economic, legal or
regulatory disadvantage, with the object of avoiding the consequence of the
event giving rise to the operation of such Section. Nothing in this Section 1.12
shall affect or postpone any of the obligations of the Borrower or the right of
any Bank provided in Sections 1.10, 2.05 and 4.04.
1.13 REPLACEMENT OF BANKS. (x) If any Bank becomes a Defaulting Bank
or otherwise defaults in its obligations to make Loans or fund Unpaid Drawings,
(y) upon the occurrence of any event giving rise to the operation of Section
1.10(a)(ii) or (iii), Section 1.10(c), Section 2.05 or Section 4.04 with respect
to any Bank which results in such Bank charging to the Borrower increased costs
in excess of those being generally charged by the other Banks or (z) as provided
in Section 13.12(b) in the case of certain refusals by a Bank (other than a Bank
whose commitments are terminated in accordance with Section 3.02(b) and/or whose
Loans are repaid in accordance with Section 4.01(v)) to consent to certain
proposed changes, waivers, discharges or terminations with respect to this
Agreement which have been approved by the Required Banks,
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the Borrower shall have the right, if no Default or Event of Default will exist
immediately after giving effect to the respective replacement, to either replace
such Bank (the "Replaced Bank") with one or more other Eligible Transferee or
Transferees, none of whom shall constitute a Defaulting Bank at the time of such
replacement (collectively, the "Replacement Bank") reasonably acceptable to the
Administrative Agent or, at the option of the Borrower, to replace only (a) the
A Term Loan Commitment or A Term Loans of the Replaced Bank with an identical A
Term Loan Commitment or A Term Loans provided by the Replacement Bank, (b) the B
Term Loan Commitment or B Term Loans of the Replaced Bank with an identical B
Term Loan Commitment or B Term Loans provided by the Replacement Bank, (c) the C
Term Loan Commitment or C Term Loans of the Replaced Bank with an identical C
Term Loan Commitment or C Term Loans provided by the Replacement Bank or (d) the
Revolving Loan Commitment (and outstandings pursuant thereto) of the Replaced
Bank with an identical Revolving Loan Commitment provided by the Replacement
Bank, PROVIDED that (i) at the time of any replacement pursuant to this Section
1.13, the Replacement Bank shall enter into one or more Assignment and
Assumption Agreements pursuant to Section 13.04(b) (and with all fees payable
pursuant to said Section 13.04(b) to be paid by the Replacement Bank) pursuant
to which the Replacement Bank shall acquire all of the Commitments and
outstanding Loans (or, in the case of the replacement of only (a) the A Term
Loan Commitment or A Term Loans, the A Term Loan Commitment or A Term Loans, (b)
B Term Loan Commitment or B Term Loans, the B Term Loan Commitment or B Term
Loans, (c) C Term Loan Commitment or C Term Loans, the C Term Loan Commitment or
C Term Loans or (d) the Revolving Loan Commitment, the Revolving Loan Commitment
and outstanding Revolving Loans) of, and in each case (except for the
replacement of only the outstanding A Term Loans and/or B Term Loans and/or C
Term Loans of the respective Tranche or Tranches) participations in Letters of
Credit by, the Replaced Bank and, in connection therewith, shall pay to (x) the
Replaced Bank in respect thereof an amount equal to the sum of (A) an amount
equal to the principal of, and all accrued interest on, all outstanding Loans
(or of the Loans of the respective Tranche or Tranches being replaced) of the
Replaced Bank, (B) except for the replacement of only the outstanding A Term
Loans and/or B Term Loans and/or C Term Loans, an amount equal to all Unpaid
Drawings that have been funded by (and not reimbursed to) such Replaced Bank,
together with all then unpaid interest with respect thereto at such time and (C)
an amount equal to all accrued, but theretofore unpaid, Fees owing to the
Replaced Bank (but only with respect to the relevant Tranche, in the case of all
Tranches of Loans being held by the respective Replaced Bank) pursuant to
Section 3.01 and (y) except in the case of the replacement of only the
outstanding A Term Loans and/or B Term Loans and/or C Term Loans of the Replaced
Bank, any Issuing Bank an amount equal to such Replaced Bank's Adjusted
Percentage (for this purpose, determined as if the adjustment described in
clause (y) of the immediately succeeding sentence had been made with respect to
such Replaced Bank) of any Unpaid Drawing (which at such time remains an Unpaid
Drawing) to the extent such amount was not theretofore funded by such Replaced
Bank and (z) in the case of any replacement of Revolving Loan Commitments, the
Swingline Bank an amount equal to such Replaced Bank's Percentage of any
Mandatory Borrowing to the extent such amount was not theretofore funded by such
replaced Bank; and (ii) all Obligations of the Borrower owing to the Replaced
Bank (other than those specifically described in clause (i) above in respect of
which the assignment purchase price has been, or is concurrently being, paid)
shall be paid in full to such Replaced Bank concurrently with such replacement.
Upon the execution of the respective Assignment and
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Assumption Agreements, the payment of amounts referred to in clauses (i) and
(ii) above and, if so requested by the Replacement Bank, delivery to the
Replacement Bank of the appropriate Note or Notes executed by the Borrower, (x)
the Replacement Bank shall become a Bank hereunder and, unless the respective
Replaced Bank continues to have outstanding Loans or Commitments hereunder, the
Replaced Bank shall cease to constitute a Bank hereunder, except with respect to
indemnification provisions under this Agreement (including, without limitation,
Sections 1.10, 1.11, 2.05, 4.04, 13.01 and 13.06 as the same may be limited by
Section 13.15 (to the extent applicable)), which shall survive as to such
Replaced Bank and (y) in the case of a replacement of a Defaulting Bank with a
Non-Defaulting Bank the Adjusted Percentages of the Banks shall be automatically
adjusted at such time to give effect to such replacement (and to give effect to
the replacement of a Defaulting Bank with one or more Non-Defaulting Banks).
SECTION 2. Letters of Credit.
2.01 LETTERS OF CREDIT. (a) Subject to and upon the terms and
conditions herein set forth, the Borrower may request that any Issuing Bank with
a Revolving Loan Commitment issue, at any time and from time to time on and
after the Initial Borrowing Date and prior to the Revolving Loan Maturity Date,
for the account of the Borrower and for the benefit of any holder (or any
trustee, agent or other similar representative for any such holders) of L/C
Supportable Obligations of the Borrower or any of its Subsidiaries, an
irrevocable standby or commercial letter of credit, in a form customarily used
by such Issuing Bank or in such other form as has been approved by such Issuing
Bank (each such letter of credit, a "Letter of Credit") in support of such L/C
Supportable Obligations.
(b) Each Issuing Bank may agree in its sole discretion, and BTCo
hereby agrees that, in the event a requested Letter of Credit is not issued by
one of the other Issuing Banks, it will (subject to the terms and conditions
contained herein), at any time and from time to time on or after the Initial
Borrowing Date and prior to the Revolving Loan Maturity Date, following its
receipt of the respective Letter of Credit Request, issue for the account of the
Borrower one or more Letters of Credit, PROVIDED that the respective Issuing
Bank shall be under no obligation to issue any Letter of Credit of the types
described above if at the time of such issuance:
(i) any order, judgment or decree of any governmental authority or
arbitrator shall purport by its terms to enjoin or restrain such Issuing
Bank from issuing such Letter of Credit or any requirement of law
applicable to such Issuing Bank or any request or directive (whether or not
having the force of law) from any governmental authority with jurisdiction
over such Issuing Bank shall prohibit, or request that such Issuing Bank
refrain from, the issuance of letters of credit generally or such Letter of
Credit in particular or shall impose upon such Issuing Bank with respect to
such Letter of Credit any restriction or reserve or capital requirement
(for which such Issuing Bank is not otherwise compensated) not in effect on
the date hereof, or any unreimbursed loss, cost or expense which was not
applicable, in effect or known to such Issuing Bank as of the date hereof
and which such Issuing Bank in good faith deems material to it; or
(ii) such Issuing Bank shall have received notice prior to the
issuance of such Letter of Credit of the type described in the penultimate
sentence of Section 2.02(b).
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(c) Notwithstanding the foregoing, (i) no Letter of Credit shall be
issued the Stated Amount of which, when added to the Letter of Credit
Outstandings (exclusive of Unpaid Drawings which are repaid on the date of, and
prior to the issuance of, the respective Letter of Credit) at such time would
exceed either (x) $10,000,000 or (y) when added to the aggregate outstanding
principal amount of all Revolving Loans of Non-Defaulting Banks and all
Swingline Loans then outstanding, the Adjusted Total Revolving Loan Commitment;
(ii) each Letter of Credit shall be denominated in Dollars and shall be issued
only on a sight basis; and (iii) each Letter of Credit shall have an expiry date
occurring not later than the earlier of (x) 12 months (or 180 days in the case
of commercial Letters of Credit) after such Letter of Credit's date of issuance,
provided that the expiry date of any standby Letter of Credit may be
automatically extendible for successive periods of up to 12 months and (y) the
fifth Business Day (or the 30th day in the case of commercial Letters of Credit)
prior to the Revolving Loan Maturity Date.
2.02 LETTER OF CREDIT REQUESTS. (a) Whenever the Borrower desires
that a Letter of Credit be issued for its account, the Borrower shall give the
Administrative Agent and the respective Issuing Bank at least three Business
Days' (or such shorter period as is acceptable to the respective Issuing Bank)
written notice thereof. In the case of Letters of Credit to be issued pursuant
to Section 2.01, each notice shall be in the form of Exhibit C (each a "Letter
of Credit Request").
(b) The making of each Letter of Credit Request shall be deemed to be
a representation and warranty by the Borrower that such Letter of Credit may be
issued in accordance with, and will not violate the requirements of, Section
2.01(c). Unless the respective Issuing Bank has received notice from the
Borrower or the Required Banks before it issues a Letter of Credit that one or
more of the conditions specified in Section 5 or Section 6 are not then
satisfied, or that the issuance of such Letter of Credit would violate Section
2.01(c), then such Issuing Bank may issue the requested Letter of Credit for the
account of the Borrower in accordance with such Issuing Bank's usual and
customary practices. Upon its issuance of any Letter of Credit, such Issuing
Bank shall promptly notify each Bank participating therein of such issuance,
which notice shall be accompanied by a copy of the Letter of Credit actually
issued and any amendments thereto.
(c) In the event that the Issuing Bank of commercial Letters of
Credit is other than the Administrative Agent, such Issuing Bank will send by
facsimile transmission to the Administrative Agent, promptly on the first
Business Day, of each week, its daily aggregate Letter of Credit stated amount
for commercial Letters of Credit for the previous week. The Administrative
Agent shall deliver to each other Participant, upon each calendar month end, and
upon each Letter of Credit fee payment, a report setting forth for such period
the daily aggregate stated amount available to be drawn under the commercial
Letters of Credit issued by all the Issuing Banks during such period.
2.03 LETTER OF CREDIT PARTICIPATIONS. (a) Immediately upon the
issuance by any Issuing Bank of any Letter of Credit, such Issuing Bank shall be
deemed to have sold and transferred to each Bank with a Revolving Loan
Commitment, other than such Issuing Bank (each such Bank, in its capacity under
this Section 2.03, a "Participant"), and each such Participant shall be deemed
irrevocably and unconditionally to have purchased and received from such Issuing
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Bank, without recourse or warranty, an undivided interest and participation, to
the extent of such Participant's Adjusted Percentage in such Letter of Credit,
each drawing made thereunder and the obligations of the Borrower under this
Agreement with respect thereto, and any security therefor or guaranty pertaining
thereto (although the Letter of Credit Fee shall be payable directly to the
Administrative Agent for the account of the Participants as provided in Section
3.01(b) and the Participants shall have no right to receive any portion of any
Facing Fees). Upon any change in the respective Revolving Loan Commitments or
Adjusted Percentages of the Banks pursuant to Section 1.13 or 13.04 or as a
result of a Bank Default, it is hereby agreed that, with respect to all such
outstanding Letters of Credit and Unpaid Drawings, there shall be an automatic
adjustment to the participations pursuant to this Section 2.03 to reflect the
new Adjusted Percentages of the assignor and assignee Bank or of all Banks with
respective Revolving Loan Commitments.
(b) In determining whether to pay under any Letter of Credit, such
Issuing Bank shall have no obligation relative to the other Banks other than to
confirm that any documents required to be delivered under such Letter of Credit
appear to have been delivered and that they appear to substantially comply on
their face with the requirements of such Letter of Credit. Any action taken or
omitted to be taken by any Issuing Bank under or in connection with any Letter
of Credit if taken or omitted in the absence of gross negligence or willful
misconduct as determined by a court of competent jurisdiction, shall not create
for such Issuing Bank any resulting liability to the Borrower or any Bank.
(c) In the event that any Issuing Bank makes any payment under any
Letter of Credit and the Borrower shall not have reimbursed such amount in full
to such Issuing Bank pursuant to Section 2.04(a), such Issuing Bank shall
promptly notify the Administrative Agent, which shall promptly notify each
Participant of such failure, and each Participant shall promptly and
unconditionally pay to such Issuing Bank the amount of such Participant's
Adjusted Percentage of such unreimbursed payment in Dollars and in same day
funds. If the Administrative Agent so notifies, prior to 11:00 A.M. (New York
time) on any Business Day, any Participant required to fund a payment under a
Letter of Credit, such Participant shall make available to such Issuing Bank in
Dollars such Participant's Adjusted Percentage of the amount of such payment on
such Business Day in same day funds. If and to the extent such Participant
shall not have so made its Adjusted Percentage of the amount of such payment
available to such Issuing Bank, such Participant agrees to pay to such Issuing
Bank, forthwith on demand such amount, together with interest thereon, for each
day from such date until the date such amount is paid to such Issuing Bank at
the overnight Federal Funds Rate. The failure of any Participant to make
available to such Issuing Bank its Adjusted Percentage of any payment under any
Letter of Credit shall not relieve any other Participant of its obligation
hereunder to make available to such Issuing Bank its Adjusted Percentage of any
Letter of Credit on the date required, as specified above, but no Participant
shall be responsible for the failure of any other Participant to make available
to such Issuing Bank such other Participant's Adjusted Percentage of any such
payment.
(d) Whenever any Issuing Bank receives a payment of a reimbursement
obligation as to which it has received any payments from the Participants
pursuant to clause (c) above, such Issuing Bank shall pay to each Participant
which has paid its Adjusted Percentage thereof, in Dollars and in same day
funds, an amount equal to such Participant's share (based upon the proportionate
aggregate amount originally funded by such Participant to the aggregate amount
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funded by all Participants) of the principal amount of such reimbursement
obligation and interest thereon accruing after the purchase of the respective
participations.
(e) The obligations of the Participants to make payments to each
Issuing Bank with respect to Letters of Credit issued by it shall be irrevocable
and not subject to any qualification or exception whatsoever and shall be made
in accordance with the terms and conditions of this Agreement under all
circumstances, including, without limitation, any of the following
circumstances:
(i) any lack of validity or enforceability of this Agreement or
any of the other Credit Documents;
(ii) the existence of any claim, setoff, defense or other right
which the Borrower or any of its Subsidiaries may have at any time against
a beneficiary named in a Letter of Credit, any transferee of any Letter of
Credit (or any Person for whom any such transferee may be acting), the
Administrative Agent, any Issuing Bank, any Participant, or any other
Person, whether in connection with this Agreement, any Letter of Credit,
the transactions contemplated herein or any unrelated transactions
(including any underlying transaction between the Borrower and the
beneficiary named in any such Letter of Credit);
(iii) any draft, certificate or any other document presented under
any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Credit
Documents; or
(v) the occurrence of any Default or Event of Default.
2.04 AGREEMENT TO REPAY LETTER OF CREDIT DRAWINGS. (a) The Borrower
hereby agrees to reimburse the respective Issuing Bank, by making payment to the
Administrative Agent in immediately available funds at the Payment Office, for
any payment or disbursement made by it under any Letter of Credit (each such
amount, so paid until reimbursed, an "Unpaid Drawing"), no later than three
Business Days after the date of such payment or disbursement, with interest on
the amount so paid or disbursed by such Issuing Bank, to the extent not
reimbursed prior to 12:00 Noon (New York time) on the date of such payment or
disbursement, from and including the date paid or disbursed to but excluding the
date such Issuing Bank was reimbursed by the Borrower therefor at a rate per
annum which shall be the Base Rate in effect from time to time plus the
Applicable Margin for Revolving Loans maintained as Base Rate Loans; PROVIDED,
HOWEVER, to the extent such amounts are not reimbursed prior to 12:00 Noon
(New York time) on the fifth Business Day following notice of such payment or
disbursement, interest shall thereafter accrue on the amounts so paid or
disbursed by such Issuing Bank (and until reimbursed by the Borrower) at a rate
per annum which shall be the Base Rate in effect from time to time plus the
Applicable Margin for Revolving Loans maintained as Base Rate Loans plus 2%, in
each such case, with interest to be payable on demand. The respective Issuing
Bank shall give the Borrower prompt
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notice of each Drawing under any Letter of Credit, PROVIDED that the failure to
give any such notice shall in no way affect, impair or diminish the Borrower's
obligations hereunder.
(b) The obligations of the Borrower under this Section 2.04 to
reimburse the respective Issuing Bank with respect to drawings on Letters of
Credit (each, a "Drawing") (including, in each case, interest thereon) shall be
absolute and unconditional under any and all circumstances and irrespective of
any setoff, counterclaim or defense to payment which the Borrower may have or
have had against any Bank (including in its capacity as the issuer of the Letter
of Credit or as Participant), or any nonapplication or misapplication by the
beneficiary of the proceeds of such Drawing, the respective Issuing Bank's only
obligation to the Borrower being to confirm that any documents required to be
delivered under such Letter of Credit appear to have been delivered and that
they appear to comply on their face with the requirements of such Letter of
Credit. Any action taken or omitted to be taken by any Issuing Bank under or in
connection with any Letter of Credit if taken or omitted in the absence of gross
negligence or willful misconduct as determined by a court of competent
jurisdiction, shall not create for such Issuing Bank any resulting liability to
the Borrower.
2.05 INCREASED COSTS. If at any time after the date of this
Agreement, the introduction of or any change in any applicable law, rule,
regulation, order, guideline or request or in the interpretation or
administration thereof by any governmental authority charged with the
interpretation or administration thereof, or compliance by any Issuing Bank or
any Participant, or any corporation controlling such Person, with any request or
directive issued after the date of this Agreement by any such authority (whether
or not having the force of law), shall either (i) impose, modify or make
applicable any reserve, deposit, capital adequacy or similar requirement against
letters of credit issued by any Issuing Bank or participated in by any
Participant, or (ii) impose on any Issuing Bank or any Participant, or any
corporation controlling such Person, any other conditions relating, directly or
indirectly, to this Agreement or any Letter of Credit; and the result of any of
the foregoing is to increase the cost to any Issuing Bank or any Participant of
issuing, maintaining or participating in any Letter of Credit, or reduce the
amount of any sum received or receivable by any Issuing Bank or any Participant
hereunder or reduce the rate of return on its capital with respect to Letters of
Credit (except for changes in the rate of tax on, or determined by reference to,
the net income or profits of such Issuing Bank or such Participant, or any
corporation controlling such Person, or any franchise tax based on the net
income or profits of such Bank or Participant, or any corporation controlling
such Person, in either case pursuant to the laws of the United States of
America, the jurisdiction in which it is organized or in which its principal
office or applicable lending office is located or any subdivision thereof or
therein), but without duplication of any amounts payable in respect of taxes
pursuant to Section 4.04(a), then, upon demand to the Borrower by such Issuing
Bank or any Participant (a copy of which demand shall be sent by such Issuing
Bank or such Participant to the Administrative Agent) and subject to the
provisions of Section 13.15 (to the extent applicable), the Borrower shall pay
to such Issuing Bank or such Participant such additional amount or amounts as
will compensate such Bank for such increased cost or reduction in the amount
receivable or reduction on the rate of return on its capital. Any Issuing Bank
or any Participant, upon determining that any additional amounts will be payable
pursuant to this Section 2.05, will give prompt written notice thereof to the
Borrower, which notice shall include a certificate submitted to the Borrower by
such Issuing Bank or such Participant (a copy of which certificate shall be sent
by such Issuing Bank or such Participant to
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the Administrative Agent), setting forth in reasonable detail the basis for the
calculation of such additional amount or amounts necessary to compensate such
Issuing Bank or such Participant. The certificate required to be delivered
pursuant to this Section 2.05 shall, if delivered in good faith and absent
manifest error, be final and conclusive and binding on the Borrower.
SECTION 3. Commitment Commission; Fees; Reductions of Commitment.
3.01 FEES. (a) The Borrower agrees to pay the Administrative Agent
for distribution to each Non-Defaulting Bank a commitment commission (the
"Commitment Commission") for the period from the Initial Borrowing Date to and
including the Revolving Loan Maturity Date (or such earlier date as the Total
Revolving Loan Commitment shall have been terminated), computed at a rate for
each day equal to 1/2 of 1% per annum on the daily average Unutilized Revolving
Loan Commitment of such Non-Defaulting Bank. Accrued Commitment Commission
shall be due and payable quarterly in arrears on each Quarterly Payment Date and
on the Revolving Loan Maturity Date or such earlier date upon which the Total
Revolving Loan Commitment is terminated.
(b) The Borrower agrees to pay to the Administrative Agent for
distribution to each Non-Defaulting Bank with a Revolving Loan Commitment, as
the case may be (based on their respective Adjusted Percentages), a fee in
respect of each Letter of Credit issued hereunder (the "Letter of Credit Fee"),
for the period from and including the date of issuance of such Letter of Credit,
to and including the termination of such Letter of Credit computed at a rate per
annum equal to the Applicable Margin for Revolving Loans maintained as
Eurodollar Loans as in effect from time to time on the daily Stated Amount of
such Letter of Credit. Accrued Letter of Credit Fees shall be due and payable
quarterly in arrears on each Quarterly Payment Date and upon the first day on or
after the termination of the Total Revolving Loan Commitment upon which no
Letters of Credit remain outstanding.
(c) The Borrower agrees to pay to the respective Issuing Bank, for
its own account, a facing fee in respect of each Letter of Credit issued for its
account hereunder (the "Facing Fee") for the period from and including the date
of issuance of such Letter of Credit to and including the termination of such
Letter of Credit, computed at a rate equal to 1/4 of 1% per annum of the daily
Stated Amount of such Letter of Credit, PROVIDED, that in no event shall the
annual Facing Fee be less than $500. Accrued Facing Fees shall be due and
payable quarterly in arrears on each Quarterly Payment Date and upon the first
day on or after the termination of the Total Revolving Loan Commitment upon
which no Letters of Credit remain outstanding.
(d) The Borrower shall pay, upon each payment under, issuance of, or
amendment to, any Letter of Credit, such amount as shall at the time of such
event be the administrative charge which the respective Issuing Bank is
generally imposing in connection with such occurrence with respect to letters of
credit.
(e) The Borrower shall pay to the Administrative Agent, for its own
account, such other fees as have been agreed to in writing by the Borrower and
the Administrative Agent.
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3.02 VOLUNTARY TERMINATION AND REDUCTION OF COMMITMENTS. (a) Upon
at least two Business Days' prior written notice (or telephonic notice confirmed
in writing) to the Administrative Agent at its Notice Office (which notice the
Administrative Agent shall promptly transmit to each of the Banks), the Borrower
shall have the right, at any time or from time to time, without premium or
penalty, to terminate or partially reduce the Total Unutilized Revolving Loan
Commitment, in whole or in part, PROVIDED that (x) each such reduction shall
apply proportionately to permanently reduce the Revolving Loan Commitment of
each Bank with a Revolving Loan Commitment, (y) any partial reduction pursuant
to this Section 3.02 shall be in integral multiples of $500,000 and (z) the
reduction to the Total Unutilized Revolving Loan Commitment shall in no case be
in an amount which would cause the Revolving Loan Commitment of any Bank to be
reduced (as required by the preceding clause (x)) by an amount which exceeds the
remainder of (x) the Unutilized Revolving Loan Commitment of such Bank as in
effect immediately before giving effect to such reduction minus (y) such Bank's
Adjusted Percentage of the aggregate principal amount of Swingline Loans then
outstanding.
(b) In the event of certain refusals by a Bank as provided in Section
13.12(b) to consent to certain proposed changes, waivers, discharges or
terminations with respect to this Agreement which have been approved by the
Required Banks, the Borrower may, upon five Business Days' written notice to the
Administrative Agent at its Notice Office (which notice the Administrative Agent
shall promptly transmit to each of the Banks) terminate all of the Revolving
Loan Commitment of such Bank, so long as (i) all Loans, together with accrued
and unpaid interest, Fees and other amounts, owing to such Bank are repaid
concurrently with the effectiveness of such termination (at which time Schedule
I shall be deemed modified to reflect such changed amounts), and at such time
such Bank shall no longer constitute a "Bank" for purposes of this Agreement,
except with respect to indemnifications under this Agreement (including, without
limitation, Sections 1.10, 1.11, 2.05, 4.04, 13.01 and 13.06 as the same may be
limited by Section 13.15 (to the extent applicable)), which shall survive as to
such repaid Bank and (ii) the Administrative Agent and each other Bank which
will be party to this Agreement after giving effect to such change, waiver,
discharge or termination with respect to this Agreement consents to such
termination of Revolving Loan Commitment and repayment of Loans.
3.03 MANDATORY REDUCTION OF COMMITMENTS. (a) In addition to any
other mandatory commitment reductions pursuant to this Section 3.03, the Total A
Term Loan Commitment (and the A Term Loan Commitment of each Bank) shall (i)
terminate in its entirety on the Initial Borrowing Date (after giving effect to
the incurrence of A Term Loans on such date) and (ii) prior to the termination
of the Total A Term Loan Commitment as provided in clause (i) above, be reduced
from time to time to the extent required by Section 4.02(A).
(b) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, the Total B Term Loan Commitment (and the B Term Loan
Commitment of each Bank) shall (i) terminate in its entirety on the Initial
Borrowing Date (after giving effect to the making of the B Term Loans on such
date) and (ii) prior to the termination of the Total B Term Loan Commitment as
provided in clause (i) above, be reduced from time to time to the extent
required by Section 4.02(A).
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(c) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, the Total C Term Loan Commitment (and the C Term Loan
Commitment of each Bank) shall (i) terminate in its entirety on the Initial
Borrowing Date (after giving effect to the making of C Term Loans on such date)
and (ii) prior to the termination of the Total C Term Loan Commitment as
provided in clause (i) above, be reduced from time to time to the extent
required by Section 4.02(A).
(d) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, the Total Revolving Loan Commitment (and the Revolving
Loan Commitment of each Bank) shall terminate in its entirety on the Revolving
Loan Maturity Date.
(e) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, on each date after the Initial Borrowing Date upon which a
mandatory prepayment of Term Loans pursuant to Sections 4.02(A)(e), (f), (g),
(h) or (i) is required (and exceeds in amount the aggregate principal amount of
Term Loans then outstanding) or would be required if Term Loans were then
outstanding, the Total Revolving Loan Commitment shall be permanently reduced by
the amount, if any, by which the amount required to be applied pursuant to said
Section (determined as if an unlimited amount of Term Loans were actually
outstanding) exceeds the aggregate principal amount of Term Loans then
outstanding.
(f) Each reduction to the Total A Term Loan Commitment, the Total B
Term Loan Commitment, the Total C Term Loan Commitment and/or the Total
Revolving Loan Commitment pursuant to this Section 3.03 (or pursuant to Section
4.02(A)) shall be applied proportionately to reduce the A Term Loan Commitment,
the B Term Loan Commitment, the C Term Loan Commitment or the Revolving Loan
Commitment, as the case may be, of each Bank with such a Commitment.
SECTION 4. Prepayments; Payments; Taxes.
4.01 VOLUNTARY PREPAYMENTS. The Borrower shall have the right to
prepay the Loans, without premium or penalty, in whole or in part at any time
and from time to time on the following terms and conditions: (i) the Borrower
shall give the Administrative Agent prior to 12:00 Noon (New York time) at its
Notice Office (x) at least one Business Day's prior written notice (or
telephonic notice promptly confirmed in writing) of its intent to prepay Base
Rate Loans (or, in the case of Swingline Loans prior to 1:00 p.m. (New York
time) on the date of such prepayment) and (y) at least three Business Days'
prior written notice (or telephonic notice promptly confirmed in writing) of its
intent to prepay Eurodollar Loans, whether A Term Loans, B Term Loans, C Term
Loans or Revolving Loans shall be prepaid, the amount of such prepayment and the
Types of Loans to be prepaid and, in the case of Eurodollar Loans, the specific
Borrowing or Borrowings pursuant to which made, which notice the Administrative
Agent shall promptly transmit to each of the Banks; (ii) each prepayment shall
be in an aggregate principal amount of at least $250,000 (or in the case of
Swingline Loans, $10,000 and, if greater, in an integral multiple of $5,000),
PROVIDED that if any partial prepayment of Eurodollar Loans made pursuant to any
Borrowing shall reduce the outstanding Eurodollar Loans made pursuant to such
Borrowing to an amount less than (1) in the case of A Term Loans, $5,000,000,
(2) in the case of B Term Loans, $5,000,000, (3) in the case of C Term Loans,
$5,000,000 and (4) in the
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case of Revolving Loans, $1,000,000, then such Borrowing shall be converted at
the end of the then current Interest Period into a Borrowing of Base Rate Loans;
(iii) prepayments of Eurodollar Loans made pursuant to this Section 4.01 made on
any day other than the last day of an Interest Period applicable thereto shall
be subject to the provisions of Section 1.11; (iv) each prepayment in respect of
any Loans made pursuant to a Borrowing shall, except as provided in clauses (v)
and (vi) below, be applied PRO RATA among the Banks which made such Loans; (v)
in the event of certain refusals by a Bank as provided in Section 13.12(b) to
consent to certain proposed changes, waivers, discharges or terminations with
respect to this Agreement which have been approved by the Required Banks, the
Borrower may, upon five Business Days' written notice to the Administrative
Agent at its Notice Office (which notice the Administrative Agent shall promptly
transmit to each of the Banks) repay all Loans, together with accrued and unpaid
interest, Fees and other amounts, owing to such Bank so long as (A) the
Revolving Loan Commitment of such Bank is terminated concurrently with such
repayment (at which time Schedule I shall be deemed modified to reflect such
changed amounts) and (B) the Administrative Agent and each other Bank which will
be party to this Agreement after giving effect to such change, waiver, discharge
or termination with respect to this Agreement consents to such repayment of
Loans and such termination of Revolving Loan Commitment; (vi) at the Borrower's
election in connection with any prepayment of Revolving Loans, such prepayment
shall not be applied to the Revolving Loans of a Defaulting Bank; and (vii) each
voluntary prepayment of Term Loans made pursuant to this Section 4.01 (other
than prepayments made pursuant to preceding clause (v)) shall be applied to the
A Term Loans, the B Term Loans and the C Term Loans on a PRO RATA basis (based
upon the then outstanding principal amount of A Term Loans, B Term Loans and C
Term Loans) to reduce the then remaining Scheduled Repayments of the respective
Tranche of Term Loans PRO RATA based upon the then remaining amount of such
Scheduled Repayments after giving effect to all prior reductions thereto.
4.02 MANDATORY REPAYMENTS AND COMMITMENT REDUCTIONS. (A) (a) (i) On
any day on which the sum of the aggregate outstanding principal amount of the
Revolving Loans made by the Non-Defaulting Banks, Swingline Loans and the Letter
of Credit Outstandings exceeds the Adjusted Total Revolving Loan Commitment as
then in effect, the Borrower shall prepay on such date the principal of
Swingline Loans and after the Swingline Loans have been repaid in full, the
principal of Revolving Loans of the Non-Defaulting Banks in an amount equal to
such excess. If, after giving effect to the prepayment of all outstanding
Swingline Loans and all outstanding Revolving Loans of Non-Defaulting Banks, the
aggregate amount of the Letter of Credit Outstandings exceeds the Adjusted Total
Revolving Loan Commitment as then in effect, the Borrower shall pay to the
Administrative Agent at the Payment Office on such date an amount of cash or
Cash Equivalents equal to the amount of such excess (up to a maximum amount
equal to the Letter of Credit Outstandings at such time), such cash or Cash
Equivalents to be held as security for all obligations of the Borrower to
Non-Defaulting Banks under Section 2.04(a) in a cash collateral account to be
established by the Administrative Agent. Such cash or Cash Equivalents shall be
released to the Borrower when such obligations under Section 2.04(a) are
satisfied or as may be necessary to insure that the amount of such cash or Cash
Equivalents do not exceed the Letter of Credit Outstandings.
(ii) On any day on which the aggregate outstanding principal amount
of the Revolving Loans made by any Defaulting Bank exceeds the Revolving Loan
Commitment of such
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<PAGE>
Defaulting Bank, the Borrower shall prepay principal of Revolving Loans of such
Defaulting Bank in an amount equal to such excess.
(b) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02(A), on each date set forth below, the
Borrower shall be required to repay that principal amount of A Term Loans, to
the extent then outstanding, as is set forth opposite such date (each such
repayment, as the same may be reduced as provided in Sections 4.01 and
4.02(A)(j), an "A Term Loan Scheduled Repayment"):
<TABLE>
<CAPTION>
Scheduled Repayment Date Amount
- ------------------------ ------
<S> <C>
Quarterly Payment Date in August 1998 $125,000
Quarterly Payment Date in November 1998 $125,000
Quarterly Payment Date in February 1999 $125,000
Quarterly Payment Date in May 1999 $125,000
Quarterly Payment Date in August 1999 $1,250,000
Quarterly Payment Date in November 1999 $1,250,000
Quarterly Payment Date in February 2000 $1,250,000
Quarterly Payment Date in May 2000 $1,250,000
Quarterly Payment Date in August 2000 $1,875,000
Quarterly Payment Date in November 2000 $1,875,000
Quarterly Payment Date in February 2001 $1,875,000
Quarterly Payment Date in May 2001 $1,875,000
Quarterly Payment Date in August 2001 $3,125,000
Quarterly Payment Date in November 2001 $3,125,000
Quarterly Payment Date in February 2002 $3,125,000
Quarterly Payment Date in May 2002 $3,125,000
Quarterly Payment Date in August 2002 $3,125,000
Quarterly Payment Date in November 2002 $3,125,000
Quarterly Payment Date in February 2003 $3,125,000
Quarterly Payment Date in May 2003 $3,125,000
Quarterly Payment Date in August 2003 $3,000,000
Quarterly Payment Date in November 2003 $3,000,000
Quarterly Payment Date in February 2004 $3,000,000
A Term Maturity Date $3,000,000
</TABLE>
; PROVIDED that in the event the aggregate principal amount of A Term Loans
incurred at the time that the Total A Term Loan Commitment is terminated in
accordance with Section 3.03(a) is less than $50,000,000, an amount equal to
such deficiency shall be applied to reduce the A Term Loan
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<PAGE>
Scheduled Repayments PRO RATA based on the then remaining principal amount of
each such A Term Loan Scheduled Repayment.
(c) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02(A), on each date set forth below, the
Borrower shall be required to repay that principal amount of B Term Loans, to
the extent then outstanding, as is set forth opposite such date (each such
repayment, as the same may be reduced as provided in Sections 4.01 and
4.02(A)(j), a "B Term Loan Scheduled Repayment"):
<TABLE>
<CAPTION>
Scheduled Repayment Date Amount
- ------------------------ ------
<S> <C>
Quarterly Payment Date in August 1998 $77,500
Quarterly Payment Date in November 1998 $77,500
Quarterly Payment Date in February 1999 $77,500
Quarterly Payment Date in May 1999 $77,500
Quarterly Payment Date in August 1999 $77,500
Quarterly Payment Date in November 1999 $77,500
Quarterly Payment Date in February 2000 $77,500
Quarterly Payment Date in May 2000 $77,500
Quarterly Payment Date in August 2000 $77,500
Quarterly Payment Date in November 2000 $77,500
Quarterly Payment Date in February 2001 $77,500
Quarterly Payment Date in May 2001 $77,500
Quarterly Payment Date in August 2001 $77,500
Quarterly Payment Date in November 2001 $77,500
Quarterly Payment Date in February 2002 $77,500
Quarterly Payment Date in May 2002 $77,500
Quarterly Payment Date in August 2002 $77,500
Quarterly Payment Date in November 2002 $77,500
Quarterly Payment Date in February 2003 $77,500
Quarterly Payment Date in May 2003 $77,500
Quarterly Payment Date in August 2003 $77,500
Quarterly Payment Date in November 2003 $77,500
Quarterly Payment Date in February 2004 $77,500
Quarterly Payment Date in May 2004 $77,500
Quarterly Payment Date in August 2004 $7,285,000
Quarterly Payment Date in November 2004 $7,285,000
Quarterly Payment Date in February 2005 $7,285,000
B Term Maturity Date $7,285,000
</TABLE>
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<PAGE>
; PROVIDED that in the event the aggregate principal amount of B Term Loans
incurred at the time that the Total B Term Loan Commitment is terminated in
accordance with Section 3.03(b) is less than $31,000,000, an amount equal to
such deficiency shall be applied to reduce the B Term Loan Scheduled Repayments
PRO RATA based on the then remaining principal amount of each such B Term Loan
Scheduled Repayment.
(d) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02(A), on each date set forth below, the
Borrower shall be required to repay that principal amount of C Term Loans, to
the extent then outstanding, as is set forth opposite such date (each such
repayment, as the same may be reduced as provided in Sections 4.01 and
4.02(A)(j), a "C Term Loan Scheduled Repayment", and together with each A Term
Loan Scheduled Repayment and B Term Loan Scheduled Repayment, the "Scheduled
Repayments"):
<TABLE>
<CAPTION>
Scheduled Repayment Date Amount
- ------------------------ ------
<S> <C>
Quarterly Payment Date in August 1998 $75,000
Quarterly Payment Date in November 1998 $75,000
Quarterly Payment Date in February 1999 $75,000
Quarterly Payment Date in May 1999 $75,000
Quarterly Payment Date in August 1999 $75,000
Quarterly Payment Date in November 1999 $75,000
Quarterly Payment Date in February 2000 $75,000
Quarterly Payment Date in May 2000 $75,000
Quarterly Payment Date in August 2000 $75,000
Quarterly Payment Date in November 2000 $75,000
Quarterly Payment Date in February 2001 $75,000
Quarterly Payment Date in May 2001 $75,000
Quarterly Payment Date in August 2001 $75,000
Quarterly Payment Date in November 2001 $75,000
Quarterly Payment Date in February 2002 $75,000
Quarterly Payment Date in May 2002 $75,000
Quarterly Payment Date in August 2002 $75,000
Quarterly Payment Date in November 2002 $75,000
Quarterly Payment Date in February 2003 $75,000
Quarterly Payment Date in May 2003 $75,000
Quarterly Payment Date in August 2003 $75,000
Quarterly Payment Date in November 2003 $75,000
Quarterly Payment Date in February 2004 $75,000
Quarterly Payment Date in May 2004 $75,000
Quarterly Payment Date in August 2004 $75,000
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<PAGE>
Quarterly Payment Date in November 2004 $75,000
Quarterly Payment Date in February 2005 $75,000
Quarterly Payment Date in May 2005 $75,000
Quarterly Payment Date in August 2005 $6,975,000
Quarterly Payment Date in November 2005 $6,975,000
Quarterly Payment Date in February 2006 $6,975,000
C Term Maturity Date $6,975,000
</TABLE>
; PROVIDED that in the event the aggregate principal amount of C Term Loans
incurred at the time that the Total C Term Loan Commitment is terminated in
accordance with Section 3.03(c) is less than $30,000,000, an amount equal to
such deficiency shall be applied to reduce the C Term Loan Scheduled Repayments
PRO RATA based on the then remaining principal amount of each such C Term Loan
Scheduled Repayment.
(e) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02(A), on each date after the Effective
Date upon which Holdings or any of its Subsidiaries receives any proceeds from
any sale or issuance of its common stock pursuant to an underwritten public
offering pursuant to a registration statement filed with the SEC (other than
equity issued to American Industrial Partners Capital Fund II, L.P. ("AIPCF") or
its affiliates) an amount equal to 50% of the cash proceeds (excluding any such
proceeds attributable to or relating to direct or indirect equity interests of
Persons other than AIPCF, Holdings or its Subsidiaries) of the respective sale
or issuance (net of all reasonable costs associated therewith, including,
without limitation, all due diligence costs and expenses paid for, or reimbursed
by, Holdings and/or any of its Subsidiaries, underwriting or similar fees,
discounts and commissions, attorneys' fees and expenses paid for, or reimbursed
by, Holdings and/or any of its Subsidiaries and other costs associated
therewith) shall be applied as a mandatory repayment of principal of outstanding
Term Loans (or, if the Initial Borrowing Date has not yet occurred, such amounts
shall be applied as a mandatory reduction to the Total Term Loan Commitment) in
accordance with the requirements of Sections 4.02(A)(j) and (k).
(f) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02(A), on each date after the Effective
Date upon which Holdings or any of its Subsidiaries receives any proceeds from
any incurrence by Holdings or any of its Subsidiaries of Indebtedness for
borrowed money (other than Indebtedness for borrowed money permitted to be
incurred pursuant to Section 9.04), an amount equal to 100% of the cash proceeds
of the respective incurrence of Indebtedness (net of all reasonable costs
associated therewith, including, without limitation, all due diligence costs and
expenses paid for, or reimbursed by, Holdings and/or any of its Subsidiaries,
any underwriting, agency, structuring or similar fees, discounts and
commissions, attorneys' fees and expenses paid for, or reimbursed by, Holdings
and/or any of its Subsidiaries, all financing and/or commitment fees and other
costs associated therewith) shall be applied as a mandatory repayment of
principal of outstanding Term Loans (or, if the Initial Borrowing Date has not
yet occurred, such amounts shall be applied as a
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<PAGE>
mandatory reduction to the Total Term Loan Commitment) in accordance with the
requirements of Sections 4.02(A)(j) and (k).
(g) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02(A), on each date after the Effective
Date upon which Holdings or any of its Subsidiaries receives proceeds from any
Asset Sale, an amount equal to 100% of the Net Sale Proceeds therefrom shall be
applied as a mandatory repayment of principal of outstanding Term Loans (or, if
the Initial Borrowing Date has not yet occurred, such amounts shall be applied
as a mandatory reduction to the Total Term Loan Commitment) in accordance with
the requirements of Sections 4.02(A)(j) and (k), PROVIDED that (i) up to an
aggregate of $5,000,000 of Net Sale Proceeds from Asset Sales shall not be
required to be used to so repay Term Loans and (ii) up to an additional
aggregate of $10,000,000 per fiscal year of the Borrower of Net Sale Proceeds
from Asset Sales shall not be required to be used to so repay Term Loans in any
fiscal year of the Borrower to the extent the Borrower elects, as hereinafter
provided, to cause such Net Sale Proceeds to be reinvested in Reinvestment
Assets (a "Reinvestment Election"). The Borrower may exercise its Reinvestment
Election (within the parameters specified in the preceding sentence) with
respect to an Asset Sale if (x) no Default or Event of Default exists and (y)
the Borrower delivers a Reinvestment Notice to the Administrative Agent within
fifteen Business Days following the date of the consummation of the respective
Asset Sale, with such Reinvestment Election being effective with respect to the
Net Sale Proceeds of such Asset Sale equal to the Anticipated Reinvestment
Amount specified in such Reinvestment Notice and, PROVIDED FURTHER, that if all
or any portion of such Net Sale Proceeds not applied to the repayment of Term
Loans pursuant to the preceding proviso are either (a) not so used or agreed
(which agreement may be subject to conditions) to be used within 180 days after
the date of receipt of such Net Sale Proceeds or (b) if agreed to be so used
within 180 days after the date of receipt of such Net Sale Proceeds and not so
used within 360 days after the date of receipt of such Net Sale Proceeds, then,
in either such case, such remaining portion not used or agreed to be used in the
case of preceding clause (a) and not used in the case of preceding clause (b)
shall be applied on the date which is 180 days following the date of receipt of
such Net Sale Proceeds in the case of clause (a) above, or the date occurring on
the date which is 360 days after the date of receipt of such Net Sale Proceeds
in the case of clause (b) above as a mandatory repayment of principal of
outstanding Term Loans in accordance with the requirements of Sections
4.02(A)(j) and (k). At the time of the acquisition of any Reinvestment Assets,
Holdings shall comply and shall cause its Subsidiaries to comply with Section
8.11, to the extent applicable.
(h) In addition to any other mandatory repayments pursuant to this
Section 4.02(A), on each Excess Cash Payment Date, an amount equal to 50% of the
Excess Cash Flow for the relevant Excess Cash Payment Period shall be applied as
a mandatory repayment of principal of outstanding Term Loans in accordance with
the requirements of Sections 4.02(A)(j) and (k).
(i) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02(A), within 90 days following each date
after the Effective Date on which Holdings or any of its Subsidiaries receives
any proceeds from any Recovery Event, an amount equal to 100% of the proceeds of
such Recovery Event (net of reasonable costs including, without limitation,
legal costs and expenses and taxes incurred in connection with such Recovery
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<PAGE>
Event) shall be applied as a mandatory repayment of principal of outstanding
Term Loans (or, if the Initial Borrowing Date has not yet occurred, such amounts
shall be applied as a mandatory reduction to the Total Term Loan Commitment) in
accordance with the requirements of Sections 4.02(A)(j) and (k), PROVIDED that
(x) so long as no Default or Event of Default then exists and such proceeds do
not exceed $10,000,000, such proceeds shall not be required to be so applied on
such date to the extent that the Borrower has delivered a certificate to the
Administrative Agent on or prior to such date stating that such proceeds shall
be used to replace or restore any properties or assets in respect of which such
proceeds were paid within 180 days following the date of such Recovery Event
(which certificate shall set forth the estimates of the proceeds to be so
expended) and (y) so long as no Default or Event of Default then exists and to
the extent that (a) the amount of such proceeds exceeds $10,000,000, (b) the
Borrower has delivered to the Administrative Agent a certificate on or prior to
the date the application would otherwise be required pursuant to this Section
4.02(A)(i) in the form described in clause (x) above and (c) the Borrower has
delivered to the Administrative Agent either (i) a certification that such
Recovery Event is not reasonably expected to result in a Default or Event of
Default or (ii) such evidence as the Administrative Agent may reasonably request
in form and substance satisfactory to the Administrative Agent establishing that
the Borrower has sufficient business interruption insurance and that the
Borrower will be receiving regular payments thereunder in such amounts and at
such times as are necessary to satisfy all material obligations and expenses of
the Borrower (including, without limitation, all debt service requirements,
including pursuant to this Agreement), without any delay or extension thereof,
for the period from the date of the respective casualty, condemnation or other
event giving rise to the Recovery Event and continuing through the completion of
the replacement or restoration of respective properties or assets, then the
entire amount and not just the portion in excess of $10,000,000 shall be
deposited with the Administrative Agent pursuant to a cash collateral
arrangement reasonably satisfactory to the Administrative Agent whereby such
proceeds shall be disbursed to the Borrower from time to time as needed to pay
actual costs incurred by it in connection with the replacement or restoration of
the respective properties or assets (pursuant to such certification requirements
as may be established by the Administrative Agent), PROVIDED FURTHER, that at
any time while an Event of Default has occurred and is continuing (other than an
Event of Default existing solely as a result of the violation of any or both of
Sections 9.08 and 9.09, but in each case only if, and to the extent, that the
violation of said covenant has occurred as a result of the underlying event
giving rise to the Recovery Event), the Required Banks may direct the
Administrative Agent (in which case the Administrative Agent shall, and is
hereby authorized by the Borrower to, follow said directions) to apply any or
all proceeds then on deposit in such collateral account to the repayment of
Obligations hereunder in the same manner as proceeds would be applied pursuant
to the Security Agreement, and, PROVIDED FURTHER, that if all or any portion of
such proceeds not required to be applied to the repayment of Term Loans pursuant
to clause (x) above are either (A) not so used within 180 days after the date of
receipt of proceeds from the respective Recovery Event or (B) if agreed (which
agreement may be subject to conditions) to be used within 180 days after the
date of receipt of proceeds from the respective Recovery Event and not so used
within 360 days after the date of receipt of proceeds from the respective
Recovery Event, then, in either case, such remaining portion not used or agreed
to be used in the case of the preceding clause (A) and not used in the case of
preceding clause (B), shall be applied on the date which is 180 days following
the date of receipt of proceeds from the respective Recovery Event in the case
of clause
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<PAGE>
(A) above, or the date which is 360 days after the date of receipt of proceeds
from the respective Recovery Event in the case of clause (B) above as a
mandatory repayment of principal of outstanding Term Loans in accordance with
the requirements of Section 4.02(A)(j) and (k), and, PROVIDED FURTHER, that if
all or any portion of such proceeds not required to be applied to the repayment
of Term Loans pursuant to clause (y) above are either not so used or agreed to
be used (which agreement may be subject to conditions) within 270 days after the
date of receipt of proceeds from the respective Recovery Event, then, such
remaining portion not used or agreed to be used, shall be applied on the date
which is 270 days following the date of receipt of proceeds from the respective
Recovery Event as a mandatory repayment of principal of outstanding Term Loans
in accordance with the requirements of Section 4.02(A)(j) and (k). If it is
subsequently determined that any portion of such proceeds that are agreed to be
so used will not be so used, then, within ten Business Days following such
determination, such amounts shall be applied as a mandatory repayment of
principal of outstanding Term Loans in accordance with the requirements of
Section 4.02(A)(j) and (k).
(j) Each amount required to be applied to repay Term Loans (or to
reduce the Total Term Loan Commitment) pursuant to Sections 4.02(A)(e), (f),
(g), (h) and (i) shall be applied to the A Term Loans, the B Term Loans and the
C Term Loans on a PRO RATA basis (based upon the then outstanding principal
amount of A Term Loans, B Term Loans and C Term Loans) to reduce the then
remaining Scheduled Repayments of the respective Tranche of Term Loans PRO RATA
based upon the then remaining amount of Scheduled Repayments of such Tranche of
Term Loans after giving effect to all prior reductions thereto.
(k) With respect to each repayment of Loans required by this Section
4.02(A), the Borrower may designate the Types of Loans of the respective Tranche
which are to be repaid and, in the case of Eurodollar Loans, the specific
Borrowing or Borrowings of the respective Tranche pursuant to which made,
PROVIDED that: (i) repayments of Eurodollar Loans pursuant to this Section
4.02(A) may only be made on the last day of an Interest Period applicable
thereto unless all Eurodollar Loans of the respective Tranche with Interest
Periods ending on such date of required repayment and all Base Rate Loans of the
respective Tranche have been paid in full; (ii) if any repayment of Eurodollar
Loans made pursuant to a single Borrowing shall reduce the outstanding
Eurodollar Loans made pursuant to such Borrowing to an amount less than (w) in
the case of A Term Loans, $5,000,000, (x) in the case of B Term Loans,
$5,000,000, (y) in the case of C Term Loans, $5,000,000 and (z) in the case of
Revolving Loans, $1,000,000, such Borrowing shall be converted at the end of the
then current Interest Period into a Borrowing of Base Rate Loans; and (iii) each
repayment of any Loans made pursuant to a Borrowing shall be applied PRO RATA
among the Banks which made such Loans. In the absence of a designation by the
Borrower as described in the preceding sentence, the Administrative Agent shall,
subject to the above, make such designation in its sole discretion with a view,
but no obligation, to minimize breakage costs owing under Section 1.11.
Notwithstanding the foregoing provisions of this Section 4.02(A), if at any time
the mandatory prepayment of Term Loans pursuant to Sections 4.02(A)(e) through
(i) above would result, after giving effect to the procedures set forth above,
in the Borrower incurring breakage costs under Section 1.11 as a result of
Eurodollar Loans being prepaid other than on the last day of an Interest Period
applicable thereto (the "Affected Eurodollar Loans"), then the Borrower may in
its sole discretion initially deposit a portion (up to 100%) of the amounts that
otherwise would have been paid in respect of the Affected Eurodollar
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Loans with the Administrative Agent (which deposit, after giving effect to
interest to be earned on such deposit prior to the last day of the relevant
Interest Periods, must be equal in amount to the amount of Affected Eurodollar
Loans not immediately prepaid) to be held as security for the obligations of the
Borrower hereunder pursuant to a cash collateral agreement to be entered into in
form and substance reasonably satisfactory to the Administrative Agent, with
such cash collateral to be directly applied upon the first occurrence (or
occurrences) thereafter of the last day of an Interest Period applicable to the
relevant Term Loans that are Eurodollar Loans (or such earlier date or dates as
shall be requested by the Borrower), to repay an aggregate principal amount of
such Term Loans equal to the Affected Eurodollar Loans not initially repaid
pursuant to this sentence. Notwithstanding anything to the contrary contained
in the immediately preceding sentence, all amounts deposited as cash collateral
pursuant to the immediately preceding sentence shall be held for the sole
benefit of the Banks whose Term Loans would otherwise have been immediately
repaid with the amounts deposited and upon the taking of any action by the
Administrative Agent or the Banks pursuant to the remedial provisions of Section
10, any amounts held as cash collateral pursuant to this Section 4.02(A)(k)
shall, subject to the requirements of applicable law, be immediately applied to
the relevant Term Loans. Following repayment of the relevant Loans, any
remaining cash collateral will be returned to the Borrower.
(B) WAIVER OF CERTAIN MANDATORY REPAYMENTS BY B AND C BANKS.
Notwithstanding anything to the contrary contained in this Section 4.02 or
anywhere in this Agreement (including, without limitation, in Section 13.12),
the Borrower shall have the option, in its sole discretion, to give the Banks
with outstanding B Term Loans (the "B Banks") and C Term Loans (the "C Banks")
the option to waive a mandatory repayment of such Loans pursuant to Section
4.02(A)(e), (f), (g) (h) and/or (i) (each such repayment, a "Waivable Mandatory
Repayment") upon the terms and provisions set forth in this Section 4.02(B). If
the Borrower elects to exercise the option referred to in the preceding
sentence, the Borrower shall give to the Administrative Agent written notice of
its intention to give the B Banks and the C Banks the right to waive a Waivable
Mandatory Repayment at least five Business Days prior to such repayment, which
notice the Administrative Agent shall promptly forward to all B Banks and C
Banks (indicating in such notice the amount of such repayment to be applied to
each such Bank's outstanding Term Loans under such facilities). The Borrower's
offer to permit such Banks to waive any such Waivable Mandatory Repayment may
apply to all or part of such repayment, PROVIDED that any offer to waive part of
such repayment must be made ratably to such Banks on the basis of their
outstanding B Term Loans and C Term Loans. In the event such B Bank or C Bank
desires to waive such Bank's right to receive any such Waivable Mandatory
Repayment in whole or in part, such Bank shall so advise the Administrative
Agent no later than the close of business two Business Days after the date of
such notice from the Administrative Agent, which notice shall also include the
amount such Bank desires to receive in respect of such repayment. If any Bank
does not reply to the Administrative Agent within the two Business Days, it will
be deemed not to have waived any part of such repayment. If any Bank does not
specify an amount it wishes to receive, it will be deemed to have accepted 100%
of the total payment. In the event that any such Bank waives all or part of such
right to receive any such Waivable Mandatory Repayment, the Administrative Agent
shall apply 100% of the amount so waived by such Bank to the A Term Loans in
accordance with Section 4.02(A)(j) and (k).
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4.03 METHOD AND PLACE OF PAYMENT. Except as otherwise specifically
provided herein, all payments under this Agreement or any Note shall be made to
the Administrative Agent for the account of the Bank or Banks entitled thereto
not later than 12:00 Noon (New York time) (or 1:00 p.m. (New York time) in the
case of Swingline Loans) on the date when due and shall be made in Dollars in
immediately available funds at the Payment Office of the Administrative Agent.
Whenever any payment to be made hereunder or under any Note shall be stated to
be due on a day which is not a Business Day, the due date thereof shall be
extended to the next succeeding Business Day and, with respect to payments of
principal, interest shall be payable at the applicable rate during such
extension.
4.04 NET PAYMENTS. (a) All payments made by the Borrower hereunder
or under any Note will be made without set-off, counterclaim or other defense.
Except as provided in Section 4.04(b), all such payments will be made free and
clear of, and without deduction or withholding for, any present or future taxes,
levies, imposts, duties, fees, assessments or other charges of whatever nature
now or hereafter imposed by any jurisdiction or by any political subdivision or
taxing authority thereof or therein with respect to such payments (but
excluding, except as provided in the second succeeding sentence, any tax imposed
on or measured by the net income or net profits of a Bank, or any franchise tax
based on the net income or net profits of a Bank, in either case pursuant to the
laws of the United States of America or the jurisdiction in which it is
organized or in which the principal office or applicable lending office of such
Bank is located or any subdivision thereof or therein) and all interest,
penalties or similar liabilities with respect to such non-excluded taxes,
levies, imposts, duties, fees, assessments or other charges (all such
non-excluded taxes, levies, imposts, duties, fees, assessments or other charges
being referred to collectively as "Taxes"). If any Taxes are so levied or
imposed, the Borrower agrees to pay the full amount of such Taxes, and such
additional amounts as may be necessary so that every payment of all amounts due
under this Agreement or under any Note, after withholding or deduction for or on
account of any Taxes, will not be less than the amount provided for herein or in
such Note. If any amounts are payable in respect of Taxes pursuant to the
preceding sentence of this Section 4.04(a), then the Borrower agrees to
reimburse each Bank, upon the written request of such Bank, for taxes imposed on
or measured by the net income or net profits of such Bank, or any franchise tax
based on the net income or net profits of such Bank, in either case pursuant to
the laws of the jurisdiction in which such Bank is organized or in which the
principal office or applicable lending office of such Bank is located or under
the laws of any political subdivision or taxing authority of any such
jurisdiction in which the principal office or applicable lending office of such
Bank is located and for any withholding of income or similar taxes as such Bank
shall determine are payable by, or withheld from, such Bank in respect of such
amounts so paid to or on behalf of such Bank pursuant to the preceding sentence
and in respect of any amounts paid to or on behalf of such Bank pursuant to this
sentence. The Borrower will furnish to the Administrative Agent within 45 days
after the date the payment of any Taxes is due pursuant to applicable law
certified copies of tax receipts evidencing such payment by the Borrower. The
Borrower agrees to indemnify and hold harmless each Bank, and reimburse such
Bank upon its written request, for the amount of any Taxes that arise from the
failure of the Borrower to pay any Taxes when due to the appropriate Tax
authority and that become payable by the Administrative Agent or any Bank as a
result of any such failure.
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(b) Each Bank that is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax purposes
agrees to deliver to the Borrower and the Administrative Agent on or prior to
the Initial Borrowing Date, or in the case of a Bank that is an assignee or
transferee of an interest under this Agreement pursuant to Sections 1.13 or
13.04 (unless the respective Bank was already a Bank hereunder immediately prior
to such assignment or transfer), on the date of such assignment or transfer to
such Bank, (i) (x) two accurate and complete original signed copies of Internal
Revenue Service Form 4224 or Form 1001 (or successor forms) certifying to such
Bank's entitlement to a complete exemption from United States withholding tax
with respect to payments to be made under this Agreement and under any Note (y)
an Internal Revenue Service Form W-8 or W-9, or successor applicable form, as
the case may be, and (z) obtain such extensions of time for filing and complete
such forms or certifications as may be reasonably requested by the Borrower or
the Administrative Agent, or (ii) if the Bank is not a "bank" within the meaning
of Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue
Service Form 1001 or 4224 pursuant to clause (i) above, (x) a certificate
substantially in the form of Exhibit D (any such certificate, a "Section
4.04(b)(ii) Certificate") and (y) two accurate and complete original signed
copies of Internal Revenue Service Form W-8 (or successor form) certifying to
such Bank's entitlement to a complete exemption from United States withholding
tax with respect to payments of interest to be made under this Agreement and
under any Note. In addition, each Bank agrees that from time to time after the
Effective Date, when a lapse in time or change in circumstances renders the
previous certification obsolete or inaccurate in any material respect, it will
deliver to the Borrower and the Administrative Agent two new accurate and
complete original signed copies of Internal Revenue Service Form 4224 or 1001
Form W-8 or Form W-9 and a Section 4.04(b)(ii) Certificate, as the case may be,
and such other forms as may be required in order to confirm or establish the
entitlement of such Bank to a continued exemption from or reduction in United
States withholding tax with respect to payments under this Agreement and any
Note, or it shall immediately notify the Borrower and the Administrative Agent
of its inability to deliver any such form or Certificate due to an event
(including without limitation, any change in treaty, law, or regulation) that
has occurred prior to the date on which any such delivery would be required
which renders all such forms inapplicable or would prevent such Bank from duly
completing and delivering such form with respect to it, in which case such Bank
shall not be required to deliver any such form or Certificate pursuant to this
Section 4.04(b). Notwithstanding anything to the contrary contained in Section
4.04(a), but subject to Section 13.04(b) and the immediately succeeding
sentence, (x) the Borrower shall be entitled, to the extent it is required to do
so by law, to deduct or withhold income or similar taxes imposed by the United
States (or any political subdivision or taxing authority thereof or therein)
from interest, fees or other amounts payable hereunder for the account of any
Bank which is not a United States person (as such term is defined in Section
7701(a)(30) of the Code) for U.S. Federal income tax purposes to the extent that
such Bank has not provided to the Borrower U.S. Internal Revenue Service Forms
that establish a complete exemption from such deduction or withholding and (y)
the Borrower shall not be obligated pursuant to Section 4.04(a) hereof to
gross-up payments to be made to a Bank in respect of income or similar taxes
imposed by the United States if (I) such Bank has not provided to the Borrower
the Internal Revenue Service Forms that establish a complete exemption from
withholding of such Taxes pursuant to this Section 4.04(b) or (II) in the case
of a payment, other than interest, to a Bank described in clause (ii) above, to
the extent that such Forms do not
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establish a complete exemption from withholding of such taxes. Notwithstanding
anything to the contrary contained in the preceding sentence or elsewhere in
this Section 4.04 and except as set forth in Section 13.04(b) and subject to
Section 1.12, the Borrower agrees to pay additional amounts and to indemnify
each Bank in the manner set forth in Section 4.04(a) (without regard to the
identity of the jurisdiction requiring the deduction or withholding) in respect
of any amounts deducted or withheld by it as described in the immediately
preceding sentence as a result of any changes after the Effective Date in any
applicable law, treaty, governmental rule, regulation, guideline or order, or in
the interpretation thereof, relating to the deducting or withholding of income
or similar Taxes.
(c) The provisions of this Section 4.04 are subject to the provisions
of Section 13.15 (to the extent applicable).
(d) If the Borrower pays any additional amount under this Section
4.04 to a Bank and such Bank or any affiliate receives in connection therewith
any refund or reduction of, or credit against, its Tax liabilities (including,
any tax imposed on or measured by the net income or net profits of a Bank, or
any franchise tax based on net income or net profits of a Bank), such Bank shall
pay the Borrower an amount that is equal to the net benefit, after tax, that was
obtained by the Bank in the year or years that such benefit was received or
realized.
SECTION 5. CONDITIONS PRECEDENT TO CREDIT EVENTS ON THE INITIAL
BORROWING DATE. The obligation of each Bank to make Loans and to participate in
Letters of Credit, and the obligations of each Issuing Bank to issue Letters of
Credit, in each case on the Initial Borrowing Date is subject, at the time of
such Credit Event, to the satisfaction of the following conditions:
5.01 EXECUTION OF AGREEMENT; NOTES. On or prior to the Initial
Borrowing Date (i) the Effective Date shall have occurred and (ii) there shall
have been delivered to the Administrative Agent for the account of each of the
Banks the appropriate A Term Note, B Term Note, C Term Note and/or Revolving
Note executed by the Borrower and to the Swingline Bank, the Swingline Note
executed by the Borrower, in each case in the amount, maturity and as otherwise
provided herein.
5.02 FEES, ETC. On the Initial Borrowing Date, the Borrower shall
have paid to the Administrative Agent and the Banks all costs, fees and expenses
(including, without limitation, legal fees and expenses to the extent invoiced)
payable to the Administrative Agent and the Banks to the extent then due.
5.03 OPINIONS OF COUNSEL. On the Initial Borrowing Date, the
Administrative Agent shall have received (i) from Skadden, Arps, Slate, Meagher
& Flom LLP, special counsel to Holdings and its Subsidiaries, an opinion
addressed to the Administrative Agent and each of the Banks and dated the
Initial Borrowing Date covering the matters set forth in Exhibit E and (ii) from
local counsel satisfactory to the Administrative Agent, opinions each of which
shall be in form and substance reasonably satisfactory to the Administrative
Agent and the Required Banks and shall cover the perfection of the security
interests granted pursuant to the Security Agreement and the Mortgages and such
other matters incident to the transactions contemplated herein as the
Administrative Agent may reasonably request.
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5.04 CORPORATE DOCUMENTS; PROCEEDINGS; ETC. (a) On the Initial
Borrowing Date, the Administrative Agent shall have received a certificate,
dated the Initial Borrowing Date, signed by an Authorized Officer of each Credit
Party, and attested to by the Secretary or any Assistant Secretary of such
Credit Party, all in the form of Exhibit F with appropriate insertions, together
with copies of the Certificate of Incorporation and By-Laws of such Credit
Party, as the case may be, and the resolutions, or such other administrative
approval, of such Credit Party, as the case may be, referred to in such
certificate, and the foregoing shall be reasonably acceptable to the
Administrative Agent.
(b) On the Initial Borrowing Date, all corporate and legal
proceedings and all instruments and agreements in connection with the
transactions contemplated by this Agreement and the other Documents shall be
reasonably satisfactory in form and substance to the Administrative Agent and
the Required Banks, and the Administrative Agent shall have received all
information and copies of all documents and papers, including records of
corporate proceedings, governmental approvals, good standing certificates and
bring-down telegrams or facsimiles, if any, which the Administrative Agent
reasonably may have requested in connection therewith, such documents and papers
where appropriate to be certified by proper corporate or governmental
authorities.
5.05 SHAREHOLDERS' AGREEMENTS; MANAGEMENT AGREEMENTS; TAX SHARING
AGREEMENTS. On the Initial Borrowing Date, there shall have been delivered to
the Administrative Agent true and correct copies, certified as true and complete
by an Authorized Officer of Holdings or its respective Subsidiaries of (i) all
agreements (if any) entered into by Holdings or any of its Subsidiaries (after
giving effect to the Transaction) governing the terms and relative rights of its
capital stock and any agreements entered into by shareholders, relating to any
such entity with respect to its capital stock (collectively, the "Shareholders'
Agreements"), (ii) all agreements (if any) with senior members of, or with
respect to, the management of Holdings or any of its Subsidiaries (after giving
effect to the Transaction) (collectively, the "Management Agreements"), and
(iii) all agreements (if any) relating to the sharing of tax liabilities and
benefits among Holdings and/or its Subsidiaries (each a "Tax Sharing Agreement"
and collectively, the "Tax Sharing Agreements"); all of which Shareholders'
Agreements, Management Agreements and Tax Sharing Agreements, shall be in form
and substance reasonably satisfactory to the Administrative Agent and the
Required Banks and shall be in full force and effect on the Initial Borrowing
Date.
5.06 CONSUMMATION OF THE TRANSACTION. (a) On or prior to the
Initial Borrowing Date:
(i) Holdings shall have received gross cash proceeds in an
aggregate amount of at least $95,000,000 in connection with (i) the
purchase by AIPCF and other investors satisfactory to the Administrative
Agent of its common stock (the "Holdings Common Stock") and/or (ii) the
issuance of its zero-coupon indebtedness in an amount not to exceed
$30,000,000 (the "Holdings Debentures", and together with the Holdings
Common Stock, the "Holdings Financing"), all of which proceeds shall be
contributed to the capital of the Borrower and shall have been utilized to
make payments owing in connection with the Transaction before (or
simultaneously with) utilizing the proceeds of
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any Loans for such purpose. On or prior to the Initial Borrowing Date,
there shall have been delivered to the Administrative Agent true and
correct copies of all Holdings Financing Documents, each of which shall be
in full force and effect, and all of the terms and conditions thereof shall
be in form and substance reasonably satisfactory to the Administrative
Agent and the Required Banks. The issuance or incurrence of the Holdings
Financing shall have been consummated in accordance with the Holdings
Financing Documents and applicable law and none of the material provisions
of the Holdings Financing Documents shall have been amended, waived,
supplemented or otherwise modified without the prior written consent of the
Administrative Agent (which consent shall not be unreasonably withheld);
(ii) the Borrower shall have received gross cash proceeds in a
minimum aggregate principal amount equal to $175,000,000 from the issuance
by the Borrower of the Senior Subordinated Notes (the "Senior Subordinated
Note Issuance"), and the Borrower shall have utilized such amount to make
payments owing in connection with the Transaction before (or simultaneously
with) utilizing proceeds of any Loans for such purpose. On or prior to the
Initial Borrowing Date, there shall have been delivered to the
Administrative Agent true and correct copies of the Senior Subordinated
Note Documents, each of which shall be in full force and effect, and all of
the terms and conditions thereof shall be in form and substance reasonably
satisfactory to the Administrative Agent and the Required Banks. The Senior
Subordinated Note Issuance shall have been consummated in accordance with
the Senior Subordinated Note Documents and applicable law and none of the
material provisions of the Senior Subordinated Note Documents shall have
been amended, waived, supplemented or otherwise modified without the prior
written consent of the Administrative Agent (which consent shall not be
unreasonably withheld); and
(iii) on or prior to the Initial Borrowing Date (i) the Borrower
shall have consummated a tender offer/consent solicitation with respect to
the outstanding Senior Secured Notes (the "Senior Secured Notes Tender
Offer/Consent Solicitation"), pursuant to which (x) the Borrower shall
offer, subject to the terms and conditions contained in the Senior Secured
Notes Tender Offer/Consent Solicitation, to purchase all of the outstanding
Senior Secured Notes at the cash price set forth in the Senior Secured
Notes Tender Offer/Consent Solicitation and (y) consents shall be solicited
to a proposed amendment to the Senior Secured Notes Indenture, on terms and
conditions set forth in the Senior Secured Notes Tender Offer Consent
Solicitation, which amendment shall provide for the substantial elimination
of the financial and certain operating covenants contained in the Senior
Secured Notes Indenture (including, without limitation, limitations on the
incurrence of liens, transactions with affiliates and indebtedness) and the
amendment or elimination of certain other provisions in the Senior Secured
Notes Collateral Documents; (ii) the period for tendering Senior Secured
Notes pursuant thereto shall terminate on or prior to the Initial
Borrowing Date; (iii) the Borrower shall have received sufficient consents
to authorize the execution and delivery of the Senior Secured Notes
Indenture Supplement; (iv) the Borrower and the trustee under the Senior
Secured Notes Indenture shall have duly executed and delivered the Senior
Secured Notes Indenture Supplement (which shall include the Senior Secured
Notes Collateral
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Documents Amendment); (v) the Borrower shall have repurchased or committed
to repurchase the all of the Senior Secured Notes (which shall in no event
be less than $50,000,000 in aggregate principal amount), and not
theretofore withdrawn, pursuant to the Senior Secured Notes Tender
Offer/Consent Solicitation (the "Senior Secured Notes Tender Offer
Repurchases"); (vi) all security interests and Liens on the assets owned by
the Borrower arising in connection with the issuance of the Senior Secured
Notes shall have been terminated and the Administrative Agent shall have
received such releases of such security interests and Liens as may have
been reasonably requested by the Administrative Agent, which releases shall
be in form and substance reasonably satisfactory to the Administrative
Agent; and (vii) the Administrative Agent shall be reasonably satisfied
that the Senior Secured Notes Tender Offer/Consent Solicitation shall be
consummated in accordance with the Senior Secured Notes Tender Offer
Documents and all applicable laws on the Initial Borrowing Date (all of the
foregoing, the "Refinancing").
(b) On or prior to the Initial Borrowing Date, there shall have been
delivered to the Banks copies of all Merger Documents, all of which shall be
certified by an Authorized Officer of Holdings and/or its Subsidiaries as true
and correct and be in full force and effect and shall be in form and substance
reasonably satisfactory to the Administrative Agent and the Required Banks. On
the Initial Borrowing Date, the Merger shall have been consummated in accordance
with the Merger Documents and all applicable laws. All material conditions to
Holdings' obligations in the Merger Agreement and related material agreements
shall have been satisfied, without waiver or modification (except with the
consent of the Administrative Agent, which consent shall not be unreasonably
withheld).
(c) On or prior to the Initial Borrowing Date, all necessary and
material governmental (domestic and foreign) and third party approvals in
connection with the Transaction shall have become final, and the transactions
contemplated by the Credit Documents and otherwise referred to herein or
therein, shall have been obtained and remain in effect, and all applicable
waiting periods shall have expired without any action being taken by any
competent authority which restrains, prevents or imposes, in the reasonable
judgment of the Administrative Agent, materially adverse conditions upon the
consummation of the Transaction and the transactions contemplated by this
Agreement. Additionally, there shall not exist any judgment, order, injunction
or other restraint issued or filed or a hearing seeking injunctive relief or
other restraint pending or notified prohibiting or imposing materially adverse
conditions upon the consummation of the Transaction or the transactions
contemplated by this Agreement.
5.07 PLEDGE AGREEMENT. On the Initial Borrowing Date, Holdings and
the Borrower shall have duly authorized, executed and delivered a Pledge
Agreement in the form of Exhibit G with such changes thereto, or such additional
pledge agreements (or amendments thereto) entered into in connection therewith,
as foreign counsel may suggest in connection with the Pledged Securities issued
by any Foreign Subsidiary of the Borrower designated by the Administrative Agent
(such Pledge Agreement, together with such additional pledge agreements, as
amended, modified, extended, renewed, replaced, restated or supplemented from
time to time, the "Pledge Agreement") and shall have delivered to the Collateral
Agent, as Pledgee, all the Pledged Securities referred to therein then owned by
such Credit Party, together with executed
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and undated stock powers, in the case of capital stock constituting Pledged
Securities, PROVIDED, that no more than 65% of the capital stock of Copetro S.A.
("Copetro") or any other Foreign Subsidiary shall be pledged pursuant to the
Pledge Agreement.
5.08 SECURITY AGREEMENT. On the Initial Borrowing Date, Holdings and
the Borrower shall have duly authorized, executed and delivered a Security
Agreement in the form of Exhibit H (as amended, modified, extended, renewed,
replaced, restated or supplemented from time to time, the "Security Agreement")
covering all of Holdings' and the Borrower's present and future Security
Agreement Collateral, together with:
(a) proper Financing Statements (Form UCC-1) fully executed for
filing under the UCC or other appropriate filing offices of each
jurisdiction as may be necessary or, in the reasonable opinion of the
Collateral Agent, desirable to perfect the security interests purported to
be created by the Security Agreement;
(b) certified copies of Requests for Information or Copies (Form
UCC-11), or equivalent reports, listing all effective financing statements
that name the Borrower as debtor and that are filed in the jurisdictions
referred to in clause (a) above, together with copies of such other
financing statements (none of which shall cover the Collateral except to
the extent evidencing Permitted Liens or in respect of which the Collateral
Agent shall have received termination statements (Form UCC-3) or such other
termination statements as shall be required by local law) fully executed
for filing;
(c) evidence of the completion of all other recordings and filings
of, or with respect to, the Security Agreement as may be necessary or, in
the reasonable opinion of the Collateral Agent, desirable to perfect the
security interests intended to be created by the Security Agreement; and
(d) evidence that all other actions necessary or, in the reasonable
opinion of the Collateral Agent, desirable to perfect and protect the
security interests purported to be created by the Security Agreement have
been taken.
5.09 MORTGAGES; TITLE INSURANCE; ETC. On the Initial Borrowing Date,
the Collateral Agent shall have received:
(a) duly authorized, fully executed, acknowledged, and delivered
deeds of trust, mortgages, leasehold deeds of trust or leasehold mortgages
substantially in the form of Exhibit I (as amended, modified, extended,
renewed, replaced, restated or supplemented from time to time, each a
"Mortgage" and collectively, the "Mortgages"), which Mortgages shall cover
such of the Real Property owned or leased by Holdings and/or its
Subsidiaries as shall be designated as such on Schedule III as a mortgaged
property thereunder (each, a "Mortgaged Property" and collectively, the
"Mortgaged Properties"), together with evidence that counterparts of the
Mortgages have been delivered to the title insurance company insuring the
Lien of the Mortgages for recording in all places to the extent necessary
or, in the reasonable opinion of the Collateral Agent, desirable to
effectively create a valid and enforceable Lien on each Mortgaged Property
in favor of the
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Collateral Agent (or such other trustee as may be required or desired under
local law) for the benefit of the Secured Creditors;
(b) duly authorized, fully executed, acknowledged, and delivered
subordination, nondisturbance and attornment agreements, assignments of
leases, landlord consents, tenant estoppel certificates, and such other
documents relating to the Mortgages that the Collateral Agent may
reasonably request; and
(c) Extended coverage policies of mortgage title insurance covering
each Mortgaged Property, together with all endorsements reasonably
requested by the Collateral Agent relating thereto issued by title insurers
reasonably satisfactory to the Collateral Agent (the "Mortgage Policies")
in amounts reasonably satisfactory to the Administrative Agent and the
Required Banks (but not in excess of the value of the respective Mortgaged
Property) assuring the Collateral Agent that the Mortgages on such
Mortgaged Properties are valid and enforceable first priority mortgage
liens on the respective Mortgaged Properties, free and clear of all defects
and encumbrances except Permitted Encumbrances and such Mortgage Policies
shall otherwise be in form and substance reasonably satisfactory to the
Administrative Agent and the Required Banks and shall include, as
appropriate and to the extent available, an endorsement for future advances
under this Agreement and the Notes and for any other matter that the
Collateral Agent in its reasonable discretion may reasonably request, shall
not include an exception for mechanics' liens, and shall provide for
affirmative insurance (to the extent available) and such reinsurance as the
Collateral Agent in its discretion may reasonably request.
5.10 ADVERSE CHANGE, ETC. On the Initial Borrowing Date, after
giving effect to the Transaction, nothing shall have occurred since December 31,
1997 which could reasonably be likely to have a material adverse effect on the
rights or remedies of the Administrative Agent or the Banks, or on the ability
of the Credit Parties to perform their respective obligations to the
Administrative Agent and the Banks or which could reasonably be likely to have a
Material Adverse Effect.
5.11 SOLVENCY LETTER; INSURANCE. On or before the Initial Borrowing
Date, the Borrower shall have delivered or shall cause to be delivered to the
Administrative Agent (i) a solvency letter in form and substance reasonably
satisfactory to the Administrative Agent from Valuation Research Corporation,
setting forth its conclusions that, after giving effect to the Transaction, each
of Holdings and its Subsidiaries taken as a whole, and the Borrower and its
Subsidiaries, taken as a whole, is not insolvent and will not be rendered
insolvent by the indebtedness incurred in connection therewith, and will not be
left with unreasonably small capital with which to engage in their business and
will not have incurred debts beyond their ability to pay debts as they mature,
and (ii) evidence of insurance complying with the requirements of Section 8.03
for the business and properties of Holdings and its Subsidiaries, in scope, form
and substance reasonably satisfactory to the Administrative Agent and the
Required Banks and naming the Collateral Agent as an additional insured and/or
loss payee, and stating that such insurance shall not be canceled or revised
without 30 days' prior written notice by the insurer to the Collateral Agent.
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5.12 PRO FORMA BALANCE SHEET; PROJECTIONS. (a) On the Initial
Borrowing Date, the Banks shall have received the unaudited projected PRO FORMA
consolidated balance sheets of Holdings and the Borrower prepared on a
consolidated basis based upon the projected balance sheet at the Initial
Borrowing Date prepared on a basis consistent with the Projections and in
accordance with the financial statement delivered pursuant to Section 7.05(a),
both immediately before and immediately after giving effect to the Transaction,
the related financing thereof and the other transactions contemplated hereby and
thereby, which projected PRO FORMA consolidated balance sheets shall be in form
and substance reasonably satisfactory to the Administrative Agent and the
Required Banks.
(b) On the Initial Borrowing Date, the Banks shall have received the
Projections described in Section 7.05(d), which Projections shall be in form and
substance reasonably satisfactory to the Administrative Agent and the Required
Banks.
SECTION 6. CONDITIONS PRECEDENT TO ALL CREDIT EVENTS. The obligation
of each Bank to make Loans and participate in Letters of Credit (including Loans
made and Letters of Credit issued on the Initial Borrowing Date), and the
obligation of any Issuing Bank to issue any Letter of Credit (including any
Letter of Credit issued on the Initial Borrowing Date), is subject, at the time
of each such Credit Event (except as hereinafter indicated), to the satisfaction
of the following conditions:
6.01 NO DEFAULT; REPRESENTATIONS AND WARRANTIES. At the time of each
such Credit Event and also after giving effect thereto (i) there shall exist no
Default or Event of Default and (ii) all representations and warranties
contained herein or in any other Credit Document shall be true and correct in
all material respects with the same effect as though such representations and
warranties had been made on the date of the making of such Credit Event (it
being understood and agreed that any representation or warranty which by its
terms is made as of a specified date shall be required to be true and correct in
all material respects only as of such specified date).
6.02 NOTICE OF BORROWING; LETTER OF CREDIT REQUEST. (a) Prior to
the making of each Loan (other than a Swingline Loan or a Mandatory Borrowing),
the Administrative Agent shall have received the notice required by Section
1.03(a). Prior to the making of each Swingline Loan, the Swingline Bank shall
have received the notice referred to in Section 1.03(b).
(b) Prior to the issuance of each Letter of Credit, the
Administrative Agent and the respective Issuing Bank shall have received a
Letter of Credit Request meeting the requirements of Section 2.02.
The acceptance of the benefit of each Credit Event shall constitute a
representation and warranty by Holdings and the Borrower to the Administrative
Agent and each of the Banks that all the conditions specified in Section 5 and
in this Section 6 and applicable to such Credit Event exist as of that time
(except to the extent that any of the conditions specified in Section 5 are
required to be satisfactory to or determined by any Bank, the Required Banks
and/or the Administrative Agent). All of the Notes, certificates, legal
opinions and other documents and papers referred to in Section 5 and in this
Section 6, unless otherwise specified, shall be delivered to the Administrative
Agent at the Notice Office or to counsel for the Administrative Agent for
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the account of each of the Banks and, except for the Notes, in sufficient
counterparts or copies for each of the Banks.
SECTION 7. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. In order to
induce the Banks to enter into this Agreement and to make the Loans, and issue
(or participate in) the Letters of Credit as provided herein, each of Holdings
and the Borrower makes the following representations, warranties and agreements,
in each case after giving effect to the Transaction consummated on the Initial
Borrowing Date, all of which shall survive the execution and delivery of this
Agreement and the Notes and the making of the Loans and the issuance of the
Letters of Credit, with the occurrence of each Credit Event on or after the
Initial Borrowing Date being deemed to constitute a representation and warranty
that the matters specified in this Section 7 are true and correct on and as of
the Initial Borrowing Date in all material respects and in all material respects
on the date of each such Credit Event (it being understood and agreed that any
representation or warranty which by its terms is made as of a specified date
shall be required to be true and correct in all material respects only as of
such specified date).
7.01 CORPORATE STATUS. Holdings, the Borrower and each of their
respective Subsidiaries (i) is a duly organized and validly existing corporation
in good standing under the laws of the jurisdiction of its organization, (ii)
has the corporate power and authority to own its property and assets and to
transact the business in which it is engaged and presently proposes to engage
and (iii) is duly qualified to do business and is in good standing in each
jurisdiction where the conduct of its business requires such qualifications
except for failures to be so qualified which, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.
7.02 CORPORATE POWER AND AUTHORITY. Each Credit Party has the
corporate power and authority to execute, deliver and perform the terms and
provisions of each of the Documents to which it is party and has taken all
necessary corporate action, as the case may be, to authorize the execution,
delivery and performance by it of each of such Documents. Each Credit Party has
duly executed and delivered each of the Documents to which it is party, and each
of such Documents constitutes such Credit Party's legal, valid and binding
obligation enforceable in accordance with its terms, except to the extent that
the enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws generally affecting creditors'
rights and by equitable principles (regardless of whether enforcement is sought
in equity or at law).
7.03 NO VIOLATION. Neither the execution, delivery or performance by
any Credit Party of the Documents to which it is a party, nor compliance by it
with the terms and provisions thereof, (i) will contravene any material
provision of any applicable law, statute, rule or regulation or any applicable
order, writ, injunction or decree of any court or governmental instrumentality,
(ii) will conflict with or result in any breach of any of the material terms,
covenants, conditions or provisions of, or constitute a default under, or result
in the creation or imposition of (or the obligation to create or impose) any
Lien (except pursuant to the Security Documents) upon any of the material
properties or assets of Holdings, the Borrower or any of their respective
Subsidiaries pursuant to the terms of any material indenture, mortgage, deed of
trust, credit agreement or loan agreement, or any other material agreement,
contract or instrument, to which Holdings, the
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Borrower or any of their respective Subsidiaries is a party or by which it or
any of its property or assets is bound or to which it may be subject or (iii)
will violate any provision of the Certificate of Incorporation or By-Laws of
Holdings or any of its Subsidiaries.
7.04 GOVERNMENTAL APPROVALS. No order, consent, approval, license,
authorization or validation of, or filing, recording or registration with
(except as have been obtained or made prior to the Initial Borrowing Date), or
exemption by, any governmental or public body or authority, or any subdivision
thereof, is required to authorize, or is required in connection with, (i) the
execution, delivery and performance of any Document or (ii) the legality,
validity, binding effect or enforceability of any such Document, except, in the
case of any failure to obtain, where such failure to so obtain would not have a
(x) Material Adverse Effect or (y) a material adverse effect on the ability of
the Credit Parties to perform their obligations under the Credit Documents or
the rights and remedies of the Administrative Agent and the Banks thereunder.
7.05 FINANCIAL STATEMENTS; FINANCIAL CONDITION; UNDISCLOSED
LIABILITIES; PROJECTIONS; ETC. (a) The balance sheets, statements of
operations, statements of stockholders' equity, statements of changes in
stockholders' equity, statements of changes in group deficiency, statements of
operations and division equity, statements of assets and liabilities, statements
of operating revenues and expenses, statements of charges in net assets,
statements of changes in group investment (deficiency) and statements of cash
flows of the Borrower and its Subsidiaries as furnished to the Banks prior to
the Effective Date fairly present the financial condition and operations of the
Borrower and its Subsidiaries at and for the periods indicated. All such
financial statements are true and correct in all material respects and have been
prepared in accordance with GAAP, consistently applied. After giving effect to
the Transaction, since December 31, 1997, there has been no material adverse
change in the business, operations, property, assets, liabilities, condition
(financial or otherwise) or prospects of the Borrower or of Holdings and its
Subsidiaries taken as a whole.
(b) (i) On and as of the Initial Borrowing Date, after giving effect
to the Transaction and to all Indebtedness incurred, and to be incurred, and
Liens created, and to be created, by Holdings and its Subsidiaries in connection
therewith, (a) the sum of the assets, at a fair valuation, of Holdings and its
Subsidiaries will exceed their debts; (b) Holdings and its Subsidiaries taken as
a whole have not incurred and do not intend to incur, and do not believe that
they will incur, debts beyond their ability to pay such debts as such debts
mature; and (c) Holdings and its Subsidiaries taken as a whole will have
sufficient capital with which to conduct their businesses. For purposes of this
Section 7.05(b), "debt" means any liability on a claim, and "claim" means (i)
right to payment, whether or not such a right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured, or unsecured or (ii) right to an
equitable remedy for breach of performance if such breach gives rise to a
payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured.
(c) Except as fully disclosed in the financial statements delivered
pursuant to Section 7.05(a) or the offering circular relating to the Senior
Subordinated Note Issuance, there were as of the Initial Borrowing Date no
liabilities or obligations with respect to Holdings or any
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of its Subsidiaries of any nature whatsoever (whether absolute, accrued,
contingent or otherwise and whether or not due) which, either individually or in
aggregate, would be material to the Borrower or to Holdings and its Subsidiaries
taken as a whole (except that amount of indebtedness described in such financial
statements has increased to $88,400,000 as of March 31, 1998). As of the
Initial Borrowing Date, neither Holdings nor the Borrower knows of any basis for
the assertion against it of any liability or obligation of any nature whatsoever
that is not fully disclosed in the financial statements delivered pursuant to
Section 7.05(a) or the offering circular relating to the Senior Subordinated
Note Issuance which, either individually or in the aggregate, would reasonably
be expected to have a Material Adverse Effect.
(d) On and as of the Initial Borrowing Date, the financial
projections dated as of May 11, 1998 (the "Projections") previously delivered to
the Administrative Agent and the Banks have been prepared on a basis consistent
with the financial statements referred to in Section 7.05(a) (other than as set
forth or presented in such Projections), and there are no statements or
conclusions in any of the Projections which are based upon or include
information known to the Borrower to be misleading in any material respect or
which fail to take into account material information regarding the matters
reported therein. On the Initial Borrowing Date, the Borrower believed that the
Projections were reasonable and attainable.
7.06 LITIGATION. There are no actions, suits or proceedings pending
or, to the best knowledge of Holdings and the Borrower, threatened (i) with
respect to any Document or (ii) that could reasonably be expected to have a
Material Adverse Effect.
7.07 TRUE AND COMPLETE DISCLOSURE. All factual information (taken as
a whole) furnished by or on behalf of Holdings or the Borrower in writing to the
Administrative Agent or any Bank for purposes of or in connection with this
Agreement, the other Credit Documents or any transaction contemplated herein or
therein is, and all other such factual information (taken as a whole) hereafter
furnished by or on behalf of the Borrower in writing to the Administrative Agent
or any Bank will be, true and accurate in all material respects on the date as
of which such information is dated or certified and not incomplete by omitting
to state any fact necessary to make such information (taken as a whole) not
misleading in any material respect at such time in light of the circumstances
under which such information was provided.
7.08 USE OF PROCEEDS; MARGIN REGULATIONS. (a) All proceeds of the
Term Loans shall be utilized by the Borrower (i) to effect the Transaction and
(ii) to pay fees and expenses related to the Transaction.
(b) Proceeds of Revolving Loans and Swingline Loans may be utilized
for the Borrower's and its Subsidiaries' general corporate and working capital
purposes and to make payments required in connection with the Transaction
following the Initial Borrowing Date PROVIDED, that up to $5,000,000 of
Revolving Loans and Letters of Credit may be utilized by the Borrower (i) to
effect the Transaction and (ii) to pay fees and expenses related to the
Transaction.
(c) No part of the proceeds of any Loan will be used to purchase or
carry any Margin Stock or to extend credit for the purpose of purchasing or
carrying any Margin Stock. Neither the making of any Loan nor the use of the
proceeds thereof will violate or be inconsistent
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with the provisions of Regulation T, U or X of the Board of Governors of the
Federal Reserve System.
7.09 TAX RETURNS AND PAYMENTS. Each of Holdings, the Borrower and
each of their Subsidiaries have timely filed or caused to be timely filed, on
the due dates thereof or within applicable grace periods, with the appropriate
taxing authority, all Federal and all material state returns, statements, forms
and reports for taxes (the "Returns") required to be filed by or with respect to
the income, properties or operations of Holdings and/or any of its Subsidiaries.
The Returns accurately reflect in all material respects all liability for taxes
of Holdings, the Borrower and their respective Subsidiaries, as the case may be,
for the periods covered thereby. Each of Holdings, the Borrower and their
respective Subsidiaries have paid all material taxes payable by them other than
taxes which are not delinquent or are being contested in good faith and for
which adequate reserves have been established in accordance with GAAP. Except
as disclosed in the financial statements referred to in Section 7.05(a), there
is no material action, suit, proceeding, investigation, audit, or claim now
pending or, to the best knowledge of Holdings or the Borrower, threatened by any
authority regarding any taxes relating to Holdings, the Borrower or any of their
respective Subsidiaries. As of the Initial Borrowing Date, except as set forth
in Schedule II, none of Holdings, the Borrower nor any of their respective
Subsidiaries has entered into an agreement or waiver or been requested to enter
into an agreement or waiver extending any statute of limitations relating to the
payment or collection of taxes of Holdings, the Borrower or any of their
respective Subsidiaries, or is aware of any circumstances that would cause the
taxable years or other taxable periods of Holdings, the Borrower or any of their
respective Subsidiaries not to be subject to the normally applicable statute of
limitations. None of Holdings, the Borrower nor any of their respective
Subsidiaries has incurred, or will incur, any material tax liability in
connection with the Transaction and the other transactions contemplated hereby.
7.10 COMPLIANCE WITH ERISA. Each Plan is in substantial compliance
with ERISA and the Code; no Reportable Event has occurred with respect to a
Plan; no Plan is insolvent or in reorganization; no Plan has a material Unfunded
Current Liability; no Plan has an accumulated or waived funding deficiency, has
permitted decreases in its funding standard account or has applied for an
extension of any amortization period within the meaning of Section 412 of the
Code; all contributions required to be made with respect to a Plan have been
timely made; none of Holdings, the Borrower nor any of their respective
Subsidiaries nor any ERISA Affiliate has incurred any material liability to or
on account of a Plan pursuant to Section 409, 502(i), 502(1), 515, 4062, 4063,
4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971, 4975 or
4980 of the Code or reasonably expects to incur any material liability under any
of the foregoing Sections with respect to any Plan; no proceedings have been
instituted to terminate or appoint a trustee to administer any Plan; no
condition exists which presents a material risk to Holdings, the Borrower or any
of their respective Subsidiaries or any ERISA Affiliate of incurring a material
liability to or on account of a Plan pursuant to the foregoing provisions of
ERISA and the Code; using actuarial assumptions and computation methods
consistent with Part 1 of subtitle E of Title IV of ERISA, the aggregate
liabilities of Holdings, the Borrower, their respective Subsidiaries and their
ERISA Affiliates to all Plans which are multiemployer plans (as defined in
Section 4001(a)(3) of ERISA) in the event of a complete withdrawal therefrom, as
of the close of the most recent fiscal year of each such Plan ended prior to the
date of the most recent Credit Event, would not exceed $5,000,000; no lien
imposed under
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the Code or ERISA on the assets of Holdings, the Borrower or any of their
respective Subsidiaries or any ERISA Affiliate exists or is reasonably likely to
arise on account of any Plan; and Holdings, the Borrower and their respective
Subsidiaries do not maintain or contribute to any employee welfare benefit plan
(as defined in Section 3(1) of ERISA) which provides benefits to retired
employees or other former employees (other than as required by Section 601 of
ERISA) or any employee pension benefit plan (as defined in Section 3(2) of
ERISA) the obligations with respect to which could reasonably be expected to
have a Material Adverse Effect.
7.11 THE SECURITY DOCUMENTS. (a) The provisions of the Security
Agreement are effective to create in favor of the Collateral Agent for the
benefit of the Secured Creditors a legal, valid and enforceable security
interest in all right, title and interest of the Credit Parties in the Security
Agreement Collateral described therein, and the Security Agreement, upon the
filing of Form UCC-1 financing statements or the appropriate equivalent (which
filing, if this representation is being made more than 10 days after Initial
Borrowing Date, has been made), create a fully perfected lien on, and security
interest in, all right, title and interest in all of the Security Agreement
Collateral described therein which is capable of being perfected with such
filings , subject to no other Liens other than Permitted Liens and Liens to be
released in connection with the Transaction.
(b) The security interests created in favor of the Collateral Agent,
as Pledgee, for the benefit of the Secured Creditors under the Pledge Agreement
constitute first priority perfected security interests in the Pledged Securities
described in the Pledge Agreement, subject to no security interests of any other
Person. No filings or recordings are required in order to perfect (or maintain
the perfection or priority of) the security interests created in the Pledged
Securities and the proceeds thereof under the Pledge Agreement, so long as the
Collateral Agent maintains possession of such Pledged Securities consisting of
certificated securities in the State of New York.
(c) The Mortgages create, as security for the obligations purported
to be secured thereby, a valid and enforceable perfected security interest in
and mortgage lien on all of the Mortgaged Properties in favor of the Collateral
Agent (or such other trustee as may be required or desired under local law) for
the benefit of the Secured Creditors, superior to and prior to the rights of all
third persons (except that the security interest and mortgage lien created in
the Mortgaged Properties may be subject to the Permitted Encumbrances, Permitted
Liens and Liens to be released in connection with the Transaction related
thereto) and subject to no other Liens (other than Liens permitted under Section
9.01). Schedule III contains a true and complete list of each parcel of Real
Property owned or leased by Holdings, the Borrower and their respective
Subsidiaries on the Effective Date, and the type of interest therein held by
Holdings, the Borrower or such Subsidiary.
7.12 REPRESENTATIONS AND WARRANTIES IN DOCUMENTS. All
representations and warranties set forth in the other Documents were true and
correct in all material respects at the time as of which such representations
and warranties were made (or deemed made).
7.13 PROPERTIES. Holdings, the Borrower and each of their respective
Subsidiaries have good and valid title to all properties (or a valid leasehold
estate with respect to leased
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properties) owned by them after giving effect to the Transaction in accordance
with the Transaction Documents, including all property reflected in the balance
sheet of the Borrower referred to in Section 7.05(a) and in the pro forma
balance sheet referred to in Section 5.12 (except for property sold or otherwise
disposed of since the date of such balance sheet in the ordinary course of
business or as otherwise permitted by this Agreement), free and clear of all
Liens, other than (i) as referred to in the balance sheet or in the notes
thereto or in such pro forma balance sheet or (ii) Permitted Liens.
7.14 CAPITALIZATION. On the Initial Borrowing Date and after giving
effect to the Transaction and the other transactions contemplated hereby, the
authorized capital stock of the Borrower shall consist of 1000 shares, $0.01 par
value per share, all of which shares are outstanding. All such outstanding
shares of common stock have been duly and validly issued, are fully paid and
nonassessable, are free of preemptive rights. As of the Initial Borrowing Date,
neither the Borrower nor its Subsidiaries has outstanding any securities
convertible into or exchangeable for its capital stock or outstanding any rights
to subscribe for or to purchase, or any options for the purchase of, or any
agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to, its capital stock.
7.15 SUBSIDIARIES. After giving effect to the Transaction, as of the
Effective Date, Holdings will have no direct or indirect Subsidiaries other than
the Borrower and its Subsidiaries.
7.16 COMPLIANCE WITH STATUTES, ETC. Each of Holdings and its
Subsidiaries is in compliance with all applicable statutes, regulations and
orders of, and all applicable restrictions imposed by, all governmental bodies,
domestic or foreign, in respect of the conduct of its business and the ownership
of its property, except such noncompliances as could not individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
7.17 INVESTMENT COMPANY ACT. None of Holdings, the Borrower nor any
of their respective Subsidiaries is an "investment company" or a company
"controlled" by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended.
7.18 PUBLIC UTILITY HOLDING COMPANY ACT. None of Holdings, the
Borrower nor any of their respective Subsidiaries is a "holding company," or a
"subsidiary company" of a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company" within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
7.19 LABOR RELATIONS. None of Holdings, the Borrower nor any of
their respective Subsidiaries is engaged in any unfair labor practice that could
reasonably be expected to have a Material Adverse Effect. There is (i) no
unfair labor practice complaint pending against Holdings or any of its
Subsidiaries or, to the best knowledge of Holdings or the Borrower, threatened
against any of them, before the National Labor Relations Board, and no
significant grievance or significant arbitration proceeding arising out of or
under any collective bargaining agreement is so pending against Holdings or any
of its Subsidiaries or, to the best knowledge of Holdings or the Borrower,
threatened against any of them, (ii) no strike, labor dispute, slowdown or
stoppage pending against Holdings or any of its Subsidiaries or, to the best
knowledge of Holdings and the
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Borrower, threatened against Holdings or any of its Subsidiaries and (iii) to
the best knowledge of Holdings and the Borrower, no union representation
question existing with respect to the employees of Holdings or any of its
Subsidiaries, except (with respect to any matter specified in clause (i), (ii)
or (iii) above, either individually or in the aggregate) such as could not
reasonably be expected to have a Material Adverse Effect.
7.20 PATENTS, LICENSES, FRANCHISES AND FORMULAS. Each of Holdings
and its Subsidiaries owns all material patents, trademarks, permits, service
marks, trade names, copyrights, licenses, franchises and formulas, or rights
with respect to the foregoing, and has obtained assignments of all leases and
other rights of whatever nature, necessary for the present conduct of its
business, without any known conflict with the rights of others which, or the
failure to obtain which, as the case may be, could reasonably be likely to have
a Material Adverse Effect.
7.21 TRANSACTION. As of the Initial Borrowing Date, the Transaction
has been consummated in all material respects in accordance with the terms of
the respective Transaction Documents and all applicable laws. As of the Initial
Borrowing Date, all consents and approvals of, and filings and registrations
with, and all other actions in respect of, all governmental agencies,
authorities or instrumentalities required in order to make or consummate the
Transaction will have been obtained, given, filed or taken and are or will be in
full force and effect (or effective judicial relief with respect thereto has
been obtained), except where the failure to so obtain, give, file or take would
not have a Material Adverse Effect. All applicable waiting periods with respect
thereto have or, prior to the time when required, will have, expired without, in
all such cases, any action being taken by any competent authority which
restrains, prevents, or imposes material adverse conditions upon the
Transaction. Additionally, there does not exist any judgment, order or
injunction prohibiting or imposing material adverse conditions upon the
Transaction, or any Credit Event or the performance by any Credit Party of its
obligations under the respective Documents. All actions taken by each Credit
Party pursuant to or in furtherance of the Transaction have been taken in
material compliance with the respective Documents and all applicable laws.
7.22 SPECIAL PURPOSE CORPORATION. As of the Initial Borrowing Date,
Holdings has no material assets other than the capital stock of the Borrower
owned by Holdings. As of the Initial Borrowing Date, Holdings has engaged in no
activities except activities undertaken in connection with the Transaction and
has no material liabilities other than liabilities incurred in connection with
the Transaction.
7.23 SENIOR SUBORDINATED NOTES AND HOLDINGS DEBENTURES. As of the
Initial Borrowing Date, (i) the Senior Subordinated Notes have been duly
authorized, issued and delivered in accordance with applicable law and the
Senior Subordinated Note Documents, and (ii) the Holdings Debentures have been
duly authorized, issued and delivered in accordance with applicable law and the
Holdings Debenture Documents. The subordination provisions contained in the
Senior Subordinated Notes and the Holdings Debentures are enforceable by the
Banks against Holdings or the Borrower, as the case may be except to the extent
that the enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws generally affecting
creditors' rights and by equitable principles (regardless of whether enforcement
is sought in equity or at law), and the holders of such Senior Subordinated
Notes or
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Holdings Debentures, as the case may be, and all Obligations of Holdings and/or
the Borrower hereunder or under the other Credit Documents are or will be within
the definition of "Senior Indebtedness" included in such provisions of the
Senior Subordinated Note Documents and the Holdings Debenture Documents.
SECTION 8. AFFIRMATIVE COVENANTS. Holdings and the Borrower hereby
covenant and agree that on and after the Effective Date and until the Total
Commitments and all Letters of Credit have terminated and the Loans, Notes and
Unpaid Drawings, together with interest, Fees and all other Obligations incurred
hereunder and thereunder, are paid in full:
8.01 INFORMATION COVENANTS. Holdings and/or the Borrower will
furnish to each Bank:
(a) MONTHLY REPORTS. Within 30 days after the end of each fiscal
month (other than the fiscal months ending March, June, September and December)
of Holdings (from and after July, 1998), the combined balance sheets of Holdings
and its Consolidated Subsidiaries as of the end of such month and the related
combined statements of income and statements of cash flows for such month and
for the last elapsed portion of the fiscal year ended with the last day of such
month, in each case setting forth in the statements of income only, the
comparative figures for the corresponding month in the prior fiscal year and the
budgeted figures for such month as set forth in the respective budget delivered
pursuant to Section 8.01(e).
(b) QUARTERLY FINANCIAL STATEMENTS. As soon as available and in any
event within 45 days after the close of each of the first three quarterly
accounting periods in each fiscal year of Holdings (from and after the fiscal
quarter ended in September 1998), the combined balance sheets of Holdings and
its Consolidated Subsidiaries as of the end of such quarter and the related
combined statements of income and statements of cash flows for such quarter and
for the last elapsed portion of the fiscal year ended with the last day of such
quarter and setting forth in the statements of income only, the comparative
figures for the corresponding quarter in the prior fiscal year and the budgeted
figures for such quarter as set forth in the respective budget delivered
pursuant to Section 8.01(e), (ii) the balance sheets of each of Holdings'
Subsidiaries as of the end of such quarter and the related statements of income
and statements of cash flows for such quarter and for the elapsed portion of the
fiscal year ended with the last day of such quarter, in each case setting forth
in the statements of income only, the comparative figures for the corresponding
quarter in the prior fiscal year and the budgeted figures for such quarter as
set forth in the respective budget delivered pursuant to Section 8.01(e), and
(iii) management's discussion and analysis of the important operational and
financial developments during such quarterly period in respect of Holdings and
its Subsidiaries.
(c) ANNUAL FINANCIAL STATEMENTS. Within 95 days after the close of
each fiscal year (after and including fiscal year 1998) of Holdings, the
consolidated balance sheets of Holdings and its Consolidated Subsidiaries as at
the end of such fiscal year and the related statements of income and retained
earnings and of cash flows for such fiscal year and, setting forth comparative
figures for the preceding fiscal year commencing fiscal year 1998 and certified,
in the case of such consolidated statements, by Ernst & Young LLP or such other
independent certified public accountants of recognized national standing
reasonably acceptable to the Administrative Agent,
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together with a report of such accounting firm (which report shall be
unqualified as to scope) stating that in the course of its regular audit of the
financial statements of Holdings and its Subsidiaries, which audit was conducted
in accordance with generally accepted auditing standards, such accounting firm
obtained no knowledge of any Default or Event of Default under Sections 9.03,
9.04, 9.05 and 9.07 through 9.09, inclusive, which has occurred and is
continuing or, if in the opinion of such accounting firm such a Default or Event
of Default has occurred and is continuing, a statement as to the nature thereof,
(ii) the balance sheets of each of Holdings' Subsidiaries at the end of such
fiscal year and the related statement of income and retained earnings and
statement of cash flows for such fiscal year, in each case setting forth
comparative figures for the preceding fiscal year, and (iii) management's
discussions and analysis of the important operational and financial developments
during such fiscal year in respect of Holdings and its Subsidiaries.
(d) MANAGEMENT LETTERS. Promptly after the receipt thereof by
Holdings or any of its Subsidiaries, a copy of any final "management letter"
received by Holdings or such Subsidiary from its certified public accountants
and management's responses thereto.
(e) BUDGETS. No later than 30 days following the commencement of the
first day of each fiscal year of Holdings, a budget in form satisfactory to the
Administrative Agent prepared by Holdings for (x) in the case of budgeted
statements of income, each of the twelve months of such fiscal year prepared in
detail, and (y) in the case of budgeted statements of sources and uses of cash
and balance sheets, for such fiscal year on an annual basis and prepared in
detail and for each of the five years immediately following such fiscal year
prepared in summary form, accompanied by the statement of the President, Chief
Financial Officer or Senior Vice President of Finance of the Borrower to the
effect that, to the best of his knowledge, the budget is a reasonable estimate
for the period covered thereby.
(f) OFFICER'S CERTIFICATES. At the time of the delivery of the
financial statements provided for in Section 8.01(a), (b) and (c), a certificate
of the Authorized Officer of the Borrower to the effect that, to the best of
such officer's knowledge, no Default or Event of Default has occurred and is
continuing or, if any Default or Event of Default has occurred and is
continuing, specifying the nature and extent thereof, which certificate shall,
in the case of any such financial statements delivered in respect of a period
ending on the last day of a fiscal quarter or year of Holdings, (x) set forth
the calculations required to establish whether the Borrower was in compliance
with the provisions of Sections 9.03, 9.04, 9.05, and 9.07 through 9.09,
inclusive, at the end of such fiscal quarter or year, as the case may be and (y)
if delivered with the financial statements required by Section 8.01(c), set
forth the calculations required to establish whether the Borrower was in
compliance with the provisions of Section 4.02(A)(h) and set forth the amount of
Excess Cash Flow for the respective Excess Cash Payment Period.
(g) NOTICE OF DEFAULT OR LITIGATION. Promptly, and in any event
within five Business Days after an Authorized Officer of Holdings or the
Borrower obtains knowledge thereof, notice of (i) the occurrence of any event
which constitutes a Default or Event of Default and (ii) any litigation or
governmental investigation or proceeding pending against Holdings or any of its
Subsidiaries which could reasonably be expected to result in a Material Adverse
Effect.
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(h) OTHER REPORTS AND FILINGS. Promptly, copies of all financial
information, proxy materials and other information and reports, if any, which
Holdings or any of its Subsidiaries shall file with the Securities and Exchange
Commission or any successor thereto (the "SEC") including, without limitation,
in connection with the registration of the Senior Subordinated Notes.
(i) ANNUAL MEETINGS WITH BANKS. At the request of the Administrative
Agent, Holdings shall within 120 days after the close of each fiscal year of
Holdings hold a meeting at a time and place selected by Holdings and acceptable
to the Administrative Agent with all of the Banks at which meeting shall be
reviewed the financial results of the previous fiscal year and the financial
condition of Holdings and the budgets presented for the current fiscal year of
Holdings and its Subsidiaries.
(j) OTHER INFORMATION. From time to time, such other information or
documents (financial or otherwise) with respect to Holdings or its Subsidiaries
as any Bank may reasonably request in writing.
8.02 BOOKS, RECORDS AND INSPECTIONS. Holdings will, and will cause
each of its Subsidiaries to, keep proper books of record and account in which
full, true and correct entries in material conformity with GAAP and all
requirements of law shall be made of all dealings and transactions in relation
to its business and activities. Holdings will, and will cause each of its
Subsidiaries to, permit officers and designated representatives of the
Administrative Agent or any Bank to visit and inspect, during regular business
hours, upon reasonable advance notice and under guidance of officers of
Holdings, the Borrower or such Subsidiary, any of the properties of Holdings,
the Borrower or such Subsidiary, and to examine the books of account of
Holdings, the Borrower or such Subsidiary and discuss the affairs, finances and
accounts of Holdings, the Borrower or such Subsidiary with, and be advised as to
the same by, its and their officers, all at such reasonable times and intervals
and to such reasonable extent as the Administrative Agent or such Bank may
request.
8.03 MAINTENANCE OF PROPERTY; INSURANCE. (a) Schedule IV sets forth
a true and complete listing of all insurance maintained by Holdings, and its
Subsidiaries as of the Effective Date. Holdings will, and will cause each of
its Subsidiaries to, (i) keep all property necessary in its business in good
working order and condition (ordinary wear and tear excepted), (ii) maintain
insurance on all its property in at least such amounts and against at least such
risks as is consistent and in accordance with industry practice and (iii)
furnish to each Bank, upon written request, full information as to the insurance
carried. In addition to the requirements of the immediately preceding sentence,
Holdings and the Borrower will at all times cause insurance of the types
described in Schedule IV to be maintained (with the same scope of coverage as
that described in Schedule IV) at levels which are at least as great as the
respective amount described opposite the respective type of insurance on
Schedule IV under the column headed "Minimum Amount Required to be Maintained."
Notwithstanding the foregoing, if such insurance ceases to be available or is no
longer available on commercially reasonable terms, the Borrower may, with the
consent of the Administrative Agent (not to be unreasonably withheld), cease to
maintain such insurance or maintain such insurance at levels that are
commercially reasonable.
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(b) All policies (including Mortgage Policies) or certificates (or
certified copies thereof) with respect to such insurance (i) shall be endorsed
to the Collateral Agent's satisfaction for the benefit of the Collateral Agent
(including, without limitation, by naming the Collateral Agent as loss payee or
as an additional insured), (ii) shall state that such insurance policies shall
not be canceled without 30 days' prior written notice thereof by the respective
insurer to the Collateral Agent, (iii) shall provide that the respective
insurers irrevocably waive any and all rights of subrogation with respect to the
Collateral Agent and the Secured Creditors, (iv) shall contain the standard
non-contributory mortgagee clause endorsement in favor of the Collateral Agent
with respect to hazard insurance coverage, (v) shall, except in the case of
public liability insurance and workers' compensation insurance, PROVIDED, that
any losses shall be payable notwithstanding (A) any act or neglect of Holdings
or any of its Subsidiaries, (B) the occupation or use of the properties for
purposes more hazardous than those permitted by the terms of the respective
policy if such coverage is obtainable at commercially reasonable rates and is of
the kind from time to time customarily insured against by Persons owning or
using similar property and in such amounts as are customary, (C) any foreclosure
or other proceeding relating to the insured properties if such coverage is
available at commercially reasonable rates or (D) any change in the title to or
ownership or possession of the insured properties if such coverage is available
at commercially reasonable rates and (vi) shall be deposited with the Collateral
Agent if such coverage is available at commercially reasonable rates.
(c) If Holdings or any of its Subsidiaries shall fail to maintain all
insurance in accordance with this Section 8.03, or if Holdings or any of its
Subsidiaries shall fail to so endorse and deposit all policies or certificates
with respect thereto, the Administrative Agent and/or the Collateral Agent shall
have the right (but shall be under no obligation) to procure such insurance and
the Borrower agrees to reimburse the Administrative Agent or the Collateral
Agent as the case may be, for all costs and expenses of procuring such
insurance.
8.04 CORPORATE FRANCHISES. Holdings will, and will cause each of its
Subsidiaries to, do or cause to be done, all things necessary to preserve and
keep in full force and effect its existence and its material rights, franchises,
licenses and patents; PROVIDED, HOWEVER, that nothing in this Section 8.04 shall
prevent (i) sales of assets (including, without limitation, capital stock of, or
other equity interests in, Subsidiaries of the Borrower) by Holdings or any of
its Subsidiaries in accordance with Section 9.02 or (ii) the withdrawal by
Holdings or any of its Subsidiaries of their qualification as a foreign
corporation in any jurisdiction where such withdrawal could not reasonably be
expected to have a Material Adverse Effect or (iii) mergers or consolidations or
liquidations permitted under Section 9.02.
8.05 COMPLIANCE WITH STATUTES, ETC. Holdings will, and will cause
each of its Subsidiaries to, comply with all applicable statutes, regulations
and orders of, and all applicable restrictions imposed by, all governmental
bodies, domestic or foreign, in respect of the conduct of its business and the
ownership of its property, except such noncompliances as could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
8.06 ERISA. As soon as possible and, in any event, within 20 days
after Holdings, the Borrower or any of their respective Subsidiaries or any
ERISA Affiliate knows or has reason to know of the occurrence of any of the
following, Holdings or the Borrower will
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deliver to each of the Banks a certificate of an Authorized Officer of Holdings
or the Borrower setting forth details as to such occurrence and the action, if
any, that Holdings, the Borrower, such Subsidiary or such ERISA Affiliate is
required or proposes to take, together with any notices required or proposed to
be given to or filed with or by Holdings, the Borrower, such Subsidiary, the
ERISA Affiliate, the PBGC, or a Plan participant or the Plan administrator with
respect thereto: that a Reportable Event has occurred; that an accumulated
funding deficiency has been incurred or an application is likely to be or has
been made to the Secretary of the Treasury for a waiver or modification of the
minimum funding standard (including any required installment payments) or an
extension of any amortization period under Section 412 of the Code with respect
to a Plan; that a contribution required to be made to a Plan has not been timely
made; that a Plan has been or is reasonably expected to be terminated,
reorganized, partitioned or declared insolvent under Title IV of ERISA; that a
Plan has an Unfunded Current Liability giving rise to a lien under ERISA or the
Code; that proceedings are likely to be or have been instituted or notice has
been given to terminate or appoint a trustee to administer a Plan; that a
proceeding has been instituted pursuant to Section 515 of ERISA to collect a
delinquent contribution to a Plan; that Holdings, the Borrower, any of their
respective Subsidiaries or any ERISA Affiliate will or is reasonably expected to
incur any material liability (including any contingent or secondary liability)
to or on account of the termination of or withdrawal from a Plan under Section
4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or with respect to a Plan
under Section 401(a)(29), 4971 or 4975 of the Code or Section 409 or 502(i) or
502(l) of ERISA; or that Holdings, the Borrower or any Subsidiary may incur any
material liability pursuant to any employee welfare benefit plan (as defined in
Section 3(1) of ERISA) that provides benefits to retired employees or other
former employees (other than as required by Section 601 of ERISA) or any
employee pension benefit plan (as defined in Section 3(2) of ERISA). Upon
request the Borrower will deliver to each of the Banks a complete copy of the
annual report (Form 5500) of each Plan required to be filed with the Internal
Revenue Service. In addition to any certificates or notices delivered to the
Banks pursuant to the first sentence hereof, copies of annual reports and any
material notices received by Holdings, the Borrower or any of their respective
Subsidiaries or any ERISA Affiliate with respect to any Plan shall be delivered
to the Banks no later than 20 days after the date such report has been filed
with the Internal Revenue Service or such notice has been received by Holdings,
the Borrower, the Subsidiary or the ERISA Affiliate, as applicable.
8.07 END OF FISCAL YEARS; FISCAL QUARTERS. Holdings shall cause (i)
each of its and the Borrower's, fiscal years to end on December 31, and (ii)
each of its and the Borrower's fiscal quarters to end on March 31, June 30 and
September 30.
8.08 PERFORMANCE OF OBLIGATIONS. Holdings will, and will cause each
of its Subsidiaries to, perform all of their obligations under the terms of each
mortgage, indenture, security agreement and other debt instrument by which it is
bound, except such non-performances as could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
8.09 PAYMENT OF TAXES. Holdings will pay and discharge or cause to
be paid and discharged, and will cause each of its Subsidiaries to pay and
discharge, all taxes, assessments and governmental charges or levies imposed
upon it or upon its income or profits, or upon any properties belonging to it,
in each case on a timely basis, and all lawful claims of governmental
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authorities which, if unpaid, might become a lien or charge upon any properties
of Holdings or any of its Subsidiaries; PROVIDED that none of Holdings nor any
of its Subsidiaries shall be required to pay any such tax, assessment, charge,
levy or claim which is being contested in good faith and by proper proceedings
if it has maintained adequate reserves with respect thereto in accordance with
GAAP.
8.10 MAINTENANCE OF SEPARATENESS. Holdings will, and will cause each
of its Subsidiaries to, satisfy customary corporate formalities including the
holding of regular board of directors' and shareholders' meetings and the
maintenance of corporate offices and records. None of the Borrower nor any of
its Subsidiaries shall make any payment to a creditor of Holdings in respect of
any liability of Holdings which is not a liability of the Borrower or such
Subsidiary, and no bank account of Holdings shall be commingled with any bank
account of the Borrower or any of its Subsidiaries. Any financial statements
distributed to any creditors of Holdings shall, to the extent permitted by GAAP,
clearly establish the corporate separateness of Holdings from the Borrower and
its Subsidiaries. Finally, neither Holdings nor any of its Subsidiaries shall
take any action, or conduct its affairs in a manner, which could result in the
corporate existence of Holdings being ignored, or in the assets and liabilities
of the Borrower or any of its Subsidiaries being substantively consolidated with
those of Holdings in a bankruptcy, reorganization or other insolvency
proceeding.
8.11 ADDITIONAL SECURITY; FURTHER ASSURANCES. (a) Holdings and the
Borrower will, and will cause each of their respective Domestic Subsidiaries to,
grant to the Collateral Agent security interests in Reinvestment Assets at the
time of the acquisition thereof as described in this clause (a). To the extent
Reinvestment Assets are acquired by the Borrower and/or its Domestic
Subsidiaries, the Borrower or such Domestic Subsidiary shall grant a Lien on and
a security interest in such Reinvestment Assets on the same terms as set forth
in the Security Documents and as otherwise set forth in this Section 8.11. To
the extent Reinvestment Assets are acquired by a merger or the acquisition of
capital stock, the Borrower shall cause the Person acquiring such Reinvestment
Assets to become a Subsidiary of the Borrower and/or its Subsidiaries, and shall
pledge or cause to be pledged (x) all capital stock owned by such acquiring
Person of any such Person so acquired which is a Domestic Subsidiary, and (y)
with respect to any such Person so acquired which is not a Domestic Subsidiary,
the lesser of (x) all of the capital stock owned by such acquiring Person of any
such Person so acquired or (y) 65% of the capital stock of such Person so
acquired, in each case pursuant to the Pledge Agreement or another agreement
similar thereto. The Borrower shall cause any such Domestic Subsidiary so
acquired to enter into a guaranty substantially similar to the Subsidiary
Guaranty and additional security documents substantially similar to the Security
Documents (to the extent applicable), all as otherwise as set forth in this
Section 8.11.
(b) Holdings will, and will cause each of its Domestic Subsidiaries
to, grant to the Collateral Agent security interests and mortgages (an
"Additional Mortgage") in such Real Property of Holdings or any of its Domestic
Subsidiaries as are not covered by the original Mortgages to the extent acquired
after the Effective Date, and as may reasonably be requested from time to time
by the Administrative Agent or the Required Banks (each such Real Property, an
"Additional Mortgaged Property"). All such Additional Mortgages shall be
granted pursuant to documentation substantially in the form of the Mortgages
delivered to the Administrative
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Agent on the Effective Date or in such other form as is reasonably satisfactory
to the Administrative Agent and shall constitute valid and enforceable perfected
Liens superior to and prior to the rights of all third Persons and subject to no
other Liens except as are permitted by Section 9.01 at the time of perfection
thereof. The Additional Mortgages or instruments related thereto shall have been
duly recorded or filed in such manner and in such places as are required by law
to establish, perfect, preserve and protect the Liens in favor of the Collateral
Agent required to be granted pursuant to the Additional Mortgages and all taxes,
fees and other charges payable in connection therewith shall have been paid in
full.
(c) Holdings will, and will cause each of its Domestic Subsidiaries
to, grant to the Collateral Agent security interests in assets acquired pursuant
to Sections 9.02 (xiii) and (xiv) at the time of the acquisition thereof as
described in this clause (c). In connection with the acquisition of the capital
stock of a Person that becomes a Domestic Subsidiary of the Borrower, the
Borrower shall pledge or cause to be pledged all capital stock of any such
Person so acquired which is owned by the Borrower or any Subsidiary Guarantor
pursuant to the Pledge Agreement and cause such Person to enter into a guaranty
substantially similar to the Subsidiary Guaranty and additional security
documents substantially similar to the Security Documents (to the extent
applicable), all as otherwise set forth in this Section 8.11.
(d) Holdings will, and will cause each of its Domestic Subsidiaries
to, at the expense of the Borrower, make, execute, endorse, acknowledge, file
and/or deliver to the Collateral Agent from time to time such vouchers,
invoices, schedules, confirmatory assignments, conveyances, financing
statements, transfer endorsements, powers of attorney, certificates, real
property surveys, reports and other assurances or instruments and take such
further steps relating to the Collateral covered by any of the Security
Documents as the Collateral Agent may reasonably require pursuant to this
Section 8.11. Furthermore, Holdings and the Borrower shall cause to be
delivered to the Collateral Agent such opinions of counsel, title insurance and
other related documents as may be reasonably requested by the Collateral Agent
to assure itself that this Section 8.11 has been complied with.
(e) Holdings will cause each Domestic Subsidiary established or
created in accordance with Section 9.14 to duly authorize, execute and deliver
to the Administrative Agent a guaranty of all Obligations and all obligations
under Interest Rate Protection Agreements in substantially the form of Exhibit J
hereto (as amended, modified, extended, renewed, replaced, restated or
supplemented from time to time, the "Subsidiary Guaranty").
(f) Holdings will cause each Domestic Subsidiary established or
created in accordance with Section 9.14 to grant to the Collateral Agent a first
priority Lien on all property (tangible and intangible) of such Subsidiary upon
terms similar to those set forth in the Security Documents (including, without
limitation, the Pledge Agreement (subject to the proviso contained in Section
5.07) and the Security Agreement) as appropriate, and reasonably satisfactory in
form and substance to the Collateral Agent and Required Banks. Holdings and the
Borrower will cause each Domestic Subsidiary, at its own expense, to execute,
acknowledge and deliver, or cause the execution, acknowledgment and delivery of,
and thereafter register, file or record in any appropriate governmental office,
any document or instrument reasonably deemed by the Collateral Agent to be
necessary or desirable for the creation and perfection of the foregoing Liens.
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Holdings and the Borrower will cause each of its Subsidiaries to take all
actions reasonably requested by the Collateral Agent (including, without
limitation, the filing of UCC-1's) in connection with the granting of such
security interests.
(g) The security interests required to be granted pursuant to this
Section 8.11 shall be granted pursuant to security documentation (which shall be
substantially similar to the Security Documents already executed and delivered
by the Borrower or its Subsidiaries, as applicable) or reasonably satisfactory
in form and substance to the Administrative Agent and shall constitute valid
and enforceable perfected security interests prior to the rights of all third
Persons and subject to no other Liens except such Liens and priority as are
permitted by Section 9.01. The Additional Security Documents and other
instruments related thereto shall be duly recorded or filed in such manner and
in such places and at such times as are required by law to establish, perfect,
preserve and protect the Liens, in favor of the Collateral Agent for the benefit
of the respective Secured Creditors, required to be granted pursuant to the
Additional Security Documents and all taxes, fees and other charges payable in
connection therewith shall be paid in full by the Borrower. At the time of the
execution and delivery of the Additional Security Documents, the Borrower shall
cause to be delivered to the Collateral Agent such opinions of counsel, Mortgage
Policies, title surveys, real estate appraisals and other related documents as
may be reasonably requested by the Administrative Agent or the Required Banks to
assure themselves that this Section 8.11 has been complied with.
(h) Each of Holdings and the Borrower agrees that each action
required above by Section 8.11(d) shall be completed as soon as possible, but in
no event later than 60 days after such action is requested to be taken by the
Administrative Agent or the Required Banks. Each of Holdings and the Borrower
further agrees that each action required by Section 8.11(a) and (e) shall be
completed within 10 Business Days and, to the extent applicable in connection
with the pledge of stock acquired in connection with the creation or acquisition
of a new Subsidiary, 8.11(e), (f) and (g) with respect to Additional Collateral,
shall be completed within 60 days of the acquisition of the assets to become
Additional Collateral.
SECTION 9. NEGATIVE COVENANTS. Holdings and the Borrower covenant
and agree that on and after the Effective Date and until the Total Commitments
and all Letters of Credit have terminated and the Loans, Notes and Unpaid
Drawings, together with interest, Fees and all other Obligations incurred
hereunder and thereunder, are paid in full:
9.01 LIENS. Holdings will not, and will not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with
respect to any property or assets (real or personal, tangible or intangible) of
Holdings or any of its Subsidiaries, whether now owned or hereafter acquired, or
sell any such property or assets subject to an understanding or agreement,
contingent or otherwise, to repurchase such property or assets (including sales
of accounts receivable with recourse to Holdings or any of its Subsidiaries), or
assign any right to receive income or permit the filing of any financing
statement under the UCC or any other similar notice of Lien under any similar
recording or notice statute; PROVIDED that the provisions of this Section 9.01
shall not prevent the creation, incurrence, assumption or existence of the
following (Liens described below are herein referred to as "Permitted Liens"):
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(i) inchoate Liens for taxes, assessments or governmental charges
or levies not yet due and payable or Liens for taxes, assessments or
governmental charges or levies being contested in good faith and by
appropriate proceedings for which adequate reserves have been established
in accordance with GAAP or Liens for property taxes on property which is to
be abandoned or for which the sole recourse for such tax, assessment or
governmental charge or levy is to such property;
(ii) Liens in respect of property or assets of the Borrower or any
of its Subsidiaries imposed by law, which were incurred in the ordinary
course of business and do not secure Indebtedness for borrowed money, such
as carriers', warehousemen's, materialmen's and mechanics' liens and other
similar Liens arising in the ordinary course of business, and (x) which do
not in the aggregate materially detract from the value of the Borrower's or
such Subsidiary's property or assets or materially impair the use thereof
in the operation of the business of the Borrower or such Subsidiary or (y)
which are being contested in good faith by appropriate proceedings, which
proceedings have the effect of preventing the forfeiture or sale of the
property or assets subject to any such Lien;
(iii) Liens in existence on the Effective Date which are listed, and
the property subject thereto described, in Schedule V, but only to the
respective date, if any, set forth in such Schedule V for the removal and
termination of any such Liens, plus renewals, replacements and extensions
of such Liens to the extent set forth on Schedule V, PROVIDED that (x) the
aggregate principal amount of the Indebtedness, if any, secured by such
Liens does not increase from that amount outstanding at the time of any
such renewal, replacement or extension and (y) any such renewal,
replacement or extension does not encumber any additional assets or
properties of Holdings or any of its Subsidiaries;
(iv) Permitted Encumbrances;
(v) Liens created pursuant to the Security Documents;
(vi) licenses, leases or subleases granted to other Persons in the
ordinary course of business not materially interfering with the conduct of
the business of Holdings and its Subsidiaries taken as a whole;
(vii) Liens upon assets subject to Capitalized Lease Obligations to
the extent permitted by Section 9.04(v), PROVIDED that (x) such Liens only
serve to secure the payment of Indebtedness arising under such Capitalized
Lease Obligation (and replacements, extensions, refinancings and renewals
thereof) and (y) the Lien encumbering the assets giving rise to the
Capitalized Lease Obligation does not encumber any other asset of the
Borrower or any Subsidiary of the Borrower;
(viii) Liens placed upon equipment or machinery or other personal or
real property used in the ordinary course of business of the Borrower or
any of its Subsidiaries at the time of acquisition thereof by the Borrower
or any such Subsidiary or within 180 days thereafter to secure Indebtedness
incurred to pay all or a portion of the purchase price thereof and all
renewals, replacements, refinancings or extensions thereof, PROVIDED
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that (x) the aggregate outstanding principal amount of all Indebtedness
secured by Liens permitted by this clause (viii) shall not at any time
exceed $10,000,000 and (y) in all events, the Lien encumbering the
equipment or machinery so acquired does not encumber any other asset of the
Borrower or such Subsidiary;
(ix) easements, rights-of-way, restrictions (including zoning
restrictions), encroachments, protrusions and other similar charges or
encumbrances, and minor title deficiencies, in each case whether now or
hereafter in existence, not securing Indebtedness for borrowed money and
not materially interfering with the conduct of the business of the Borrower
or any of its Subsidiaries;
(x) Liens arising from precautionary UCC financing statement
filings regarding operating leases entered into by Holdings or any of its
Subsidiaries;
(xi) Liens arising out of the existence of judgments or awards not
constituting an Event of Default under Section 10.09, PROVIDED that no cash
or property in excess of $7,500,000 is deposited or delivered to secure the
respective judgment or award;
(xii) statutory, contractual and common law landlords' liens under
leases to which Holdings or any of its Subsidiaries is a party;
(xiii) Liens (other than any Lien imposed by ERISA) incurred or
deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security, or to secure the performance of tenders, statutory obligations,
surety, stay, customs and appeal bonds, statutory bonds, bids, leases,
government contracts, trade contracts, performance and return of money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money), PROVIDED that the aggregate amount of deposits
at any time pursuant to this clause (xiii) shall not exceed $7,500,000;
(xiv) any interest or title of a lessor, sublessor, licensee or
licensor under any lease or license agreement permitted by this Agreement;
(xv) Liens in favor of a banking institution arising as a matter of
law encumbering deposits (including the right of set-off) held by such
banking institutions incurred in the ordinary course of business and which
are within the general parameters customary in the banking industry;
(xvi) deposits made in the ordinary course of business to secure
liabilities for premiums to insurance carriers;
(xvii) Liens arising out of conditional sale, title retention,
consignment or similar arrangements for sale of goods entered into by the
Borrower or any of its Subsidiaries in the ordinary course of business;
(xviii) Liens on assets of Foreign Subsidiaries to secure Foreign
Subsidiary Indebtedness;
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(xix) Liens arising in connection with transactions relating to
accounts receivable permitted under Section 9.02 (xi);
(xx) Liens existing on any asset or property of the Borrower or any
Subsidiary of the Borrower prior to the acquisition of such asset or
property or prior to the time any such Subsidiary became a Subsidiary of
the Borrower (and any replacement, extension or renewal of such Lien so
long as such Lien (as so extended, replaced or renewed) does not (i) secure
obligations in excess of $15,000,000 and (ii) extend to any property that
was not subject to such Lien prior to such replacement, extension or
renewal; and
(xxi) Liens securing reimbursement obligations not to exceed
$2,500,000 in respect of trade related letters of credit provided in the
ordinary course of business (exclusive of reimbursement obligations in
respect of Letters of Credit) and covering the goods (or the documents of
title in respect of such goods) financed by such letters of credit.
9.02 CONSOLIDATION, MERGER, PURCHASE OR SALE OF ASSETS, ETC.
Holdings will not, and will not permit any of its Subsidiaries to, wind up,
liquidate or dissolve its affairs or enter into any transaction of merger or
consolidation, or convey, sell, lease or otherwise dispose of (or agree to do
any of the foregoing at any future time) all or any part of its property or
assets, or enter into any sale-leaseback transactions, or purchase or otherwise
acquire (in one or a series of related transactions) any part of the property or
assets (other than purchases or other acquisitions of inventory, materials,
equipment and intangible assets, including property acquired by way of trade or
barter agreements, in the ordinary course of business) of any Person, except
that:
(i) Capital Expenditures made by the Borrower and its Subsidiaries
shall be permitted to the extent not in violation of Section 9.07;
(ii) each of the Borrower and its Subsidiaries may sell, lease or
otherwise dispose of any assets PROVIDED that (a) the aggregate Net Sale
Proceeds of all assets subject to sales or other dispositions pursuant to
this clause (ii) shall not exceed $15,000,000 in any fiscal year of the
Borrower, (b) each such disposition is for fair market value and (c) at
least 75% of the consideration received in respect thereof is cash (or Cash
Equivalents) (including assumption of Indebtedness);
(iii) in addition to sales, leases, transfers, conveyances or
dispositions otherwise permitted, each of the Borrower and its Subsidiaries
may sell, lease, transfer, convey or otherwise dispose of property,
equipment or other assets that is (a) obsolete or worn out or (b) no longer
useful or necessary in the operation of the business of such Person;
(iv) investments may be made to the extent permitted by Section
9.05;
(v) each of the Borrower and its Subsidiaries may lease (as
lessee) real or personal property in the ordinary course of business (so
long as such lease does not create a Capitalized Lease Obligation not
otherwise permitted by Section 9.04(v));
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(vi) each of the Borrower and its Subsidiaries may make sales,
conveyances, dispositions or other transfers of goods, equipment and
inventory (including pursuant to barter or trade transactions) in the
ordinary course of business;
(vii) licenses or sublicenses by the Borrower and its Subsidiaries
of software, trademarks, patents and other intellectual property in the
ordinary course of business and which do not materially interfere with the
business of the Borrower or any Subsidiary;
(viii) the Borrower or any Subsidiary Guarantor may transfer assets
to or lease assets to or acquire or lease assets from the Borrower or any
other Subsidiary Guarantor (so long as the security interests granted
pursuant to the Security Documents is not, in the reasonable judgment of
the Collateral Agent, adversely affected thereby) or any Subsidiary of the
Borrower may be merged or consolidated with or into, or be liquidated into,
the Borrower or any Subsidiary Guarantor (so long as the Borrower or such
Subsidiary Guarantor is the surviving corporation);
(ix) any Foreign Subsidiary may be merged with and into, or be
dissolved or liquidated into, or transfer any of its assets to, any other
Foreign Subsidiary;
(x) the Transaction shall be permitted;
(xi) the Borrower and its Subsidiaries may sell or discount, in
each case without recourse (except for customary indemnities,
representations, warranties and agreements) and in the ordinary course of
business, accounts receivable arising in the ordinary course of business
(x) which are overdue or (y) which the Borrower may reasonably determine
are difficult to collect, but only in connection with the compromise or
collection thereof (and not as part of any bulk sale or financing of
receivables);
(xii) transfers of condemned property to the respective governmental
authority or agency that have condemned same (whether by deed in lieu of
condemnation or otherwise), and transfers of properties that have been
subject to a casualty to the respective insurer of such property or its
designee as part of an insurance settlement, so long as the proceeds
thereof are applied as required by Section 4.02(A)(i);
(xiii) the Borrower and its Subsidiaries may acquire the capital
stock (or other equity interests) or assets of any Person which is merged
into, or becomes a Domestic Subsidiary of, the Borrower or such Subsidiary
so long as the aggregate amount expended pursuant to this clause (xiii)
does not exceed $10,000,000; and
(xiv) in addition to the acquisition permitted pursuant to preceding
clause (xiii), the Borrower and its Subsidiaries may acquire the capital
stock (or other equity interests) or assets of any Person which is merged
into, or becomes a Domestic Subsidiary of, the Borrower or such Subsidiary
with (a) the reinvestment of Excess Cash Flow for the relevant Excess Cash
Payment Period to the extent (x) not required to be applied to repay the
Loans pursuant to Section 4.02(A)(h), (y) not used to make Capital
Expenditures
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pursuant to Section 9.07(c)(iii) and (z) not used to make investments
pursuant to Section 9.05(ix);
To the extent the Required Banks waive the provisions of this Section 9.02 with
respect to the sale of any Collateral, or any Collateral is sold as permitted by
this Section 9.02 (other than clause (vii) thereof), such Collateral shall be
sold free and clear of the Liens created by the Security Documents, and the
Administrative Agent and Collateral Agent shall be authorized to take any
actions deemed appropriate in order to effect the foregoing and shall, at the
request of the Borrower, take any such actions reasonably appropriate to effect
the foregoing.
9.03 DIVIDENDS. Holdings shall not, and shall not permit any of its
Subsidiaries to, authorize, declare or pay any Dividends with respect to
Holdings or any of its Subsidiaries except that:
(i) any Subsidiary of the Borrower may pay Dividends to the
Borrower or any Wholly-Owned Domestic Subsidiary of the Borrower;
(ii) any Foreign Subsidiary of the Borrower may pay dividends to
the Borrower or any of its Subsidiaries or any other Person owning an
equity interest in such Foreign Subsidiary;
(iii) the Borrower may pay cash Dividends to Holdings for the
purpose of paying, so long as all proceeds thereof are promptly used by
Holdings to pay, its operating expenses incurred in the ordinary course of
business and other corporate overhead costs and expenses (including,
without limitation, legal and accounting expenses and similar expenses) in
a maximum principal amount of $1,000,000 per annum;
(iv) Holdings may pay cash Dividends, and the Borrower may pay cash
Dividends to Holdings to enable Holdings, to pay management fees or
executive compensation to the extent such management fees or executive
compensation are permitted by Section 9.06(iv) and (v);
(v) the Borrower may pay cash Dividends to Holdings for the
purpose of paying, so long as all proceeds thereof are promptly used by
Holdings to pay franchise taxes and federal, state and local income taxes
and interest, and penalties with respect thereto, if any, payable by
Holdings, PROVIDED that any refund shall be promptly returned by Holdings
to the Borrower; and
(vi) so long as there shall exist no Default or Event of Default
(both before and after giving effect to the payment thereof), the Borrower
may pay cash Dividends to Holdings so long as the proceeds thereof, are
simultaneously used by Holdings to pay interest, when and as due, on the
Holdings Debentures in accordance with the terms of the Holdings Debenture
Documents; PROVIDED that (x) any payments of Dividends to Holdings by the
Borrower pursuant to this Section 9.03(vi) shall not be made before the
fifth year after the Effective Date; and (y) at the time of any payments of
Dividends to Holdings by the Borrower pursuant to this Section 9.03(vi)
(both before and after giving effect to such
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payment) the Consolidated Fixed Charge Coverage Ratio shall be equal to or
greater than1.0:1.0.
9.04 INDEBTEDNESS. Holdings will not, and will not permit any of its
Subsidiaries to, contract, create, incur, assume or suffer to exist any
Indebtedness, except:
(i) Indebtedness incurred pursuant to this Agreement and the other
Credit Documents;
(ii) Indebtedness existing on the Borrower's balance sheet as at
March 31, 1998 shall be permitted in an aggregate principal amount not to
exceed the sum of $5,000,000 PLUS the aggregate principal amount thereof as
of March 31, 1998 (as the same may be refinanced or replaced, so long as
the principal amount thereof is not increased by more than $5,000,000);
(iii) accrued expenses and current trade accounts payable incurred
in the ordinary course of business;
(iv) Indebtedness under Interest Rate Protection Agreements to the
extent entered into pursuant to Section 9.05;
(v) Indebtedness evidenced by Capitalized Lease Obligations to the
extent permitted pursuant to Section 9.07;
(vi) Indebtedness subject to Liens permitted under Sections
9.01(viii) and (xxi);
(vii) Indebtedness (x) of the Borrower evidenced by the Senior
Subordinated Notes issued on the Initial Borrowing Date in an aggregate
principal amount not to exceed $175,000,000 (PLUS the principal amount of
Senior Subordinated Notes that may be issued pursuant to the
payment-in-kind provisions thereof) and (y) arising under guaranties by the
Subsidiary Guarantors of the obligations of the Borrower under the Senior
Subordinated Notes;
(viii) Indebtedness of Holdings evidenced by the Holdings Debentures
in an aggregate principal amount not to exceed $57,000,000;
(ix) additional Indebtedness of the Borrower and its Subsidiaries
(other than Foreign Subsidiaries) not to exceed $15,000,000 in aggregate
principal amount outstanding at any time;
(x) Contingent Obligations of the Borrower or any Subsidiary as a
guarantor of the lessee under any lease pursuant to which the Borrower or a
Subsidiary is the lessee so long as such lease is otherwise permitted
hereunder;
(xi) intercompany Indebtedness (a) among the Borrower and the
Subsidiary Guarantors and (b) among Subsidiary Guarantors; and
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(xii) intercompany Indebtedness (a) among the Foreign Subsidiaries
of the Borrower and (b) between the Borrower or any Subsidiary as lender
and any Foreign Subsidiary as borrower, PROVIDED that the aggregate amount
of such intercompany loans pursuant to this clause (b) shall be subject to
the limitations of Section 9.05 (x).
(xiii) Indebtedness of the Borrower or its Subsidiaries in respect of
performance bonds, bid bonds, appeal bonds, surety bonds and similar
obligations and trade-related letters of credit, in each case provided in
the ordinary course of business, and any extension, renewal or refinancing
thereof to the extent not provided to secure the repayment of other
Indebtedness and to the extent that the amount of refinancing Indebtedness
is not greater than the amount of Indebtedness being refinanced;
(xiv) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument drawn against
sufficient funds in the ordinary course of business, PROVIDED that such
Indebtedness is extinguished within five Business Days of its incurrence;
(xv) Indebtedness of a Subsidiary acquired after the date hereof
and Indebtedness of a corporation merged or consolidated with or into the
Borrower or a Subsidiary after the date hereof, which Indebtedness in each
case exists at the time of such acquisition, merger or consolidation and is
not created in contemplation of such event and where such acquisition,
merger or consolidation is permitted by this Agreement (and any extension,
renewal or refinancing thereof), PROVIDED that the aggregate principal
amount of Indebtedness outstanding under this clause shall not exceed
$15,000,000; and
(xvi) additional Foreign Subsidiary Indebtedness (and any extension,
renewal or refinancing thereof); provided that the aggregate principal
amount of outstanding Foreign Subsidiary Indebtedness permitted under this
clause (xvi) at any time shall not exceed $25,000,000.
9.05 ADVANCES, INVESTMENTS AND LOANS. Holdings will not, and will
not permit any of its Subsidiaries to, directly or indirectly, lend money or
credit or make advances to any Person, or purchase or acquire any stock,
obligations or securities of, or any other interest in, or make any capital
contribution to, any other Person, or purchase or own a futures contract or
otherwise become liable for the purchase or sale of currency or other
commodities at a future date in the nature of a futures contract, or hold any
cash or Cash Equivalents, except that the following shall be permitted:
(i) the Borrower and its Subsidiaries may acquire and hold
accounts receivables owing to any of them, if created or acquired in the
ordinary course of business and payable or dischargeable in accordance with
customary terms;
(ii) the Borrower and its Subsidiaries may acquire and hold cash
and Cash Equivalents;
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(iii) the Borrower and its Subsidiaries may make loans and advances
in the ordinary course of business to their respective officers, directors
and employees so long as the aggregate principal amount thereof at any time
outstanding (determined without regard to any write-downs or write-offs of
such loans and advances) shall not exceed $1,000,000;
(iv) the Borrower may enter into Interest Rate Protection
Agreements on terms satisfactory to the Administrative Agent;
(v) Holdings and any of its Subsidiaries may make investments
necessary to form Subsidiaries of the Borrower under Section 9.14;
(vi) promissory notes and other similar non-cash consideration
received by the Borrower and its Subsidiaries in connection with
dispositions permitted by Section 9.02;
(vii) the Borrower and its Subsidiaries may acquire and own
investments (including debt obligations) received in connection with the
bankruptcy or reorganization of suppliers and customers and in settlement
of delinquent obligations of, and other disputes with, customers and
suppliers arising in the ordinary course of business;
(viii) investments by the Borrower or any Subsidiary in any
Subsidiary Guarantor;
(ix) investments by the Borrower and its Subsidiaries (other than
investments made in Foreign Subsidiaries or Foreign Joint Ventures)
consisting of the reinvestment of Excess Cash Flow for the relevant Excess
Cash Payment Period to the extent (w) not required to be applied to repay
the Loans pursuant to Section 4.02(A)(h), (x) not used to make Capital
Expenditures pursuant to Section 9.07(c)(iii), (y) not used to make
acquisitions pursuant to Section 9.02(xiv) and (z) such investments (other
than investments resulting in the ownership by the Borrower and/or its
Subsidiaries of 100% of the capital stock of the Person in which such
investment is made) in an aggregate principal amount (net of any amount of
such investments returned to the Borrower and its Subsidiaries) do not
exceed $2,000,000;
(x) (i) the Borrower and any Subsidiary of the Borrower may make
investments in any Foreign Subsidiary or Foreign Joint Venture of the
Borrower, PROVIDED that the aggregate amount of such investments (net of
any amount of such investments returned to the Borrower or such Subsidiary
Guarantor) shall not exceed $35,000,000 and (ii) Foreign Subsidiaries and
Foreign Joint Ventures may make investments among one another;
(xi) the Borrower and its Subsidiaries may make acquisitions
permitted under Section 9.02(xiii);
(xii) the Borrower and its Subsidiaries may incur Indebtedness
permitted under Section 9.04 (xi) and (xii);
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(xiii) the Borrower and its Subsidiaries may make acquisitions
permitted by the definition of Capital Expenditures contained in Section
11;
(xiv) the Borrower and its Subsidiaries may make investments in
accordance with Sections 4.02(A)(g) and 4.02(A)(i); and
(xv) in addition to investments permitted by clauses (i) through
(xiv) of this Section 9.05, the Borrower and its Subsidiaries may make
additional loans, advances and investments (other than investments in
Foreign Subsidiaries and Foreign Joint Ventures) in an aggregate principal
amount not to exceed $2,000,000 in any fiscal year (net of any amount of
such investments returned to the Borrower and its Subsidiaries).
9.06 TRANSACTIONS WITH AFFILIATES. Holdings will not, and will not
permit any of its Subsidiaries to, enter into any transaction or series of
related transactions, whether or not in the ordinary course of business, with
any Affiliate of Holdings or any of its Subsidiaries, other than in the ordinary
course of business and on terms and conditions substantially as favorable to
Holdings or such Subsidiary as would reasonably be obtained by Holdings or such
Subsidiary at that time in a comparable arm's-length transaction with a Person
other than an Affiliate, except that:
(i) Dividends may be paid to the extent provided in Section 9.03;
(ii) loans may be made and other transactions may be entered into
by the Borrower and its Subsidiaries to the extent permitted by Sections
9.02, 9.04 and 9.05;
(iii) customary fees, indemnities and reimbursements may be paid to
non-officer directors of Holdings;
(iv) Holdings and its Subsidiaries may enter into and make payments
pursuant to employment arrangements with executive officers and senior
management employees in the ordinary course of business;
(v) Holdings and its Subsidiaries may make payments pursuant to
employment agreements existing on the Initial Borrowing Date;
(vi) Holdings and its Subsidiaries may make payments pursuant to
the Tax Sharing Agreements; and
(vii) Holdings may enter into management agreements with the
Borrower and its Subsidiaries and AIPCF Management Fees may be paid so long
as no Default or Event of Default shall exist at the time of such payment.
Except as specifically provided above, no management or similar fees
shall be paid or payable by Holdings or any of its Subsidiaries to any Person
other than the Borrower.
9.07 CAPITAL EXPENDITURES. (a) Holdings will not, and will not
permit any of its Subsidiaries to, make any Capital Expenditures, except that
during any fiscal period set forth below (taken as one accounting period) the
Borrower and its Subsidiaries may make Capital
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Expenditures so long as the aggregate amount of such Capital Expenditures made
under this Section 9.07(a) does not exceed in any period set forth below the
amount set forth opposite such period below:
<TABLE>
<CAPTION>
PERIOD AMOUNT
------ ------
<S> <C>
Initial Borrowing Date to $10,000,000
and including the last day
of the Fiscal Year ending
December 31, 1998
Fiscal Year ending $10,000,000
December 31, 1999
Fiscal Year ending $11,000,000
December 31, 2000
Fiscal Year ending $12,000,000
December 31, 2001
Fiscal Year ending $13,000,000
December 31, 2002
Fiscal Year ending $14,000,000
December 31, 2003
Fiscal Year ending $15,000,000
December 31, 2004
Fiscal Year ending $15,000,000
December 31, 2005
January 1, 2006 to and $15,000,000
including the C Term
Maturity Date
</TABLE>
(b) In addition to the Capital Expenditures permitted pursuant to
preceding clause (a) above, to the extent that the Capital Expenditures made by
the Borrower and its Subsidiaries in any period set forth in clause (a) above
are less than the amount permitted to be made in such period (without giving
effect to any additional amount available as a result of this clause (b) or
clauses (c) or (d) below), the amount of such difference may be carried forward
and used to make Capital Expenditures in the two succeeding fiscal years of the
Borrower.
(c) In addition to the Capital Expenditures permitted pursuant to
preceding clauses (a) and (b), the Borrower and its Subsidiaries may make
additional Capital Expenditures consisting of (i) the reinvestment of Net Sale
Proceeds of Asset Sales not required to be applied
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to prepay the Loans pursuant to Section 4.02(A)(g) as a result of the proviso
contained therein, (ii) the reinvestment of proceeds of Recovery Events not
required to be applied to repay the Loans pursuant to Section 4.02(A)(i),
(iii) the reinvestment of the amounts of Excess Cash Flow (x) not required to be
applied to repay the Loans pursuant to Section 4.02(A)(h), (y) not used to make
acquisition pursuant to Section 9.02(xiv) or (z) not used to make investments
pursuant to Section 9.05(ix).
9.08 ADJUSTED LEVERAGE RATIO. Holdings and the Borrower will not
permit the Adjusted Leverage Ratio at any time during a period set forth below
to be greater than the ratio set forth opposite such period below:
<TABLE>
<CAPTION>
PERIOD RATIO
------ -----
<S> <C>
Fiscal quarter ended September 30, 1998 5.75 to 1
Fiscal quarter ended December 31, 1998 5.75 to 1
Fiscal quarter ended March 31, 1999 5.75 to 1
Fiscal quarter ended June 30, 1999 5.75 to 1
Fiscal quarter ended September 30, 1999 5.75 to 1
Fiscal quarter ended December 31, 1999 5.75 to 1
Fiscal quarter ended March 31, 2000 5.50 to 1
Fiscal quarter ended June 30, 2000 5.50 to 1
Fiscal quarter ended September 30, 2000 5.50 to 1
Fiscal quarter ended December 31, 2000 5.50 to 1
Fiscal quarter ended March 31, 2001 5.50 to 1
Fiscal quarter ended June 30, 2001 5.50 to 1
Fiscal quarter ended September 30, 2001 5.50 to 1
Fiscal quarter ended December 31, 2001 5.50 to 1
Fiscal quarter ended March 31, 2002 5.25 to 1
Fiscal quarter ended June 30, 2002 5.25 to 1
Fiscal quarter ended September 30, 2002 5.25 to 1
Fiscal quarter ended December 31, 2002 5.25 to 1
Fiscal quarter ended March 31, 2003 5.00 to 1
Fiscal quarter ended June 30, 2003 5.00 to 1
Fiscal quarter ended September 30, 2003 5.00 to 1
Fiscal quarter ended December 31, 2003 5.00 to 1
Fiscal quarter ended March 31, 2004 5.00 to 1
Fiscal quarter ended June 30, 2004 5.00 to 1
Fiscal quarter ended September 30, 2004 5.00 to 1
Fiscal quarter ended December 31, 2004 5.00 to 1
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Fiscal quarter ended March 31, 2005 5.00 to 1
Fiscal quarter ended June 30, 2005 5.00 to 1
Fiscal quarter ended September 30, 2005 5.00 to 1
Fiscal quarter ended December 31, 2005 5.00 to 1
Fiscal quarter ended March 31, 2006 5.00 to 1
</TABLE>
9.09 INTEREST COVERAGE RATIO. Holdings and the Borrower will not
permit the Interest Coverage Ratio for any period of four consecutive fiscal
quarters, in each case taken as one accounting period, ended on the last day of
any fiscal quarter set forth below to be less than the amount set forth opposite
such fiscal quarter below:
<TABLE>
<CAPTION>
FISCAL QUARTER RATIO
-------------- -----
<S> <C>
Fiscal quarter ended September 30, 1998 1.75 to 1
Fiscal quarter ended December 31, 1998 1.75 to 1
Fiscal quarter ended March 31, 1999 1.75 to 1
Fiscal quarter ended June 30, 1999 1.75 to 1
Fiscal quarter ended September 30, 1999 1.75 to 1
Fiscal quarter ended December 31, 1999 1.75 to 1
Fiscal quarter ended March 31, 2000 1.85 to 1
Fiscal quarter ended June 30, 2000 1.85 to 1
Fiscal quarter ended September 30, 2000 1.85 to 1
Fiscal quarter ended December 31, 2000 1.85 to 1
Fiscal quarter ended March 31, 2001 1.95 to 1
Fiscal quarter ended June 30, 2001 1.95 to 1
Fiscal quarter ended September 30, 2001 1.95 to 1
Fiscal quarter ended December 31, 2001 1.95 to 1
Fiscal quarter ended March 31, 2002 2.00 to 1
Fiscal quarter ended June 30, 2002 2.00 to 1
Fiscal quarter ended September 30, 2002 2.00 to 1
Fiscal quarter ended December 31, 2002 2.00 to 1
Fiscal quarter ended March 31, 2003 2.00 to 1
Fiscal quarter ended June 30, 2003 2.00 to 1
Fiscal quarter ended September 30, 2003 2.00 to 1
Fiscal quarter ended December 31, 2003 2.00 to 1
Fiscal quarter ended March 31, 2004 2.00 to 1
Fiscal quarter ended June 30, 2004 2.00 to 1
Fiscal quarter ended September 30, 2004 2.00 to 1
Fiscal quarter ended December 31, 2004 2.00 to 1
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Fiscal quarter ended March 31, 2005 2.00 to 1
Fiscal quarter ended June 30, 2005 2.00 to 1
Fiscal quarter ended September 30, 2005 2.00 to 1
Fiscal quarter ended December 31, 2005 2.00 to 1
Fiscal quarter ended March 31, 2006 2.00 to 1
</TABLE>
9.10 LIMITATION ON MODIFICATIONS OF CERTIFICATE OF INCORPORATION,
BY-LAWS AND CERTAIN OTHER AGREEMENTS; LIMITATIONS OF PREPAYMENTS AND
MODIFICATIONS OF INDEBTEDNESS; ETC. Holdings will not, and will not permit any
of its Subsidiaries to (i) make (or give any notice with respect of) any
voluntary or optional payment or prepayment on or redemption or acquisition for
value of (including, without limitation, by way of depositing with the trustee
with respect thereto money or securities before due for the purpose of paying
when due), after the issuance thereof, any Holdings Debentures or any Senior
Subordinated Notes, (ii) amend or modify, or permit the amendment or
modification of any provision of the foregoing Indebtedness (including, without
limitation, the Senior Subordinated Note Documents and the Holdings Financing
Documents), or (iii) amend, modify or change its Certificate of Incorporation
(including, without limitation, by the filing or modification of any certificate
of designation) or By-Laws, other than any amendments, modifications or changes
which would not be reasonably likely to be materially adverse to the interest of
the Banks.
9.11 LIMITATION ON CERTAIN RESTRICTIONS ON SUBSIDIARIES. Holdings
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 such Subsidiary to (a) pay
dividends or make any other distributions on its capital stock or any other
interest or participation in its profits owned by Borrower or any Subsidiary of
the Borrower, or pay any Indebtedness owed to the Borrower or any Subsidiary of
the Borrower, (b) make loans or advances to the Borrower or any Subsidiary of
the Borrower or (c) transfer any of its properties or assets to the Borrower or
any Subsidiary of the Borrower, except for such encumbrances or restrictions
existing under or by reason of (i) applicable law, (ii) this Agreement, the
other Credit Documents and the Transaction Documents, (iii) customary provisions
restricting subletting or assignment of any lease governing a leasehold interest
of the Borrower or any Subsidiary of the Borrower, (iv) customary provisions
restricting assignment of any licensing agreement entered into by the Borrower
or any Subsidiary of the Borrower in the ordinary course of business, (v) the
Credit Agreement, dated February 4, 1997, between Copetro, Banca Nazionale del
Lavoro S.A. and any other bank party thereto (as amended, restated, refinanced,
renewed or replaced), (vi) Indebtedness of the Borrower or any Domestic
Subsidiary permitted under Section 9.04 to the extent no more restrictive, taken
as a whole, than this Agreement and (vii) Foreign Subsidiary Indebtedness.
9.12 LIMITATION ON ISSUANCE OF CAPITAL STOCK. (a) Holdings will not
issue (i) any preferred stock or (ii) any class of redeemable common stock.
(b) The Borrower will not issue, or permit any of its Subsidiaries to
issue, any capital stock (including by way of sales of treasury stock) or any
options or warrants to purchase, or securities convertible into, capital stock,
except (i) for transfers and replacements of then
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outstanding shares of capital stock, (ii) for stock splits, stock dividends and
similar issuances which do not decrease the percentage ownership of Holdings or
any of its Subsidiaries in any class of the capital stock of the Borrower or
such Subsidiary, (iii) to qualify directors to the extent required by applicable
law, (iv) the Borrower may issue additional shares of common stock to Holdings,
so long as all such shares are promptly delivered to the Collateral Agent and
pledged pursuant to the Pledge Agreement and (v) in connection with the creation
of Subsidiaries of the Borrower in compliance with Section 9.14.
9.13 BUSINESS. (a) Holdings shall engage in no types of business
and shall have no material assets or material liabilities, other than its
ownership of the capital stock of the Borrower and liabilities incident thereto,
liabilities under or related to the Holdings Debentures, and liabilities not
prohibited under this Agreement.
(b) The Borrower will not, and will not permit any of its
Subsidiaries to, engage (directly or indirectly) in any business other than the
type of business in which the Borrower and its Subsidiaries are engaged on the
Effective Date and reasonable extensions thereof.
9.14 LIMITATION ON CREATION OF SUBSIDIARIES. Holdings shall not
directly establish, create or acquire any additional Subsidiaries after the
Initial Borrowing Date, other than with the written consent of the
Administrative Agent and the Required Banks. The Borrower may establish, create
or acquire subsidiaries after the Initial Borrowing Date in compliance with
Section 8.11.
9.15 NO OTHER DESIGNATED SENIOR INDEBTEDNESS. Holdings will not, and
will not permit any Subsidiary to, create or permit the creation after the
Initial Borrowing Date of, any class of "Designated Senior Indebtedness" as
defined in the Senior Subordinated Note Documents other than the Obligations.
SECTION 10. EVENTS OF DEFAULT. Upon the occurrence of any of the
following specified events (each an "Event of Default"):
10.01 PAYMENTS. The Borrower shall (i) default in the payment when
due of any principal of any Loan or any Note or (ii) default, and such default
shall continue unremedied for three or more Business Days, in the payment when
due of any Unpaid Drawings or interest on any Loan or Note, or any Fees or any
other amounts owing hereunder, thereunder or under any other Credit Document; or
10.02 REPRESENTATIONS, ETC. Any representation, warranty or
statement made by any Credit Party herein or in any other Credit Document or in
any certificate delivered pursuant hereto or thereto shall prove to be untrue in
any material respect on the date as of which made or deemed made; or
10.03 COVENANTS. Holdings or the Borrower shall (i) default in the
due performance or observance by it of any term, covenant or agreement contained
in Section 8.01(g)(i), 8.07 or Section 9 or (ii) default in the due performance
or observance by it of any other term, covenant or agreement contained in this
Agreement (other than as described in
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Section 10.01, 10.02 or 10.03(i)), and such default shall continue unremedied
for a period of 30 days after written notice to the Borrower by the
Administrative Agent or any Bank; or
10.04 DEFAULT UNDER OTHER AGREEMENTS. Holdings or any of its
Subsidiaries shall (i) default in any payment of any Indebtedness (other than
the Obligations) beyond the period of grace, if any, provided in the instrument
or agreement under which such Indebtedness was created or (ii) default in the
observance or performance of any agreement or condition relating to any
Indebtedness (other than the Obligations) or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such Indebtedness
(or a trustee or agent on behalf of such holder or holders) to cause (determined
without regard to whether any notice is required), any such Indebtedness to
become due prior to its stated maturity, or (iii) any Indebtedness (other than
the Obligations) of Holdings or any of its Subsidiaries shall be declared to be
due and payable, or required to be prepaid other than by a regularly scheduled
required prepayment, prior to the stated maturity thereof, PROVIDED that (x) it
shall not be a Default or Event of Default under this Section 10.04 unless the
aggregate principal amount of all Indebtedness as described in preceding clauses
(i) through (iii), inclusive, is at least $5,000,000; or
10.05 BANKRUPTCY, ETC. Holdings or any of its Significant
Subsidiaries shall commence a voluntary case concerning itself under Title 11 of
the United States Code entitled "Bankruptcy," as now or hereafter in effect, or
any successor thereto (the "Bankruptcy Code"); or an involuntary case is
commenced against Holdings or any of its Significant Subsidiaries and the
petition is not controverted within 10 days, or is not dismissed within 60 days,
after commencement of the case; or a custodian (as defined in the Bankruptcy
Code) is appointed for, or takes charge of, all or substantially all of the
property of Holdings or any of its Significant Subsidiaries, or Holdings or any
of its Significant Subsidiaries commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction whether now or
hereafter in effect relating to Holdings or any of its Significant Subsidiaries,
or there is commenced against Holdings or any of its Significant Subsidiaries
any such proceeding which remains undismissed for a period of 60 days, or
Holdings or any of its Significant Subsidiaries is adjudicated insolvent or
bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or Holdings or any of its Significant Subsidiaries
suffers any appointment of any custodian or the like for it or any substantial
part of its property to continue undischarged or unstayed for a period of 60
days; or Holdings or any of its Significant Subsidiaries makes a general
assignment for the benefit of creditors; or any corporate action is taken by
Holdings or any of its Significant Subsidiaries for the purpose of effecting any
of the foregoing; or
10.06 ERISA. (a) Any Plan shall fail to satisfy the minimum funding
standard required for any plan year or part thereof or a waiver of such standard
or extension of any amortization period is sought or granted under Section 412
of the Code, any Plan shall have had or, in the reasonable opinion of the
Required Banks, is likely to have a trustee appointed to administer such Plan,
any Plan is, shall have been or is likely to be terminated or to be the subject
of termination proceedings under ERISA, any Plan shall have an Unfunded Current
Liability, a contribution required to be made to a Plan has not been made,
Holdings, the Borrower or any of
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their respective Subsidiaries or any ERISA Affiliate has incurred or is likely
to incur a liability to or on account of a Plan under Section 409, 502(i),
502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section
401(a)(29), 4971 or 4975 of the Code, or Holdings, the Borrower or any of their
respective Subsidiaries has incurred or is likely to incur liabilities pursuant
to one or more employee welfare benefit plans (as defined in Section 3(1) of
ERISA) which provide benefits to retired employees or other former employees
(other than as required by Section 601 of ERISA) or employee pension benefit
plans (as defined in Section 3(2) of ERISA); (b) there shall result from any
such event or events the imposition of a lien, the granting of a security
interest, or a liability or a material risk of incurring a liability; and in
each case in clauses (a) and (b) above, such lien, security interest or
liability, in the reasonable opinion of the Required Banks, will have a material
adverse effect upon the business, operations, property, assets, liabilities or
condition (financial or otherwise) of Holdings, the Borrower or of Holdings and
its Subsidiaries taken as a whole; or
10.07 SECURITY DOCUMENTS. At any time after the execution and
delivery thereof, any of the Security Documents shall cease to be in full force
and effect, or shall cease in any material respect to give the Collateral Agent
for the benefit of the Secured Creditors the Liens, rights, powers and
privileges purported to be created thereby (including, without limitation, a
perfected security interest in, and Lien on, all of the Collateral), in favor of
the Collateral Agent, superior to and prior to the rights of all third Persons
(except as permitted by Section 9.01), and subject to no other Liens (except as
permitted by Section 9.01), or any Credit Party shall default in the due
performance or observance of any term, covenant or agreement on its part to be
performed or observed pursuant to any of the Security Documents and such default
shall continue beyond any grace period specifically applicable thereto pursuant
to the terms of such Security Document; or
10.08 GUARANTY. Any Guaranty or any provision thereof shall cease to
be in full force or effect as to the relevant Guarantor or other party
thereunder (other than in accordance with the express terms thereof) or any
Guarantor or other party thereunder or Person acting by or on behalf of such
Guarantor or such party shall deny or disaffirm such Guarantor's or such party's
obligations under the relevant Guaranty, or any Guarantor or such party shall
default in the due performance or observance of any term, covenant or agreement
on its part to be performed or observed pursuant to any Guaranty; or
10.09 JUDGMENTS. One or more judgments or decrees shall be entered
against Holdings or any of its Subsidiaries involving in the aggregate for
Holdings and its Subsidiaries a liability (not paid or fully covered by a
reputable and solvent insurance company) and such judgments and decrees either
shall be final and non-appealable or shall not be vacated, discharged or stayed
or bonded pending appeal for any period of 60 consecutive days, and the
aggregate amount of all such judgments exceeds $7,500,000; or
10.10 CHANGE OF CONTROL. A Change of Control shall occur;
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then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Administrative Agent, upon the written request of
the Required Banks, shall by written notice to the Borrower, take any or all of
the following actions, without prejudice to the rights of the Administrative
Agent, any Bank or the holder of any Note to enforce its claims against any
Credit Party (PROVIDED that, if an Event of Default specified in Section 10.05
shall occur with respect to the Borrower, the result which would occur upon the
giving of written notice by the Administrative Agent to the Borrower as
specified in clauses (i) and (ii) below shall occur automatically without the
giving of any such notice): (i) declare the Total Commitments terminated,
whereupon all Commitments of each Bank shall forthwith terminate immediately and
any Commitment Commission shall forthwith become due and payable without any
other notice of any kind; (ii) declare the principal of and any accrued interest
in respect of all Loans and the Notes and all Obligations owing hereunder and
thereunder to be, whereupon the same shall become, forthwith due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by each Credit Party; (iii) terminate any Letter of Credit
which may be terminated in accordance with its terms; (iv) direct the Borrower
to pay (and the Borrower agrees that upon receipt of such notice, or upon the
occurrence of an Event of Default specified in Section 10.05 with respect to the
Borrower, it will pay) to the Collateral Agent at the Payment Office such
additional amount of cash, to be held as security by the Collateral Agent, as is
equal to the aggregate Stated Amount of all Letters of Credit issued for the
account of the Borrower and then outstanding; (v) enforce, as Collateral Agent,
all of the Liens and security interests created pursuant to the Security
Documents and (vi) apply any cash collateral held pursuant to Section 4.02(A) in
satisfaction of the Obligations.
SECTION 11. Definitions and Accounting Terms.
11.01 DEFINED TERMS. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"A Term Loan" shall have the meaning provided in Section 1.01(a).
"A Term Loan Commitments" shall mean for each Bank the amount set
forth opposite such Bank's name in Schedule I hereto in the column entitled "A
Term Loan Commitment" as same may be (x) reduced from time to time pursuant to
Sections 3.03, 4.02(A) and/or 10 or (y) adjusted from time to time as a result
of assignments to or from such Bank pursuant to Section 1.13 or 13.04(b).
"A Term Loan Scheduled Repayments" shall have the meaning provided in
Section 4.02(A)(b).
"A Term Maturity Date" shall mean May 31, 2004.
"A Term Notes" shall have the meaning provided in Section 1.05(a).
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"Additional Collateral" shall mean all property (whether real or
personal) in which security interests are granted (or have been purported to be
granted) (and continue to be in effect at the time of determination) pursuant to
Section 8.11.
"Additional Mortgage" shall have the meaning provided in Section
8.11(b).
"Additional Mortgaged Property" shall have the meaning provided in
Section 8.11(b).
"Additional Security Documents" shall mean all mortgages, pledge
agreements, security agreements and other security documents entered into
pursuant to Section 8.11 with respect to Additional Collateral.
"Adjusted Certificate of Deposit Rate" shall mean, on any day, the sum
(rounded to the nearest 1/100 of 1%) of (1) the rate obtained by dividing (x)
the most recent weekly average dealer offering rate for negotiable certificates
of deposit with a three-month maturity in the secondary market as published in
the most recent Federal Reserve System publication entitled "Select Interest
Rates," published weekly on Form H.15 as of the date hereof, or if such
publication or a substitute containing the foregoing rate information shall not
be published by the Federal Reserve System for any week, the weekly average
offering rate determined by the Administrative Agent on the basis of quotations
for such certificates received by it from three certificate of deposit dealers
in New York of recognized standing or, if such quotations are unavailable, then
on the basis of other sources reasonably selected by the Administrative Agent,
by (y) a percentage equal to 100% minus the stated maximum rate of all reserve
requirements as specified in Regulation D applicable on such day to a
three-month certificate of deposit of a member bank of the Federal Reserve
System in excess of $100,000 (including, without limitation, any marginal,
emergency, supplemental, special or other reserves), plus (2) the then daily net
annual assessment rate as estimated by the Administrative Agent for determining
the current annual assessment payable by the Administrative Agent to the Federal
Deposit Insurance Corporation for insuring three-month certificates of deposit.
"Adjusted Consolidated EBITDA" for any period shall mean (i)
Consolidated EBITDA for such period plus (ii) the principal amount of Senior
Subordinated Notes issued in lieu of interest during such period PROVIDED that
in the event Holdings, the Borrower or any Subsidiary of Holdings acquired any
Person during such period, Adjusted Consolidated EBITDA for such period shall be
calculated on a pro forma basis, based on the actual historical results of such
acquired Person as if such Person had been acquired on the first day of such
period.
"Adjusted Consolidated Net Income" for any period shall mean
Consolidated Net Income for such period plus, to the extent deducted in
computing such Consolidated Net Income, without duplication, the sum of the
amount of (i) all net non-cash charges (including, without limitation,
depreciation, amortization, deferred tax expense, non-cash interest expense and
non-cash items) resulting from purchase accounting adjustments, (ii) income tax
expense and withholding tax expense incurred in connection with cross-border
transactions involving Foreign Subsidiaries, (iii) any special charges
(including any non-cash fees or expenses) incurred in connection with the Merger
and the Transaction, (iv) AIPCF Management Fees and other
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amounts paid to AIPCF or its Affiliates pursuant to Section 9.03 and 9.06, (v)
non-cash exchange, translation or performance losses relating to any foreign
currency hedging transactions or currency fluctuations, and (vi) net non-cash
losses which were included in arriving at Consolidated Net Income for such
period less the sum of the amount of all net non-cash gains (exclusive of such
non-cash items reflected in Adjusted Consolidated Working Capital) included in
arriving at Consolidated Net Income for such period; PROVIDED that in the event
Holdings, the Borrower or any Subsidiary of Holdings acquired any Person during
such period, Adjusted Consolidated Net Income for such period shall be
calculated on a pro forma basis, based on the actual historical results of such
acquired Person as if such Person had been acquired on the first day of such
period.
"Adjusted Consolidated Working Capital" at any time shall mean
Consolidated Current Assets (but excluding therefrom all cash and Cash
Equivalents) less Consolidated Current Liabilities.
"Adjusted Leverage Ratio" shall mean on the date of determination
thereof the ratio of (i) Consolidated Indebtedness on such date to (ii) Adjusted
Consolidated EBITDA (which shall be calculated for any period ending prior to
June 30, 1999, by using the following amounts for such following periods:
fiscal quarter ended June 30, 1997, $13,807,000; fiscal quarter ended
September 30, 1997, $15,160,000; fiscal quarter ended December 31, 1997,
$17,001,000; and fiscal quarter ended March 31, 1998, $16,528,000 for the Test
Period ended on the last day of any fiscal quarter last ended prior to the date
such determination is made.
"Adjusted Percentage" shall mean (x) at a time when no Bank Default
exists, for each Bank, such Bank's Percentage and (y) at a time when a Bank
Default exists (i) for each Bank that is a Defaulting Bank, zero and (ii) for
each Bank that is a Non-Defaulting Bank, the percentage determined by dividing
in the case of such Bank's Percentage, such Bank's Revolving Loan Commitment at
such time by the Adjusted Total Revolving Loan Commitment at such time, it being
understood that all references herein to Revolving Loan Commitments and the
Adjusted Total Revolving Loan Commitment at a time when the Total Revolving Loan
Commitment or Adjusted Total Revolving Loan Commitment, as the case may be, has
been terminated shall be references to the Revolving Loan Commitments or
Adjusted Total Revolving Loan Commitment, as the case may be, in effect
immediately prior to such termination, PROVIDED that (A) no Bank's Adjusted
Percentage shall change upon the occurrence of a Bank Default from that in
effect immediately prior to such Bank Default if after giving effect to such
Bank Default, and any repayment of Revolving Loans at such time pursuant to
Section 4.02(A)(a) or otherwise, the sum of the aggregate outstanding principal
amount of Revolving Loans of all Non-Defaulting Banks plus the then outstanding
Swingline Loans and the Letter of Credit Outstandings, exceed the Adjusted Total
Revolving Loan Commitment; (B) the changes to the Adjusted Percentage that would
have become effective upon the occurrence of a Bank Default but that did not
become effective as a result of the preceding clause (A) shall become effective
on the first date after the occurrence of the relevant Bank Default on which the
sum of the aggregate outstanding principal amount of the Revolving Loans of all
Non-Defaulting Banks plus the then outstanding Swingline Loans and the Letter of
Credit Outstandings is equal to or less than the Adjusted Total Revolving Loan
Commitment; and (C) if (i) a Non-Defaulting Bank's Adjusted Percentage is
changed pursuant to the preceding clause (B) and (ii) any repayment of such
Bank's Revolving Loans or of
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Swingline Loans or of Unpaid Drawings with respect to Letters of Credit, that
were made during the period commencing after the date of the relevant Bank
Default and ending on the date of such change to its Adjusted Percentage must be
returned to the Borrower as a preferential or similar payment in any bankruptcy
or similar proceeding of the Borrower, then the change to such Non-Defaulting
Bank's Adjusted Percentage effected pursuant to said clause (B) shall be reduced
to that positive change, if any, as would have been made to its Adjusted
Percentage if (x) such repayments had not been made and (y) the maximum change
to its Adjusted Percentage would have resulted in the sum of the outstanding
principal of Revolving Loans made by such Bank plus such Bank's new Adjusted
Percentage of the then outstanding Swingline Loans and the outstanding principal
amount of Letter of Credit Outstandings equaling such Bank's Revolving Loan
Commitment at such time.
"Adjusted Total Revolving Loan Commitment" shall mean at any time the
Total Revolving Loan Commitment less the aggregate Revolving Loan Commitments of
all Defaulting Banks at such time.
"Administrative Agent" shall mean Bankers Trust Company, in its
capacity as Administrative Agent for the Banks hereunder, and shall include any
successor to the Administrative Agent appointed pursuant to Section 12.09.
"Affected Eurodollar Loans" shall have the meaning provided in Section
4.02(A)(k).
"Affiliate" shall mean, with respect to any Person, any other Person
(including for purposes of Section 9.06 only, all directors, officers and
partners of such Person) directly or indirectly controlling, controlled by, or
under direct or indirect common control with, such Person; PROVIDED, HOWEVER,
that for purposes of Section 9.06, an Affiliate of Holdings shall include any
Person that directly or indirectly owns more than 10% of any class of the
capital stock of Holdings. A Person shall be deemed to control another Person
if such Person possesses, directly or indirectly, the power to direct or cause
the direction of the management and policies of such other Person, whether
through the ownership of voting securities, by contract or otherwise.
"Agreement" shall mean this Credit Agreement, as amended, modified,
extended, renewed, replaced, restated or supplemented from time to time.
"AIPCF" shall mean American Industrial Partners Capital Fund II, L.P.
"AIPCF Management Fee" shall mean payment by Holdings or its
Subsidiaries of a management fee in an amount not to exceed $1.85 million in any
fiscal year and the reimbursement by Holdings or its Subsidiaries of AIPCF's
reasonable out of pocket expenses incurred in connection with the rendering of
management services to or on behalf of Holdings or its Subsidiaries.
"Anticipated Reinvestment Amount" shall mean, with respect to any
Reinvestment Election, the amount specified in the Reinvestment Notice delivered
by the Borrower in connection therewith as the amount of Net Sale Proceeds from
the related Asset Sale that the
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Borrower and/or its Subsidiaries intend to use to purchase, construct or
otherwise acquire Reinvestment Assets.
"Applicable Margin" shall mean a percentage per annum equal to, in the
case of (i) A Term Loans and Revolving Loans and Swingline Loans which are
maintained as (x) Base Rate Loans, 1.25% and (y) Eurodollar Loans, 2.25%,
reduced in each case by the applicable Interest Reduction Discount, (ii) in the
case of B Term Loans that are maintained (x) as Base Rate Loans, 1.75%, and (y)
Eurodollar Loans, 2.75%, reduced in each case by the applicable Interest
Reduction Discount and (iii) in the case of C Term Loans that are maintained as
(x) Base Rate Loans, 2.00% and (y) Eurodollar Loans, 3.00%, reduced in each case
by the applicable Interest Reduction Discount.
"Asset Sale" shall mean the sale, transfer or other disposition by
Holdings or any of its Subsidiaries to any Person other than Holdings or any of
its Subsidiaries of any asset of Holdings or such Subsidiary (other than sales,
transfers or other dispositions (a) in the ordinary course of business of goods
or inventory and/or obsolete or excess equipment or intellectual property, (b)
the proceeds of which do not exceed $1,000,000 per annum, (c) of accounts
receivable under Section 9.02(xi) or (d) trade or barter transactions entered
into in the ordinary course of business).
"Assignment and Assumption Agreement" shall mean the Assignment and
Assumption Agreement substantially in the form of Exhibit K (appropriately
completed).
"Authorized Officer" of any Credit Party shall mean any of the
Chairman of the Board, the President, the Chief Executive Officer, any Vice
President, the Treasurer, the Secretary, any Assistant Secretary, any Assistant
Treasurer, the Chief Financial Officer or the Controller of such Credit Party or
any other officer of such Credit Party which is designated in writing to the
Administrative Agent, BTCo and the Issuing Bank by any of the foregoing officers
of such Credit Party as being authorized to give such notices under this
Agreement.
"B Bank" shall have the meaning provided in Section 4.02(B).
"B Term Loan" shall have the meaning provided in Section 1.01(b).
"B Term Loan Commitments" shall mean for each Bank the amount set
forth opposite such Bank's name in Schedule I hereto in the column entitled "B
Term Loan Commitment" as same may be (x) reduced from time to time pursuant to
Sections 3.03, 4.02(A) and/or 10 or (y) adjusted from time to time as a result
of assignments to or from such Bank pursuant to Section 1.13 or 13.04(b).
"B Term Loan Scheduled Repayment" shall have the meaning provided in
Section 4.02(A)(c).
"B Term Maturity Date" shall mean May 31, 2005.
"B Term Notes" shall have the meaning provided in Section 1.05(a).
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"Bank" shall mean each financial institution listed on Schedule I, as
well as any Person which becomes a "Bank" hereunder pursuant to Sections 1.13
and 13.04(b).
"Bank Default" shall mean (i) the refusal (which has not been
retracted) of a Bank to make available its portion of any Borrowing (including a
Mandatory Borrowing) or to fund its portion of any unreimbursed payment under
Section 2.03(c) or (ii) a Bank having notified in writing the Borrower and/or
the Administrative Agent that it does not intend to comply with its obligations
under Section 1.01(d) or Section 2.
"Bankruptcy Code" shall have the meaning provided in Section 10.05.
"Base Rate" at any time shall mean the highest of (i) 1/2 of 1% in
excess of the Adjusted Certificate of Deposit Rate and (ii) the Prime Lending
Rate.
"Base Rate Loan" shall mean (i) each Swingline Loan and (ii) each Loan
designated or deemed designated as such by the Borrower at the time of the
incurrence thereof or conversion thereto.
"Borrower" shall have the meaning provided in the first paragraph of
this Agreement.
"Borrowing" shall mean the borrowing of one Type of Loan of a single
Tranche from all the Banks having Commitments of the respective Tranche (or from
the Swingline Bank in the case of Swingline Loans) on a given date (or resulting
from a conversion or conversions on such date) having in the case of Eurodollar
Loans the same Interest Period, PROVIDED that Base Rate Loans incurred pursuant
to Section 1.10(b) shall be considered part of the related Borrowing of
Eurodollar Loans.
"BTCo" shall mean Bankers Trust Company in its individual capacity.
"Business Day" shall mean (i) for all purposes other than as covered
by clause (ii) below, any day except Saturday, Sunday and any day which shall be
in New York City a legal holiday or a day on which banking institutions are
authorized or required by law or other government action to close and (ii) with
respect to all notices and determinations in connection with, and payments of
principal and interest on, Eurodollar Loans, any day which is a Business Day
described in clause (i) above and which is also a day for trading by and between
banks in the New York interbank Eurodollar market.
"C Bank" shall have the meaning provided in Section 4.02(B).
"C Term Loan" shall have the meaning provided in Section 1.01(c).
"C Term Loan Commitments" shall mean for each Bank the amount set
forth opposite such Bank's name in Schedule I hereto in the column entitled "C
Term Loan Commitment" as same may be (x) reduced from time to time pursuant to
Sections 3.03, 4.02(A) and/or 10 or (y) adjusted from time to time as a result
of assignments to or from such Bank pursuant to Section 1.13 or 13.04(b).
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"C Term Loan Scheduled Repayments" shall have the meaning provided in
Section 4.02(A)(d).
"C Term Maturity Date" shall mean May 31, 2006.
"C Term Notes" shall have the meaning provided in Section 1.05(a).
"Capital Expenditures" shall mean, with respect to any Person, all
expenditures (excluding barter transactions effected in the ordinary course of
business) by such Person which should be capitalized in accordance with GAAP,
including all such expenditures with respect to fixed or capital assets
(including, without limitation, expenditures for maintenance and repairs which
should be capitalized in accordance with GAAP) and the amount of Capitalized
Lease Obligations incurred by such Person (which shall be deemed to include (i)
expenditures by such person to acquire stock or other evidence of beneficial
ownership of any other Person for the purpose of acquiring the capital assets of
such Person and (ii) expenditures for equipment at customers and property
additions; PROVIDED, HOWEVER, that Capital Expenditures for the Borrower and its
Subsidiaries shall not include (a) expenditures to the extent made with the
proceeds of the issuance of capital stock of Holdings after the Initial
Borrowing Date not used to prepay Loans pursuant to Section 4.02(A)(e), (b)
expenditures of the Borrower and its Subsidiaries that are paid for by a third
party and for which neither Holdings nor any Subsidiary of Holdings has provided
or is required to provide or incur, directly or indirectly, any consideration or
obligation to such third party and (c) the book value of any asset owned by the
Borrower and its Subsidiaries prior to or during any relevant period to the
extent that such book value is included as a capital expenditure during such
period as a result of the Borrower and its Subsidiaries reusing or beginning to
reuse such asset during such period without a corresponding expenditure actually
having been made in such period.
"Capitalized Lease Obligations" of any Person shall mean all rental
obligations which, under GAAP, are or will be required to be capitalized on the
books of such Person, in each case taken at the amount thereof accounted for as
indebtedness in accordance with GAAP.
"Cash Equivalents" shall mean, as to any Person, (i) securities issued
or directly and fully guaranteed or insured by the United States 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
one year from the date of acquisition, (ii) time deposits and certificates of
deposit of any commercial bank having, or which is the principal banking
subsidiary of a bank holding company organized under the laws of the United
States, any State thereof, the District of Columbia or any foreign jurisdiction
having capital, surplus and undivided profits aggregating in excess of
$200,000,000, with maturities of not more than one year from the date of
acquisition by such Person, (iii) repurchase obligations with a term of not more
than 90 days for underlying securities of the types described in clause (i)
above entered into with any bank meeting the qualifications specified in clause
(ii) above, (iv) commercial paper issued by any Person incorporated in the
United States rated at least A-1 or the equivalent thereof by Standard & Poor's
Corporation or at least P-1 or the equivalent thereof by Moody's Investors
Service, Inc. and in each case maturing not more than one year after the date of
acquisition by such Person, (v) investments in money market funds substantially
all of whose assets are comprised of securities of
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the types described in clauses (i) through (iv) above, (vi) demand deposit
accounts maintained in the ordinary course of business not in excess of
$1,000,000 in the aggregate and (vii) in the case of any Foreign Subsidiary; (a)
direct obligations of the sovereign nation (or any agency thereof) in which such
Foreign Subsidiary is organized and is conducting business or in obligations
fully and unconditionally guaranteed by such sovereign nation (or any agency
thereof), (b) investments of the type and maturity described in clauses (i)
through (v) above of foreign obligors, which investments or obligors (or the
direct or indirect parents of such obligors) have ratings described in such
clauses or equivalent ratings from comparable foreign rating agencies or (c)
investments of the type and maturity described in clauses (i) through (v) above
of foreign obligors (or the direct or indirect parents of such obligors), which
investments or obligors (or the direct or indirect parents of such obligors) are
not rated as provided in such clauses or in clause (b) above but which are, in
the reasonable judgment of Holdings or its Subsidiaries, comparable in
investment quality to such investment and obligors (or the direct or indirect
parent of such obligors).
"Change of Control" shall mean such time as (i) Holdings shall cease
to own 100% of the capital stock of the Borrower, (ii) prior to the initial
public offering by Holdings of its common stock (other than a public offering
pursuant to a registration statement on Form S-8), American Industrial Partners,
AIPCF or any of their respective Affiliates (collectively, the "Initial
Investors") cease to be, directly or indirectly, the beneficial owners, in the
aggregate, of a majority of the voting power of the Voting Stock and a majority
of the economic interests in all capital stock of Holdings or (iii) after the
initial public offering by Holdings of its common stock (other than a public
offering pursuant to a registration statement on Form S-8), (A) any Schedule
13D, Form 13F or Schedule 13G under the Exchange Act, or any amendment to such
Schedule or Form, is received by Holdings which indicates that, or Holdings
otherwise becomes aware that, a "person" or "group" (within the meaning of
sections 13(d) and 14(d)(2) of the Exchange Act) other than the Initial
Investors or their Related Parties (as defined below) has become, directly or
indirectly, the "beneficial owner," by way of merger, consolidation or
otherwise, of 35% or more of the voting power of the Voting Stock of Holdings
and (B) such person or group has become, directly or indirectly, the beneficial
owner of a greater percentage of the Voting Stock and economic interests in all
capital stock of Holdings than beneficially owned by the Initial Investors or
other Related Parties, (iv) during any period of two consecutive calendar years,
individuals who at the beginning of such period constituted the Board of
Directors of Holdings (together with any new directors whose election by the
Board of Directors of Holdings or whose nomination for election by the
stockholders of Holdings was approved by a vote of a majority of the directors
then still in office who either were directors at the beginning of such period
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the directors of Holdings, then in
office or (v) any "change of control" occurs under any of the Senior
Subordinated Note Documents or Holdings Debenture Documents . "Related Party"
with respect to any Initial Investor means (A) any controlling stockholder, 80%
(or more) owned Subsidiary, or spouse, or immediate family member (in the case
of any individual) of such Initial Investor or (B) 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 Initial Investor and/or such other persons referred to in the
immediately preceding clause (A).
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"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated and the rulings issued thereunder.
Section references to the Code are to the Code, as in effect at the date of this
Agreement, and to any subsequent provision of the Code, amendatory thereof,
supplemental thereto or substituted therefor.
"Collateral" shall mean all property (whether real or personal) with
respect to which any security interests have been granted (or purported to be
granted) pursuant to any Security Document, including, without limitation, all
Pledge Agreement Collateral, all Security Agreement Collateral, all Mortgaged
Properties and all cash and Cash Equivalents delivered as collateral pursuant to
Section 4.02(A) or Section 10 hereof and all Additional Collateral, if any.
"Collateral Agent" shall mean the Administrative Agent acting as
collateral agent for the Secured Creditors pursuant to the Security Documents.
"Commitment" shall mean any of the commitments of any Bank, I.E.,
whether the Term Loan Commitments or Revolving Loan Commitment.
"Commitment Commission" shall have the meaning provided in Section
3.01(a).
"Consolidated Current Assets" shall mean, at any time, the
consolidated current assets of Holdings and its Consolidated Subsidiaries
determined on a consolidated basis in accordance with GAAP.
"Consolidated Current Liabilities" shall mean, at any time, the
consolidated current liabilities of Holdings and its Consolidated Subsidiaries
determined on a consolidated basis in accordance with GAAP at such time, but
excluding (i) the current portion of any Indebtedness under this Agreement and
any other long-term Indebtedness which would otherwise be included therein, (ii)
accrued but unpaid interest with respect to the Indebtedness described in clause
(i), and (iii) the current portion of Capitalized Lease Obligations.
"Consolidated EBIT" shall mean, for any period, the Adjusted
Consolidated Net Income of Holdings and its Consolidated Subsidiaries determined
on a consolidated basis in accordance with GAAP, before Consolidated Net
Interest Expense and provision for taxes and without giving effect to any
extraordinary gains or losses; PROVIDED that in the event Holdings, the Borrower
or any Subsidiary of Holdings acquired any Person during such period,
Consolidated EBIT for such period shall be calculated on a pro forma basis,
based on the actual historical results of such acquired Person as if such Person
had been acquired on the first day of such period.
"Consolidated EBITDA" shall mean, for any period, Consolidated EBIT,
adjusted by adding thereto the amount of all depreciation and amortization
charges that were deducted in arriving at Consolidated EBIT for such period;
PROVIDED that in the event Holdings, the Borrower or any Subsidiary of Holdings
acquired any Person during such period, Consolidated EBITDA for such period
shall be calculated on a pro forma basis, based on the actual historical results
of such acquired Person as if such Person had been acquired on the first day of
such period.
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"Consolidated Fixed Charge Coverage Ratio" means, for any period, the
ratio of (x) Consolidated EBITDA for such period to (y) Consolidated Fixed
Charges for such period.
"Consolidated Fixed Charges" means, for any period, the sum, without
duplication, of (i) Consolidated Net Cash Interest Expense for such period, (ii)
the amount of all Capital Expenditures made by the Borrower and its Subsidiaries
for such period (other than Capital Expenditures to the extent financed with
equity proceeds, Asset Sale proceeds, insurance proceeds or Indebtedness (other
than with Revolving Loans), (iii) the scheduled principal amount of all
amortization payments on all Indebtedness (including, without limitation, the
principal component of all Capitalized Lease Obligations) of the Borrower and
its Subsidiaries for such period (as determined on the first day of such
period), (iv) the amount of all cash payments made by the Borrower and its
Subsidiaries in respect of taxes or tax liabilities for such period and (v) the
amount of all Dividends paid by Holdings during such period.
"Consolidated Indebtedness" shall mean, at any time, without
duplication, the sum of the aggregate outstanding principal amount of all
Indebtedness for borrowed money (excluding the principal amount of the Holdings
Debentures), and the principal component of Capitalized Lease Obligations, of
Holdings and its Consolidated Subsidiaries determined on a consolidated basis in
accordance with GAAP.
"Consolidated Net Cash Interest Expense" shall mean, for any period,
the total consolidated cash interest expense of Holdings and its Consolidated
Subsidiaries determined on a consolidated basis in accordance with GAAP for such
period plus, without duplication, that portion of Capitalized Lease Obligations
of Holdings and its Consolidated Subsidiaries representing the interest factor
for such period in each case net of the total consolidated cash interest income
of Holdings, its Consolidated Subsidiaries for such period; PROVIDED that in the
event Holdings, the Borrower or any Subsidiary of Holdings acquired any Person
during such period, Consolidated Net Cash Interest Expense for such period shall
be calculated on a pro forma basis, based on the actual historical results of
such acquired Person as if such Person had been acquired on the first day of
such period.
"Consolidated Net Income" shall mean, for any period, net after tax
income of Holdings and its Consolidated Subsidiaries determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Interest Expense" shall mean, for any period, the
total consolidated interest expense of Holdings and its Consolidated
Subsidiaries determined on a consolidated basis in accordance with GAAP for such
period (calculated without regard to any limitations on the payment thereof)
plus, without duplication, that portion of Capitalized Lease Obligations of
Holdings and its Consolidated Subsidiaries determined on a consolidated basis in
accordance with GAAP representing the interest factor for such period in each
case net of the total consolidated cash interest income of Holdings and its
Consolidated Subsidiaries for such period, but excluding the amortization of any
deferred financing costs incurred in connection with this Agreement.
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"Consolidated Subsidiaries" shall mean, as to any Person, all
Subsidiaries of such Person which are consolidated with such Person for
financial reporting purposes in accordance with GAAP.
"Contingent Obligation" shall mean, as to any Person, any obligation
of such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(i) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (ii) to advance or supply funds (x) for the
purchase or payment of any such primary obligation or (y) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation or (iv) otherwise to assure or hold harmless the holder
of such primary obligation against loss in respect thereof; PROVIDED, HOWEVER,
that the term Contingent Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of which such
Contingent Obligation is made (or, if less, the maximum amount of such primary
obligation for which such Person may be liable pursuant to the terms of the
instrument evidencing such Contingent Obligation) or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof
(assuming such Person is required to perform thereunder) as determined by such
Person in good faith.
"Copetro" shall mean Copetro S.A., a corporation organized under the
laws of Argentina.
"Credit Documents" shall mean this Agreement and, after the execution
and delivery thereof pursuant to the terms of this Agreement, each Note, each
Security Document and each Subsidiary Guaranty, if any.
"Credit Event" shall mean the making of any Loan or the issuance of
any Letter of Credit.
"Credit Party" shall mean Holdings, the Borrower and each Subsidiary
thereof party to a Credit Document.
"Default" shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
"Defaulting Bank" shall mean any Bank with respect to which a Bank
Default is in effect.
"Dividend" with respect to any Person shall mean that such Person has
declared or paid a dividend or returned any equity capital to its stockholders
or authorized or made any other
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distribution, payment or delivery of property (other than common stock of such
Person) or cash to its stockholders as such, or redeemed, retired, purchased or
otherwise acquired, directly or indirectly, for consideration any shares of any
class of its capital stock outstanding on or after the Effective Date (or any
options or warrants issued by such Person with respect to its capital stock), or
set aside any funds for any of the foregoing purposes, or shall have permitted
any of its Subsidiaries to purchase or otherwise acquire for consideration any
shares of any class of the capital stock of such Person outstanding on or after
the Effective Date (or any options or warrants issued by such Person with
respect to its capital stock). Without limiting the foregoing, "Dividends" with
respect to any Person shall also include all payments made or required to be
made by such Person with respect to any stock appreciation rights, plans, equity
incentive or achievement plans or any similar plans or setting aside of any
funds for the foregoing purposes but shall exclude AIPCF Management Fees.
"Documents" shall mean the Credit Documents and the Transaction
Documents.
"Dollars" and the sign "$" shall each mean freely transferable lawful
money of the United States.
"Domestic Subsidiary" shall mean each Subsidiary that is incorporated
or organized in the United States or any state thereof.
"Drawing" shall have the meaning provided in Section 2.04(b).
"Effective Date" shall have the meaning provided in Section 13.10.
"Eligible Transferee" shall mean and include a commercial bank, mutual
funds, financial institution or other institutional "accredited investor" (as
defined in Regulation D of the Securities Act).
"Employee Stock Option Plan" shall mean any plan, to be entered into
after the Initial Borrowing Date, for the compensation of management of Holdings
or any of its Subsidiaries, or any arrangement for the benefit of management of
Holdings or any of its Subsidiaries, in form and substance reasonably acceptable
to the Administrative Agent.
"End Date" shall have the meaning provided in the definition of
Interest Reduction Discount.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder. Section references to ERISA are to ERISA, as in effect at
the date of this Agreement and any subsequent provisions of ERISA, amendatory
thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in Section 3(9)
of ERISA) which together with the Borrower or any Subsidiary of the Borrower
would be deemed to be a "single employer" within the meaning of Section 414(b),
(c), (m) or (o) of the Code.
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"Eurodollar Loan" shall mean each Loan designated as such by the
Borrower at the time of the incurrence thereof or conversion thereto.
"Eurodollar Rate" shall mean the offered quotation which appears on
Telerate Page 4738 for Dollar deposits of amounts in immediately available funds
comparable to the outstanding principal amount of the Eurodollar Loan of BTCo
with maturities comparable to the Interest Period applicable to such Eurodollar
Loan commencing two Business Days thereafter as of 10:00 A.M. (New York time) on
the date which is two Business Days prior to the commencement of such Interest
Period, divided (and rounded off to the nearest 1/16 of 1%) by a percentage
equal to 100% minus the then stated maximum rate of all reserve requirements
(including, without limitation, any marginal, emergency, supplemental, special
or other reserves required by applicable law) applicable to any member bank of
the Federal Reserve System in respect of Eurocurrency funding or liabilities as
defined in Regulation D (or any successor category of liabilities under
Regulation D).
"Event of Default" shall have the meaning provided in Section 10.
"Excess Cash Flow" shall mean, for any period, the remainder of (a)
the sum of (i) Adjusted Consolidated Net Income for such period and (ii) the
decrease, if any, in Adjusted Consolidated Working Capital from the first day to
the last day of such period, minus (b) the sum of (i) the amount of Capital
Expenditures made by the Borrower and its Subsidiaries on a consolidated basis
during such period pursuant to and in accordance with Section 9.07(a) and (b),
except to the extent financed with the proceeds of Indebtedness or pursuant to
Capitalized Lease Obligations, (ii) the aggregate amount of permanent principal
payments of Indebtedness for borrowed money of the Borrower and the repayment of
the principal component of Capitalized Lease Obligations of the Borrower and its
Subsidiaries (excluding (1) payments with proceeds of issuances of Indebtedness
or equity or with proceeds of asset sales and (2) payments of Loans or other
Obligations pursuant to Sections 4.02 (e), (f), (g) and (i)), (iii) cash
Dividends paid during such period, (iv) the increase, if any, in Adjusted
Consolidated Working Capital from the first day to the last day of such period,
(v) the amount of all expenses (including expenses incurred in connection with
acquisitions) that have been paid during such period to the extent that such
expenses have been capitalized in accordance with GAAP but only to the extent
that the payment thereof does not otherwise reduce Adjusted Consolidated Net
Income and (vi) the principal amount of Senior Subordinated Notes paid with
additional notes; and PROVIDED that in the event Holdings, the Borrower or any
Subsidiary of Holdings acquired any Person during such period, Adjusted
Consolidated Net Income for such period shall be calculated on a pro forma
basis, based on the actual historical results of such acquired Person as if such
Person had been acquired on the first day of such period.
"Excess Cash Payment Date" shall mean the date occurring 110 days
after the last day of each fiscal year of the Borrower (beginning with its
fiscal year ending December 31, 1998).
"Excess Cash Payment Period" shall mean with respect to the repayment
required on each Excess Cash Payment Date, the immediately preceding fiscal year
of the Borrower.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
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"Facing Fee" shall have the meaning provided in Section 3.01(c).
"Federal Funds Rate" shall mean for any period, a fluctuating interest
rate equal for each day during such period to the weighted average of the rates
on overnight Federal Funds transactions with members of the Federal Reserve
System arranged by Federal Funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three Federal Funds
brokers of recognized standing selected by the Administrative Agent.
"Fees" shall mean all amounts payable pursuant to or referred to in
Section 3.01.
"Foreign Joint Ventures" means joint ventures entered into by the
Borrower or any of its Subsidiaries for the primary purpose of operating a
business outside of the United States of the type in which the Borrower and its
Subsidiaries are engaged on the Initial Borrowing Date and reasonable extensions
thereof.
"Foreign Subsidiary" shall mean each Subsidiary of the Borrower
incorporated or organized in a jurisdiction other than the United States or any
State thereof.
"Foreign Subsidiary Indebtedness" shall mean, at any time, the sum of
the aggregate outstanding amount of all Indebtedness incurred by all of the
Foreign Subsidiaries.
"GAAP" shall have the meaning provided in Section 13.07(a).
"Guaranteed Obligations" shall mean the irrevocable and unconditional
guaranty made by Holdings (i) to each Bank for the full and prompt payment when
due (whether at the stated maturity, by acceleration or otherwise) of the
principal and interest on each Note issued by the Borrower to such Bank, and
Loans made, under the Credit Agreement and all reimbursement obligations and
Unpaid Drawings with respect to Letters of Credit, together with all the other
obligations and liabilities (including, without limitation, indemnities, fees
and interest thereon) of the Borrower to such Bank now existing or hereafter
incurred under, arising out of or in connection with the Credit Agreement or any
other Credit Document and the due performance and compliance with all the terms,
conditions and agreements contained in the Credit Documents by the Borrower and
(ii) to each Bank and each Affiliate of a Bank which enters into an Interest
Rate Protection Agreement with the Borrower, which by its express terms are
entitled to the benefit of the Guaranty pursuant to Section 14 with the written
consent of the Borrower and the Administrative Agent, the full and prompt
payment when due (whether by acceleration or otherwise) of all obligations of
the Borrower owing under any such Interest Rate Protection Agreement, whether
now in existence or hereafter arising, and the due performance and compliance
with all terms, conditions and agreements contained therein.
"Guarantor" shall mean Holdings and each Subsidiary Guarantor, if any.
"Guaranty" shall mean the guaranty made by Holdings pursuant to
Section 14, and any Subsidiary Guaranty executed pursuant to Section 8.11(e).
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"Holdings" shall have the meaning provided in the first paragraph of
this Agreement.
"Holdings Common Stock" shall have the meaning provided in Section
5.06(a)(i).
"Holdings Debentures" shall have the meaning provided in Section
5.06(a)(i).
"Holdings Debenture Documents" shall mean the Holdings Debentures, the
Holdings Debenture Indenture and all other documents or instruments executed in
connection with the Holdings Debentures.
"Holdings Debenture Indenture" shall mean that certain indenture dated
as of May 22, 1998 by and between Holdings, as issuer and State Street Bank and
Trust Company of California, N.A. as trustee, which Holdings Debenture Indenture
shall contain terms and conditions reasonably satisfactory to the Administrative
Agent.
"Holdings Financing" shall have the meaning provided in Section
5.06(a)(i).
"Holdings Financing Documents" shall mean the Holdings Debenture
Documents, the Holdings Common Stock and all other documents or agreements
relating to the issuance or incurrence of the foregoing.
"Indebtedness" shall mean, as to any Person, without duplication, (i)
all indebtedness (including principal, interest, fees and charges) of such
Person for borrowed money or for the deferred purchase price of property or
services due more than 90 days after acquisition of the property or receipt of
services or which is otherwise represented by a note, (ii) the maximum amount
available to be drawn under all letters of credit issued for the account of such
Person and all unpaid drawings in respect of such letters of credit, (iii) all
Indebtedness of the types described in clause (i), (ii), (iv), (v) or (vi) of
this definition secured by any Lien on any property owned by such Person,
whether or not such Indebtedness has been assumed by such Person (to the extent
of the lesser of the amount of such Indebtedness and the value of the respective
property), (iv) Capitalized Lease Obligations, (v) all Contingent Obligations of
such Person and (vi) all obligations under any Interest Rate Protection
Agreement or under any similar type of agreement.
"Initial Borrowing Date" shall mean the date occurring on or after the
Effective Date on which the initial Borrowing of Term Loans hereunder occurs.
"Interest Coverage Ratio" shall mean on the date of determination
thereof the ratio of (i) Consolidated EBITDA to (ii) Consolidated Net Cash
Interest Expense for the Test Period ended on the last day of the fiscal quarter
last ended prior to the date such determination is made, PROVIDED that for any
period ending prior to June 30, 1999, (x) Consolidated EBITDA shall be
calculated by using Consolidated EBITDA of the Borrower, including fiscal
quarters ending prior to the Initial Borrowing Date, and (y) Consolidated Net
Cash Interest Expense shall be calculated, (I) for the Test Period ended
September 30, 1998, by multiplying Consolidated Net Cash Interest Expense for
the fiscal quarter ended on the same date by 4; (II) for the Test Period Ended
December 31, 1998, by multiplying Consolidated Net Cash Interest Expense for the
fiscal quarter
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ended on the same date by 2; and (III) for the Test Period ended March 31, 1999,
by multiplying Consolidated Net Cash Interest Expense for the fiscal quarter
ended on the same date by 4/3.
"Interest Determination Date" shall mean, with respect to any
Eurodollar Loan, the second Business Day prior to the commencement of any
Interest Period relating to such Eurodollar Loan.
"Interest Period" shall have the meaning provided in Section 1.09.
"Interest Rate Protection Agreement" shall mean any interest rate swap
agreement, interest rate cap agreement, interest collar agreement, interest rate
hedging agreement or other similar agreement or arrangement.
"Interest Reduction Discount" shall mean (i) initially 0% and (ii)
from and after each day of delivery of any certificate delivered in accordance
with the following sentence indicating an entitlement to an Interest Reduction
Discount other than zero (each, a "Start Date") to and including the applicable
End Date described below, the percentage set forth below opposite the Leverage
Ratio indicated to have been achieved in any certificate delivered in accordance
with the following sentence:
<TABLE>
<CAPTION>
Base Rate Eurodollar
Leverage Ratio Loans Loans
-------------- ----------- ----------
<S> <C> <C>
Equal to or greater than 5:1 0% 0%
Equal to or greater than 4.5:1
but less than 5.0:1 0.25 % 0.25 %
Equal to or greater than 4.0:1
but less than 4.5:1 0.50 % 0.50 %
Less than 4.0:1 0.75 % 0.75 %
</TABLE>
The Leverage Ratio shall be determined based on the delivery of a certificate of
the Borrower to the Administrative Agent (with a copy to be sent by the
Administrative Agent to each Bank), certified by an Authorized Officer of the
Borrower within 30 days after the last day of any fiscal quarter of the
Borrower, (commencing with its fiscal quarter ending December 31, 1998, which
certificate shall set forth the calculation of the Leverage Ratio for the Test
Period ended immediately prior to the relevant Start Date and the Interest
Reduction Discount which shall be thereafter applicable (until same is changed
or ceases to apply in accordance with the following sentences). The Interest
Reduction Discount so determined shall apply, except as set forth in the
succeeding sentence, from the Start Date to the earlier of (x) the date on which
the next certificate is delivered to the Administrative Agent and (y) the date
which is 30 days following the last day of the fiscal quarter in which the
previous Start Date occurred (the "End Date"), at which time, if no certificate
has been delivered to the Administrative Agent indicating an entitlement to an
Interest Reduction Discount other than zero (and thus commencing a new Start
Date), the Interest Reduction Discount shall be reduced to zero.
Notwithstanding anything to the contrary contained
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above in this definition, the Interest Reduction Discount shall be reduced to
zero at all times during which there shall exist an Event of Default.
"Issuing Bank" shall mean, BTCo and any Bank which at the request of
the Borrower and with the consent of the Administrative Agent agrees, in such
Bank's sole discretion, to become an Issuing Bank for the purpose of issuing
Letters of Credit pursuant to Section 2. The sole Issuing Bank on the Initial
Borrowing Date is BTCo.
"L/C Supportable Obligations" shall mean obligations of the Borrower
or its Subsidiaries incurred in the ordinary course of business.
"Leaseholds" of any Person means all the right, title and interest of
such Person as lessee or licensee in, to and under leases or licenses of land,
improvements and/or fixtures.
"Letter of Credit" shall have the meaning provided in Section 2.01(a).
"Letter of Credit Fee" shall have the meaning provided in Section
3.01(b).
"Letter of Credit Outstandings" shall mean, at any time, the sum of
(i) the aggregate Stated Amount of all outstanding Letters of Credit and (ii)
the amount of all Unpaid Drawings relating to Letters of Credit.
"Letter of Credit Request" shall have the meaning provided in Section
2.02(a).
"Leverage Ratio" shall mean on the date of determination thereof the
ratio of (i) Consolidated Indebtedness on such date to (ii) Consolidated EBITDA
(which shall be calculated for any period ending prior to June 30, 1999, by
using the following amounts for such following periods: fiscal quarter ended
June 30, 1997, $13,807,000; fiscal quarter ended September 30, 1997,
$15,160,000; fiscal quarter ended December 31, 1997, $17,001,000; and fiscal
quarter ended March 31, 1998, $16,528,000 for the Test Period ended on the last
day of any fiscal quarter last ended prior to the date such determination is
made.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), preference,
priority or other security agreement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any financing or similar statement or notice filed under the UCC or
any other similar recording or notice statute, and any lease having
substantially the same effect as any of the foregoing).
"Loan" shall mean each Term Loan, each Revolving Loan and each
Swingline Loan.
"Majority Banks" shall mean collectively (and not individually) with
respect to any Tranche, Non-Defaulting Banks whose outstanding Term Loans of
such Tranche (or, if prior to the Initial Borrowing Date, Term Loan Commitments
of such Tranche) constitute at least a majority of the total outstanding Term
Loans of such Tranche (or, if prior to the Initial Borrowing Date, Term Loan
Commitments of such Tranche) of all Non-Defaulting Banks.
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"Management Agreements" shall have the meaning provided in Section
5.05.
"Mandatory Borrowing" shall have the meaning provided in Section
1.01(f).
"Margin Stock" shall have the meaning provided in Regulation U.
"Maximum Swingline Amount" shall mean $5,000,000.
"Material Adverse Effect" shall mean a material adverse effect on the
business, operations, properties, assets, liabilities, condition (financial or
otherwise) or prospects of the Borrower or Holdings and its subsidiaries taken
as a whole.
"Merger" shall mean the merger between Great Lakes Acquisition Sub.
Corp. and Great Lakes Carbon Corporation, pursuant to the Merger Agreement.
"Merger Agreement" shall mean the Agreement and Plan of Merger dated
as of April 22, 1998, by and between Great Lakes Carbon Corporation and
Holdings.
"Merger Documents" shall mean the Merger Agreement and all other
documents executed in connection with the Merger.
"Mortgage" shall have the meaning provided in Section 5.09(a), and,
after the execution and delivery thereof, shall include each Additional Mortgage
delivered pursuant to Section 8.11.
"Mortgage Policies" shall have the meaning provided in Section
5.09(c).
"Mortgaged Property" shall have the meaning provided in Section
5.09(a) and, after the execution or delivery thereof, shall include each
property covered by an Additional Mortgage.
"Net Interest Expense" shall mean, for any period, the total interest
expense of any Person for such period (calculated without regard to any
limitations on the payment thereof) plus, without duplication, that portion of
Capitalized Lease Obligations of such Person representing the interest factor
for such period in each case net of the total consolidated cash interest income
of such Person for such period, but excluding the amortization of any deferred
financing costs incurred in connection with this Agreement.
"Net Sale Proceeds" shall mean for any sale, lease, transfer or other
disposition of assets, the gross cash proceeds (including any cash received by
way of deferred payment pursuant to a promissory note, receivable or otherwise,
but only as and when received) received by Holdings and/or any of its
Subsidiaries from such sale, lease, transfer or other disposition, net of
reasonable transaction costs (including, without limitation, any underwriting,
brokerage or other customary selling commissions and reasonable legal, advisory
and other fees and expenses, including title and recording expenses and
reasonable expenses incurred for preparing such assets for sale, associated
therewith) and payments of unassumed liabilities relating to the assets sold at
the time of, or within 30 days after, the date of such sale, the amount of such
gross cash proceeds
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required to be used to repay any Indebtedness (other than Indebtedness of the
Banks pursuant to this Agreement) which is secured by the respective assets
which were sold, all distributions and other payments made to minority interest
holders in Subsidiaries of the Borrower in connection with such disposition, and
the estimated marginal increase in income taxes which will be payable by
Holdings' consolidated group with respect to the fiscal year in which the sale
occurs as a result of such sale; but excluding any portion of any such gross
cash proceeds which Holdings determines in good faith should be reserved for
post-closing adjustments (to the extent Holdings' delivers to the Banks a
certificate signed by an Authorized Officer as to such determination), it being
understood and agreed that on the day that all such post-closing adjustments
have been determined (which shall not be later than one year following the date
of the respective asset sale), the amount (if any) by which the reserved amount
in respect of such sale or disposition exceeds the actual post-closing
adjustments payable by Holdings or any of its Subsidiaries shall constitute Net
Sale Proceeds on such date).
"Non-Defaulting Bank" shall mean and include each Bank which is not a
Defaulting Bank.
"Note" shall mean each Term Note, each Revolving Note and the
Swingline Note.
"Notice of Borrowing" shall have the meaning provided in Section 1.03.
"Notice of Conversion" shall have the meaning provided in Section
1.06.
"Notice Office" shall mean the office of the Administrative Agent
located at 130 Liberty Street, New York, New York 10006, Attention: Andrew
Keith, or such other office as the Administrative Agent may hereafter designate
in writing as such to the other parties hereto.
"Obligations" shall mean all amounts owing to the Administrative
Agent, the Collateral Agent or any Bank pursuant to the terms of this Agreement
or any other Credit Document.
"Participant" shall have the meaning provided in Section 2.03(a).
"Payment Office" shall mean the office of the Administrative Agent
located at 130 Liberty Street, New York, New York 10006, Attention: Andrew
Keith, or such other office as the Administrative Agent may hereafter designate
in writing as such to the other parties hereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor thereto.
"Percentage" shall mean, at any time, for each Bank with a Revolving
Loan Commitment, the percentage obtained by dividing such Bank's Revolving Loan
Commitment by the Total Revolving Loan Commitment; PROVIDED, that if the Total
Revolving Loan Commitment has been terminated, the Percentage of each such Bank
shall be determined by dividing such Bank's Revolving Loan Commitment
immediately prior to such termination by the Total Revolving Loan Commitment
immediately prior to such termination.
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"Permitted Encumbrance" shall mean, with respect to any Mortgaged
Property, such exceptions to title as are set forth in the title insurance
policy or title commitment delivered with respect thereto, all of which
exceptions must be acceptable to the Administrative Agent in its reasonable
discretion.
"Permitted Liens" shall have the meaning provided in Section 9.01.
"Person" shall mean any individual, partnership, joint venture, firm,
corporation, association, trust or other enterprise or any government or
political subdivision or any agency, department or instrumentality thereof.
"Plan" shall mean any multiemployer or single-employer plan, as
defined in Section 4001 of ERISA, which is maintained or contributed to by (or
to which there is an obligation to contribute of), the Borrower or a Subsidiary
of the Borrower or an ERISA Affiliate, and each such plan for the five year
period immediately following the latest date on which the Borrower, a Subsidiary
of the Borrower or an ERISA Affiliate maintained, contributed or had an
obligation to contribute to such plan.
"Pledge Agreement" shall have the meaning provided in Section 5.07.
"Pledge Agreement Collateral" shall mean all "Collateral" as defined
in the Pledge Agreement.
"Pledged Securities" shall mean "Pledged Securities" as defined in the
Pledge Agreement.
"Prime Lending Rate" shall mean the rate which Bankers Trust Company
announces from time to time as its prime lending rate, the Prime Lending Rate to
change when and as such prime lending rate changes. The Prime Lending Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. Bankers Trust Company may make commercial
loans or other loans at rates of interest at, above or below the Prime Lending
Rate.
"Projections" shall have the meaning provided in Section 7.05(d).
"Quarterly Payment Date" shall mean the last Business Day of each
August, November, February and May commencing with August 1998.
"Real Property" of any Person shall mean all the right, title and
interest of such Person in and to land, improvements and fixtures, including
Leaseholds.
"Recovery Event" shall mean the receipt by Holdings or any of its
Subsidiaries of any (i) cash insurance proceeds payable (x) by reason of theft,
loss, physical destruction or damage or any other similar event with respect to
any property or assets of Holdings or any of its Subsidiaries and (y) under any
policy of insurance required to be maintained under Section 8.03 or (ii)
condemnation award payable by reason of eminent domain or deed in lieu thereof.
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"Refinancing" shall have the meaning provided in Section 5.06(a)(iii).
"Register" shall have the meaning set forth in Section 13.17.
"Regulation D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof establishing reserve requirements.
"Regulation T" shall mean Regulation T of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof.
"Regulation U" shall mean Regulation U of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof.
"Regulation X" shall mean Regulation X of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof.
"Reinvestment Assets" shall mean any assets to be employed in the
business of the Borrower and its Subsidiaries as described in Sections
4.02(A)(g) and 9.02(ii).
"Reinvestment Election" shall have the meaning provided in Section
4.02(A)(g).
"Reinvestment Notice" shall mean a written notice signed by the
Authorized Officer of the Borrower stating that the Borrower, in good faith,
intends and expects to use all or a specified portion of the Net Sale Proceeds
of an Asset Sale to purchase, construct or otherwise acquire Reinvestment
Assets.
"Replaced Bank" shall have the meaning provided in Section 1.13.
"Replacement Bank" shall have the meaning provided in Section 1.13.
"Reportable Event" shall mean an event described in Section 4043(b) of
ERISA with respect to a Plan as to which the 30-day notice requirement has not
been waived by the PBGC.
"Required Banks" shall mean Non-Defaulting Banks, the sum of whose
outstanding Term Loans (or, if prior to the Initial Borrowing Date, Term Loan
Commitments) and Revolving Loan Commitments (or after the termination thereof,
outstanding Revolving Loans and Adjusted Percentage of outstanding Swingline
Loans and Letter of Credit Outstandings) represent an amount greater than 50% of
the sum of (x) all outstanding Term Loans (or, if prior to the Initial Borrowing
Date, Term Loan Commitments) of Non-Defaulting Banks and (y) the Total Revolving
Loan Commitment (or after the termination thereof, the sum of the then total
outstanding Revolving Loans and Adjusted Percentage of the then outstanding
Swingline Loans and Letter of Credit Outstandings at such time) of
Non-Defaulting Banks.
"Returns" shall have the meaning provided in Section 7.09.
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"Revolving Loan" shall have the meaning provided in Section 1.01(d).
"Revolving Loan Commitment" shall mean, for each Bank, the amount set
forth opposite such Bank's name in Schedule I hereto directly below the column
entitled "Revolving Loan Commitment," as same may be (x) reduced from time to
time pursuant to Sections 3.02, 3.03, 4.02(A) and/or 10 or (y) adjusted from
time to time as a result of assignments to or from such Bank pursuant to Section
1.13 or 13.04(b).
"Revolving Loan Maturity Date" shall mean May 31, 2003.
"Revolving Note" shall have the meaning provided in Section 1.05(a).
"Scheduled Repayments" shall have the meaning provided in Section
4.02(A)(d).
"SEC" shall have the meaning provided in Section 8.01(h).
"Section 4.04(b)(ii) Certificate" shall have the meaning provided in
Section 4.04(b).
"Secured Creditors" shall have the meaning assigned that term in the
Security Documents.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Security Agreement" shall have the meaning provided in Section 5.08
and include any Additional Security Document delivered pursuant to Section 8.11.
"Security Agreement Collateral" shall mean all "Collateral" as defined
in the Security Agreement.
"Security Document" shall mean and include the Pledge Agreement, the
Security Agreement, each Mortgage and, after the execution and delivery thereof,
each Additional Mortgage and each Additional Security Document required to be
delivered pursuant to Section 8.11.
"Senior Secured Notes" shall mean the 10% Senior Secured Notes due
2006 issued by the Borrower under the Senior Secured Notes Indenture.
"Senior Secured Notes Collateral Documents" shall mean the Senior
Secured Notes Security Agreement, the Senior Secured Notes Mortgage, Assignment
of Rents, Leases and Leasehold Interests and Fixture Filing Statement, the
Senior Secured Notes Patent Security Agreement and the Senior Secured Notes
Trademark Security Agreement.
"Senior Secured Notes Collateral Documents Amendment" shall mean the
amendments to the Senior Secured Notes Collateral Documents in form and
substance satisfactory to the Administrative Agent and entered into by the
parties to the respective Senior
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Secured Notes Collateral Documents in connection with the Senior Secured Notes
Tender Offer/Consent Solicitation.
"Senior Secured Notes Indenture" shall mean that certain indenture
dated as of December 20, 1995, among the Borrower and The Bank of New York as
trustee.
"Senior Secured Notes Indenture Supplement" shall mean the
Supplemental Indenture to the Senior Secured Notes Indenture in form and
substance satisfactory to the Administrative Agent and entered into by the
Borrower and The Bank of New York in connection with the Senior Secured Notes
Tender Offer/Consent Solicitation.
"Senior Secured Notes Mortgage, Assignment of Rents, Leases and
Leasehold Interests and Fixture Filing Statement" shall mean the Mortgage,
Assignment of Rents, Leases and Leasehold Interests and Fixture Filing Statement
dated as of December 20, 1995 among the Borrower and The Bank of New York as
trustee.
"Senior Secured Notes Patent Security Agreement" shall mean the Patent
Security Agreement dated as of December 20, 1995 among the Borrower and The
Bank of New York as trustee.
"Senior Secured Notes Security Agreement" shall mean the Security
Agreement dated as of December 20, 1995 among the Borrower and The Bank of New
York as trustee.
"Senior Secured Notes Tender Offer/Consent Solicitation" shall have
the meaning set forth in Section 5.06(a)(iii).
"Senior Secured Notes Tender Offer Documents" shall mean the Senior
Secured Notes Indenture Supplement, the Senior Secured Notes Collateral
Documents Amendment and the Senior Secured Notes Tender Offer/Consent
Solicitation, as in effect on the Initial Borrowing Date and as same may be
amended, modified or supplemented from time to time pursuant to the terms
thereof and hereof.
"Senior Secured Notes Tender Offer Repurchases" shall have the meaning
provided in Section 5.06(a)(iii).
"Senior Secured Notes Trademark Security Agreement" shall mean the
Trademark Security Agreement dated as of December 20, 1995 among the Borrower
and The Bank of New York as trustee.
"Senior Subordinated Note Documents" shall mean the Senior
Subordinated Notes, the Senior Subordinated Note Indenture and all other
documents executed in connection with the Senior Subordinated Notes.
"Senior Subordinated Note Indenture" shall mean that certain indenture
dated as of May 22, 1998 by and between the Borrower and State Street Bank and
Trust Company of California, N.A., as trustee.
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"Senior Subordinated Note Issuance" shall have the meaning provided in
Section 5.06(a)(ii).
"Senior Subordinated Notes" shall mean the 10 1/4% Senior Subordinated
Notes due 2008 issued by the Borrower under the Senior Subordinated Note
Indenture.
"Shareholders' Agreements" shall have the meaning provided in Section
5.05.
"Significant Subsidiary" of Holdings shall mean (i) the Borrower, (ii)
any Subsidiary Guarantor and (iii) any other Subsidiary of Holdings that would
be a "significant subsidiary" of Holdings as defined in Article 1, Rule 1-02 of
Regulation S-X, promulgated pursuant to the Exchange Act, as such Regulation is
in effect on the date hereof.
"Start Date" shall have the meaning provided in the definition of
Interest Reduction Discount.
"Stated Amount" of each Letter of Credit shall, at any time, mean the
maximum amount available to be drawn thereunder (in each case determined without
regard to whether any conditions to drawing could then be met).
"Subsidiary" shall mean, as to any Person, (i) any corporation more
than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person and/or one or
more Subsidiaries of such Person and (ii) any partnership, association, joint
venture or other entity in which such Person and/or one or more Subsidiaries of
such Person has more than a 50% equity interest at the time.
"Subsidiary Guarantor" shall mean each Domestic Subsidiary of the
Borrower .
"Subsidiary Guaranty" shall have the meaning provided in Section
8.11(e).
"Swingline Bank" shall mean Bankers Trust Company, in its capacity as
the lender of Swingline Loans.
"Swingline Expiry Date" shall mean the date which is five Business
Days prior to the Revolving Loan Maturity Date.
"Swingline Loans" shall have the meaning provided in Section 1.01(e).
"Swingline Note" shall have the meaning provided in Section 1.05(a).
"Tax Sharing Agreement" shall have the meaning provided in Section
5.05.
"Taxes" shall have the meaning provided in Section 4.04(a).
"Term Loan" shall have the meaning provided in Section 1.01(c).
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"Term Loan Commitment" shall mean for each Bank, the A Term Loan
Commitment, B Term Loan Commitment or C Term Loan Commitment, if any, of such
Bank.
"Term Notes" shall have the meaning provided in Section 1.05(a).
"Test Period" shall mean for any determination the four consecutive
fiscal quarters then last ended (taken as one accounting period).
"Total A Term Loan Commitment" shall mean, at any time, the sum of the
A Term Loan Commitments of each Bank.
"Total B Term Loan Commitment" shall mean, at any time, the sum of the
B Term Loan Commitments of each Bank.
"Total C Term Loan Commitment" shall mean, at any time, the sum of the
C Term Loan Commitments of each Bank.
"Total Commitment" shall mean the sum of the Total Term Loan
Commitment and the Total Revolving Loan Commitment.
"Total Revolving Loan Commitment" shall mean, at any time, the sum of
the Revolving Loan Commitments of each of the Banks.
"Total Term Loan Commitment" shall mean, at any time, the sum of the A
Term Loan Commitments, the B Term Loan Commitments and the C Term Loan
Commitments of each of the Banks.
"Total Unutilized Revolving Loan Commitment" shall mean, at any time,
the sum of the Unutilized Revolving Loan Commitments of each of the Banks.
"Tranche" shall mean the respective facility and commitments utilized
in making Loans hereunder, with there being five separate Tranches, I.E., A Term
Loans, B Term Loans, C Term Loans, Revolving Loans and Swingline Loans.
"Transaction" shall mean the Merger, the Senior Subordinated Note
Issuance, the Holdings Financing, the Refinancing and the incurrence of Loans on
the Initial Borrowing Date.
"Transaction Documents" shall mean the Merger Documents, the Senior
Subordinated Note Documents, the documents effecting the Refinancing, the
Holdings Financing Documents and all other documents effectuating the
Transaction or executed in connection therewith.
"Type" shall mean the type of Loan determined with regard to the
interest option applicable thereto, I.E., whether a Base Rate Loan or a
Eurodollar Loan.
"UCC" shall mean the Uniform Commercial Code as from time to time in
effect in the relevant jurisdiction.
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"Unfunded Current Liability" of any Plan means the amount, if any, by
which the actuarial present value of the accumulated benefits under the Plan as
of the close of its most recent plan year, determined in accordance with
Statement of Financial Accounting Standards No. 35, based upon the actuarial
assumptions used by the Plan's actuary in the most recent annual valuation of
the Plan, exceeds the fair market value of the assets allocable thereto,
determined in accordance with Section 412 of the Code.
"United States" and "U.S." shall each mean the United States of
America.
"Unpaid Drawing" shall have the meaning provided in Section 2.04(a).
"Unutilized Revolving Loan Commitment" with respect to any Bank, at
any time, shall mean such Bank's Revolving Loan Commitment at such time less (i)
the aggregate outstanding principal amount of Revolving Loans made by such Bank
plus (ii) such Bank's Adjusted Percentage of all Letter of Credit Outstandings.
"Voting Stock" shall mean, as to any Person, any class or classes of
capital stock of such Person pursuant to which the holders thereof have the
general voting power under ordinary circumstances to elect at least a majority
of the Board of Directors of such Person, or any class or classes of capital
stock convertible into such stock at the option of the holders thereof.
"Waivable Mandatory Repayment" shall have the meaning provided in
Section 4.02(B).
"Wholly-Owned Domestic Subsidiary" shall mean each Wholly-Owned
Subsidiary of the Borrower incorporated or organized under the laws of the
United States or any State thereof.
"Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any
corporation 100% of whose capital stock (other than director's qualifying
shares) is at the time owned by such Person and/or one or more Wholly-Owned
Subsidiaries of such Person and (ii) any partnership, association, joint venture
or other entity in which such Person and/or one or more Wholly-Owned
Subsidiaries of such Person has a 100% equity interest at such time. Any
reference to a Wholly-Owned Subsidiary, unless expressly to a Wholly-Owned
Subsidiary of another Person, shall mean a Wholly-Owned Subsidiary of the
Borrower.
SECTION 12. The Administrative Agent.
12.01 APPOINTMENT. The Banks hereby designate Bankers Trust Company
as Administrative Agent (for purposes of this Section 12, the term
"Administrative Agent" shall include Bankers Trust Company in its capacity as
Collateral Agent pursuant to the Security Documents) to act as specified herein
and in the other Credit Documents. Each Bank hereby irrevocably authorizes, and
each holder of any Note by the acceptance of such Note shall be deemed
irrevocably to authorize, the Administrative Agent to take such action on its
behalf under the provisions of this Agreement, the other Credit Documents and
any other instruments and agreements referred to herein or therein and to
exercise such powers and to perform such duties
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hereunder and thereunder as are specifically delegated to or required of the
Administrative Agent by the terms hereof and thereof and such other powers as
are reasonably incidental thereto. The Administrative Agent may perform any of
its duties hereunder by or through its respective officers, directors, agents,
employees or affiliates.
12.02 NATURE OF DUTIES. The Administrative Agent shall not have any
duties or responsibilities except those expressly set forth in this Agreement
and the Security Documents. Neither the Administrative Agent nor any of its
respective officers, directors, agents, employees or affiliates shall be liable
for any action taken or omitted by it or them hereunder or under any other
Credit Document or in connection herewith or therewith, unless caused by its or
their gross negligence or willful misconduct. The duties of the Administrative
Agent shall be mechanical and administrative in nature; the Administrative Agent
shall not have by reason of this Agreement or any other Credit Document a
fiduciary relationship in respect of any Bank or the holder of any Note; and
nothing in this Agreement or any other Credit Document, expressed or implied, is
intended to or shall be so construed as to impose upon the Administrative Agent
any obligations in respect of this Agreement or any other Credit Document except
as expressly set forth herein or therein.
12.03 LACK OF RELIANCE ON THE ADMINISTRATIVE AGENT. Independently
and without reliance upon the Administrative Agent, each Bank and the holder of
each Note, to the extent it deems appropriate, has made and shall continue to
make (i) its own independent investigation of the financial condition and
affairs of Holdings and its Subsidiaries in connection with the making and the
continuance of the Loans and the taking or not taking of any action in
connection herewith and (ii) its own appraisal of the creditworthiness of
Holdings and its Subsidiaries and, except as expressly provided in this
Agreement, the Administrative Agent shall not have any duty or responsibility,
either initially or on a continuing basis, to provide any Bank or the holder of
any Note with any credit or other information with respect thereto, whether
coming into its possession before the making of the Loans or at any time or
times thereafter. The Administrative Agent shall not be responsible to any Bank
or the holder of any Note for any recitals, statements, information,
representations or warranties herein or in any document, certificate or other
writing delivered in connection herewith or for the execution, effectiveness,
genuineness, validity, enforceability, perfection, collectibility, priority or
sufficiency of this Agreement or any other Credit Document or the financial
condition of Holdings and its Subsidiaries or be required to make any inquiry
concerning either the performance or observance of any of the terms, provisions
or conditions of this Agreement or any other Credit Document, or the financial
condition of Holdings and its Subsidiaries or the existence or possible
existence of any Default or Event of Default.
12.04 CERTAIN RIGHTS OF THE ADMINISTRATIVE AGENT. If the
Administrative Agent shall request instructions from the Required Banks with
respect to any act or action (including failure to act) in connection with this
Agreement or any other Credit Document, the Administrative Agent shall be
entitled to refrain from such act or taking such action unless and until the
Administrative Agent shall have received instructions from the Required Banks;
and the Administrative Agent shall not incur liability to any Person by reason
of so refraining. Without limiting the foregoing, neither any Bank nor the
holder of any Note shall have any right of action whatsoever against the
Administrative Agent as a result of the Administrative Agent acting or
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refraining from acting hereunder or under any other Credit Document in
accordance with the instructions of the Required Banks.
12.05 RELIANCE. The Administrative Agent shall be entitled to rely,
and shall be fully protected in relying, upon any note, writing, resolution,
notice, statement, certificate, telex, teletype or telecopier message,
cablegram, radiogram, order or other document or telephone message signed, sent
or made by any Person that the Administrative Agent believed to be the proper
Person, and, with respect to all legal matters pertaining to this Agreement and
any other Credit Document and its duties hereunder and thereunder, upon advice
of counsel selected by the Administrative Agent.
12.06 INDEMNIFICATION. To the extent the Administrative Agent is not
reimbursed and indemnified by the Borrower the Banks will reimburse and
indemnify the Administrative Agent, in proportion to their respective
"percentages" as used in determining the Required Banks, for and against any and
all liabilities, obligations, losses, damages, penalties, claims, actions,
judgments, costs, expenses or disbursements of whatsoever kind or nature which
may be imposed on, asserted against or incurred by the Administrative Agent in
performing its respective duties hereunder or under any other Credit Document,
in any way relating to or arising out of this Agreement or any other Credit
Document; PROVIDED that no Bank shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the Administrative Agent's gross
negligence or willful misconduct.
12.07 THE ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. With
respect to its obligation to make Loans under this Agreement, the Administrative
Agent shall have the rights and powers specified herein for a "Bank" and may
exercise the same rights and powers as though it were not performing the duties
specified herein; and the term "Banks," "Required Banks," "holders of Notes" or
any similar terms shall, unless the context clearly otherwise indicates, include
the Administrative Agent in its individual capacity. The Administrative Agent
may accept deposits from, lend money to, and generally engage in any kind of
banking, trust or other business with any Credit Party or any Affiliate of any
Credit Party as if it were not performing the duties specified herein, and may
accept fees and other consideration from the Borrower or any other Credit Party
for services in connection with this Agreement and otherwise without having to
account for the same to the Banks.
12.08 HOLDERS. The Administrative Agent may deem and treat the payee
of any Note as the owner thereof for all purposes hereof unless and until a
written notice of the assignment, transfer or endorsement thereof, as the case
may be, shall have been filed with the Administrative Agent. Any request,
authority or consent of any Person who, at the time of making such request or
giving such authority or consent, is the holder of any Note shall be conclusive
and binding on any subsequent holder, transferee, assignee or indorsee, as the
case may be, of such Note or of any Note or Notes issued in exchange therefor.
12.09 RESIGNATION BY THE ADMINISTRATIVE AGENT. (a) The
Administrative Agent may resign from the performance of all its functions and
duties hereunder and/or under the other Credit Documents at any time by giving
15 Business Days' prior written notice to the Borrower
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and the Banks. Such resignation shall take effect upon the appointment of a
successor Administrative Agent pursuant to clauses (b) and (c) below or as
otherwise provided below.
(b) Upon any such notice of resignation, the Banks shall appoint a
successor Administrative Agent hereunder or thereunder who shall be a commercial
bank or trust company reasonably acceptable to the Borrower.
(c) If a successor Administrative Agent shall not have been so
appointed within such 15 Business Day period, the Administrative Agent, with the
consent of the Borrower, shall then appoint a successor Administrative Agent who
shall serve as Administrative Agent hereunder or thereunder until such time, if
any, as the Banks appoint a successor Administrative Agent as provided above.
(d) If no successor Administrative Agent has been appointed pursuant
to clause (b) or (c) above by the 20th Business Day after the date such notice
of resignation was given by the Administrative Agent, the Administrative Agent's
resignation shall become effective and the Required Banks shall thereafter
perform all the duties of the Administrative Agent hereunder and/or under any
other Credit Document until such time, if any, as the Banks appoint a successor
Administrative Agent as provided above.
SECTION 13. Miscellaneous.
13.01 PAYMENT OF EXPENSES, ETC. The Borrower shall: (i) whether or
not the transactions herein contemplated are consummated, pay all reasonable
out-of-pocket costs and expenses of the Administrative Agent (including, without
limitation, the reasonable fees and disbursements of White & Case LLP and local
counsel) in connection with the preparation, execution and delivery of this
Agreement and the other Credit Documents and the documents and instruments
referred to herein and therein and any amendment, waiver or consent relating
hereto or thereto, of the Administrative Agent in connection with its
syndication efforts with respect to this Agreement and, following an Event of
Default, each of the Banks in connection with the enforcement of this Agreement
and the other Credit Documents and the documents and instruments referred to
herein and therein (including, without limitation, the reasonable fees and
disbursements of counsel for the Administrative Agent and, following an Event of
Default, for each of the Banks including any reasonable allocated costs of
in-house counsel); (ii) pay and hold each of the Banks harmless from and against
any and all present and future stamp, excise and other similar taxes with
respect to the foregoing matters and save each of the Banks harmless from and
against any and all liabilities with respect to or resulting from any delay or
omission (other than to the extent attributable to such Bank) to pay such taxes;
and (iii) indemnify the Administrative Agent and each Bank, and each of their
respective officers, directors, employees, representatives and agents from and
hold each of them harmless against any and all liabilities, obligations
(including removal or remedial actions), losses, damages, penalties, claims,
actions, judgments, suits, costs, expenses and disbursements (including
reasonable attorneys' and consultants' fees and disbursements) incurred by,
imposed on or assessed against any of them as a result of, or arising out of, or
in any way related to, or by reason of, (a) any investigation, litigation or
other proceeding (whether or not the Administrative Agent or any Bank is a party
thereto) related to the entering into and/or performance of this Agreement or
any other Credit
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Document or the use of any Letter of Credit or the proceeds of any Loans
hereunder or the consummation of any transactions contemplated herein
(including, without limitation, the Transaction) or in any other Credit Document
or the exercise of any of their rights or remedies provided herein or in the
other Credit Documents, or (b) the non-compliance of any Real Property with
foreign, federal, state and local laws, regulations, and ordinances (including
applicable permits thereunder) applicable to any Real Property, owned or at any
time operated by Holdings or any of its Subsidiaries, including, in each case,
without limitation, the reasonable fees and disbursements of counsel and other
consultants incurred in connection with any such investigation, litigation or
other proceeding (but excluding in the case of each of clause (a) and (b) above,
any losses, liabilities, claims, damages or expenses to the extent incurred by
reason of the gross negligence or willful misconduct of the Person to be
indemnified). To the extent that the undertaking to indemnify, pay or hold
harmless the Administrative Agent or any Bank set forth in the preceding
sentence may be unenforceable because it is violative of any law or public
policy, the Borrower shall make the maximum contribution to the payment and
satisfaction of each of the indemnified liabilities which is permissible under
applicable law.
13.02 RIGHT OF SETOFF; COLLATERAL MATTERS. (a) In addition to any
rights now or hereafter granted under applicable law or otherwise, and not by
way of limitation of any such rights, upon the occurrence and continuance of an
Event of Default, each Bank is hereby authorized at any time or from time to
time, without presentment, demand, protest or other notice of any kind to
Holdings or the Borrower or to any other Person, any such notice being hereby
expressly waived, to set off and to appropriate and apply any and all deposits
(general or special) and any other Indebtedness at any time held or owing by
such Bank (including, without limitation, by branches and agencies of such Bank
wherever located) to or for the credit or the account of Holdings or the
Borrower against and on account of the Obligations and liabilities of Holdings
or the Borrower to such Bank under this Agreement or under any of the other
Credit Documents, including, without limitation, all interests in Obligations
purchased by such Bank pursuant to Section 13.06(b), and all other claims of any
nature or description arising out of or connected with this Agreement or any
other Credit Document, irrespective of whether or not such Bank shall have made
any demand hereunder and although said Obligations, liabilities or claims, or
any of them, shall be contingent or unmatured.
(b) NOTWITHSTANDING THE FOREGOING SUBSECTION (a), AT ANY TIME THAT
THE LOANS OR ANY OTHER OBLIGATION SHALL BE SECURED BY REAL PROPERTY LOCATED IN
CALIFORNIA, NO BANK SHALL EXERCISE A RIGHT OF SETOFF, BANKER'S LIEN OR
COUNTERCLAIM OR TAKE ANY COURT OR ADMINISTRATIVE ACTION OR INSTITUTE ANY
PROCEEDING TO ENFORCE ANY PROVISION OF THIS AGREEMENT OR ANY NOTE THAT IS NOT
TAKEN BY THE REQUIRED BANKS OR APPROVED IN WRITING BY THE REQUIRED BANKS IF SUCH
SETOFF OR ACTION OR PROCEEDING WOULD OR MIGHT (PURSUANT TO SECTIONS 580a, 580b,
580d AND 726 OF THE CALIFORNIA CODE OF CIVIL PROCEDURE OR SECTION 2924 OF THE
CALIFORNIA CIVIL CODE, IF APPLICABLE, OR OTHERWISE) AFFECT OR IMPAIR THE
VALIDITY, PRIORITY, OR ENFORCEABILITY OF THE LIENS GRANTED TO THE COLLATERAL
AGENT PURSUANT TO THE SECURITY DOCUMENTS OR THE ENFORCEABILITY OF THE NOTES AND
OTHER OBLIGATIONS HEREUNDER, AND ANY ATTEMPTED EXERCISE
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BY ANY BANK OF ANY SUCH RIGHT WITHOUT OBTAINING SUCH CONSENT OF THE REQUIRED
BANKS SHALL BE NULL AND VOID. THIS SUBSECTION (b) SHALL BE SOLELY FOR THE
BENEFIT OF EACH OF THE ADMINISTRATIVE AGENT, THE COLLATERAL AGENT AND THE BANKS
HEREUNDER AND SHALL NOT CREATE ANY RIGHTS FOR THE BENEFIT OF ANY CREDIT PARTY OR
ANY OTHER PERSON.
13.03 NOTICES. Except as otherwise expressly provided herein, all
notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, telecopier or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered: if to Holdings, at
Holdings' address specified opposite its signature below; if to the Borrower, at
the Borrower's address specified opposite its signature below; if to any Bank,
at its address specified opposite its name below; and if to the Administrative
Agent, at its Notice Office; or, as to any Credit Party or the Administrative
Agent, at such other address as shall be designated by such party in a written
notice to the other parties hereto and, as to each Bank, at such other address
as shall be designated by such Bank in a written notice to the Borrower and the
Administrative Agent. All such notices and communications shall, when mailed,
be effective (5) Business Days after deposit in the mails, and when telegraphed,
telexed, telecopied, or cabled or sent by overnight courier, be effective one
Business Day after dispatch, except that notices and communications to the
Administrative Agent and the Borrower shall not be effective until received by
the Administrative Agent or the Borrower, as the case may be.
13.04 BENEFIT OF AGREEMENT. (a) This Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective successors
and assigns of the parties hereto; PROVIDED, HOWEVER, no Credit Party may assign
or transfer any of its rights, obligations or interest hereunder or under any
other Credit Document without the prior written consent of the Banks (it being
understood that this Section 13.04 shall not prevent a merger or consolidation
otherwise permitted by this Agreement) and, PROVIDED FURTHER, that, although any
Bank may transfer, assign or grant participations in its rights hereunder, such
Bank shall remain a "Bank" for all purposes hereunder (and may not transfer or
assign all or any portion of its Commitments hereunder except as provided in
Section 13.04(b)) and the transferee, assignee or participant, as the case may
be, shall not constitute a "Bank" hereunder and, PROVIDED FURTHER, that no Bank
shall transfer or grant any participation under which the participant shall have
rights to approve any amendment to or waiver of this Agreement or any other
Credit Document except to the extent such amendment or waiver would (i) extend
the final scheduled maturity of any Loan, Note or Letter of Credit (unless such
Letter of Credit is not extended beyond the Revolving Loan Maturity Date) in
which such participant is participating, or reduce the rate or extend the time
of payment of interest or Fees thereon (except in connection with a waiver of
applicability of any post-default increase in interest rates) or reduce the
principal amount thereof, or increase the amount of the participant's
participation over the amount thereof then in effect (it being understood that a
waiver of any Default or Event of Default or of a mandatory reduction in the
Total Commitment shall not constitute a change in the terms of such
participation, and that an increase in any Commitment or Loan shall be permitted
without the consent of any participant if the participant's participation is not
increased as a result thereof), (ii) consent to the assignment or transfer by
the Borrower of any of its rights and obligations under this Agreement or (iii)
release all or substantially all of the Collateral under all of the Security
Documents (except as expressly provided in the Credit Documents) supporting the
Loans hereunder in which such participant is participating. In the
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case of any such participation, the participant shall not have any rights under
this Agreement or any of the other Credit Documents (the participant's rights
against such Bank in respect of such participation to be those set forth in the
agreement executed by such Bank in favor of the participant relating thereto)
and all amounts payable by the Borrower hereunder shall be determined as if such
Bank had not sold such participation.
(b) Notwithstanding the foregoing, any Bank (or any Bank together
with one or more other Banks) may (x) assign all or a portion of its Revolving
Loan Commitment (and related outstanding Obligations hereunder) and/or its
outstanding Term Loans (or, if prior to the Initial Borrowing Date, Term Loan
Commitment) to (i) its parent company and/or any affiliate of such Bank which is
at least 50% owned by such Bank or its parent company or to one or more Banks or
(ii) in the case of any Bank that is a fund that invests in bank loans, any
other fund that invests in bank loans and is managed by the same investment
advisor of such Bank or by an Affiliate of such investment advisor and (y)
assign all, or if less than all, a portion equal to at least $5,000,000 in the
aggregate for the assigning Bank or assigning Banks, of such Revolving Loan
Commitments and outstanding principal amount of Term Loans (or, if prior to the
Initial Borrowing Date, Term Loan Commitment) hereunder to one or more Eligible
Transferees (treating any fund that invests in bank loans and any other fund
that invests in bank loans and is managed by the same investment advisor of such
fund or by an Affiliate of such investment advisor as a single Eligible
Transferee), each of which assignees shall become a party to this Agreement as a
Bank by execution of an Assignment and Assumption Agreement, PROVIDED that, (i)
at such time Schedule I shall be deemed modified to reflect the Commitments
(and/or outstanding Term Loans, as the case may be) of such new Bank and of the
existing Banks, (ii) upon surrender of the old Notes, new Notes will be issued,
at the Borrower's expense, to such new Bank and to the assigning Bank, such new
Notes to be in conformity with the requirements of Section 1.05 (with
appropriate modifications) to the extent needed to reflect the revised
Commitments (and/or outstanding Term Loans, as the case may be), (iii) the
consent of the Administrative Agent shall be required in connection with any
such assignment (which consent shall not be unreasonably withheld) and (iv) the
Administrative Agent shall receive at the time of each such assignment, from the
assigning or assignee Bank, the payment of a non-refundable assignment fee of
$3,500 and, PROVIDED FURTHER, that such transfer or assignment will not be
effective until recorded by the Administrative Agent on the Register pursuant to
Section 13.17 hereof. To the extent of any assignment pursuant to this Section
13.04(b), the assigning Bank shall be relieved of its obligations hereunder with
respect to its assigned Commitments. At the time of each assignment pursuant to
this Section 13.04(b) to a person which is not already a Bank hereunder and
which is not a United States person (as such term is defined in Section
7701(a)(30) of the Code) for Federal income tax purposes, the respective
assignee Bank shall provide to the Borrower and the Administrative Agent the
appropriate Internal Revenue Service Forms (and, if applicable a Section
4.04(b)(ii) Certificate) described in Section 4.04(b). To the extent that an
assignment of all or any portion of a Bank's Commitments and related outstanding
Obligations pursuant to Section 1.13 or this Section 13.04(b) would, at the time
of such assignment, result in increased costs under Section 1.10, 1.11, 2.05 or
4.04 from those being charged by the respective assigning Bank prior to such
assignment, then the Borrower shall not be obligated to pay such increased costs
(although the Borrower shall be obligated to pay any other increased costs of
the type described above resulting from changes after the date of the respective
assignment).
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(c) Nothing in this Agreement shall prevent or prohibit any Bank from
pledging its Loans and Notes hereunder to a Federal Reserve Bank in support of
borrowings made by such Bank from such Federal Reserve Bank and, with the
consent of the Administrative Agent, any Bank which is a fund may pledge all or
any portion of its Loans and Notes to its trustee in support of its obligations
to its trustee.
13.05 NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the
part of the Administrative Agent or any Bank or any holder of any Note in
exercising any right, power or privilege hereunder or under any other Credit
Document and no course of dealing between the Borrower or any other Credit Party
and the Administrative Agent or any Bank or the holder of any Note shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
power or privilege hereunder or under any other Credit Document preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege hereunder or thereunder. The rights, powers and remedies herein or in
any other Credit Document expressly provided are cumulative and not exclusive of
any rights, powers or remedies which the Administrative Agent or any Bank or the
holder of any Note would otherwise have. No notice to or demand on any Credit
Party in any case shall entitle any Credit Party to any other or further notice
or demand in similar or other circumstances or constitute a waiver of the rights
of the Administrative Agent or any Bank or the holder of any Note to any other
or further action in any circumstances without notice or demand.
13.06 PAYMENTS PRO RATA. (a) Except as otherwise provided in this
Agreement, the Administrative Agent agrees that promptly after its receipt of
each payment from or on behalf of the Borrower in respect of any Obligations
hereunder, it shall distribute such payment to the Banks (other than any Bank
that has consented in writing to waive its PRO RATA share of any such payment)
PRO RATA based upon their respective shares, if any, of the Obligations with
respect to which such payment was received.
(b) Each of the Banks agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise), which is applicable to the payment of the principal of, or interest
on, the Loans, Unpaid Drawings, Commitment Commission or Letter of Credit Fees,
of a sum which with respect to the related sum or sums received by other Banks
is in a greater proportion than the total of such Obligation then owed and due
to such Bank bears to the total of such Obligation then owed and due to all of
the Banks immediately prior to such receipt, then such Bank receiving such
excess payment shall purchase for cash without recourse or warranty from the
other Banks an interest in the Obligations of the respective Credit Party to
such Banks in such amount as shall result in a proportional participation by all
the Banks in such amount; PROVIDED that if all or any portion of such excess
amount is thereafter recovered from such Bank, such purchase shall be rescinded
and the purchase price restored to the extent of such recovery, but without
interest.
(c) Notwithstanding anything to the contrary contained herein, the
provisions of the preceding Sections 13.06(a) and (b) shall be subject to the
express provisions of this Agreement which require, or permit, differing
payments to be made to Non-Defaulting Banks as opposed to Defaulting Banks.
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13.07 CALCULATIONS; COMPUTATIONS. (a) The financial statements to
be furnished to the Banks pursuant hereto shall be made and prepared in
accordance with generally accepted accounting principles in the United States
consistently applied throughout the periods involved (except as set forth in the
notes thereto or as otherwise disclosed in writing by the Borrower to the
Banks); PROVIDED that, except as otherwise specifically provided herein, all
computations of Excess Cash Flow and all computations determining compliance
with Sections 9.07 through 9.11, inclusive, shall utilize accounting principles
and policies in conformity with those used to prepare the historical financial
statements delivered to the Banks pursuant to Section 7.05(a) (with the
foregoing generally accepted accounting principles, subject to the preceding
proviso, herein called "GAAP").
(b) All computations of interest payable at the Eurodollar Rate,
Commitment Commission and Fees hereunder shall be made on the basis of a year of
360 days for the actual number of days (including the first day but excluding
the last day) occurring in the period for which such interest, Commitment
Commission or Fees are payable. All computations of interest payable at the
Base Rate shall be made on the basis on a year of 365 (or 366, as applicable)
days for the actual number of days (including the first day but excluding the
last day) occurring in the period for which such interest is payable.
13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF
JURY TRIAL. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL, EXCEPT AS
OTHERWISE PROVIDED IN CERTAIN OF THE MORTGAGES, BE CONSTRUED IN ACCORDANCE WITH
AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT,
EACH OF HOLDINGS AND THE BORROWER HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. EACH OF HOLDINGS AND THE BORROWER FURTHER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN
ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO ANY CREDIT PARTY AT ITS ADDRESS SET FORTH
OPPOSITE ITS SIGNATURE BELOW, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER
SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT
UNDER THIS AGREEMENT, ANY BANK OR THE HOLDER OF ANY NOTE TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST ANY CREDIT PARTY IN ANY OTHER JURISDICTION.
(b) EACH OF HOLDINGS AND THE BORROWER HEREBY IRREVOCABLY WAIVES ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF
THE AFORESAID ACTIONS OR
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PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY
FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT
THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM.
(c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING
OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
13.09 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with the Borrower and the
Administrative Agent.
13.10 EFFECTIVENESS. This Agreement shall become effective on the
date (the "Effective Date") on which the Borrower, the Administrative Agent and
each of the Banks shall have signed a counterpart hereof (whether the same or
different counterparts) and shall have delivered the same to the Administrative
Agent at its Notice Office or, in the case of the Banks, shall have given to the
Administrative Agent telephonic (confirmed in writing), written or telex notice
(actually received) at such office that the same has been signed and mailed to
it. The Administrative Agent will give the Borrower and each Bank prompt
written notice of the occurrence of the Effective Date.
13.11 HEADINGS DESCRIPTIVE. The headings of the several sections and
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
13.12 AMENDMENT OR WAIVER; ETC. (a) Neither this Agreement nor any
other Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing signed by the respective Credit Parties party thereto and the
Required Banks, PROVIDED that no such change, waiver, discharge or termination
shall, without the consent of each Bank (other than a Defaulting Bank) (with
Obligations being directly affected), (i) extend the final scheduled maturity of
any Loan or Note or extend the Stated Maturity of any Letter of Credit beyond
the Revolving Loan Maturity Date, or reduce the rate or extend the time of
payment of interest or Fees thereon (except in connection with a waiver of
applicability of any post-default increase in interest rates), or reduce the
principal amount thereof (except to the extent repaid in cash), (ii) release all
or substantially all of the Collateral (except as expressly provided in the
Credit Documents) under all the Security Documents, (iii) amend, modify or waive
any provision of this Section 13.12, (iv) reduce the percentage specified in the
definition of Required Banks (it being understood that, with the consent of the
Required Banks, additional extensions of credit pursuant to this Agreement
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may be included in the determination of the Required Banks on substantially the
same basis as the extensions of Term Loans and Revolving Loan Commitments are
included on the Effective Date) or (v) consent to the assignment or transfer by
the Borrower of any of its rights and obligations under this Agreement; PROVIDED
FURTHER, that no such change, waiver, discharge or termination shall (1)
increase the Commitments of any Bank over the amount thereof then in effect
without the consent of such Bank (it being understood that waivers or
modifications of conditions precedent, covenants, Defaults or Events of Default
or of a mandatory reduction in the Total Commitment shall not constitute an
increase of the Commitment of any Bank, and that an increase in the available
portion of any Commitment of any Bank shall not constitute an increase in the
Commitment of such Bank), (2) without the consent of the Swingline Bank, amend,
modify or waive any provision relating to the rights or obligations of the
Swingline Bank or with respect to Swingline Loans (including, without
limitation, the obligations of the other Banks with Revolving Loan Commitments
to fund Mandatory Borrowings), (3) without the consent of the Administrative
Agent, amend, modify or waive any provision of Section 2 or alter its rights or
obligations with respect to Letters of Credit, (4) without the consent of the
Administrative Agent, amend, modify or waive any provision of Section 12 as same
applies to such Administrative Agent or any other provision as same relates to
the rights or obligations of such Administrative Agent, (5) without the consent
of the Collateral Agent, amend, modify or waive any provision relating to the
rights or obligations of the Collateral Agent, and (6) without the consent of
the Majority Banks of any Tranche of Term Loans, amend the definition of
Majority Banks with respect to such Tranche, or this clause (6), or alter the
required application of any prepayments or repayments (or commitment
reductions), as between the various Tranches, pursuant to Section 4.01 or
4.02(A) (excluding Sections 4.02(A)(b), (c) or (d)) with respect to such Tranche
(although the Required Banks may waive, in whole or in part, any such
prepayment, repayment or commitment reduction, except pursuant to Sections
4.02(A)(b), (c) or (d), so long as the application, as amongst the various
Tranches, of any such prepayment, repayment or commitment reduction which is
still required to be made is not altered).
(b) If, in connection with any proposed change, waiver, discharge or
termination to any of the provisions of this Agreement as contemplated by
clauses (i) through (v), inclusive, of the first proviso to Section 13.12(a),
the consent of the Required Banks is obtained but the consent of one or more of
such other Banks whose consent is required is not obtained, then the Borrower
shall have the right, so long as all non-consenting Banks are treated as
described in clauses (A) or (B) below, to either (A) replace each such
non-consenting Bank or Banks with one or more Replacement Banks pursuant to
Section 1.13 so long as at the time of such replacement, each such Replacement
Bank consents to the proposed change, waiver, discharge or termination or (B)
terminate such non-consenting Bank's Revolving Loan Commitment and repay its
Loans, in accordance with Sections 3.02(b) and 4.01(v), respectively, PROVIDED
that in any event the Borrower shall not have the right to replace a Bank,
terminate its Revolving Loan Commitment or repay its Loans solely as a result of
the exercise of such Bank's rights (and the withholding of any required consent
by such Bank) pursuant to the second proviso to Section 13.12(a).
13.13 SURVIVAL. All indemnities set forth herein including, without
limitation, in Sections 1.10, 1.11, 2.05, 4.04, 13.01 and 13.06 shall, subject
to Section 13.15 (to the extent applicable), survive the execution, delivery and
termination of this Agreement and the Notes and the making and repayment of the
Loans.
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13.14 DOMICILE OF LOANS. Each Bank may transfer and carry its Loans
at, to or for the account of any office, Subsidiary or Affiliate of such Bank.
Notwithstanding anything to the contrary contained herein, to the extent that a
transfer of Loans pursuant to this Section 13.14 would, at the time of such
transfer, result in increased costs under Section 1.10, 1.11, 2.05 or 4.04 from
those being charged by the respective Bank prior to such transfer, then the
Borrower shall not be obligated to pay such increased costs (although the
Borrower shall be obligated to pay any other increased costs of the type
described above resulting from changes giving rise to such increased costs after
the date of the respective transfer to the extent such costs would have been
applicable had such transfer not occurred).
13.15 LIMITATION ON ADDITIONAL AMOUNTS, ETC. Notwithstanding
anything to the contrary contained in Section 1.10, 1.11, 2.05 or 4.04 of this
Agreement, unless a Bank gives notice to the Borrower that it is obligated to
pay an amount under the respective such Section within 180 days after the later
of (x) the date the Bank incurs the respective increased costs, Taxes, loss,
expense or liability, reduction in amounts received or receivable or reduction
in return on capital or (y) the date such Bank has actual knowledge of its
incurrence of the respective increased costs, Taxes, loss, expense or liability,
reductions in amounts received or receivable or reduction in return on capital,
then such Bank shall only be entitled to be compensated for such amount by the
Borrower pursuant to said Section 1.10, 1.11, 2.05 or 4.04, as the case may be,
to the extent the costs, Taxes, loss, expense or liability, reduction in amounts
received or receivable or reduction in return on capital are incurred or
suffered on or after the date which occurs 180 days prior to such Bank giving
notice to the Borrower that it is obligated to pay the respective amounts
pursuant to said Section 1.10, 1.11, 2.05 or 4.04, as the case may be. This
Section 13.15 shall have no applicability to any Section of this Agreement other
than said Sections 1.10, 1.11, 2.05 and 4.04. Each Bank shall be entitled to be
compensated for amounts pursuant to Sections 1.10, 1.11, 2.05 and 4.04 only to
the extent such Bank makes the same demands for compensation from all of its
other customers facing the same or similar circumstances.
13.16 CONFIDENTIALITY. (a) Subject to the provisions of clause (b)
of this Section 13.16, each Bank agrees that it will not disclose without the
prior consent of Holdings or the Borrower (other than to its employees,
auditors, advisors or counsel or to another Bank if the Bank or such Bank's
holding or parent company in its sole discretion determines that any such party
should have access to such information in connection with this Agreement and the
Transaction, provided such Persons shall be subject to the provisions of this
Section 13.16 to the same extent as such Bank) any information with respect to
Holdings or any of its Subsidiaries which is now or in the future furnished
pursuant to this Agreement or any other Credit Document, PROVIDED that any Bank
may disclose any such information (a) as has become generally available to the
public, (b) as may be required or appropriate in any report, statement or
testimony submitted to any municipal, state or Federal regulatory body having or
claiming to have jurisdiction over such Bank or to the Federal Reserve Board or
the Federal Deposit Insurance Corporation or similar organizations (whether in
the United States or elsewhere) or their successors, (c) as may be required or
appropriate in respect to any summons or subpoena or in connection with any
litigation, (d) in order to comply with any law, order, regulation or ruling
applicable to such Bank, (e) to the Administrative Agent or the Collateral Agent
and (f) to any prospective or actual transferee or participant in connection
with any contemplated transfer or participation of any of the Notes or
Commitments or any interest therein by such Bank, PROVIDED
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that such prospective transferee agrees with such Bank on terms and conditions
substantially the same as those contained in this Section.
(b) Each of Holdings and the Borrower hereby acknowledges and agrees
that each Bank may share with any of its affiliates any information related to
Holdings or any of its Subsidiaries (including, without limitation, any
nonpublic customer information regarding the creditworthiness of Holdings and
its Subsidiaries, provided such Persons shall be subject to the provisions of
this Section 13.16 to the same extent as such Bank and provided such sharing of
information is undertaken in connection with this Agreement and the Transaction.
13.17 REGISTRY. The Borrower hereby designates the Administrative
Agent to serve as the Borrower's agent, solely for purposes of this Section
13.17, to maintain a register (the "Register") on which it will record the
Commitments from time to time of each of the Banks, the Loans made by each of
the Banks and each repayment in respect of the principal amount of the Loans of
each Bank. Failure to make any such recordation, or any error in such
recordation shall not affect the Borrower's obligations in respect of such
Loans. With respect to any Bank, the transfer of the Commitments of such Bank
and the rights to the principal of, and interest on, any Loan made pursuant to
such Commitments shall not be effective until such transfer is recorded on the
Register maintained by the Administrative Agent with respect to ownership of
such Commitments and Loans and prior to such recordation all amounts owing to
the transferor with respect to such Commitments and Loans shall remain owing to
the transferor. The registration of assignment or transfer of all or part of
any Commitments and Loans shall be recorded by the Administrative Agent on the
Register only upon the acceptance by the Administrative Agent of a properly
executed and delivered Assignment and Assumption Agreement pursuant to Section
13.04(b). Coincident with the delivery of such an Assignment and Assumption
Agreement to the Administrative Agent for acceptance and registration of
assignment or transfer of all or part of a Loan, or as soon thereafter as
practicable, the assigning or transferor Bank shall surrender the Note
evidencing such Loan, and thereupon one or more new Notes in the same aggregate
principal amount shall be issued to the assigning or transferor Bank and/or the
new Bank. The Borrower agrees to indemnify the Administrative Agent from and
against any and all losses, claims, damages and liabilities of whatsoever nature
which may be imposed on, asserted against or incurred by the Administrative
Agent in performing its duties under this Section 13.17.
SECTION 14. Holdings Guaranty.
14.01 THE GUARANTY. In order to induce the Banks to enter into this
Agreement and to extend credit hereunder and in recognition of the direct
benefits to be received by Holdings from the proceeds of the Loans and the
issuance of the Letters of Credit and to induce the Banks or any of their
respective Affiliates to enter into Interest Rate Protection Agreements,
Holdings hereby agrees with the Banks as follows: Holdings hereby
unconditionally and irrevocably guarantees as primary obligor and not merely as
surety the full and prompt payment when due, whether upon maturity, by
acceleration or otherwise, of any and all of the Guaranteed Obligations of the
Borrower to the Secured Creditors. If any or all of the Guaranteed Obligations
of the Borrower to the Secured Creditors becomes due and payable hereunder,
Holdings unconditionally promises to pay such indebtedness to the Secured
Creditors, or order, on demand, together with
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<PAGE>
any and all reasonable expenses which may be incurred by the Administrative
Agent or the Secured Creditors in collecting any of the Guaranteed Obligations.
14.02 BANKRUPTCY. Additionally, Holdings unconditionally and
irrevocably guarantees the payment of any and all of the Guaranteed Obligations
of the Borrower to the Secured Creditors whether or not then due or payable by
the Borrower upon the occurrence in respect of the Borrower of any of the events
specified in Section 10.05, and unconditionally and irrevocably promises to pay
such Guaranteed Obligations to the Secured Creditors, or order, on demand, in
lawful money of the United States.
14.03 NATURE OF LIABILITY. The liability of Holdings hereunder is
exclusive and independent of any security for or other guaranty of the
Guaranteed Obligations of the Borrower whether executed by Holdings, any other
guarantor or by any other party, and the liability of Holdings hereunder shall
not be affected or impaired by (a) any direction as to application of payment by
the Borrower or by any other party, or (b) any other continuing or other
guaranty, undertaking or maximum liability of a guarantor or of any other party
as to the Guaranteed Obligations of the Borrower, or (c) any payment on or in
reduction of any such other guaranty or undertaking (except to the extent the
Guaranteed Obligations are partially or wholly satisfied as a result thereof),
or (d) any dissolution, termination or increase, decrease or change in personnel
by the Borrower, or (e) any payment made to the Administrative Agent or the
Secured Creditors on the indebtedness which the Administrative Agent or such
Secured Creditors repay the Borrower pursuant to court order in any bankruptcy,
reorganization, arrangement, moratorium or other debtor relief proceeding, and
Holdings waives any right to the deferral or modification of its obligations
hereunder by reason of any such proceeding.
14.04 INDEPENDENT OBLIGATION. The obligations of Holdings hereunder
are independent of the obligations of any other guarantor or the Borrower, and a
separate action or actions may be brought and prosecuted against Holdings
whether or not action is brought against any other guarantor or the Borrower and
whether or not any other guarantor or the Borrower be joined in any such action
or actions. Any payment by the Borrower or other circumstance which operates to
toll any statute of limitations as to the Borrower shall operate to toll the
statute of limitations as to Holdings.
14.05 AUTHORIZATION. Holdings authorizes the Administrative Agent
and the Secured Creditors without notice or demand (except as shall be required
by applicable statute and cannot be waived), and without affecting or impairing
its liability hereunder, from time to time to:
(a) change the manner, place or terms of payment of, and/or change or
extend the time of payment of, renew, increase, accelerate or alter, any of the
Guaranteed Obligations (including any increase or decrease in the rate of
interest thereon), any security therefor, or any liability incurred directly or
indirectly in respect thereof, and the Guaranty herein made shall apply to the
Guaranteed Obligations as so changed, extended, renewed or altered;
(b) take and hold security for the payment of the Guaranteed
Obligations and sell, exchange, release, surrender, realize upon or otherwise
deal with in any manner and in any order any property by whomsoever at any time
pledged or mortgaged to secure, or howsoever securing,
-109-
<PAGE>
the Guaranteed Obligations or any liabilities (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof, and/or any offset
thereagainst;
(c) exercise or refrain from exercising any rights against the
Borrower or others or otherwise act or refrain from acting;
(d) release or substitute any one or more endorsers, guarantors, the
Borrower or other obligors;
(e) settle or compromise any of the Guaranteed Obligations, any
security therefor or any liability (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and may subordinate the
payment of all or any part thereof to the payment of any liability (whether due
or not) of the Borrower to its creditors other than the Banks;
(f) apply any sums by whomsoever paid or howsoever realized to any
liability or liabilities of the Borrower to the Secured Creditors regardless of
what liability or liabilities of Holdings or the Borrower remain unpaid;
(g) consent to or waive any breach of, or any act, omission or
default under, this Agreement or any of the instruments or agreements referred
to herein, or otherwise amend, modify or supplement this Agreement or any of
such other instruments or agreements; and/or
(h) take any other action which would, under otherwise applicable
principles of common law, give rise to a legal or equitable discharge of
Holdings from its liabilities under the Holdings Guaranty.
14.06 RELIANCE. It is not necessary for the Administrative Agent or
the Secured Creditors to inquire into the capacity or powers of the Borrower or
its Subsidiaries or the officers, directors, partners or agents acting or
purporting to act on its behalf, and any Guaranteed Obligations made or created
in reliance upon the professed exercise of such powers shall be guaranteed
hereunder.
14.07 SUBORDINATION. Any of the indebtedness of the Borrower
relating to the Guaranteed Obligations now or hereafter owing to Holdings is
hereby subordinated to the Guaranteed Obligations of the Borrower owing to the
Administrative Agent and the Secured Creditors; and if the Administrative Agent
so requests at a time when an Event of Default exists, all such indebtedness
relating to the Guaranteed Obligations of the Borrower to Holdings shall be
collected, enforced and received by Holdings for the benefit of the Secured
Creditors and be paid over to the Administrative Agent on behalf of the Secured
Creditors on account of the Guaranteed Obligations of the Borrower to the
Secured Creditors, but without affecting or impairing in any manner the
liability of Holdings under the other provisions of this Guaranty. Prior to the
transfer by Holdings of any note or negotiable instrument evidencing any of the
indebtedness relating to the Guaranteed Obligations of the Borrower to Holdings,
Holdings shall mark such note or negotiable instrument with a legend that the
same is subject to this subordination. The provisions of this Section 14.07
(and any claims of Holdings as described above) are subject to the provisions of
Section 14.08(c) and (d).
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<PAGE>
14.08 WAIVER. (a) Holdings waives any right (except as shall be
required by applicable statute and cannot be waived) to require the
Administrative Agent or the Secured Creditors to (i) proceed against the
Borrower, any other guarantor or any other party, (ii) proceed against or
exhaust any security held from the Borrower, any other guarantor or any other
party or (iii) pursue any other remedy in the Administrative Agent's or the
Secured Creditors' power whatsoever. Holdings waives any defense based on or
arising out of any defense of the Borrower, any other guarantor or any other
party, other than payment in full of the Guaranteed Obligations, based on or
arising out of the disability of the Borrower, any other guarantor or any other
party, or the unenforceability of the Guaranteed Obligations or any part thereof
from any cause, or the cessation from any cause of the liability of the Borrower
other than payment in full of the Guaranteed Obligations. The Administrative
Agent and the Secured Creditors may, at their election, foreclose on any
security held by the Administrative Agent, the Collateral Agent or the Secured
Creditors by one or more judicial or nonjudicial sales, whether or not every
aspect of any such sale is commercially reasonable (to the extent such sale is
permitted by applicable law, including, but not limited to, the Communications
Acts), or exercise any other right or remedy the Administrative Agent and the
Secured Creditors may have against the Borrower or any other party, or any
security, without affecting or impairing in any way the liability of Holdings
hereunder except to the extent the Guaranteed Obligations have been paid.
Holdings waives any defense arising out of any such election by the
Administrative Agent and the Secured Creditors, even though such election
operates to impair or extinguish any right of reimbursement or subrogation or
other right or remedy of Holdings against the Borrower or any other party or any
security.
(b) Holdings waives all presentments, demands for performance,
protests and notices, including without limitation notices of nonperformance,
notices of protest, notices of dishonor, notices of acceptance of this Guaranty,
and notices of the existence, creation or incurring of new or additional
Guaranteed Obligations. Holdings assumes all responsibility for being and
keeping itself informed of the Borrower's financial condition and assets, and of
all other circumstances bearing upon the risk of nonpayment of the Guaranteed
Obligations and the nature, scope and extent of the risks which Holdings assumes
and incurs hereunder, and agrees that the Administrative Agent and the Secured
Creditors shall have no duty to advise Holdings of information known to them
regarding such circumstances or risks.
(c) Holdings understands that to the extent the Guaranteed
Obligations are secured by Real Property, Holdings shall be liable for the full
amount of the liability hereunder notwithstanding foreclosure on any such Real
Property by trustee sale or any other reason impairing Holdings' or any secured
creditors' right to proceed against the Borrower. Holdings hereby waives, to the
fullest extent permitted by applicable laws, all rights and benefits under
Sections 580a, 580b, 580d and 726 of the California Code of Civil Procedure. In
addition, Holdings hereby waives, to the fullest extent permitted by applicable
laws, without limiting the generality of the foregoing or any other provision
hereof, all rights and benefits which might otherwise be available to Holdings
under California Civil Code Sections 2787 through 2855 inclusive, 2899 and 3433.
(d) Holdings understands, is aware and hereby acknowledges that if
the Banks elect to foreclose on any of the Mortgaged Property security
nonjudicially, any right of
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<PAGE>
subrogation of Holdings against the Borrower may be impaired or extinguished and
that as a result of such impairment or extinguishment of subrogation rights,
Holdings may have a defense to a deficiency judgment arising out of the
operation of Section 580d of the California Code of Civil Procedure and related
principles of estoppel. Holdings waives all rights and defenses arising out of
an election of remedies by the Banks, even though that election of remedies,
such as a nonjudicial foreclosure with respect to security for a guaranteed
obligation, has destroyed the guarantor's rights of subrogation and
reimbursement against the principal by the operation of Section 580d of the Code
of Civil Procedure or otherwise.
14.09 NATURE OF LIABILITY. It is the desire and intent of Holdings
and the Secured Creditors that this Holdings Guaranty shall be enforced against
Holdings to the fullest extent permissible under the laws and public policies
applied in each jurisdiction in which enforcement is sought. If, however, and
to the extent that, the obligations of Holdings under this Holdings Guaranty
shall be adjudicated to be invalid or unenforceable for any reason (including,
without limitation, because of any applicable state or federal law relating to
fraudulent conveyances or transfers), then the amount of the Guaranteed
Obligations of Holdings shall be deemed to be reduced and Holdings shall pay the
maximum amount of the Guaranteed Obligations which would be permissible under
applicable law.
-112-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
ADDRESS:
GREAT LAKES ACQUISITION CORP.
551 Fifth Avenue
Suite 3800
New York, New York 10176
Tel: (212) 983-1399
Fax: (212) 986-5099
Attention: President
By: /s/ James Mckenzie
-------------------------------------
Title:
with a copy to:
GREAT LAKES CARBON CORPORATION
Skadden, Arps, Slate,
Meagher & Flom
919 Third Avenue
New York, New York 10022
Attention: David Reamer
By: /s/ James Mckenzie
-------------------------------------
Title:
-113-
<PAGE>
130 Liberty Street BANKERS TRUST COMPANY,
New York, New York 10006 Individually and as Administrative Agent
Tel: (212) 250-8617
Fax: (212) 250-7200 By: /S/ Andrew Keith
Attention: Andrew Keith -------------------------------------
Title: Vice President
277 Park Avenue DLJ CAPITAL FUNDING, INC.,
New York, New York, 10172 Individually and as Documentation Agent
Tel: (212) 892-7911
Fax: (212) 892-7542 By: /s/ Eric Swanson
Attention: Dana Klien -------------------------------------
Title: Managing Director
With a copy to:
DONALDSON, LUFKIN & JENRETTE
2121 Avenue of the Stars
Suite 3000
Tel: (310) 282-7443
Fax: (310) 282-6178
Attention: David Miller
231 South LaSalle BANK OF AMERICA NT&SA,
Chicago, Illinois 60697 Individually and as Co-Agent
Tel: (312) 828-3141
Fax: (312) 828-3555 By: /s/ Kevin Morrison
Attention: Kevin Morrison -------------------------------------
Title: Vice President
-114-
<PAGE>
ABN AMRO BANK N.V.
San Francisco International Branch
By: /s/ Dianne Barkley
-------------------------------------
Title: Group Vice President
By: /s/ Gina Brusatori
-------------------------------------
Title: Vice President
BANKBOSTON, N.A.
By: /S/ C. Andrew Picullel
-------------------------------------
Title: Vice President
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
By: /s/ Nicholas J. Campbell
-------------------------------------
Title: Vice President
CREDITANSTALT CORPORATE FINANCE, INC.
By: David E. Yewer
-------------------------------------
Title: Vice President
By: /s/ Christina Schoen
-------------------------------------
Title: Senior Vice President
-115-
<PAGE>
FLEET CAPITAL
By: /s/ Mark D. Newlun
-------------------------------------
Title: Vice President
THE FUJI BANK, LIMITED
By: /s/ Teiji Teramoto
-------------------------------------
Title: Vice President And Manager
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Janet K. Williams
-------------------------------------
Title: Duly Authorized Signatory
HELLER FINANCIAL
By: /s/ Patrick Hayes
-------------------------------------
Title: Vice President
NATIONAL CITY BANK
By: /s/ Barry C. Robinson
-------------------------------------
Title: Vice President
-116-
<PAGE>
TRANSAMERICA BUSINESS CREDIT CORPORATION
By: /s/ Perry Vavoules
-------------------------------------
Title: Senior Vice President
WELLS FARGO BANK, N.A.
By: /s/ Michael Real
-------------------------------------
Title: Assistant Vice President
-117-
<PAGE>
EXHIBIT 12.1
GREAT LAKES CARBON CORPORATION
SELECTED HISTORICAL AND OTHER DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, FIRST QUARTER
--------------------------------------------- ----------------
1993 1994 1995 1996 1997 1997 1998
----- ----- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNNGS TO FIXED CHARGES:
(1) Income before income taxes 4,878 55 21,451 42,707 34,675 6,840 12,474
----- ----- ------ ------ ------ ----- ------
(2) Fixed charges:
Interest expense 2,063 1,819 1,543 8,419 7,801 2,080 1,868
Capitalized interest 0 0 0 0 808 0 374
Interest portion of rental expense 808 741 794 792 817 199 199
----- ----- ------ ------ ------ ----- ------
Total fixed charges 2,871 2,560 2,337 9,211 9,426 2,279 2,441
(3) Earnings:
Income before income taxes 4,878 55 21,451 42,707 34,675 6,840 12,474
Fixed charges 2,871 2,560 2,337 9,211 9,426 2,279 2,441
Capitalized interest 0 0 0 0 (808) 0 (374)
----- ----- ------ ------ ------ ----- ------
Total earnings 7,749 2,615 23,788 51,918 43,293 9,119 14,541
----- ----- ------ ------ ------ ----- ------
----- ----- ------ ------ ------ ----- ------
Earnings to fixed charges (3/2) 2.7x 1.0x 10.2x 5.6x 4.6x 4.0x 6.0x
----- ----- ------ ------ ------ ----- ------
</TABLE>
<PAGE>
GREAT LAKES ACQUISITION CORP.
SUBSIDIARIES
Great Lakes Carbon Corporation, a Delaware corporation
2
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated July 20, 1998, with respect to the balance sheet of
Great Lakes Acquisition Corp. and our report dated February 13, 1998 with
respect to the consolidated financial statements of Great Lakes Carbon
Corporation, included in the Registration Statement on Form S-4 and the related
Prospectus of Great Lakes Acquisition Corp. for the registration of $56,600,000
13 1/8% Series B Senior Discount Debentures due 2009.
/s/ ERNST & YOUNG LLP
New York, New York
July 20, 1998
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
_________
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(b)(2)
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, NATIONAL ASSOCIATION
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
United States 06-1143380
(JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER
ORGANIZATION IF NOT A U.S. NATIONAL BANK) IDENTIFICATION NO.)
633 West 5th Street, 12th Floor, Los Angeles, California 90071
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Lynda A. Vogel, Senior Vice President and Managing Director
633 West 5th Street, 12th Floor, Los Angeles, California 90071
(213) 362-7399
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
Delaware 13-3637043
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
551 FIFTH AVENUE, SUITE 3600
NEW YORK, NEW YORK 10176
(Address of principal executive offices) (Zip Code)
GREAT LAKES ACQUISITION CORP.
13 1/8% SERIES B SENIOR DISCOUNT DEBENTURES DUE 2009
(TYPE OF SECURITIES)
<PAGE>
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO WHICH
IT IS SUBJECT.
Comptroller of the Currency, Western District Office, 50 Fremont
Street, Suite 3900, San Francisco, California, 94105-2292
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its parent, State
Street Bank and Trust Company.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN EFFECT.
A copy of the Articles of Association of the trustee, as now in
effect, is on file with the Securities and Exchange Commission as Exhibits
with corresponding exhibit numbers to the Form T-1 of Western Digital
Corporation, filed pursuant to Section 305(b)(2) of the Act, on May 12,
1998 (Registration No. 333-52463), and are incorporated herein by
reference.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A Certificate of Corporate Existence (with fiduciary powers) from the
Comptroller of the Currency, Administrator of National Banks is on file
with the Securities and Exchange Commission as Exhibits with corresponding
exhibit numbers to the Form T-1 of Western Digital Corporation, filed
pursuant to Section 305(b)(2) of the Act, on May 12, 1998 (Registration No.
333-52463), and are incorporated herein by reference.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST
POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS SPECIFIED
IN PARAGRAPH (1) OR (2), ABOVE.
Authorization of the Trustee to exercise fiduciary powers (included in
Exhibits 1 and 2; no separate instrument).
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on file
with the Securities and Exchange Commission as Exhibits with corresponding
exhibit numbers to the Form T-1 of Western Digital Corporation, filed
pursuant to Section 305(b)(2) of the Act, on May 12, 1998 (Registration No.
333-52463), and are incorporated herein by reference.
1
<PAGE>
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN
DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(b) OF THE ACT.
The consent of the trustee required by Section 321(b) of the Act is
annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING AUTHORITY.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority is annexed hereto as Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company of California,
NATIONAL ASSOCIATION, organized and existing under the laws of the United States
of America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of Los
Angeles, and State of California, on the 17th day of July, 1998.
STATE STREET BANK AND TRUST COMPANY
OF CALIFORNIA, NATIONAL ASSOCIATION
By: /s/ Scott C. Emmons
-----------------------------------
Scott C. Emmons
Assistant Vice President
2
<PAGE>
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the proposed issuance by Great
Lakes Acquisition Corp. of its 13 1/8% Series B Senior Discount Debentures
due 2009, we hereby consent that reports of examination by Federal, State,
Territorial or District authorities may be furnished by such authorities to
the Securities and Exchange Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
OF CALIFORNIA, NATIONAL ASSOCIATION
By: /s/ Scott C. Emmons
----------------------------------------
Scott C. Emmons
Assistant Vice President
Dated: July 17, 1998
3
<PAGE>
EXHIBIT 7
Consolidated Report of Condition and Income for A Bank With Domestic Offices
Only and Total Assets of Less Than $100 Million of State Street Bank and Trust
Company of California, a national banking association duly organized and
existing under and by virtue of the laws of the United States of America, at the
close of business MARCH 31, 1998, published in accordance with a call made by
the Federal Deposit Insurance Corporation pursuant to the required law: 12
U.S.C. Section 324 (State member banks); 12 U.S.C. Section 1817 (State nonmember
banks); and 12 U.S.C. Section 161 (National banks).
<TABLE>
<CAPTION>
Thousands
of Dollars
<S> <C>
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin. . . . . . . . . . . . . 6,852
Interest-bearing balances . . . . . . . . . . . . . . . . . . . . . . . . . 0
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary . . . . . . . . . . . . . . . . . . . . 0
Loans and lease financing receivables:
Loans and leases, net of unearned income. . . . . . . . . . 0
Allowance for loan and lease losses . . . . . . . . . . . . 0
Allocated transfer risk reserve . . . . . . . . . . . . . . 0
Loans and leases, net of unearned income and allowances . . . . . . . . . . 0
Assets held in trading accounts. . . . . . . . . . . . . . . . . . . . . . . . . 0
Premises and fixed assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . 253
Other real estate owned. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Investments in unconsolidated subsidiaries . . . . . . . . . . . . . . . . . . . 0
Customers' liability to this bank on acceptances outstanding . . . . . . . . . . 0
Intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 814
---------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,957
---------
---------
LIABILITIES
Deposits:
In domestic offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Noninterest-bearing . . . . . . . . . . . . . . . . . 0
Interest-bearing . . . . . . . . . . . . . . . . . . . 0
In foreign offices and Edge subsidiary. . . . . . . . . . . . . . . . . . . 0
Noninterest-bearing. . . . . . . . . . . . . . . . . . 0
Interest-bearing . . . . . . . . . . . . . . . . . . . 0
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary . . . . . . . . . . . . . . . . . . . . 0
Demand notes issued to the U.S. Treasury and Trading Liabilities . . . . . . . . 0
Other borrowed money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Subordinated notes and debentures. . . . . . . . . . . . . . . . . . . . . . . . 0
Bank's liability on acceptances executed and outstanding . . . . . . . . . . . . 0
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,356
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,356
---------
EQUITY CAPITAL
Perpetual preferred stock and related surplus. . . . . . . . . . . . . . . . . . 0
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500
Surplus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 750
Undivided profits and capital reserves/Net unrealized holding gains (losses) . . 2,352
Cumulative foreign currency translation adjustments. . . . . . . . . . . . . . . 0
Total equity capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,602
---------
Total liabilities and equity capital . . . . . . . . . . . . . . . . . . . . . . 7,958
---------
---------
</TABLE>
4
<PAGE>
I, Kevin R. Wallace, Vice President and Comptroller of the above named bank do
hereby declare that this Report of Condition and Income for this report date
have been prepared in conformance with the instructions issued by the
appropriate Federal regulatory authority and is true to the best of my knowledge
and belief.
Kevin R. Wallace
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the appropriate Federal regulatory authority and is true and correct.
Lynda A. Vogel
James A. Quale
Stephen Rivero
5
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
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</TABLE>
<PAGE>
LETTER OF TRANSMITTAL
GREAT LAKES ACQUISITION CORP.
OFFER FOR ALL OUTSTANDING
13 1/8% SENIOR DISCOUNT DEBENTURES DUE 2009
IN EXCHANGE FOR
13 1/8% SERIES B SENIOR DISCOUNT DEBENTURES DUE 2009
PURSUANT TO THE PROSPECTUS, DATED , 1998
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON
, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE
WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
DELIVERY TO:
State Street Bank and Trust Company of California, N.A., EXCHANGE AGENT
c/o State Street Bank and Trust Company
<TABLE>
<S> <C>
BY MAIL: BY OVERNIGHT COURIER:
2 International Place 2 International Place
Boston, MA 02110 Boston, MA 02110
Attention: Attention:
BY HAND:
2 International Place
Boston, MA 02110
FOR INFORMATION CALL:
(213) 362-7369
BY FACSIMILE TRANSMISSION
(for Eligible Institutions only):
(617) 664-5290
Attention: Corporate Trust Department
CONFIRM BY TELEPHONE:
(617) 664-5587
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY OF THIS LETTER OF
TRANSMITTAL.
The undersigned acknowledges that he or she has received and reviewed the
Prospectus, dated , 1998 (the "Prospectus"), of Great Lakes
Acquisition Corporation, a Delaware corporation (the "Company"), and this Letter
of Transmittal (the "Letter"), which together constitute the Company's offer
(the "Exchange Offer") to exchange an aggregate principal amount of up to
$56,600,000 of the Company's 13 1/8% Series B Senior Discount Debentures due
2009 which have been registered under the Securities Act of 1933, as amended
(the "New Debentures"), for a like principal amount of the Company's issued and
outstanding 13 1/8% Senior Discount Debentures due 2009 (the "Old Debentures")
from the registered holders thereof (the "Holders").
For each Old Debenture accepted for exchange, the holder of such Old
Debenture will receive a New Debenture having a principal amount equal to that
of the surrendered Old Debenture. The New
<PAGE>
Debentures will bear interest from the most recent date to which interest has
been paid on the Old Debentures or, if no interest has been paid on the Old
Debentures, from May 22, 1998. Accordingly, registered Holders of New Debentures
on the relevant record date for the first interest payment date following the
consummation of the Exchange Offer will receive interest accruing from the most
recent date to which interest has been paid or, if no interest has been paid,
from May 22, 1998. Old Debentures accepted for exchange will cease to accrue
interest from and after the date of consummation of the Exchange Offer. Holders
of Old Debentures whose Old Debentures are accepted for exchange will not
receive any payment in respect of accrued interest on such Old Debentures.
This Letter is to be completed by a Holder of Old Debentures either if
certificates are to be forwarded herewith or if a tender of certificates for Old
Debentures, if available, is to be made by book-entry transfer to the account
maintained by the Exchange Agent at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in "The
Exchange Offer--Book-Entry Transfer" section of the Prospectus and an Agent's
Message is not delivered. Tenders by Book-entry transfer may also be made by
delivering an Agent's Message in lieu of this Letter. 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 (as
defined below), 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 this Letter
and that the Company may enforce this Letter against such participant. Holders
of Old Debentures whose certificates are not immediately available, or who are
unable to deliver their certificates or confirmation of the book-entry tender of
their Old Debentures into the Exchange Agent's account at the Book-Entry
Transfer Facility (a "Book-Entry Confirmation") and all other documents required
by this Letter to the Exchange Agent on or prior to the Expiration Date, must
tender their Old Debentures according to the guaranteed delivery procedures set
forth in "The Exchange Offer--Guaranteed Delivery Procedures" section of the
Prospectus. See Instruction 1. Delivery of documents to the Book-Entry Transfer
Facility does not constitute delivery to the Exchange Agent.
The undersigned has completed the appropriate boxes below and signed this
Letter to indicate the action the undersigned desires to take with respect to
the Exchange Offer.
2
<PAGE>
List below the Old Debentures to which this Letter relates. If the space
provided below is inadequate, the certificate numbers and principal amount of
Old Debentures should be listed on a separate signed schedule affixed hereto.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
DESCRIPTION OF OLD DEBENTURES
-------------------------------------------------------------------------------------------
(1) (2) (3) (4)
AGGREGATE
PRINCIPAL
NAME(S) AND ADDRESS(ES) AMOUNT OF PRINCIPAL
OF REGISTERED WARRANT HOLDER(S) CERTIFICATE OLD AMOUNT
(PLEASE FILL IN, IF BLANK) NUMBER(S)(*) DEBENTURE(S) TENDERED(**)
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
TOTAL
- ---------------------------------------------------------------------------------------------
*NEED NOT BE COMPLETED IF OLD DEBENTURES ARE BEING TENDERED BY BOOK-ENTRY TRANSFER.
**UNLESS OTHERWISE INDICATED IN THIS COLUMN, A HOLDER WILL BE DEEMED TO HAVE TENDERED ALL OF
THE OLD DEBENTURES REPRESENTED BY THE OLD DEBENTURES INDICATED IN COLUMN 2. SEE
INSTRUCTION 2. OLD DEBENTURES TENDERED HEREBY MUST BE IN DENOMINATIONS OF PRINCIPAL AMOUNT
OF $1,000 AND ANY INTEGRAL MULTIPLE THEREOF. SEE INSTRUCTION 1.
- ---------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
/ / CHECK HERE IF TENDERED OLD DEBENTURES 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 ____________________________________________________
By crediting the Old Debentures to the Exchange Agent's account at the
Book-Entry Transfer Facility's Automated Tender Offer Program ("ATOP") and by
complying with applicable ATOP procedures with respect to the Exchange Offer,
including transmitting to the Exchange Agent a computer-generated message (an
"Agent's Message") in which the holder of the Old Debentures acknowledges and
agrees to be bound by the terms of, and makes the representations and warranties
contained in, the Letter, the participant in the Book-Entry Transfer Facility
confirms on behalf of itself and the beneficial owners of such Old Debentures
all provisions of this Letter (including all representations and warranties)
applicable to it and such beneficial owner as fully as if it had completed the
information required herein and executed and transmitted this Letter to the
Exchange Agent.
/ / CHECK HERE IF TENDERED OLD DEBENTURES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s) ____________________________________________
Window Ticket Number (if any) ______________________________________________
Date of Execution of Notice of Guaranteed Delivery _________________________
Name of Institution Which Guaranteed Delivery ______________________________
If Delivered by Book-Entry Transfer, Complete the Following:
Account Number _____________________________________________________________
Transaction Code Number ____________________________________________________
/ / CHECK HERE IF TENDERED OLD DEBENTURES ARE ENCLOSED HEREWITH
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO
Name: ______________________________________________________________________
Address: ___________________________________________________________________
_______________________________________
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of New
Debentures. If the undersigned is a broker-dealer that will receive New
Debentures for its own account in exchange for Old Debentures that were acquired
as a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus meeting the requirements of the
Securities Act of 1933, as amended, in connection with any resale of such New
Debentures; however, by so acknowledging and by delivering such a prospectus the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act of 1933, as amended. If the undersigned is a
broker-dealer that will receive New Debentures, it represents that the Old
Debentures to be exchanged for the New Debentures were acquired as a result of
market-making activities or other trading activities.
4
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
LADIES AND GENTLEMEN:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount of Old
Debentures indicated above. Subject to, and effective upon, the acceptance for
exchange of the Old Debentures tendered hereby, the undersigned hereby sells,
assigns and transfers to, or upon the order of, the Company all right, title and
interest in and to such Old Debentures as are being tendered hereby.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as the undersigned's true and lawful agent and attorney-in-fact with
respect to such tendered Old Debentures, with full power of substitution, among
other things, to cause the Old Debentures to be assigned, transferred and
exchanged. The undersigned hereby represents and warrants that the undersigned
has full power and authority to tender, sell, assign and transfer the Old
Debentures, and to acquire Exchange Debentures issuable upon the exchange of
such tendered Old Debentures, and that, when the same are accepted for exchange,
the Company will acquire good and unencumbered title thereto, free and clear of
all liens, restrictions, charges and encumbrances and not subject to any adverse
claim when the same are accepted by the Company. The undersigned hereby further
represents that any New Debentures acquired in exchange for Old Debentures
tendered hereby will have been acquired in the ordinary course of business of
the person receiving such New Debentures, whether or not such person is the
undersigned, that neither the Holder of such Old Debentures nor any such other
person is participating in, intends to participate in or has an arrangement or
understanding with any person to participate in the distribution of such New
Debentures and that neither the Holder of such Old Debentures nor any such other
person is an "affiliate," as defined in Rule 405 under the Securities Act of
1933, as amended (the "Securities Act"), of the Company.
The undersigned acknowledges that this Exchange Offer is being made in
reliance on interpretations by the staff of the Securities and Exchange
Commission (the "SEC"), as set forth in no-action letters issued to third
parties, that the New Debentures issued pursuant to the Exchange Offer in
exchange for the Old Debentures may be offered for resale, resold and otherwise
transferred by Holders thereof (other than any such Holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Debentures are acquired
in the ordinary course of any such Holder's business and any such Holder has no
arrangement with any person to participate in the distribution of such New
Debentures. However, the Company has not sought and does not intend to seek its
own no-action letter, and accordingly, the SEC has not considered and will not
consider the Exchange Offer in the context of a no-action letter and there can
be no assurance that the staff of the SEC would make a similar determination
with respect to the Exchange Offer. 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 New Debentures and has no arrangement or
understanding to participate in a distribution of New Debentures. If any Holder
is an affiliate of the Company, is engaged in or intends to engage in or has any
arrangement or understanding with respect to the distribution of the New
Debentures to be acquired pursuant to the Exchange Offer, such Holder (i) could
not rely on the applicable interpretations of the staff of the SEC and (ii) must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. If the undersigned is
a broker-dealer that will receive New Debentures for its own account in exchange
for Old Debentures, it represents that the Old Debentures to be exchanged for
the New Debentures were acquired by it as a result of market-making activities
or other trading activities and acknowledges that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such New Debentures; however, by so acknowledging and by delivering a prospectus
meeting the requirements of the Securities Act, the undersigned will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
5
<PAGE>
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old Debentures tendered hereby. All
authority conferred or agreed to be conferred in this Letter and every
obligation of the undersigned hereunder shall be binding upon the successors,
assigns, heirs, executors, administrators, trustees in bankruptcy and legal
representatives of the undersigned and shall not be affected by, and shall
survive, the death or incapacity of the undersigned. This tender may be
withdrawn only in accordance with the procedures set forth in "The Exchange
Offer--Withdrawal Rights" section of the Prospectus.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please deliver the New Debentures (and, if applicable,
substitute certificates representing Old Debentures for any Old Debentures not
exchanged) in the name of the undersigned or, in the case of a book-entry
delivery of Old Debentures, please credit the account indicated above maintained
at the Book-Entry Transfer Facility. Similarly, unless otherwise indicated under
the box entitled "Special Delivery Instructions" below, please send the New
Debentures (and, if applicable, substitute certificates representing Old
Debentures for any Old Debentures not exchanged) to the undersigned at the
address shown above in the box entitled "Description of Old Debentures."
6
<PAGE>
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD
DEBENTURES" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE
OLD DEBENTURES AS SET FORTH IN SUCH BOX ABOVE.
- -------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for Old Debentures not exchanged
and/or New Debentures are to be issued in the name of and sent to someone
other than the person or persons whose signature(s) appear(s) on this Letter
above, or if Old Debentures delivered by book-entry transfer which are not
accepted for exchange are to be returned by credit to an account maintained
at the Book-Entry Transfer Facility other than the account indicated above.
Issue: New Debentures and/or Old
Name(s) ____________________________________________________________________
(PLEASE TYPE OR PRINT)
___________________________________________________________________________
(PLEASE TYPE OR PRINT)
Address ____________________________________________________________________
____________________________________________________________________________
(ZIP CODE)
(COMPLETE SUBSTITUTE FORM W-9)
/ / Credit unexchanged Old Debentures delivered by book-entry transfert to
the Book-Entry Transfer Facility account set forth below.
____________________________________________________________________________
(BOOK-ENTRY TRANSFER FACILITY
ACCOUNT NUMBER, IF APPLICABLE)
- ------------------------------------------------------
- ------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for Old Debentures not exchanged
and/or New Debentures are to be sent to someone other than the person or
persons whose signature(s) appear(s) on this Letter above or to such person
or persons at an address other than shown in the box entitled "Description
of Old Debentures" on this Letter above.
Mail: New Debentures and/or Old Debentures to:
Name(s) ____________________________________________________________________
(PLEASE TYPE OR PRINT)
___________________________________________________________________________
(PLEASE TYPE OR PRINT)
Address ____________________________________________________________________
____________________________________________________________________________
(ZIP CODE)
- -----------------------------------------------------
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF OR AN AGENT'S MESSAGE IN LIEU
THEREOF (TOGETHER WITH THE CERTIFICATES FOR OLD DEBENTURES OR A BOOK-ENTRY
CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED
DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK
CITY TIME, ON THE EXPIRATION DATE.
7
<PAGE>
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9 ON REVERSE SIDE)
x ______________________________ ____________________________________ , 1998
x ______________________________ ____________________________________ , 1998
SIGNATURE(S) OF OWNER DATE
Area Code and Telephone Number: ____________________________________________
If a holder is tendering any Old Debentures, this Letter must be signed
by the registered holder(s) as the name(s) appear(s) on the certificate(s)
for the Old Debentures or by any person(s) authorized to become registered
holder(s) by endorsements and documents transmitted herewith. If signature
is by a trustee, executor, administrator, guardian, officer or other person
acting in a fiduciary or representative capacity, please set forth full
title. See Instruction 3.
Name(s) ____________________________________________________________________
____________________________________________________________________________
(PLEASE TYPE OR PRINT)
Capacity: __________________________________________________________________
Address: ___________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
(INCLUDING ZIP CODE)
SIGNATURE GUARANTEE
(If required by Instruction 3)
Signature(s) Guaranteed by
an Eligible Institution: ___________________________________________________
AUTHORIZED SIGNATURE
____________________________________________________________________________
TITLE
____________________________________________________________________________
NAME AND FIRM
Date: _______________________________________________________________ , 1998
- --------------------------------------------------------------------------------
7
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER FOR THE
13 1/3% SENIOR DISCOUNT DEBENTURES DUE 2009 OF GREAT LAKES ACQUISITION CORP. IN
EXCHANGE FOR THE
13 1/3% SERIES B SENIOR DISCOUNT DEBENTURES DUE 2009 OF GREAT LAKES ACQUISITION
CORP.,
1. DELIVERY OF THIS LETTER AND DEBENTURES; GUARANTEED DELIVERY PROCEDURES.
This Letter is to be completed by holders of Old Debentures either if
certificates are to be forwarded herewith or if tenders are to be made
pursuant to the procedures for delivery by book-entry transfer set forth in
"The Exchange Offer--Book-Entry Transfer" section of the Prospectus and an
Agent's Message is not delivered. Tenders by book-entry transfer may also be
made by delivering an Agent's Message in lieu of this Letter of Transmittal.
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, and makes the representations and warranties
contained in, the Letter of Transmittal and that the issuers may enforce the
Letter of Transmittal against such participant. Certificates for all
physically tendered Old Debentures, or Book-Entry Confirmation, as the case
may be, as well as a properly completed and duly executed Letter (or
manually signed facsimile hereof) and any other documents required by this
Letter, must be received by the Exchange Agent at the address set forth
herein on or prior to the Expiration Date, or the tendering holder must
comply with the guaranteed delivery procedures set forth below. Old
Debentures tendered hereby must be in denominations of principal amount of
$1,000 and any integral multiple thereof.
Holders whose certificates for Old Debentures are not immediately available
or who cannot deliver their certificates and all other required documents to
the Exchange Agent on or prior to the Expiration Date, or who cannot
complete the procedure for book-entry transfer on a timely basis, may tender
their Old Debentures pursuant to the guaranteed delivery procedures set
forth in "The Exchange Offer--Guaranteed Delivery Procedures" section of the
Prospectus. Pursuant to such procedures, (i) such tender must be made
through an Eligible Institution, (ii) prior to 5:00 P.M., New York City
time, on the Expiration Date, the Exchange Agent must receive from such
Eligible Institution a properly completed and duly executed Letter (or a
facsimile thereof) and Notice of Guaranteed Delivery, substantially in the
form provided by the Company (by facsimile transmission, mail or hand
delivery), setting forth the name and address of the holder of Old
Debentures and the amount of Old Debentures tendered, stating that the
tender is being made thereby and guaranteeing that within three New York
Stock Exchange ("NYSE") trading days after the Expiration Date, the
certificates for all physically tendered Old Debentures, in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, together with a
properly completed and duly executed Letter (or facsimile thereof or Agent's
Message in lieu thereof) with any required signature guarantees and any
other documents required by this Letter will be deposited by the Eligible
Institution with the Exchange Agent, and (iii) the certificates for all
physically tendered Old Debentures, in proper form for transfer, or a
Book-Entry Confirmation, as the case may be, together with a properly
completed and duly executed Letter (or facsimile thereof or Agent's Message
in lieu thereof) with any required signature guarantees and any and all
other documents required by this Letter, are received by the Exchange Agent
within three NYSE trading days after the Expiration Date.
The method of delivery of this Letter, the Old Debentures and all other
required documents is at the election and risk of the tendering holders, but
the delivery will be deemed made only when actually received or confirmed by
the Exchange Agent. If Old Debentures are sent by mail, it is suggested that
8
<PAGE>
the mailing be registered mail, properly insured, with return receipt
requested, made sufficiently in advance of the Expiration Date to permit
delivery to the Exchange Agent prior to 5:00 P.M., New York City time, on
the Expiration Date.
See "The Exchange Offer" section of the Prospectus.
2. PARTIAL TENDERS (NOT APPLICABLE TO DEBENTUREHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER).
If less than all of the Old Debentures evidenced by a submitted certificate
are to be tendered, the tendering holder(s) should fill in the aggregate
principal amount of Old Debentures to be tendered in the box above entitled
"Description of Old Debentures--Principal Amount Tendered." A reissued
certificate representing the balance of nontendered Old Debentures will be
sent to such tendering holder, unless otherwise provided in the appropriate
box on this Letter, promptly after the Expiration Date. All of the Old
Debentures delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise indicated.
3. SIGNATURES ON THIS LETTER; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF
SIGNATURES.
If this Letter is signed by the registered holder of the Old Debentures
tendered hereby, the signature must correspond exactly with the name as
written on the face of the certificates or on the Book-Entry Transfer
Facility's security position listing as the holder of such Old Debentures
without any change whatsoever.
If any tendered Old Debentures are owned of record by two or more joint
owners, all of such owners must sign this Letter.
If any tendered Old Debentures are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate copies of this Letter as there are different registrations of
certificates.
When this Letter is signed by the registered holder or holders of the Old
Debentures specified herein and tendered hereby, no endorsements of
certificates or separate bond powers are required. If, however, the New
Debentures are to be issued, or any untendered Old Debentures are to be
reissued, to a person other than the registered holder, then endorsements of
any certificates transmitted hereby or separate bond powers are required.
Signatures on such certificate(s) must be guaranteed by an Eligible
Institution.
If this Letter is signed by a person other than the registered holder or
holders of any certificate(s) specified herein, such certificate(s) must be
endorsed or accompanied by appropriate bond powers, in either case signed
exactly as the name or names of the registered holder or holders appear(s)
on the certificate(s) and signatures on such certificate(s) must be
guaranteed by an Eligible Institution.
If this Letter or any certificates or bond powers are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and, unless waived by the
Company, proper evidence satisfactory to the Company of their authority to
so act must be submitted.
ENDORSEMENTS ON CERTIFICATES FOR OLD DEBENTURES OR SIGNATURES ON BOND POWERS
REQUIRED BY THIS INSTRUCTION 3 MUST BE GUARANTEED BY A FIRM WHICH IS A
FINANCIAL INSTITUTION (INCLUDING MOST BANKS, SAVINGS AND LOAN ASSOCIATIONS
AND BROKERAGE HOUSES) THAT IS A PARTICIPANT IN THE SECURITIES TRANSFER
AGENTS MEDALLION PROGRAM, THE NEW YORK STOCK EXCHANGE MEDALLION SIGNATURE
PROGRAM OR THE STOCK EXCHANGES MEDALLION PROGRAM (EACH AN "ELIGIBLE
INSTITUTION").
SIGNATURES ON THIS LETTER NEED NOT BE GUARANTEED BY AN ELIGIBLE INSTITUTION,
PROVIDED THE OLD DEBENTURES ARE TENDERED: (I) BY A REGISTERED HOLDER OF OLD
DEBENTURES (WHICH TERM, FOR PURPOSES OF THE EXCHANGE OFFER, INCLUDES ANY
PARTICIPANT IN THE BOOK-ENTRY TRANSFER FACILITY SYSTEM WHOSE NAME
9
<PAGE>
APPEARS ON A SECURITY POSITION LISTING AS THE HOLDER OF SUCH OLD DEBENTURES)
WHO HAS NOT COMPLETED THE BOX ENTITLED "SPECIAL ISSUANCE INSTRUCTIONS" OR
"SPECIAL DELIVERY INSTRUCTIONS" ON THIS LETTER, OR (II) FOR THE ACCOUNT OF
AN ELIGIBLE INSTITUTION.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
Tendering holders of Old Debentures should indicate in the applicable box
the name and address to which New Debentures issued pursuant to the Exchange
Offer and or substitute certificates evidencing Old Debentures not exchanged
are to be issued or sent, if different from the name or address of the
person signing this Letter. In the case of issuance in a different name, the
employer identification or social security number of the person named must
also be indicated. Debentureholders tendering Old Debentures by book-entry
transfer may request that Old Debentures not exchanged be credited to such
account maintained at the Book-Entry Transfer Facility as such
Debentureholders may designate hereon. If no such instructions are given,
such Old Debentures not exchanged will be returned to the name and address
of the person signing this Letter.
5. TAXPAYER IDENTIFICATION NUMBER.
Federal income tax law generally requires that a tendering holder whose Old
Debentures are accepted for exchange must provide the Company (as payor)
with such holder's correct Taxpayer Identification Number ("TIN") on
Substitute Form W-9 below, which in the case of a tendering holder who is an
individual, is his or her social security number. If the Company is not
provided with the current TIN or an adequate basis for an exemption from
backup withholding, such tendering holder may be subject to a $50 penalty
imposed by the Internal Revenue Service. In addition, the Exchange Agent may
be required to withhold 31% of the amount of any reportable payments made
after the exchange to such tendering holder of New Debentures. If
withholding results in an overpayment of taxes, a refund may be obtained.
Exempt holders of Old Debentures (including, among others, all corporations
and certain foreign individuals) are not subject to these backup withholding
and reporting requirements. See the enclosed Guidelines of Certification of
Taxpayer Identification Number on Substitute Form W-9 (the "W-9 Guideline")
for additional instructions.
To prevent backup withholding, each tendering holder of Old Debentures must
provide its correct TIN by completing the Substitute Form W-9 set forth
below, certifying, under penalties of perjury, that the TIN provided is
correct (or that such holder is awaiting a TIN) and that (i) the holder is
exempt from backup withholding, or (ii) the holder has not been notified by
the Internal Revenue Service that such holder is subject to backup
withholding as a result of a failure to report all interest or dividends or
(iii) the Internal Revenue Service has notified the holder that such holder
is no longer subject to backup withholding. If the tendering holder of Old
Debentures is a nonresident alien or foreign entity not subject to backup
withholding, such holder must give the Exchange Agent a completed Form W-8,
Certificate of Foreign Status. These forms may be obtained from the Exchange
Agent. If the Old Debentures are in more than one name or are not in the
name of the actual owner, such holder should consult the W-9 Guidelines for
information on which TIN to report. If such holder does not have a TIN, such
holder should consult the W-9 Guidelines for instructions on applying for a
TIN, check the box in Part 2 of the Substitute Form W-9 and write "applied
for" in lieu of its TIN. Debenture: Checking this box and writing "applied
for" on the form means that such holder has already applied for a TIN or
that such holder intends to apply for one in the near future. If the box in
Part 2 of the Substitute Form W-9 is checked, the Exchange Agent will retain
31% of reportable payments made to a holder during the sixty (60) day period
following the date of the Substitute Form W-9. If the holder furnishes the
Exchange Agent with his or her TIN within sixty (60) days of the Substitute
Form W-9, the Exchange Agent will remit such amounts retained during such
sixty (60) day period to such holder and no further amounts will be retained
or withheld from payments made to the
10
<PAGE>
holder thereafter. If, however, such holder does not provide its TIN to the
Exchange Agent within such sixty (60) day period, the Exchange Agent will
remit such previously withheld amounts to the Internal Revenue Service as
backup withholding and will withhold 31% of all reportable payments to the
holder thereafter until such holder furnishes its TIN to the Exchange Agent.
6. TRANSFER TAXES.
The Company will pay all transfer taxes, if any, applicable to the transfer
of Old Debentures to it or its order pursuant to the Exchange Offer. If,
however, New Debentures and/or substitute Old Debentures not exchanged are
to be delivered to, or are to be registered or issued in the name of, any
person other than the registered holder of the Old Debentures tendered
hereby, or if tendered Old Debentures are registered in the name of any
person other than the person signing this Letter, or if a transfer tax is
imposed for any reason other than the transfer of Old Debentures to the
Company or its order pursuant to the Exchange Offer, the amount of any such
transfer taxes (whether imposed on the registered holder or any other
persons) will be payable by the tendering holder. If satisfactory evidence
of payment of such taxes or exemption therefrom is not submitted herewith,
the amount of such transfer taxes will be billed directly to such tendering
holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Old Debentures specified in this
Letter.
7. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive satisfaction of any or all
conditions enumerated in the Prospectus.
8. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Old Debentures, by execution of this
Letter or an Agent's Message in lieu thereof, shall waive any right to
receive notice of the acceptance of their Old Debentures for exchange.
Neither the Company, the Exchange Agent nor any other person is obligated to
give notice of any defect or irregularity with respect to any tender of Old
Debentures nor shall any of them incur any liability for failure to give any
such notice.
9. MUTILATED, LOST, STOLEN OR DESTROYED OLD DEBENTURES.
Any holder whose Old Debentures have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above
for further instructions.
10. WITHDRAWAL RIGHTS
Tenders of Old Debentures may be withdrawn at any time prior to 5:00 P.M.,
New York City time, on the Expiration Date.
For a withdrawal of a tender of Old Debentures to be effective, a written
notice of withdrawal must be received by the Exchange Agent at the address
set forth above 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 tendered the Old Debentures to be withdrawn (the "Depositor"), (ii)
identify the Old Debentures to be withdrawn (including certificate number or
numbers and the principal amount of such Old Debentures), (iii) contain a
statement that such holder is withdrawing his election to have such Old
Debentures exchanged, (iv) be signed by the holder in the same manner as the
original signature on the Letter by which such Old Debentures were tendered
(including any required signature guarantees) or be accompanied by documents
of transfer to have the Trustee with respect to the Old
11
<PAGE>
Debentures register the transfer of such Old Debentures in the name of the
person withdrawing the tender and (v) specify the name in which such Old
Debentures are registered, if different from that of the Depositor. If Old
Debentures have been tendered pursuant to the procedure for book-entry
transfer set forth in "The Exchange Offer--Book-Entry Transfer" section of
the Prospectus, any notice of withdrawal must specify the name and number of
the account at the Book-Entry Transfer Facility to be credited with the
withdrawn Old Debentures and otherwise comply with the procedures of such
facility. All questions as to the validity, form and eligibility (including
time of receipt) of such notices will be determined by the Company, whose
determination shall be final and binding on all parties. Any Old Debentures
so withdrawn will be deemed not to have been validly tendered for exchange
for purposes of the Exchange Offer and no New Debentures will be issued with
respect thereto unless the Old Debentures so withdrawn are validly
retendered. Any Old Debentures that have been tendered for exchange but
which are not exchanged for any reason will be returned to the Holder
thereof without cost to such Holder (or, in the case of Old Debentures
tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
set forth in "The Exchange Offer--Book-Entry Transfer" section of the
Prospectus, such Old Debentures will be credited to an account maintained
with the Book-Entry Transfer Facility for the Old Debentures) as soon as
practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Debentures may be retendered by
following the procedures described above at any time on or prior to 5:00
P.M., New York City time, on the Expiration Date.
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter, and requests for
Notices of Guaranteed Delivery and other related documents may be directed
to the Exchange Agent, at the address and telephone number indicated above.
12
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(See Instruction 5)
PAYOR'S NAME: STATE STREET BANK AND TRUST COMPANY
<TABLE>
<C> <S> <C>
- ----------------------------------------------------------------------------------------
SUBSTITUTE Part 1--PLEASE PROVIDE YOUR
FORM W-9 TIN IN THE BOX AT RIGHT AND TIN: ----------------------
Department of the Treasury CERTIFY BY SIGNING AND DATING Social Security Number or
Internal Revenue Service BELOW. Employer Identification
Number
----------------------------------------------------------
Payor's Request for Taxpayer
Identification Number Part 2--TIN Applied For / /
("TIN")
and Certification
- ----------------------------------------------------------------------------------------
CERTIFICATION: Under the penalties of perjury, I certify that:
(1) the number shown on this form is my correct Taxpayer Identification Number (or I am
waiting for a number to be issued to me).
(2) I am not subject to backup withholding either because: (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue Service (the "IRS")
that I am subject to backup withholding as a result of a failure to report all interest
or dividends, or (c) the IRS has notified me that I am no longer subject to backup
withholding, and
(3) any other information provided on this form is true and correct.
Signature ----------------------------------------------------- Date -------------
- ----------------------------------------------------------------------------------------
You must cross out item (2) of the above certification if you have been notified by the
IRS that you are subject to backup withholding because of underreporting of interest or
dividends on your tax return and you have not been notified by the IRS that you are no
longer subject to backup withholding.
- ----------------------------------------------------------------------------------------
</TABLE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 2 OF SUBSTITUTE FORM W-9
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has not
been issued to me, and either (a) I have mailed or delivered an application to
receive a taxpayer identification number to the appropriate Internal Revenue Service
Center or Social Security Administration Office or (b) I intend to mail or deliver
an application in the near future. I understand that if I do not provide a taxpayer
identification number by the time of the exchange, 31 percent of all reportable
payments made to me thereafter will be withheld until I provide a number.
- ---------------------------------------- ----------------------------------------
Signature Date
- ------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
GREAT LAKES ACQUISITION CORP.
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of Great Lakes Acquisition Corp. (the "Company") made pursuant to
the Prospectus, dated , 1998 (the "Prospectus"), if certificates for
the outstanding 13 1/8% Senior Discount Debentures due 2009 of the Company (the
"Old Debentures") are not immediately available or if the procedure for
book-entry transfer cannot be completed on a timely basis or time will not
permit all required documents to reach State Street Bank and Trust Company of
California, N.A., as exchange agent (the "Exchange Agent") prior to 5:00 P.M.,
New York City time, on the Expiration Date of the Exchange Offer. Such form may
be delivered or transmitted by facsimile transmission, mail or hand delivery to
the Exchange Agent as set forth below. In addition, in order to utilize the
guaranteed delivery procedure to tender Old Debentures pursuant to the Exchange
Offer, a completed, signed and dated Letter of Transmittal (or facsimile
thereof) must also be received by the Exchange Agent prior to 5:00 P.M., New
York City time, on the Expiration Date. Capitalized terms not defined herein are
defined in the Prospectus.
DELIVERY TO: State Street Bank and Trust Company of California, EXCHANGE AGENT
C/O STATE STREET BANK AND TRUST COMPANY
<TABLE>
<S> <C>
BY MAIL: BY OVERNIGHT COURIER:
2 International Place 2 International Place
Boston, MA 02110 Boston, MA 02110
Attention: Kellie Mullen Attention: Kellie Mullen
BY HAND:
2 International Place
Boston, MA 02110
</TABLE>
FOR INFORMATION CALL:
BY FACSIMILE TRANSMISSION
(FOR ELIGIBLE INSTITUTIONS ONLY):
(617) 664-5290
Attention: Corporate Trust Department
CONFIRM BY TELEPHONE:
(617) 664-5587
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the
Company the principal amount of Old Debentures set forth below pursuant to the
guaranteed delivery procedure described in "The Exchange Offer--Guaranteed
Delivery Procedures" section of the Prospectus.
<PAGE>
Principal Amount of Old Debentures Tendered:*
<TABLE>
<S> <C>
$
Certificate Nos. (if available): If Old Debentures will be delivered by
book-entry transfer to The Depository
Trust Company, provide account number.
Total Principal Amount Represented by
Old Debentures Certificate(s):
$ Account Number
</TABLE>
________________________________________________________________________________
ALL AUTHORITY HEREIN CONFERRED OR AGREED TO BE CONFERRED SHALL SURVIVE THE
DEATH OR INCAPACITY OF THE UNDERSIGNED AND EVERY OBLIGATION OF THE UNDERSIGNED
HEREUNDER SHALL BE BINDING UPON THE HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS
AND ASSIGNS OF THE UNDERSIGNED.
________________________________________________________________________________
PLEASE SIGN HERE
X
- ----------------------------
- ------------
X
- ----------------------------
- ------------
Signature(s) of Owner(s) Date
or Authorized Signatory
Area Code and Telephone Number:
- --------------
Must be signed by the holder(s) of Old Debentures as their name(s) appear(s)
on certificates for Old Debentures or on a security position listing, or by
person(s) authorized to become registered holder(s) by endorsement and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or other
person acting in a fiduciary or representative capacity, such person must set
forth his or her full title below.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
<TABLE>
<S> <C>
Name(s):
Capacity:
Address(es):
</TABLE>
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a financial institution (including most banks, savings and
loan associations and brokerage houses) that is a participant in the Securities
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Program or the Stock Exchanges Medallion Program, hereby guarantees
that the certificates representing the principal amount of Old Debentures
tendered hereby in proper form for transfer, or timely confirmation of the
book-entry transfer of such Old Debentures into the Exchange Agent's account at
The Depository Trust Company pursuant to the procedures set forth in "The
Exchange Offer--Guaranteed Delivery Procedures" section of the Prospectus,
together with any required signature guarantee and any other documents required
by the Letter of Transmittal, will be
- ------------------------
* Must be in denominations of principal amount of $1,000 and any integral
multiple thereof.
<PAGE>
received by the Exchange Agent at the address set forth above, no later than
three New York Stock Exchange trading days after the Expiration Date.
<TABLE>
<S> <C>
Name of Firm Authorized Signature
Address Title
Name:
Zip Code (Please Type or Print)
Area Code and Tel. No. Dated:
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR OLD DEBENTURES WITH THIS FORM. CERTIFICATES
FOR OLD DEBENTURES SHOULD BE SENT ONLY WITH A COPY OF YOUR PREVIOUSLY
EXECUTED LETTER OF TRANSMITTAL.
<PAGE>
GREAT LAKES ACQUISITION CORP.
OFFER FOR ALL OUTSTANDING
13 1/8% SENIOR DISCOUNT DEBENTURES DUE 2009
IN EXCHANGE FOR
13 1/8% SERIES B SENIOR DISCOUNT DEBENTURES DUE 2009,
TO: BROKERS, DEALERS, COMMERCIAL BANKS,
TRUST COMPANIES AND OTHER NOMINEES:
Great Lakes Acquisition Corp. (the "Company") is offering, upon and subject
to the terms and conditions set forth in the Prospectus, dated , 1998
(the "Prospectus"), and the enclosed Letter of Transmittal (the "Letter of
Transmittal"), to exchange (the "Exchange Offer") its 13 1/8% Series B Senior
Discount Debentures due 2009, which have been registered under the Securities
Act of 1933, as amended, for its outstanding 13 1/8% Senior Discount Debentures
due 2009 (the "Old Debentures"). The Exchange Offer is being made in order to
satisfy certain obligations of the Company contained in the Registration Rights
Agreement, dated as of May 22, 1998, by and among the Company and the initial
purchasers referred to therein.
We are requesting that you contact your clients for whom you hold Old
Debentures regarding the Exchange Offer. For your information and for forwarding
to your clients for whom you hold Old Debentures registered in your name or in
the name of your nominee, or who hold Old Debentures registered in their own
names, we are enclosing the following documents:
1. Prospectus dated , 1998;
2. The Letter of Transmittal for your use and for the information of your
clients;
3. A Notice of Guaranteed Delivery to be used to accept the Exchange Offer
if certificates for Old Debentures are not immediately available or time will
not permit all required documents to reach the Exchange Agent prior to the
Expiration Date (as defined below) or if the procedure for book-entry transfer
cannot be completed on a timely basis;
4. A form of letter which may be sent to your clients for whose account you
hold Old Debentures registered in your name or the name of your nominee, with
space provided for obtaining such clients' instructions with regard to the
Exchange Offer;
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
6. Return envelopes addressed to State Street Bank and Trust Company of
California, N.A., the Exchange Agent for the Exchange Offer.
YOUR PROMPT ACTION IS REQUESTED. THE EXCHANGE OFFER WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED BY THE COMPANY
(THE "EXPIRATION DATE"). OLD DEBENTURES TENDERED PURSUANT TO THE EXCHANGE OFFER
MAY BE WITHDRAWN AT ANY TIME BEFORE THE EXPIRATION DATE.
To participate in the Exchange Offer, a duly executed and properly completed
Letter of Transmittal (or facsimile thereof or Agent's Message in lieu thereof),
with any required signature guarantees and any other required documents, should
be sent to the Exchange Agent and certificates representing the Old Debentures,
or a timely Book-Entry confirmation of such Old Debentures into the Exchange
Agent's account at the Book-Entry Transfer Facility, should be delivered to the
Exchange Agent, all in accordance with the instructions set forth in the Letter
of Transmittal and the Prospectus.
If a registered holder of Old Debentures desires to tender, but such Old
Debentures are not immediately available, or time will not permit such holder's
Old Debentures or other required documents to reach the Exchange Agent before
the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected by following the
guaranteed delivery procedures described in the Prospectus under "The Exchange
Offer--Guaranteed Delivery Procedures."
<PAGE>
The Company will, upon request, reimburse brokers, dealers, commercial banks
and trust companies for reasonable and necessary costs and expenses incurred by
them in forwarding the Prospectus and the related documents to the beneficial
owners of Old Debentures held by them as nominee or in a fiduciary capacity. The
Company will pay or cause to be paid all stock transfer taxes applicable to the
exchange of Old Debentures pursuant to the Exchange Offer, except as set forth
in Instruction 6 of the Letter of Transmittal.
Any inquiries you may have with respect to the Exchange Offer, or requests
for additional copies of the enclosed materials, should be directed to State
Street Bank and Trust Company of California, N.A., the Exchange Agent for the
Exchange Offer, at its address and telephone number set forth on the front of
the Letter of Transmittal.
Very truly yours,
GREAT LAKES ACQUISITION CORP.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF
THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN
THE PROSPECTUS OR THE LETTER OF TRANSMITTAL.
Enclosures
2
<PAGE>
GREAT LAKES ACQUISITION CORP.
OFFER FOR ALL OUTSTANDING
13 1/8% SENIOR DISCOUNT DEBENTURES DUE 2009
IN EXCHANGE FOR
13 1/8% SERIES B SENIOR DISCOUNT DEBENTURES DUE 2009,
TO OUR CLIENTS:
Enclosed for your consideration is a Prospectus, dated , 1998
(the "Prospectus"), and the related Letter of Transmittal (the "Letter of
Transmittal"), relating to the offer (the "Exchange Offer") of Great Lakes
Acquisition Corp. (the "Company") to exchange its 13 1/8% Series B Senior
Discount Debentures due 2009, which have been registered under the Securities
Act of 1933, as amended (the "New Debentures"), for its outstanding 13 1/8%
Senior Discount Debentures due 2009 (the "Old Debentures"), upon the terms and
subject to the conditions described in the Prospectus and the Letter of
Transmittal. The Exchange Offer is being made in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreement, dated
as of May 22, 1998, by and among the Company and the initial purchasers referred
to therein.
This material is being forwarded to you as the beneficial owner of the Old
Debentures held by us for your account but not registered in your name. A TENDER
OF SUCH OLD DEBENTURES MAY ONLY BE MADE BY US AS THE HOLDER OF RECORD AND
PURSUANT TO YOUR INSTRUCTIONS.
Accordingly, we request instructions as to whether you wish us to tender on
your behalf the Old Debentures held by us for your account, pursuant to the
terms and conditions set forth in the enclosed Prospectus and Letter of
Transmittal.
Your instructions should be forwarded to us as promptly as possible in order
to permit us to tender the Old Debentures on your behalf in accordance with the
provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 P.M.,
New York City time, on , 1998, unless extended by the Company. Any Old
Debentures tendered pursuant to the Exchange Offer may be withdrawn at any time
before the Expiration Date.
Your attention is directed to the following:
1. The Exchange Offer is for any and all Old Debentures.
2. The Exchange Offer is subject to certain conditions set forth in the
Prospectus in the section captioned "The Exchange Offer--Certain Conditions to
the Exchange Offer."
3. Any transfer taxes incident to the transfer of Old Debentures from the
holder to the Company will be paid by the Company, except as otherwise provided
in the Instructions in the Letter of Transmittal.
4. The Exchange Offer expires at 5:00 P.M., New York City time, on
, 1998, unless extended by the Company.
If you wish to have us tender your Old Debentures, please so instruct us by
completing, executing and returning to us the instruction form on the back of
this letter. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR INFORMATION ONLY
AND MAY NOT BE USED DIRECTLY BY YOU TO TENDER OLD DEBENTURES.
<PAGE>
INSTRUCTIONS WITH RESPECT
TO THE EXCHANGE OFFER
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer made by Great Lakes
Acquisition Corp. with respect to its Old Debentures.
This will instruct you to tender the Old Debentures held by you for the
account of the undersigned, upon and subject to the terms and conditions set
forth in the Prospectus and the related Letter of Transmittal.
Please tender the Old Debentures held by you for my account as indicated
below:
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL AMOUNT OF OLD DEBENTURES
------------------------------------------------------
<S> <C>
13 1/8% Senior Discount Debentures due 2009..............
/ / Please do not tender any Old Debentures held by you
for my account.
Dated: , 1998
Signature(s)
Please print name(s) here
Address(es)
Area Code and Telephone Number
Tax Identification or Social Security No(s).
</TABLE>
None of the Old Debentures held by us for your account will be tendered
unless we receive written instructions from you to do so. Unless a specific
contrary instruction is given in the space provided, your signature(s) hereon
shall constitute an instruction to us to tender all the Old Debentures held by
us for your account.
<PAGE>
, 1998
State Street Bank and Trust Company of California, N.A.
Attention: Corporate Trust Services Division
Ladies and Gentlemen:
Great Lakes Acquisition Corp., a Delaware Corporation (the "Company"),
proposes to make an offer (the "Exchange Offer") to exchange its 13 1/8% Senior
Discount Debentures due 2009 (the "Old Debentures") for its 13 1/8% Series B
Senior Discount Debentures due 2009 (the "New Debentures"). The terms and
conditions of the Exchange Offer as currently contemplated are set forth in a
prospectus, dated ___ , 1998 (the "Prospectus"), and the accompanying Letter of
Transmittal to be distributed to all record holders of the Old Debentures. A
copy of the Prospectus and the accompanying Letter of Transmittal are attached
hereto as Exhibits A and B. The Old Debentures and the New Debentures are
collectively referred to herein as the "Debentures." Initially capitalized
terms used but not defined herein shall have the respective meanings given them
in the Prospectus.
Copies of each of the form of the Notice of Guaranteed Delivery, the form
of Letter to Brokers, Dealers and the form of Letter to Clients are attached
hereto as Exhibit C.
The Company hereby appoints State Street Bank and Trust Company of
California, N.A., to act as exchange agent (the "Exchange Agent") in connection
with the Exchange Offer. References hereinafter to "you" shall refer to State
Street Bank and Trust Company of California, N.A.
The Exchange Offer is expected to be commenced by the Company on or about
___, 1998. The Letters of Transmittal accompanying the Prospectus (or in the
case of book entry securities, the ATOP system) are to be used by the holders of
the Old Debentures to accept the Exchange Offer and contain instructions with
respect to (i) the delivery of certificates for Old Debentures tendered in
connection therewith and (ii) the book entry transfer of Debentures to the
Exchange Agent's account.
<PAGE>
The Exchange Offer shall expire at 5:00 P.M., New York City time, on ___ ,
1998 or on such later date or time to which the Company may extend the Exchange
Offer (the "Expiration Date"). Subject to the terms and conditions set forth in
the Prospectus, the Company expressly reserves the right to extend the Exchange
Offer from time to time by giving oral (to be confirmed in writing) or written
notice to you before 9:00 A.M., New York City time, on the Business Day
following the previously scheduled Expiration Date.
The Company expressly reserves the right (i) to terminate the Exchange
Offer, and not to accept for exchange any Old Debentures not theretofore
accepted for exchange, upon the occurrence of any of the conditions of the
Exchange Offer specified in the Prospectus under the caption "The Exchange Offer
- -- Certain Conditions to the Exchange Offer" and (ii) to amend the Exchange
Offer. The Company will give you prompt oral (confirmed in writing) or written
notice of any amendment, termination or nonacceptance of Old Debentures.
In carrying out your duties as Exchange Agent, you are to act in accordance
with the following instructions:
1. You will perform such duties and only such duties as are specifically
set forth in the section of the Prospectus captioned "The Exchange Offer" or as
specifically set forth herein; provided, however, that in no way will your
general duty to act in good faith be discharged by the foregoing.
2. You will establish an account with respect to the Old Debentures at The
Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of
the Exchange Offer within two Business Days after the date of the Prospectus,
and any financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of the Old Debentures by causing
the Book-Entry Transfer Facility to transfer such Old Debentures into your
account in accordance with the Book-Entry Transfer Facility's Automated Tender
Offer Program ("ATOP").
3. You are to examine each of the Letters of Transmittal and certificates
for Old Debentures (or confirmation of book-entry transfer into your account at
the Book-Entry Transfer Facility) and any other documents delivered or mailed to
you by or for holders of the Old Debentures to ascertain whether: (i) the
Letters of Transmittal and any such other documents are duly executed and
properly completed in accordance with instructions set forth therein and (ii)
the Old Debentures have
2
<PAGE>
otherwise been properly tendered. In each case where the Letters of
Transmittal or any other document has been improperly completed or executed
or any of the certificates for Old Debentures are not in proper form for
transfer or some other irregularity in connection with the acceptance of the
Exchange Offer exists, you will endeavor to inform such holders of the need
for fulfillment of all requirements and to take any other action as may be
necessary or advisable to cause such irregularity to be corrected.
4. With the approval of any Vice President of the Company (a "Designated
Officer") (such approval, if given orally, to be confirmed in writing) or any
other party designated by any such Designated Officer in writing, you are
authorized to waive any irregularities in connection with any tender of Old
Debentures pursuant to the Exchange Offer.
5. Tenders of Old Debentures may be made only as set forth in the Letters
of Transmittal and in the section of the Prospectus captioned "The Exchange
Offer -- Procedures for Tendering Old Debentures," and Old Debentures shall be
considered properly tendered to you only when tendered in accordance with the
procedures set forth therein.
Notwithstanding the provisions of this paragraph 5, Old Debentures which
any Designated Officer of the Company shall approve as having been properly
tendered shall be considered to be properly tendered. Such approval, if given
orally, shall be confirmed in writing.
6. You shall advise the Company with respect to any Old Debentures
received subsequent to the Expiration Date and accept its instructions with
respect to disposition of such Old Debentures.
7. You shall accept tenders:
(a) in cases where the Old Debentures are registered in two or more names
only if signed by all named holders;
(b) in cases where the signing person (as indicated on the Letters of
Transmittal) is acting in a fiduciary or a representative capacity only when
proper evidence of such person's authority so to act is submitted; and
3
<PAGE>
(c) from persons other than the registered holder of Old Debentures
provided that customary transfer requirements, including satisfaction of any
applicable transfer taxes, are fulfilled.
You shall accept partial tenders of Old Debentures where so indicated and
as permitted in the Letters of Transmittal and deliver certificates for Old
Debentures to the transfer agent for division and return any untendered Old
Debentures to the holder (or such other person as may be designated in the
Letters of Transmittal) as promptly as practicable after expiration or
termination of the Exchange Offer.
8. Upon satisfaction or waiver of all of the conditions to the Exchange
Offer, the Company will notify you (such notice, if given orally, to be
confirmed in writing) of its acceptance, promptly after the Expiration Date,
of all Old Debentures properly tendered and you, on behalf of the Company,
will exchange such Old Debentures for the New Debentures and cause such Old
Debentures to be canceled by the Old Debentures Trustee. Delivery of New
Debentures will be made on behalf of the Company by you at the rate of $1,000
principal amount of New Debentures for each $1,000 principal amount of the
Old Debentures tendered promptly after notice (such notice, if given orally,
to be confirmed in writing) of acceptance of said Old Debentures by the
Company; provided, however, that in all cases, Old Debentures tendered
pursuant to the Exchange Offer will be exchanged only after timely receipt by
you of (i) a Book-Entry Confirmation (as defined in the Prospectus) with
respect to such Old Debentures or (ii) certificates for such Old Debentures
and a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) with any required signature guarantees and all other
required documents. You shall issue New Debentures only in denominations of
$1,000 or any integral multiple thereof. Old Debentures may be tendered in
denominations of $1,000 or any integral multiple thereof.
9. Tenders pursuant to the Exchange Offer are irrevocable, except that,
subject to the terms and upon the conditions set forth in the Prospectus and the
Letters of Transmittal, Old Debentures tendered pursuant to the Exchange Offer
may be withdrawn at any time on or prior to the Expiration Date.
10. The Company shall not be required to exchange any Old Debentures
tendered if any of the conditions set forth in the Exchange Offer are not met.
Notice of any decision by the Company not to exchange any Old Debentures
tendered shall be given orally (and confirmed in writing) by the Company to you.
4
<PAGE>
11. If, pursuant to the Exchange Offer, the Company does not accept for
exchange all or part of the Old Debentures tendered because of an invalid
tender, the occurrence of certain other events set forth in the Prospectus under
the caption "The Exchange Offer -- Certain Conditions to the Exchange Offer" or
otherwise, you shall promptly after the expiration or termination of the
Exchange Offer return those certificates for unaccepted Old Debentures (or
effect appropriate book-entry transfer), together with any related required
documents and the Letter of Transmittal relating thereto that are in your
possession, to the persons who deposited them.
12. All certificates for reissued Old Debentures, unaccepted Old Debentures
or for New Debentures shall be forwarded (a) by first-class certified mail,
return receipt requested, under a blanket surety bond protecting you and the
Company from loss or liability arising out of the non-receipt or non-delivery of
such certificates; (b) by registered mail insured separately for the replacement
value of each of such certificates or (c) by effectuating appropriate book-entry
transfer.
13. You are not authorized to pay or offer to pay any concessions,
commissions or solicitation fees to any broker, dealer, bank or other persons or
to engage or utilize any person to solicit tenders.
14. As Exchange Agent hereunder you:
(a) shall have no duties or obligations other than those specifically set
forth in the section of the Prospectus captioned "The Exchange Offer," the
Letter of Transmittal or herein or as may be subsequently agreed to in writing
by you and the Company;
(b) will be regarded as making no representations and having no
responsibilities as to the validity, sufficiency, value or genuineness of any of
the certificates or the Old Debentures represented thereby deposited with you
pursuant to the Exchange Offer, and will not be required to and will make no
representation as to the validity, value or genuineness of the Exchange Offer or
the Letter of Transmittal or any other disclosure materials delivered in
connection therewith;
(c) shall not be obligated to take any legal action hereunder which might
in your reasonable judgment involve any expense or liability, unless you shall
have been furnished with indemnity reasonably satisfactory to you;
5
<PAGE>
(d) may reasonably rely on and shall be protected in acting in reliance
upon any certificate, instrument, opinion, notice, letter, telegram or other
document or security delivered to you and reasonably believed by you to be
genuine and to have been signed by the proper party or parties;
(e) may reasonably act upon any tender, statement, request, agreement or
other instrument whatsoever not only as to its due execution and validity and
effectiveness of its provisions, but also as to the truth and accuracy of any
information contained therein, which you shall in good faith believe to be
genuine or to have been signed or represented by a proper person or persons;
(f) may rely on and shall be protected in acting upon written or oral
instructions from any Designated Officer of the Company;
(g) may consult with counsel satisfactory to you, including counsel for the
Company, with respect to any questions relating to your duties and
responsibilities and the advice or opinion of such counsel shall be full and
complete authorization and protection in respect of any action taken, suffered
or omitted to be taken by you hereunder in good faith and in accordance with the
advice or opinion of such counsel, provided that you shall promptly notify the
Company of any action taken or omitted by you in reliance upon such advice or
opinion; and
(h) shall not advise any person tendering Old Debentures pursuant to the
Exchange Offer as to the wisdom of making such tender or as to the market value
or decline or appreciation in market value of any Old Debentures.
15. You shall take such action as may from time to time be requested by the
Company or its counsel (and such other action as you may reasonably deem
appropriate) to furnish copies of the Prospectus, Letter of Transmittal and the
Notice of Guaranteed Delivery or such other forms as may be approved from time
to time by the Company, to all persons requesting such documents and to accept
and comply with telephone requests for information relating to the Exchange
Offer, provided that such information shall relate only to the procedures for
accepting (or withdrawing from) the Exchange Offer. The Company will furnish
you with copies of such documents at your request. All other requests for
information relating to the Exchange Offer shall be directed to the Company,
Attention: [Adele Robles], Secretary.
6
<PAGE>
16. You shall advise by facsimile transmission or telephone, and promptly
thereafter confirm in writing to [Adele Robles], Secretary of the Company, and
such other person or persons as the Company may request, daily (and more
frequently during the weeks immediately preceding the Expiration Date) and as
otherwise requested, as to the number of Old Debentures which have been tendered
pursuant to the Exchange Offer and the items received by you pursuant to this
Agreement, separately reporting and giving cumulative totals as to items
properly received and items improperly received. In addition, you will also
inform, and cooperate in making available to, the Company or any such other
person or persons, upon oral request made from time to time, such other
information as it or such person reasonably requests. Such cooperation shall
include, without limitation, the granting by you to the Company and such person
as the Company may request, of access to those persons on your staff who are
responsible for receiving tenders, in order to ensure that immediately prior to
the Expiration Date the Company shall have received information in sufficient
detail to enable it to decide whether to extend the Exchange Offer. You shall
prepare a final list of all persons whose tenders were accepted, the aggregate
principal amount of Old Debentures tendered, the aggregate principal amount of
Old Debentures accepted and deliver said list to the Company promptly after the
Expiration Date.
17. Letters of Transmittal and Notices of Guaranteed Delivery shall be
stamped by you as to the date and the time of receipt thereof and shall be
preserved by you for a period of time at least equal to the period of time you
preserve other records pertaining to the transfer of securities.
18. You hereby expressly waive any lien, encumbrance or right of set-off
whatsoever that you may have with respect to funds deposited with you for the
payment of transfer taxes by reasons of amounts, if any, borrowed by the
Company, or any of its subsidiaries or affiliates pursuant to any loan or credit
agreement with you or for compensation owed to you hereunder.
19. For services rendered as Exchange Agent hereunder, you shall be
entitled to compensation as set forth on Schedule I attached hereto, plus
reasonable out-of-pocket expenses and reasonable attorneys' fees, incurred in
connection with your services hereunder, within thirty days following receipt by
the Company of an itemized statement of such expenses and fees in reasonable
detail.
20.(a) The Company covenants and agrees to indemnify and hold you (which
for purposes of this paragraph shall include your directors, officers and
7
<PAGE>
employees) harmless in your capacity as Exchange Agent hereunder from and
against any and all loss, liability, cost, damage, expense and claim, including
but not limited to reasonable attorneys' fees and reasonable expenses, incurred
by you as a result of, arising out of or in connection with the performance by
you of your duties under this Agreement or the compliance by you with the
instructions set forth herein or delivered hereunder; provided, however, that
the Company shall not be liable for indemnification or otherwise for any loss,
liability, cost, damage, expense or claim arising out of your gross negligence
or willful misconduct. In no case shall the Company be liable under this
indemnity with respect to any claim against you unless the Company shall be
notified by you, by letter or by facsimile confirmed by letter, of the written
assertion of a claim against you or of any other action commenced against you,
promptly after you shall have received any such written assertion or notice of
commencement of action. The Company shall be entitled to participate at its own
expense in the defense of any such claim or other action, and, if the Company so
elects, the Company may assume the defense of any suit brought to enforce any
such claim; provided that the Company shall not be entitled to assume the
defense of any such action if the named parties to such action include both the
Company and you and representation of both parties by the same legal counsel
would, in the written opinion of counsel to you, be inappropriate due to actual
or potential conflicting interests between them. In the event that the Company
shall assume the defense of any such suit or threatened action in respect of
which indemnification may be sought hereunder, the Company shall not be liable
for the fees and expenses of any counsel thereafter retained by you. The
Company shall not be liable under this paragraph for the reasonable fees and
reasonable expenses of more than one legal counsel for you.
(b) You agree that, without the prior written consent of the Company (which
consent shall not be unreasonably withheld), you will not settle, compromise or
consent to the entry of any pending or threatened claim, action, or proceeding
in respect of which indemnification could be sought in accordance with the
indemnification provisions of this Agreement (whether or not you or the Company
or any of its controlling persons is an actual or potential party to such claim,
action or proceeding), unless such settlement, compromise or consent includes an
unconditional release of the Company and controlling persons from all liability
arising out of such claim, action or proceeding.
21. You shall arrange to comply with all requirements under the tax laws of
the United States, including those relating to missing Tax Identification
Numbers, and shall file any appropriate reports with the Internal Revenue
Service. The
8
<PAGE>
Company understands that you are required in certain instances to withhold an
amount equal to 31% of the payments made with respect to (i) interest on the
New Debentures and (ii) proceeds from the sale, exchange, redemption or
retirement of the New Debentures from holders who have not supplied their
correct Taxpayer Identification Number or required certification, or holders
from whom you have been instructed by the Internal Revenue Service to
withhold. Such funds will be turned over to the Internal Revenue Service in
accordance with applicable regulations.
22. You shall notify the Company of the amount of any transfer taxes
payable in respect of the exchange of Old Debentures and, upon receipt of
written approval from the Company, you shall deliver or cause to be delivered,
in a timely manner to each governmental authority to which any transfer taxes
are payable in respect of the exchange of Old Debentures, your check in the
amount of all transfer taxes so payable, and the Company shall reimburse you for
the amount of any and all transfer taxes payable in respect of the exchange of
Old Debentures; provided, however, that you shall reimburse the Company for
amounts refunded to you in respect of your payment of any such transfer taxes,
at such time as such refund is received by you.
23. THIS AGREEMENT AND YOUR APPOINTMENT AS EXCHANGE AGENT HEREUNDER SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
INCLUDING, WITHOUT LIMITATION, SECTION S-1401 OF THE NEW YORK GENERAL
OBLIGATIONS LAW, AND SHALL INURE TO THE BENEFIT OF, AND THE OBLIGATIONS CREATED
HEREBY SHALL BE BINDING UPON, THE SUCCESSORS AND ASSIGNS OF EACH OF THE PARTIES
HERETO, AND NO OTHER PERSON SHALL HAVE ANY RIGHTS HEREUNDER.
24. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
25. In case any provision of this Agreement 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.
26. This Agreement shall not be deemed or construed to be modified,
amended, rescinded, canceled or waived, in whole or in part, except by a written
instrument
9
<PAGE>
signed by a duly authorized representative of the party to be charged. This
Agreement may not be modified orally.
27. Unless otherwise provided herein, all notices, requests and other
communications to any party hereunder shall be in writing (including facsimile
or similar writing) and shall be given to such party, addressed to it, at its
address or facsimile number set forth below:
If to the Company:
Great Lakes Acquisition Corp.
4 Greenspoint Plaza, Suite 2200
16945 Northchase Drive
Houston, Texas 77060
Facsimile: (281) 775-4722
Attention: Corporate Secretary
If to the Exchange Agent:
State Street Bank and Trust Company of California, N.A.
633 West Fifth Street, 12th Floor
Los Angeles, California 90071
Facsimile: (213) 362-7357
Attention: Scott C. Emmons
28. Unless terminated earlier by the parties hereto, this Agreement shall
terminate 180 days following the last Expiration Date. Notwithstanding the
foregoing, Paragraphs 19, 20 and 22 shall survive the termination of this
Agreement. Upon any termination of this Agreement, you shall promptly deliver
to the Company any certificates for Debentures, funds or property then held by
you as Exchange Agent under this Agreement.
10
<PAGE>
29. This Agreement shall be binding and effective as of the date hereof.
Please acknowledge receipt of this Agreement and confirm the arrangements
herein provided by signing and returning the enclosed copy.
GREAT LAKES ACQUISITION CORP.
By:
-------------------------------------
Name: James D. McKenzie
Title: Chief Executive Officer
Accepted as the date
first above written:
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., as Exchange Agent
By:
-------------------------------------
Name:
Title:
<PAGE>
SCHEDULE I
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A.
FEE SCHEDULE
EXCHANGE AGENT SERVICES
GREAT LAKES ACQUISITION CORP. 13 1/8% SERIES B
SENIOR DISCOUNT DEBENTURES DUE 2009
I. EXCHANGE AGENCY
A fee for the receipt of exchanged 13 1/8% Series B Senior Discount
Debentures of Great Lakes Acquisition Corp. will be charged at $[ ] per
letter of transmittal. The total charge will be subject to a minimum of
$[ ] and maximum of $[ ].
This fee covers examination and execution of all required documentation,
receipt of transmittal letters, reporting as required to the Company and
communication with DTC.
II. MISCELLANEOUS
Fees for services not specifically covered in this schedule will be
assessed in amounts commensurate with the services rendered.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER. Social Security numbers have nine digits separated by two hyphens: I.E.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: I.E., 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- -------------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF --
- -------------------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, any of the
individuals(1)
3. Husband and wife (joint The actual owner of the
account) account or, if joint
funds, either person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if the minor
account) is the only contributor,
the minor(1)
6. Account in the name of The ward, minor, or
guardian or committee incompetent person(3)
for a designated ward,
minor, or incompetent
person
7. a. The usual revocable The grantor-trustee(1)
savings trust account
(grantor is also
trustee)
b. So-called trust The actual owner(1)
account that is not a
legal or valid trust
under State law
8. Sole proprietorship The owner(4)
account
- -------------------------------------------------------
- -------------------------------------------------------
<CAPTION>
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF --
<S> <C>
- -------------------------------------------------------
9. A valid trust, estate, The legal entity (Do not
or pension trust furnish the identifying
number of the personal
representative or trustee
unless the legal entity
itself is not designated
in the account title)(5)
10. Corporate account The corporation
11. Religious, charitable, The organization
or educational
organization account
12. Partnership account The partnership
held in the name of the
business
13. Association, club, or The organization
other tax-exempt
organization
14. A broker or registered The broker or nominee
nominee
15. Account with the The public entity
Department of
Agriculture in the name
of a public entity
(such as a State or
local government,
school district, or
prison) that receives
agricultural program
payments
- -------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
Note: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number, at
the local office of the Social Security Administration or the Internal Revenue
Service and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
- - A corporation.
- - A financial institution.
- - An organization exempt from tax under section 501(a), or an individual
retirement plan.
- - The United States or any agency or instrumentality thereof.
- - A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- - A foreign government, a political subdivision of a foreign government, or an
agency or instrumentality thereof.
- - An international organization or any agency, or instrumentality thereof.
- - A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
- - A real estate investment trust.
- - A common trust fund operated by a bank under section 584(a).
- - An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- - An entity registered at all times under the Investment Company Act of 1940.
- - A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- - Payments to nonresident aliens subject to withholding under section 1441.
- - Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- - Payments of patronage dividends where the amount received is not paid in
money.
- - Payments made by certain foreign organizations.
- - Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- - Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
- - Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- - Payments described in section 6049(b)(5) to non-resident aliens.
- - Payments on tax-free covenant bonds under section 1451.
- - Payments made by certain foreign organizations.
- - Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045 and 6050A.
PRIVACY ACT NOTICE. Section 6109 requires most recipients of dividend, interest,
or other payments to give taxpayer identification numbers to payers who must
report the payments to the IRS. The IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1984, Payers must generally
withhold 20% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
under-payment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
